The FDCPA presents a hot topic for many plaintiff lawyers because it allows for statutory damages, attorney fees, and contains generic, catch-all language such as “misleading” and “deceptive.” An argument can even be made that a true statement still violates the FDCPA if that statement can be interpreted as having two meanings where one meaning would violate the Act. It all comes down to the least sophisticated consumer. Luckily, Courts are not allowing claimants to raise arguments that were not properly asserted. The Second District Court of Appeals (Montgomery County) recently decided the case of Palisades Collection, LLC v. O’Brien (Montgomery 2007), 172 Ohio App.3d 186, 2007-Ohio-3460. In a unanimous decision, the Second District held that a trial court is not permitted to find a violation of the FDCPA based on a theory that was not properly asserted and not tried with the implied consent of the parties.
The O’Brien case involved a claim by Palisades Collection to collect a debt that was assigned by Bank One to Palisades; upon receiving service, defendant O’Brien filed a counterclaim alleging a violation of the FDCPA. The only allegation asserted by O’Brien was that Palisades did not provide a validation letter to a valid address. Six months after the counterclaim was filed, and after Palisades had already obtained a default judgment against Daniel O’Brien, the former husband of the defendant, Palisades dismissed its complaint against Miki O’Brien.
At trial, Palisades made it clear on numerous occasions that the only issue for trial was whether it sent the required letter and whether that letter was sent to a valid address. Conversely, O’Brien raised the argument that Palisades violated the FDCPA by failing to dismiss the complaint against O’Brien early enough in the ligitation. Despite repeated objections by Palisades, the trial court allowed O’Brien to present the new argument. Following trial, the trial court allowed that parties to submit post-trial briefs. Again, Palisades argued that the only issue that needed to be addressed was whether the validation letter had been properly sent to a valid address.
The trial court issued its decision finding Palisades in violation of the FDCPA because it did not dismiss the complaint against O’Brien early enough. The trial court awarded statutory damages and also awarded attorney fees. On appeal, the Second District did not waste time in finding that the trial court was wrong in holding that Palisades violated the FDCPA based on a theory that was neither alleged nor tried by the implied consent of the parties.
Along with holding that liability cannot be found based on a theory that was neither asserted nor tried by implied consent, the Second District addressed several other issues that were raised by Palisades. In a tit-for-tat fashion, the Second District found that Palisades waived several potential defenses by not properly raising them at the trial court level. The defenses that were found to be waived included the following:
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Palisades waived the argument that O’Brien failed to present necessary evidence that Palisades was a debt collector.
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Palisades waived the argument that O’Brien’s theory of liability under § 1692g was abrogated by a recent clarifying amendment.
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Palisades waived the argument that a violation of the FDCPA cannot be predicated based merely on the filing and maintenance of a lawsuit to recover a
debt.
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Palisades waived the argument regarding the constitutionality of the FDCPA under the commerce clause.
While the Second District precluded Palisades from raising the above defenses, the Second District did allow Palisades the benefit of the bona fide error defense. Under 15 U.S.C. § 1692k(c), “[a] debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably calculated to avoid any such error.” The Second District determined that Palisades had properly raised the defense in its answer to the counterclaim, some evidence had been presented on this issue at trial, and Palisades raised it again in its post-trial brief. Hence, the Second District determined that on remand the trial court could consider whether Palisades was entitled to the benefit of this defense.
This case shows the importance of raising all available defenses at every stage of the litigation, and also shows the importance of properly objecting to evidence and testimony that was not pled from the outset. If you have any questions or need guidance in any issue regarding creditor rights liability, please contact a member of our Finance & Creditor Rights Liability Group.
