Lori Liles v. American Corrective , 350 F.3d 742 ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 02-8020/02-3724
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Lori Liles; Kristine Burgess; Robert *
Mettler; Rebecca Reynolds, on their *
behalf and on behalf of all others *
similarly situated, *
*
Plaintiffs - Appellees, *
*
v. *
* Appeal from the United States
Elena Del Campo; Lydia Rosario; * District Court for the
Audra Phillips, * Southern District of Iowa.
*
Intervenor Plaintiffs - Appellants, *
*
v. *
*
American Corrective Counseling *
Services, Inc.; Donald R. Mealing, *
*
Defendants - Appellees. *
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Submitted: October 20, 2003
Filed: December 2, 2003
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Before MORRIS SHEPPARD ARNOLD, BOWMAN, and MURPHY, Circuit
Judges.
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MURPHY, Circuit Judge.
Lori Liles brought this action on behalf of a class against American Corrective
Counseling Services, Inc. and its owner Don Mealing (collectively ACCS), alleging
that their bad check restitution programs violated the Fair Debt Collection Practices
Act, 15 U.S.C. §§ 1692-1692o, and state law.1 Intervenors Elena Del Campo and
Lydia Rosario filed similar suits against ACCS in Florida and California and were
allowed to intervene after the parties in this case filed a joint motion for preliminary
approval of a settlement agreement and for conditional class certification. The
district court2 granted the joint motion after noting that protracted settlement
negotiations had taken place, and it also granted a motion by ACCS to enjoin related
litigation. The intervenors appeal the injunction and seek leave to appeal the class
certification. We deny leave for an interlocutory appeal and affirm.
ACCS is a private company based in California which contracts with local
prosecutors to administer bad check misdemeanor diversion programs.3 These
programs give writers of nonsufficient fund (NSF) checks an opportunity to avoid
criminal prosecution by voluntarily participating in them. The programs provide
restitution to the check payee and instruct the issuer on how to manage home
finances. ACCS contacts individuals who have written NSF checks and offers them
an opportunity to participate in a bad check misdemeanor diversion program for a fee.
1
The original complaint included claims for violation of the Iowa Debt
Collection Practices Act (IDCPA), Iowa Code § 537.7102(5), and for common law
abuse of process. The statutory claims were not included in subsequent amended
complaints. Appellants Appx. at Tab 16.
2
The Honorable Ronald E. Longstaff, Chief Judge, United States District Court
for the Southern District of Iowa.
3
ACCS operates bad check misdemeanor diversion programs in at least fifteen
states, including California, Georgia, Florida, Indiana, Illinois, Iowa, Minnesota,
Maryland, Michigan, and Nevada.
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A participating individual is required to pay ACCS the money owed on the NSF
check, a program fee, and an additional processing fee. Participants are supposed to
attend a class on writing checks, but ACCS allegedly fails to offer such classes in
every state. After participants attend the class, the prosecutor is to dismiss the bad
check charges.
Lori Liles received an official notice sent by ACCS after she wrote an NSF
check to Wal-Mart in July 2000. The notice was printed on the stationery of a county
attorney. It stated that a criminal complaint was being processed against her because
of a NSF check and that she could avoid prosecution if she participated in the bad
check restitution program. The notice required Liles to pay the balance on the notice
within 30 days. That balance included the amount of the NSF check, plus a $10
returned item fee and a $125 program fee.
In September 2000, Liles filed this class action suit against ACCS in the United
States District Court for the Southern District of Iowa. Her complaint alleged that the
bad check restitution programs run by ACCS violate the Fair Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692o, the Civil Rights Act, 42 U.S.C.
§ 1983, and various tort laws. According to the complaint, the programs harass
debtors, use false, deceptive or misleading debt collection practices, and falsely imply
that legal actions have been or will be taken. Liles sought to represent a nationwide
class consisting of persons who had received an official notice substantially similar
to hers or who were otherwise contacted by someone affiliated with a bad check
misdemeanor program in affiliation or under contract with ACCS. Similar lawsuits
were filed in federal district courts in Georgia, Indiana, Florida, California, and
Illinois.4
4
See Del Campo v. Am. Corrective Counseling Serv., Inc., et. al., Case No.
C01-21151 PVT (N.D. Cal., filed Dec. 11, 2001); Barnhart v. Am. Corrective
Counseling Serv., Inc., Case No. 01-C-5507 (N.D. Ill., filed July 16, 2001) (settled
and dismissed July 31, 2002); Rosario v. Am. Corrective Counseling Serv., Inc., et
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ACCS moved for summary judgment. The district court denied the motion as
to the FDCPA and IDCPA claims, struck the requests for punitive damages and
injunctive relief, and dismissed the abuse of process claims. After a second motion
to dismiss was denied, Liles amended her complaint to exclude the IDCPA claims
and moved for certification of a nationwide class. Shortly thereafter the parties
entered into settlement negotiations, and Liles subsequently withdrew her motion for
class certification. After lengthy negotiations, the parties filed a joint motion for
preliminary approval of settlement and conditional certification of a nationwide class.
ACCS later filed a motion to enjoin related litigation.
After the filing of the joint motion for preliminary approval of settlement and
conditional certification of a nationwide class, Elena Del Campo and Lydia Rosario
sought to intervene. The court granted the motion and allowed them to conduct
extensive discovery. Five months later, the court held an oral hearing on the motions
for conditional class certification and preliminary settlement approval. At the hearing
the parties proposed a settlement to be paid out of the ACCS insurance policy.
Preliminary discovery and settlement negotiations revealed that the ACCS
insurance policy was the only known asset available for settlement of these claims.
The insurance policy is a wasting policy, and the value of the policy diminishes as
funds are paid out. Although the policy originally had a $2 million limit, it has been
drawn on to pay ACCS defense costs in this and related litigation. Ongoing defense
costs will continue to deplete the policy, and continued litigation threatens to drain
the fund completely. The proposed settlement includes notification to the estimated
800,000 class members and indicates that each would have to file a claim in order to
al., Civil Action No. 2:01-CV-221-FTM-29DNF (M.D. Fla., filed Apr. 30, 2001);
Vanduyn v. Am. Corrective Counseling Serv., Inc., Case No. IP 01-0537 C T/G (S.D.
Ind., filed Apr. 20, 2001) (settled and dismissed July 24, 2002); Calman v. Am.
Corrective Counseling Serv., Inc., Civil Action No. 01-CV-0581 (N.D. Ga.., filed
Mar. 1, 2000) (dismissed May 29, 2001).
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participate in the settlement award. It also broadly releases all potential state and
federal claims against ACCS and the prosecutors involved in the programs.
The intervenors oppose the proposed settlement and conditional nationwide
class certification. They argue that the class certification did not meet the
requirements of Federal Rules of Civil Procedure 23(a) and 23(b) and that the
proposed settlement was not fair, adequate, or reasonable given the different state law
claims available to various class members. Primarily to preserve the settlement fund,
the court granted preliminary approval of the class settlement, conditionally certified
the class, enjoined all related litigation, and set a court date for approval of a plan for
class notification.
The intervenors petitioned for permission to appeal the district court class
certification and later filed an appeal of the order enjoining related litigation. After
these filings, Liles moved the district court to set aside the settlement, to decertify the
class, to vacate its orders, and to dismiss the appeals. The court held a hearing on the
motion to set aside the settlement and subsequently denied all the pending motions,
stating that it had granted conditional approval of the settlement because it was fair,
adequate, reasonable, and in the best interests of all the parties involved.
After the district court issued its order enjoining related litigation, federal
courts in the Middle District of Florida and the Northern District of California stayed
their proceedings. With different class representatives, counsel for the intervenor
filed a new proposed class action against ACCS in the Northern District of California.
ACCS then moved in this case to enforce the district court's order enjoining related
litigation and for a finding of contempt or for amendment of the injunction order.
The district court enforced its injunction and found the intervenor attorneys in
contempt.
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Intervenors claim that the district court erred in granting the conditional class
certification and in enjoining related litigation. They request permission for an
interlocutory appeal of the conditional class certification and seek decertification and
reversal of the order enjoining related litigation.
A court of appeals may permit an appeal from an order granting or denying
class action certification if taken in a timely manner. Fed. R. Civ. P. 23(f). The
intervenors urge our court to grant an interlocutory appeal under the D.C. Circuit test
for permitting interlocutory appeals in In re Lorazpam & Clorazepate, 289 F.3d 98(D.C. Cir. 2002).5 They argue that the district court did not make the findings
required by Rule 23 when it conditionally certified the nationwide class. ACCS
responds that an interlocutory appeal would be inappropriate here because the district
court's class certification is not dispositive of the litigation and several significant
hurdles must be met before a final settlement and class certification are approved.
We conclude that an interlocutory appeal would be premature in this case.
Several steps remain before the district court finally approves class certification and
any settlement. To permit an appeal at this stage would unnecessarily delay the
resolution of the litigation and further jeopardize the limited assets available for
resolving the claims. Permission for an interlocutory appeal of the conditional class
certification should therefore be denied.
5
Other circuits have also addressed the question of when to grant an
interlocutory appeal under Rule 23(f). See In re Sumitomo Copper, 262 F.3d 134 (2d
Cir. 2001); Lienhart v. Dryvit Sys., Inc., 255 F.3d 138 (4th Cir. 2001); Newton v.
Merrill Lynch et al., 259 F.3d 154 (3rd Cir. 2001); Prado-Steiman v. Bush, 221 F.3d
1266 (11th Cir. 2000); Waste Mgmt. Holding, Inc. v. Mowbray, 208 F.3d 288, 293
(1st Cir. 2000); Blair v. Equifax Check Serv., Inc., 181 F.3d 832, 833-36 (7th Cir.
1999). The facts in this case do not favor an interlocutory appeal under any of these
formulations, and we need not undertake here the task of refining a circuit standard
for review of such petitions.
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We review an order enjoining related litigation for abuse of discretion. United
States v. New York Tel. Co., 434 U.S. 159, 164 (1977). The All Writs Act provides
that federal courts "may issue all writs necessary or appropriate in aid of their
respective jurisdictions." 28 U.S.C. § 1651(a). Injunctions of related proceedings
in other federal courts are appropriate when necessary for adjudication or settlement
of a case. See White v. Nat'l Football League, 41 F.3d 402, 409 (8th Cir. 1994).
The district court enjoined proceedings in related litigation to preserve the
settlement fund, to eliminate the risk of inconsistent or varying adjudications that
would deplete the fund, to avoid confusion among the class members, and to save
scarce judicial resources. The court acted within its discretion in issuing the
injunction because enjoining related litigation was necessary to ensure the
enforceability of the order approving the preliminary settlement and to prevent further
draining of the limited settlement fund. As the district court found, neither settlement
nor notification of class members could be achieved if the settlement fund were eaten
up by litigation in other courts. Without enjoining related litigation, the court ran the
risk of undermining the settlement that had been negotiated and preliminarily
approved and of exhausting the only asset available for class recovery. We conclude
that the court did not abuse its discretion in enjoining related litigation.
Accordingly, permission for an interlocutory appeal of the conditional class
certification is denied, and the district court's injunction of related litigation is
affirmed.
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