Judge Posner Strikes a Small Win for Class Actions

By Jason Enzler

Earlier this week a panel of the Seventh Circuit Court of Appeals, led by legal luminary Judge Richard Posner, took the relatively rare step of reversing a district court’s denial of a motion for class certification.  The opinion in Phillips v. Asset Acceptance, LLC rejected the lower court’s ruling that would have limited the reach of the Fair Debt Collection Practices Act and narrowly interpreted the role of class actions in such cases.

The plaintiff, Gwendolyn Phillips, was originally sued by debt collector Asset Acceptance for a debt arising from Ms. Phillips’ purchase of natural gas for her home.  Ms. Phillips commenced a separate lawsuit against Asset Acceptance, alleging that it had violated the Fair Debt Collection Practices Act by waiting too long to sue her.  Apparently, Ms. Phillips was not the only target of this unlawful behavior because she moved to certify a class of 793 others who were also victims of these improper debt collection practices.

The district judge rejected her certification motion, reasoning that the proposed class would actually be much smaller (the judge winnowed it down to only 23 prospective class members) and would be better served if they were all just joined in a single lawsuit.  At the heart of the matter was a dispute over whether the applicable statute of limitations under the Fair Debt Collection Practices Act is four years or five years.  Ms. Phillips was sued five years after her debt accrued, but the vast majority of the proposed class was sued within five years.  Thus, the district judge ruled Ms. Phillips would be an inadequate representative for the majority of the proposed class.  The judge further ruled that proposed class members who had not been served with a complaint by Asset Acceptance could not be class members because they did not suffer any injury.

The Seventh Circuit reversed the decision, holding that the statute of limitations under the Fair Debt Collection Practices Act is four years and rejecting Asset Acceptance’s argument that such a finding could not be made on a class certification motion because it is a merits question.  The appellate court also rejected the no-harm-no-foul reasoning regarding service of the complaint, finding that injury is not a necessary element when the damages sought are statutory, such as under the Fair Debt Collection Practices Act.  While this decision is not groundbreaking, it is one of the few decisions to come out of the appellate courts these days reversing a lower court in favor of class certification.

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