Filed: Feb. 10, 2015
Latest Update: Mar. 02, 2020
Summary: 13-2742-cv Monique Sykes, et al. v. Mel S. Harris & Associates, LLC, et al. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _ August Term, 2013 (Argued: February 7, 2014 Decided: February 10, 2015) Docket Nos. 13-2742-cv, 13-2747-cv, 13-2748-cv _ MONIQUE SYKES, REA VEERABADREN, KELVIN PEREZ, CLIFTON ARMOOGAM, Individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. MEL S. HARRIS AND ASSOCIATES LLC, MEL S. HARRIS, TODD FABACHER, MICHAEL YOUNG, KERRY LUTZ, ESQ.,
Summary: 13-2742-cv Monique Sykes, et al. v. Mel S. Harris & Associates, LLC, et al. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT _ August Term, 2013 (Argued: February 7, 2014 Decided: February 10, 2015) Docket Nos. 13-2742-cv, 13-2747-cv, 13-2748-cv _ MONIQUE SYKES, REA VEERABADREN, KELVIN PEREZ, CLIFTON ARMOOGAM, Individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. MEL S. HARRIS AND ASSOCIATES LLC, MEL S. HARRIS, TODD FABACHER, MICHAEL YOUNG, KERRY LUTZ, ESQ., L..
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13‐2742‐cv
Monique Sykes, et al. v. Mel S. Harris & Associates, LLC, et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
____________________
August Term, 2013
(Argued: February 7, 2014 Decided: February 10, 2015)
Docket Nos. 13‐2742‐cv, 13‐2747‐cv, 13‐2748‐cv
____________________
MONIQUE SYKES, REA VEERABADREN, KELVIN PEREZ, CLIFTON
ARMOOGAM, Individually and on behalf of all others similarly situated,
Plaintiffs‐Appellees,
v.
MEL S. HARRIS AND ASSOCIATES LLC, MEL S. HARRIS, TODD FABACHER,
MICHAEL YOUNG, KERRY LUTZ, ESQ., LR CREDIT 18, LLC, L‐CREDIT, LLC,
LEUCADIA NATIONAL CORPORATION, LR CREDIT, LLC, LR CREDIT 10,
LLC, SAMSERV, INC., WILLIAM MLOTOK, BENJAMIN LAMB, DAVID
WALDMAN, JOSEPH A. ORLANDO, MICHAEL MOSQUERA, JOHN
ANDINO, LR CREDIT 14, LLC, LR CREDIT 21, LLC, PHILIP M. CANNELLA,
Defendants‐Appellants.1
____________________
Before: JACOBS, CALABRESI, and POOLER, Circuit Judges.
1
The Clerk of the Court is directed to amend the caption as above.
Defendants Leucadia National Corporation, a company that purchases
consumer debts, Mel S. Harris and Associates, a law firm with a significant debt‐
collection practice, and Samserv, Inc., a process server, appeal from the
September 4, 2012 class certification opinion and March 28, 2013 class
certification order of the United States District Court for the Southern District of
New York (Denny Chin, Circuit Judge).
The district court’s March 28, 2013 order certified two classes. The first
class, pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure,
comprised “all persons who have been or will be sued by the Mel Harris
defendants as counsel for the Leucadia defendants . . . assert[ing] claims under
the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§ 1961; New York General Business Law (GBL) § 349; and New York Judiciary
Law § 487.” Special App’x at 46. The second class, certified pursuant to Rule
23(b)(3) of the Federal Rules of Civil Procedure, comprised “all persons who have
been sued by the Mel Harris defendants as counsel for the Leucadia defendants
in . . . New York City Civil Court and where a default judgment has been
obtained. Plaintiffs in the Rule 23(b)(3) class assert claims under RICO; the Fair
2
Debt Collection Practices Act, 15 U.S.C. § 1692; GBL § 349; and New York
Judiciary Law § 487.” Special App’x at 47.
We conclude that the district court did not abuse its discretion in certifying
either class.
Affirmed. Judge Jacobs dissents in a separate opinion.
____________________
PAUL D. CLEMENT, Bancroft PLLC, Washington, DC
(Candice Chiu, Bancroft PLLC, Washington, DC; James R.
Asperger and Maria Ginzburg, Quinn Emanuel Urquhart &
Sullivan LLP, New York, NY; Marc A. Becker, London, UK;
Brett A. Scher, Kaufman Dolowich & Voluck LLP, Woodbury,
NY, on the brief), for Defendants‐Appellants Mel S. Harris LLC,
Mel S. Harris, Michael Young, David Waldman, Kerry Lutz, and
Todd Fabacher.
MIGUEL A. ESTRADA, Gibson, Dunn & Crutcher LLP,
Washington, DC (Scott P. Martin, Gibson, Dunn & Crutcher
LLP, Washington, DC; Michael Zimmerman, Zimmerman
Jones Booher LLC, Salt Lake City, UT; Lewis H. Goldfarb and
Adam R. Schwartz, McElroy, Deutsch, Mulvaney & Carpetner
LLP, Morristown, NJ; Mark D. Harris, Proskauer Rose LLP,
New York, NY, on the brief), for Defendants‐Appellants Leucadia
National Corporation, L‐Credit, LLC, LR Credit, LLC, LR Credit 10,
LLC, LR Credit 14, LLC, LR Credit 18, LLC, LR Credit 21, LLC,
Joseph A. Orlando, and Philip M. Cannella.
JACK BABCHIK, Babchik & Young LLP, White Plains, NY, for
Defendants‐Appellants Samserv, Inc., William Mlotok, Benjamin
Lamb, Michael Mosquera, and John Andino.
3
MATTHEW D. BRINCKERHOFF, Emery Celli Brinckerhoff &
Abady LLP, New York, NY (Jonathan S. Abady, Debra L.
Greenberger and Vasudha Talla, Emery Celli Brinckerhoff &
Abady LLP, New York, NY; Josh Zinner, Susan Shin and
Claudia Wilner, New Economy Project, New York, NY;
Carolyn E. Coffey and Ariana Lindermayer, of counsel to
Jeanette Zelhoff, MFY Legal Services, New York, NY; Charles
J. Ogletree, Jr., Harvard Law School, Boston, MA, on the brief),
for Plaintiffs‐Appellees.
JEAN CONSTANTINE‐DAVIS, AARP Foundation Litigation,
Washington, DC, on behalf of Amici Curiae AARP, National
Association of Consumer Advocates, and National Consumer Law
Center, in support of Plaintiffs‐Appellees.
DANIELLE F. TARANTOLO, New York Legal Assistance
Group, New York, NY, on behalf of Amicus Curiae Consumer
Advocates, in support of Plaintiffs‐Appellees.
SARANG VIJAY DAMLE, Senior Counsel, Consumer
Financial Protection Bureau, Washington, DC (Meredith
Fuchs, General Counsel, To‐Quyen Truong, Deputy General
Counsel, David M. Gossett, Assistant General Counsel, Jessica
Rank Divine, Attorney, Consumer Financial Protection
Bureau, Washington, DC; Jonathan E. Nuechterlein, General
Counsel, John F. Daly, Deputy General Counsel for Litigation,
Theodore (Jack) Metzler, Attorney, Federal Trade
Commission, Washington, DC, on the brief), on behalf of Amici
Curiae The Consumer Financial Protection Bureau and Federal
Trade Commission, in support of Plaintiffs‐Appellees.
POOLER, Circuit Judge:
These consolidated appeals are taken from the September 4, 2012 class
4
certification opinion, Sykes v. Mel Harris & Assocs., LLC, 285 F.R.D. 279 (S.D.N.Y.
2012) (“Sykes II”), and March 28, 2013 class certification order of the United States
District Court for the Southern District of New York (Denny Chin, Circuit Judge).
Defendants in this case comprise three entities: “(1) various subsidiaries of
Leucadia National Corporation (“Leucadia”) that purchase and collect consumer
debt; (2) Mel S. Harris and Associates LLC (“Mel Harris”), a law firm specializing
in debt collection litigation; [and] (3) Samserv, Inc. (“Samserv”), a process service
company.” Sykes II, 285 F.R.D. at 283. Defendants also include “associates of each
of the foregoing entities,” id., and we respectively refer to them as the Leucadia
defendants, Mel Harris defendants, and Samserv defendants (as did the district
court).
The district court’s March 28, 2013 order certified two classes. The first
class, certified pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure,
comprises “all persons who have been or will be sued by the Mel Harris
defendants as counsel for the Leucadia defendants . . . assert[ing] claims under
the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
§ 1961; New York General Business Law (GBL) § 349; and New York Judiciary
Law § 487.” Special App’x at 46.
5
The second class, certified pursuant to Rule 23(b)(3) of the Federal Rules of
Civil Procedure, comprised “all persons who have been sued by the Mel Harris
defendants as counsel for the Leucadia defendants in . . . New York City Civil
Court and where a default judgment has been obtained. Plaintiffs in the Rule
23(b)(3) class assert claims under RICO; the Fair Debt Collection Practices Act
[(FDCPA)], 15 U.S.C. § 1692; GBL § 349; and New York Judiciary Law § 487.”
Special App’x at 47.
We conclude that the district court did not abuse its discretion in certifying
either class.
Affirmed.
BACKGROUND
We draw our facts from the district court’s class certification opinion,
which depended on “the depositions, declarations, and exhibits submitted . . . in
connection with” the motion for class certification. Sykes II, 285 F.R.D. at 283. The
district court, as was proper, only resolved “factual disputes to the extent
necessary to decide the class certification issue.” Id. (citing In re Initial Public
Offering Sec. Litig., 471 F.3d 24, 27, 41–42 (2d Cir. 2006). It did not resolve “factual
assertions relate[d] to the merits . . . but state[d] them as the parties’ assertions,”
6
and we will follow that practice. Id. Where we are required to supplement the
background as laid out by the district court by virtue of the arguments of the
parties on appeal, we will also refer to the depositions, declarations, and exhibits
which formed the record before the district court at class certification.
I. Plaintiffs
“Monique Sykes, Rea Veerabadren, Kelvin Perez, and Clifton Armoogam
are New York City residents who were each sued by various defendants in debt
collection actions commenced in New York City Civil Court between 2006 and
2010.” Sykes II, 285 F.R.D. at 283. Each plaintiff “denies being served with a
summons and complaint in their respective action. . . . Defendants, nevertheless,
were able to obtain default judgments against them.” Id.
II. Defendants’ Alleged Default Judgment Scheme
A. Default Judgments
These default judgments, in the words of plaintiffs, are the result of
defendants’ construction of a “default judgment mill.” The “mill” operates in this
fashion: first, by obtaining charged‐off consumer debt; second, by initiating a
debt‐collection action by serving a summons and complaint on the purported
debtor; and third, by submitting fraudulent documents to the New York City
7
Civil Court in order to obtain a default judgment.
At the first step, “[p]laintiffs allege that the Leucadia and Mel Harris
defendants entered into joint ventures to purchase debt portfolios, and then filed
debt collection actions against the alleged debtors with the intent to collect
millions of dollars through fraudulently‐obtained default judgments.” Id.
At the second step, Mel Harris would employ “a software program . . .
designed by [Mel Harris employee] Mr. [Todd] Fabacher.” Appellees’ App’x at
157. Fabacher is employed as a “director of information technology for Mel
Harris.” Sykes II, 285 F.R.D. at 284. His program “selects and organizes debts for
the generation of a summons and complaint for each debt. These documents are
signed by an attorney, and bundled together in batches of 50. Each batch is sent
to a single process serving company.” Appellees’ App’x at 157. Further, the
process serving company associated with each debt is saved by this computer
program, so “the process serving company associated with any particular debt
can be readily ascertained.” Appellees’ App’x at 157.
To effectuate this second step, Leucadia and Mel Harris defendants would
hire a process server, often Samserv. Sykes II, 285 F.R.D. at 283. Plaintiffs allege
that “Samserv routinely engaged in ‘sewer service’ whereby it would fail to serve
8
the summons and complaint but still submit proof of service to the court.” Id.
This proof of service was first delivered to Mel Harris, which, “[a]fter process
[wa]s allegedly served, . . . receive[d] from the process serving company an
electronic affidavit of service.” Appellees’ App’x at 157. After receiving this
affidavit of service, the system designed by Fabacher “automatically organize[d]
and print[ed] a motion for a default judgment [and] an affidavit of merit . . .
within approximately 35 days after the date of service of process.” Appellees’
App’x at 157–58.
Having generated these documents, at the third step, “[a]fter a debtor
failed to appear in court for lack of notice of the action, the Leucadia and Mel
Harris defendants would then apply for a default judgment by providing the
court with . . . an ‘affidavit of merit’ attesting to their personal knowledge regarding
the defendant’s debt and an affidavit of service as proof of service.” Sykes II, 285
F.R.D. at 283 (emphasis added).
Before the district court at the class certification stage, there was substantial
evidence of the scope and impacts of this alleged scheme. “Between 2006 and
2009, various Leucadia entities filed 124,838 cases,” and Mel Harris represented
Leucadia in 99.63 percent of those cases. Id. at 284. “The ‘vast majority’ of such
9
cases were adjudicated without appearance by the defendant debtors, indicating
the likelihood that a default judgment was entered.” Id. Further, “[b]etween 2007
and 2010 various Leucadia entities obtained default judgments in 49,114 cases in
New York City Civil Court.” Id.
B. Affidavits of Service
The district court concluded that “[b]etween January 2007 and January
2011, Samserv defendants performed service of process in 94,123 cases filed by
Mel Harris in New York City Civil Court, 59,959 of which were filed on behalf of
Leucadia defendants.” Id. In evaluating the evidence submitted by plaintiffs with
respect to Samserv’s practice of engaging in sewer service, the district court
concluded that there was “substantial support for plaintiffs’ assertion that
defendants regularly engaged in sewer service.” Id. This conclusion was based on
the fact that “[r]ecords maintained by defendants reveal hundreds of instances of
the same process server executing service at two or more locations at the same
time,” id., as well as the fact that “[t]here were . . . many other occasions where
multiple services were purportedly made so close in time that it would have been
impossible for the process server to travel from one location to the other as
claimed.” Id.
10
Plaintiffs point out that the record before the district court also included a
number of other irregularities. For example, “in 2,915 instances, a process server
claimed to have attempted or completed service before the date that the service
was assigned to that process server—[a] physical impossibility.” Appellees’
App’x at 163. Additionally, process servers often reported 60 service attempts in
a single day, Appellees’ App’x at 183, and the six particular process servers who
accounted for a majority of service performed by Samserv for Mel Harris
“reported high volumes of service, including hundreds of days on which they
claimed to have made more than 40 visits in a single day,” Appellees’ App’x at
165. However, an experienced process server attested to the fact that “based on
[his] experience, . . . it is unlikely that a process server could regularly make more
than 25 service attempts at personal residences in one day.” Appellees’ App’x at
153. Finally, “[t]he six process servers also reported widely divergent rates of
personal, substitute, and nail and mail service.” Appellees’ App’x at 165. There
was no evidence in the record at class certification that would explain the
divergent rates for the means of service. Plaintiffs finally point out that, despite
the district court’s order that Samserv defendants produce logbooks recording
11
their service attempts by October 6, 2009, which could ostensibly confirm service,
none have been turned over.
C. Affidavits of Merit
The district court provided a complete overview of the process for
generating affidavits of merit, the facts of which are not challenged on appeal.
“The affidavits of merit submitted by the Mel Harris and Leucadia defendants . . .
follow a uniform format.” Sykes II, 285 F.R.D. at 284. Fabacher “attests that he is
‘an authorized and designated custodian of records’ for” one of the Leucadia
entities that owns the charged‐off debt, in New York City Civil Court. Id. He
affirms that because he “‘maintain[s] the . . . records and accounts . . . including
records maintained by and obtained from [the collection entity’s] assignor’ . . . he
is ‘thereby fully and personally familiar with, and [has] personal knowledge of, the
facts and proceedings relating to the [debt collection action].’” Id. (first, second,
fourth, and fifth alterations in original) (emphasis added).
The district court explained the crux of the issue as follows:
Typically, Fabacher does not receive the original credit agreements
between the account holders and the creditors. Instead, he receives
a bill of sale for the portfolio of debts purchased that includes
‘sample’ credit agreements and ‘warranties’ made by the seller
regarding the debts in the portfolio. In many instances, such
12
agreements do not exist. If they do exist, Fabacher’s ‘standard
practice’ does not entail reviewing them before endorsing an
affidavit of merit. He instead relies on the warranties made by the
original creditor . . . .
Fabacher produces the affidavits of merit for signature in batches of
up to 50 at a time. He ‘quality check[s]’ one affidavit in each batch
and if it is accurate, he signs the remaining affidavits in the batch
without reviewing them. The quality check consists of ensuring that
information printed on the affidavit matches the information stored
in the Debt Master database.
Id. at 285 (alteration in original). Reviewing these allegations at an earlier stage in
the proceedings, the district court concluded that “[a]ssuming 260 business days
a year, Fabacher had to have personally (and purportedly knowledgeably) issued
an average of twenty affidavits of merit per hour, i.e., one every three minutes,
over a continuous eight‐hour day.” Sykes v. Mel Harris & Assocs., LLC, 757 F.
Supp. 2d 413, 420 (S.D.N.Y. 2010) (“Sykes I”).
Plaintiffs point out that the practice of Leucadia defendants in purchasing
these charged‐off debts, which involves acquiring only limited information with
respect to the character of this debt, is not uncommon in the secondary consumer
debt market. Typical information transmitted in the purchase of a consumer debt
will include the consumer’s name, address, and the amount owed. See Federal
Trade Commission, The Structure and Practices of the Debt Buying Industry, 34–35
13
(Jan. 2013), available at
http://www.ftc.gov/sites/default/files/documents/reports/structure‐and‐practices‐
debt‐buying‐industry/debtbuyingreport.pdf (last visited Feb. 6, 2015). It is
extremely rare, however, that the purchaser of the debt will receive any
underlying documentation on the debt. Id.
III. Proceedings Below
Monique Sykes commenced this action against “some of the Leucadia, Mel
Harris, and Samserv defendants” on October 6, 2009, alleging FDCPA and GBL
claims. Sykes II, 285 F.R.D. at 285. Rea Veerabadren joined the action on December
28, 2009, and “class allegations and RICO claims were added.” Id. Kelvin Perez
joined the suit on March 31, 2010, at the filing of a second amended complaint,
which added the New York Judiciary Law claim against Mel Harris. Id.
Defendants moved to dismiss, and the district court denied the motion. In
adjudicating the motion to dismiss, the district court reasoned, inter alia, that the
FDCPA claims were not time‐barred under the relevant one‐year statute of
limitations for Sykes and Perez on the grounds that those claims had been
equitably tolled. Sykes I, 757 F. Supp. 2d at 421–22. This was because, the district
court found, “sewer service purposefully ensures that a party is never served,
14
[therefore] it is plausible that defendants’ acts were ‘of such character as to
conceal [themselves]’ to warrant equitable tolling.” Id. at 422 (second alteration in
original) (quoting Bailey v. Glover, 88 U.S. (21 Wall.) 342, 349–50 (1874)).
For their part, Samserv defendants moved to dismiss the FDCPA claims on
the grounds that they were not “debt collectors” for the purposes of the FDCPA.
Id. at 423 (citing exemptions for process servers under 15 U.S.C. § 1692a(6)(D)).
The district court disagreed, reasoning that the FDCPA “protects process servers
only ‘while’ they serve process,” and therefore “Samserv defendants’ alleged
failure to serve plaintiffs process and provision of perjured affidavits of service
remove them from the exemption.” Id.
Leucadia and Samserv defendants further argued that plaintiffs lacked
standing to bring their claims under RICO. Id. at 427. This was because,
according to defendants, plaintiffs could neither establish an injury to their
property interest nor that “the RICO violations were [] the proximate cause of
their injuries “ Id. The district court disagreed, reasoning that “defendants’
pursuit of default judgments and attempts to enforce them against plaintiffs
proximately caused their injuries, see Baisch v. Gallina, 346 F.3d at 366, 373–74 (2d
Cir. 2003), which include the freezing of personal bank accounts and incurring of
15
legal costs to challenge those default judgments.” Id. at 427–28.
Finally, Leucadia and Mel Harris defendants challenged the district court’s
subject matter jurisdiction under the Rooker‐Feldman doctrine, “because plaintiffs
are effectively appealing from a state‐court judgment.” Id. at 429. The district
court rejected this argument as well. First, the district correctly noted that the
doctrine would only apply if “a plaintiff invites a district court to review and
reject an adverse state‐court judgment.” Id. (citing Hoblock v. Albany Cnty. Bd. of
Elections, 422 F.3d 77, 85 (2d Cir. 2005)). The district court then concluded that
“plaintiffs assert claims independent of the state‐court judgments and do not
seek to overturn them.” Id.
Following the district court’s decision, plaintiffs moved for class
certification, as well as for another opportunity to amend their complaint. Sykes
II, 285 F.R.D. at 285. The third amended complaint (the operative complaint on
appeal) added Clifton Armoogam as plaintiff and an additional Leucadia entity
as defendant. Id. The district court granted the motion for class certification on
September 4, 2012. Id. at 294. Leucadia and Mel Harris defendants obtained new
counsel after this decision.
On March 28, 2013, the district court adopted plaintiffs’ proposed class
16
certification order. The two classes certified are as follows.
Pursuant to Federal Rule of Civil Procedure 23(b)(2), a class is
certified of all persons who have been or will be sued by the Mel
Harris defendants as counsel for the Leucadia defendants in actions
commenced in New York City Civil Court and where a default
judgment has been or will be sought. Plaintiffs in the Rule 23(b)(2)
class assert claims under [RICO], [GBL] § 349, and New York Judiciary
Law § 487.
Pursuant to Rule 23(b)(3), a class is certified of all persons who
have been sued by the Mel Harris defendants as counsel for the
Leucadia defendants in actions commenced in New York City Civil
Court and where a default judgment has been obtained. Plaintiffs in
the Rule 23(b)(3) class assert claims under RICO; the [FDCPA]; GBL §
349, and New York Judiciary Law § 487.
Special App’x at 46‐47.
JURISDICTION
The district court exercised jurisdiction under 28 U.S.C. § 1331, 28 U.S.C. §
1367, and 15 U.S.C. § 1962k(d). After certification, each defendant timely
petitioned for leave to appeal the grant of certification pursuant to Rule 23(f) of
the Federal Rules of Civil Procedure. Our court granted these petitions July 19,
2013. We have jurisdiction pursuant to 28 U.S.C. § 1292(e).
STANDARD OF REVIEW
17
“We review a district court’s decision to certify a class under Rule 23 for
abuse of discretion, the legal conclusions that informed its decision de novo, and
any findings of fact for clear error.” In re U.S. Foodservice Inc. Pricing Litig., 729
F.3d 108, 116 (2d Cir. 2013) (“In re U.S. Foodservice”).
DISCUSSION
I. Legal Standards
A. Class Certification
“The class action is ‘an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.’” Wal‐Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011) (quoting Califano v. Yamasaki, 442
U.S. 682, 700–701 (1979)). Two classes of plaintiffs were certified in this case,
under both Rule 23(b)(2) and Rule 23(b)(3) of the Federal Rules of Civil
Procedure. As such, plaintiffs must meet both the requirements for the particular
relief, injunctive or monetary, sought under those two rules, as well as the
threshold requirements for class certification under Rule 23(a).
1. Rule 23(a) Prerequisites
Rule 23(a) of the Federal Rules of Civil Procedure provides that a class may
be certified only if four prerequisites have been met: numerosity, commonality,
18
typicality, and adequacy of representation. See Dukes, 131 S. Ct. at 2550; accord In
re Nassau Cnty. Strip Search Cases, 461 F.3d 219, 225 (2d Cir. 2006). Specifically, the
Rule provides as follows:
One or more members of a class may sue or be sued as
representative parties on behalf of all members only if:
(1) the class is so numerous that joinder of all members is
impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect
the interests of the class.
Fed. R. Civ. P. 23(a). These remaining requirements “do[] not set forth a mere
pleading standard. A party seeking class certification must . . . be prepared to
prove that there are in fact sufficiently numerous parties, common questions of
law or fact, etc.” Dukes, 131 S. Ct. at 2551.
The Supreme Court has recently clarified the commonality requirement
under Rule 23(a). “Commonality requires the plaintiff to demonstrate that the
class members have suffered the same injury. This does not mean merely that
they have all suffered a violation of the same provision of law.” Id. (internal
quotation marks and citation omitted). Interpreting this requirement in the
context of sexual discrimination claims in violation of Title VII of the Civil Rights
19
Act, the Court instructed that such claims “must depend upon a common
contention—for example, the assertion of discriminatory bias on the part of the
same supervisor. That common contention, moreover, must be of such a nature
that it is capable of classwide resolution—which means that determination of its
truth or falsity will resolve an issue that is central to the validity of each one of the
claims in one stroke.” Id. at 2551 (emphasis added). Furthermore, the Court noted
that in certain “context[s] . . . ‘[t]he commonality and typicality requirements of
Rule 23(a) tend to merge. Both serve as guideposts for determining whether
under the particular circumstances maintenance of a class action is economical
and whether the named plaintiff’s claim and the class claims are so interrelated
that the interests of the class members will be fairly and adequately protected in
their absence.’” Id. at 2551 n.5 (alteration in original) (quoting Gen. Tel. Co. of Sw.
v. Falcon, 457 U.S. 147, 157–58 (1982)).
2. Rule 23(b)(2) Requirements for Injunctive Relief
Beyond these prerequisites, Rule 23(b) provides additional considerations
for a district court to consider prior to the certification of a class. Under Rule
23(b)(2), a class action may only be maintained if “the party opposing the class
has acted or refused to act on grounds that apply generally to the class, so that
20
final injunctive relief . . . is appropriate respecting the class as a whole.” Fed. R.
Civ. P. 23(b)(2). The Supreme Court has clarified that certification of a class for
injunctive relief is only appropriate where “a single injunction . . . would provide
relief to each member of the class.” Dukes, 131 S. Ct. at 2557.
3. 23(b)(3) Requirements
Rule 23(b)(3) imposes two additional burdens on plaintiffs attempting to
proceed by class action, namely, predominance and superiority. Specifically, a
class may be certified only if the district court determines as follows:
[T]he questions of law or fact common to class members
predominate over any questions affecting only individual members,
and that a class action is superior to other available methods for
fairly and efficiently adjudicating the controversy. The matters
pertinent to these findings include:
(A) the class members’ interests in individually controlling the
prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the
controversy already begun by or against class members;
(C) the desirability or undesirability of concentrating the
litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3).
In assessing the justifications for the creation of Rule 23(b)(3) classes
the Supreme Court has observed as follows:
21
While the text of Rule 23(b)(3) does not exclude from certification
cases in which individual damages run high, the Advisory
Committee had dominantly in mind vindication of the rights of
groups of people who individually would be without effective
strength to bring their opponents into court at all. . . . “The policy at
the very core of the class action mechanism is to overcome the
problem that small recoveries do not provide the incentive for any
individual to bring a solo action prosecuting his or her rights. A class
action solves this problem by aggregating the relatively paltry
potential recoveries into something worth someone’s (usually an
attorney’s) labor.” Mace v. Van Ru Credit Corp., 109 F.3d 388, 344 (7th
Cir. 1997).
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997) (some internal quotation
marks and citations omitted).
With respect to common issues, Rule 23(b)(3), by its plain terms, imposes a
“far more demanding” inquiry into the common issues which serve as the basis
for class certification. Id. at 623–24. While the inquiry may be more demanding,
the Supreme Court has also instructed that Rule 23(b)(3) “does not require a
plaintiff seeking class certification to prove that each elemen[t] of [her] claim [is]
susceptible to classwide proof.” Amgen Inc. v. Conn. Ret. Plans and Trust Funds,
133 S. Ct. 1184, 1196 (2013) (internal quotation marks omitted) (alterations in
original). Rather, all that is required is that a class plaintiff show that “common
questions ‘predominate.’” Id. (quoting Fed. R. Civ. P. 23(b)(3)). That is,
22
“[i]ndividual questions need not be absent. The text of Rule 23(b)(3) itself
contemplates that such individual questions will be present. The rule requires
only that those questions not predominate over the common questions affecting
the class as a whole.” Messner v. Northshore Uni. HealthSystem, 669 F.3d 802, 815
(7th Cir. 2012).
Furthermore, “[c]ommon issues may predominate when liability can be
determined on a class‐wide basis, even when there are some individualized
damage issues.” In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 139
(2d Cir. 2001); see also Leyva v. Medline Indus. Inc., 716 F.3d 510, 514 (9th Cir. 2013)
(“[T]he presence of individualized damages cannot, by itself, defeat class
certification under Rule 23(b)(3).”). The Supreme Court has explicitly determined
that it is “clear that individualized monetary claims belong in Rule 23(b)(3).”
Dukes, 131 S. Ct. at 2558. For the purposes of class certification, however,
plaintiffs cannot “identif[y] damages that are not the result of the wrong.”
Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1434 (2013). That is, “the plaintiffs must
be able to show that their damages stemmed from the defendant’s actions that
created the legal liability.” Leyva, 716 F.3d at 514. Put another way,
[t]he plaintiffs must . . . show that they can prove, through common
23
evidence, that all class members were . . . injured by the alleged
conspiracy. . . . That is not to say the plaintiffs must be prepared at
the certification stage to demonstrate through common evidence the
precise amount of damages incurred by each class member. But we
do expect the common evidence to show all class members suffered
some injury.
In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252 (D.C. Cir. 2013)
(internal citations omitted).
Finally, the disjunctive inquiry that district courts must engage in prior to
class certification requires analysis of the predominance of common issues, as
well as a determination that class certification is the superior method for
adjudicating these claims. Fed. R. Civ. P. 23(b)(3). Rule 23(b)(3) also lists four
factors—individual control of litigation, prior actions involving the parties, the
desirability of the forum, and manageability—which courts should consider in
making these determinations. Fed. R. Civ. P. 23(b)(3)(A)–(D). By the structure of
the rule, these factors seem to apply both to the predominance and superiority
inquiry. However, while these factors, structurally, apply to both predominance
and superiority, they more clearly implicate the superiority inquiry. See, e.g., Vega
v. T‐Mobile USA Inc., 564 F.3d 1256, 1278 (11th Cir. 2009) (“In determining
superiority, courts must consider the four factors of Rule 23(b)(3).”).
24
While Rule 23(b)(3) sets out four individual factors for courts to consider,
manageability “is, by the far, the most critical concern in determining whether a
class action is a superior means of adjudication.” 2 William B. Rubenstein,
Newberg on Class Actions § 4.72 (5th ed. West 2014). As a component of
manageability, in determining whether a class action in a particular forum is a
superior method of adjudication, courts have considered “when a particular
forum is more geographically convenient for the parties . . . or, for example, when
the defendant is located in the forum state.” Id. § 4.71.
B. Claims for Relief
1. FDCPA
Plaintiffs allege that Leucadia, Mel Harris, and Samserv defendants acted
in violation of various provisions of the FDCPA. The FDCPA was enacted “to
eliminate abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e).
The statute provides for civil liability for a wide range of abusive actions, and
plaintiffs focus their claims on violations of Section 1692e and Section 1692f of the
statute.
Section 1692e prohibits “false or misleading representations,” and provides
as follows:
25
A debt collector may not use any false, deceptive, or misleading
representation or means in connection with the collection of any
debt. Without limiting the general application of the foregoing, the
following conduct is a violation of this section: . . . (2) The false
representation of – (A) the character, amount, or legal status of any
debt . . . (8) Communicating or threatening to communicate to any
person credit information which is known or which should be
known to be false, including the failure to communicate that a
disputed debt is disputed. . . . (10) The use of any false
representation or deceptive means to collect or attempt to collect any
debt . . . .
15 U.S.C. § 1692e(2), (8), (10). Section 1692f, for its part, prohibits a debt collector
from “us[ing] unfair or unconscionable means to collect or attempt to collect any
debt.” Id. § 1692f. The FDCPA limits actions to those brought “within one year
from the date on which the violation occurs.” Id. § 1692k(d).
Violations of these provisions expose a debt collector to civil liability.
15 U.S.C. § 1692k. The district court concluded, and defendants do not
meaningfully challenge, that “[l]iability under the FDCPA can be established
irrespective of whether the presumed debtor owes the debt in question.” Sykes II,
285 F.R.D. at 292; see also Baker v. G.C. Svcs. Corp., 677 F.2d 775, 777 (9th Cir. 1982)
(“The Act is designed to protect consumers who have been victimized by
unscrupulous debt collectors, regardless of whether a valid debt actually
exists.”). In the case of a class action, named plaintiffs’ damages are capped at
26
$1,000. 15 U.S.C. § 1692k(a)(2)(A)–(B). Class damages are capped at $500,000 or 1
per centum of the net worth of the debt collector. Id. § 1692k(a)(2)(B). Prevailing
plaintiffs are also entitled to costs and attorney’s fees. Id. § 1692k(a)(3). The
FDCPA instructs that, in the case of a class action, that damages should be
assessed, inter alia, on the basis of “the frequency and persistence of
noncompliance by the debt collector, the nature of such noncompliance, the
resources of the debt collector, the number of persons adversely affected, and the
extent to which the debt collectorʹs noncompliance was intentional.” Id. §
1692k(b)(2).
2. RICO
To prevail on their civil RICO claims in this case, “plaintiffs must show (1)
a substantive RICO violation under [18 U.S.C.] § 1962, (2) injury to the plaintiff’s
business or property, and (3) that such injury was by reason of the substantive
RICO violation.” In re U.S. Foodservice, 729 F.3d at 117. Plaintiffs allege Leucadia,
Mel Harris, and Samserv defendants together formed a RICO enterprise for the
purposes of 18 U.S.C. § 1961(4), which the district court found plausible at the
motion to dismiss stage. Sykes I, 757 F. Supp. 2d at 426. Plaintiffs further allege
here that defendants, as part of this enterprise, engaged in acts of wire and mail
27
fraud in violation of 18 U.S.C. §§ 1341, 1344, which can serve as predicate acts for
a violation of 18 U.S.C. § 1962(c). The district court concluded that plaintiffs had
plausibly alleged that “defendants’ pursuit of default judgments and attempts to
enforce them against plaintiffs proximately caused their injuries, which include
the freezing of personal bank accounts and incurring of legal costs to challenge
those default judgments.” Sykes I, 757 F. Supp. 2d at 427–28.
3. State Law Claims
Plaintiffs finally bring two claims under state law. First, plaintiffs bring
claims pursuant to New York’s General Business Law, which prohibits
“[d]eceptive acts or practices in the conduct of any business, trade or commerce
or in the furnishing of any service in this state.” N.Y. Gen. Bus. L. § 349(a). “To
maintain a cause of action under § 349, a plaintiff must show: (1) that the
defendant’s conduct is ‘consumer oriented’; (2) that the defendants is engaged in
a ‘deceptive act or practice’; and (3) that the plaintiff was injured by this
practice.” Wilson v. Nw. Mut. Ins. Co., 625 F.3d 54, 64 (2d Cir. 2010) (citing Oswego
Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A., 623 N.Y.S. 2d 529,
532–33 (1995). With respect to the first element, it “may be satisfied by showing
that the conduct at issue ‘potentially affect[s] similarly situated consumers.’” Id.
28
(alteration in original) (quoting Oswego Laborers’ Local 214 Pension Fund, 623
N.Y.S. 2d at 533). The statute provides that an individual “may bring an
action . . . to enjoin such unlawful act or practice, an action to recover his actual
damages or fifty dollars, whichever is greater, or both such actions.” N.Y. Gen.
Bus. L. § 349(h). The law also provides that a court may award attorney’s fees and
also treble damages “up to one thousand dollars, if the court finds the defendant
wilfully or knowingly violated this section.” Id.
Second, plaintiffs bring a claim pursuant to the New York Judiciary Law
against the Mel Harris defendants. New York law provides that “[a]n attorney . . .
who . . . [i]s guilty of any deceit or collusion, or consents to any deceit or
collusion, with the intent to deceive the court or any party . . . [i]s guilty of a
misdemeanor, and . . . he forfeits to the party injured treble damages, to be
recovered in a civil action.” N.Y. Jud. L. § 487.
II. Application
A. The Proposed Classes Satisfy the Requirements of Commonality &
Typicality Under 23(a)2
2
As previously noted, the Supreme Court has acknowledged that, in
certain “context[s] . . . ‘[t]he commonality and typicality requirements of Rule
23(a) tend to merge.’” Dukes, 131 S. Ct. at 2551 n.5 (second alteration in original).
The district court analyzed both typicality and commonality and found that the
29
Rule 23(a)’s commonality prerequisite is satisfied if there is a common
issue that “drive[s] the resolution of the litigation” such that “determination of its
truth or falsity will resolve an issue that is central to the validity of each one of
the claims in one stroke.” Dukes, 131 S. Ct. at 2551. Consideration of this
requirement obligates a district court to determine whether plaintiffs have
“suffered the same injury.” Id. (internal quotation marks omitted). The district
court concluded that plaintiffs had satisfied the commonality requirement of
Rule 23(a). Specifically, the district court reasoned as follows:
[Plaintiffs’] overarching claim is that defendants systematically filed
false affidavits of merit and, in many instances, false affidavits of
service to fraudulently procure default judgments in New York City
Civil Court. Whether a false affidavit of merit or a false affidavit of
service or both were employed in a particular instance, the fact
remains that plaintiffs’ injuries derive from defendants’ alleged
unitary course of conduct, that is, fraudulently procuring default
judgments.
Sykes II, 285 F.R.D. at 290 (internal quotation marks and citation omitted). The
district court thus determined that the common injury in this case, which was the
same for all plaintiffs, is a fraudulently procured default judgment. We conclude
proposed class satisfied the typicality requirement “for many of the same reasons
they meet the commonality requirement.” Sykes II, 285 F.R.D. at 291. Defendants
and plaintiffs agree that in this case, the commonality and typicality
considerations are sufficiently merged to warrant their consideration in tandem.
30
that this commonality determination was not an abuse of discretion.
1. Affidavits of Merit
At the outset, Leucadia and Mel Harris defendants principally argue that,
by characterizing the common issue in this litigation as one involving the false
and fraudulent affidavits of merit, the district court impermissibly discounted the
importance of the affidavits of service. Thus, Leucadia defendants suggest that
“the district court, by elevating the importance of the affidavits of merit and
minimizing the importance of the affidavits of service, impermissibly rewrote
Plaintiffs’ substantive claims.” Mel Harris, likewise, suggest that “the District
Court elevated the importance of the affidavits of merit only by impermissibly
rewriting plaintiffs’ substantive claims to fit the class‐action procedure.” We
disagree. The operative complaint in this case makes clear that both sewer service
and false affidavits of merit are necessary to effectuating defendants’ alleged
scheme. Thus, while the operative complaint alleges that sewer service is “the
primary reason” few defendants appear in New York City Civil Court to defend
against debt collection actions, plaintiffs have made clear that this is but one
component of the overarching debt collection plan effectuated by defendants.
Thus, plaintiffs allege that “in order to secure an otherwise legally unobtainable
31
judgment on default, Defendants fraudulently swear to the courts that they have
actually served their victims, when they have not, and that they have admissible
proof that a debt is owed, when they do not.” Joint App’x at 54. We see nothing
impermissible in the district court determining that defendants’ scheme, which
had multiple components, was a “unitary course of conduct” that depended on
false affidavits of merit for its success. Marisol A. v. Giuliani, 126 F.3d 372, 377 (2d
Cir. 1997).
Second, such a framework makes sense, as it is not disputed that these
false affidavits of merit are necessary to the scheme to procure fraudulently
obtained default judgments based on what is required in state court. The New
York City Civil Court has jurisdiction over debt collection actions that seek to
recover damages of $25,000 or less. N.Y.C. Civ. Ct. Act § 202. Section 3215 of the
New York Civil Practice Law and Rules governs the procedures for obtaining a
default judgment in these courts. Section 3215(a) permits plaintiffs seeking “a
sum certain” to make an application “to the clerk within one year after the
default. The clerk, upon submission of the requisite proof, shall enter judgment
for the amount demanded in the complaint . . . .” N.Y. C.P.L.R. § 3215(a).
Requisite proof, in turn, is defined in Section 3215(f) as “proof of service of the
32
summons and the complaint . . . and proof of the facts constituting the claim, the
default and the amount due by affidavit made by the party.” Id. § 3215(f). Thus,
both affidavits of service, as well as affidavits of merit, are necessary to obtain
default judgments, though neither, independently, is sufficient.
Plaintiffs’ contention is that Fabacher’s statement in each one of the
affidavits of merit, that he is “personally familiar with, and [has] personal
knowledge of, the facts and proceedings relating to” the default judgment action,
see, e.g., Appellees’ App’x at 10, is false. The reason such statements are false is
that Fabacher has not reviewed, nor do defendants actually possess, documents
relevant to the underlying debt.
Resolving the question of whether this contention is false “will resolve an
issue that is central to the validity of each one of the claims in one stroke.” Dukes,
131 S. Ct. at 2551. With respect to the FDCPA, determining whether Fabacher’s
statement is indeed false resolves the central basis for FDCPA liability in this
case, namely, the prohibition on making “any false, deceptive, or misleading
representation . . . in connection with the collection of any debt.” 15 U.S.C. §
1692e. Similarly, the prohibition on “deceptive acts or practices,” N.Y. Gen. Bus.
L. § 349(a), and the prohibition on attorney’s engaging in “deceit,” N.Y. Jud. L.
33
§ 487, can fairly be said to turn on the falsity of Fabacher’s representation of
personal knowledge. Both wire and mail fraud, the predicate acts underlying
plaintiffs’ theory of RICO liability, may be established “by means of false or
fraudulent . . . representations.” 18 U.S.C. § 1341 (mail fraud); id. § 1343 (wire
fraud). False affidavits of merit thus provide independent bases for liability for
each of the claims advanced by plaintiffs. While the resolution of this question
will not address each element of each of these claims, that is not required for
there to be a common question under Rule 23. See Amgen, 133 S. Ct. at 1196. The
district court did not abuse its discretion by finding that a fraudulently obtained
state court judgment that depended on the filing of a false affidavit of merit could
serve as a common issue satisfying Rule 23(a).
2. Affidavits of Service
Moreover, even assuming that the district court was required to determine
that the false affidavits of service were susceptible to class‐wide proof, we would
still conclude that the district court did not abuse its discretion in finding that the
requirements of Rule 23(a) were satisfied. The district court found, on the basis of
the evidence before it, that there was “substantial support for plaintiffs’ assertion
that defendants regularly engaged in sewer service.” Sykes II, 285 F.R.D. at 284.
34
Further, determining whether to certify a class may require a court “to consider
how a trial on the merits would be conducted if a class were certified.” Bell Atl.
Corp. v. AT&T Corp. 339 F.3d 294, 302 (5th Cir. 2003) (internal quotation marks
omitted) (discussing predominance requirement under Rule 23(b)(3)).
Plaintiffs articulate two distinct reasons why they will be able to bring
forward at trial competent evidence which will prove the fraudulent nature of the
affidavits of service. First, they suggest that the affidavits of service will not be
entitled to credibility, given the district court’s finding that “defendants regularly
engaged in sewer service.” Sykes II, 285 F.R.D. at 284. Absent the affidavits of
service, the only other means that Samserv defendants would have at their
disposal to prove service would be contemporaneous logbooks, which process
servers are required to keep by law. N.Y. Gen. Bus. L. § 89cc. Absent these
logbooks, the testimony of process servers cannot be credited. First Commercial
Bank of Memphis v. Ndiaye, 733 N.Y.S. 2d 562, 565 (N.Y. Sup. Ct. 2001) (“Testimony
of a process server who fails to keep records in accordance with statutory
requirements cannot be credited.”).
Second, plaintiffs aver that, because Samserv defendants have been
ordered to turn over their logbooks to plaintiffs, but have not, they will be able to
35
prove fraud by spoliation. Rule 37(b)(2)(A) of the Federal Rules of Civil
Procedure permits, in the case of a failure to comply with a discovery order, the
district court to, inter alia, “direct[] that the matters embraced in the order or
other designated facts be taken as established for purposes of the action, as the
prevailing party claims.” Fed. R. Civ. P. 37(b)(2)(A)(i). Proof of fraudulent service
might thus be achieved on a class‐wide level. Defendants misread the
requirements of Rule 23(a) when they suggest that these theories of class‐wide
proof fail to “affirmatively demonstrate [plaintiffs’] compliance with” Rule 23(a).
Dukes, 131 S. Ct. at 2551. All that must be proven, at this stage, is that “there are in
fact sufficiently . . . common questions of law or fact.” Id. Anticipating proof of
failures of service in the manner suggested by plaintiffs is in keeping with
demonstrating a common question of fact based on the district court’s obligation
to anticipate “how a trial on the merits would be conducted if a class were
certified.” Bell Atl. Corp., 339 F.3d at 302 (internal quotation marks omitted).
In sum, the district court did not abuse its discretion in determining that
plaintiffs had demonstrated sufficiently common questions of law or fact to
satisfy the prerequisites of Rule 23(a).
36
B. The District Court did Not Abuse its Discretion in Certifying the
23(b)(3) Class
While Rule 23(b)(3) also speaks in terms of commonality, it imposes a “far
more demanding” inquiry. Amchem, 521 U.S. at 623–24. By its terms, it anticipates
the existence of individual issues: the class may only be certified if “questions of
law or fact common to class members predominate over any questions affecting
only individual members.” Fed. R. Civ. P. 23(b)(3). The mere existence of
individual issues will not be sufficient to defeat certification. Rather, the balance
must tip such that these individual issues predominate. But the district court
must establish that a class action is superior to “other available methods for fairly
and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). We
conclude that the district court did not abuse its discretion in finding these
requirements met, and thus certifying this class under Rule 23(b)(3).
1. Common Questions of Law and Fact Predominate
Defendants submit that individual issues will predominate over common
issues in this case because the district court will be forced to confront individual
issues with respect to damages, timeliness, and service. We conclude that the
district court did not abuse its discretion in finding that these issues, even if they
37
are individualized in certain respects, do not predominate over class issues.
a. Damages
In making its decision on the propriety of class certification, the district
court reasoned as follows:
Every potential class member’s claim arises out of defendants’
uniform, widespread practice of filing automatically‐generated, form
affidavits of merit based on ‘personal knowledge’ and, in many
instances, affidavits of service, to obtain default judgments against
debtors in state court. Whether this practice violates the FDCPA,
New York GBL § 349, New York Judiciary Law § 487, and/or
constitutes a pattern of racketeering activity in violation of 18 U.S.C.
§ 1962(c) and (d) does not depend on individualized
considerations. . . . The Court recognizes that should defendants be
found liable on some or all of these claims, individual issues may
exist as to causation and damages as well as to whether a class
member’s claim accrued within the applicable statute of limitations.
This, however, does not preclude a finding of predominance under
Rule 23(b)(3).
Sykes II, 285 F.R.D. at 293.
Plaintiffs’ operative complaint seeks three kinds of damages: statutory
damages; “actual and/or compensatory damages . . . in an amount to be proven at
trial”; and what plaintiffs refer to as “incidental damages.” Joint App’x at 219–20.
It is not disputed that statutory damages under GBL § 349 can be assessed on the
basis of common proof, as they are capped at $50. N.Y. Gen. Bus. L. § 349(h).
38
Furthermore, Congress has devised a generally applicable formula for class
action damages under the FDCPA, one which caps damages at $500,000 and
provides that district courts consider, among other factors, the scope of the
violations of the FDCPA as well as the number of individuals implicated by
fraudulent debt collection practices. 15 U.S.C. § 1692k(b)(2).
The only individualized damages inquiries that “may exist,” Sykes II, 285
F.R.D. at 293, are those that turn, in plaintiffs’ words, on “the return of the money
extracted from them as a result of . . . fraudulent judgments,” as well as
incidental damages. We conclude that inquiries into these damages are not
sufficient grounds on which to conclude that the district court’s determination
that individualized damages issues will not predominate in this case was an
abuse of discretion. In the first place, plaintiffs point out that the amount of any
money extracted from plaintiffs is stored by defendants themselves. Because the
evidence necessary to make out such damages claims, while individual, is easily
accessible, such individual damage considerations do not threaten to overwhelm
the litigation. See Leyva, 716 F.3d at 514.
Second, defendants misstate the central holding of Comcast in an attempt to
advance the argument that individual damages issues predominate in this case. It
39
is true that the Court, in Comcast, reversed a grant of class certification on the
grounds that individual damages issues precluded certification. But these
damages claims were individual because, based on undisputed evidence, the
plaintiffs’ “model f[e]ll[ ] . . . short of establishing that damages [were] capable of
measurement on a classwide basis.” 133 S. Ct. at 1433. This was only so, however,
because the sole theory of liability that the district court determined was common
in that antitrust action, overbuilder competition, was a theory of liability that the
plaintiffs’ model indisputably “failed to measure” when determining the
damages for that injury. Id. This is not the case here. The common theory of
liability that plaintiffs advance is dependent on a fraudulent course of conduct
that was allegedly engaged in by defendants, in violation of multiple federal and
state statutes. That liability model is uniquely tied to the damages, which
plaintiffs claim they are entitled to with respect to each claim that they advance,
whether under the FDCPA, RICO, or state statutes. Comcast did not rewrite the
standards governing individualized damage considerations: it is still “clear that
individualized monetary claims belong in Rule 23(b)(3).” Dukes, 131 S. Ct. at 2558.
All that is required at class certification is that “the plaintiffs must be able to
show that their damages stemmed from the defendant’s actions that created the
40
legal liability.” Leyva, 716 F.3d at 514. Plaintiffs in Comcast, admittedly, could not
do so. Plaintiffs here have satisfied that standard.
Third, defendants suggest that the district court did not engage in the
“rigorous analysis” required at the class certification stage. In doing so, they
emphasize that the district court’s statement that individualized questions “do[]
not preclude a finding of predominance under Rule 23(b)(3)” was not sufficient
to make out the opposite conclusion, namely, that common questions did
predominate. Sykes II, 285 F.R.D. at 293. Defendants’ quest for magic words
overlooks the vast number of common issues that the district court identified as
necessary to resolve this litigation. It is true that the law of this Circuit is that the
fact that “damages may have to be ascertained on an individual basis . . . is . . . a
factor that we must consider in deciding whether issues susceptible to
generalized proof ‘outweigh’ individual issues.” McLaughlin v. Am. Tobacco Co.,
522 F.3d 215, 231 (2d Cir. 2008), abrogated on other grounds by Bridge v. Phx. Bond &
Indem. Co., 533 U.S. 639 (2008), as recognized by In re U.S. Foodservice, 729 F.3d at
119. However, from the above it is clear that individual damages did factor into
the district court’s analysis. The district court simply found that these individual
considerations did not outweigh other issues which were common, such as the
41
following:
(1) whether defendants’ practice of filing affidavits of merit and/or
affidavits of service with respect to the plaintiff class members
violates the FDCPA; (2) whether defendants collectively constitute a
RICO enterprise within the meaning of 18 U.S.C. § 1961(4); (3)
whether defendants have engaged in a pattern of racketeering
activity in connection with the collection of debt in violation of 18
U.S.C. § 1962(c) and (d); (4) whether defendants have used deceptive
acts and practices in the conduct of their businesses in violation of
New York GBL § 349; and (5) whether the Mel Harris defendants
have engaged in deceit and collusion with intent to deceive the
courts and any party therein in violation of New York Judiciary Law
§ 487.
Sykes II, 285 F.R.D. at 293. Defendants concede that each of these questions is one
that is common to the members of the class certified under Rule 23(b)(3). They
merely quibble with the district court’s assessment that, on balance, these
ultimate issues of liability outweigh the individualized concerns that they raise.
On reviewing the district court’s certification order, this is not a sufficient
contention on which we may rely to conclude that the district court abused its
discretion in certifying this class.
b. Timeliness
The district court acknowledged, as well, that individualized issues of
timeliness may inhere in the class “should defendants be found liable on some or
42
all of these claims.” Id. at 293. Defendants argue, again, that the district court was
wrong to find that the presence of such individual issues did not indicate that
individual issues would predominate. Plaintiffs respond that they do not invoke
equitable tolling. Plaintiffs are correct: in support of their motion for class
certification before the district court, plaintiffs averred that they “do not seek to
include as class members persons whose claims accrued outside the statute of
limitations for each substantive claim. . . . Indeed, only individuals whose claims
accrued within one year prior to the filing of the Complaint will seek relief on the
FDCPA claim.” Sykes v. Mel Harris & Assocs., No. 09‐cv‐8486 (DC), ECF No. 99, at
27.
Defendants point out that the district court had earlier relied on equitable
tolling in order to determine that the claims of Sykes and Perez were timely
under the FDCPA. They do not claim that plaintiffs are estopped from arguing
that equitable tolling does not apply based on the district court’s determination
that Sykes and Perez could bring actions under the FDCPA on the basis of
equitable tolling. Sykes I, 757 F. Supp. 2d at 413. Rather, the only argument with
any impact advanced by any of the defendants with respect to this matter is one
made by Mel Harris defendants, who argue that disclaiming equitable tolling
43
“simply trades (without eliminating) a serious Rule 23(b)(3) predominance
problem for a Rule 23(a) adequacy problem: Class counsel’s decision to abandon
equitable tolling may render the remaining claims a marginally better ‘fit’ for
class treatment. But that comes at the expense of class members they represent
who have claims that are timely only because of equitable tolling . . . .”
We see no merit in this contention. Under Rule 23(a)(4) of the Federal Rules
of Civil Procedure, adequacy is satisfied unless “plaintiff’s interests are
antagonistic to the interest of other members of the class.” Baffa v. Donaldson,
Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir. 2000). The fact that some class
members may advance RICO, GBL, and Judiciary Law claims on the basis of the
date that the complaint was filed (as they have longer statutes of limitations, see
Gaidon v. Guardian Life Ins. Co. of America, 727 N.Y.S. 2d 30, 34 (2001) (three years
for GBL claims), Lefkowitz v. Applebaum, 685 N.Y.S. 2d 460, 461 (2d Dep’t 1999)
(three years for New York Judiciary Law); Agency Holding Corp. v. Malley–Duff &
Assocs., 483 U.S. 143, 156 (1987) (four years for RICO)) does not mean the interests
of these class members are antagonistic to those other members of the class that
also advance FDCPA claims.
While it may be true that disclaiming equitable tolling for Sykes and Perez
44
may necessitate the district court to limit the sorts of claims that these named
plaintiffs may bring, that is a determination for the district court to make in the
first instance. It is certainly not a justification for reversing the district court’s
grant of class certification: at the most, if Sykes’s and Perez’s FDCPA claims are
time‐barred, this only means that they cannot assert claims under the FDCPA.
The practical import of such a rule is that Sykes and Perez may be members of a
subclass, advancing only a portion of the claims certified under Rule 23(b)(3).
Such subclasses are contemplated by the Federal Rules, see Fed. R. Civ. P. 23(c)(5),
and may be certified after the original certification order is upheld. See Marisol,
126 F.3d at 378 (holding that the district court did not abuse its discretion in
certifying the class but suggesting that prior to trial the district court “ensure that
appropriate subclasses are identified”).
It is within plaintiffs’ prerogative to disclaim equitable tolling, and they
may do so without sacrificing the adequacy of representation, especially as
defendants make no actual attempt to show why such a disclaimer may be
antagonistic. It is for the district court to determine the impact of this disclaimer
on the specific claims particular plaintiffs may bring, but it may do that at a
45
future date, without our disturbing the class certification order.3
c. Causation
The district court also determined that individual causation issues may
exist in this case, Sykes II, 285 F.R.D. at 293, but nevertheless found that such
causation issues would not predominate. We agree.
Individual issues related to causation in this case are formulated by
defendants on appeal as individual issues related to service. Thus, for example,
Mel Harris advance the argument that “a class member who was properly served
and paid debts that he actually owed has sustained a radically different ‘injury’
from an unserved member subject to a default judgment for a debt he did not
owe.” Likewise, Leucadia defendants submit that “where the entry of judgment
resulted from a debtor’s failure to appear despite adequate notice, the debtor
3
For similar reasons, defendants’—and the dissent’s, see infra Op. pp.
20–21—contentions regarding the inappropriateness of certifying a class to bring
claims against Samserv, when Samserv admittedly did not serve process on all
individuals who were sued or will be sued in New York City Civil Court by Mel
Harris on behalf of Leucadia, are also misplaced. Plaintiffs who were not served
by Samserv allege no FDCPA or GBL claims against Samserv—they only bring
RICO claims. Carving out such claims may also be the subject of an appropriate
subclass under Rule 23(c)(5), but this is for the district court to determine in the
first instance. See Marisol, 126 F.3d at 379 (“Rule 23 gives the district court
flexibility to certify subclasses as the case progresses and as the nature of the
proof to be developed at trial becomes clear.”).
46
must articulate a different theory of injury.” None of these contentions are
availing.
First, with respect to the FDCPA claims, the district court concluded that
the existence of an underlying debt was unnecessary in order to establish liability
under that statute. Sykes II, 285 F.R.D. at 292. Affidavits of merit, submitted to the
Civil Court, were allegedly fraudulent in attesting to “personal knowledge” of
the existence of such underlying debt, and were also necessary to obtaining the
default judgments that plaintiffs allege were fraudulently obtained. We fail to
recognize any individualized causation issues with respect to plaintiffs’ claims
under the FDCPA. See Baker, 677 F.2d at 777 (actual debt is not necessary to bring
claims under the FDCPA).
Second, where causation does seem most relevant to us, and where we
presume the district court recognized such individualized causation issues, was
with respect to plaintiffs’ claims under RICO. This is because RICO requires that
the alleged injury to plaintiffs’ “business or property . . . was by reason of the
substantive RICO violation.” In re U.S. Foodservice, 729 F.3d at 117. This causation
analysis will require the district court to identify (1) the property interest that is
protected by RICO, as alleged by plaintiffs, and (2) whether the injury to that
47
interest was caused by the RICO violation. The district court at least found that
the injuries to plaintiffs included “freezing of personal bank accounts and
incurring of legal costs to challenge those default judgments.” See Sykes I, 757 F.
Supp. 2d at 427–28. Defendants do not challenge that this is a sufficient property
interest on appeal. Nor do they bring forward any evidence that the damage to
these property interests was not the result of default judgments. What they do
argue, however, is that if a debt was actually owed, and a default judgment was
achieved by means of proper service, a plaintiff cannot actually be an injured
party under RICO to the extent that defendants extracted money based on a
default judgment. The argument has force. But it remains a single arguably
individual issue among the myriad common issues that we have already noted.
We will not upset the district court’s determination that plaintiffs have carried
their burden to show that common issues predominate on the basis of
defendants’ construction of this hypothetical class plaintiff alleging one
particular claim.
Third, none of the potential causation issues related to service suggest that
Samserv is not a proper class defendant in this case. It is true that Samserv was
kept in this litigation with respect to the FDCPA claims on the basis that it could
48
not claim the benefits of the FDCPA’s exemption for process servers on the
grounds that the district court concluded, at the motion to dismiss stage, that
plaintiffs adequately alleged that Samserv engaged in sewer service. Sykes I, 747
F. Supp. 2d at 423. This does nothing to absolve Samserv of claims under RICO,
however, which premises Samserv’s liability on its participation in a RICO
conspiracy. See Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495–97 (1985). Nor,
based on our conclusions regarding the amenability of class claims regarding
common proof of the falsity of Samserv’s affidavits of service, supra at pp. 34–36,
does it mean that Samserv is not a proper defendant with respect to plaintiffs’
FDCPA claims.
In short, the district court properly considered the evidence before it. It
concluded that, while individual issues existed in this case, they did not
predominate over common issues. Defendants wish the district court had
performed this balancing equation differently. But that is not sufficient for us to
find that the district court abused its discretion in certifying this class under Rule
23(b)(3).
2. Proceeding by Class is a Superior Method of Adjudication
a. Defendants’ Theory of Superiority is Unpersuasive
49
Mel Harris defendants raise, for the first time on appeal, the novel theory
that the district court’s superiority analysis was incorrect because it undervalued
the obligation to consider the “desirability . . . of concentrating the litigation of
the claims in the particular forum.” Fed. R. Civ. P. 23(b)(3)(C). In particular, Mel
Harris suggest that “[i]f the gravamen of this case . . . really were the adequacy of
the affidavits of merits filed with the New York City Civil Court, surely that court
is the superior forum to hear the complaint and devise any remedies.”4
This is a fine rhetorical point that depends for its strength on a complete
misreading of (1) the jurisdiction of the New York City Civil Court, (2) the
4
The dissent intimates that Mel Harris cannot be expected to have
previously raised this superiority theory, as their arguments below were tailored
to plaintiffs’ emphasis on sewer service, which involved questions of fact unique
to each debtor. See infra Op. p. 10. According to the dissent, class counsel’s shift in
the focus of the complaint, to the submission of false affidavits of merit, accounts
for the new state‐forum argument. But this explanation falls flat, as any shift in
the focus of plaintiffs’ allegations has not affected the nature of defendants’
contentions. Mel Harris defendants continue to insist that resolution of plaintiffs’
claims will require “individualized showings,” now related to the affidavits of
merit, which will result in “one hundred thousand mini‐trials.” Further, the state
procedural remedy the dissent endorses to address these claims concurrently, see
infra Op. pp. 8–14, could have been raised by Mel Harris before the district court,
as that provision applies to sewer service, see N.Y. C.P.L.R. § 5015(c) (providing,
upon application of an administrative judge, for en masse vacatur of default
judgments obtained, inter alia, by “fraud, misrepresentation, . . . lack of due service,
. . . or other illegalities”) (emphasis added)).
50
requirements of Rule 23(b)(3), and (3) the gravamen of plaintiffs’ complaint.
In the first place, there is no basis to assert that plaintiffs’ claims even could
be heard as a class in the New York City Civil Court. These courts have
jurisdiction only over those actions in which the value of the controversy is
$25,000 or less. N.Y.C. Civ. Ct. Act § 202. While individual plaintiffs might seek
to bring their actions in such a court based on this amount‐in‐controversy
limitation, there is no basis to conclude that plaintiffs could proceed as a class
there. The argument amounts to little more than Mel Harris’s expression of a
preference that their alleged widespread fraudulent behavior be dealt with in a
piecemeal fashion. That is not how plaintiffs have chosen to proceed. The fact
that Mel Harris would have preferred plaintiffs to have advanced their claims
differently cannot make it a requirement under Rule 23(b)(3).
Second, the forum analysis of Rule 23(b)(3) is not grounded in a
consideration of the comparative value of pursuing a claim in federal or state
court. Defendants’ authorities on this issue, which are apparently the only
authorities that have ever conducted a superiority analysis by reference to the
availability of relief in a federal or state forum, have not considered claims
analogous to those brought by plaintiffs here. Kamm v. Cal. City Dev. Corp., 509
51
F.2d 205 (9th Cir. 1975) dealt with a case in which putative class plaintiffs had
already been represented by the State Attorney General in a prior action with
putative class defendants. Id. at 207–08. The same was true of two other cases
defendants rely on for the proposition that analysis of state court action is
required to determine whether a federal forum is superior. Cartwright v. Viking
Indus., Inc., 2009 WL 2982887, at * 14 (E.D. Cal. Sept. 14, 2009) (referencing
ongoing state litigation); Plant v. Merrifield Town Ctr., Ltd. P’ship, 2008 WL
4951352, at * 3 (E.D. Va. Nov. 12, 2008) (same). While there has been state court
litigation in this case, it is not state court litigation which advances the claims that
plaintiffs advance now. Further, we will not credit the statement of the United
States District Court of the Eastern District of Louisiana, that “strains on the state
judicial system after Hurricane Katrina” supported a federal forum for particular
plaintiffs’ claims, as support for Mel Harris’s contention that analysis of the
superiority requires a consideration of the comparative merits of a state or federal
court. Turner v. Murphy Oil USA, Inc., 234 F.R.D. 597, 610 (E.D. La. 2006). The
Turner court purported to consider the value of state versus federal court writ
large, but did so only in the context of resource strains on state court, which have
not been alleged here. And this observation was far from necessary to the
52
holding, given that the district court prefaced this observation by recognizing the
value of certifying a class in order to “centralize these proceedings.” Id.
Defendants here seek the opposite of centralization: rather, they seek the
fragmentation of each of plaintiffs’ claims into, perhaps, hundreds of thousands
of actions. The overwhelming weight of authority suggests that the forum
requirement is one that centers on geography, rather than a comparative analysis
of the benefits available under either federal or state law. Rubenstein, supra,
§ 4.71. Mel Harris’s authorities have not convinced us otherwise.
Third, Mel Harris’s argument depends on a misreading of the gravamen of
plaintiffs’ allegations. It is ultimately not the procedures of New York City Civil
Court, or the ultimate default judgments, that are at issue in this case. It is, rather,
the fraudulent means that defendants employed in order to obtain those
judgments. These means are the basis of claims that sound both in federal and in
state law. To the extent that the district court had jurisdiction to entertain these
claims, we see no basis for rewriting Rule 23(b)(3)(C) to impose a limit on the
district court’s power.
Even if we were to credit Mel Harris’s argument that forum analysis
requires us to consider state fora as opposed to federal fora, we would not
53
conclude that the district court abused its discretion in concluding that
proceeding by class is superior to alternatives for adjudicating these claims. Fed.
R. Civ. P. 23(b)(3). Defendants engage in no other consideration of the 23(b)(3)
factors. They do not even engage with the district court’s conclusions that a class
action “is, without question, more efficient than requiring thousands of debtors
to sue individually.” Sykes II, 285 F.R.D. at 294. Echoing the Supreme Court’s
concerns in Amchem, 521 U.S. at 617, the district court concluded that “class
members’ interest[] in litigating separate actions is likely minimal given their
potentially limited means with which to do so and the prospect of relatively
small recovery.” Sykes II, 285 F.R.D. at 294 (citing Fed. R. Civ. P. 23(b)(3)(A)).
Nor are we convinced that proceeding in state court is, as the dissent
suggests, “superior in every way” to class action. See infra Op. pp. 1, 8–13. New
York law provides for the en masse vacatur of default judgments obtained
through fraud or other illegal means upon the application of an administrative
judge, who “may bring a proceeding to relieve a party or parties” from such
judgments. N.Y. C.P.L.R. § 5015(c) (emphasis added). Having initiated this
proceeding, the administrative judge, rather than the judgment defaulter, acts as
the petitioner before a different judge who is to decide the application. See, N.Y.
54
C.P.L.R. § 5015 (McKinney), Practice Commentaries, C5015:13; see also, Mead v.
First Trust & Deposit Co., 397 N.Y.S. 2d 295, 297 (N.Y. Sup. Ct. 1977)
(acknowledging denial of amicus curiae status to legal services corporation that
requested proceedings under forerunner provision to § 5015(c) because it “was
interested in the outcome of the proceeding”). Notwithstanding its remedial
purposes, this discretionary procedure (1) provides plaintiffs no right of action,
(2) cannot address the gravamen of the plaintiffs’ allegations here as it could only
vacate the default judgments against them, and (3) denies plaintiffs any control
over the course of the litigation. The dissent’s distaste for “hungry lawyers,” and
aversion to awarding attorneys’ fees in class actions, see infra Op. pp. 10, 14,
cannot justify requiring plaintiffs, under the guise of Rule 23(b)(3)’s superiority
analysis, to pass through the threshold of the state courthouse to seek relief that
cannot seriously be entertained as an adequate, let alone superior, substitute for
proceeding by class on these claims.
b. Defendants’ Rooker‐Feldman and Full Faith & Credit
Arguments are Unavailing at the Class Certification
Stage
Just how far Mel Harris’s superiority arguments fall from the mark of
55
requiring reversal of the district court’s class certification order under Rule
23(b)(3)(C) becomes even clearer when considered in light of the two doctrinal
bases on which defendants argue that class certification was inappropriate in
light of federalism concerns, namely, the Rooker‐Feldman doctrine and the Full
Faith and Credit Act. We take these arguments in order.
Rooker‐Feldman bars the federal courts from exercising jurisdiction over
claims “brought by state‐court losers complaining of injuries caused by state‐
court judgments rendered before the district court proceedings commenced and
inviting district court review and rejection of those judgments.” Exxon Mobil Corp.
v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). We have clarified that in order
to satisfy the requirements of Rooker‐Feldman, the defendant must satisfy the
following four requirements:
First, the federal‐court plaintiff must have lost in state court. Second,
the plaintiff must complain of injuries caused by a state‐court
judgment. Third, the plaintiff must invite district court review and
rejection of that judgment. Fourth, the state‐court judgment must
have been rendered before the district court proceedings
commenced.
Hoblock, 422 F.3d at 85 (internal quotation marks and modifications omitted). The
causation requirement is only satisfied if “the third party’s actions are produced
56
by a state court judgment and not simply ratified, acquiesced in, or left
unpunished by it.” Id. at 88.
The district court concluded, at the motion to dismiss stage, that “plaintiffs
assert claims independent of the state‐court judgments and do not seek to
overturn them.” Sykes I, 757 F. Supp. 2d at 429. We agree. As explained
previously, claims sounding under the FDCPA, RICO, and state law speak not to
the propriety of the state court judgments, but to the fraudulent course of
conduct that defendants pursued in obtaining such judgments.
Leucadia defendants, for their part, offer the more subtle argument that the
causation components of Rooker‐Feldman required the district court to exclude
from its class certification order “remittance” damages, by which Leucadia means
the compensatory damages that plaintiffs claim defendants have extracted as a
result of the entry of a default judgment. We disagree.
The crux of the issue, as identified by Leucadia, is not simply Rooker‐
Feldman, but rather the requirement that the district court’s certification order
“define the class and the class claims, issues, or defenses, and must appoint class
counsel.” Fed. R. Civ. P. 23(c)(1)(B). Leucadia’s argument is that the certification
order under Rule 23(b)(3), which identifies all of the above but does not exclude
57
the certain category of damages that Leucadia believes is not cognizable under
Rooker‐Feldman, finds no basis in the text of Rule 23, nor in the class certification
decisions that we have identified.
Even if we credited Leucadia’s contention that the state court judgment
satisfied the causal requirements of Rooker‐Feldman, rather than acting as
ratification of a harm that resulted from fraudulent conduct on behalf of
defendants, Hoblock, 422 F.3d at 85, the contention would have no merit. There is
no textual basis to endorse Leucadia’s view that certain categories of damages
must be carved out of a class certification order under Rule 23(c)(1)(B). The
requirements are that the class, the class claims, and issues, be identified. Fed. R.
Civ. P. 23(c)(1)(B). The district court’s class certification order did just that: it
identified a class of individuals that it defined as “all persons who have been
sued by the Mel Harris defendants as counsel for the Leucadia defendants.”
Special App’x at 47. It further identified the claims as those arising under RICO,
the FDCPA, GBL § 349, and New York Judiciary Law § 487. Special App’x at 47.
There are good reasons for these limited requirements. The district court’s
order is not a final statement of the merits, just as class certification is not an
opportunity to “engage in free‐ranging merits inquiries.” Amgen, 133 S. Ct. at
58
1194–95. We see no use in a class certification order that is required to list all
possible defenses to all possible damage claims, nor do we see, in the text of Rule
23, any requirement for it.
Nor, in our view, do defendants’ arguments sounding under the Full Faith
and Credit Act fare much better. The act requires that state court proceedings
must be afforded “the same full faith and credit in every court within the United
States . . . as they have by law or usage in the courts of such State . . . from which
they are taken.” 28 U.S.C. § 1738. Defendants urge that such doctrine bars us
from considering plaintiffs’ damages claims seeking the return of default
judgments, because state courts treated judgments entitling them to recovery as
valid. We decline to consider this argument, however, for the same reasons that
the district court declined to carve out specific damages that might be available to
the class based on its certification order: such a determination is simply not
required under Rule 23(c)(1)(B).5
5
It may also be, on full adjudication of the merits of this issue, that the
district court may determine that the issue has not been properly raised. The
requirement that federal courts afford full faith and credit to state court
judgments is an argument that federal courts must give res judicata effect to the
state court judgment. See Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481–82
(1982). Res judicata is an affirmative defense that must be pleaded. See Fed. R.
Civ. P. 8(c). Defendants have not asserted a res judicata defense in their answers.
59
A word may be in order, however, to illustrate how far afield defendants’
arguments sounding in federalism require us to go from the ultimate merits of
plaintiffs’ claims. The parties remonstrate over whether or not Fabacher’s
declaration as to “personal knowledge” was in fact required to make out an
application for a default judgment in New York Civil Court. Thus, Mel Harris in
particular have asked us to consider a Directive of the New York Civil Court,
issued in 2009. This directive imposes burdens on third‐party creditors seeking
default judgments in addition to those imposed under Section 3215 of the CPLR.
N.Y.C. Civ. Ct. Directive DRP‐182 (May 2009). This Directive requires, in
particular, that a third‐party debt collector include “[a]n Affidavit of a Witness of
the Plaintiff, which includes a chain of title of the accounts, completed by the
plaintiff/plaintiff’s witness.” Id. This form affidavit only requires the witness to
attest to the chain of title “to the best of [his or her] knowledge.” Id. Plaintiffs, for
their part, point to a checklist prepared by the New York City Civil Court, which
directs parties pursuing a default judgment to submit “an Affidavit of Facts from
a person with personal knowledge of the facts.” New York City Civil Court,
Entering Civil Judgments,
http://www.courts.state.ny.us/COURTS/nyc/civil/judgments_atty.shtml#checklist
60
(last visited Feb. 6, 2015).
Whether or not Fabacher was required to attest to personal knowledge of
the underlying debt in his affidavit of merit, as plaintiffs contend, or whether a
more lax standard governs his affidavits, as Mel Harris contend, is ultimately
irrelevant to adjudicating liability under any of the claims that plaintiffs have
brought. What matters is that, in hundreds of thousands of forms, he did attest to
this knowledge, despite the undisputed fact, at the class certification stage, that
he did not in fact actually review underlying documentation related to these
loans. Whatever was required in New York City Civil Court will not decide the
issue of liability for these defendants. The conduct of defendants, and the
question of whether this conduct was ultimately fraudulent, will decide their
liability. The federal system, with its guarantees of concurrent jurisdiction, and
the federal laws under which plaintiffs seek relief, permit as much.
3. We Decline to Decide, in the First Instance, Whether the
FDCPA Permits Claims for the False Statements Alleged
Here
Defendants raise a final issue related to the propriety of class certification,
namely, the question of whether or not the FDCPA permits a plaintiff to assert
claims for a false statement that was made to a party other than the debtor.
61
We must determine the propriety of making a decision on this issue at this
stage in the proceedings. Plaintiffs point out that we are not to “engage in free‐
ranging merits inquiries at the certification stage.” Amgen, 133 S. Ct. at 1194–95.
And it is undisputed that the question of whether false statements, such as those
made by Fabacher in his affidavits of merit, made to third parties are actionable
under the FDCPA is a question common to the class under both Rule 23(a) and
23(b)(3): resolving that such statements are not actionable would “resolve an
issue that is central to the validity” of the FDCPA claim “in one stroke.” Dukes,
131 S. Ct. at 2551. Indeed, the district court’s class certification decision stated
that “there is a question of law as to whether making false representations in
court, rather than to a debtor, violates the FDCPA,” Sykes II, 285 F.R.D. at 290, but
ultimately did not pass on the issue. We think this the proper determination, as it
is unlikely that the Federal Rules, which require a plaintiff to identify a common
question at the class certification stage, also require the district court to resolve
that question at the same stage in the litigation. The district court did not commit
error in declining to rule definitively on whether the FDCPA covers the false
statements at issue in this case.
62
We decline to address this question, in the first instance,6 on appeal. See
Dardana Ltd. v. Yuganskneftegaz, 317 F.3d 202, 208 (2d Cir. 2003) (“It is this Court’s
usual practice to allow the district court to address arguments in the first
instance.”). We leave it to the district court to decide this issue at a later stage of
the litigation.
C. The District Court Did Not Abuse its Discretion in Certifying the Rule
23(b)(2) Class
1. Proposed Injunctive Relief Benefits All Class Members
Injunctive relief is appropriate if “the party opposing the class has acted or
refused to act on grounds that apply generally to the class.” Fed. R. Civ. P.
23(b)(2). The district court concluded that such relief was appropriate because of
“defendants’ uniform filing of false affidavits in state court to fraudulently
procure default judgments against putative class members.” Sykes II, 285 F.R.D. at
293. This injunction, as currently sought by plaintiffs, includes four elements:
first, a direction that defendants “cease engaging in debt collection practices that
violate the FDCPA, RICO, NY GBL § 349, and NY Jud. Law § 487;” second, a
6
We have not ruled on whether an FDCPA claim may be brought for
misrepresentations made to third parties. Kropelnicki v. Siegel, 290 F.3d 118, 128
(2d Cir. 2002).
63
direction that defendants locate and notify class members that a default judgment
has been entered against them and that “they have the right to file a motion with
the court to re‐open their case;” third, a direction that defendants “serve process
in compliance with the law in any and all future actions;” and fourth, a direction
that defendants’ affidavits of merit in future actions reflect their personal
knowledge of the facts. Joint App’x at 219.
1 The Supreme Court has clarified that certification of a class for injunctive
2 relief is only appropriate where “a single injunction . . . would provide relief to
3 each member of the class.” Dukes, 131 S. Ct. at 2557; Amara v. CIGNA Corp., Nos.
4 13‐447(L), 13‐526(XAP), 2014 WL 7272283, at *9 (2d Cir. 2014) (noting that the
5 Supreme Court in Dukes “simply emphasized that in a class action certified under
6 Rule 23(b)(2), ‘each individual class member’ is not ‘entitled to a different
7 injunction’” (emphasis in original) (quoting Dukes, 131 S. Ct. at 2557)). Mel
8 Harris submit that this proposed injunctive relief does not satisfy this standard,
9 because individualized issues of service differentiate class members from one
10 another, and the named plaintiffs will not benefit because they “have already had
11 their default judgments vacated.”
12 This claim is without merit. “[R]elief to each member of the class,” does not
64
1 require that the relief to each member of the class be identical, only that it be
2 beneficial. Dukes, 131 S. Ct. at 2557–58. And while Mel Harris attempt to refocus
3 the proposed injunctive relief on the affidavits of service, it is clear that the
4 proposed injunctive relief sweeps broadly enough to benefit each class member.
5 There is no support for the contention, for example, that because certain class
6 members received service, they will not be provided relief by the notification
7 proposed by the injunction as well. See Amara, 2014 WL 7272283, at *9 (finding
8 decertification of Rule 23(b)(2) class not required where certain class members,
9 who might not benefit from injunction’s reformation of retirement plan, received
10 “some benefit in the form of new notice” of changes to the plan). Furthermore,
11 while named plaintiffs have had their default judgments vacated, they might
12 each still be subject to a further action by these same defendants. The district
13 court did not abuse its discretion in concluding that plaintiffs had satisfied the
14 requirements of Rule 23(b)(2).
15 2. We Decline to Decide, in the First Instance, Whether RICO
16 Permits Private Injunctive Relief
17 Defendants finally argue that injunctive relief is not available under RICO.
18 For the same reasons that we found the district court did not commit error in
65
1 declining to rule on the availability of relief under the FDCPA, we find that the
2 district court did not commit error in declining to decide, at the class certification
3 stage, whether RICO permits private injunctive relief.
4 Because the district court did not reach this question below, we decline to
5 address it for the first time7 on appeal. See Dardana, 317 F.3d at 208.
6 CONCLUSION
7 For the foregoing reasons, the opinion and order of the district court is
8 hereby affirmed.
9
7
We have yet to decide whether RICO allows for private injunctive relief.
See, e.g., Motorola Credit Corp. v. Uzan, 202 F. Supp. 2d 239, 243 (S.D.N.Y. 2002).
66
DENNIS JACOBS, Circuit Judge, dissenting:
This class action alleges that the defendant firms cut sharp corners in
obtaining default judgments against the class members in the Civil Court of New
York City. On this interlocutory appeal from class certification, the panel
concludes that the superiority and predominance prerequisites to a Rule 23(b)(3)
damages class have been satisfied. I respectfully dissent.
The superiority ruling is error because a statutory procedure is available, in
the Civil Court itself, for redressing such an allegedly wide‐ranging fraud‐‐one
that is superior in every way to this unwieldy federal class action. The district
court’s predominance ruling cannot be sustained because the court failed to
perform, as is necessary, a rigorous weighing of common and individualized
issues. The majority also holds that a Rule 23(b)(2) equitable and declaratory
relief class was properly certified even though the named plaintiffs can get no
benefit from that supposed relief because they have already achieved vacatur (or
discontinuance) of the default judgments against them.
This is class litigation for the sake of nothing but class litigation.
I
Four plaintiffs, on behalf of a class of over 100,000, sued a buyer of bad
debts (the “Leucadia defendants”), a law firm (the “Mel Harris defendants”), and
a process server (“Samserv”), alleging that they fraudulently obtained default
judgments against the class members. The alleged scheme proceeded in two
steps: (1) a process server, sometimes a Samserv employee (but more often than
not, not) engaged in sewer service, and then prepared a fraudulent affidavit of
service; and (2) the debt buyer and the law firm generated and submitted
standardized affidavits of merit falsely attesting to personal knowledge of the
debt. See N.Y. C.P.L.R. 3215(f) (requiring “proof of the facts constituting the
claim, the default and the amount due”).
The dominant focus of the complaint is the fraud in service of process;1
although plaintiffs do not actually deny that many class members received
proper service. But service is too individualized an issue for class certification.
The point was recognized implicitly by the district court,2 and acknowledged
1
See Third Am. Compl. ¶ 4 (“[S]ewer service is the primary reason so few
of the people sued by Defendants appear in court to defend themselves.”); see
also supra Op. p. 31 (acknowledging complaint’s emphasis on sewer service but
concluding “plaintiffs have made clear that this is but one component of the
overarching debt collection plan”).
2
See Sykes v. Mel Harris & Assocs., LLC, 285 F.R.D. 279, 290 (S.D.N.Y.
2012) (“Sykes II”) (“[Plaintiffs’] overarching claim is that defendants
systematically filed false affidavits of merit and, in many instances, false affidavits
2
more directly by its dismissal of one named plaintiff’s claim as time‐barred
because service had been effected more than a year prior to the entry of default.
Sykes v. Mel Harris & Assocs., LLC, 757 F. Supp. 2d 413, 422 (S.D.N.Y. 2010)
(“Sykes I”). Plaintiffs’ backstop contention–‐that irregularities in Samserv’s
logbooks should allow for a presumption that all service was fraudulent‐‐is easily
refuted.3
To patch this hole, plaintiffs changed focus to the affidavits of merit (all of
of service to fraudulently produce default judgments . . . .” (emphasis added));
id. at 291 (“[I]ndividualized proof of service or lack thereof is not fatal to the
prerequisite of commonality. Here, defendants’ uniform course of conduct was
to file an allegedly false affidavit of merit and, at least in some instances, an
allegedly false affidavit of service.” (emphases added)).
3
See Wal‐Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2555 (2011) (“Even if
[statistical proof] established . . . a pay or promotion pattern that differs from the
nationwide figures or the regional figures in all of Wal–Mart’s 3,400 stores, that
would still not demonstrate that commonality of issue exists. . . .”); id. at 2556
(“Respondents’ anecdotal evidence suffers from the same defects, and in
addition is too weak to raise any inference that all the individual, discretionary
personnel decisions are discriminatory.”); id. at 2561 (“Because the Rules
Enabling Act forbids interpreting Rule 23 to ‘abridge, enlarge or modify any
substantive right,’ a class cannot be certified on the premise that Wal‐Mart will
not be entitled to litigate its statutory defenses to individual claims.” (citations
omitted)); see also 650 Fifth Ave. Co. v. Travers Jewelers Corp., No. LT75766/20,
2010 WL 4187936, at *4 (N.Y.C. Civ. Ct. 2010) (“Where a respondent rebuts an
affidavit of service with a sworn denial of service, the petitioner must establish
jurisdiction by a preponderance of the evidence at a traverse hearing.”).
3
which were generated by a software program used by a single Mel Harris
employee) as the “glue” holding together this miscellaneous and diverse class.
Wal‐Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2552 (2011). (The putative debts
are to Sears, a credit card company, a bank, and a gym.4)
The district court certified two classes: (1) a Rule 23(b)(3) class seeking
money damages for “all persons who have been sued by the Mel Harris
defendants as counsel for the Leucadia defendants in actions commenced in New
York City Civil Court and where a default judgment has been obtained”; and (2)
a Rule 23(b)(2) class seeking equitable and declaratory relief for “all persons who
have been or will be sued by the Mel Harris defendants as counsel for the
Leucadia defendants in actions commenced in New York City Civil Court and
where a default judgment has or will be sought.” Sykes v. Mel Harris & Assocs.,
LLC, 285 F.R.D. 279, 294 (S.D.N.Y. 2012) (“Sykes II”). Plaintiffs in both classes
assert claims under the Racketeer Influenced and Corrupt Organizations Act
(“RICO”),5 New York General Business Law,6 and (as against the Mel Harris
4
See Third Am. Compl. ¶¶ 136, 166, 198, 269.
5
See supra Op. pp. 27‐28, 34, 47‐49; see also 18 U.S.C. § 1962(c).
6
See supra Op. pp. 28‐29, 38; see also N.Y. Gen. Bus. Law §§ 349(a), (h).
4
defendants alone) New York Judiciary Law.7 The damages class also alleges Fair
Debt Collection Practices Act (“FDCPA”) claims.8
II
It is useful and diplomatic to set out first the points of my agreement with
the majority. I agree that it was no abuse of discretion to find that the Rule 23(a)
prerequisites‐‐numerosity, commonality, typicality, and adequacy of
representation‐‐are met. There is a common issue as to whether the affidavits of
merit were fraudulent, and the claims asserted about the affidavits of merit are
typical. Fed. R. Civ. P. 23(a)(2), (3); see also, e.g., Gen. Tel. Co. of Sw. v. Falcon,
457 U.S. 147, 157 n.13 (1982) (“The commonality and typicality requirements of
Rule 23(a) tend to merge.”). That issue alone is unlikely to be decisive, but the
“determination of its truth or falsity will resolve an issue that is central to the
validity of each one of the claims in one stroke.” Dukes, 131 S. Ct. at 2551. Thus,
unlike in Dukes, all of the claims are held together by “glue,” id. at 2552–‐or some
7
See supra Op. p. 29; see also N.Y. Jud. Law § 487.
8
See supra Op. pp. 25‐26, 33‐35, 40, 48‐49; see also 15 U.S.C. §§ 1692e,
1692f, 1692k(a).
5
dabs of it.
I also agree that the amount of debt owed by each class member, which
defendants urge as an individualized issue that defeats certification, is beside the
point. The harm can be viewed as the obligation created by a fraudulent default
judgment, so that it should not matter that the original debt may remain, and be
unaffected. See Hamid v. Stock & Grimes, LLP, 876 F. Supp. 2d 500, 501‐03 (E.D.
Pa. 2012) (“It is clear from its underlying purpose that debtors may recover for
violations of the FDCPA even if they have defaulted on a debt. . . . If [plaintiff’s]
payment was not a proper element of actual damages under the FDCPA, a debt
collector could harass a debtor in violation of the FDCPA, as a result of that
harassment collect the debt, and thereafter retain what it collected.”); accord
Abby v. Paige, No. 10‐23589‐CIV, 2013 WL 141145, at *8‐9 (S.D. Fla. Jan. 11, 2013);
cf. Sparrow v. Mazda Am. Credit, 385 F. Supp. 2d 1063, 1071 (E.D. Cal. 2005)
(“[S]trong policy reasons exist to prevent the chilling effect of trying FDCPA
claims in the same case as state law claims for collection of the underlying
debt.”); Isa v. Law Office of Timothy Baxter & Assocs., No. 13‐cv‐11284, 2013 WL
5692850, at *3 (E.D. Mich. 2013) (“Congress did not intend for collectors to engage
in violations, enter judgments, and use state law on judgment execution to force
6
payment to creditors.”).
The last point of my agreement with the majority is that the substantive
legal questions the defendants invite us to answer either counsel in favor of
commonality and typicality, or are entirely tangential to the class certification
decision and best left unanswered at this stage. One such question‐‐what is
required for an affidavit of merit under New York law?‐‐is a common question of
law in this case. In any event, “Rule 23 grants courts no license to engage in
free‐ranging merits inquiries at the certification stage. Merits questions may be
considered to the extent‐‐but only to the extent‐‐that they are relevant to
determining whether the Rule 23 prerequisites for class certification are
satisfied.” Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194‐95
(2013).
III
In my view, the damages class was improperly certified. Rule 23(b)(3)
requires first, that “a class action is superior to other available methods for fairly
and efficiently adjudicating the controversy” and second, that “the questions of
law or fact common to class members predominate over any questions affecting
7
only individual members.” Fed. R. Civ. P. 23(b)(3). The Rule specifies, as
“matters pertinent to these findings,” “the desirability or undesirability of
concentrating the litigation of the claims in the particular forum” and “the likely
difficulties in managing a class action.” Fed. R. Civ. P. 23(b)(3)(C)‐(D) (emphasis
added). These very factors counsel against certification here. See Madison v.
Chalmette Refining, LLC, 637 F.3d 551, 554 (5th Cir. 2011) (“The decision to
certify a class is within the broad discretion of the district court, but that
discretion must be exercised within the framework of Rule 23.” (internal
quotation marks and alterations omitted)).
A
The district court concluded that a federal class action is a superior method
for resolving this litigation over state court proceedings, because: (1) it is more
efficient than requiring thousands of individual suits; (2) most class members
would not litigate given the small recovery and their limited means; (3) the
conduct all occurred in New York; and (4) any problems could be alleviated
through use of class management tools. See Sykes II, 285 F.R.D. at 294. The
majority endorses this analysis. See supra Op. pp. 49‐55.
Even if a federal class action were a good way to remedy an allegedly
8
massive and pervasive fraud perpetrated on a New York court, it cannot be
superior to the adequate remedial scheme already offered by the courts of New
York. State law provides that, “on motion of any interested person,” a party may
be relieved from a judgment based on the grounds of, inter alia, “excusable
default,” “fraud, misrepresentation, or other misconduct of an adverse party.”
N.Y. C.P.L.R. 5015(a)(1), (3). And, on an application by an administrative judge,
vacatur may be granted en masse “upon a showing that default judgments were
obtained by fraud, misrepresentation, illegality, unconscionability, lack of due
service, violations of law, or other illegalities.” Id. 5015(c); cf. Jack Mailman &
Leonard Flug DDS, P.C. v. Whaley, No. 31880/02, 2002 WL 31988623, at *6
(N.Y.C. Civ. Ct. Nov. 25, 2002) (forwarding the court’s decision “to the
administrative judge for the possible institution of proceedings in conformity
with C.P.L.R. 5015(c)”). Because vacatur en masse is done by an administrative
judge, it is a remedy that is broad, wholesale, effective, and easy. The only
remaining salient advantage of this federal class action is attorneys’ fees, which
do not much help the members of the class.
The majority observes that the availability of recourse to state avenues for
relief was not raised in the district court. See supra Op. pp. 49 & n.4. True,
9
defendants’ superiority arguments in their opposition to class certification
focused on the existence of issues personal to each class member, as well as
manageability, and the prospect of “mini‐trials just to determine the threshold
issue of class membership.” See Mem. of Law in Opp’n to Class Cert., Dkt. No.
90 at 22‐23. But that is because the complaint was chiefly predicated on sewer
service, an issue as to which facts varied from debtor to debtor, whereas class
counsel (at least for current purposes) shifted focus to the submission of
materially false affidavits of merit. In any event, the district court’s ruling on
superiority rests on the determination that a class action is “without question,
more efficient than requiring thousands of debtors to sue individually.” Sykes II,
285 F.R.D. at 294. It is this consideration that is obviated by the New York
procedure. See N.Y. C.P.L.R. 5015(c). “[T]he Legislature has gone so far as to
create a special subdivision allowing an administrative judge to bring a
proceeding to vacate default judgments en masse where obtained by fraud,
misrepresentation . . . lack of service, . . . or other illegalities.” Shaw v. Shaw, 467
N.Y.S.2d 231, 233 (2d Dep’t 1983) (internal quotation marks omitted).
Rule 23 requires consideration of any other “available method[] for fairly
and efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3); see also id.
10
advisory committee notes (observing the court “ought to assess the relative
advantages of alternative procedures” and stating that “[a]lso pertinent is the
question of the desirability of concentrating the trial of the claims in the
particular forum”). One such “method” that is “available” is afforded by the
New York Legislature for redressing harms alleged in this case by recourse to the
Civil Court, in which the alleged wrong was done. In the majority’s view, “the
forum analysis of Rule 23(b)(3) is not grounded in a consideration of the
comparative value of pursuing a claim in federal or state court.” Supra Op. p. 51.
That seems to me error, at least when the state court remedy affords relief‐‐
available en masse‐‐for harm that was suffered in that forum.
Amici briefs filed by consumer advocacy groups explain that unscrupulous
debt collection practices abuse the legal process, and demonstrate that this well‐
documented problem has drawn the attention of all levels of government for
years. But that observation does not speak to a need for federal class action
remedies. As the parties point out, the Civil Court has recently issued directives
regarding “Default Judgments on Purchased Debt,” imposing new and
additional requirements on third‐party debt collectors like the Leucadia
11
defendants.9 Collectors must now include an “Affidavit of Sale of Account by
Original Creditor” and an “Affidavit of the Sale of the Account by the Debt
Seller” for each debt re‐sale. Cf. Shaw, 467 N.Y.S.2d at 234 (“A judgment
obtained without proper service of process is invalid, even when the defendant
has actual notice of the law suit, because as a prophylactic measure such rule is
necessary to prevent ‘sewer service’”) (citing Feinstein v. Bergner, 48 N.Y.2d 234,
239‐41 (1979)).
The New York court system needs no helping hand from a federal class
action initiative. The majority observes that plaintiffs’ claims cannot be heard as
a class in Civil Court. See supra Op. pp. 50‐51. But class litigation is not an end
in itself. It is simply a “device to vindicate the rights of individuals class
members.” In re Gen. Motors Corp. Engine Interchange Litig., 594 F.2d 1106,
1127 n.33 (7th Cir. 1979); see also Blaz v. Belfer, 368 F.3d 501, 504 (5th Cir. 2004)
(explaining a class action is merely a procedural device). New York’s Civil Court
also provides such a device. N.Y. C.P.L.R. 5015(c). The majority also discounts
the state procedure because it is implemented by judges. See supra Op. p. 54.
9
Available at
http://www.courts.state.ny.us/courts/nyc/SSI/directives/DRP/drp182.pdf.
12
But one would have thought that to be an advantage; it reduces the burden on
plaintiffs and may obviate the need for counsel altogether.
The majority’s other critiques of the state procedure are easily disposed of.
Vacatur en masse is discretionary‐‐so are many aspects of class certification. See
id. at 55. The majority cites to the district court’s observation that a class action
is‐‐“without question”‐‐a more efficient way of proceeding. Id. at 54. But the
state remedy is far more speedy than a cumbersome class action. In state court,
all that is needed is to push on an open door. And that, evidently, is what the
class representatives themselves did; they have all had their judgments vacated
or discontinued. Thus, the door of the state court is open for the vacatur of the
default judgments en masse, without class certification, subclasses, hungry
lawyers, or issues of process and statutes of limitations. Cf. In re Aqua Dots
Prods. Liability Litig., 654 F.3d 748, 752 (7th Cir. 2011) (“A representative who
proposes that high transaction costs (notice and attorneys’ fees) be incurred at
the class members’ expense to obtain a refund that already is on offer is not
adequately protecting the class members’ interests.”). The countervailing
benefits of a class action accrue almost entirely to the lawyers in a fee‐rich
environment, and leave trivial benefits for consumption by the class.
13
B
“Rule 23(b)(3)’s predominance criterion is even more demanding” than the
“rigorous analysis” mandated under Rule 23(a), and requires a “close look at
whether common issues predominate over individual ones.” Comcast Corp. v.
Behrend, 133 S. Ct. 1426, 1432 (2013) (internal quotation marks omitted); see also
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615, 623‐24 (1997) (“Even if Rule
23(a)’s commonality requirement may be satisfied by that shared experience, the
predominance criterion is far more demanding.”).
The district court acknowledged problems that might easily be viewed as
fatal: “individual issues may exist as to causation and damages as well as to
whether a class member’s claim accrued within the applicable statute of
limitations.” Sykes II, 285 F.R.D. at 293. The district court nevertheless hoped
that these problems could be dealt with through “a number of management
tools,” and cited “appointing a magistrate judge or special master to preside over
individual damages proceedings, decertifying the class after the liability trial and
providing notice to class members concerning how they may proceed to prove
damages, creating subclasses, or altering or amending the class.” Id. at 293‐94
(internal quotation marks omitted).
14
No doubt, resourceful judges can seek or find ways to overcome
difficulties. But predominance cannot be determined without a careful balancing
of the individualized issues against the common issues. It is not enough to
discount problems on the basis of hope and confidence. Compare In re U.S.
Foodservice Inc. Pricing Litig., 729 F.3d 108, 131 (2d Cir. 2013) (“[C]lose
inspection of this case reveals that any class heterogeneity is minimal and is
dwarfed by common considerations susceptible to generalized proof.”) with
Sykes II, 285 F.R.D. at 292 (“[U]se of sewer service and false affidavits of service
may warrant equitable tolling. Even still, though, the Court can address such
issues at later stages of the litigation if necessary.” (citation omitted)).
The existence of such management tools, which are always at hand, does
not help to distinguish a claim that justifies certification from a claim that does
not. Cf. Sacred Heart Health Sys., Inc. v. Humana Military Healthcare Servs.,
Inc., 601 F.3d 1159, 1176, 1184 (11th Cir. 2010) (“[A] class action with numerous
uncommon issues may quickly become unmanageable.”); cf. also In re Initial
Pub. Offerings Sec. Litig., 471 F.3d 24, 42 (2d Cir. 2006) (“Plaintiffs’ own
allegations and evidence demonstrate that the Rule 23 requirement of
predominance of common questions over individual questions cannot be met
15
under the standards as we have explicated them.”). The useful inquiries are why
such tools will be needed and how they would be used. What proceedings are
envisioned for the magistrate judge? The magistrate judge who hears a hundred
thousand claims, four a day, would finish work in about a century. What
subclasses, or “amended” or “alternative” classes would serve‐‐and who would
represent any of them, seeing as how all of the default judgments against the
present class representatives have already been vacated or withdrawn? A better‐
considered case‐management tool is de‐certification. See Fed. R. Civ. P.
23(c)(1)(C).
Specifically, many claims in this case may be defeated by the statute of
limitations. The issue demands a close scrutiny that has not been given. If
members were served (or otherwise notified) of the default judgment more than
one year before the class action commenced, they cannot now rely on equitable
tolling. See New York v. Hendrickson Bros., 840 F.2d 1065, 1083 (2d Cir. 1988)
(equitable tolling only appropriate if plaintiff was ignorant of cause of action
because of defendant’s concealment). A member‐by‐member inquiry concerning
service of process will likely be required. Moreover, all members served after
April 1, 2008 were provided supplemental notice by the state court before a
16
default judgment was entered, see N.Y. Comp. Codes R. & Regs. tit. 22,
§ 208.6(h)(2); so what will be required is an individualized examination of
whether a plaintiff was served or what notice was effected by the court’s new
system.
In an effort to skate past this appeal, class counsel now jettison their
clients’ defense of equitable tolling, and propose to include as class members
only persons whose claims are not barred by the statute of limitations. But the
district court (for one) seemed to think the plaintiffs were still seeking the benefit
of equitable tolling when it certified the class. See Sykes II, 285 F.R.D. at 292.
Crucially, the class definition does not exclude claims based on the date of filing.
Even if this maneuver succeeds (it appears it has), see supra Op. pp. 43‐45,
plaintiffs are simply trading a commonality problem for problems of typicality
and adequacy of representation: the district court earlier relied on equitable
tolling in order to save the FDCPA claims of two of the named plaintiffs.
IV
Class certification for equitable and declaratory relief under Rule 23(b)(2)
is likewise deeply flawed. Such a class may only be certified if “the party
17
opposing the class has acted or refused to act on grounds that apply generally to
the class, so that final injunctive relief or corresponding declaratory relief is
appropriate respecting the class as a whole.” Fed. R. Civ. P. 23(b)(2). In other
terms, “Rule 23(b)(2) applies only when a single injunction or declaratory
judgment would provide relief to each member of the class.” Dukes, 131 S. Ct. at
2557.
The named plaintiffs seek an injunction that would do absolutely nothing
for them. The injunction sought would direct defendants to (1) conform their
debt collection practices to the laws cited in the complaint, (2) locate and notify
class members that a default judgment has been entered against them and that
they have the right to file a motion to re‐open, (3) serve process in compliance
with law, and (4) produce and file affidavits of merit that truthfully reflect
personal knowledge. See Third Am. Compl. ¶ 80. But the default judgments
against all of the named plaintiffs were already vacated or discontinued before they
asserted these claims. See id. ¶¶ 131, 161, 215, 330; Sykes I, 757 F. Supp. 2d at 429
(“In fact, all plaintiffs have had the default judgments against them vacated or
discontinued.”). They get nothing from the equitable relief they seek (absent any
speculation that they will be subject to future suits and default judgments by the
18
Leucadia and Mel Harris defendants). “[A] single injunction or declaratory
judgment” will therefore not “provide relief to each member of the class.”
Dukes, 131 S. Ct. at 2557.
V
I cannot figure out what Samserv is doing here. The common thread
identified by the district court was the preparation of the allegedly fraudulent
affidavits of merit. Samserv had no role in drafting those affidavits. Moreover,
fewer than half the class members were served with process (or given sewer
service) by Samserv. And though plaintiffs respond that Samserv was still part
of the RICO enterprise, the only common RICO issue identified is the affidavits
of merit.
A class certification order cannot reach a defendant based on a
purportedly common underlying thread unrelated to that defendant’s conduct.
See Fed. R. Civ. P. 23(c)(1)(b) (“An order that certifies a class action must define
the class and the class claims, issues, or defenses . . . .”); see also, e.g., In re Initial
Pub. Offerings Sec. Litig., 471 F.3d at 41 (stating “a district judge may certify a
class only after making determinations that each of the Rule 23 requirements has
19
been met”).
The majority’s proposal that the district court may certify subclasses is no
answer to these problems, for reasons set forth above. See supra Op. n.3; see also
Sacred Heart Health Sys., 601 F.3d at 1184 (finding subclasses “no answer” when
common questions did not predominate and concluding class action was not
superior to other available means for fairly adjudicating claims).
* * *
Certification of this misbegotten class will generate grinding of gears and
spinning of wheels for years to come, notwithstanding an effective, superior, and
immediately available remedy in state court.
20
