Legal info and news

Hey, I started this thread as a place to share articles, info we come across that pertains to debt collection.

I found this article on law.com and surprise surprise, a few names are familiar, any way enjoy

Debt-collection lawyers who file affidavits to obtain garnishments in state courts are fair game for consumers' Fair Debt Collection Practices Act (fdcpa) lawsuits in federal court, the 6th U.S. Circuit Court of Appeals has held.

The decision marks the first time that a federal circuit has held that a debt-collection lawyer's affidavit is not protected by the absolute immunity commonly granted to witnesses in judicial proceedings.

Both industry and consumer attorneys say this decision means that debt-collection lawyers will have to be more careful in future about what they sign -- or have their clients sign the affidavits.

The 6th Circuit denied absolute immunity to Weltman, Weinberg & Reis Co., a Cleveland-based national debt-collection practice, and Weltman lawyer Mark N. Wiseman. Plaintiff Robert Todd has accused Wiseman of allegedly filing a false affidavit to initiate a garnishment proceeding in a state collection court. Todd v. Weltman, Weinberg & Reis Co., No. 04-4109 (6th Cir.).

The case arises from a relatively common practice in Ohio and other states: A debt collector, having obtained a default judgment against a debtor, tried to satisfy the judgment by filing an affidavit that it had a reasonable basis to believe that the property was nonexempt, or garnishable.

But in this case, the "nonexempt" property at issue was Todd's Social Security benefits, which are normally exempt.

RULING DRAWS PRAISE

Lawyers who represent consumers have welcomed the decision.

Richard J. Rubin, a solo practitioner in Santa Fe, N.M., who represents consumers in credit and debt collection abuse litigation, said the decision "really goes right to the heart of lawyers acting as debt collectors.

"Collection lawyers have to be very careful now when they go into state collection court that they don't misrepresent anything," Rubin said, because in contrast to risking a busy small claims judge's wrist-slapping for breaking a state court ethics rule, they now face the prospect of being sued for their alleged misconduct in federal court and paying statutory damages and attorney fees under the FDCPA.

Robert W. Murphy, a consumer fraud law solo practitioner in Fort Lauderdale, Fla., said he sees "a dozen cases every month" in which a debt collector or a lawyer for a debt collector makes a declaration on the status of a debtors' assets without any supporting documentation.

"The big lesson to lawyers here is that when they get involved in making averments, signing statements on behalf of their clients, they walk away from the role of being an advocate and become participants," exposing themselves to violations of the FDCPA, Murphy said.

Christine M. Haaker, a litigation partner in Thompson Hine's Dayton, Ohio, office who represents Weltman and has moved the court to rehear the case en banc, declined to comment.

According to the firm's motion for rehearing, the 6th Circuit incorrectly "grafted a probable cause requirement" to the Ohio garnishment statute where there is "no such evidentiary showing required under Ohio law."

Weltman also argues that the appeals panel failed to follow Briscoe v. LaHue, 460 U.S. 325 (1983), the standard for applying absolute witness immunity to federal statutory claims. Like the defendant police officers in Briscoe, lawyers serve an essential function in the judicial process, the firm claims.

"In this case, the function served is to assist the court in ascertaining information from the debtor to enforce judgments," the Weltman motion says.

In denying the defendants absolute immunity, the 6th Circuit wrote that "the purpose of the immunity is to preserve the integrity of our judicial system, not to assist a self-interested party who allegedly lies in an affidavit to initiate garnishment proceedings."

The court also broke with other circuits in rejecting Weltman's argument based on the U.S. Supreme Court's Rooker-Feldman doctrine, which bars lower federal courts from reviewing state court decisions, according to the firm's motion.

Under that doctrine, only a state court has jurisdiction to vacate a state court judgment fraudulently obtained. But in this case, the 6th Circuit held that Todd's FDCPA action was an independent federal claim that Todd was injured when Weltman filed a false affidavit.