February 17, 2019

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Sending Pleading to Consumer Did Not Violate FDCPA Where Attorney Had Not Entered Appearance, Seventh Circuit Rules

The U.S. Court of Appeals for the Seventh Circuit has ruled that because the plaintiff’s attorney had not yet filed a written appearance or pleading with the Illinois state court where the defendant law firm had filed a collection action against her, the law firm did not violate the Fair Debt Collection Practices Act (FDCPA) by mailing notice of a motion for default judgment to the plaintiff instead of only to her attorney.

In Holcomb v. Freedman Anselmo Lindberg, LLC, the plaintiff initially appeared pro se in the defendant's state court lawsuit seeking to collect a credit card debt she owed. The plaintiff subsequently retained an attorney from a legal clinic, who sent a letter to the defendant with notice that the clinic was representing the plaintiff, and also appeared for the plaintiff at two hearings. At both hearings, the court entered a form “trial court order” with a checkbox indicating that the plaintiff’s counsel was “present before the court” but which did not identify the individual attorney or the clinic by name. Later, the law firm moved for default judgment and, because the plaintiff’s attorney had not yet filed a written appearance or pleading with the state court, mailed notice of the motion to both the plaintiff and her attorney.

In her lawsuit filed in an Ohio federal district court, the plaintiff alleged that by mailing notice of the motion to her, the law firm had violated Section 1692c(a)(2) of the FDCPA, which prohibits a debt collector from communicating with a consumer about collection of a debt when it knows the consumer is represented by counsel. An exception to the prohibition permits direct contact with a represented debtor with the “express permission of a court of competent jurisdiction.” Relying on this exception, the law firm moved for summary judgment and argued that it had the court’s express permission to serve the plaintiff because it was required to do so under court rules. Specifically, the law firm pointed to Rule 11 of the Illinois Supreme Court Rules, which provides that “[i]f a party is represented by an attorney of record, service shall be made upon the attorney” and “[o]therwise service shall be made upon the party.” The district court rejected the law firm’s argument as “hyper-technical” and entered summary judgment for the plaintiff.

In reversing the district court and remanding for entry of judgment in the law firm’s favor, the Seventh Circuit rejected the plaintiff’s argument that her attorney had become an “attorney of record” when he appeared for her at two hearings and the state court “issued orders” indicating that her counsel was present. Relying on several Illinois state court decisions, the Seventh Circuit concluded that Rule 11 established “a bright-line rule” under which a lawyer could become an attorney of record only by filing a written appearance or other pleading with the court.

The Seventh Circuit also rejected the plaintiff’s argument that if Rule 11 were understood to require service on a represented party whose attorney had not yet filed a written appearance, it conflicted with FDCPA Section 1692c(a)(2) and was therefore preempted. Calling plaintiff’s preemption argument one “that verges on frivolous,” the Seventh Circuit concluded that because Rule 11 “fits comfortably” within the exception to Section 1692c(a)(2) that allows a debt collector to communicate with a represented debtor if permitted to do so by a court of competent jurisdiction, Rule 11 “operates in harmony with Section 1692c(a).”

Finally, the Seventh Circuit rejected the plaintiff’s argument that when an attorney has not yet filed a written appearance, Rule 11 allows its requirement for service on the party to be satisfied by serving the attorney as the party’s “agent.” According to the Seventh Circuit, the plaintiff’s argument rested on “an unsound reading of the rule,” which clearly required service on “the party himself, not to his (non-record attorney) as agent” when there was no attorney of record.

Copyright © by Ballard Spahr LLP


About this Author

Kaplinksy, partner, New York, finance

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

Culhane, Ballard, Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing, advertising and marketing, application processing, privacy, disclosure, pricing, substantive terms, servicing, collection, portfolio sales, and securitization. His regulatory practice includes preparing clients for banking agency and CFPB compliance examinations and assisting in the defense of attorney general investigations and banking agency and CFPB enforcement actions. His clients have ranged from a multibillion-dollar bank holding company, to one of the nation's largest residential mortgage lenders, to a leading provider of financial institution forms and documentation. Mr. Culhane is a member of the firm's Fair Lending Task Force.

Stefanie Jackman, Ballard Spahr law firm, Partner, financial services institutions lawyer

Stefanie H. Jackman devotes her practice to assisting financial services institutions facing government investigations and enforcement actions, as well as defending them in individual and class action lawsuits. Ms. Jackman regularly handles matters arising under an array of federal and state consumer financial laws, including UDAP/UDAAP statutes, FDCPA, FCRA, TCPA, EFTA, SCRA, and TILA. Ms. Jackman represents clients across the financial services industry, including banks and nonbanks, mortgage banking lenders and servicers, debt collectors and buyers, third-party...