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Court Denies Class Certification Based on Judicial Estoppel

October 16, 2018 by Carlton Fields

The plaintiff brought a putative class action after allegedly defaulting on charges for medical services. Shortly thereafter, the creditor assigned, placed, or transferred the debt to the defendants for collection. The defendants later sent the plaintiff a collection letter, which the plaintiff asserted did not accurately identify the creditor of the alleged debt (naming “WF, Inc – Elmwood Mem.” as the creditor). The plaintiff alleged that he did not recognize the name of the creditor on the letter and that, as a result, the letter violated the Fair Debt Collection Practices Act (FDCPA). The plaintiff sought to certify a class of “all persons with addresses in the State of Wisconsin to whom the defendants mailed an initial written communication in an attempt to collect a debt” that named an incorrect or unidentifiable creditor.

In opposing the plaintiff’s motion for class certification, the defendants argued that the plaintiff was not an adequate class representative because he was subject to a judicial estoppel defense that could not be sustained against other class members. In particular, the defendants argued that the plaintiff was subject to a judicial estoppel defense because in a previous filing for Chapter 7 bankruptcy protection he identified defendants as an entity attempting to collect a debt owed to “Elmbrook Memorial.” Thus, the defendants argued that the plaintiff should be estopped from pursuing the putative class action because: (1) he failed to list the class action as an asset; and (2) he showed no signs of being confused by the debt collection letter from which he was able to identify Elmbrook Memorial as a creditor and the defendants as the parties collecting on its behalf.

The court denied the plaintiff’s motion for class certification, reasoning that the judicial estoppel argument was both legally and factually specific to the plaintiff and his bankruptcy proceedings. Consequently, the court found that the defendants presented “at least an ‘arguable’ defense to [the plaintiff’s] claim and therefore […] [the plaintiff] is an inadequate representative of the class.” In so finding, the court noted that “a debtor in bankruptcy who denies owning an asset, including a chose in action or other legal claim, cannot realize on that concealed asset after the bankruptcy ends.” As such, the defendants posited an arguable defense “peculiar to” the plaintiff, which “[brought] into question the adequacy of the named plaintiff’s representation” of the class.

Heisler v. Convergent Healthcare Recoveries, Inc., No. 16-CV-1344 (E.D. Wisc. Sept. 27, 2018).

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