Lawrence Crawford, on behalf of himself and a class of others similarly situated v. Equifax Payment Services, Inc., and Equifax Check Services, Inc.

In the
United States Court of Appeals
For the Seventh Circuit
Nos. 99-1973 & 99-2122
Lawrence Crawford, on behalf of himself
and a class of others similarly situated,
Plaintiff-Appellee,
v.
Equifax Payment Services, Inc.,
and Equifax Check Services, Inc.,
Defendants-Appellees.
Appeals of:
Beverly Blair and Latressa Wilbon,
Proposed Intervenors.
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 C 4240--Sidney I. Schenkier, Magistrate Judge.
Submitted December 7, 1999--Decided January 3, 2000
Before Posner, Chief Judge, and Easterbrook and
Rovner, Circuit Judges.
Easterbrook, Circuit Judge. These appeals are
successive to Blair v. Equifax Check Services,
Inc., 181 F.3d 832 (7th Cir. 1999). Plaintiffs in
three class actions contend that Equifax Check
Services mailed debt-collection letters that
violate 15 U.S.C. sec.sec. 1692e and 1692g, parts
of the Fair Debt Collection Practices Act.
Details of the claims are not important. Lawrence
Crawford filed suit first, in June 1997. Beverly
Blair filed a similar suit in December 1997, and
Latressa Wilbon filed the third suit in August
1998. All three plaintiffs sought to represent a
class of debtors who had received letters from
Equifax. Blair and Wilbon were consolidated
before District Judge Plunkett, who certified
both as class actions on February 25, 1999.
Crawford was handled separately. On March 3,
1999, Magistrate Judge Schenkier, presiding by
consent under 28 U.S.C. sec.636(c),

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simultaneously certified Crawford as a class
action and tentatively approved a settlement. The
class certified in Crawford is much more
comprehensive than the classes certified in Blair
and Wilbon; all members of the Blair and Wilbon
classes are members of the Crawford class. One
feature of the Crawford settlement is that
members of the class lose their right to class
handling of claims for damages. On this basis
Equifax asked Judge Plunkett to decertify Blair
and Wilbon. He declined, and we affirmed. Our
opinion in Blair holds that unless the Crawford
settlement is finally approved, Blair and Wilbon
are entitled to pursue their own actions. Blair
and Wilbon attempted to intervene in Crawford to
oppose the settlement, but Magistrate Judge
Schenkier denied their motions and then finally
approved the settlement. We have for decision two
appeals: the first contests the denial of the
motions to intervene, and the second--whose
propriety is contingent on the success of the
first, see Marino v. Ortiz, 484 U.S. 301, 304
(1988); Felzen v. Andreas, 134 F.3d 873 (7th Cir.
1998), affirmed by an equally divided Court under
the name California Public Employees’ Retirement
System v. Felzen, 525 U.S. 315 (1999)--challenges
the settlement’s approval.
Debt-collection letters that violate sec.1692g
expose the debt collector to actual damages plus
a penalty up to $1,000. In a class action the
total damages cannot exceed $500,000 or 1% of the
debt collector’s net worth, whichever is less. 15
U.S.C. sec.1692k(a). All three of the class
actions sought these financial penalties.
Magistrate Judge Schenkier’s order certifying the
Crawford class and tentatively approving a
settlement nonetheless provided that the class
would proceed under Fed. R. Civ. P. 23(b)(2),
which applies when "the party opposing the class
has acted or refused to act on grounds generally
applicable to the class, thereby making
appropriate final injunctive relief or
corresponding declaratory relief with respect to
the class as a whole", rather than under Rule
23(b)(3), which is designed for cases seeking
money damages. The plan was that none of the
Crawford class members would receive personal
notice or be allowed to opt out, rights they
would have enjoyed if the class had been
certified under Rule 23(b)(3) (as Blair and
Wilbon were). The substantive terms of the
settlement are these:
Equifax will never again use the form letters
that plaintiffs say violate sec.1692g.
Crawford will receive $500 as damages, plus
a $1,500 "incentive award" for serving as the
class representative.

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Equifax will donate $5,500 to the Legal
Clinic of Northwestern University Law School
for use in protecting consumers’ rights.
Equifax will pay reasonable attorneys’ fees
(later fixed at $78,000) for the services of
Crawford’s attorney.
Rights of all class members other than
Crawford to seek damages are unaffected--they
receive nothing in this case but are free to
file their own suits, provided, however, that
no other suit may proceed as a class action.
Blair and Wilbon deem these terms inadequate.
Members of the class other than Crawford receive
no relief for harms that may already have been
done. They gain nothing (the settlement does not
include a concession of liability that would
facilitate individual suits), but lose something:
the possibility of any collective proceeding for
damages. Because these are small-stakes cases, a
class suit is the best, and perhaps the only, way
to proceed. Mace v. Van Ru Credit Corp., 109 F.3d
338, 344 (7th Cir. 1997); In re General Motors
Corp. Pick-Up Truck Fuel Tank Products Liability
Litigation, 55 F.3d 768, 809 (3d Cir. 1995).
Unsurprisingly, Blair and Wilbon opposed this
settlement, which did them (and other members of
the classes they represent) no favors. Whether it
caused them injury depends on the merits, a
subject on which we express no view. Perhaps
Crawford settled for a pittance because
plaintiffs’ claim is weak, or because Equifax
would be entitled to a setoff or counterclaim, on
account of the bad debts, exceeding any recovery.
See Channell v. Citicorp National Services, Inc.,
89 F.3d 379 (7th Cir. 1996).
To have recourse to this court if the
settlement should be approved over their
objections, Blair and Wilbon had to become
parties, which they sought to do on March 26,
1999, by filing motions to intervene. Although
these motions were filed only 23 days after the
class had been certified, and before the deadline
for objecting to the terms of the settlement,
Magistrate Judge Schenkier denied them, ruling
that Blair and Wilbon should have acted sooner--
indeed, that they should have moved to intervene
in August 1998, as soon as their lawyer learned
of the suits’ overlap. Although the parties
debate when counsel first learned that the
Crawford class could be a superset of the Blair
and Wilbon classes, we need not address that
issue. Let us assume that Blair and Wilbon knew
from the get-go about the relation among the
classes. Why should that have prompted
intervention? The class device is designed to

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avoid the need for class members to become
parties.
A representative plaintiff acts as fiduciary for
the others. Only when the class members suspect
that the representative is not acting in their
best interests is there a need to intervene. This
means that delay must be measured from the time
the would-be intervenors learned (or should have
known) of the representative’s shortcomings.
United Airlines, Inc. v. McDonald, 432 U.S. 385,
394 (1977) (intervention by a member of the class
is timely when the intervenor acts "as soon as it
[becomes] clear . . . that the interests of the
unnamed class members would no longer be
represented by the named class representatives").
Unnamed members of the class rarely will suspect
a shortfall in the adequacy of representation
before learning of the terms of a (potentially
inadequate) settlement or problems in the class
definition--and given the possibility of opt-out,
even that may not occasion intervention. Until
March 1999 Blair and Wilbon had every reason to
suppose that they would be entitled to opt out as
of right; Crawford’s pleadings sought
certification under Rule 23(b)(3), and the switch
to Rule 23(b)(2) was a last-minute change.
As a rule the time for unnamed members of the
class to intervene can not commence until notice
under Rule 23; but in this case the class members
never received personal notice, either of the
class certification or of the settlement. The
district court violated Rule 23(c)(1): "As soon
as practicable after the commencement of an
action brought as a class action, the court shall
determine by order whether it is to be so
maintained." Apparently Crawford and Equifax
agreed to delay the certification and notice, and
the court went along despite the language of the
rule. Equifax, which moved to consolidate Blair
with Wilbon, did not inform the district court of
the overlap between Crawford and the other cases,
and the lack of a formal certification made it
hard for third parties to deduce the overlap.
These maneuvers are not sound reasons to ensnare
class members; if the court itself could not
define the Crawford class until March 3, 1999,
why should unnamed class members be deemed to
have had earlier knowledge of its scope? Although
counsel for Blair and Wilbon acquired actual
knowledge of the settlement despite the lack of
notice, no one contends that counsel tarried
unduly thereafter. The district court abused its
discretion by concluding that the motions to
intervene were untimely.
Magistrate Judge Schenkier gave a second reason
for denying the motions: that the appearance of
Blair and Wilbon would cause "prejudice" in

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Crawford by upsetting the settlement. The premise
of this conclusion is a belief that simply by
becoming parties Blair and Wilbon could nix the
deal by withholding their assent. This belief is
not correct: Crawford, not Blair or Wilbon, had
been certified to represent the Crawford class,
and only the representative’s approval is
essential to settlement. Blair and Wilbon wanted
to intervene so that they could appeal if the
court approved the settlement under Rule 23(e)
despite their objections; they recognized that a
settlement had been reached already. Thus even if
there were reason to doubt the proposition that
an intervenor can’t usurp the class
representative’s prerogatives, the magistrate
judge could have avoided any problem by limiting
the extent of the intervenors’ rights to
objecting and, if necessary, appealing. The
possibility that we would see merit to their
appeal cannot be called "prejudice"; appellate
correction of a district court’s errors is a
benefit to the class. Because only parties may
appeal, it is vital that district courts freely
allow the intervention of unnamed class members
who object to proposed settlements and want an
option to appeal an adverse decision. So in the
end, it does not matter whether intervention
would come under Fed. R. Civ. P. 24(a) or (b), or
what the standard of appellate review may be; the
magistrate judge’s order cannot survive even the
most deferential kind of review.
Nor can the settlement itself survive. Ortiz v.
Fibreboard Corp., 119 S. Ct. 2295, 2314-15
(1999), and Jefferson v. Ingersoll International,
Inc., No. 99-8032 (7th Cir. Oct. 25, 1999), show
that the class members ordinarily are entitled to
personal notice and an opportunity to opt out of
representative actions for money damages--which
the Crawford case is, even though most of the
money went to Crawford’s lawyer. Both Ortiz and
Jefferson stress that these rights are based on
the seventh amendment and the due process clause
of the fifth amendment, as well as on the terms
of Rule 23. Crawford contends that Ortiz does not
apply to a settlement approved before the date on
which Ortiz was issued, a frivolous position
given the rule that principles applied in the
cases that announce them (as Ortiz and Jefferson
were) govern all other pending cases too. Harper
v. Virginia Department of Taxation, 509 U.S. 86
(1993); James B. Beam Distilling Co. v. Georgia,
501 U.S. 529 (1991). Anyway, Ortiz and Jefferson
are not exactly novelties. Rule 23 itself limits
no-opt-out classes to the situations described in
Rule 23(b)(1) and (2), which Crawford does not
meet: all private actions under the Fair Debt
Collection Practices Act are for damages. See 15
U.S.C. sec.1692k and Sibley v. Fulton DeKalb
Collection Service, 677 F.2d 830, 834 (11th Cir.

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1982). Recognition that notice and an opportunity
to opt out are vital to most representative
actions for damages is of long standing. See
Richards v. Jefferson County, 517 U.S. 793, 799-
802 (1996); Phillips Petroleum Co. v. Shutts, 472
U.S. 797, 811-12 (1985); Eisen v. Carlisle &
Jacquelin, 417 U.S. 156, 174-75 (1974); Mullane
v. Central Hanover Bank & Trust Co., 339 U.S.
306, 314-15 (1950); Hansberry v. Lee, 311 U.S.
32, 42-45 (1940).
All questions of notice and opt-out aside, the
settlement is substantively troubling. Crawford
and his attorney were paid handsomely to go away;
the other class members received nothing (not
even any value from the $5,500 "donation") and
lost the right to pursue class relief. By
agreeing to a class definition so broad that it
included anyone who was sent a letter "similar"
to the one he had received, Crawford consented to
a class of approximately 214,000 members, which
ensured that none could recover much-- recall
that the cap under sec.1692k(a)(2)(B)(ii) is
$500,000, implying a maximum award of $2.34
apiece, and if Equifax’s net worth is less than
$50 million then the cap is even lower. Blair and
Wilbon, by contrast, have been certified to
represent smaller classes for which the cap could
be as high as $250 per debtor, holding out some
prospect of a net judgment after Equifax’s setoff
rights. Although Magistrate Judge Schenkier
stated that the prospective part of the deal is
valuable to the class, Blair and Wilbon believe
that Equifax stopped using the challenged letters
early in 1998. Given the litigation risk, Equifax
is not apt to employ them again no matter what
the settlement provides. Even if Equifax’s
promise is of some value to debtors in the
future, the change in form letters is useful to
class members only if they again write bad checks
that Equifax has verified. For persons who stay
out of financial trouble, only damages matter,
yet all the settlement does for (to?) them is cut
them off at the knees. They gain nothing, yet
lose the right to the benefits of aggregation in
a class. Magistrate Judge Schenkier concluded
that Crawford’s attorney was a vigorous champion
of the class, despite the appearance that for
$78,000 he sold out the class. Even so, the fact
that one class member receives $2,000 and the
other 200,000+ nothing is quite enough to
demonstrate that the terms should not have been
approved under Rule 23(e).
The order denying intervention is reversed, as
is the order approving the settlement. Circuit
Rule 36 will apply on remand. The district court
is instructed to assign Crawford, Blair, and
Wilbon to a single judge for consolidated
proceedings.

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