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Ninth Circuit Upholds FDCPA Ruling Against Debt Collection Law Firm
On March 4, the U.S. Court of Appeals for the Ninth Circuit affirmed a debtor’s judgment against a debt collector under the federal Fair Debt Collection Practices Act (FDCPA), the Montana Unfair Trade Practices and Consumer Protection Act and state tort claims of malicious prosecution and abuse of process. McCollough v. Johnson, Rodenburg & Lauinger, No. 09-35767 (9th Cir. Mar. 4, 2011). The plaintiff debtor’s delinquent credit card account was sold by the credit issuer to a debt buyer. The debt buyer brought a state court action to recover on the debt but dismissed the action after the debtor asserted in response that the statute of limitations had run. The debt buyer then retained a debt collection law firm, Johnson, Rodenburg & Lauinger (JRL), to pursue the action, which it did until it was instructed to dismiss the suit several months later based on it being time barred. The debtor brought an action against JRL in federal court. The district court granted partial summary judgment on the FDCPA claims and the debtor won the other claims at trial. In affirming the ruling of the district court, the Ninth Circuit found that JRL’s defense of bona fide error as to the FDCPA action failed as a matter of law. The court held that JRL erred by relying without verification on its debt buyer client’s representation that the statute of limitations was extended and by overlooking contrary information in its electronic file. "JRL thus presented no evidence of procedures designed to avoid the specific errors that led to its filing and maintenance of a timebarred collection suit" against the debtor, the court concluded. The court also upheld summary judgment on the debtor’s claim that JRL violated the FDCPA by pursuing unauthorized attorneys’ fees. The FDCPA prohibits "[t]he collection of any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law." JRL’s presentment of generic evidence that all credit cardholder agreements provide provisions for attorneys’ fees was found to be insufficient to defeat summary judgment. The court also concluded that: false requests for admission of JRL in the underlying action violated the FDCPA; the district court did not abuse its discretion in allowed testimony from other consumers relating to JRL; and, that the district court properly allowed the jury’s $250,000 award for actual damages due to the emotional distress of the plaintiff, who years earlier had suffered a head injury and suffered from mixed personality disorder and multiple other afflictions, including post-traumatic stress disorder.
Eleventh Circuit Holds FDCPA Private Right of Action May Be Premised on Violation of Corresponding State Law That Provides No Private Right of Action
On March 30, the U.S. Court of Appeals for the Eleventh Circuit held that a federal cause of action under the Fair Debt Collection Practices Act (FDCPA) is cognizable when premised upon a failure to comply with a state consumer protection statute, even where the state statute is analogous to the FDCPA and itself provides no private right of action. LeBlanc v. Unifund CCR Partners, No. 08-16031, 2010 WL 1200691 (11th Cir. Mar. 30, 2010). In LeBlanc, the plaintiff debtor ceased making payments on a credit card. The defendant debt collector purchased the charged-off account and endeavored to collect the debt by, among other things, sending a letter to the debtor advising that it "may refer this matter to an attorney in your area for legal consideration." The debt collector subsequently filed suit in state court to collect the debt. The debtor filed suit in federal court, alleging violations of the FDCPA and the Florida Consumer Collection Practices Act (CCPA). The district court granted partial summary judgment to the debtor, finding that the debt collector violated the FDCPA by failing to register as an "out-of-state consumer collection agency" with the State of Florida, as required by the CCPA, and therefore could not legally sue to collect the debt. Because the district court also viewed the letter as a threat to take legal action, it held that the debt collector violated the FDCPA’s prohibition on any "threat to take action that could not be legally taken" and for using "unfair or unconscionable means to collect a debt." On appeal, the debt collector argued that, because the CCPA provision requiring registration does not itself provide a private right of action, premising a federal cause of action upon the same conduct and legal theory under the FDCPA would undermine or circumvent the state’s consumer protection scheme. The Eleventh Circuit, however, found that (i) the CCPA’s goal of providing consumers with the most protection possible must favor enforcement in the event of any inconsistency between federal and state statutes; (ii) in deeming the CCPA’s remedies cumulative, the legislature contemplated dual enforcement; and (iii) the fact that a debt collector’s failure to register is a misdemeanor criminal act in Florida demonstrates the seriousness of CCPA violations. Therefore, the Eleventh Circuit held that a violation of the CCPA for failure to register may support a federal cause of action under the FDCPA for threatening to take an action not legally available. As to the merits of the claims, the court found that (i) whether the letter constituted a threat for purposes of Section 1692e(5) of the FDCPA and (ii) whether the letter constituted an unfair or unconscionable means to attempt to collect a debt presented genuine issues of material fact for resolution by a jury, and precluded summary judgment.
California Court Holds FCRA Preempts California’s Confidentiality of Medical Information Act
On January 29, the California Court of Appeals, Second District, held that the Fair Credit Reporting Act (FCRA) preempts claims regarding the disclosure of medical information under California’s Confidentiality of Medical Information Act (CMIA). Brown v. Mortensen, No. B199793, 2010 WL 324749 (Cal. Ct. App. Jan. 29, 2010). In this case, the plaintiff disputed a medical debt with the defendant debt collector. To verify the existence of the debt, the debt collector disclosed confidential medical information to three consumer credit reporting agencies. The plaintiff subsequently filed suit, arguing that the disclosure of the records violated the CMIA. Holding that FCRA expressly preempted the claim, the court noted that FCRA “preempts state law relating to the duties of furnishers of information to consumer reporting agencies” and reasoned that, because “[the CMIA claims] are rooted in [the debt collector’s] furnishing of information to consumer reporting agencies,” FCRA preempted the consumer’s CMIA claims, regardless of the fact that the CMIA pertains to the disclosure of medical information and not to consumer reporting. In arriving at its decision, the court noted that its approach accorded with several decisions finding for preemption of state law by FCRA, including (i) Pirouzian v. SLM Corp., 396 F.Supp.2d 1124 (S.D.Cal. 2005), which held that FCRA preempted certain claims under the Rosenthal California Fair Debt Collection Practices Act (CFDCPA), (ii) Howard v. Blue Ridge Bank, 371 F.Supp.2d 1139 (N.D.Cal. 2005), which held that FCRA preempted an unfair competition claim brought under section 17200 of the California Business and Professions Code, (iii) Roybal v. Equifax, 405 F.Supp.2d 1177 (E.D.Cal. 2005), which held that FCRA preempted negligence and negligent misrepresentation claims, as well as claims for violations of section 17200 of the California Business and Professions Code, the CFDCPA, and the California Consumer Legal Remedies Act, and (iv) Sanai v. Saltz 170 Cal.App.4th 746 (Cal. Ct. App. 2009), which held that FCRA preempted claims of slander, libel, intentional and negligent interference with prospective economic advantage, intentional and negligent infliction of emotional distress, and violations of the California Consumer Credit Reporting Agencies Act. The court noted that, while the 2003 amendment to FCRA, the Fair and Accurate Credit Transactions Act (FACTA), addresses the use and sharing of medical information in connection with debt collection, the court held that those provisions did not apply in this case because the events in dispute and the filing of the complaint occurred prior to the effective date of FACTA.