Court Brief: Graziano on Chopping Block Before 3rd Circuit En Banc Hearing (Part II: Conclusion)


by Andrew M. Schwartz

Gordon Rees Scully Mansukhani, LLP

On February 19, 2020, Gordon Rees Scully Mansukhani’s Appellate Practice Group Co-Chair Jack Cohn, with the assistance of GRSM partners Peter Siachos, Sean Flynn, and Andrew Schwartz, argued before the en banc panel, seeking the overruling of the holding in Graziano v. Harrison, 950 F.2d 107 (3rd Cir. 1991). 

On March 30, 2020, the 3rd Circuit issued its decision on the en banc review of Riccio v. Sentry Credit.

The questions before the en banc panel were (1) “Does 15 U.S.C. § 1692g(a)(3) allow debtors to orally dispute a debt’s validity?” and (2) “Should [the] en banc Court resolve a circuit conflict by overturning a three-decades-old panel decision which has been eroded by intervening Supreme Court authority?”

The 3rd Circuit answered both questions in the affirmative.

The March 30, 2020 decision concluded that Graziano was no longer good law in the 3rd Circuit and, in doing so, fell in line with the 2nd, 4th and 9th Circuits. The en banc panel resorted to a contextual reading of Section 1692g, as a whole, and reached the conclusion consistent with its fellow Circuits, that Section 1692g permits both oral and written disputes.

The 3rd Circuit acknowledged that the holding in Graziano ran afoul of this interpretive canon, the rule against surplusage. As the Graziano decision rendered Section 1692g(a)(3) meaningless (a trivial “amuse-bouche” for 1692g(a)(4)).

Ultimately, the 3rd Circuit determined that the plain meaning of Section 1692g(a)(3) permitted a debtor to orally dispute her debt.

Importantly, the Court rejected Riccio’s request to curb the retroactive application of the en banc holding, so that Riccio’s claims against Sentry, and the claims of many other matters of equal import pending in the district courts, would be determined under the Graziano precedent. Further, in footnote 5, the 3rd Circuit provided an “out” for those debt collectors that followed the Graziano holding by adding an “in writing” requirement in its Section 1692g(a)(3) disclosures.

During the en banc argument, Jack Cohn argued that the least sophisticated consumer standard was an anomaly that did not fit within the contours of the FDCPA. While the en banc panel did not address this issue, footnote 6 sets the stage for this fundamental fight – whether the least sophisticated consumer standard comports with the ordinary meaning of the FDCPA.

Read the Riccio v. Sentry decision and judgment.