In a decision that cries out for legislative action the United States Court of Appeals for the Seventh Circuit has ruled that attorneys who collect consumer debts in the Seventh Circuit may not rely upon decisions of the Seventh Circuit in determining how they should comply with the FDCPA. The troubling en banc decision reversed a panel decision in favor of the defendant law firm.
In Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC, Oliva sued BHLM for violating the venue provision of the FDCPA, 15 U.S.C. § 1692i. At the time BHLM sued Oliva in state court, the venue that it chose had been expressly approved by the Seventh Circuit Court of Appeals in Newsom v. Friedman, a 1996 case which held that the FDCPA’s venue restrictions required a Cook County resident to be sued in the county, but not necessarily within the municipal department district of the county in which the consumer resided. The suit against Oliva complied with the FDCPA as the Newsom decision had interpreted it.
Eighteen years after Newsom, the Seventh Circuit revisited the issue, and in Suesz v. Med-1 Solutions, LLC, the entire Court of Appeals, sitting en banc, concluded that its earlier decision in Newsom was incorrect. BHLM immediately changed its suit-filing practices to conform to the Suesz decision; however, the suit against Oliva had already been filed.
Oliva sued the law firm in federal court, alleging that it had sued him in an improper venue. The district court granted summary judgment in favor of the law firm based on the FDCPA’s bona fide error defense, rejecting the argument that Suesz left the law firm liable under the FDCPA for suing in the wrong venue. On appeal, a panel of the Seventh Circuit affirmed. However, rehearing the matter en banc, the larger court reversed, concluding that: (1) Suesz was controlling; (2) its effect was retroactive; and (3) the law firm could not avail itself of the bona fide error defense because the Supreme Court’s decision in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., precluded application of the FDCPA’s bona fide error defense to mistakes of law in interpreting the FDCPA.
It is difficult to argue with the Court’s conclusion that Suesz had retroactive effect, as the en banc Court specifically addressed that issue in Suesz. It is also clear that the Supreme Court held in Jerman that the bona fide error defense does not apply to mistaken interpretations of the FDCPA. However, at the time BHLM sued Oliva its interpretation of the FDCPA’s venue provision was not a “mistake of law;” rather, it was the law until Suesz was decided. However, the majority’s opinion in Oliva rejects that notion, concluding that its decision in Newsom was not “the law.”
In reaching such a conclusion, the majority ignored a different part of the Jerman decision. The Supreme Court was clear in its warning to lower courts: “As in Heintz, we need not authoritatively interpret the Act’s conduct-regulating provisions to observe that those provisions should not be assumed to compel absurd results when applied to debt collecting attorneys.”
Lawyers are ethically obligated to represent their clients competently and diligently. At the time Olivo was sued, diligence and competence called for following the Newsom decision. The majority decision in Oliva punishes attorneys for carrying out their ethical duties to their clients. That is not merely our opinion. It is the opinion of the four dissenting judges of the Circuit, who wrote:
I’m not sure why the court is bent on punishing debt collectors for following the law. Is the intention to put debt collectors out of business? To allow debtors to refuse to pay their debts with impunity? I can’t think of a rule better suited to those ends than the rule the court announces today.
Today’s decision also gravely undermines the rule of law by discouraging debt collectors from following this court’s controlling precedent. Indeed, the court leaves open the possibility that debt collectors may even be subject to liability for engaging in conduct that controlling precedent not only permits, but mandates. The court notes that Newsom allowed, but did not require, Blatt to file suit where it did. Yet nowhere does the court reassure us that Blatt would not be liable if Newsom had ruled the other way round. Intentional or not, here’s the message today’s ruling sends to debt collectors: Think twice before following the controlling law of this circuit. For tomorrow we may change our mind. And you may wish you hadn’t.
Today, in an almost surreal inversion of law and logic, the court punishes Blatt for doing exactly what the controlling law explicitly authorized Blatt to do at the time it did it. It does so through a fantastical expansion of the (previously) confined judicial doctrine of retroactivity, and in spite of a statutorily mandated bona fide error defense. The court tries to soften the blow by mildly suggesting that Blatt’s punishment may be mitigated because it acted in good faith. Small comfort to Blatt. Blatt is being punished for dutifully adhering to controlling law notwithstanding its legal entitlement to a statutory defense. A mere reduction in punishment does nothing to right that wrong.
The Oliva decision shows the clear need either for the Supreme Court to narrow its limitations on use of the bona fide error defense or for Congress to do so. A rule of law that imposes strict liability upon lawyers for conduct that was legally permitted at the time it occurred is a rule that impairs the role of lawyers as advocates. It is the “absurd result” against which the Supreme Court has warned, and it is time for that court, or Congress, to recognize that its warning has been ignored.