On Tuesday a federal judge in Georgia dismissed two separate putative class action cases concerning the filing of Proofs of Claims on Out-of-Statute debt in bankruptcy proceedings.

The two cases are McNorrill v. Asset Acceptance, LLC (Case No. 14-210, U.S.D.C Southern District of Georgia, Augusta Division) and Willis v. Cavalry Investments, LLC, (Case No. 14-227, U.S.D.C Southern District of Georgia, Augusta Division). The Orders are essentially identical. 

A copy of the McNorrill Order can be found here.

A copy of the Willis Order can be found here

The orders cite the U.S. Supreme Court decision in Midland Funding, LLC v. Johnson (137 S. Ct.1407, 2017). insideARM wrote about that groundbreaking decision on May 15, 2017.  We also published a second, more detailed, article written by attorney Joann Needleman on May 17, 2017.  

 

Background

There is little reason to go into extensive background on the two cases. They both involved the issue of whether the filing of a proof of claim that is obviously time barred is a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act. The Midland case effectively decided that issue. 

The Court’s Order

Following the Supreme Court’s decision in Midland Funding, the court ordered the plaintiffs to explain why the cases should not be dismissed. In response, the plaintiffs asked the court to dismiss the cases without prejudice under Federal Rules of Civil Procedure 41 (a) (2). The defendants in both cases agreed that the cases should be dismissed, but argued that a dismissal with prejudice would be more appropriate.

Editor’s Note: A dismissal with prejudice is dismissal of a case on merits after adjudication. When a case is dismissed with prejudice the plaintiff is barred from bringing an action on the same claim. Dismissal with prejudice is a final judgment and the case becomes res judicata on the claims that were or could have been brought in it. A dismissal without prejudice is the exact opposite.  The case is theoretically not dismissed forever and the plaintiff could bring another lawsuit on the same claim. 

The court wrote:

“Here, the only prejudice Defendant will suffer is the slight possibility of another lawsuit. The court therefore grants Plaintiff’s motion, and this case is DISMISSED WITHOUT PREJUDICE.” 

insideARM Perspective

It is somewhat surprising that the court decided not to dismiss with prejudice. The Supreme Court decision is binding precedent. But, as the Honorable J. Randall Hall, United States District Court Judge wrote, “There is only a slight possibility of another lawsuit.” 

insideARM has not scoured other jurisdictions for similar cases. However, we suspect there are other similar cases that will be dismissed throughout the country.


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