Class Action Challenging Defendants Debt Collection Practices Warranted Class Action Treatment Illinois Federal Court Holds
Plaintiffs filed a class action against MRC Receivables and others alleging violations of the federal Fair Debt Collection Practices Act (FDCPA) and the Illinois Collection Agency Act (ICAA). Herkert v. MRC Receivables Corp., 254 F.R.D. 344, 346 (N.D.Ill. 2008). Defendants are engaged in the business of “purchasing and managing charged-off consumer receivables portfolios.” Id. After defendants filed suit against them to collect on credit card debts, plaintiffs filed their class action lawsuit, id. Specifically, the class action complaint alleged that defendants “had a policy and practice of violating Section 1692e and 1692f of the FDCPA, and Section 425/9(a)(20) of the ICAA,” id., at 346-47. The gravamen of the class action is that defendants filed lawsuits to collect credit card debts without attaching a signed contract to the complaints, and after the expiration of the 5-year statute of limitations. Id., at 347. Plaintiffs moved the district court to certify the litigation as a class action, id., at 346. The district court amended the definition of the class and, as amended, granted plaintiffs’ motion for class action treatment.
The motion for class certification proposed three classes, under the FDCPA and one under the ICAA. Heckert, at 347. The district court readily found Rule 23(a)(1)’s numerosity requirement for class actions to be satisfied because defendants “file…thousands of cases each month in Illinois state court.” Id., at 348. The federal court rejected defendants’ claim that they would not be able “to construct an accurate search of their record-keeping system on a searchable, system-wide basis, and that it would thus be impossible to determine the identity of the class members.” Id. However, the court agreed to amend the class definitions “to ensure that the classes are ascertainable based on objectively identifiable criteria, namely, according to the date of the final statement of account as given in the affidavits attached to the state court complaints.” Id. As so amended, the class definition would not require the parties to rely on defendants’ records in order to ascertain class membership, id., at 349.
The federal court next found no difficulty in concluding that the commonality and typicality requirements of Rule 23(a)(2) and (a)(3) had been met. Heckert, at 350. Put simply, the class action claims presented “common legal and factual issues,” and the plaintiffs’ claims were typical of the claims of the putative class. Id. With respect to the latter, the district court rejected the defense reliance on “potentially unique defenses” such as differences in credit card member agreements, differences in state laws, and differences in arbitration clauses, including whether the arbitration clause precluded class action relief. Id. The court observed that these unique defenses “do not necessarily preclude class certification,” and found based on the record before it that the unique defenses were unlikely to be common given that only one such variation existed among the 35 sample agreements provided to the court, id.
Turning to the adequacy of representation test for class action treatment under Rule 23(a)(4), the defense raised two arguments: (1) as to the FDCPA class action claims, that the named plaintiffs’ deposition testimony established that they lacked sufficient knowledge of the class action lawsuit in order to adequately represent the class, Heckert, at 350-51, and (2) as to the ICAA class action claims, that the named plaintiffs did not possess the claims asserted and that they were in any event inadequately informed to adequately represent the class, id., at 351-52. With respect to the FDCPA class, the federal court noted that “an adequate class representative must maintain only an ‘understanding of the basic facts underlying the claims, some general knowledge, and a willingness and ability to participate in discovery.’” Id., at 351 (citation omitted). Plaintiffs met this test, id. With respect to the ICAA class, the court found that the amendment to the definition of the class resolved the membership issue, see id., at 351, and that they, too, had the minimal level of familiarity needed to represent the class, id., at 352. Moreover, the typicality requirement was satisfied because plaintiffs’ counsel were qualified to represent the interests of the class. See id., at 351-52.
Finally, the district court turned to whether the predominance and superiority tests of Rule 23(b)(3) had been met. See Heckert, at 352. The predominance test is “more demanding” than the commonality test, and defendants argued it was not met because “no standardized policy is being attacked” and because “acknowledgment of the debt by the consumer would toll the statute of limitations.” Id. The federal court disagreed, finding that the class action “turns on Defendants’ alleged standard practice of filing suit on time-barred debts.” Id. And with respect to superiority, the court found that the test had been met because “each individual consumer’s claim would likely be too small to vindicate through an individual suit.” Id., at 353. The district court agreed with defendants that statutory damages and attorney fees were recoverable under the FDCPA, but found that individuals still may not pursue their claims and that resolving the issues on a class-wide basis was superior to individual lawsuits, id. Accordingly, the district court amended the proposed definitions of the classes and, as so amended, granted plaintiffs’ motion for class action certification. Id., at 353-54.