As you may recall, two years ago, in Simon v. FIA Card Services, N.A. (copy available here), the U.S. Court of Appeals for the Third Circuit held that alleged violations of the FDCPA resulting from conduct in a bankruptcy case were not precluded by the Bankruptcy Code.
At issue was whether the defendants engaged in false, misleading or deceptive conduct in connection with their service of a subpoena for a Rule 2004 examination. The certification of service on the subpoenas indicated service both directly on the plaintiffs and on their attorney, but the subpoenas were actually only served on the attorney. In addition, the location provided for the examination was improper under the bankruptcy rules.
The U.S. District Court for the District of New Jersey originally held that the complaint failed to state a claim for relief prior to the Third Circuit reversing and remanding the case.
Now on remand, the District Court granted the defendants’ motions for summary judgment, holding that the alleged irregularities with the subpoena were immaterial, and would not mislead a competent attorney regarding a consumer’s rights.
Two significant holdings come from this opinion, which is available here.
First, the district court held that although technically inaccurate, the statement that the subpoenas had been served on the plaintiffs at their home address was immaterial, and thus would not mislead the least sophisticated consumer regarding his rights under the FDCPA. The District Court recognized that multiple Circuits -- including the Second, Fourth, Sixth, Seventh and Ninth Circuit, as well as district courts within the Third Circuit -- have all included a materiality component in FDCPA claims.
The District Court held:
the misstatement regarding service had no connection to the nature or legal status of the debt, it was of no consequence to the bankruptcy proceeding, and it would not in any way have affected the decisionmaking of the least sophisticated debtor with respect to their response to the debt collector’s action.
The second significant holding in this opinion is that a “competent attorney standard” is appropriate to evaluate the claims that the subpoenas were false and deceptive. Because the subpoenas were sent to the plaintiffs’ attorneys and not to the plaintiffs directly, the District Court determined that the interpretation of the misstatement at issue (the location of the deposition) had to be determined from the perspective of the competent attorney and not the least sophisticated debtor.
The District Court acknowledged that the Third Circuit rejected the competent attorney standard in specific situations, such as whether the “mini Miranda” disclosures had been provided, or a threshold inquiry of whether the subpoena rule had been violated. However, because the issue here was whether the attorney recipient would be misled by the content of the subpoena, the District Court agreed with other Circuits that have held that the least sophisticated debtor standard is inappropriate for evaluating communications with lawyers.
Ultimately, the District Court held that the competent attorney would not be misled by the subpoenas and would recognize immediately, as plaintiffs’ attorney actually did, the defects in the subpoenas and would advise the plaintiffs accordingly.
The plaintiffs have already appealed the summary judgment ruling to the Third Circuit, such that the Third Circuit will have to directly address both materiality and the competent attorney standard.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
Fax: (312) 284-4751
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
California Finance Law Developments