Contrary to longstanding practice, collection cases must now be filed in the Cook County municipal district court where the debtor lives or the contract was signed.

This summer, the seventh circuit sent shockwaves through the Cook County creditor's bar by ruling in effect that filing a collection case in a Cook County district court other than the one where the debtor lives or the contract was signed violates the Fair Debt Collection Practices Act (FDCPA). Before that ruling, debt collectors' regular practice - approved by an earlier seventh circuit opinion - was to file in any of the six municipal districts in the county, not necessarily in a particular district courthouse. But the court's decision in Suesz v. Med-1 Solutions, LLC, 757 F.3d 636 (7th Cir. 2014), overruled that prior holding and, what's more, made the new decision retroactive to cases on file when the opinion came down in July.

The facts of Suesz

In Suesz, a consumer named Mark Suesz filed a class action lawsuit against Med-1 Solutions, LLC, alleging that Med-1's regular business practice was to file lawsuits in small claims courts located in townships where the consumer neither lives nor signed the contract that created the debt, which, he alleged, violates the FDCPA.

Mark lives in Hancock County, Indiana. He had entered into a contract with a hospital in Marion County, Indiana. That county is divided into several townships, each of which has its own small claims court.

Med-1 Solutions, LLC sued Mark for his outstanding debt in Pike Township Small Claims Court. Community North Hospital, which hired Med-1 to recover the debt is located in Lawrence Township. The FDCPA requires debt collectors to sue consumers in the "judicial district or similar legal entity" where the consumer lives or where the consumer signed the contract being sued on. 15 U.S.C. §1692i(a)(2).

Although Suesz discusses the structure of Marion County and Indiana's courts, the opinion applies to any county that has multiple courthouses where small claims cases are heard. The Suesz court noted that the FDCPA does not define the term "judicial district." After a lengthy discussion of the various means of defining the term, the seventh circuit held that "the relevant judicial district or similar legal entity is the smallest geographic unit relevant for venue purposes in the court system in which the case was filed, regardless of the source of the venue rules." Suesz, 757 F.3d at 648.

"The FDCPA takes the state courts as it finds them," the court wrote. Id. at 649. It said that even though a local rule or statute might allow a debt collector to file a lawsuit in a venue that is prohibited under the FDCPA, that fact would not excuse compliance with the Act.

Making it retroactive

The Suesz court also expressly overruled its prior ruling in Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996), which had held that the six municipal districts in the Circuit Court of Cook County were not judicial districts under the Act. The Circuit Court of Cook County is divided into six municipal districts, each of which has its own courthouse. Each courthouse handles small claims lawsuits, among others. Prior to the ruling in Suesz, debt collectors filed their small claims actions against Cook County residents at the Richard J. Daley Center, which services the County's First Municipal District.

With Newsom overruled, debt collectors have been filing motions to transfer venue on a vast number of small claims matters. It is likely that the other courthouses in Cook County will see a large influx of collection cases.

What has members of the creditor's bar particularly concerned is that Suesz applies retroactively. In Suesz, Med-1 asked the seventh circuit to only overrule Newsom prospectively because debt collectors had been relying on Newsom when filing their lawsuits. Suesz, 757 F.3d at 649. The court declined to do so.

First, it stated, "reliance on prior law is insufficient in itself to justify making a new judicial ruling prospective." Id. Second, it observed, reliance on the opinion of one intermediate appellate court "does not create the degree of certainty concerning an issue of federal law that would justify reliance so complete as to justify applying a decision only prospectively in order to protect settled expectations." Id. at 649-50.

The Suesz court's refusal to apply the ruling only prospectively creates a significant problem for debt collectors in Cook County. Many of the small claims cases on file at the Richard J. Daley Center as of July 2, 2014, when Suesz was handed down, could potentially violate the FDCPA's venue provisions. Any lawsuit that should have been filed at the courthouses located in Skokie, Maywood, Rolling Meadows, Bridgeview, or Markham could trigger liability under the Act.

It remains unclear whether transferring venue would "cure" any violations - the FDCPA is a strict liability statute. Merely filing the case in the wrong venue triggers liability. Even so, as Joseph R. Marconi notes in an ISBA Mutual Liability Minute blog post, "an immediate motion to transfer to the appropriate Municipal District" is a smart move for creditors. See http://www.isbamutual.com/liability-minute/debt-collectors-beware-venue-provision-of-fdcpa-re.

The case was remanded to the Southern District Court of Indiana for further proceedings. A petition for a writ of certiorari has been filed with the U.S. Supreme Court.