Source: http://californiafinance.mwbllp.com/2018/09/fyi-9th-cir-holds-fdcpa-plaintiff-must.html
Timestamp: 2019-03-20 05:34:07
Document Index: 480295704

Matched Legal Cases: ['§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692', '§ 1692']

California Finance Litigation Blog: FYI: 9th Cir Holds FDCPA Plaintiff Must Prove Defendant's Net Worth
FYI: 9th Cir Holds FDCPA Plaintiff Must Prove Defendant's Net Worth
The U.S. Court of Appeals for the Ninth Circuit recently held that the plaintiff carries the burden of proving the debt collector's net worth to obtain statutory damages in a class action under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA").
A consumer financed the purchase of a computer through an installment loan. When the consumer defaulted, the creditor charged off the account and sold the debt to a third party. The third party referred the account to a law firm which sent collection letters that failed to identify the correct original creditor. The law firm filed a complaint but ultimately dismissed the lawsuit.
The consumer filed suit alleging that the law firm's letters and complaint violated section 1692e of the FDCPA by using "false, deceptive, or misleading representation[s] or means in connection with the collection of any debt." The trial court certified a class of consumer plaintiffs.
The trial court then granted the debt collector's motion for summary judgment, but the Ninth Circuit reversed and remanded. The Ninth Circuit found that the misidentifications were material under the FDCPA as a matter of law.
On remand, the trial court dismissed the consumer's letter-based claims for lack of standing. The consumer's complaint-based claim went to trial. The focus at trial was evidence supporting the class award of statutory damages and the law firm's bona fide error defense.
The trial court determined that the plaintiff carried the burden at trial of introducing evidence regarding the law firm's net worth. The law firm had produced hundreds of pages of bank statements, copies of checks, tax returns, and deposition testimony regarding its financial condition. Despite access to this evidence, the consumer did not provide an expert to interpret the financial information for the jury.
Thus, the trial court found that the consumer lacked competent evidence to satisfy his burden of production at trial, and dismissed his complaint-based class claim.
As you may recall, the FDCPA provides a two-step determination for awarding statutory damages to class members, excluding named plaintiffs. 15 U.S.C. § 1692k(a)-(b).
First, the fact finder determines the damages ceiling. Specifically, a class may recover statutory damages "not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector[.]" 15 U.S.C. § 1692k(a)(2)(B).
Second, the exact amount of damages within that range is determined based on various non-exhaustive factors, including "the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector's noncompliance was intentional." 15 U.S.C. § 1692k(b)(2).
The FDCPA, however, is silent as to which party carries the burden of producing evidence at trial of the defendant's net worth.
The parties agreed that one percent of the law firm's net worth was less than $500,000, and therefore the limit on statutory damages available to the class must be one percent of the law firm's net worth. The consumer argued that the law firm carried the burden of introducing evidence of its own net worth.
The Ninth Circuit began its analysis by observing "one of the most basic positions of law -- that the plaintiff bears the burden of proving his case, including the amount of damages" Faria v. M/V Louise V, 945 F.2d 1142, 1143 (9th Cir. 1991).
To determine whether the FDCPA provides an exception to the default rule, the Ninth Circuit noted that section 1692k limits statutory damages for the class to "the lesser of" of $500,000 or one percent of the defendant's net worth. Congress' use of "the lesser of" signals that the FDCPA requires the factfinder to determine the defendant's net worth in calculating statutory damages.
Thus, the Ninth Circuit held that evidence of the defendant's net worth was a prerequisite to establishing statutory damages in a class action.
Next, the consumer argued that the fact finder can skip the cap analysis in subsection (a), and proceed directly to the list of factors in subsection (b), on which he conceded that he carried the burden of proof.
The consumer also argued that the law firm must bear the burden of proof because it had superior access to the relevant evidence, and placing the burden on the plaintiff would increase litigation costs and discourage class actions under the FDCPA.
The Ninth Circuit rejected these arguments because Congress did not structure section 1692k to allow the factfinder to award any amount, and then allow the debt collector to limit damages by introducing evidence of its net worth as an affirmative defense. The Ninth Circuit supported its reasoning with the FDCPA's two exceptions to liability of debt collectors.
The first exception is the bona fide error defense for defendants that can "show by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c).
The second exception is the safe harbor from liability where the defendant can show it complied with an advisory opinion by the Consumer Financial Protection Bureau. 15 U.S.C. § 1692k(e).
The Court held that sections 1692k(c) and 1692k(e) indicate that "Congress knew how to shift the burden of proof to the defendant, but chose not to do so regarding evidence of net worth." Therefore, the Court continued, the FDCPA's "text and structure" makes evidence of net worth essential to a class statutory damages award; it is not an affirmative defense."
Thus, the Ninth Circuit held that "[i]f a plaintiff seeks class statutory damages, it carries the burden of introducing such evidence at trial."
Accordingly, the Ninth Circuit affirmed the trial court's dismissal of the consumer's class action.
Posted by Eric Tsai at 1:30 PM
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