Jury Returns Inconsistent Verdict in CFPB Action Against Ohio Debt Collection Law Firm, Verdict Under Advisement

An advisory jury, empaneled pursuant to Federal Rule 39(c)(1), recently returned an inconsistent verdict after trial in an action brought by the Consumer Financial Protection Bureau last year challenging that attorneys of a law firm specializing in the collection of debts were not “meaningfully involved” in collection activities engaged in by the firm in violation of the federal Fair Debt Collection Practices Act.

A copy of the complaint in Consumer Financial Protection Bureau v. Weltman, Weinberg & Reis Co., L.P.A. is available at:  Link to Complaint.

The jury determined that the law firm’s pre-suit collection letters contained “false, deceptive, or misleading representations or means in connection with the collection of a debt.” However, the jury rejected the CFPB’s claim that the firm’s attorneys were not meaningfully involved in the debt collection process.

Despite the jury’s verdict, the trial judge stated that he will make the final decision. U.S. District Court Judge Donald C. Nugent has taken the jury’s verdict under advisement and has given the CFPB until June 15 to submit a brief arguing why he should rule in its favor. The law firm’s response will be due two weeks later.

A copy of the verdict slip is available at: Link to Verdict Slip.

In April 2017, the CFPB commenced the enforcement action against the law firm in the U.S. District Court for the Northern District of Ohio alleging that collection letters being sent out by the firm suggested to its recipient that they were from an attorney, although no attorney with the firm had been “meaningfully involved” in sending the letter, including in “reaching a professional judgment that sending the letter is appropriate because, for example, the information in the letter is accurate and the debt is due and owing.”

This, the CFPB opined, was false and misleading from the perspective of the “least sophisticated consumer,” and such misrepresentation was “material because it had the potential to influence consumers to pay an alleged debt when they would not have otherwise.”

At issue were pre-suit demand letters the law firm sent to consumers on its firm letterhead that prominently described the firm as “ATTORNEYS AT LAW,” asserted that a particular balance was due and owing, and listed the firm’s name in the signature block. Some letters also referenced “possible legal action” in the event the consumer does not pay the amount demanded.

Despite the fact that the letters were sent under the law firm’s name, the CFPB alleged that no firm attorney reviewed the letters before they were sent, or reviewed the consumer’s file or formed a professional judgment that the debt demanded was actually due and owing before the firm sent a demand letter on firm letterhead to a consumer.

The CFPB claims were based on 15 U.S.C. § 1692e(3), which prohibits a debt collector, in connection with the collection of any debt, to falsely represent or imply that “any communication is from an attorney.”

In its trial brief, the law firm challenged the CFPB’s characterization of the facts, maintaining that its “attorneys design, supervise, and participate in every step of the collections process. And that the involvement of [the firm’s] attorneys is more than sufficient to satisfy the requirements of the law.” Amongst other things, the firm argued that it “maintains a robust compliance program” and that “all of its practices, processes, and procedures are designed and implemented under the constant supervision of experienced [firm] attorneys.”

According to the firm, the initial demand letters they send are:

calculated to advise the putative debtor that (1) the debt has been placed with [the firm] for collection and (2) the consumer has specific rights under the FDCPA. This demand letter is sent on [firm] letterhead to accurately convey the facts that [the firm] is a law firm that has been retained to collect the putative debt; no more, no less. The letter does not state that an attorney has reviewed the particular circumstances of the account, it does not mention any potential legal action, and it is not even signed by an attorney.

While the verdict returned answered in the affirmative whether the preponderance of the evidence demonstrated that the initial demand letter at issue being sent by the firm “contained any false, deceptive, or misleading representations,” the verdict went on to conclude that the CFPB had failed to prove that the firm’s attorneys were not “meaningfully involved” in the debt collection process being challenged.

The verdict slip itself required the jury to first consider whether the letter in issue contained any false or misleading representations or means in collection of a debt and if so the jury was directed to the question regarding the meaningful involvement of the firm’s attorneys. (Id.)

Stopping short of finding a lack of meaningful involvement caused the jury’s deliberations to conclude without reaching both the issues of whether the least sophisticated consumer would have been misled and whether any misrepresentation was material; elements the CFPB conceded it necessarily needed to prove in order for liability to attach to the firm. (See, CFPB’s Proposed Jury Instructions, Doc No. 69-4, pp. 11-12).

Given the CFPB’s sole theory of liability proceeding to trial, its claim that the firm’s attorneys were not “meaningfully involved” in the sending of the letters at issue, being outright rejected by the jury may provide a basis by which the law firm could avoid liability but does not necessarily signal victory for the law firm yet.

The verdict is only advisory and may be accepted or rejected by the presiding judge, (see Rule 39(c)(1)), who previously denied summary judgment for both parties citing issues of fact remaining regarding whether the least sophisticated consumer would believe the firm was acting as an attorney when the challenged letters were sent and, if so, whether attorneys from the firm were “meaningfully involved,” which would render any claims that the letters were misleading moot. (Opinion and Order, Doc No. 61, pp. 7-8).

Maurice Wutscher attorney Brady Hermann contributed to this article.

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Shannon Miller is based in Maurice Wutscher's Pennsylvania office, where he focuses his practice on various aspects of financial services law, with an emphasis on consumer financial services litigation. He has successfully represented financial institutions and law firms throughout the country for claims filed under the Fair Debt Collection Practices Act, Fair Credit Reporting Act, and various state consumer protection statutes. Shannon has first-chaired more than 100 jury trials. He is a former prosecutor for the Delaware County Office of the District Attorney, where he investigated and prosecuted white collar crimes, and other felonies.