Consumer Finance Litigation

In seeming contradiction to a line of recent federal court cases which had held that a debt collector's filing suit to collect a debt without evidence to prove its claim did not, in itself, amount to a violation of the FDCPA, a federal district judge in the Southern District of Alabama recently denied a debt collector's motion for judgment on the pleadings based on similar allegations. The court found that the plaintiff's allegations went beyond the allegations at issue in the other cases by alleging not only that the debt collector had no evidence at the time it filed suit, but that it had no intention of obtaining evidence to prove its claim at any point during the lawsuit and knew that it would not ever be able to prove its claim due to its lack of evidence. In the case, Samuels v. Midland Funding, LLC, No. CV 12-0490-WS-C, 2013 WL 466386, (S.D. Ala. Feb. 7, 2013), the plaintiff Samuels alleged that Midland filed suit against him, in conformity with its alleged "uniform practice," "without taking reasonable steps to ensure the validity of the debt and with no intention of obtaining evidence to prove its claim" but with the intention to intimidate the debtor into payment or a default judgment. The court articulated Samuels' theory as alleging "that a defendant's filing and prosecution of a collection action, while knowing that it lacks evidence to prove its claim and knowing that it will not obtain or even try to obtain such evidence--such that it knows it cannot ever prove its claim and possesses no intention of doing so--violates the Act." In denying Midland's motion, the court first rejected Midland's argument that the FDCPA does not govern conduct in connection with a state court collection action, relying on Heintz v. Jenkins, 514 U.S. 291 (1995). The court then reviewed the various cases that have addressed the viability of FDCPA claims premised on similar allegations of a debt collector's filing a collection complaint without supporting evidence. The court distinguished several cases out of the Sixth Circuit, including Harvey v. Great Seneca Financial Corp., 453 F.3d 324 (6th Cir. 2006), on the basis that those cases addressed allegations that the debt collector filed suit without having on hand, at the time of filing the collection complaint, the means to prove the complaint. The court stated that Samuels, in contrast, "does not base his claim on the mere lack of supporting evidence at the moment the suit was filed." The court then distinguished Bandy v. Midland Funding, LLC, No. 12-00491-KD-C, 2013 WL 210730 (S.D. Ala. Jan. 18, 2013), an opinion also out of the Southern District of Alabama issued a few weeks previously by a different judge, who had found for the debt collector on essentially identical allegations. The court stated that Bandy involved claims that were analogous to those presented in Harvey, i.e., that the debt collector did not have evidence at the time of filing suit, whereas Samuels alleged that the debt collector had a "fixed intention not to prove its claim" and deliberately elected not to seek evidence to prove its claim. The court noted that there was no indication that Midland had filed an affidavit in support of its state collection complaint, perhaps suggesting that an affidavit might have negated Samuels' allegation that Midland lacked evidence. The court also appeared to place weight on the fact that a debtor's ability to engage in discovery and dispositive motion practice in Alabama state district court, where the collection complaint was filed, is "rather restricted." In addition, the court rejected Midland's argument that state law already provides remedies for allegedly abusive litigation, noting that many state laws are enforced concurrently with the FDCPA. The court made a point to note that its order denying Midland's motion for judgment on the pleadings "does not definitively resolve whether the Act provides the plaintiff a cause of action." Instead, the Court's order meant "only that the defendant has not demonstrated that no such cause of action exists," and the Court indicated that Midland was free to assert new arguments at the summary judgment stage. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.