Compliance Digest – June 7

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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.

SDFL Judge Dismisses FDCPA Case Over Use of Word ‘Enforce’ in Letter

A District Court judge in Florida has granted one defendant’s motion to dismiss and another defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act case because the plaintiff lacked standing, ruling that the plaintiff should have known the collection letter in question was not misleading because he waited a year after receiving it to file his lawsuit. More details here.

WHAT THIS MEANS, FROM STEFANIE JACKMAN OF BALLARD SPAHR: The district court, following existing Eleventh Circuit precedent, reached a sensible decision in this case. It is yet another example of the continuing evolution of Article III standing and the ability to present lack of standing as a successful defensive strategy in litigation.

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EDWI Judge Grants MTD in FDCPA Case Over Credit Reporting Disclosure in Letter

In a case that was defended by Khari Ferrell of Malone Frost Martin, a District Court judge in Wisconsin has granted a defendant’s motion to dismiss after it was sued for allegedly violating the Fair Debt Collection Practices Act by informing the plaintiff that it would notify him before reporting the debt to a credit reporting agency. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: File this one under “A Positive Trend Continues.” The Seventh Circuit has repeatedly announced that FDCPA claims premised on bare “confusion,” or “stress,” or “anxiety” do not satisfy the minimum Article III requirements for standing. The district courts are heeding the call. Of particular note, the Eastern District of Wisconsin in this case rejected the plaintiff’s argument that an “informational injury” (i.e., an alleged failure to provide information required by the statute, or to provide it in a clear and non-deceptive way) is somehow special and can suffice for standing without some additional “harm.” The McGee court ruled that, just like any other FDCPA claim, a plaintiff alleging failure to provide required information must also plead (and later prove) that the deprivation of information concretely damaged the plaintiff.

Add this case to the quiver and keep firing Article III arrows at deficiently-pled complaints!

Judge Rules Collection Suit Does Not Waive Arbitration Clause

Filing a collection lawsuit against an individual does not waive the arbitration clause in an underlying credit agreement, ruled a District Court judge in Texas, who has granted a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act case. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: The Southern District of Texas recently held that a prior lawsuit to collect a debt does not necessarily preclude a creditor from compelling arbitration of a subsequent suit alleging illegal debt collection practices. In Dean v. Biggs & Greenslade, P.C., No. H-21-0242 (S.D. Tex. May 19, 2021), the plaintiff filed a putative class action asserting that the defendants, the original creditor and the debt collection firm it hired, violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”) and the Texas Debt Collection Act, Tex. Fin. Code § 392, et seq. (“TDCA”). The defendants responded by moving to compel arbitration based on an arbitration clause in the note. The Plaintiff argued that defendants had waived the right to arbitrate because the creditor had previously filed a small claims actions seeking to collect the amount due on the loan. In rejecting this argument, the court held that the earlier breach of contract action was completely distinct from the claims asserted under the FDCPA and the TDCA and that the plaintiff had not shown that she was materially prejudiced by the previous proceedings. Consequently, it granted the defendants’ motion to compel arbitration and dismissed the plaintiff’s claims. 

This case is a good reminder, though, to always check the contracts for arbitration provisions. Although the Court here decided the issue correctly, Plaintiffs are always looking for ways to get out of arbitration provisions and certainly won’t hesitate to allege these types of arguments. 

Judge Approves Settlement in FDCPA Class Action

A District Court judge in Connecticut has approved a settlement in a Fair Debt Collection Practices Act class-action lawsuit after the defendant was accused of sending collection letters that improperly assessed post-judgment interest. The defendant has agreed to pay $10,000 to the members of the class, $3,000 to the named plaintiff, and nearly $37,000 in legal fees to the plaintiffs’ attorneys. More details here.

WHAT THIS MEANS, FROM SARAH DEMOSS OF PREMIERE CREDIT: A lot of lawsuits initially proposed as a class action are settled on an individual basis before the class is ever certified. In my experience, this is because some consumer attorneys use the threat of a class as a negotiation tool without ever intending on putting in the work that a class action requires. On the flip side, agencies are often quick to settle early to avoid the costs associated with defense of a class action even if they have a decent chance at winning. So, the tactic works. This case gives the industry a rare look at the details surrounding a class settlement calculation. Although pretty straightforward, it puts into reality the FDCPA damage calculations that most agencies only discuss once a year during their annual FDCPA training and testing. Your net worth matters, and so does the time Opposing Counsel spends working on the matter. This case was a good refresher of how we get to the final numbers (if we choose to fight long enough to get there).

Defendant Files Petition for En Banc Re-Hearing in Hunstein Case

The defendant in the Hunstein case yesterday filed its petition with the Eleventh Circuit Court of Appeals seeking to have the case re-heard before all of the court’s judges — known as an en banc hearing — arguing that the three-judge panel erred when it ruled last month that a statutory violation of Section 1692c(b) of the Fair Debt Collection Practices Act is sufficient to confer standing. More details here.

Briefs in Support of Hunstein Petition Start Rolling in

Companies and organizations across the accounts receivable management industry are starting to line up behind the defendant in Hunstein v. Preferred Collection and Management Services, filing amicus briefs supporting the defendant’s petition for an en banc re-hearing before the entire Eleventh Circuit Court of Appeals. Yesterday, briefs were filed by the Florida Creditors Bar Association, the National Creditors Bar Association, and The Print & Mail Coalition, a group of 12 different companies that providing printing services to companies in the ARM industry. More amicus briefs are expected to be filed in the days to come. More details here.

WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: Ready to talk about Hunstein again today? This conversation is not going away.

As an update, the briefs are in. More than a dozen amicus briefs were filed by the June 1st deadline. Collectively, they offer compelling support for the May 25th Petition for Rehearing En Banc, and leave no stone unturned. A summary does not do them justice, and we all need to speak fluent Hunstein at this point, so read them, or at least a sampling, here: AccountsRecovery.net Hunstein Resource Guide.

What’s next? The entire industry now waits to see whether the Eleventh Circuit’s full panel will re-hear the case. But please don’t hold your breath while waiting, and don’t be complacent. Legally, this is only an Eleventh Circuit problem for now, but practically it is a nationwide and industry-wide problem. The Plaintiffs Bar is testing the waters and filing Hunstein copycat lawsuits in other jurisdictions. Hopefully, the results will be different elsewhere. With more than a dozen well-written Hunstein briefs from which to draw inspiration, the Defense Bar is well armed. But, this is a still a fight that will need to be fought, no matter what the Eleventh Circuit does next.

What can we do? Approach the legal battles in a thoughtful way. Pick the most factually-ideal cases in front of the best judges to pursue a long-haul defense, and preserve all of the available arguments. And, don’t just defend these claims. Be proactive. There are multiple creative solutions in the works. Pick one, or more than one, and we can change the circumstances of these cases going forward to position the industry players outside of the Hunstein fact pattern. 

Hunstein Ruling Makes Appearance in FCRA Decision Over Lack of Standing

The web of rulings spiraling out of the Eleventh Circuit Court of Appeals’s decision in Hunstein v. Preferred Collection & Management Services is beginning to be woven, this time in a Fair Credit Reporting Act case. But in this case a District Court judge determined the plaintiff did not have standing to accuse a potential employer of violating the FCRA by procuring a credit report on the members of the class without first providing a lawful disclosure and granted the defendant’s motion for summary judgment. More details here.

WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: Judge Walker’s opinion touches on two important Hunstein-related points. First, the court observes that the practice of selecting a common law claim to analogize to a statutory harm is “an odd process” that risks inconsistent results depending upon which cause of action the court chooses as its point of comparison. The court, citing to Hunstein, noted that analogizing the statutory provision at issue with invasion of privacy-type torts could confer standing, while a comparison to negligent or intentional misrepresentation would likely yield the opposite conclusion. This illustrates yet another reason Hunstein requires further review—different judges may interpret statutes to be more closely aligned with different common law causes of action, resulting in the risk of conflicting district court opinions on standing.

Second, Judge Walker’s opinion reinforces the benefit of developing a record prior to attacking a plaintiff’s Article III standing. In Hunstein, because of the case’s procedural posture, neither the district court nor the Eleventh Circuit had the opportunity to consider what, if any, information about Mr. Hunstein was actually received or reviewed by the letter vendor. Here, because the Court was able to view the record evidence as part of its summary judgment analysis, Judge Walker knew definitively that the plaintiff never actually experienced any invasion of his privacy—the record showed that “Defendant only ever procured the information that Plaintiff would have authorized.” This factored heavily into the court’s conclusion that Plaintiff failed to demonstrate an injury in fact, and lacked standing to proceed.

Bill Introduced to Amend FCRA to Protect Servicemembers

A bill has been introduced in the House of Representatives that would amend the Fair Credit Reporting Act to install additional protections for servicemembers on active duty or who are deployed in a combat zone or on a ship. More details here.

WHAT THIS MEANS, FROM HELEN MAC MURRY OF MAC MURRAY & SHUSTER: The sponsor of this bill, Rep. Linda Sanchez (D-CA), is persistent – this is the third time she’s introduced this bill. It hasn’t been able to get Senate approval in the past. Much of this issue is addressed in the FTC’s Free Electronic Credit Monitoring for Active Duty Military Rule promulgated in 2019. It requires CRAs to notify active duty military consumers about any “material” additions or modifications to their credit files. This bill, however, may prove useful in preventing late payments and the like from even making it to the credit file.

Appeals Court Affirms TCPA Ruling for Defendant Over Lack of Standing

The Court of Appeals for the Third Circuit has affirmed the dismissal of a Telephone Consumer Protection Act suit in which the District Court ruled the plaintiff lacked standing to sue because he never claimed anything other than a “bare procedural harm that resulted in no harm.” More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: The decision here by the Third Circuit Court of Appeals in Leyse v. Bank of America decision is favorable to the industry. It was a TCPA case filed by a very opportunistic plaintiff – the type of plaintiff who attempts to manufacture TCPA claims against legitimate businesses on a class action and non-class action basis and has done so for years. This was a good opportunity for a federal Appellate Court to shut him down. 

The plaintiff worked as an investigator for a law firm specializing in filing TCPA lawsuits. In this role, he made investigative calls to companies to find out the frequency and amount of calls they placed to consumers. During these calls, he used a false name, withheld the true purpose of the calls, and secretly recorded them. He then provided the information to his attorney employer, who used it to file TCPA class actions. His employer also represented Leyse as the lead plaintiff in the instant lawsuit against Bank of America.

Bank of America moved to dismiss the complaint in the Federal District Court in New Jersey on many grounds, including that the plaintiff had not suffered any “injury-in-fact” (i.e., lacked the right) to bring the case in Federal Court as required by the now famous Supreme Court decision in Spokeo, Inc. v. Robbins. The Federal District Court agreed. The plaintiff appealed and argued to the Third Circuit Court of Appeal that the TCPA does not require an allegation of injury beyond the statutory violation itself to establish Article III standing. The Third Circuit court also agreed with defendant Bank of America, holding that the plaintiff could not show an injury-in-fact that is necessary to demonstrate the required standing under Article III. The 3rd Circuit also noted that it declined to adopt a bright line rule that mere allegation in a complaint of TCPA statutory harm automatically confers a right to bring a suit under the TCPA . That is the excellent part of this ruling. 

The outcome in Leyse by the Third Circuit Court of Appeals is correct and fair under the circumstances. However, it should be noted that some courts in other cases have agreed with the plaintiff’s argument, i.e., that no alleged injury beyond the statutory violation is needed in TCPA cases in order to confer the right to sue in Federal Court. The Leyse decision is therefore a welcome addition to the growing bank of industry-friendly case law in on the issue of “standing” to sue in federal courts. 

NOTE: The decision here is deemed “non-precedential” which means that this decision does not add significantly to the existing body of standing case law in this Federal Circuit. Attorneys should consult their jurisdictions’ local rules of procedure as to the ethical obligations when relying on unpublished opinions.

I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.


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