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.
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When given multiple “meaningful” offers to settle a lawsuit, the Seventh Circuit Court of Appeals has sent up a warning flare to all plaintiffs and their attorneys that they should accept it, lest they lose the big payday they were hoping for.
WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: Counsel for all litigants – plaintiffs and defendants alike – have an ethical obligation to advise their clients as to the relative strengths and weaknesses of their respective positions and related litigation strategy without regard to counsel’s own interests. Such advice and recommendations should be offered from the perspective of what is best for the litigant under the circumstances (not the attorney). Unfortunately, it is not uncommon to see aggressive posturing by counsel based on tenuous or other questionable legal positions in order to lengthen litigation and incur additional fees that then will be requested as part of any settlement discussions or judicial award. But in many instances, these fees need not be incurred by litigants if both parties receive counsel that allows them to be realistic about their respective positions, potential exposure, and potential recovery. Just because there exists the “potential” for a larger award does not necessarily justify prolonging litigation in an effort to recover that potential award if a full and fair settlement that addressed the alleged wrong can be achieved earlier in the matter. As the Paz court correctly recognized and the Seventh Circuit affirmed, extending litigation based on tenuous legal positions or hypothetical paydays is not a practice that should be rewarded if we want to remain true to what our legal system is supposed to afford – prompt, effective, and fair resolution of alleged wrongs within the confines of the law.
A District Court judge in New Jersey has granted a defendant’s motion for summary judgment after it was sued for allegedly violating the Fair Debt Collection Practices Act by including an invitation for the plaintiff to contact the defendant via telephone in an initial collection letter, creating confusion over the requirement that a dispute must be filed in writing.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: By way of update for those of you who send letters into any of the 3rd Circuit states, New Jersey, Pennsylvania or Delaware the following should be of interest.
Adjusting the current score, “we” (statutory purists) just went up 4 – 2 in New Jersey. Issue: Does Graziano v Harrison require you to insert the words “in writing” into the first sentence, §1692g(3) of the validation notice. (Unless you notify this office within thirty (30) days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.) Plaintiffs’ counsel currently say yes, “we” disagree.
Several days ago, on May 16th, Judge Arleo reversed herself and granted Defendant’s motion for Summary Judgment in Poplin v Chase Receivables agreeing with those of us who believe the statute says what it means and means what it says.
The New Jersey box score:
Cadillo v. Stoneleigh Recovery Assocs., LLC. (Judge Wigenton, December 2017) was the first case in New Jersey to find that “in writing” was required. Score 0-1. Then came Borozan v Fin. Recovery Servs (Judge Wolfson, June 2018) finding it was not required. Score 1-1. Poplin v Chase Receivables (Judge Arleo, Sept 2018) followed Cadillo denying a motion to dismiss. Score 1-2. Rodriguez v. Northland Group (Judge Wolfson, December 2018) disagreed with the Cadillo and Poplin decisions. Score 2-2. Judge Arleo, then threw a change-up and granted the motion to dismiss in Bencosme v Caine & Weiner (March 6) Score 3-2. (Appeal filed as of this writing no briefing schedule set) Two days later, March 8th Summary Judgment was granted in Cadillo. The Court acknowledging the “inconsistent legal decisions” certified its decision for interlocutory appeal. (As of May 17 it has not accepted by the 3rd Circuit). Score still 3-2. Next case up was Vedernikov v. Mercantile Adjustment Bureau LLC (Judge A Thompson, April 25, 2019) which denied a motion to dismiss. Score now tied 3-3 The reversal in Poplin however changes the score back in favor of the good guys 4-2.
In the Eastern District of Pennsylvania, the trend is in the opposite direction with four decisions Guzman v. HOVG, LLC, Durnell v. Stoneleigh Recovery Assocs., Henry v Radius Global Solutions, and Grady v Portfolio Recovery Associates (filed on May 23rd) all following Cadillo. No good news there, yet. Check back for updates.
Once a briefing schedule is set for one of the cases currently on appeal, it is likely stays will be available for those cases litigating the issue.
The Consumer Financial Protection Bureau today filed suit against Foster & Garbus, a collection law firm, alleging it violated the Fair Debt Collection Practices Act by misrepresenting that attorneys were meaningfully involved in lawsuits.
WHAT THIS MEANS, FROM MICHAEL KLUTHO OF BASSFORD REMELE: What’s most curious to me about this Complaint is the fact that, despite an apparently extensive pre-suit investigation conducted by the CFPB, it nonetheless does not identify a single individual who was “wrongfully” sued. Yes, it does outline the volume of suits that were brought by Foster & Garbus over multiple years (which happens to mirror the multitude of creditors who provided goods and services, for which they were never paid). But what the Complaint does not do is outline even a single actual instance of an actual person who was sued for a debt they didn’t owe. This appears to be a remedy in search of a harm.
Moreover, the reality is that conducting the extensive and detailed investigation the CFPB outlines in its complaint — i.e., conducting a pre-suit “inquiry into the facts surrounding an alleged debt [including] requesting supporting documentation, such as account applications, billing statements, payment histories, the terms and conditions governing an account, or consumer correspondence, from its clients to corroborate the purported debts before filing suit.” – would effectively bring legal collections to a halt.
Reliance on a client’s business records (transmitted electronically in an easily-reviewable and usable format) would no longer be allowed if this CFPB suit is allowed to go forward. Yet, Courts routinely conclude and hold that attorneys (and agencies as well) do have the right to rely on what their creditor clients’ tell them when it comes to the details on an outstanding debt. Nonetheless, according to this Complaint, lawyers bringing lawsuit against a consumer who didn’t pay for goods delivered and services rendered would be forced to “re-invent the wheel” in each and every instance. They must disregard what their clients tell them about the details on the involved debt, and instead, they themselves must recreate the involved account, cradle to grave.
But what does the FDCPA actually say? Before suit is commenced, the FDCPA instructs that the attorney must send an FDCPA-required notice that informs the consumer of the attorney’s involvement, as well as the name of the creditor and the amount owed, along with a statutorily-specified recitation of the consumer’s rights to dispute and request written verification of the debt. Add to that is the fact that if the consumer is sued, the consumer is then served with a lawsuit that once again outlines the same information along with a summons that informs the consumer when and how to respond to the complaint. If a particular consumer believes the information is wrong, the consumer has multiple opportunities to request debt verification information and challenge the debt that is being collected.
Simply put, Congress never imposed a so-called “meaningful involvement” requirement when it enacted the FDCPA. Instead, Congress created multiple other protections in favor of the consumer that do take care of the “harm” the CFPB says it’s attempting to remedy. It’s up to any involved consumer to exercise those rights. Tying up collection attorneys with duplicative “cradle to grave” inquiries on each and every account serves no purpose other than to make legal collections cost-prohibitive, all to the detriment of creditors who provided goods and services in good faith to the involved consumer.
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For the second time, the Second Circuit Court of Appeals has ruled on a case that seeks to determine when the statute of limitations on a potential violation of the Fair Debt Collection Practices Act occurs, determining that an individual does not need to receive notice of the violation before the statute of limitations starts.
WHAT THIS MEANS, FROM DENNIS BARTON OF THE BARTON LAW GROUP: In Benzemann v. Houslanger & Assocs., PLLC (May 2019), the plaintiff tried to convince the court the FDCPA one-your statute of limitation did not start to run until plaintiff was both injured and had notice of the legal wrongdoing. The court rejected that position as too far reaching. It held that the statute of limitations begins to run on the date the FDCPA violation occurred and began to injure the consumer. In this case, the Second Circuit Court of Appeals rejected the application of the discovery rule (which says the statute of limitations begins to run when the consumer discovers the wrongdoing or could have discovered the wrongdoing exercising due diligence) but implied that it may apply in other cases. Most important, the court was concerned that acceptance of plaintiff’s theory could result in the statute of limitations never commencing if a plaintiff argued (s)he never received notice of the legal wrongdoing. While the opinion remains ambiguous in parts, the court wanted to protect the sanctity of the FDCPA’s one-your statute of limitation while still preserving fairness by requiring the consumer to have been injured prior to the statute of limitation starting to run.
Proposed FCC Rule Would Give Consumers Power to Block All Calls If Caller Is Not In Their Contact List
Ajit Pai, the chairman of the Federal Communications Commission, yesterday proposed what he described as a “bold action” that would give phone companies the block “unwanted” calls from being connected to consumers and allow consumers to block calls from individuals who are not on their contact list.
WHAT THIS MEANS, FROM RICK PERR OF FINEMAN KREKSTEIN & HARRIS: The headlines appeared to suggest that a new policy initiative was being issued by the FCC; however, Chairman Pai made comments subsequent to the headlines that the policy he enunciated was no different than policy positions previously rolled out by the FCC. The ARM Industry must face the reality that call blocking and labeling will come to pass. It is incumbent on the industry to push for notifications along with mechanisms for an appeal process when legitimate numbers are being blocked by the carrier without prior consent of the called party.
A District Court judge in Wisconsin has denied a motion for summary judgment filed by the owner of a company that provided autodialing services after he was sued by a serial plaintiff for allegedly violating the Telephone Consumer Protection Act.
WHAT THIS MEANS, FROM JUNE COLEMAN OF CARLSON & MESSER: Cunningham v. Montes, Jr. is a great example of the importance for the defendant to be absolute, certain, and unequivocal in her or his testimony, the importance of using every opportunity to create great evidence. In Cunningham, tollfreezone.com allowed its clients to make unsolicited automated calls, and that included calls to Cunningham’s cell phone. Mr. Montes, Jr. owned and operated the website. Tollfreezone.com did not have any employees; all activities were performed by Mr. Montes, Jr. And Mr. Cunningham, in the words of the Court, “is a prolific filer of TCPA litigation,” having filed over 150 TCPA lawsuits since 2006. These facts were undisputed. What was disputed for Defendant’s Motion for Summary Judgment was whether Mr. Montes, Jr. and his website could be liable for his client’s telemarketing campaigns that were run through the website.
According to the 2015 FCC Order, as well as previous FCC rulings, liability under the TCPA lies with those who “make” or “initiate” prohibited calls, which includes parties who are so involved in the placing of a specific call as to be deemed to have initiated the call. Montes, Jr. and tollfreezone.com argued that they did not make any calls, but offered a service for their clients to make calls. The FCC 2015 Order listed several factors to consider in this analysis, including the extent to which the defendant controls the call’s message, the extent to which the defendant controls who receives the call, whether the manner that the calls are placed is arranged by the customer or the service, and whether the service knowingly offers its platform for its clients to violate the TCPA.
Some of the evidence was great. Tollfreezone.com’s clients signed a contract wherein the clients attested that they were abiding by all federal and state laws, including the TCPA. However, this great evidence was diminished by Montes, Jr.’s ceasing to allow his clients to call states where there was a higher risk of TCPA litigation, giving rise to an inference that Montes Jr. was aware that his clients were violating the TCPA. This also created evidence that he exercised control over his client’s use of the service. Further, given the inference that Montes, Jr. knew his clients were violating the TCPA, the fact that Montes, Jr. took no action to ensure compliance beyond the contract term was a negative factor in the analysis. Additionally, Montes, Jr. testified that about a dozen times a day, clients would call Montes with questions, and sometimes he would help his clients by loading their data and automated recordings into the system and then hitting the “send” button to start the campaign. Montes, Jr. also testified that in some cases, he even wrote the scripts for the prerecorded calls. While Montes argued that this was only for his political clients (and political calls do not violate the TCPA), Montes’s deposition testimony when asked whether he ran or was involved in commercial telemarketing campaigns for his clients was: “No, not usually.” And when asked whether he ever wrote scripts for commercial customers, Montes, Jr. said “I might have.”
Related to the issue of whether the calls were made through tollfreezone.com, Montes, Jr. testified that he could not remember if some of the callers were clients of his, even though the callers were listed on the website as clients. In addition to the “I don’t remember” testimony, Montes, Jr. failed to preserve records related to specific telemarketing campaigns, which is the subject of a future motion for sanctions for spoliation of evidence. Against this background, there is no question why the Court found issues of fact and denied Defendants’ Motion for Summary Judgment. (It was undisputed that two other internet companies owned by Montes, Jr. were unassociated with automated calls of any kind, and the Court granted the Motion for Summary Judgment as to these other defendants.)
On a side note, Defendants argued that Cunningham did not have injury-in-fact, and thus did not have standing, because he was a professional TCPA plaintiff. The Court acknowledged that Cunningham had filed a lot of lawsuits, but cited the Seventh Circuit’s explanation “[T]here is no support for the idea that one whose rights have been violated by 50 different persons should be allowed to sue only a few of them.” (Murray v. GMAC Morg. Corp., 434 F.3d 948, 954 (7th Cir. 2006).) Interestingly, the Court distinguished Telephone Science Corp. v. Asset Recovery Solutions, LLC, No. 15-cv-5182, 2016 WL 4179150 (N.D. Ill. Aug. 8, 2016), where the Telephone Science Corp. Court dismissed the TCPA claim for lack of standing because the plaintiff maintained thousands of phone numbers specifically for the purpose of inviting robocalls. (See also Stoops v. Wells Fargo Bank, N.A., 197 F.Supp. 3d 782 (W.D. Penn. 2016) ((dismissing TCPA claim for lack of standing when plaintiff admitted to having purchased 35 cell phones for the purpose of receiving calls that violate the TCPA).) The Court found that there was no evidence that Cunningham’s three telephones were being used for that purpose. Apparently, this argument works when there are at least 35 phones, but not with three phones.
Companies and law firms in our industry should always take advantage of every opportunity to make good evidence. Not make up good evidence, but use your circumstances to create great evidence. That means creating written policies and procedures which can be used as evidence if the need arises. And it means telling your story in a deposition not with an eye toward uncertain, “I don’t know” testimony to ensure that Plaintiff cannot use the testimony as an admission of certain liability. While unequivocal deposition testimony, may leave wiggle room to oppose a plaintiff’s motion for summary judgment, uncertain and “I don’t know” and “I might have” answers in depositions can be used to argue that maybe the defendant did do it or maybe the defendant did participate, preventing the ability to prevail on a defendant’s motion for summary judgment. And even more importantly, uncertain and equivocal deposition testimony may leave a jury’s verdict uncertain as well. Importantly, such vague and uncertain deposition testimony leaves a question as to credibility. The art of winning a case is telling the defendant’s story so that the story is strong and credible. Unequivocal deposition testimony simply does not present a strong and credible case.
A District Court judge in Illinois has granted a defendant’s motion for judgment on the pleadings after it was sued for allegedly violating the Fair Debt Collection Practices Act by not properly identifying the current creditor in a collection letter, ruling that the plaintiff’s lack of understanding of the identity of the current creditor “defie[d] logic.”
WHAT THIS MEANS, FROM MARK ROONEY OF THE ROONEY FIRM: The court’s dismissal in Osideko v. L J Ross Assocs., Inc., represents at least the second time in two months a federal district court has swiftly rejected consumer allegations of confusion over the identity of a creditor. In this case, the collection letter to the consumer twice identified the current creditor. Both the top-right and bottom-right corners of the letter included this notation: “Current Creditor: Wec (2134) (PEOPLES GAS & COKE COMPANY).” The court granted the defendant’s motion for judgment on the pleadings because the plaintiff’s complaint — that he could not decipher whether the debt was owed to one or multiple entities — “defies logic.” In an April decision, another court similarly found it implausible that a consumer could be confused by a letter that clearly indicated both the current and original creditor names. While the decisions come from different judges in different districts, together they suggest a welcome imposition of limits on the sort of creative and questionable claims of confusion that seem to have proliferated in recent years, particularly with respect to creditor names. Also of note in the Osideko decision, the court emphasized that the FTC’s 1988 interpretation of the FDCPA allows agencies to identify creditors by an official entity name, a “d/b/a” name, or a commonly used acronym. This common-sense rule still holds up in court and practitioners would do well to re-familiarize themselves with it.
Thanks again to Applied Innovation — the team behind ClientAccessWeb, Papyrus, PayStream, and GreenLight — for sponsoring the Compliance Digest.