The U.S. Court of Appeals for the Sixth Circuit recently affirmed the dismissal of a lawsuit brought against Midland Funding, LLC (Midland), and its collection law firm under the Fair Debt Collection Practices Act (FDCPA). The lawsuit alleged that Midland violated the FDCPA by serving process on the plaintiffs in several underlying state-court collection actions via newspaper publication.

Midland filed various collection lawsuits against the plaintiffs in a Michigan state court to collect on defaulted credit card debt, according to the lawsuit. After attempts to personally serve the plaintiffs failed, Midland asked the state court for permission to serve the plaintiffs by publishing notice of the lawsuits in a local newspaper. The state court granted Midland's request and adopted the company's suggested notice language in its written orders. The court-approved notices, which Midland thereafter published "verbatim" in a local newspaper, "reveal[ed] [p]laintiffs' names and addresses as well as the dollar amounts owed, original creditors, and current debt holders."

In a lawsuit filed in a Michigan federal district court, the plaintiffs claimed that Midland and its collection firm's actions violated the FDCPA. The complaint first alleged the defendants "misled the state court," in violation of FDCPA Section 1692e, because they failed to disclose to the court that, once their attempts at personal service failed, Michigan law required them to serve plaintiffs by registered or certified mail before resorting to service by publication. Second, the complaint alleged that the defendants unlawfully "harassed" and "shamed" the plaintiffs, in violation of FDCPA Section 1692d, by using the court-approved language to publicize the debt in a local newspaper. In their motion to dismiss, defendants argued that they did not falsely represent Michigan law in their application for service via publication, and that complying with a state court's orders is not "harassing or abusive" under the FDCPA.

The district court dismissed the plaintiffs' FDCPA claims and the Sixth Circuit affirmed. According to the Sixth Circuit, the defendants did not violate the FDCPA by asking the state court to allow service on the plaintiffs via publication. Respecting the plaintiffs' Section 1692e claim, the Sixth Circuit found that Michigan's service statute does not clearly require a certain sequence of "alternative service" after a failed attempt to personally serve a party. Consequently, the Sixth Circuit held that the defendants merely "failed to comport with [p]laintiffs' understanding of Michigan law"—an understanding endorsed by neither "judicial interpretation [n]or authoritative guidance."

The Sixth Circuit also affirmed dismissal of the plaintiffs' Section 1692d claim, holding that "[d]efendants' compliance with . . . state-court orders by itself is not cognizable as harassing or abusive conduct" under the FDCPA. In reaching this holding, the Sixth Circuit relied on its previous opinion in Harvey v. Great Seneca Financial Corp., which held that, as a general matter, "employing the court system [to collect a defaulted debt] . . . cannot be said to be an abusive tactic under the FDCPA." Acknowledging that the FDCPA prohibits publishing "a list of consumers who allegedly refuse to pay debts," the Sixth Circuit refused to go so far as to "sanction[] as actionable compliance with a court order to obtain service." Although "less [personally identifiable and debt-related] information could have been used" in the published notice, the Sixth Circuit ruled that plaintiffs' claims were properly dismissed because the "publication of unexpurgated debt information in accordance with a court order is [not] a per se violation of the FDCPA."

Attorneys in Ballard Spahr's Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance.

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