In Gallego v. Northland Group Inc., 2016 WL 697383, at *3-4 (C.A.2 (N.Y.),2016), the Court of Appeals was called on to review the District Court’s denial of class certification in an FDCPA class action.  The Court of Appeals first expounded on whether there was a substantial federal question, because the FDCPA claim was grounded in a violation of state law — namely, a failure under New York law to provide the “call-back” name in a dunning letter.  

We agree with the district court that Gallego fails to state a claim under the FDCPA. The complaint can be read as asserting two alternative theories of FDCPA liability: either that the prohibitions of §§ 1692e(10) and 1692f against “false representation[s,] deceptive means” and “unfair or unconscionable means” in effect incorporate the New York City Administrative Code’s provisions on debt collection agencies, or that failing to include a call-back name is itself “deceptive” or “unfair or unconscionable,” under the plain meaning of those terms.  Neither theory has merit. As to the first, there is no indication that Congress intended for §§ 1692e(10) and 1692f to incorporate state-or local-law standards of conduct. On the contrary, the FDCPA expressly contemplates the existence of state laws that offer protections to consumers that go beyond the FDCPA itself. The section entitled “[r]elation to State laws” provides that the FDCPA preempts state laws to the extent that they are “inconsistent” with the FDCPA, and further clarifies that “a State law is not inconsistent with [the FDCPA] if the protection such law affords any consumer is greater than the protection provided by [the FDCPA].” 15 U.S.C. § 1692n. If the FDCPA itself incorporated applicable state and local law, that clarification would be unnecessary. Accordingly, we join every other Circuit Court to have considered the question in concluding that violations of state and local debt collection statutes are not per se actionable under the FDCPA. See Currier v. First Resolution Inv. Corp., 762 F.3d 529, 537 (6th Cir.2014) (stating that “Congress did not turn every violation of state law into a violation of the FDCPA”); LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1192 (11th Cir.2010) (holding that “the conduct or communication at issue must also violate the relevant provision of the FDCPA,” and not merely a state-law provision); Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 474 (7th Cir.2007) (holding that § 1692f “does not take a state-law dispute and move it to federal court”); Carlson v. First Revenue Assurance, 359 F.3d 1015, 1018 (8th Cir .2004) (stating that the FDCPA “was not meant to convert every violation of a state debt collection law into a federal violation”); Wade v. Reg’l Credit Ass’n, 87 F.3d 1098, 1100 (9th Cir.1996) (disagreeing “that debt collection practices in violation of state law are per se violations of the FDCPA”).  The second theory is equally unavailing. The omission of a call-back name is neither a “false representation” nor a “deceptive means” under § 1692e(10). . . .  That said, neither theory is so obviously frivolous that it fails to raise a colorable federal question.

The Court of Appeals then discussed, and affirmed, the district court’s denial of class certification.  

In concluding that Rule 23(b)(3)’s superiority requirement was not met, the district court pointed to the “meaningless” amount—16.5 cents, by our calculation—that each putative class member would receive from the settlement if all of the estimated 100,000 class members filed a claim. Gallego, 102 F.Supp.3d at 510. It further explained that the cost of providing class members “the best notice that is practicable under the circumstances,” as required by Rule 23(c)(2)(B), “would be disproportionate to the benefit accruing to” the class members. Id. In response, Gallego claims that the vast majority of class members are unlikely to file claims, estimating the probable participation rate at 5%, and that those who do file claims will thus recover a more substantial amount. An expected low participation rate is hardly a selling point for a proposed classwide settlement—and the relief provided would still be trivial even if only 5% of class members filed a claim. Denial of certification was within the range of permissible decisions where it appeared that the intended result of the settlement was “mass indifference, a few profiteers, and a quick fee to clever lawyers.” Id.  There was also reason for the district court to doubt that Gallego would “fairly and adequately protect the interests of the class,” as required by Rule 23(a)(4). See id. at 511 (finding that “certifying a class would do little more than turn [Northland]’s settlement with Mr. Gallego into a general release of liability from all similarly situated plaintiffs at minimal extra cost”). The settlement agreement reached by Gallego and Northland provided that all class members who did not affirmatively opt out of the settlement would release their claims against Northland, not only under the FDCPA, but also under other federal laws, “state law, New York City law (including the New York City Administrative Code), common law, territorial law, or foreign law.” J.A. 64. The release applied to all “[c]laims arising out of any of the facts, events, occurrences, acts or omissions complained of in the Lawsuit, or other related matters … relating to letters sent to them that are substantially similar to the letter” received by Gallego. Id. The conclusion is reasonable that absentee class members’ interests would not be best served by a settlement that required them to release any and all claims relating to similar letters from Northland in exchange for as little as 16.5 cents—or for no money at all, if they succumbed to the mass indifference predicted by Gallego himself.