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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 Rules Debt Collection Lawsuit Waives Arbitration Clause
A District Court judge in Maryland has denied a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act case, ruling that the defendant waived its right to arbitrate by engaging in prior litigation. More details here.
WHAT THIS MEANS, FROM LORI QUINN OF MESSER STRICKLER BURNETTE: Plaintiff brought a putative Class Action against Oliphant in State Court that was removed to Federal Court alleging violations of the Fair Debt Collection Practices Act, Maryland Consumer Debt Collection Act and Mary Maryland’s Consumer Protection Act. Defendant filed a Motion to Compel Arbitration and Plaintiff opposed. Plaintiff obtained a personal loan that included an Arbitration Provision. Oliphant to whom Plaintiff’s loan had been transferred filed a collection action when Plaintiff defaulted. Defendant filed a motion to compel arbitration. The Court found the Arbitration Agreement was valid and generally signed agreements with such clauses are valid. However, Plaintiff argued that Oliphant had waived the right to arbitrate when it brought the collection action. The court agreed with plaintiff finding it Oliphant acted inconsistent with its right to compel arbitration by starting the debt collection action and that the debt collection claims were related to the claims in the debt collection case. Ultimately, the Court stated Oliphant had waived the right to compel arbitration and the motion was denied.
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State Court Judge Grants Motion to Compel in FDCPA Case Over Transfer of Account to ‘Litigation Department’
Even though he acknowledged that the language in an underlying contract could have been clearer, a State Court judge in Wisconsin has granted a defendant’s motion to compel arbitration in a Fair Debt Collection Practices Act case that was defended by Avanti Bakane of Gordon Rees. More details here.
WHAT THIS MEANS, FROM CHUCK DODGE OF HUDSON COOK: PRA got through this case because its lawyer was able to convince the Wisconsin state judge that its purchase-and-sale agreement intended to convey from the selling bank to PRA the consumer’s account and the agreement. While in our industry that is just about always the intention unless there is a compelling reason for the seller to hold onto certain rights, evidently state court judges have found holes in purchase-and-sale agreements with respect to certain rights and obligations in the underlying credit agreement. At risk here was a class-action jury trial. The consumer credit card agreement included an arbitration clause that gave the consumer the opportunity to opt out, and she never did. The court reviewed PRA’s motion to compel arbitration and ultimately agreed with PRA that its purchase-and-sale agreement sufficiently evidenced the intention of the creditor to sell the account and corresponding account agreement (in its entirety, including the arbitration clause). It is a relief that the court got this right, but debt buyers should take a moment to review those forward-flow or one-time purchase agreements to ensure that it is clear that they are buying the agreement (in its entirety) along with the account. The detail will be in the definitions in those agreements, as it was in this case – but the potential downside of losing access to arbitration because of doubt at the state court level about whether the parties intended to convey that part of the account agreement is too great to take the risk.
Appeals Court Vacates Ruling in Collections, Credit Reporting Case
The Court of Appeals for the Second Circuit has vacated a lower court’s ruling in a case where the defendant was accused of harassing the plaintiff by sending a disputed termination fee to collections and reporting the debt to the credit reporting agencies. The lower court had granted a motion to compel arbitration that was filed by the defendant, but because the plaintiff never actually alleged that a federal law was broken, the lower court had no jurisdiction to issue a ruling, the Appeals Court determined. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: The Second Circuit’s decision in Herskovic v. Verizon Wireless highlights the difficulties in dealing with pro se litigants. Here, the pro se litigant filed a complaint in state court which referenced credit reporting but did not artfully articulated the claim. In response, Verizon removed the matter to federal court on that basis. The pro se litigant then sent a letter to the federal district court opposing the transfer, stating the case was not a FCRA case and that only a small part of his claims was for credit reporting, but not including a formal motion for remand. The federal district court then granted Verizon’s motion to compel arbitration. After arbitration was commenced and completed, the district court confirmed the arbitration award.
On the pro se litigant’s appeal, the Second Circuit reversed and remanded the matter to state court, concluding there was no federal jurisdiction. In doing so, the Second Circuit determined that the complaint did not affirmatively raise a federal claim and, importantly, while “correcting his credit report might have implicated an exclusive federal remedy,” the exclusivity of a federal remedy is not an element of a federal claim. With that, the Court vacated the district court’s judgment and remanded the matter to state court. So what’s the takeaway? ARM members and their counsel need to have a super heightened awareness of the need to establish federal jurisdiction when removing cases from state court. Notices of removal should contain specific paragraphs pointing to the basis for federal jurisdiction, rather than summarily stating it exists. Here, the Court did not believe Verizon met its burden of proof and because subject matter jurisdiction can be raised at any time, it can become an issue late in the game.
Judge Denies Motion to Remand FDCPA ‘Inconvenient Time/Place’ Case Back to State Court
In our continuation of “inconvenient time/place ruling week” here at AccountsRecovery, we have yet another ruling in a defendant’s favor, except this time, it’s not on a motion to dismiss. A District Court judge in Oklahoma has denied a plaintiff’s motion to remand a case back to state court where it was originally filed, ruling that receipt of a single unwanted communication is enough for the plaintiff to have suffered a concrete injury and keep the case in federal court. More details here.
Judge Grants MTD in FDCPA Case Over Sending Letter Response to ‘Email Only’ Notification
For the second time this week, we have a ruling in favor of a defendant that was sued for responding to a “please only contact me via email” message with a letter, but this time, the judge uses Regulation F to show why the defendant did not violate the Fair Debt Collection Practices Act it was accused of breaking, in a case that was defended by Jacob Bach and Xerxes Martin of Martin Golden Lyons Watts Morgan. More details here.
Another Judge Grants MTD in FDCPA Case Over Convenient Channel of Communication
A District Court judge in Oklahoma has granted a defendant’s motion to dismiss after it was sued for violating the Fair Debt Collection Practices Act because it responded to a certified letter from the plaintiff that email was the only way to conveniently contact her by sending another letter to the plaintiff via traditional mail. More details here.
WHAT THIS MEANS, FROM RICK PERR OF KAUFMAN DOLOWICH: These are three cases that are related by the fact that they involve time/place/manner complaints by the consumer and that they all take place in Oklahoma. But, the decisions are very much impacted by facts unique to each case. In the first case, which was decided not on the merits of whether the contact was permissible but on whether the case should remain in federal court due to a concrete injury suffered by the plaintiff, the trial court found, relying on precedent by the United States Court of Appeals for the Tenth Circuit that an unwanted telephone call created a concrete injury to the recipient, that a single unwanted email also constituted a concrete injury. This approach is not followed by every Circuit and its value should be limited to those cases brought in the Tenth Circuit.
The other two cases focus on the merits of the claims. In the Peters case, the trial court correctly determines that the express language of the FDCPA and Regulation F exclude from the time/place/manner restriction communication methods required by law. The FDCPA requires that a response to a timely validation request must be sent by way of the United States Postal Service. Thus, despite the consumer’s request that she be only contact via email, the law holds otherwise. In the Lusk case, the trial court reaches the same conclusion but for a different reason. Plaintiff argues that she was inconvenienced by receiving mail at her place of residence. The trial court muses that delivery by email does not restrict its delivery when she is at home; thus, she could encounter the same “inconvenience” at home if an email is delivered when she is at home. The trial court held that her claim is not protected by the statute and the regulations and dismissed the complaint.
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.
