On Monday the Third Circuit Court of Appeals affirmed a lower court decision granting a plaintiff summary judgment on a Telephone Consumer Protection Act (TCPA) claim and reversed a trial decision in favor of the defendant on a Fair Debt Collection Practices Act (FDCPA) claim. The case is Daubert v. NRA Group, LLC, d/b/a National Recovery Agency (Case Nos. 16-3613 and 16-3629, U.S. Court of Appeals, Third Circuit).

A copy of the opinion can be found here.

The introductory paragraph in the opinion succinctly summarizes the case and the decision: 

“This case — involving tens of thousands of dollars in statutory damages, half a jury trial, and cross-appeals — stems from a debt collector’s pursuit of $25 in unpaid medical bills. John Daubert won summary judgment on his TCPA claim against NRA but he lost at trial on his FDCPA claim. NRA appeals. Daubert cross-appeals. We’ll affirm on the TCPA claim but reverse and remand on the FDCPA claim.” 


Plaintiff, John Daubert went to Wilkes-Barre General Hospital for treatment. The Hospital’s radiology department, operated by Radiology Associates of Wyoming Valley, x-rayed him. His bill was $46. Radiology Associates forwarded his medical report and cellphone number to the company that billed its patients, Medical Billing Management Services, or MBMS. Daubert’s health-insurer contributed $21, so Daubert was responsible for the remaining $25. He apparently didn’t pay (it’s unclear why). MBMS transferred his account to a debt collector, NRA, and passed along Daubert’s cell number.

NRA attempted to collect the $25 that Daubert owed Radiology Associates in two ways. First, it sent him a collection letter. Visible through glassine windows on the envelope were — Daubert alleged — the bare sequence of letters and numbers NRA used to keep track of Daubert’s collection account in its system and — undisputedly — a barcode that, when scanned by the appropriate reader, revealed that account number.

Second, NRA called Daubert sixty-nine times in ten months. He answered just once. Each call was made using a Mercury Predictive Dialer.

Daubert sued NRA. He alleged violations of the FDCPA. Daubert claimed the bare account number and barcode on the collection letter’s envelope could have revealed his private information. NRA filed an answer to the complaint claiming a “bona fide error” defense.

Daubert subsequently amended his complaint to include a TCPA claim based on the 69 calls to his cell phone. NRA’s answer to the complaint alleged “prior express consent” for the calls.

During Discovery plaintiff served NRA with a Notice of Deposition under Federal Rule of Civil Procedure 30(b)(6) asking NRA to pick a witness to testify on behalf of things germane to both claims. NRA designated their Director of Payment Processing as their witness. The witness testified how NRA employees generate calling campaigns and how the dialer operates. From the deposition transcript:

  1. Is a human being involved in the placement of any phone calls made on the dialer, with the exception of creating a campaign?
  2. I — I don’t know. I don’t think there’s any other way to — no. The dialer does the dialing.
  3. Okay. So a human being selects the campaign criteria but then the dialer actually places the phone call?

When discovery closed, Plaintiff moved for summary judgment on both claims. He cited the testimony above and his own affidavit that he “never provided” Radiology Associates with his cell number or gave them permission to call his cell number.

In opposing the motion NRA submitted an affidavit from a different employee it didn’t produce during discovery. This affidavit contradicted the testimony of the Director of Payment Processing. This affidavit said that the Mercury Dialer couldn’t make a call without “human intervention” and that a person “must hit the “F4” key on a keyboard to launch a call. The affidavit further stated that without hitting the “F4” key, the dialer cannot make a call.” 

The court granted the summary judgment motion on the TCPA claim. The court relied on the “sham-affidavit doctrine” and declined to consider the affidavit that was submitted by NRA that contradicted the deposition testimony. However, the court denied the summary judgment motion on the FDCPA claim and a jury trial was scheduled to resolve the FDCPA claim. At trial NRA moved for judgment as a matter of law on the FDCPA claim. The court granted that motion holding that no reasonable jury could find that the alleged FDCPA violation could not have occurred from anything other than a bona fide error. The two appeals followed.

The Court of Appeals Opinion 

The TCPA Claim 

First, the Court of Appeals discussed the issue pf prior express consent. The court recognized other cases involving medical bills, referencing Baisden, et al. v. Credit Adjustments, Inc. and Mais v. Gulf Coast Collection Bureau (see insideARM article about Baisden case here and on Mais here). 

In both of those cases the courts had ruled that the consent to call a cell phone was given when admissions documents were filled out and those documents provided notice that the information could be used by others in the hospital that provided medical care. However, the court distinguished the facts in this case from the facts in Baisden and Mais, saying: 

“No evidence of such prior express consent exists in the record. NRA managed to show only that Daubert maybe provided his cell number to the Hospital, an intermediary associated with Radiology Associates. By pointing that out, we hold, Daubert carried his burden as the movant to show the absence of a genuine, material factual dispute on NRA’s prior express consent defense.” 

The court then moved to the issue of whether the district court acted correctly in disregarding the affidavit that contradicted the deposition testimony.  The Court of Appeals determined that the district court “acted well within its discretion” to disregard the affidavit. The court said that NRA failed to “provide a satisfactory explanation for the discrepancy.” 

The FDCPA Claim 

The court then turned to Daubert’s appeal of the district court’s decision to grant NRA judgment as a matter of law on the FDCPA claim. Here the court barely discussed the long line of “envelope” cases (for a quick summary of those cases, see the insideARM FDCPA caselaw chart). Instead, the court focused on the applicability of the “bona fide error defense” to this case.

The court wrote:

“The bona fide error defense says a debt collector can escape liability under the FDCPA by proving that its statutory violation was “not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.  But the defense doesn’t apply if the violation resulted “from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. In other words, a mistake of law isn’t a bona fide error. 

Where an issue of law under the FDCPA is unsettled by the Supreme Court or a precedential decision of the relevant court of appeals, debt collectors can’t escape a district court’s finding of FDCPA liability under the bona fide error defense by pointing to the persuasive authority they relied on at the time to justify their conduct.”

insideARM Perspective 

This case provides a lot of things for ARM companies to consider.

First, the risk/reward of time and effort expended on a small balance accounts. 69 phone calls for a $25 claim?

Second, the choice of who to participate in a deposition under Federal Rule 30(b)(6).  Under that rule a corporate defendant can choose who to serve as the corporate representative.  See this article written by David L. Johnson and Kyle Young of the Miller & Martin PLLC law firm published in the American Bar. In that article the authors note: 

“At first blush, selecting an individual to serve as a corporate representative in a lawsuit may seem like a mundane task. Selecting the wrong individual, however, can prove disastrous.” 

The issue of whether a dialer is or is not an Automated Telephone Dialing System (ATDS) is very complicated. How should the system be described? How should human intervention be explained? Selection of a witness to discuss a system’s TCPA compliance should be carefully considered. 

Finally, as can be seen from a review of the insideARM FDCPA caselaw chart, decisions in the “envelope cases” are not consistent. The most conservative approach is probably the best approach to avoiding FDCPA litigation on what can be seen on an envelope, or through the glassine window.  

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