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Rocio Galvan and Joseph Hawthorne, Individually and On Behalf of A Class v. Nco Financial Systems

September 11, 2012

ROCIO GALVAN AND JOSEPH HAWTHORNE, INDIVIDUALLY AND ON BEHALF OF A CLASS, PLAINTIFFS,
v.
NCO FINANCIAL SYSTEMS, INC., DEFENDANT. ROCIO GALVAN AND JOSEPH HAWTHORNE, INDIVIDUALLY AND ON BEHALF OF A CLASS, AND PEOPLE OF THE STATE OF ILLINOIS EX REL. ROCIO GALVAN AND JOSEPH HAWTHORNE, PLAINTIFFS,
v.
NCO PORTFOLIO MANAGEMENT, INC., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:

MEMORANDUM OPINION AND ORDER

Rocio Galvan and Joseph Hawthorne have sued NCO Portfolio Management, Inc. (NCO Portfolio) and have, in a separate suit, sued NCO Financial Systems, Inc. (NCO Financial), both under the Illinois Collection Agency Act (ICAA). See 225 ILCS 425/4 & 14. In the latter suit, Hawthorne also asserts a claim against NCO Financial under the Fair Debt Collection Practices Act (FDCPA). See 15 U.S.C. § 1692f(1). The suit against NCO Financial is Case No. 11 C 3918. The suit against NCO Portfolio is Case No. 11 C 4651.

In Case No. 11 C 4651, plaintiffs allege that NCO Portfolio was not a licensed debt collector and violated the ICAA by purchasing debts from financial institutions and collecting the debts. NCO Portfolio contracted with NCO Financial to collect some of these debts.

In Case No. 11 C 3918, plaintiffs allege that NCO Financial violated the ICAA and the FDCPA by collecting the debts on behalf of NCO Portfolio. Specifically, plaintiffs allege that because NCO Portfolio was not licensed, it could not legally purchase the debts and thus acquired no rights to payment. According to plaintiffs, NCO Financial violated the ICAA and the FDCPA by collecting on NCO Portfolio's behalf amounts to which NCO Portfolio was not entitled.

Plaintiffs have moved in each case to certify a class of similarly situated plaintiffs. They have since withdrawn the request to certify an FDCPA class in Case No. 11 C 3918. For the reasons stated below, the Court grants plaintiffs' motions for class certification with regard to the proposed ICAA classes in both cases.

Facts

The Court takes the following facts from the complaints filed in these cases. NCO Portfolio is a Delaware corporation operating in Illinois. It purchases debts owed by individuals, including individuals residing in Illinois. NCO Portfolio sued to collect some of these individuals' debts and contracted with NCO Financial to collect some of the debts.

Galvan owed a debt to AT&T Universal in connection with her use of a personal credit card. NCO Portfolio purchased the debt from AT&T Universal and contracted with NCO Financial to collect the debt from Galvan. NCO Financial attempted to collect from Galvan and successfully collected funds in 2008.

Hawthorne owed a debt to Citibank in connection with his use of a personal credit card. NCO Portfolio purchased that debt from Citibank and contracted with NCO Financial to collect the debt from Hawthorne. NCO Financial attempted to collect from Hawthorne and successfully collected funds in 2006.

Hawthorne says that he paid NCO Portfolio in full. Despite this, he says, NCO Portfolio sued him, alleging that the debt was not fully paid. NCO Portfolio later dismissed the case. Hawthorne says that NCO Financial attempted further collection from him as recently as 2011.

Legal Background

The ICAA was amended effective January 1, 2008 in a way that arguably broadened the scope of regulated collection agencies in Illinois. Before the amendment, the statute provided that any person or entity that, for compensation, offered to collect debts was a collection agency that had to be licensed. There were conflicting court decisions concerning whether a debt buyer was considered to be a collection agency under the ICAA. The 2008 amendment changed the statute's definition of collection agencies to expressly include any person or entity that engages in debt collection for itself or for others. 225 ILCS 425/2.

In LVNV Funding, LLC v. Trice, ___ Ill. App. 3d ___, 952 N.E.2d 1232 (2011), the Illinois Appellate Court ruled that an unlicensed debt buyer violates the ICAA by purchasing a debt and then attempting to collect it. Id., 952 N.E.2d at 1237. Plaintiffs allege in Case No. 11 C 4651 that NCO Portfolio violated the ICAA both before and after the 2008 amendment by collecting or attempting to collect debts it had purchased, either directly or through other entities like NCO Financial. Plaintiffs allege in Case No. 11 C 3918 that NCO Financial violated the ICAA before and after the 2008 amendment by collecting and attempting to collect, for NCO Portfolio, debts that NCO Portfolio had purchased but on which NCO Portfolio could not legally collect because it was unlicensed.

Discussion

In Case No. 11 C 4651, plaintiffs ask the Court to certify a Rule 23(b)(3) class against NCO Portfolio consisting of all natural persons residing in Illinois from whom NCO Portfolio collected a debt between June 8, 2006 and June 28, 2011 who did not release their claims as part of the class settlement in Caston-Palmer v. NCO Portfolio, Case No. 08 C 2818. In Case No. 11 C 3918, plaintiffs ask the Court to certify a Rule 23(b)(3) class against NCO Financial consisting of all natural persons residing in Illinois from whom NCO Financial demanded and collected payment of a debt allegedly owed to NCO Portfolio between June 8, 2006 and June 28, 2011 who did not release their claims as part of the settlement in Caston-Palmer v. NCO Portfolio.

As noted earlier, plaintiffs originally asked the Court to certify a similar Rule 23(b)(3) sub-class pertaining to NCO Financial's alleged violations of the FDCPA, but they have since withdrawn that request. See Pls.' NCOF Reply at 2 n.2. This renders moot several of the arguments that NCO Financial made in opposition to class certification.

In Case No. 11 C 4651, NCO Portfolio makes the following arguments in opposition to plaintiffs' motion:

- There are no class members because NCO Portfolio does not itself engage in collection activity. - As a debt buyer, NCO Portfolio was not required to be licensed before the ICAA was amended in 2008, so it cannot be liable for collection of debts purchased before the amendment. A class that includes pre-2008 amendment plaintiffs is thus over-inclusive. In addition, because NCO Portfolio purchased both Galvan's and Hawthorne's debts before the amendment, they are inadequate class representatives and their claims are not typical of those of the entire class. Moreover, a class that includes members with claims arising before the 2008 amendment as well as members with claims arising after the amendment is inappropriate because their claims are based on divergent legal theories. - Some potential class members were sued to collect their debts, whereas others were the subject of collection activity short of being sued. Class certification is inappropriate because of the differences in relief available to these different groups. In addition, NCO Portfolio argues that because both named plaintiffs were sued, they cannot adequately represent class members who were not sued. - Proof of damages is likely to be an individualized issue not susceptible to common proof. - Common issues do not predominate, because some class members may have signed ...


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