I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
Every week, AccountsRecovery.net brings you the most important news in the industry. But, with compliance-related articles, context is king. That’s why the brightest and most knowledgable compliance experts are sought to offer their perspectives and insights into the most important news of the day. Read on to hear what the experts have to say this week.
Judge Grants MSJ For Defendant in FDCPA Case Over Debt Amount
A District Court judge in Georgia has adopted a Magistrate Court’s recommendation and granted a defendant’s motion for summary judgment in two Fair Debt Collection Practices Act cases that argued that the balance of a judgment owed to the plaintiff by the creditor should have reduced the balance being sought by the defendant to collect on a separate debt. More details here.
WHAT THIS MEANS, FROM BRENDAN LITTLE OF LIPPES MATHIAS: Defendant was attempting to collect a balance from Plaintiff related to a lease agreement breached by Plaintiff. Plaintiff hired counsel and disputed the debt arguing, in part, that the balance sought was incorrect because Plaintiff did not see a credit for the $2,000 judgment Plaintiff obtained against Defendant in Maryland state court related to his claim for breach of implied warrant of habitability. Defendant responded to the dispute providing validation of the debt. At summary judgment, Plaintiff argued that because the balance being collected did not include a credit for the $2,000 Maryland judgment, Defendant violated Sections 1692e & f. Rejecting Plaintiff’s position, the Court determined that there was nothing in record to demonstrate that the jury in Maryland considered his past due rent and issued a judgment abating rent. Said differently, “there is no evidence that the outstanding amount on [Plaintiff’s] rental account was altered by the Maryland judgment and thus, no evidence that [Defendant] sought to recover a false amount in contravention of the FDCPA.” Plaintiff’s remaining positions, including those raised for the first time objecting to the Report and Recommendation and that Defendant’s setoff defense equated to collection activity in violation of the FDCPA, were rejected by the District Court.
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Judge Partially Dismisses Claims in FDCPA Case Over Duplicative Collection Suits
A District Court judge in New York has partially denied a motion to dismiss in a Fair Debt Collection Practices Act case, allowing claims of abusive debt collection practices to move forward after the defendant allegedly sued the plaintiff twice to recover the same debt. More details here.
WHAT THIS MEANS, FROM MARISSA COYLE OF FROST ECHOLS: Plaintiff sued defendants because they sought recovery for unpaid rent from two separate courts. Both suits requested recovery for unpaid rent for the same time period. Due to the duplicative nature of the suits, Plaintiff filed an action alleging various theories of liability, including the FDCPA and NY state law.
The Court found Plaintiff had standing to pursue her abusive debt collection claim. Plaintiff alleged she incurred parking charges (no free parking was available) and copying fees. Plaintiff also alleged lost wages resulting from arriving late to work and lost personal or sick days. The Court found these injuries to be concrete.
However, the Court determined Plaintiff did not have standing to pursue her misleading debt collection practices claim. Plaintiff claimed the least sophisticated consumer would be misled to believe he/she owed the same debt twice. Unfortunately for Plaintiff, she didn’t claim she was misled to believe she was responsible for the same debt twice. Ultimately, Plaintiff only alleged a potential injury.
When reviewing complaints, be sure you evaluate whether the plaintiff properly alleged standing alongside whether the complaint can withstand a motion to dismiss.
Appeals Court Upholds Ruling for Defendant in FDCPA Case Over Furnishing After Cease Request
The Court of Appeals for the Second Circuit on Friday affirmed the dismissal of a Fair Debt Collection Practices Act lawsuit filed against a debt collection company that was centered around alleged improper communication practices by the defendant after the plaintiff requested a cease in communication regarding an outstanding debt. More details here.
WHAT THIS MEANS, FROM NICK PROLA OF BASSFORD REMELE: In a short and sweet ruling from the Second Circuit, the Court followed long standing authority that credit reporting is not a communication with the consumer under the FDCPA. To hold otherwise would destroy credit reporting for the ARM industry and allow consumers to remove the reporting of collection accounts, simply by relaying a refusal to pay.
Buried in a footnote is an answer to a common question posed by agencies – whether a collector may respond to a consumer’s dispute and refusal to pay with substantiation of the debt. While agencies should still tread carefully when a clear refusal to pay without further exposition is received, intentionally vague disputes that are interpreted as requests for substantiation can be processed accordingly. Providing substantiation so that collection efforts can continue should not require a crystal ball. Common sense prevails here.
Appeals Court Vacates Summary Judgment Award in FDCPA Case, Dismisses for Lack of Standing Instead
In a case defended by David Grassi and Chad Echols at Frost Echols, along with Brad Armstrong at Moss & Barnett, the Court of Appeals for the Eighth Circuit has vacated a lower court’s summary judgment ruling in favor of a defendant in a Fair Debt Collection Practices Act case, only to have the case dismissed because the plaintiff lacked standing to sue in the first place. More details here.
WHAT THIS MEANS, FROM DALE GOLDEN OF MARTIN GOLDEN LYONS WATTS MORGAN: To many, the Eighth Circuit Court’s opinion may seem like just “another dismissal for lack of standing.” And while that was ultimately the court’s ruling, which resulted in the court vacating the District Court’s summary judgment in favor of the defendant, the opinion provides a good road map for getting FDCPA cases dismissed for lack of Article III jurisdictional standing. The only potential downside for the defendant here is likely the possibility that the plaintiff can refile in state court. While I don’t know the specifics of Minnesota state law on equitable tolling of the statute of limitations, many states have liberal laws that provide no real barriers to refiling in state court cases dismissed in federal court due to lack of standing, even if the statute of limitations would have otherwise expired.
Judge Dismisses Most Claims in FDCPA Class-Action
A District Court judge in Virginia has dismissed the majority of claims against several defendants in a Fair Debt Collection Practices Act class-action lawsuit, but allowed one key claim against a collection agency to proceed. More details here.
WHAT THIS MEANS, FROM ISSA MOE OF MOSS & BARNETT: This case has a relatively complicated fact pattern and lengthy opinion, which means it’s interesting for lawyers but likely much less so for business folks. I’ll do my best to highlight the interesting stuff for readership. To that end, I provide an oversimplified explanation of the case below. I apologize for the lengthy analysis. If I had more time, I would have written a shorter one.
The plaintiff sued a handful of entities, including a bank, trusts that purchased student loans, and their debt collectors, for violations of the FDCPA and Virginia Consumer Protection Act based on their allegedly impermissible attempts to collect defaulted student loans from her. The plaintiff filed the lawsuit as a class action, claiming the defendants did not have the right to collect any sums from her or class members because the accounts lacked the documentation necessary to prove the trusts’ ownership of the loans. The defendants moved to dismiss the claims on various grounds, including that certain claims were time-barred and that plaintiff lacked prudential standing to assert the claims to the extent they were premised on alleged misrepresentations that the trusts’ assignment of the student loans was valid.
In about 40 pages of legal analysis, which would send most non-attorneys (and some attorneys as well) to Snoozeville, the district court determined that the defendants were almost entirely correct, granting motions to dismiss all but one claim. Several claims fell victim to the FDCPA’s one-year statute of limitations. Nothing incredibly exciting to discuss on that front.
The claims dismissed on prudential standing grounds, however, presented a much more interesting analysis in my opinion. They were based on the plaintiff’s assertion that the trusts shouldn’t be able to collect her student loans because they could not show an appropriate chain of title. The court dismissed these claims on the grounds that the plaintiff lacked prudential standing to challenge the validity of the assignments in this manner. I won’t do a deep dive on prudential standing, but the basic proposition is that a plaintiff must assert their own legal rights and interests and can’t rest their claims on the legal rights or interests of third parties. And under Virginia law, where a plaintiff is neither a party to nor intended beneficiary of a loan assignment, they lack standing to dispute the assignment’s validity. However, that’s precisely what the plaintiff was trying to do here. She was neither a party to nor intended beneficiary of the student loan assignments to the trusts, yet she brought claims for violations of consumer protection laws based on alleged misrepresentations regarding the validity of the assignments (and by extension, the trusts’ ability to collect the loans). The court was not buying what the plaintiff was selling. Claims dismissed for lack of prudential standing!
What about the claim that survived? Well, in a decision I can only describe as a head-scratcher, the court refused to dismiss an FDCPA claim based on the proposition that a letter offering to resolve (or settle) an out-of-statute debt at a discount could mislead a consumer into believing the time-barred debt is legally enforceable (and that legal action is possible) where the letter also states that the debt collector is “not obligated to renew the offer.” This compliance analysis is already long enough, so I won’t explain here why I think that holding is absurd and the result of a poor analysis of the plain meaning of words like “settle”. Even if I did, I’d probably get overruled by Wikipedia, so what’s the point in trying. And for those of you who didn’t catch it, that’s a jab at the 7th Circuit’s 2014 McMahon v LVNV Funding, LLC decision. 😉
If you want more on the opinion, you’ll have to give it a read yourself. Make sure you bring a cup of coffee, though. You might need the caffeine to get through it. Happy reading!
Oklahoma District Court Judge Dismisses Class-Action Component of FDCPA Suit
A District Court judge in Oklahoma has dismissed the class-action component of a Fair Debt Collection Practices Act lawsuit, while also dismissing some of the claims, after the defendant was accused of not sending a collection lawsuit summons to the plaintiff’s correct address, which it allegedly had. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: The plaintiff in Downs v Robinson Hoover and Fudge, PLLC (“RHF”) claimed that there was ineffective (“sewer service”) in a collection lawsuit that resulted in a default judgment. She asserted multiple FDCPA counts and sought to certify a class. RHF filed a R. 12(b)(6) motion. The court denied the motion as to plaintiff’s individual claims relating to the supposed improper service.
The more interesting part of the opinion has to do with the class aspect. RHF moved to dismiss the class claim, contending that the definition was flawed in numerous ways. The court discussed how there is uncertainty on what rules and standards apply when facing a challenge to a class definition at the early pleading stage. It ultimately side steps some of these procedural issues, determining that the class definition contained a few fundamental flaws.
It is unusual to move to dismiss a class claim with the initial responsive pleading. This is a helpful ruling that gives support and some guidance on how to make an early challenge to a flawed class definition.
I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
