The Fifth Circuit Court of Appeals has overturned a lower court’s dismissal of a lawsuit which ruled that an attempt to recover money that was overpaid as part of a grant program related to recovery efforts following Hurricanes Katrina and Rita do not classify as debts under the Fair Debt Collection Practices Act and given the plaintiff’s suit a second chance.
A copy of the ruling in the case of Calogero v. Shows, Cali & Walsh can be accessed by clicking here.
Without digging too far into the weeds, the plaintiff received $33,392.68 in grants from the state of Louisiana to rebuild her house after Hurricanes Katrina and Rita. Under the terms of the grant, the plaintiff agreed to repay the state if she received any money from her insurance or the Federal Emergency Management Agency. A decade later, the plaintiff received a collection letter attempting to recover $4,600 in grant overpayments. The defendant identified itself as a debt collector in the letter. The plaintiff disputed the debt and the defendant sent another letter that included a breakdown of the amount owed.
The plaintiff filed suit, alleging the defendant violated a number of sections of the FDCPA. The defendant successfully moved to have the case dismissed, arguing the debts it was trying to collect do not fall under the definition of “debt” within the FDCPA. The plaintiff appealed.
In this case, the Fifth Circuit sought to determine whether the money that was given to the plaintiff “aris[es] out of a transaction” as required under the FDCPA. Using the Third Circuit’s three-part test, the Fifth Circuit determined that the funds do meet the definition of “debt” under the FDCPA and overturned the dismissal of the suit.
