Consumer Finance Litigation

On Tuesday, the Eleventh Circuit Court of Appeals expanded the scope of conduct that is actionable under the Fair Debt Collection Practices Act ("FDCPA") to include communications directed to a debtor's attorney. However, the Court also said that such communications may not be actionable under a "least sophisticated consumer" standard and that a plaintiff may have to hurdle a higher bar to establish a violation. In Miljkovic v. Shafritz and Dinkin, P.A., et al., No. 8:14-cv-00635-VMC-TBM, 2015 WL 3956570 (11th Cir. 2015), the plaintiff debtor brought suit against debt collection attorneys Shafritz and Dinkin ("S&D"), counsel for non-party Publix Employees Federal Credit Union ("Publix"). The matter involved litigation activity in state court. S&D sued the debtor after he failed to repay his automobile loan to Publix. S&D subsequently obtained a final judgment in favor of Publix. S&D sought a writ of garnishment against the debtor, but the debtor filed a claim of exemption from the garnishment. S&D then filed a sworn reply, disputing the debtor's right to an exemption. The sworn reply stated, in pertinent part:

3. On behalf of [Publix], the undersigned disputes that [the debtor] is a head of household/family within the meaning of Florida Statutes.
4. The facts supporting [the debtor's] Claim of Exemption are in dispute and, therefore, this garnishment action should be set for trial to determine these factual issues and [Publix's] right to garnishment of the wages/salary at issue.

A federal court lawsuit was then initiated by the debtor, claiming that the sworn reply filed by S&D was abusive, misleading and unfair, violating several provisions of the FDCPA. The debtor argued that S&D had no facts that would allow it to dispute his right to an exemption to the writ of garnishment. S&D moved to dismiss the federal lawsuit contending that (1) the FDCPA was not intended to regulate representations made by debt-collection attorneys in procedural court filings and (2) because the sworn reply was directed to the state court and to the debtor's attorney, it was not an actionable communication under the FDCPA. The district court agreed and dismissed the complaint on the grounds that the FDCPA did not apply to S&D's conduct before the state court, but also noting that even if the activity was covered, the debtor had failed to state a violation of the statute. The Eleventh Circuit affirmed the lower court's dismissal order, but only because it found that the debtor had failed to state an actionable violation of the statue. The Eleventh Circuit disagreed with the lower court's analysis regarding the FDCPA's application to state court litigation conduct. The court stated that the issue was one of first impression in the Eleventh Circuit, namely: whether representations made by an attorney in court filings during the course of debt-collection litigation are actionable under the FDCPA. In finding that representations made by an attorney to a state court or debtor's attorney are actionable under the FDCPA, the Eleventh Circuit cited the "plain language" of the statute, other persuasive decisions interpreting the language (including the Heintz v. Jenkins, 514 U.S. 291 (1995) Supreme Court decision), and the purpose of the statute. However, given its holding that the FDCPA does apply to litigation-related activities, the court then examined whether S&D's filing of the sworn denial could constitute a violation under the Act. The court held it could not. First, the Eleventh Circuit held that the filing of S&D's sworn denial could not violate Section 1692d, which prohibits a debt collector from engaging in conduct that would harass, oppress or abuse a person. Citing its prior decision in Jeter v. Credit Bureau, Inc., 760 F.2d 1168 (11th Cir, 1985), the court stated that while filing a debt collection lawsuit (or, in this case, a sworn denial to a garnishment opposition) might cause a consumer embarrassment, inconvenience and expense, it does not have the natural consequence of harassing, abusing or oppressing a debtor. Next, the court considered whether the sworn denial violated Section 1692e of the FDCPA, which prohibits deceptive practices in debt collection. In a footnote, the court noted that the applicable standard for determining the deceptiveness of a debt collector's actions is in flux:

While we have determined that the FDCPA applies to debt-collection activities directed to a consumer's attorney, the standard by which such claims should be evaluated is a different question. [S&D & Publix] reasonably suggest that the "least sophisticated consumer" standard is inappropriate for evaluating the tendency of conduct or language to deceive or mislead a consumer's attorney. The Seventh Circuit, among others, has adopted a "competent lawyer" standard to determine whether a communication or representation to a consumer's attorney would deceive or mislead that attorney under § 1692e. (citations omitted). We do not adopt or reject such a standard here because, if [the debtor] cannot make the minimal showing under Jeter, he is necessarily unable to demonstrate that individuals held to a higher standard of competence, be it an attorney or a state court judge, could be misled or deceived by the sworn reply.

The court then held that the sworn denial was not misleading in the "traditional sense," because it (1) did not misrepresent the nature or effect of the writ of garnishment, (2) did not erroneously state the amount of the debt owed, (3) did not incorrectly identify the holder of the debt, and (4) did not contain "false or deliberately ambiguous threats." Instead, the sworn denial simply stated S&D and Publix's legal position relative to the debtor's argument for exemption. The court also noted that the facts supporting the exemption were in dispute and noted that S&D and Publix had the ability to determine the veracity of the alleged facts through discovery. Providing further cover for debt collectors engaged in litigation, the Eleventh Circuit then stated:

It is not enough to allege that [the debtor] believed that he was entitled to the "head of family" exemption and that [S&D and Publix] inconveniently and disappointingly disagreed. It would be passing odd to find that allegations that a state court filing asserted a legal position contrary to that of the consumer were sufficient to state a claim under § 1692e. See Jerman, 559 U.S. at 599-600, 130 S. Ct. at 1621-22 (noting "the Act's conduct-regulating provisions . . . should not be assumed to compel absurd results when applied to debt collecting attorneys"). Without more, we will not limit a debt-collector attorney's ability to engage in conduct inherent to the adversarial process-and expected in a garnishment action in Florida state court. See Rivell v. Private Health Care Sys., Inc., 520 F.3d 1308, 1309 (11th Cir. 2008) (per curiam) ("[T]he complaint's '[f]actual allegations must be enough to raise a right to relief above the speculative level.'").

Additionally, the court stated that simply because the wage garnishment action was ultimately withdrawn was not enough to state a violation of the statute:

[S&D's] subsequent dissolution of the writ of garnishment does not affect our analysis. An "apparent objective" of the FDCPA is the preservation of creditors' judicial remedies. See Heintz, 514 U.S. at 296, 115 S. Ct. at 1492. If judicial proceedings are to accurately resolve disputes, including debt collection disputes, debt-collector attorneys must be permitted to present legal arguments in their clients' favor and to invoke the remedies available to them, including wage garnishment. See id. (citing § 1692c(2)-(3)) ("[The Act allows] the actual invocation of the remedy that the collector 'intends to invoke.'"). The fact that [S&D and Publix's attempt to collect on [the debtor's] debt by garnishing his wages "turn[ed] out ultimately to be unsuccessful" does not make the filing of the sworn reply "an action that cannot legally be taken." See id. at 296, 115 S. Ct. at 1491 (internal quotation marks omitted).

Finally, the court held that the FDCPA's "catch-all" provision, located in Section 1692f, could not be used to save the debtor's claims. The court noted that a "catch-all" is not a "free-for-all" and because the debtor did not allege any conduct that would be "unfair or unconscionable," in addition to being abusive, deceptive or misleading, there was no grounds to find that the debtor could state a claim under Section 1692f.