Opinion ID: 2680617
Heading Depth: 2
Heading Rank: 2

Heading: PHS’s Cross-Appeal

Text: owed” as well as inform the consumer that if he or she “notifies the debt collector in writing . . . that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt” and mail a copy to the consumer. 15 U.S.C. § 1692g(a). The Letter included this information. The statute further provides that if the consumer disputes the debt, then “the debt collector shall cease collection of the debt, or any disputed portion thereof,” until the debt collector verifies the debt and mails the verification to the consumer. 15 U.S.C. § 1692g(b). 4 Section 1692e(2) prohibits “[t]he false representation of” “the character, amount, or legal status of any debt” or “any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.” 15 U.S.C. § 1692e(2). Section 1692e(10) prohibits “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.” 15 U.S.C. § 1692e(10). 5 The District Court also dismissed McLaughlin’s claim under 15 U.S.C. § 1692f(1). Section 1692f(1) prohibits “[t]he collection of any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1). McLaughlin does not challenge that ruling on appeal. 4 One claim survived dismissal, namely McLaughlin’s claim that PHS violated the FDCPA by creating the false impression that attorneys were involved in the debt collection activity in violation of § 1692e(3).6 Discovery proceeded on this claim. Before the motion had been decided, McLaughlin had served a document demand upon PHS seeking “‘[a]ll invoices for professional services rendered by [PHS] in relation to the loan of Timothy McLaughlin.’” App. 186 (alterations in original). PHS objected, claiming that the information was not likely to lead to the discovery of admissible evidence. In response, McLaughlin filed a motion to strike this objection and a motion to compel, arguing that the invoices were “clearly relevant” to his claim “that Defendants sought attorney’s fees and costs from him that had not been incurred and were not authorized by the underlying loan documents.” Pl.’s Mot. to Strike Objections & Compel Disc. at 10, McLaughlin v. Phelan Hallinan & Schmieg, LLP, No. 10-1406 (W.D. Pa. Nov. 9, 2011), ECF. No. 66. The District Court orally granted McLaughlin’s motion. Despite this order, PHS did not produce the invoices during discovery. Instead, they withheld them until they attached them to their summary judgment reply brief. The District Court found that these invoices “contain[ed] . . . material facts” showing that PHS had in fact misstated the attorney’s fees and costs of suit. App. 161. Specifically, the District Court noted that the invoices showed that PHS had incurred only $440 in total costs and $625 in fees, and not the $550 and $650, respectively, set forth in the Letter. As a result, the District Court invited McLaughlin to file a motion seeking relief from its orders dismissing his § 1692e(2) claim. McLaughlin thereafter moved for reconsideration of the District Court’s dismissal order, but the motion was denied. The District Court did not say that the Letter was accurate but rather held that it contained “reasonable estimates” of the itemized costs, and therefore did not violate the FDCPA. App. 182-84. 6 Section 1692e(3) prohibits “[t]he false representation or implication that any individual is an attorney or that any communication is from an attorney.” 15 U.S.C. § 1692e(3). 5 The District Court, however, did find that PHS’s failure to produce the invoices during discovery was sanctionable under Fed. R. Civ. P. 37(b)(2)(A) and sua sponte ordered PHS to pay all expenses, including attorney’s fees, that McLaughlin had incurred in connection with his motion for reconsideration, reasoning that PHS’s action prevented full and timely investigation of the facts and led to additional briefing on the summary judgment motion. The parties thereafter submitted briefs concerning the amount of the award. PHS argued that the District Court raised the issue of sanctions sua sponte, and hence did not provide PHS with notice that sanctions were being contemplated, and asked the District Court7 to “reevaluat[e] . . . the imposition of sanctions” in light of its view that the invoices were irrelevant to the lack of attorney involvement claim under § 1692e(3), which was the only claim pending at the time discovery occurred, and to find that its noncompliance with the discovery order was therefore neither in bad faith nor willful. Mem. of Law in Opp’n to Pl.’s Appl. for Att’ys Fees & Expenses at 1-2, Apr. 8, 2013, ECF No. 111 [“ECF No. 111”]. The District Court considered this request, found that PHS had ample opportunity to address the sanctions issue, adopted the finding that the conduct was sanctionable, and ordered sanctions in the amount of $15,050.50. PHS appeals the sanctions order.