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No FDCPA Violation When Debt Collector is Articulating its “good faith legal position” in its Prayer for Relief 8th Cir. Holds

  • Written by Steel Rose

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court’s dismissal of the plaintiffs’ claims in consolidated cases brought under the federal Fair Debt Collection Practices Act against a debt collector law firm, after the debt collector law firm failed to meet evidentiary burdens in various collection lawsuits.

In so ruling, the Eighth Circuit held that the FDCPA “was not meant to convert every violation of a state debt collection law into a federal violation,” and a party does not violate the FDCPA by articulating its “good faith legal position” in its “prayer for relief.” Here, (1) the plaintiffs failed to establish that the defendant took anything other than a good faith legal position in its prayer for relief; and (2) the debt collector was entitled to bring a good faith claim to collect alleged debts, despite ultimately not meeting its evidentiary burden in court.

A copy of the opinion in Smith v. Stewart, Zlimen & Jungers, Ltd is available at: Link to Opinion.

In December 2018, the debt collection law firm filed collection actions on behalf of a creditor against the plaintiffs. The plaintiffs subsequently challenged whether the law firm possessed, or could present evidence establishing, a valid and complete chain of assignment for the alleged debts between the original creditors and the current creditor.

The only document the law firm presented to the court was a redacted computer printout that was not the actual attachment to any of the alleged bills of sale. The court agreed with the plaintiffs and dismissed the collection claims for lack of standing.

In March 2019, the plaintiffs filed complaints in federal court alleging that the law firm’s conduct in bringing the collection actions violated the FDCPA.

The plaintiffs first argued that the defendant violated 15 U.S.C. § 1692e by asserting in the statements of claim that the plaintiffs owed disbursements without providing evidence of any entitlement to these disbursements or of the intention to seek to recover them. Second, the plaintiffs argued that the law firm violated 15 U.S.C. § 1692f by bringing debt collection lawsuits without sufficient evidence to establish a valid and complete chain of assignment between the original creditors and the current creditor, in violation of the court’s amended standing order.

The trial court granted the defendant’s motion to dismiss both lawsuits. First, the trial court determined that the plaintiffs had failed to state a claim under § 1692e that the defendant used any “false, deceptive, or misleading representations or means” by seeking disbursements in the statements of claim. The trial court treated the challenged statements as “the equivalent of the prayer for relief” and further held that the plaintiffs failed to allege any facts that would support a finding that the law firm made the claim for disbursements in bad faith.

Second, the trial court concluded that the law firm had not used “unfair or unconscionable” collection means in violation of § 1692f when it failed to meet its evidentiary burden to establish standing in court. The trial court reasoned that the FDCPA “was not meant to convert every violation of a state debt collection law into a federal violation” and likewise that the law firm’s failure to satisfy the amended standing order’s evidentiary standards did not violate the FDCPA. The plaintiffs timely appealed.

On review, the Eighth Circuit upheld the trial court’s dismissal of the plaintiffs’ § 1692e claims. The FDCPA broadly prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. When evaluating whether a communication is false, the Eighth Circuit uses an “unsophisticated consumer” standard. Janson v. Katharyn B. Davis, LLC, 806 F.3d 435, 437 (8th Cir. 2015). Additionally, “lawyers who regularly, through litigation, attempt to collect consumer debts” on behalf of their clients are debt collectors governed by the FDCPA. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 593 (2010).

Moreover, a debt collector’s representations made to third parties, including courts adjudicating consumer credit lawsuits, may support liability under § 1692e, and the Eighth Circuit takes a “case-by-case” approach in making this determination. See Hemmingsen v. Messerli & Kramer, P.A., 674 F.3d 814, 818-19 (8th Cir. 2012). To read more click here