Troutman Sanders Obtains Dismissal of Large FDCPA Class Action
John Lynch and Kyle McNew of Troutman Sanders’ Consumer Law Litigation Group obtained a significant win on several important questions under the federal Fair Debt Collection Practices Act (FDCPA) in a West Virginia Class Action.
McCormick v. Wells Fargo Bank d/b/a/ Wells Fargo Home Mortgage, et al., No. 3:08-944, 2009 U.S. Dist. LEXIS 15406, 2009 WL 483961 (S.D.W. Va. Feb. 26, 2009) concerned an FDCPA class action against a law firm engaged by a lender in connection with delinquent mortgage debt. The firm sent the plaintiffs a “dunning letter” containing certain information, as well as the validation notice required by the FDCPA at 15 U.S.C. § 1692g(a). The plaintiffs sued in West Virginia state court on behalf of a class of West Virginia residents who received a similar dunning letter from the law firm, alleging that other language in the letter contradicted and/or overshadowed their rights under the FDCPA. On behalf of the defendant law firm, Troutman Sanders removed the case to federal court under the Class Action Fairness Act and then moved to dismiss the class claim on the ground that, as a matter of law, the disputed language in the dunning letter did not contradict or overshadow the plaintiffs’ FDCPA rights. The plaintiffs soon thereafter moved to certify the class, which Troutman Sanders also opposed.
The language at the center of the dispute was the following statement, which appeared immediately following the section 1692g(a) validation notice: “Please be advised that during the thirty (30) day period, this firm will not delay or cease with its collection of the debt.” In response to the motion to dismiss, the plaintiffs advanced two main arguments. First, they argued that whether language in a dunning letter contradicts/overshadows FDCPA rights is a question of fact, thus open to discovery and not properly resolved on a motion to dismiss. Second, the plaintiffs argued that the disputed language contradicted the duty to cease collection efforts if, within thirty days of receipt of the dunning letter, the debtor disputes or requests verification of the debt. This duty is located at 15 U.S.C. § 1692g(b), and is not one of the rights and obligations that the FDCPA requires be disclosed to the debtor. Both of these issues presented questions that have not been answered by the Fourth Circuit and that are the subject of disagreement among the federal courts.
As to the first question, the Fourth Circuit has never directly addressed whether overshadowing/contradiction claims present a question of law or fact, and there is a nationwide circuit split on this issue. Troutman Sanders urged the Court to join with those courts that view a claim of contradiction/overshadowing as a question of law. The Court examined the cases from other circuits as well as the few Fourth Circuit overshadowing/contradiction cases, and held that the Fourth Circuit would likely view the issue as a question of law. Thus, the Court determined that it was proper to resolve the claim at the motion to dismiss stage, thereby obviating the plaintiffs’ discovery requests in connection with the FDCPA class claim.
As to the second question, very few courts have addressed whether a claim exists for contradicting/overshadowing FDCPA rights and obligations other than those five set forth in the section 1692g(a) validation notice and, again, those that have addressed the issue have come to differing conclusions. The McCormick plaintiffs alleged in their complaint that the disputed language contradicted/overshadowed the validation notice, but in their response to the motion to dismiss argued that the disputed language contradicted the section 1692g(b) duty to cease collection efforts. Troutman Sanders argued that no such claim exists because overshadowing/contradiction claims do not extend to all rights and obligations under the FDCPA and, instead, are limited only to those that must be disclosed under the FDCPA. The Court agreed and held that the only FDCPA rights and obligations subject to overshadowing/contradiction claims are those five set forth in the section 1692g(a) validation notice.
Finally, the Court examined the disputed language to determine whether there was any overshadowing or contradiction of the five section 1692g(a) rights and obligations. After reviewing case law from other jurisdictions, the Court determined that the language in question did not overshadow or contradict any aspect of the validation notice. Therefore, the Court dismissed the plaintiffs’ FDCPA claim with prejudice and denied the plaintiffs’ request for class certification as moot.
Troutman Sanders’ Consumer Law Litigation Group has extensive experience representing clients, including lenders, loan servicers, and debt collectors, on consumer finance issues. This experience includes individual and class action claims of all varieties in numerous state and federal courts, as well as regulatory or executive investigations and enforcement actions, including claims brought under the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Practices Act, state consumer protection and unfair competition acts, state common law, and, recently, various allegations of “predatory lending.” For more information, please contact John Lynch at 757.687.7765 or john.lynch@troutmansanders.com.