The United States Supreme Court has taken up the issue of whether the Bona Fide Error (“BFE”) defense under the Fair Debt Collection Practices Act (“FDCPA”) applies to mistakes of law committed by debt collectors.
In Jerman v Carlisle, et al, the defendant law firm transmitted a collection letter to Ms. Jerman that may not have complied with the FDCPA. It was a minor error in their demand letter that caused this brouhaha. The defendant law firm’s demand letter informed Ms. Jerman (and others as they had sent this letter to other debtors as well) that unless they disputed the debt in writing, that the law firm would assume that the debt was valid. The FDCPA makes no requirement for a debtor to posit such a dispute in writing. You can read the oral argument before the Supreme Court by clicking on Jerman v Carlisle. This lawsuit was certified as a class action which may explain why the Supreme Court took this case.
The Sixth Circuit Court of Appeals dismissed the case by holding that the BFE defense applies to mistakes of law as well as mistakes of fact Jerman v Carlisle, 538 F.3d 469 (2008). The Sixth Circuit held that a plain reading of the FDPCA shows that the BFE defense does not exclude mistakes of law and so, neither should the court. This is a very interesting holding, indeed. Cases that have examined the BFE defense under the FDCPA, have mostly held that this defense applies only to errors of fact. The Sixth Circuit holding in Jerman was really breaking new ground with this holding.
So why did the United States Supreme Court accept this case for review? Ms. Jerman had turned her FDPCA lawsuit into a class action against the defendant law firm. If the defendant loses this case, it stands to pay a huge sum in attorneys’ fees plus class action damages of $500,000 or 1% of the law firm’s net worth, whichever is lesser. As I read the oral argument, it became apparent to me that at least one Justice had an agenda for protecting attorneys.
Three attorneys argued this case before the Supreme Court. Mr. Kevin Russell argued on behalf of Karen Jerman, the Plaintiff/Petitioner. Mr. William Jay argued on behalf of the Solicitor General, Department of Justice, supporting Ms. Jerman’s position. Finally Mr. George Coakley argued on behalf of the Defendant/Respondent law firm.
In my opinion, Justice Breyer’s pointed questions and comments indicated that he was interested in protecting lawyers. In my opinion, he seemed to be leaning towards affirming the Sixth Circuit. Unfortunately, I think that Mssrs. Russell and Jay had the better arguments before the court. I found Mr. Russell’s arguments quite persuasive when he pointed out that:
 The bona fide error defense speaks only to mistakes of fact and not to mistakes of law;
 Had Congress intended to include mistakes of law in the Bona Fide Error Defense, it would have expressly included such language in the statutue;
 Courts should not expand the Bona Fide Error Defense to include mistakes of law simply because it may result in an unfair consequence to the lawyer defendants;
Mr. Jay advanced an excellent argument against extending the BFE defense to include mistakes of law. He noted that several other statutes, including the Truth in Lending Act, a companion consumer credit statute, include a BFE Defense and none of the other statutes or the cases construing them have included mistakes of law as part of those BFE defenses.
As a collection attorney, I was rooting for Mr. Coakley. My colleagues and I are depending upon him to represent us and convince the Supreme Court that the Sixth Circuit decision in Jerman was correct. Unfortunately, I did not find Mr. Coakley’s arguments nearly as persuasive as Mssrs Russell’s or Mr. Jay’s.
Mr. Coakley began his argument by looking at a plain reading of the statute and then moved quickly into conceptual analogies that were more heady than persuasive. He then argued that some courts had construed the TILA’s BFE defense to include mistakes of law as well as fact. He then argued that Congress amended the TILA to definitively exclude mistakes of law from the TILA’s BFE defense. Although Mr. Coakley properly argued that this indicated that Congress intended to treat the FDPCA and the TILA as different statutes, this argument proved too much and subsequently, was Mr. Coakley’s undoing.
Justice Scalia noted that there were no appellate decisions construing the TILA BFE defense to include mistakes of law prior to the 1980 Congressional amendment to that statute. Justice Scalia then accused Mr. Coakley of misleading the court by implying that Congress had amended the TILA in light of court decisions construing that statute’s BFE defense as including mistakes of law. Any litigator knows that his ability to persuade a court is directly tied to his credibility. If the judge does not trust you, the court will put little credence in what you have to say. Mr. Coakley, in my opinion, shot himself in the foot by advancing the argument that Congress amended TILA’s BFE defense due to court decisions construing that defense as including mistakes of law.
I will let you know when the court rules on this case.

If you have questions about credit or collection issues, contact Attorney Gary Nitzkin or call toll free (888) 293-2882 for a free consultation.  For more information about our firm, visit www.creditor-law.com.  For more information about debt collection, follow our blog at www.michigancollectionlawblog.com.