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Bassett v. Credit Management Services, Inc.

United States District Court, D. Nebraska

June 28, 2018

KELLY M. BASSETT, individually and as heir and Personal Representative of the Estate of James M. Bassett, on behalf of herself and all others similarly situated; Plaintiff,
v.
CREDIT MANAGEMENT SERVICES, INC., and JASON MORLEDGE, Defendants.

          MEMORANDUM AND ORDER

          JOSEPH F. BATAILLON, SENIOR UNITED STATES DISTRICT JUDGE

         This matter is before the court on the plaintiff's motions to certify a class, Filing No. 49 and to exclude expert testimony under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 592-93 (1993), Filing No. 63.[1] This is a putative class action for violations of the Fair Debt Collection Practices Act, (“FDCPA”) 15 U.S.C. §1692 et seq., and the Nebraska Consumer Protection Act, Neb. Rev. Stat. § 59-1601 et seq. (“NCPA”).

         I. BACKGROUND

         On behalf of herself and others similarly situated and as personal representative of her deceased husband's estate, plaintiff Kelly M. Bassett alleges defendant CMS wrongfully and deceptively miscast its cause of action in county court cases in order to obtain attorney fees under Neb. Rev. Stat. § 25-1801, wrongfully sought and obtained fees for in-house counsel, and wrongfully collected and kept prejudgment interest and attorneys' fees as undisclosed collection fees. She alleges that CMS's conduct violated of 15 U.S.C. § 1692e (prohibiting false, misleading, or deceptive representations), § 1692e(2)(A) (prohibiting false representation of the character, amount, or legal status of any debt); § 1692e(2)(B) (prohibiting false representation of services rendered or compensation which may lawfully be received by any debt collector for the collection of a debt), § 1692e(5) (prohibiting a “threat to take any action that cannot legally be taken or that is not intended to be taken”), § 1692e(10) (prohibiting “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer”), § 1692f (prohibiting the use of “unfair or unconscionable means to collect or attempt to collect any debt.”); and § 1692f(1)(prohibiting “[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law” and Neb. Rev. Stat. § 59-1602.

         Bassett moves for certification of a class pursuant to Fed.R.Civ.P. 23(a) and 23(b)(3) defined as follows:

(i) all persons with addresses in Nebraska;
(ii) to whom Defendants sent or served, or caused to be sent or served, a county court collection complaint in the form of Exhibit A (Filing No. 1-1);
(iii) in an attempt to collect an alleged unpaid medical account;
(iv) which requested an award of statutory attorneys' fees and/or prejudgment interest pursuant to Neb. Rev. Stat. § 25-1801.

         The record shows that the time period involved is from March 4, 2016 to June/July 2016, which is the period of time that CMS filed the subject form collection complaints. In support of her motion, the plaintiff has shown that during that time defendant CMS used a standard form template complaint similar to Exhibit A when suing Nebraska residents in Nebraska County Courts. Filing No. 51-7, Ex. 4B, Deposition of Tessa Stevens (“Stevens Dep.”) at 7, 27-28, 30-31; Filing No. 51-12, Ex. 5A, Deposition of Dana Fries (“Fries Dep.”), at 22-23; Filing No. 51-15, Ex. 5C, Deposition of Steven Morrison (“Morrison Dep.”) at 40-41. CMS used this standard form complaint in 3, 800 Nebraska law suits against between 4, 000 and 6, 000 Nebraska residents during that time frame. Filing No. 51-7, Ex.4B, Stevens Dep. at 29-30. In each of these cases, CMS relied on quantum meruit as its theory of recovery. Id. at 28-30.; Filing No. 51-12, Ex.5A, Fries Dep. at 22-23; Filing No. 51-13, Ex. 5B, Deposition of Megan Bischoff (“Bischoff Dep.”) at 17-20, 26-28; Filing No. 51-15, Ex.5C Morrison Dep. at 37-39).

         CMS relies on Neb. Rev. Stat. § 25-1801 as authority for its demand for payment of attorney fees and prejudgment interest in collecting these county court cases. Filing No. 51-7, Ex.4B, Stevens Dep. at 45-49; Filing No. 51-12, Ex.5A, Fries Dep. at 22-26; Filing No. 51-13, Ex.5B, Bischoff Dep. at 23-24; Filing No. 51-15, Ex.5C Morrison Dep.at 29, 44-45. CMS's in-house counsel sign and file the template complaints. Filing No. 51-7, Ex.4B, Stevens Dep. at 8-9, 65; Filing No. 51-6, Ex.4A, Deposition of Jason Morledge, (“Morledge Dep.”) at 77-79; Filing No. 51-12, Ex.5A Fries Dep. at 22-23; Filing No. 51-13, Ex.5B, Bischoff Dep. at 4-7; Filing No. 51-15, Ex.5C, Morrison Dep. at 10-11. CMS's in-house counsel are paid a straight salary and do not receive the statutory attorney fees CMS collects. Filing No. 51-7, Ex. 4B, Stevens Dep. at 53; Filing No. 51-18, Ex. 6, Answers to Requests for Admission (“RFA”) at 2-3. CMS does not pay any portion of the attorney fees or prejudgment interest collected under Neb. Rev. Stat. § 25-1801 to original creditors. Filing No. 51-2, Ex. 2, Affidavit of Kenneth King, (“King Aff.”); Filing No. 51-18, Ex. 6, RFA at 6-7. CMS keeps the money collected for costs, fees, and interest under Neb. Rev. Stat. § 25-1801. Filing No. 51-7, Ex.4B, Stevens Dep. at 49-50. The fees and interest collected under Neb. Rev. Stat. § 25-1801 go directly into CMS's bank account. Id. at 50-51. CMS's general policy is to apply consumers' postjudgment payments to costs, interest, and attorney fees before sending any payment to the original creditor for its share of the principal debt. Id. at 52; Filing No. 51-18, Ex. 6, RFA at 2.

         Fremont Medical Center (hereinafter “FMC”) is one of CMS's clients. Filing No. 51-7, Ex.4B, Stevens Dep. at 52-53. Kenneth King, custodian of records and manager of patient financial services for FMC, states in his declaration that CMS provides extensive reports to FMC on a regular basis. Filing No. 51-2, Ex.2, King Decl. at 2. In addition, Fremont Medical Center produced over 1, 400 pages of documentation reports and records about specific accounts from CMS. Id., Ex. A. These reports include the names of the consumer, the amount collected for each, the split of the share between CMS and FMC and the total collected. See, e.g., id., King Decl. at 1; Filing No. 51-3, CMS reports (representative sample with consumer names redacted). The judgment in favor of CMS and against the plaintiff was in the amount of $2, 643.07 for the underlying debt, costs in the amount of $69.16, prejudgment interest in the amount of $72.99, attorney's fee of $269.30, and post-judgment interest at 2.391%.[2] Filing No. 1-1, Ex. E.

         In opposition to the motion, the defendants argue that the plaintiff seeks a second bite at the apple and wants to relitigate the prior state court lawsuit and “undo a prior judgment[.]” Filing No. 53, Response at 2. They argue class certification is not appropriate because individualized determinations are necessary with respect to the underlying Nebraska County Court cases. Further, they argue that the plaintiff is not a proper representative of the class.

         In connection to their opposition to the plaintiff's motion for class certification, the defendants offer a purported expert opinion from retired Nebraska County Court Judge Philip Martin regarding the accepted community practices and relevant standard of care for attorneys filing pleadings such as the one at issue in this case. Judge Martin was asked “to provide comment and opinion concerning the customary standards and practices in Nebraska County Courts regarding the manner in which creditors, assignees and collection attorneys plead claims for interest and fees under Neb. Rev. Stat. § 25-1801, and the customary standards applied by County Judges in ruling on such claims.” Filing No. 54-2, Expert Report of Hon. Philip Martin at 3.

         Judge Martin concludes that “the pleadings at issue in the underlying Bassett case are readily understandable to [him] to as a recently retired Hall County Judge, ” and in [his] opinion, the complaints at issue are “(if anything) more detailed and technically precise than most such pleadings I have reviewed in collection cases venued in Hall County over my 25 years on the bench” and further that “it does not appear to [him] that those pleadings were inconsistent with the facts, or with the standards as commonly applied in Hall County over the last 25 years.” Id. at 7. He also states “it was well known in Hall County throughout the years in which I served as a Judicial Officer that Credit Management Services, Inc. appeared in County Courts through in-house lawyers employed by the company, ” and that he and other county court judges awarded attorneys' fees to in-house counsel in the belief the awards were consistent with Nebraska law and community standards. Id. at 8-9.

         The plaintiff moves to exclude Judge Martin's report, contending that Martin's testimony is not relevant to any issue, nothing in his conclusions is helpful to the court, and he is not qualified to testify to issues involving the FDCPA. She argues that the testimony includes legal conclusions and opinions on matters on which Judge Martin is not qualified as an expert.

         II. LAW

         A. Expert testimony

         Federal Rule of Evidence 702 allows for the admission of expert opinions. Under Rule 702, A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and ...

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