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Ruling may expedite demise of Marion County township venues

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Marion County’s unique township small claims courts may be on the verge of extinction, hastened by a game-changing ruling this month by the full 7th Circuit Court of Appeals.

“The message here is that venue abuse and forum shopping are something the federal courts take seriously, and it can get expensive if you don’t comply,” said Daniel Edelman, a Chicago attorney who successfully challenged dismissal of a federal lawsuit over Marion County’s township courts.

At issue is the jurisdiction of those courts – whether the township courts may hear debt-collection disputes arising anywhere in Marion County or whether the dispute must have a basis to be heard in a particular township court.

SmallClaims-1-15col.jpg A case from Pike Township Small Claims Court in Marion County was at the center of a 7th Circuit Court of Appeals decision that aimed to discourage “forum shopping” by debt collectors. (IL Photo/Eric Learned)

The 7th Circuit ruled en banc in Mark Suesz v. Med-1 Solutions LLC, 13-1821, that “judicial districts” for Marion County small claims matters are the designated township courts under the Fair Debt Collection Practices Act. The result was a reversal of a prior three-judge panel ruling in this case, and the full court also overturned its precedent of Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996).

In a holding applying to thousands of pending cases, the 7th Circuit majority found the intent of the FDCPA would not be served unless the township courts were recognized as judicial districts. That means collections suits must either name defendants who live in the township or be filed in the township where transactions occurred.

Critics said large-volume debt-collection filers brought their cases in township courts deemed friendlier to collectors, putting defendants at a disadvantage. The 7th Circuit largely agreed. Jeff Boulden, a former legal aid attorney who documented abusive practices in some of the township courts, called the ruling “a clear victory for debtors” protected by the FDCPA.

Attorneys representing debt collectors say the ruling is likely to accelerate a shift they’ve already seen, with more matters filed directly in Marion Superior Court despite higher filing fees.

“There’s a big risk to an attorney by filing in the wrong township,” said Fred Pfenninger of Pfenninger & Associates in Indianapolis. Suits filed in the wrong township court now could expose attorneys to fines of $1,000 per violation under the FDCPA.

Allegations of forum abuse were at the center of a 2012 report issued by a task force that studied Marion County’s small claims courts and recommended reforms. Court of Appeals Judge John Baker co-chaired the task force and said he will ask lawmakers to overhaul the system.

rosenberg-louis-mug Rosenberg

Baker said the 7th Circuit’s ruling was coincidental to the work he’s been doing on small claims reform. “The 7th Circuit has judicially recognized the same shortcomings we have discovered,” he said, noting the opinion repeatedly cited the task force report co-authored by Court of Appeals Senior Judge Betty Barteau.

“We’re at the point in time where anybody who looks at this even from within has to take notice of the deficiencies that were discovered and the inequities,” he said.

Baker said Indiana Chief Justice Brent Dickson asked him to prepare legislation for the upcoming session of the General Assembly that would incorporate the township courts into Marion Superior Court – “Option A” from the task force report. Though details are still being developed, Baker said the proposal, if adopted, would essentially do away with township small claims courts.

He predicts that the proposal will be forwarded to Dickson in the next couple of weeks and then be submitted to Judiciary Committee leaders at the Statehouse. “We’re not going to hide the ball,” Baker said, though he acknowledged the likelihood that township judges and officials will resist changing a system that delivers millions of dollars annually to the nine localities within Marion County. Those fees instead would go to the county if small claims cases were moved to Superior Court.

In Suesz v. Med-1, the 7th Circuit remanded to the federal court in Indianapolis, where Edelman will seek class certification for as many as 3,633 plaintiffs who may have been sued in the wrong judicial district. The lead plaintiff was a Hancock County resident sued for a debt owed in Marion County’s Lawrence Township. The suit was filed in Pike Township.

Pike Township Judge A. Douglas Stephens said the ruling was surprising because it overturned so much precedent. Nevertheless, he said, “Most filers changed their practices at the first of the year and they are consistent with what this opinion says anyway.”

Stephens said the decision won’t entail greater scrutiny of filings by clerks to ensure proper venue – that’s a risk plaintiffs take when they file.

baker-john-g-mug Baker

As for potentially doing away with township courts, Stephens said, “We’ve heard that the last six years,” and that any such move would necessarily entail a comprehensive discussion of township government.

Meanwhile, Edelman believes the ruling also will apply to other forum-shopping cases in which he’s pursuing a certification of classes on behalf of Marion County small claims litigants.

Marion Circuit Judge Louis Rosenberg, who has statutory authority to oversee the small claims courts, thinks the U.S. Supreme Court might review the 7th Circuit’s ruling in Suesz.

“It’s a pretty divided Circuit,” Rosenberg said of the majority opinion co-authored by Circuit Judges David Hamilton and Richard Posner and joined by five jurists, along with a concurring opinion from Judge Diane Sykes. Judges Joel Flaum and Michael S. Kanne dissented.

Rosenberg said the concurring opinion takes the position that the majority may have gone too far in terms of remedies available under the FDCPA. The ruling also presents the issue of how the Supremacy Clause relates to state statutes concerning jurisdiction and venue. Federal courts typically have been deferential to state statutes governing jurisdiction, he said.

“That may be the issue on which the case will be appealed,” he said.

Med-1 didn’t rule out seeking an appeal to the U.S. Supreme Court. “We continue to review all our available appellate options. Unfortunately, we cannot comment more, as this case is still ongoing,” Med-1 attorney and chief compliance officer Francis R. Niper said in a statement.

“We are disappointed that the 7th Circuit has decided to reverse itself in its recent decision. We have, of course, abided by this change in the law, and will continue to do so going forward. We note that this decision creates additional confusion and conflicts with the Marion County Small Claims rules, as they were recently amended.”

But anecdotal evidence suggests filers already may have decided to change venue. Rosenberg said that through March of this year, total filings across all small claims courts were down about 20 percent, though it’s difficult to assess whether that’s due to a shift in where debt cases are filed. He noted the decline is an acceleration of a reduction in filings in recent years.

Pfenninger said the ruling will create a hardship for lawyers who filed collections cases in a particular court for reasons of convenience. “The (7th Circuit) seeks to impose a problem that many collections attorneys familiar with the system don’t believe exists,” he said.

He noted that a similar situation exists in Lake County, where 10 city and town courts hear small claims matters that may arise anywhere in the county. “The question is, how is that different?”

It may not be. In the opening paragraphs of Suesz, the majority held that its ruling “has significant consequences not only for consumer debtors and debt collectors in Marion County but also for parties to debt-collection suits in other court systems that, depending on the answer to the interpretive (jurisdiction) question, may be vulnerable to abusive forum-shopping by debt collectors.”

Rosenberg said one result of the ruling will be increased paranoia among debt collectors as to how courts will interpret jurisdiction. “The paranoia may be justified,” he said.•

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  • Significant Victory For Consumers!
    The 7th Circuit's decision in Suesz is not just a key win for consumers who live in and/or transact business in Marion (and Cook County, IL). As I publicized in "The Poplicola Report On The Marion County Small Claims Courts" (published July, 2013) thousands of consumers from across the nation have, over the years, been sued in Marion County Small Claims Courts, despite the fact that they never lived, nor signed contracts in Marion County. Thousands of consumers who were unable to travel to Indianapolis to defend themselves had Default Judgments entered against them. Many were then subjected to Proceedings Supplemental that frequently saw wages garnished and/or bank accounts frozen. Suesz will likely put an end to these abusive practices as well. This decision is a vindication of consumers' rights to have an 'opportunity to be heard' in suits filed against them.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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