Seventh Circuit Directs Certification of a Negative Value FDCPA Case

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Plaintiff brought a putative class action alleging that the defendant violated the Fair Debt Collection Practices Act (FDCPA) when it sought to collect or settle debts that were not legally enforceable because the statute of limitations had run.

The proposed Class Definition was: (a) all individuals in Illinois (b) to whom [the defendant] (c) sent a letter seeking to collect a debt that referred to a “settlement” (d) which debt was (i) a credit card debt on which the last payment had been made more than five years prior to the letter, or (ii) a debt arising out of the sale of goods (including gas) on which the last payment had been made more than four years prior to the letter (e) which letter was sent on or after February 28, 2011 and on or before March 19, 2012, (f) where the individual after receipt of the letter, (i) made a payment, (ii) filed suit, or (iii) responded by requesting verification or contesting the debt.

The district court was satisfied that the proposed class met the numerosity, commonality, typicality, and adequacy requirements of Rule 23(a), but concluded that, because the proposed class includes persons seeking actual damages, “the case therefore eventually would involve issues of individual causation and damages.” Even if “the amount of damages due each class member is ‘capable of ministerial determination,’ causation, i.e., determining whether class members paid the debt because of the letter, out of moral compulsion, or for some other reason, is not.”

The U.S. Seventh Circuit Court of Appeals reversed.

First, the court found that interlocutory appeal was appropriate, as the denial of certification was effectively fatal to the litigation.

On the predominance issue, the Seventh Circuit noted that the district court’s reasoning “suggests that the existence of individual issues of causation automatically bars class certification under Rule 23(b)(3). That overstates the case. Although ‘proximate cause … is necessarily an individual issue,’ we have explained that ‘the need for individual proof alone does not necessarily preclude class certification.'” Indeed, it “is well established that, if a case requires determinations of individual issues of causation and damages, a court may ‘bifurcate the case into a liability phase and a damages phase.'” While the defendant suggested that the district court’s ruling “merely recognized … that class certification is problematic where determining membership in the class requires an assessment of the subjective states of mind of individual class members,” the court of appeals disagreed. “The court did not say that determining membership in the class would require individualized assessments of ‘subjective states of mind of individual class members.’ Although Class A includes persons who made a payment after receiving a dunning letter in violation of the FDCPA, the definition of the proposed class says nothing about their reason for doing so; membership in the subclass of persons who made a payment does not hinge on causation. We add that there is yet another reason why proof of causation is irrelevant to determining class membership in this case: The FDCPA is a strict-liability statute, and so members of the class would be entitled to statutory damages for a violation of the Act regardless of any actual damages.”

McMahon v. LVNV Funding, LLC, 807 F.3d 872 (7th Cir. 2015).

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