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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. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

  5. JOE CLAYPOOL candidate for Superior Court in Harrison County - Indiana This candidate is misleading voters to think he is a Judge by putting Elect Judge Joe Claypool on his campaign literature. paragraphs 2 and 9 below clearly indicate this injustice to voting public to gain employment. What can we do? Indiana Code - Section 35-43-5-3: Deception (a) A person who: (1) being an officer, manager, or other person participating in the direction of a credit institution, knowingly or intentionally receives or permits the receipt of a deposit or other investment, knowing that the institution is insolvent; (2) knowingly or intentionally makes a false or misleading written statement with intent to obtain property, employment, or an educational opportunity; (3) misapplies entrusted property, property of a governmental entity, or property of a credit institution in a manner that the person knows is unlawful or that the person knows involves substantial risk of loss or detriment to either the owner of the property or to a person for whose benefit the property was entrusted; (4) knowingly or intentionally, in the regular course of business, either: (A) uses or possesses for use a false weight or measure or other device for falsely determining or recording the quality or quantity of any commodity; or (B) sells, offers, or displays for sale or delivers less than the represented quality or quantity of any commodity; (5) with intent to defraud another person furnishing electricity, gas, water, telecommunication, or any other utility service, avoids a lawful charge for that service by scheme or device or by tampering with facilities or equipment of the person furnishing the service; (6) with intent to defraud, misrepresents the identity of the person or another person or the identity or quality of property; (7) with intent to defraud an owner of a coin machine, deposits a slug in that machine; (8) with intent to enable the person or another person to deposit a slug in a coin machine, makes, possesses, or disposes of a slug; (9) disseminates to the public an advertisement that the person knows is false, misleading, or deceptive, with intent to promote the purchase or sale of property or the acceptance of employment;

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