We previously reported on the Seventh Circuit Court of Appeals' decision in Oliva v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 864 F.3d 492 (7th Cir. 2017). In Oliva, the sharply-divided Seventh Circuit held that the debt collector was liable under the Fair Debt Collection Practices Act even though the collector followed a longstanding law on venue selection, including the Seventh Circuit's own controlling precedent at the time. The Supreme Court has now denied the debt collector's petition for review of the Oliva ruling.
As we explained in our previous post, the case arose out of the debt collector's choice of venue in filing a collections lawsuit. The debt collector relied on the Seventh Circuit's 18-year-old controlling precedent interpreting the FDCPA's venue provision and probably never foresaw that its entirely justified conduct would result in FDCPA liability. The problem was that of timing. During the pendency of the debt collection lawsuit, the Seventh Circuit overruled itself, thus rendering the debt collector's choice of venue erroneous. When the borrower sued, the trial court entered a judgment for the debt collector on the grounds of a bona fide error defense. Sitting en banc, the Seventh Circuit reversed on the grounds that the new precedent applied retroactively and, therefore, the debt collector's conduct violated the FDCPA even though it had not at the time of the conduct. The Seventh Circuit also rejected the debt collector's argument that its venue choice was subject to a bona fide error defense.
In its petition to the Supreme Court, the debt collector led with a quote from Justice Kennedy's dissent in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A., 559 U.S. 573 (2010). The majority in Jerman held that the bona fide error defense under the FDCPA applies to mistakes of fact and not mistakes of law, no matter how justified. In his dissent, Justice Kennedy predicted that the Supreme Court's holding would result in liability where a debt collector follows a "particular practice [that] is compelled by existing precedent ... if that precedent is later overruled."
This is exactly what happened here. As the debt collector emphasized, the issue with the Seventh Circuit's expansive reading of Jerman is that it characterized the debt collector's error as an unprotected "mistake of law" despite the undisputed fact that, at the time of the conduct at issue, there was no mistake at all. To be sure, the debt collector's choice of venue did not become a mistake until the Seventh Circuit changed its controlling precedent and retroactively applied it to the debt collector's conduct after it took place.
As a result of the Supreme Court's denial of the debt collector's petition, the Seventh Circuit's ruling stays in place, along with all the unfortunate ramifications that will likely follow. In fact, the Seventh Circuit already relied on Oliva in a recent decision and held that a defendant's reliance on the Seventh Circuit's prior precedent did not absolve the defendant from liability under the FDCPA.
We will continue to monitor Oliva's progeny as it develops.
The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
