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ORLOFF v. SYNDICATED OFFICE SYSTEMS

April 21, 2004.

MAXINE ORLOFF, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED
v.
SYNDICATED OFFICE SYSTEMS, INC., HEALTHCARE BUSINESS SERVICES and CENTRAL FINANCIAL CONTROL



The opinion of the court was delivered by: RICHARD B. SURRICK, District Judge

MEMORANDUM & ORDER

Plaintiff, Maxine Orloff, ("Plaintiff) filed this consumer class action against Defendants, Syndicated Office Systems ("SOS"), Healthcare Business Services ("HBS"), and Central Financial Control ("CFC") after HBS and CFC attempted to collect a debt for medical expenses that Plaintiff allegedly owed to HBS. Plaintiff alleges that Defendants violated the Credit Repair Organization Act, 15 U.S.C. § 1679, et. seq. ("CROA"), the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"), the Pennsylvania Fair Credit Extension Uniformity Act, 73 PA. CONS. STAT. § 2270.1, et seq. ("FCEUA"), and the Unfair Trade Practices and Consumer Protection Law, 73 PA. CONS. STAT. § 201-1, et seq. ("UTPCPL"). On January 21, 2004, we provisionally certified this case as a class action pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(1) for the purpose of achieving a settlement. On March 29, 2004, we held a fairness hearing to assess the settlement the parties reached. Presently before the Court is Plaintiff's Motion for Final Approval of Class Action Settlement (Doc. No. 35) and Plaintiff's Motion for Award of Attorneys' Fees and Reimbursement of Expenses (Doc. No. 36). For the following reasons, we will grant both Motions. I. BACKGROUND

A. Plaintiff's Allegations

  Plaintiff's claims are based on two letters that she received from HBS and CFC seeking to collect money owed to a medical facility where Plaintiff purportedly incurred unreimbursed medical expenses. (Am. Compl. ¶¶ 10-19.) Both letters allegedly attempted to coerce Plaintiff into paying a debt that she purportedly owed. (Id. ¶¶ 10, 12.) The letters allegedly were false, deceptive, misleading, and unfair and violated CROA, FDCPA, FCEUA, and UTPCPL. Plaintiff alleges that Defendants' acts caused her actual and consequential damages. (Id. ¶ 22.)

  Plaintiff purports to bring this action on behalf of herself and a class of persons who received substantially similar letters from Defendants during the two years prior to the filing of the complaint (the "Class"). (Id. ¶ 23.) Plaintiff alleges that the Class has hundreds, if not thousands of members, the precise number of which is known only to Defendants. (Id. ¶ 24.) Plaintiff argues that there are questions of law and fact common to the Class that predominate over other questions, namely, whether Defendants violated CROA, FDCPA and UTPCPL by mailing letters substantially similar to those mailed to Plaintiff. (Id. ¶ 25.) Plaintiff states that her claims are typical of the claims of the Class, which all arise from the same operative facts and are based on the same legal theories. (Id. ¶ 26.) Plaintiff claims she has fairly and adequately protected the interests of the Class and that she has retained counsel experienced in handling class actions and claims involving unlawful business practices. (Id. ¶ 27.) Finally, Plaintiff argues that this action meets the other criteria required for class treatment, including the requirement that a class action be superior to other available litigation methods for the fair and efficient adjudication of this controversy. (Id. ¶ 31.) B. The Settlement and the Fairness Hearing

  The settlement provides for the following: (1) Defendants shall fully, finally, and completely forgive ten percent, or approximately $437,000, on a pro rata basis, of the total debt allegedly owed to Defendants by the approximately 3,340 members of the Class, and shall report that ten percent forgiveness to the consumer reporting agencies to which Defendants report; (2) Plaintiff, as a representative of the Class, shall receive $5,000 in full settlement and satisfaction of her individual claims pursuant to 15 U.S.C. § 1692k(a)(2)(B)(i), and as compensation for her services rendered to the Class as well as a ten percent forgiveness of her alleged debt; (3) Defendants shall fund all administration expenses related to the settlement, including the costs required to provide notice of the settlement to the Class; (4) Defendants shall confirm that they no longer send the letter attached as Exhibit A to the complaint in connection with their efforts to collect debts in Pennsylvania; (5) Defendants shall revise the letter attached as Exhibit B to the complaint and begin using the form of letter attached to the Settlement Agreement at Tab 1 in connection with their efforts to collect debts in Pennsylvania; and (6) Defendants shall pay up to $67,500 to satisfy Plaintiff's reasonable attorneys' fees and costs, subject to the approval of the Court.

  Defendants identified 3,147 potential Class members and mailed them notice of the settlement on February 17, 2004. (Doc. No. 40 ¶ 3.) The notice conformed to the requirements of Rule 23 and informed the Class members of the existence of this action, the terms of the settlement, and the Class members' rights with respect to the settlement. Specifically, the notice informed each Class member that they had the right to participate in the settlement or opt out of the Class, and to object to any of the terms of the settlement. The notice also informed each Class member of the procedure necessary to opt out of the Class and/or object to the settlement, including each Class members' right to appear at the fairness hearing scheduled for March 29, 2004. Notices could not be served on 665 Class members, either because their last known addresses were invalid or the notices were returned as "undeliverable" by the United States Postal Service. (Id. ¶ 6.) As of March 23, 2004, only one potential Class member opted out of the settlement. (Id. ¶ 7.) No Class member have objected to the settlement. (Id. ¶ 8.) On March 29, 2004, a fairness hearing was conducted with respect to the settlement. No Class members appeared at that hearing to object to the settlement.

 II. FAIRNESS OF THE SETTLEMENT

  In order to ensure meaningful appellate review of a decision to approve a settlement, a district court must present its reasons for approving the settlement. Eichenholtz v. Brennan, 52 F.3d 478, 488-89 (3d Cir. 1995). "It is essential in cases such as this that the district court set forth the reasoning supporting its conclusion in sufficient detail to make meaningful review possible; use of `mere boilerplate' language will not suffice." Bryan v. Pittsburgh Plate Glass Co., 494 F.2d 799, 804 (3d Cir. 1974). First we will examine the proposed Class to ensure that it meets the requirements of Rule 23. Then we will evaluate the fairness of the settlement by following the nine-factor test adopted by the Court of Appeals for the Third Circuit in Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975).

  A. Class Certification

  On January 21, 2004, we provisionally certified the Class for the purpose of reaching a settlement. Before we can finally approve the settlement, however, Plaintiff must demonstrate that the Class meets the requirements of Rule 23. In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, 308 (3d Cir. 1998) ("[A] district court must first find a class satisfies the requirements of Rule 23, regardless whether it certifies the class for trial or for settlement."). To be certified, the Class must meet all of the requirements of Rule 23(a), and the action must fit into one of the three categories of class actions set forth in Rule 23(b)(1), (b)(2) or (b)(3). In re Life USA Holding Inc., 242 F.3d 136, 143 (3d Cir. 2001). Rule 23(a) states that:
One or more members of a class may sue or be sued as representative parties on behalf of all 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 four elements are often referred to as numerosity, commonality, typicality, and adequacy of representation, respectively." In re Life USA, 242 F.3d at 143.

  1. Numerosity

  "Numerosity requires a finding that the putative class is so numerous that joinder of all members is impracticable." Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 182 (3d Cir. 2001). Defendants represent that 3,340 people received the debt collection letters at issue in this case during the relevant time period. "No minimum number of plaintiffs is required to maintain a suit as a class action, but generally if the named plaintiff demonstrates that the potential number of plaintiffs exceeds 40, the first prong of Rule 23(a) has been met." Stewart v. Abraham, 275 F.3d 220, 227 (3d Cir. 2001); see also Oslan v. Collection Bureau of Hudson Valley, 206 F.R.D. 109, 111 (E.D. Pa. 2002) (finding numerosity requirement met when there were either 740 or 941 class members). A class with 3,340 potential members satisfies the numerosity requirement. 2. Commonality

  Commonality demands that there are "questions of law or fact common to the class." FED. R. CIV. P. 23(a)(2). "The commonality requirement will be satisfied if the named plaintiffs share at least one question of fact or law with the grievances of the prospective class." Stewart, 275 F.3d at 227 (quoting Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994)). Generally, courts have held that the commonality requirement is satisfied when "the defendants have engaged in standardized conduct towards members of the proposed class by mailing to them allegedly illegal form letters or documents." Saunders v. Berks Credit & Collections, Inc., No. 00-3477, 2002 WL 1497374, at *6 (E.D. Pa. July 11, 2002) (citing Keele v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998)). Furthermore, courts in this district have previously found commonality in debt collection letter class action lawsuits. See, e.g., Saunders, 2002 WL 1497374, at *6 (finding commonality requirement met when consumers sent substantially similar debt collection letters); Hudson Valley, 206 F.R.D. at 111 (same); Schilling v. Let's Talk Cellular & Wireless, No. 00-3123, 2002 WL 391695, at *1 n.1 (E.D. Pa. Feb. 6, 2002) (same). Plaintiff claims that Defendants sent her debt collection letters that were substantially similar to those sent to the other Class members and that those letters violated the same federal and state debt collection statutes. These allegations are sufficient to show questions of law or fact that are common to the Class.

  3. Typicality

  Typicality requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." FED. R. CIV. P. 23(a)(3). The central inquiry in a typicality evaluation is whether "the named plaintiff's individual circumstances are markedly different or . . . the legal theory upon which the claims are based differs from that upon which the claims of other class members will perforce be based." Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985) (quoting Weiss v. York Hosp., 745 F.2d 786, 809 n. 36 (3d Cir. 1984). "The heart of this requirement is that the plaintiff and each member of the represented group have an interest in prevailing on similar legal claims." Seidman v. Am. Mobile Sys., Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1994).

  Plaintiffs claims and those of the other Class members are typical because Plaintiff and the other Class members received substantially similar letters and claim that those letters violated the same federal and state statutes. Other courts have found the typicality requirement satisfied under similar circumstances in debt collection class actions. See, e.g., Saunders, 2002 WL 1497374, at *7; Hudson Valley, 206 F.R.D. at 112; Schilling, 2002 WL 391695, at *1 n.1. We are satisfied that the typicality requirement has been met here.

  4. Adequacy of Representation

  A class representative is adequate if (1) the class representative's counsel is competent to conduct a class action; and (2) the class representative's interests are not antagonistic to the class's interests. In re General Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 800-01 (3d Cir. 1995). A number of courts in this district have found that Plaintiff's counsel are competent to prosecute class actions such as this. See, e.g., Saunders, 2002 WL 1497374 at *8 ("Defendants do not challenge the qualifications of Saunders' counsel [Francis & Mailman P.C.] and the Court finds them to be well qualified"); Hudson Valley, 206 F.R.D. at 112 ("Francis & Mailman P.C. and Donovan Searles LLC, possess sufficient qualifications, skill, and experience in consumer law and class action practice to prosecute this suit to its conclusion."). We concur. Plaintiffs counsel is very experienced in prosecuting ...


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