N.D. Ill.: Claim Splitting Barred by FDCPA Even if Same Claim Occurred on to Two Separate, Unique Accounts

The legal doctrine of res judicata precludes a plaintiff from relitigating an identical claim based on the same set of facts against the same defendant when the first claim was already decided on the merits. In the context of the Fair Debt Collection Practices Act (FDCPA), a question recently arose in the Northern District of Illinois: whether res judicata applies to a second lawsuit filed by the same plaintiff against the same agency under a similar set of facts if the two suits involved two separate accounts placed with the agency.

According to the court in Horia v. Nationwide Credit and Collection, Inc., No. 17-cv-08355 (Jul. 31, 2018 N.D. Ill.), this particular situation triggers res judicata and qualifies as claim splitting by consumers.

Factual and Procedural Background

Plaintiff’s two separate accounts owed to two separate hospitals were placed with Nationwide Credit and Collection, Inc. (Nationwide) for collection. For both accounts:

• Plaintiff retained Community Lawyers Group;
• Community Lawyers Group sent a dispute letter on the same day to Nationwide;
• After the letters were sent, Plaintiff obtained his credit report and found that both accounts were not marked as disputed by Nationwide.

Community Lawyers Group filed a lawsuit on behalf of Plaintiff stating that failure to mark the account as disputed on his credit report violated the FDCPA, but this suit was filed regarding only one of the two accounts. The parties settled this matter and it was dismissed with prejudice.

Following this, Community Lawyers Group filed a second identical lawsuit on behalf of Plaintiff, except this lawsuit was based solely on the second account.

Nationwide brought a motion to dismiss this second lawsuit under the res judicata doctrine.

The Decision

The court agreed with Nationwide that, in the context of the FDCPA, the second suit was barred by res judicata.

Res judicata was created to promote judicial economy and prevent the parties and the court from having to spend time deciding the same issues over and over again. The doctrine has three requirements: the parties must be the same, the causes of action must be the same, and there must be a judgment on the merits of the first claim.

In this situation, the court found that all three elements were met. Both suits were filed by Plaintiff against Nationwide alleging identical claims that arose from essentially the same set of facts. A dismissal with prejudice is considered a decision on the merits. Due to this, the court found that the second suit’s claims should have been alleged in the initial suit and that the second suit should be dismissed accordingly.

The court noted that the FDCPA's cap on damages does not allow Plaintiff to get a second FDCPA award for the claim for the same set of facts. The FDCPA caps individual damages at $1,000 “regardless of whether the debt collector committed just one violation or multiple violations.” In this situation, the court found that even though the two claims arose out of two separate accounts, the facts of the two cases are so substantially similar -- identical dispute letters sent by Community Lawyers Group on the same day to Nationwide, who did not mark both accounts as disputed on the consumer's credit report -- they should have been brought under the first suit. If both claims were brought under the first suit, Plaintiff would only be entitled to only $1,000 even if this issue arose on two separate, unique accounts.

Based on the above, the court granted the motion to dismiss.

insideARM Perspective

It is no secret that FDCPA litigation is a volume business. While applying only to this narrow set of facts, the Northern District of Illinois provides further support to the damages cap shield provided by the FDCPA. The volume litigation nature of the FDCPA may never change, but it is comforting to see even consumer-friendly jurisdictions such as this one reinforce the protective perimeter in some way.