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Powers v. Credit Management Services, Inc.

United States District Court, D. Nebraska

February 2, 2016

LAURA POWERS, on behalf of herself and all others similarly situated; NICHOLE PALMER, JASON PALMER, Plaintiffs,
v.
CREDIT MANAGEMENT SERVICES, INC., DANA K. FRIES, TESSA HERMANSON, JESSICA L. V. PISKORSKI, BRADY W. KEITH, MICHAEL J. MORLEDGE, TESSA HERMANSON, Defendants

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[Copyrighted Material Omitted]

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          For Laura Powers, on behalf of herself and all others similarly situated, Plaintiff: O. Randolph Bragg, HORWITZ, HORWITZ LAW FIRM - CHICAGO, Chicago, IL; Pamela A. Car, William L. Reinbrecht, CAR, REINBRECHT LAW FIRM, Omaha, NE.

         For Nichole Palmer, Jason Palmer, Plaintiffs: Pamela A. Car, William L. Reinbrecht, CAR, REINBRECHT LAW FIRM, Omaha, NE.

         For Credit Management Services, Inc., Dana K. Fries, Jessica L. V. Piskorski, Brady W. Keith, Michael J. Morledge, Tessa Hermanson, Defendants: Christopher R. Morris, Jessica L. Klander, Michael A. Klutho, BASSFORD, REMELE LAW FIRM, Minneapolis, MN; John M. Guthery, Jr., PERRY, GUTHERY LAW FIRM, Lincoln, NE.

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         MEMORANDUM AND ORDER

         Joseph F. Bataillon, Senior United States District Judge.

         This matter is before the court on the named plaintiffs' second motion to certify a class, Filing No. 176. This is an action for violations of the Fair Debt Collection Practices Act, (FDCPA), 15 U.S.C. § 1692, et seq., and the Nebraska Consumer Protection Act, (NCPA), Neb. Rev. Stat. § 59-1601, et seq.

         I. BACKGROUND

         Relevant to the class certification issue are the plaintiffs' allegations that defendant CMS filed standardized collection complaints that were misleading in that they included amounts for recovery of prejudgment interest and attorneys' fees that are not authorized under Nebraska law and included misrepresentations concerning presenting a demand for payment. Filing No. 17, Amended Complaint at 4-5, 7-8; Exs. A and C. This court earlier certified a class action comprised of debtors who had received standardized collection complaints and standardized discovery materials from CMS.[1] Filing No. 105, Findings and Recommendations of the Magistrate Judge; Filing No. 150, Memorandum and Order. On interlocutory appeal, the Eighth Circuit Court of Appeals (" Eighth Circuit" ) reversed this court's earlier class certification order and remanded for proceedings consistent with its opinion. See Filing No. 150, Memorandum and Order; Filing No. 169, Eighth Circuit Opinion; Powers v. Credit Management Services, Inc., 776 F.3d 567 (8th Cir. 2015). The Eighth Circuit found that the classes, as certified, did " not meet the commonality, predominance, and superiority requirements of Rule 23." Id. at 573. The Eighth Circuit further stated that the classes, as certified, would require individualized assessments of the purported class-members state court collection actions.[2] Id. at 571, 573.

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          The Appeals Court also suggested that the court should have ruled on then-pending motions for summary judgment before certifying the class. Id. at 571 n.1. The Court noted two unresolved issues of law, which the court has now resolved, generally in favor of the plaintiffs. Id. at 571, 573. The Eighth Circuit also made other findings that are no longer relevant in view of the changed posture of the case.[3]

         The plaintiffs now seek certification of two classes: a § 25-1801 class and a § 45-104 class, with subclasses created for the statute limitations period of one year under the FDCPA and of four years under the NCPA. See Filing No. 176, Motion. Plaintiffs propose certification as follows:

The § 25-1801 class consists of:
(i) all persons with addresses in Nebraska against whom Defendants filed a county court collection complaint in the form of Exhibit C (ii) which sought to recover attorneys' fees, prejudgment interest, and costs, pursuant to Neb. Rev. Stat. § 25-1801 (iii) where CMS did not personally provide the ninety-day presentation of the claim (iv) in an attempt to collect an alleged debt which, as shown by the nature of the alleged debt, defendants' records, or the records of the original creditors,

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was primarily for personal, family, or household purposes.
The § 45-104 class consists of:
(i) all persons with addresses in Nebraska upon whom Defendants served a county court collection complaint in the form of Exhibit A (ii) which sought to recover prejudgment interest pursuant to Neb. Rev. Stat. § 45-104 (iii) in an attempt to collect an alleged debt which, as shown by the nature of the alleged debt, defendants' records, or the records of the original creditors, was primarily for personal, family, or household purposes.

Filing No. 176, Motion at 2. The class definitions proposed in the plaintiffs' second motion apply to all defendants and do not involve a breakdown by attorney.

         Defendants oppose the motion for certification, arguing that the motion is an improper attempt for reconsideration of the Eighth Circuit's opinion and is barred by res judicata and law of the case. Further, they contend the plaintiffs cannot satisfy the requirements of Fed.R.Civ.P. 23.

         II. FACTS

         Relevant facts are set forth in the court's order on the parties' motions for summary judgment and will be repeated only as necessary to the court's findings. The record shows that in the Powers collection lawsuit, Defendants sought to collect on " goods, services and/or labor" in the amount of $454.00. Filing No. 17, Amended Complaint, Ex. A, Powers collection complaint. The collection complaint states in Paragraph 4 that " GIKK ORTHO SPECIALISTS provided goods, services and/or labor to Defendant(s) and/or family members of Defendant(s). The reasonable value or agreed amount of these services is $454.00 and such is a liquidated amount." The collection complaint further provides that " [p]laintiff requests prejudgment interest of $224.48 from 4/25/2007 to 6/7/11, pursuant to Sec. 45-104 and accruing prejudgment interest and attorney fees, as allowable by law." Id. Further it states " More than 90 days have elapsed since the presentation of this claim." Id.

         In the Palmer collection complaint, CMS sought recovery of three amounts: $24.51 for goods, services and/or labor of Physicians of Ob/Gyn-Dr. Benjamin Ryder, stating the " reasonable value or agreed amount of these services is $24.51 and such amount is a liquidated amount" ; $602.39 for goods, services and/or labor of Physicians of Ob/Gyn-Dr. Mary Kratoska, again stating $602.39 was the reasonable value of the services and the amount was liquidated; and $229.48 for services provided by Physicians of Ob/Gyn - Dr. Nancy Hicks, also stating the amount was reasonable and liquidated. Id., Ex. C, Palmer collection complaint. In the Palmer collection complaint, CMS sought statutory attorney fees pursuant to Neb. Rev. Stat. § 25-1801, and accruing prejudgment interest. Id. Further, it stated more than 90 days elapsed since the presentation of the claim. Id.

         Undisputed evidence shows that the Palmer and Powers collection complaints are examples of standard form pleading routinely filed by CMS. Filing No. 85-2, Ex. 1A, Deposition of Tessa Hermanson (" Hermanson Dep." ) at 52-54. CMS in-house counsel Dana Fries testified in her deposition that " if we were proceeding or asking for interest under that Nebraska revised statute [25-1801], that we have to be able to prove that more than 90 days has elapsed between the presentation of the claim and the date that we filed the claim" and that her understanding of " presentation" was when the debtor was presented with the underlying bill. Filing No. 178-4, Ex. 3A, Deposition of Dana Fries (" Fries Dep." ) at 26. CMS has never sent a notice to county court defendants by certified mail, return receipt requested required for unliquidated claims under Neb. Rev. Stat. § 45-103.02, nor did it present any claim 90 days in advance of filing the county court actions. Filing No. 50-8, Ex. 7, Answers to Requests for Admission at 13. Fries testified that every complaint contains the language that the claim is liquidated, in order for defendants to avail themselves of prejudgment interest under § 45-104. Filing No. 182-3, Ex. 2A, Fries Dep. at 47. Fries testified " liquidated means readily determinable or easily calculated." Id.

         The record shows that allegation of the reasonable value of services were determined by relying on the assignor, or original creditor. Filing No. 178-6, Ex. 4A, Deposition of Tessa Hermanson (" Hermanson Dep." ) at 58. CMS in-house counsel Hermanson regarded the claim presented 90 days in advance of filing the county court actions to be " the original creditor sending a bill." Id. at 60. She also testified no one at CMS sends a letter by certified mail on behalf of CMS prior to the filing of a lawsuit. Id. at 63.

         CMS collects on a wide variety of debts, including medical, utilities, banks, landlord-tenant matters, storage, and dentists' and

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doctors' offices. Filing No. 182-5, Ex. 3A, Hermanson Dep. at 26. Dana Fries testified she could not give an example of a single commercial client. Filing No. 182-3, Ex. 2A, Fries Dep. at 11.

         Hermanson acknowledged that the only difference between the Powers complaint and the Palmer complaints was the statute CMS was suing under. Filing No. 182-5, Ex. 3A, Hermanson Dep. at 52. Ms. Hermanson admits that all of CMS's collection actions fall into one of two causes of action which are the subject of the present lawsuit, i.e., a suit under § 25-2801 and a suit under § 45-104, as evidenced by Exhibits A and C. Id. CMS in-house counsel Brady Keith testified that the collection actions were for breach of contract. Filing No. 85-8, Ex. 2B, Keith Dep. at 31. Dana Fries testified the causes of action were " an implied contract of - quasi contract, unjust enrichment type theory" and " [c]ould also be a contract, a written contract theory." Filing No. 109-1, Ex. 1A, Fries Dep. at 45. Hermanson also testified that the Powers collection complaint is based on " a contract for services provided" and the Palmer collection complaint is based " on implied contract to services provided, quasi contract theory." Id. Ex. 1B, Hermanson Dep. at 61.

         CMS admits that the county court Complaints in the form of Exhibits A and C have been in use since at least 2008.[4] Filing No. 85-2, Ex.1A, Hermanson Dep. at 53-54. The county court complaints are standard forms used by its attorneys on a regular basis, with only the names and amounts changed to suit the individual case. Id. CMS attorney Brady Keith testified that these county court complaints are standardized with ...


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