Author Archives: Andrew P. Carroll

High Court Hands Victory to Secondary Debt Market

In Justice Neil Gorsuch’s first written opinion for the Supreme Court, he handed down a major victory for the secondary debt market by ruling that debt buyers do not fall under the definition of “debt collector” for purposes of the FDCPA. Under the FDCPA, debt collectors are subject to strict requirements when attempting to collect debts and violating these rules leads to significant liability. Until now, a split among the circuits existed as to whether the term “debt collector” includes entities that purchase debt originally owned by another party.  The Supreme Court therefore granted writ in Henson v. Santander Consumer USA, Inc. in order to resolve the inconsistent application across jurisdictions.

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Debt Collectors Earn Win on FDCPA Claim for Stale Debt

Debt collectors recently won an important victory in the U.S. Supreme Court, which ruled that filing a stale claim in bankruptcy court does not run afoul of the Fair Debt Collection Practices Act (the “FDCPA”). Although the Opinion does not affect a debtor’s potential claim for sanctions under frivolous filing rules, it does remove at least one potential avenue for recovery.

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Don’t Be a Halfway Law Partner

It is not uncommon for attorneys to join forces to defray costs. This often means sharing office space, support staff, and equipment. Some attorneys take this a step further, advertising themselves as a partnership even if their practices remain separate. Such arrangements should be made with caution, however, as they may lead to vicarious liability among the so-called partners.

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What’s a “Communication” under the FDCPA?

The five-day rule under the FDCPA, which requires a debt collector to provide the precise amount owed within five days of its initial communication with a borrower, often operates as a trap to debt collection firms. The lack of a statutory definition for “initial communication” means that courts are free to interpret what will qualify, leaving debt collection firms to make their own determinations as to what will sufficiently protect them from later lawsuits based on this section of the statute. Although pleadings are still a widely acknowledged exception, many states do not include pre-foreclosure notices.

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Attorneys: Be a Watchdog for Your Accountant Clients

The standard of care governing every professional begins with the scope of the engagement. That may seem fairly obvious to those in the professional malpractice community but it is often misunderstood by laypeople. Isn't a CPA engaged to detect fraud? Isn't a lawyer engaged to win my case? One of the difficult aspects of defending a malpractice case is overcoming the lay perspective of the precise role of a professional. Often the defense of a professional can turn on whether the fact finder fully understands the distinct role of the professional in the limited context of the facts presented. Accordingly, professionals should be proactive in ensuring that the parties and others refer to the applicable professional standard that governs the case.

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Lawyers ≠ Partnering with Non-Lawyers

Law firm financing has become an increasingly complex and interesting aspect of the legal business. From personal injury litigation loans, to the financing of the Gawker lawsuit by a Silicon Valley billionaire, it appears many want to get a piece of a lawsuit these days. However, the Second Circuit recently affirmed a district court ruling that law firms are still forbidden fruit for third-party financiers.

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Bankruptcy Law Preempts State Claim for Wrongful Use of Civil Proceedings

The Automatic Stay under U.S. Bankruptcy law is a powerful tool in the judicial system. By filing for bankruptcy, a person or entity immediately creates a cocoon of safety that is generally impenetrable without subjecting the offending party to punitive repercussions. In fact, even parties without knowledge of the bankruptcy filing may nevertheless face consequences from the presiding bankruptcy court for violating the Automatic Stay. Of course, this does not mean that parties can use a bankruptcy petition solely to protect themselves from outside pressures. The bankruptcy rules also allow a court to impose sanctions upon a party or its attorney if it the petition is found to have been filed frivolously. However, a Pennsylvania trial court recently reaffirmed that it remains within the bankruptcy court’s sole discretion to do so, and that any similar state court claim is preempted by federal law.

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CPA Takes Advantage of Procedural Quirk

The idiosyncratic nature of the Louisiana legal system is one that is noted, if not explored, in many law schools around the country. Even as early as high school, many teachers will explain that Louisiana is unique insofar as its legal system is based primarily on Spanish and French civil law, rather than the British tradition used in the other 49 states. The differences between Louisiana and the rest of the country do not end there, however, and a large accounting firm was recently successful in obtaining dismissal of an action based on a Louisiana-specific accounting malpractice statute.

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Attorney + CEO = Coverage Denied

Attorney? Check. CEO? Check. Coverage? Unlikely. Some attorneys wear multiple hats. We have other interests, other business ventures, other opportunities to make a buck. Attorneys are often exposed to other areas of business depending on the nature of their practice. Through their role as counsel, or through other opportunities, some attorneys become more directly involved in non-legal businesses. The more traditional route is to switch to in-house counsel, but sometimes attorneys will go so far as to start a new company. While both are commonplace and not inherently problematic, issues begin to arise when an attorney is both practicing law and working for a company. The blurring of the line between lawyer and business executive not only creates potential conflicts of interest, but may have coverage consequences.

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Title Insurer off the Hook for Closing Agent Misconduct

The closing of a home loan often involves multiple parties, and even a sophisticated buyer can be confused as to who represents whom. The individuals present can include representatives from the bank, real estate agents, title insurance agents, etc. However, each person in the room has a specifically defined role, and it is important for all parties to be aware of what these roles are.

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