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.
WDWA Judge Rules Plaintiff in a Hunstein Case Has Standing to Sue
Where Hunstein cases are being dismissed across the country on the basis that plaintiffs do not have standing to sue because they did not suffer a concrete injury, a District Court judge in Washington has denied a defendant’s motion for judgment on the pleadings in a Fair Debt Collection Practices Act case involving a Hunstein claim, ruling that precedent in the Ninth Circuit gives the plaintiff standing to sue. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: This decision is an outlier with respect to Article III standing for letter-vendor (“Hunstein”) claims, as the vast majority of federal courts have held that plaintiffs do not have standing to pursue those claims in federal court when they merely allege that information about their debt was shared with a letter vendor. It appears this court utilized the “kind-degree framework” recommended in the dissent to the Hunstein en banc decision. That is, this court found that the disclosure of personal information to a single person or entity involves the same kind of injury as that associated with a public disclosure of private facts (the common-law analogue for a “Hunstein” claim), even if the degree of injury is different. Most other federal courts require an allegation of “publicity,” which involves far more than what is typically alleged in these cases.
THE COMPLIANCE DIGEST IS SPONSORED BY:
Florida Appeals Court Rules Concrete Injury Required for Standing, Receiving One Text Message Not an Injury
In a case that was first highlighted at TCPAWorld.com, a Florida state appeals court has ruled that state courts in The Sunshine State have the same Article III concrete harm thresholds that federal courts do, and that the receipt of one unwanted text message is not enough for a plaintiff to have standing to sue. In issuing its ruling, the Third District Court of Appeal overturned a lower court’s ruling, reversed certification of a class, and directed that the case be dismissed. More details here.
WHAT THIS MEANS, FROM LAUREN BURNETTE OF MESSER STRICKLER: There’s so much to unpack in this opinion! Standing remains a hot topic, and Eldridge does an excellent job of reiterating that courts address harms, not hypotheticals or hyper-technical violations of strict liability statutes causing no injury. For now, though, I think one of the most important pieces in this opinion is its impact on the penultimate question — how much “harm” is enough? Federal district and circuit courts continue to grapple with this question. Eldridge emphasizes that at least in Florida, the bar for “substantive harm” is high. It isn’t enough to be annoyed at receiving a text, and characterizing the text as a “nuisance” didn’t get Eldridge far enough. Expect lots of opinions to follow, as courts pick apart what constitutes a substantive harm sufficient to allow claims of this nature to proceed in Florida’s state courts.
Judge Denies Motion for Attorney’s Fees in FDCPA Case in Which Plaintiff Never Appeared
Everyone has war stories about credit repair firms that sue on behalf of clients who don’t even know they are now plaintiffs in a lawsuit. A case involving Credit Repair Lawyers of America in which the plaintiff never responded to the firm’s attorneys or to a hearing in front of a federal judge led the defendant to seek attorney’s fees, but precedent in the Ninth Circuit precluded a District Court judge in Arizona from doing so. More details here.
WHAT THIS MEANS, FROM COOPER WALKER OF FROST ECHOLS: You don’t have to be in the collection industry long to develop a healthy appetite for seeking sanctions on meritless claims (I use the term “meritless” here to keep it clean — I’ll tell you how I really feel when we’re in person). However, seeking sanctions should be an highly calculated decision. It is easy to allow emotions to dictate in these situations, but these emotions should be left at the door. Obtaining sanctions is very hard to do. If you don’t do it right, then you are almost certainly throwing good money after bad. Seeking sanctions takes money out of your pocket (and/or your litigation budget) and should not be done unless there is a real opportunity for return. If you are dealing with a problematic opposing counsel who takes chances in the ethical arena, he or she will eventually give you the right opportunity. Don’t miss your opportunity to land a significant blow because you insisted on throwing punches that had no chance of bringing them down.
Judge Dismisses FDCPA Suit Over Post-Judgment Communications
A District Court judge in Pennsylvania has dismissed a plaintiff’s Fair Debt Collection Practices Act suit on his own, without even needing a motion from the defendant, ruling the plaintiff’s attempt to sue the defendant after it obtained a default judgment is “not plausible.” More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: The judge in this case puts an end to a drawn out effort by a pro se plaintiff to undo a default judgment in a collection action. The plaintiff had attempted numerous times to open the default judgment, but was unable to convince a state court judge to re-open the collection suit. In response to numerous attempts by the lawyer helping the creditor enforce its judgment, the pro se litigant sued in federal court under the FDCPA making various allegations. Without waiting for a motion to dismiss from the law firm, the District Court judge dismisses the case with prejudice, saying clearly near the end of the Opinion that allowing the plaintiff to amend her complaint an try the FDCPA claims again would be futile. Based on her factual allegations (recounting that the law firm had taken reasonable steps to try to enforce the judgment (those were not the plaintiff’s words)) and the FDCPA claims she attached to her claims, the judge was able to determine as a matter of law that the plaintiff was not going to be able to cobble a viable FDCPA claim together. The Opinion is conclusory in some places about the claims, but overall it gives a strong sense that there was nothing there for the plaintiff to make into a plausible FDCPA claim. Kudos to the judge for ending the run-around – allowing the plaintiff to run the law firm around in the courts trying to fight her default judgment was a waste of time and resources. Sometimes, it’s OK to say “when.”
CFPB Issues Warning About Re-Opening ‘Fake’ Accounts
Banks beware — you may think you are doing something nice for a consumer when you re-open a closed account so that a deposit or withdrawal can be made and save the consumer from potential issues, but you are likely breaking the law, the Consumer Financial Protection Bureau warned yesterday in a newly published circular. More details here.
WHAT THIS MEANS, FROM JOHN REDDING OF ALSTON & BIRD: No good deed goes unpunished by the CFPB – that seems to be the message from their most recent circular addressing the reopening of deposit accounts, even to accept deposits. On May 10, the CFPB issued a circular addressing the unilateral re-opening of deposit accounts, stating that doing so may cause harm to consumers that is outweighed by any benefit, even when opened to accept a deposit and make funds available to the consumer. Rather, it appears the CFPB considers the better practice to be rejecting the deposit, taking no action, and leaving it to the customer and whoever attempted to make the deposit to work it out . . . all while the consumer lacks access to those very funds.
The circular also addresses unilateral re-openings to process and return an NSF, thereafter imposing a fee on the consumer, which one can more readily understand. However, the examples cited with respect to re-opening to accept a deposit include a payroll processor who inadvertently attempts to deposit in the wrong account or a merchant processing a refund. And the risk is apparently the potential incurring of a fee – not the actual incurring, but the potential – and the fact a third party might gain access to the account. Ultimately, based on this circular, consumers better hope they notice when funds they are expecting don’t arrive or that a third party seeking to make the deposit will use alternative means to contact the consumer, or those funds may never reach the consumer.
Judge Remands Hunstein Case Back to State Court After Both Sides Try to Keep it Federal
That a District Court judge in New Jersey has remanded a Hunstein class-action case back to state court after ruling the plaintiff lacked standing is not a man-bites-dog type of story, but what makes this case slightly more unusual than the run-of-the-mill Hunstein cases that have been filed is that the both the plaintiff and the defendant were arguing to keep the case in federal court. The judge also denied a request from the plaintiff for a stay in the case, pending the outcome of a Hunstein case that was recently argued before the Court of Appeals for the Third Circuit. More details here.
WHAT THIS MEANS, FROM CHRISTOPHER MORRIS OF BASSFORD REMELE: Here an agency, facing a state court putative class action alleging violation of the FDCPA through disclosure to a third party letter vendor, removed that claim to federal court, then moved to dismiss. The court independently requested briefing on the matter of jurisdiction, and both plaintiff and defendant asked the court to find that standing existed (defendant, having already affirmatively taken the position that federal standing existed by removing the case to federal court, really had no other choice). But the federal district court was unpersuaded, reasoning that the plaintiff’s mail vendor theory of harm “fails to allege a concrete harm because she fails to allege that her personal information was given any publicity.” The court went on to aptly observe that even if a small group of mail vendor employees were able to access her information, such dissemination is still not enough to become public knowledge of the kind that would result in any meaningful harm. Thus, the case was remanded back to New Jersey state court, and in defending that case, the defendant will have the benefit of the federal district court’s ruling that there exists no discernable harm at all to the plaintiff.
Judge Denies Collection Fraudster’s Bid for Compassionate Release
A District Court judge in New York has denied a defendant’s motion for compassionate release from home confinement, ruling the individual did not make his case for having extraordinary and compelling reasons for the judge to grant the motion. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF GORDON REES: Sessum sought compassionate release from his home confinement sentence. Sessum argued that he was unable to take appropriate medications and if he could take the proper medication, he could manage his pain, obtain employment and earn income. District Judge Failla of the Southern District of New York denied Sessum’s motion. In her analysis, Judge Failla relied upon the guidance provided by the Second Circuit in United States v Saldadino, 7 F.4th 120 (2d Circ. 2021) which set forth the three factors to be considered for compassionate relief. Those factors are 1) the defendant must exhaust all administrative remedies; 2) consideration of the factors set forth in 18 U.S.C. §3553(a); and 3) the inmate must show circumstances are extraordinary and compelling that a reduction is warranted. Here, the Court found Sessum did not exhaust his administrative remedies; failed to demonstrate extraordinary or compelling reasons; and §3553(a) factors did not warrant compassionate release. The Court focused on the two years Sessum given after his surgeries but before any confinement to deal with his medical issues andonce confined engaged in communication with the prison to make sure Sessum’s medical needs were met. What this means – before seeking compassionate relief, know the legal components for the request.
Judge Denies MTD in TCPA Class Action Even Though Plaintiff Pressed ‘2’
A District Court judge in Missouri has denied a defendant’s motion to dismiss a Telephone Consumer Protection Act class action that alleged a debt collector used a prerecorded robotic message instructing the plaintiff to “press 2 if you are not this person.” The plaintiff pressed 2, the call ended, and the plaintiff filed this class action. More details here.
WHAT THIS MEANS, FROM DAVID SCHULTZ OF HINSHAW CULBERTSON: Saggio’s putative class action TCPA claims appear weak. Consequently, the defense came out with an aggressive challenge, arguing: (1) plaintiff lacked Article III standing, (2) plaintiff failed to plead necessary elements of his claim, (3) plaintiff and the class could not seek injunctive relief, and (4) the court should strike the class action claims. It thus went for a knockout punch. The court, though, rejected all of the arguments – at least for now.
There is a lot of strategy that goes into motion practice and I don’t question the motions here. Each argument had merit and is preserved, and the rulings may give insight on how to later approach the case. However, if nothing else, the Saggio v Medicredit opinion highlights the difficulties with early motions on the pleadings. The standards, as the court repeatedly stated, favor the plaintiff.
Appeals Court Affirms Ruling, Defendant Bound by Settlement Reached by Former Attorney
If you are going to convince a federal judge that he or should should believe you over a lawyer, you better have some solid proof, a panel of judges from the Court of Appeals for the Third Circuit has ruled, affirming a lower court’s ruling that a defendant in a Fair Debt Collection Practices Act case should be bound by the terms of a settlement that his attorney reached. More details here.
WHAT THIS MEANS, FROM JONATHAN ROBBIN OF J. ROBBIN LAW: In a FDCPA case brought in the District of New Jersey, an attorney representing four different defendants entered into a settlement agreement which included reasonable attorney’s fees for the plaintiff, and allowed a Magistrate judge to determine what those fees should be. Importantly, this case demonstrates that clients are bound by their attorneys’ actions. Specifically, following the Magistrate’s ruling, one defendant obtained different counsel, moved to dismiss the action, and claimed the original attorney was not representing him and that he had not been served with the amended complaint. The plaintiff sought additional attorneys’ fees for his opposition to the defendant’s motion, and the District Court judge doubled the award because plaintiff was forced to oppose the ultimately unsuccessful motion. On appeal, the Third Circuit affirmed the District Court’s judgment because there was no evidence that the District Court erred and further noted that the prior attorney provided clear testimony and an email in which the defendant responded that a proposed settlement “looked good.” Thus, know that you are bound by your attorney’s actions and will not be able to recant, especially if you are aware of it.
CFPB Makes Case to SCOTUS Why Funding Structure is Constitutional
The Consumer Financial Protection Bureau has fired its opening salvo in defense of its funding structure, arguing in its brief to the Supreme Court that the ruling from the Court of Appeals for the Fifth Circuit was “flawed” and “has no support in text, history, or precedent” and should be overturned. More details here.
WHAT THIS MEANS, FROM LESLIE BENDER OF EVERSHEDS-SUTHERLAND: Since the Consumer Financial Protection Bureau (CFPB) filed its brief a week ago urging the Supreme Court to reverse the decision of the Fifth Circuit, attorneys general and a number of other groups have filed briefs in support of the CFPB. Over a dozen amicus briefs have been filed thus far, often representing the combined efforts of multiple filers. By way of background, the Fifth Circuit’s decision challenged the constitutionality of the CFPB’s funding mechanism and left a number of unanswered questions about what the implications of that might be. Stated otherwise, it is unclear how far-reaching a Supreme Court ruling affirming the Fifth Circuit’s decision could be on every order and other action issued by the CFPB. When a constitutional question about the CFPB was last before the Supreme Court, the Court ruled 5-4 in an opinion written by Chief Justice Roberts to strike down restrictions on removal of a CFPB director but left the CFPB otherwise in place. See Seila Law LLC v. Consumer Financial Protection Bureau, 140 S.Ct. 2183 (2020)
In addition to briefs filed by professors and military and veterans’ organizations, two dozen attorney generals New York Attorney General Letitia James stated, “I will continue to work with my fellow attorneys general to defend the CFPB and ensure it is able to work with our respective states to help protect consumers throughout the country.” Joining AG James were attorneys general from Arizona, California, Colorado, Connecticut, Delaware, Hawai’i, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia. In addition, a group of real estate trade organizations have joined forces to file an amicus brief urging the Supreme Court to exercise caution as the Supreme Court’s ruling could dramatically affect the stability of mortgage and real estate markets. Over 140 current and former Democratic lawmakers also filed an amicus brief in defense of the CFPB led by Senator Sherrod Brown of Ohio and Senator Maxine Waters of California.
Ten consumer advocacy organizations also have filed an amicus brief in support of the CFPB’s position, including Public Citizen, Consumer Action, the Electronic Privacy Information Center, the National Consumer Law Center, the National Association of Consumer Advocates, and U.S. Public Interest Research Group.
There is a second challenge to the CFPB’s constitutionality pending in the Fifth Circuit which reveals a split in how the attorneys general view the CFPB. In that case fourteen republican attorneys general filed an amicus brief in support of a lawsuit brought by the U.S. Chamber of Commerce and other co-plaintiffs against the CFPB alleging in that lawsuit that the CFPB exceeded its statutory authority by amending its examination manual to include discrimination (disparate impact) as an “unfair practice under the Consumer Financial Protection Act.
Oral argument has not yet been scheduled by the Supreme Court in this case and while it has been pending a Second Circuit court flatly rejected the Fifth Circuit’s decision, which case is cited in the CFPB’s brief. In CFPB v. Law Offices of Crystal Moroney, the Second Circuit held that the CFPB’s funding is not unconstitutional. In the meantime, experts speculate that even if the Supreme Court affirms the Fifth Circuit’s decision, the Supreme Court would likely stay its mandate to provide Congress with an opportunity to rectify the constitutional issue. As this proceeds, industries regulated by the CFPB may want to consider staying the course.
Collection Law Firm Fighting CFPB CID Plans to Ask Supreme Court to Intervene
A collection law firm fighting a Civil Investigative Demand from the Consumer Financial Protection Bureau is planning on appealing its case to the Supreme Court, and has asked the Court of Appeals for the Second Circuit to hold off issuing its final ruling in the case. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH & VOLUCK: There is now a split among the federal circuit courts of appeal on whether the CFPB’s funding mechanism is constitutional. However, there likely will not be any immediate direct impact on the industry, and the CFPB will proceed with its enforcement actions. The Fifth Circuit found in CFPB v. Community Financial Services Association of America that the CFPB’s funding mechanism violates the Appropriations Clause of Article I of the Constitution. That case is now pending before the U.S. Supreme Court. The Second Circuit in Moroney came to the exact opposition conclusion, namely that the CFPB’s funding mechanism is constitutional. It is not surprising that Moroney is asking for the Second Circuit to stay issuing its mandate (which means stopping the Second Circuit from having its ruing take effect) pending Moroney filing a writ of certiorari to the Supreme Court. It is likely that the Supreme Court will agree to hear the Moroney case and then consolidate it with the Community Financial Services case. In Selia Law v. CFPB, even though the Supreme Court found that the CFPB having a single director who could only be removed from office “for cause,” violated the separation of powers, the remedy was only to change how the director can be removed and the CFPB continued to operate. A similar result could happen here where even if the Supreme Court finds the CFPB’s funding mechanism to be unconstitutional, it likely would just result in greater Congressional oversight over the CFPB through the power of the purse and the CFPB will continue its operations.
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.
