Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA
From ScotusWiki
Argued January 13, 2009.
Docket: 08-1200
Issue: Whether a debt collector’s legal error qualifies for the bona fide error defense under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692.
[Howe & Russell represents the petitioner]
Contents |
[edit] Briefs and Documents
[edit] Decision
REVERSED AND REMANDED in a 7-2 decision with an opinion written by Justice Sotomayor. Justice Breyer filed a concurring opinion, and Justice Scalia filed an opinion concurring in part and concurring in the judgment. Justice Kennedy dissented, joined by Justice Alito. (April 21, 2010)
[edit] Oral Argument
Transcript (January 13, 2010)
[edit] Merits Briefs
- Brief for Petitioner Karen L. Jerman
- Brief for Respondents Carlisle, McNellie, Rini, Kramer & Ulrich LPA
- Reply Brief for Petitioner Karen L. Jerman
[edit] Amicus Briefs
- Brief for the United States of America in Support of Petitioner
- Brief for Public Citizen, et al. in Support of Petitioner
- Brief for New York, et al. in Support of Petitioner
- Brief for ACA International in Support of Respondents
- Brief for American Legal and Financial Network (AFN) in Support of Respondents
- Brief for the California Association of Collectors in Support of Respondents
- Brief for the Commercial Law League of America and DBA International in Support of Respondents
- Brief for the Mississippi Creditors' Attorneys Association in Support of Respondents
- Brief for the National Association of Retail Collection Attorneys in Support of Respondents
- Brief for the Ohio Creditor's Attorneys Association and California Creditor's Bar Association in Support of Respondents
- Brief for USFN - America's Mortgage Banking Attorneys in Support of Respondents
- Brief for DRI - The Voice of the Defense Bar in Support of Respondents
[edit] Certiorari-Stage Documents
[edit] Opinion Recap
Jonathan Eisenman originally wrote the following for SCOTUSblog:
People who unwittingly violate criminal laws frequently run aground on the aphorism that “ignorance of the law is not an excuse.” Earlier this week the Court offered the same warning not to hapless criminals, but to debt collectors who stray from the terms of the Fair Debt Collection Practices Act (“FDCPA”). In Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, the Court held – by a vote of seven to two – that the FDCPA’s bona fide error defense –established in Section 1692k(c) – does not apply to errors of law. The result? If a nationwide debt collector mistakenly calls a debtor after 9 p.m. (a violation of the Act), it nevertheless has a defense if it made the factual mistake of placing the debtor in a time zone where it isn’t yet 9 p.m. On the other hand, a debt collector who commits the legal error of requiring a debtor to dispute a debt in writing, when the FDCPA is silent on whether a writing can be required, has no defense if sued for requiring the writing, no matter the genesis—reasonable or not—of the legal error. So concluded the Court in an opinion by Justice Sotomayor and joined by Chief Justice Roberts, Justice Stevens, Justice Thomas, Justice Ginsburg, and Justice Breyer (who also wrote a separate, concurring opinion). Justice Scalia concurred in part and in the judgment, but—true to form—had his own thoughts on the majority’s reliance on the FDCPA’s legislative history. Justices Kennedy and Alito dissented.
The Court began its substantive discussion by quoting the “‘common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally.’” When Congress means to offer such an excuse, it does so more explicitly than in § 1692k(c). For example, when the scope of a law is meant to exclude ignorant violators, the law is often directed only at “willful” conduct: “Willful” violations are traditionally interpreted to require a defendant to know that its actions violate the law. Consequently, ignorance of the law is an excuse if violating the law requires willfulness. But willfulness is nowhere mentioned in the portion of the FDCPA that makes debt collectors liable to debtors for failing to comply with the Act, § 1692k(a), nor is it mentioned in the section of the Act providing debt collectors a defense.
The majority then looked to the FDCPA’s legislative history, and the provenance of § 1692k(a) in a similar defense provided by the Truth In Lending Act (TILA). Section 130(c) of the TILA provided the affirmative defense that “[a] creditor may not be held liable in any action brought under [TILA] if the creditor shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” In the nine-year period between the passage of that language and the passage of the FDCPA, three courts of appeals considered the scope of the application of the bona fide error defense in TILA; none interpreted it to extend to errors of law. From this, the majority posits that when Congress used the same language in the FDCPA, it intended that language to similarly be read as not extending to errors of law.
The Court acknowledged a point raised by Carlisle, its amici, and the dissent—that narrowing the scope of the bona fide error defense in cases such as this will allow plaintiffs with minimal actual damages to threaten debt collectors with costly class-action litigation. However, the majority parried this argument by noting that if an attorney is liable for an FDCPA violation but the violation is trivial, the damages will be de minimis. Moreover, not only could a court elect to award a prevailing plaintiff only minimal attorney fees in such a case, but it could even award fees to the defendant under § 1692k(a)(3) if the plaintiff’s suit “was brought in bad faith and for the purpose of harassment.” That the FDCPA, without a defense for mistakes of law, could impose a constraint on an attorney’s zealous advocacy is of no moment, the majority found, as many laws constrain attorneys’ conduct. In any event, the Court observed, many states have similar debt collection statutes that provide no defense for bona fide legal errors; consequently, even under Carlisle’s reading of the exception, debt collectors may not escape liability for their conduct under state law.
To take the dissent’s position, the majority concluded, could grant blanket immunity to anyone who seeks a legal opinion on a provision of the FDCPA before violating that statute. Further, the dissent’s position would invite litigation as to a defendant’s subjective intent to violate the statute, because by creating a defense for errors of law, the dissent essentially reads a willfulness requirement into the Act (i.e., the defendant must know that its action violates the law). If debt collectors are unsure as to the meaning of some part of the Act, they can seek a formal opinion on its meaning from the FTC, pursuant to § 1692k(e). Acting within the scope of the FTC’s formal advice immunizes a debt collector from suit for its action. Thus, absent some absurdity arising from applying § 1692k(c) only to mistakes of fact, the majority would not interpret the law contrary to its understanding of the statute’s legislative history or the traditional notion that a mistake of law does not excuse the law’s violation.
Justice Breyer wrote separately to emphasize that his agreement with the Court’s judgment hinged on the actual availability of FTC advisory opinions. Otherwise a party, faced with the uncertain meaning of a provision of the FDCPA, could be sued even if it acts in good faith on an understanding of the law that later proves erroneous. The availability of official advisory opinions solves that problem; were the FTC to prove dilatory in issuing them, Justice Breyer explained, he would view the case differently.
Justice Scalia joined the Court’s opinion “except for its reliance on two legal fictions.” First, Justice Scalia disagreed with the Court’s reliance on the history of the TILA to interpret the FDCPA. He observed that the courts of appeals which had interpreted the TILA bona fide error defense did not discuss whether the defense applied to factual errors, which the FDCPA’s defense assuredly does. Instead, those courts of appeals only discussed clerical errors; if the majority wanted to rely on those opinions, Justice Scalia suggested, it should similarly limit the FDCPA. Second, Justice Scalia upbraided the majority for making “fulsome use of that other legal fiction, legislative history . . . .” Here, Justice Scalia contended, the majority compounded the sin of relying on legislative history by taking a biased view of the FDCPA’s history and discounting those portions that undermined the Court’s conclusion. Nevertheless, because “[t]he Court’s textual analysis stands on its own, without need of (or indeed any assistance from) the two fictions” he discussed, Justice Scalia concurred in the judgment.
Justice Kennedy’s dissent, joined by Justice Alito, seems driven largely by what the two must view as an unfavorable outcome: the ability of a plaintiff like Ms. Jerman to proceed with a costly class action suit against a defendant like Carlisle, without having shown actual damages as a result of Carlisle’s legal error. That danger is heightened by statutes, like the FDCPA, which provide attorney fees to the prevailing plaintiff. Even if the victorious plaintiff gets de minimis damages, the availability of attorney fees for their trouble may cause attorneys to engage in barely meritorious litigation.
The dissent would thus read § 1692k(c) as it is “most naturally” read: to include any bona fide error, whether it be one of law or one of fact. That the statute speaks of an intentional “violation” of the Act implies a legal violation; thus, a bona fide error in the same context includes a legal error, by the dissent’s reasoning. The dissent argues that majority’s reliance on the jurisprudence surrounding the word “willful” (and its absence from the FDCPA) is misplaced, as that jurisprudence surrounds criminal, not civil, infractions.
Further, the dissenters were unconvinced by the majority’s argument that many laws constraint a lawyer’s ability to engage in damn-the-torpedoes-full-steam-ahead litigation. Instead, they wrote, in a case like this—in which the underlying law is unclear on whether a debt must be disputed in writing—a lawyer advising a debt collector is damned either way: A debtor can argue that a collector (or a lawyer acting as a collector) violated the FDCPA if it demands a writing or if it fails to demand a writing. The dissenters were similarly unconvinced by the “availability” (as the dissenters would have it) of the FTC advisory opinion as a method for insulating against the dangers that the dissenters anticipate. They noted that the FTC has issued only four opinions, in response to seven requests, in the entire history of the FDCPA.
Finally, the dissent, like Justice Scalia, was unconvinced by the majority’s logic surrounding the connection between TILA and the FDCPA. Particularly noteworthy to the dissenters was the fact that Congress amended TILA’s bona fide error defense in 1980 to specifically exclude legal error. If Congress understood the original language—the language incorporated in the FDCPA—to already exclude legal error, why go to the trouble of amending it to make explicit that exclusion?
[edit] Oral Argument Recap
Analysis
The following was written by Matt Sundquist for SCOTUSblog.
Oral argument in No. 08-1200, Jerman v. Carlisle, focused narrowly on legal definitions, legislative history, and Congressional intentions.
Kevin Russell represented petitioner Karen Jerman. He began by emphasizing that “Congress rarely makes ignorance of the law a defense to civil liability”; when it has done so, it does so “quite plainly.” No such evidence of Congress’s intent was present in this case, Russell continued. Justice Scalia quickly broke in to ask whether a violation of law was the act that constitutes violating the law, or the fact of violating the law. Russell responded that under the Court’s prior interpretations, the term “violation” “is best understood to refer to the act.”
Justice Breyer, Chief Justice Roberts, and Justice Sotomayor each proposed hypotheticals examples to test Jerman’s arguments. Justice Breyer wondered whether a lawyer and his client would be liable for making an error while litigating, even if the lawyer had sufficiently researched the law. Chief Justice Roberts wondered whether a ruling in Jerman’s favor might discourage debt collectors from seeking legal advice, so as to limit their liability. And Justice Sotomayor questioned whether a district court could rule that an attorney had violated the law but nonetheless not award damages. In answering, Russell consistently returned to his opening argument: if Congress had intended to provide a special remedy for lawyers litigating in debt-collection cases, it would have done so explicitly. Congress, Russell maintained, gave district courts discretionary power over statutory damages, but it has never specifically amended the FDCPA to include legal errors within the scope of the bona fide error defense.
Assistant to the Solicitor General William Jay, arguing on behalf of the United States in support of Jerman, next took the podium. He suggested that the Court should interpret the FDCPA in conjunction with the Truth in Lending Act (TILA), which does not extend to legal errors. “Errors of law,” he explained, “are not what Congress or the agency had in mind.” Jay next responded to skepticism about the utility of relying on the Federal Trade Commission (FTC) for an opinion, a “safe harbor” for debt collection agencies under the FDCPA. Justice Ginsburg wondered whether the short statute of limitations – one year – might discourage debt collectors from seeking an opinion. The Chief Justice suggested that it would be unrealistic to rely on FTC requests. In ten years, seven FTC requests have been made, and four have been answered. Jay defended the FTC “safe harbor,” emphasizing that Congress intended the FDCPA to protect “unsophisticated debtors” while allowing more sophisticated debt collectors to resolve their questions by seeking an FTC opinion.
Representing the respondent, George Coakley faced questions from Justice Sotomayor regarding whether Congress intended to provide an “automatic defense” when a debt collector sought legal advice before violating the FDCPA. Justice Breyer, Justice Ginsburg, and the Chief Justice all soon joined in this line of questioning. A lay debt collector, Coakley countered, could still be held liable even for actions taken at the advice of his attorney if a court subsequently ruled against him – which in Coakley’s view exemplified the unfair nature of the statute.
Turning to the parallels between the TILA and the FDCPA, Justice Scalia asked whether the FDCPA should, like TILA, exclude legal errors from the bona fide error defense. Justice Scalia read the decisions of the courts of appeals interpreting the TILA from 1977 to 1980 as uniformly holding that legal errors were not protected by the bona fide error defense, such that Congress’s 1980 amendment did not change the law, but instead affirmed an accepted judicial interpretation. Justice Ginsburg then asked whether the Court should interpret the FDCPA in parallel with the TILA, because the operative clauses were the same. Coakley responded that because Congress had not amended the FDCPA, though it could have, the statutes should be read separately.
Justice Stevens then began a series of questions regarding the relative importance of providing a defense for legal errors in TILA and FDCPA cases. Coakley responded that the statues were “significantly different,” rendering it virtually impossible to weigh the importance of a legal error defense. Coakley then quoted Justice Breyer to the effect that “reading the bona fide error provision to exclude legal error is worse than unfair.” In response, however, Justice Breyer indicated that “the answer now seems to be floating around the FTC idea” – that is, that attorneys could be shielded from liability for legal errors if they have consulted with the FTC and received an opinion letter, on which they then rely. This avenue, Justice Breyer suggested, would “protect the lawyer against true legal surprise.” In response, and in conclusion, Coakley cautioned against an opinion that would allow a lawyer or debt collector to be personally liable for advising his client in an area in which the law was “unsettled.”
[edit] Pre-Argument Articles
[edit] Argument Preview
The following was originally written by Matt Sundquist for SCOTUSblog.
Background
In 2006, respondent Carlisle, McNellie, Rini, Kramer, & Ulrich filed a complaint seeking to foreclose on the home owned by petitioner Karen L. Jerman. They sent Ms. Jerman a copy of the complaint and a validation notice which indicated that the debt would be assumed valid unless Jerman disputed the claim in writing within thirty days. Jerman retained a lawyer to dispute the claim; after investigating, the respondents realized the debt had been paid and dismissed the complaint.
Jerman then filed a complaint against the respondents for unlawful collection practices. Specifically, she alleged that the requirement that she dispute the debt had to be filed “in writing,” which violated the Fair Debt Collection Practices Act (FDCPA). Jerman sought class certification for all consumers served with a similar notice, actual damages, penalties consisting of the lesser of either $500,000 or one percent of respondents’ net worth, and attorney’s fees.
The respondents filed a motion to dismiss, which the district court denied. The district court found that, by directing borrowers to contest the notice “in writing,” the respondents had violated the FDCPA. However, the district court subsequently granted the respondents’ motion for summary judgment, agreeing with respondents that they were shielded from liability by 15 U.S.C § 1692k(c), which exempts debt collectors from liability when they can show that “the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.”
On appeal, the Sixth Circuit affirmed. It followed the Tenth Circuit’s decision in Johnson v. Riddle, which rejected the holdings of three other circuits – the Second, Eighth, and Ninth – that the FDCPA’s bona fide error defense does not apply to legal errors. Those cases, the Tenth Circuit concluded, relied on the Truth in Lending Act (TILA), which has generally been applied only to clerical errors; by contrast, the Tenth Circuit concluded, the FDCPA was not limited to clerical errors. In its decision, the Sixth Circuit emphasized that Congress has amended the FDCPA on multiple occasions without clarifying that the bona fide error defense does not apply to legal errors. Thus, including legal errors within the protective framework of the FDCPA is in line with Congress’s objective of eliminating abusive practices without putting debt collectors who make bona fide errors at a competitive disadvantage.
Ms. Jerman filed a petition for certiorari, which the Supreme Court granted on June 29, 2009.
In her brief on the merits, Ms. Jerman emphasizes that Congress has rarely, if ever “made mistake of a law a complete defense” against culpability, and that even unintentional legal errors are outside the protection afforded to bona fide errors. She further notes that when Congress has wanted to impose liability only when a defendant knows both what he is doing and that his actions violate the law, it has used the term “willful violation.” By contrast, Congress’s use of the term “intentional” in the FDCPA indicates that it intended it to apply to debt collectors who violated the statute even if they did not understand the legal consequences for doing so. Congress’s intent to exclude legal mistakes from the bona fide error shield can also be seen from its requirement that a defendant seeking to invoke the defense demonstrate that the error occurred despite reasonable procedures to avoid such errors; Ms. Jerman posits that it is “quite difficult” to develop procedures to avoid mistakes of law.
Ms. Jerman next contends that extending the bona fide error defense to legal mistakes will undermine Congress’s intent to discourage abusive collection practices by allowing collection agencies to “take an aggressive view of the law” because they believed there would be no legal recourse for illegal actions. Finally, she notes that although Congress amended TILA to exclude errors of law from the bona fide legal error category, it did so simply to clarify, and it did not intend to change the TILA’s operative language. Because Congress used the same language in the FDCPA, Ms. Jerman suggests, it too should be interpreted to exclude legal errors from the bona fide defense.
In their brief on the merits, the respondents counter that a “plain text analysis” of the FDCPA leads to the conclusion that Section 1692k(c) covers all unintentional, bona fide legal errors, as long as there were procedures in place to avoid errors. Congress did not intend to omit legal errors from the category of bona fide errors; if it had intended to do so, it would have expressly provided such an exclusion. Moreover, Congress in the FDCPA intended to “equitably balance” the concerns of debt collection agencies and borrowers, and allowing legal practitioners to avail themselves of the bona fide error protection fulfills this purpose. The respondents cite Heintz v. Jenkins, a 1995 case which concluded that the FDCPA applied to attorneys engaged in debt collection litigation, as further proof that the scope of FDCPA extends to include attorneys and legal errors.
Responding to Ms. Jerman’s arguments regarding the similarities between the FDCPA and the TILA, the respondents counter that such an argument would lead to indistinguishable treatment for ethical and unethical debt collectors. However, they continue, this is contrary to the FDCPA’s intent, which is to curtail abusive practices, and their error amounts to a legal error. Thus, by punishing a bona fide legal error, the Court would be punishing a non-abusive practice.
