A Federal Magistrate Judge in Texas said this week that a plaintiff suing a collection agency for FDCPA violations filed the case in bad faith and that not only should his case be dismissed, but he should be found liable for the attorney’s fees accrued by the debt collection agency over the course of its defense.
Paul D. Stickney, magistrate judge in the U.S. District Court for the Northern District of Texas, wrote in his findings, conclusions and recommendations to the District Court that Craig Cunningham’s case against The CMI Group, based in Carrollton, Texas, had “no genuine issues of material fact” and should be dismissed. He further recommended a finding that Cunningham filed the action in bad faith and for purposes of harassment and that CMI should be awarded reasonable attorney’s fees.
Cunningham sued CMI in August 2009 alleging that in the course of attempting to collect a debt originating with Time Warner, the ARM firm had violated the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act. Specifically, Cunningham claimed CMI had made false and misleading statements, threatened to take an action that cannot legally be taken, failed to cease communication after receiving notice, failed to validate debt upon request, and contacted him at an inconvenient time and place.
Using frank and direct language, Judge Stickney shot down each of Cunningham’s claims.
Stickney’s recommendations, filed on Monday, will be sent to a District Court Judge for final approval.
“We’re obviously very pleased with the way the case has gone so far,” Thomas Stockton, Chairman and CEO of CMI, told insideARM.com.
Cunningham has made a name for himself in recent years as a consumer that “turns the tables” on debt collection agencies by aggressively filing suit for FDCPA claims, and teaching others how to follow his lead. He has written numerous articles on the Internet guiding debtors through the steps they should take to sue collectors, and In January he was favorably spotlighted in a lengthy feature in the Dallas Observer which called him “a radical enemy of the banking system.” His case against CMI was discussed in the article; Cunningham claimed he was going after the company for $200,000.
Stickney noted Cunningham’s writings in his recommendations. When discussing whether Cunningham acted in bad faith filing the suit, Stickney wrote, “Plaintiff offers himself as an ‘angry and litigious consumer’ and an expert in debt collection. Plaintiff also authors articles on how to sue debt collection companies for profit.”
Debt collection agencies are often faced with a difficult choice when sued on FDCPA claims. Defending a case is often far more expensive than settling up front, a fact that consumer attorneys and pro se litigants know all too well. But there is a growing movement in the ARM industry for companies to defend cases that they see as frivolous.
“I hope this case further exposes the cottage industry of suing debt collection firms for profit,” said Mike Ginsberg, President and CEO of ARM advisory firm Kaulkin Ginsberg, a sister company of insideARM.com. “Some tactics they use are deplorable, and everyone should know about it.”
CMI noted that in their case, Cunningham deployed some questionable tactics he preaches.
After the initial round of discovery, Cunningham amended his complaint to include 28 of CMI’s employees, regardless of whether the employees handled his account, according to CMI General Counsel Chris Meier. “Cunningham claimed that each of the named defendants had violated at least one of the laws set forth in his complaint, but it was clear from the articles Cunningham had published that he had ulterior motives—to increase CMI’s legal fees by increasing the workload of its retained counsel, Robbie Malone,” said Meier. Meier noted that Cunningham called Malone 2-3 times each day despite having no new information to discuss.
Stickney noted that the court found the most offense with this behavior. “Most worrisome to the Court, Plaintiff took actions in bad faith in attempt to multiply his claims. Plaintiff repeatedly called Defendants in an attempt to multiply his claims under the FDCPA, asking questions in hope that he could construe the answer as a false misrepresentation,” Stickney wrote.
According to CMI, the opinion — which will likely be published if accepted by the District Court judge — contains very favorable case law. First, the magistrate states that a collection agency does not “threaten” a consumer with credit reporting if it is merely responding to a direct inquiry. Second, the magistrate addresses Cunningham’s allegations that CMI failed to provide verification of the debt by stating, “While the FDCPA does give debtors an opportunity to dispute the validity of a debt, it does not give a ‘debtor’s veto’ that allows debtors to cease all collection efforts by rejecting a debt collector’s verification.” Third, the magistrate held that 15 U.S.C. §1692c’s prohibition on calls at an inconvenient time or place did not apply to calls on Cunningham’s cell phones merely because he deemed them “inconvenient.” Fourth, and perhaps most importantly according to CMI, the magistrate held on the TCPA matter that (a) prior express consent is imputed to a debt collector if it is previously given to a creditor and (b) any revocation of such consent must be done in writing, not verbally as attempted by Cunningham.