DocketNumber： No. C 08-03174 MEJ
Citation Numbers： 278 F.R.D. 479
Judges： James, Maria
Filed Date： 11/15/2011
Status： Precedential
Modified Date： 11/26/2022
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
I. INTRODUCTION
Pending before the Court is Plaintiffs Krista O’Donovan, Eduardo De La Torre, and Lori Saysourivong’s (collectively “Plaintiffs”) Motion for Class Certification. Dkt. No. 60. After carefully considering the parties’ arguments, the Court GRANTS IN PART and DENIES IN PART Plaintiffs’ Motion, as set forth below.
II. BACKGROUND
A. Factual Background
The following factual allegations are taken from Plaintiffs’ Fourth Amended Class Action Complaint (“FAC”), filed on February 25,2010. Dkt. No. 54.
Defendant CashCall is a California corporation engaged in the business of making unsecured personal loans to consumers at high interest rates. Id. ¶¶ 4,17,18.
In October 2005, Plaintiff Krista O’Donovan borrowed $5,075 from CashCall. Id. ¶ 20. Pursuant to the Promissory Note and Disclosure Statement that Ms. O’Donovan executed, the loan was based on an annual percentage rate of interest (“APR”) of 59.83%, with the total payments to amortize the debt listed as $30,161.86, or six times the principal. Id.
In February 2006, Plaintiff Eduardo De La Torre borrowed $2,600 from CashCall with an APR of approximately 98%. Id. ¶ 24. The stated total payments required to amortize the debt was over $9,000. Id. De La Torre alleges that CashCall made this loan despite his financial inability to repay it in the time and manner provided in the Cash-Call Promissory Note and Disclosure Statement. Id. ¶ 25. Particularly, at the time he received the loan from CashCall, De La Torre was a college student whose income consisted of wages earned from part-time work and student loans and his monthly living expenses exceeded his income. Id. ¶¶ 25, 26. He alleges that “[p]aying CashCall back for the loan in the time and manner required by CashCall was especially difficult because repayment would require several years of regular payments, which was not realistic given De La Torre’s status as a student without significant earned income.” Id. ¶ 26. De La Torre also avers that CashCall did not conduct any assessment of his employment, earning capacity, monthly expenses, or outstanding debt when it approved him for the loan. Id. ¶ 27.
In May 2006, Plaintiff Lori Saysourivong executed a loan for $2,525 from CashCall at an APR of 99.07%, according to CashCall’s Promissory Note and Disclosure Statement. Id. ¶ 28. The stated total payments to amortize the debt was $9,149.51. Id. Saysouri-vong alleges that CashCall made this loan despite her financial inability to repay it in the time and manner set forth in the Promis
Pursuant to California Civil Code section 1781 and Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs bring this lawsuit as a class action on behalf of themselves and all others similarly situated as members of a proposed class. Id. ¶ 32. Plaintiffs define the putative class as, “All individuals who borrowed money from CashCall, Inc., for personal, family, or household use at any time from June 30, 2004 to the present.” Id. On behalf of themselves and the putative class, Plaintiffs assert claims for: (1) violation of the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq., and Federal Reserve Regulation E (“Regulation E”), 12 C.F.R. § 205 et seq.; (2) violation of the Consumer Legal Remedies Act (“CLRA”), Cal. Civ.Code § 1750 et seq.; (3) violation of the Rosenthal Fair Debt Collection Practices Act, Cal. Civ.Code § 1788 et seq.; (4) unlawful business practices in violation of California Business & Professions Code section 17200; (5) unlawful and unfair business practices in violation of Business & Professions Code section 17200; and (6) unlawful, fraudulent, and unfair business practices in violation of Business & Professions Code section 17200. Id. at 8-18.
With respect to Plaintiffs’ first claim for violation of the EFTA and Regulation E, Plaintiffs allege that the Promissory Note and Disclosure Statements associated with Plaintiffs’ and the putative class members’ loans “uniformly specify a particular day of the month when CashCall is allowed to initiate and affect electronic fund transfers from customer accounts to collect installment payments and other amounts from Plaintiffs and the Plaintiff Class.” Id. ¶43. They allege that CashCall has engaged “in the business practice of initiating and effecting electronic funds transfers from customer accounts to collect payments on days of the month other than those agreed to and specified in the Promissory Note and Disclosure Statement.” Id. ¶ 44. Particularly, Plaintiffs allege that when CashCall fails to collect a loan installment payment or other charge through an electronic funds transfer (“EFT”) on the agreed-upon day, it thereafter attempts to collect the installment payment and other charges on later days during the same installment cycle that were not agreed to or authorized by the customer, thereby violating the EFTA, 15 U.S.C. § 1693e(a), and Regulation E. Id. ¶¶ 44-47.
Plaintiffs also allege that CashCall engages in the business practice of conditioning the extension of credit on the customer’s agreement to repayment by means of preauthor-ized EFTs, and requires that customers agree to a provision permitting CashCall to make electronic debits from their bank account, in violation of § 1693k(l) of the EFTA and Regulation E. Id. ¶ 48. Further, Plaintiffs allege that CashCall has violated EFTA § 1693e(a) and Regulation E by limiting customers’ rights to cancel or stop payment of a preauthorized EFT. Id. ¶¶ 50-51.
Plaintiffs’ second claim is for violation of California’s Consumer Legal Remedies Act, Cal. Civ.Code § 1750. Id. at 10-11. Plaintiffs allege that CashCall violated section 1770(a)(5) of the CLRA by representing that the services it provides have characteristics and benefits that they do not have. Id. ¶ 56. Plaintiffs also allege that CashCall has violated section 1770(a) (14) of the CLRA by representing that it has rights and remedies that are prohibited by law, including the right to collect debts without providing notices required by law, and that it has the right to collect debts in a manner prohibited by the EFTA and the Rosenthal Act. Id. ¶ 57. Further, Plaintiffs allege that CashCall has violated CLRA section 1770(a)(19) “by including unfair and unconscionable loan
Plaintiffs’ third claim is for violation of California’s Rosenthal Fair Debt Collection Practices Act, Cal. Civ.Code § 1788, and the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692. Id. at 12. Plaintiffs allege that when they were late in making payments on their respective loans, CashCall employees called them multiple times during the day and aggressively demanded that they make payments on their loans, made misrepresentations, and yelled at and threatened Plaintiffs. Id. ¶ 68. Plaintiffs also allege that CashCall contacted third parties in an attempt to collect on Plaintiffs’ debts, including family members, friends, and employers. Id. Plaintiffs further allege that CashCall claimed and collected amounts not authorized under the loan agreements, such as insufficient fund fees on electronic debit transactions made on unauthorized days of the month, and failed to include certain debt collection notices required by law. Id. ¶ 69(d), (e).
Plaintiffs’ fourth through sixth claims are for violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code § 17200. Id. at 13-18. Plaintiffs allege that CashCall engages in the illegal and unfair business practice by making loans with unconscionable terms and interest rates, by failing to accurately and fairly represent the characteristics and benefits of the loans, and by making loans without regard to the customer’s ability to repay the loan. Id. ¶¶ 75-91. Plaintiffs also allege that CashCall’s business practices in making and collecting loans are unlawful business practices in violation of the UCL because they violate the EFTA, the Rosenthal Act, and the CLRA. Id. ¶ 96. Finally, Plaintiffs allege that Cash-Call’s “marketing, sale, and collection of its loans are fraught with material misrepresentations and omissions that are likely to deceive consumers,” thereby violating section 17200. Id. ¶¶ 100-02.
B. Procedural Background
Plaintiffs filed this action against CashCall on July 1, 2008. Dkt. No. 1. On October 10, 2008, Plaintiffs filed their First Amended Complaint (Dkt. No. 11), which CashCall moved to dismiss. On June 24, 2009, the Court granted CashCall’s motion in part and denied it in part. Dkt. No. 34. Plaintiffs subsequently filed Second and Third Amended Complaints. Dkt. Nos. 35, 38. On February 25, 2010, Plaintiffs filed the operative Fourth Amended Complaint. Dkt. No. 54. On March 26, 2010, CashCall filed its Answer and Counterclaim for breach of contract against De la Torre and Saysourivong. Dkt. No. 57.
On June 3, 2010, Plaintiffs filed the instant Motion for Class Certification (Dkt. No. 60) and supporting declarations (Dkt. Nos. 62, 63, 64, 65). On June 24, 2010, CashCall filed its Opposition (Dkt. No. 76) and supporting declarations (Dkt. Nos. 77-84), to which Plaintiffs filed their Reply (Dkt. No. 87). On September 2, 2010, the Court held a hearing on the Motion and took the matter under submission. Having carefully considered the parties’ arguments and thoroughly reviewed their supporting documents and cited authorities, the Court now rules as follows.
III. DISCUSSION
A. Proposed Classes
Plaintiffs move to certify the following National Class for claims based on the EFTA, Rosenthal Act, and UCL claims (the “proposed National Class”):
All individuals who borrowed money from CashCall, Inc. for personal, family, or household use (a) from whose bank accounts CashCall withdrew or attempted to withdraw monthly loan installment payments on multiple days of the same month; or (b) who received a collection communication from CashCall stating that payment had to be made using money order, Mon-eyGram, or other certified funds; or (c) was late in making a payment and was telephoned by CashCall during the first 59*487 days of delinquency in connection with the late payment, or (d) who signed CashCall’s promissory note containing the electronic funds authorization, at any time from June 30, 2004 to the present.
Mot. at 4. Plaintiffs contend that this Class is nationwide in scope because the EFTA claims are federal and apply nationally, and because the Rosenthal Act and related unlawful UCL claims apply generally to Cash-Call because its conduct giving rise to the members’ injuries that occurred in California, where it is incorporated and headquartered. Id.
Plaintiffs also move to certify the following class of California borrowers for UCL claims based on CashCall’s alleged practice of extending loans with unfair terms and its violations of California’s Finance Lenders Law (the “proposed California Class”):
All individuals who, while residing in California, borrowed from $2,500 to $2,600 at interest rate of 90% or higher from Cash-Call, Inc., for personal, family, or household use at any time from June 30, 2004 to the present.
Id. at 5.
B. Legal Standard
“The class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.’ ” Wal-Mart Stores, Inc. v. Dukes, — U.S.-, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374 (2011) (citing Califano v. Yamasaki, 442 U.S. 682, 700-01, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979)). Federal Rule of Civil Procedure 23 (“Rule”) provides the rubric for assessing whether a particular lawsuit may be certified as a class action. Toward this end, the party seeking class certification bears the burden of establishing that the requirements of Rule 23(a) and (b) are satisfied. United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int’l Union v. ConocoPhillips Co., 593 F.3d 802, 807 (9th Cir.2010).
First, under Rule 23(a), the party seeking certification must demonstrate that: (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. Pro. 23(a)(1)— (4). As the Supreme Court explained in Dukes:
Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate. The Rule’s four requirements — numerosity, commonality, typicality, and adequate representation — effectively limit the class claims to those fairly encompassed by the named plaintiffs claims.
Dukes, 131 S.Ct. at 2550 (internal quotations and citation omitted).
If the party successfully establishes each of the elements under Rule 23(a), it must then demonstrate that the proposed class satisfies at least one of the three requirements listed in Rule 23(b). Id. at 2548. Here, Plaintiffs rely on Rule 23(b)(3), which provides that a class may be maintained where “questions of law or fact common to class members predominate over any questions affecting only individual members,” and a class action would be “superior to other available methods for fairly and efficiently adjudicating the controversy.”
“In determining the propriety of a class action, the question is not whether the plaintiffs have stated a cause of action or will prevail on the merits, but, rather, whether the requirements of Rule 23 are met.” Pablo v. ServiceMaster Global Holdings, Inc., 2009 WL 2524478, at *4 (N.D.Cal. Aug. 17, 2009) (citing Staton v. Boeing Co., 327 F.3d 938, 954 (9th Cir.2003)). The district court is therefore obligated to conduct a “rigorous analysis” into the applicable Rule 23 factors before certifying a class action. Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). The Supreme Court has recognized that “the class determination generally involves considerations that are ‘enmeshed in the factual and legal issues comprising the plaintiffs cause of action.’ ” Coopers & Lybrand v. Livesay, 437 U.S. 463, 469, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978) (quoting Mercantile Nat’l Bank v. Langdeau, 371 U.S. 555, 558, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963)). Nevertheless, “[ajlthough some inquiry into
C. Rule 23(a) Factors
1. Whether the Action is Maintainable Under Rule 2S(a)
a. Numerosity
Rule 23(a)(1) requires that a class be so numerous that joinder of all members is impracticable. “The numerosity requirement ensures that the class action device is used only where it would be inequitable and impracticable to require every members of the class to be joined individually.” Celano v. Marriott Int’l, Inc., 242 F.R.D. 544, 548 (N.D.Cal.2007) (citing Schwarzer, Tashima & Wagstaffe, Federal Civil Procedure Before Trial § 10:258). However, courts have recognized that “impractical” does not mean “impossible.” Id.; Arnold v. United Artists Theatre Circuit, Inc., 158 F.R.D. 439, 448 (N.D.Cal.1994) (citing Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913 (9th Cir.1964)). To satisfy this requirement, Plaintiffs need not state the exact number of class members, nor is there a threshold number above which impracticability is presumed. See In re Rubber Chems. Antitrust Litig., 232 F.R.D. 346, 350-51 (N.D.Cal.2005); Aguayo v. Oldenkamp Trucking, 2005 WL 2436477, at *12 (E.D.Cal. Oct. 3, 2005). Rather, courts must examine the specific facts of each case. Gen. Tel. Co. of the Northwest, Inc. v. Equal Employment Opportunity Comm’n, 446 U.S. 318, 330, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980). In making this determination, courts may make common sense assumptions regarding whether joinder is impractical. In re Rubber Chems. Antitrust Litig., 232 F.R.D. at 350 (finding that, as a matter of common sense, evidence that purported class of over 1,000 individuals or business entities dispersed throughout the United States was sufficient to establish that joinder of all class members is impracticable).
Here, Plaintiffs assert that Rule 23(a)(l)’s numerosity requirement “is readily established.” Mot. at 5. In support, Plaintiffs proffer that CashCall “has made several hundred thousand loans since 2005 and in 2006 made over 75,000 loans of $2,600 at 96% interest.” Id. (citing Whitney Huston Decl. Ex. 23, Dkt. No. 65). Regarding the proposed California Class, Plaintiffs submit that CashCall made nearly 70,000 loans in 2005 to California borrowers. Id. Based on these figures, Plaintiffs contend that Class membership is likely to number in the tens of thousands, making joinder impracticable.
In its Opposition, CashCall does not present any argument regarding Plaintiffs’ submission on the numerosity element. Cash-Call does, however, recognize that Plaintiffs’ class definitions “include every CashCall borrower from June 30, 2004 — more than 388,-000 people.” Opp’n at 1.
As the foregoing summary illustrates, the parties gave short shrift to the numerosity element. Although Plaintiff cites to the total number of borrowers who executed loan agreements with CashCall, their national Class includes several subgroups for which Plaintiffs fail to provide any estimate. For instance, Plaintiffs seek to represent Cash-Call customers from whose accounts Cash-Call made multiple EFT withdrawals and customers who received collection letters. While information about the precise number of CashCall customers who would comprise these subclasses may be in CashCall’s control and thus unavailable to Plaintiffs at this juncture, this does not relieve Plaintiffs of then-burden of providing some estimate of the potential class members in these subclasses for purposes of seeking class certification. However, to the extent that Plaintiffs’ claims rely on terms of CashCall’s loan agreements,
b. Commonality
Next, under Rule 23(a)(2), Plaintiffs must establish that there are “questions of law or fact common to the class.” This element is satisfied if there exists a “common contention” that is of “such a nature that it is capable of classwide resolution____” Dukes, 131 S.Ct. at 2551. More specifically, commonality requires the plaintiff to demonstrate that the class members have suffered the same injury, not merely that they have all suffered a violation of the same provision of law. Id. To meet this requirement, even a single common question is sufficient. Id. at 2556. At the same time, in order to establish that a common legal or factual question underlies the class, named plaintiffs must adequately demonstrate that any dissimilarities between the putative class members do not vitiate the common question(s) that bind the putative members and makes class treatment appropriate. Id. As the Supreme Court summarized:
What matters to class certification ... is not the raising of common “questions”— even in droves — but, rather, the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.
Id. (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L.Rev. 97, 132 (2009)). Thus, “where claims of the class are so factually and legally distinct as to be completely separate, commonality is absent.” Andrews Farms v. Calcot, Ltd., 2009 WL 1211374, at **5 (E.D.Cal. May 1, 2009).
Here, Plaintiffs contend that issues common to the class are “clear,” and proffer the following chart:
Claim Common Issues
Electronic Funds Transfers • CashCall collects payments multiple times -within a given and related UCL Claims month from borrowers who are delinquent, without authorization.
• In its take-it-or-leave-it contract, CashCall requires borrowers to agree to make payments through EFTs and its _cancellation policy violates the EFTA._
Rosenthal Act Claims and • CashCall employs uniform and automated collection emails UCL Claims and letters [that] would mislead and deceive the “least sophisticated consumer” into related believing he/she has to make payments through MoneyGram or with other certified funds.
• CashCall’s standardized EFT practices (that is, multiple monthly withdrawals, conditioning) are unlawful debt collection methods in violation of the Rosenthal Act.
• Whether CashCall’s automated telephone collection system annoys, abuses, and harasses its customers with excessive _and unnecessary telephone calls._
Unconscionable, Unfair and • CashCall charges an interest rate of 90% or higher on its Unlawful Loan Terms $2,600 loan products.
• CashCall systematically fails to take into account the borrowers [sic] ability to repay the loan, requiring aggressive collection practices.
*490 • The terms of CashCall’s loan, which are the same for each borrower, including the length of repayment, the interest only structure, and the high interest rate, are unfair._
Mot. at 6. Aside from the foregoing list, Plaintiffs provide no substantive discussion regarding the common factual and legal issues they have identified.
In its Opposition, CashCall does not directly address whether Plaintiffs have met the commonality requirement under Rule 23(a) (2), but argues at various points in its brief that individual issues pervade each of Plaintiffs’ claims, thereby vitiating any commonality of issues or claims. See Opp’n at 1-3, 12, 16-23.
Looking first at the EFTA claims, Plaintiffs identify the common issues as: (1) “CashCall collects payments multiple times within a given month from borrowers who are delinquent without authorization”; and (2) “In its take-it-or-leave-it contract, Cash-Call requires borrowers to agree to make payments through EFTs and its cancellation policy violates the EFTA.” Mot. at 6. As to the first issue, assuming that the putative class members did not authorize more than one EFT withdrawal during a month, whether CashCall’s alleged practice of attempting to collect a delinquent loan payment through multiple EFT withdrawals in a single month violates the EFTA is an issue that is shared by all similarly-situated class members. Likewise, whether CashCall’s alleged practice of requiring customers to agree to EFT payments and whether its EFT cancellation policy in effect before February 2007 violate the EFTA, also raise issues that are common to all putative class members who executed loan agreements with those provisions.
Turning to Plaintiffs’ Rosenthal Act claims, Plaintiffs assert that there are four common issues among the class. First, Plaintiffs assert that “CashCall employs uniform and automated collection emails and letters [that] would mislead and deceive the ‘least sophisticated consumer’ into believing he/she has to make payments through MoneyGram or with other certified funds.” Id. The Court queries whether this issue is common to the class. As discussed in greater detail below, whether a CashCall customer was mislead or deceived by statements made in CashCall’s email messages and letters is a highly fact-specific, individualized inquiry. However, to the extent that Plaintiffs are claiming that CashCall’s email messages and letters contained patently false or inaccurate information, for instance, stating that customers have no option other than to make payments through MoneyGram or with certified funds, when in fact they have the option of making payments through alternate forms 0e.g., cash payment), the falsity or inaccuracy of such representations would be common among all customers who received the communications.
Second, Plaintiffs assert that “CashCall’s standardized EFT practices (that is, multiple monthly withdrawals, and conditioning loans on authorization of EFTs) are unlawful debt collection methods in violation of the Rosen-thal Act.” Id. To the extent that Plaintiffs have identified operating EFT practices that are uniformly applicable to CashCall’s customers, the question of whether such practices constitute unlawful debt collection methods under the Rosenthal Act is an issue that is common to the class.
Third, Plaintiffs proffer, “[w]hether Cash-Call’s automated telephone collection system annoys, abuses, and harasses its customers with excessive and unnecessary telephone calls” is a factual issue common to the class. Id. The Court, however, disagrees. Particularly, a customer’s, individualized, personal reaction to a collection phone call from Cash-Call is not an injury, fact, or legal question shared throughout the class. Rather, because each class member’s reaction is unique and based on his or her own circumstance, the question of whether customers were either annoyed, abused, or harassed by Cash-Call’s collection calls is not an issue that lends itself to classwide resolution. See Dukes, 131 S.Ct. at 2551.
Finally, the Court turns to Plaintiffs’ proffered issues associated with their claims that challenge the legality and enforceability of the terms of the loan agreements. The first issue Plaintiffs identify is that “Cashcall charges an interest rate of 90% or higher on its $2,600 loan products.” Mot. at 6. Notably, the interest rates charged by CashCall were not uniform. However, Plaintiffs ap
Next, Plaintiffs assert that “Cash-Call systematically fails to take into account the borrowers’ ability to repay the loan, requiring aggressive collection practices.” Id, To the extent that Plaintiffs are asserting that CashCall failed to utilize any screening procedure to determine if the class members who executed loan agreements qualified for such loans, the question of whether the lack of such procedure was unfair or unlawful is common to all class members.
Lastly, Plaintiffs assert that “[t]he terms of CashCall’s loan, which are the same for each borrower, including the length of repayment, the interest only structure, and the high interest rate, are unfair.” Id. Again, to the extent that Plaintiffs are asserting that certain uniform terms of the loan agreements violate some provision of law or are otherwise unenforceable, this would be an issue that is common to all class members who executed a loan agreement.
In sum, Plaintiffs have identified common issues of fact and law as to each of their claims that are sufficient to satisfy Rule 23(a)(2).
c. Typicality
Third, Rule 23(a)(3) requires Plaintiffs to demonstrate that “the claims or defenses of the representative parties are typical of the claims or defenses of the class .... ” “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” In re Tableware Antitrust Litig., 241 F.R.D. 644, 649 (N.D.Cal.2007) (citing Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir.1992)). “Typicality refers to the nature of the claim or defense of the class representative, and not to the specific facts from which it arose or the relief sought.” Hanon, 976 F.2d at 508 (internal citations omitted). “The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class.” Id. Thus, “representative claims are ‘typical’ if they are reasonably co-extensive with those of absent class members; they need not be substantially identical.” Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir.1998).
Here, Plaintiffs argue that their claims arise from the same facts and legal theories as the putative class members’ and are therefore typical. Mot. at 7. Specifically, with respect to the EFTA claims, Plaintiffs contend that each of them were subjected to the identical practices to which all members of the proposed classes were subjected to — multiple draws from their bank accounts and CashCall’s practice of conditioning their loans upon the agreement to pay by EFT. Id. Regarding the Rosenthal Act claims, Plaintiffs assert that they were subjected to the same collection practices as the putative class members, including receiving misleading collection letters, being subjected to illegal collection methods in violation of the EFTA, and being harassed by the same telephone collection procedures. Id. Regarding claims based on the loan terms, Plaintiffs argue “each of the Plaintiffs’ loans was made at an unconscionably high interest rate, without CashCall acting in regard for their ability to repay the loan and under consumer adhesion contracts that were unfair and one-sided.” Id. Plaintiffs maintain that “[n]o peculiar circumstances apply to the Plaintiffs which distinguish their claims, or CashCall’s treatment of them, from other class members.” Id. at 7:25-26.
In response, CashCall does not proffer any direct challenge to Plaintiffs’ typicality argument. Rather, throughout its Opposition, CashCall repeatedly asserts that the claims Plaintiffs seek to assert require individualized inquiries into the circumstances surrounding each customer’s loan and interactions with CashCall. Such arguments, however, go to the question of whether individual issues predominate, which the Court addresses at length, below. Setting that issue aside, the Court finds that, to the extent that Plaintiffs’ claims stem from the same
d. Adequacy of Representation
The final requirement of Rule 23(a) is that Plaintiffs must be able to “fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). “To satisfy constitutional due process concerns, absent class members must be afforded adequate representation before entry of a judgment which binds them.” Hanlon, 150 F.3d at 1020 (citing Hansberry v. Lee, 311 U.S. 32, 42-43, 61 S.Ct. 115, 85 L.Ed. 22 (1940)). To determine whether representation is adequate under Rule 23(a)(4), the Court must assess whether: (1) the named plaintiffs and their counsel have any conflicts of interest with other class members; and (2) the named plaintiffs and their counsel will prosecute the action vigorously on behalf of the class. Id.
In their Motion, Plaintiffs contend that their claims are reflective of those of the putative class members’ and the relief they seek is identical to that sought for the Classes. Mot. at 8. Plaintiffs thus assert that their interests are aligned with those of the Classes. Id. In its Opposition, CashCall has not identified any conflict between Plaintiffs and the Classes they seek to represent. Based on this Court’s review, there is nothing in the record indicating that any actual or potential conflict exists between the named Plaintiffs and the putative class members.
As to the second inquiry, Plaintiffs contend that they have been pursuing the interests of the Classes by actively participating in this litigation. Id. Further, Plaintiffs submit that their counsel, The Sturdevant Law Firm and Arthur Levy, have extensive experience in prosecuting consumer protection class actions and that counsel is qualified to represent Plaintiffs and the Classes in this litigation. Id. The Court finds that Plaintiffs’ have adequately demonstrated their commitment to pursing this case on behalf of the Classes and counsel’s ability to competently represent them in this litigation.
Taken together, the Court finds that Plaintiffs have established that they will fairly and adequately represent the interests of the class, as required by Rule 23(a)(4).
D. Rule 23(b)(3) Requirements
Having found that Plaintiffs have made a sufficient showing as to the Rule 23(a) requirements, Plaintiffs next must demonstrate that the action can be certified under any of the three categories listed in Rule 23(b). In their Motion, Plaintiffs seek certification of their claims pursuant to Rule 23(b)(3),
the court finds that the question of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.
Rule 23(b)(3)’s predominance and superiority requirements were added “to cover cases ‘in which a class action would achieve economies of time, effort, and expense, and promote ... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.’ ” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (quoting Fed.R.Civ.P. 23(b)(3) Adv. Comm. Notes to 1966 Amend). Thus, “a central concern of the Rule 23(b)(3) predominance test is whether ‘adjudication of common issues will help achieve judicial economy.’” Vinole v. Countrywide Home Loans, 571 F.3d 935, 944 (9th Cir.2009). “This analysis presumes that the existence of common issues of fact or law have been established pursuant to Rule 23(a)(2); thus, the presence of commonality alone is not sufficient to fulfill Rule 23(b)(3).” Hanlon, 150 F.3d at 1022. Instead, “Rule 23(b)(3) focuses on the relationship between the common and individual issues,” and “tests whether proposed classes are suffi-
In addition to establishing the predominance of common questions, Plaintiffs must establish that a class action is superior to alternative methods of resolving the claims. Fed.R.Giv.P. 23(b)(3). To guide this assessment, Rule 23(b)(3) sets forth a list of factors relevant to the superiority inquiry:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already begun by or against class members;
(c) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.
Fed.R.Civ.P. 23(b)(3). “This inquiry ‘requires the court to determine whether maintenance of this litigation as a class action is efficient and whether it is fair,’ such that the proposed class is superior to other methods for adjudicating the controversy.” Aho v. AmeriCredit Fin. Servs., Inc., 2011 WL 3047677, at *12 (S.D.Cal. Jul. 25, 2011) (quoting Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175-76 (9th Cir.2010)).
1. Whether Common Questions Predominate
To determine whether common questions predominate, the Court must examine each of the claims and defenses at issue in this ease and assess whether generalized evidence would prove those elements on a class-wide basis, or whether individual proof is needed to establish each class member’s entitlement to relief based on the facts and law of the ease. See Joseph M. McLaughlin, McLaughlin on Class Actions: Law and Practice § 5:23 (7th ed.2011). “If the evidence needed to make a prima facie showing on a given question requires members of the proposed class to present evidence that varies from member to member, then it is an individual question. If the same evidence will permit each class member to make a prima facie showing, a question is common.” Id.
a. EFTA Claims
Plaintiffs’ first claim is for violation of the EFTA, 15 U.S.C. § 1693, and Federal Reserve Regulation E, 12 C.F.R. § 205. Compl. at 8-10. Section 1693e addresses preauthorized transfers and provides, in relevant part:
(a) A preauthorized electronic fund transfer from a consumer’s account may be authorized by the consumer only in writing, and a copy of such authorization shall be provided to the consumer when made. A consumer may stop payment of a preau-thorized electronic fund transfer by notifying the financial institution orally or in writing at any time up to three business days preceding the scheduled date of such transfer. The financial institution may require written confirmation to be provided to it within fourteen days of an oral notification if, when the oral notification is made, the consumer is advised of such requirement and the address to which such confirmation should be sent.
15 U.S.C. § 1693e(a). In this action, Plaintiffs’ EFTA claim is based on three theories: (1) that CashCall initiated unauthorized EFTs in an attempt to collect loan installment payments from Plaintiffs’ and the putative class members’ bank accounts (the “multiple sweeps” or “double dipping” claim); (2) that CashCall illegally conditioned the extension of credit on a customer agreeing to electronic payment (the “conditioning” claim); and (3) that CashCall required customers to submit a written request for cancellation of their EFT authorization seven days before the EFT withdrawal date (the
Plaintiffs first assert that CashCall violated § 1693e(a) by initiating unauthorized EFTs from Plaintiffs’ and class members’ accounts after a scheduled EFT for a regular monthly loan payment was returned unsatisfied due to insufficient funds. Mot. at 8-11. Specifically, Plaintiffs contend that Cash-Call’s standard Promissory Note and Disclosure Statement contains an “Electronic Funds Authorization” provision which authorizes CashCall to withdraw a scheduled monthly loan payment from the customer’s checking account on a specified day each month.
Plaintiffs assert that the written authorization in the Promissory Notes only allows CashCall to initiate an EFT to withdraw the scheduled loan payment on the single, specified, recurring day of the month (usually the first day), and does not authorize CashCall to run multiple sweeps for the same payment on later days of the month of CashCall’s choosing. Mot. at 10. Plaintiffs thus charge that “CashCall’s Rerun and Backend ACHs are unauthorized raids on its customers’ bank accounts____” Id.
With respect to the specific instances of unauthorized EFTs, Plaintiffs assert that CashCall conducted Rerun and Backend ACHs on all three of their accounts, and cite to their respective Loan Transaction History reports documenting such transactions in support. Mot. at 10 (citing Huston Deck, Ex. 7 (De La Torre report); Ex. 8 (Saysourivong report); Ex. 9 (O’Donovan report)). Plaintiffs argue that this evidence demonstrates that factual and legal issues exist that are common to the Class. Particularly, Plaintiffs advance that “class members whose CashCall Loan Transaction History and Servicing Transaction Logs reflect these illegal ‘ACH’ transactions have a remedy under the EFTA to redress CashCall’s common illegal practices and common proof of this claim predominates.” Mot. at 10-11. Thus, Plaintiffs contend that common issues predominate this claim.
In its Opposition, CashCall argues that determining whether a borrower authorized a particular EFT transaction raises numerous individual questions. Opp’n at 9. First, it argues that 111,000 borrowers never had an ACH rerun due to insufficient funds in the borrower’s account. Id. (citing Bennett Deck ¶ 26, Dkt. No. 82). Second, CashCall argues that beginning in February 2007, the Electronic Funds Authorization and Disclosure was amended to state: “I also authorize you to withdraw funds from my account on additional days throughout the month in the
The Court has carefully considered the parties’ arguments and supporting materials, and agrees with CashCall that individual issues predominate this claim. While Plaintiffs have demonstrated that a common issue exists as to CashCall’s multiple sweeps practice, CashCall has, in turn, demonstrated that there are sufficient individual issues that would come to the forefront in litigating this claim. In particular, while Plaintiffs contend that the Court would only need to examine CashCall’s transaction logs to determine whether a delinquent borrower was subjected to an unauthorized sweep, CashCall has identified evidence indicating that in some instances the delinquent borrower consented to CashCall initiating an EFT withdrawal on a date other than that specified in the loan agreement or an alternate payment arrangement. Thus, to determine whether an EFT withdrawal or attempted withdrawal was unauthorized, the Court would need to examine more than simply the transaction logs. Rather, it must also consider any evidence CashCall may have that shows a specific borrower authorized or consented to the EFT. Further, if Plaintiffs successfully established that the multiple EFT withdrawals violated the EFTA, neither Plaintiffs nor the putative class members sustained uniform damages. Instead, as CashCall points out, Plaintiffs contend that the damages for this claim include funds unlawfully collected and any bank NSF fees that each delinquent borrower incurred. As a result, the issue of damages not only presents an issue that would need to be evaluated on a case-by-case basis, but makes class treatment of this class unmanageable. Accordingly, the Court finds that individual issues outnumber the common issues involved with this claim. The Court therefore finds that it fails to meet Rule 23(b)(3)’s requirement.
Plaintiffs’ second theory for the EFTA claim is that CashCall illegally conditioned the extension of credit on each customer agreeing to electronic payment by preauthorized EFTs, in violation of the EFTA. Compl. ¶ 48; Mot. at 11. Pursuant to 15 U.S.C. § 1693k(l), “No person may ... condition the extension of credit to a consumer on such consumer’s repayment by means of preauthorized electronic fund transfers.” In their Motion, Plaintiffs argue that “Cash-Call engaged in the classwide practice of requiring loan applicants to click on a box at the conclusion of the Electronic Funds Authorization and Disclosure stating, T understand CashCall’s payment collection policy and authorize electronic debits from my bank account.’ ” Mot. at 11 (citing Huston Decl., Ex. 11 at P0352). According to Plaintiffs, each class member was required to sign the standard Promissory Note containing this EFT payment provision and CashCall would not fund a loan unless the customer checked the box agreeing to EFT payments, thereby violating § 1693k(l) and giving rise to a class-wide claim. Id. at 11-12 (citing Huston Decl., Ex. 3 at 846-50).
The Court has considered the parties’ arguments and agrees with Plaintiffs that common issues predominate this claim. Whether CashCall’s practice of requiring borrowers to consent to EFT payments is common to all borrowers who executed a CashCall Promissory Note, and CashCall has not articulated what individual issues would need to be addressed to resolve this claim. However, the Court agrees with CashCall that only borrowers whose loans originated with CashCall are proper members of this class.
Plaintiffs’ third theory for the EFTA claim is that CashCall’s policy of requiring customers to submit a written request for cancellation of their EFT authorization seven days before the EFT withdrawal date violated § 1963e(a). As set forth above, § 1963e(a) provides that “[a] consumer may stop payment of a preauthorized electronic fund transfer by notifying the financial institution orally or in writing at any time up to three business days preceding the scheduled date of such transfer.” Plaintiffs argue that because the promissory note that each of them, as well as each putative class member, signed contained this provision, the issue of whether the seven-day cancellation requirements violated § 1963e(a) is “universal to the Class.” Mot. at 12.
CashCall counters that “[n]ot all putative class members are commonly situated because their promissory notes differed.” Opp’n at 10. Specifically, CashCall indicates that while from July 2004 to February 2007 its standard promissory note stated that requests must be received seven calendar days before the due date, after February 2007, it amended the promissory note to state that requests must be received three business days in advance of the due date. Opp’n at 10 (citing Bennett Decl. ¶ 15 & Ex. A, B.). Further, CashCall argues that, regardless of the terms of the EFT Authorization, its practice has been to always promptly process cancellation requests and that it typically could cancel an EFT as long as the request was received before the next scheduled transaction. Opp’n at 10. Thus, it argues that requests to cancel EFT authorization “necessarily involve individual issues and will depend on the borrower’s interaction with the CashCall customer service representative.” Opp’n at 11.
The Court, however, is unpersuaded by CashCall’s argument. As Plaintiffs have pointed out, at least prior to February 2007, the EFT Authorization in CashCall’s standard Promissory Note expressly stated that to cancel an EFT, CashCall must receive the cancellation at least seven days before the payment due date. Because this provision uniformly appeared in its Promissory Notes, the issue whether the seven-day advance cancellation requirement violates § 1693e(a) is common to Plaintiffs and all class members who executed promissory notes prior to February 2007, and the evidence necessary to establish this claim — which consists mainly of the express language in the Promissory Note — is uniform to all class members. CashCall has failed to identify any individual issues or evidence that would be necessary to address this claim. Thus, the Court agrees with Plaintiffs that common issues predominate this claim.
b. Rosenthal Act Claims
Plaintiffs’ third claim is for violation of California’s Rosenthal Fair Debt Collection Practices Act, codified at California Civil Code section 1788. Compl. at 12-13. Again, Plaintiffs allege several discrete violations by CashCall.
Your loan is now past due and you must immediately replace this payment via Mon-eyGram transaction in the amount of [$ — ] (see instructions below).
[....]
MONEYGRAM INSTRUCTIONS:
[....]
To find a MoneyGram location near you, please visit MoneyGram.com or contact a CashCall agent at [telephone number].
Mot. at 13 (citing Ex. 17).
Plaintiffs contend that CashCall also uses a form “breach” letter and/or email, which it sends to borrowers when the account is more than 30 days delinquent, which provides in relevant part:
You have breached your contract and your [Loan #] with CashCall, Inc. is now in default. You must bring the loan current by sending the amount shown below to CashCall, Inc. in the form of a money order, money gram, or certified check.
Id. (citing Ex. 30).
Plaintiffs further submit that CashCall also included the “standard MoneyGram demand” in its “breach of promise to pay” letters and/or emails that it generated and sent to customers who failed to pay in accordance with a promise to pay (“PTP”). Id. (citing Ex. 33). This communication stated in relevant part:
In our recent telephone conversation, you promised to pay $_on (date). We have not received your payment at this point and you are past due on your loan with CashCall, Inc. You must bring the loan current immediately by sending this agreed upon amount to CashCall in the form of a money order, money gram, or certified cheek.
Id.
Finally, Plaintiffs contend that CashCall uses a form “every opportunity” letter and/or email that it sends to customers when a loan becomes sixty days delinquent, which demands payment by MoneyGram, stating: “Please note that payments must be made with certified funds only (cashier’s cheek payable to CashCall or a money transfer via MoneyGram Express Payment, Receiver code 3299).” Id. at 14 (citing Ex. 35).
Plaintiffs assert that, “[b]ecause CashCall’s practice in sending the communications is uniform and the likelihood to deceive is a single objective, class-wide determination, common issues predominate on the Rosen-thal Act deception claims.” Id. at 14. Particularly, Plaintiffs indicate that they “intend to show at trial that CashCall’s communications would lead the least sophisticated consumer to believe that he/she had to respond to these letters by paying with certified funds, most notably MoneyGrams. By insisting on certified funds, CashCall left the misleading impression that a' borrower who failed to pay with certified funds would suffer adverse consequences, such as rejection of the payment and legal action.” Id.
CashCall, however, maintains that individual issues predominate this claim because not all borrowers received the same collection letters. Opp’n at 12. Rather, CashCall asserts that neither Plaintiffs nor all borrowers received each of the four emails/letters. Id. CashCall also asserts that individual issues predominate because not all borrowers who received one of the emails or letters would interpret it the same way; instead, a borrower’s interpretation of the emails would necessarily depend on their interactions with CashCall. Opp’n at 12-13. For example, CashCall argues that after receiving the letters/emails, Plaintiff O’Donovan made payments by personal check. Id. at 13.
Further, CashCall argues that the cases Plaintiffs cite where courts have certified Rosenthal Act class actions — namely Gonzales v. Arrow Financial Services LLC, 233 F.R.D. 577 (S.D.Cal.2006), and Palmer v. Stassinos, 233 F.R.D. 546 (N.D.Cal.2006)—
The Court has carefully considered the parties’ arguments and finds that CashCall has sufficiently demonstrated that individual issues predominate Plaintiffs’ Rosenthal Act claim based on CashCall’s collection letters and email messages. As CashCall points out, not all borrowers received each of the four letters/email messages at issue. Rather, the correspondence a delinquent borrower received depended on that borrower’s particular circumstances (e.g., installment payment returned unpaid, breach of promise to make payment). While the letters and email messages contain similar language regarding the means of payment, the language is not identical, but varies between each of the four letters/email messages. As a result, litigation of this claim requires a determination of which class members received which of the four letters/email messages and an assessment of each of the communications separately. Thus, the Court agrees with Cash-Call that the instant claim is different from those addressed in the cases Plaintiffs’ rely upon where a single representation was at issue and applied to all class members. Moreover, to the extent that a borrower’s conduct in response to the correspondence is admissible to show how the communications were interpreted, this requires borrower-specific information. Accordingly, the Court finds that individual issues predominate this claim.
Plaintiffs next charge that Cash-Call’s systematic use of automated telephone collection calls to coerce consumers to make a payment on a delinquent loan violates the Rosenthal Act and the FDCPA. Mot. at 15. The Rosenthal Act bars a creditor from “[c]ausing a telephone to ring repeatedly or continuously to annoy the person called” and from “[c]ommunieating, by telephone or in person, with the debtor with such frequency as to be unreasonable and to constitute harassment to the debtor under the circumstances.” Cal. Civ.Code § 1788.11(d) & (f). Concurrently, the federal FDCPA prohibits “engaging] in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” 15 U.S.C. § 1692d. Particularly, this includes “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” 15 U.S.C. § 1692d(5).
According to Plaintiffs, “CashCall’s automated telephone system is designed to generate a huge and repeating volume of annoying collection calls. Plaintiffs contend this system generates so many and such frequent calls that it violates the fair debt collection laws.” Mot. at 15. In support, Plaintiffs cite to CashCall’s Servicing Transaction Logs for each of the three Plaintiffs, arguing that each log shows “a shocking number of outgoing CashCall telephone calls.” Id. (citing Exs. 27, 28, 29). Plaintiffs also proffer a lengthy description of how CashCall’s predictive dialer system operates. Id. at 16-17.
Plaintiffs submit that because CashCall’s telephone collection practices are automated and systematized, they apply uniformly to the class, and thus common issues predominate. Id. at 15. CashCall, however, asserts that the critical question is how CashCall used its predictive dialer system in specific situations and how each borrower who received a call reacted. Opp’n at 14. CashCall further submits that, contrary to Plaintiffs’ assertion, not all of its collection calls are made by the predictive dialer and the type of call depends on the length of a borrower’s delinquency. Opp’n at 14 (citing Klopstock Deck ¶¶ 13, 15, 17, 19). Additionally, Cash-Call argues that, to the extent that Plaintiffs base their claim on call volume, each Plaintiff — and each putative class member for that matter — received a different number of phone calls, thereby raising individual issues.
The Court has carefully considered the parties’ arguments and agrees with CashCall
Plaintiffs also assert that CashCall’s alleged unauthorized EFTs in a single month amounts to an illegal collection practice in violation of the Rosenthal Act. Mot. at 15 (citing 15 U.S.C. §§ 1692e(5) & 1692f(l)). Thus, they argue that common issues also predominate on the parallel claim under the Rosenthal Act. However, as discussed above, the Court finds that individual issues predominate any common issues associated with Plaintiffs’ double-dipping claim. Accordingly, this claim is not suitable for class treatment.
c. Plaintiffs’ UCL Claims
Plaintiffs bring three claims for violation of California’s UCL. Compl. at 13-18. The UCL prohibits “any unlawful, unfair or fraudulent business act or practice----” Cal. Bus. & Prof.Code § 17200. This section “establishes three varieties of unfair competition — acts or practices which are unlawful, or unfair, or fraudulent. In other words, a practice is prohibited as unfair or deceptive even if not unlawful and vice versa.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) (internal quotations and citations omitted).
Plaintiffs allege violations of the unlawful and unfair prongs of their UCL as independent bases for class-wide relief. Mot. at 18.
i. The “Unlawful” Prong
Plaintiffs allege that CashCall has engaged in unlawful business practices based on its alleged violations of the EFTA, the Rosen-thal Act, California Financial Code section 22303, California Civil Code section 1670.5, and California Financial Code section 22150 and its accompanying regulation, Title 10 of the California Code of Regulations, section 1452.
(a) EFTA and Rosenthal Act Violations
Plaintiffs argue that because their claims for violation of the EFTA and Rosenthal Act are appropriate for class treatment, their UCL claim under the unlawful prong based on underlying violations of these laws, are also suitable for class treatment. Mot. at 18 n. 5. In its Opposition, CashCall argues that this UCL claim cannot be certified for the same reasons that the underlying claims cannot be certified. Opp’n at 16 n. 20. As discussed above, Plaintiffs have sufficiently shown that their EFTA claim based on Cash-Call’s alleged conditioning of loans on consent to EFT payments and the seven-day cancellation policy in CashCall’s Promissory Note meet the criteria for class treatment. Because Plaintiffs’ UCL claim under the unlawful prong may premised on the same underlying violations, it is also appropriate for class treatment.
(b) Cal. Fin.Code § 22302 and Cal. Civ.Code § 1670.5
Pursuant to California Financial Code section 22302(a), “Section 1670.5 of the [California] Civil Code applies to the provisions of a loan contract that is subject to [the California Finance Lenders Law].” Cal. Fin.Code § 22302(a). Section 22302(b) further provides that “[a] loan found to be unconscionable pursuant to Section 1670.5 of the Civil Code shall be deemed to be in violation of this division and subject to the remedies specified in this division.” Civil Code section 1670.5, in turn, provides that if a court finds, as a matter of law, that a contract, or any provision thereof, is unconscionable at the time it was made, it may “refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”
Here, Plaintiffs assert that CashCall makes loans with unconscionable interest rates of 90% or higher, in violation of Financial Code section 22302, Civil Code section 1670.5, and the UCL. Mot. at 19-20. Plaintiffs argue that a determination of CashCall’s liability may be made on a classwide basis based on common proof. Id. at 18. Accord
In California,
[T]he law has clearly established that the term [“unconscionable”] has both a procedural and a substantive element. The former takes into consideration the parties’ relative bargaining strength and the extent to which a provision is ‘hidden’ or unexpected, while the substantive element requires terms that ‘shock the conscience’ or at the least may be described as ‘harsh or oppressive.’ Both elements must be present, but ‘the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’
Trend Homes, Inc. v. Superior Court, 131 Cal.App.4th 950, 956, 32 Cal.Rptr.3d 411 (2005) (internal citations omitted). Further, the terms “harsh,” “oppressive,” and “shocks the conscience” are “not synonymous with ‘unreasonable,’” and “it is important that courts not be thrust into the paternalistic role of intervening to change contractual terms that the parties have agreed to merely because the court believes the terms are unreasonable.” Aron v. U-Haul Co. of Cal., 143 Cal.App.4th 796, 809, 49 Cal.Rptr.3d 555 (2006) ; see Camilla v. Wash. Mut. Bank, F.A., 2009 WL 3614793, at *7 (E.D.Cal. Oct. 27, 2009).
Plaintiffs argue that both the procedural and substantive components can be proven on a class-wide basis. Mot. at 20. With respect to procedural unconscionability, Plaintiffs argue that it will be proven by establishing that CashCall’s promissory notes are adhesion contracts that were offered on a take-it-or-leave it basis, without any opportunity for negotiation of the loan terms. Id. (citing Huston Deck, Ex. 13 at 175: 4-15, 236:12-237:1, 239:12-242:25). Plaintiffs assert that because all class members were in this position, whether the contract is a contract of adhesion, and therefore procedurally unconscionable, is a common question for all class members. Id.
CashCall, on the other hand, argues that the procedural unconscionability element raises individual issues. Opp’n at 18-23. CashCall argues that the procedural uncon-scionability analysis focuses on all of the circumstances surrounding contract formation and requires a finding of surprise or oppression, which are individual questions. Opp’n at 18. It argues that Plaintiffs cannot establish surprise because it disclosed the interest rates, and that any determination of surprise would require the Court to examine testimony from each class member about whether he or she read the contract or whether they were aware of the interest rate from some other source. Opp’n at 19-20. CashCall also contends that during its “fluid” loan process, each borrower receives different disclosures about the loans and has different interactions with CashCall through which they get information about the loan. Opp’n at 20-21. However, as Plaintiffs point out, they do not base their procedural uncon-scionability argument on a surprise theory. Reply at 11. Thus, the Court agrees with Plaintiffs that CashCall’s arguments are in-apposite.
Alternatively, CashCall asserts that individual issues predominate the issue of alleged oppression. Opp’n at 23. Particularly, CashCall contends that to determine whether the loan agreements were oppressive the Court must examine whether a borrower attempted to obtain a loan on more favorable terms. Opp’n at 23. It asserts that “the potential availability of other lending sources renders a class-wide determination of oppression improper.” Id. However, as Plaintiffs point out, California courts “have routinely found the procedural element satisfied where the agreement containing the challenged provision was a contract of adhesion.” Gatton v. T-Mobile USA, Inc., 152 Cal.App.4th 571, 582, 61 Cal.Rptr.3d 344 (2007). As the Gatton court held: “absent unusual circumstances, use of a contract of adhesion
CashCall also asserts that it has modified 51,581 loans and granted 102,251 deferments. Opp’n at 23. Without any meaningful explanation, it argues that its “willingness to modify loans is another factor cutting against certifying the unconscionability claim.” Id. However, whether CashCall subsequently modified loans does not go to the issue of whether the loan agreement was oppressive at the time it was entered into by the borrower.
As to substantive unconscionability, Plaintiffs argue that the issue whether the interest rate was unfairly one-sided requires a single determination for all class members, without regard to the particular circumstances of each class member who signed the contract. Mot. at 20. Specifically, Plaintiffs argue that “[c]ommon evidence of substantive unconscionability will show that CashCall offered its standard $2,600 loan product at 90 + % interest uniformly on a class-wide basis.” Id. They further attest that they will proffer evidence on a class-wide basis that CashCall’s high interest rate was one-sided and “well outside of industry norms.” Id. at 21. In its Opposition, CashCall asserts that high interest rates alone cannot establish unconscionability and that its loans are exempt from California’s usury restrictions. Opp’n at 17-18 & fn 21. CashCall also argues that Plaintiffs have failed to cite any California decision certifying a class action based on an allegedly unconscionable interest rate. Id. at 17.
In Carboni v. Arrospide, 2 Cal.App.4th 76, 83-86, 2 Cal.Rptr.2d 845 (1992), the California Court of Appeal held that a secured loan with an interest rate of 200% was both procedurally and substantively unconscionable. In analyzing whether the loan was substantively unconscionable, the court first evaluated the interest rate of the loan as compared to the prevailing rate charged for similar loans in the credit market, and found that it was uncontested that the 200% interest rate was approximately ten times that charged in the credit market for comparable loans. Id. at 84, 2 Cal.Rptr.2d 845. Next, the court analyzed the circumstances of the transaction Id. In particular, in making this inquiry, the court noted that “substantive unconscionability turns not only on a one-sided result, but also on an absence of justification for it.” Id. at 850 (internal quotations omitted) (citing A & M Produce Co. v. FMC Corp., 135 Cal.App.3d 473, 484, 186 Cal.Rptr. 114 (1982)). The lender in Carboni argued that the high interest rate was justified because no other charges were made for the loan and, if the borrower would have paid it off as scheduled, the loan would have been cheaper to alternatives available to the borrower. Id. The court, however, was unpersuaded by these arguments and found that they failed to justify a 200% rate on the amount borrowed. Id. at 85, 2 Cal.Rptr .2d 845.
In this case, the same issues relating to substantive unconscionability could be determined on a class wide basis without raising individual issues. Evidence regarding the 90% and above interest rates CashCall charged on its loans could be compared to those of similar loans in the credit market and any finding would be uniformly applicable to all class members whose loan had an interest rate at or above that amount. Additionally, any justification CashCall has for charging interest rates above 90% would not
Taken together, the Court finds that both procedural and substantive uneonscionability can be determined on a classwide basis. It therefore finds that common issues predominate Plaintiffs’ UCL claim for violation of California Finance Code section 22303 and Civil Code section 1670.5 based on the interest rate charged to borrowers.
(c) Cal. Fin.Code § 22150 and California Code of Regulations, Title 10, § 1452
Plaintiffs also assert that CashCall violated California Financial Code section 22150 through its practice of funding loans without regard to the borrower’s ability to repay the loan. Compl. ¶ 88; Mot. at 21. Section 1452 of Title 10 of the California Code of Regulations was promulgated pursuant to Financial Code section 22150, and provides:
When making or negotiating loans, a finance company shall take into consideration, in determining the size and duration thereof, the financial ability of the borrowers to repay the same, to the end that the borrowers should be reasonably able to repay said loans in the time and manner provided in the loan contracts.
CaLCode Regs. tit. 10, § 1452.
Plaintiffs argue that common issues predominate this claim because the claim “examines CashCall’s common conduct in making loans without attention to whether the consumer could or could not repay the loan.” Mot. at 21. They contend that “[p]roof of this claim will thus be a centralized inquiry into CashCall’s process (or lack thereof) for evaluating a borrower’s ability to repay his/ her loan prior to its funding.” Id. In particular, Plaintiffs intend to proffer evidence concerning CashCall’s business model and its underwriting process, which Plaintiffs characterize as “inadequate.” Id. at 21-22. CashCall responds that its “entire underwriting process involves an individual evaluation of each prospective borrower’s financial condition,” and proffers testimony from Thomas Morgan describing its procedures. Opp’n at 24. CashCall further argues that Plaintiffs’ own testimony undermines their theory, as all three Plaintiffs testified that they could initially afford their monthly payments and intended to pay off their loans early. Id. (citing Seiling Deck, Exs. H at 39:5-21, 230:11-17; Ex. I at 144:17-145:16; Ex. J at 86:14-17, Dkt. No. 84). Additionally, Cash-Call proffers evidence that 33% of all borrowers paid off their loans early. Opp’n at 25 (citing Ethan Post Deck ¶ 12, Dkt. No. 77).
On its face, Plaintiffs’ argument that the Court would only need to examine, generally, whether CashCall has some procedure in place to assess a borrower’s ability to repay the loan has some traction. However, in order to resolve whether CashCall violated section 1452, the Court will need to examine how CashCall’s loan application and underwriting process actually operated to vet individual borrowers. Specifically, CashCall has identified evidence that both its automated and manual underwriting process screens potential borrowers for creditworthiness, and routinely reject a significant percentage of applicants because they do not meet its underwriting criteria. Opp’n at 24 (citing Thomas Morgan Deck ¶¶ 5-23, Dkt. No. 81). The question then becomes whether these procedures are sufficient to satisfy Cash-Call’s obligation under section 1452. If, as Plaintiffs contend, the procedures provided no meaningful review of the borrower’s ability, Plaintiffs may have a meritorious claim. On the other hand, if the procedures were sufficient in analyzing a borrower’s financial status and ability to successfully repay the loan, CashCall may prevail. Either way, the generalized inquiry Plaintiffs propose will ultimately lead to a more particularized examination of CashCall’s underwriting process vis-a-vis individual borrowers to determine whether CashCall engaged in any meaningful consideration of their ability to repay the loans in the time and manner specified in the loan agreement. As a result, the Court finds that common questions do not predominate this claim and it is unsuitable for class treatment.
ii. The “Unfair” Prong
Plaintiffs allege that “CashCall’s business practices in offering loans with grossly one-sided terms (including the charging of excessively high interest rates, requiring payment of 4-6 times the original loan
Looking at this claim, California appellate courts disagree on how to define an “unfair” act or practice in the context of a UCL consumer action. See Rubio v. Capital One Bank, 613 F.3d 1195, 1204-05 (9th Cir.2010); Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 735-36 (9th Cir.2007). One test California courts have applied “requires that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be tethered to specific constitutional, statutory, or regulatory provisions.” Drum v. San Fernando Valley Bar Ass’n, 182 Cal.App.4th 247, 256, 106 Cal.Rptr.3d 46 (2010) (internal quotations omitted) (citing Bardin v. Daimlerchrysler Corp., 136 Cal.App.4th 1255, 1260-61, 39 Cal.Rptr.3d 634 (2006)). A second test formulated by the California courts examines “whether the alleged business practice ‘is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.’ ” Id. (quoting Bardin, 136 Cal.App.4th at 1260, 39 Cal.Rptr.3d 634).
Plaintiffs argue that the claim is suitable for certification under either test because the focus is CashCall’s practices of charging interest rates above 90% and the structure and length of repayment — all of which are sufficiently uniform and do not require individual assessments of each class member. Mot. at 23. The Court, however, disagrees. To determine whether the terms of CashCall’s loan agreements are “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers” under the UCL, the Court must examine the utility of CashCall’s practices in including each provision and the affect on borrowers. Thus, the circumstances surrounding each loan agreement, including each borrower’s financial circumstances, would come into play, requiring individualized examinations. The Court therefore finds that this claim is inappropriate for class treatment.
2. Whether the Class Action Device is Superior
The final factor the Court must consider under Rule 23(b)(3) is whether “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Because the Court has found that only Plaintiffs’ EFTA claim and their UCL claim under the unlawful prong based on the EFTA violations and on violations of California Financial Code section 22302 and Civil Code section 1670.5 meet the foregoing requirements for class action treatment, the Court’s analysis is focused on whether class action is superior as to those claims.
In support, Plaintiffs first argue that “the stake of an individual Class member is insufficient to support individual litigation.” Mot. at 24. Particularly, they assert that “the monetary recovery for an individual Class member is small relative to the cost and burden of individual pursuit of the claims,” and that “[d]evelopment of the evidence and legal issues, discovery, and expert witness requirements combine to pose costs and risks that are prohibitive for an attorney and client in the non-class setting.” Id.
CashCall, however, argues that the proposed Class is not manageable. Opp’n at 4. It contends that “Plaintiffs’ unwieldy class definition ... creates insurmountable ease management challenges,” and charges that Plaintiffs have not even attempted to explain
With respect to the class members’ interests in individually controlling the prosecution of separate actions, the Court agrees with Plaintiffs that the relatively small amount of damages that may be recovered from the EFTA and related UCL claims as compared to the costs of litigating an individual suit weighs in favor of class treatment of the claims.
As to the extent and nature of any litigation concerning CashCall’s practices already begun by class members, the parties have not identified any similar class actions involving the same claims or putative class or any individual actions that are currently pending.
With respect to the desirability or undesirability of concentrating litigation of the claims in the particular forum, because Cash-Call is a California corporation and has made loans to consumers throughout the state of California, the Northern District is both a convenient and appropriate forum for litigating this case.
Finally, the Court must assess the likely difficulties in managing a class action. Cash-Call argues that a class action would not be manageable for several reasons. First, it argues that Plaintiffs’ class definition is vague and because Plaintiffs’ claims involve distinct factual and legal issues, creating subclasses would splinter the case into a myriad of predominant individual issues. Opp’n at 5. Next, CashCall argues that because more than 175,961 putative class members are currently in default, it would need to file compulsory counterclaims or seek offsets, creating additional manageability problems. Id. Third, CashCall argues that Plaintiffs’ requested remedy of rescission of the loans “is an inherently individual remedy that is ill-suited for class adjudication.” Id.
The Court, however, is unpersuaded by CashCall’s concerns. As set forth in this Order, only two of Plaintiffs’ claims are appropriate for class treatment. Thus, this significantly limits the factual and legal issues in play and makes for a more refined putative class. As to these claims, because they rely on documentary evidence, namely loan agreements, the putative class members who executed the agreements are ascertainable. As to the remedies Plaintiffs seek on behalf of the putative class, the Court does not see any issues determining which class members would be entitled to damages or other relief if they prevail on their claims. Accordingly, the Court finds that class action is superior to individual litigation of Plaintiffs’ claims and, as to those claims, there are no obvious manageability problems.
IV. CONCLUSION
In sum, the Court finds that Plaintiffs have met their burden of demonstrating that the following claims are suitable for class treatment under Rule 23(a) and (b)(3): (1) the claim for violation of the EFTA based on CashCall’s cancellation policy in its pre-Feb-ruary 2007 Promissory Notes; (2) the claim for violation of the EFTA based on Cash-Call’s alleged conditioning of loans on a borrower’s consent to EFT payments; (3) the UCL claim premised on the EFTA violations; and (4) the UCL claim based on violation of California Financial Code section 22303 and Civil Code section 1670.5. The Court therefore GRANTS Plaintiffs’ Motion as to these claims and certifies the following National Class under Rule 23(b)(3):
All individuals who borrowed money from CashCall, Inc., between June 30, 2004 and February 2007, who signed CashCall’s promissory note containing an electronic funds authorization indicating that cancellations of such authorization must be received at least seven days prior to the applicable payment due date.
The Court also certifies the following California Class:
All individuals who, while residing in California, borrowed from $2,500 to $2,600 at an interest rate of 90% or higher from CashCall, Inc., for personal, family, or household use at any time from June 30, 2004, to the present.
The Motion is DENIED in all other respects.
The Court retains the inherent power to review class certification decisions at any time. Fed. R. Civ. Pro. 23(c)(1) (C); Officers For Justice v. Civil Serv. Comm’n, 688 F.2d 615, 633 (9th Cir.1982). Should future
IT IS FURTHER ORDERED that this matter is set for a case management conference on January 19, 2012 at 10:00 a.m. At the conference the Court will discuss issues not addressed by the parties in the certification motion, including appointment of class counsel pursuant to Rule 23(g) and a briefing schedule for Plaintiffs’ motion for class notice. The parties shall file a joint ease management statement no later than January 5, 2012 outlining any other issues that will need to be addressed at the conference. After the hearing, the Court will issue a supplemental class certification order resolving these issues.
IT IS SO ORDERED.
. Although the Fourth Amended Complaint refers to the Promissory Note as Exhibit A, Plaintiffs failed to attach it as an exhibit. However, it is located in the record as Exhibit A to Plaintiffs' Third Amended Complaint, Docket No. 38 at 22.
. In a footnote, Plaintiffs state that their claims for injunctive relief based on UCL violations, are also suitable for class certification under Rule 23(b)(2). Mot. at 3 n. 2. Plaintiffs, however, present no argument in support of this request.
. Specifically, the Electronic Funds Authorization states:
I hereby authorize CashCall to withdraw my scheduled loan payment from my checking account on or about the FIRST day of each month. I further authorize CashCall to adjust this withdrawal to reflect any additional fees, charges or credits to my account. I understand that CashCall will notify me 10 days prior to any given transfer if the amount to be transferred varies by more than $50 from my regular payment amount. I understand that this authorization and the services undertaken by CashCall in no way alters or lessens my obligations under the loan agreement. I understand that I can cancel this authorization at any time (including prior to my first payment due date) by sending written notification to CashCall. Cancellations must be received at least seven days prior to the applicable due date.
Huston Deck, Ex. 11 at P0352.
. "ACH” stands for Automatic Clearing House. Huston Deck, Ex. 22 at CC944.