New York City Debt Collection Defense Attorney

Single Ad in USA Today Not Enough to give Notice to Absent Class Member

In Hecht v. United Collection Bureau, Inc.[1] a recent case from the Second Circuit Court of Appeals, the plaintiff, Ms. Hecht, appealed from a judgment of the U.S. District Court for the District of Connecticut which had rejected Ms. Hecht's Fair Debt Collections Practices Act ("FDCPA") claims against United Collection Bureau, Inc. ("UCB"), and had held that the judgment in the class action Gravina v. United Collection Bureau, Inc.[2] precluded her case under the doctrine of res judicata.[3]

In her appeal to the Second Circuit, Hecht did not dispute that res judicata applied; rather, she argued that binding her to the judgment in Gravina would violate due process because the notice of class certification and settlement in that case was constitutionally inadequate. The Second Circuit agreed.

Ms. Hecht's complaint against UCB in the lower court had alleged that debt collector UCB violated 15 U.S.C. 1692d(6) by placing telephone calls without meaningful disclosure of the caller's identity, and 1692e(11), by failing to disclose in its initial communication that the debt collector was attempting to collect a debt and that any information obtained would be used for that purpose. UCB responded with a motion to dismiss, arguing that Ms. Hecht's claims had already been litigated in Gravina. In support, UCB produced documents from the Gravina case that showed that the claims in that case were materially identical to Ms. Hecht's claims.

Included in those documents was the Gravina Settlement Order, which provided for each named class representative to receive $2,500, for the remainder of the class to get a negligible payment, which would be paid into the court's cy press[4] fund, and permanently enjoined UCB to use its best efforts to correct the behavior that had allegedly violated the FDCPA. With the court's approval, notice of the settlement was published in one national paper, USA Today, one time.

In the District Court, Ms. Hecht argued that the settlement did not bind her because it was published only once in one publication. The District Court disagreed, noting the "miniscule" amount of money at stake. Ms. Hecht appealed.

In deciding Ms. Hecht's appeal, the Appellate Court applied a two step analysis. First, stated the court, it must determine if Ms. Hecht had a due process right to notice and the opportunity to opt out of the Gravina settlement. If so, then it would decide whether the Gravina notice satisfied due process.

In class action cases, Fed. R. Civ. P. 23, as interpreted by the Supreme Court in Wal-Mart Stores, Inc. v. Dukes,[5] provides that "absent class members have a due process right to notice and an opportunity to opt out of class litigation when the action is 'predominantly' for money damages." In the Gravina case, stated the court, the FDCPA does not allow for recovery for injunctive relief, nor did the plaintiffs ask for it in their complaint. Plaintiffs did, however, request maximum allowable money damages. Thus, the court concluded that the action was "predominantly for money damages," and that Ms. Hecht was entitled to the due process right to notice and the opportunity to opt out.

Turning to the sufficiency of notice in Gravina, the court cited to the notice standards as set forth by the Supreme Court in Mullane,[6] and noted that while "constructive notice by publication may be sufficient to satisfy due process," the single notice printed in USA Today in Gravina did not do so. In fact, stated the court, "It is difficult to imagine a manner of providing notice more akin to the "mere gesture" deprecated in Mullane, or less "reasonably calculated to apprise interested parties of the pendency of the action," than the Gravina notice."

Sheril Stanford

[1] 2010 WL 3538269 [2d Circ., August 17, 2012, No. 11-1327].

[2] No. 09-Civ. 4816 (E.D.N.Y. Nov. 29, 2010).

[3] A legal term defined most basically as "already legally decided," meaning that a court cannot hear the issue again.

[4] Essentially a charitable fund.

[5] 564 U.S. ___, 131 S. Ct. 2541, 2558-59 (2011).

[6] Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 315 (1950).