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Scally v. Hilco Receivables

March 30, 2005


The opinion of the court was delivered by: Judge James B. Zagel


Plaintiff asks for an order determining that its Fair Debt Collection Practices Act ("FDCPA") action*fn1 may proceed as a class action against Defendants Hilco Receivables, LLC ("Hilco"), Lake Cook Partners, LLC ("LCP") and M.R.S. Associates, Inc. ("MRS"). Plaintiff's underlying action complains that MRS, a collection agency, sent a confusing, initial form letter in violation of the FDCPA. She further alleges that MRS sent the letter on behalf of Hilco, LCP and other third parties. Plaintiff seeks to certify two classes; Defendants oppose class certification for both groups.

The first class Plaintiff seeks to certify is the "Hilco/LCP class." That class is defined as: all natural persons who satisfy the following criteria:

a. Hilco and/or LCP owned their alleged credit card debt;

b. a letter was sent to the person which (i) stated a balance due, (ii) did not state the date as of which the balance was stated, (iii) stated that the debt was accruing interest as provided for in the debtor's agreement with the original credit grantor, (iv) demanded payment of a "contractual obligation," and (v) did not contain the "safe harbor" language specified in Chuway v. Nat'l Action Fin. Servs., 362 F.3d 944 (7th Cir. 2004).

The second class Plaintiff seeks to certify is the "MRS class," which includes "all natural persons" whose "alleged credit card debt was owned by someone other than the Sherman Financial Group or a subsidiary" and meets subsection (b) of the first class. In her Reply Memorandum, Plaintiff clarifies the definition of this class, explaining that it includes "persons whose debt was owned by someone other than Sherman Financial Group or a subsidiary, and not simply those who owed a debt to Hilco and/or Lake Cook."

As a preliminary matter, Defendants take issue with Plaintiff's two class definitions. Defendants claim that the Hilco/LCP class is "nonsensical" because Hilco is not a collector on Plaintiff's account and is therefore outside the scope of the FDCPA. The FDCPA distinguishes between "debt collectors" and "creditors;" the latter are not covered by the Act. Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003). However, the Act does treat assignees as debt collectors if "the debt sought to be collected was in default when acquired by the assignee." Id. (citation omitted). Plaintiff has alleged that Hilco/LCP is a "debt collector" because it purchased Plaintiff's debt after the debt became delinquent. Plaintiff further alleges that Hilco/LCP hired MRS as a debt collector on the delinquent debt it purchased from MBNA, and contends that Hilco/LCP is vicariously liable for the actions of MRS. See, e.g., Fox v. Citicorp Credit Servs., 15 F.3d 1507, 1516 (9th Cir. 1994) (holding that a collection agency employing a collection attorney who violates the FDCPA is liable for the attorney's actions). Plaintiff also bases liability on Hilco/LCP's actions in "indirectly" collecting debts. See 15 U.S.C. § 1692(a)(6). Plaintiff argues that by outsourcing the mailing of a collection letter to MRS, Hilco and LCP did not lose their identity or status as debt collectors, which they assumed by attempting to collect on the debt originally in default to MBNA. I find that for the purposes of class certification, Plaintiff has sufficiently alleged that Hilco/LCP is a "debt collector" within the meaning of the FDCPA. Defendant's motion to deny certification of the Hilco/LCP class because the class definition is fundamentally flawed is denied.

Defendants also challenge the MRS class definition. Plaintiff defines this class to include all of the members of the first class as well as any other individuals who received similar notices from MRS on behalf of other collectors, with the sole exception of Sherman Financial Group.*fn2

Plaintiff makes no allegations regarding the number or nature of those MRS class members who do not already belong to the Hilco/LCP class. Plaintiff has offered no evidence that MRS sent letters on behalf of any debt collectors other than Hilco/LCP (and Sherman Financial Group); therefore, there is no evidence to substantiate the existence of the members of this second class beyond those who are already members of the Hilco/LCP class. At best, Plaintiff's allegations suggest only a remote possibility that other class members may be discovered. Because Plaintiff's proposed MRS class appears entirely duplicative of her first class, her Motion to Certify the MRS class is denied.*fn3

Rule 23 Requirements for Class Certification

Under Fed R. Civ. P. 23(a), a party seeking class certification must show that: 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 those of the class; and 4) the representative parties will fairly and adequately protect the interests of the class. Failure to satisfy any one of the requirements ofRule 23(a) requires denial of class certification. Harriston v. Chicago Tribune Co., 992 F.2d 697, 703 (7th Cir. 1993). A party seeking class certification must also demonstrate that the proposed class falls into one of the three categories identified in Fed. R. Civ. P. 23(b). Plaintiff contends that the class falls within the scope of Rule 23(b)(3), which requires that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Fed. R. Civ. P. 23(b). Defendants agree that the members of Plaintiff's proposed class satisfy the third, or "typicality," requirement of Rule 23(a), but dispute Plaintiff's ability to satisfy the other three elements. Defendants also challenge Plaintiff's ability to satisfy the 23(b)(3), or "superiority," requirement.


In order to certify the Hilco/LCP class, I must find that the class is "so numerous that joinder of all members is impracticable." F. R. Civ. P. 23(a)(1). Generally, classes with more than one hundred plaintiffs satisfy the numerosity requirement. In re VMS Ltd. P'ship. Sec. Litig., No. 90 C 2412, 1992 U.S. Dist. LEXIS 14445, at *4 (N.D. Ill. Sept. 23, 1992). The alternative to class litigation -- joinder -- "would stretch the facilities and abilities of this Court beyond their elastic limit" in cases involving more than one hundred plaintiffs. Johnson v. Brelje, 482 F. Supp. 121, 123 (N.D. Ill. 1979). However, a plaintiff cannot rely on conclusory allegations that joinder is impractical, nor merely speculate as to class size, in order to establish numerosity. Marcial v. Coronet Ins. Co., 880 F.2d 954, 957 (7th Cir. 1989).

In her initial petition for class certification, Plaintiff made no specific allegation regarding the number of potential class members but suggested that Defendant MRS's use of form letters on behalf of Hilco/LCP permits an inference of numerosity. However, in response to Plaintiff's discovery requests (propounded at the time her motion for class certification was filed), Defendants stated that 13,398 persons satisfy ...

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