'Professional
plaintiff' fit to represent class
By
David Ziemer
Wisconsin Law Journal
Jan.
25, 2006
| What
the court held
Case:
Nancy R. Murray v. GMAC Mortgage Corp., No. 05-8035.
Issue:
WWas it error for a district court to refuse class certification
of an action under the FCRA because the named class representative
is a "professional plaintiff"?
Holding:
Yes. A plaintiff's decision to sue every creditor who may
have violated the FCRA, rather than just one, has no relevance
to her fitness to serve as class representative. |
The
fact that a plaintiff has repeatedly been the named plaintiff
in class actions is not grounds to hold that she is unfit to serve
as the named plaintiff and class representative, the Seventh Circuit
held on Jan. 17.
Shortly
after her debts had been discharged in bankruptcy, Nancy Murray
received a credit solicitation from GMAC Mortgage (GMACM), which
had learned her name and address by asking credit bureaus to forward
information about potential borrowers who met specified criteria.
GMACM
offered Murray a loan to be secured by a mortgage on her home.
Deluged by offers from creditors, Murray showed them to a lawyer,
who concluded that GMACM had violated the Fair Credit Reporting
Act (FCRA) in two ways: GMACM had not made the "firm offer
of credit" that is essential when a potential lender accesses
someone's credit history without that person's consent; and GMACM's
offer did not include a "clear and conspicuous" notice
of the recipient's right to close her credit information to all
who lacked her prior consent.
Murray
filed suit in Illinois federal court, proposing to represent a
class of about 1.2 million recipients of similar offers from GMACM
and demanding statutory damages, which range from $100 to $1,000
per person. She also filed similar suits against other lenders,
represented by the same attorneys.
While
waiting for the judge to decide whether the suit could proceed
as a class action, the parties reached a tentative settlement.
However, the district judge refused to read it, stating that this
would be a waste of time because he had decided that Murray could
not represent the class.
The
district court gave four reasons for declining to certify the
class: (1) counsel did not try to cut a deal for Murray personally;
(2) the complaint seeks statutory but not compensatory damages;
(3) statutory damages, if awarded to a class, would be ruinously
high; and (4) Murray is a "professional plaintiff" unfit
to represent a class.
The
Seventh Circuit accepted interlocutory appeal and reversed, in
an opinion by Judge Frank H. Easterbrook.
Explaining
the first reason for denying class certification, the district
court had written, "Murray's interests are antagonistic to
other class members' interests because Murray may desire to settle
her claim alone. Murray might be able to recover more funds individually
with fewer complications if she settled individually."
However,
the Seventh Circuit found that just the opposite was true. Under
the tentative settlement, GMACM agreed to put up a fund of $950,000:
Murray would get the first $3,000; the remaining class members
(1.2 million) and counsel would divide the rest. Money not claimed
would be distributed to Murray's lawyers and to charity.
The
Seventh Circuit found the settlement inequitable, because it gave
Murray three times the statutory maximum of $1,000, while the
others don't even get 1 percent of the $100 minimum. Contradicting
the district court's stated reason for denying certification;
the Seventh Circuit noted, "Oddly, this is the sort of tactic
that the district judge chastised counsel for not employing on
Murray's behalf."
The
court added, "if the reason other class members get relief
worth about 1% of the minimum statutory award is that the suit
has only a 1% chance of success, then how could Murray personally
accept 300% of the statutory maximum? And, if the chance of success
really is only 1%, shouldn't the suit be dismissed as frivolous
and no one receive a penny? If, however, the chance of success
is materially greater than 1%, as the proposed payment to Murray
implies, then the failure to afford effectual relief to any other
class member makes the deal look like a sellout. Thus it may well
be that Murray is not a good champion, that her law firm (Edelman,
Combs, Latturner & Goodwin, LLC) is not an appropriate counsel,
or both. But this is the opposite of the district judge's reason
(recall that the judge wanted Murray to jettison the class for
personal benefit), so this consideration cannot sustain the decision."
The
court also rejected the district court's second reason —
that Murray should have sought compensatory damages for herself
and all class members rather than statutory damages — finding
that such reasoning "would make consumer class actions impossible."
The
court found, "an effort to determine a million consumers'
individual losses would make the suit unmanageable. Yet individual
losses, if any, are likely to be small — a modest concern
about privacy, a slight chance that information would leak out
and lead to identity theft. That actual loss is small and hard
to quantify is why statutes such as the Fair Credit Reporting
Act provide for modest damages without proof of injury."
The
court concluded, "Refusing to certify a class because the
plaintiff decides not to make the sort of person-specific arguments
that render class treatment infeasible would throw away the benefits
of consolidated treatment."
The
court also rejected the district court's third reason — that
statutory damages, if awarded, would be ruinously high for GMACM.
The
court concluded, "The reason that damages can be substantial,
however, does not lie in an 'abuse' of Rule 23; it lies in the
legislative decision to authorize awards as high as $1,000 per
person, combined with GMACM's decision to obtain the credit scores
of more than a million persons (cite omitted)."
The
court noted that the FCRA, unlike other consumer statutes, does
not limit the aggregate award to any class.
The
court wrote, "The district judge sought to curtail the aggregate
damages for violations he deemed trivial. Yet it is not appropriate
to use procedural devices to undermine laws of which a judge disapproves.
Maybe suits such as this will lead Congress to amend the Fair
Credit Reporting Act; maybe not. While a statute remains on the
books, however, it must be enforced rather than subverted."
The
court acknowledged that an award could be unconstitutionally excessive,
but found it better to apply constitutional limits after a class
is certified, reasoning, "Reducing recoveries by forcing
everyone to litigate independently — so that constitutional
bounds are not tested, because the statute cannot be enforced
by more than a handful of victims — has little to recommend
it."
Finally,
the court rejected the district court's denial of class certification
because it found Murray and the rest of her family to be "professional
plaintiffs."
The
court distinguished Murray from "professional plaintiffs"
in the securities context — those who buy one share in many
corporations, with the intent that, when one falls, the plaintiff
can attempt to extract a payoff by filing a proposed class action.
The
court noted that Congress has prevented this, in securities litigation,
by insisting that the investors with the largest stakes control
the litigation; the FCRA, however, lacks any such requirement.
Distinguishing
Murray from the sort of plaintiffs that Congress sought to limit
in the securities field, the court wrote, "Murray just opened
the mail as it arrived. She did not invite any of the offers or
entrap any potential creditor into accessing her credit history.
Her decision to sue everyone who accessed that credit history
without her consent, rather than just a few, does not injure any
other potential borrower. Nothing about the frequency of Murray's
litigation implies that she is less suited to represent others
than is a person who received and sued on but a single offer."
Accordingly,
the court vacated the decision of the district court and remanded
for further proceedings.
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here for Case Analysis.
David
Ziemer can be reached by email.
