SIXTH CIRCUIT FINDS ATTORNEY SUBJECT TO INDIVIDUAL LIABILITY UNDER FDCPA FOR POTENTIALLY DECEPTIVE COLLECTION LETTER
The United States Court of Appeals for the Sixth Circuit recently held that an attorney acting on behalf of a debt collection agency can be subject to individual liability under the federal Fair Debt Collection Practices Act (“FDCPA”) for sending a collection letter that arguably misrepresented his involvement in the collection process. Kistner v. Law Offices of Michael P. Margelefsky, LLC, No. 07-3134, 2008 WL 495345 (Feb. 26, 2008).
In Kistner, a debtor received a form collection letter that was printed on law firm letterhead. The attorney was the sole member of the firm, which was organized as a limited liability company. The letter was not signed by the attorney, but rather contained a block signature indicating that the letter was from an “Account Representative.” Although the attorney initially drafted the form letter, he did not review the specific letter that was sent to the debtor. Moreover, the letter was not reviewed by an “Account Representative” before mailing.
The debtor filed a class action lawsuit against the firm and the attorney individually alleging, among other things, that the letter was deceptive and thus violated the FDCPA. The district court granted summary judgment to the firm and the attorney after concluding that the collection letter did not make any misrepresentations and was not deceptive.
On appeal, the court noted that whether liability should attach in this case without piercing the corporate veil was an issue of first impression in the Sixth Circuit. Noting a split of authority on the issue, the court held that subjecting the sole member of an LLC to individual liability for violating the FDCPA requires proof that the individual is a “debt collector” under the FDCPA, but does not require piercing the corporate veil. The Sixth Circuit indicated that the individual attorney in the case before the court “regularly engaged, directly and indirectly, in the collection of debts” by (i) drafting the form letter that was sent to the debtor, (ii) negotiating terms with the mailing service provider used in the debt collection practice, (iii) overseeing compliance with applicable collection laws, (iv) intervening as a lawyer in the debt collection practice when necessary and (v) instructing debtors to make payments to him individually. For these reasons, the Sixth Circuit concluded that the attorney was a “debt collector,” and thus could be subject to individual liability under the FDCPA.
The Sixth Circuit also held that there was a genuine issue of material fact as to whether the collection letter that was sent to the debtor violated the FDCPA by giving the debtor a false impression that the letter was from an attorney when in fact the attorney did not review the debtor’s file, did not determine whether the particular letter should be sent nor know the identity of the debtor prior to sending the letter. According to the Sixth Circuit, a jury could conclude that a “least sophisticated consumer” might be deceived into believing that the letter was from an attorney as the letter was printed on law firm letterhead, made repeated reference to a law firm and directed remittance to an individually named lawyer notwithstanding the fact that the letter also stated that it was from a debt collector and was signed by an unnamed “Account Representative.”
- Margaret Stolar and Charles Gall