Opinion ID: 1443113
Heading Depth: 3
Heading Rank: 1

Heading: Applicability of the FDCPA's Bona Fide Error Defense to Mistakes of Law

Text: A debt collector may avoid liability for an FDCPA violation under the Act's bona fide error defense, which provides: A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows 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 issue of whether this defense applies to mistakes of law, in addition to procedural or clerical errors, is one of first impression for this Court. Jerman argues that Smith v. Transworld Sys., Inc., 953 F.2d 1025 (6th Cir. 1992) is instructive. Smith recognized that the bona fide error defense protects a debt collector from liability resulting from a clerical error. Id. at 1034 (holding that although collection agency's second collection letter, mailed shortly after receiving consumer's cease-communication assist letter, violated the FDCPA, the agency was shielded under the bona fide error defense because its procedures were reasonably adapted to avoid any such error). Thus, Smith is not relevant to the instant matter because it indisputably involved a clerical error; moreover, the panel majority did not address whether the bona fide error defense also applies to mistakes of law. See id. Although Judge Krupansky, concurring in part and dissenting in part, opined that the bona fide error defense applies only to clerical errors, id. at 1034, his statement is simply dicta and does not serve as precedent. Further, the district courts in this circuit are split. Compare Dunaway v. JBC & Assoc., Inc., No. 03-73597, 2005 WL 1529574, at  (E.D.Mich. June 20, 2005) (citing Smith for the erroneous proposition that the Sixth Circuit has explicitly held that the bona fide error defense applies only to clerical errors), and Edwards v. McCormick, 136 F.Supp.2d 795, 800 (S.D.Ohio 2001) (explaining that were the mistake an error in legal judgment, it could not be erased by [the bona fide error defense] and citing Smith for the proposition that the defense applies only to clerical errors), with Miller v. Javitch, Block & Rathbone, 534 F.Supp.2d 772, 777 (S.D.Ohio 2008) (stating that the bona fide error defense is applicable to mistakes of law as well as clerical errors and finding defendant shielded by defense for an alleged mistake of law (citing Delawder v. Platinum Fin. Serv. Corp., 443 F.Supp.2d 942, 952 (S.D.Ohio 2005), which holds that the defense applies to debt-collection attorneys who unintentionally violate the FDCPA by asserting in good faith a legal claim that was later rejected by a court)); Lee v. Javitch, Block & Rathbone, LLP, No. 1:06-CV-585, 2007 WL 4591961, at  1 (S.D.Ohio Dec.28, 2007) (noting Smith, and circuit split, but explaining that recent and more persuasive case authority has permitted the defense for mistakes of law as well as fact); Kelly v. Great Seneca, 443 F.Supp.2d 954, 960 (S.D.Ohio 2005) (FDCPA liability is not imposed for good faith mistakes or errors of law or mathematics.); and Taylor v. Luper, Sheriff & Niedenthal Co., L.P.A., 74 F.Supp.2d 761, 765 (S.D.Ohio 1999) (There is nothing in the language of [the defense] which limits its application to clerical mistakes or ministerial errors.). Courts outside of this Circuit are also divided as to whether the bona fide error defense applies to mistakes of law or is limited, as Jerman contends, to procedural or clerical errors. See Johnson v. Riddle, 305 F.3d 1107, 1121 n. 14 (10th Cir.2002) (collecting cases). Although the majority view is that the defense is available for clerical and factual errors only, a growing minority of courts . . . have concluded that mistakes of law can be considered bona fide errors under section 1692k(c). Nielsen v. Dickerson, 307 F.3d 623, 641 (7th Cir.2002) (citations omitted). The most recent appellate court to speak directly on this subject is the Tenth Circuit in Johnson v. Riddle . There, the court listed, and then rejected, the holdings from the Second, Eighth, and Ninth Circuits that the bona fide error defense does not apply to legal errors. See Picht v. Jon R. Hawks, Ltd., 236 F.3d 446, 451 (8th Cir. 2001) (citing Hulshizer v. Global Credit Servs., Inc., 728 F.2d 1037, 1038 (8th Cir. 1984)); Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22, 27 (2d Cir.1989); Baker v. G.C. Servs. Corp., 677 F.2d 775, 779 (9th Cir.1982). The court explained that those cases simply dispense[d] with the issue by citing earlier cases back to the Ninth Circuit's decision in Baker v. G.C . Services.  Johnson, 305 F.3d at 1122. The Johnson Court rejected the Baker analysis because  Baker rested its holding entirely upon the similarity of the FDCPA bona fide error defense to the `nearly identical' bona fide error defense provided in the Truth in Lending Act (`TILA'), a provision uniformly interpreted to apply only to clerical errors and not to legal errors. Id. (citations omitted). [3] The Johnson Court found the TILA analogy to be faulty: [The plaintiff] also analogizes the provision to a similar section in [the TILA], 15 U.S.C. § 1640(c), which is limited to clerical mistakes and which does not include errors of judgment or law. But. . . the TILA bona fide error provision expressly defined bona fide errors as [including, but not limited to,] clerical, calculation, computer malfunction and programming, and printing errors, except that an error of legal judgment with respect to a person's obligations under this subchapter is not a bona fide error. 15 U.S.C. § 1640(c). The FDCPA provision does no such thing. This, along with the statutes' different purposes, distinguishes the two. Id. at 1122-23 (quoting Jenkins v. Heintz, 124 F.3d 824, 832 n. 7 (7th Cir.1997)). The Johnson Court concluded that unlike the TILA, the plain language of the FDCPA suggests no intent to limit the bona fide error defense to clerical errors. To the contrary, § 1692k(c) refers by its terms to any `error' that is `bona fide.' Id. at 1123. The court next looked to legislative history, and found no indication . . . that Congress intended this broad language to mean anything other than what it says. Id. (citing S.Rep. No. 95-382, at 3 (A debt collector has no liability, however, if he violates the act in any manner . . . when such violation is unintentional and occurred despite procedures designed to avoid such violations. (emphasis added))). The Johnson Court found further support in the Supreme Court's reasoning in Heintz v. Jenkins, 514 U.S. 291, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995), which affirmed the Seventh Circuit's conclusion that the FDCPA applies to lawyers acting as debt collectors. We previously decided otherwise, based in part on our view that any other rule automatically would make liable any litigating lawyer who brought, and then lost, a claim, against a debtor. Heintz, 514 U.S. at 295, 115 S.Ct. 1489 (citing Green v. Hocking, 9 F.3d 18, 21 (6th Cir.1993)). As the Johnson Court explained, the Heintz Court agreed with Green 's premise, but found such fear insignificant in light of the bona fide error rule. Id. Heintz accepted for argument's sake the Sixth Circuit's view that any debt collection lawyer whose claim fails necessarily violates the FDCPA. However, the Court concluded that such a premise did not produce absurd results, because of the existence of the bona fide error defense rule. In other words, the Court apparently believed that the bona fide error defense would apply in at least a portion of the cases where the lawyer brought suit to collect an amount beyond that legally owed by the debtor. This reasoning at least suggests that the defense is available for mistakes of law, because presumably mistake of law may contribute to the reasons why some of the underlying debt collection procedures are lost. Johnson, 305 F.3d at 1123. See also Taylor v. Luper, Sheriff & Niedenthal Co., 74 F.Supp.2d 761, 764 (S.D.Ohio 1999) (noting that, if mistakes of law were not protected by the bona fide error defense, ethical duty of zealous advocacy could require debt collecting lawyer to assert claims that would expose her to FDCPA liability). After the Johnson holding, the Seventh Circuit, in Nielsen, 307 F.3d at 641, also rejected Baker 's TILA analogy and stated that the FDCPA's provision does not expressly remove legal mistakes from the realm of errors that can be considered bona fide. The court cited its previous opinion, Jenkins, 124 F.3d at 832 n. 7, which noted that nothing in the language of the FDCPA bona fide error provision limits the reach of the defense to clerical errors and other mistakes not involving the exercise of legal judgment, but ultimately concluded that there was no evidence that the mistake at issue had in fact involved the exercise of any legal judgment. Nonetheless, the Nielsen Court assumedconsistent with [its] observations in Jenkins that a legal mistake can qualify as a bona fide error under the FDCPA, but it found the defense inapplicable because the collector intended to contravene the applicable law of the circuit. Id. at 641. Jerman argues that Johnson is incorrect and that the statutory language of the FDCPA supports the view that Congress intended the defense to apply only to clerical errors. Specifically, Jerman points to the last phrase of the defensethat the violation resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error. 15 U.S.C. § 1692k(c) (emphasis added). In Jerman's view, this language eliminates the ability of a debt collector attorney to escape FDCPA liability based upon a legal mistake because, practically, it makes no sense that a collector can maintain procedures reasonably adapted to avoid mistakes of law. [4] Jerman further argues that the distinction between the language in the FDCPA and the TILA is inappropriate because when Congress passed the FDCPA in 1977, the TILA's bona fide statutory language did not provide explicitly the legal error exclusion, but had merely been interpreted as such. In other words, the two acts were then identical. It was not until 1980 that Congress revised the TILA and expressly excluded errors of law from the bona fide error defense. See Pub.L. No. 96-221. Therefore, Jerman argues, it is incorrect to compare the current versions of the TILA and the FDCPA: By using the same language for the FDCPA [when it was enacted] in 1977 after [courts] construed that same language in the TILA to apply to clerical errors only, Congress gave that interpretation the force of the law. The Johnson Court considered and rejected this same argument: We acknowledge that it is more common to speak of procedures adapted to avoid clerical errors than to speak of procedures adopted to avoid mistakes of law. However, absent a clearer indication that Congress meant to limit the defense to clerical errors, we instead adhere to the unambiguous language of the statute as supported by the available legislative history. Johnson, 305 F.3d at 1123. We agree with the persuasive reasoning and analysis set forth in Johnson. Indeed, debt collectors may set up procedures more often to avoid clerical mistakes, but there is nothing unusual about attorney collectors maintaining procedures, such as frequent education and review of the FDCPA law, in order to avoid mistakes of law. Moreover, the fact that the TILA's bona fide error provision expressly excludes errors of legal judgment while the analogous provision in the FDCPA does not have such limitation suggests that, unlike the TILA, Congress did not intend to limit the defense to clerical errors. Although the FDCPA was adopted when the TILA had identical language that courts had interpreted to exclude legal errors, the legislative history of the FDCPA shows that a debt collector has no liability . . . if he violates the act in any manner . . . when such violation is unintentional and occurred despite procedures designed to avoid such violations. S.Rep. No. 95-382, at 5 (emphasis added). Further, Congress has amended the FDCPA several times since its enactment, and has never changed the language to exclude mistakes of law from the bona fide error defense. In addition, protection for attorneys who make bona fide errors of law is consistent with the FDCPA's purpose of eliminating abusive debt collection practices and ensuring that those debt collectors who refrain from abusive collection practices are not competitively disadvantaged. 15 U.S.C. § 1692(e).