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11th Circuit: Don't Break the Law to Comply With It
Federal appeals court rejects collection company's defense against debtor's suit
Fulton County Daily Report
October 19, 2009
Arguing that you broke the law in order to comply with it is not, apparently, the way to win an argument before the 11th U.S. Circuit Court of Appeals.
In a tart but analytical opinion, the court said a debt collector could not defend itself by saying it acted in good faith when it intentionally violated one requirement of the Fair Debt Collection Practices Act so that it will not run afoul of another provision.
Niagara Credit Solutions Inc. argued that it broke the rule saying debt collectors must identify themselves and tell a debtor it is calling to collect a debt so that it could comply with a rule barring debt collectors from communicating about the debt with third parties (such as a roommate who hears an answering message from a debt collector).
Trying to sum up the situation, Judge Edward E. Carnes wrote in the opening paragraph of the opinion, "In an oft-repeated statement from the Vietnam War, an unidentified American military officer reputedly said that 'we had to destroy the village to save it.' That oxymoronic explanation may be apocryphal, but the debt collection agency in this case offers up much the same logic."
And that logic impressed neither Carnes nor Senior Judge Peter T. Fay and 9th Circuit Judge Arthur L. Alarcon, sitting by designation. The panel heard arguments in the case on Sept. 25 and issued an opinion on Wednesday, less than three weeks later.
The panel affirmed a decision by Judge Beverly B. Martin of the U.S. District Court for the Northern District of Georgia (who is awaiting confirmation for a post on the 11th Circuit), who had adopted a decision by Magistrate Judge C. Christopher Hagy.
One of the debtor's attorneys, Kris K. Skaar of Decatur, Ga.'s Skaar & Feagle, noted, "We've won on every step, we just haven't won on the same grounds," said Skaar.
Skaar, who worked on the case with his law partner James M. Feagle, pointed out that a similar case from the 6th Circuit, Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 538 F.3d 469, is poised to go before the U.S. Supreme Court on the theory the magistrate considered -- whether a mistake of law qualifies for a bona fide error defense.
Skaar said his case is likely to be significant regardless of how the high court rules. "It's significant in that it means that even if the ... the Supreme Court sides with the industry and says an error of law can be a bona fide error, [the 11th Circuit case] means that there will still be meaningful review, and it won't be an automatic win for the industry."
Skaar & Feagle's client, debtor Brenda Edwards, owed less than $1,000 to the Consumer Shopping Network when her past-due account was assigned to Niagara Credit Solutions. Between July and October 2007, according to the court file, Niagara left more than a dozen messages on Edwards' answering machine.
Two of the messages, the text of which is printed in the court's opinion, merely stated that the message was for Edwards and that she needed to call an 800 number. The messages did not reveal what company was calling or why.
Carnes wrote that those messages were consistent with a "well-defined" policy of Niagara's to leave a bare-bones message simply asking the debtor to call back about an "important matter."
"Niagara purposefully left out of the messages any information disclosing that they were from Niagara Credit Solutions, Inc. or a debt collector or that the call had been made for the purpose of collecting a debt," Carnes wrote. "The Fair Debt Collections Practices Act specifically requires that a debt collector disclose in all communications with a debtor that the message is from a debt collector."
But Niagara deliberately did not comply, the court said, because, "it feared that doing so would risk violating another provision of the Act, which generally forbids an agency from communicating about the debt with a third party. ... It was concerned that answering machine messages might be played by or within the hearing of a family member or roommate, who would then know that a collection agency was calling the debtor."
Niagara's attorney, Michael D. Robl of Thomerson Spears & Robl, could not be reached for comment.
