PETERS v. AT T CORPORATION, (N.D.Ill. 6-11-1998)

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Docket Number

No. 97 C 8273.

Attorney(S)

Cathleen M. Combs, Daniel A. Edelman, James 0. Latturner, Adam Goodman, Edelman Combs, Chicago, IL, for Andrew Peters. John Henry Wickert, Fay Clayton, Michael R. LaPorte, Robinson, Curley Clayton, P.C., Chicago, IL, for AT T Corp. David Matthew Schultz, John Matthew Foley, Robert H. Muriel, Hinshaw Culbertson, Chicago, IL, for GC Services Ltd. Partnership, DLS Enterprises, Inc., GC Financial Corp.

Judges

Elaine E. Bucklo

Acts

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Smart Summary

Factual and Procedural Background

On November 26, 1997, Andrew Peters filed suit against AT T Corporation, GC Services Limited Partnership, DLS Enterprises, Inc., and GC Financial Corporation alleging violations of the Fair Debt Collection Practices Act (FDCPA). The suit arises from a collection letter Mr. Peters received shortly after June 2, 1997, sent by GC Services seeking payment for an AT T residential long-distance telephone bill. The letter lacked a contact number for GC Services, instead directing consumers to contact AT T at a toll-free number and to send payments to a fictitious address. Mr. Peters alleged that GC Services had no substantive information about the debt and was merely lending its name to assist AT T's collection efforts, as GC Services had not been hired to perform actual collection services at the time the letters were sent. AT T allegedly used GC Services' name to give the appearance that a third party was collecting the debts. Mr. Peters sought class certification, while defendants DLS and GC Financial moved to dismiss the complaint against them.

Legal Issues Presented

Whether the case meets the requirements for class certification under Federal Rules of Civil Procedure 23(a) and 23(b)(3).
Whether the general partners of GC Services, DLS and GC Financial, are liable under the FDCPA for the collection activities of GC Services.

Arguments of the Parties

Plaintiff's Arguments

The collection letters sent by GC Services on behalf of AT T violated the FDCPA because GC Services was not authorized to perform collection services and was lending its name only.
Mr. Peters is an adequate class representative who received the same form letter as other class members and seeks statutory damages on their behalf.
The class satisfies Rule 23(a) prerequisites of numerosity, commonality, typicality, and adequacy, as well as the predominance and superiority requirements of Rule 23(b)(3).
DLS and GC Financial, as general partners of GC Services, are vicariously liable under partnership law for the acts of GC Services in sending the collection letters.

Defendants' Arguments (DLS and GC Financial)

They moved to dismiss the complaint against them, arguing that the complaint fails to allege their personal involvement in the collection attempts.
They contend they are not debt collectors and cannot be held liable solely due to their status as general partners of GC Services.
They rely on corporate law principles concerning piercing the corporate veil and personal liability of officers and shareholders, which they argue are inapplicable to limited partnerships.
They argue GC Services exceeded its authority by conspiring with AT T to perform illegal acts, and thus they should not be held liable for those acts.
They challenge Mr. Peters' adequacy as class representative, claiming he is apathetic, insufficiently motivated, lacks understanding of the complaint, and has no monetary injury.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Harriston v. Chicago Tribune Co., 992 F.2d 697 (7th Cir. 1993)	Requirements for class certification under Rule 23.	Used to establish that all Rule 23(a) and one Rule 23(b) requirement must be met for class certification.
Spencer v. Central States, Southeast Southwest Areas Pension Fund, 778 F.Supp. 985 (N.D.Ill. 1991)	Commonality requirement under Rule 23(a).	Supported finding that common questions of law or fact exist among class members.
De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225 (7th Cir. 1983)	Typicality requirement under Rule 23(a).	Established that claims arising from the same course of conduct and legal theory satisfy typicality.
Gammon v. GC Services Ltd. Partnership, 162 F.R.D. 313 (N.D.Ill. 1995)	Adequacy of representation under Rule 23(a).	Outlined elements for adequacy of class representation, including lack of conflicts, sufficient interest, and qualified counsel.
Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997)	Application of agency and partnership law to vicarious liability.	Guided the court in applying general partnership principles to determine vicarious liability of general partners under FDCPA.

Court's Reasoning and Analysis

The court analyzed class certification by sequentially applying the Rule 23(a) prerequisites and Rule 23(b)(3) requirements. It found numerosity satisfied given AT T's large customer base and the form nature of the collection letter. Commonality was established through shared legal and factual questions, including the role of GC Services and whether the letters violated the FDCPA. Typicality was met because Mr. Peters' claims arose from the same conduct and legal theory as those of the class. Adequacy was contested by defendants but the court found Mr. Peters sufficiently interested, informed, and represented by qualified counsel, rejecting claims of apathy and lack of understanding.

Regarding Rule 23(b)(3), the court concluded that common questions predominate and a class action is superior, especially given the small damages at issue and the FDCPA's explicit provision for class actions.

In addressing the motion to dismiss DLS and GC Financial, the court rejected the defendants' reliance on corporate veil piercing principles, holding that partnership law governs liability for general partners. Under Delaware partnership law and uniform partnership acts, general partners are jointly and severally liable for partnership obligations. The court found that the complaint sufficiently alleged that GC Services acted within the scope of its authority, thus potentially exposing its general partners to vicarious liability. The complaint's allegations were viewed in the light most favorable to Mr. Peters, leading to denial of the motion to dismiss.

Holding and Implications

The court GRANTED Andrew Peters' motion for class certification, finding all Rule 23 requirements satisfied.

The court DENIED the motion to dismiss filed by DLS Enterprises, Inc. and GC Financial Corporation, holding that they may be held vicariously liable as general partners of GC Services under partnership law for the alleged FDCPA violations.

This decision allows the litigation to proceed as a class action against all defendants and clarifies that general partners in a limited partnership may be liable for the partnership's debt collection activities under the FDCPA. The ruling does not establish new precedent but applies existing partnership and class action principles to the facts before the court.

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Andrew PETERS, on behalf of himself and all others similarly situated, Plaintiff, v. AT T CORPORATION, GC Ser

MEMORANDUM OPINION AND ORDER

ELAINE BUCKLO, District Judge

On November 26, 1997, the plaintiff, Andrew Peters, brought this action against the defendants, AT T Corporation ("AT T"), GC Services Limited Partnership ("GC Services"), DLS Enterprises, Inc. ("DLS"), and GC Financial Corporation ("GC Financial"), alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Mr. Peters seeks to certify this case as a class action. DLS and GC Financial move to dismiss the complaint against them. For the reasons set forth below, Mr. Peters' motion for class certification is granted and DLS' and GC Financial's motion to dismiss is denied.

Background

Mr. Peters alleges that shortly after June 2, 1997, he received via the United States mail the collection letter attached to the complaint as Exhibit A. The letter was from GC Services, a collection agency, and sought payment of an AT T residential long-distance telephone bill. There was no telephone number provided at which a consumer could contact GC Services. The letter allegedly encouraged consumers to call AT T at a toll free phone number to inquire about the debt and to make payments to AT T at a fictitious address. Mr. Peters claims that GC Services had no information about the debt beyond that appearing on the face of the letter.

The complaint alleges that AT T seeks to have payments on delinquent accounts sent to Post Office Box 8211, Fox Valley, Illinois 60572-8211. To induce AT T's customers to pay AT T, AT T and GC Services allegedly agreed to send or cause to be sent collection letters similar to the one in Exhibit A, which purport to emanate from GC Services. Mr. Peters claims, however, that GC Services had not been hired to perform any actual collection services for AT T at the time the collection letters were sent. He says GC Services was merely lending its name to assist collection activities. AT T, in the process of collecting its own debt, was allegedly using GC Services' name to indicate that a third person was collecting or attempting to collect such debts.

Class Certification

Mr. Peters moves to certify this case as a class action. The proposed class consists of all persons (1) who were mailed a collection letter in the form represented by Exhibit A of the complaint, (2) which letter was not returned by the Postal Service, (3) on or after November 26, 1996, (4) in connection with a bill for residential phone service allegedly owed to AT T.

To obtain class certification, Mr. Peters must satisfy the four requirements of Rule 23(a) and one of the requirements of Rule 23(b) of the Federal Rules of Civil Procedure. Harriston v. Chicago Tribune Co., 992 F.2d 697, 703 (7th Cir. 1993). The failure to meet any single requirement precludes class certification. Id. I find that Mr. Peters has met the requirements of Rules 23(a) and 23(b)(3).

A. Rule 23(a)

The four prerequisites for a class action under Rule 23(a) are:

(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). The only prerequisite that the defendants, GC Services, DLS, and GC Financial (collectively the "GC Defendants"), challenge is the ability of Mr. Peters to fairly and adequately protect the interests of the class.

AT T does not contest class certification.

1. Numerosity

The numerosity requirement is met. AT T is a large long distance telephone carrier. The collection letter sent to Mr. Peters is a form letter to collect amounts allegedly owed to AT T. Based on these facts, it is reasonable to infer that many individuals received the form collection letter and that joinder of all the individuals would be impracticable. 2. Commonality

Mr. Peters has propounded discovery to determine the exact number of class members.

To satisfy the Rule 23(a) commonality requirement, Mr. Peters need only demonstrate that at least one question of law or fact is common to all class members. Spencer v. Central States, Southeast Southwest Areas Pension Fund, 778 F.Supp. 985, 989 n. 2 (N.D.Ill. 1991). In this case, the common questions of law or fact include: (1) whether GC Services plays a significant role in collecting debts that are the subject of the collection letters or is merely lending its name to AT T; (2) whether AT T is deemed a debt collector because it is using GC Services name; and (3) whether the form collection letters violate the FDCPA. Thus, the commonality requirement is satisfied.

3. Typicality

"A plaintiffs claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members and his or her claims are based on the same legal theory." De La Fuente v. Stokely-Van Camp, Inc., 713 F.2d 225, 232 (7th Cir. 1983) (quoting H. Newberg, Class Actions, § 1115(b), at 185 (1977)). Here, each claim arises from the receipt of collection letters similar to the one Mr. Peters received that allegedly violate the FDCPA. Typicality is therefore established.

4. Adequacy of Representation

The adequacy of representation requirement has three elements: (1) the chosen class representative cannot have antagonistic or conflicting claims with other members of the class, . . . (2) the named representative must have sufficient interest in the outcome to ensure vigorous advocacy, . . . and, (3) counsel for the named plaintiff must be competent, experienced, qualified, and generally able to conduct the proposed litigation vigorously.

Gammon v. GC Services Ltd. Partnership, 162 F.R.D. 313, 317 (N.D.Ill. 1995) (citations and quotations omitted). Mr. Peters has retained qualified counsel. ( See Pl.'s App. C for qualifications). The GC Defendants argue, however, that Mr. Peters cannot adequately represent the class for three reasons.

First, the GC Defendants claim that Mr. Peters' conduct thus far shows his lack of interest and involvement in the case. By placing the collection letter on top of his drawer for a couple of months before taking any action, by failing to write GC Services, and by failing to call AT T, they argue that Mr. Peters is irresponsible, apathetic, and insufficiently motivated to properly represent the class. They say that Mr. Peters has not sufficiently communicated with his attorneys, Edelman Combs, because he has only met with them once and has only spoken to them on the phone for a total of less than ten minutes. Furthermore, Mr. Peters has only glanced at some documents and has not read all of them yet.

In Mr. Peters' deposition, he stated that although he placed the collection letter on his dresser and waited a couple of months before he took any action, he eventually took the letter to a lawyer, Eric Kelly, to work out a payment plan. Mr. Kelly informed him that he might have a lawsuit and referred him to Adam Fishbein. Mr. Fishbein in turn referred him to his present lawyers, Edelman Combs. Mr. Peters has pursued all suggested avenues since he was first informed that he might have a lawsuit and this indicates that he is anything but apathetic to this suit.

Mr. Peters is a resident of New York State. He reviewed the complaint in this case. He traveled to Chicago for his deposition. His willingness to travel to Chicago indicates that he is sufficiently interested in the case and can represent the class. Furthermore, because Mr. Peters is from New York, most of his initial conversations about this case were with his attorneys in New York. It is not surprising then that his communications with Edelman Combs have not been substantial since they were the third attorneys that Mr. Peters spoke to and eventually hired.

Second, the GC Defendants claim that Mr. Peters lacks a basic understanding of the allegations in his complaint. They claim that Mr. Peters does not know why two of the named defendants, GC Financial and DLS, are being sued nor does he understand the alleged FDCPA violations. They argue that Mr. Peters is blindly relying on his attorneys.

It is not unreasonable for Mr. Peters to rely on his counsel to inform him that GC Services is a limited partnership and that as the general partners, GC Financial and DLS may be liable. Furthermore, contrary to the defendants' assertions, I find that Mr. Peters' answers in his deposition sufficiently indicate that he understands the complaint's allegations.

Finally, the GC Defendants claim that Mr. Peters' lack of monetary injury indicates that he does not have the same interest nor does he suffer the same injury as the class members and would be unlikely to accept a monetary settlement that would benefit the class. In this case, however, the injuries alleged are the receipt of collection letters which allegedly violate the FDCPA. Mr. Peters received such a letter and thus is a member of the class. Furthermore, his interest in this suit is the same as other members of the class — he seeks statutory damages. His monetary interest in bringing this claim is the same as other members of the class who might receive both actual and statutory damages.

B. Rule 23(b)(3)

Rule 23(b)(3) requires that the common questions of law and fact predominate and that a class action is superior to other forms of adjudication. There is a common factual link among the plaintiffs in the class: they all received a similar collection letter allegedly from GC Services. The common question of law is whether or not this letter violates the FDCPA. Additionally, a class action is the superior means for adjudicating this case. The FDCPA specifically contemplates class actions. See 15 U.S.C. §§ 1692k(a)(2)(B) (b)(2). Many plaintiffs may not know their rights are being violated, may be unable to hire competent counsel to protect their rights, and may not have a monetary incentive to individually litigate their rights given the small amounts at stake. See id. § 1692k(a) (amount of damages). A class action ensures that the plaintiffs' rights are vindicated and promotes judicial efficiency by adjudicating thousands of potential individual suits in one action.

Motion to Dismiss

The FDCPA imposes liability on a "debt collector." 15 U.S.C. § 1692k. A debt collector is "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). GC Services admits that it is a debt collector.

GC Services is a limited partnership. Its alleged general partners are DLS and GC Financial (collectively "General Partners"). The General Partners move to dismiss the complaint against them stating that it fails to allege that either of them were involved in GC Services' attempt to collect Mr. Peters' debt. They argue that they are not debt collectors and that Mr. Peters seeks to impose liability on them solely by virtue of their affiliation as general partners of GC Services. The law that they rely on is general corporate law dealing with piercing the corporate veil and with determining when a corporate officer, director, or shareholder is personally liable. This law, however, is not applicable to determine liability in the context of a limited partnership.

To determine whether the General Partners are vicariously liable for the acts of GC Services under the FDCPA, the court should look to general partnership law. See, e.g., Bartlett v. Heibl, 128 F.3d 497, 499-500 (7th Cir. 1997) (looking to general principles of agency law to find that if a lawyer "were being sued for conduct within the scope of his agency or employment as a partner or an associate of a law firm, the firm could be named along with him as a defendant, because it would be liable jointly with him for that conduct"). GC Services is a partnership organized under Delaware law. Under Delaware partnership law, "a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to persons other than the partnership and the other partners." Del.Code.Ann. tit. 6, § 17-403(b). A partner in a partnership is "liable . . . [j]ointly and severally for everything chargeable to the partnership. . . ." Id. § 1515(a). General partnership principles are in accord. See, e.g., Unif. Limited Partnership Act § 403(b) (amended 1985) ("[A] general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to persons other than the partnership and the other partners."); Unif. Partnership Act § 306(a) (amended 1996) ("[A]ll partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.").

The General Partners counter that even if they are potentially jointly and severally liable, GC Services' conduct in this case exceeded the scope of its authority under the partnership agreement. They claim that GC Services had the authority to undertake ordinary collection activities but not to conspire with AT T to perform illegal acts and thus, they are not liable for its actions. In the complaint, however, Mr. Peters alleges that GC Services and its general partners permitted the collection letters to be used. (Compl. ¶ 27). Viewing the complaint in light most favorable to Mr. Peters, GC Services' conduct was within the scope of its authority and thus, the General Partners cannot be dismissed since they are potentially liable jointly and severally for the acts of GC Services.

Conclusion

Mr. Peters' motion for class certification is granted. DLS' and GC Financial's motion to dismiss them from this action is denied.