Last month, Federal Communications Commission (FCC) Chairman Ajit Pai responded to letters from three representatives on the need for Telephone Consumer Protection Act (TCPA) clarity and the ongoing issue of robocalls. On October 4, 2018, Rep. Michael Burgess (R-TX) added his voice to the conversation by also sending a letter to Chairman Pai.

Rep. Burgess’s letter echoes the sentiments of those sent previously by Rep. Ken Buck (R-CO), Rep. David McKinley (R-WV), and Rep. Lee Zeldin (R-NY). The Burgess letter commends the FCC on its efforts to crack down on illegal robocalls while also stressing the need for the FCC to clarify and modernize the TCPA, especially after the ACA International v. FCC decision. Rep. Burgess urged the FCC to create a TCPA framework that “protects consumers while maintaining the ability of good faith callers to contact customers.”

insideARM Perspective

Since Rep. Burgess’s letter is similar in content to the prior letters, it is likely that Chairman Pai’s response will be similar as well. In his prior responses, Chairman Pai stated that the FCC was seeking comment on the TCPA post-ACA Int’l. v. FCC, but did not provide any clear indication of how and when a solution would arrive.

Since Chairman Pai’s responses to the initial three letters, two events occured.

First, the Ninth Circuit ruled in Marks v. Crunch San Diego that a device that dials from a list of telephone numbers is considered an automated telephone dialing system (ATDS) per the TCPA, creating a jurisdictional split on the issue with the Third Circuit. Crunch San Diego filed a petition for an en banc rehearing of the case in the Ninth Circuit, which is still pending.

Second, the FCC issued a request for comments on how the FCC should reconcile the split in interpretations by the courts of what constitutes an ATDS. This request had a relatively short comment period, with initial comments due on October 17.

With all of this activity on the issue, hopefully FCC guidance will be issued soon.

On October 4, 2018, the Bureau of Consumer Financial Protection (BCFP or Bureau) filed a consent order with Bluestem Brands, Inc., Bluestem Enterprises, Inc., and Bluestem Sales, Inc. (collectively Bluestem), an online retailer. In addition to agreeing to certain compliance-related measures, Bluestem was ordered to pay a civil penalty of $200,000 to the Bureau.

According to the order, the Bureau alleges that Bluestem “engaged in unfair acts and practices by substantially delaying forwarding post-sale payments made by consumers to Bluestem.” Bluestem sells charged-off accounts to third-party debt buyers. The order mentions that Bluestem does not take affirmative action to notify consumers when their account is sold. After the sale of an account, some consumers would still make payments directly to Bluestem. Bluestem delayed forwarding some of these payments to the debt buyers, which “was likely to subject consumers to misleading debt-collection efforts and inaccurate credit reporting.”

The order states that since 2013, there were 3,500 instances where the payment forwarding delay was over 365 days and 18,000 instances of at least a 31-day delay. According to the order, this was due to “operational errors” that stemmed from a conversion of Bluestem’s accounts receivable system.

In addition to the civil penalty mentioned above, Bluestem is ordered to:

• Update its processes, systems, and controls to prevent recurrence of the issue;
• Submit a comprehensive compliance plan to the Enforcement Director;
• Notify the Bureau if there is any issue with compliance with the Order’s obligations; and
• Bluestem’s Board of Directors must review all submissions required by the consent order.

insideARM Perspective

As technology advances, system conversions are inevitable. Any company that has gone through a system conversion knows that it is a hefty task to undertake. This consent order highlights the need for proper checks for all entities that touch an account to catch discrepancies, especially after a significant event like a system conversion. With that said, there are certain things not addressed in this consent order that would be helpful in evaluating the situation:

• Did Bluestem catch these discrepancies on their own?
• Did the purchasers report or forward to Bluestem any complaints from consumers stating that the accounts have already been resolved?
• What percentage of total accounts sold were problematic?

While the third item doesn’t diminish that, according to this consent order, at least 18,000 consumers were impacted by this issue, it’s a very different situation if the error occurred 1% of the time versus 90% of the time.

One other note relates to a handshake communication, meaning a communication that lets the consumer know that the account is no longer with the entity they have been regularly communicating with. While a handshake communication would not preclude all direct payments, at least some of the consumers might have sent their payments to the purchasing entity had they received one. This wouldn’t solve the issue of delayed forwarding of direct payments, but the impact of the issue might have been smaller.

In Marks v. Crunch San Diego, LLC, No. 14-56834, 2018 WL 4495553 (9th Cir. Sept. 20, 2018), the Ninth Circuit gave us a new definition of an automatic telephone dialing system.  Crunch argues that in expanding the definition of an ATDS so broadly, the Ninth Circuit has essentially re-written the Telephone Consumer Protection Act (“TCPA”), “in a manner that directly conflicts with the statutory text, legislative history, and binding intracircuit and persuasive inter-circuit authority from the Third and D.C. Circuits regarding the definition of an “automatic telephone dialing system” (ATDS).”

Definitions at Issue

In Marks, the Ninth Circuit held,

[T]he term “automtic telephone dialing system” means equipment which has the capacity—(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).

The TCPA already defines an ATDS as,

[E]quipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers. 47 U.S.C. § 227(a)(1).

While not a definition, Crunch also clarifies that the Ninth Circuit “erroneously concluded that Crunch did not dispute that [its] ‘system dials numbers automatically.’”  Crunch reiterates that the opposite is true: it both argued and demonstrated that a user of Crunch’s system had to manually type out message, manually determine the date and time of delivery, manually put numbers into the system and manually determine which numbers to dial.

Abrogation of the Ninth Circuit’s Own Decision

Crunch argues that Marks abrogates the Ninth Circuit’s own ruling in Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 951 (9th Cir. 2009)(holding that the statute’s clear meaning and Congress’s “clear and unambiguous” intent, was a reading of the phrase “to store or produce telephone numbers to be called, using a random of sequential number generator” to mean “store, produce, or call randomly or sequentially generated telephone numbers”).

The Marks Court restricted Satterfield’s holding to “whether a device has the “capacity ‘to store or produce telephone numbers’” which Crunch argues, reads Satterfield too narrowly.  Crunch states, “[a]fter Satterfield, and until now, it was clear that the dispute over the meaning of an ATDS centered around the phrase “using a random or sequential number generator” and not the issue of capacity.  Crunch argues that the Marks Court applied the phrase “using a sequentially generated telephone number” to have bearing only on the word “produce” not “store”  – which, it argues, drastically changes the meaning of the statutory text of the TCPA as well as misinterprets Congress’s intent.

The Crunch Team Are Astute Grammarians

Here is where things get technical. “Punctuation canon” technical.

Citing prior authority from the Ninth Circuit in Yang v. Majestic Blue Fisheries, LLC, 876 F.3d 996, 1000 (9th Cir. 2017), Crunch argues,

The grammatical structure of this provision requires reading the phrase “using a random or sequential number generator” as modifying either term—“store” or “produce”—in the preceding phrase. The “punctuation canon” dictates that “to store or produce telephone numbers to be called” must be read as the dependent phrase modified by “using a random or sequential number generator…” … The use of the disjunctive in the phrase preceding the comma compels reading the statute as requiring that an ATDS must have the capacity to either “store” phone numbers “using a random or sequential number generator,” or “produce” phone numbers “using a random or sequential number generator;…

Crunch continues that to implement the Marks interpretation of an ATDS, the statute you would have to be rewritten, either:

 [R]evising the statute’s punctuation so that it read: equipment which has the capacity (A) to store[,] or produce telephone numbers to be called [no comma] using a random or sequential number generator; and (B) to dial such numbers ….

[O]r changing the syntax with added words and subsections: equipment which has the capacity (A) to [i] store [telephone numbers to be called] or [ii] produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.

Crunch also points out that “Marks’s assertion that ‘if a device already has the numbers stored, there would be no need to produce or generate numbers’ illustrates that the phrase ‘using a random or sequential number generator’ would be a nullity.’”

BU

Crunch, we believe, correctly argues that the Ninth Circuit’s definition of an ATDS re-opens the overbreadth problem that the Third Circuit and the D.C. Circuit resolved this year in ACA Int’l v. FCC, 885 F.3d 687, 698-700 (D.C. Cir. 2018)(expressly holding that an ATDS cannot be broadly construed where every one of the over 224 million smartphones in the United States would qualify as an ATDS), and Dominguez v. Yahoo, Inc., 894 F.3d 116, 121 (3d Cir. 2018)(the device “had the present capacity to function as an autodialer by generating random or sequential telephone numbers and dialing those numbers”)(emphasis added).

Our full explanation and analysis of those decisions can be found here and here.

Post-Legislative Policies and Inaction Cannot Be the Basis to Re-Write a Statute in the Courts  

Crunch also attacks the Ninth Circuit’s reasoning that, “Congress ratified the FCC’s broader interpretation by leaving the statutory definition unchanged, while narrowly amending the TCPA to exempt debt collection calls made on behalf of the U.S.”

Citing the Ninth Circuit’s own decisions in Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994) and Bruesewitz v. Wyeth LLC, 562 U.S. 223, 242 (2011), Crunch states that congressional inaction itself is not, and should not have been, persuasive to the Marks Court – or any court for that matter.

Further, Crunch notes that the initial purpose in restricting devices that generated random or sequential numbers was to prevent the influx of calls to emergency numbers (i.e., hospitals).  Restricting dialers – like your iPhone – that merely call stored numbers, would not curb the type of abuses Congress set out to prevent and would not serve the legislative intent.  Surprisingly, Crunch did not drive home the point that regular iPhone users are not the bad guy robo-callers that the nation has growth to loathe, but perhaps that is implied.

The Marks Court Relied on Irrelevant Authority

In its petition, Crunch also informs the Marks Court that it relied on irrelevant authority in reaching its new definition of an ATDS. Awkward, but true.

In Marks, the Court addressed cases concerning the Do Not Call Registry (see our blog on the DNCR here), but those cases deal with the issue of consent to be called, not the manner or device by which the consumer is called.  Crunch also rightly points out that do-not-call cases are actionable regardless of whether an ATDS is used to place the call because the cause of action arises on lack of consent, not functionality.

In Sum

Federal Rule of Appellate Procedure 35 states, “[a]n en banc hearing or rehearing is not favored and ordinarily will not be ordered unless: (1) en banc consideration is necessary to secure or maintain uniformity of the court’s decisions; or (2) the proceeding involves a question of exceptional importance.

It appears that Crunch went the “maintain uniformity of the court’s decisions” route.  However, with 2,712 TCPA cases filed to date this year, and over 224 million smart phones impacted by the Ninth Circuit’s Marks ruling, in TCPAland, there is an element of exceptional importance present here too.

Despite our collegiality with Marks’s counsel, Abbas Kazerounian (check him out on the Ramble Podcast here) …. We’re pulling for you, Crunch!

–

Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

On Saturday, Justice Brett Kavanaugh, formerly of the Court of Appeals for the District of Columbia Circuit, was confirmed and sworn in as an Associate Justice of the U.S. Supreme Court. The Supreme Court now has a firm conservative-leaning majority, which will likely impact several collections-related cases that are or have the potential to be on the court’s docket in the near future.

Definition of “Debt Collection”

The new Supreme Court roster will likely impact the decision in Obduskey v. Wells Fargo, 138 S. Ct. 2710 (2018), which is on the court’s docket for the term currently in session. As previously published by insideARM, Obduskey questions the definition of “debt collection” and whether it encompasses actions where payment is never requested or demanded from the consumer. The case stems from a 10th Circuit decision that affirmed the district court’s ruling finding that the Fair Debt Collection Practices Act (FDCPA) does not apply to non-judicial foreclosure proceedings. However, as the 10th Circuit noted, not all courts agree with this opinion, and the Supreme Court will now have the final say. 

Constitutionality of BCFP Structure

If the Supreme Court decides to hear it, a case that will certainly feel the impact of having Justice Kavanaugh on the bench is State National Bank of Big Spring, et al. v. Steven Mnuchin, et al. Currently, a petition for writ of certiorari — or a request for the Supreme Court to hear the case — has been filed and is pending before the court. State National Bank questions the constitutionality of the structure of the Bureau of Consumer Financial Protection (BCFP), an issue that has come up several times in the past year or so.

If the Supreme Court decides to hear this case, Justice Kavanaugh’s opinion would almost assuredly be that the structure of the BCFP is unconstitutional. While still on the D.C. Circuit, Justice Kavanaugh found as much when he authored the panel decision in PHH v. Consumer Financial Protection Bureau, 839 F.3d 1 (2016) and a dissenting opinion in the court’s en banc review of the case.

Definition of ATDS

Another issue that has the potential to find itself on the Supreme Court’s docket is the definition of an automatic telephone dialing system (ATDS) according to the Telephone Consumer Protection Act (TCPA). While businesses, consumers, and consumer advocates alike await guidance from the Federal Communications Commission (FCC) on the issue, the question of whether a device that dials from a list of numbers falls under the definition of the ATDS is making its way up the ladder in the judicial system.

Currently, there is a jurisdictional split between circuit courts of appeal on the answer to that question. In June 2018, the Third Circuit found that a device that dials from a list of numbers falls outside the definition of an ATDS in Dominguez v. Yahoo, Inc., No. 17-1243 (3d Cir. June 26, 2018). Meanwhile, the Ninth Circuit recently found the exact opposite in Marks v. Crunch San Diego, LLC, No. 14-56834 (9th Cir. Sept. 20, 2018). Crunch filed a petition for en banc review of the panel decision by the Ninth Circuit. It is uncertain whether the parties will take the issue all the way to the Supreme Court or stop short of seeking Supreme Court review — as happened in the PHH case referenced above — but the new roster of the Supreme Court is likely to impact the court’s decision if the issue does arise.

Oh dear. Oh dear me.

The Hon. Matthew Kennelly has already made quite the mark on TCPAland. He  handed down the big Aranda ruling that turned Spokeo-based TCPA arguments into minced meat. And he recently prevailed over the largest TCPA settlement in history in the Birchmeier settlement–a $76MM resolution that saw Edelson PC singing all the way to the bank.  

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Perhaps it was just the bad luck of having drawn the same judge that had just approved the largest TCPA class settlement in history. Or perhaps it was the rather extraordinary back-story of the case–which included a preliminary injunction having been entered on a classwide basis before the settlement was reached.  Or maybe it was the humongous 16% claims rate–generated by a spirited online advertising campaign?–that drove down the per-class member recovery following the notice period. Whatever it was, the Court in Snyder v. Ocwen Loan Servicing, Case No. 14 C 8461 Case No. 16 C 8677, 2018 U.S. Dist. LEXIS 167471 (N.D. Ill. Sept. 28, 2018) just handed down the most remarkable rejection of a class settlement in TCPA history.

The Court found that a $17.5MM check was not big enough–at least not on the record before it–to compensate class members. And, in the most extraordinary of rebukes, the Court suggested that class counsel may have sold the class short:

On the record before the Court, it is fair to say that there is a good chance that class counsel have sold the case short-at least, the Court cannot determine otherwise on the present record.

Snyder at * 19.

Holy smokes.

The strangest part of all this is that the resolution looked good on paper. Really good. At  least as compared to other settlements in the TCPA class settlement “market.” $17.5MM to resolve the claims of 1.7MM class members is big money. That’s over $10.25 a class member–well above market value for these cases. And when recognizing that the settlement was struck while ACA Int’l was pending–and when further recognizing that a court in Michigan just found that Ocwen’s dialer is not even an ATDS–this settlement seemed downright favorable to the class. Indeed, the Godfather of TCPA class actions is on record opining that Ocwen “overpaid.”

But Judge Kennelly disagreed, to say the least. His decision does not mention Keyes, but it does rely on the record created as part of the earlier preliminary injunction proceeding to suggest that the defendant’s record keeping may not have been up to snuff. And while the Court (somewhat reluctantly it seemed) concedes that 23(b)(3) certification was far from assured owing to the potential for individualized consent inquiries, the Court was utterly unimpressed with Class Counsel’s showing respecting the Defendant’s purported inability to pay the billion dollar judgment that was possible in this case. (Quick background–Class Counsel in TCPA class cases seeking settlement approval commonly remind the court, without irony, that if the case were to proceed to trial the defendant wouldn’t be able to pay the full amount of the judgment anyway.) The Court was also concerned with the seemingly “gratis” dismissal of two related bank defendants–although the decision strongly implies that their calls were wrapped within the class settlement amount as part of an indemnity deal with the primary defendant.

And while Class Counsel had urged that the $17.5MM represented a good resolution for the class, the Court reminded everyone why that representation could not be taken for granted:

Class counsel strongly urge that the settlement represents a reasonable resolution of the claims when one balances the strengths and weaknesses of the claims of the class. And their opinion is worthy of consideration. But the Court cannot simply defer to them, particularly when they stand to gain millions of dollars from the proposed settlement.

Snyder at *19.

Wow.

It is important to note, however, that the Court did not find any funny business between class counsel and defense counsel. Although the settlement was rejected, the Court was careful to find that the settlement negotiations were “arm’s length” and that “[t]here is no indication of any side deals.”  So this isn’t a situation where the Court thought that the fix was in–just that Class Counsel failed to present sufficient evidence to justify the settlement amount that was negotiated between the parties.

At bottom, the settlement was sunk and deemed insufficient by the Snyder Court–at least on the present record– and the parties are now in the most extraordinary of positions. Does Class Counsel take the opportunity and try to pig out on an (even more) massive settlement?  Or do they act prudently and try to salvage the current settlement by flipping a copy of Keyes to the Court and otherwise supplementing the record (and/or accepting a fee cut?) Does Ocwen refuse to play ball at all and now fight certification and–perhaps–even try the case on the merits one day with Keyes in their pocket?  How does the calculus surrounding the FCC’s pending TCPA Public Notice proceeding factor in?

This is completely unprecedented territory for all involved and just a truly remarkable turn of events.  No TCPA settlement of this size has ever been rejected by a court. It will be very interesting to see what happens next.

—

Editor’s note: This article is provided through a partnership between insideARM and Womble Bond Dickinson. WBD powers our TCPA case law chart and provides a steady stream of their timely, insightful and entertaining take on this ever-evolving, never-a-dull-moment topic. WBD – and all insideARM articles – are protected by copyright. All rights are reserved.

MARRIETTA, Ga. — Sequium Asset Solutions, LLC, a leader in outsourced Accounts Receivable Management, has announced their proprietary and data-driven mobile application called DAVID℠; that will allow consumers to solve their obligations when it comes to debt management, and empower them to be in control of their own financial situations.  

What is David℠ 

David℠ is yet another extension of Sequium’s continuation of providing multi- channel communication and payment methodologies to its consumer base. This self-service application allows consumers to make payment arrangements, settlements, and to communicate with us via the channel of their choice. David℠ provides access to email, text, phone, push notifications and live chat to its users. The system has a multitude of payment options and it links to various non-traditional payment sources. 

This smartphone application is totally compliant with all regulations i.e. reg-e, e-sign etc., and simultaneously protects consumers’ privacy while maintaining the highest degree of encryption and security protocols. The system allows for real-time access to their account information and can feature rewards and incentives for complying with the payment arrangements they have set for themselves. Further, the system is fully customizable to meet all of our clients’ needs including Rule Based Payments and AI integrated solutions. 

“The circumstances in our lives tend to matter less to us than the sense of control we feel we have,” said Greg Schubert, President and CEO of Sequium Asset Solutions, LLC. “This highly advanced tool gives that exact control that consumers require to manage their own unique financial situations.”

Schubert added, “David℠ has been a significant imperative of the company as we continue to leverage technology, data science, business intelligence and advanced machine learning. Sequium was formed with the vision to re-engineer the entire collection process in this new world we live in. David℠ is more than just an application as it is an extension of how individuals now communicate on a daily basis. At the end of the day, Sequium wants to own that access to the smartphone. It’s where things are going and where we are going to be every step of the way, and then some.”

Resolving your debt is just a click away– Slay your debts℠ and take back control of your financial challenges with our exclusive mobile application. “DAVID℠ is here to help.”

Defendants in Fair Debt Collection Practices Act (FDCPA) cases rarely get relief for their legal defense costs even if they succeed on the merits. The Eastern District of New York (E.D.N.Y.), however, has drawn the line. In Cameau v. National Recovery Agency, Inc., Case No. 15-cv-2861 (E.D.N.Y Sep. 28, 2018), the court sanctioned plaintiff and his counsel for not dismissing or amending a complaint when it became clear that it was no longer supported by the evidence.

Factual and Procedural Background

At some point, plaintiff incurred a debt that was later assigned to National Recovery Agency, Inc. for collection. Plaintiff returned a telephone call where, according to the complaint, the National Recovery representative refused to identify the company he was calling from.

During plaintiff’s deposition, plaintiff admitted that he had little to no recollection about the allegations made in the complaint. Based on the deposition testimony, National Recovery’s defense counsel sent a safe harbor letter to plaintiff’s counsel requesting dismissal of the complaint. Since plaintiff’s counsel did not respond to this letter, National Recovery moved for summary judgment, for attorneys’ fees, and for sanction.

The magistrate judge reviewing the matter recommended that the court deny the motion for attorneys fees but grant the motion for summary judgment and motion for sanctions.

Plaintiff’s counsel filed an objection to the magistrate judge’s report and recommendation. With his objection, plaintiff’s counsel included a recording of the call that took place between plaintiff and National Recovery. The call recording clearly shows that (1) defendant never asked who was calling and (2) that the representative stated he was calling from National Recovery immediately after identifying his name.

The Decision

The court adopted the magistrate judge’s recommendations and granted National Recovery’s motion for summary judgment and motion for sanctions. At the time the magistrate reviewed the motions, the call recording was not yet submitted. However, the magistrate found that the deposition testimony contradicts the allegations made in the complaint. Due to this contradiction, plaintiff’s counsel “had a duty to… either withdraw certain claims or amend his allegations to conform to the newly discovered evidence (or lack thereof).” Plaintiff’s counsel did neither.

Reviewing the call recording, the court determined that the magistrate judge’s recommendations hold even more weight. The call recording itself shows that the key factual allegations in the complaint were contradictory to what occured in the call. The court found that plaintiff’s counsel failed to comply with Rule 11 of the Federal Rules of Civil Procedure that requires attorneys to verify that the allegations in their complaints have or will have evidentiary support.

Further, the court found that sanctions are appopriate due to plaintiff’s counsel’s failure to respond to the safe harbor letter sent by National Recovery’s defense counsel. By failing to respond and acting “objectively unreasonably” in response to the letter, National Recovery was forced to file a motion for summary judgment on the issue. 

Ultimately, the court sanctioned plaintiff and platinff’s counsel jointly and severally for National Recovery’s legal fees associated with the motion for summary judgment.

insideARM Perspective

The court here showed that even plaintiffs and their counsel have consequences for their actions. Interestingly, the court did not just sanction plaintiff’s counsel, but instead also sanctioned the plaintiff. When parties are jointly and severally liable, it means the party entitled to relief may seek the full amount from either of the other parties. 

While it is good to see E.D.N.Y. draw the line, it could be argued that the court did not go far enough. Plaintiff’s counsel was in possession of the call recording, as shown by him presenting the recording to the court. The court should have inquired into how long ago platintiff’s counsel had the call in his possession. Let’s say for argument’s sake that plaintiff’s counsel had possession of the call recording prior to filing the complaint, wouldn’t it mean that he filed a complaint not supported by the evidence? If that is the case, wouldn’t it make sense then that the sanctions cover any litigation procedure that stemmed from this complaint, including responding to the complaint and taking plaintiff’s deposition?

On Friday afternoon, the Department of Education (ED) filed a motion in the Court of Federal Claims. The motion was a request for clarification – or reconsideration – of the scope of the Court’s Order from two Fridays ago, which granted the plaintiff’s motion to permanently enjoin ED from cancelling its solicitation for unrestricted debt collection services.

The motion notes that the Court’s September 14, 2018 Opinion said:

[T]he “[administrative record] before the court is not enough to show that [the Department of Education’s] decision to cancel the solicitation was rational.” Based on that holding, the Court “set aside [the Department of Education’s] May 3, 2018 cancellation decision and return[ed] the procurement to its posture as of May 2, 2018.” The Court “does not suggest what further action the Department of Education may take. Rather, the Court holds only that the administrative record before it does not support the agency’s May 3, 2018 decision to cancel the solicitation.” The Court then issued the following injunction: “[T]he United States of America, the United States Department of Education, and their officers, agents, servants, employees, and representatives are permanently ENJOINED, pursuant to RCFC 65(d), from cancelling Solicitation No. ED-FSA-16-R-0009.”

ED wants to know whether the Court really meant that it could never cancel this Solicitation, or whether ED is at liberty to fix the identified weaknesses in the administrative record on which it relied to reach its cancellation decision. And if the Court really DID mean to enjoin ED from ever cancelling the Solicitation, ED is requesting that the Court reconsider. ED says,

The position that ED occupied immediately prior to cancellation afforded ED the option to exercise its discretion and take any appropriate action necessary to manage the procurement in accordance with its needs, including, litigating the then pending protests, taking corrective action, or cancellation. For this reason, the Government interprets the Court’s full opinion as directing a return to that pre-cancellation state of affairs, and not as a permanent bar preventing the agency from exercising its right to undertake whatever action it deems necessary and rationally supported, including a potential future cancellation.

insideARM Perspective

Everyone has been waiting to see what ED would do in response to the September 14 permanent injunction. Sources told insideARM last week that a status update has been scheduled in the Court of Federal Claims for October 20, 2018. I believe this update was scheduled prior to the submission of ED’s Motion for Clarification or Reconsideration. It would be unlike Judge Wheeler to take almost three weeks to respond to a motion, so I suspect we will hear something soon on this current request.

UPDATED 12:33 PM On October 1, 2018: As I suspected, Judge Wheeler has responded to ED’s Motion. Here’s what he said,

The Court clarifies that it intended only to enjoin the Department of Education from cancelling the solicitation based on the administrative record that it submitted in this proceeding…. The Department of Education “retains the power to proceed with the award process or to terminate the award process” for any legal, sufficiently supported reason…. Accordingly, the Government’s motion for clarification is GRANTED. The Court’s September 14, 2018 Order is amended as follows:

It is ORDERED that the United States of America, the United States Department of Education, and their officers, agents, servants, employees, and representatives are permanently ENJOINED, pursuant to RCFC 65(d), from cancelling Solicitation No. ED-FSA-16-R-0009 on the basis of the administrative record that the Department of Education relied on to justify its May 3, 2018 cancellation decision. (citations omitted)

PORT SAINT LUCIE, Fla. — United Holding Group has donated to support the 5th Annual Ravenna Invitational in support of the Infinite Hero Foundation (IHF), an organization that provides access to essential therapies and resources for our military veterans and their families.

United Holding Group’s donation will further Infinite Hero Foundation’s mission to combat the most difficult issues- both mental and physical- that face our veterans and their families. The goal of the Invitational is to raise awareness and provide funding for critical services for our military heroes. This year’s Annual Ravenna Invitational was held on July 19-23, 2018 in Littleton, Colorado. The Event included a working forum supported by IHF to which the Ravenna community and all golfing event participants were invited. The forum included working demonstrations of technology and adaptive equipment along with a panel discussion on the topic of brain health. The IHF Invitational also included a Gala and scramble style golf tournament, both of which featured several influential, world-class speakers.

“United Holding Group is proud to support the 5th Annual Ravenna Invitational,” says Darren Turco, President of United Holding Group. “We actively support charities that make a positive impact in our communities. Supporting the Infinite Hero Foundation is our way to express our gratitude to our military heroes. We are honored to assist IHF in providing funds for grants that give our veterans and their families the cutting-edge research, technology, and care that benefit their mental and physical health.”

About Infinite Hero Foundation

The mission of the Infinite Hero Foundation is to fund and support non-profit veteran service organizations who provide access to innovative technology, adaptive equipment, community resources, medical research, and mental health care for our Nation’s military heroes. Since its founding, IHF has awarded over $3 million in grants to support veterans from all branches of the military and their families who have unique, service-related, mental and physical injuries. With very low overhead, the organization funnels maximum resources directly to partnered organizations. The Infinite Hero Foundation is a non-profit public benefit organization founded in 2012.

About United Holding Group

United Holding Group (UHG) is a receivables management firm specializing in the divestiture of non-performing and partially performing assets. United Holding Group strives to provide unique and reliable solutions for creditors, lenders, financial institutions, and partners. United Holding Group is very active in supporting the local community, sponsoring charities, and participating in multiple activities to better our communities.

Gomez v. Cavalry Portfolio Services, LLC et al., Case No. 14-cv-9420 (N.D. Ill. Sept. 24, 2018) is a court decision full of questions but not much analysis on some key issues. The case involved the statute of limitations, whether a purchaser of defaulted debt is a debt collector subject to the Fair Debt Collection Practices Act (FDCPA), and what happens to a subsequent creditor’s right to collect interest if the original creditor stopped doing so after charge off. The insideARM perspective below discusses some gaps in this decision.

Factual and Procedural Background

Plaintiffs incurred a credit card debt through FIA Card Services, a subsidiary of Bank of America (BOA). In accordance with its policies on charged off accounts, BOA stopped assessing interest on the account and stopped sending periodic statements to plaintiffs once it charged off the account. The cardholder agreement for this account, which plaintiffs agreed to when they opened the credit card, states that BOA’s failure to exercise any of its rights under the agreement does not constitute a waiver those rights in the future.

Eventually, BOA sold the account to Cavalry SPV I, LLC (Cavalry SPV), which placed the account for collection with Cavalry Portfolio Services, LLC (CPS). When CPS began collection efforts on the account, it assessed interest from the time of charge off through the date of its first letter to plaintiffs, and continued to assess interest while collection efforts continued. CPS sent collection letters to plaintiffs on January 16, 2013 and March 27, 2013, with the balance increasing in the subsequent letter due to interest.

After plaintiffs received the second letter, they retained an attorney for the purposes of settling the account. The attorney sent a request for debt validation to CPS. On March 21, 2014, CPS responded with a letter that stated, “Per your request, please find enclosed the verification of your client’s debt. Your account is now subject to resumption of collection efforts. You may contact us at [phone number] from [time] Monday through Friday.” There response letter did not contain a request for payment or any reference to settling the debt.

On November 24, 2014, plaintiffs filed a lawsuit against CPS alleging that adding post-charge off interest to the account after BOA waived such interest violated the FDCPA. Both parties filed motions for summary judgment.

The Decision

The court’s decision was broken down into three parts — one per each issue referenced in the beginning of this article.

Waiver of Post-Charge Off Interest

The court found that BOA’s actions qualified as an implied waiver of the right to collect post-charge off, pre-sale interest. The court was convinced that BOA effected an implicit waiver by not charging interest or sending periodic statements to plaintiffs for two years for two years. The court referenced BOA’s broader policy of stopping the calculation and assessment of interest for charge off accounts as a knowing and voluntary action.

According to the court, since BOA waived its right to post-charge off interest, it could not transfer such right when it sold the account to Cavalry SPV. The court based this on the principle that a party cannot assign a right it does not possess. Since, according to the court, Cavalry SPV did not obtain the right to post-charge off interest, then CPS could not collect it for this account. The first two letters sent by CPS attempted to collect such interest, the court found them problematic under the FDCPA. However, the court found the verification response letter to be compliant because it made no reference to post-charge off interest and made no demand for payment.

Cavalry SPV as Debt Collector Subject to FDCPA

Next the court turned to whether Cavalry SPV, as a debt purchaser, is subject to the FDCPA when CPS — not Cavalry SPV — was collecting on the debt. The court cited the U.S. Supreme Court’s three-part definition of debt collector from Henson v. Santander Consumer USA, Inc. as “(1) a person whose principal purpose is to collect debts; (2) a person who regularly collects debts owed to another; or (3) a person who collects its own debts, using a name other than its own as if it were a debt collector.”

However, the court then jumped to a pre-Hansen Seventh Circuit decision, Ruth v. Triumph Partnerships, 577 F.3d 790 (7th Cir. 2009), that states a debt purchaser is considered a debt collector if the purchased debt is in default. The reasoning for this being “[t]he purchaser of an already-defaulted debt — like the debt collector, and unlike the originator and servicer of a non-defaulted debt — has no ongoing relationship with the debtor and, therefore, no incentive to engender goodwill by treating the debtor with honesty and respect.”

Without any further analysis, the court simply found that Cavalry SPV is subject to the FDCPA because it purchased the account in question after default.

Statute of Limitations

Ultimately, the court granted summary judgment in favor of the defendants on statute of limitations grounds. While the court did take issue with the first two letters sent to plaintiffs, it noted that these two letters were sent more than a year prior to the filing of the lawsuit and thus were outside of the FDCPA’s statute of limitations. The court found nothing false or misleading about the verification response letter, which was the only letter that was within the statute of limitations. Based on this, the court entered judgment in favor of Cavalry SPV and CPS.

insideARM Perspective

While the statute of limitations ultimately saved the day, the court’s decision contains many unanswered questions and some eyebrow-raising reasoning.

First, even though the court referenced the cardholder agreement, there is zero analysis about the impact of the contractual terms on BOA’s alleged waiver. By agreeing to the cardholder agreement, plaintiffs explicitly waived a non-action, implicit waiver. If plaintiffs waived the “non-action waiver,” how can it then be the grounds for finding a violation? And let’s also address the larger elephant in the room: why does an alleged implicit waiver by BOA hold water in the court’s eyes but not a concrete, explicit contractual waiver by plaintiffs? 

Second, the decision regarding whether or not Cavalry SPV — as opposed to CPS — is a debt collector lacks much needed analysis. The court cites Henson but fails to analyze how it impacts Ruth, a pre-Henson Seventh Circuit decision, when all courts in the United States are bound by the Supreme Court’s ruling. The court’s decision does zero analysis on Cavalry SPV and CPS being two, separate entities with separate roles. There was also no analysis of whether Cavalry SPV and CPS, both of which contain “Cavalry” in their name, avoid prong 3 of the Henson definition.

Third, as more of an observation, the court dodged analyzing an issue that will be heard by the U.S. Supreme Court in the upcoming term: is an action that does not request payment considered debt collection? Defendants argued in their motion for summary judgment that the verification response letter was not a collection communication. Instead of performing any analysis on this particular issue, the court instead said that even if it was, the letter was not false or deceptive.

In sum, it would have been nice to see a deeper analysis by the court.