Opinion ID: 4188856
Heading Depth: 1
Heading Rank: 4

Heading: Jerman and Good‐Faith Mistakes of Law

Text: The FDCPA provides a private right of action for persons whose rights under the Act are violated. 15 U.S.C. § 1692k. Remedies include actual damages, statutory damages up to $1000 per violation, and attorney fees. The Act also provides a safe harbor, a defense that bars liability “if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwith‐ standing the maintenance of procedures reasonably adapted to avoid any such error.” § 1692k(c). Blatt Hasenmiller has ar‐ gued, and the district court and panel agreed, that this safe harbor protected it from liability because it relied in good faith upon our precedent in Newsom in choosing venue for its collection suit against Oliva. The Supreme Court decided Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA to resolve a circuit split as to whether the Act’s safe harbor applies to debt collectors’ good‐ faith mistakes of law. 559 U.S. at 580–81. In Jerman, the debt collector had sent a notice to the debtor saying that the debt would be assumed to be valid unless she disputed it in writ‐ ing. For purposes of the Supreme Court litigation, the Court assumed that the debt collector had violated § 1692g by tell‐ ing the debtor that she would have to dispute the validity of the debt in writing. Id. at 580 n.3. The Supreme Court held that § 1692k(c) does not apply to errors of law in interpreting the Act. The Court stated its holding as follows: “We therefore hold that the bona fide error defense in § 1692k(c) does not apply to a violation of the FDCPA resulting from a debt col‐ lector’s incorrect interpretation of the requirements of that statute.” Id. at 604–05. No. 15‐2516 11 The panel in this case concluded that Jerman did not bar Blatt Hasenmiller’s defense under § 1692k(c). The panel read the Jerman holding narrowly, as applying only to the debt col‐ lector’s own mistaken interpretation of the law but not to re‐ liance on a precedent that was later overruled as mistaken. Oliva II, 825 F.3d at 792. In other words, a debt collector could rely on a court’s, or at least an appellate court’s, mistaken in‐ terpretation of the Act. The panel also said that even if the dis‐ tinction between a court’s interpretation and a debt collector’s interpretation does not hold up, the debt collector’s interpre‐ tation was not mistaken when it was made. Id. With respect, we do not read Jerman so narrowly. We see no indications that the Court intended to allow § 1692k(c) to protect some mistakes of law about the Act but not others. The opinion includes no indication of how courts might distin‐ guish between protected and unprotected mistakes of law, nor do we see a workable line between protected and unpro‐ tected mistakes of law. There are also clear signs in Jerman that the Court was reaching all mistaken interpretations of the Act, regardless of how understandable or reasonable they might have been. For example, the Jerman dissent argued that the majority’s deci‐ sion would have unworkable consequences for attorneys col‐ lecting debts, requiring an attorney to resolve legal ambigui‐ ties against her client “even where there is substantial legal authority for a position favoring the client.” 559 U.S. at 597, citing id. at 619–24 (Kennedy, J., dissenting). The Jerman ma‐ jority was not persuaded to make an exception for mistakes supported by “substantial legal authority.” Id. at 597. That logic fits this case unless there is a manageable way to distin‐ 12 No. 15‐2516 guish between mistakes supported by “controlling” legal au‐ thority and those supported by “substantial” legal authority. We do not see one, and the panel and dissent do not offer one for purposes of Jerman and § 1692k(c). Nor has any other cir‐ cuit tried to confine Jerman as the panel did here. Also relevant to the scope of Jerman, the Court pointed out that Congress had included in § 1692k an additional safe har‐ bor for a debt collector who seeks and follows an advisory opinion from the Federal Trade Commission’s Bureau of Con‐ sumer Protection: No provision of this section imposing any liabil‐ ity shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Bureau, notwithstanding that af‐ ter such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason. § 1692k(e). The Court found that the inclusion of the safe har‐ bor for FTC advice was inconsistent with a broad defense for good‐faith mistakes of law: Debt collectors would rarely need to consult the FTC if § 1692k(c) were read to offer immunity for good‐faith reliance on advice from private counsel. Indeed, debt collectors might have an affirmative incentive not to seek an advisory opinion to resolve ambiguity in the law, as re‐ ceipt of such advice would prevent them from claiming good‐faith immunity for violations No. 15‐2516 13 and would potentially trigger civil penalties for knowing violations under the FTC Act. 559 U.S. at 588. That analysis is surely correct as a practical matter. See also id. at 605–06 (Breyer, J., concurring) (empha‐ sizing the safe harbor for FTC advice as solution for legal un‐ certainty). Jerman recognized the issue it was deciding is important for effective enforcement of the FDCPA. It is important be‐ cause there is so much room to argue different interpretations of the FDCPA. A broad exception for good‐faith legal errors (akin to a qualified immunity defense under 42 U.S.C. § 1983) would allow debt collectors to resolve all legal uncertainty in their own favor, at least as long as they consulted a lawyer. See Jerman, 559 U.S. at 601–02. The result would be to give “a competitive advantage to debt collectors who press the boundaries of lawful conduct,” inviting a “race to the bottom” driving more conservative collectors out of business and run‐ ning directly contrary to the overall purpose of the Act. Id. at 602. As we read the Jerman opinion, the Court chose to avoid that result by rejecting application of § 1692k(c) to any legal errors concerning the FDCPA. In essence, the Court read the Act as putting the risk of legal uncertainty on debt collectors, giving them incentives to stay well within legal boundaries. And along these lines, it is worth remembering that nothing in Newsom or the Act required Blatt Hasenmiller to sue in the venue it chose. Jerman and our interpretation of § 1692k(c) do 14 No. 15‐2516 not nullify the statutory defense but confine it to factual and clerical errors. See Jerman, 559 U.S. at 587.4 We must still acknowledge, of course, that if any mistaken interpretations of the Act were made in good faith, it was in cases like this. Debt collectors in Cook County relied on circuit precedent in believing they could choose freely among the districts within the county in filing debt collection suits. Our colleagues in dissent make that point with strong language. But as we pointed out above and in Suesz, suppose the over‐ ruling of Newsom had come not from this court sitting en banc but from the Supreme Court. Such a decision would not have needed to overrule any Supreme Court precedent, and there is no reason to think the Supreme Court would have given such a decision only prospective in effect. See Suesz, 757 F.3d at 650. In that situation, the defendant would not be entitled to a safe harbor. We see no reason to distinguish between those two paths to overruling Newsom. The unstated assumption of the dissent is that a judicial decision is “the law.” With a statute, however, the controlling law is and always has been the statute itself, as enacted by both houses of Congress and signed by the President. One judge or a panel of judges may or may not understand that text correctly, but the statute remains the law even if judges err. That is why overrulings of earlier statutory decisions, like 4 Blatt Hasenmiller has pointed out that the Jerman opinion said it was not addressing the effect of good‐faith mistakes about matters of state law. See 559 U.S. at 580 n.4. From the reservation of that question, Blatt Hasen‐ miller concludes that not all mistakes of law are excluded from the safe harbor. For the reasons in the text, we think the reservation of the state‐ law issue does not signal a willingness to draw fine lines between different mistakes of law concerning the FDCPA itself. No. 15‐2516 15 reversals by the Supreme Court, are retroactive. It is also why it makes sense to think of the defendant’s action here as re‐ flecting a mistake of law despite the reliance on admittedly substantial precedent. Defendant was mistaken about the meaning of the statute, and so were the panels in Newsom and Suesz. The fact that different sets of lawyers, including those with judicial commissions, made a legal error does not make it less a legal error. Nevertheless, in recognition of the equitable points the de‐ fendant makes about its reliance on Newsom, it is helpful to recall that the FDCPA provides that, in determining damages for a violation where the safe harbor is not available, the court “shall consider, among other relevant factors … the extent to which such noncompliance was intentional.” 15 U.S.C. § 1692(b)(1). We are aware of one area in the law where reliance on con‐ trolling circuit precedent has been given special treatment: an exception from the exclusionary rule under the Fourth Amendment. In United States v. Leon, 468 U.S. 897 (1984), the Supreme Court recognized an exception to the exclusionary rule for Fourth Amendment violations that resulted from po‐ lice officers’ reasonable reliance on facially valid search war‐ rants. In Davis v. United States, 564 U.S. 229 (2011), the Su‐ preme Court extended the Leon good‐faith exception to searches conducted in objectively reasonable reliance on binding appellate precedent. That unusual rule in Davis is based on the exclusionary rule’s “high cost to both the truth and the public safety,” and the absence of offsetting benefits resulting from deterring police misconduct when the police are complying with circuit precedent. Id. at 232. The interest 16 No. 15‐2516 in protecting debt collectors’ choices of venue is not at all com‐ parable to the stakes under the exclusionary rule. We see no reason to create a similar rule under the FDCPA, especially in the face of Jerman’s rejection of mistakes of law as grounds for the safe harbor under 15 U.S.C. § 1692k(c). The judgment of the district court is VACATED and the case is REMANDED for further proceedings consistent with this opinion.5 5 We do not address here situations in which a debt collector con‐ cluded in good faith that the FDCPA required it to act in such a way that a court later determined was prohibited. No. 15‐2516 17 MANION, Circuit Judge, with whom BAUER, FLAUM, and