United States District Court, W.D. Washington, Seattle
LISA GROCHOWSKI, on behalf of herself and others similarly situated, Plaintiff,
DANIEL N. GORDON, P.C., and MIDLAND CREDIT MANAGEMENT, INC., Defendants.
Thomas S. Zilly United States District Judge
THIS MATTER comes before the Court on (i) a Rule 12(b)(6) motion to dismiss brought by defendant Midland Credit Management, Inc. (“MCM”), docket no. 129, and joined by defendant Daniel N. Gordon, P.C. (the “Gordon Firm”), docket no. 131, (ii) a motion for class certification brought by plaintiff Lisa Grochowski, docket no. 133, which was later revised, docket no. 134-2, and (iii) a motion for preliminary approval of a class action settlement brought jointly by plaintiff and MCM, docket no. 144. Having reviewed all papers filed in support of and in opposition to each motion, the Court enters the following order.
Plaintiff commenced this putative class action on February 22, 2013, against the Gordon Firm and Midland Funding, LLC (“Midland”), asserting one or more claims under each of five different subsections of the Fair Debt Collection Practices Act (“FDCPA”) and two claims under Washington’s Consumer Protection Act (“CPA”). The Court granted Midland’s motion for summary judgment because plaintiff had provided no evidence to support either direct or vicarious liability on the part of Midland. See Order at 5-6 (docket no. 88); Minute Order at ¶ 1 (docket no. 91). The Court also granted in part the Gordon Firm’s motion for summary judgment, dismissing Count IV of the Complaint, which alleged violation of 15 U.S.C. § 1692f(1), as well as portions of each of the other five counts of the Complaint. See Minutes (docket no. 107); Tr. at 32-37 (Aug. 14, 2014) (docket no. 110).
Plaintiff subsequently sought and was granted leave to amend her complaint. See Minute Order (docket no. 122). The Amended Complaint joined MCM as a defendant in this matter and reduced the number of claims to essentially two, namely (i) an FDCPA claim against both MCM and the Gordon Firm, which is brought under three different provisions of the FDCPA, specifically 15 U.S.C. §§ 1692e(2)(A), (5), and (10), and pleaded as Counts I, II, and III of the Amended Complaint, and (ii) a CPA claim against only the Gordon Firm, which is Count IV of the Amended Complaint.
The FDCPA claim is premised on the following allegations. Plaintiff obtained a loan from Capital One Bank (USA), N.A. (“Capital One”) on which she defaulted. See Am. Compl. at ¶¶ 17 & 19 (docket no. 123). Capital One “charged off” the debt,  in the amount of $5, 025.54, and sold it to Equable Ascent Financial, LLC (“Equable”). Id. at ¶¶ 20 & 22. Equable unsuccessfully attempted to collect $5, 025.54 from plaintiff and then sold the debt to Midland. Id. at ¶¶ 24-26. MCM, acting on behalf of Midland, also failed to collect from plaintiff, and then turned to the Gordon Firm for assistance. See Id. at ¶¶ 36-37 & 42-44. MCM’s correspondence with plaintiff indicated that the accrued interest was $0 and the interest rate was 0%. See id. at ¶¶ 39-41; see also Exs. B & C to Compl. (docket nos. 1-2 & 1-3). In contrast, the Gordon Firm’s “dunning letter” to plaintiff indicated that the amount due was $6, 325.85, which included interest at the rate of twelve percent (12%) per annum from the date of Capital One’s “charge off” of the debt, which was July 30, 2010. See Am. Compl. at ¶¶ 50-52.
Plaintiff’s FDCPA claim is based on a theory that either Equable or Midland, through its agent MCM, waived or is equitably estopped from charging interest at the rate set forth by a Washington statute. Plaintiff contends that, as a result of such alleged waiver or equitable estoppel, the Gordon Firm’s “dunning letter” violated the FDCPA by improperly including interest in the balance owed by plaintiff. The Court previously ruled that the issues of waiver and equitable estoppel involve questions of fact that must be resolved by a jury. Tr. at 34 (Aug. 14, 2014) (docket no. 110). At the time, however, MCM was not yet a party, and after being joined as a defendant, MCM moved to dismiss on the ground that the Amended Complaint did not sufficiently plead facts to support a finding of waiver or equitable estoppel. The Gordon Firm joined MCM’s motion,  and it is now ripe for the Court’s consideration.
Unlike her FDCPA claim, plaintiff’s CPA claim involves only the Gordon Firm’s alleged operation as an “out-of-state collection agency” without the requisite license.The Gordon Firm has moved to dismiss plaintiff’s CPA claim for lack of subject matter jurisdiction. The motion assumes that the three counts of the Amended Complaint brought under federal law will be dismissed, and asks the Court to decline to exercise supplemental jurisdiction over plaintiff’s state law claim. See 28 U.S.C. § 1367(c). For the reasons discussed below, however, a portion of plaintiff’s FDCPA claim will remain in the case, and the Gordon Firm’s motion to dismiss plaintiff’s CPA claim is therefore DENIED as moot.
Plaintiff seeks to have the following three classes certified: (i) all persons located in Washington to whom MCM sent a debt collection letter indicating that accrued interest was $0 and/or the interest rate was 0% and from whom the Gordon Firm attempted, during the Class Period,  to collect on the debt; (ii) all persons located in Washington from whom MCM attempted to collect on a debt acquired by either Midland or MCM from Equable pursuant to an agreement dated April 19, 2012, the balance of which did not include any post “charge off” interest, and from whom the Gordon Firm later attempted, during the Class Period, to collect on the debt; and (iii) all persons located in Washington from whom the Gordon Firm attempted, during the Class Period and while not licensed as an “out-of-state collection agency, ” to collect on a debt.
With respect to the first class and the claim under the FDCPA, MCM and plaintiff have reached a settlement, which does not include the Gordon Firm,  and they have asked the Court for preliminary approval of their agreement, pursuant to which MCM will establish a common fund totaling $25, 000, of which plaintiff would receive $4, 000. Settlement Agr. at ¶¶ 4.1-4.2, Ex. A to Mtn. (docket no. 144). The other class members would each receive a pro-rata share of the common fund, and plaintiff’s attorney’s fees and costs would be between $40, 000 and $67, 500, as determined by agreement of the parties or, if necessary, by mediator Paris Kallas. Id. at ¶¶ 4.1 & 4.3. MCM and plaintiff represented in their joint motion that the first class has 29 members. In response, the Gordon Firm has indicated that the number of potential class members is only 13. In her reply, which MCM did not join, plaintiff suggests a different definition of the class and asks the Court to certify the first class regardless of whether it has 29 or 13 members.
As to the second class, plaintiff estimates that the number of members is 71, but she does not clarify whether any of these individuals are also members of the first or third class, or indeed whether she is even a member of the second class. The Gordon Firm indicates that all of the debts sold by Equable to Midland originated with Capital One and that, during the Class Period, the Gordon Firm sent “dunning letters” to only 18 people in Washington relating to debts “charged off” by Capital One and eventually acquired by Midland. In reply, plaintiff states that the second class is not limited to individuals whose debts originated with Capital One. Contrary to plaintiff’s suggestion, however, a broader class would not be appropriate because plaintiff would not be a suitable representative for persons who borrowed from other creditors, which might have used loan or credit terms different from those of Capital One. See Simkus v. Cavalry Portfolio Servs., LLC, 2014 WL 1775666 at *1 (N.D. Ill. May 5, 2014) (reciting the following language from Bank of America’s cardholder agreement: “failure to exercise any rights . . . will not waive any of our rights in the future”).
In connection with the third class, plaintiff represents that 6, 450 Washington residents are potential class members. The Gordon Firm contends that, with respect to plaintiff’s CPA claim, individual issues predominate because the elements of injury and causation cannot be decided on a class-wide basis. Having made such argument, the Gordon Firm does not offer any estimate of the size of an appropriately tailored class for plaintiff’s CPA claim.
A. Rule 12(b)(6) Motion to Dismiss