No FDCPA Violations in Simon After Remand

Two years ago, in Simon v. FIA Card Services, N.A., the Third Circuit held that alleged violations of the FDCPA resulting from conduct in a bankruptcy case were not precluded by the Bankruptcy Code.

At issue was whether the defendants engaged in false, misleading or deceptive conduct in connection with their service of a subpoena for a Rule 2004 examination.  The certification of service on the subpoenas indicated service both directly on the plaintiffs and on their attorney whereas they were actually only served on the attorney. In addition, the location provided for the examination was improper under the bankruptcy rules.

The district court originally held that the complaint failed to state a claim for relief prior to the Third Circuit reversing and remanding the case.

Now on remand, the district court has granted the defendants’ motions for summary judgment, holding that the alleged irregularities with the subpoena were immaterial and would not mislead a competent attorney regarding a consumer’s rights.

Two significant holdings come from this opinion which can be found here.

First, the district court held that although technically inaccurate, the statement that the subpoenas had been served on the plaintiffs at their home address was immaterial and thus would not mislead the least sophisticated consumer regarding his rights under the FDCPA.  The court recognized that multiple Circuits including the Second, Fourth, Sixth, Seventh and Ninth as well as district courts within the Third Circuit have all included a materiality component in FDCPA claims.

The court held:

“the misstatement regarding service had no connection to the nature or legal status of the debt, it was of no consequence to the bankruptcy proceeding, and it would not in any way have affected the decisionmaking of the least sophisticated debtor with respect to their response to the debt collector’s action.”

The second significant holding is that the court applied a “competent attorney standard” to evaluate the claims that the subpoenas were false and deceptive.  Because the subpoenas were sent to the plaintiffs’ attorneys and not to them directly, the district court determined that the interpretation of the misstatement at issue (the location of the deposition) had to be determined from the perspective of the competent attorney and not the least sophisticated debtor.

The district court acknowledged that the Third Circuit has rejected the competent attorney standard in specific situations such as whether the 1692e(11) disclosure had been provided or a threshold inquiry of whether the subpoena rule had been violated.  However, because the issue was whether the recipient would be misled by the content of the subpoena, the district court agreed with other Circuits that have held that the least sophisticated debtor standard is inappropriate for judging communications with lawyers.

Ultimately, the district court found that the competent attorney would not be misled by the subpoenas and would recognize immediately, as plaintiffs’ attorney actually did, the defects in the subpoenas and advise the plaintiffs accordingly.

Plaintiffs have already appealed the summary judgment ruling to the Third Circuit so now the Third Circuit will have to directly address both materiality and the competent attorney standard.

Tom Dominczyk is an attorney with the firm Maurice Wutscher, LLP. He focuses on various aspects of financial services law, with an emphasis on consumer financial services litigation. He has successfully represented financial institutions and law firms throughout the country for claims filed under the Fair Debt Collection Practices Act, Fair Credit Reporting Act and various state consumer protection statutes.