Appeals Court Reverses Summary Judgment Against Collector in FDCPA Case

The Court of Appeals for the Seventh Circuit has reversed a lower court’s ruling in favor of a plaintiff and granted summary judgment in favor of a collection law firm that was accused of violating the Fair Debt Collection Practices Act by serving a motion to both an individual as well as her attorney, because the attorney had not yet filed notice of appearance before the court.

A copy of the ruling in Holcomb v. Freedman Anselmo Lindberg can be accessed by clicking here.

The plaintiff had an unpaid credit card debt that was placed with the defendant. The defendant sued the plaintiff in Illinois state court. The plaintiff originally represented herself in the suit, but subsequently hired an attorney. When the defendant moved for a default judgment, the attorney had not yet filed a notice of appearance with the state court, so the defendant served the motion to both the plaintiff and her attorney. The plaintiff sued, alleging the defendant violated Section 1692(c)(a)(2) of the FDCPA, which prohibits debt collectors from directly contacting debtors who are represented by counsel absent “express permission.” The defendant argued it was following a state rule in Illinois requiring service of court papers only to “attorneys of record” if there is one, otherwise the papers must be served to the party. Because the attorney had not yet filed notice of appearance, he was not yet the attorney of record, thus requiring service on the plaintiff. A judge called the argument “hyper-technical” and granted summary judgment in favor of the plaintiff.

Even though the attorney had represented the plaintiff in two hearings before the default judgment motion was served, the Appeals Court ruled there needs to be a “bright line” test to determine attorney participation and that test is whether the attorney has filed notice of appearance before the Court. Said the ruling: “A lawyer does not become an attorney of record simply by representing a party.”

For the ARM industry, the ruling is a victory because, in many cases, an attorney purporting to represent an individual reaches out to a collection agency, but the attorney has not yet filed a notice of appearance. Deciding on whom to contact going forward has created a legal dilemma.