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Author: Steven Uhrich

Potential For MDL Not Reason to Delay Certifying FDCPA Class

Link: Rhodes v. ENHANCED RECOVERY COMPANY, LLC, Dist. Court, SD Indiana 2018 (Oct. 19, 2018)

A class was certified in an FDCPA case brought by Philipps and Philipps, Ltd. despite Defendant’s assertions that a heightened ascertainability standard should apply and that a potential consolidation into MDL on a bona fide error defense issue should warrant a stay of that decision.

“Defendant has indicated in its response in opposition to Plaintiff’s class certification motion that it intends to apply to the Multi District Litigation Panel to have this case and four other unidentified cases joined for purposes of conducting discovery regarding a potential bona fide error defense and argues without further explanation that “it would be more appropriate to consider the issue of class certification after Defendant makes its application to the MDL Panel.” Def.’s Resp. at 2. We are not persuaded that Defendant’s potential application to the MDL Panel is an adequate basis on which to delay a ruling on Plaintiff’s motion for class certification.”

The opinion was issued by judge Sarah Barker.

No TCPA Claim for Student Loan Debt Backed by U.S.

Link: Sanford v. NAVIENT SOLUTIONS, LLC, Dist. Court, Case No. 1:17-cv-4356-WTL-DLP (S.D. Ind. Oct. 1, 2018).

Judge William T. Lawrence dismissed a complaint on the pleadings alleging that Navient violated the Telephone Consumer Protection Act when it placed calls to the plaintiff’s cell phone. The court found that contrary to Plaintiff’s position, an  August 11, 2016, Report and Order from the FCC that would have placed restrictions on the collection of debts had not yet gone into effect. Thus the language in the TCPA that “a cellular telephone service . . . unless such call is made solely to collect a debt owed to or guaranteed by the United States” is controlling. 47 U.S.C. § 227(b)(1)(A)(iii).

 

 

 

Demanding “Pre-Purchase” Interest Not Valid Under FDCPA

Link: Gomez V. Cavalry Portfolio Services, LLC, Case No. 14-cv-09420 (N.D. Ill Sept. 24, 2018).

Plaintiffs had Bank of America (“BOA”) credit cards that were delinquent and charged off in 2009. BOA did not compute or track interest on an account after it was charged off. BOA also did not send regular billing statements to holders of charged-off accounts. Two years after BOA charged off Plaintiffs’ account, BOA sold the account to Cavalry SPV, which immediately assigned it to Cavalry Portfolio Services, LLC for servicing and collection.

Plaintiffs, through his counsel Edelman, Combs, Latturner & Goodwin LLC, filed a class action lawsuit under the Fair Debt Collection Practices Act alleging that defendants computed and added post-charge-off, pre-purchase interest to the account—basically, that it added two years’ worth of interest that BOA had not computed or tracked while it held the debt.  Plaintiffs alleged that Defendants violated the FDCPA by adding interest to credit card debts after the assignor bank had waived that interest. Both parties filed cross motions for summary judgment.

Plaintiffs argued that (1) BOA waived its right to collect post-charge-off, pre-sale interest, (2) this waiver barred Defendants from imposing post-charge-off, pre-sale interest, and (3) Cavalry violated the FDCPA by adding post-charge-off, pre-sale interest, thereby misrepresenting the amount Plaintiff owed.

Defendants argued that (1) Cavalry SPV is not a debt collector, (2) Plaintiffs’ claim is barred by the statute of limitations, and (3) the response letter is not a collection communication.

Judge Andrea R. Wood entered summary judgment in favor of defendant because it was not filed within the one-year statute of limitations period for FDCPA claims. The court also held, somewhat ironically, that Defendant waived its argument regarding choice-of-law analysis as to the waiver issue (Defendant didn’t want Illinois law to apply). Under that analysis, judge Wood found that:

the fact that BOA chose not to charge interest for two years (and it consciously made that decision as part of a broader policy) indicates that it intended to waive its right to collect this post-charge-off interest retroactively. BOA’s implied waiver of the right to charge interest on Plaintiffs’ account retroactively is further evidenced by the fact that BOA did not send periodic account statements to Plaintiffs.

It thus appears the merits of the suit would likely have supported summary judgment had the statute of limitations been met.

 

FDCPA Claim for Failure to ID “Current Creditor” Tossed Out

Link: Smith v. Simm Associates, Inc., Case No. 17-C-769 (E.D. Wisc., Sept. 30, 2018).

A class action case brought by Edelman Combs Latturner & Goodwin LLC was thrown at at summary judgment by judge William C. Griesbach. The plaintiff alleged that the collection letters sent out by the defendant violated  § 1692g(a) by:

Smith alleges that Simm violated §§ 1692g(a)(2) and 1692e of the FDCPA by failing to identify Comenity as the “current creditor” in its letter, instead of as the “original creditor.” Although Comenity was both the original and the current creditor, Smith claims that the letter nevertheless violated § 1692g(a)(2) by failing to also expressly identify Comenity as the “current creditor.”

The court found that:

There was nothing abusive, unfair, or deceptive about Simm’s notice to Smith about her outstanding debt. The letter contained the name of the creditor to whom the debt was owed, and offered payment arrangements authorized by PayPal Credit, the name Smith was most likely to recognize as the source of the debt. I therefore conclude that Simm did not violate § 1692g.

Failure to ID Creditor Suffices Spokeo Standard

Link: Heisler v. Convergent Healthcare Recoveries, Inc., Case No. 16-CV-1344 (E.D. Wisc., Sept. 27, 2018).

Plaintiff filed suit alleging that the dunning letters sent by CHRI did not identify the original creditor in violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692g.

The court provides a great analysis of the FDCPA for purposes of Article III standing analysis post-Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).

Heisler alleges that CHRI violated his rights under the FDCPA by failing to identify the creditor to whom the debt was owed and by using false, deceptive, and misleading representations or means in connection with the collection of the debt. (Compl. ¶ 46.) As in Pogorzelski, Heisler’s allegations that the debt collection letter sent by CHRI failed to identify the creditor of the debt in violation of his rights under the FDCPA sufficiently pleads a concrete injury-in-fact for purposes of standing. As to CHRI’s allegation that Heisler never opened the letter, this fact is irrelevant as Heisler seeks statutory damages, “a penalty that does not depend on proof that the recipient of the letter was misled.” See Bartlett v. Heibl, 128 F.3d 497, 499 (7th Cir. 1997). Thus, I find that Heisler has standing to sue in this case.

Unfortunately for Plaintiffs represented by Edelman, Combs, Latturner & Goodwin, judge Nancy Joseph also denied class certification because there is a unique defense that Plaintiff’s cause of action should be barred by judicial estoppel based on actions taken during the course of Plaintiff’s bankruptcy proceedings.

TCPA Class Against CPA, LP Certified in Part: Issues With Rep Agreement

Link: Lanteri V. Credit Protection Association LP, 1:13-cv-1501-WTL-MJD (S.D. Ind., Sept. 26, 2018).

Plaintiff, represented by Philipps & Philipps Ltd., Keogh Law, Ltd., and Macey and Aleman, P.C., sought to certify two classes in their Telephone Consumer Protection Act lawsuit against CPA. The suit alleges CPA continued to send texts to the class after they sent a “stop” text message in response or while the debt was subject to an automatic stay order of a bankruptcy court.

The court affirmed the “stop” class after dealing with the following language in the Plaintiff’s representation/retainer agreement:

If Client abandons the class and settles on an individual basis against the advice of Attorneys, Client shall be obligated to pay Attorneys their normal hourly rates for the time they expended in the case, and shall be obligated to reimburse the Attorneys for all expenses incurred.

The court found this objectionable but allowed the class to be certified if Plaintiff files an amended agreement without that language.

As the Defendants concede, the fee arrangement does not explicitly prohibit the Plaintiff from settling, and the Court notes that the arrangement does not impose any fees, costs, or expenses on the Plaintiff were she to agree to a class settlement against her attorneys’ advice. Nonetheless, as the Defendants also indicate, the arrangement creates the appearance of a possible conflict with respect to the Plaintiff’s ability to freely withdraw her claim or settle her claim against her attorneys’ advice.

The court, judge William T. Lawrence, also found that the bankruptcy class was not ascertainable:

The problem with this proposed class is that the Plaintiff has not provided a mechanism for how it will identify its members. The Plaintiff suggests that it can start from the list of persons who were called during the relevant time period and whose accounts were given a certain code by the Defendants, and then perform a “ministerial act” of reviewing bankruptcy court dockets to determine which of those persons filed for bankruptcy. This suggestion ignores the fact that this method would not identify the Plaintiff herself or others like her who filed for bankruptcy but whose account was not coded as doing so by the Defendants. It also equates filing for bankruptcy with the imposition of an automatic stay, when there are circumstances in which a bankruptcy filing does not result in a stay. See 11 U.S.C. § 362. The determination of whether there was an automatic stay in a particular case and, if so, until what date, is not necessarily a ministerial act. The Plaintiff offers no explanation of how “compar[ing] bankruptcy filing dates to call dates,” Dkt. No. 183 at 14, will be sufficient to determine whether the call dates were made during the pendency of an automatic stay; she does not address the need to determine (1) if an automatic stay did, in fact, take effect; and (2) if so, when the stay was lifted. In addition, if the class member filed under Chapter 13, any claim that accrued during the pendency of the bankruptcy proceeding was property of the estate, and if it was not disclosed as an asset during the pendency of the bankruptcy case, it cannot be pursued without reopening that case. Rainey v. United Parcel Serv., Inc., 466 Fed. Appx. 542 (7th Cir. 2012).

 

 

TCPA Class Case Against Citigroup Fails Certification

Link: Tomeo v. Citigroup, Inc., Case No. 13-cv-4046 (N.D. Ill., Sept. 27, 2018).

Judge Sara L. Ellis denied a motion brought by Plaintiff’s attorneys (DiCello Levitt & Casey LLC) to certify two Rule 23(b)(3) classes under the Telephone Consumer Protection Act for calling their telephones using an automatic telephone dialing system (“ATDS”) without their express consent.  The court found that Plaintiff did not satisfy his burden of establishing that common issues of fact or law predominate.

The court reminds us of the import of Rule 26: Citi attempted to attach a previously undisclosed expert declaration to its motion to strike Plaintiff’s expert reports. The court found that was procedurally improper because Citi submitted it after the close of expert discovery and further, Citi did not move to extend the deadline or for permission to submit a sur-rebuttal.

Regarding expert testimony, Rule 26 provides that “[a] party must make disclosures at the times and in the sequence that the court orders.” Fed R. Civ. Pro. 26(a)(2)(D). Unless Citi can show that the failure to provide Taylor’s report in a timely manner was justified or harmless, the Court should exclude it. Finwall v. City of Chicago, 239 F.R.D. 494, 500 (N.D. Ill. 2006)(citing Keach v. U.S. Trust Co., 419 F.3d 626, 639 (7th Cir. 2005)).

However, Plaintiff’s expert report is still stricken because they did not inspect Citi’s ATDS system itself:

 it is Tomeo’s burden to demonstrate that his expert reports and testimony are admissible, and he has not provided that support. Just as in Legg, Hansen cannot even credibly state that Citi’s equipment conforms to the specifications discussed in the manual. Because the Court finds that Tomeo has not shown that Hansen’s opinions regarding Citi’s dialers are based on sufficient facts and data, the Court excludes the portions of Hansen’s reports that make findings regarding the function of Citi’s dialers.

As to class certification generally, the court said that there would need to be too many individualized inquiries as to whether there was a wrong number or consent given for the calls.

Simply put, neither Tomeo nor his experts adequately identify a common way to address the individual variations of consent and revocation that occurred in this case … And in the cases where the Seventh Circuit held that class certification could be appropriate even though causation or damages required individual proof, the issues requiring individual proof did not directly affect whether the defendant was liable for some violation of the law. See, e.g., McMahon v. LVNV Funding, LLC,807 F.3d 872, 875 (7th Cir. 2015) (finding that the predominate issue was whether the defendant’s actions violated the FDCPA, not whether that violation damages the class members); Pella Corp. v. Saltzman, 606 F.3d 391, 394 (7th Cir. 2010)(holding that the central question in the case was whether the product at issue was defective when it left the factory, not whether that defect proximately caused the class members’ damages). The individualized issues in those cases could be separated from the primary issue of liability. Here, on the other hand, consent is inextricably intertwined with primary issue of liability to the point where it predominates over the other common issues in the case.

Class Settlement Denied in TCPA and FDCPA Case Against Ocwen

Link: Snyder v. Ocwen Loan Servicing, LLC, Case No. 16-cv-8677 (N.D. Ill., Sept. 28, 2018).

In this large TCPA / FDCPA case against mortgage servicing company Ocwen, judge Matthew F. Kennelly denied the parties’ motion for final approval of a class which was potentially enormous: Ocwen’s records showed that it had made, during the period covered by the limited class proposed for preliminary injunctive relief, over 146 million calls to 1.45 million unique telephone numbers.

Once Plaintiffs (represented by Burke Law Offices and others) realized Ocwen’s insurer would not be covering them (Ocwen failed to give its insurer notice), there was a question whether Ocwen would be able to cover any settlement or if it would need to fold, leaving the class with nothing. Plaintiffs responded by trying to add in the banks and trusts Ocwen was working for, but the court in an earlier ruling denied that request as not timely. Plaintiffs then filed suit against the banks and trusts themselves.

The judge rejected the final $17,500,000 settlement on two grounds: One, that there was nothing in the record that showed Ocwen would not be able to pay, which might account for the relatively low amount of money given the number of calls. Two, the settlement called for the dismissal of the second case filed against the banks and trusts, but there did not appear to be any consideration given by the banks in the settlement agreement.

As a refresher on getting a class settlement approved, here’s the standard the court used:

A district court may approve a proposed settlement of a class action only after it directs notice in a reasonable manner to all class members who would be bound and finds, after a hearing (which the Court has already held), that the proposed settlement is “fair, reasonable and adequate.” Fed. R. Civ. P. 23(e)(2). In making the latter determination, courts in this circuit typically consider the following factors:

(1) the strength of the case for plaintiffs on the merits, balanced against the extent of settlement offer; (2) the complexity, length, and expense of further litigation; (3) the amount of opposition to the settlement; (4) the reaction of members of the class to the settlement; (5) the opinion of competent counsel; and (6) the stage of the proceedings and the amount of discovery completed. . . . The most important factor relevant to the fairness of a class action settlement is the strength of plaintiff’s case on the merits balanced against the amount offered in the settlement.

Wong v. Accretive Health, Inc., 773 F.3d 859, 863-64 (7th Cir. 2014) (internal quotation marks and citations omitted). The Court notes that as of December 1, 2018, absent contrary Congressional action, an amendment to Rule 23(e)(2) setting forth a list of points a court must consider in determining whether a proposed class action settlement is fair, reasonable, and adequate. The Court will address these points as well. They include whether:

• the class representatives and class counsel have adequately represented the class;

• the proposal was negotiated at arm’s length;

• it treats class members equitably relative to each other; and

• the relief provided by the settlement is adequate, taking into consideration the costs, risks, and delay of trial and appeal; the effectiveness of the proposed method of distributing relief; the terms of any proposed award of attorney’s fees; any agreements made in connection with the proposed settlement.

Proposed Fed. R. Civ. P. 23(e)(2) (eff. Dec. 1, 2018).

Mistaken ID FDCPA Claim Survives Summary Judgment

Link 1: (SHA Opinion) Ali v. Portfolio Recovery Associates, LLC, Case No. 15-cv-06178 (N.D. Ill. Sept. 30, 2018);
Link 2: (SAA Opinion) Ali v. Portfolio Recovery Associates, LLC, Case No. 15-cv-06178 (N.D. Ill. Sept. 30, 2018).

These two consolidated cases derive from PRA’s attempt to collect different debts from the wrong Syed H. Ali and from his father Syed A. Ali. The suit alleges that PRA unsuccessfully sought to collect a debt from a person named SHA located in Texas, and then went after a different SHA—one of the plaintiffs here. PRA sent collection letters and then filed a lawsuit through the defendant attorneys. The underlying error here is defendants sought collection against the Debtor and served the collections complaint at an address where another person bearing the same name (including middle initial) lived.

Plaintiff, represented by  Bryan Thompson and Robert Harrer of the Chicago Consumer Law Center, P.C., Daniel Brown, of Main Street Attorney, LLC, Blaise & Nitschke, P.C. & The Law Office of M. Kris Kasalo, Ltd., filed a 9-count complaint.

Opinion 1

The court (Judge Sharon Johnson Coleman) issued two opinions: one for the minor SHA and one for the father SAA. As to SHA, the court found that factual issues abound as to whether this was a consumer debt (thus falling within the FDCPA) and also regarding the Bona Fide Error defense that Defendants asserted. However the court granted summary judgment as to the 1692d and 1692f claims finding that there wasn’t harassing or unfair or unconscionable means used in the attempted debt collections.

The claim under the Illinois Collection Agency Act (“ICAA”), 225 ILCS 425/1 et seq. failed because the court found that the ICAA did not intend to give consumers a private right of action and dismissed it sua sponte under Rule 12(h)(3):

SHA cites Sherman as authority for his implied right of private action. Sherman v. Field Clinic, 74 Ill. App. 3d 21, 392 N.E. 2d 154 (1st Dist. 1979). Since Sherman was decided nearly 40 years ago this district and even Illinois state courts have been split on whether to follow it . . .  If the legislature intended for there to be an implied right of action, it would have written it into the law itself, especially considering the lapse in time since Sherman was decided, implying this right.

Opinion 2

The second (SAA) opinion  addressed additional claims by SAA against Blitt & Gaines, P.C. and Freedman Anselmo Lindberg Oliver, LLC (which have since merged). The additional counts were brought under the Fair Credit Reporting Act and Fair Debt Collection Practices Act. The court dismissed the 1692d claim on the basis that there was no evidence that the collection attorneys knew they had they wrong man, but allwed the 1692e claim against PRA to survive despite the Bona Fide Error defense:

The Section 1692e FDCPA violations against Portfolio stem from its alleged failure to confirm the account Debtor’s personal information and recognize that it differed from SAA’s information before pursuing collections and the lawsuit. This Court finds that there is a question of fact whether a reasonable, unsophisticated consumer would be misled by Portfolio’s actions. SAA was upset and confused by the letters and the lawsuit against “Syed Ali.” Indeed, mistakenly being sent a demand letter or being served with a lawsuit in one’s name, taken in isolation, could be confusing[. . .]

This Court [. . .] finds an issue of fact as to the sufficiency of Portfolio’s controls and procedures since Portfolio was on notice from the August 29, 2014 TransUnion report, prior to its filing of the lawsuit against Syed Ali, that another Syed Ali lived at the address associated with the Debtor.

The court granted summary judgment in favor of the debt collector attorneys based on their bona fide error defense, noting that they don’t have to apply “most comprehensive approach to avoid errors. Courts have found it sufficient for defendants to take reasonable efforts to avoid violations if FDCPA.”

As to the impermissible pull claim under the FCRA, the court sided with PRA in that the CRA was the entity responsible for the pull on the incorrect address and the subsequent pulls were related to accounts that the correct SAA had with Portfolio.

 

In Rem Demand for Neighborhood Association Debt Violates FDCPA

Link: Ellison v. Fullett Rosenlund Anderson PC, Case No. 17 CV 2236 (N.D. Ill., Sept. 28, 2018).

Defendant law firm sent a notice on behalf of Brookside Village Neighborhood Association to collect past due monthly assessments. Plaintiff had discharged the debt in bankruptcy. Regardless, Defendant sent a dunning letter titled “IN REM NOTICE AND DEMAND FOR POSSESSION” that stated:

THIS IS THE PROPERTY’S NOTICE … that the property is in default of its ongoing obligation due to Brookside Village Neighborhood Association in the sum of $4,100.00 for its proportionate share of the expenses … lawfully agreed upon due and owing at least in part since 02/01/2011, as well as the sum of $265.02 in legal fees and costs in attempting to collect this account, for a total sum of $4,365.02.

This is its NOTICE that payment in full of the amount stated above is demanded of the property and that, unless its payment of the FULL AMOUNT is made on or before the expiration of thirty-four (34) days after the date of mailing of this Notice, THE ASSOCIATION MAY SEEK TO TERMINATE ANY RIGHT TO POSSESSION OF THE PREMISES.

The court, judge Harry D. Leinenweber, found that Plaintiff is a “consumer” despite having discharged the debt, that the notice was in connection with the collection of a debt (despite Defendant’s arguments it was only “in rem”), and that the notice taken as a whole would be misleading and confusing on its face to the average unsophisticated consumer.

Defendant’s hail mary argument that the FDCPA conflicts with Illinois’ Forcible Entry and Detainer Act was summarily rejected:

FRA fails to identify any conflict, let alone one that rises to the magnitude of conflict present in Ho, between FEDA and the FDCPA. Nor can the Court find any such conflicts. While fulfilling FEDA requirements, a notice or letter can still be drafted in a way that violates the FDCPA. This happens to be the case for the Notice here. Regardless of whether the Notice complies with FEDA requirements, the Court finds that the Notice was misleading and could have been crafted in a way to avoid ambiguity and confusion, particularly by informing Plaintiff either that she was not liable for the debt or by specifying the amount, if any, she was still liable for post-bankruptcy discharge.

Plaintiff was represented by Edelman, Combs, Latturner & Goodwin LLC.