Case Name: Lorie Ann Guzman v. Mandarich Law Group, LLP, et al.
Case No.: 18-CV-322871

This is an action under the Rosenthal Fair Debt Collection Practices Act (“RFDCPA” or “Rosenthal Act”). Before the Court is plaintiff’s motion to certify a class. Defendant Mandarich Law Group, LLP opposes plaintiff’s motion and brings its own motion to deny certification and dismiss the action. Mandarich also brings a motion for an order granting its “subsequent application for summary judgment on the issue of [its] cure pursuant to Cal. Code of Civ. Proc. § 1008 (b),” and dismissing plaintiff’s individual and class claims. Plaintiff filed a “limited” opposition to this second motion, urging that the motion is procedurally improper and/or untimely.

I. Factual and Procedural Background

Plaintiff incurred a consumer debt in the form of a credit account issued by WebBank. (Complaint, ¶ 15.) She was unable to pay the debt and defaulted on her payments to WebBank. (Id. at ¶ 16.) The debt was subsequently assigned or otherwise transferred to defendant for collection, and it sent an initial collection letter to plaintiff dated February 9, 2017. (Id. at ¶¶ 17-21.) The letter notified plaintiff of her specific debt in 12-point type, but, in violation of Civil Code section 1812.701, subdivision (b), provided the notice required by Civil Code section 1812.700, subdivision (a) in 10-point type. (Id. at ¶¶ 22-24.)

Plaintiff alleges that sending initial collection letters with this formatting is defendant’s standard practice, and brings a putative class action on behalf of other WebBank debtors who received such a letter. (Complaint, ¶¶ 25-40.) Her complaint asserts a single cause of action under Civil Code sections 1812.700-1812.702 (the “Consumer Collection Notice” statute). Plaintiff’s claim is styled a Rosenthal Act claim because under Civil Code section 1812.702, a violation of the Consumer Collection Notice requirements is considered a violation of the Rosenthal Act.

Plaintiff filed her complaint on February 2, 2018. Defendant answered and filed a motion for summary judgment, or, alternatively, summary adjudication. Among the grounds raised in support of its motion, Mandarich urged that it had cured any violation of the Consumer Collection Notice statute by sending a corrected letter to Guzman upon discovering the violation when it received notice of this lawsuit. (See Civ. Code § 1788.30, subd. (d) [“A debt collector shall have no civil liability under this title if, within 15 days either after discovering a violation which is able to be cured, or after the receipt of a written notice of such violation, the debt collector notifies the debtor of the violation, and makes whatever adjustments or corrections are necessary to cure the violation with respect to the debtor.”].) In an order filed on April 18, 2019, the Court denied Mandarich’s motion. It rejected the cure argument, stating that the violation likely was not one that was “able to be cured” under the Rosenthal Act and, even if it were, there was a triable issue of fact regarding whether the violation had been cured “where the ‘curative’ letter was not sent for more than a year after the initial notice, months after the debt at issue had already been settled.”

Following the Court’s ruling, the Court of Appeal for the First District issued a published opinion addressing the cure defense in another Consumer Collection Notice action, Timlick v. National Enterprise Systems, Inc. (2019) 35 Cal.App.5th 674. Timlick held that the type-size violation at issue here is subject to the cure defense and that such a violation is “able to be cured” under the Rosenthal Act. It left undisturbed the trial court’s ruling on summary judgment that the defendant had timely cured the violation as to the named plaintiff by issuing a revised collection letter in response to her complaint, a year after it sent the initial demand letter. However, it reversed the judgment for the defendant, holding that the “pick off” doctrine applied in these circumstances. That doctrine establishes an exception to the general rule that the named plaintiff in a class action must be a member of the class where the defendant unilaterally gives relief to the plaintiff for the purpose of avoiding the class action.

Notwithstanding its holding regarding the “pick off” doctrine, Mandarich contends that Timlick requires the Court to deny class certification in this case. It also moves for an order granting reconsideration of the Court’s April 18th order and entering summary judgment in its favor.

II. Class Certification

Plaintiff moves to certify a class of

[a]ll persons with addresses in California to whom Defendants sent, or caused to be sent, an initial written communication in the form of Exhibit “1” to the Class Action Complaint for Statutory Damages, in an attempt to collect a defaulted consumer debt originally owed to WebBank, which were not returned as undeliverable by the U.S. Post Office during the period one year prior to the date of filing this action through the date of class certification.

Mandarich filed a memorandum in opposition to plaintiff’s motion, as well as a notice of motion for an order denying certification, denying plaintiff’s appointment as the class representative, and dismissing the action.

A. Legal Standard

As explained by the California Supreme Court,

The certification question is essentially a procedural one that does not ask whether an action is legally or factually meritorious. A trial court ruling on a certification motion determines whether the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.

(Sav-On Drug Stores, Inc. v. Superior Court (Rocher) (2004) 34 Cal.4th 319, 326, internal quotation marks, ellipses, and citations omitted.)

California Code of Civil Procedure section 382 authorizes certification of a class “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court ….” As interpreted by the California Supreme Court, section 382 requires: (1) an ascertainable class and (2) a well-defined community of interest among the class members. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.)

The “community-of-interest” requirement encompasses three factors: (1) predominant questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. (Sav-On Drug Stores, Inc. v. Superior Court, supra, 34 Cal.4th at p. 326.) “Other relevant considerations include the probability that each class member will come forward ultimately to prove his or her separate claim to a portion of the total recovery and whether the class approach would actually serve to deter and redress alleged wrongdoing.” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435.)

The plaintiff has the burden of establishing that class treatment will yield “substantial benefits” to both “the litigants and to the court.” (Blue Chip Stamps v. Superior Court (Botney) (1976) 18 Cal.3d 381, 385.) The court must examine all the evidence submitted in support of and in opposition to the motion “in light of the plaintiffs’ theory of recovery.” (Department of Fish and Game v. Superior Court (Adams) (2011) 197 Cal.App.4th 1323, 1349.) The evidence is considered “together”: there is no burden-shifting as in other contexts. (Ibid.)

B. Numerous and Ascertainable Class

“The trial court must determine whether the class is ascertainable by examining (1) the class definition, (2) the size of the class and (3) the means of identifying class members.” (Miller v. Woods (1983) 148 Cal.App.3d 862, 873.) Generally, “[c]lass members are ‘ascertainable’ where they may be readily identified without unreasonable expense or time by reference to official records.” (Rose v. City of Hayward (1981) 126 Cal. App. 3d 926, 932.) Ascertainability is required in order to give notice to putative class members as to whom the judgment in the action will be res judicata; merits-related issues like whether class members will be able to prove their damages are not to be considered in relation to this factor. (See Cohen v. DIRECTV, Inc. (2009) 178 Cal.App.4th 966, 975-976 [“The defined class of all HD Package subscribers is precise, with objective characteristics and transactional parameters, and can be determined by DIRECTV’s own account records. No more is needed.”].)

Here, defendant has already identified the 443 putative class members from its records. The class definition is clear, objective, and appropriate. While defendant contends that plaintiff has failed to prove that all putative class members received a letter in the same format as hers, it stated in response to discovery requests that the class list it produced reflected contact information for “all California residents whom were sent collection letters in the form of Plaintiff’s Exhibit ‘1’ ….” Defendant provides no evidence that any of these letters used different type sizes than plaintiff’s, as it now suggests. Plaintiff thus establishes that the letters were in the same format, and the Court finds that the class is numerous, ascertainable, and appropriately defined.

C. Predominant Questions of Law and Fact

Regarding predominance,

[t]he ultimate question in every case of this type is whether . . . the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.

(Lockheed Martin Corp. v. Superior Court (Carrillo) (2003) 29 Cal.4th 1096, 1104-1105, quoting Collins v. Rocha (1972) 7 Cal.3d 232, 238.) For example, “if the community of interest is mainly one of law, and if the factual issues requiring separate adjudication are numerous and substantial, a class action does not subserve the judicial process or the litigants.” (Bozaich v. State of California (1973) 32 Cal.App.3d 688, 694-695.) Nevertheless, “[a] class action can be maintained even if each class member must at some point individually show his or her eligibility for recovery or the amount of his or her damages, so long as each class member would not be required to litigate substantial and numerous factually unique questions to determine his or her individual right to recover.” (Acree v. General Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 397.) Predominance ultimately “hinges on whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.” (Duran v. U.S. Bank Nat. Assn. (2014) 59 Cal.4th 1, 28, internal citation and quotations omitted.)

Here, there is no real dispute that class members received initial collection letters formatted in the same manner. Defendant’s liability will turn on common issues including whether the letters violated the Consumer Collection Notice requirements; whether defendant is a debt collector and whether class members are debtors for purposes of the statute; and the penalties that may be appropriate considering factors including “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 collector’s noncompliance was intentional” (15 U.S.C. § 1692k(b)(2), incorporated by Civ. Code, § 1788.17). Given these circumstances, plaintiff’s claim is clearly amenable to class treatment “as an analytical matter.” (Brinker Restaurant Corp. v. Superior Court, supra, 53 Cal.4th at p. 1021.)

Nevertheless, defendant contends that individual issues regarding its curative letter to plaintiff will predominate. This issue is addressed more thoroughly below in the context of adequacy and typicality. With regard to predominance, the facts surrounding the curative letter are undisputed, and the issues surrounding its legal impact are greatly narrowed if not entirely resolved by Timlick. The common issues in the case are much more numerous and substantial than those arising from the curative letter.

The Court finds that common issues predominate in this case.

D. Adequacy and Typicality

“Adequacy of representation depends on whether the plaintiff’s attorney is qualified to conduct the proposed litigation and the plaintiff’s interests are not antagonistic to the interests of the class.” (McGhee v. Bank of America (1976) 60 Cal.App.3d 442, 450.) The fact that a class representative does not personally incur all of the damages suffered by each different class member does not necessarily preclude the representative from providing adequate representation to the class. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 238.) Only a conflict that goes to the very subject matter of the litigation will defeat a party’s claim of representative status. (Ibid.)
“Although the questions whether a plaintiff has claims typical of the class and will be able to adequately represent the class members are related, they are not synonymous.” (Martinez v. Joe’s Crab Shack Holdings (2014) 231 Cal.App.4th 362, 375.) “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” (Ibid., quoting Seastrom v. Neways, Inc. (2007) 149 Cal.App.4th 1496, 1502.)

Mandarich contends that adequacy and typicality are not satisfied here because Guzman—unlike the other putative class members—received a curative letter and is consequently no longer entitled to recover penalties. While the Court makes no ruling on the issue at this juncture, it assumes that under Timlick, Mandarich is correct that Guzman is no longer entitled to recover penalties on her own behalf. However, as noted above, Timlick also holds that the “pick off” doctrine applies in these circumstances.

As described in Timlick,

A typical pick off situation arises when, prior to class certification, a defendant in a proposed class action gives the named plaintiff the entirety of the relief claimed by that individual. The defendant then attempts to obtain dismissal of the action, on the basis that the named plaintiff can no longer pursue a class action, as the named plaintiff is no longer a member of the class the plaintiff sought to represent. The defendant seeks to avoid exposure to the class action by “picking off” the named plaintiff, sometimes by picking off named plaintiffs serially.

(Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at p. 689, internal citations and quotations omitted.)

Timlick explained that “[u]nder these circumstances, the involuntary receipt of relief does not, of itself, prevent the class plaintiff from continuing as a class representative.” (Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at p. 689, internal citations and quotations omitted.) Rather,

the trial court must consider whether the named plaintiff can continue to fairly represent the class in light of the individual relief offered by the defendant, an evaluation that in most cases may be performed in the context of a ruling on a motion for class certification. If the named plaintiff cannot do so, the court should allow an opportunity to amend the complaint to redefine the class or to add additional representatives, and if amendment fails, the court should not dismiss the action without giving notice of the dismissal to the members of the putative class.

(Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at p. 689, internal citations and quotations omitted.)

Timlick held that the “pick off” doctrine applied in the circumstances presented by that case—which, as Mandarich itself urges, are substantively identical to those present here. (Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at pp. 689-690.) It reasoned that “just as in a typical pick off scenario, [the defendant] voluntarily gave special treatment to the named plaintiff only, resulting in the elimination of her standing to maintain a putative class action,” and the same policy concerns supporting the “pick off” doctrine were implicated by these circumstances. (Ibid.) Thus, following Timlick, the Court must evaluate whether Guzman can fairly represent the class under the “pick off” doctrine.

Considering the circumstances here, the Court finds she can. Guzman received the same initial collection letter as the rest of the class and did not receive the curative letter until over a year later. Her experience was the same as that of other class members until after this action was filed and Mandarich attempted to pick her off from the class. While she may no longer be able to recover penalties on her own behalf, the relevant statutes provide that in a class action under the Rosenthal Act, the penalties recoverable by the named plaintiffs are assessed separately from those recoverable by the rest of the class in any event. The penalties that may be awarded to the named plaintiffs and to the class are very limited, and do not provide a large financial incentive to the named plaintiffs in any case under the Act. Moreover, Guzman has already been deposed in connection with this action and submits a declaration establishing that she understands her duties as a class representative and will continue to actively participate in the litigation. For these reasons, the Court finds that Guzman is an adequate class representative. To the extent her claims are no longer typical of the class, the “pick off” doctrine applies. Plaintiff’s experience and claims were entirely typical of the class until she received a curative letter over a year after this action was filed. The impact of that letter can be determined in the context of a class action in which Guzman serves as the class representative.

Finally, the Court notes that Timlick found that the trial court had erred “in dismissing the entire putative class action without first affording Timlick the opportunity to amend her complaint, redefine the putative class, or locate a suitable class representative, and without giving notice to the putative class,” without specifically mentioning the possibility that Timlick could continue to serve as the class representative. (Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at pp. 690.) The Court interprets the more general direction that Timlick could “amend her complaint” to allow for this possibility; in any event, Timlick’s earlier discussion of the “pick off” doctrine clearly contemplates that a trial court could conclude that “the named plaintiff can continue to fairly represent the class in light of the individual relief offered by the defendant….” (Timlick v. National Enterprise Systems, Inc., supra, 35 Cal.App.5th at p. 689, internal citations and quotations omitted.) Again, the Court finds that conclusion is supported here.

E. Superiority

Finally, a class action should not be certified unless substantial benefits accrue both to litigants and the courts. (Basurco v. 21st Century Ins. Co. (2003) 108 Cal.App.4th 110, 120.) The question is whether a class action would be superior to individual lawsuits. (Ibid.) “Thus, even if questions of law or fact predominate, the lack of superiority provides an alternative ground to deny class certification.” (Ibid.) Generally, “a class action is proper where it provides small claimants with a method of obtaining redress and when numerous parties suffer injury of insufficient size to warrant individual action.” (Id. at pp. 120-121, internal quotation marks omitted.)

Here, each class member will have a small claim. Without a class action, it is highly unlikely that any class member would have the incentive to bring a lawsuit. In addition, there are hundreds of members of the proposed class. It would be inefficient for the Court to hear and decide the same issues separately and repeatedly for each class member. A class action is superior to individual lawsuits under the circumstances.

F. Conclusion and Order

For the reasons stated above, plaintiff’s motion for class certification is GRANTED and defendant’s motion for an order denying class certification is DENIED. The following class is certified:

All persons with addresses in California to whom Defendants sent, or caused to be sent, an initial written communication in the form of Exhibit “1” to the Class Action Complaint for Statutory Damages, in an attempt to collect a defaulted consumer debt originally owed to WebBank, which were not returned as undeliverable by the U.S. Post Office during the period one year prior to the date of filing this action through the date of class certification.

The parties shall meet and confer regarding a procedure for providing notice to the class and a form of notice. If they come to agreement, plaintiff shall file a stipulation along with a statement and proposed order pursuant to California Rules of Court, rule 3.766. If there is any dispute regarding these issues, the parties shall advance their next case management conference to a mutually agreeable date so that the issues may be promptly addressed.

III. Motion for Reconsideration

Plaintiff urges that Mandarich’s motion for reconsideration is procedurally improper and/or untimely. First, she contends that the motion—which was filed on July 29, 2019, 14 court days before the scheduled hearing—is an improperly noticed motion for summary judgment. However, Mandarich’s motion is expressly made pursuant to Code of Civil Procedure section 1008, and is therefore a motion for reconsideration rather than a motion for summary judgment. Still, plaintiff correctly urges that any motion must be filed and served at least 16 court days before the hearing. At a minimum, the hearing on Mandarich’s motion must be continued to permit plaintiff to file a substantive opposition.

The Court anticipates that its ruling on class certification may impact Mandarich’s choice to proceed with its motion for reconsideration. After reviewing the tentative ruling above, the parties shall meet and confer to determine whether the motion is likely to proceed and, if so, to agree to potential dates for the continued hearing. They shall report the results of their meet and confer discussions to the Court at the scheduled August 16th hearing.

The Court will prepare the order.