The Supreme Court of the United States yesterday denied a request from plaintiff to hear arguments in a debt collection case after an Appeals Court reversed itself and decided a change in precedent over where a collections lawsuit should be filed can be applied retroactively. More simply, the appeals court ruled that a collection law firm can be sued for filing a lawsuit in the improper jurisdiction, even if the jurisdiction was proper when the original lawsuit was filed.
The Supreme Court does not provide reasons why a request for a hearing was denied.
A copy of the plaintiff’s petition for a hearing can be accessed here.
Here is the background on the case:
Ronald Oliva had an unpaid balance on a credit card that was sold to a third party. The third party assigned collection of the debt to a law firm, Blatt Hasenmiller Leibsker & Moore LLC, which filed suit against Oliva in Cook County, Illinois. The Circuit Court of Cook County is divided into six different districts. The district that the suit was filed in was neither the proper district where the debtor resided or where the original contract was signed. But a ruling in the 7th Circuit – Newsom v. Friedman – had ruled that the relevant judicial district included anywhere in the county, making it permissible for the law firm to file the suit in any of the six districts.
A subsequent case before the 7th Circuit, Suesz v. Med‐1 Solutions, LLC, 18 years later, overturned that ruling. In Suesz, the 7th Circuit ruled that the relevant judicial district is the “smallest geographic area” that is “relevant for determining venue in the court system in which the suit is filed.” Moreover, the 7th Circuit determined that this ruling was retroactive.
After the Suesz ruling, Blatt dismissed the case. But Oliva subsequently filed suit against the law firm, alleging that the lawsuit was filed in the improper jurisdiction. A district court granted summary judgment in favor of the law firm, saying it was covered under the bona fide error defense of the Fair Debt Collection Practices Act. Oliva appealed and the 7th Circuit upheld the summary judgment ruling. The plaintiff then requested an en banc hearing of all the judges from the 7th Circuit Court of Appeals. In a ruling that was issued yesterday, the court ruled 7-4 in favor of overturning its original decision, applying a Supreme Court decision in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, which says that mistakes of law are not covered under the bona fide error clause of the FDCPA
The plaintiffs in this case cited the “bona fide” error defense in the Fair Debt Collection Practices Act as a reason why the case should be brought before the Supreme Court.
This case therefore presents the Court with a straightforward question of statutory construction that affects millions of consumers, the entire debt collection industry, and every circuit that has interpreted the Act for their benefit: whether reliance on controlling circuit precedent is a “procedure reasonably adapted to avoid error” and becomes a “bona fide error” if that precedent is later overturned.
The Seventh Circuit Court of Appeals ruled on the case last July. It used another Supreme Court ruling in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, which says that mistakes of law are not covered under the bona fide error clause of the FDCPA.
