In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13‐2251
GWENDOLYN PHILLIPS,
Plaintiff‐Appellant,
v.
ASSET ACCEPTANCE, LLC,
Defendant‐Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 09 C 7993 — Gary S. Feinerman, Judge.
____________________
ARGUED NOVEMBER 8, 2013 — DECIDED DECEMBER 2, 2013
____________________
Before POSNER, ROVNER, and WILLIAMS, Circuit Judges.
POSNER, Circuit Judge. We have granted the plaintiff’s pe‐
tition for leave to appeal the district court’s denial of her mo‐
tion to certify a class.
The plaintiff, a consumer, was sued by Asset Acceptance,
a debt collector that is the defendant in this case, for a debt
arising from her purchase of natural gas for household use.
She riposted with the present suit, which charges that Asset
2 No. 13‐2251
Acceptance sued her after the statute of limitations on the
creditor’s claim had run. If this is true, Asset Acceptance’s
suit violated the Fair Debt Collection Practices Act, 15 U.S.C.
§§ 1692 et seq.; see §§ 1692e, 1692f; Huertas v. Galaxy Asset
Mgmt., 641 F.3d 28, 32–33 (3d Cir. 2011) (per curiam); Harvey
v. Great Seneca Financial Corp., 453 F.3d 324, 332–33 (6th Cir.
2006); Herkert v. MRC Receivables Corp., 655 F. Supp. 2d 870,
875–76 (N.D. Ill. 2009). The complaint contains supplemental
claims under Illinois and other states’ laws, making similar
allegations.
The reason for outlawing stale suits to collect consumer
debts is well explained in Kimber v. Federal Financial Corp.,
668 F. Supp. 1480, 1487 (M.D. Ala. 1987):
As with any defendant sued on a stale claim, the pas‐
sage of time not only dulls the consumerʹs memory of the
circumstances and validity of the debt, but heightens the
probability that she will no longer have personal records
detailing the status of the debt. Indeed, the unfairness of
such conduct is particularly clear in the consumer context
where courts have imposed a heightened standard of
care—that sufficient to protect the least sophisticated con‐
sumer. Because few unsophisticated consumers would be
aware that a statute of limitations could be used to defend
against lawsuits based on stale debts, such consumers
would unwittingly acquiesce to such lawsuits. And, even if
the consumer realizes that she can use time as a defense,
she will more than likely still give in rather than fight the
lawsuit because she must still expend energy and re‐
sources and subject herself to the embarrassment of going
into court to present the defense; this is particularly true in
light of the costs of attorneys today.
No. 13‐2251 3
Phillips moved to certify a plaintiff class consisting of
debtors sued by Asset Acceptance for debts arising from the
sale of natural gas to consumers—sued, as Phillips had been
sued, after the statute of limitations had run. She had filed
her suit at the tail end of 2009 and her motion for class certi‐
fication in April of the following year. By March 2011 the
motion was ripe for the district judge to rule on, but for un‐
explained reasons he didn’t rule for 25 more months. When
finally he did, he denied the motion, precipitating the peti‐
tion for leave to appeal.
According to data compiled for use in briefing the mo‐
tion, the class that the plaintiff wants certified has 793 mem‐
bers, of whom 343 reside in Illinois; there is as yet virtually
no information about the others. Of the 343, 290 were sued
between four and five years after the claims against them
accrued (debt‐collection claims accrue on the date that the
debt sued on became delinquent), and 45 were sued more
than five years after accrual. We don’t know the situation of
the remaining 8 Illinois debtors (343 – (290 + 45) = 8), though
in its brief filed in the district court opposing class certifica‐
tion the defendant said they’d been sued within four years
of accrual. Of the 45, 23 were served and 22 not; the corre‐
sponding figures for the 290 are 93 and 197 but the
served/not served figures for the 290 played no part in the
district court’s analysis.
The statute of limitations applicable to the 335 (343 – 8) Il‐
linoisans was either four or five years; the plaintiff says four,
the defendant five. Indisputably the plaintiff was sued more
than five years after the claim against her accrued. There‐
fore, the district judge reasoned, she was indifferent to
whether the statute of limitations was four or five years—the
4 No. 13‐2251
suit against her was untimely in either event—and she thus
lacked an adequate incentive to litigate on behalf of the 290
class members who were victims of untimely suits only if the
statute of limitations is four years. So the judge discarded
the 290, which shrank the class to 45—and then he shrank it
further, to 23, by ruling that suing to collect a debt but failing
to serve the defendant does not violate the Fair Debt Collec‐
tion Practices Act even if the suit is untimely. No service, no
harm, he thought, because without service the court in
which a suit is filed does not obtain jurisdiction over the de‐
fendant.
The judge capped his analysis by ruling that 23 was too
small a number of claimants to justify a class action; with a
number so small, joinder by the plaintiff, he ruled, would be
an adequate alternative to a class action. This ruling knocked
out the Illinois state law claims, but not necessarily the fed‐
eral ones, as they are not limited to Illinois residents—
remember that the total membership of the proposed class is
793, and thus fewer than half are Illinoisans. But because
there was as yet no information about the Ausländers (such
as how many of them had been sued more than 5 years after
their debts had become delinquent), the judge would not ex‐
clude the possibility that the federal claims (that is, the
claims based on the Fair Debt Collection Practices Act) were
sufficiently numerous to justify certification. But presumably
in that event—though the judge didn’t mention this wrin‐
kle—either the named plaintiff (Phillips) would have to be
replaced by another class member, one who unlike Phillips
had been sued within five years of the accrual of the credi‐
tor’s claim, or the other class member would have to be
made a second class representative.
No. 13‐2251 5
We are skeptical that Phillips is not an adequate repre‐
sentative of the debtors sued more than four but fewer than
five years after the creditors’ claims accrued, just because her
claim is solid whether the statute of limitations is four years
or five. To question her adequacy is to be unrealistic about
the role of the class representative in a class action suit. The
role is nominal. Dechert v. Cadle Co., 333 F.3d 801, 802–03 (7th
Cir. 2003); Culver v. City of Milwaukee, 277 F.3d 908, 910 (7th
Cir. 2002); cf. Amchem Products, Inc. v. Windsor, 521 U.S. 591,
625–26 (1997). The class representative receives modest
compensation (what is called an “incentive fee” or “incen‐
tive award”) for what usually are minimal services in the
class action suit, see Espenscheid v. DirectSat USA, LLC, 688
F.3d 872, 876–77 (7th Cir. 2012); Theodore Eisenberg & Geof‐
frey P. Miller, “Incentive Awards to Class Action Plaintiffs:
An Empirical Study,” 53 UCLA L. Rev. 1303, 1308 (2006)—
which is in fact entirely managed by class counsel. For “class
action attorneys are the real principals and the class repre‐
sentative/clients their agents” in class action suits. 1 William
B. Rubenstein, Newberg on Class Actions § 3:52, p. 327 (5th ed.
2011); see Mars Steel Corp. v. Continental Illinois Nat’l Bank &
Trust Co., 834 F.2d 677, 678 (7th Cir. 1987); Deposit Guaranty
Nat’l Bank v. Roper, 445 U.S. 326, 339 (1980); Martin H. Re‐
dish, “Class Actions and the Democratic Difficulty: Rethink‐
ing the Intersection of Private Litigation and Public Goals,”
2003 U. Chi. Legal F. 71, 105. If the suit is successful, they re‐
ceive much greater compensation than the class representa‐
tive(s).
But Phillips’s (modest) services to the class will be great‐
er, and her incentive award likely therefore to be greater if
the suit is successful, the more complex the class is. And it
will be more complex if the class includes the four‐year as
6 No. 13‐2251
well as the five‐year debtors. So she does have an incentive
to assist in the claims of the four‐year debtors, even though
any attorneys’ fees awarded by the court (if they win) will
dwarf her compensation.
A greater concern is that if Phillips has nothing to gain
from establishing that the governing statute of limitations is
4 years, her claim is not typical of the claims of the entire
class, as also required by Fed. R. Civ. P. 23(a)(3); see General
Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 155–56
(1982). Were there doubt about Phillips’s adequacy as class
representative—and given that there are grounds for doubt
about the typicality of her claim—the judge could have cre‐
ated a subclass consisting of the four‐year class members
and directed class counsel to designate a representative for
it. There was no reason to refuse to certify a class. Moreover,
if the statute of limitations is four years, all the Illinois class
members (and probably the rest of the 793 class members as
well) are in the same boat—sued after the statute of limita‐
tions on the creditors’ claims had run. In that event the issue
of typicality (along with the non‐issue of adequacy) will
evaporate. So the judge, if unwilling (as he was) to appoint a
second class representative, should have ruled on whether
the statute of limitations was four years or five.
The defendant argues that it would have been wrong for
the judge to do so because statute of limitations is a merits
issue rather than one of class action procedure. In this case,
actually, it’s both, because resolving it would determine the
composition of the class and might (if the answer shrank the
class to a size at which a joinder of plaintiffs would be a fea‐
sible alternative) determine whether the suit could be main‐
tained as a class action at all. See Amgen Inc. v. Connecticut
No. 13‐2251 7
Retirement Plans & Trust Funds, 133 S. Ct. 1184, 1194–95
(2013); Wal‐Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551–52
(2011); American Honda Motor Co. v. Allen, 600 F.3d 813, 815
(7th Cir. 2010) (per curiam); Szabo v. Bridgeport Machines, Inc.,
249 F.3d 672, 676–77 (7th Cir. 2001). Since it is a pure ques‐
tion of law, the district judge could answer it without requir‐
ing additional discovery or resolving factual disputes.
And for the same reason we can rule on it. The defendant
argues, no, the district judge is entitled to rule on it first.
That’s wrong. Appellate courts decide pure questions of
law—that is, questions of law the answers to which do not
depend on resolving factual disputes—without deference to
the answers given by trial judges (“de novo,” as the cases
say). Pierce v. Underwood, 487 U.S. 552, 557–58 (1988); Superl
Sequoia Ltd. v. Carlson Co., 615 F.3d 831, 833 (7th Cir. 2010);
9C Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 2588, pp. 440–58 (3d ed. 2008). There is no
obligation to allow a district court to opine on an issue when
the appellate court has no obligation to defer, to even the
slightest extent, to the district court’s view of the matter.
With the focus of the litigation to date on debt‐collection
suits against Illinois residents, the choice is between Illinois’
four‐year statute of limitations for suits on sale contracts, 810
ILCS 5/2‐725(1), and its five‐year statute of limitations for
suits on unwritten contracts. 735 ILCS 5/13‐205. It’s true
though ignored by the parties that the statute of limitations
for suits on written contracts is ten years, 735 ILCS 5/13‐206,
and the natural gas contracts on which the defendant’s debt‐
collection suits were based are written. But both the five‐
year and the ten‐year statutes of limitations have an excep‐
tion for contracts governed by section 2‐725 of the Uniform
8 No. 13‐2251
Commercial Code (codified for Illinois in 810 ILCS 5/2‐725),
the four‐year statute. So that’s the one that governs sales
contracts.
The defendant argues that a sale of natural gas pursuant
to utility contracts, the type of contract involved in this case,
is a mixed goods‐and‐services sale; natural gas to be usable
must be delivered, and the usual mode of delivery is by pip‐
ing it into the user’s premises. Mixed goods‐and‐services
sales are treated as sales of services when the element of ser‐
vice predominates, Belleville Toyota v. Toyota Motor Sales,
U.S.A., Inc., 770 N.E.2d 177, 194–95 (Ill. 2002), and sales of
services are not subject to UCC § 2‐725 because Article 2 is
limited (“unless the context otherwise requires”) to “transac‐
tions in goods.” 810 ILCS 5/2‐102. Sales of goods, however,
being transactions in goods, are governed by Article 2, and
specifically by section 2‐725—and the UCC defines natural
gas as a good. 810 ILCS 5/2‐107(1); see Prenalta Corp. v. Colo‐
rado Interstate Gas Co., 944 F.2d 677, 678, 687 (10th Cir. 1991);
Pennzoil Co. v. FERC, 645 F.2d 360, 387 (5th Cir. 1981); Energy
Marketing Services, Inc. v. Homer Laughlin China Co., 186
F.R.D. 369, 371, 374 (S.D. Ohio 1999), affirmed, 229 F.3d 1151
(6th Cir. 2000); Stanton v. National Fuel Gas Co., 1 Pa. D. & C.
4th 223, 233–34 (Com. Pl. 1987); In re Pilgrim’s Pride Corp., 421
B.R. 231, 240–41 (Bankr. N.D. Tex. 2009). The drafters must
have been aware that natural gas is usually delivered to
homes and other places that use natural gas in pipes. So a
good can be delivered in a pipe.
The defendant argues that it sued some of the class
members to collect debts for both gas and electric service,
and there is a split of authority over whether electric service
(like water service) should be considered the sale of a good
No. 13‐2251 9
or of a service. Compare GFI Wisconsin, Inc. v. Reedsburg Util‐
ity Comm’n, 440 B.R. 791, 797–802 (W.D. Wis. 2010), and
Helvey v. Wabash County REMC, 278 N.E.2d 608, 609–10 (Ind.
App. 1972), with In re Pilgrimʹs Pride Corp., supra, 421 B.R. at
238–40, and Williams v. Detroit Edison Co., 234 N.W.2d 702,
705–06 (Mich. App. 1975). This is not true of the sale to Phil‐
lips, however, or the sales to any other Illinois class mem‐
bers. As far as the record indicates, the only utility company
serving Illinois customers that the defendant purchased
debts from to collect, a company called Nicor, sells only gas.
Anyway it should make no difference whether class mem‐
bers were sued just to collect money owing for the purchase
of gas or money owing for the purchase of electricity as well.
The two costs are separated on the customer’s bill.
All the class members, therefore, are in the same boat,
having been sued more than four years after their debts ac‐
crued—unless the judge was right to carve out debtors who
were not served with the untimely complaints. His ground
was that if there’s no service, the debtor‐defendant has noth‐
ing to fear. That’s true sometimes, but not always—probably
not often. “[F]iling a complaint may cause actual harm to the
debtor: a pending legal action, even pre‐service, could be a
red flag to the debtor’s other creditors and anyone who runs
a background or credit check, including landlords and em‐
ployers. The debt collector may also use the pending legal
action to pressure a debtor to pay back the debt informally,
without serving the complaint—precisely the type of unfair
practice prohibited by the FDCPA. See 15 U.S.C. § 1692e(5)
(‘The threat to take any action that cannot legally be taken or
that is not intended to be taken.’).” Tyler v. DH Capital
Mgmt., Inc., No. 13‐5021, 2013 WL 5942072, at *6 (6th Cir.
Nov. 7, 2013).
10 No. 13‐2251
But even if no debtors were ever harmed by being sued
but not served, the district judge would have been wrong to
exclude from the class the debtors who were not served.
Proof of injury is not required when the only damages
sought are statutory. Murray v. GMAC Mortgage Corp., 434
F.3d 948, 952–53 (7th Cir. 2006); Bartlett v. Heibl, 128 F.3d 497,
499 (7th Cir. 1997); Baker v. G.C. Services Corp., 677 F.2d 775,
780–81 (9th Cir. 1982). And those appear to be the only dam‐
ages sought in the federal portion of this case. The Fair Debt
Collection Practices Act does not specify the amount of stat‐
utory damages to be awarded, but it imposes ceilings: in
class actions the named plaintiff may receive no more than
$1,000 and the class as a whole no more than the lesser of ei‐
ther $500,000 or 1 percent of the debt collector’s net worth.
15 U.S.C. § 1692k(a)(2)(B). But the controlling consideration,
so far as any potential difficulty in computing damages to
class members for violation of the Fair Debt Collection Prac‐
tices Act is concerned, is that there does not appear to be any
ground for awarding a different amount to different class
members.
Actual damages are, however, sought in at least one of
the supplemental state law claims (the Illinois claim—and
may be sought in others as well), and that’s a complicating
factor, as actual damages are bound to vary across class
members. But we said in Butler v. Sears, Roebuck & Co., 727
F.3d 796, 800–01 (7th Cir. 2013), that “a class action limited to
determining liability on a class‐wide basis, with separate
hearings to determine—if liability is established—the dam‐
ages of individual class members, or homogeneous groups
of class members, is permitted by Rule 23(c)(4) [of the Feder‐
al Rules of Civil Procedure] and will often be the sensible
way to proceed. … It would drive a stake through the heart
No. 13‐2251 11
of the class action device, in cases in which damages were
sought rather than an injunction or a declaratory judgment,
to require that every member of the class have identical
damages. If the issues of liability are genuinely common is‐
sues, and the damages of individual class members can be
readily determined in individual hearings, in settlement ne‐
gotiations, or by creation of subclasses, the fact that damages
are not identical across all class members should not pre‐
clude class certification. Otherwise defendants would be
able to escape liability for tortious harms of enormous ag‐
gregate magnitude but so widely distributed as not to be
remediable in individual suits.”
Another complicating factor in this case, however, is that
different states in which class members reside may differ
with respect to their laws governing suits against debt col‐
lectors. But whether because of these or any other factors
any or all of the supplemental state law claims should be re‐
tained in this class action, compartmentalized by the crea‐
tion of subclasses, or relinquished altogether, is not before
us.
To conclude: all 343 Illinois residents appear to be proper
class members, adequately represented by plaintiff Phillips
because the applicable statute of limitations is four years, so
that all the debt collection suits against the class members
were time‐barred and hence violated the Fair Debt Collec‐
tion Practices Act (and perhaps Illinois law as well, though
we do not opine on that question)—unless it should turn out
that the defendant can dock in the safe harbor of 15 U.S.C.
§ 1692k(c) (“a debt collector may not be held liable in any
action brought under this subchapter if the debt collector
shows by a preponderance of evidence that the violation was
12 No. 13‐2251
not intentional and resulted from a bona fide error notwith‐
standing the maintenance of procedures reasonably adapted
to avoid any such error”); or that the defendant has defens‐
es, such as equitable tolling or equitable estoppel, to the bar
of the statute of limitations. But all that remains for the dis‐
trict judge to do regarding certification is to determine the
proper scope of the class. It need not be limited to Illinois
residents or to claims under the Fair Debt Collection Practic‐
es Act. But how far it extends (and whether subclasses
should be created for residents of different states because of
differences among state laws) remains to be determined.
The denial of class certification is reversed and the case
returned to the district court for further proceedings con‐
sistent with this opinion.
REVERSED AND REMANDED.