United States District Court, E.D. Pennsylvania
February 3, 2004.
CREDIT BUREAU COLLECTION SERVICES, INC., individually and d/b/a CBCS and CBCS NATIONAL, INC. DAVID SHULICK, individually and on behalf of all others similarly situated v. CBC COMPANIES, INC., individually, t/a and d/b/a CBCS and CBCS NATIONAL, INC.
The opinion of the court was delivered by: JOHN FULLAM, Senior District Judge
MEMORANDUM AND ORDER
On March 24, 2003, I granted plaintiffs' unopposed motion for class
certification. After various pretrial proceedings, the case was scheduled
for trial to commence on February 2, 2004. Shortly before trial, the
parties filed a flurry of motions: Plaintiffs' Motion for Summary
Judgment, Defendant CBC Companies' Cross-Motion for Summary Judgment,
Defendants' Motion for Leave to Identify an Out-of-Time Expert Witness,
defendant's amended motion to the same effect, etc. The day of the
scheduled trial, the Court learned for the first time that plaintiffs'
counsel had neglected to provide any notice
to the class members, he being of the view that it would suffice to
send out such notices after the trial (!!).
Two days before the scheduled trial, defendant filed a motion to
decertify the class, based upon the failure to give notice. This motion,
and plaintiff's response, were presented to the Court at the time
appointed for the commencement of trial. In these circumstances, it was
obvious the trial could not proceed. The Court determined that because
the statute of limitations has expired since these actions were filed,
and since at least some members of the class may have been aware of the
filing of these actions and assumed that the statute of limitations was
no longer a problem, the preferable course was to afford the named
plaintiff and his counsel an opportunity to provide the required notice to
the class, with leave to opt-out, etc. (this being a Rule 23(b)(3)
Turning now to the pending motions, the motion for decertification of
the class will be denied. Plaintiff's motion for summary judgment will be
granted in part and denied in part. Both parties will be granted
additional time identify witnesses and otherwise complete their trial
preparations; defendants' motion to identify an expert witness will be
dismissed as moot in view of this ruling. And, finally, defendant CBC
Companies, Inc.'s motion for summary judgment will be denied.
I. Liability of Credit Bureau Collection Services, Inc.
As discussed in my Memorandum and Order of March 24, 2003, it is
undisputed that the defendant Credit Bureau Collection Services, Inc. is
a "debt collector" within the meaning of the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692 et seq., and that it caused to be
mailed to approximately 2,875 persons who owed money to the defendant's
client, Verizon Communications, letters which were in technical violation
of the statute, because the envelopes partially revealed the content of
the letters, and disclosed, to the casual observer, that the persons to
whom the letters were mailed had an account with Verizon and owed
specified sums of money. This violated § 1692f(8) of the statute. I
therefore conclude that plaintiff is entitled to summary judgment to the
effect that the violations occurred. As to the defendant Credit Bureau
Collection Services, Inc., the only remaining issue is whether the
defendant is entitled to the exemption provided in § 1692k(c) of the
statute, exempting from liability a debt collector who "shows by a
preponderance of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error." Whether that
defense is available involves factual issues which cannot be resolved on
a motion for summary judgment. Accordingly, as to the defendant Credit
Services, Inc., the only issue on liability which requires trial is
the § 1692k(c) issue.
II. Motion of CBC Companies, Inc. for Summary Judgment
CBC Companies, Inc. is the parent company of Credit Bureau Collection
Services, Inc. The parent company has a net worth in excess of $50
million. If it is found liable, the maximum recovery on behalf of the
entire class would be $500,000 (1% of the parent's net worth). But the
collection-agency subsidiary, Credit Bureau Collection Services, Inc. is
alleged to have a much lower net worth. If it is the only defendant found
liable, the potential recovery on behalf of the class would be limited to
approximately $11,000 or $12,000 (1% of net worth).
There is undoubtedly a close working relationship between parent and
subsidiary, but the parent company has apparently attempted to avoid
being held responsible for any violations committed by the subsidiary.
The parent company is a large concern engaged in many different lines of
business. Shortly before the violations involved in this case occurred,
the subsidiary was relocated from the home office to a separate facility
some 20 miles away. On the other hand, the actual mailing of the letters
was handled by the parent company, as part of the service which it
routinely provides to its subsidiaries (and gets reimbursed for); most,
if not all, of the officers and
directors of the subsidiary are also officers or directors of the parent
company; and the parent company handles payroll for the subsidiary. There
is also evidence that, at the time the violations involved in this case
occurred, the parent company had registered the trade name "Credit Bureau
Collection Services, Inc." as one of its trade names, at least in the
State of Ohio where the firms are located. I conclude that there are
legitimate factual issues which preclude summary judgment with respect to
the potential liability of CBC Companies, Inc.
An Order follows.
1. Plaintiff is granted an extension of time of 60 days in which to
submit a proposed form of notice to the class, and in which to send the
approved notice to the class members.
2. Both parties are granted a 30-day extension of time in which to
identify any witnesses, expert or otherwise, not previously disclosed,
and to conduct further discovery if required.
3. The motion of defendant CBC Companies, Inc. for Summary Judgment is
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