New Opinion: Debt Collector Runs Afoul Of FDCPA

August 28, 2009

In Sears v. Federal Credit, Corp., a magistrate judge in the U.S. District Court for the Western District of Virginia recommended judgment against a debt collector for violation of the Fair Debt Collections Practices Act for failure to disclose in its initial voicemail communications to the debtor that the collector was “attempting to collect a debt and that any information information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector.”  Those initial voicemail communications were as follows:

First Message: Hey Dave, uh, Sam Coffee, Federal Credit, I apologize for the inconvenient call.  Um, over some time we’ve tried to settle a case with you and I don’t know what had happened but I think they may have initiated legal action.  Could you call me so I can see if I can nip this thing and stop it?  866-611-6300.  My extension is 221.  Please call me ASAP so I know what has happened.  This is uh, I apologize, I apologize, I think I see a docket number here, please call.

Second Message: Message is for David Sears and Denise Finey.  This is Jill Brown, I’m with the Federal Credit Corporation’s Legal Department and we’ve been trying to get a hold of you for some time now regarding a case that was pending legal action against you here in our office.  However, this has now been forwarded to our attorney and on the 30th they’re going to determine whether or not this is going to affect [sp] your Federal Income Tax next year.  In order to help prevent this from happening[,] I need to hear from you at Toll Free 866-611-6300 at extension 228.  You will need to reference the Case Number 29613 when you call back.

Obviously, these calls did not contain the information required under the FDCPA.  And it seemed like Federal Credit knew that, because part of the opinion details how Federal Credit did not even bother to oppose Sears’s motion for summary judgment, and generally failed to respond properly to discovery.  Debt collectors should regard this opinion as a lesson in the importance of following federal standards closely, and in instructing their employees how to comply with those standards, or else face liability and embarassment.

Leave a Comment » | Collections | Permalink
Posted by merrittgreen

New Opinion: Miller Act Precludes Contractual Set-Off Provision

July 31, 2009

In Acoustical Concepts, Inc. v. Travelers Casualty and Surety Co. of America, et al., the U.S. District Court for the Eastern District of Virginia ruled on a case of first impression that a defendant is precluded from raising a contractually-based set-off claim in response to a claim under the Miller Act, 40 U.S.C. § 3131 et seq.

By law, no one can place a mechanics’ lien on federal property under any circumstance.  The purpose of the Miller Act was to replace subcontractor state-created mechanics’ lien rights.  Under the Miller Act, the prime contractor is required to post a payment bond to guarantee that the subcontractor gets paid.  Rather than filing a lien claim, if a subcontrator has not been paid after 90 days, the subcontractor has a cause of action against the payment bond (and the bonding company) for payment.

In this case, the subcontract agreement had an offset provision, which said that the prime could set-off payments owed to the subcontractor on the federal project with claims that the prime had against the sub on other non-federal projects.  Judge T.S. Ellis, III ruled that the contractual set-off provision was contrary to the requirements and purpose of the Miller Act.  This is a very favorable ruling for subcontractors, who can now pursue their Miller Act claims independently of any contractual impediments with the prime.

Leave a Comment » | Civil Litigation, Collections, Government Contracts | Permalink
Posted by merrittgreen

The Pro Se Corporation?

July 23, 2009

Normally, a corporation must be represented by counsel in any court proceeding, although there are certain things a corporation can do without counsel in the general district court (see Va. Code § 16.1-88.03).  As of this month, Va. Code § 16.1-81.1 went into effect, allowing certain corporations to be represented by an officer in the general district courts on all matters under the following circumstances:

  1. The amount in controversy does not exceed $2,500, exclusive of interest, attorney fees contracted for, and costs;
  2. The corporation’s stock is held by no more than five people;
  3. That stock is not publicly offered or planned to be publicly offered at the time of the litigation; and
  4. The officer has the unanimous consent of the shareholders to represent the corporation.

The purpose of this law appears to allow corporations to recover relatively small amounts from debtors without having to incur attorneys’ fees, which even in the general district court can easily swallow up the entire amount owed.  However, it is somewhat odd that the law specifically mentions “attorney fees contracted for,” since presumably having an officer represent the corporation will mean that there will be no such fees.  It may be that a corporation seeking to enforce a contract that sets a specific amount for attorneys’ fees — say, 20%, which is typical for the industry — may be able to recover those fees under the contract even if it proceeds pro se.  This may prompt some corporations to prefer a 20% fee to the alternative request for “reasonable attorneys’ fees.”

Leave a Comment » | Civil Litigation, Collections | Permalink
Posted by merrittgreen

Follow

Get every new post delivered to your Inbox.