The U.S. Court of Appeals for the Eleventh Circuit recently held that the FDCPA applies to litigation activity, even when the debt collector’s conduct is directed at someone other than the consumer, such as the court or the debtor’s counsel.
A copy of the opinion is available at: http://media.ca11.uscourts.gov/opinions/pub/files/201413715.pdf
A creditor obtained a money judgment against a debtor, and then sought and obtained a continuing writ of garnishment on the debtor’s wages in order to collect the debt. In response, the debtor filed a claim of exemption, which the creditor disputed in a sworn reply.
However, the writ of garnishment was eventually dissolved on the creditor’s motion after the debtor provided discovery showing that his wages were exempt from garnishment under section 222.11(2), Florida Statutes, because he made $750 or less per week and provided more than one-half of his wife’s support.
The debtor then filed suit in federal court, alleging that the creditor’s debt collection attorney’s filing in the garnishment proceedings was abusive, misleading and unfair under several provision of the FDCPA.
The debt collector attorneys moved to dismiss for failure to state a claim, arguing that the FDCPA does not apply to representations made in court filings by attorneys in the process of collecting a debt, and that their filing in the garnishment proceedings was not an actionable communication because it was directed to the court and debtor’s counsel, not the debtor.
The district court agreed with the debt collector attorneys, and dismissed the complaint because the FDCPA did not apply to the attorney’s conduct at issue and, even if it did, the complaint failed to state a claim on which relief could be granted.
On appeal by the debtor, the Eleventh Circuit noted that “the plain language of the FDCPA, other persuasive decisions interpreting that language, and the purpose underlying the Act mandate a finding that the FDCPA applies to attorneys … who regularly engage in debt collection activity, even when that activity includes litigation and even when the attorneys’ conduct is directed at someone other than the consumer.”
However, the Eleventh Circuit agreed with district court that the debtor failed to state a claim under the FDCPA, and affirmed the dismissal of the complaint.
The threshold issue addressed by the Appellate Court was whether the FDCPA applied at all to the debt-collection activities of attorneys. The Court rejected the defendants’ argument that the FDCPA does not apply to representations made by debt-collection lawyers in “formulaic procedural filings” not directed to the consumer, finding that under Supreme Court precedent and the plain language of the FDCPA, the FDCPA “applies to lawyers and law firms who regularly engage in debt-collection activity, even when that activity involves litigation, and categorically prohibits abusive conduct in the name of debt collection, even when the audience for such conduct is someone other than the consumer.”
The Eleventh Circuit noted that, in Heintz v. Jenkins, 514 U.S. 291, 294, 115 S. Ct. 1489, 1490 (1995), the Supreme Court held that the FDCPA “applies to the litigating activities of [debt-collector] lawyers.” Moreover, the Appellate Court noted, although a prior version of the FDCPA contained an exemption for lawyers, Congress repealed the exemption.
Finally, the Appellate Court noted that after the Heintz decision, Congress amended section 1692e(11) of the FDCPA, which prohibits initial written communications to a consumer unless they disclose that they are from a debt collector, to exclude formal pleadings “made in connection with a legal action” from the requirements of that particular section only. The Eleventh Circuit also noted that, if Congress had intended to exempt all litigation activity rather than only formal pleadings, it could have done so but did not.
Analyzing the plain language of the three FDCPA section at issue, 1692d, 1692e and 1692f, the Eleventh Circuit concluded that the “FDCPA’s statutory text does not provide nor does it imply immunity for debt collection practices otherwise forbidden by the Act simply because those debt collection practices are directed at a consumer’s attorney or any other non-consumer.”
Because the filing of the debt collector attorney’s sworn reply to the debtor’s claim of exemption from garnishment was filed in connection with the collection of a debt, and no statutory exemption applied, the Eleventh Circuit held that the conduct was actionable under the FDCPA.
Having determined that the FDCPA applied to the debt collector attorney’s conduct, the Eleventh Circuit addressed whether the debtor pled sufficient facts to allow the Court to draw the reasonable inference that the law firm and lawyer defendants are liable for the misconduct alleged.
The Eleventh Circuit agreed with the district court that the complaint failed to sufficiently allege that the defendants engaged in conduct prohibited by the FDCPA.
First, the Appellate Court found that section 1692d does not, as a matter of law, prohibit the conduct involved in the case at bar because it did not include the use of violence, obscene or profane language, or repeated phone calls, conduct the natural consequence of which the FDCPA expressly recognizes as harassing, oppressive or abusive. Even when viewed from the perspective of the least sophisticated consumer, the Eleventh Circuit held, the filing in the garnishment action did not have the natural consequence of harassing, abusing or oppressing the debtor.
Second, the Eleventh Circuit held that the complaint failed to alleged sufficient facts to state a claim under section 1692e of the FDCPA, which generally prohibits deceptive practices in collecting a debt, because the conduct at issue did not involve implying that the debtor had committed a crime, falsely representing the amount of the debt, or threatening to take legal action with no intent to follow-through.
The Appellate Court reasoned that the sworn reply at issue was not misleading or deceptive because it did not misrepresent the nature or effect of the writ of garnishment, it did not incorrectly state the amount of the debt, it did not not incorrectly identify the holder of the debt, and it did not contain false or ambiguous threats of future litigation. Rather, the Eleventh Circuit noted, the court filing at issue simply contained the defendants’ legal position on the debtor’s claim of exemption to garnishment.
The Eleventh Circuit also noted that the debtor did not allege he or anyone else was misled or deceived by the filing of a sworn statement disputing his position that he was a “head of family” under Florida law, and the Court found that the defendants did not have to accept the debtor’s argument at face value. Instead, the debt collector attorney and had the right to challenge the debtor’s claim of exemption, particularly as the debtor did not state his wife’s income in his affidavit and this information was necessary in order to determine whether debtor provided more than one-half of his wife’s support.
Finally, the Appellate Court concluded that the conduct at issue did not fall within the FDCPA’s catch-all provision, section 1692f, which generally prohibits unfair or unconscionable means to collect a debt.
The Eleventh Circuit held that the complaint failed to identify specifically how the conduct at issue was either unfair or unconscionable, in addition to being allegedly abusive, deceptive, or misleading, and disagreeing with the other side’s legal position is part of the very nature of litigation, the filing of the reply did not rise to the level of unfair or unconscionable under section 1692f.
Accordingly, the district court’s dismissal of the complaint for failure to state a claim under the FDCPA was affirmed.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com
Admitted to practice law in Illinois
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates are available on the internet, in searchable format, at:
Financial Services Legal Developments
and
The Consumer Financial Services Blog™
and
California Finance Law Developments
and
