The Second Circuit recently opined that a low-value class settlement is not appropriate for class certification. In Gallego v. Northland Group, Inc., plaintiff filed a class action under the Fair Debt Collection Practices Act (FDCPA) against a debt collector for allegedly sending consumers a demand letter which failed to identify the name of the person to call back. Because the FDCPA does not incorporate state or local-law standards of conduct, the plaintiff’s claim seemingly lacked merit. Notwithstanding same, the defendant debt collection agency agreed to settle the lawsuit on a class-wide basis. The parties then jointly moved for approval of the class-wide settlement and to certify the settlement class consisting of 100,000 class members. Notably, the settlement agreement provided for class members to release their claims against the defendant, not only under the FDCPA, but also under state law and New York City law (including the New York City Administrative Code). The agreement also called for a class fund of $17,500, of which the named plaintiff would receive $1,000 with the remainder distributed pro-rata amongst the class members – meaning that if all 100,000 class members were to submit claims, each would only receive 16.5 cents. The district court denied class certification, concluding that the class action was “neither the superior nor fairer method for litigating the issues in the Complaint.” The Second Circuit affirmed the district court’s ruling, finding that class members’ interest would not be best served by a settlement that required them to release any and all claims in exchange for as little as 16.5 cents.
The Gallego decision recognizes that many FDCPA cases are ill-suited for class certification. Specifically, class certification should be denied where class members will only receive meaningless or trivial relief. The Gallego decision is also a reminder that courts will not rubber-stamp class-action settlements reached by the parties, but rather will examine them to determine whether class members are giving up too much.
For more information on the Gallego decision, defense of class actions or the FDCPA, contact Katherine Olson at (312) 334-3444 or firstname.lastname@example.org.