Saturday, February 13, 2021

FYI: 7th Cir Holds No Standing Without Detrimental Reliance in FDCPA Case

The U.S. Court of Appeals for the Seventh Circuit recently affirmed the dismissal of a consumer's claims under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") for failing to sufficiently allege a concrete injury to confer standing under Article III.

 

Consistent its string of recent decisions addressing Article III standing for claims under the FDCPA, the Seventh Circuit concluded that the consumer's mere claims that a collection letter instructed her that a dispute of her debt must be in writing did not allege sufficient injury, because she did not try to show how a dispute would have benefitted her.

 

A copy of the opinion is available at:  Link to Opinion

 

A consumer ("Consumer") received a letter from a debt collector ("Debt Collector") that included the statement: "If you dispute this balance or the validity of this debt, please let us know in writing. If you do not dispute this debt in writing within 30 days after you receive this letter, we will assume this debt is valid."

 

The Consumer filed suit in federal court alleging that the letter's instructions for a consumer to put their dispute in writing failed to comply with subsection 1692g(a)(3) of the FDCPA, arguing that a consumer is entitled to choose how to dispute a debt.  See 15 U.S.C. § 1692g(a)(3) (requiring that a debt collector send each consumer "a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.").

 

When the case first came to the Seventh Circuit, the appellate court held that the Debt Collector had waived or forfeited its right to arbitration.  The trial court later dismissed the suit on remand, holding that the Consumer failed to allege injury to confine Article III standing, relying principally upon Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), and Casillas v. Madison Avenue Associates, Inc., 926 F.3d 329 (7th Cir. 2019). 

 

This appeal followed.

 

The Seventh Circuit noted that this appeal was stayed while it considered several other cases that presented questions about standing to sue under the FDCPA, and summarized their holdings in those cases. 

 

After Casillas applied Spokeo's holding that the requirement of injury as an element of standing is essential to confer standing applied to claims raised under the FDCPA, Larkin v. Finance System of Green Bay, Inc., 982 F.3d 1060 (7th Cir. 2020) and its successors in the Seventh Circuit rejected several trial judges' distinction between "procedural" claims governed by Spokeo and Casillas to "substantive" claims -- for which any asserted violation of the statute would be treated as an injury -- holding that injury in fact is essential to standing in either scenario. 

 

Larkin and Gunn v. Thrasher, Buschmann & Voelkel, P.C., 982 F.3d 1069 (7th Cir. 2020) further held that a consumer's assertion that she was confused by a debt collection letter does not show injury unless the confusion leads the consumer to take some detrimental step.  Although the  Consumer here claimed she was confused by the letter she received, she did not contend that the lack of clarity led her to take any detrimental action, and thus needed to show injury another way.

 

The Seventh Circuit next contrasted the Consumer's claims with those raised in Casillas, wherein the plaintiff made an argument opposite of the Consumer here: that the debt collector's failure to tell her that she had to communicate in writing caused her to lose the protections afforded under the FDCPA.  In that instance, the Court held that because Casillas didn't want to communicate with the debt collector at all, the omission of details could not have harmed her — "no harm, no foul."  926 F.3d at 331.

 

On appeal, the Consumer attempted to distinguish Casillas on the grounds that she would have disputed the debt orally if she could have.  However, the Seventh Circuit noted that her complaint made no such assertion, and even conflicts with the trial court record wherein she replied "[W]hether [she], herself, intended to dispute the debt cannot be said at this point in the litigation" when her standing was challenged.  Thus, the Seventh Circuit reasoned that if she could not make up her mind after filing suit, she couldn't have had an intent to dispute the debt within 30 days of receiving the letter.

 

In any event, because the Consumer never explained on appeal how a need to use a writing deterred her from disputing a debt (and did not claim to be illiterate), or what good a dispute would have done her, she was no worse off than if the letter had told her that she could dispute the debt orally.  Therefore, the Seventh Circuit held, the Consumer did not allege any injury sufficient to confer standing.

 

Because the Seventh Court agreed with the trial court that the Consumer lacked Article III standing, it declined to address the question whether a debt collector violates §1692g(a)(3) by telling consumers to put their disputes in writing, and affirmed dismissal.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Thursday, February 11, 2021

FYI: Ill App Ct (2nd Dist) Holds Borrower's Second Attempt to Vacate Foreclosure Judgment Untimely

The Appellate Court of Illinois, Second District, recently affirmed a trial court order dismissing a borrower's attempt to vacate a default foreclosure judgment as untimely because the borrower's first attempt to undo the foreclosure, which was withdrawn without prejudice, did not toll the time to file the petition within 60 days from the borrower's first appearance in the case.

 

A copy of the opinion is available at:  Link to Opinion

 

The mortgagee served the borrower via special process server, but the borrower failed to timely appear in court. On December 6, 2011, the trial court entered a default judgment and an order of foreclosure.

 

On October 10, 2017, the borrower appeared and moved to vacate the default judgment and to quash the service of process.

 

On November 1, 2017, the trial court allowed the borrower to file an "amended motion/petition" within 14 days. On November 15, 2017, the borrower filed an amended petition to quash the service of process alleging that the service was defective.

 

Then, on February 15, 2018, the borrower sought leave of court to file a second amended petition.  However, instead of seeking a hearing on this motion, the borrower agreed to withdraw it.  The trial court entered the parties' agreed order on February 16, 2018 withdrawing the amended petition without prejudice, striking the motion for leave to file a second amended petition, and closing the case.

 

On August 3, 2018, the borrower moved to reopen the case and filed a second amended petition to quash service of process.  In response, the mortgagee moved to dismiss the petition as untimely and to strike the motion.  The mortgagee argued that the borrower failed to file the petition "within 60 days of borrower's first appearance in the action, as required by section 15-1505.6(a)" of the Illinois Mortgage Foreclosure Law.

 

On November 6, 2019, the trial court entered an order finding that borrower's second amended petition was untimely under section 15-1506.6(a) and declined to reopen the case. This appeal followed.

 

As you may recall, section 15-1505.6(a) of the Illinois Mortgage Foreclosure Law provides that "in a residential mortgage foreclosure proceeding, when a party moves to dismiss the cause or to quash service of process on the basis that the trial court lacked personal jurisdiction, the party must do so within 60 days of either the date he or she first files an appearance or the date he or she first participates in a hearing without filing an appearance, whichever is earlier."

 

The Appellate Court observed that it addressed a similar situation in BAC Home Loans Servicing, LP v. Pieczonka, 2015 IL App (1st) 133128. There the Court held that an amended motion to quash was untimely under section 15-1505.6(a) because it was filed more than 60 days after the borrower's first appearance. 

 

The borrower voluntarily withdrew the first motion to vacate and did not seek an extension of time.  As such, "the relevant period was between the borrower's first appearance and the date of his amended motion."  The amended motion was untimely because it was filed more than 60 days after the borrower's first appearance.  Although Pieczonka concerned a motion to quash only and not a section 2-1401 petition, the Appellate Court found that this distinction did not matter because the plain language of section 15-1505.6(a) controlled.

 

The borrower argued that Pieczonka was inapposite because the borrower there did not withdraw the petition "without prejudice."  The Appellate Court rejected this argument because "section 15-1506.6 plainly requires the challenge to service to be made within 60 days of the first appearance, with the only exception being if the time is extended by the trial court for good cause shown."  

 

The borrower in this appeal failed to seek an extension of time and was not granted one.  Withdrawing the petition without prejudice did "not equate to an extension of time for good cause shown."   As such, the second amended petition was untimely because it was filed more than 60 days after the borrower first appeared.

 

The Appellate Court also rejected the borrower's argument that Bank of New York Mellon v. Laskowski, 2018 IL 121995, implicitly overruled Pieczonka.  The Appellate Court found Laskowski distinguishable because it involved an involuntarily dismissal.  The borrower could not move to dismiss or to quash while the case was dismissed.  In contrast, the borrower in Pieczonka, like the borrower in this case, voluntarily withdrew the motion to quash and did not request an extension of time for good cause shown. 

 

Thus, the Appellate Court ruled that the holding in Pieczonka controls this matter and the voluntarily dismissal of the petition did not toll the time under section 15-1506.6. 

 

The Appellate Court next examined the borrower's argument that he could refile his petition within one year of the dismissal order under 735 ILCS 5/13-217. Under 735 ILCS 5/2-1009(a), a plaintiff may voluntarily dismiss their action any time before trial begins. Section 13-217 gives a plaintiff one year to refile a "new action" after a voluntary dismissal.

 

The Appellate Court determined that section 13-217 could not help the borrower here because a " new action" brought pursuant to section 13-217 does not reinstate an old action.  Rather, a complaint filed under this provision is "new and separate action," that does not allow borrower to reinstate an old dismissed case.

 

Therefore, the Appellate Court affirmed the trial court order finding that borrower's second amended petition was untimely under section 15-1506.6(a) and declining to reopen the closed case.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Monday, February 8, 2021

FYI: 11th Cir Holds "Administrative Feasibility" Not Required for Class Certification

The U.S. Court of Appeals for the Eleventh Circuit recently vacated a trial court order denying certification of a class of similarly situated owners of allegedly defective refrigerators for claims against its manufacturer.

 

In so ruling, the Eleventh Circuit held that although administrative feasibility is relevant to whether a proposed class may proceed under Rule 23(b)(3), it is not a prerequisite to certification of a putative class. 

 

A copy of the opinion is available at:  Link to Opinion

 

The manufacturer and seller ("Manufacturer") of gas-absorption refrigerators for use in RVs initiated limited recalls in 2006 and 2008 after identifying a defect that it estimated affected .01% of the recalled refrigerators.

 

18 owners of the Manufacturer's refrigerators (the "Class Representative Consumers") file a putative class action lawsuit contending that the defect was more significant and widespread, affecting almost every refrigerator sold between 1997 and 2016, and that the Manufacturer knew of, but concealed these facts.  The Class Representatives alleged that the Manufacturer violated the Magnuson-Moss Warranty Act and various state laws, and subsequently moved to certify a class under Rule 23(b)(3) of all customers who purchased the Manufacturer's refrigerators in certain states since 1997.

 

At the class-certification stage, the Manufacturer disputed the Class Representative Consumers' contention that the proposed class met Rule 23's ascertainability requirement, because they provided no evidence that their proposed method of identification would be workable. 

 

The trial court agreed, citing the Eleventh Circuit's unpublished opinion in Karhu v. Vital Pharms., Inc., 621 F. App'x 945, 947–48 (11th Cir. 2015) that administrative feasibility is an element of the ascertainability requirement, and denied class certification and dismissed the action without prejudice on the basis that the denial of certification divested it of subject matter jurisdiction under the Class Action Fairness Act.  The Class Representative Consumers appealed.

 

On appeal, the Eleventh Circuit first addressed the Manufacturer's argument that the court should not reach the merits because the Class Representative Consumers either invited error as to the role of administrative feasibility or forfeited their challenge to that alleged requirement.  See United States v. Brannan, 562 F.3d 1300, 1306 (11th Cir. 2009) (Court may not review an error if the "party induce[d] or invite[d] the district court into making [that] error."); Blue Martini Kendall, LLC v. Miami Dade County, 816 F.3d 1343, 1349 (11th Cir. 2016) (Court will not consider an issue that could have been raised before the trial court but is not raised until appeal). 

 

The Appellate Court determined that the doctrines of invited error and forfeiture did not apply because the Class Representative Consumers did not concede that administrative feasibility is a requirement for class certification in the trial court.  Moreover, the Appellate Court held, this issue was properly preserved for appeal because the motion for class certification cited case law authority to support the proposition that their class is ascertainable, which coupled with their argument that objective criteria made the class ascertainable, should have put the trial court on notice that the necessity of proving administrative feasibility was in dispute. Cf. Clark v. Wainwright, 701 F.2d 895, 897 (11th Cir. 1983).

 

Next, the Eleventh Circuit reviewed whether or not administrative feasibility under Rule 23(b)(3) is a prerequisite for certification, an issue the court identified as a "hotly contested" between its sister circuits. 

 

The Eleventh Circuit previously stated that it was an implied prerequisite of Rule 23 -- that is, class representatives bear the burden to establish that their proposed class is "adequately defined and clearly ascertainable," and they must satisfy this requirement before the trial court can consider whether the class satisfies the enumerated prerequisites of Rule 23(a).  Little v. T-Mobile USA, Inc., 691 F.3d 1302 (11th Cir. 2012). 

 

Traditionally, class definition and ascertainability were one inquiry (DeBremaecker v. Short, 433 F.2d 733, 734 (5th Cir. 1970)), but the Third Circuit applied a heighted standard that proof of ascertainability encompasses both the definition of a class and its administrative feasibility, requiring putative class representatives to prove that the identification of class members will be "a manageable process that does not require much, if any, individual factual inquiry."  Byrd v. Aaron's Inc., 784 F.3d 154, 163 (3d Cir. 2015); Carrera v. Bayer Corp., 727 F.3d 300, 307–08 (3d Cir. 2013). 

 

The First and Fourth Circuits adopted this requirement of proof of administrative feasibility as a prerequisite for certification, while this approach is rejected in the Second, Sixth, Seventh, Eighth and Ninth Circuit.  The Eleventh Circuit acknowledged that it has addressed this issue only in unpublished decisions applying the Third Circuit's heightened standard, but that these do not bind it as precedent.  11th Cir. R. 36-2.

 

Addressing the issue here, the Eleventh Circuit concluded that its precedent does not establish administrative feasibility as a requirement for class certification. The Court reasoned that while a trial court must determine that a proposed class is "adequately defined and clearly ascertainable" before it may consider whether the requirements of Rule 23(a) are satisfied (Little, 691 F.3d at 1304), because membership can be capable of determination without being capable of convenient termination, administrative feasibility is not an inherent aspect of ascertainability. 

 

Moreover, the Appellate Court concluded that neither the text of Rule 23(a) nor 23(b) require proof of administrative feasibility.  Administrative feasibility does not follow from the text of Rule 23(a) because it does not bear on the ability of a district court to consider the enumerated elements of that subsection unlike traditional ascertainability—a plaintiff proves it after certification by explaining how the district court can locate the remainder of the class after certification by proving that the proposed process will be manageable. 

 

Nor does a requirement of administrative feasibility follow from Rule 23(b), according to the Eleventh Circuit.  Rule 23(b)(3)(D) instructs the trial court, in deciding whether "a class action [would be] superior to other available methods for fairly and efficiently adjudicating the controversy," to consider "the likely difficulties in managing a class action," but in the Eleventh Circuit's view it does not permit trial courts to make administrative feasibility a requirement. 

 

Instead, the Eleventh Circuit held, the manageability inquiry focuses on whether a class action "will create relatively more management problems than any of the alternatives," not whether it will create manageability problems in an absolute sense. Klay v. Humana, Inc., 382 F.3d 1241, 1273 (11th Cir. 2004), abrogated in part on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008). Thus, the Court reasoned, administrative difficulties in class member identification or otherwise do not alone doom a motion for certification.

 

Lastly, the Eleventh Circuit concluded that even if the trial court's decision to deny class certification was correct, dismissal was inappropriate, because "federal jurisdiction under the Class Action Fairness Act does not depend on certification," such that a trial court retains jurisdiction even after it denies certification. Wright Transp., Inc. v. Pilot Corp., 841 F.3d 1266, 1271 (11th Cir. 2016).

 

For these reasons, the trial court's dismissal and denial of certification was vacated and remanded for further proceedings.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

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and

 

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