Gallego v. Northland Grp. Inc., No. 15-1666-CV, 2016 WL 697383 (2d Cir. Feb. 22, 2016)
Debtor brought a class action against a debt collector alleging violations of the Fair Debt Collection Practices Act (FDCPA) by sending him and other class members a collection letter that gave a call-back number but did not specify the name of the person at that number. The district court dismissed the case for lack of subject matter jurisdiction on the ground that it did not raise a colorable federal question. The district court also denied the debtor’s motion for class certification.
On appeal, the U.S. Court of Appeals for the Second Circuit held that although the FDCPA claims lacked merit, they were not so frivolous that they failed to raise a colorable federal question sufficient to support federal jurisdiction. The court further concluded that the district court did not abuse its discretion in denying class certification.
As to class certification, the court found that denial of certification was within the range of permissible decisions where it appeared that the intended result of the settlement was "mass indifference, a few profiteers, and a quick fee to clever lawyers." The court drew upon the de minimis recovery of the putative class. Specifically, the court concluded that Fed. R. Civ. P. 23(b)(3)'s superiority requirement was not met, focusing upon the "meaningless" amount — 16.5 cents, by the court's calculation — that each putative class member would receive from the settlement if all of the estimated 100,000 class members filed a claim.
The court also found the proposed agreement reached by the parties to be inadequate. The release provided that all class members who did not affirmatively opt out of the settlement would release their claims against the debt collector, not only under the FDCPA, but also under other federal laws, "state law, New York City law (including the New York City Administrative Code), common law, territorial law, or foreign law." The court found that the absentee class members' interests would not be best served by a settlement that required them to release any and all claims relating to similar letters from the debt collector in exchange for as little as 16.5 cents — or for no money at all.
