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Second Circuit Adopts FDCPA Least Sophisticated Consumer Safe Harbor Approach Established by the Seventh Circuit

In Avila, et al. v. Riexinger & Associates, LLC, et al., Case No. 15-1584(L), the Second Circuit Court of Appeals applied the least sophisticated consumer standard of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”) to conclude that a consumer cannot be expected to know that a total debt provided in a given statement continues to increase interest or other fees.  The Second Circuit held that when a debt collector issues a notice to a borrower that includes a statement of the complete amount of their debt, the debt collector must either accurately inform the consumer that the amount of the debt stated in the notice will increase over time based upon interest or other fees, or clearly state that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date. In Avila, a consumer brought a putative class action against a debt collector for violation of § 1692e of the FDCPA alleging that the practice of disclosing in a collection notice only the “current balance” of the amount owed amounts to “false, deceptive, or misleading” collection practices under the statute.  The consumer alleged that the notice led them to believe that the amount owed was not increasing.  The Second Circuit agreed and held that the least sophisticated consumer could believe that payment in full of the current balance provided in the notice would satisfy the entire debt owed, and that a failure to mention the ongoing accrual of interest and fees was misleading. Further, the Court held that “the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees.”

The Second Circuit also held that Section 1692e requires additional disclosures to ensure that consumers are not misled into thinking that simply paying the “current balance” as listed on the collection notice will always result in full satisfaction of the amount owed. Accordingly, the Second Circuit adopted the “safe harbor” approach established by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000).  The “safe harbor” doctrine allows a debt collector to prevent liability under Section 1692e “if the collection notice either accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or clearly states that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date.”

Although the Second Circuit declined to establish the exact language of any disclosure that a debt collector must use to sidestep a possible FDCPA violation, the Court expressed that the language proposed in Miller, 214 F.3d, at 876, would certainly qualify a debt collector for treatment under the newly-created safe-harbor.

Debt collection agencies, or those that act as debt collectors, should pay particular attention to the language of Miller that the Second Circuit suggests will satisfy the newly-recognized safe harbor provision. For information on revising statements to consumers to comply with the safe harbor language, or for other information regarding this topic, contact Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

Second Employment related FCRA Claim filed against AMAZON.COM

A second class action has been filed against Amazon.com in the U.S. District Court for the District of New Jersey alleging that Amazon violated the Fair Credit Reporting Act by failing to warn an applicant a negative reports it received and in turn, failing to allow the applicant an opportunity to clarify or fix what he deemed were errors on the report.   Plaintiff also alleges Amazon failed to provide him with a copy of that report or a list of his rights under the FCRA as required.  According to Plaintiff’s Complaint, Amazon allegedly offered him a position but later withdrew the offer after receiving negative information in a background check from a third party background screener.

The New Jersey Plaintiff seeks to represent a class of those people (employees or job applicants) at Amazon who did not receive a copy of their reports or correspondence explaining that the report would not be provided within 2 to five years from the date of filing.  As a best practice, employers should be aware of the requirements imposed by the FCRA and provide all applicable notices to employees or prospective employees as required.

For more information on the FCRA and its application in the employment law field, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

CFPB to Curb Mandatory Arbitration in Bank Contracts

On October 7th, 2015, the Consumer Financial Protection Bureau (“CFPB”) is set to propose new regulations which would prohibit financial institutions from including arbitration clauses that revoke consumers’ rights to class-action litigation. Such clauses appear in a broad range of financial contracts including, but not limited to, those for credit cards, checking and deposit accounts, prepaid cards, money transfer services, home mortgages, and private student loans. Through this proposal, the CFPB hopes to shift more power to consumers but in doing so, it has sparked national debate as to whether consumers are actually helped or harmed by arbitration agreements. According to a March study conducted by the CFPB, mandatory arbitration clauses affect millions of consumers, of which only 7% were aware such clauses restrict their rights to sue in court. The CFPB hopes their findings will justify the pending regulations; Opponents of the proposed regulation maintain that consumer class actions often times do little to help consumers and impose huge costs to businesses.

For more information regarding the proposed regulations or about the CFPB generally, contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

33% Attorney’s Fee Award Reduced to Lodestar Calculation in FLSA Settlement

Marshall v. Deutsche Post DHL, decided September 21, 2015 involved a collective action against DHL and DHL Express (USA) Inc. The plaintiffs represented a class of DHL agents working at airports in New York, Miami and Los Angeles who were “undercompensated through defendants’ alleged unlawful rounding of time, automatic deductions for meals, and requests that employees work off-the-clock.” Plaintiffs, through class counsel, obtained a settlement of $1,500,000 for the 242 class members involved. In approving the settlement, the district court stated that it had no issues with the settlement amount for the class members, but took issue with the calculation of class counsel’s attorney’s fees pursuant to that settlement. Although class counsel appeared to have billed a total of 1,325 hours on the case for a total lodestar figure of $591,571.25, class counsel requested $500,000 in fees, or one third of the settlement amount, and sought to be reimbursed for $33,371.39 for costs. The magistrate judge approved the proposed settlement and no class member or other interested party made any objection. Fast forward to the settlement approval by the district court – as stated above, the court took no issue with the settlement amount as to the class stating “the settlement is substantively fair and adequate and therefore is approved.” The court next evaluated class counsels’ request for an award equal to 1/3 of the total settlement amount. The court stated a “court may calculate a reasonable attorneys’ fee either by determining the so-called “lodestar” amount or by awarding a percentage of the settlement. “See McDaniel v. Cnty. Of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010). The court also acknowledged that “the trend in this Circuit is toward the percentage method,” but either approach is appropriate. McDaniel, 595 F.3d at 417 (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 121(2d Cir. 2005). Even so, the court, citing to McDaniel, 595 F.3d at 417, stated “the percentage-of-the fund method”…“create[s] perverse incentives of its own, potentially encouraging counsel to settle a case prematurely once their opportunity costs begin to rise.”

The district court ultimately disagreed with the magistrate’s finding that the 1/3 award was reasonable stating that “there is reason to be wary of much of the case law awarding attorney’s fees in FLSA cases in this circuit” citing to Fujiwara v. Sushi Yasuda Ltd., 58 F.Supp. 3d 424, 436 (S.D.N.Y. 2014). Therefore, the district court followed several other New York federal district judges partial to Fujiwara and applied the lodestar method but refused to apply a multiplier. In doing so, the court reduced the award to $370,236.50, approximately 25 percent of the total settlement, stating “[w]hile counsel urge the use of a lodestar multiplier, the various considerations that might justify a multiplier have already been factored into the determination of counsel’s reasonable hourly rate. I decline to add a multiplier to the fee award.” See Goldberger v. Integrated Res., Inc., 209 F.3d 43, 51-57 (2d Cir. 2000).

The Marshall decision could present a concern for mid-size or larger firms, who generally bill at much higher rates, who are considering taking on the risk of employment common fund class or collective actions.

For more information on the FLSA, class or collective actions or any other employment law issue, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

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CLASS ACTION STATUS GRANTED AGAINST UBER TECHNOLOGIES

Judge Edward Chen of the Northern District Court of California recently certified a class action suit against Uber Technologies, Inc. which claims the service treated its drivers like employees rather than independent contractors. The plaintiffs in this case believe that since Uber controls much of the drivers’ experiences (i.e. setting fares, deciding when and why they can be terminated, etc.), drivers should be classified as employees and therefore be eligible for expense reimbursements for car repairs, tips, and insurance. The class action will not apply to drivers that waived their right to litigate, certain drivers who work for independent transportation companies and drivers outside the state of California.  If a ruling limiting the class to those employed in the state of California is successfully appealed, however, the class action could be applicable to drivers around the country.

For more information regarding the class action against Uber or employment law generally, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

Employer Alert - To What Extent Do Employees Have the Right to be Accommodated with Respect to Their Religious Beliefs?

Employees refusing to do their job duties based upon religious beliefs have been a trending topic in the news recently.  For example, Kim Davis, a county clerk in Kentucky, gained national media attention when she refused to issue marriage licenses after the U.S. Supreme Court ruled that the right to marriage is guaranteed to same-couples by the Fourteenth Amendment. In the midst of the news stories surrounding the Kim Davis controversy, another employee filed a federal lawsuit based upon her employer placing her on administrative leave due to her religious beliefs inhibiting her ability to perform her job duties.  Charee Stanley, a Muslim flight attendant for ExpressJet Airlines, was recently placed on administrative leave after she refused to serve alcohol for religious reasons.  Stanley began her employment prior to converting to the Muslim faith.

Stanley asked her supervisor for a religious accommodation, i.e., having one of her colleagues serve the alcohol while she did another job duty.  The supervisor agreed.  The accommodation worked for a while, until one of her colleagues filed an internal complaint against Stanley claiming she was not doing her job because she refused to serve alcohol.  Subsequently, the airline revoked the religious accommodation and placed her on administrative leave without pay for 12 months - “after which her employment would be administratively terminated.”

Stanley is now seeking redress from the EEOC.  Stanley claims she was disciplined for following the direction of her employer and that her employer had no justification to revoke her religious accommodation.  Stanley’s position is that ExpressJet acknowledged serving alcohol was “not an essential duty or function of flight attendant” by granting the religious accommodation and the fact that the revoked the accommodation is in violation of Title VII of the Civil Rights Act of 1964.

While employers should be mindful and knowledgeable about their duties when it comes to accommodating employees based on religious beliefs, employers also need to be aware of their rights.  Title VII provides that an employer must reasonably accommodate an employee’s religious beliefs and practices unless doing so would cause “undue hardship on the conduct of the employer’s business.”  The U.S. Supreme Court has ruled that “undue hardship” means that an employer need not incur more than minimal costs in order to accommodate an employee’s religious practices.  The EEOC has interpreted “undue hardship” to mean that an employer can show that a requested accommodation causes it an undue hardship if accommodating an employee’s religious practices requires anything more than ordinary administrative costs, diminishes efficiency in other jobs, infringes on other employees’ job rights or benefits, impairs workplace safety, causes coworkers to carry the accommodated employee’s share of potentially hazardous or burdensome work, or if the proposed accommodation conflicts with another law or regulation.

Accordingly, religion is not an automatic ticket employees can use to avoid certain job duties.  There are limitations and employers need to be aware of their rights under Title VII.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

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Sixth Circuit Expands the Definition of “Person” Under the FDCPA

The Sixth Circuit recently made a ruling which expanded the definition of “person” under the FDCPA to include artificial entities such as corporations or limited liability companies for purposes of 15 U.S.C. § 1692k.  In Anarion Investments LLC v. Carrington Mortgage Services, LLC et al., the district court dismissed the complaint on the basis that plaintiff, a limited liability company, was not a “person” under the FDCPA and could not recover under the statute’s civil liability provision.  This provision states that a debt collector who fails to comply with the FDCPA “with respect to any person is liable to such person.”  On appeal, the Sixth Circuit decided that under this provision, the term “person” includes artificial entities and natural persons.  The Sixth Circuit relied on the federal dictionary for the definition of “person” which includes artificial entities unless the context indicates otherwise.  The Sixth Circuit clearly ignored the FDCPA’s statutory purpose as the FDCPA’s legislative history and purpose to protect natural persons from abusive debt collection practices clearly “indicates otherwise” so as to not include artificial entities. Despite expanding the definition of “person” under Section 1692k, the Sixth Circuit’s opinion is unlikely to make a large impact because the FDCPA only applies to consumer debts - those incurred for personal, family, or household purposes.  Nonetheless, this type of ruling is troublesome as it demonstrates the unpredictability of court’s interpretations of even those terms that are defined within the statute.

For more information on this topic, contact Stephanie A. Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

 

 

SEVENTH CIRCUIT REVERSES PRIOR DECISIONS TO THE EXTENT THEY HOLD A DEFENDANT’S OFFER OF FULL COMPENSATION MOOTS THE LITIGATION OR OTHERWISE ENDS ARTICLE III STANDING

In a recent opinion, the Seventh Circuit ruled that a defendant’s offer of full compensation does not render an individual plaintiff’s claims moot.  See Chapman v. First Index, Inc., 2015 U.S. App. LEXIS 13767 (7th Cir. Aug. 6, 2015).  In Chapman, a facsimile recipient brought a lawsuit against the sender alleging two violations of the Telephone Consumer Protection Act (TCPA).  Defendant subsequently made an offer of judgment (“OOJ”) under Federal Rule of Civil Procedure 68 for $3,002.00, an injunction, and costs.  Section 227(b)(3)(B) of the TCPA authorizes awards of actual damages or $500 per fax, whichever is greater, and can be trebled if the violation was willful; while Section 227(b)(3)(A) allows for an injunction.  As Plaintiff failed to identify any actual damages, defendant’s OOJ constituted a fully compensatory offer.  Consequently, when the OOJ lapsed, the district court dismissed Plaintiff’s individual claims as moot. On appeal, the Seventh Circuit reversed and in doing so overruled Damasco, Thorogood, Rand, and similar decisions to the extent they held a defendant’s offer of full compensation moots the litigation.  The Court acknowledged that a case becomes moot only when it is impossible for a court to grant any effectual relief whatsoever to the prevailing party.  By that standard, plaintiff’s case was not moot as the district court could still award damages and enter an injunction.  “If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs.”  Essentially, even if plaintiff had accepted the OOJ the district court could not have entered judgment, all it could do is dismiss the case, and in that sense as “soon as the offer was made, the case would have gone up in smoke[.]”

Importantly, but without ruling on same, the Seventh Circuit left open the possibility that the district court could have entered a judgment according to the offer’s terms.  Though Chapman holds a rejected OOJ, by itself, cannot render a case moot, Chapman certainly suggests that proper disposition of a case following an unaccepted offer of complete relief is for the district court to enter judgment in the plaintiff’s favor.  Consequently, defendants facing an unaccepted OOJ may choose to move for entry of judgment in accordance with the offer’s terms.  After judgment is entered, the plaintiff’s individual claims will become moot for purposes of Article III.

Notably, whether a class action is rendered moot when named plaintiffs receive an offer of complete relief is currently pending before the Supreme Court.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted sub nom. Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (May 18, 2015).  Recognizing same, the Seventh Circuit in Chapman admittedly felt compelled to “clean up the law of the circuit promptly[.]”

For more information on the Chapman decision, Rule 68 offers of judgment or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com

 

Seventh Circuit: FDCPA Not An Enforcement Mechanism for State Law

On July 27, 2015, the Seventh Circuit Court of Appeals ruled that the Southern District of Indiana was correct in granting defendant’s motion for summary judgment in a Fair Debt Collection Practices (“FDCPA”) case.  In Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., the issue at hand was not that the debt itself that was disputed but rather the manner in which the firm hired by Capital One, the owner of the account, attempted to collect the debt. Bentrud took issue with the firm’s conduct after the invocation of an arbitration provision contained in the original credit agreement.  Specifically, Bentrud argued that the firm unfairly filed a second motion for summary judgment after Bertrud had elected arbitration in violation of the arbitration clause. The Seventh Circuit found nothing impermissible about the firm’s request in light of the state court’s prior orders and deadlines.

Most important, however, was the Court’s continued affirmance that not every action or inaction in a collection action implicates the FDCPA.  While limiting its discussion to the particular facts before it, the Circuit confirmed once again that that it would “not transform the FDCPA into an enforcement mechanism for matters governed by state law.” In this case, failing to comply with the terms of an arbitration provision in the underlying contract did not trigger the FDCPA’s protections. This decision should be particularly helpful to those currently litigating FDCPA actions premised on state law and procedural issues occurring in prior collection litigation.

Interestingly, the decision also discussed the sometimes conflicting ethical decisions faced by FDCPA regulated collection counsel in light of an attorney’s general ethical obligations to its own clients. While the Seventh Circuit stopped short of providing a safe haven to collection attorneys facing such an ethical debacle, it is at least refreshing to see an Appellate Court recognize it.

For more information about this case or the Fair Debt Collection Practices Act generally, contact Nicole M. Strickler at nstrickler@messerstrickler.com or (312) 334-3442.

Seventh Circuit Holds Passive Debt Buyers Covered by ICAA Prior to 2013 Amendment

On July 21, 2015, the Seventh Circuit Court of Appeals ruled that passive debt buyers were covered by the Illinois Collection Agency Act (the “Act”) prior to the Act’s most recent revision in 2013 amending the Act to explicitly define debt buyers and state that debt buyers are subject to the Act’s licensing provision.  In Galvan v. NCO Portfolio Management, Inc., 2015 U.S. App. LEXIS 12551 (7th Cir. July 21, 2015), the question was raised as to whether the defendant -- a passive debt buyer -- was required to register as a debt collection agency from June 2006 – June 2011.  Relying on deposition testimony from a lawyer in the Illinois Department of Financial and Professional Regulation – the agency charged with enforcing the Act, the district court said “no.”  The Illinois Supreme Court, however, recently held otherwise in LVNV Funding, LLC v. Trice, 32 N.E.3d 553 (Ill. 2015) (“Trice II”).   In Trice II, the state’s highest court held that a passive debt buyer defendant qualified as a collection agency under the Act in two respects: (1) under subsection 3(b) as an “assignee” of the original creditor; and (2) under subsection 3(d) as an entity that “buys . . . indebtedness and engages in collecting the same.”  Said decision made it clear that passive debt buyers using third party collection agencies do indeed qualify as collection agencies and this was true even before the Act was amended in 2013. For more information about this case or the Illinois Collection Agency Act generally, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440. 

 

Independent Contractor Classification Narrowed by Department of Labor

On July 15, 2015, the Department of Labor (“DOL”) issued new guidance which would allow more workers to qualify for overtime pay.  In the Administrator’s Interpretation No. 2015-1, the DOL is narrowing the definition of an independent contractor taking the position that most work should be performed by employees and independent contractors should be used sparingly. Under this new guidance, the department considers six factors when determining a worker’s status:

■ The extent to which the work performed is an integral part of the employer’s business

■ The worker’s opportunity for profit or loss depending on his or managerial skill

■ The extent of the relative investments of the employer and the worker

■ Whether the work performed requires special skills and initiative

■ The permanency of the relationship

■ The degree of control exercised or retained by the employer

These six factors will be examined in relation to one another and no single factor can determine into which category a worker falls. Additionally, hiring business entities and independent contractors will not consequently protect an employer from liability under the Fair Labor Standards Act.

Finally, the DOL reinforces that the type and scope of work being performed should be reviewed before an independent contractor is hired. When it is appropriate to hire an independent contractor, ensure the correct indemnification provisions are in place to protect a company from any wage and hour claims that may arise. It is an employer’s duty to audit the status of all independent contractors in the event their duties or the work being performed becomes more akin to that of an employee as opposed to an independent contractor.

For more information on the new DOL guidance or any other employment law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

EFFECTIVE MAY 13, 2015: UPDATE TO PHILADELPHIA SICK LEAVE REQUIREMENTS

Under the new Philadelphia law, employers with 10 or more employees will be required to provide up to one hour of paid sick leave for every 40 hours worked (including overtime hours) by an employee in the city.  Employees who are salaried exempt employees accrue sick time based on the employee's normal work week or a 40-hour work week, whichever is less.  Employees may accrue up to 40 hours of sick leave in a calendar year (unless the employer allows more).  Employers with fewer than 10 employees will be required to provide unpaid sick leave on the same terms.  Employers must update their employee handbooks and provide notification to employees of these new provisions immediately as this was required to be done by May 13, 2015. At its discretion, an employer may loan sick leave to an employee in advance of accrual.  The date on which actual accrual of paid sick leave begins should be measured from May 13, 2015, but the time period for an employee to use accrued paid sick leave is measured by the actual date of employment – an employee must be employed for at least 90 days by the employer before being able to use any accrued paid sick leave.

Like the California law, employers must allow employees to carry over all accrued paid sick leave to the next year, without limit, if the employer does not provide all 40 hours of paid sick leave at the beginning of each year.  Although the carry-over has no limitations, an employer may limit use of sick leave in any single calendar year to 40 hours.

Employers must allow employees to use the 40 hours of paid sick leave on either an oral or written request for their own or for a family member’s need.  Employers are not required to pay an employee for accrued, but unused, paid sick leave at the end of employment but keep in mind an employer will likely be required to pay out any accrued but unused vacation or PTO time pursuant to Pennsylvania state law.

If the employer’s current policy allows for paid sick leave of at least 40 hours, or 5 days, in a year, you do not need to change the policy, but must follow the record keeping and notification requirements and be used for the same purposes and under the same conditions as paid sick leave under the new law.

Employers must provide notice to employees of their entitlement to paid sick leave, including the amount, the terms under which leave can be used, the guarantee against retaliation, and the right to file a complaint regarding violations of the ordinance. Notice can be (a) by written notice in English or in any other languages spoken by five percent of the employees, or (b) by displaying a poster prepared by the city.

Employers must also maintain records documenting the hours worked, sick leave used, and payments made to employees for sick time. The failure to maintain or retain adequate records creates a rebuttable presumption against the employer, absent clear and convincing evidence otherwise. In addition, an employer must make these records available to the city enforcement agency upon request.

Under the new law, employers cannot:

■ Require that an employee find a replacement worker to cover the hours during which the employee is absent as a condition of utilizing paid sick leave.

■ Deny the right to use accrued sick leave or discharge, or take any negative employment action including threats to discharge, demotions, suspensions, or discrimination against any employee for using accrued sick time, attempting to use accrued sick time, filing a complaint with the agency or alleging a violation, cooperating in an investigation or prosecution of an alleged violation, or opposing any policy or practice that is prohibited.

For more information on the new Philadelphia law, employer vacation/sick/PTO policies or any other employment law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

Account Number on Envelope Not a FDCPA Violation

On March 17, Judge Milton I. Shadur, a Senior U.S. District Judge for the Northern District of Illinois, dismissed a Fair Debt Collection Practices Act (“FDCPA”) case, which alleged an account number on an envelope violated the statute, just one day after the complaint was filed. In Sampson v. MRS BPO, LLC, No. 15-C-2258, 2015 WL, the court held that revealing an indecipherable sequence of numbers and symbols on the outside of an envelope was not abusive and, therefore, could not violate the FDCPA. In his Opinion, Judge Shadur wrote, “It takes only a quick look at those two exhibits to see that the Complaint is a bad joke -- a joke because the claims are so patently absurd, and a bad one because $400 has been wasted on a filing fee.” The Court reasoned the public would need supernatural powers to determine the letter held inside the envelope was sent in an effort to collect a debt.

The attorney who represented Plaintiff is now facing sanctions for his conduct.

For more information regarding this case and what abusive behaviors the FDCPA covers, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

New York Department of Financial Services Clarifies Debt Collection Regulations

On February 19, 2015, the New York State Department of Financial Services (the “Department”) issued answers to frequently asked questions to assist debt collectors and debt buyers in understanding and complying with the recently enacted rules regulating debt collection practices in the state of New York.  For a quick overview of the newly enacted New York regulations see December 8, 2014 Blog Post titled “New York Issues New Rules on Debt Collection.”  The FAQs are available on the Department’s website: http://www.dfs.ny.gov/legal/regulations/adoptions/faq-debt-collect.htm. Note that the Department is likely to update its website with additional information as it continues to receive questions regarding the new regulations.  Accordingly, debt collectors and debt buyers are encouraged to visit the website as the effective date for the regulations approaches. As a reminder, the new regulations will take effect on March 3, 2015, with the exception of Sections 1.2(b) (disclosure requirements) and 1.4 (substantiation requirements), which take effect on August 30, 2015.  Debt collectors who collect in the state of New York should examine the regulations and newly issued FAQs and prepare compliance plans to meet the new requirements.

For more information on the new regulations and/or compliance recommendations, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Federal Court Determines Voicemail Message and Return Phone Call with an Unintended Recipient Not in Violation of FDCPA

A federal court in New York recently decided that a voicemail message stating that the call was from a debt collector where the voicemail message’s intended recipient was disclosed to a third party who returned the call was not a violation of the Fair Debt Collection Practices Act (“FDCPA”).  In Abraham Zweigenhaft v. Receivables Performance Management, LLC, RPM left the following voicemail message:  “We have an important message from RPM.  This is a call from a debt collector.  Please call 1(866) 212-7408.”  Mr. Zweigenhaft’s son heard the message and returned the call.  He then had the following conversation with the RPM representative: RPM: Thank you for calling Receivables Performance Management on a recorded line. This is Michelle how can I help you?

Caller: Hi how are you? I received a message to call you, and I am just trying to figure out who you are trying to reach.

RPM: Okay and your phone number please, area code first.

Caller: (718) 258-9010

RPM: And is this Abra?

Caller: Is this who?

RPM: Abra Zweigenhaft?

Caller: Nope. It's not.

RPM: Okay let me go ahead and take your phone number off the list. The last four digits again please. 9010 or 7032?

Caller: 9010

RPM: Okay I'll take it off the list. You have a nice day.

Caller: Thank you.

RPM: Uh huh, bye bye.

Zweigenhaft filed suit against RPM alleging that the content of the voicemail message and the phone call together conveyed information regarding the consumer’s debt to a third party, Zweigenhaft’s son, in violation of FDCPA § 1692c(b).  The United States Court for the Eastern District of New York disagreed that this was a violation.  The court recognized the statute’s conflicting provisions.  Debt collectors are required by the FDCPA to meaningfully identify themselves when calling a consumer, but doing so may inevitably convey information about a consumer’s debt, which if overheard by a third party gives rise to consumer arguments that the debt collector violated the FDCPA.  In finding that the communications did not violate the FDCPA, the court stated that if it were to find that the contact was a violation of the FDCPA “would place an undue restriction on an ethical debt collector in light of our society’s common use of communication technology.”

For more information on this topic, contact Joseph Messer at 312-334-3440 or at jmesser@messerstrickler.com or Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

 

Hang Up That Telephone: The Importance of Training Collectors to Properly Receive Attorney Information

Recently, United States Magistrate Judge David D. Noce created an important teaching moment for collectors in Istre v. Miramed Revenue Group, LLC et al, a case pending in the U.S. District Court for the Eastern District of Missouri. In Istre, after collection attempts, the plaintiff allegedly placed a call to the collection agency to inform it that he had retained counsel regarding his debts. At the beginning of the call, plaintiff told the agency that he had retained counsel. Instead of ending the call, however, the agency allegedly asked, “Why are you having a lawyer involved in this?” and, “So how are you going to go about this?” Only after plaintiff again stated that he had retained counsel regarding his debt did the agency request the attorneys’ contact information, which plaintiff immediately provided.

Upon these alleged facts, plaintiff alleged various violations of the Fair Debt Collection Practices Act, 15 U.S.C. 1692c(a)(2), d, e and f. Defendants filed a motion to dismiss, arguing that by initiating the call, plaintiff consented to the ensuing discussion about his debt. The court, however, agreed with plaintiff that the mere fact that plaintiff initiated the phone call was not conclusive that he thereby consent to the debt collector to the collection attempt. The court further held that without that consent, once notified of legal representation, defendants may only ask for the attorney’s contact information before ending the call. As a result, the court found that plaintiff properly stated a cause of action under 1692c(a)(2), d, and f. However, it granted the motion with respect to 1692e, finding that no misleading statement had been alleged in the complaint.

The decision shows the importance of dissuading collectors from continuing a telephone call after receipt of attorney information. For a full copy of the opinion, see http://scholar.google.com/scholar _case?case=14559722534209738563&q=istre+v.+miramed+revenue+group&hl=en&as_sdt=400006&as_vis=1.

For more information on this subject, and other consumer litigation compliance information, contact Nicole Stricler, 312-334-3442, nstrickler@messerstrickler.com.

Federal Judge Rules One Voicemail Message Is Not Enough to Sustain FDCPA Violation

In Hagler v. Credit World Services, Inc., a federal judge in Kansas decided that a debt collection agency was not in violation of the FDCPA by failing to identify itself as a debt collector in one voicemail message.  The judge explained that multiple calls must be made in order for “harassment” to occur.

Plaintiff was initially contacted by a Credit World Services employee to discuss the outstanding debt.  Plaintiff informed the employee that he would need to call him back.  After waiting about a month with no contact with Plaintiff, Defendant called Plaintiff and left the following voicemail:

“Hi, this message is for Charles.  Please call Bill Jackson at 913-362-3950 when you get a chance. 

 My extension is like 281.  Thank you.”

Plaintiff sued, arguing that Defendant’s voicemail violated several provisions of the FDCPA.  Specifically, Plaintiff alleges Defendant:

•Failed to disclose meaningfully the caller’s identity, in violation of 15 U.S.C. § 1692d(6);

•Failed to disclose that a debt collector had left the voicemail, in violation of 15 U.S.C. § 1692e(11); and

•Used misleading and deceptive language, in violation of 15 U.S.C. § 1692e.

Plaintiff also claimed that the voicemail message was otherwise deceptive and failed to comply with the provisions of the FDCPA.  Plaintiff and Defendant filed cross-motions for summary judgment on all four claims.

The judge agreed with the collection agency on all four counts.  The judge decided that the voicemail message did not provide a “meaningful” disclosure of the employee’s identity as a debt collector under § 1692d(6) as the employee only provided his name, which has no real meaning to the debtor.  The judge explained further that the employee must provide more about himself than his name to be a “meaningful” disclosure.  However, the judge ruled that a violation requires more than just one call.

Because the clear language of § 1692d(6) prohibits the placement of telephone “calls” without meaningful disclosure, the judge did not agree that this single voicemail message violated the FDCPA.  He supported this finding by citing other district courts who also focused on the plural usage of “calls” in the statute.  See Thorne v. Accounts Receivables Mgmt, Inc., 2012 U.S. Dist. LEXIS 109165 (S.D. Fla. July 23, 2012); Jordan v. ER Solutions, Inc., 900 F. Supp. 2d 1323 (S.D. Fla. 2012); Sanford v. Portfolio Recovery Assocs., LLC, 2013 U.S. Dist. LEXIS 103214 (E.D. Mich. May 30, 2013).

The judge also determined that the debt collector was not in violation of the FDCPA for failing to provide the “mini-Miranda” disclosure.  The judge noted that “in order to ‘convey information regarding a debt,’ a message must ‘expressly reference debt’ or the recipient must be able to infer that the message involved a debt.”  Since the employee did not mention the debt in the voicemail message, the judge did not consider it a debt collection communication under the FDCPA.

Finally, the judge disagreed that the message was misleading.  The employee merely left his name, phone number, and requested Plaintiff call him back.  The judge decided that nothing in the message was intended to mislead the Plaintiff.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

MOOTED TCPA CLAIM REVIVED IN SECOND ACTION AGAINST SAME DEFENDANTS

The Eastern District of New York recently held that a plaintiff’s TCPA claims were not precluded by the Southern District of Texas’ ruling that the same claims against the same defendants were mooted by a Rule 68 offer of judgment.  See Bank v. Spark Energy Holdings, No. 13-6130, 2014 U.S. Dist. LEXIS 84493 (E.D.N.Y. June 20, 2014). 

The plaintiff alleged that he received telemarketing calls from defendants “using an artificial or prerecorded voice” without his prior express consent in violation of the Telephone Consumer Protection Act (“TCPA”).  He initially filed a class action suit in the Southern District of Texas, where after nearly two years of defending the case and prior to plaintiff moving for class certification, defendants made a Rule 68 offer of judgment offering plaintiff complete relief.  Although the plaintiff rejected the offer, the Texas court found that the offer rendered plaintiff’s claims moot because he no longer had a personal stake in the outcome of the litigation.  Accordingly, the Texas court dismissed the plaintiff’s claims for lack of subject matter jurisdiction. 

Shortly thereafter, the plaintiff filed suit in the Eastern District of New York and asserted the same TCPA claims against the same defendants.  The defendants moved to dismiss the claims based on the preclusive effect of the Texas court’s ruling.  The New York court denied the motion to dismiss, reasoning that neither claim nor issue preclusion applied.  The New York court held that claim preclusion only applied if there was a final judgment on the merits in the prior action and that dismissal for lack of subject matter jurisdiction is generally not considered a final judgment on the merits.  The New York court further held that issue preclusion did not apply because an identical issue was not adjudicated in the prior action:

"I find that the identical issue is not presented here because the prior’ court’s determination of mootness relied on particular factual circumstances that are not the same as the facts presented in this suit.  In the Texas case, the court decided that plaintiff’s individual TCPA claim was moot because plaintiff had rejected a Rule 68 offer that would have provided complete relief on his claim.  In this suit, defendants have not made any Rule 68 offer, so the court is not presented with the same factual scenario.  Since the first requirement to establish issue preclusion is not satisfied, the Texas court’s prior finding of mootness does not require the dismissal of plaintiff’s claims as moot in this action."

While the New York judge did express sympathy for defendants’ position (having litigated plaintiff’s TCPA claim for almost two years in Texas, successfully moving to have the suit dismissed, and now facing the same TCPA claims in New York), she nevertheless found in favor of the plaintiff, stating: “[a] finding that a claim is moot in one case simply does not mean that claim is moot in all subsequent cases.”

While the opinion appears to undermine the goals that the mootness and preclusion doctrines were meant to serve, if this tactic gains traction, defendants should consider immediately making the same offer of judgment upon notice of the second lawsuit.  Defendants should also consider filing a motion to transfer venue to the first court rather than relitigating the mootness issue in the second court. 

For more information on the aforementioned case and the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.  

C.D. of California Rules Law Firm’s Debt Collection Letter Did Not Misrepresent Attorney Involvement or Threaten Legal Action

On January 23, 2014 the U.S. District Court for the Central District of California issued an order granting Defendants’ motion to dismiss  in an FDCPA case captioned John Kermani v. Law Office of Joe Pezzuto, LLC; Joseph James Pezzuto II.  Importantly, the court dismissed Plaintiff’s claim with prejudice.  Nicole Strickler of Messer Strickler, Ltd. represented the Defendants.

The following facts were taken from Plaintiff’s complaint which the Court accepted as true for purposes of deciding the motion to dismiss.  Plaintiff’s complaint arose out of his alleged receipt of a single dunning notice sent by a Law Office on a debt incurred by Plaintiff to Bank of America, N.A.  Allegedly, the Law Office sent a dunning letter stating that Bank of America was the creditor and included the account number and current balance of the debt.  The Plaintiff alleged that the dunning letter was printed on the Law Office’s letterhead and contained the following disclaimers: “At this time no attorney with our law firm has personally reviewed the particular circumstances of your account”, and “BE ADVISED THIS IS AN ATTEMPT TO COLLECT A DEBT BY A DEBT COLLECTOR.”  In addition, Plaintiff alleged that the Law Office twice obtained Plaintiff’s consumer report from TransUnion, a consumer reporting agency.

Plaintiff alleged that Defendants violated (1) the Fair Credit Reporting Act (“FCRA”) and the Consumer Credit Reporting Agencies Act (“CCRAA”) by obtaining Plaintiff’s report without a permissible purpose, and (2) the Fair Debt Collections Practices Act (“FDCPA”) and Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”) by falsely implying the dunning letter came from an attorney, thus misleading Plaintiff to believe Defendants had been retained for legal action; falsely representing the character of a debt; and threatening to communicate false credit information.

Discussion:

FCRA and CCRAA Claims:

Plaintiff alleged that the Law Office violated the FCRA and the parallel California statute, the CCRAA, by obtaining his consumer report without a permissible purpose.  The FCRA prohibits a person from obtaining a credit report for purposes not specified in 15 U.S.C. § 1681b.  One such purpose, however, is using “the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the … collection of an account of [] the consumer.”  15 U.S.C. § 1681b(a)(3)(A).  Plaintiff alleged that the Law Office lacked a permissible purpose because he was not involved with any credit transaction with the Law Office.  The Judge quickly dismissed this argument as the FCRA and CCRAA do not limit permissible purposes to situations where consumers have “direct dealings” with debt collectors.  Pyle v. First Nat’l Collection Bureau, No. 1:12-CV-00288-AWI, 2012 WL 5464357m at *3 (E.D. Cal. Nov. 8, 2012).  The relevant inquiry is whether the debtor was involved in a credit transaction with the creditor, not the collection agency.  Therefore, the Law Office had a permissible purpose for obtaining Plaintiff's credit report.

FDCPA and Rosenthal Act Claims:

Plaintiff also alleged various violations of the FDCPA and the parallel California statute, the Rosenthal Act.  Many of Plaintiff’s claims were unsupported with facts and were quickly dismissed as failing to state a claim.  The most interesting finding of the Court’s decision involved Plaintiff's claims under FDCPA §1692e(3) and e(5).  Under §1692e(3) a debt collector is prohibited from falsely representing that “any individual is an attorney or that any communication is from an attorney.”  Likewise, §1692e(5) prohibits debt collectors from threatening “to take any legal action that cannot legally be taken or that is not intended to be taken.  The Plaintiff alleged that the Law Office misrepresented that the dunning letter came from an attorney in violation of §1692e(3).  The Plaintiff also alleged that the dunning letter misled him to believe that the Law Office had been “retained for legal action” against him by stating that “[t]his office has been retained to collect the debt owed by you.” 

The Court specifically found that the dunning letter did not give the misimpression that an attorney was involved in the collection of a debt, or that it threatened legal action.  First, the Plaintiff alleged no facts to support that the dunning letter was written by a non-attorney.  Conversely, Plaintiff alleged that Mr. Pezzuto is an attorney.  Second, the Court stated that “[t]he disclaimer that ‘no attorney with our law firm has personally reviewed the particular circumstances of your account,’ does not support the allegation that a non-attorney wrote the letter, rather, the statement creates a presumption of some minimal level of attorney involvement.”  Therefore, the dunning letter did not give the misimpression that an attorney was involved in the collection of the debt, and was not in violation of §1692e(3).

Likewise, the Court found that the dunning letter did not threaten legal action.  In fact, the language of the letter informed Plaintiff that the Law Office was “retained to collect the debt against” him, with no reference to possible litigation.  Additionally, the letter states, “[a]t this time, no attorney with our law firm has personally reviewed the particular circumstances of your account.”  The Court found that no language in the letter refers to litigation or suggests any purpose for the letter other than to collect a debt.  Therefore, the letter was not in violation of §1692e(5).

If you need assistance with reviewing or rewriting your dunning letter, contact Nicole Strickler at (312) 334-3442 or by e-mailing nstrickler@messerstrickler.com.

 

TCPA Traps in Health Care Collections: ACA International’s Article on Joe Messer & Nicole Strickler’s Presentation at ACA Fall Forum

Last month, Joe Messer and Nicole Strickler, partners at Messer Strickler, Ltd., gave two presentations at the ACA International’s 2013 Fall Forum in Chicago. The topics of their presentations were: “Avoiding TCPA Traps in Health Care Collections” and “The Forgotten and Misunderstood: Avoiding Liability under State Laws Affecting Debt Collection.” ACA International, the Association of Credit and Collection Professionals shared an overview, as well as valuable takeaways from one of these presentations with its audience by publishing an article “TCPA Traps in Health Care Collections” on the organization’s website. The presentation focused on the overview of the Telephone Consumer Protection Act (“TCPA”), vicarious liability for collectors and their health care provider clients, and recent TCPA case law that regulates medical debt collection. To emphasize the importance of Joe and Nicole’s message and information they shared, ACA International warned its audience in the article: “Violations of the TCPA can result in catastrophic class-action liability for collectors and their health care provider clients who may be sued on ‘vicarious liability’ grounds.”

Joe and Nicole have earned a national reputation for successfully defending lawsuits brought under the Fair Debt Collection Practices Act (“FDCPA”), Fair Credit Reporting Act (“FCRA”), TCPA, and other state and federal consumer protection laws. Both Joe and Nicole have substantial experience defending corporations, lending institutions, collection agencies, asset purchasers, lawyers as well as individuals; they have conducted many trials in state and federal courts and have served as lead counsel on multiple class action cases. Joe and Nicole are also active members and often presenters at ACA International, NARCA, NAPBS, ABA and other professional organizations.

To learn more about Telephone Consumer Protection Act and TCPA traps in health care collections, as well as potential liability for collectors in health care and other industries, contact Joe Messer at (312) 334-3440 or Nicole Strickler at (312) 334-3442.