Liles v. Campo

• Decision Date: 02 December 2003
• Docket Number: No. 02-3724.,No. 02-8020.,02-8020.,02-3724.
• Citation: 350 F.3d 742
• Parties: Lori LILES; Kristine Burgess; Robert Mettler; Rebecca Reynolds, on their behalf and on behalf of all others similarly situated, Plaintiffs-Appellees, v. Elena DEL CAMPO; Lydia Rosario; Audra Phillips, Intervenor Plaintiffs-Appellants, v. American Corrective Counseling Services, Inc.; Donald R. Mealing, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

350 F.3d 742

Lori LILES; Kristine Burgess; Robert Mettler; Rebecca Reynolds, on their behalf and on behalf of all others similarly situated, Plaintiffs-Appellees, v. Elena DEL CAMPO; Lydia Rosario; Audra Phillips, Intervenor Plaintiffs-Appellants, v. American Corrective Counseling Services, Inc.; Donald R. Mealing, Defendants-Appellees.

No. 02-8020.

No. 02-3724.

United States Court of Appeals, Eighth Circuit.

Submitted: October 20, 2003.

Filed: December 2, 2003.

Counsel who presented argument on behalf of the appellants was Paul Arons of Friday Harbor, Washington. Also appearing on the brief were O. Randolph Bragg and Sharon Grace.

Counsel who presented argument on behalf of the appellees was David L. Hartsell of Chicago, Illinois. Also appearing on the briefs were Steven L. Serck, Wood R. Foster, Jr., and Jordan M. Lewis.

Before MORRIS SHEPPARD ARNOLD, BOWMAN, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.

Lori Liles brought this action on behalf of a class against American Corrective Counseling Services, Inc. and its owner Don Mealing (collectively ACCS), alleging that their bad check restitution programs violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o, and state law.¹ Intervenors Elena Del Campo and Lydia Rosario filed similar suits against ACCS in Florida and California and were allowed to intervene after the parties in this case filed a joint motion for preliminary approval of a settlement agreement and for conditional class certification. The district court² granted the joint motion after noting that protracted settlement negotiations had taken place, and it also granted a motion by ACCS to enjoin related litigation. The intervenors appeal the injunction and seek leave to appeal the class certification. We deny leave for an interlocutory appeal and affirm.

ACCS is a private company based in California which contracts with local prosecutors to administer bad check misdemeanor diversion programs.³ These programs give writers of nonsufficient fund (NSF) checks an opportunity to avoid criminal prosecution by voluntarily participating in them. The programs provide restitution to the check payee and instruct the issuer on how to manage home finances. ACCS contacts individuals who have written NSF checks and offers them an opportunity to participate in a bad check misdemeanor diversion program for a fee. A participating individual is required to pay ACCS the money owed on the NSF check, a program fee, and an additional processing fee. Participants are supposed to attend a class on writing checks, but ACCS allegedly fails to offer such classes in every state. After participants attend the class, the prosecutor is to dismiss the bad check charges.

Lori Liles received an official notice sent by ACCS after she wrote an NSF check to Wal-Mart in July 2000. The notice was printed on the stationery of a county attorney. It stated that a criminal complaint was being processed against her because of a NSF check and that she could avoid prosecution if she participated in the bad check restitution program. The notice required Liles to pay the balance on the notice within 30 days. That balance included the amount of the NSF check, plus a $10 returned item fee and a $125 program fee.

In September 2000, Liles filed this class action suit against ACCS in the United States District Court for the Southern District of Iowa. Her complaint alleged that the bad check restitution programs run by ACCS violate the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692o, the Civil Rights Act, 42 U.S.C. § 1983, and various tort laws. According to the complaint, the programs harass debtors, use false, deceptive or misleading debt collection practices, and falsely imply that legal actions have been or will be taken. Liles sought to represent a nationwide class consisting of persons who had received an official notice substantially similar to hers or who were otherwise contacted by someone affiliated with a bad check misdemeanor program in affiliation or under contract with ACCS. Similar lawsuits were filed in federal district courts in Georgia, Indiana, Florida, California, and Illinois.⁴

ACCS moved for summary judgment. The district court denied the motion as to the FDCPA and IDCPA claims, struck the requests for punitive damages and injunctive relief, and dismissed the abuse of process claims. After a second motion to dismiss was denied, Liles amended her complaint to exclude the IDCPA claims and moved for certification of a nationwide class. Shortly thereafter the parties entered into settlement negotiations, and Liles subsequently withdrew her motion for class certification. After lengthy negotiations, the parties filed a joint motion for preliminary approval of settlement and conditional certification of a nationwide class. ACCS later filed a motion to enjoin related litigation.

After the filing of the joint motion for preliminary approval of settlement and conditional certification of a nationwide class, Elena Del Campo and Lydia Rosario sought to intervene. The court granted the motion and allowed them to conduct extensive discovery. Five months later, the court held an oral hearing on the motions for conditional class certification and preliminary settlement approval. At the hearing the parties proposed a settlement to be paid out of the ACCS insurance policy.

Preliminary discovery and settlement negotiations revealed that the ACCS insurance policy was the only known asset available for settlement of these claims. The insurance policy is a wasting policy, and the value of the policy diminishes as funds are paid out. Although the policy originally had a $2 million limit, it has been drawn on to pay ACCS defense costs in this and related litigation. Ongoing defense costs will continue to deplete the policy, and continued litigation threatens to drain the fund completely. The proposed settlement includes notification to the estimated 800,000 class members and indicates that each would have to file a claim in order to participate in the settlement award. It also broadly releases all potential state and federal claims against ACCS and the prosecutors involved in the programs.

The intervenors oppose the proposed settlement and conditional nationwide class certification. They argue that the class certification did not meet the requirements of Federal Rules of Civil Procedure 23(a) and 23(b) and that the proposed settlement was not fair, adequate, or reasonable given the different state law claims available to various class members. Primarily to preserve the settlement fund, the court granted preliminary approval of the class settlement, conditionally certified the class, enjoined all related litigation, and set a court date for approval of a plan for class notification.

The intervenors petitioned for permission to appeal the district court class certification and later filed an appeal of the order enjoining related litigation. After these filings, Liles moved the district court to set aside the settlement, to decertify the class, to vacate its orders, and to dismiss the appeals. The court held a hearing on the motion to set aside the settlement and subsequently denied all the pending motions, stating that it had granted conditional approval of the settlement because it was fair, adequate, reasonable, and in the best interests of all the parties involved.

After the district court issued its order...