Saturday, September 10, 2011

FYI: 7th Cir Reverses DWP of Putative FDCPA Class Action Claims

The U.S. Court of Appeals for the Seventh Circuit recently reversed a
lower court's decision to dismiss a putative class action lawsuit against
a debt collector for want of prosecution, because the mistakes made by the
plaintiff's attorney were not sufficient to justify the dismissal. A copy
of the opinion is attached.

A consumer sued a debt collection law firm, Harris & Harris, Ltd.
("Harris") for alleged violations of the federal Fair Debt Collection
Practices Act ("FDCPA"). Both parties agreed that Harris violated the
FDCPA with respect to the consumer, and that the consumer was entitled to
modest statutory damages. However, the consumer's attorney also included
in his complaint two putative class counts, which alleged that the
envelopes and payment reminders used by Harris to collect debts violated
the FDCPA on a classwide basis.

The lower court "expressed doubt that it would ever certify a class" in
this matter, but nevertheless continued the matter several times to permit
the consumer's attorney to expand on and amend the putative class claims.
On several occasions, the consumer's attorney failed to meet the lower
court's deadlines, and arrived for a hearing after the court had already
considered his case. Due to the consumer's attorney's failure to appear
and repeated failure to meet other deadlines, the lower court dismissed
the case for want of prosecution.

As you may recall, Federal Rule of Civil Procedure 41(b) provides that
"[i]f a plaintiff fails to prosecute or to comply with.a court order, a
defendant may move to dismiss the action or any claim against it." In
addition, Federal Rule of Civil Procedure 23 provides that a court "must
determine by order whether to certify the action as a class action" at an
"early practicable time."

The Seventh Circuit held that the lower's court decision to dismiss the
action for want of prosecution was an abuse of discretion. In reaching
that conclusion, the Court first noted that dismissal for want of
prosecution is an "extraordinarily harsh sanction." Gabriele v. Hamlin,
514 F.3d 734, 736 (7th Cir. 2008). In addition, dismissal for want of
prosecution should be imposed based on a consideration of, among several
other factors, whether the mistakes made are the responsibility of the
plaintiff or the plaintiff's lawyer, and the prejudice to the defendant as
a result of those mistakes. Aurora Lamp & Lighting Inc. v. International
Trading Corp, 325 F.3d 752, 755 (7th Cir. 2003).

Here, the Court indicated that the attorney's fees Harris had to incur due
to the repeated errors of the consumer's counsel were not sufficient
prejudice, and noted that all of the mistakes made were attributable to
the consumer's attorney, rather than to the consumer herself.

In addition, the Court noted that despite the questionable nature of the
class action claims, the borrower's individual allegation against Harris
appeared to have merit. It also observed that several less severe
mechanisms were available to dismiss the class action claims: the lower
court could have used Federal Rule of Civil Procedure 41(b) to dismiss
only the class action claims, allowing the individual claim to survive, or
it could have declined to certify the action as a class action under
Federal Rule of Civil Procedure 23.

The Court placed emphasis on the fact that the borrower's attorney did not
receive any warning from the lower court that he was on "thin ice."

Therefore, "[g]iven the nature of [the borrower's attorney's] mistakes,
the court's ongoing approach to the case, and the lack of any explicit
warning," the Court reversed and remanded the lower court's decision to
dismiss the action for want of prosecution.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874

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