Appeals Court Rules Against Collection Agency in FDCPA Litigation Case

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A three-judge panel in California late last week sided with a District Attorney in the state and ruled that a lawsuit the DA brought against a debt collection agency can proceed. The collection agency had won dismissal of the lawsuit in a lower court after invoking its litigation privilege.

Kern County District Attorney Lisa Green filed an action against Persolve LLC for violations of the Fair Debt Collection Practices Act (FDCPA) and California’s Rosenthal Fair Debt Collection Practices Act. At issue was language used in letters with consumers. Persolve primarily uses the legal collection channel to recover debts, and as such, the communications were related to impending litigation.

Because only individuals that are in debt can bring suit under the FDCPA and California’s Rosenthal Act, the DA sued under the state’s Unfair Competition Law (UCL). Persolve argued that litigation privilege barred the action because the debt collection communications related to anticipated litigation. A Superior Court judge in Kern County agreed.

But Green appealed on the grounds that applying litigation privilege to public UCL actions would make the debt collection statutes effectively inoperable.

California’s Court of Appeal, Fifth Appellate District in Fresno, agreed with Green, writing that litigation privilege is “not without limit.” The panel noted that the DA action “borrowed” banned practices from the FDCPA and Rosenthal Act, writing:

Where, as here, the “borrowed” statute is more specific than the litigation privilege and the two are irreconcilable, unfair competition law claims based on conduct specifically prohibited by the borrowed statute are excepted from the litigation privilegeAccordingly, the People’s unfair competition law claims that are based on conduct that is specifically prohibited by the [Rosenthal] Act and/or the [FDCPA] are not barred by the litigation privilege.

The panel reversed the lower court ruling, sending it back to superior court for further proceedings.

Continuing the Discussion

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  • avatar David Bifulco, Esq. says:

    Bootstrapping at its best!!! And why would the DA be involved in a civil matter anyway? They should be more concerned with the false FDCPA claims and extortion we have to put up with.

  • avatar Commercial Guy says:

    I agree. One would think, based on the statistics in this link, that the DA’s time would be better spent on matters of greater import.

    http://www.healthykern.org/modules.php?op=modload&name=NS-Indicator&file=indicator&iid=605

    But what do I know, I’m just a bill collector…

  • avatar gwheelock915 says:

    David,

    And what about all those false account stated or breach of contract claims you bring on behalf of your clients?

    Don’t say it isn’t fair when you are in an industry where, right or wrong, you are automatically assumed to be among the worst of the worst.

    Tell me if you heard this one before: A collections attorney walks into a bar…

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