After four years and two appeals, the case of Simon et v. FIA Card Services et al., stemming from communications surrounding sending a bankruptcy subpoena, has finally been resolved in favor of the attorneys as well as the creditor.
The history of Simon is as follows:
Plaintiffs filed a Chapter 7 bankruptcy and a credit card debt owed to FIA was included in their petition. Defendant, law firm, Weinstein & Riley, on behalf of FIA sent two letters to Plaintiff’s counsel advising him that their client was contemplating a non-dischargability proceeding and offered to settle account. The letters also referred to and attached Notices of Examination pursuant to Rule 2004 of the Federal Rules of Bankruptcy Procedure (FRBP), which are subject to FRPB 9016 and Federal Rule of Civil Procedure (FRCP) 45. The Notices included a certificate of service that attested that copies were also mailed to Plaintiff at their home address. However the law firm did not in fact send the notices to the Plaintiffs.
Plaintiffs brought a federal lawsuit in the District Court of New Jersey alleging Defendants violated §§ 1692e, e(5), e(11) and e(13) of the FDCPA. Plaintiffs alleged that Defendants violated §§ 1692e(5) & (13) by failing to comply with FRCP 45 in four ways:
- By failing to send the Notice to the Plaintiff at their home address as required under FRCP 45;
- By specifying a location in New York rather than New Jersey for the examination;
- By failing to include the full subpoena text; and
- By failing to include in the subpoena the method of recording
Defendants filed a motion to dismiss arguing that Plaintiffs’ claims were precluded by the Bankruptcy Code; the District Court agreed. Relying on the reasoning of the Ninth Circuit in Walls v. Wells Fargo, 276 F. 3d 503 (9th Cir. 2002) and the line of cases thereafter including similar cases decided within the Third Circuit, the District Court found no reason to bypass the remedial scheme of the Bankruptcy Code in favor of the FDCPA and granted the Defendants’ motion. The District Court found that the alleged failures to follow FRCP 45 were either contradicted by the documents upon which the claims were based or not sufficiently pled. The Plaintiffs appealed.
The Third Circuit disagreed in part. While it affirmed the dismissal of the § 1692e(5) & (13) because Defendants fully complied with FRCP 45 as it related to the location of the examination and the method of recording, the Circuit Court reversed the District Court’s holding that the Bankruptcy Code precluded Plaintiff’s FDCPA claims, stating that the proper inquiry was whether a direct conflict existed between the Bankruptcy Code and the FDCPA or whether both can be enforced. In the case of the § 1692e(11) claim, a direct conflict did exist because to insert the mini-Miranda warning on the Notice would be in direct conflict with the Bankruptcy Code. The Circuit Court did conclude that there was no conflict between the Defendants’ ability to comply with FRBP 9016 and FRCP 45 and the FDCPA, when it failed to send the subpoena to the Plaintiffs directly and when it failed to include the full text of the subpoena. As to those claims, the Circuit Court reversed, and the remainder of the case was remanded to determine whether the FDCPA was in fact violated.
Returning to the District Court, both the law firm and the Plaintiffs moved for summary judgment on the remaining issues. FIA moved for summary judgment that is was not a debt collector, which was granted. As to the issue of the failure to serve the Plaintiffs at their home address, the District Court found persuasive the line of case which read a materiality requirement inherent in the FDCPA’s prohibition on false, deceptive and misleading collection practices. The Court stated that the “FDCPA is ‘designed to provide information that helps consumers chose intelligently and by definition, immaterial information neither contributes to that objective (if the statement is correct) nor undermines it (if the statement is incorrect).”
Further, the Court found that, although the subpoena did not comply with FRCP 45, whether that failure amounted to a false or deceptive act must be decided by the “competent attorney standard.” Under the circumstances, since the communication only went to the attorney, the Plaintiffs were fully protected and the attorney was not otherwise deceived by the communication. Summary judgment was granted to the law firm. Plaintiffs appealed again to the Third Circuit.
By the time of the second appeal, Jensen v. Pressler & Pressler had been decided by the Third Circuit and incorporated the requirement that a false statement be material to be actionable. Adopting the logic of Jensen, the Third Circuit affirmed that the false statements in the subpoena were not material, although the court declined to adopt the “competent attorney standard.” The court found that while the subpoenas did not set forth the text verbatim, they did not contradict them in any way which would mislead the least sophisticated consumer.
There are several take-aways from Simon.
First and foremost, some of the simplest arguments are the best. Granted had it not been for Jensen, Simon II may have been more difficult, but you get the sense from the Judge’s opinion that Plaintiffs’ claims of undeniable deception simply did not hold water. Practicality finally won the day in Simon. While some of the Third Circuit’s holdings regarding preclusion have been successful for subsequent cases at the District Court level, especially Torres v. Cavalry, which is currently pending on Plaintiffs’ appeal, one wonders whether Simon had to even address the preclusion issue at all. As Simon I found, even if the claims were not precluded, the complaint on its face still failed to state a claim. Kudos to the Weinstein Firm and FIA for fighting the good fight.