Michigan Court of Appeals affirms dismissal of post-judgment interest case, says state court rule precludes class actions

Courts State Issues Michigan Consumer Finance Appellate Debt Collection Class Action

On April 21, the Michigan Court of Appeals affirmed a trial court’s dismissal of a post-judgment interest putative class action after concluding that a court rule that precludes “‘actions’ based on claimed violations of statutes that permit[ ] recovery of statutory damages in lieu of actual damages” necessitated the dismissal of the plaintiff’s class action claim. According to the opinion, after the plaintiff defaulted on her $900 credit card debt, the debt was assigned to the defendant debt collector who calculated the plaintiff’s unpaid balance to be $6,241.20. The defendant sought judgment against the plaintiff in that amount, plus interest, fees, and costs, and obtained a default judgment against the plaintiff after she did not respond. The defendant consequently obtained several writs of garnishment, all of which indicated that post-judgment interest had been added to the debt. Several years later, the plaintiff filed a putative class action alleging the defendant violated the FDCPA and the Michigan Regulation of Collection Practices Act (RCPA) by overstating how much she owed “and by impermissibly inflating [defendant’s] costs and the amount of interest it charged.” The state trial court dismissed the plaintiff’s class action claims with prejudice on the basis that Michigan Court Rules (MCR) preclude her from recovering statutory damages under the RCPA because the RCPA does not explicitly permit class actions. The court also dismissed her individual claims for lack of subject-matter jurisdiction.

On appeal, the plaintiff argued that the trial court erred when it dismissed her class action claims under MCR because she also sought equitable relief and actual damages; however, the Michigan Court of Appeals pointed to a provision in the MCR that states “[a]n action for a penalty or minimum amount of recovery without regard to actual damages imposed or authorized by statute may not be maintained as a class action unless the statute specifically authorizes its recovery in a class action.” The Court of Appeals explained that the RCPA is implicated under this rule because (i) it permits the recovery of statutory damages; and (ii) does not contain a provision explicitly permitting class actions, and as such, “plaintiff’s class action claims must be dismissed irrespective of the fact that she also sought injunctive relief, declaratory relief, and actual damages.” The Court of Appeals further held that even if the plaintiff attempted to plead individual claims, the case would not be allowed to proceed because the actual damages in this case are not high enough to meet the jurisdictional minimum amount in Michigan.