Federal Judge Rules in Favor of Debt Buyer in FDCPA Entrapment Case

Eighteen months after the filing of a putative Fair Debt Collection Practices Act (FDCPA) class action that arose out of a $131 balance on a Verizon account a New York Federal Judge has granted summary judgment in favor of the defendants and dismissed the lawsuit. A copy of the Order granting Summary Judgment can be found here.

The case is Huebner v. Midland Credit Management, Inc. Case No. 14-cv-6046 (BMC), United States District Court, Eastern District of New York. The case involved the following facts:

In 2010, plaintiff switched his phone service to Verizon. He previously had Verizon service but had changed to another carrier. As a result of his reversion to Verizon, the provider performed some work on plaintiff’s phone line to ensure he had adequate service. Verizon billed him a $131 fee for that work. Plaintiff advised Verizon that he should not have been charged this fee and he never paid the bill.

Midland Credit Management (MCM) and Midland Funding, LLC (Midland) acquired the debt from Verizon in July 2013. Midland purchased the debt and placed it with MCM for servicing. The account reflected that plaintiff owed Verizon $131.21.

Plaintiff is an attorney. On October 17, 2013, plaintiff called MCM. He had set up a tape recorder before making the call and recorded the entire call. During that call plaintiff asked what he had to do to dispute the debt; the agent asked him what the dispute was, and plaintiff repeatedly refused to describe it. However, plaintiff’s refusals were sufficiently indirect and oblique that each one caused the collection agent to ask another question in an effort to find out what the problem was with the debt. Plaintiff consistently evaded the questions.

Defendant’s records of plaintiff’s account contain the agent’s notes of the call, and show that she marked the account as “deleted” following the call. Defendant’s records also establish that on the same day, following the call, it sent plaintiff a letter advising him that it had ceased collection efforts and had instructed the Credit Reporting Agencies (CRAs) to delete the information MCM had reported regarding the account.

Defendant’s internal procedures recognize the options allowed under the FDCPA when it determines that a debt is disputed. Defendant can simply mark and report the debt to the CRAs as disputed, and either leave it in that category or attempt to confirm the validity of the debt and, if it can confirm validity, proceed with collection efforts. Alternatively, upon marking the debt as disputed, defendant can simply delete it, which it will presumably do if it determines that the debt is not worth the trouble of pursuing.

The records also showed that following the call, defendant coded the account as “289,” which, meant that the account was disputed and deleted. Within six days after the call, defendant sent multiple requests to Experian, TransUnion, and Equifax, starting on October 23, 2013, asking them to delete the item in question. These requests were reiterated on a monthly basis three times thereafter pursuant to defendant’s policy of issuing repeated requests to the CRAs to increase the likelihood that the agencies will comply with requests for deletion.

On October 15, 2014 Plaintiff filed suit against the defendants. Plaintiff alleged that defendant violated the FDCPA by attempting to collect a $131 debt plaintiff allegedly owed Verizon and purchased by the defendant. Plaintiff alleged that defendant’s attempt to seek an explanation from him when it marked his debt as disputed, as well as its failure to report his debt as disputed, were both illegal.

insideARM previously wrote about this case on February, 17, 2015. At that time the Judge in the case, The Honorable Brian M. Cogan, had issued an Order to Show Cause  why the action should not be dismissed, with fees awarded under 15 U.S.C. § 1692k(a)(3), and sanctions issued pursuant to Rule 11. As noted in that February 17, 2016 article, in that Order the Judge had some harsh commentary about the case:

“[This] case…goes beyond anything that the Court has seen. It represents a deliberate and transparent attempt by a sophisticated debtor to entrap a collection company into a technical violation. Even more problematically, plaintiff chose to bring this action even though there is a tape recording showing that the attempt at entrapment utterly failed. The collection company in this case did everything by the book, and yet has still found itself a defendant in an FDCPA action. There are substantial questions about whether this action should be allowed to proceed and whether defendant is entitled to recover attorneys’ fees for having had to defend it.”

On May 15, 2015 Judge Cogan issued his decision on the Order to Show Cause.  Judge Cogan again chastised the Plaintiff:

“In responding to the Order to Show Cause, plaintiff does not deny that he attempted to trick defendant into a violation of the FDCPA. Instead, he makes essentially two arguments. First, he claims that if I had a more complete record, which he has now supplied, I would have seen that defendant did, in fact, violate the FDCPA, for reasons to which he did not refer at the Initial Status Conference. Second, he alleges that because the Order to Show Cause criticized abuses of the FDCPA by some attorneys and plaintiffs, and because of the manner in which I have managed this case, I have demonstrated bias that mandates my recusal. As part of this argument, he contends that I have a financial interest in defendant, and therefore should not be hearing this case. Based on these allegations, he moves to vacate the Order to Show Cause, to have me recuse myself, and to certify for appeal my ruling on these motions in the event I deny them. Defendant has opposed plaintiff’s motion, urging that there is neither merit to his case nor to his motion for recusal.

……plaintiff’s motion for recusal is in part frivolous and entirely without merit. Had plaintiff done his research, he would have learned that I have no financial interest, as that term is defined in the Code of Conduct for United States Judges, in defendant, and that nothing in the Order to Show Cause, or in my management of this case, approaches the level necessary to warrant disqualification. With respect to the merits of plaintiff’s case, to the extent that the Order to Show Cause was based on only a partial view of the facts (and it appears now that it was), it was because plaintiff’s counsel, in violation of his obligations under Federal Rule of Civil Procedure 16, failed to give me any of the facts behind his claim other than his reliance on the recorded conversation, which proved nothing except plaintiff’s failed attempt to entrap defendant. Accordingly, for the reasons set forth below, plaintiff’s motion for recusal and related relief is denied. The case shall proceed in the normal course to determine if the new version of the claim that plaintiff has now set forth has any merit. However, I am sanctioning plaintiff’s attorney for failing to participate in the Initial Status Conference in good faith as required by Rule 16.”

The above background leads us to last week’s Order granting Summary Judgment. In that Order Judge Cogan writes:

“Even construing the facts most favorably to [plaintiff] (like assuming he never received either of the two mailings that defendant sent him), and applying the “least sophisticated consumer” standard (although plaintiff is a lawyer and anything but an unsophisticated consumer), see, e.g., Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir. 1993), I cannot see a genuine issue of fact as to any of them. Defendant did exactly what it was supposed to do under the FDCPA. Indeed, defendant undertook this action even though any reasonable reading of plaintiff’s recorded call shows that he was trying to trick defendant into not complying with the FDCPA. Defendant failed to take the bait and allowed him to dispute his debt; it then stopped collecting on the debt and notified the CRAs.

Defendant’s policies instruct its employees to ask follow-up questions when a consumer advises that he is disputing his debt. I see no problem with that under the law at all. There is nothing unreasonable about allowing a debt collector to ask an individual to explain why he is disputing his debt, as long as it does not interfere with an individual’s ability to dispute that debt. Asking follow-up questions enables the debt collector to focus its investigation on what the problem is with the debt, rather than shooting in the dark. It might even allow the collection agency to resolve the dispute on the spot. If the consumer answers the question by saying, “I only owe $120, not $131,” the collection agent might well say, “fine, we’ll take it.” Problem solved.

What plaintiff did is not what the least sophisticated consumer would do, because the least sophisticated consumer would not be an experienced FDCPA lawyer trying to manufacture an FDCPA claim. He would not say that he is disputing the debt “because the debt is non- existent,” leaving the agent clueless. Rather, when asked why he wanted to dispute the claim, the least sophisticated consumer would simply say, “Verizon didn’t tell me they were going to charge me reinstituting service, and when they charged me, I refused to pay.” The truth seldom requires any sophistication.

Defendant’s motion for summary judgment is therefore granted, and the Third Amended Complaint is dismissed. Plaintiff’s motion for class certification is denied. The Clerk is directed to enter judgment accordingly.”

insideARM Perspective

The court records show the following totals:

• 96 separate documents filed
• 7 different attorneys representing the Plaintiff
• 3 separate, lengthy Orders from the Judge Handling the case

It is difficult to provide meaningful perspective on three separate Orders with simple, clean, concise language from a United States District Court Judge. Simply reading the three Orders will provide all the perspective needed.

This case has been ongoing for 18 months. MCM had to spend considerable amounts in legal fees to defend the action. All on a $131 account! The obvious question is whether this is really the end of the line for this case.