I’m thrilled to announce that Frost Echols is the new sponsor for the Compliance Digest. Frost Echols reputation has been built on aggressively protecting the rights of businesses throughout our local jurisdictions. Founding partners, Mike Frost and Chad Echols, developed a deep understanding of regulatory compliance, commercial litigation and business operations through years of advising executives in the collection industry. We are committed to a strategic, economic, and aggressive approach to your legal representation.
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 After Borrower Tried to Force Arbitration Mid-Litigation
A District Court judge in New Jersey has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act case using a doctrine I’ve never heard of before. More details here.
WHAT THIS MEANS, FROM JEFF TURNER OF SURDYK DOWD & TURNER: There’s a saying that if you throw enough “stuff” against the wall, some of it will stick. Unfortunately for the Plaintiff in Thang Duong v. Pressler Felt & Warshaw, LLP, the United States District Court for the District of New Jersey proved to be a Teflon wall for everything Plaintiff tossed up to try and prove that Defendant violated the FDCPA.
The case had its origin in a collection action filed against Plaintiff. Plaintiff failed to answer or otherwise appear, and a default judgment was entered against Plaintiff. Plaintiff ultimately answered and then waited until after the trial date to request arbitration. There were additional filings and proceedings that took place in state court and the filing of the lawsuit in federal court followed.
Plaintiff filed a motion for summary judgment, arguing Defendant’s conduct in the underlying state court debt collection action violated the FDCPA. The Court denied Plaintiff’s motion, finding that Plaintiff failed to demonstrate Defendant’s conduct was unconscionable. The Defendant subsequently filed a motion for summary judgment, which led to the most recent opinion of the Court.
In the motion for summary judgment, Defendant argued it was entitled to summary judgment under the law of the case doctrine, because the Court’s opinion overruling Plaintiff’s motion for summary judgment established that Defendant’s conduct did not violate the FDCPA. Plaintiff opposed Defendant’s motion and of course disagreed that that the law of the case entitled Defendant to summary judgment.
For all the non-legal scholars out there, you probably don’t see the law of the case doctrine discussed much, but it’s “fun” to see it come up every now and then. As the Court explained, the law of the case doctrine provides that “when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages in the same case.” However, the doctrine is discretionary. In this case, the court declined to apply the doctrine, noting that cross-motions require evaluation of each party’s motion by viewing facts in a light most favorable to the nonmoving party.
The Court then addressed numerous arguments set forth by Plaintiff as Plaintiff attempted to show that a viable claim existed under the FDCPA. On review, the Court concluded that the Cardholder Agreement and FAA did not permit plaintiff to unilaterally determine the validity of the arbitration request; that the Defendant did not violate the FDCPA by allowing the state court to enter default judgment; that Defendant’s arguments regarding arbitration waiver had a reasonable basis in law; that Defendant’s motion to reinstate and transfer to small claims court did not violate AAA Rules or the Cardholder Agreement; and that Defendant’s attempt to reopen the AAA arbitration was permitted under rules and agreement.
As such the Court granted Defendant’s motion for summary judgment, finding no reasonable trier of fact could find for plaintiff because the undisputed facts showed that Defendant’s advocacy was supported by the Cardholder Agreement, FAA, and the New Jersey Rules of Court. None of the action taken by Defendant was unconscionable under FDCPA. Thus, despite Plaintiff’s attempts to the contrary, no claims stuck to the proverbial litigation wall.
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Judge Says Only Licensed Attorneys Can Give One-on-One Advice in Collection Lawsuits
A District Court judge in New York has dismissed a lawsuit challenging the state’s ban on non-lawyers providing individualized legal advice, ruling that the state’s long-standing restrictions on the unauthorized practice of law can be applied to a program designed to help consumers respond to debt collection lawsuits. The decision represents the latest chapter in a closely watched case that could have reshaped who is allowed to provide guidance to consumers facing collection litigation. More details here.
WHAT THIS MEANS, FROM MIKE FROST OF FROST ECHOLS: Plaintiff Upsolve, Inc., is a New York-chartered nonprofit “with the mission of helping Americans access their civil legal rights for free.” The organization provides free online education on topics including debt collection defense, student loans, wage garnishment, and evictions. It also provides free resources to self-represented Chapter 7 bankruptcy filers and “invests heavily in public advocacy to raise awareness around civil rights injustices.”
This lawsuit involved an Upsolve, Inc. initiative called the American Justice Movement (“AJM”). The AJM program trains and supervises “Justice Advocates,” who are not lawyers, but provide legal advice to various consumers.
The judicial ruling reinforces that only licensed attorneys can provide individualized legal advice, which puts clear limits on what Justice Advocates, sovereign citizens, and assignment of claims counsel can do without engaging in the unauthorized practice of law. For sovereign citizen–style groups, which often promote personalized legal tactics or defenses in court, the impact is more direct. The decision strengthens the state’s ability to shut down or penalize non-lawyers who guide individuals on how to respond to lawsuits or filings, making it harder for such groups to legally offer one-on-one litigation advice. Overall, the ruling draws a sharper line between general guidance (allowed) and individualized legal strategy (restricted to attorneys).
Appeals Court Affirms Summary Judgment in FCRA Case Over Medical Debt Reporting
The Court of Appeals for the Ninth Circuit has affirmed a ruling in favor of a defendant in a Fair Credit Reporting Act lawsuit over the accuracy of the information being furnished and the reasonableness of a dispute investigation of a medical debt incurred by the plaintiff’s husband. More details here.
WHAT THIS MEANS, FROM AKLEELA WHITE OF HINSHAW CULBERTSON: The Lovelady decision signals that there is real latitude for reporting debts as “joint” in a community property state that creates shared liability for spouses. In community property states, such as Arizona, furnishers and CRAs can rely on statutory spousal liability for necessaries, particularly medical expenses, to justify joint account designations. The court relied on Samaritan Health System v. Caldwell, which confirmed that necessary medical care is presumed to benefit the marital community, and that creditors can pursue all community property to satisfy the debt. Furnishers should keep in mind that joint liability reporting is defensible where state law supports it. Those who furnish accounts in community property states should document the state-law basis for joint liability designations and make sure their reporting codes match the applicable statutory framework. Consumers disputing such designations need to show the report is either factually false or would materially mislead a reasonable creditor, a high bar after Lovelady.
Judge Dismisses FDCPA Case Challenging Collection Lawsuit but Declines to Sanction Plaintiff
A District Court judge in New Jersey has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act, while denying the defendant’s motion for sanctions against the plaintiff, who claimed the debt was void and the defendant violated the statute for filing a collection lawsuit seeking to recover the debt. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER LOCKE: In Reeves v. Pressler, Felt & Warshaw, LLP, the Plaintiff alleged that a law firm violated the FDCPA by initiating a lawsuit in state court to collect a debt when the Plaintiff alleged that the debt was void. The court relied on recent Third Circuit case law to evaluate whether Plaintiff had standing based on the “informational injury” doctrine, which suggests that omitting statutorily required information can result in a cognizable injury. To survive a motion to dismiss on these grounds, a plaintiff must allege that they were denied information to which they were legally entitled, and that the denial caused adverse consequences related to the purpose of the statute.
The court dismissed Plaintiff’s complaint without prejudice, finding that Plaintiff failed to state an injury-in-fact and therefore lacked Article III standing. Although the complaint alleged that the lawsuit in state court deprived Plaintiff of “truthful, non-misleading” information in connection with the collection of the debt, it failed to specify what legally required information was denied. Further, the court found that Plaintiff’s conclusory statement about suffering “emotional damages like stress, anxiety, embarrassment, and financial loss including having to pay for court fees” was insufficient to show that Plaintiff experienced adverse consequences relating to the purposes of the statute, even assuming arguendo that the statement satisfied the causation element. Aside from the fact that the complaint failed to include any supporting factual allegations, these damages did not relate to the purpose of the FDCPA. The court also noted that nothing in the complaint indicated that Plaintiff could not pay her debt because of the lawsuit, or that she suffered downstream financial consequences.
Frost Echols reputation has been built on aggressively protecting the rights of businesses throughout our local jurisdictions. Founding partners, Mike Frost and Chad Echols, developed a deep understanding of regulatory compliance, commercial litigation and business operations through years of advising executives in the collection industry. We are committed to a strategic, economic, and aggressive approach to your legal representation.
