Ohio Federal Court Approves Robo-Signing Class Action Settlement

On August 12, the U.S. District Court for the Northern District of Ohio, in Midland Funding, LLC v. Brent, No. 3:08-cv-01434, 2011 WL 3557020 (N.D. Ohio Aug. 12, 2011), approved a settlement of class action litigation regarding the use of affidavits where the affiant lacked personal knowledge of the facts set forth in the affidavit. The debt collection company had sued the defendant borrower concerning a debt that borrower owed. The borrower asserted a class action counterclaim alleging violations of the Fair Debt Collection Practices Act (FDCPA). The counterclaim alleged that form affidavits, such as the one initially filed against the borrower, were signed by employees who lacked personal knowledge of the facts asserted. The court held that the practice of "robo-signing" affidavits during debt collection actions violated both the FDCPA and the Ohio Consumer Sales Protection Act. That decision induced further class action complaints in other states. Following unsuccessful mediation, the court granted class certification of individuals who had been sued using an affidavit that falsely claimed to be based on the affiant's personal knowledge, while rejecting class certification of individuals who had been sued in an effort to collect on a higher interest rate than the law allowed. Following completion of motions practice in the original defendant's action, the parties agreed to participate in a settlement conference with the court. This conference led to an agreement to settle the original action as well as other actions against the debt collection company.

The parties stipulated to the certification of a class of individuals who had been sued by the debt collection company between January 1, 2005 and the date that the Order of Preliminary Approval of Class Action Settlement was entered into by the Court, in any debt collection action in any court where an affidavit attesting to facts about the underlying debt was used in connection with the lawsuit. In exchange for a class-wide release, the debt collection company agreed to pay $5.2 million into an interest-bearing fund for the benefit of the class, with no more than $1.5 million in attorney's fees being paid out of the fund. All eligible class members were to receive $10 each, with possible increases based on the availability of remaining funds. The settlement also included injunctive relief that required the debt collection company to create and implement written procedures for generating and using affidavits in debt collection lawsuits to prevent the use of affidavits where an affiant lacks personal knowledge of the facts in the affidavit. Despite objections from the attorneys general of 38 states and the Federal Trade Commission that the release was overbroad and the settlement sum insufficient, the court approved the settlement of the class action litigation. The court found that the "release is limited to claims where the basis for relief is the affidavit itself," and did not include instances where "the factual basis for the claim is something other than the affidavit." The court further noted that the "release simply prevents a deficient affidavit from furnishing the basis for an independent claim for damages" against the debt collection company. The court also found that the settlement was the product of arms-length negotiations and was fair, reasonable, and adequate.