Russell v. Absolute Collection Servs., Inc.

• Citation: 763 F.3d 385
• Decision Date: 15 August 2014
• Docket Number: No. 12–2357.,12–2357.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)
• Parties: Diane RUSSELL, Plaintiff–Appellee, v. ABSOLUTE COLLECTION SERVICES, INC., Defendant–Appellant, and Charlton Clarkson, Defendant.

763 F.3d 385

Diane RUSSELL, Plaintiff–Appellee,

v.ABSOLUTE COLLECTION SERVICES, INC., Defendant–Appellant,andCharlton Clarkson, Defendant.

No. 12–2357.

United States Court of Appeals,Fourth Circuit.

Argued: April 11, 2014.

Decided: Aug. 15, 2014.

ARGUED:Sean T. Partrick, Yates, McLamb & Weyher, LLP, Raleigh, North Carolina, for Appellant. Deepak Gupta, Gupta Beck PLLC, Washington, D.C., for Appellee. ON BRIEF:Allison J. Becker, Jennifer D. Maldonado, Yates, McLamb & Weyher, LLP, Raleigh, North Carolina, for Appellant. Joanne Faulkner, New Haven, Connecticut; Suzanne R. Begnoche, Chapel Hill, North Carolina, for Appellee.

Before MOTZ, DIAZ, and FLOYD, Circuit Judges.

Affirmed by published opinion. Judge FLOYD wrote the opinion, in which Judge MOTZ and Judge DIAZ joined.

FLOYD, Circuit Judge:

Diane Russell was the target of a dunning campaign waged by Absolute Collection Services, Inc. (Absolute Collection), wherein Absolute Collection made repeated collection demands to Russell for a debt that she incurred in 2008. Within one month of receiving Absolute Collection's first collection letter, Russell paid the outstanding bill in full. Although the collection letter instructed Russell to send payment for the debt to Absolute Collection, she instead paid the creditor directly and notified Absolute Collection of her payment during two telephone conversations with collection agents. Yet, over the next few months, Absolute Collection continued sending Russell demand letters falsely asserting that the already-paid debt remained due and threatening to report it to credit bureaus as “past due.”

Russell filed suit against Absolute Collection in federal district court in North Carolina, alleging that Absolute Collection's conduct violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692–1692p, and the North Carolina Collection Agency Act, N.C. Gen.Stat. § 58–70–1 et seq., by, inter alia, falsely reporting the status of the debt and threatening to report the paid-off debt to credit bureaus as “past due.” Following a five-day jury trial, the district court granted Russell's motion for judgment as a matter of law with respect to certain claims under the FDCPA and allowed the state claims to go to the jury, which found in favor of Russell and awarded to her $37,501.00.

Absolute Collection now appeals the district court's orders (1) denying Absolute Collection's motion for judgment as a matter of law; (2) granting Russell's motion for judgment as a matter of law; (3) excluding certain evidence relevant to Absolute Collection's bona-fide-error defense; and (4) denying Absolute Collection's post-trial motions. We reject each of Absolute Collection's challenges and affirm the district court's judgment in its entirety.

I.

A.

We begin with the salient portions of the FDCPA's statutory framework and then survey the factual and procedural history before turning to the merits of Absolute Collection's claims. Congress enacted the FDCPA “to eliminate abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e). To effectuate this purpose, the FDCPA regulates interactions between consumers and debt collectors by imposing affirmative statutory obligations upon debt collectors and proscribing certain abusive conduct. See, e.g., id. § 1692b (setting forth debt collectors' obligations when acquiring location information about consumers); id. § 1692d (prohibiting “any conduct the natural consequence of which is to harass, oppress, or abuse any person”); Clark v. Absolute Collection Serv., Inc., 741 F.3d 487, 490–91 (4th Cir.2014) (per curiam) (explaining obligations triggered by a debtor's oral dispute under § 1692g(a)(3)). As relevant here, the FDCPA makes it unlawful for debt collectors to make false or deceptive statements in the course of their collection activities. See15 U.S.C. § 1692e.

Debt collectors that violate the FDCPA are liable to the debtor for actual damages, costs, and reasonable attorney's fees. 15 U.S.C. § 1692k(a)(1), (a)(3). The FDCPA also provides the potential for statutory damages up to $1, 000 subject to the district court's discretion. Id. § 1692k(a)(2)(A). A debtor generally is not required to show an intentional or knowing violation on the part of the debt collector to recover damages under the FDCPA. Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 375 (4th Cir.2012) (“[T]he FDCPA ‘imposes liability without proof of an intentional violation.’ ” (quoting Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d Cir.2011))). The statute, however, excludes from liability violations that were the result of bona fide errors. See15 U.S.C. § 1692k(c). To qualify for the bona-fide-error defense, a defendant is required to show, by a preponderance of the evidence, that (1) it unintentionally violated the FDCPA; (2) the violation resulted from a bona fide error; and (3) it maintained procedures reasonably adapted to avoid the violation. Id.

B.

This appeal has its genesis in a $501 medical bill. After Diane Russell failed to remit payment for medical services rendered to her husband, Sandhills Emergency Physicians (Sandhills) enlisted Absolute Collection to recover the outstanding $501 balance. On December 8, 2008, Absolute Collection sent Russell an initial collection letter advising her that Sandhills “authorized us to extend to you a courtesy which allows you thirty (30) days in order to pay the balance on your account and prevent further, more serious collection activity.” Absolute Collection followed its initial demand letter with five telephone calls to Russell over the next couple of weeks. On December 30, 2008, Russell paid the entire balance owed by mailing a check directly to Sandhills, which applied the payment to her account on January 8, 2009.

A collection agent from Absolute Collection telephoned Russell on February 6, 2009, seeking to collect on the Sandhills bill. Russell informed the agent that she paid the entire $501 debt directly to Sandhills and that the check had cleared her bank account. The agent noted Russell's response in her call notes and ended the call without asking for proof of payment. Later that month, however, Russell received another demand letter, stating, “We are dismayed by your inaction with respect to our previous requests that you settle your account with Sandhills Emergency Physicians. Our records indicate that you still owe $501.00 for services which were rendered to you.” Russell telephoned Absolute Collection and again reported her payment to Sandhills. The collection agent advised Russell to send proof of her payment and suggested that she could set up a payment plan to pay the bill. Russell did neither.

On March 31, 2009, Absolute Collection sent Russell another collection letter, stating,“As you are aware, your account with Sandhills Emergency Physicians has not been satisfied.” The letter also threatened, “[W]e will be reporting your past due account to national credit bureaus. This information will remain on your credit file for the next seven (7) years. You may be denied credit in the future as a result.” Fearful that her credit would be ruined, Russell filed a complaint with the Better Business Bureau. When the complaint was transmitted to Absolute Collection, an employee from Absolute Collection contacted Sandhills and verified that Russell had paid the entire balance on the bill. Absolute Collection thereafter ceased its collection efforts with respect to Russell.

C.

Russell filed a complaint against Absolute Collection in federal district court, alleging violations of the FDCPA and parallel North Carolina consumer-protection laws. Absolute Collection denied liability and raised a bona-fide-error defense to the FDCPA claims. In March 2010, after the discovery period closed, Russell filed a motion for summary judgment on liability against Absolute Collection under the FDCPA. Absolute Collection opposed the motion, maintaining that Russell's claims under the FDCPA failed as a matter of law because she never disputed the debt in writing. Alternatively, Absolute Collection argued that it presented sufficient evidence to create a genuine issue of material fact pertaining to its defense of bona fide error. Relying upon an affidavit from its chief operating officer, Absolute Collection explained that its bona-fide-error defense was based on its practice of asking debtors for proof of payment as well as its reliance upon Sandhills to report subsequent payments on accounts that have been referred for collection.

The case was scheduled for trial during the district court's November 2010 term of court. That month, with Russell's summary judgment motion still pending, the district court held a pretrial conference. During the hearing, Absolute Collection clarified that it intended to base its bona-fide-error defense on the failure of its internal systems to receive payment information that Sandhills was contractually obligated to report. Following the conference, Russell filed a motion in limine, requesting the district court to exclude evidence of any procedures between Absolute Collection and Sandhills that Absolute Collection failed to disclose during the discovery period. The district court postponed the trial until January 2011.

The district court denied Russell's motion for summary judgment on January 10, 2011. Although it rejected Absolute Collection's contention that Russell's claims failed as a matter of law because she did not dispute the debt in writing, the district court nevertheless found that there were genuine issues of material fact regarding Absolute Collection's bona-fide-error defense. That same day, the district court issued a separate order continuing the trial to April 2011, due to inclement weather, and reopening discovery on the limited issue of Absolute Collection's assertion of bona fide error, “specifically with respect to any procedures that existed between [Absolute Collection] and Sandhills ......