A line of cases developing within the Third Circuit highlights the need for the Supreme Court to grant the pending petition for a writ of Certiorari in Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC. The crucial question to be put to the Court is whether a debt collector should be subjected to liability under the FDCPA when the appellate precedent on which the collector’s conduct was based is later rejected by the court from which that precedent issued.
As a reminder, Oliva involved an alleged violation of the FDCPA’s venue provision. Blatt had sued Oliva in the venue expressly authorized by the Seventh Circuit’s 1996 decision in Newsom v. Friedman. However, after that collection suit was filed, in Suesz v. Med-1 Solutions, LLC,the Seventh Circuit, sitting en banc, rejected its eighteen-year-old holding in Newsom, concluding that the venue choice approved in Newsom actually violated the FDCPA.
Oliva then sued Blatt for violating the FDCPA by suing him in an improper venue. A panel of the Seventh Circuit held that Blatt’s reliance on the Newsom decision entitled it to invoke the FDCPA’s bona fide error defense. Reviewing the panel’s decision en banc, the Seventh Circuit concluded that the bona fide error defense could not apply to a mistake of law and that reliance on its own, earlier jurisprudence constituted such a mistake; therefore, Blatt was subject to liability for filing suit in the venue that the court of appeals had earlier approved. Blatt has filed a petition for a writ of certiorari that is now pending before the Supreme Court.
While Oliva concerns a decision by the Seventh Circuit to change its own jurisprudence, a looming split of authority between the Third Circuit and three other circuits has the potential to create far more havoc in light of the Oliva decision. The Third Circuit issue arises as a result of that court’s 1991 ruling in Graziano v. Harrison. Graziano involved Section 1692g(a) of the FDCPA, which requires that a validation notice include:
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
In Graziano, the letter at issue told the debtor that unless he disputed the debt “in writing” Harrison would assume the debt was valid. Although Section 1692g(a)(3) does not contain the reference to a writing that is in sub-sections (4) and (5), the court of appeals held that Harrison did not violate the FDCPA by adding a writing requirement to the sub-section (3) notice, holding that “given the entire structure of section 1692g, subsection (a)(3) must be read to require that a dispute, to be effective, must be in writing.”
In the twenty-six years since Graziano, that holding has been rejected by the Ninth Circuit in Camacho v. Bridgeport Fin., Inc., by the Second Circuit in Hooks v. Forman, Holt, Eliades & Ravin, LLC, and by the Fourth Circuit in Clark v. Absolute Collection Serv. Nevertheless, Graziano remains valid case law in the Third Circuit. District court decisions within that circuit, most notably in two recent decisions, Homer v. Law Offices of Frederic I. Weinberg & Assocs., P.C. and Cadillo v. Stoneleigh Recovery Assocs., have treated Graziano as not merely permission to include an “in writing” requirement in the 1692g(a)(3) disclosure, but as a mandate to do so.
The reasoning employed by the courts in the Third Circuit is flawed in multiple ways. Not only did those courts insert words that were omitted from an unambiguous provision of the FDCPA, but they ignored the rule of statutory construction that would require respecting the distinction that Congress made by specifically referencing a writing in subsections (4) and (5) but not in sub-section (3) of Section 1692g(a). Nevertheless, what should most concern debt collectors is what their liabilities will be when the circuit split is ultimately resolved.
If the issue reaches the Third Circuit and they reverse, lawyers who have been relying on Graziano will immediately be subject to suit for having relied on Graziano. Indeed, the essence of the Oliva holding is that such liability is inescapable. If the Third Circuit affirms and the split is ultimately resolved by the Supreme Court, no matter which way they rule debt collectors following one of the two rules on Section 1692g(a)(3) will end up having been wrong. Again, Oliva says that the collectors on the losing side will be liable under the FDCPA, with no recourse to the Act’s bona fide error defense.
Oliva presents an opportunity for the Supreme Court to hold that following existing case law is not a “mistake of law” that falls outside of the bona fide error defense. Although the Court held in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A. that a mistake of law is not a bona fide error, an attorney’s considered decision to follow the law of his or her circuit is simply not a “mistake.” Splits in circuit authority such as that which has developed under Section 1692g(a)(3) underscore the importance of the Oliva appeal in light of the Seventh Circuit’s rejection of reliance on precedent as a defense to the FDCPA.