On January 11, 2023, the Third Circuit held that attempting to collect on a default judgment did not constitute using "'false, deceptive, or misleading' representations in connection with collecting the judgment" if the default judgment was later vacated. Lowe v. FBCS, Inc., No. 21-3307, 2023 WL 154970, at *1 (3rd Cir. Jan. 11, 2023).
Barbara Lowe (Lowe) filed a lawsuit claiming FBCS, Inc. (FBCS) and LVNV Funding, LLC (LVNV) (collectively, Defendants) violated the Fair Debt Collection Practices Act (FDCPA) by calling her to collect on a default judgment later vacated and declared void ab initio. The underlying default judgment was entered in a 2016 debt collection case LVNV filed against Lowe, and was entered at the same time as a conflicting order dismissing the action. In 2018, the New Jersey Superior Court "filed a Statement for Docketing that confirmed default judgment was entered in favor of LVNV and against Lowe on October 14, 2016." FBCS allegedly began calling Lowe to collect on the default judgment in 2019. Lowe claimed she disputed the debt and that FBCS sent Lowe a letter acknowledging her dispute in September of 2019.
Lowe filed this federal lawsuit in March of 2020 claiming the Defendants "attempted to collect a debt they 'knew or should have known . . . was unenforceable' and thus made a false representation in violation of the FDCPA . . . ." Several months later, in August of 2020, Lowe moved the New Jersey Superior Court to vacate the judgment against her and declare it void ab initio. The New Jersey Superior Court granted Lowe's motion in August 2021.
The Defendants and Lowe both moved for summary judgment. The District Court found that, because the default judgment existed when the alleged communications were made, the fact that the default judgment was subsequently declared invalid did not make FBCS's attempts to collect the debt false or misleading. Accordingly, the District Court granted summary judgment in Defendants' favor.
Lowe appealed. Essentially, Lowe argued that the "alleged attempts to collect on the default judgment in 2019 are per se improper because the Superior Court, two years later, vacated the default judgment and declared it void ab initio." Lowe further argued that "[b]ecause 'void ab initio' means '[n]ull from the beginning,' . . . the default judgment order should be treated as if it were never in effect and 'per se not valid' when the debt collection efforts occurred." Thus, according to Lowe, the "'Defendants attempted to collect on a debt that was not authorized at law.'"
The Third Circuit agreed the District Court properly granted summary judgment in Defendants' favor. The Third Circuit explained:
[a]lthough the Superior Court eventually vacated and declared void ab initio the default judgment order after Lowe filed this action, the default judgment order was in effect when Defendants allegedly attempted to collect. If Defendants attempted to collect on the default judgment prior to the Superior Court's vacatur order, such action would not misrepresent the "legal status" of the judgment . . . or constitute a "threat to take any action that cannot legally be taken" . . . because judgment was entered against Lowe at the time of the alleged communication.
In other words, because the judgment was in effect when the Defendants attempted to collect, the Defendants' conduct was not made retroactively unlawful by the subsequent vacatur of the judgment.
PartnerAlan is a partner and practices in the firm’s Financial Services section. Prior to law school, he was employed at a large financial corporation in its commercial lending division. Directly after law school, Alan spent two years as ...
