Compliance Digest – August 15

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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.

Judge Grants Defendant’s MSJ In FDCPA Class over Tax Reporting Language in Letter

Despite making many arguments to the contrary, a District Court judge in New Jersey has granted summary judgment to the defendant in a Fair Debt Collection Practices Act case, ruling the plaintiffs now lack standing to sue in federal court, even though a class had previously been certified in the case. More details here.

WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH & VOLUCK: Defendant agencies are winning Pyrrhic victories at a rapid pace. Prevailing on standing is not the same as having a court issue a decision on the merits of a lawsuit. Nevertheless, in this case, having a class effectively decertified and a case dismissed is a big step for the agency. It remains to be seen what happens if this case is re-filed in state court. 

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Judge Partially Grants MSJ for Plaintiff in FDCPA Case Over Collecting Incorrect Amount

A District Court judge in Washington has partially granted a plaintiff’s motion for summary judgment, ruling that the defendant’s attempts to collect an unpaid apartment debt that was inflated because the creditor determined that the plaintiff had forfeited her security deposit violated certain provisions of the Fair Debt Collection Practices Act. More details here.

WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: The decision in this case is certainly disheartening but the defendant debt collector did not dispute that the disputed amount (which formed the basis for the lawsuit) was unlawfully withheld from the consumer. This led the Judge to “proceed[] on the assumption that part of the Balance Defendant sought to collect from Plaintiff – $1,250 – was not legally owed to Riverstone.” This reminds me of the old adage, bad facts make bad law. Once the point was conceded that the balance sought to be collected was even partially inflated, defendant would have an incredibly difficult time overcoming the strict liability aspect of the FDCPA. Although the defendant attempted to invoke the bona fide error defense, the Judge said that she did not see anywhere in the procedures a process “relating to the review of debt accounts’ accuracy or propriety.” In short, if a debt collector wants rely on the bona fide error defense, its policies and procedures should speak on that particular issue. (On an interesting note, the debt collector may have been fighting an uphill battle from the beginning since the Judge was a former attorney with Washington State Attorney General’s Office in its anti-trust and consumer protection division.)

Appeals Court Vacates Attorney’s Fees Award, Overturns Sanctions in FDCPA Case

In separate rulings tied to the same parties in two Fair Debt Collection Practices Act lawsuits, the Seventh Circuit Court of Appeals on Friday vacated a District Court’s award of attorney’s fees that were significantly lower than what the plaintiff’s attorneys had requested and overturned sanctions that were impost against the plaintiff’s attorneys. More details here.

WHAT THIS MEANS, FROM PATRICK NEWMAN OF BASSFORD REMELE: Courts are hesitant to award sanctions against plaintiff’s counsel in consumer protection cases. To quote your favorite band, and mine, “Sad But True.” Unfortunately, this appellate opinion is not the first to reverse a district court’s award of sanctions in a FDCPA case, either.  

Thus, the takeaway here is simple: if you’re going to tee up a sanctions motion, you must do it by the book and on the proper bases. And even then, taking the appropriate steps is no guarantee of success. As this opinion illustrates, it is possible to get an order in district court that is too good and will not stand up on appeal, where you can rest assured the reviewing panel of judges will closely scrutinize the imposition of sanctions—just like they did in this case. That’s why defendants in FDCPA cases should view a sanctions motion as an investment (and, more specifically, one that is unlikely to go 10X and could very well produce a negative return).

Bonus silver-lining-take-away: in an offhand sort of way, the Seventh Circuit here confirmed that if a defendant in a fee-shifting case makes a written settlement offer during litigation that the plaintiff then fails to beat at trial, a district judge may properly deny the plaintiff’s attorneys’ fees incurred after the date the written offer is made. Internalize this one and incorporate it into your litigation playbook if you find yourself sued in the Seventh Circuit.

Eleventh Circuit Denies En Banc Request in TCPA Case Related to Class Action Incentive Awards

Nearly two years after it issued its opinion, the Court of Appeals for the Eleventh Circuit has denied an en banc rehearing request in a Telephone Consumer Protection Act case against a debt collector, but four of the 11 judges felt strongly enough about the merits that they wrote a 30-page dissenting opinion about why the case should have been heard before the entire panel. More details here.

WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This is a fascinating case.

In 2020, the Eleventh Circuit Court of Appeals held in this TCPA class action that an “incentive award” of $6,000 to the named plaintiff was illegal and violated Supreme Court precedent dating back to the 1800s. That was a noteworthy decision, considering that such incentive awards are routinely included as part of many class action settlements (TCPA or otherwise) and also routinely approved by Courts around the country. In other words, when a class action is certified, either by motion for class certification or class action settlement, the plaintiff usually requests an “incentive” award be paid to the lead class representative for the work they did in bringing the class action and seeing it through fruition. The incentive award requests, in some amount, are almost routinely granted by Federal District Courts. 

The most recent development in this case is that the Eleventh Circuit Court of Appeals declined to re-hear the 2020 initial 11th Circuit decision “en banc,” i.e., by all of the Eleventh Circuit Judges, as opposed to a smaller panel of Judges.  Requests for “en banc” re-hearings are often denied, as it was in this case. However, this is a significant ruling and issue. Here, a minority of the 11th Circuit Judges felt so strongly about the issue, that they urged their colleagues to grant the en banc request, which is not as common. And, the dissenting Judges filed a 30-page dissenting opinion, noting that NO Federal Circuit Court in the US has so far gone down this path and relied on the authorities that the 11th Circuit panel did in coming up with their majority decision on the wrongful nature of incentive awards. 

NOTE:  the dissenting opinion of the minority of the 11th Circuit Judges regarding the urging of the majority of the 11th Circuit panel to hear the matter by the full panel of 11th Circuit Judges “en banc” means nothing at this time. CRUX — The original 2020 11th Circuit opinion, holding that the $6,000 incentive award was illegal, is still valid and is now the law of the land in the 11th Circuit.

Why this is a very good ruling for the Defense Industry as a Whole — This is good news for the industry, as to class action litigation, in general. This decision might dissuade TCPA plaintiffs from agreeing to serve as class representatives in cases in the future as there is no benefit to being a lead class representative in class actions in cases that fall within 11th Circuit Jurisdiction (i.e., federal District Courts in Florida, Georgia and Alabama). And, it may dissuade plaintiff’s attorneys from seeking to request an incentive award for lead class representatives due to the opinion herein. And, also importantly, in class action litigation brought by parties in Courts within the 11th Circuit, there may be better opportunities to resolve these class actions on an “individual basis”, where needed, in order to shut down problematic cases for the defense quickly. An offer to the plaintiff of some monetary amount above mere statutory damages is more than the plaintiff will likely recover in cases within the 11th Circuit and therefore incentive for the lead plaintiff to take the “individual” resolution offer to resolve the entire case. 

Good decisions from our Federal Courts just keep on coming!!! 

Judge Dismisses Case Claiming Reg F Violation for Lack of Standing

In a case involving a claim that a defendant violated one of the provisions of Regulation F, a District Court judge in New York has dismissed a Fair Debt Collection Practices Act case, ruling the plaintiff lacked standing to sue after receiving a letter that, among other issues, failed to include an itemization of the debt. More details here.

WHAT THIS MEANS, FROM MIKE FROST OF MALONE FROST MARTIN: As we have seen in the Eastern District of New York and elsewhere, Judges have focused on Article III standing in Fair Debt Collection Practices Act claims. Here, the Judge focused on the alleged statutory violations and the absence of any alleged injury cause by the alleged statutory violations, by the plaintiff. At least in the Eastern District of New York asserting deficiencies in a debt collection letter absent any alleged injury cause by those deficiencies is unlikely to pass the Article III standing analysis.

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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Appeals Court Vacates Dismissal of TCPA Class Action, Remands Case to Determine Standing

The Court of Appeals for the Eleventh Circuit has vacated the dismissal of a Telephone …

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