A Washington Appeals Court has overturned the dismissal of a lawsuit against a collection law firm that was accused of violating a state collection law, ruling that the law firm’s actions as a collection agency were outside the scope of the litigation privilege. The ruling draws a distinction between actions taken by a law firm in its role as legal counsel and those taken in its capacity as a debt collector, which potentially opens the door for consumer protection claims against firms operating in dual roles.
The background: In 2021, a law firm that is also a licensed collection agency in the state of Washington sued an individual to collect on a $92,000 debt allegedly tied to a failed business. The plaintiff in the case claimed he had no connection to the debt and therefore was not liable for it. The firm initially sent documents linking the consumer to the debt, but the documents were not signed by the individual.
- The firm proceeded with litigation and ultimately obtained a default judgment.
- When the consumer learned of the judgment, he sought to have it vacated and was successful.
- Then, in 2024, the consumer filed suit under the Washington Consumer Protection Act, alleging that the firm’s debt collection activities violated the Washington Collection Agency Act. A state court judge dismissed the case, citing litigation privilege and a lack of unfair or deceptive acts. The consumer appealed the ruling.
The ruling: The appellate court reversed the trial court’s dismissal, holding that:
- The litigation privilege does not apply to a law firm’s conduct as a debt collector when it functions primarily as a collection agency.
- The plaintiff’s complaint, alleging that the firm sought and obtained judgment and fees on a debt he did not owe, sufficiently alleged a violation of the CPA under the WCAA.
- In rejecting the firm’s arguments, the court wrote that “[r]edress for the harms alleged…is found in the WCAA, and applying the litigation privilege here renders [the law firm’s] improper debt collection conduct entirely impossible to address.”
