November 17, 2013

Houston Firm Can't Beat Unfair Debt Collection Class Action

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Law360, Houston (October 21, 2013, 10:12 PM ET) -- A Texas federal judge Monday denied Dover & Fox PC’s bid to duck a putative class action alleging unfair debt collection practices, saying the firm failed to defeat an allegation that it is a debt collector under federal law.
U.S. District Judge Keith P. Ellison denied the firm’s motion for summary judgment, ruling that “conclusory” statements offered by the firm’s partners in affidavits about the limited scope of their debt collection practice were not enough to show that they are not subject to the Fair Debt Collection Practices Act.

“The Fifth Circuit mandates a heavily fact-intensive inquiry to determine whether or not an individual or entity qualifies as a 'debt collector' under the FDCPA,” Judge Ellison said in a 13-page opinion. “The parties have supplied the court with some evidence relevant to this inquiry. However, they have not come forward with enough to demonstrate conclusively that Dover & Fox is or is not properly classified as a ‘debt collector’ under the FDCPA as a matter of law; relevant and determinable factual issues remain open.”

Representatives for Dover & Fox were not immediately available for comment Monday.

Dover & Fox had hoped to beat the proposed class action by arguing that because debt collection constituted only 5 percent of its practice and that the volume of debt collection cases it handled was small compared with other firms, it did not qualify as a debt collector.

Under the FDCPA, a debt collector generally is defined as a person or company “regularly” engaged in debt collection as their principal purpose of business. Citing Sixth Circuit cases, the firm said that its limited debt collection practice insulated it from the FDCPA’s reach.

But Judge Ellison disagreed, noting that the Fifth Circuit has ruled that a person may regularly collect debts even if debt collection is not the principal purpose of their business.

“Thus, in the Fifth Circuit, ‘no bright-line rule identifies when an attorney or law firm ‘regularly’ collects or attempts to collect debts, so courts must make this determination on a case-by-case basis,’” Judge Ellison said.

That Dover & Fox does not have employees dedicated to debt collection may serve to show that debt collection is not Dover & Fox’s principal purpose, but does not illustrate the volume or frequency of its debt collection activities, Judge Ellison said.

Judge Ellison also said that although the firm sent only 38 collection letters to various consumers in the year leading up to the lawsuit, perhaps showing that the firm does not regularly engage in debt collection, that fact was not conclusive since discovery has not yet been completed and that the plaintiffs may uncover more debt collection activity.

And the firm also lost its challenge to liability under the Texas Debt Collection Act, which Judge Ellison said defines debt collector more broadly than the FDCPA.

Lynn and Deborah Kirkpatrick launched the suit against the firm earlier this year after they each received letters from the firm demanding repayment of an outstanding debt allegedly owed to City of Deer Park Federal Credit Union.

Both letters threatened that if the pair failed to make good on their debt within 14 days, they would be hit with a collection lawsuit. But state and federal law requires that consumers be given 30 days to dispute the validity of any claimed debt, and the more imminent litigation threat “overshadowed” those legal protections, the Kirkpatricks claim in their suit.

The Kirkpatricks are represented by Marshall Meyers and Noah Daniel Radbil of Weisberg & Meyers LLC

Dover & Fox is represented by Harvey Lee Burns Jr. of Giddens & Burns.

The case is Kirkpatrick et al. v. Dover & Fox PC et al., case number 4:13-cv-00123, in the U.S. District Court for the Southern District of Texas.