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Ybarrondo v. NCO Financial Systems

March 4, 2009

DARRELL YBARRONDO, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
NCO FINANCIAL SYSTEMS, INC., AND DOES 1-25, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: M. James Lorenz

ORDER GRANTING JOINT MOTION FOR CERTIFICATION OF A SETTLEMENT CLASS, PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT AGREEMENT, AND APPROVING NOTICE TO THE CLASS WITH MODIFICATIONS

This is an unfair debt collection action pursuant to Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. ("FDCPA") and Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code § 1788 et seq. ("California FDCPA"). Plaintiff alleges he received a form letter from Defendant, a debt collector, in violation of the fair debt collection laws. He seeks to certify a class action, obtain a declaratory judgment that Defendant's practices were unlawful, statutory damages, and attorneys' fees, costs and expenses of litigation.

After Defendant filed an answer denying liability, on May 22, 2007 the parties filed a Joint Motion for Class Certification of a Settlement Class, Preliminary Approval of Class Action Settlement Agreement, and Notice to the Class. On May 29, 2007 the California Attorney General's office issued a letter raising concerns about the settlement. The parties did not disclose the letter to the court at that time. Upon review of the documents submitted by the parties, the court found they were inadequate to warrant preliminary settlement approval. By order signed June 4, 2007, the court ordered supplemental briefing and identified the areas of concern the parties were to address.

On December 28, 2007, Plaintiff filed a Supplemental Brief in support of the joint motion. In light of the concerns expressed by the court and the California Attorney General, the parties had renegotiated the settlement. However, concerns regarding settlement fairness and other issues remained, and the parties' initial motion was denied without prejudice on January 18, 2008.

Subsequently the parties for the first time engaged in formal discovery. They renegotiated the settlement again, and on December 23, 2008 entered into the Second Amended Class Action Settlement Agreement ("Agreement"). On January 6, 2009 they filed a Joint Motion for Certification of a Settlement Class, Preliminary Approval of Second Amended Class Action Settlement Agreement, and Notice to the Class ("Joint Motion"). For the reasons which follow, the Joint Motion is GRANTED. The proposed notices to the class and subclass are APPROVED AS MODIFIED.

Plaintiff alleged that a form debt collection letter mailed by NCO Financial Systems, Inc. ("NCO" and "Letter," respectively) violated the FDCPA and California FDCPA by stating in part, "your credit bureau report may be reviewed. Now is the time to improve your credit report." Plaintiff contended that the reference to credit reporting was misleading because the threat to report the account to credit bureaus could not be legally carried out. Further, Plaintiff contended that the reference to credit bureau reporting was misleading because it incorrectly implied that payment or non-payment of the debt may impact the consumer's credit rating.*fn1

NCO denied any and all liability asserted in this case.

The Parties established that the putative class consists of approximately 1,406 individuals to whom the Letter was sent during the class period. During the course of formal discovery, information was developed as to the temporal relationship between the Letter, other collection efforts by NCO, and payments by members of the putative class. In sum, 62 of the 1,406 individuals made payments to NCO at some point in time. Of the 62 individuals who made payments, 18 made at least one payment within 90 days after NCO sent him or her an Letter. Accordingly, the putative class consists of 1,406 individuals ("Class" or "Class Members" or "Members"), and includes a putative subclass of 18 individuals who began making payments to NCO within 90 days of the Letter being sent to them ("Subclass" or "Subclass Members" or "Members").

In exchange for a release, NCO promises to pay $23 to each Class Member who timely submits a claim. In addition, it will pay to each Member of the Subclass the amount the Member had paid to NCO since the Letter on his or her account subject to this case, provided the Member timely submits a refund claim. Defendant will waive and forgive the underlying debt referred to in the Letter for each Class Member who does not exclude him- or herself from the settlement. The value of debt forgiveness is disputed, however, its current face value is $5.8 million. In addition, NCO will pay the named Plaintiff $2,000 in statutory damages and in recognition of his services. Finally, NCO promises to pay class counsel's attorney's fees and costs in the amount by the court.

Upon review of the Complaint, Joint Motion and the Agreement, IT IS HEREBY ORDERED as follows:

1. Pursuant to Federal Rule of Civil Procedure 23, this action is hereby preliminarily certified, for settlement purposes only, as a class action on behalf of all natural persons with California addresses who meet the following criteria: (a) he/she was sent a letter by NCO in the same or substantially similar form to the Letter represented by Exhibit A attached to the Agreement; (b) the Letter was sent on or after November 3, 2004 and on or before March 10, 2006, and the Letter was not returned by the Postal Service; and, (c) the Letter seeks to collect a debt originally owed to American General Finance. NCO represents that there are approximately 1,406 Class Members. There exists within the Class a Subclass of 18 Class Members who made at least one payment to NCO on his or her American General Finance account referenced in the Letter within 90 days of the date NCO sent him or her the Letter.

2. For the reasons stated in the declaration of Darrell Ybarrondo dated December 23, 2008, Darrell Ybarrondo, named Plaintiff in this action, is certified as the Class Representative. For the same reasons and the reasons stated in the Joint Motion, the law firm of Wickman & Wickman, Attorneys at Law, is appointed as Class Counsel pursuant to Federal Rule of Civil Procedure 23(g).

3. Pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3) and for the reasons stated in the Joint Motion, the court preliminarily finds with respect to the Class, including the Subclass:

A. The Class Members are so numerous that joinder of all of them in this action is impracticable;

B. There are questions of law and fact common to the Class Members, which predominate over any individual questions;

C. The Class Representative's claims are typical of the claims of the Class Members;

D. The Class Representative and Class Counsel have fairly and adequately represented and protected the interests ...


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