A Supreme Court decision yesterday could make it easier for consumers to sue collectors for sending erroneous collection notices.
The high court, in a 7-2 opinion, ruled that collectors can't protect themselves from such lawsuits simply by stating they made a legal error when sending a notice. The actions of an Ohio law firm
At issue were the actions of an Ohio law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co., that started foreclosure proceedings on behalf of Countrywide Home Loans Inc. The homeowner in the case, Karen Jerman, disputed that the debt existed. Countrywide later confirmed that Jerman had paid the debt, and the law firm withdrew the foreclosure lawsuit. Jerman then sued the law firm, arguing that it violated the Fair Debt Collection Practices Act (FDCPA) by contending in the foreclosure suit that Jerman's alleged debt would be assumed to be valid unless she contested it in writing.
A lower court agreed with Jerman that the firm violated the FDCPA, but ruled that the law firm was shielded from liability because the violation wasn't intentional and was the result of a bona fide legal error.
Justice Sonia Sotomayor and the court disagreed, ruling that Congress hadn't explicitly provided a mistake-of-law defense to collectors. "We have long recognized the common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally," Justice Sotomayor wrote in a 30-page opinion.
Justice Anthony Kennedy, joined by Justice Samuel Alito, dissented, saying the court's ruling could allow abusive litigation by plaintiffs' lawyers. The decision, Justice Kennedy wrote, "aligns the judicial system with those who would use litigation to enrich themselves at the expense of attorneys who strictly follow and adhere to professional and ethical standards."
Justice Sotomayor rejected that criticism. "We do not foresee that our decision today will place unmanageable burdens on lawyers practicing in the debt collection industry," she wrote.
The case now will return to the lower courts to determine whether Carlisle’s mistake violates the FDCPA's protections.
Jerman's counsel, Kevin Russell, a partner at Howe & Russell in Bethesda, Md., said, the "decision treated debt collectors the same way the law treats anyone else who violates a federal statute that provides a private right of action. And it keeps in place an important incentive for debt collectors to abide by the law, when they otherwise have very strong financial incentives to press the envelope of lawful behavior in attempting to collect debts."
If the decision had been in favor of Carlisle McNellie, he added, "It would have been the first time the Supreme Court had ever recognized a mistake-of-law defense to civil liability."
Carlisle McNellie was represented by George Coakley, a partner at Reminger in Cleveland.