The FDCPA and legal errors

The following is a recap of Jerman v. Carlisle (08-1200), which was argued Wednesday morning.  Check the Jerman SCOTUSwiki page for more information. [Note: Howe & Russell represent the petitioner in this case, though the author of this post is not affiliated with the law firm.]

Oral argument last Wednesday in No. 08-1200, Jerman v. Carlisle, focused narrowly on legal definitions, legislative history, and Congressional intentions.  (You can read more on the background of the case here.)

Kevin Russell represented petitioner Karen Jerman.  He began by emphasizing that “Congress rarely makes ignorance of the law a defense to civil liability”; when it has done so, it does so “quite plainly.”  No such evidence of Congress’s intent was present in this case, Russell continued.  Justice Scalia quickly broke in to ask whether a violation of law was the act that constitutes violating the law, or the fact of violating the law.  Russell responded that under the Court’s prior interpretations, the term “violation” “is best understood to refer to the act.”

Justice Breyer, Chief Justice Roberts, and Justice Sotomayor each proposed hypotheticals examples to test Jerman’s arguments.  Justice Breyer wondered whether a lawyer and his client would be liable for making an error while litigating, even if the lawyer had sufficiently researched the law.  Chief Justice Roberts wondered whether a ruling in Jerman’s favor might discourage debt collectors from seeking legal advice, so as to limit their liability.  And Justice Sotomayor questioned whether a district court could rule that an attorney had violated the law but nonetheless not award damages.  In answering, Russell consistently returned to his opening argument: if Congress had intended to provide a special remedy for lawyers litigating in debt-collection cases, it would have done so explicitly.  Congress, Russell maintained, gave district courts discretionary power over statutory damages, but it has never specifically amended the FDCPA to include legal errors within the scope of the bona fide error defense.

Assistant to the Solicitor General William Jay, arguing on behalf of the United States in support of Jerman, next took the podium.  He suggested that the Court should interpret the FDCPA in conjunction with the Truth in Lending Act (TILA), which does not extend to legal errors.  “Errors of law,” he explained, “are not what Congress or the agency had in mind.”   Jay next responded to skepticism about the utility of relying on the Federal Trade Commission (FTC) for an opinion, a “safe harbor” for debt collection agencies under the FDCPA.  Justice Ginsburg wondered whether the short statute of limitations – one year – might discourage debt collectors from seeking an opinion.  The Chief Justice suggested that it would be unrealistic to rely on FTC requests.  In ten years, seven FTC requests have been made, and four have been answered.  Jay defended the FTC “safe harbor,” emphasizing that Congress intended the FDCPA to protect “unsophisticated debtors” while allowing more sophisticated debt collectors to resolve their questions by seeking an FTC opinion.

Representing the respondent, George Coakley faced questions from Justice Sotomayor regarding whether Congress intended to provide an “automatic defense” when a debt collector sought legal advice before violating the FDCPA.   Justice Breyer, Justice Ginsburg, and the Chief Justice all soon joined in this line of questioning.  A lay debt collector, Coakley countered, could still be held liable even for actions taken at the advice of his attorney if a court subsequently ruled against him – which in Coakley’s view exemplified the unfair nature of the statute.

Turning to the parallels between the TILA and the FDCPA, Justice Scalia asked whether the FDCPA should, like TILA, exclude legal errors from the bona fide error defense.  Justice Scalia read the decisions of the courts of appeals interpreting the TILA from 1977 to 1980 as uniformly holding that legal errors were not protected by the bona fide error defense, such that Congress’s 1980 amendment did not change the law, but instead affirmed an accepted judicial interpretation.   Justice Ginsburg then asked whether the Court should interpret the FDCPA in parallel with the TILA, because the operative clauses were the same.  Coakley responded that because Congress had not amended the FDCPA, though it could have, the statutes should be read separately.

Justice Stevens then began a series of questions regarding the relative importance of providing a defense for legal errors in TILA and FDCPA cases.  Coakley responded that the statues were “significantly different,” rendering it virtually impossible to weigh the importance of a legal error defense.   Coakley then quoted Justice Breyer to the effect that “reading the bona fide error provision to exclude legal error is worse than unfair.”   In response, however, Justice Breyer indicated that “the answer now seems to be floating around the FTC idea” – that is, that attorneys could be shielded from liability for legal errors if they have consulted with the FTC and received an opinion letter, on which they then rely.  This avenue, Justice Breyer suggested, would “protect the lawyer against true legal surprise.”  In response, and in conclusion,  Coakley cautioned against an opinion that would allow a lawyer or debt collector to be personally liable for advising his client in an area in which the law was “unsettled.”