Alabama Consumer Law Blog

We are often asked by other lawyers to comment on recent consumer cases and the recent case from Georgia, St. Claire v. Trauner (2008 WL 151542), caught our attention so we thought we would mention it here.

On January 11, 2008, Judge Evans from the Northern District of Georgia issued an opinion in a Fair Debt Collection Practices Act case that only involved a dispute over the attorney's fee to be awarded the consumer lawyer Lisa Wright.

The defendant, Trauner, Cohen, & Thomas, LLP, agreed to settle the case for $1,000 plus attorney's fees. This was because the defendant had received a validation request but failed to respond appropriately and instead continued its collection activities.

Lisa Wright asked for $300 per hour and the defendant argued this was too high because Lisa Wright sues lots of debt collectors. The court rightly rejected this argument as the fact that a lawyer sues collection agencies often is no reason to reduce the award (perhaps it should increase the award).

The court did reduce the award, however, to $250 per hour because this was a very simple case. Next the defendant said the hours expended by the plaintiff's lawyer were excessive - the court rejected this by noting the hours were under nine. Therefore, the court awarded attorney's fees in this very simple case that settled shortly after being filed. The fees and costs totaled $2587.

The moral of this case is that defendants who violate the FDCPA by abusing consumers will have to pay reasonable attorney's fees. Defendants love to say their wrongdoing was a "technical" violation and that the defense attorneys don't charge $250 or $300 or $350 per hour but this case reminds us that even for "simple" cases a lawyer who has been practicing for less than seven years is entitled to $250 per hour.

We know Lisa Wright from various consumer conferences and congratulate her on this excellent opinion that, hopefully, will remind debt collectors that there is a price to be paid for abusing consumers.

If you have been the victim of an abusive debt collector or abusive debt collector, please feel free to contact us as we sue abusive debt collectors.

A growing trend is for abusive debt collectors to start collecting on bad checks - which is fine as long as the law is followed - but the twist is these companies do this as if they were the district attorney.

The Consumer Law & Policy Blog summarizes the decision as follows in its excellent blog post:

Judge Berzon's opinion is the most thorough and scholarly treatment to date on the question of private entities and sovereign immunity. In a sweeping rejection of ACCS's arguments, the Ninth Circuit characterized sovereign immunity as “strong medicine” that should be carefully limited, especially in the case of for-profit corporations that are not democratically accountable to the public. Quoting the philosopher Gilbert Ryle, the court called the argument that a private company could enjoy sovereign immunity a “category error,” like “inquiring into the gender of a rock or into which day of the week is reptilian.”

To summarize the problem, Deepak Gupta states it well:

I've blogged here before about so-called check diversion companies -- private debt collectors that use their contracts with prosecutors to gin out collection demands, on official prosecutor stationary, threatening consumers who have written bad checks with criminal prosecution or jail unless they pay exorbitant collection fees. Passing a bad check is only a crime where there's knowing and intentional fraud, but these companies demand fees regardless of whether a crime has been committed. It's a lucrative and shady business that essentially criminalizes civil debt collection.

If you have been harassed by one of these masquerading collection agencies, which the Eleventh Circuit Court of Appeals (covering Alabama) has already said do not automatically have immunity, you do have rights. Please contact us and we will be happy to explain your options as we are always interested in suing abusive debt collectors.

We are seeing more and more Alabama consumers who are being mistreated either during or after a bankruptcy. We have written about discharged creditors (who cannot collect money from the debtor - its been discharged) still trying to collect the money even though it is illegal to do so. You can read about it here and here. Amazingly, abuse even happens by creditors during the bankruptcy process.

The Wall Street Journal has reported that Judge Jim Pappas has sanctioned Countrywide (or its subsidiaries) for wrongful conduct - in this case not answering discovery or showing up to depositions. Please click here to read the rest of this interesting story by WSJ reporter Amir Efrati.

If you are being mistreated by any creditor during or after a bankruptcy, please consult with your bankruptcy lawyer to help determine your rights. Over the years we have been brought into a number of cases by bankruptcy attorneys to help stop abusive creditors (during and after bankruptcy) who are breaking the laws in their obsession to collect money they are not entitled to collect.

In a recent decision of Thornton v. Wolpoff and Abramson, No. 07-12016, by the Eleventh Circuit Court of Appeals, the court rejected Wolpoff and Abramson's argument that the Ms. Thornton's attorney should not receive the Court ordered attorney fees as required by the Fair Debt Collection Practices Act ("FDCPA") to a successful plaintiff.

Ms. Thornton had sued Wolpoff for violations of the FDCPA related to Wolpoff's collection activities surrounding a balance on a credit card bill that had belonged to her ex-husband. The jury found that Wolpoff had violated the law, but only awarded Ms. Thornton nominal damages in the amount of $1.

After the trial, the court awarded Ms. Thornton's attorney fees at a rate of $250 per hour and in the amount of $7,500. This was significantly less that what was asked for by the plaintiff, due to the court's finding that the case could have been settled by the parties at an early stage of the litigation for a nominal amount of money. It was also significantly more that asked for by Wolpoff.

Both sides appealed, with Wolpoff arguing that the plaintiff did not bring a "successful action" and thus should not be compensated for her attorney's time. The court squarely rejected Wolpoff's argument that a jury finding of $1 resulted in a meaningless difference than a jury's finding in it is favor or awarding 0 dollars. The court stated simply, "Wolpoff is incorrect. The difference between zero dollars and one dollar is the difference between an unsuccessful action and a successful action." at p. 7.

Wolpoff position that the trial court had no discretion to award Ms. Thornton's attorney fees for her work, the court found, was simply not supported by the law. This is important as debt collectors and debt buyers often think that the award of attorney's fees is not a real possibility - this opinion shows otherwise.

The Alabama Appellate Watch is an excellent blog by Lightfoot, Franklin and White, LLC. The Appellate Watch blog focuses on the decisions normally released every Friday by the Alabama Supreme Court and the Court of Civil Appeals. It contains the full text of each decision and a good analysis of the civil cases.

We have found the lawyers at Lightfoot to be excellent and honorable opponents and we expect to always find the posts at Appellate Watch to be the same.

We recommend that you take a look at this fine blog as the Alabama Supreme Court and the Court of Civil Appeals do release decisions that affect Alabama consumers.

Here is an important press release related to a recent decision striking down a class action ban in an arbitration provision.

FOR IMMEDIATE RELEASE
Contact: Deborah Mathis, Communications Director, at (202) 797-8600 Ext. 246

PAYDAY LENDER’S CLASS ACTION BAN STRUCK DOWN IN FLORIDA

Public Justice, the Washington-based national public interest law firm, helped score a victory for Floridians this week when a Palm Beach County Circuit Court opened the door to payday loan customers who want to sue usurious lenders on a class action basis.

McKenzie Check Advance, which provides check cashing services and payday loans in more than 200 stores across the country, had attempted to force customers with claims to go into individual arbitration in lieu of a class action in court or class arbitration. But Circuit Court Judge Elizabeth Maass found that enforcement of the class action ban embedded in McKenzie’s loan agreements effectively meant no claims would be brought against the lender because individual claims are typically too expensive for customers to pursue. The court’s ruling voids the class action ban in McKenzie’s arbitration clauses.

“Judge Maass saw through the payday lender's smoke screen to the truth: corporations should not be allowed to gut Florida's consumer protection laws in the fine print of contracts just because a given consumer can read,” said Paul Bland, a Public Justice attorney who argued the case on behalf of plaintiffs Tiffany Kelly and Wendy Betts. “The facts made it obvious that this payday lender's contract would undermine important consumer protection statutes passed by the Florida legislature, and Judge Maass did the right and courageous thing by refusing to enforce the illegal part of the contract."

In addition to Bland, the legal team included Ted Leopold of Ricci~Leopold in Palm Beach; Clay Yates of Port St. Lucie; Christopher Casper of Tampa; Richard A. Fisher of Tennessee; and Public Justice Waters & Kraus Fellow Amy Radon. Leopold is a member of the Public Justice Foundation Executive Committee and Fisher is a member of the Public Justice Foundation Board.

The victory was part of Public Justice's Access to Justice Campaign and Class Action Preservation Project.

###

Public Justice (formerly Trial Lawyers for Public Justice) is America’s public interest law firm. Dedicated to using trial lawyers’ and other attorneys’ skills and resources to advance the public good, Public Justice is supported by – and can call on -- a nationwide network of more than 3,000 of the nation’s top lawyers to pursue precedent-setting and socially significant litigation. It has a wide-ranging litigation docket in the areas of consumer rights, worker safety, civil rights and liberties, toxic torts, environmental protection, and access to the courts. Public Justice is the principal project of The Public Justice Foundation, a not-for-profit membership organization headquartered in Washington, DC, with a West Coast office in Oakland, California. The Public Justice web site address is www.publicjustice.net.

This opinion from the Fourth Circuit Court of Appeals rejected the arguments of Equifax in this six figure verdict except on two grounds. The emotional distress damages were reduced to $150,000 and the trial court was instructed to conduct a hearing on the attorney's fee award.

A good analysis of the impact of identity theft is provided by Denise Richardson in her fine blog post. We recommend this to your reading. She also has a link to the opinion so you can read it yourself.

While we disagree with the reduction of the emotional distress damages, overall this opinion benefits consumers and for that we are thankful.

1-3-08 Update - we just saw an excellent blog post on this case at the South Carolina Bankruptcy and Consumer Law Blog written by Sheryl Sisk Schelin. We think you will enjoy this excellent post.

A serious problem for Alabama consumers and consumers around the country is the wide spread practice of forcing consumers to "accept" arbitration agreements. These often say that the consumer can not file or participate in any class action. Thus, times where an Alabama consumer is cheated out of $50 has to be filed individually which, as a practical matter, means most cases are not filed and consumers are left frustrated.

The Ninth circuit recently ruled that these class action waivers are unconscionable under California law. Read this short post by the Consumer Law & Policy blog for more information and the direct link to the case.

This is an excellent decision as it is important for Alabama consumers and consumers around the nation to have the option to pursue the bad guys in a class action. While the Ninth circuit does not have authority over Alabama, any good law is helpful to get more and more appellate courts making the right decision.

Our friend Robert Duff of the Indiana Consumer Law Blog has an interesting post about a recent U.S. Supreme Court decision which holds that when a credit reporting agency (such as Equifax, Experian, or Trans Union) recklessly reports or recklessly investigates your disputes, punitive damages can be considered by the jury. Some areas of the country previously held that only "intentional" conduct would allow this.
The implication? According to Robert Duff:

What does this mean? Well, it's HUGE! Quite simply, it means that punitive damages will be much, much easier for consumers to obtain under the FCRA. It means that FCRA defendants will have a much more difficult time obtaining summary judgment on punitive damages claims. It means the value of many FCRA lawsuits just went up astronomically, because now consumers can get these claims before a jury. And when that happens, look out! I think we'll see a slew of large punitive damage verdicts in the next year.

Hopefully, this will make both the furnishers and credit reporting agencies care a little bit more about maintaining standards designed to ensure accurate credit reporting.

Remember if you want to follow the Fair Credit Reporting Act approach (there are alternative state law methods) the first step is always to pull your credit reports, then see if the reports are accurate, then dispute the wrong information.

We ran across a recent blog post on the Trial Lawyer Resource Center blog site that summed up our feelings on the frivolous multimillion lawsuit that was recently tried in Washington DC over a pair of pants. The post was entitled, Crazy Pants Lawyer get Zero: The System Works.

The post makes the point that, while our system of justice is not perfect, it does work. At the end of the day, the plaintiff in that case had the right to file the lawsuit, a bad lawsuit, just like we all have the right to say or do something stupid. However, he did so at his own risk. The case was tried, he had his day in court and the judge found that his case had no merit and, in addition, ordered that he pay the court costs for the defendants.

Few would argue that that was not the correct outcome, though it is not always easy to actually know what the real facts are. One need look no further than the Duke Lacrosse case to see just how fast the facts of a case can be distorted from the media and by outsiders. It didn't take long for many in media and public to convict those players. However, the system ultimately worked, though slowly.

The truth is that there are frivolous lawsuits filed. However, the system takes care of those like it did in the DC pants case. As trial lawyers, we evaluate cases based on what potential jurors would do with the case. Most lawyers don't file frivolous cases because they know that jurors and judges will throw them out of court.

In the end, the system does work. A consumer justice lawyer, Joe Watkins, summed up the verdict in favor of the dry cleaners and the harm these type cases can have on our justice system when he said, “the suit itself was ludicrous. As an attorney for 30 years I am aware of the dangers that this type of sensationalism can generate. The general public cannot help but be engrossed in its details. Now that the decision has been reached, the general public can bask in what is just another example of the Civil Justice System accurately and fairly working for us all,” said Watkins. To read the post click here.

Yesterday, in Bach v. First Union, the Sixth Circuit Court of Appeals reduced the verdict for violating the Fair Credit Reporting Act. The original verdict was $400,000 in compensatory damages and 2.6 million in punitive damages.

The first appeal resulted in the court directing the district court to review the punitive damage award and reduce it. The district court did so by reducing the punitive damage award by $400,000, the amount of the compensatory damages.

On the second appeal, the appellate court said the punitive damages could not exceed the compensatory damages. Thus, the maximum the punitive damage award could be is $400,000 for a total verdict of $800,000 (plus we assume attorney's fees and costs).

The court felt in this specific case that because the compensatory damages were so high that the punitive damages should not exceed the compensatory damages. The court cautioned, however, that if smaller compensatory damages had been awarded, a greater ratio (than 1:1) might be appropriate.

A couple of observations. First, this case shows the potential for large verdicts in FCRA cases. Defendants in these cases often claim that no jury will punish the furnishers of information (such as First Union or Wachovia now) or credit reporting agencies (such as Equifax, Experian and Trans Union). It also shows that significant compensatory damages ($400,000) can be awarded in these cases which is also something that the industry lawyers suggest won't or can't happen.

While we don't think the court should have reduced the punitive damage award again, fortunately the verdict is still substantial and will hopefully encourage the industry to take errors on credit reports seriously.

Our friends at Consumer Law & Policy Blog have a great post on a recent decision that can impact victims of debt collection abuse in Alabama and elsewhere.

In a forceful opinion issued today, Sayyed v. Wolpoff & Abramson, No. 06-1458 (May 9, 2007), the Fourth Circuit rejected a debt-collection law firm’s argument that it enjoys common-law immunity from FDCPA claims that arise out of statements made in the course of litigation.

Farid Sayyed alleged in federal district court that the law firm Wolpoff & Abramson (W & A) had filed, in a state-court debt-collection action, interrogatories and a summary judgment motion that contained false statements. W & A argued that it was absolutely immune from FDCPA claims arising from statements made in litigation, and the district court agreed and dismissed.

The Fourth Circuit reversed.

It was absurd to argue that a debt collector can lie in litigation but its nice to have a well written opinion rejecting this crazy argument. Read the rest of the post at CL&P for additional analysis of this opinion.
Update on May 11, 2007 - read this good post for the perspective of the Michigan Debt Collection Law Blog for the analysis of a collection attorney.

Today the Seventh Circuit Court of Appeals issued a decision styled Gillespie v. Equifax which held that the way that Equifax reports the "Date of Last Activity" potentially violates the Fair Credit Reporting Act.

The plaintiffs defaulted on some debts and they were sold to a debt buyer collection agency. The issue in the case concerned the date of last activity and the rule against keeping negative items for more than seven years (actually seven and a half years - we'll address this in another post). The way Equifax reports the information, if a consumer makes a payment after an account becomes delinquent, then the date of last activity is the date the last payment was made. This could extend the seven year period in violation of the law.

As the court put it,

More troubling is the concern that Equifax’s
exclusive use of the Date of Last Activity could effectively
allow Equifax the opportunity to keep delinquent accounts
in the credit file past the seven and one-half year limitation
of § 1681c(c)(1). The Date of Last Activity that previously
listed the date of delinquency in the account will be
replaced should the consumer make an intervening
payment on the account. The date of the intervening
payment would become the new Date of Last Activity used
in the seven and one-half year calculation. However, the
negative credit history relating to the prior delinquency
would presumably remain within the consumer’s credit
file despite the fact that the consumer faces a new seven
and one-half year period before the information is removed
from her file.
Equifax has not provided an explanation for why it posts
both positive payment information and negative delinquency
data within the Date of Last Activity field. Even
more damning to Equifax is the fact that the field immediately
next to the Date of Last Activity is a field
labeled “Date Maj. Dlqu. Rptd.” Equifax defines the Date
Maj. Dlqu. Rptd. field as “the date the first major delinquency
was reported.” Although the Date Maj. Dlqu. Rptd.
field appears to be available for use on Equifax’s form, it
remains blank on the disclosures provided to the plaintiffs
pursuant to § 1681g(a)(1).

This decision was not "on the merits" but was a ruling by the appellate court to tell the trial court to resume the case. We'll watch and see how this case plays out but it does show how often the credit reports are set up in a way to harm consumers of this state and all other states.

The firm that handled this case for the consumers was Pietz Law Office out of Pittsburgh, PA. Congratulations to James Pietz for bringing this important case!