Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A.
559 U.S. 573, 2010 U.S. LEXIS 3480, 176 L. Ed. 2d 519 (2010)
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Rule of Law:
The 'bona fide error' defense provided in § 1692k(c) of the Fair Debt Collection Practices Act (FDCPA) does not apply to a violation resulting from a debt collector's mistaken interpretation of the legal requirements of the FDCPA itself.
Facts:
- Carlisle, a law firm, filed a foreclosure complaint on behalf of its client, Countrywide Home Loans, against Karen L. Jerman.
- The complaint included a notice served on Jerman, stating that the mortgage debt would be assumed valid unless Jerman disputed it in writing.
- Jerman's lawyer sent a letter to Carlisle disputing the debt.
- Carlisle contacted its client, Countrywide, which acknowledged that Jerman had already paid the debt in full.
- Upon learning the debt was paid, Carlisle withdrew the foreclosure lawsuit.
Procedural Posture:
- Karen L. Jerman filed a class-action lawsuit against Carlisle, a law firm, in the U.S. District Court for the Northern District of Ohio for alleged violations of the FDCPA.
- The District Court found that Carlisle had violated the FDCPA by requiring Jerman to dispute the debt in writing.
- However, the District Court granted summary judgment in favor of Carlisle, concluding that the violation was shielded by the FDCPA's bona fide error defense because it was a mistake of law.
- Jerman appealed the summary judgment ruling to the U.S. Court of Appeals for the Sixth Circuit.
- The Sixth Circuit affirmed the District Court's decision, holding that the bona fide error defense encompasses mistakes of law.
- The U.S. Supreme Court granted certiorari to resolve a circuit split on the issue.
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Issue:
Does the 'bona fide error' defense in § 1692k(c) of the Fair Debt Collection Practices Act (FDCPA) apply to a debt collector's mistaken interpretation of the legal requirements of the FDCPA?
Opinions:
Majority - Justice Sotomayor
No. The bona fide error defense in § 1692k(c) of the FDCPA does not apply to a violation resulting from a debt collector's mistaken interpretation of the requirements of that statute. The Court's reasoning is grounded in the long-standing legal principle that ignorance of the law is no excuse. The statutory requirement that a debt collector maintain 'procedures reasonably adapted to avoid any such error' is more naturally read to apply to processes designed to prevent clerical or factual mistakes, not errors in legal reasoning. Furthermore, the FDCPA provides a separate safe harbor for actions taken in good-faith conformity with an FTC advisory opinion (§ 1692k(e)), suggesting this is the intended mechanism for resolving legal uncertainty, rather than the bona fide error defense. To hold otherwise would undermine the role of the FTC and create an incentive for debt collectors to avoid seeking official guidance.
Dissenting - Justice Kennedy
Yes. The bona fide error defense should apply to a debt collector's mistaken interpretation of the FDCPA's legal requirements. The plain text of the statute, which applies to a 'violation' that was 'not intentional,' naturally includes good-faith legal errors, as a 'violation' is a legal infraction. The majority's interpretation will punish attorneys for taking reasonable, good-faith legal positions on complex and unsettled statutory questions, creating an irreconcilable conflict between an attorney's duty of zealous advocacy for a client and their personal financial interest in avoiding liability. This will entrench a 'cottage industry' of litigation over technical, harmless violations, forcing settlements even where no fault or injury exists, a result Congress could not have intended.
Concurring - Justice Breyer
No. While the Court's interpretation may create a dilemma for lawyers facing legal uncertainty, the statute provides a remedy through the FTC advisory opinion process under § 1692k(e). By seeking and following an FTC opinion, a lawyer can gain immunity from liability. If this dilemma proves to be a serious, practical problem for debt-collecting lawyers, the FTC can and should respond to more requests for advisory opinions, thereby mitigating the issue. This statutory mechanism, combined with other tools like damages caps, makes the majority's interpretation workable.
Concurring - Justice Scalia
No. The Court reaches the correct result, but its reasoning relies on the legal fictions of legislative history and imputed congressional awareness of a handful of appellate court decisions. The textual analysis of the statute stands on its own. The tradition of distinguishing errors of fact from errors of law supports the conclusion that the FDCPA's bona fide error defense applies to factual and clerical mistakes but not to legal ones. The Court's reliance on disparate and often contradictory legislative history is unnecessary and unpersuasive.
Analysis:
This decision significantly narrows the scope of the FDCPA's 'bona fide error' defense, resolving a circuit split by holding that the defense does not shield debt collectors from liability for misinterpreting the Act's legal requirements. It firmly places the risk of legal uncertainty on the debt collector, including law firms, rather than the consumer. The ruling may increase litigation against collectors in areas where the FDCPA's requirements are ambiguous, incentivizing them to adopt more cautious, consumer-friendly practices or to more frequently seek formal guidance from the Federal Trade Commission to avoid liability.
