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Galvan v. NCO Portfolio Mgmt., Inc.

United States Court of Appeals, Seventh Circuit

July 21, 2015

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-Appellants,
v.
NCO PORTFOLIO MANAGEMENT, INC., Defendant-Appellee. 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-Appellants,
v.
NCO FINANCIAL SYSTEMS, INC., Defendant-Appellee

Argued February 20, 2014.

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 11 C 4561 & 11 C 3918 -- Matthew F. Kennelly, Judge.

For Rocio Galvan, JOSEPH HAWTHORNE, individually and on behalf of a class, Plaintiff - Appellants (13-2264): Timothy J. Sostrin, Attorney, Keogh Law, Ltd, Chicago, IL.

For Nco Portfolio Management, Incorporated, Defendant - Appellee (13-2264): Bryan C. Shartle, Attorney, Sessions, Fishman, Nathan & Israel, LLC, Metairie, LA.

For JOSEPH HAWTHORNE, individually and on behalf of the class defined below, Rocio Galvan, Plaintiff - Appellants (13-2266): Timothy J. Sostrin, Attorney, Keogh Law, Ltd, Chicago, IL.

For Nco Financial Systems, Incorporated, Defendant - Appellee (13-2266): Bryan C. Shartle, Attorney, Sessions, Fishman, Nathan & Israel, LLC, Metairie, LA.

Before EASTERBROOK, MANION, and SYKES, Circuit Judges.

OPINION

Page 717

Sykes, Circuit Judge.

For 40 years Illinois regulators and debt collectors have played a kind of cat-and-mouse game. The legislature has gradually expanded the scope of the business activities that trigger the requirements of the Illinois Collection Agency Act (" ICAA" or " the Act" ), 225 Ill.Comp.Stat. 425/1 et seq., and the industry has responded by finding ways to do business without engaging in those activities. The question in this case is whether passive debt buying was covered by the Act before the most recent revision in 2013. The district court said " no," but the Illinois Supreme Court recently held otherwise. In LVNV Funding, LLC v. Trice (" Trice II " ), 2015 IL 116129, 392 Ill.Dec. 245, 32 N.E.3d 553, 559 (Ill. 2015), the state high court concluded that a passive debt buyer " clearly qualifies as a 'collection agency' as defined in section 3 of the Act." That holding resolves the sole issue in this appeal. We reverse and remand for further proceedings.

I. Background

From June 2006 to June 2011, NCO Portfolio Management, Inc., purchased large quantities of Illinois consumers' defaulted debt and referred the collection of this debt to its sister corporation NCO Financial Systems, Inc., an Illinois-licensed debt collector, and also to outside attorneys, who are exempt from the ICAA. See 225 Ill.Comp.Stat. 425/2.03(5). NCO Portfolio carefully avoided direct collection activities and did not communicate with debtors or credit-reporting agencies, leaving those tasks to NCO Financial and outside counsel. As such, NCO Portfolio did not consider itself a " collection agency" subject to the registration requirement of the ICAA, see id. § 425/4, and did not in fact register with the licensing authorities. During this time period, NCO Financial engaged in various efforts to collect the debts NCO Portfolio referred to it, and outside lawyers filed 2,749 lawsuits on NCO Portfolio's behalf.

The named plaintiffs in this class action are two Illinois consumers whose debts NCO Portfolio bought and referred to NCO Financial or outside counsel for collection during the relevant time period. They sued in state court alleging that NCO Portfolio engaged in unlawful unlicensed debt collection in violation of the ICAA. NCO Portfolio removed the case to federal court under the Class Action Fairness Act. See 28 U.S.C. § 1332(d). In a second case filed in federal court following removal, the same plaintiffs alleged that

Page 718

NCO Financial violated the Act because it knew or should have known that NCO Portfolio was an unlicensed debt collector and could not ...


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