FYI: SCOTUS Rules Fannie Mae's "Sue or Be Sued" Clause Does Not Confer Automatic Fed Court Jurisdiction

The Supreme Court of the United States recently held that the "sue-and-be-sued" clause in the Federal National Mortgage Association's ("Fannie Mae") charter does not confer subject matter jurisdiction on federal district courts over all cases involving Fannie Mae, and that an independent basis for subject matter jurisdiction must exist such as federal question or diversity.

 

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

 

Justice Sotomayor's opinion began by reciting the history of Fannie Mae, which began with the federal government's attempts to stabilize and strengthen the residential mortgage market during the Great Depression.

 

The National Housing Act of 1934 gave the Administrator of the recently-created Federal Housing Administration ("FHA") to form "national mortgage associations" to purchase and sell certain types of first mortgages and other first liens and to "borrow money for such purposes." The National Housing Act also conferred on Fannie Mae the power to "sue and be sued, complain and defend, in any court of law or equity."

 

In 1954, the National Housing Act was amended to restructure Fannie Mae's charter in order that it was no longer wholly owned by the federal government. Instead, "[p]rivate shareholders held its common stock and the Department of the Treasury held its preferred stock." Also, the language of the "sue-and-be-sued" clause was changed to "sue and to be sued, and to complain and to defend, in any court of competent jurisdiction, State or Federal."

 

"In 1968, Fannie Mae became fully privately owned and relinquished part of its portfolio to its new spinoff, the Government National Mortgage Association (known as Ginnie Mae)." Fannie Mae "'continue[d] to operate the secondary market operations' but became 'a Government-sponsored private corporation.'"

 

Fannie Mae currently participates in the secondary mortgage market by "purchas[ing] mortgages that meet its eligibility criteria, packages them into mortgage-backed securities, and sells those securities to investors, and it invests in mortgage-backed securities itself. One of those mortgages purchases led to Fannie Mae's entanglement in this case."

 

Turning to the facts of the case at bar, the borrower refinanced her mortgage in 1999. Fannie Mae purchased the mortgage, which the prior holder continued to service.  The borrower defaulted and the servicer/former mortgagee repurchased the mortgage from Fannie Mae and sued to foreclose. 

 

The borrower transferred title of the property to her daughter and filed bankruptcy in an unsuccessful bid to avoid foreclosure, the property eventually being sold at a trustee's sale in 2001.  The mother and daughter borrowers then filed suit in state court, alleging that "deficiencies in the refinancing, foreclosure, and sale of their home entitled them to relief against Fannie Mae."

 

Fannie Mae removed the case to federal court based on the "sue-and-be-sued" clause in its charter which it asserted conferred federal question jurisdiction under 28 U.S.C § 1441(a).

 

The district court denied a motion to remand the case to state court and then dismissed the case "on claim preclusion grounds." After further litigation, the district court entered a final judgment in Fannie Mae's favor. The borrowers then moved to set aside the judgment under Federal Rule of Civil Procedure 60(b) based on "fraud upon the court," which the district court denied.

 

The borrowers appealed, and the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal and the denial of the Rule 60(b) motion.  The borrowers moved for rehearing and the Ninth Circuit withdrew its opinion and "ordered briefing on the question whether the District Court had jurisdiction over the case under Fannie Mae's sue-and-be-sued clause."

 

The Ninth Circuit affirmed the district court's judgment, relying on the Supreme Court's 1992 decision in American Nat. Red Cross v. S.G, interpreting it as establishing the rule that "[w]hen a sue-and-be sued clause in a federal charter expressly authorizes suit in federal courts, it confers jurisdiction on the federal courts."

 

On certiorari review, the Supreme Court reversed the Ninth Circuit, framing the question as "whether Fannie Mae's sue-and-be-sued clause goes further and grants federal courts jurisdiction over all cases involving Fannie Mae."

 

The Supreme Court noted that the dissent in the Ninth Circuit's opinion instead interpreted the Red Cross decision "as setting out only a 'default rule' that provides a 'starting point for [the] analysis … It read the 'any court of competent jurisdiction [language] in Fannie Mae's sue-and-be sued clause to overcome that default rule by requiring an independent source of jurisdiction in cases involving Fannie Mae."

 

The Supreme Court pointed out the First and District of Columbia Circuits "have concluded that the language in Fannie Mae's sue-and-be-sued clause grants jurisdiction to federal courts", while four other Circuits -- the Seventh, Second, Fifth and Third – "have disagreed, finding that similar language did not grant jurisdiction."

 

The Court explained that it did "not face a clean slate" because it had "addressed the jurisdictional reach of sue-and-be sued clauses in five federal charters. Three clauses were held to grant jurisdiction, while two were found wanting." These opinions "support the rule that a congressional charter's 'sue and be sued' provision may be read to confer federal court jurisdiction if, but only if, it specifically mentions the federal courts."

 

Turning to the clause at issue, the Supreme Court explained that while "Fannie Mae's sue-and-be-sued clause resembles the clauses this Court has held confer jurisdiction in one important respect … it 'specifically mentions the federal courts[,]' [it] differs in a material respect from the three clauses the Court has held sufficient to grant federal jurisdiction." Specifically, the clause at issue contains the qualifying words "any court of competent jurisdiction."

 

The Court reasoned that "[a] court of competent jurisdiction is a court with the power to adjudicate the case before it … [a]nd a court's subject-matter jurisdiction defines its power to hear cases." Thus, "[i]t follows that a court of competent jurisdiction is a court with a grant of subject-matter jurisdiction covering the case before it." Based on such basic principles, the "Court has understood the phrase 'court of competent jurisdiction' as a reference to a court with an existing source of subject-matter jurisdiction."

 

The Supreme Court concluded that "Fannie Mae's sue-and-be-sued clause is most naturally read not to grant federal courts subject-matter jurisdiction over all cases involving Fannie Mae. In authorizing Fannie Mae to sue and be sued 'in any court of competent jurisdiction, State or Federal,' it permits suit in any state or federal court already endowed with subject-matter jurisdiction over the suit."

 

The Court clarified that its ruling in "Red Cross does not require a different result."  Although some courts have interpreted that decision "to set out a rule that an express reference to the federal courts suffices to make a sue-and-be-sued clause a grant of federal jurisdiction … Red Cross contains no such rule." Instead, the Court explained that that decision reiterates 'the basic rule' from earlier decisions "that a sue-and-be-sued clause conferring only a general right to sue does not grant jurisdiction to the federal courts."

 

The Supreme Court rejected as unpersuasive Fannie Mae' arguments "against reading its sue-and-be-sued clause as merely capacity conferring."  First, Fannie Mae argued that the phrase "court of competent jurisdiction" "might refer to a court with personal jurisdiction over the parties before it, a court of proper venue, or a court of general, rather than specialized jurisdiction."

 

However, the Court ruled, just because the clause mentions federal courts "does not resolve the jurisdictional question." Accordingly "arguments as to why the phrase … could still have meaning if it does not carry its ordinary meaning are beside the point."

 

The Court went on the explain that "even if the phrase carries additional meaning, that would not further Fannie Mae's argument." Taking Fannie Mae's argument that the phrase "court of competent jurisdiction" could mean personal jurisdiction, the Court reasoned that "nothing in Fannie Mae's sue-and-be-sued clause suggests that the reference to 'court of competent jurisdiction' refers only to a court with personal jurisdiction over the parties before it." Reading the phrase to include both subject matter and personal jurisdiction "does not help Fannie Mae. So long as the sue-and-be-sued clause refers to an outside source of subject-matter jurisdiction, it does not confer subject-matter jurisdiction."

 

The Court next rejected Fannie Mae's argument that when its sue-and-be-sued clause was adopted in 1954, courts had interpreted the phrase "court of competent jurisdiction" to confer jurisdiction on federal courts and Congress relied on such decisions, known as the "prior construction canon of statutory interpretation."

 

Fannie Mae pointed to "three types of statutory provisions" that supported its argument that "the phrase 'court of competent jurisdiction' had acquired a settled meaning by 1954." The first two dealt with the Federal Housing Administration's sue-and-be-sued clause and two Circuit Court of Appeals decisions from the 1940's holding that the FHA's sue-and-be-sued clause "overrode the general rule … that monetary claims against the United States exceeding $10,000 must be brought in the Court of Federal Claims, rather than the federal district courts."

 

The Court distinguished the two cases as inapposite because "[t]hese courts did not state that their jurisdiction was founded on the sue-and-be-sued clause, as opposed to statutes governing the original jurisdiction of the federal district courts. … Thus, even assuming that two appellate court cases can 'settle' an issue … these two cases did not because they did not speak to the question here."

 

The Court rejected Fannie Mae's argument based on a "second set of cases [addressing] provisions authorizing suit for a violation of a statute" as well as a third set of cases that "interpreted provisions making federal jurisdiction over certain causes of action exclusive" because none of the cases "suggest that Congress in 1954 would have surveyed the jurisprudential landscape and necessarily concluded that the courts had already settled the question of whether a sue-and-be-sued clause containing the phrase 'court of competent jurisdiction' confers jurisdiction on the federal courts."

 

The Court also rejected Fannie Mae's argument that there was no indication that Congress intended to change the original grant of jurisdiction to federal courts enacted in 1934 when it amended the sue-and-be-sued clause in 1954 because "[t]he addition in 1954 of 'court of competent jurisdiction,' a phrase that, as discussed, carries a clear meaning, means that the current sue-and-be-sued clause does not confer jurisdiction."

 

Finally, the Supreme Court recognized that "[s]uits involving Freddie Mac may be brought in federal court." 

 

However, the Court rejected Fannie Mae's argument that because its "sibling rival, the Federal Home Loan Corporation, known as Freddie Mac," has the power under its applicable statutes "to sue and be sued, complain and defend, in any State, Federal, or other court" and that Freddie Mac is a federal agency and civil actions against it may be removed to federal district court before trial, "there is no good reason to think that Congress gave Freddie Mac fuller access to the federal courts than it has."

 

The Court explained that "[l]eaving aside the clear textual indications suggesting that Congress did just that, a plausible reason does exist."  Namely, in 1970, "when Freddie Mac's sue-and-be-sued clause and related jurisdictional provisions were enacted, Freddie Mac was a Government-owned corporation. … Fannie Mae, on the other hand, had already transitioned into a privately owned corporation."

 

In addition, the Court reasoned that Fannie Mae's argument "contains a deeper flaw. The doors to federal court remain open to Fannie Mae through diversity and federal question jurisdiction."

 

Accordingly, the Court reversed Ninth Circuit's ruling.  

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Maryland   |   Massachusetts   |   Michigan   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   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

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

 

FYI: SCOTUS to Decide Whether Entity is FDCPA "Debt Collector" Merely Because It Purchases Defaulted Debt

The Supreme Court of the United States recently decided that it will review the decision of the U.S. Court of Appeals for the Fourth Circuit in Henson v. Santander Consumer USA, Inc., a ruling discussed in our prior update below.

 

As you may recall from our prior update, the U.S. Court of Appeals for the Fourth Circuit held that the fact that a debt is in default at the time it is purchased by an entity does not necessarily make that entity a "debt collector" subject to the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("FDCPA"). 

 

A link to the docket is available here:  Link to Docket

 

The plaintiff consumer filed a petition for a writ of certiorari with the Supreme Court of the United States, asking the Court to resolve a "deep, mature circuit conflict that has only become more entrenched with time." The conflict refers to a circuit split over whether a creditor, such as a bank or finance company, collecting on a debt acquired in default is a "debt collector" subject to the FDCPA.

 

As you may recall, the FDCPA generally governs the activities of "debt collectors," not "creditors." Under the definition provided in the FDCPA, the following are defined as debt collectors:

 

- Any person whose principal purpose is to collect debts;

- Any person who regularly collects debts owed to another; or

- Any person who collects its own debts, using a name other than its own.

 

The FDCPA also provides that a person is not a debt collector if that person is "collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity concerns a debt which was not in default at the time it was obtained by such a person."

 

The FDCPA defines a "creditor" as:

 

- Any person who offers or extends credit creating a debt; or

- Any person to whom a debt is owed.

 

But the FDCPA further provides that a person is not a creditor if that person "receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another."

 

The Fourth Circuit, along with the Ninth and Eleventh Circuits, has held that an entity is not a debt collector unless its principal purpose is to collect debt, it regularly collects debts owed to another, or it is collecting debt using a name other than its own.

 

In these circuits, if the entity does not meet the definition of a "debt collector" under one of those three tests, then it matters not that the entity is excluded from the definition of a "creditor" on the basis that the debt in question was in default at the time it was acquired. As the Eleventh Circuit put it, the exclusion from the definition of "debt collector" is not a "trap door" and it should not be "interpreted to bring entities that do not meet the definition of 'debt collector' within the ambit of the FDCPA solely because the debt on which they seek to collect was in default at the time they acquired it."

 

The Fourth, Ninth, and Eleventh Circuits also reject the argument that an entity that takes assignment of debts in default is regularly collecting debts owed to another because the debts were owed to a different creditor at the time of default.  Under this view, as long as the entity is not collecting using a name other than its own, an entity taking assignment of accounts in default is not a "debt collector" because its principal purpose is not to collect debt, nor does it regularly collect debts owed to another.  But, under this view, a debt buyer is a "debt collector" if, for instance, the debt buyer's principal purpose is to collect debt.

 

On the other side of the circuit split, the Third, Sixth and Seventh Circuits have focused on the exclusions from the definitions of "debt collector" and "creditor;" and reasoned that an entity that takes assignment of a debt in default is a debt collector, while an entity that takes assignment of a debt that is not in default is a creditor with respect to that debt. The Seventh Circuit explained that "[i]f the one who acquired the debt continues to service it, it is acting much like the original creditor that created the debt. On the other hand, if it simply acquires the debt for collection, it is acting more like a debt collector."

 

Also, both the CFPB and the FTC have adopted the view that the default status of the debt at the time of acquisition determines whether the entity is a "creditor" or a "debt collector." The CFPB took this approach in a recent consent order with a large bank, finding that the bank violated the FDCPA by failing to send validation notices on student loan accounts that were in default at the time they were acquired from another bank.

 

In an amicus brief, the FTC urged the Eleventh Circuit to find that a bank that acquired a portfolio of credit card accounts from another bank was a "debt collector" with respect to those accounts that were in default at the time of acquisition.

 

With the CFPB working to promulgate rules for first- and third-party collectors, finance companies, banks and other companies will be looking to the Supreme Court for clarity on whether they will be considered FDCPA debt collectors with respect to accounts that are in default at the time they are acquired from other lenders. 

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Maryland   |   Massachusetts   |   Michigan   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   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

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

 

---

From: Ralph T. Wutscher
Date: Sun, Apr 10, 2016 at 10:43 PM
Subject: FYI: 4th Cir Confirms Entity Is Not FDCPA "Debt Collector" Merely Because It Purchases Defaulted Debt
To: Ralph T. Wutscher
Cc: DC Office, San Diego Office, San Francisco Office, Chicago Office, Cincinnatti Office, Cleveland Office, New York Office, Boston Office, New Jersey Office, Philadelphia Office, Indiana Office, Texas Office, Florida Office

The U.S. Court of Appeals for the Fourth Circuit recently held that the fact that a debt is in default at the time it is purchased by a third party does not necessarily make that third party a "debt collector" subject to the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("FDCPA"). 

Instead, the Court held that the respective definitions of "creditor" and "debt collector" under the FDCPA control whether an entity is a debt collector subject to the FDCPA.

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

Four Maryland consumers took out separate loans with a lender to purchase their respective automobiles.  The loans were originally made by a lender that was not a defendant in this action.  After the plaintiffs were unable to make payments, the lender foreclosed on the loans, leaving the plaintiffs obligated to pay deficiencies.

The company then sold the defaulted loans to the defendant finance company ("Finance Company") as part of an investment bundle of receivables, and the Finance Company thereafter attempted to collect on the loans it had purchased.

The plaintiffs filed a class action complaint against the Finance Company, alleging that the Finance Company violated the FDCPA by supposedly engaging in various prohibited collection practices. 

The plaintiffs alleged that the Finance Company was a "debt collector" under the FDCPA because:  (1) the debt they were attempting to collect was in default at the time the Finance Company purchased it; (2) the debt was originally "owed or due [to] another"; and (3) that because the Finance Company had been a debt collector prior to purchasing their loans, the Finance Company remained a debt collector after purchasing those same loans from the lender.

The Finance Company moved to dismiss on the ground that the plaintiffs "did not allege facts showing that…[it] qualified as a 'debt collector' subject to the FDCPA."  As you may recall, the FDCPA generally covers only the conduct of debt collectors, not creditors, "generally distinguishing between the two based on whether the person acts in an agency relationship with the person to whom the borrower is indebted."

The lower court agreed and dismissed the complaint, holding that the Finance Company "was collecting debts on its own behalf as a creditor and that the FDCPA generally does not regulate creditors collecting on debt owed to themselves."   

In affirming the dismissal, the Fourth Circuit held that after the Finance Company purchased the plaintiffs' loans, it became a creditor, and that because the Complaint only alleged collection activity after it became a creditor, its collection activity was not subject to the FDCPA. 

The Fourth Circuit rejected each of the plaintiffs' arguments, noting that each argument "contains several interpretational and logical flaws such that their interpretation of the FDCPA ultimately stands in tension with its plain language."

Rejecting the plaintiffs' first argument that the Finance Company was a "debt collector" because the loans it purchased had been in default, the Court held that the "default status of a debt has no bearing on whether a person [or entity] qualifies as a debt collector under the threshold definition set forth in 15 U.S.C. § 1692a(6)." 

The plaintiffs asserted that because 15 U.S.C. § 1692a(4) "excludes from the definition of creditor 'any person to the extent that he receives an assignment of a debt in default solely for the purpose of facilitating collection of such debt for another' such person must of logical necessity be a debt collector." 

The Fourth Circuit held that the plaintiffs argument was flawed in that it (1) ignores the requirement that the person must have received the debt "solely for the purposes of facilitating collection"; and (2) because it fails to address whether the Finance Company actually fits the definition of "debt collector" (and instead appears to attempt to prove a "negative pregnant"). 

Accordingly, the Court held that the default status of the debt is not determinative as to whether an entity is a debt collector subject to the FDCPA.

Importantly, the Fourth Circuit held that the determination of whether an entity is a debt collector "is ordinarily based on whether a person collects debt on behalf of others or for its own account."  And, that the "main exception" to that general rule is "when the 'principal purpose' of the person's [or entity's] business is to collect debt." 

The Court further noted, "[w]ith limited exceptions a debt collector [subject to the FDCPA] thus collects debt on behalf of a creditor.  A creditor, on the other hand, is a person to whom the debt is owed, and when a creditor collects its debt for its own account, it is not generally acting as a debt collector." 

Moreover, Fourth Circuit noted, the FDCPA in § 1692a(6) "defines a debt collector as (1) a person whose principal purposes is to collect debts; (2) a person who regularly collects debts owed to another; or (3) a person who collects its own debts, using a name other than its own as if it were a debt collector."

Applying this definition to the Finance Company, the Court held that the Finance Company did meet any of the above three definitions of "debt collector" under the FDCPA. 

For one, its "principal purpose" was not to collect debts because it also engaged in a substantial amount of direct lending and investing.  In addition, as alleged in the complaint, the Finance Company was not collecting on debts "owed to another," but instead collecting own "debts for its own account" because its collection activity only occurred after it purchased the defaulted debt from the lender. 

Thus, the Fourth Circuit held that the Finance Company did not fit the first definition of a "debt collector" provided in the FDCPA.

The Court also held that the Finance Company did not meet the second definition of "debt collector" because the plaintiffs had not (and could not) show that the Finance Company "regularly" collected debts "owed to another" or that it was "doing so here."  Rather, as the Court explained, the Finance Company was plainly collecting debts "owed to it…not to another…making it a creditor" and thus not subject to the FDCPA.

Finally, the Fourth Circuit held that the Finance Company plainly did not meet the third definition of "debt collector" because it was not using a name other than its own in collecting the debts.

In rejecting the plaintiffs' argument that the debt was originally due or owed to another, the Court held that there was no support for that argument in the plain language of the FDCPA itself. 

Instead, the Court held, to the extent "Congress was regulating debt-collector conduct, defining the terms 'debt collector' to include a person who regularly collects debts owed to another, it had to be referring to debts as they existed at the time of the conduct that is subject to regulation."  Thus, the Court held, as the debts were not "owed to another" but instead owned by the Finance Company at the time it engaged in the allegedly prohibited practices, those alleged practices were not subject to FDCPA regulation.

Likewise, in rejecting the plaintiffs' remaining arguments that the Finance Company had previously been a debt collector (or acted as a debt collector for other loans), the Fourth Circuit held that the plaintiffs grossly misinterpreted the FDCPA:

Under the plaintiffs' interpretation, a company such as [the Finance Company]—which as a consumer finance company, lends money, services loans, collects debt for itself, collects debt for other, and otherwise engages in borrowing and investing its capital—would be subject to the FDCPA for all of its collection activities simply because one of its several activities involves the collection debts for others.

The Court held that "Congress did not intend this."  Rather, the Fourth Circuit held that Congress "aimed [the FDCPA] at abusive conduct by persons who were activing as debt collectors" as explained in § 1692(e) of the FDCPA.  Thus, the Court held that the Finance Company is "therefore subject to the FDCPA only when acting as a 'debt collector' in § 1692a(6)" and not when it is engaging in activity to collect on its own debts "as a creditor." 

Accordingly, the Court affirmed dismissal of the complaint.

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Maryland   |   Massachusetts   |   Michigan   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   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

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

 

FYI: MD Fla Holds Non-Foreclosure Collection on Time-Barred Debt Does Not Provide Basis for FDCPA or FCCPA Claim

The U.S. District Court for the Middle District of Florida recently granted in part a mortgage loan servicer's motion to dismiss a consumer borrower's claims under the federal Fair Debt Collection Practices Act ("FDCPA"), the Florida Consumer Collection Practices Act ("FCCPA"), the federal Fair Credit Reporting Act ("RESPA"), the federal Declaratory Judgment Act ("DJA"), holding:

 

(a) the borrower's complaint stated claims under the FDCPA and FCCPA because the allegations raised a plausible inference that the servicer knew the borrower was represented by counsel;

 

(b) the borrower's allegations that statute of limitations had run on a portion of the mortgage loan debt did not provide a plausible basis for borrower's claims, and that the statute of limitations issue should be raised, it at all, as an affirmative defense to an actual collection or foreclosure action;

      

(c) the borrower's allegations of fraudulent loan documents did not provide a plausible basis for her claims because neither the FDCPA nor the FCCPA authorize the borrower to demand: (1) 'presentment' of the original note from a mere debt collector; or (2) premature compliance with the standing and proof requirements of a foreclosure action;

 

(d) the borrower's FCRA claim failed because it provided no well-pled factual allegations and simply parroted the statutory provisions; and

 

(e) the Court declined to exercise subject matter jurisdiction under the DJA because the relief sought was available under the FDCPA, FCCPA and RESPA.

 

A copy of the opinion is attached.

 

A borrower signed a promissory note in 2008 secured by a mortgage on her home. The loan went into default December of 2009 and the mortgagee sued to foreclose, but ended up voluntarily dismissing the case without prejudice in October of 2014.

 

In November of 2015, a new loan servicer began servicing the loan. One year later, the mortgagee sold the loan to a trust and notified the borrower of the new owner's identity.

 

In June of 2016, the borrower filed a complaint in the district court against the loan servicer, alleging that the servicer called her at least fifty times on her cellular phone trying to collect the loan knowing that the borrower was represented by counsel with respect to the loan in supposed violation of the TCPA, FDCPA, and FCCPA.

 

The borrower also alleged that the servicer improperly reported and attempted to collect the full amount of the unpaid debt, instead of a lesser amount because the statute of limitations had run of a portion of the debt, and failed to correct the error, in violation of the FDCPA, FCCPA, RESPA and FCRA.  Florida has a five-year statute of limitations for mortgage foreclosures, and more than five years had passed since the borrower defaulted and the prior servicer filed the foreclosure action.

 

The complaint sought a declaratory judgment, actual, statutory and punitive damages, attorney's fees and costs.

 

The loan servicer moved to dismiss the FDCPA, FCRA, RESPA, declaratory judgment and FCCPA claims.  The District Court found that the complaint stated claims under the FDCPA and FCCPA because the allegations raised a plausible inference that the servicer knew the borrower was represented before receiving a RESPA letter from the attorney.

 

The Court then rejected the servicer's argument that the statute of limitations barred the action because the defendant began servicing the loan in November of 2015, and the plaintiff's claims arose from conduct after that date.

 

The Court turned to address the borrower's argument that the note and mortgage were fraudulent and that she had the right to demand "presentment" of the original note under three sections of Florida's version of the Uniform Commercial Code dealing with negotiable instruments, and that if the servicer could not do so, its debt collection efforts necessarily violated the FDCPA and FCCPA.

 

The Court disagreed, rejecting borrower's "unsupported and confusing arguments" because "[e]ven construed broadly, neither the FDCPA nor the FCCPA provide authority for [the borrower] to demand: (1) 'presentment' from a mere debt collector; or (2) premature compliance with the standing and proof requirements of a foreclosure action." The court concluded that borrower's allegations of fraudulent loan documents "does not provide a plausible basis for [the borrower's] claims."

 

As to the borrower's argument that the loan servicer was trying to collect on a portion of the loan balance that was time-barred, the servicer argued that (a) the statute of limitations is a defense, not a cause of action; (b) the statute of limitations does not extinguish a lien or a claim; and (c) the statute of limitations does not apply until a lawsuit to enforce the loan is filed.

 

In response, the borrower argued, based on a Federal Trade Commission publication and Eleventh Circuit case law, that a billing statement that attempts to collect a sum certain from a consumer, which includes an unenforceable portion, and that threatens legal action avoidable only by payment, is "coercive and misleading."

 

The Court held that while the FTC publication relied upon does state that it is unlawful for a debt collector to "threaten to sue you on a time-barred claim," because it also contained other language that debt collectors may contact consumers about time-barred claims, such "seemingly inconsistent statements … simply do not support Plaintiff's reliance on the [statute of limitations] [i]ssue to support her claims."

 

Turning to the case law cited by the borrower, the Court distinguished the Eleventh Circuit's decisions in Crawford v. LVNV Funding LLC and Johnson v. Midland Funding, LLC as "unavailing because neither concern non-judicial debt collection activity of a partially time-barred claim. Rather, for reasons peculiar to bankruptcy proceedings, the Crawford and Johnson courts held that bankruptcy debtors can assert FDCPA adversary proceedings based on a creditor's filing of a proof of claim that is entirely unenforceable under the applicable statute of limitations."

 

Finding no specific authority supporting the borrower's argument in a non-bankruptcy context, the Court found that the statute of limitations argument did not "provide a plausible basis for [her] claims [and that the issue] should be raised, it at all, as an affirmative defense to an actual collection or foreclosure action."

 

As to the borrower's FCRA claim that the servicer was liable for willfully or negligently reporting allegedly incorrect "delinquency information," the Court found that these claims failed because: "aside from the wholesale incorporation by reference of paragraphs 1 through 58, Plaintiff provided no well-pled factual allegations [in the FCRA counts]; and (2) Plaintiff simply parroted certain provisions of the FCRA…." For these reasons, which amounted to impermissible "shotgun pleading," the Court dismissed the FCRA claims.

 

Turning to borrower's RESPA claim, the Court again agreed with the servicer's argument that it consisted only of conclusory allegations and "shotgun pleading" and accordingly dismissed it as well.

 

Addressing the borrower's final claim for declaratory judgment, the Court explained that the Declaratory Judgment Act "does not establish federal jurisdiction on its own" and, even if subject matter jurisdiction exists, a court has discretion to decline to exercise it. Because the relief sought was the same available under the FDCPA, FCCPA or RESPA, the Court declined "to exercise its discretion to consider the equitable relief of a declaratory judgment."

 

Accordingly, the Court dismissed the FDCPA, FCRA, RESPA, declaratory judgment and FCCPA claims without prejudice, giving the borrower ten days to file an amended complaint, failing which the case would proceed on the remaining TCPA claim only.

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Maryland   |   Massachusetts   |   Michigan   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   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

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments

 

 

FYI: 9th Cir Rejects "Administrative Feasibility" or "Ascertainability" Class Cert Requirement

The U.S. Court of Appeals for the Ninth Circuit recently held that class action plaintiffs are not required to demonstrate that there is an administratively feasible way to determine who is in a class in order for the class to be certified.

 

In so ruling, the Ninth Circuit noted that the Sixth, Seventh, and Eighth Circuits have similarly ruled. See Sandusky Wellness Ctr., LLC, v. Medtox Sci., Inc., 821 F.3d 992, 995–96 (8th Cir. 2016); Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015); Mullins v. Direct Digital, LLC, 795 F.3d 654, 658 (7th Cir. 2015), cert. denied, ––– U.S. ––––, 136 S.Ct. 1161, 194 L.Ed.2d 175 (2016). 

 

Although the Court focused on the Third Circuit's contrary ruling, the First, Second, Fourth, and Eleventh Circuits have also held to the contrary.  See, e.g., In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015); Brecher v. Republic of Argentina, 806 F.3d 22 (2d Cir. 2015), EQT Prod. Co. v. Adair, 764 F.3d 347 (4th Cir. 2014); Byrd v. Aaron's Inc., 784 F.3d 154 (3d Cir. 2015); Carrera v. Bayer Corp., 727 F. 3d 300 (3d Cir. 2013); Karhu v. Vital Pharmaceuticals, Inc., Case No. 14-11648 (11^th Cir 2015)(unreported).

 

The Ninth Circuit held that a separate "administrative feasibility" or "ascertainability" prerequisite to class certification was not compatible with the language of Rule 23.  In addition, the Court opined that Rule 23's enumerated criteria already address the policy concerns that had motivated some courts to adopt a separate administrative feasibility or ascertainability requirement, and Rule 23 did so without undermining the balance of interests inherent in certifying a class. 

 

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

 

Consumers who purchased cooking oil products labeled "100% Natural" filed putative class actions asserting state-law claims against the manufacturer in eleven states. The cases were consolidated in this action.

 

The consumers moved to certify eleven classes defined to include all persons who resided in the States of California, Colorado, Florida, Illinois, Indiana, Nebraska, New York, Ohio, Oregon, South Dakota, or Texas who had purchased the manufacturer's products within the applicable statute of limitations periods established by the laws of their state of residence (the "Class Period") through the final disposition of this and any and all related actions.

 

The manufacturer opposed class certification on the grounds that there would be no administratively feasible way to identify members of the proposed classes because consumers would not be able to reliably identify themselves as class members.  Thus, the manufacturer argued that the class was not eligible for certification.

 

Although the trial court acknowledged that the Third Circuit and some district courts had refused certification in similar circumstances, it declined to join in their reasoning. Instead, the trial court held that, at the certification stage, it was sufficient that the class was defined by an objective criterion -- here, whether class members purchased manufacturer's oil during the class period.

 

The trial court ultimately granted the consumers' motion for class certification in part, and certified eleven statewide classes to pursue certain claims for damages under Federal Rule of Civil Procedure 23(b)(3).  The manufacturer then appealed to the Ninth Circuit pursuant to Rule 23(f).

 

As you may recall, Federal Rule of Civil Procedure 23 governs class action procedure in federal court.  Parties seeking class certification must satisfy each of the four requirements of Rule 23(a) — numerosity, commonality, typicality, and adequacy — and at least one of the requirements of Rule 23(b). See Ellis v. Costco Wholesale Corp., 657 F.3d 970, 979–80 (9th Cir. 2011).

 

Rule 23(a), which is titled "prerequisites," provides that one or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.  Rule 23(a) does not mention "administrative feasibility."

 

The manufacturer argued that the Court should reverse the class certification because the district court did not require the consumers to proffer a reliable way to identify members of the certified classes here, which included consumers in eleven states who purchased the cooking oils labeled "100% Natural" during the relevant period.

 

The manufacturer argued that, in addition to satisfying these enumerated criteria, class proponents must also demonstrate that there is an administratively feasible way to determine who is in the class. The manufacturer claimed that the consumers did not propose any way to identify class members and could not prove that an administratively feasible method existed because consumers do not generally save grocery receipts and are unlikely to remember details about individual purchases of a low-cost product like cooking oil.

 

The Ninth Circuit rejected the manufacturer's argument, holding that Rule 23(a)'s omission of "administrative feasibility" was meaningful. Relying on Silvers v. Sony Pictures Entm't, Inc., 402 F.3d 881, 885 (9th Cir. 2005), the Court concluded that because the drafters specifically enumerated "prerequisites," Rule 23(a) constituted an exhaustive list.

 

The Court of Appeals also took guidance from language used in other provisions of the Rule, noting, for example, in contrast to Rule 23(a), that Rule 23(b)(3) provides, "The matters pertinent to these findings include," followed by four listed considerations. FED. R. CIV. P. 23(b)(3).

 

Relying on Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 78 L.Ed.2d 17 (1983), the Ninth Circuit reasoned that if the Rules Advisory Committee had intended to create a non-exhaustive list in Rule 23(a), it would have used similar language. The Court noted that where Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion. See Russello v. United States, 464 U.S. 16, 23, 104 S. Ct. 296, 78 L.Ed.2d 17 (1983).

 

Moreover, Ninth Circuit noted that Rule 23(b)(3) requires a court certifying a class under that section to consider the likely difficulties in managing a class action, and held that imposing a separate administrative feasibility requirement would render that manageability criterion largely superfluous, a result that contravenes the familiar precept that a rule should be interpreted to give effect to every clause.

 

The Ninth Circuit also relied on the Supreme Court precedent of Amchem Products, Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). In Amchem, the Supreme Court considered whether a settlement-only class could be certified without satisfying the requirements of Rule 23.  In holding that it could not, the Supreme Court underscored that the Federal Rules of Civil Procedure result from "an extensive deliberative process involving a Rules Advisory Committee, public commenters, the Judicial Conference, the Supreme Court, and Congress." Id. at 620, 117 S.Ct. 2231.

 

Noting that in Amchem, the Supreme Court warned that the "text of a rule thus proposed and reviewed limits judicial inventiveness" and admonished that "courts are not free to amend a rule outside the process Congress ordered," the Ninth Circuit concluded that the lesson of Amchem Products was plain: "Federal courts ... lack authority to substitute for Rule 23's certification criteria a standard never adopted." Id. at 622, 117 S.Ct. 2231.

 

In sum, the Ninth Circuit concluded that the language of Rule 23 does not impose a freestanding administrative feasibility prerequisite to class certification, and, mindful of the Supreme Court's guidance, the Court of Appeals declined to interpose an additional hurdle into the class certification process delineated in the enacted Rule. 

 

The Ninth Circuit recognized that the Third Circuit requires putative class representatives to demonstrate "administrative feasibility" as a prerequisite to class certification. See Byrd v. Aaron's Inc., 784 F.3d 154, 162–63 (3d Cir. 2015); Carrera v. Bayer Corp., 727 F.3d 300, 306–08 (3d Cir. 2013). The Court noted that the rationale that the Third Circuit has given for imposing an administrative feasibility requirement is the need to mitigate the administrative burdens of trying a Rule 23(b)(3) class action.

 

Courts adjudicating such actions must provide notice that a class has been certified and an opportunity for absent class members to withdraw from the class. See Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338, 362, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011); accord FED. R. CIV. P. 23(c)(2)(B). The Third Circuit largely justifies its administrative feasibility prerequisite as necessary to ensure that compliance with this procedural requirement does not compromise the efficiencies Rule 23(b)(3) was designed to achieve.  See Shelton v. Bledsoe, 775 F.3d 554, 562 (3d Cir. 2015); Carrera, 727 F.3d at 307.

 

However, the Ninth Circuit noted that Rule 23(b)(3) already contains a specific, enumerated mechanism to achieve that goal: the manageability criterion of the superiority requirement. Rule 23(b)(3) requires that a class action be "superior to other available methods for fairly and efficiently adjudicating the controversy," and it specifically mandates that courts consider "the likely difficulties in managing a class action." FED. R. CIV. P. 23(b)(3)(D).

 

The Court also observed that the Seventh Circuit had rejected the Third Circuit's justifications in Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015), and the Sixth Circuit followed suit in Rikos v. Procter & Gamble Co., 799 F.3d 497, 525 (6th Cir. 2015). Accordingly, the Ninth Circuit concluded that Rule 23's enumerated criteria already addressed the interests that motivated the Third Circuit and, therefore, an independent administrative feasibility requirement was unnecessary.

 

Moreover, relying on the Seventh Circuit case of Mullins, which observed that requiring class proponents to satisfy an administrative feasibility prerequisite "conflicts with the well-settled presumption that courts should not refuse to certify a class merely on the basis of manageability concerns," the Ninth Circuit concluded that this presumption makes ample sense given the variety of procedural tools courts can use to manage the administrative burdens of class litigation. See Mullins, 795 F.3d at 663.

 

The Court further noted that Rule 23(c) already enables district courts to divide classes into subclasses or certify a class as to only particular issues. FED. R. CIV. P. 23(c)(4), (5).  The Ninth Circuit also reasoned that adopting a freestanding administrative feasibility requirement instead of assessing manageability as one component of the superiority inquiry would have practical consequences inconsistent with the policies embodied in Rule 23, noting that Rule 23(b)(3) calls for a comparative assessment of the costs and benefits of class adjudication, including the availability of "other methods" for resolving the controversy, FED. R. CIV. P. 23(b)(3).

 

In addition, following the reasoning of the Seventh Circuit's Mullins, the Ninth Circuit held that a standalone administrative feasibility requirement would invite courts to consider the administrative burdens of class litigation "in a vacuum." See Mullins, 795 F.3d at 663. The Court reasoned that the difference in approach would often be outcome determinative for cases like this one, in which administrative feasibility would be difficult to demonstrate but in which there might be no realistic alternative to class treatment. See id. at 663–64.

 

The Ninth Circuit therefore concluded that class actions involving inexpensive consumer goods would likely fail at the outset if administrative feasibility were a freestanding prerequisite to certification.

 

Again citing to the Supreme Court case, Amchem, the Court reasoned that the authors of Rule 23 opted not to make the potential administrative burdens of a class action dispositive and instead directed courts to balance the benefits of class adjudication against its costs. The Ninth Circuit held that it lacked authority to substitute its judgment for the authors of Rule 23. See Amchem Prods., 521 U.S. at 620, 117 S.Ct. 2231.

 

The Ninth Circuit noted that Third Circuit justified its administrative feasibility requirement as necessary to protect absent class members and to shield bona fide claimants from fraudulent claims. With respect to absent class members, the Third Circuit had expressed concern about whether courts would be able to ensure individual notice without a method for reliably identifying class members. See Byrd, 784 F.3d at 165; Carrera, 727 F.3d at 307.

 

The Ninth Circuit, however, believed that concern was unfounded, because neither Rule 23 nor the Due Process Clause requires actual notice to each individual class member.

 

As you may recall, Rule 23 requires only the "best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." FED. R. CIV. P. 23(c)(2)(B).  "Rule 23 rule does not insist on actual notice to all class members in all cases and recognizes it might be impossible to identify some class members for purposes of actual notice." See Mullins, 795 F.3d at 665.

 

Similarly, the Ninth Circuit held, the Due Process Clause does not require actual, individual notice in all cases. See Silber v. Mabon, 18 F.3d 1449, 1453–54 (9th Cir. 1994). Courts have routinely held that notice by publication in a periodical, on a website, or even at an appropriate physical location is sufficient to satisfy due process. See, e.g., Hughes v. Kore of Ind. Enter., Inc., 731 F.3d 672, 676–77 (7th Cir. 2013).

 

Moreover, the Court observed that the Third Circuit's lack-of-notice concern presumes that some harm will inure to absent class members who do not receive actual notice. 

 

Although in theory, inadequate notice might deny an absent class member the opportunity to opt out and pursue individual litigation, the Ninth Circuit held that in reality, that risk was virtually nonexistent in low-value consumer class actions.  Such cases typically involve low-cost products and, as a result, recoveries were too small to incentivize individual litigation. The Court explained that an administrative feasibility requirement like that imposed by the Third Circuit would likely bar such actions because consumers generally do not keep receipts or other records of low-cost purchases.

 

The Ninth Circuit further explained that, practically speaking, a separate administrative feasibility requirement would only protect a purely theoretical interest of absent class members at the expense of any possible recovery for all class members in those cases that depend most on the class action mechanism.

 

The Court concluded that justifying an administrative feasibility requirement as a means of ensuring perfect recovery at the expense of any recovery would undermine the very purpose of Rule 23(b)(3), which was the "vindication of 'the rights of groups of people who individually would be without effective strength to bring their opponents into court at all.' " Amchem Prods., 521 U.S. at 617, 117 S.Ct. 2231.

 

The Ninth Circuit noted that the Third Circuit had expressed concern that without an administrative feasibility requirement, individuals would submit illegitimate claims and thereby dilute the recovery of legitimate claimants. See Carrera, 727 F.3d at 310.

 

The Ninth Circuit agreed that the fraud concern of the Third Circuit might be valid in theory, but, relying again on Mullins, it concluded that, in practice, the risk of dilution based on fraudulent or mistaken claims was low. See Mullins, 795 F.3d at 667. The Court pointed to class actions involving low-cost consumer goods, noting that consumers were unlikely to risk perjury charges and spend the time and effort to submit a false claim for a de minimis monetary recovery.

 

Further, the Court noted that consistently low participation rates in consumer class actions made it very unlikely that non-deserving claimants would diminish the recovery of participating, bona fide class members. 

 

Finally, observing that the Third Circuit has characterized its administrative feasibility requirement as necessary to protect the due process rights of defendants to raise individual challenges and defenses to claims, the Ninth Circuit, relying on Mazza v. Am. Honda Motor Co., Inc., 666 F.3d 581, 595 (9th Cir. 2012) and Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 594 (3d Cir. 2012), pointed out that at the class certification stage, class representatives bear the burden of demonstrating compliance with Rule 23.

  

The Court reminded the manufacturer that it would have the opportunity to challenge the claims of absent class members if and when they filed claims for damages. The Court explained that at the claims administration stage, other litigants have relied on claim administrators, various auditing processes, sampling for fraud detection, and follow-up notices to explain the claims process, and other techniques tailored by the parties and the court to validate claims. See Mullins, supra, 795 F.3d at 667. The Court explained that Rule 23 specifically contemplates the need for such individualized claim determinations after a finding of liability.

 

The manufacturer did not explain why such procedures are insufficient to safeguard its due process rights.

 

Given the existing opportunities to challenge the consumers' case, the Ninth Circuit could see no reason why requiring an administratively feasible way to identify all class members at the certification stage would be necessary to protect the manufacturer's due process rights. See Mullins, 795 F.3d at 670. Although it noted that the manufacturer might prefer to terminate the litigation at class certification rather than later challenging each individual class member's claim to recovery, the Court concluded that there is no due process right to "a cost-effective procedure for challenging every individual claim to class membership." Id. at 669.

 

Even if the concern were that claimants in cases like this would eventually offer only a self-serving affidavit as proof of class membership, the Court did not see any reason why that issue should be resolved at the class certification stage to protect a defendant's due process rights. The Court explained that if an oil consumer pursued an individual lawsuit instead of a class action, an affidavit describing her purchases would create a genuine issue if the manufacturer disputed the affidavit, and would prevent summary judgment against the consumer. See Mullins, 795 F.3d at 669; accord FED. R. CIV. P. 56(c)(1)(A). Given that a consumer's affidavit could force a liability determination at trial without offending the Due Process Clause, the Ninth Circuit saw no reason to refuse class certification simply because that same consumer presented her affidavit in a claims administration process after a liability determination had already been made.

 

Moreover, the Court explained that identification of class members would not affect a defendant's liability in every case. For example, in this case, the consumers proposed to determine the manufacturer's aggregate liability by (1) calculating the price premium attributable to the allegedly false statement that appeared on every unit sold during the class period, and (2) multiplying that premium by the total number of units sold during the class period.  This would affect the amount paid to each class member, but not the total amount paid by the defendant.

 

The Ninth Circuit agreed with the Seventh Circuit that, in cases in which aggregate liability can be calculated in such a manner, "the identity of particular class members does not implicate the defendant's due process interest at all" because "the addition or subtraction of individual class members affects neither the defendant's liability nor the total amount of damages it owes to the class." See Mullins, 795 F.3d at 670; see also Six (6) Mexican Workers, 904 F.2d at 1307.

 

For these reasons, the Ninth Circuit held that protecting a defendant's due process rights did not necessitate an independent administrative feasibility requirement.

 

In conclusion, the Ninth Circuit affirmed the trial court's ruling declining to condition class certification on the consumers' proffer of an administratively feasible way to identify putative class members.

 

 

 

Ralph T. Wutscher
Maurice 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
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Indiana   |   Maryland   |   Massachusetts   |   Michigan   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   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

 

and

 

The Consumer Financial Services Blog™

 

and

 

Webinars

 

and

 

California Finance Law Developments