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Every week, AccountsRecovery.net brings you the most important news in the industry. But, with compliance-related articles, context is king. That’s why the brightest and most knowledgable compliance experts are sought to offer their perspectives and insights into the most important news of the day. Read on to hear what the experts have to say this week.
Appeals Court Affirms Ruling in FDCPA Case Over SOL for Filing Suit
The Court of Appeals for the Second Circuit has affirmed the ruling of a lower court granting summary judgment to the defendants in a Fair Debt Collection Practices Act case, ruling the plaintiff’s claims were time-barred because they were made more than one year from the alleged violation, and dismissed the plaintiff’s arguments why the one-year limit should not have applied. More details here.
WHAT THIS MEANS, FROM BRENT YARBOROUGH OF MAURICE WUTSCHER: The least sophisticated consumer is presumed to have a basic level of understanding, so surely he can figure out that “today” represents some date within the last few days. If $0.00 in fees and interest was added between April 2021 and “today,” it really doesn’t matter whether “today” was two days ago or five days ago because either way it should be obvious that interest and fees are not being added. Unfortunately, a few courts have allowed these claims to survive a motion to dismiss so I expect we will continue to see lawsuits over undated validation notices.
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Collector Unable to Get All Claims Dismissed in Undated MVN Class Action
A District Court judge in New Jersey has granted a defendant’s motion to dismiss a Fair Debt Collection Practices Act class action involving an undated Model Validation Notice on most of the claims, but denied the motion regarding a claim that the MVN violated Section 1692g(a) of the statute because a least sophisticated debtor would be “unable to determine whether the amount of the Debt owed was still accurate as of the date they received the letter.” More details here.
WHAT THIS MEANS, FROM BRIT SUTTELL OF BARRON & NEWBURGER: The result here should not be surprising to anyone following the “undated MVN” cases. So far, no court has given a debt collector the “safe harbor” that the CFPB wrote into Reg. F. And this continues to be disappointing, but not likely to change. At this point, debt collectors should be putting the date on their MVN to avoid this low-hanging fruit. The industry to just going to need to wait until the rest of the claims make their way through the courts. There are alternative arguments that can be made on these cases that do not rely on Reg. F or the safe harbor and it would behoove debt collectors to start making those. This is an easy fix and hopefully these claims will begin to die down.
Appeals Court Affirms Ruling in TCPA Class Action Over Definition of ATDS
The Court of Appeals for the Second Circuit has affirmed the dismissal of a Telephone Consumer Protection Act case, ruling that in order to meet the definition of an automated telephone dialing system, the technology must include the capacity to randomly or sequentially generate telephone numbers to be dialed. More details here.
WHAT THIS MEANS, FROM LORAINE LYONS OF MARTIN GOLDEN LYONS WATTS MORGAN: This Second Circuit case marks a significant victory under the TCPA. Since the U.S. Supreme Court’s 2021 decision in Duguid, the plaintiff’s bar has been leveraging footnote 7 in Duguid to bring TCPA claims and arguing that a text message is an artificial or prerecorded voice message. Both of these arguments failed in the Soliman case.
The first issue addressed was whether the phrase “using a random or sequential number generator” in the TCPA’s statutory definition of an ATDS refers to a telephone number generator or to generate any number used to store or produce telephone numbers. The Second Circuit agreed with the district court affirming that a random or sequential number generator encompasses a dialing system that generates telephone numbers and a system that dials telephone numbers from a pre-existing list of telephone numbers is not an ATDS under the TCPA. Also, the Second Circuit affirmed the district court’s holding that a text message is not a “voice” under the TCPA.
While this case represents a significant win, it’s worth noting that there was a dissenting opinion regarding the interpretation of footnote 7 in the Supreme Court’s Duguid case.
Appeals Court Overturns $35M TCPA Settlement in Text Message Case
The Court of Appeals for the Eleventh Circuit Court yesterday reversed a previous approval of a substantial settlement under the Telephone Consumer Protection Act (TCPA), ruling that the lower court abused its discretion and overlooked evidence of collusion between the class counsel and failed to properly inform members of the class about the settlement. The ruling also issued a stern warning to class counsel about its failure to include a reference to important information that should have been provided to the members of the class. More details here.
WHAT THIS MEANS, FROM DAVID KAMINSKI OF CARLSON & MESSER: This case is just a classic mess from beginning to end. It would take 5 pages of text to explain all of it in detail.
Suffice it to say, in Drazen v. GoDaddy and Pinto, No. 21-10199, 2024 WL 2122466 (11th Cir. May 13, 2024), the plaintiffs alleged that defendant violated the Telephone Consumer Protection Act (TCPA) by using an autodialer to make telephone calls and send text messages. The parties agreed to a settlement of up to $35 million in cash and vouchers for those class members who made claims, with up to $10.5 million for attorney’s fees. (nice payday for them, huh?)
Before this settlement was complete, GoDaddy had a chance to exit from this settlement before the Supreme Court ruled in Duguid v. Facebook and severely narrowed the interpretation what is an autodialer such that GoDaddy would have had no liability in the case. The plaintiff’s Counsel pushed this settlement forward feverishly because they knew this autodialer text class action would go down the drain once the Supreme Court ruled in Facebook and narrowed the ATDS issue.
This case has bounced back and forth between the lower federal district court and the 11th Circuit Court of Appeals several times. During this latest round of challenges to the 11th Circuit Court of Appeals regarding the lack of due process regarding the settlement and the settlement notice to the class members, Judge Tjoflat (remember him, of Hunstein fame??), who authored the Decision of the 11th Circuit, and who is almost 95 years old, wrote a scathing opinion and stated as follows:
- That the conduct of the attorneys was reprehensible on both sides and that the plaintiff counsel is deemed “inadequate class counsel”. “We emphasize that we think that the sort of strategy employed by all counsel has no place in the federal district court.”
- Judge Tjoflat slammed the lower Federal District Court in approving the subject class settlement, stating: the District Court’s error . . . .“was of such magnitude, … particularly in the circumstances of this case,” in which it had a fiduciary duty to protect absent class members, “to have seriously prejudiced” absent class members’ ability to make an informed decision about the settlement”.
- That the Notice that was provided to the class members failed to inform the class of critical facts and rights they had in connection with the settlement and ”denied them due process of law”.
Where we are now: The case now goes back down to the federal district court to see if the Court can somehow cobble together a settlement with terms that will pass judicial muster.
Again, this case has had so many twists and turns. And, Judge Tjoflat’s decision is very harsh on so many levels and it is questionable what type of impact, if any, it will have going forward.
This one ain’t over yet. Stay tuned and you’ll catch all of the upcoming drama right here in Gibbland!!!!!
NJ Appeals Court Affirms Ruling Over Motion to Vacate Default Judgment
The Appellate Division of the Superior Court of New Jersey has affirmed a lower court’s ruling that an individual who was sued for an unpaid debt and failed to respond waited too long to file a motion to vacate the default judgment against her. More details here.
WHAT THIS MEANS, FROM MONICA LITTMAN OF KAUFMAN DOLOWICH: The consumer here was denied a second bite at the apple to argue her debt was void. The creditor obtained a default judgment against the consumer in 2013. In 2019, the consumer filed a separate lawsuit arguing the debt was void because the creditor was not licensed. The court dismissed the claim because the consumer should have asserted all claims regarding the debt in the original collection lawsuit. Then, nearly 10 years after the default judgment was entered, the consumer tried to vacate the default judgment by again arguing the creditor was not licensed. The appellate court upheld the default judgment. By not arguing the licensing issue earlier, the consumer was prevented from bringing a subsequent lawsuit under the FDCPA. The consumer tried to re-open the old collection action in order to now bring the FDCPA claims. The court denied the consumer this opportunity.
Judge Grants MSJ for Defendant in FDCPA Case
A District Court judge in Massachusetts has granted a defendant’s motion for summary judgment in a Fair Debt Collection Practices Act lawsuit, ruling that the defendant was the rightful owner of the accounts in question, was allowed to report the debts to the credit reporting agencies, responded to the plaintiff’s validation requests, and did not contact the plaintiff at inconvenient times or places. More details here.
WHAT THIS MEANS, FROM CAREN ENLOE OF SMITH DEBNAM: Since early 2023, we have been seeing a wave of pro se litigants bringing FDCPA and FCRA cases, presumably looking for a quick pay day, credit repair, and forgiveness of debts. Clark appears to be one of those cases in which the consumer filed FDCPA and FCRA claims and then when push came to shove, disappeared. In Clark, once the debt buyer filed a motion for summary judgment, the consumer failed to respond, leaving the Court with the record created by the debt buyer and an unopposed motion for summary judgment to rule upon. The trouble, of course, is the expense of litigating.
When faced with these nuisance value suits, ARM members have two choices: (a) attempt to settle for a de minimus amount; or (b) aggressively defend the action. We encourage our clients and others in the ARM industry to formulate a strategy for dealing with these suits. Too often we are seeing identical suits by different consumers which share other nonpublic record consistencies (for instance, dispute letters with identical handwriting from different consumers). Settling those suits, which may serve a business purpose, it may also be empowering the consumer network to file more of these. While the costs of litigation most likely will exceed the amount of settlement, ARM members are encouraged to consider the merits of the case and their volume of pro se litigation and early on set the maximum settlement amount for each case (depending upon its merits) and maintain those boundaries while aggressively defending the case.
I’m thrilled to announce that Bedard Law Group is the new sponsor for the Compliance Digest. Bedard Law Group, P.C. – Compliance Support – Defense Litigation – Nationwide Complaint Management – Turnkey Speech Analytics. And Our New BLG360 Program – Your Low Monthly Retainer Compliance Solution. Visit www.bedardlawgroup.com, email John H. Bedard, Jr., or call (678) 253-1871.
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