A motion from the plaintiffs in a lawsuit filed against Sherman Financial Group to have the suit certified as a class action has been denied by a District Court judge for the Southern District of Indiana.
The lawsuit, Cox et al v. Sherman Capital LLC et al, claimed violations of the Fair Debt Collection Practices Act, the Racketeer Influence and Corrupt Organizations Act (RICO), and sought to include all residents of Indiana who were subject to collection activity from the defendants as well as anyone who paid money to the defendants.
An interesting legal argument was made by plaintiffs in that when a creditor securitizes an asset, such as a credit card account or an auto loan, the creditor ceases to be the asset’s owner and is no longer eligible to collect on the debt. In fact, once an asset is pooled into a security, the plaintiffs allege that the receivable no longer exists, but instead is turned into data.
From a preliminary ready of the order denying the class certification, it appears as though the claim of ownership is one of the primary reasons why the class was not certified.
In particular, the Plaintiffs will need to establish that each class member’s debt was securitized, was written-off by the originating bank or servicer, was sold either as “data” or as debt to the Defendants, and that the sale took place prior to the Defendants’ collection activities against the individual class member.
The different classes that the plaintiffs sough to have certified were huge, and also apparently a reason why the judge denied the certification.
Given the sheer enormity of the proposed class and the complexity of the Plaintiffs’ legal theories, without some indication that the Plaintiffs’ claims are capable of proof through evidence common to the class rather than individual to its members, the Court is not persuaded that common issues predominate in this case or that a class action is the superior method for litigating the Plaintiffs’ claims.
A full version of the motion is available here.
