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A Tale of Two Lawsuits - Campuzano and Womack

June 1, 2009

Federal -- Fair Debt

Two cases in the same courthouse addressing the same legal issues and facts. One case resulting in the granting our motion to dismiss, the other denying our motion for summary judgment the very next day and the successful appeal that followed.

Under the Fair Debt Collection Practices Act, 15 U.S.C. §1692a, et seq. (the "FDCPA"), circuit courts have consistently held that a lawyer who collects debts must be meaningfully involved in the drafting and issuance of collection letters signed by the attorney. While the FDCPA is silent on the requirement of meaningful involvement, all circuit courts that have addressed the issue have imposed this standard on attorneys who collect consumer debts, premised on the Model Rules of Professional Conduct. It is easy to see the appeal of this application to attorneys who collect on debts because one would expect that an attorney would review documents prior to sending demand letters to consumers. See Clomon v. Jackson, 988 F.2d 1314, 1321 (2nd Cir. 1993); Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996); Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 305-306 (2nd Cir. 2003); and Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1237 (5th Cir. 1997).

As the Avila Court aptly stated, when a consumer gets a letter from an attorney, he knows "the price of poker has just gone up."

A letter from an attorney implies that a real lawyer, acting like a lawyer usually acts, directly controlled or supervised the process through which the letter was sent. That is the essence of the connotation that accompanies the title of "attorney." A debt collection letter on an attorney's letterhead conveys authority. Consumers are inclined to more quickly react to an attorney's threat than to one coming from a debt collection agency. It is reasonable to believe that a dunning letter from an attorney threatening legal action will be more effective in collecting a debt than a letter from a collection agency. The attorney letter implies that the attorney has reached a considered, professional judgment that the debtor is delinquent and is a candidate for legal action. And the letter also implies that the attorney has some personal involvement in the decision to send the letter. Thus, if a debt collector (attorney or otherwise) wants to take advantage of the special connotation of the word "attorney" in the minds of delinquent consumer debtors to better effect collection of the debt, the debt collector should at least ensure that an attorney has become professionally involved in the debtor's file. Any other result would sanction the wholesale licensing of an attorney's name for commercial purposes, in derogation of professional standards:

[A] lawyer has been given certain privileges by the state. Because of these privileges, letters . . . purporting to be written by attorneys have a greater weight than those written by laymen. But such privileges are strictly personal, granted only to those who are found through personal examination to measure up to the required standards. Public policy therefore requires that whatever correspondence purports to come from a lawyer in his official capacity must be at least passed upon and approved by him. He cannot delegate this duty of approval to one who has not been given the right to exercise the functions of a lawyer. American Bar Association, Formal Opinion 68 (1932).

As explained in Avila, the requirement of meaningful involvement by an attorney debt collector prior to the issuance of a collection letter signed by the attorney was required because of the attorney's specialized role as an attorney and this special role's effect on a debtor - i.e. the fear of imminent litigation - not because of the attorney's role as a debt collector. Imposing the same requirement on non-lawyer debt collectors, as Campuzano suggested, places a burden on the debt collector in his role as a debt collector. Nothing in the FDCPA or applicable case law suggested that an executive of a debt collection agency is required to be meaningfully involved in a collection account prior to the issuance of a collection letter signed by the executive.

In Campuzano-Burgos, et al., v. Midland Credit Management, et al, in the U.S. District Court for the Eastern District of Pennsylvania, Civil Action No. 07-92 (Dalzell, J.), the plaintiffs sought to apply the meaningful involvement standard to non-attorney executives who signed collection letters sent to consumers. The plaintiffs claimed that, like an attorney collector, the FDCPA should be read to require that non-attorney executives of collection agencies need to be meaningfully involved in the collection minutia concerning each debtor before a letter, signed by the executive, issues to the consumer.

Recognizing the incongruity of applying a meaningful attorney involvement standard arising out of the Model Rules to non-attorney collectors (irrespective of their title), the defendants filed a motion for summary judgment.

A few months prior to the Campuzano motion, on precisely the same issue, involving the same attorneys, counsel filed a motion to dismiss in Lancess Womack v. National Action Financial Services, Civil Action No. 06-4935 (Bayson, J.), 2007 U.S. Dist. LEXIS 54206, *15 (E.D. Pa. July 25, 2007), in the U.S. District Court for the Eastern District of Pennsylvania.

On July 25, 2007, the Honorable Michael Baylson granted the Motion to Dismiss in Womack, refusing to apply the attorney meaningful involvement standard to non-attorney executives who are signatories on collection letters.

On July 26, 2007, in Campuzano-Burgos v. Midland Credit Mgmt., 497 F. Supp. 2d 660 (E.D. Pa. 2007), the Honorable Stuart Dalzell denied our Motion for Summary Judgment and granted summary judgment in favor of the plaintiffs on the very same issue rejected by Judge Baylson the day prior.

After Judge Dalzell was apprized of the Womack decision, he agreed to certify the question to the Third Circuit, pursuant to 28 U.S.C. § 1292. We subsequently filed a Petition for Allowance of the Appeal, and the Third Circuit accepted the appeal.

Prior to oral argument, the United States District Court for the Northern District of California, in Cruz, et al., v. MRC Receivables Corp., 563 F. Supp. 2d 1092 (N.D. Cal. 2008), expounded on the legal issues in play by comparing the Womack decision with the Campuzano holding. The Cruz Court rejected Campuzano in favor of the logic in Womack.

On September 11, 2008, oral argument was held before the Third Circuit, and it was clear that the Third Circuit intended to reverse the Campuzano holding. On December 18, 2008, the Third Circuit reversed Campuzano in a precedential opinion and remanded the case to the trial court with instructions to enter summary judgment in favor of the defendants, with costs taxed to the appellee.

While the facts of the Womack and Campuzano cases provide relief to collection agencies in the context of collection letters signed by non-attorney executives, the more significant import of these decisions is the prevention of a heightened duty of care on executives of collection agencies under the FDCPA based solely on their title.

*Andrew is a shareholder in our Philadelphia, Pennsylania, office who can be reached at (215) 575-2765 or amschwartz@mdwcg.com.

 

Defense Digest, Vol. 15, No. 2, June 2009

Affiliated Attorney

Andrew M. Schwartz
Chair - Consumer Financial Services Litigation and Compliance Group
(215) 575-2765
amschwartz@mdwcg.com

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