Class Certification

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Class Certification in FDCPA Case where Servicer Raised Preclusion Defense

The district court abused its discretion when it denied certification of a class of plaintiffs alleging FDCPA violations based on the mortgage servicer’s post-discharge collection efforts where the servicer’s defense that the Bankruptcy Code’s discharge injunction precluded the claim applied to all claims of the purported class members. Sellers v. Rushmore Loan Management Services, No. 15-1106 (11th Cir. Oct 29, 2019).

After the Sellerses moved out of their home and obtained a chapter 7 discharge, the mortgage servicer, Rushmore, continued to send them monthly statements listing an ever-increasing amount due on their mortgage. The Sellerses filed suit in the district court alleging that Rushmore’s continued collection efforts violated the FDCPA and the Florida Consumer Collection Practices Act (FCCPA) by falsely representing its right to collect the discharged debt. In addition, the Sellerses sought to certify a class of consumers subject to the same conduct. In its answer to the complaint, Rushmore argued against class certification and raised the affirmative defense that the claims were preempted/precluded by the Bankruptcy Code’s discharge injunction provision.

The district court declined to certify the class, finding that the issue of whether the Code preempted/precluded the purported class’s claims was a matter of individualized consideration. Its decision rested on the finding that the preclusive effect of the Bankruptcy Code was a function of the applicability of section 524(j), which permits a debt collector to collect payments in lieu of foreclosure from a debtor whose personal liability was discharged in bankruptcy but who continues to live on the property. The district court found that the issue of preclusion would affect only debtors to whom section 524(j) applied. [Read more…] about Class Certification in FDCPA Case where Servicer Raised Preclusion Defense

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Nationstar Cannot Wriggle Out of Discharge Injunction Violation

Nationstar waived its right to argue that the court could not address the merits of the debtor’s discharge injunction case before ruling on class certification, and several of Nationstar’s post-discharge communications violated the injunction. Forson v. Nationstar Mortgage, LLC., No. 08-61001, Adv. Proc. No. 15-2137 (Bankr. S.D. Ohio March 21, 2018).

Terry Lee Forson reopened his chapter 13 bankruptcy and filed an adversary complaint against Nationstar Mortgage LLC, alleging violation of the discharge injunction, section 524(a)(2), based on Nationstar’s continued collection activities post-discharge. Contending that Nationstar’s conduct was part of an ongoing business practice, Mr. Forson sought class certification. He filed a motion for summary judgment to which Nationstar objected, arguing that, under the one-way rule, the court could not address the merits of the case until it had made a finding with respect to class certification. [Read more…] about Nationstar Cannot Wriggle Out of Discharge Injunction Violation

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Fifth Circuit Affirms Class Certification Challenging Fee Collection Practices

The Fifth Circuit found that the bankruptcy court did not abuse its discretion when it certified a class of plaintiffs, under Rule 23(b)(2), who challenged certain fee-charging and collection practices of Countrywide Home Loans. Rodriguez v. Countrywide Home Loans, No. 11-40056 (5th Cir. Sept. 14, 2012). [Read more…] about Fifth Circuit Affirms Class Certification Challenging Fee Collection Practices

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Fourth Circuit Opens Door to Class Proofs of Claim

The Fourth Circuit recently found that class proofs of claim are permissible subject to certification under Bankruptcy Rule 7023 (incorporating Civil Rule 23) and Rule 9014. Gentry v. Seigel, No. 10-2418 (4th Cir. Feb. 2, 2012). NACBA and NACA filed an amicus brief seeking reversal of the bankruptcy court’s decision that the bankruptcy process is always superior to class actions. The Fourth Circuit agreed. It held that certification of a creditor class is fact specific issue to be determined on a case-by-case basis. The court further held that a motion for class certification need not be filed before the expiration of the claims bar date. While the court ultimately affirmed the denial of class certification, it made clear that its decision was based on the specific facts of the case rather than on a bright line rule disfavoring class proofs of claim.
Gentry 4th Cir opinion