Reuters: Hot Stocks: UPDATE 1-U.S. appeals court voids Encore debt settlement

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UPDATE 1-U.S. appeals court voids Encore debt settlement Feb 26th 2013, 15:41 Tue Feb 26, 2013 10:41am EST * Judges: Settlement not fair or reasonable or adequate * Consumer allegations of false, "robo-signed" affidavits (Adds details from decision, stock price, case citation) Feb 26 (Reuters) - A federal appeals court on Tuesday voided a controversial $5.2 million settlement intended to resolve allegations that Encore Capital Group Inc had used illegal and deceptive tactics to collect debts from roughly 1.44 million consumers. The 6th U.S. Circuit Court of Appeals said U.S. District Judge David Katz in Toledo, Ohio, abused his discretion in finding that the settlement with Encore and its Midland Funding and Midland Credit Management units was "fair, reasonable and adequate," and in certifying a nationwide settlement class. It sent the case back to the lower court for further proceedings. San Diego, California-based Encore's settlement had won court approval in August 2011. It was intended to resolve claims that Midland relied on false or "robo-signed" affidavits to collect consumer debt that was not owed or was already paid off. Such affidavits are more commonly associated with the mortgage industry. Spokesmen for Encore were not immediately available for comment. The company's shares traded down $1.89, or 6 percent, at $29.45 in morning trading on the Nasdaq. They had been little changed before news of the decision surfaced. Thirty-eight state attorneys general led by New York's Eric Schneiderman had opposed the settlement. They called the payout "paltry" relative to the harm to consumers, and said the accord stripped consumers of their right to defend against existing Midland lawsuits. In voiding the settlement, Judge R. Guy Cole wrote for a unanimous three-judge 6th Circuit panel that the relief offered to most class members was "perfunctory at best," and included only "de minimis" financial relief for many people believed to owe hundreds or thousands of dollars. He also said an injunction limiting Midland's activities also offered "little value" because it lasted only one year, did not prohibit false affidavits, and offered only future relief "that likely does not benefit class members at all." The case is Vassalle et al v. Midland Funding LLC et al, 6th U.S. Circuit Court of Appeals, Nos. 11-3814, 11-3961, 11-4016, 11-4019 and 11-4021. (Reporting by Jonathan Stempel in New York; Editing by Gerald E. McCormick and Grant McCool) Link this Share this Digg this Email Reprints

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