11th Circuit Court of Appeals
11th Circuit Court of Appeals (Jason Bennitt)

A few words in a collection letter made a law firm the subject of a class-action lawsuit.

McCalla Raymer’s Orlando office found itself pitted against Hialeah resident Xilena Caseres over a demand letter the firm sent in 2012 to collect just under $270,000 on a delinquent mortgage.

But Caseres said the collection letter violated the Fair Debt Collection Practices Act. She filed suit, demanding a jury trial and charging the law firm with failing to correctly notify her of her rights under the debt collection law.

She also moved to raise a putative class made up of all Reverse Mortgage Solutions clients who’d received similar notices.

First Contact?

Caseres’ complaint said McCalla Raymer’s “demand letter would be deceptive to the least sophisticated consumer with regard to his/her legal rights.”

Her attorney, Hallandale Beach-based Scott Owens, argued the letter was McCalla Raymer’s initial contact with his client, so it had to meet several criteria under the Fair Debt Collection Practices law.

A key sticking point was whether McCalla flubbed a line notifying the consumer of her right to dispute the debt. The line should have read the “debt collector” would assume the debt was valid if the borrower didn’t dispute it within 30 days, Owens argued. Instead, it referenced the “creditor,” and therefore violated the law.

McCalla had five days after the initial communication to send proper notice, but never did, according to the complaint. Instead, it skipped right to a foreclosure suit on behalf of the lender, Reverse Mortgage Solutions Inc.

Even though the letter preceded the foreclosure, it included a reference to the impending suit, Reverse Mortgage Solutions Inc. v. Xilena Caseres.

“As a result of defendant’s conduct, plaintiff and the class are entitled to an award of statutory damages,” according to the complaint in Xilena M. Caseres v. McCalla Raymer, which requested expenses, damages, attorney’s fees and other relief.

But McCalla’s attorneys, Jamie Isani and Barry Davidson of Hunton & Williams in Miami, said the law firm clearly distinguished itself from Reverse Mortgage Solutions.

The letter reads, “This law firm represents the interest of your lender, as named herein above, regarding an alleged unpaid debt.”

Plus, McCalla’s lawyers argued, there was no technical difference between the law firm and the creditor assuming the debt’s validity.

“The plaintiff was trying to apply a hyper-technical reading of the statute. The letter informed the consumer that the law firm is representing the lender, so it does not mislead the consumer,” Isani said. “The court didn’t determine whether McCalla had to give that notice, but did find the letter was an initial communication. And because it was an initial communication, it had to comply with the statute. But both the trial court and the appellate court found it did comply.”

McCalla Raymer escaped the class action when the case came before U.S. Court of Appeals for the Eleventh Circuit judges Lanier Anderson and Stanley Marcus, with Richard Goldberg of the Court of International Trade sitting in by designation.

The judges upheld the district court’s dismissal of the case, even though they disagreed with the lower court’s finding that the letter was not an “initial communication.”

“Because we hold that the letter, which was an initial communication, would not mislead the least sophisticated consumer, we affirm the decision of the district court,” Anderson wrote in a decision affirmed by the other judges.

More litigation

The ruling might have stopped further action by the homeowners, but their attorney says it opens the door for future cases against lenders.

Owens predicted more litigation would follow, after the Consumer Financial Protection Bureau issues new scheduled guidelines for creditors and debt collectors, including a model for informing borrowers of their right to dispute debts.

“The Caseres decision will have very little impact on either consumers or the debt collection industry,” he said in a statement. “…In the debt collection industry, the underlying collector-creditor contracts typically specify that debt collectors are not agents of the creditor, but are instead independent contractors. The 11th Circuit has now ruled otherwise. McCalla Raymer and other debt collectors will likely face more—not less—FDCPA litigation because of this aspect of the Caseres decision, at least within the Eleventh Circuit.”