Lawyers May Be Liable for Filing a Fishy Motion

(CN) - Debt-collection attorneys may have been deceptive in filing a motion for default judgment against a Michigan man who had not missed the deadline to answer the complaint he had only just been served, the 6th Circuit ruled.

A medical practice hired Leikin, Ingber & Winters to collect a $2,900 debt Valentine Grden owed for infection treatments.

Grden made regular monthly payments to Leikin Ingber for several years, but he missed two payments and made several partial ones. When his balance was down to $536, the firm sued Grden for $678, which included interest, and also attached a motion for default judgment.

Grden called Leikin Ingber for his balance shortly thereafter, and one of the firm's employees incorrectly told Grden that he owed $1,016. Grden said he was surprised the amount had practically doubled in a week, and had the lawyers send written notice of the alleged $1,016 balance.

Later, Grden sued Leikin Ingber in federal court, claiming the lawyers violated the Fair Debt Collection Practices Act by misrepresenting how much he owed and by serving Grden the motion for default judgment simultaneously with the collection complaint.

A federal judge in Detroit tossed the lawsuit however, finding that neither of the firm's actions were deceptive. On Monday, however, the Cincinnati-based federal appeals court reinstated Grden's claim as to the summary-judgment motion.

"An unsophisticated consumer who is served with a motion for entry of default judgment might well think that he has somehow already defaulted," Judge Raymond Kethledge wrote for a three-judge panel.

Though Leikin Ingber claimed its motion requested judgment "upon default," the appellate judges said "those words are an exercise in studied ambiguity."

"They merely recite the necessary condition for relief, rather than saying anything about whether the condition has already occurred," Kethledge wrote. "Thus, there is nothing about the motion for default judgment that would upend the consumer's natural inclination to think there must be some factual basis for it - i.e., that he has already defaulted. That means that a jury could find the motion to be misleading.

But Leikin Ingber's inaccurate balance reading is not actionable because it was not made "in connection with the collection of any debt," as is statutorily required, according to the five-page ruling.

"Here, on one hand, the balance statements obviously came from a debt collector -indeed from one that had already sued Grden - and they stated a balance 'due,'" Kethledge wrote. "On the other hand, the statements themselves did not demand payment or threaten any consequences if Grden did not pay. But for us the decisive point is that Leiken made the balance statements only after Grden called and asked for them. The statements were merely a ministerial response to a debtor inquiry, rather than part of a strategy to make payment more likely. Thus, under the circumstances present here, a reasonable jury could not find that an animating purpose of the statements was to induce payment by Grden."

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