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Consumer Financial Protection Bureau v. Weltman, Weinberg & Reis Co., L.P.A.

United States District Court, N.D. Ohio, Eastern Division

July 25, 2018

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,
v.
WELTMAN, WEINBERG & REIS CO., L.P.A., Defendant.

          MEMORANDUM OPINION AND ORDER

          DONALD C. NUGENT, JUDGE.

         This matter is before the Court subsequent to a four-day trial to the Court, with an advisory jury duly empaneled and sworn pursuant to Fed. R. Civ. Pro. 39(c)(1). Following trial, the parties each submitted proposed findings of fact and conclusions of law. The issues have now been fully presented and are ready for the Court's consideration.

         PROCEDURAL HISTORY

         Plaintiff, the Consumer Financial Protection Bureau ("the Bureau"), filed this action on April 17, 2017, alleging that Defendant Weltman, Weinberg & Reis Co., L.P.A. ("Weltman") violated Sections 807(3), 807(10 and 814(b)(6) for the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e(3), (10), and 16921(b)(6); and, Sections 1031(a), 1036(a)(1), 1054, and 1055 of the Consumer Financial Protection Act of 2010 ("CFPA"), 12 U.S.C. §§5531(a), 5536((a)(1), 5564, and 5565, by "misrepresenting the level of attorney involvement in demand letters and calls to consumers. (ECF #1, ¶ 1, 2). Following discover}' both parties moved for summary judgment. (ECF # 44, 45). Both of these motions were denied. (ECF #61).

         Trial of this matter commenced on May 1, 2018, before an advisory jury, pursuant to Fed. R. Civ. Pro. 39(c)(1). Prior to the jury's empanelment, the Plaintiff voluntarily dismissed Counts 4, 5 and 6, with prejudice, and withdrew its request for disgorgement. (ECF #79). This left Counts One through Three for trial. Count One alleged that Weltman's demand letters "misrepresented that the letters were from attorneys and that attorneys were meaningfully involved, when in most cases the attorneys were not meaningfully involved in preparing and sending the letters" in violation of Sections 807(3) and 807 (1) of the FDCPA, 15 U.S.C. § 1692e(3), (10). Count Two alleged that the same letters violated Section 1036(a)(1)(A) of the CFPA, 12 U.S.C. § 5536(a)(l)(A), for the same reason. Count Three alleges that this also constituted deceptive acts and practices in violation of Sections 1031 (a) and 1036(a)(1)(B) of the CFPA, 12 U.S.C. §§5531(a)(1) and 5536(a)(1)(B).

         At trial, the Plaintiff called three witnesses: (1) Ms. Eileen Bitterman; (2) Mr. David Tommer; and, (3) Dr. Ronald Goodstein, and submitted exhibits. Defendant called two additional witnesses: (1) Chuck Pona; and, (2) Scott Weltman. On May 4, 2018, after four days of trial, the jury submitted their answers to the following interrogatories:

1. Do you find that the Plaintiff proved by a preponderance of the evidence that the initial demand letter sent by Weltman contained any false, deceptive, or misleading representations or means in connection with the collection of a debt? YES (Enter "yes" or "no").
If your answer to Interrogatory Number 1 is yes, continue to Interrogatory Number 2. If your answer is no, your deliberations are finished and you should not answer any further questions.
2. Do you find that the Plaintiff proved by a preponderance of the evidence that Weltman's lawyers were not meaningfully involved in the debt collection process. NO, (Enter "yes" or "no").
If your answer to Interrogatory Number 2 is yes, continue to Interrogatory 3. IF your answer is no, your deliberations are finished and you should not answer any further questions.

         After the advisory jury returned these findings, the parties were given a final opportunity to present their proposed findings of fact and conclusions of law.

         The Court is not bound by the advisory jury's determination, but finds that their answer to Interrogatory Number 2 comports fully with the weight of the evidence presented at trial. The jury's answer to Interrogatory Number 1, however, does not correctly reconcile the evidence presented with the Court's instructions or the standard of proof required of the Plaintiff in this case. Although there was some evidence presented in support of the idea that the letters could be misleading to certain consumers, that evidence came exclusively from an expert that the Court does not find credible. Further, the Complaint relies solely on the assertion that the demand letters were misleading because they were sent from a law firm, and lawyers were not meaningfully involved in the debt collection process. The jury's finding, adopted by this Court, that lawyers were meaningfully involved disproves the Plaintiffs sole theory of liability, and precludes recovery under the Complaint.

         ANALYSIS

         1. Applicable law

         Neither party disputes that Weltman is a debt collector to whom the FDCPA and the CFPA apply, or that Weltman's demand letters were sent in connection with the collection or attempt to collect debts. The question at issue in this case is whether Weltman's debt collection demand letters violated the FDCPA or the CFPA. The FDCPA and the CFPA were violated if the letters used "any false, deceptive, or misleading representation or means in connection with the collection of any debt," or if they falsely represent or imply that communication is "from an attorney." 15 U.S.C. §1692e and 1692e(3). A demand letter is not false or misleading for using letterhead that "accurately describes the relevant legal entities," had an accurate and truthful signature block, and includes a "conspicuous notation that the letter is sent by a debt collector." Sheriff v. Gillie, 136 S.Ct. 1594 (2016).

         The letters are alleged to have violated the FDCPA and the CFPA not because they contain false statements, but because they allegedly falsely imply that an attorney was meaningfully involved in the collection of the debts to which the letters relate. According to case law from various circuits, a demand letter indicating that it comes "from an attorney" can be found to be deceptive even if literally true, if the letter is not the product of an attorney's professional judgment, or if the attorney was not sufficiently involved in the collection of the debt or the drafting of the letter. See, e.g., Nielsen v. Dickerson, 307 F.3d 623 (7th Cir. 2002); Lesher v. Law Offices of Mitchell N. Kay, P. C., 650 F.3d 993, 1003 (3d Cir. 2011); Greco v. Trauner, Cohen & Thomas, LLP, 412 F.3d 360, 364 (2d Cir. 2005); Consumer Fin. Prot. Bureau v. Frederick J. Hanna & Assoc, P.C, 114 F.Supp.3d 1342, 1363 '(N.D.Ga. 2015). In order to establish any of the violations alleged in the Complaint, the Plaintiff must show, by a preponderance of the evidence, that:

         1. The least sophisticated debtor would believe, based on the initial demand letter, that Weltman was acting as an attorney in the debt collection process;[1] and, 2. Weltman's lawyers were not meaningfully involved in the debt collection process; and, 3. The representation that Weltman was acting as an attorney in the debt collection process was material.

         The least sophisticated debtor is to be considered uninformed, naive, and trusting, but also possessing reasonable intelligence, and capable of making basic logical deductions and inferences. Sanford v. Portfolio Recovery Assocs., LLC, NO. 12-11526, 2013 WL 3798285, at *12 (E.D. Mich. July 22, 2013)(citations omitted). It is not a requirement that the Defendant intended to mislead or deceive a consumer. This standard is "lower than simply examining whether particular language would deceive or mislead a reasonable debtor," Smith v. Computer Credit, Inc., 167 F.3d 1052, 1054 (6th Cir. 1999), but does not give credence to "frivolous misinterpretations or nonsensical interpretations.. .." Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 592 (6* Cir. 2009).

         There is no specific test for what constitutes "meaningfully involved." Cases have held that an attorney has sufficient personal involvement in the process if one reviews the file of the individual consumer to whom the letter was sent and/or exercises some "professional judgment as to the delinquency and validity of any individual debt" before the letter is issued. See, e.g. Consumer Financial Protection Bureau v. Frederick J. Hanna & Assoc, P.C., 114 F.Supp.3d 1342, 1363 (N.D.Ga. 2015); Avila v. Rubin, 84 F.3d 222, 229 (7, h Cir. 1996); Lesher v. Law Offices of Mitchell N. Kay, P. C., 650 F.3d 993, 999 (3d Cir. 2013). This is not necessarily a set requirement for meaningful involvement, however, as this is a question that must be determined based on the individual facts and totality of the circumstances in each case. See, Miller v. Wolpoff & Abramson, LLP, 321 F.3d 292, 304 (2d cir. 2003).

         In order for a representation to be material, it must be likely to influence the least sophisticated debtor's decision on whether or not to pay a debt. See, Wallace v. Washington Mut. Bank, F.A., 683 F.3d 323, 326-27 (6(h Cir. 2012). Creating a legitimate fear of the actual consequences of owing a valid debt is not misleading or deceptive under the act.

         2. Stipulated Facts[2]

         The parties stipulated to the following facts:

         1. The Bureau (Plaintiff) is an independent agency of the United States that enforces and issues regulations pursuant to federal consumer financial law, including the Fair Debt Collection Practices Act and the Consumer Financial Protection Act of 2010.

         2. Weltman (Defendant) is an Ohio professional corporation organized under the laws of Ohio that operates as a law firm.

         3. Weltman has maintained a website, www.weltman.com, from at least July 21s1, 2011, to date.

         4. Weltman is a debt collector under the Fair Debt Collection Practices Act and a covered person under the Consumer Financial Protection Act of 2010.

         3. Evidence at Trial

         Eileen Bitterman, the compliance officer and a shareholder of Weltman, is a lawyer licensed to practice law in Ohio. She is responsible for creating policies and overseeing training. (ECF #75 at 44). She testified as follows.

         Weltman is owned by shareholders, all of whom are attorneys. (ECF #75 at 130). Weltman is hired by creditors to collect a variety of types of consumer debt. (ECF #75 at 44-45). During the relevant time period, Weltman had up to 7, 000 creditor clients. (ECF #75 at 98). Weltman has a consumer collection unit that is staffed by non-attorneys but is overseen by an attorney who is the business unit leader, and collections support attorneys. (ECF #75 at 48). They are paid on a contingency fee basis, based on the amount of money they are able to collect from consumers. (ECF #76 at 94, 107).

         In an attempt to collect on consumer debts, Weltman sends out letters that are generated from attorney-approved templates. (ECF #75 at 50-51). One of these templates is an initial demand letter that includes the name of Weltman, Weinberg & Reis Co., L.P.A. and the words "Attorneys at Law," at the top of the letter. (ECF #75 at 57, 86). These letters are signed by Weltman, and are on Weltman letterhead. (ECF #75 at 57-58, 80, 86). Ms. Bitterman testified that 4.2 million demand letters, from these templates, were sent to consumers between July 21, 2011 and October 31, 2017. (ECF #75 at 91). She also testified that some templates for follow-up letters also state that "this law firm is a debt collector attempting to collect this debt for our client." or other references indicating that Weltman is a law firm, which are a truthful statements. (ECF #75 at 64-66).

         Weltman does not contend that they are practicing law when they send demand letters. (ECF #76 at 96). They do not require an attorney to review every individual consumer account before a demand letter is sent. (ECF #75 at 98-99). Weltman attorneys do not form a professional judgment about the validity of a debt or the appropriateness of sending a demand letter before the letters are sent. (ECF #75 at 99). Weltman receives information from creditor clients about consumer accounts and data is loaded into Weltman's computer system. (ECF #75 at 73-74). The data is then "scrubbed." Scrubbing is a process by ...


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