LVNV Funding, LLC v. Davis ( 2020 )

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Appellate Court Date: 2022.02.02
10:49:25 -06'00'
LVNV Funding, LLC v. Davis, 2020 IL App (5th) 190380Appellate Court LVNV FUNDING, LLC, Plaintiff and Counterdefendant-Appellant,
Caption v. CASEY DAVIS, as Independent Administrator of the Estate of
Guillermo Macia, Deceased, Individually and on Behalf of Class
Defined Herein, Defendant and Counterplaintiff-Appellee (Alegis
Group, LLC; Resurgent Capital Services LP; and Sherman Financial
Group, LLC, Third-Party Defendants-Appellants).
District & No. Fifth District
No. 5-19-0380
Filed December 23, 2020
Decision Under Appeal from the Circuit Court of St. Clair County, No. 13-L-562; the
Review Hon. Andrew J. Gleeson, Judge, presiding.
Judgment Reversed and remanded.
Counsel on Nabil G. Foster, of Barron & Newburger, P.C., of Evanston, and Louis
Appeal J. Manetti Jr., of Hinshaw & Culbertson LLP, of Chicago, for
appellants.
David Cates, of Cates Mahoney, LLC, of Swansea, and Sean K.
Cronin, of Donovan Rose Nester, P.C., of Belleville, for appellee.
Panel JUSTICE MOORE delivered the judgment of the court, with opinion.
Presiding Justice Boie and Justice Barberis concurred in the judgment
and opinion.
OPINION
¶1 The plaintiff/counterdefendant, LVNV Funding, LLC (LVNV), along with the third-party
defendants, Alegis Group, LLC, Resurgent Capital Services LP, and Sherman Financial Group,
LLC, appeal, pursuant to Illinois Supreme Court Rule 306(a)(8) (eff. Oct. 1, 2019), the August
5, 2019, order of the circuit court of St. Clair County that granted the motion of the defendant
and counterplaintiff, Casey Davis, as independent administrator of the estate of Guillermo
Macia, deceased, to certify a class as to count I of Davis’s counterclaim, which alleges a
violation of section 8b of the Collection Agency Act (Act) (225 ILCS 425/8b (West 2012)).
For the following reasons, we reverse and remand for further proceedings.
¶2 I. BACKGROUND
¶3 On December 26, 2012, LVNV filed a complaint against Guillermo Macia in the circuit
court of St. Clair County. The complaint requested payment for a debt Macia owed to Chase
Bank USA for use of a credit card. According to the complaint, Chase Bank USA assigned,
“for value,” its rights under the credit card agreement to LVNV “per Exhibit B.” Thereafter,
Macia filed a class action counterclaim against LVNV, as well as third-party claims against
Alegis Group, LLC, Resurgent Capital Services LP, and Sherman Financial Group, LLC
(collectively, the defendants). 1
¶4 Macia’s counterclaim alleges that LVNV is a licensed debt collection agency that is “in the
business of purchasing or acquiring defaulted debts, including debts originally owed to others
and incurred for personal, family, or household purposes.” Count I of the counterclaim requests
money damages as a result of the defendants’ alleged violation of section 8b of the Act. Id. In
particular, count I alleges that the defendants violated section 8b of the Act in the following
ways: (1) filing suit without having an assignment in the form specified by section 8b and
(2) filing suit without attaching an assignment in the form specified by section 8b.
¶5 On January 21, 2014, the circuit court was informed that Macia had died, and Davis was
substituted as the representative for his estate. On April 30, 2018, Davis filed an amended
motion for partial class certification, requesting class certification for count I of the class action
counterclaim only. On August 14, 2018, after full briefing by the parties, the circuit court held
a hearing on the amended motion for partial class certification and took the matter under
advisement. On August 5, 2019, the circuit court entered an order certifying the following
class:
1
The third-party claim alleges the following relationship between LVNV and the third-party
defendants: (1) Resurgent Capital Services LP manages and services domestic and international
consumer debt portfolios for credit grantors and debt buyers, including LVNV, and performs debt
collection services on their behalf; (2) Alegis Group, LLC, is the sole general partner of Resurgent
Capital Services LP; and (3) “LVNV and Resurgent [Capital Services LP] are under common
ownership and management, and both are a part of Sherman Financial.”
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“THE ILLINOIS CLASS: All individuals who have been named as a defendant in a
collection lawsuit filed in an Illinois court, since January 1, 2008, to this date, where
any of the ‘debt collectors’ was a named plaintiff, and the lawsuit, on the date it was
filed, did not comply with the provisions of the Illinois Collection Agency Act, 225
ILCS 425/1 et seq., in that the debt collector was not in possession of a valid assignment
of the purported debt and/or failed to attach same to the Complaint.
Further, the Court HEREBY FINDS that the term ‘debt collector,’ as defined by the
Illinois Class, means:
‘DEBT COLLECTORS’: Counter-Defendant and Third Party Defendants and any
other entities or individuals associated in fact with the above or which are owned,
wholly or in part, managed, agents, employed by, or otherwise controlled by the
above.”
¶6 On September 4, 2019, the defendants filed a petition for leave to appeal from the circuit
court’s order certifying the class. On October 2, 2019, this court entered an order allowing the
appeal.
¶7 II. ANALYSIS
¶8 This court has explained the standards we are to employ when reviewing an order granting
class certification as follows:
“ ‘The decision regarding class certification is within the discretion of the trial court
and will not be disturbed on appeal unless the trial court abused its discretion or applied
impermissible legal criteria.’ Cruz v. Unilock Chicago, Inc., 383 Ill. App. 3d 752, 761
(2008) (citing Smith v. Illinois Central R.R. Co., 223 Ill. 2d 441, 447 (2006)). ‘The
proponent of the class action bears the burden to establish all four of the prerequisites
set forth in section 2-801 [of the Code of Civil Procedure (735 ILCS 5/2-801 (West
2002))].’ Cruz, 383 Ill. App. 3d at 761 (citing Avery v. State Farm Mutual Automobile
Insurance Co., 216 Ill. 2d 100, 125 (2005)). However, as indicated by the Illinois
Supreme Court in Barbara’s Sales, Inc. [v. Intel Corp., 227 Ill. 2d 45, 72 (2007)], there
is no need to determine whether the prerequisites of the class action are satisfied if, as
a threshold matter, the record establishes that the plaintiffs have not stated an actionable
claim.” Coy Chiropractic Health Center, Inc. v. Travelers Casualty & Surety Co., 409
Ill. App. 3d 1114, 1118 (2011).
¶9 The defendants ask this court to consider whether there is a private right of action under
the Act and to reverse the class certification on the basis that no such private right of action
exists. We decline to do so because, as an initial matter, we find that count I fails to state an
actionable claim against the defendants. Count I of the class action counterclaim, upon which
the class was certified in this case, is predicated on LVNV’s alleged violation of section 8b of
the Act. 225 ILCS 425/8b (West 2012). Specifically, count I is based upon LVNV’s filing of
a collection lawsuit against Macia in December 2012 without possessing an assignment that
complies with section 8b and/or without attaching that assignment to the complaint. Section
8b of the Act provides, in relevant part, as follows:
“Assignment for collection. An account may be assigned to a collection agency for
collection with title passing to the collection agency to enable collection of the account
in the agency’s name as assignee for the creditor provided:
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(a) The assignment is manifested by a written agreement, separate from and in
addition to any document intended for the purpose of listing a debt with a collection
agency. The document manifesting the assignment shall specifically state and include:
(i) the effective date of the assignment; and
(ii) the consideration for the assignment.
***
(e) No litigation shall commence in the name of the licensee as plaintiff unless:
(i) there is an assignment of the account that satisfies the requirements of this Section
and (ii) the licensee is represented by a licensed attorney at law.” Id.¶ 10 Our colleagues in the First District explained the scope of section 8b’s requirements in
Unifund CCR Partners v. Shah, 2013 IL App (1st) 113658. In Shah, the court began by
explaining the distinction between first-party collection, assignment for collection, and the sale
of a debt:
“First, the creditor may try to collect the debt itself by bringing an action in its own
name against the debtor. Alternatively, the creditor may hire a third party, known as a
collection agent, to pursue the lawsuit against the debtor. In this situation, the creditor
assigns legal title in the debt to the collection agent but retains equitable title for itself.
This type of partial assignment is known as an assignment for collection. Finally, the
creditor may decide to sell off its entire interest in the account to a third party,
commonly known as a debt buyer. By doing so, the creditor divests itself of both legal
and equitable title and retains no ownership interest in the debt.” (Emphasis added.) Id.¶ 5 (citing Sprint Communications Co. v. APCC Services, Inc., 554 U.S. 269 (2008)
(explaining generally the history of assignments for collection and the legal/equitable
title dichotomy)).
¶ 11 As pointed out by the court in Shah, section 8b of the Act (225 ILCS 425/8b (West 2012))
is titled “ ‘Assignment for collection’ ” and refers only to “an account that is ‘assigned to a
collection agency for collection with title passing to the collection agency to enable collection
of the account in the agency’s name as assignee for the creditor.’ ” (Emphases in original.)
Shah, 2013 IL App (1st) 113658, ¶ 14. According to the Shah court, “[t]his is a textbook
definition of an assignment for collection, which is a specific legal concept that refers to the
transfer of only legal title for the sole purpose of collecting a debt on behalf of the creditor.”
Id. As the Shah court explained, “assignment for collection is distinct from a sale, which refers
to the transfer of both legal and equitable title.” (Emphasis in original.) Id. (citing Sprint, 554
U.S. at 275-80 (historical overview of the evolution of the assignability of choses in action)).
¶ 12 In subsection (a), which explains the documentation necessary to effectuate an assignment
for collection, we find further support for the conclusion that the legislature did not intend for
section 8b of the Act (225 ILCS 425/8b (West 2018)) to apply in cases where a debt buyer is
pursuing litigation on its own behalf. Subsection (a) specifies that an assignment for collection
be “separate from and in addition to any document intended for the purpose of listing a debt
with a collection agency.” Id. § 8b(a). In a debt buyer situation such as in the case at bar, a debt
is not listed with the buyer as a collection agency but instead sold to the buyer outright. In
addition, subsection (e) refers to “licensee as plaintiff” and requires that “the licensee is
represented by a licensed attorney at law” (id. § 8b(e)), indicating that the plaintiff to which it
refers merely has a license to pursue litigation, rather than ownership of the cause of action.
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¶ 13 Based on the foregoing, we agree with the conclusion in Shah that “[b]y referring
specifically to assignments for collection, the plain language of section 8b indicates that the
legislature intended to exclude sales of an account to a debt buyer from the section’s reach.”
Shah, 2013 IL App (1st) 113658, ¶ 14. Accordingly, while a debt buyer is required to meet the
requirements of section 2-403(a) of the Code of Civil Procedure (735 ILCS 5/2-403(a) (West
2018)), which requires that the assignee and owner of a cause of action allege on oath in the
pleading that he or she is the actual bona fide owner thereof, and set forth how and when he or
she acquired title, a debt buyer is not subject to the requirements of section 8b of the Act. 2
¶ 14 In 2013, the legislature amended the Act to explicitly exempt assignments to debt buyers
from the requirements of section 8b of the Act by providing, in section 8.6(b), as follows:
“With respect to its activities as a debt buyer in pursuing the collection of accounts
it owns, a debt buyer shall be subject to all of the terms, conditions, and requirements
of this Act, except that a debt buyer shall not be required to *** (iv) adhere to the
assignment for collection criteria under Section 8b of this Act.” 225 ILCS 425/8.6(b)
(West 2018).
¶ 15 We find the above-quoted 2013 amendment to the Act, added via Public Act 97-1070 (eff.
Jan. 1, 2013), was intended to clarify the legislature’s original intent to apply section 8b of the
Act (225 ILCS 425/8b (West 2018)) only to “assignments for collection” and not to debt buyers
collecting on their own behalf. “A subsequent amendment to a statute may be an appropriate
source for discerning legislative intent.” (Internal quotation marks omitted.) K. Miller
Construction Co. v. McGinnis, 238 Ill. 2d 284, 298-99 (2010). “[W]hile an amendatory change
in the language of a statute creates a presumption that it was intended to change the law as it
previously existed, ‘ “the presumption is not controlling [citations] and may be overcome by
other considerations.” ’ ” Id. at 299 (quoting People v. Parker, 123 Ill. 2d 204, 211 (1988),
quoting People v. Nunn, 77 Ill. 2d 243, 248 (1979)).
¶ 16 If the circumstances surrounding an amendment to a statute indicate that the legislature
only intended to interpret the original act, the presumption of an intention to change the law is
rebutted. Id. We find this to be the case here. At the time the General Assembly was considering
House Bill 5016 (the bill that would become Public Act 97-1070), Senator Kirk Dillard, who
was a co-sponsor of the bill, explained at the bill’s third reading that the bill was “an effort to
improve the Collection Agency Act by clarifying the definition and regulation of debt buyers.”
97th Ill. Gen. Assem., Senate Proceedings, May 25, 2012, at 25 (statements of Senator Dillard).
Because the 2013 amendment is consistent with a reasonable interpretation of the prior
enactment, as set forth above, and the legislative history indicates the amendment was intended
as a clarification, we find the change effected by the amendment was a formal change intended
merely to interpret the original act. See K. Miller Construction Co., 238 Ill. 2d at 299 (citing
2
We hold only that section 8b of the Act (225 ILCS 425/8b (West 2018)) does not apply to a debt
buyer that files a lawsuit on its own behalf to collect a debt it has purchased. A debt buyer meets the
definition of “ ‘[c]ollection agency’ ” under the Act if, in the ordinary course of its business, it engages
in collection activities on behalf of itself or others. Id. § 2. As such, if a debt buyer engages in such
activities, it is subject to other requirements of the Act, such as registration (id. § 4) and qualifications
for license (id. § 7), and is subject to disciplinary action by the Department of Financial and Professional
Regulation for the conduct set forth in section 9 of the Act (id. § 9).
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1A Norman J. Singer, Statutes and Statutory Construction § 22.30, at 366, 374-75 (6th ed.
2002 rev.)).
¶ 17 Based on the foregoing, we find that the requirements of section 8b of the Act (225 ILCS
425/8b (West 2018)) do not apply to debt buyers pursuing collection litigation on their own
behalf. As such, count I fails to state a claim against the defendants based on the facts alleged
in the complaint. As a result, the circuit court erred in granting Davis’s motion to certify a class
as to count I of his complaint. See Coy Chiropractic Health Center, Inc., 409 Ill. App. 3d at
1118 (citing Barbara’s Sales, 227 Ill. 2d at 72).
¶ 18 We note that even if we were to find that section 8b applied to debt buyers pursuing
litigation on their own behalf, the class, as certified, would be improper. The class definition
encompasses all cases where the defendants were “not in possession of a valid assignment of
the purported debt and/or failed to attach same to the [c]omplaint.” (Emphasis added.)
However, section 8b of the Act (225 ILCS 425/8b (West 2018)) contains no requirement that
an assignment be attached to the complaint. Rather, section 8b requires only there is an
assignment of the account that meets the requirements of that section. Id. Candice Co. v.
Ricketts, 281 Ill. App. 3d 359 (1996), the case upon which Davis relies for the contention that
a violation of section 8b may be predicated on the failure to attach such an assignment, is
completely irrelevant. That case found that an assignee of a contractor may file a claim under
the Mechanics Lien Act (770 ILCS 60/0.01 et seq. (West 1992)) but must attach the assignment
to the complaint pursuant to section 2-606 of the Code of Civil Procedure (735 ILCS 5/2-606
(West 1992)). Candice Co., 281 Ill. App. 3d at 362. Accordingly, while it may be a violation
of section 2-606 of the Code of Civil Procedure to fail to attach an assignment to the complaint,
it is not a violation of section 8b of the Act.
¶ 19 Finally, the defendants seek to have this court review an order of the circuit court denying
the motion to dismiss as to Sherman Financial Group, LLC, based on a lack of jurisdiction, as
well as an order compelling them to produce certain documents. These orders are outside of
our scope of review. Our jurisdiction over this appeal is based on Illinois Supreme Court Rule
306(a)(8) (eff. Oct. 1, 2019), which permits an interlocutory appeal by permission of an order
denying or granting class certification. The propriety of the order denying class certification is
in no way dependent on the merits of the order denying the motion to dismiss as to Sherman
Financial Group, LLC, nor the order compelling discovery. Accordingly, we have no
jurisdiction to review those orders as part of this appeal. See U.S. Bank National Ass’n v. IN
Retail Fund Algonquin Commons, LLC, 2013 IL App (2d) 130213, ¶ 18 (on interlocutory
appeal, court only has jurisdiction to review orders that go to the sufficiency of the order
appealed from).
¶ 20 III. CONCLUSION
¶ 21 For the foregoing reasons, we reverse the August 5, 2019, order of the circuit court of
St. Clair County that granted Davis’s motion for partial class certification and remand for
further proceedings not inconsistent with this opinion.
¶ 22 Reversed and remanded.
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