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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 Denies MTD in FDCPA Class Over Eviction Action
A District Court judge in Minnesota has denied a defendant’s motion to dismiss a Fair Debt Collection Practices Act class-action, ruling that eviction proceedings are subject to the FDCPA and that the “competent attorney” standard does not apply to communications received before the plaintiff retained a lawyer. More details here.
WHAT THIS MEANS, FROM JACOB BACH OF MARTIN LYONS WATTS MORGAN: Even if the FDCPA case law may be on your side, you must always be cognizant of what the state law from the applicable jurisdiction says. In this matter, state law defined eviction in a manner that made it easy for the district court to find that an eviction was a debt collection proceeding and thus subject the provisions of the FDCPA. That brought this case under the purview of the FDCPA and its requirements, and thus brought the pleadings filed in the proceeding into the purview of the FDCPA. Even if your communications may be directed at attorneys or at the court, it is still important to avoid making any false representations that may end up being subject to an FDCPA claim.
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Judge Dismisses FDCPA Class-Action for Lack of Standing
A win is a win, right? Regardless of how it’s accomplished? A District Court judge in New Jersey has dismissed a plaintiff’s Fair Debt Collection Practices Act class-action lawsuit over the contents of a letter responding to a debt verification request on the grounds the plaintiff lacked standing to sue, never getting to the merits of a motion to dismiss that was filed by the defendants. More details here.
WHAT THIS MEANS, FROM STACY RODRIGUEZ OF ACTUATE LAW: United States District Judge Zahid N. Quraishi (District of New Jersey) recently dismissed a putative class action FDCPA lawsuit due to the plaintiff’s lack of standing. In Winter v. Resurgent Capital Services et al., No. 3:22-cv-00772, the plaintiff claimed that she received a letter that was materially deceptive and failed to disclose that the statute of limitations would recommence if she made a payment. The defendants moved to dismiss on multiple grounds, including that the letter was sent in response to plaintiff’s request for verification of the debt, and was not a communication made in an attempt to collect a debt.
Judge Quraishi, however, declined to rule on any of the defense arguments. Instead, Judge Quraishi sua sponte undertook a threshold standing analysis to determine if the Court had subject matter jurisdiction to hear the case, which is not an uncommon twist for FDCPA cases filed in (or removed to) federal court in recent years. Judge Quraishidismissed the lawsuit without prejudice due to the plaintiff’s failure to establish a concrete harm sufficient to establish Article III standing. The Judge found that the plaintiff had “not allege[d] an injury beyond statutory violations” noting that “confusion” is “insufficient to confer standing” and the plaintiff’s failure “to take advantage of her dispute rights” or “her inaction following receipt of the [l]etter” is not alleged to have been caused by the letter.
The takeaway? Even if the defense decides not to launch a standing attack, it should be expected that a federal judge might raise the issue independently. Federal courts are required to determine threshold issues of subject matter jurisdiction before they are authorized to issue rulings on Rule 12(b)(6) defenses. There still may be reasons, however, for declining to raise a standing defense at the outset – for example, pleadings that arguably allege a concrete harm, or a lack of directly-on-point or binding authority from your court or particular judge, combined with a preference to stay in federal court.Regardless of whether standing is a defense-led or Court-initiated analysis, a standing dismissal is still a valuable result. You end up with a ruling that the type of violation this plaintiff (and here, arguably the class members similarly situated to the plaintiff) allegedly experienced, caused no actual or concrete harm. Many states have similar standing/harm requirements – sometimes a product of case law – that can be invoked (now with the benefit of a federal judge’s Article III analysis of the same claims) if and when the plaintiff re-files in state court.
Plaintiffs Voluntarily Dismiss FDCPA Suits Over Failure to Remove Dispute Flags
Is there a light at the end of the tunnel for companies facing claims that they did not remove a dispute notification from an account after a consumer rescinded a dispute? A District Court judge in Georgia has granted requests from plaintiffs in two separate Fair Debt Collection Practices Act lawsuits seeking to voluntarily dismiss their claims against the same defendant. More details here.
WHAT THIS MEANS, FROM CHAD ECHOLS OF FROST ECHOLS: Success in fighting consumer litigation comes in different forms. While the company had to invest money through defense costs to get to summary judgment, the result of a voluntary dismissal after months of litigation is “success.” The theory of liability here is – at its core – ridiculous. Paying a ransom settlement on this theory incentivizes additional claims. Having the consumer firm work on the case, only to dismiss it later, is a certain loss for the attorneys who took the case expecting to pocket part of a settlement. A voluntary dismissal with prejudice serves to steer consumer counsel away from this fact pattern going forward. We all celebrate those long judicial opinions that establish our view of the law, but two-page opinions that show the other side “threw in the towel” are good ones too.
Judge Partially Grants MSJ for Plaintiff in FDCPA Case
A Magistrate Court judge in Nevada has partially granted a plaintiff’s motion for summary judgment in a Fair Debt Collection Practices Act case — but only on the grounds that there are no genuine issues of material fact that the plaintiff is a consumer, the defendant is a debt collector, and the debt in question arose out of a transaction for personal, family, or household purposes — otherwise denying the motion on all the counts related to allegedly violating the FDCPA. More details here.
WHAT THIS MEANS, FROM MITCH WILLIAMSON OF BARRON & NEWBURGER: What makes this case noteworthy is the fact that the Court found Article III Standing based on alleged: “(1) loss of sleep; (2) acute and ongoing anxiety; (3) loss of quality of life; (4) use of vacation time from work; and (5) loss of credit expectancy.” In doing so the Court cited to a pre TransUnion v Ramirez local District Court FCRA case Salazar v. ABC Auto. Invs., LLC, 2019 U.S. Dist. LEXIS 112341 where there were specific allegations of credit impairment. Interestingly is that the Court cited Salazar for the proposition that “allegations of anxiety, loss of sleep and appetite, and humiliation confer Article III Standing.”
What makes this case stand out, as least to me, is the fact that the Plaintiff submitted an expert report in support of her damages claims. It appears, although not 100% clear, that the report spoke to the effect the collection activity had on Inserra’s credit worthiness. What is equally unclear is whether the Defendant produced its own expert report to challenge Plaintiffs. What is clear however, was that the effect of the expert report was to support Plaintiff’s argument that she had Article III Standing.
On the flip side, Plaintiff’s lone successes through summary judgment were finding that she was a consumer, the debt was consumer oriented and the defendant was a debt collector. More often than not most collectors will concede those issues when they answer the complaint unless there are strong facts clearly negating same. (The debt arose from yard work at the Plaintiff’s residence.)
As to the various FDCPA counts, the Court found all were genuinely in dispute, starting with whether the debt was actually owed or not, which the Court commented, would color the various allegations of violative conduct. A careful reading of this decision provides a bit of a road map for the defense going forward.
In conclusion, while on the one hand it is troubling that the Court relied on a decision where there were allegations of detrimental effects on the plaintiff’s credit; issues that lend themselves to proofs to support a finding that stress and anxiety also provide Article III Standing, especially in light of the current trend going in the opposite direct. On the other hand given the number of specific violations alleged, this is not a case that lend itself to a standing argument to begin with. Given the nature of the allegations, the only reason I could see for pushing an Article III argument is if it was known that the state court where the case could end up was “anti-debtor.”
Use of ‘Knowingly’ False Collection Letter Precludes Company From Coverage
A District Court judge in Colorado has ruled that an insurance company does not have to cover customers that were found liable for using a faulty debt collection letter, because of a provision in the agreement that excluded coverage in the event that material was published with a “knowledge of falsity.” More details here.
WHAT THIS MEANS, FROM KATIE ZUGSAY OF FINEXUS INSURANCE AGENCY: At first blush, this ruling may appear alarming, as plaintiffs’ attorneys typically characterize wrong-doing as intentional, as was alleged here. However, this case involved defamation, triggering a General Liability policy—a particular sector in which insurers have suffered historic losses in recent years, and for which coverages are becoming more restrictive, generally. Also, the court was persuaded by bad facts not likely to be present in a typical consumer debt collection letter case. Namely, the commercial collection letters here were “broadly published,” and the Defendant’s CFO testified to having known the contents of the letters were false at the time they were published. That said, collection agencies’ E&O policies typically exclude or will reverse defense cost payments made for claims in which alleged, intentionally wrongful, malicious acts, etc. are proven, so this case serves as a reminder to ensure our policies, procedures, training, and audit programs are continuously reviewed and kept up-to-date, so honest mistakes remain defensible.
Judge Denies MTD in FDCPA Case, Rules Claim of ‘Financial Loss’ Sufficient to Have Standing
Stating that a plaintiff suffered a financial loss without necessarily going into specifics about what those losses actually were was enough for a District Court judge in Michigan to deny a defendant’s motion to dismiss a Fair Debt Collection Practices Act case. More details here.
WHAT THIS MEANS, FROM VIRGINIA BELL FLYNN OF TROUTMAN PEPPER: Allegations of financial loss are sufficient to establish Article III standing for an Fair Debt Collection Practices Act (“FDCPA”) lawsuit at the pleadings stage, a district court judge for the Eastern District of Michigan recently held. The third-party debt collector defendant originally filed suit against the plaintiff in a Michigan state court to collect an unpaid credit debt. After the plaintiff denied he owed the debt and submitted proof of identity theft, and the defendant dismissed the collection lawsuit, the plaintiff filed suit against the defendant for violating the FDCPA. The plaintiff alleged that the defendant wrongfully filed a collection lawsuit without proof, disclosed debt information to the process server, and attempted to collect on a debt that the plaintiff did not owe. The plaintiff further alleged that the defendant’s unlawful filing of a collection lawsuit damaged his financial and personal reputation and caused great stress, anxiety, and financial loss. The defendant moved to dismiss, arguing the plaintiff lacked Article III standing to bring his claims.
The court denied the defendant’s motion to dismiss the FDCPA claims, finding the plaintiff had established Article III standing. The court agreed with the defendant that the plaintiff’s reputational damage and claims of stress and anxiety were not injuries in fact. Significantly, the court found that the plaintiff’s fear of a potential judgment against him was “too speculative” to qualify as an injury in fact. However, the court held the plaintiff’s financial losses established Article III standing. Although the defendant challenged the plaintiff’s allegations of financial loss as “vague,” the plaintiff had obtained legal counsel and incurred financial costs in response to the defendant’s collection lawsuit. As a result, the court found that the plaintiff’s claim of a financial loss was a concrete injury that established Article III standing.
The decision, though brief, offers clarity to debt collector defendants who contest a plaintiff’s Article III standing for lack of an injury in fact – simple allegations of financial loss may be sufficient to move a case forward.
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.
