The United States Court of Appeals for the Ninth Circuit recently reversed in part and affirmed in part a District Court’s decision, holding that a letter may have violated the FDCPA by failing to clearly convey the dispute process, but that it did not violate the FDCPA by including fees incurred by a paralegal as “attorneys’ fees.”  See Almada v. Krieger Law Firm, A.P.C., 2022 U.S. App. LEXIS 1946 (9th Cir. Jan. 24, 2022).  In the case, the defendant law firm sent a letter to the debtor stating:

Under the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information.

The letter also stated that the debtor was being charged attorneys’ fees.  The debtor then brought this action, alleging that the letter violated the FDCPA for two reasons.  First, the debtor argued that the bold language improperly said the dispute must be in writing, in violation of 15 USC 1692g(a)(3), which requires letters to include “a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector,” but does not require that the dispute be in writing.  Second, the debtor argued that the charge for attorneys’ fees included work done by a paralegal and was misleading under the FDCPA.  The defendant law firm moved for summary judgment. The District Court granted the defendant’s motion, holding that the third sentence of the letter constitutes the proper notice under 1692g(a)(3), and that sentence does not mention that the dispute must be in writing, regardless of what the first sentence states.  It also found that the paralegal charge was not misleading.  The debtor appealed.

The Ninth Circuit reversed in part and affirmed in part.  First, it held that the District Court did not apply the proper analysis in reviewing the letter, because “the least sophisticated debtor would not extract each sentence of the challenged paragraph, line them up against the disclosures the FDCPA requires, and analyze whether each sentence, in isolation, accurately conveys the required warnings. Instead, the least sophisticated debtor would examine the letter as a whole and would conclude based on the bold text expressly stating that he must dispute the debt in writing that he was required to dispute the debt in writing.”  Second, the Court affirmed the District Court’s holding that the defendant did not violate the FDCPA by classifying certain fees incurred by a paralegal as “attorneys’ fees.”  The Court acknowledged that there were no California cases interpreting the term under the FDCPA, but that courts have interpreted the term in other statutes to include work performed by paralegals.  Therefore, the Court found that the charge was not misleading and therefore did not violate the FDCPA.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.