Compliance Digest – April 4

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.

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.

Appeals Court Overturns $163k Attorney’s Fee Award in Favor of Defendants in FDCPA Case

The Court of Appeals for the Fifth Circuit has reversed a lower court’s decision ordering the attorneys representing a plaintiff in a Fair Debt Collection Practices Act and Texas Fair Debt Collection Practices Act case to pay $163,000 in attorney’s fees to the defendant while also remanding the case back to the District Court to determine whether a settlement award made to a plaintiff designates him as the prevailing party, requiring the defendant to cover his legal fees instead. More details here.

WHAT THIS MEANS, FROM JONATHAN HOFFMANN OF BALCH & BINGHAM: We all know attorneys’ fees are the rub in most FDCPA cases. Actual injury is rare, which leaves mostly technical “gotchas” or “slip through the cracks” type issues for lawsuits. Ozmun started as a rare example of flipping that paradigm on its head, shifting fees in the opposite direction and forcing the plaintiffs to pay costs incurred in defending against a more egregious example of “gotcha” FDCPA litigation.  The Fifth Circuit, however, took away the awarded fees for a failure of proof on the record and the fact that the award pinned the price tag on counsel for the plaintiff itself (something not contemplated by the statutes). The primary point to watch here, though, (other than to make sure there’s a factual record of bad faith when seeking to fee shift on a plaintiff) is what the Fifth Circuit directed the district court to do in remanding the case: determine whether obtaining a settlement makes a plaintiff a “prevailing party”.

The Fifth Circuit admitted it had no precedent to answer the question, which isn’t surprising given most would assume prevailing parties must…well, prevail. They’re the winners of a litigated dispute. Settlement doesn’t have a winner (or it only has winners, if you’re a glass half full type). Ozmun isn’t over. It seems unlikely that Judge Sparks (who presides over the matter at the district court level) will do something damaging to the industry given the prior rulings in this case. But, the fact the Fifth Circuit is saying this is even a live question will certainly empower plaintiffs in other forums, and that’s what I’m watching for moving forward here.

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Judge Lowers Attorney’s Fees by 30% in FDCPA Settlement

A Magistrate Court judge in New York has awarded the attorneys representing a plaintiff in a Fair Debt Collection Practices Act $11,297 in fees, after the plaintiff accepted an offer of judgment in the amount of $1,050 over a $59 debt that was owed to the original creditor. More details here.

WHAT THIS MEANS, FROM AMANDA GRIFFITH OF BERMAN BERMAN BERMAN LOWARY & SCHNEIDER: This case is just another in hundreds of examples where attorneys’ fees outweigh the actual violation. Here, Plaintiff made a rather trivial allegation that a letter filed to inform her of the consequences of disputing the debt. However, as a letter case, it was alleged as a class action – allowing for a more expansive discovery process.

Upon acceptance if a small offer to compromise over a small [$59.00] debt, Plaintiff’s counsel as awarded nearly 11 times the amount of judgment plus fees. In large part, the Court was vested with the power to decide fees via the language in the offer to compromise. Most general settlement agreements require that the settlement amount be inclusive of such fees and costs.

Judge Denies MSJ For Defendant in TCPA Claim Over Whether Plaintiff Revoked Consent

A District Court judge in Illinois has dismissed a Fair Debt Collection Practices Act claim made by a plaintiff — who has the same name as a plaintiff’s attorney — against a debt collector while denying the defendant’s motion for summary judgment on a Telephone Consumer Protection Act claim, ruling that it isn’t clear whether or not the plaintiff revoked consent to be contacted. More details here.

WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The attorneys’ fees for the dismissed FDCPA claim are likely higher than the potential damages under the TCPA for eight calls and a single text message. However, that will not always be the case. Even after the Supreme Court’s decision in Facebook, the TCPA remains a major threat to debt collectors. If you are making calls using an artificial or prerecorded voice, you must have consent and you should make sure you are tracking and acting on a consumer’s revocation of consent. In this case, the consumer merely alleged that she orally revoked consent during a phone call, but the defendant had no record of the alleged revocation. A recording of the disputed call might have ended this case early. 

Judge Denies Competing Motions in FDCPA, TCPA Case

A District Court Judge in Nevada has denied competing motions for judgment on the pleadings filed by both the plaintiff and defendant in a Fair Debt Collection Practices Act and Telephone Consumer Protection Act case about calls that were made to the plaintiff by the defendant after the debt had been settled. More details here.

WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Earlier this month, plaintiff and defendant alike found their efforts to obtain judgment on the pleadings stymied — for the TCPA claim, by the lack of expressly pled factual details relating to consent, and for the FDCPA claim, by the fact that bona fide error is an affirmative defense to an otherwise strict-liability statute. Carroll v. Medicredit, Inc., No. 2:20-cv-017238-KJD-EJY, 2022 WL 823631 (D. Nev. Mar. 18, 2022). The defendant, Medicredit, Inc., settled a defaulted hospital debt owed by the plaintiff, but called her two months after the settlement payment posted disclosing that it was a debt collector and naming the original owner of the medical debt. The plaintiff sued for violations of the TCPA and FDCPA, alleging that while she had previously consented to artificial and prerecorded voice messages, she had revoked her consent when she settled the debt, and that Medicredit had made misleading representations about the settled debt. 

The court ruled that since the parties had simply agreed that prior express consent existed without providing any details about the circumstances in which the plaintiff gave that consent, it could not determine as a matter of law whether settling the debt was enough to clearly revoke the consent. The court thus denied both parties’ motion for judgment on the pleadings. Furthermore, because the FDCPA’s basic prohibition on misleading communications is a strict liability statute, the court found that the elements for a Section 1692e violation had all been satisfied on the pleadings and denied the defendant’s motion for judgment on the pleadings. However, since Medicredit had raised the affirmative defense of bona fide error, the plaintiff was also not entitled to judgment on the pleadings.

This decision serves as an important strategic reminder on two points. First, for litigators dealing with the TCPA or other context-driven, fact-dependent claims, it demonstrates the importance of alleging all relevant facts for one’s case, even on points where the parties agree, not only in order to avoid a Rule 12(b)(6) dismissal due to conclusory allegations, but also to improve one’s chances of winning judgment on the pleadings. Second, it underscores the potentially significant impact of affirmative defenses in litigation where the plaintiff’s prima facie case is strong, giving defendants another chance to avoid liability or additional leverage for settlement negotiations.

Judge Grants Motion for Defendant in FCRA Over Removal of Dispute Notification

A District Court judge in Tennessee has granted a defendant’s motion for judgment on the pleadings that it did not violate the Fair Credit Reporting Act by failing to remove a dispute notification when furnishing information about an individual’s credit report to a credit reporting agency, because the individual only submitted the removal request to the CRA and not to the defendant itself. More details here.

WHAT THIS MEANS, FROM JESSICA KLANDER OF BASSFORD REMELE: We’re used to handling disputes. But this case involves the opposite issue – a request to remove a dispute notation. It is becoming increasingly more common to receive requests to remove disputes. These requests most often occur in the following scenarios: (1) the consumer is attempting to get a loan and was directed to get the dispute notations removed; or (2) it’s an attempt to manufacture a claim based on the hope that the request is unheeded. Either way, it can lead to a lawsuit. Dispute removal requests can put agencies in a sticky situation depending on how the request was received and whether it triggers any obligation on the part of the agency. Fortunately, this Court correctly concluded that the consumer’s attempt to direct his request to the CRAs (rather than directly to the furnisher) doomed his claim. But this case further illustrates the growing trend of such unorthodox requests. Be sure you have a plan and, better yet, a policy and procedure in place to handle such requests.    

Supreme Court Declines to Hear Arguments in TCPA ATDS Case

The Supreme Court yesterday denied a petition to hear arguments in a Telephone Consumer Protection Act case that sought to overturn an Appeals Court ruling issued last year over whether the entire statute was unenforceable because it contained a provision for five years that was found to be unconstitutional. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: Ever since the Supreme Court’s ruling in Barr v. American Association of Political Consultants, Inc., 140 S. Ct. 2335 (July 6, 2020), the lower federal district courts have struggled with the logical follow-up question after the Barr decision: i.e., whether the unconstitutional government debt exemption in the TCPA rendered the entire TCPA unconstitutional for the 5-year period that it was in effect. If that was true, then there was no Federal Court Jurisdiction (i.e., no right to bring a TCPA lawsuit) for any TCPA case filed between 2015 up until the 2020 Barr decision was issued by the Supreme Court.  Of course, the Courts and Congress think the TCPA is far too important of a statute and claimed that it was ridiculous to think that the entire TCPA was unconstitutional during the time the unconstitutional single government debt exemption existed in the TCPA. In fact, the majority of federal courts in the US who have been faced with this issue have gone out of their way to rule that the 2015 unconstitutional exception in the TCPA never affected the remaining provisions of the TCPA.  In other words, a Court can “sever” the bad portion of a law, thus leaving the remainder intact. 

Last year, the Sixth Circuit Court of Appeals ruling in Lindenbaum v. Realgy, LLC, rejected the argument that the government debt exception rendered the entire TCPA unconstitutional between 2015 and July 2020. Although a few courts have held otherwise, the argument that the entire TCPA was invalid between 2015-2020 is all but a lost cause. The 6th Circuit decision will resonate will other Federal Courts of appeal that may address this issue. At least for now, it appears the TCPA between 2015 and 2020 will be deemed a valid and enforceable law.  

It was fairly clear from those of us who closely watch these types of cases that the Supreme Court was not  going to take up the 6th Circuit’s ruling. Based on this, lawsuits filed under the TCPA between 2015 and 2020 are here to stay. With such a volatile issue at stake, where the Supreme Court itself noted in its decisions in Barr (2020) and Duguid v. Facebook (2021) how important the TCPA is to the American public, the Supreme Court was not going to deal with a decision it likely agrees with via the 6th Circuit’s Lindenbaum decision. The TCPA is here to stay!!   

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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