A recent opinion issued by the U.S. District Court for the Northern District of Illinois held in Janetos v. Fulton Friedman & Gullace, LLP (United States District Court, N.D. Illinois, Case No. 12-1473) that debt collector Asset Acceptance, LLC (Asset) could not escape liability for a violation of the Fair Debt Collection Practices Act (FDCPA) by law firm Fulton Friedman & Gullace, LLP (Fulton) taken on Asset’s behalf. A copy of the opinion can be found here.


Plaintiffs Mary T. Janetos, Erik King, Pamela Fujioka, and Ignacio Bernave alleged that form debt collection letters sent by Fulton violated the FDCPA through using confusing language.

Previously, on appeal of entry of summary judgment for defendants, the Seventh Circuit reversed the lower court and held that Fulton’s failure to make mandated disclosures violated the FDCPA as a matter of law and that Asset, the debt collector, could not escape liability for Fulton’s conduct:

"A debt collector should not be able to avoid liability for unlawful debt collection practices simply by contracting with another company to do what the law does not allow it to do directly … [W]e think it is fair and consistent with the Act to require a debt collector who is independently obliged to comply with the Act to monitor the actions of those it enlists to collect debts on its behalf."

The Seventh Circuit remanded the case back to the District Court for further proceedings, after which the plaintiffs filed a motion for summary judgment and Asset filed a cross-motion on the measure of class damages.


Judge Thomas M. Durkin began discussion of the case by noting the FDCPA’s civil liability provision calling for actual and statutory damages in addition to attorney’s fees and costs for individuals and class members if a FDCPA action successfully enforces liability. According to Judge Durkin, the relevant portion of the FDCPA for this case is the following:

"any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable . . . in the case of a class action . . . [for] such amount as the court may allow for all [unnamed] class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector."

In this case, it was undisputed that Fulton has a net worth of $0, while 1% of Asset’s net worth exceeds $500,000.

Asset cited Section 13 of the Restatement (Third) of Torts to argue that Fulton is the only liable party in this case. The plaintiffs argued "that all liable debt collectors must be held separately to the penalties set forth in the statutory damages provision."

The Court granted the plaintiffs’ motion and denied Asset’s motion for three reasons:

  • The FDCPA civil damages provision does not distinguish liability between debt collectors, instead applying to "any debt collector who fails to comply."
  • The violation in this case is "statutory, not tortious," and Asset’s liability in the case "derives from a failure to supervise, making it culpable in and of itself."
  • Concern about setting a bad precedent. Judge Durkin notes that "if Asset Acceptance were permitted to hide behind Fulton’s insolvency, it would be encouraged to outsource unethical debt collection practices to judgment-proof debt collectors like Fulton," which "would undermine the purpose of the FDCPA."

The Court did agree with Asset with respect to duplicative damages, ruling that "actual damages may not be double collected" and that Asset’s net worth is relevant to determining class damages. Judge Durkin also noted that the following is true in this sort of case:

"In determining the amount of class damages, courts must consider 'the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional' in determining damages."

insideARM Perspective

This case has been working its way through the courts for a long time, and has been previously covered on insideARM in April 2016 and in February 2015.

This is a negative result for the industry, which highlights the importance of ensuring your company’s compliance with the FDCPA, as well as making sure any partner of yours is also compliant

Readers should compare this result with the case we wrote about on December 13, 2016, Petri v. Mercy Health d/b/a Mercy Hospital St. Louis (United States District Court, E.D. Missouri, Case No. 15-1296). In that case, the court did not find vicarious liability for the client that hired a collection agency that violated the FDCPA.

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