law

MS Obtains Unanimous Jury Verdict in Favor of Clients in FDCPA Case

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On April 8, 2015, a jury of seven sitting in the Southern District of California determined that a law firm and its asset purchaser client did not violate the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (“FDCPA”) by including a request for 10% interest in the prayer for relief of a state court collection complaint.  In Hadsell v. Mandarich Law Group, LLP and CACH, LLC, a consumer filed an FDCPA claim against the two companies alleging a myriad of false claims, including that the companies had disclosed the debt to third parties and failed to abide by a request to cease and desist. After success on motions to dismiss and summary judgment, the case proceeded to a jury trial on one sole issue: whether a request for 10% statutory interest in the prayer for relief of a state court complaint violates the FDCPA where the credit card contract in question provided for an 8.9% interest rate. Like many consumer law claims against law firms, this complaint was spurred from a state court collection action on the debt. In late 2011, Mandarich Law Group, LLP filed a state court complaint on behalf of CACH, LLC to collect on a defaulted Bank of America account.  The state court complaint had two counts, breach of contract and account stated.  In the prayer for relief, the complaint requested that the court find that a 10% interest apply under the account stated theory.

Approximately 30 days after the state court suit was filed, the consumer filed suit in the U.S. District Court for the Southern District of California, claiming that the collection action, among other activity, violated the FDCPA. Plaintiff was represented by the San Diego law firms of Hyde & Swigart and Kazerouni Law Group.

The Plaintiff’s focal point during the jury trial was that the defendants intentionally violated FDCPA § 1692(f) and (f)(1) by requesting 10% interest when they were aware of the 8.9% interest rate that was set by the initial contract between the consumer and creditor.  Defendants argued, in contrast, that there was a valid factual basis to pursue the account stated claim and for the Court to assess 10% interest--- the default rate under the California Code---- based on the final charge-off statement on the account.  Further, Defendants’ argued that asking the state court to decide the question of interest was not an attempt to collect an authorized amount as the court had the legal ability to award it under the facts.  The jury unanimously agreed and found that no violation of the FDCPA occurred.

Lead trial counsel for Defendants was Nicole M. Strickler of MS&S. For more information on this case or any other FDCPA related issues, contact her at nstrickler@messerstrickler.com or at 312-334-3442.

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.

SEVENTH CIRCUIT GROWS WEARY OF EXCESSIVE TCPA LITIGATION PRIMARILY BENEFITING PLAINTIFF’S ATTORNEYS

The Seventh Circuit recently issued its decision in

Bridgeview Health Care Ctr., Ltd. v. Clark

, Case Nos. 14-3728 &15-1793 (March 21, 2016), holding that agency rules apply in determining whether a fax is sent “on behalf” of a principal in violation of the Telephone Consumer Protection Act (“TCPA”).  The appeal arose out of unsolicited fax advertisements which were blasted across multiple states in violation of the TCPA. While the parties agreed that the TCPA was violated, they disputed who was responsible for sending the faxes -- the company advertised in the faxes or the marketing company that actually sent the faxes.  The district court determined that the defendant was only liable for those faxes it authorized the marketing company to send.  The Seventh Circuit affirmed.

A fax sender is defined in federal regulations as either the person “on whose behalf” the unsolicited ad is sent or the person whose services are promoted in the ad.  The Seventh Circuit found the district court correctly rejected strict liability as applicable to junk faxes and held that “[i]n applying the regulatory definition of a fax sender . . . agency rules are properly applied to determine whether an action is done ‘on behalf’ of a principal.”  After analyzing each of the three types of agency (express actual authority, implied actual authority, and apparent authority) in the context of the case, the Court found that none of them applied to faxes sent outside a 20-mile radius of defendant’s business.

Notably the Court took the appeal as an opportunity to criticize the current state of TCPA litigation, noting:

[W]hat motivates TCPA suits is not simply the fact than an unrequested ad arrived on a fax machine.  Instead, there is evidence that the pervasive nature of junk-fax litigation is best explained this way: it “has blossomed into a national cash cow for plaintiff’s attorneys specializing in TCPA disputes.”. . . We doubt that Congress intended the TCPA, which it crafted as a consumer-protection law, to become the means of targeting small business.  Yet in practice, the TCPA is nailing the little guy, while plaintiffs’ attorneys take a big cut. . . . Nevertheless, we enforce the law as Congress enacted it.

The Bridgeview opinion is a clear indication of the Seventh Circuit’s displeasure with the TCPA plaintiffs’ bar.  Indeed, the Court even took a shot at plaintiff’s attorneys, noting the attorneys “currently have about 100 TCPA suits pending” and used the marketing company’s hard drive to find plaintiffs.

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

When a Creditor is a “Debt Collector” Under the FDCPA

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The Federal Trade Commission (“FTC”) recently released a statement that the meaning of “debt collector” may be more expansive under the Fair Debt Collection Practices Act (“FDCPA”) than previously thought. A “debt collector” is defined under the FDCPA as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” §803(6). With this definition, it has long been assumed that creditors who collect their own debts are not covered by the FDCPA. However, Section 803(6) goes on to say “the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”

The FTC has asserted FDCPA claims against companies using other names to collect their own debts, characterizing them as “debt collectors” under the FDCPA. The FTC has issued a warning toremind creditors that the FDCPA can in fact apply to creditors who collect on their own behalf. Creditors should regularly review their policies to ensure their practices and procedures follow all applicable laws and regulations.

View the FTC’s Original Post Here

To learn more about the FTC’s warning and how to avoid FDCPA violations please contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

“Ban the Box” Introduced to Congress

On September 10, 2015, a bill was introduced by Senator Cory Booker (D-NJ) and Representative Elijah Cummings (D-MD) marking the first time “ban the box” has been proposed at the federal level.  If passed, The Fair Chance Act would prevent federal agencies and contractors from inquiring about prospective employees’ criminal records before extending a formal job offer.  Once a job offer is presented, the employer may ask about an applicant’s criminal background and revoke the job offer based on the result of a criminal background check.  Law enforcement, national security agencies, and positions with access to classified information will be exempt from this proposed law. For more information about the proposed Fair Chance Act, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

 

Read More on “Ban the Box”

                Illinois Enacts “Ban the Box” Law Impacting Private Employers

                Private Employers May be Impacted by the “Ban the Box” Approach in 2014

                The “Ban the Box” Movement Continues                

               “Ban the Box” and Local Ordinances – What Employers Should Know

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.

15 Million Consumers Impacted by Experian Reports Data Breach

From September 1, 2013 through September 16, 2015, consumers who applied for postpaid services or device financing through Experian’s client, T-Mobile USA, were notified of an unauthorized breach from which consumers’ names, dates of birth, addresses, Social Security numbers, and drivers’ license numbers were at risk.  Personal payment cards and bank accounts were not accessed during the breach.  The breach, which affected Experian North America’s business units – not its consumer credit bureau, impacted approximately 15 million consumers in the United States.  As a result, Experian is offering credit protection resources to those who were or may have been affected. It is critical for credit and collection agencies to be aware of the risks of data breaches and the practices that will prevent them.  Identity theft is the fastest growing consumer complaint as determined by the 2014 Consumer Complaint Survey Report by the Consumer Federation of America and North American Consumer Protection Investigators. Be sure to take preventative measures to protect both your company and the consumers you serve.

For more information regarding the Experian Reports data breach, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

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

 

MS&S Welcomes Adam T. Hill

Messer Strickler, Ltd. is pleased to welcome Adam T. Hill to the firm. With over 7 years of experience, Mr. Hill’s background in representing consumers gives him a unique perspective in consumer defense work. Licensed in Illinois, New York, and various district courts throughout the country, Mr. Hill’s arrival will allow us to continue to provide exceptional service to our clients in more places than ever before.

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.

FCC 2015 Rulemaking Highlights

On July 10, 2015, the FCC issued its long-awaited rulemaking on the Telephone Consumer Protection Act (the “TCPA”). Undoubtedly, the rulings are heavily consumer centric offering little help to those businesses which have long complained of TCPA litigation abuse. Interestingly, the order resulted in two scathing dissents from FCC commissioners. Regardless as to the “side” taken, the ruling does offer valuable help in resolving issues that have been heavily litigated since the last FCC order. A highlight of the FCC’s determinations is contained herein: Interpretation of a dialer:  If the dialer is not “currently” or “presently” dialing random or sequential phone numbers, this condition does not exempt the equipment used from the TCPA’s definition of “dialer.”

Consent:

  • The following does not constitute “consent” for purposes of the TCPA:
    • Being on an acquaintance’s phone contact list.
    • Receiving consent from a prior subscriber or user of the telephone number.
  • Consumers may revoke consent at any time and through any reasonable means.
  • 2012 “Prior Express Written Consent” Rule for certain parties waived temporarily to allow gathering of updated consent.
  • Certain free, pro-consumer financial and health care-related messages are exempted from consent requirement.

Text messages:

  • Internet-to-phone text messages require consumer consent.
  • Text messages are “calls” subject to the TCPA
  • “On demand” text messages sent in response to a consumer request are not subject to the TCPA.

VoIP:

  • Carriers and Voice over Internet Protocol (VoIP) providers can implement call-blocking technology to help consumers stop unwanted robocalls.

Software:

  • Application providers that play a “minimal role” in sending text messages are not per se liable for unwanted robocalls.
  • Collect-call services are not liable for making unwanted robocalls when providing “call set-up” information.

For more information on the new ruling, please contact Nicole M. Strickler at 312-334-3442 or nstrickler@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.

Request for Fees Not Yet Incurred In Complaint Violation of FDCPA

The Third Circuit Court of Appeals recently concluded that a demand for a specific amount of attorneys’ fees in a complaint before the fees have actually been incurred is an “actionable misrepresentation under the Fair Debt Collection Practices Act” (“FDCPA”).  In Dale Kaymark et al. v. Bank of America and Udren Law Offices PC, the plaintiff claimed that an itemized list of total debt in the foreclosure complaint improperly included $1,650 in attorneys’ fees, not all of which had been incurred. The district court dismissed the FDCPA claim on the grounds that legal pleadings were not subject to the section of the FDCPA at issue. On appeal, the Third Circuit was not persuaded that formal pleadings filed by attorneys are exempt from the FDCPA’s requirement that debt collectors must not use any "false, deceptive or misleading representation or means in connection with the collection of any debt." Instead, subject to very limited and express exceptions, "all litigation activities, including formal pleadings, are subject to the FDCPA." When drafting demand letters and complaints, creditors must be cautious when demanding fees from the debtor which the creditor has not yet incurred.  Although creditors are not barred from listing an estimate of anticipated fees in their demand letter or complaint, they must do so explicitly. Otherwise, the debtor might assume that the amounts listed as “due” are, in fact, due as of a particular date.

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