In a decision dated June 19, 2012, the United States District Court for the Western District of New York granted consumer plaintiff, Michael Hallmark, leave to amend a complaint he had filed in October 2011 against Cohen & Slamowitz, LLP and Midland Funding, LLP for violations of the Fair Debt Collection Practices Act (FDCPA). The consumer had complained specifically about two letters he had received from Cohen & Slamowitz on behalf of debt buyer Midland Funding: one dated August 1, 2011, which claimed the alleged amount of the debt was $1,835.31, and the second dated August 17, 2011, a little more than two weeks later, that claimed that the alleged amount of the debt was $1,982.89, a difference of $147.58.
The parties failed to reach agreement during mediation, but during mediation, defendant's counsel disclosed that $140 of the $147.58 was attributable to court filing fees for an action that Cohen & Slamowitz intended to file against Mr. Hallmark in state court, but had not yet filed.
Approximately one month later, the plaintiff consumer sought to amend his complaint against Cohen & Slamowitz and Midland Funding, based on the admission during mediation that the defendants were attempting to collect court-filing fees from alleged debtors before such fees were even expended.
The proposed amended complaint alleged violations of 15 U.S.C. §§ 1692e(2), e(2)(A), e(5), e(10), f and f(1), which prohibit false representations of the amount of the asserted debt, unfounded threats of legal action, use of deception in debt collection, unfair collection activities, and attempts to collect an unauthorized amount. The plaintiff also sought to assert a class action claim based on defendant's use of form letters like the August 17, 2012 letter, which included the court filing fee as part of the alleged amount due prior to the fee having actually been paid by the defendants.
Cohen & Slamowitz and Midland opposed plaintiff's motion to amend on two grounds: first, that the new allegations in the amended complaint were based on statements made during the course of settlement negotiations, which plaintiffs claimed were inadmissible under Federal Rule of Evidence 408(a)(2) and second, that plaintiff's class allegations failed to state a claim and were futile. The court disagreed with both arguments.
As to defendants' evidentiary claim, the court pointed out that Rule 408(a)(2) by its terms "does not immunize from proof the establishment of facts learned during settlement discussions other than information specifically regarding compromise negotiations." The rule "does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations." Therefore, the court found no merit to defendant's argument that the motion to amend be denied on Rule 408 grounds.
As to the second argument, the court stated that plaintiff need only show that its complaint would survive a motion to dismiss, which it had done, and that in determining whether the proposed amendment is futile, the court need only evaluate the likelihood that the proposed class will be certified under Fed. R. Civ. P. 23(c). Defendants argued that plaintiff's allegations regarding the numerosity requirement were too unspecific. The court found, however, that as Cohen & Slamowitz is a high volume debt collector, the court would make "common sense assumptions" to support a finding of numerosity. As to commonality, the court stated it would be easy to determine commonality through discovery, by determining who was sent the letters. Therefore, the court found there was little reason to conclude that the requirements of Rule 23(b) would not be satisfied.
Accordingly, the court granted the plaintiff consumer's motion to amend the complaint, and case will proceed to the class certification phase.