736 F.3d 1076 (7th Cir. 2013), 13-2251, Phillips v. Asset Acceptance, LLC

Docket Nº:13-2251.
Citation:736 F.3d 1076, 87 Fed.R.Serv.3d 287
Opinion Judge:POSNER, Circuit Judge.
Party Name:Gwendolyn PHILLIPS, Plaintiff-Appellant, v. ASSET ACCEPTANCE, LLC, Defendant-Appellee.
Attorney:Daniel A. Edelman, Edelman Combs Latturner & Goodwin, Chicago, IL, for Plaintiff-Appellant. Theodore W. Seitz, Dykema Gossett PLLC, Lansing, MI, for Defendant-Appellee.
Judge Panel:Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.
Case Date:December 02, 2013
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 1076

736 F.3d 1076 (7th Cir. 2013)

87 Fed.R.Serv.3d 287

Gwendolyn PHILLIPS, Plaintiff-Appellant,


ASSET ACCEPTANCE, LLC, Defendant-Appellee.

No. 13-2251.

United States Court of Appeals, Seventh Circuit.

December 2, 2013

Argued Nov. 8, 2013.

Page 1077

[Copyrighted Material Omitted]

Page 1078

Daniel A. Edelman, Edelman Combs Latturner & Goodwin, Chicago, IL, for Plaintiff-Appellant.

Page 1079

Theodore W. Seitz, Dykema Gossett PLLC, Lansing, MI, for Defendant-Appellee.

Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge.

We have granted the plaintiff's petition for leave to appeal the district court's denial of her motion to certify a class.

The plaintiff, a consumer, was sued by Asset Acceptance, a debt collector that is the defendant in this case, for a debt arising from her purchase of natural gas for household use. She riposted with the present suit, which charges that Asset Acceptance sued her after the statute of limitations on the creditor's claim had run. If this is true, Asset Acceptance's suit violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. ; see §§ 1692e, 1692f; Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 32-33 (3d Cir.2011) (per curiam); Harvey v. Great Seneca Financial Corp., 453 F.3d 324, 332-33 (6th Cir.2006); Herkert v. MRC Receivables Corp., 655 F.Supp.2d 870, 875-76 (N.D.Ill.2009). The complaint contains supplemental claims under Illinois and other states' laws, making similar allegations.

The reason for outlawing stale suits to collect consumer debts is well explained in Kimber v. Federal Financial Corp., 668 F.Supp. 1480, 1487 (M.D.Ala.1987):

As with any defendant sued on a stale claim, the passage of time not only dulls the consumer's memory of the circumstances and validity of the debt, but heightens the probability that she will no longer have personal records detailing the status of the debt. Indeed, the unfairness of such conduct is particularly clear in the consumer context where courts have imposed a heightened standard of care— that sufficient to protect the least sophisticated consumer. Because few unsophisticated consumers would be aware that a statute of limitations could be used to defend against lawsuits based on stale debts, such consumers would unwittingly acquiesce to such lawsuits. And, even if the consumer realizes that she can use time as a defense, she will more than likely still give in rather than fight the lawsuit because she must still expend energy and resources and subject herself to the embarrassment of going into court to present the defense; this is particularly true in light of the costs of attorneys today.

Phillips moved to certify a plaintiff class consisting of debtors sued by Asset Acceptance for debts arising from the sale of natural gas to consumers— sued, as Phillips had been sued, after the statute of limitations had run. She had filed her suit at the tail end of 2009 and her motion for class certification in April of the following year. By March 2011 the motion was ripe for the district judge to rule on, but for unexplained reasons he didn't rule for 25 more months. When finally he did, he denied the motion, precipitating the petition for leave to appeal.

According to data compiled for use in briefing the motion, the class that the plaintiff wants certified has 793 members, of whom 343 reside in Illinois; there is as yet virtually no information about the others. Of the 343, 290 were sued between four and five years after the claims against them accrued (debt-collection claims accrue on the date that the debt sued on became delinquent), and 45 were sued more than five years after accrual. We don't know the situation of the remaining 8 Illinois debtors (343 - (290 + 45) = 8), though in its brief filed in the district court opposing class certification the defendant said they'd been sued within four years of accrual. Of the 45, 23 were served and 22 not; the corresponding figures for the 290

Page 1080

are 93 and 197 but the served/not served figures for the 290 played no part in the district court's analysis.

The statute of limitations applicable to the 335 (343 - 8) Illinoisans was either four or five years; the plaintiff says four, the defendant five. Indisputably the plaintiff was sued more than five years after the claim against her accrued. Therefore, the district judge reasoned, she was indifferent to whether the statute of limitations was four or five years— the suit against her was untimely in either event— and she thus lacked an adequate incentive to litigate on behalf of the 290 class members who were victims of untimely suits only if the statute of limitations is four years. So the judge discarded the 290, which shrank the class to 45— and then he shrank it further, to 23, by ruling that suing to collect a debt but failing to serve the defendant does not violate the Fair Debt Collection Practices Act even if the suit is untimely. No service, no harm, he thought, because without service the court in which a suit...

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