Consumer Financial Protection Bureau v. Frederick J. Hanna & Associates, P.C.Consumer Financial Protection Bureau v. Frederick J. Hanna & Associates, P.C.
ORDER
Frederick J. Hanna & Assоciates, P.C. (the “Firm”) is a self-proclaimed creditors’ rights law firm. According to the Consumer Financial Protection Bureau (the “Bureau”), from 2009 through 2013; the Firm’s small group of lawyers filed tens of thousands of lawsuits in Georgia each year to recover on allegedly defaulted debt. The Bureau alleges, however, that the Firm’s lawyers have essentially no meaningful involvement in these lawsuits. Moreover, according to the Bureau, in these debt-collection lawsuits, the Firm’s lawyers rely on affidavits, which the Firm and its three partners named in this case knew or should have known were executed by a person without personal knowledge of the facts contained in those affidavits. For these reasons, the Bureau lodges claims under the Fair Debt Collection Practices Act (“FDCPA”),
Defendants move to dismiss the Complaint [Doc. 20]. With the benefit of oral argument and for the reasons that follow, the Court DENIES Defendants’ Motion to Dismiss.
I. Legal Standard
A complaint should be dismissed under Rule 12(b)(6) only where it appears that the facts alleged fail to state a “plausible” claim for relief. Bell Atlantic v. Twombly,
A claim is plausible where the plaintiff alleges factual content that “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
II. Background
According to the allegations in the Complaint, since January 1, 2009, the Firm has collected or attempted to collect debts for several credit-card issuers and “debt buyers.”
The Bureau maintains that, although the Georgia Collection Suits “may have featured the signatures of attorneys,” these lawsuits were in fact “prepared and filed without meaningful attorney involvement” in either the decision to initiate the lawsuit or in the preparation of the pleadings. (Id. ¶¶ 17, 28.) To support this assertion, the Bureau points to a number of facts. For example, during the relevant time, the Firm allegedly employed hundreds of non-attorney staff but only between 8 and 16 attorneys. (Id. ¶ 14.)' The Firm then delegated to the non-áttorneys many important responsibilities including determining whether a case was “suit worthy,” determining the alleged principal, interest, and attorneys’ fees owed, and actually drafting complaints. (Id. ¶ 16.) The Bureau further alleges that the Firm’s attorneys routinely relied on “an automated system and support-staff research” to determine (1) “whether consumers had sought relief in bankruptcy”; (2) “whether their debts were barred by limitations”; and (3) “legally significant facts such as each consumer’s date of initial contract and the date the consumer last made a payment.” (Id.)
Once the Firm delegated these tasks to nón-attorney staff or automated systems, the few attorneys on staff were allegedly left to essentially skim and sign the prepared pleadings. The Firm’s attorneys thus allegedly gave “only cursory review to” the suits the Firm was filing, “checking the pleadings prepared by non-attorney support staff for grammar and spelling errors.” (Id. ¶ 18.) The alleged expectation was that the lawyer would spend “no more than one minute rеviewing and signing the pleadings prepared by support staff.” (Id.) This' makes sense, given the alleged ratio of the volume of lawsuits filed to the number of attorneys at the Firm. In 2009 and 2010, for instance, the Firm allegedly arranged for one attorney to sign about 138,000 lawsuits, averaging about 1,300 collection suits each week. (Id: ¶ 15.) Assuming' this one attorney did nothing but review and sign collection suits for eight hours a day, five days per week, for every week of the year without vacation, the lawyer would literally have less than a minute to approve each suit. (See id.) For these reasons, the Bureau alleges that the “Firm’s attorneys-did not exercise independent professional judgment in determining whether to file the Georgia Collection Suits or what remedies to seek.” (Id. ¶ 18.)
Moreover, according to thé Bureau, the Firm routinely relied on affidavits that its
Apparently, the Firm’s Georgia Collection Suits were largely successful. According to the Bureau, most cases ended in a default judgment or settlement. {Id. ¶ 21.) However, in those few cases where the consumer responded to the lawsuit, the Firm routinely dismissed the cases. {Id. ¶ 22.) The Bureau reports that since 2009, the Firm voluntarily dismisses about 155 cases each week. {Id.) The Bureau does nоt allege the reason for these voluntary dismissals. But the Bureau notes that “consumers who retained attorneys were almost four times more likely to have their cases dismissed.” {Id.) .
The Bureau argues that the Firm’s litigation practices violate the FDCPA and CFPA in two ways. First, the Bureau argues that the filing of the Georgia Collection Suits, signed by attorneys, falsely conveyed to .consumers that an attorney was meaningfully involved in preparing or filing the case. According to the Bureau, this false implication violates (1) Section 807 of the FDCPA, and specifically 807(3), which prohibits “the false representation or implication that ... any communication is from an attorney,”
III. Analysis
Defendants raise several arguments in support of their Motion to Dismiss. First, Defendants assert that the “practice-of-law exclusion” in the CFPA,
A. CFPA Practice-of-law exclusion
Defendants first аrgue that the CFPA’s “practice-of-law” exclusion, found in § 1027(e) and codified at
The Bureau responds to the Defendants’ practice-of-law defense by arguing that an “exception” to this exclusion unambiguously applies in this case, providing a carve-out for the Bureau to bring, its CFPA claims against Defendants here. After a thorough consideration of the parties’ positions, and with the benefit of oral argument, the Court concludes that the practice-of-law . exclusion does not bar the Bureau’s CFPA claims..
“As with any question of statutory interpretation, [the Court] begin[s] by examining the text of the statute to determine whether its meaning is clear.” Lindley v. F.D.I.C.,
The CFPA’s practice-of-law' exclusion begins with a broad limitation on the Bureau’s authority. Under
However, at the outset, - the practice-of-law exclusion also contemplates that some activities engaged in by attorneys “as part of the practice of law” may nonetheless be regulated by the Bureau. See
Paragraph (1) shall not be construed so-as to limit the exercise by the Bureau of any supervisory, enforcement, or other authority regarding the offering or provision of a consumer financial product or service described in any subpara-graph ofsection 5481(5) of this title—
(A) that is not offered or provided as' part of, or incidental to, the practice of law, occurring- exclusively within the scope of the attorney-client relationship; or
(B) that is otherwise offered or provided by the attorney in question with respect to any consumer who is not receiving legal advite or services from the attorney in connection with such financial product or servitt.
Although cumbersome, once unpacked, subparagraph (2)(B) unambiguously includes the conduct at issue here and thus provides a carve-out for the Bureau to bring its CFPA claims. First, to fall within the exceptions to the practice-of-law exclusion, the activity must involve “the offering or provision of a consumer financial product or service.” The CFPA expressly defines a “consume!1 financial product or service” to include “collecting debt related to any consumer financial product or service.”
The statute then provides two, categories of activities that are not excluded from the Bureau’s authority.
Subparagraph (2)(B), on the other hand, encompasses the Firm’s alleged conduct. Under Subparagraph (2)(B), the Bureau may exert its authority over an attorney’s debt collection practice “that is otherwise offered or provided by the attorney in question with respect to any consumer who is not receiving legal advice or services from the attorney in connection with such financial product or service.”
At oral argument, counsel for Defendants proposed, for the first time, that four words within subparagraph (2)(B) dictate a different result. (See June 5, 2015 Oral Arg. Tr. (Oral Arg. Tr. at 6-9, Doc. 38).) These four words, emphasized below, are “otherwise,” “the” and “in question.”
Paragraph (1) shall not be construed so as to limit the exercise by the Bureau of any supervisory, enforcement, or other authority regarding the offering or provision of a consumer financial product or service described in any subparagraph ofsection 5481(5) of this title—
(A) that is not offered or provided as part of, or incidental to, the practice of law, occurring exclusively within the scope of the attorney-client relationship; or
(B) that is otherwise offered or provided by the attorney in question withrespect to any consumer who is not receiving legal advice or services from the attorney in connection with such financial product or service.
Although Defendants’ point was zealously advanced at oral argument, it is not persuasive. While Defendants argue that the omission of the four words identified above totally changes the meaning of the subsection, Defendants do not explain precisely how the meaning is totally changed. They suggest that the conduct in subsection (B) is simply a subcategory of the conduct covered in (A), but they fail to articulate how their proposal makes sense given that the two subsections, are provided in the^ disjunctive as separate exceptions to the practice-of-law exclusion.
It is, on the other' hand, much easier to understand the statute’s use of the terms “otherwise” and “the attorney in question” to reference the introductory paragraph of
(1) In general
Except as provided under paragraph (2), the Bureau may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law under the laws of a State iff which the attorney is licensed to practice law. , • \
(2) Rule of construction \ . ,
Paragraph (1) shall not be construed so as touimit the exercise by the Bureau of any supervisory, enforcement, or other authority regarding the offering or provision of a consumer financial product or service described in any subparagraph of section 5/81(5) of this title— \
(A) that is not offered dr provided as part of, or incidental to, the practice of law, occurring exclusively within the\scope of the attorney-client relationship; or \
(B) that is otherwise offered or provided by the attorney in question with respect to any consumer who is not receiving legal advice or services from the attorney in connection with such financial product or service.
Defendants next argue that the Bureau’s proposed reading of the statute ignores the statutory context of the practice-of-law exclusion. (Reply at 5.) Defendants accurately report that the exclusion is “broad and sweeping,” applying at the outset to all activity “engaged in by an attorney as part of the practice of law.” (id. (citing
Defendants finally argue that if Congress had wanted to “immunize only lawyers- who represent consumers,” which is essentially the outcome of the Bureau’s proposed interpretation of subparagraph (2)(B), Congress could have been clearer. (Reply at 6.) Maybe so. But simply because subparagraph ' (2)(B) is complexly worded, does not mean the Court should disregard its plain meaning.
Because the statute is clear, “we need not resort to legislative history, and we. certainly should-not do so to undermine the plain meaning of the statutory language.” Harris v. Garner,
Defendants direct the Court to Representative John Conyers’s conference report issued shortly before the law’s passage. Representative Conyers was then the Chairman of the House Judiciary Committee, a committee which according to Conyers, was “instrumentally involved in shaping” several provisions including the Practice of Law Exclusion. Conference Report on H.R. 4173, Dodd-Frank Wall Street Reform and Consumer Protection Act, ■ Speech of Hon. John Conyers, J. of Michigan, 156 Cong. Rec. E1347-01, 1348-49 (2010). Conyers recognized that “because of the breadth of the authority being given the Bureau, including the definitions of ‘covered person’ and ‘financial product or service,’ and the complexities of the practice of law, there was a concern about potential overlap.” Id. Conyers made clear that Congress did not intend to allow the Bureau to regulate the practice of law, which should'be left to the state supreme courts and the ethical codes and disciplinary rules governing all aspects of the practice of law. Id.
Accordingly, our .Committee worked to make clear that the new Consumer Financial Protection Bureau established in the bill is not being given authority to regulate the practice of law, which is regulated by the State or States in which the attorney in question is licensed to practice. At the same time, the Committee worked to clarify that this protection for the practice of law is not intended to preclude the new Bureau from regulating other conduct engaged in by individuals who happen to be attorneys or to be acting under their direction, if the conduct is not part of the practice of law or incidental to the practice of law.
Id, Defendants argue that this is evidence of Congress’s intent to preclude the Bureau from bringing the CFPA claims here.
On the other hand, Mr. Conyers appears to recognize — as the statute does — that even some activities that are “considered part of the practice of law by the State supreme court or other governing body that is regulating the practice of law in the State in question” may nonetheless be regulated by the Bureau. Id. Mr. Conyers explains that, in order to be free of the Bureau’s oversight, a lawyer’s actions not only need to be classified- as part of the practice of law, but the lawyer’s conduct also “must be engaged in exclusively within the scope of the attorney-client relationship; and the product or service must not be offered by or under direction of the attorney in question with respect to any consumer who is not receiving legal advice or services from the attorney in connection with it.” Id. These are essentially the exact exceptions identified in the statute, and according to Conyers, they are intendr ed to offer “further protection against abuse.” Id.
Moreover, Mr. Conyers’s statements appear singularly focused on attorneys who represent consumers. Mr. Conyers- prefaces his remarks by focusing within “the myriad activities engaged in as part of the practice of law” on those activities which “assist consumer clients in resolving serious debt problems, including but by no means limited to representing them in bankruptcy proceedings.” Id. Later, Co-nyers 'explains that Congress wished to avoid сausing “material harm to consumer clients of bankruptcy lawyers, consumer lawyers, and real estate lawyers — the very consumers the'Bureau is being created to protect.” Id. And Conyers does not men-tioh'at any point a concern about creditor-attorneys’ practice of law. See id; see also 77 Fed.Reg. 65775-01, 65784 (noting that Conyers’s remarks focused on attorneys who provide legal services to consumers and did not address lawyers who act on behalf of commercial clients).
And finally, the Court must understand Mr. Conyers’s statements, and indeed the practice-of-law exclusion itself, within the context of the larger CFPA and even larger. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), of which, the CFPA was one part. The Dodd-Frank Act endeavored to, among other things, “protect consumers from abusive financial services practices.” Pub.L. 111-203, 124 Stat 1376 (July 21, 2010). To further this purpose, the Dodd-Frank Act established the Consumer Financial Protection Bureau and instructed the Bureau “to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair,, transparent, and competitive.”
Defendants finally urge the Court to reject the Bureau’s interpretation of the exception to the practice-of-law exclusion
The D.C. Court of Appeals agreed. The Court of Appeals recognized that “[ljike the statute, the regulations at no point describe the statutory or regulatory scheme as governing the practice of law as such.” Id. at 456. The court then noted the broad manner in which the term “financial institutions” is defined in the statute, but relying on, among things, Congress’s centuries-long abstention from regulating the practice of law, held that the GLBA did not cover attorneys engaged in the practice of law. Defendants argue that this case stands for the proposition-that, for Congress-to disrupt the traditional balance, it would need to do so more clearly than it has done in the CFPA.
This argument falls flat for two reasons. First, although as a general matter, the practice of law is regulated by the states, the federal government, with the United States Supreme Court’s approval, has historically regulated some aspects of the practice of law. In Heintz v. Jenkins,
Second, unlike the relevant statute and regulations in ABA — which do not even mention the practice of law — the CFPA expressly provides the Bureau a narrow scope of authority over lawyers engaged in activity that is otherwise part of the practice of law. See
Because the exception to the practice-of-law exclusion' unambiguously covers the alleged conduct here,
B. Constitutional Defenses
Defendants next raise twó constitutional defenses to the Bureau’s FDCPA and CFPA claims. First, Defendants argue that this case unconstitutionally infringes on their Fust Amendment right to petition the government for redress. Second, Defendants argue that the Equal Protection Clause of the Fifth Amendment prohibits the Bureau from imposing what amounts to additional burdens on their ability to file breach of contract lawsuits. Neither argument is persuasive.
1. Noerr-Pennington Doctrine and the Petition Clause
Defendants first invoke the Noerr-Pennington doctrine and their First Amendment right to petition the courts. The Noerr-Pennington doctrine, as originally articulated, provided that, because a person has a First Amendment right to petition the government for redress, he is immune from antitrust liability for his efforts to petition. See Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc.,
Nonetheless, several courts have considered and rejected the argument that the Noerr-Pennington doctrine extends even further to FDCPA claims brought against debt-collectors based on litigation activity. See Wise v. Zwicker & Assoc., P.C.,
Defendants direct the Court to Hem-mingsen, in which the Eighth Circuit Court of Appeals affirmed dismissal on summary judgment of an FDCPA claim brought against a creditor’s lawyers, holding that the specific statements at issue— those made in a legal memorandum and client affidaviN-were simply not false or misleading. Hemmingsen v. Messerli & Kramer, P.A.,
It was not false or mislеading to submit a client affidavit and legal memorandum arguing [the defendant’s] legal position that Ms. Hemmingsen was liable for the unpaid account balance, even if [her husband, George] was the only one who used the credit card and made partial payments on the account, when [the creditor’s] records reflected that George submitted the initial application, added •Ms. Hemmingsen. to the account by phone, neither spouse questioned statements identifying it as a joint account, partial payments were made by checks from a joint account, and a Marital Termination Agreement signed by Ms. Hemmingsen listed it as a joint obligation for the couple’s “living expenses.” The fact that a state court judge rejected the contention, unaware that Ms. Hemmingsen had personally made at least one payment on the account, does not prove that those assertions were false or misleading for purposes of§ 1692e . Nor has Ms. Hemmingsen produced any evidence showing that the state court judge — or anyone else — “was misled, deceived, or otherwise duped” by [the defendant’s] pleadings.
Id. at 820 (quoting O’Rourke v. Palisades Acquisition XVI, LLC,
2. Equal Protection Clause
Defendants next argue that the Fifth Amendment’s Equal Protection Clause prohibits the Bureau from imposing upon the Firm and its clients “requirements on the bringing of debt collection lawsuits not applicable to other kinds' of litigants.” (Mot. Dismiss at 36.) Defendants argue' that their clients have a fundamental right to access to the courts, and thus the Court should apply strict scrutiny to the Bureau’s claims which have the effect of burdening this right.
Defendants’ equal protection claim fails right out of the gate because they erroneously suggest that the Court should apply strict scrutiny in a knee-jerk fashion the. moment one’s ability to access the courts is infringed in any manner. On the contrary, “[w]hen a claim involves a right not entitled to special constitutional protection, access,to the courts may be hindered, if there is a rational basis for so doing.” Woods v. Holy Cross Hasp.,
The Supreme Court came out the other way in United States v. Kras, a case in which a debtor challenged bankruptcy court fees. United States v. Kras,
However unrealistic the remedy may be in a particular situation, a debtor, in theory, and oftеn in actuality, may adjust his debts by negotiated agreement with his ci-editors. At times the happy passage of the applicable limitation period, or other acceptable creditor arrangement, will provide the answer. Government’s role with respect to the private commercial relationship is qualitatively and quantitatively different from its role in the establishment, enforcement, and dissolution of marriage.
Id. at 445-46,
The right at issue here is the Firm’s creditor clients’ right to go to court to recover on their loans. This right is no more constitutionally significant than the right of a debtor to go to court to discharge his debt — indeed, it is essentially the same right viewed from the creditor’s perspective. The Firm’s clients “in theory, and often in actuality, may adjust [the] debts by negotiated agreement with [their debtors].” Kras,
C. Meaningful Attorney Involvement 1. FDCPA
The Bureau alleges that the Firm’s practice of filing debt collection lawsuits without any meaningful involvement by an ■ attorney violates
Under the broadly construed terms of
In Clomon, for example, the Second Circuit held that a lawyer violated the
[T]he use of an attorney’s signature on a collection letter implies that the letter is “from” the attorney who signed it; it implies, in other words, that the attorney directly controlled or supervised the process through which the letter was sent. We have also found here that the use of an attorney’s signature implies— at least in the absence of language to the contrary — that the attorney .signing the letter formed an opinion about how to manage the case of the debtor to whom the letter was sent. In a mass mailing, these implications are frequently false: the attorney whose signature is .used might play no role either in sending the letters or in determining who should receive them.
Id. “In short,” the court explained, “the fact that [the lawyer] played virtually no day-to-day role in the debt collection process supports the conclusion that the collection letters were not ‘from’ [the lawyer] in any meaningful sense of that word. Consequently, the facts of this' ease establish a violation of' subsection (3) of
Several circuit courts and many district courts in this circuit have adopted and expanded on this “meaningful involvement” doctrine for determining whether a
• In Avila, the Seventh Circuit explained the relevant concern motivating the meaningful attorney doctrine. “An unsophisticated . consumer, getting a letter from an ‘attorney,’ knows the price of poker has just gone up,” the court reasoned. Avila,
To go further, several district courts have applied this meaningful attorney involvement doctrine to an FDCPA claim such as the one presented here premised on the filing of a lawsuit without meaningful attorney involvement. See, e.g., Bock v. Pressler & Pressler, LLP,
Defendants do not argue that a complaint filed in court 'is somehow not a communication under
Instead of arguing that a complaint is not a communication, Defendants make four interrelated arguments, none of which adequately support their Motion to Dismiss. First, Defendants argue that the court-made “meaningful attorney involvement” doctrine — which is not codified in the FDCPA — should not be extended to pleadings because a different set of concerns are involved when dealing with dunning letters. According to Defendants, “[c]purts have uniformly rationalized ‘a meaningful involvement’ requirement for attorney collection letters on the basis that “[a] letter from a lawyer implies that the lawyer - has become involved in the. debt collection process, and the fear of a lawsuit is likely to intimidate most consumers.””
The Court rejects Defendants’ argument for two' reasons. First, Defendants mis-characterize the reasoning of the cases cited above when they suggest that' the sole driving force behind the meaningful attorney involvement doctrine is the imminence of a lawsuit. This is too narrow a view of the rationale behind the meaningful attorney involvement doctrine. The main concern in these cases is more generally that a communication signed by a lawyer but without meaningful attorney involvement falsely leads the consumer to believe that a lawyer has reviewed the debtor’s account and assessed the validity of the creditor’s position. See Clomon,
' The same is equally if not more true for consumers who are served with an actual, debt collection lawsuit. The least sophisticated consumer is likely to believe when served with a debt collection complaint that a lawyer has reviewed his account and determined that the creditor has a valid claim. (Arguably, even a more sophisticated consumer would come to this same conclusion, unless of course the consumer is aware that the law firm who filed the complaint runs a litigation-mill without any meaningful attorney involvement.) In Avila, the Seventh Circuit held that “if a debt collector (attorney or otherwise) wants to take advantage of the special connotation of the word ‘attorney’ in the minds of delinquent consumer debtors to better effect collection of the debt, the debt collector should at least ensure that an attorney has become professionally involved in the debtor’s file.” Avila,
Likewise, if an attorney wants to take advantage of the fear that serving a complaint would inspire in a debtor, the lawyer should at the very least ensure that he has become professionally involved in the decision to file the lawsuit. So while it is true thát the stakes have already been raised when a debtor has been served with a debt-collection complaint, if that complaint has had no meaningful attorney oversight, then there is a real possibility that it is legally or factually untenable. In other words, a reasonable inference to draw from the Bureau’s allegations is that a consumer faced with a debt collection lawsuit filed by the Firm would view the complaint as a legally valid statement of the consumer’s obligation because the complaint was purportedly prepared by counsel. It is thus plausible that such consumers would therefore effectively be coerced into paying a debt that they may or may not actually owe or doing the same through default. (Cоmpl. ¶¶ 21-22.) As such, the Bureau plausibly alleges a violation of the FDCPA.
Second,
Third, Defendants argue that applying a “non-existent” standard would render the FDCPA void for vagueness. If Defendants’ argument were correct, then any application of the least sophisticated consumer standard to novel factual circumstances would likewise render the
Finally, Defendants reassert that the “obvious reason” for rejecting the Bureau’s
In sum, a reasonable inference one can draw from the Bureau’s allegations is that the Firm files lawsuits on a massive scale, not based on any legal determination that each lawsuit is warranted, but instead as an extension or replacement of dunning letters, to scare debtors into' paying up. The least sophisticated consumer could view a lawsuit, signed by an attorney, as an indication that a lawyer had in fact scrutinized the case and determined that it had legal merit. In this way, the Firm’s alleged litigation-mill may plausibly violate
2. CFPA
Defendants next argue that even if true, the Complaint does not state a claim under the CFPA for allegedly deceptive acts or practiсes based on the allegation that the Firm’s attorneys sign complaints filed in court even though they were not “meaningfully involved.” ’
The CFPA prohibits “any unfair, deceptive, or abusive act or practice.”
Defendants assert that “no consumer reacting reasonably to a complaint filed by an FJ Hanna attorney could be misled with respect to whether his or her purported creditor had initiated a lawsuit to collect a debt.” (Mot. Dismiss at 25, Doc. 20.) Defendants then argue that even if these debt-collection complaints misrepresented the level of attorney involvement, this misrepresentation “would have been immaterial because whether or not an attorney was meaningfully involved in preparing the complaint, the reality remained that the 'consumer had become the subject of a civil lawsuit filed by FJ- Hanna on behalf of its client.” (Id.)
It is true that, according to the Complaint, the Firm’s litigation practice did not mislead consumers regarding whether they are defendants in a lawsuit; once the case was filed, the consumers were obviously defendants in a lawsuit. But this is not the basis of the Bureau’s claim. Instead,-as discussed above, the Complaint plausibly alleges that the Firm’s litigation practice misled consumers acting reasonably under 'the circumstances that a lawyer has reviewed the consumer’s file and determined that it validly merits litigation. The Court therefore rejects Dеfendants’ Motion to Dismiss the CFPA'claim premised on the alleged massive filing of debt-collection complaints without meaningful attorney involvement.
D. Use of Affidavits
The Bureau’s second basis for its FDCPA and CFPA claims is premised on the Firm’s alleged use of affidavits when the Firm knew or should have known that the affiant had no personal knowledge of some of the material facts in the affidavit (collectively, the “Affidavit Claims”). According to the Bureau, for those affidavits received from its debt-buyer clients .(as opposed to its creditor clients), the Firm allegedly “did not determine whether any underlying documentation for the debt was available.” (Compl. ¶ 24.) The Firm also allegedly failed to “review the contracts governing the sale of accounts to determine whether those contracts disclaimed any warranties regarding the accuracy or validity of (he debts.” (Id. ¶24.) The Bureau alleges that this sloppy affidavit practice violated the following sections of the FDCPA and CFPA:
• FDCPA,15 U.S.C. § 1692e(2)(A) (prohibiting the “false representation of ... the character, amount, or legal status of any debt”);
• FDCPA,15 U.S.C. § 1692e(10) (prohibiting “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer”);
• FDCPA,15 U.S.C. § 1692f (“A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”);
• CFPA, 12 U.S.C.' § 5536(a)(1)(A) (“It shall be unlawful for ... any covered person or service provider ... to offer or provide to a consumer any financial product or service not in conformity with Federal consumer financial • law, or otherwise commit any act or omission in violation of a Federal consumer financial law[.]”);
• CFPA,12 U.S.C. § 5536(a)(1)(B) (prohibiting “any unfair, deceptive, or abusive act or practice”).16
(See Compl. Counts ill & IV (the “Affidavit Claims”).)
Defendants move to dismiss the Affidavit Claims, asserting essentially two arguments. First, Defendants argue that Rule 9’s heightened pleading standard should apply to these claims and that the Bureau has failed to meet that level of specificity. Second, Defendant argues that these claims fail even under the more lax notice pleading standard of
1. Rule 9(b)
Defendants first contend that Rule 9(b) should apply to the Bureau’s Affidavit Claims. Defendants readily admit the Eleventh Circuit has not addressed whether Rule 9(b) applies to FDCPA allegations. (Mot. Dismiss at 26.) In fact, apparently no circuit court has decided whether and to. what extent Rule 9(b) applies to claims under
However, in 2005, the Tenth Circuit concluded that Rule 9(b) does not apply to claims brought under § 5(a) of the FTC Act — claims ’ which are analyzed in the same manner as those brought under
District courts are split as to whether Rule 9(b) should apply to claims alleging deceptive means to collect debts, but several apply reasoning similar to the Tenth Circuit’s in Freecom. Compare Neild v. Wolpoff & Abramson, LLP,
The few cases applying the heightened pleading standard of Rule 9(b) to FDCPA claims are unpersuasive. The Bureau’s consumer protection claims here are not subject to Rule 9(b). First, Rule 9(b) expressly applies only to claims alleging “fraud or mistake,” and as the Tenth Circuit and several district courts have reasoned, consumer protection claims are not claims of fraud, even if there is a deceptive dimension to them. Cf. Miller Pipeline Corp. v. British Gas PLC,
Second, the United States Supreme Court has consistently. cautioned against extending this heightened pleading standard beyond claims for fraud or mistake. For example, in Leatherman v. Tarrant Cnty. Narcotics Intelligence & Coordination Unit,
Finally, applying a heightened pleading standard to consumer protection claims is not only inconsistent with some of the policy reasons for applying Rule 9(b) in the first place, but is also inconsistent with the remedial nature of consumer protection statutes. Six main reasons justify the heightened pleading standard applicable to fraud claims. Wright & Miller, Federal Practice & Procedure, § 1296: Pleading the Circumstances of Fraud, or Mistake— History and Purpose. These include:
(1) “safeguarding] potential- defendants from lightly made claims charging the commission of acts that involve some degree of moral turpitude”-;
(2) minimizing the potential for unfounded “nuisance” claims;
(3) limiting fraud claims to those in which .the “alleged injustice is severe enough to warrant the risks and difficulties inherent in a re-examination of old and settled matters,” which is-often the goal of fraud claims;
(4) deterring suits designed solely for discovery purposes;
(5) enabling defendants to fully understand the allegation so they can craft an adequate response; -and ' .
(6)minimizing fraud suits generally, which are “disfavored.”
Id.
Many of these concerns do not apply at all, or their application is minimized in the context of a consumer protection claim. For example, reason number 3 — limiting the reopening of old and settled matters to only where justice so' requires — is not a concern in an FDCPA or CFPA case like this one which seeks monetary penalties and injunctive relief but does not seek to reopen any matter. Consumer protection claims are not disfavored so reason number 6 is inapplicable. Reasons numbers 2 and 4 (minimizing nuisance suits and deterring suits designed solely for discovery purposes) are equally applicable to any lawsuit, but Congress has never expressed a concern about consumers harassing debt collectors. The relevant goal of these consumer protection laws is exactly the opposite: to reduce debt collectors’ harassment of consumers.
Moreover, imposing a heightened pleading standard to claims under the FDCPA and CFPA would be inconsistent with the general remedial nature of these statutes. (See supra note 12.) A consumer’s ability to enforce his lights under the FDCPA or CFPA would no doubt be hindered if courts impose a heightened pleading standard. See Inge v. Rock Fin. Corp.,
2.
Relying on Ness v. Gurstel Chargo, P.A., 933, F.Supp.2d 1156 (D.Minn. 2013), Defendants argue that the Bureau’s Affidavit Claims fail to satisfy
■ In Ness, the district court dismissed FDCPA claims under §§ 1692d, 1692e, and 1692f premised on .the assertion that the defendant debt-collectors “falsely attested to personal knowledge of the debts in affidavits submitted with the motions for default judgment.”-
The Bureau’s Complaint here is more similar to the’complaint in Sykes than the threadbare complaint in Ness. Here, the Bureau alleges that the Firm’s debt-buyer clients were “often” unable to support their litigation claims with “basic - documents, such as original contracts underlying the alleged debts or the chain of title evidencing that the debt buyer had standing to sue the consumer.” (Compl, ¶ 20.) Given the huge volume of lawsuits filed by the Firm, and the Firm’s alleged lack of verification for the huge volume of affidavits it served along with its pleadings, it is plausible that some of these affidavits falsely сonveyed that the affiants had personal knowledge of the debt. Likewise, the Bureau’s allegation that the Firm filed thousands of lawsuits without bothering to check whether the affidavits were based on the affiant’s actual knowledge plausibly suggests that the Firm should have known that some of the affidavits were not in fact based on the affiant’s personal knowledge.
Moreover, the Court recognizes that the Bureau’s Affidavit Claims focus on Defendant’s collection activities in the context of the debt-buyer market in which these debt claims arise. As ‘ the Sixth Circuit has recognized, “Debt buyers now pay billions of dollars to purchase' tens of billions of dollars of consumer debt each year, most of it charged-off credit card debt.... Debt buyers usually purchase bad debts in bulk portfolios, often in the form of a spreadsheet, and rarely obtain the underlying documents relating to the debt.” Stratton v. Portfolio Recovery Assocs., LLC,
Defendants’
At this early stage of litigation, the Bureau’s Affidavit Claims sufficiently allege FDCPA and CFPA violations.
E. Statute of Limitations
The final issue raised by the parties is whether the one-year statute of limitations applicable generally to FDCPA claims,
According to Defendants, the inquiry begins and ends with
For its part, the Bureau looks* not only at subsection (d), but also at the rest of § -1692k and the following subsection, § 1692Z, to infer that, although the statute announces a one-year statute of limitations for “an action to- enforce any liability under this subchapter,” the statute actually applies only to actions to enforce liability to individual consumers. The Court is of course required to consider the entire statute, and hot individual terms in isolation. See Harrison v. Benchmark Elec. Huntsville, Inc.,
According to the Bureau, that
The Bureau finally argues that because
To bring this last point home, the Bureau relies on two actions brought by the Securities and Exchange Commission (“SEC”), in which the Eleventh Circuit held that the SEC was not subject to the limitations period applicable to private actions. SEC v. Diversified Corporate Consulting Grp.,
When the SÉC sues'to enforce the securities laws, it is vindicating public rights and furthering public ‘ interests, and therefore is acting in the United States’ssovereign capacity. This is so even though the SEC seeks disgorgement-as a remedy of the violation and even thoughj. the disgorged proceeds may be used to compensate the defendant’s victims.
Id. Because the relevant statute,
The Court agrees that if Congress were silеnt as to the limitations period applicable to the Bureau’s FDCPA claim, invoking this' canon of construction would make sense. Here, however, the Court is hard-pressed to proclaim that Congress was silent as to the limitations period applicable to claims brought by the Bureau. The CFPA’s own limitations provisions, and the provisions, relevant to the Bureau’s predecessor agency the FTC, suggest that Congress envisioned some statute of limitations applying when the Bureau brings an action.
Rejecting the Bureau’s position, however, does not resolve this issue because it is at least arguable that the appropriate limitations period for the Bureau’s FDCPA claim is in fact provided in the CFPA itself,
(g) Time for bringing action
(1) In general
Except as otherwise permitted by law or equity, no action may be brought under this title more than 3 years after the date of discovery of the violation to which an action relates.
(1) Limitations under other Federal laws
(A) In general
An action arising under this title does not include claims arising solely under enumerated consumer laws.
(B) Bureau authority
In any action arising solely under ..an enumerated consumer law, the Bureau may commence, defend, or intervene in the action in accordance with the requirements of that provision of law, as applicable.
(C) Transferred authority
In any action arising solely under laws for which authorities were transferred under subtitles F and H, the Bureau may commence, defend, or intervene in the action in accordance with the requirements of that provision of law, as applicable.
One way to read this section is to hold that, absent some- clear directive to the contrary, the Bureau’s “action,” which was expressly brought under title 12, (see Compl.), should be subject to a three-year
Unfortunately, subparagraph (g)(2)(A) does little to clarify. According to subpar-agraph (g)(2)(A), “[a]n action arising under this title does not include claims arising solely under • enumerated consumer laws.”
Finally, a.survey of case law across the country has revealed , little that is helpful to resolving the.statute of limitations question here. The only case somewhat on point. presented to the Court is one from this district, but if anything, it seems to favor the application of a three-year statute of limitations. In FTC v. CompuCredit, a Magistrate Judge in this district rejected the application of the one-year statute of limitations in an action brought by the Federal - Trade Commission (“FTC”), for essentially the reasons advocated by the Bureau. Fed. Trade Comm’n v. CompuCredit, No. 1:08-CV-1976-BBM-RGV,
. Thus, even if the Bureau were correct that
As the Court rejects the “no limitations period” argument, the Court is left at this point with two possibilities: limiting the Defendants’ potential liability to conduct occurring within one year of the filing of this lawsuit, or reaching back a full three years for liability purposes. Either way, however, no claim in this action will be completely foreclosed on statute of limitations grounds. And 'as a practical matter, it makes little difference at this stage of litigation whether a one-year or three-year statute of limitations applies.'" The Bureau’s CFPA claims under
IV. Conclusion
For the foregoing reasons, the Court DENIES Defendants’ Motion to Dismiss [Doc. 20].
. The Bureau also contends that the types of misconduct alleged above violate 12 U.S.C. .
. Defendants challenge the Bureau’s assertion that § 5517(e)(2)(B) “preserves” the-Bureau’s authority to prosecute Defendants. "Subsection 5517(e)(2) does not provide preservations of authority,” Defendants contend, “which are provided in § 5517(e)(3).” (Reply at 5.) ''Rather,” Defendants continue,. "Congress ex-, plicitly included § 5517(e)(2)(A) and (B) as ‘rules of construction’ to help delineate the
. The Court also notes that Congress's unusual manner of creating a broad exclusion to the Bureau’s enforcement authority, and then carving out exceptions to. the exclusion using double, or in fact, triple negatives, appears to
. In McColiough, the Ninth Circuit rejected out of hand a law firm’s contention that the' FDCPA should not be read to cover discovery procedures. McCollough,
. See Romer v. Evans,
. To be clear, the potential fundamental right Defendants invoke here, the right to' access the courts, belongs to the Firm’s clients, not the Firm itself. The only right of its own that the Firm seeks to protect is the right to represent these clients — i.e., the right to practice law. But as the Bureau correctly notes, the right to practice law is unquestionably not a fundamental right. See Schwarz v. Kogan,
. In Bonner v. City of Prichard,
. Moreover, Defendants offer no facts to suggest that the Bureau's action here would impede, in any meaningful way, their creditor-clients from bringing any nonfrivolous legal claims.
. See LeBlanc v. Unifund CCR Partners,
. In addition, under Georgia law, the signing of a pleading certifies only that the attorney "has read the pleading and that it’s not interposed for delay.”
. See also Brown v. Card Serv. Ctr.,
. Defendants argue that the Court should subject the FDCPA claims here to stricter vagueness test because the law." 'threatens to inhibit the exercise of constitutionally protected rights’ such as the First Amendment right to petition courts for redress,” (Mot. Dismiss at 20 (quoting Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc.,
. Defendants raise this same vagueness challenge regarding the alleged CFPA violation, and for the same reasons above, the Court rejects this challenge.
. The Bureau also notes that a violation of the FDCPA constitutes a violation of the CFPA under
. The Bureau also invokes 12. U.S.C. § 5531(a) which simply authorizes the Bureau to "take any action authorized under part E to prevent a covered person or service provider from committing or engaging in an unfair, deceptive, or abusive act or practice under Federal law in connection with any transaction with a сonsumer for a consumer financial product or service, or the offering of a consumer financial product or service."
. To the extent Rule 9(b) might apply at all, it would only apply to claims under the FDCPA and CFPA that have' a fraud dimension to them. See, e.g., Cutler ex rel. Jay v. Sallie Mae, Inc., No. EDCV-13-2142-MWF (DTBx),
. The only change in Rule 9(b) since this Supreme Court ruling was purely "stylistic” and not meant to change the substance of the Rule. See
. The Court recognizes it may turn out after discovery that, based on all the circumstances, the Firm had no reason to doubt the veracity of the affidavits, and that the affidavits in fact truthfully reflected the amount owed and other relevant facts.
. Defendants also move to dismiss the Bureau's CFPA claims based on conduct that pre-dates July 21, 2011, the "designated ■transfer date” on which certain authorities from other agencies were transferred to the Bureau and on which
. The Bureau also asserts that a 1977 Senate Banking Committee report supports its reading of the statute. The Court disagrees. It is true that, like the final version of the FDCPA, the report the Bureau cites separately addresses private enforcement actions and administrative enforcement actions. See S. Rep. No 382, 95th Cong, 1st Sess. at 5 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1699-1700. But the Report in its separate discussions of the two types of actions makes no mention of the statute of- limitations. See id. When the Report later provides a "section-by-section summary,” the Report, like the statute itself, in no way indicates that the statute of limitations is limited to private actions. See id. at 1702 ("Jurisdiction for actions is conferred on U.S. district and state courts; there is a 1 year statute of limitations.”). In fact, one reading of the Report suggests that the drafters of the legislation did not make the semantic distinction the Bureau advocates for between thé terms "civil liability” and "enforcing compliance.” As the Bureau observes, the Senate Banking .Committee "view[ed] this legislation as primarily self-enforcing; consumers who have been subjected to collection abuses will be enforcing compliance." Id. at 1699. But according to the Bureau, the administrative agencies "enforce compliance,” and the consumers commence actions to enforce liability. (Resp. at 35-36.) In sum, this Senate Report is unhelpful to the Court’s analysis here.
. CompuCredit settled before the District Judge had occasion to consider Judge Vineyard’s Report and Recommendation.
. Judge Vineyard relied without elaboration on Weiss v. Regal Collections,
.