Appeals Court Overturns Sanctions of Plaintiff’s Attorneys in FDCPA Case

The Court of Appeals for the Fifth Circuit has overturned a lower court’s ruling that had placed sanctions on the attorneys representing a plaintiff in a Fair Debt Collection Practices Act case for not settling a lawsuit quickly enough, but affirmed a ruling that the District Court judge was not biased against the plaintiff.

A copy of the ruling in the case of Tejero v. Portfolio Recovery Associates can be accessed by clicking here.

The defendant attempted to collect a $2,100 credit card debt from the plaintiff. Through his attorneys, the plaintiff said he disputed the debt by sending a fax to the defendant. The defendant reported the debt to a credit bureau without mentioning the dispute. The plaintiff filed suit, and at the order of a District Court judge, both sides exchanged settlement offers. The defendant offered to settle for $1,101 plus reasonable attorney’s fees. The plaintiff’s lawyers did not submit a settlement offer and did not respond to the plaintiff’s offer. After both sides filed motions for summary judgment, the two sides ultimately settled the case for $1,000 and to forgive the underlying debt.

But a District Court judge declined to award attorney’s fees to the plaintiff’s lawyers, and ordered them to pay the defendant’s attorney’s fees and costs. The judge made the decision because the plaintiff’s attorneys failed to comply with the original settlement-offer order, continued to litigate the case even after receiving an offer that would make the plaintiff whole, and drafted the original dispute debt letter in a manner that would cause the debt collector not to realize that the debt was disputed, so that counsel could engage in a “scheme” to “force settlements from debt collectors by abusing the FDCPA.”

The plaintiff appealed the ruling to the Fifth Circuit. The Fifth Circuit ruled that the plaintiff’s motion for summary judgment should not have been considered frivolous, especially because the District Court judge denied the defendant’s motion for summary judgment, proving there was an issue of triable fact.

As well, the letter used by the attorneys to dispute the debt was clear enough to indicate the debt was being disputed, the Appeals Court ruled.

“The relevant part of the letter reads: ‘My monthly expenses exceed my monthly income . . . and the amount you are reporting is not accurate either,’ ” the Appeals Court wrote. “Aside from invoking the word ‘dispute,’ we struggle to see how a debtor could dispute a debt more clearly than by writing, ‘the amount you are reporting is not accurate.’ “

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