« Ind. Courts - A Day in Lake County for Judicial Nominating Commission Interviews | Main | Ind. Law - Changes to Title 35 Felony Offenses with New levels and Sentencing Ranges [Updated] »

Wednesday, July 02, 2014

Ind. Decisions - 7th Circuit holds Marion County Small Claims Courts are judicial districts for the purposes of the FDCPA - this is big [Updated]

On Oct. 31, 2013, a panel of the 7th Circuit, with Judge Posner dissenting, upheld the Indiana district Court ruling finding Marion County Small Claims Courts were not judicial districts for the purposes of the FDCPA. The FDCPA contains a venue provision requiring debt collectors to bring suit in the “judicial district” where the contract was signed or where the consumer resides. Suesz asserted that Med‐1 violated this provision because he lives in a neighboring county and the debt was incurred in a township other than Pike.

Today, meeting en banc, the 7th Circuit reversed the distrct court ruling, with Judge Posner co-authoring the opinion.

In Mark Suesz v. Med-1 Solutions, LLC, a 58-page in total opinion, before Before WOOD, Chief Judge, and POSNER, FLAUM, EASTERBROOK, KANNE, ROVNER, WILLIAMS, SYKES, TINDER, and HAMILTON, Circuit Judges, Judges Hamilton and Posner write:

The federal Fair Debt Collection Practices Act (“FDCPA”) requires a collector of consumer debts to file its debt-collection suit in the “judicial district or similar legal entity” where the contract was signed or where the debtor resides. 15 U.S.C. § 1692i. This appeal requires us to apply this statutory language to the nine small claims courts in Marion County, Indiana, which together hear some 70,000 civil cases each year. This interpretive issue has significant consequences not only for consumer debtors and debt collectors in Marion County but also for parties to debt-collection suits in other court systems that, depending on the answer to the interpretive question, may be vulnerable to abusive forum-shopping by debt collectors.

Defendant Med-1 Solutions, LLC filed suit in the Pike Township of Marion County Small Claims Court to collect a consumer debt from plaintiff Mark Suesz. The plaintiff alleges that the defendant violated § 1692i by filing in that court because the contract was not signed in Pike Township and the plaintiff does not live there.

In Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996), a panel of this court held that the intra-county districts used to delineate the venue of small claims cases in Illinois’s Cook County Circuit Court were not separate judicial districts for purposes of § 1692i. In this case, the district court and a split panel of this court followed the reasoning of Newsom to hold that the township small claims courts in Marion County are likewise not separate judicial districts; rather, the entire county is the relevant district, giving the debt collector a wide choice of venue. Suesz v. Med-1 Solutions, LLC, 734 F.3d 684 (7th Cir. 2013). We granted the plaintiff’s petition for rehearing en banc.

We conclude that the correct interpretation of “judicial district or similar legal entity” in § 1692i is the smallest geographic area that is relevant for determining venue in the court system in which the case is filed. See Hess v. Cohen & Slamowitz LLP, 637 F.3d 117, 123–24 (2d Cir. 2011). For the small claims courts in Marion County, that smallest area is a township. We therefore reverse the judgment of the district court. We also overrule Newsom, which adopted a test based on details of court administration rather than on the applicable venue rules. * * *

An investigation of the township courts by a task force of two Indiana Court of Appeals judges identified serious venue problems in those courts. Small Claims Task Force, Report on the Marion County Small Claims Courts, pp. 13–14 www.in.gov/judiciary/files/pubs-smclaims-rept-2012.pdf (visited July 2, 2014). Many defendants are unaware of their right to ask the courts to transfer a case to the townships where they live. Id. at 13. And paradoxically, although township courts were intended to be more convenient for parties, they could be less convenient than if the venue were countywide. The combination of the size of the county, the nine court locations, limited public transportation other than to and from the center of the county, and the debt collectors’ ability to file in any township made it harder for many small claims defendants in Marion County to get to court than it was for defendants in counties in which the courts were centrally located. Id. at 14.

The task force also acknowledged concerns that “largevolume filers appear to file their cases in township courts that appear to provide outcomes favorable to them or provide less oversight for settlement negotiations and settlement agreements,” and that townships have an incentive to pressure judges to “favor large-volume filers in order to generate revenue for the township from filing fees.” Id. Without specifically endorsing those concerns, the task force found that judges who “have made efforts to review settlement terms, as opposed to judges who allegedly rubberstamp settlement agreements, have seen dramatic declines in new filings in their township courts,” as shown by state judicial statistics. Id. * * *

V. Retroavtivity. Our interpretation of § 1692i requires us to reverse the judgment of the district court and to remand for further proceedings on class certification and the merits of plaintiff’s claim. But Med-1 Solutions, perhaps seeing the handwriting on the wall, asks that if we overrule Newsom, as we do today, we should do so only on a prospective basis. It argues that debt collectors have relied on Newsom to allow them to choose venue anywhere in the appropriate county. * * *

The judgment of the district court dismissing this action is REVERSED and the case is REMANDED to the district court for further proceedings consistent with this opinion.

J. Sykes concurs, beginning at p. 29

J. Flaum and J. Kanne dissent, beginning at p. 39 and p. 46, respectively.

ILB: The study referenced in today's opinion was issued on May 1, 2012, and little has happened since, as discussed in this Jan. 19, 2014 ILB post. See also this Jan. 30th update.

[Updated at 7:45 AM, 7/3/14] Although I write above that little has happened since, and that certainly is true with respect to needed legislative fixes, I received this note last evening from Fran Quigley, Clinical Professor, Health and Human Rights Clinic, IU McKinney Law:

[A former student] alerted me to your post relaying the good news about the 7th Circuit decision in Suesz.

We want to point out that, since the Task Force report you reference, the Indiana Supreme Court has taken action on this Marion County small claims forum-shopping problem. The Court amended Small Claims Rule 12 to limit venue to the townships where the defendant lives or is employed, or where the transaction took place.

As you can see from the Proposal and Memorandum our Clinic filed, which was part of a broad range of advocacy on small claims due process issues by ... students, the prior rule contained no such limitations. You mentioned in a 2013 post that the rule change had been proposed. It appears that the proposed change is now law, and should be curbing the “frequent filer” problem.

Posted by Marcia Oddi on July 2, 2014 05:49 PM
Posted to Ind. (7th Cir.) Decisions