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NCBA to file Amicus Brief – State Creditors Bar Associations to Participate

News ,

NCBA Amicus Committee approved the preparation and filing of an Amicus Brief in the matter of Thompson v. Midland’s appeal filed in the 6th Circuit 375 F. Supp. 3d 774 (E.D. Ky. 2019). The Committee is pleased to report that they selected Barron & Newburger, P.C. to prepare the Amicus in this matter.

The issue on Appeal is the applicability of the Bono Fide Error (BFE) defense based on the interpretation of state law, which in this case happens to be the statute of limitations applied to a credit card action. This is a critical issue for NCBA members and the court’s ruling appears to be an overreach in the regulation of the practice of law.

The Committee and Midland’s counsel suggested it would be helpful to have any willing State Creditors Bar Association (SCBA) sign on to the Amicus. They felt this would demonstrate to the Court that there is broad consensus among the legal community that a mistake of state law should not preclude an attorney from utilizing the bono fide error defense.

We requested that all SCBAs consider formal participation in this Amicus and many have already responded that they will. Should your SCBA be interested in joining this important Amicus Brief there is still time. Please e-mail nathan@creditorsbar.org for more information.

Facts of the Case

The relevant facts are undisputed. Prior to 2002, Thompson obtained a credit card from Spiegel Inc., operated through Spiegel's wholly-owned subsidiary, First Consumers National Bank ("FCNB"). The last payment made on the account was made on June 30, 2002. A debt was incurred on the account, which FNCB "charged off" on or around February 9, 2003. Defendant Midland then purchased the debt from Spiegel on or around December 4, 2007.

Between January 2008 and December 2011, MCM sent nine letters to Thompson, attempting to collect the debt. On or around March 11, 2012, MCM sent the account to the law firm Morgan & Pottinger, P.S.C. for review and consideration of a potential lawsuit.
Midland filed a collection action in the Lawrence County, Kentucky District Court on August 7, 2012.

Thompson moved for judgment on the pleadings, arguing that the lawsuit was time-barred under Kentucky's five-year statute of limitations for contracts not in writing pursuant to Kentucky Revised Statute ("KRS") § 413.90(2).

At some point in the litigation, Midland moved for voluntary dismissal without prejudice. The Lawrence District Court granted Thompson's motion for judgment on the pleadings and dismissed the case with prejudice on May 21, 2013.

Court’s Ruling in 375 F. Supp. 3d 774 (E.D. Ky. 2019)–(only) Issue on Appeal

Whether the bona fide error defense is available to a debt collector who violates the FDCPA based on a mistake of state law.

U.S. District Court Eastern District of KY (Northern Div. at Ashland) on Mar 25, 2019 ruled: Defendant is not entitled to the bona fide error defense.

Midland argued summary judgment in its favor is appropriate because even if Midland violated some provision of the FDCPA by filing a collection suit outside the statute of limitations, the bona fide error defense applies, absolving it of liability.
The Court’s ruling in part states:

“Without binding precedent from the Sixth Circuit, the Court finds persuasive the approach taken by the Western District of Michigan to extend the reasoning of the Supreme Court in Jerman to mistakes of state law. See Verburg , 295 F.Supp.3d at 774 ; Harden , 2016 WL 6997905, at *2 (finding bona fide error defense unavailable for mistaken interpretation of state statute of limitations); see also New Gemini Capital Grp. , 859 F.Supp.2d 990 (S.D. Iowa 2012) (finding bona fide error defense inapplicable for mistaken understanding of statute of limitations where state law unsettled at time of collection action). The Supreme Court's rationale for restricting a debt collector from taking advantage of the bona fide error defense for mistakes of law concerning the FDCPA applies equally to restrict Midland from taking advantage of the defense based on its misinterpretation of the Kentucky statute of limitations.”

“Defendant cites two additional cases in support of the availability of the bona fide error defense where a debt collector inadvertently seeks to enforce a debt after the statute of limitations has elapsed. [Docket No. 69 at 30 (citing Charbonneau v. Mary Jane Elliott, P.C. , 611 F.Supp.2d 736, 743 (E.D. Mich. 2009) ; Moya v. Hocking , 10 F.Supp.2d 847, 851 (W.D. Mich. 1998) ) ]. However, both cases are easily distinguishable as involving mistakes of fact or clerical errors, resulting in miscalculation of the statute of limitations, rather than a misapprehension of the applicable statute of limitations—a mistake of law. Charbonneau , 611 F.Supp.2d at 743 (finding bona fide error defense applicable where defendant relied on an incorrect date of final payment it received from the seller of the plaintiff's debt); Moya , 10 F.Supp.2d at 849, 853 (bona fide error defense applicable where defendants relied on incorrect accrual date to calculate statute of limitations). Accordingly, the Court finds that under the circumstances presented in this case, the bona fide error defense is inapplicable.”