Ambiguous Language in Validation Notice Creates Disputed Issue of Material Fact on Meaningful Attorney Involvement Claim

 

By: Landon G. Van Winkle

 

The U.S. District Court for the Eastern District of New York recently denied cross-motions for summary judgment on a debtor’s claim that a law firm’s validation notice constituted a meaningful attorney involvement violation of the FDCPA. Solovyova v. Grossman & Karaszewski PLLC, No. 19-CV-2996, 2021 U.S. Dist. LEXIS 27837, at *19–21 (E.D.N.Y. Feb. 12, 2021).  Specifically, the debtor took issue with a disclosure in the validation notice, which she attached to her complaint, that provided “[i]n making this demand we are relying entirely on information provided by our client.” Id. at *18. The debtor advanced seven discrete FDCPA claims in connection with the notice, although the law firm defendant successfully moved for summary judgment on six of those claims. Id. at *22.

 

With respect to the meaningful attorney involvement claim, the debtor argued that the disclosure in the validation notice was ambiguous because “the least sophisticated consumer ‘could read the letter and be reasonably led to believe that the communication was from an attorney . . . At the same time, one could read the statement that Defendant was relying entirely on information provided by his client and be under the impression that no attorney was meaningfully involve[d] in the case.’” Id. at *18. Because the letter could be read to imply that no attorney was meaningfully involved in the review of the debtor’s case or preparation of the letter, the debtor argued that it violated several provisions of § 1692e, including § 1692e(3), which proscribes any “false representation or implication that any . . . communication is from an attorney.” See, e.g., Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 301 (2d Cir. 2003) (“Although there is no dispute that [defendants] are law firms, or that the letters sent by those firms were ‘from’ attorneys in the literal sense of that word, some degree of attorney involvement is required before a letter will be considered ‘from an attorney’ within the meaning of the FDCPA.”).

 

The disclosure at issue placed the law firm in a somewhat awkward position. On the one hand, it was not the clear and unambiguous disclaimer of attorney involvement approved by the Second Circuit in Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 364–65 (2d Cir. 2005) (holding that disclaimer in collection letter that “at this time, no attorney with this firm has personally reviewed the particular circumstances of your account” sufficiently rebutted implied level of attorney involvement created by sending letter on firm letterhead with attorneys’ signature to eliminate any potential confusion by least sophisticated consumer receiving the letter, and thus nullified any claim that the letter violated the FDCPA). On the other hand, the notice was not silent as to the level of attorney involvement, such as the letters at issue in Miller or the more extreme case of the completely uninvolved attorney in Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993) (affirming district court’s grant of summary judgment to plaintiff who claimed form collection letters sent by attorney who “never considered the particular circumstances of [plaintiff’s] case prior to the mailing of the letters and . . . never participated personally in the mailing” violated § 1692e of the FDCPA where attorney had provided form letters to debt collector client which were mass-mailed to debtors with a “mechanically reproduced facsimile” of the attorney’s signature and attorney had no knowledge of plaintiff’s individual file).

 

The court had no difficulty in concluding that the validation notice was “‘from’ the law firm in the literal sense,” because it was on the law firm’s letterhead, contained the law firm’s address, telephone number, and email address, listed the attorneys associated with the firm, and was signed by the firm (although not by any individual attorney). Solovyova, 2021 U.S. Dist. LEXIS 27837, at *19. The court then concluded that a genuine dispute of material fact precluded either party’s motion for summary judgment, because the disclosure at least suggested “that the defendant sent the plaintiff this letter based solely on information provided by the creditor, without any attorney review.” Id. at *20 (quoting Hochhauser v. Grossman & Karaszewski, PLLC, No. 19CV2468ARRRML, 2020 U.S. Dist. LEXIS 74548, 2020 WL 2042390, at *6 (E.D.N.Y. Apr. 28, 2020)).

 

Critically, while the law firm argued that its attorneys had been meaningfully involved in the review of the debtor’s account and preparation of the notice at issue, it did not proffer any evidence of this assertion in support of its motion for summary judgment, “such as a declaration by an attorney, or by providing documentation that lawyers used their professional judgment in forming an opinion about how to manage the case or making the decision to send said letter.” Solovyova, 2021 U.S. Dist. LEXIS 27837, at *21. However, because the debtor had also not proffered “admissible evidence that an attorney was not meaningfully involved,” neither party was entitled to summary judgment. Id. at *21 (emphasis added).

 

Thus, while the law firm may not have prevailed on its motion for summary judgment, it very well could prevail at trial, as the burden remains on the debtor to prove that no attorney at the law firm was meaningfully involved in the review of her account or the preparation of the notice. While a Greco disclosure may not always be appropriate in a validation notice (such as where an attorney has reviewed the debtor’s file and been meaningfully involved in the preparation of the notice), any attempt to expressly define the scope of an attorney’s involvement in preparing a validation notice must be carefully drafted to avoid ambiguity and to effectively address the implications created when a validation notice is sent “from” a law firm in the literal sense. 

Landon Van Winkle is an attorney in Smith Debnam's Consumer Financial Services Litigation and Compliance Group.

Adjusting Policies and Procedures for the Dead Consumer

 

By Caren D. Enloe

 

Section 1692a(3) defines a consumer as any natural person obligated or allegedly obligated to pay a consumer debt.   The final debt collection rule interprets the definition of a consumer to include deceased natural consumers, as well. Looking towards a November 30^th effective date, here are some key items that may require adjustments to your policies and procedures.

Initial Skip Traces. Because the Rule now addresses communications regarding dead consumers, it’s important to review skip trace policies and ensure policies are in place which will provide the debt collector with ample information as to the deceased consumer’s estate. Collection agencies will therefore want to examine their skip trace policies and procedures to ascertain whether they adequately identify estates and the representatives of those estates wherever possible.  According to the CFPB,  acceptable means for identifying estates would include a search of public records and use of location information communications.

 

Location Information.  The Rule will allow debt collectors to seek location information concerning persons authorized to act on behalf of the deceased consumer’s estate. While neither the FDCPA nor the Rule allow for the debt collector to disclose the debt, the Rule’s Official Commentary provides directed guidance on the what content is acceptable in location information communications.  Specific to deceased consumers, the Comments  indicate a debt collector may state: “that the debt collector is seeking to identify and locate the person who is authorized to act on behalf of the deceased consumer’s estate” or “that the debt collector is seeking to identify and locate the person handling the financial affairs of the deceased consumer.”  See Comment 10(b)(2)-1. Collection agencies should consider  incorporating this language into their skip tracing and location inquiries.  While not a per se safe harbor, adherence to the language of the comments provides some persuasive authority for compliance.

 

Debt Validation Notice.  For purposes of debt validation, the Rule  makes clear that if the debt collector knows or should know that the consumer is deceased, and if the debt collector has not previously provided the validation notice to the deceased consumer, the debt collector must provide the debt validation notice to a person authorized to act on behalf of the deceased consumer’s estate. Under the CFPB’s interpretation this would include executors, administrators and personal representatives.

 

The “should know” standard should give debt collectors pause to consider what tools they have at their disposal that would or should allow them to know a consumer is deceased.  Debt collectors should be establishing policies and procedures which address when and to whom a debt validation notice should be sent when the consumer is deceased, as well as processes for identifying estates and the appropriate representative of the estate. 

 

Debt collectors should be mindful of the specificity required when sending validation notices to the representative of a deceased consumer.  Comment 34(a)(1)-1 requires that the debt collector identify by name the person who is authorized to act on behalf of the deceased person.  It is not enough to simply address the debt validation to the “Estate of John Smith.”  Instead, the debt collector will need to identify the specific person authorized to act on behalf of the deceased consumer’s estate and, where the validation notice has not previously been provided, provide it addressed to the appropriate representative.

 

Permissive Parties for Communication. For all other communications and consistent with this expansive interpretation of who is a consumer, the Rules likewise include as permissive third parties for communication the deceased consumer’s spouse, parent (if the consumer is a minor), legal guardian, executor or administrator, and confirmed successor in interest (as defined Regulation X).  Moreover, the Comments clarify that the terms “executor” and “administrator” include less formal personal representatives.  See Comment 6(a)(4)-1. “Persons with such authority may include personal representatives under the informal probate and summary administration procedures…, persons who sign declarations or affidavits to effectuate the transfer of estate assets, and persons who dispose of the deceased consumer’s financial assets or other assets of monetary value extrajudicially.”  Collection agencies should be mindful of this clarification and should begin reviewing their policies, procedures and scripts to evaluate whether they are sufficiently robust to adequately identify such parties.

 

Because the Rule takes a more expansive view of who is a consumer, collection agencies should begin reviewing their policies, procedures, scripts and letter contents to ensure they are properly communicating with the appropriate representatives of estates. Skip tracing and location contacts should be updated to identify deceased consumers and those authorized to act on behalf of the deceased consumer’s estate.  Debt validation notices should be similarly updated to send debt validation notices to the appropriate named representative of the estate.  And finally, policies and procedures should be updated to identify the appropriate third parties for further communications concerning the debt when the consumer is deceased.