“I’m strong to the fin-ich. Cause I eats me spin-ach. I’m Popeye the . . . debt collector man?”

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

PopeyeFor lawyers, debt collection can be a trap for the unwary. The Fair Debt Collection Practices Act ("FDCPA") governs debt collection by both attorneys and non-attorneys. It generally prohibits debt collectors from using deceptive, abusive, or unfair practices to collect debts. While that sounds straightforward, it is often difficult to figure out whether you are even a debt collector governed by the FDCPA, much less whether what you are trying to collect is a debt under the FDCPA and whether what you are doing to collect that debt is deceptive. And the consequences for running afoul of the FDCPA — statutory damages and attorney's fees — can be significant.

A recent decision from the U.S. Court of Appeals for the Third Circuit, Tepper v. Amos Financial, LLC, offered a good primer on one of these tricky issues — whether a party that buys debt and seeks to collect that debt for its own account qualifies as a debt collector under the FDCPA — but the more interesting aspect of the opinion is the court's frequent references to Popeye (the sailor man, not the fast food restaurant).

The opinion began: "Many would gladly pay Tuesday for a hamburger today." This, of course, is a reference to Wimpy's famous tag-line in Popeye. The court then described the basic purpose of the FDCPA and introduced the issue in the case as follows:

The Act does not apply . . . to all entities who collect debts; only those whose principal purpose is the collection of any debts, and those who regularly collect debts owed another are subject to its proscriptions. Those entities whose principal place business is to collect the defaulted debts they purchase seek to avoid the Act's reach. We believe such an entity is what it is – a debt collector. [Emphasis added.] If so, the Act applies.

Understandably, the court was not willing to go so far as have the defendant declare "I yam what I yam, and that's all that i yam," but you get the point. Popeye references continued throughout the opinion, so keep reading. 

Continue reading ““I’m strong to the fin-ich. Cause I eats me spin-ach. I’m Popeye the . . . debt collector man?””

Federal Reserve Approves Colorado Credit Union To Serve Cannabis Industy (But There’s A Catch)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

image from 3.bp.blogspot.comThe Wall Street Journal recently reported that the Federal Reserve conditionally approved a Colorado credit union, Fourth Corner Credit Union, to serve cannabis-linked businesses. To obtain this approval, however, the credit union had to “step back from its original plan to serve state-licensed dispensaries.” Instead, it will focus on “individuals and companies that support legalized marijuana, including those who partner with vendors, such as accountants and landlords.” In other words, the credit union can service individuals and entities involved in the cannabis industry, but not those who “touch the plant.”

 Read the full article here.

Litigation Privilege Protects Client’s Statement That His Former Lawyer Was a Liar, Thief, and “No Good Drunk”

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Privilege (pd)Anyone who has practiced law for any period of time likely has a story about a misdirected email. You know, the one you meant to send to a client or a colleague, but it went to your adversary or your supervising partner instead. These situations often just result in mild to moderate awkwardness around the office, but they sometimes create bigger problems. MacNaughton v. Harmelech, a recent decision from the Appellate Division, involved the latter. But it also involved the litigation privilege, something I wrote about just a few weeks back. (What Do eBay, The "40 Year Old Virgin," And The Litigation Privilege Have In Common?). And, fortunately for defendant, the statements in his misdirected email were protected by that privilege.

In MacNaughton, plaintiff, a New Jersey lawyer, represented defendant in a lawsuit involving defendant's company. Defendant disputed plaintiff's bill and plaintiff eventually sued defendant over the bill. At some point during the litigation, the trial court asked the parties whether they were interested in mediation. Around the same time, however, plaintiff was "in contact with another of defendant's creditors about banding together to force defendant into involuntary bankruptcy." As you might expect, when defendant learned about plaintiff's efforts, it colored his decision about whether to agree to mediation. In fact, defendant sent the following email, reprinted exactly as it appeared in the Appellate Division's decision, to his lawyers on the subject:

Please I Am asking you to file a paper in the state court there WILL NOT BE AGREE NOT TO BE A MEDIATION MACNAUGHTON CALL TODAY AND ASK HIM TO TRY TO POT ME IN IN VALENTRY BANKRUPTCY AS YOU SEE HE IS A. LIAR THIEF AND NO GOOD DRUNK

NO TO BE TRUSTED THANKS

Unfortunately, defendant also copied plaintiff on this email. Upon receiving it, plaintiff filed a one-count complaint for defamation. The trial court held a hearing on whether the statements were protected under the litigation privilege. After taking testimony from defendant and his current counsel, the court applied the four-factor test from Hawkins v. Harris, and held that they were. As a result, plaintiff's claim was dismissed. Plaintiff appealed.  

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What Do eBay, The “40 Year-Old Virgin,” And The Litigation Privilege Have In Common?

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Jonah hillNot much, but please keep reading.

In the movie, the 40-Year-Old-Virgin, an almost unrecognizable Jonah Hill has a very small, but funny, part. He plays a customer at the “We Sell Your Stuff On Ebay” store, which is owned by Steve Carell’s character’s love interest, played by Catherine Keener. According to IMDB.com, Hills plays “Ebay Customer,” who is, to say the least, having trouble understanding how the store works. He wants to buy some "wonderful" shoes that he found at the store. Keener's character explains that she does not actually sell any of the items in her store at the store, she sells them on eBay. Hill's character just doesn't get it, eventually telling Keener's character that he just wanted to buy the shoes and take them home, but that she was "making it extremely difficult" for him to do so.

The recent Appellate Division decision, XCalibur Communications v. Karcich, involved a dispute over the sale of the plaintiff’s merchandise on eBay. No word on whether any of those sales involved shoes like the ones Hill’s character was looking to buy, but the decision helps clarify the scope of the litigation privilege, which is broader than many people think. 

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Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Subway (pd)I am a regular Subway customer, so I read the Seventh Circuit's opinion, In re. Subway Footlong Sandwich Marketing and Sales Practices Litigation, with great interest. You probably remember the events that spawned this litigation. As the Seventh Circuit described it: "In January 2013 Matt Corby, an Australian teenager, purchased a Subway Footlong sandwich and, for reasons unknown, decided to measure it. The sandwich was only 11 inches long. He took a photo of the sandwich next to a tape measure and posted the photo on his Facebook page. Thus a minor social-media sensation was born." And, "[w]ithin days of Corby's post, the American class-action bar rushed to court," therefore, a class action lawsuit was also born. It ended a few years later with a settlement, which the Seventh Circuit just overturned.

To say that the Seventh Circuit was critical of the settlement would be an understatement. Its opinion is filled with subtle, and not so subtle, criticisms of the settlement and plaintiffs' counsel. For example, early in its opinion, the court observed: "In their haste to file suit [ ] the lawyers neglected to consider whether the claims had any merit. They did not." It did not get much better for plaintiffs from that point on.

The court noted that the parties engaged in limited, informal discovery early on in the case, with the intent of going to mediation. This discovery revealed that plaintiffs' claims were deficient. It showed that "the length of the [baked] bread has no effect on the quantity of food each customer receives." First, all of Subway's raw dough is exactly the same size. So, even the few rolls that bake to approximately a quarter-inch less than 12 inches because of natural, and unpreventable, "vagaries in the baking process" provide the same bread as those that bake to the full 12 inches. Second, Subway standardizes the amount of meat and cheese that its "sandwich artists" put on each sandwich, so whether the bread is 12 inches long or a quarter-inch short, the customer still gets the same amount of food. (In the interest of full disclosure, because I am a regular, I do occasionally get an extra slice of ham, salami, and pepperoni on my six-inch BMT at my local Subway.) "This early discovery, limited though it was, extinguished any hope of certifying a damages class."

"Rather than drop the suits as meritless," however, plaintiffs shifted the focus of the lawsuit from one seeking damages to one seeking injunctive relief. THey filed an amendec complaint and, after mediation, reached a settlement with Subway, under which Subway would, for four years, implement practices designed to ensure, the the extent possible, that its sandwich rolls measured at least 12 inches long. But, the settlement noted that "because of the inherent variability in food production and the bread baking process, Subway could not guarantee that each sandwich roll [would] always be exactly 12 inches or greater in length after baking." In other words, Subway would try to fix, but could not guarantee that it would fix, the problem that spawned the lawsuit. 

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Exception To The Rule: Ambulance Service Providers Are “Learned Professionals” And Not Subject To New Jersey’s Consumer Fraud Act

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Ambulance (pd)New Jersey's Consumer Fraud Act ("CFA") is generally recognized as one of the strongest consumer protection laws in the country. It prohibits "any unconscionable commercial practice, deception, fraud, false pretense, false promise or misrepresentation" that leads to an "ascertainable loss." But, certain "learned professionals" — doctors, lawyers, hospitals, etc. — are insulated from liability under the CFA. In Atlantic Ambulance Corporation v. Cullum, the Appellate Division added ambulance service providers to the list of "learned professionals" who are not subject to the CFA. 

In Atlantic Ambulance, defendants received services from plaintiff, an ambulance service provider. After they failed to pay the bills for those services, plaintiff sued. In response, defendants filed a counterclaim alleging that they were overbilled by plaintiff in violation of the CFA. Defendants sought to bring their counterclaim as a class action on behalf of themselves and all other similarly situated people who were allegedly overcharged during a six-year period.

After five years of discovery, defendants moved for class certification. The trial court denied the motion for a number of reasons, only one of which is relevant for this post. Plaintiff argued that defendants could not maintain a cause of action under the CFA because they did not pay their bills, therefore they had not suffered any "ascertainable loss." The trial court agreed, expressly rejecting defendants' argument that an excessive bill from plaintiff, by itself, was enough to prove an ascertainable loss. Defendants appealed. 

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Words Matter: Language In Retainer Agreement Bars Recovery Of Fees Incurred In Fee Arbitration Proceeding

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Words (pd)One of my favorite quotes from a judicial decision comes from the New Jersey Supreme Court in Atlantic Northern Airlines v. Schwimmer: "Litigation proceeding from the poverty of language is constant." I have never understood this to be a knock on the drafter. Rather, I understood it to mean that no matter how carefully you choose your words you can never make a contract, agreement, or other document litigation-proof. You see examples of this nearly every day in the daily decisions, including in the Appellate Division's recent decision in The Law Offices of Bruce E. Baldinger, LLC v. Rosen.

Baldinger involved a dispute between a law firm and its former client over attorney's fees. Defendant retained plaintiff to represent him in connection with a dispute with a contractor over work performed at defendant's home. Plaintiff and defendant entered into a retainer agreement that included an initial flat fee of $1,200 followed by hourly billing. The retainer agreement also dictated that interest at the rate of 1% per month would be charged on any unpaid balances after 30 days. The retainer agreement also contained the following provision, which is most important to our story: "If collection and enforcement efforts are required, you agree to pay counsel fees along with costs of suit." This would become important later on.

After about a month, defendant "became dissatisfied with plaintiff's representation and terminated plaintiff's services." Defendant had already paid the $1,200 flat fee, but plaintiff demanded that he also pay an addition $4,308 for work performed by plaintiff up to that point. Defendant refused to pay.

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