Opinion ID: 2769428
Heading Depth: 1
Heading Rank: 2

Heading: The Standard-Form Complaint Classes

Text: CMS served named plaintiff Powers a state court collection complaint (Exhibit A) alleging she owed $454.00 for goods and services provided by “GIKK Ortho Specialists.” The complaint sought prejudgment interest “pursuant to Sec. 45-104.” CMS served the Palmer named plaintiffs a collection complaint (Exhibit C) alleging they owed $856.38 for goods and services provided by “OB/GYN physicians.” The complaint sought prejudgment interest “pursuant to Sec. 25-1801.” Both complaints sought “the costs of this action, prejudgment interest, attorney’s fees if applicable, and post-judgment interest as allowed by law.” The FDCPA prohibits a debt collector from attempting to collect any amount, including interest on the principal obligation, “unless such amount is expressly . . . permitted by law.” 15 U.S.C. § 1692f(1). Plaintiffs claim Exhibits A and C were facially invalid because they sought prejudgment interest not permitted by the cited Nebraska statutes. The § 45-104 Subclass. Section 45-104 allows an award of prejudgment interest at the statutory rate “on money due on any instrument in writing, or on settlement of the account from the day the balance shall be agreed upon.” Plaintiffs allege that CMS’s standard-form allegations that interest may be awarded under this statute violate FDCPA § 1692f(1) because § 45-104 does not apply if the consumer contests the collection lawsuit, in which case CMS has an unliquidated claim and prejudgment interest may not be recovered unless additional requirements are met under § 45-103.02. Rule 23(a)(2) requires plaintiffs to show there are questions of law or fact common to the four classes. Commonality requires a showing that class members -5- “have suffered the same injury.” Gen. Tel. Co. v. Falcon, 457 U.S. 147, 157 (1982). The issue as framed by plaintiffs seems to present an unresolved common question of law in applying § 45-104. However, “[w]hat matters to class certification . . . is not the raising of common ‘questions’ -- even in droves -- but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” Dukes, 131 S. Ct. at 2551 (quotation omitted; emphasis in original). If plaintiffs’ interpretation of § 45-104 is wrong, then the FDCPA and NCPA named plaintiffs lose on this theory attacking the standard-form complaints, and prompt resolution of the summary judgment cross motions would have obviated the need for class certification of these claims.1 On the other hand, if plaintiffs’ state law theory is correct, many individualized inquiries are required to resolve class members’ claims. Our decision in Hemmingsen established that, to recover under FDCPA § 1692f, a class member must prove that CMS’s prayer for an award of interest in the state court collection suit was “unfair or unconscionable,” not merely unsuccessful. Therefore, to resolve this theory of liability, the records pertaining to every state court collection suit must be reviewed to determine: (i) whether CMS claimed prejudgment interest under § 45-104 (as in the Powers complaint, but not in the Palmer complaint); (ii) if claimed, did CMS recover prejudgment interest under § 45-104, making the alleged violation of FDCPA § 1692f(1) material, see Hahn v. Triumph P’ships LLC, 557 F.3d 755, 757-58 (7th Cir. 2009); (iii) for every potentially material violation, whether the underlying consumer transaction reflects that CMS had a legitimate claim 1 Although a district court must determine whether to certify a class at “an early practicable time” in the litigation, Rule 23(c)(1)(A), it is not uncommon for a district court to rule on a summary judgment motion that will clarify or simplify the litigation prior to ruling on class certification. See Hartley v. Suburban Radiologic Consultants, Ltd., 295 F.R.D. 357, 367-68 (D. Minn. 2013); Jenkins v. General Collection Co., 538 F. Supp. 2d 1165 (D. Neb. 2008). -6- under § 45-104;2 (iv) whether plaintiffs’ legal theory was litigated by the class member and resolved by the state court for issue preclusion purposes, see generally Taylor v. Sturgell, 553 U.S. 880, 891-93 (2008).3 The district court also failed to address a legal question whose resolution may depend on the facts of a particular class member’s claim -- whether the affirmative defense in 15 U.S.C. § 1692k(c) applies to FDCPA violations caused by the debt collector’s misinterpretation of what is “permitted by” state law, a question the Supreme Court declined to decide in Jerman, 559 U.S. at 579-81 n.4. See Johnson v. Riddle, 305 F.3d 1107, 1121-24 (10th Cir. 2002). 2 Under § 45-104, a claim is liquidated if “‘no reasonable controversy exists as to either plaintiff’s right to recovery or as to the amount of such recovery.’ The mere contesting of the amount of or right to recovery does not alone create a reasonable controversy.” Lincoln Benefit Life Co. v. Edwards, 243 F.3d 457, 462 (8th Cir. 2001), quoting Lange Indus. v. Hallam Grain Co., 507 N.W.2d 465, 477 (Neb. 1993). 3 The district court concluded that the underlying state court judgments were irrelevant to class certification because “plaintiffs are contesting the defendants’ collection practices and not whether debt was owed.” Powers v. Credit Mgmt. Servs., Inc., No. 8:11CV436, 2013 WL 1189114, at  (D. Neb. Mar. 14, 2013). We disagree. “When an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Restatement (Second) of Judgments § 27 (emphasis added); see also Chicago, R.I. & P. Ry. v. Schendel, 270 U.S. 611, 616-17 (1926); Bell v. Sellevold, 713 F.2d 1396, 1404 (8th Cir. 1983). Because plaintiffs challenge CMS’s use of a standard-form pleading, CMS is not liable under the FDCPA to any class member who unsuccessfully litigated this issue in state court. For class members whose state court collection suits are pending, a federal court has jurisdiction over overlapping FDCPA claims, but “it would be proper for the district court to stay proceedings and direct that [plaintiffs] proceed to file their action as a permissive counterclaim in state court.” Peterson v. United Accounts, Inc., 638 F.2d 1134, 1137 (8th Cir. 1981). Thus, issue preclusion principles fatally undermine the district court’s analysis of commonality and predominance. -7- Finally, the district court erred in ruling that plaintiffs’ separate claims against the in-house collection attorneys did not affect class certification because “the question of individual defendant liability should be addressed at a later stage in the proceedings.” Powers, 2013 WL 3716412, at . The issue is more complex. The record reflects that (i) one in-house attorney signed the standard-form pleadings above a signature box showing all four, and (ii) these debt-ridden young lawyers have a negative or very small net worth. Each class member may have a stronger claim against the individual attorney who signed the pleadings in that consumer’s collection lawsuit. Because total damages are capped in an FDCPA class action,4 a smaller class limited to collection suits in which an individual defendant participated would hold out the prospect of higher recoveries for those with the strongest claims. See Crawford v. Equifax Payment Servs. Inc., 201 F.3d 877, 882 (7th Cir. 2000). Thus, by alleging that impecunious individual defendants are jointly and severally liable to all members of the largest possible classes, plaintiffs created an issue of class action superiority that cannot be ignored at the certification stage.5 The § 25-1801 Subclass. Section 25-1801 provides that any person may present a claim for less than $2000 and, “at the expiration of ninety days after the presentation of such claim,” may sue on the claim and recover interest at the statutory 4 The FDCPA caps statutory damages in a class action at the lesser of $500,000 or one per cent of the debt collector’s the net worth. 15 U.S.C. § 1692k(a)(2)(B)(ii). An individual plaintiff, on the other hand, can recover up to $1,000 in statutory damages, plus attorneys’ fees and costs. § 1692(k)(a)(2)(A) and (a)(3). The NCPA allows statutory damages for each class member up to $1,000, with no apparent cap for class actions. Neb. Rev. Stat. § 59-1609. 5 There is irony here, indeed injustice, that should not go unnoticed. Plaintiffs’ experienced class action attorneys assert aggressive theories restricting the application of Nebraska prejudgment interest statutes in seeking to impose potentially mammoth FDCPA damage liability on young attorneys who filed standard-form pleadings seeking awards of interest to which CMS might not be entitled. -8- rate “from the date of presentation.” Plaintiffs allege that CMS’s standard-form complaints violate FDCPA § 1692f(1) because CMS alleges that “more than 90 days have elapsed since the presentation of this claim,” when in fact CMS does not present the claim but relies on the original creditor’s billing statement, and therefore recovery of prejudgment interest is not “permitted by” § 25-1801. Again, the issue as framed appears to present a common question of law -- whether § 25-1801 requires that an assignee of the original creditor must personally present the claim at least ninety days before commencing a collection suit. The text of the Nebraska statute does not explicitly resolve the question. A prompt grant of defendants’ summary judgment motion would have resolved this portion of the named plaintiffs’ claims, no doubt obviating the need for class certification. But again, even if plaintiffs’ state law theory is correct, individualized inquiries are required. Even though every standard-form complaint apparently included the ninety-day allegation, each class member’s state court collection suit must be examined to determine: (i) did CMS seek prejudgment interest under § 25-1801, as it did in the Palmer complaint but not in the Powers complaint; (ii) if so, did CMS personally provide the ninety-day presentation, in which case CMS complied with plaintiffs’ interpretation of § 25-1801, or did CMS rely on an assignor’s billing statement or demand for payment;6 (iii) did CMS recover prejudgment interest under § 25-1801, making the alleged FDCPA violation material; and (iv) was plaintiffs’ legal theory litigated by the class member and resolved by the state court for issue preclusion purposes. For these reasons, the standard-form complaint classes do not meet the commonality, predominance, and superiority requirements of Rule 23. 6 CMS alleged that it usually relies on original billing statements, but “where such a bill or demand is not sent, Defendants do personally present the claim.” -9-