Powers v. Credit Mgmt. Servs., Inc.

• Decision Date: 13 January 2015
• Docket Number: No. 13–2831.,13–2831.
• Citation: 776 F.3d 567
• Parties: Laura POWERS, et al., Plaintiffs–Appellees v. CREDIT MANAGEMENT SERVICES, INC., et al., Defendants–Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

776 F.3d 567

Laura POWERS, et al., Plaintiffs–Appellees

v.CREDIT MANAGEMENT SERVICES, INC., et al., Defendants–Appellants.

No. 13–2831.

United States Court of Appeals, Eighth Circuit.

Submitted: Sept. 8, 2014.

Filed: Jan. 13, 2015.

Christopher R. Morris, argued, Minneapolis, MN, (Jessica Lee Prom Klander and Michael A. Klutho, of Minneapolis, MN; and John M. Guthery of Lincoln, NE., on the brief), for Defendants–Appellants.

Pamela A. Car, argued, Omaha, NE (Owen Randolph Bragg, of Chicago, IL and William L. Reinbrecht, of Omaha, NE. on the brief), Plaintiffs–Appellees.

Before WOLLMAN, LOKEN, and MURPHY, Circuit Judges.

Opinion

LOKEN, Circuit Judge.

This is an interlocutory appeal of a district court order certifying four classes of Nebraska consumers, an appeal authorized by Rule 23(f) of the Federal Rules of Civil Procedure. Credit Management Services, Inc. (CMS) is a Nebraska corporation engaged in collecting consumer debts assigned to CMS by the original creditor (or by a prior assignee). CMS is a “debt collector” subject to the provisions of the federal Fair Debt Collection Practices Act (FDCPA). See 15 U.S.C. § 1692a(6).

The record reflects that CMS commences consumer debt collection actions in Nebraska state courts by filing standard-form complaints. The complaints allege, inter alia, that “more than 90 days have elapsed since the presentation of this claim” to the consumer and seek prejudgment interest “pursuant to” Neb.Rev.Stat. § 25–1801 or § 45–104, and attorney fees “as allowable by law.” When named plaintiffs Laura Powers and Nichole and Jason Palmer contested CMS's state court collection complaints (Exhibits A and C to plaintiffs' First Amended Complaint), CMS served nearly identical discovery requests seeking disclosure of detailed employment and financial information, including their rates of compensation and copies of their recent tax returns (Exhibits B and D).

Plaintiffs filed this putative class action against CMS and four in-house CMS attorneys customarily listed in the signature boxes of the standard-form collection complaints and discovery requests. Plaintiffs allege that CMS's standard-form pleadings violate various provisions of the FDCPA, making them unfair or deceptive acts or practices that also violate the Nebraska Consumer Protection Act (NCPA), Neb.Rev.Stat. § 59–1602. In certifying four classes, the district court agreed with plaintiffs that the predominant common question is whether the defendants sent each class member standard collection complaints and discovery requests, which violate the FDCPA and NCPA. Powers v. Credit Mgmt. Servs., Inc., No. 8:11CV436, 2013 WL 3716412, at *5 (D.Neb. July 12, 2013). The four classes consist of persons who received a county court collection complaint or discovery requests seeking to collect a debt “for personal, family, or household purposes,” or had such a collection action pending, during the applicable one-year (FDCPA) and four-year (NCPA) limitations periods. We granted CMS leave to appeal and now reverse, concluding that the district court abused its discretion by failing to conduct the “rigorous analysis ... of what the parties must prove” that Rule 23 requires. Elizabeth M. v. Montenez, 458 F.3d 779, 786 (8th Cir.2006), citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 622–23, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) ; see also Wal–Mart Stores, Inc. v. Dukes, –––U.S. ––––, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011).

I. Framing the Issues

Rule 23(a) provides that no class action may be certified unless the court determines:

(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.

If these requirements are met, the court must find that the class can be certified under one of the Rule 23(b) categories. Here, the district court certified the classes under Rule 23(b)(3), which requires finding “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

The required “preliminary inquiry of the class certification stage may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap the merits of the case.” Luiken v. Domino's Pizza, LLC, 705 F.3d 370, 372 (8th Cir.2013) (quotation omitted). Here, the four classes comprise thousands of Nebraska consumers sued by CMS in state courts using standard-form complaints and discovery requests. Obviously, the nature of the underlying consumer debts, the relief sought by CMS in state court, and the outcome of the many state court suits varied substantially. Thus, class certification was appropriate only if, as plaintiffs alleged, CMS's standard-form complaints and discovery requests, on their face, violated the FDCPA and therefore the NCPA. Though cross motions for summary judgment were pending when the district court ruled, the court granted class certification without ruling on those motions. The court concluded that the “main issue” establishing commonality, typicality, and predominance is “whether CMS's complaints in the form of Exhibits A & C and discovery requests in the form of Exhibits B & D violate the FDCPA and/or NCPA.” Powers, 2013 WL 3716412, at *4, *7. The court did not conduct a “rigorous analysis” of what plaintiffs must prove to prevail on their facial invalidity theories. Our task, then, is to fill this void, which requires separate analyses of the legal theories attacking the standard-form complaints and discovery requests.

In conducting this analysis, we bear in mind an important distinction. Run-of-the-mill certified FDCPA class actions have involved standard-form collection letters sent directly to consumers before the filing of collection lawsuits. See, e.g., Evans v. Am. Credit Sys., Inc., 222 F.R.D. 388, 394 (D.Neb.2004), on which the district court relied. But in this case, plaintiffs challenge standard-form pleadings used by a debt collector in collection lawsuits it actually filed. In Heintz v. Jenkins, 514 U.S. 291, 299, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995), the Supreme Court held that a 1986 amendment applied the FDCPA's substantive prohibitions to litigation activities of attorneys who regularly engage in consumer debt collection. However, the Court noted “the statute's apparent objective of preserving creditors' judicial remedies.” Id. at 296, 115 S.Ct. 1489. The Act's “conduct-regulating provisions,” the Court later cautioned, “should not be assumed to compel absurd results when applied to debt collecting attorneys.” Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 559 U.S. 573, 600, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010). It is a matter of common knowledge in the legal community that standard form pleadings are routinely used by cost-conscious attorneys in all types of litigation.

We recently surveyed the complex question of FDCPA liability for litigation activities in a non-class action, concluding that a debt collector's fact allegations in a state court pleading are not false and misleading for purposes of § 1692e simply because they were “rejected as not adequately supported in the collection suit.” Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814, 819 (8th Cir.2012). In the class certification context, these complexities—ignored by plaintiffs and not addressed by the district court—are highly relevant to a rigorous analysis of the well-traveled Rule 23 inquiries into commonality, typicality, adequate representation of the class, predominance, and superiority. See Jenkins v. Gen. Collection Co., No. 8:06CV743, 2008 WL 4104677, at *11–13 (D.Neb. Aug. 28, 2008).

II. The Standard–Form Complaint Classes

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 “have suffered the same injury.” Gen. Tel. Co. v. Falcon, 457 U.S. 147, 157, 102 S.Ct. 2364, 72 L.Ed.2d 740 (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...