In addition to the explicit Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy of representation, an implied prerequisite to certification is that the class must be sufficiently definite:  that is, the party seeking certification must demonstrate that an identifiable and ascertainable class exists.  A class is ascertainable if it is defined by objective criteria and is sufficiently definite so that it is administratively feasible to determine whether a particular individual is a member of the class, which is important for purposes of being able to enforce the preclusive effect of a final judgment.

The United States District Court for the Northern District of California recently granted a motion to certify a class even though a primary criterion for defining the class was all but unascertainable due to what the plaintiff characterized as the defendant’s “shoddy recordkeeping.”

The consumer plaintiff, Ms. Gold, incurred a financial obligation when she used her HSBC Bank credit card to purchase goods and services primarily for personal or household use.  After HSBC Bank transferred debt accounts including Gold’s to Midland for collection,  Midland sent Gold and others like her a collection letter stating that:

  • “We can help you reduce your past due balance with HSBC Bank Nevada, N.A. and get your finances back on track.”
  • “Your credit report will be updated with each payment made, and once you’ve completed your agreed-upon payments to settle the account, your credit report will be updated as ‘Paid in Full’!”
  • “Having a good credit report is important . . . We can help you get your finances back on track.”

As the basis for her lawsuit, Gold contended that the letter misleadingly implied HSBC Bank’s continued ownership of the debt account or that Midland could impact HSBC Bank’s reporting of the debt to credit bureaus, and that these misrepresentations violated the federal and California versions of the Fair Debt Collection Practices Act (together, the “FDCPA”).

Gold sought to certify hybrid classes under Rule 23(b)(2) and (b)(3) of all persons with California addresses to whom Midland sent the offending letter in an attempt to collect an alleged debt originally owed to HSBC Bank which was primarily for personal, family, or household purposes during the period one year prior to the date of filing the class action.  The problem with the class as defined by Gold was that it endeavored to rely on Midland’s or HSBC Bank’s records to establish that the underlying debt was incurred “primarily for personal, family, or household purposes,” yet Midland’s records did not show the reasons for which the unpaid obligations were incurred, and Gold never even sought records from HSBC Bank.

Although the Court was troubled by Gold’s lack of diligence in failing to seek the necessary records from HSBC Bank, it was unwillingly to concede that the class was inherently unascertainable.  Acknowledging Midland’s entitlement to assurance through reasonable proof that only qualified individuals with debt related to personal, family, or household purposes would be confirmed as class members, the Court was nevertheless receptive to Gold’s suggestion that the name on each debt account could be used to identify whether the financial obligation was incurred by an individual or business, which would serve to preliminarily identify potential class members.  In the Court’s view, it would be administratively feasible to then narrow the potential class members further through use of an appropriately drafted notice and claim form, perhaps including a required submission of credit card statements to confirm the nature of the financial obligation.

The Court certified FDCPA classes under Rule 23(b)(3), but declined to create hybrids by also certifying the classes under Rule 23(b)(2).  The Court reasoned that the classes as defined extended only to past recipients of a letter that Midland no longer used, so there would be no benefit to class members in a Rule 23(b)(2) classes for declaratory relief that was not already being provided in the 23(b)(3) classes for damages.

Gold v. Midland Credit Mgmt., Inc., et al., No. 13-cv-02019-BLF (N.D. Cal. Oct. 7, 2014).