6th Circuit Kiboshes Defendant Zombie Debt Buyer, Named Consumer Plaintiffs (& Their Lawyers) From Screwing Over 133,000 Unnamed Class Action Members With Crappy Settlement In FDCPA-Robosigning Suit

In Cincinnati, Ohio, the Toledo Blade reports:

• A federal appeals court has reversed a lower court’s approval of a class-action lawsuit settlement that dealt with robo-signed [debt collection lawsuit] filings.
  
  Originally filed in 2008 in Erie County, the class-action suit challenged debt-collection agency Midland Funding’s practice of using false affidavits to initiate [debt collection lawsuits]. The affidavits claimed the person signing the paperwork had direct knowledge of the situation, when in fact they did not.
  
  Midland employees had been signing 200 to 400 computer-generated affidavits a day for use in debt-collection actions without any knowledge of the accounts.
  
  In August, 2011, a U.S. District judge approved a $5.2 million settlement in the Midland Funding vs. Brent case that would have paid $17.38 to each of the approximately 133,000 plaintiffs.(1)
  
  Eight plaintiffs objected to the ruling, however, arguing the settlement was improper and unfair.
  
  In a decision published [February 26, 2013], the 6th District Court of Appeals agreed, sending the case back to the district court.
  
  Among the points the appellate court raised in its reversal was that while the settlement exonerated the debts of the four named plaintiffs, [...] it did not exonerate the debts of the other plaintiffs.
  
  In fact, the settlement prevented unnamed class members from using Midland’s use of false affidavits against the collection agency in other lawsuits.
  
  The court said that virtually guaranteed Midland would be able to collect those debts.
  
  The court wrote that the “disparity in relief is so great that we conclude the district court abused its discretion in finding that the settlement was fair, reasonable, and adequate.”
  
  The settlement also provided a one-year injunction that required Midland of San Diego, to change its policies. The appellate court argued that Midland would be free to resume its “predatory practices” after that year, should it choose to do so.

Source: Appeals court agrees deal unfair to plaintiffs in Erie County robo-signing case.

For the ruling, see Vassalle v. Midland Funding LLC (6th Cir. February 26, 2013).

(1) From the court ruling:

• Midland agreed to pay $5.2 million into a common fund for the benefit of the class. From this fund, class counsel would receive attorney fees of no more than $1.5 million, and the costs of administration.
  
  From the remainder of the fund, eligible class members who timely returned a claim form would receive payments of $10.00 each. In fact, however, the response rate was such that each class member would receive $17.38.
  
  In addition, the four named plaintiffs were to receive $8,000 collectively.