A Cautionary Tale Regarding Case and Witness Preparation in Third Circuit TCPA and FDCPA Decision

In a cautionary tale for the defense bar, the Third Circuit recently upheld a consumer's TCPA claims and reversed summary judgment on the FDCPA claims in Daubert v. NRA, Nos. 16-3613 and 16-3629 (3d Cir. July 3, 2017).

Describing the mangled litigation arising from a $25 unpaid medical debt, the Third Circuit affirmed the district court's application of the sham-affidavit doctrine against the debt collector defendant, and also rejected its bona fide error defense. At a deposition, an employee of the defendant testified that the debt collector's dialer placed the phone calls to the consumer. At summary judgment, defendant submitted an affidavit from another witness (who was not previously deposed and the affidavit not previously disclosed) stating that the dialer cannot make calls without human intervention, in direct contradiction to the deposition testimony of the other witness. The Third Circuit held that the district court acted within its discretion when it disregarded the affidavit, particularly since the defendant failed to point to "independent evidence in the record" to corroborate the affidavit; failed to explain why the deponent was "understandably" mistaken, confused or not in possession of all the facts at her deposition; or sought to supplement the record with said affidavit. The Third Circuit accordingly upheld the TCPA claim.

With respect to the FDCPA claim, the defendant initially prevailed on its bona fide error defense at trial when it moved for judgment as a matter of law. Plaintiff claimed that defendant's use of a bar code on the envelope containing the collection letter violated Douglass v. Convergent Outsourcing, 765 F.3d 299 (3d Cir. 2014). The district court agreed with defendant's good faith reliance on two federal court decisions within the same district which held that barcodes do not violate Section 1692f(8) of the FDCPA.

However, the Third Circuit reversed by applying the United States Supreme Court's decision in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010), which held that mistakes of law do not qualify as a bona fide error defense. The Third Circuit emphasized that a district court's decision binds only the parties in that case and is not binding precedent in the same judicial district or even upon the same district judge in a different case. The Third Circuit also noted that the open question before this Circuit is whether the use of a barcode violates the FDCPA even if the "bare account number" is not visible, but it is a question that was not raised by defendant on appeal. Also significant is the Third Circuit's remark that the defense of whether conduct that was "expressly permitted under the controlling law in effect at the time, but that is later prohibited after a retroactive change of law" is an issue that has yet to be resolved by this Circuit.

The Third Circuit ends its Opinion with another cautionary measure not just for the defense bar but for the trial courts as well: namely calculating damages under FDCPA's Section 1692k(a). The panel reminded the trial court to consider the frequency and persistence of a defendant's noncompliance, the nature of such noncompliance, and the extent to which such noncompliance was intentional.

Overall, the Third Circuit's opinion is particularly instructive as a reminder to practitioners not only to prepare their witnesses for depositions but also to remain current with federal rules and procedures as they apply to discovery and motion practice. In an area of law with a fee shifting provision and where attorney's fees escalate rapidly, attorneys need to tread carefully.