Van Hoven v. Buckles & Buckles, P.L.C.

547 F.Supp.3d 694

Maureen VAN HOVEN, Plaintiff,

v.BUCKLES & BUCKLES, P.L.C., et al., Defendants.

CASE No. 1:14-CV-60

United States District Court, W.D. Michigan, Southern Division.

Signed July 1, 2021

Kevin James Rogers, Phillip C. Rogers, Law Office of Phillip C. Rogers, Michael O. Nelson, Grand Rapids, MI, for Plaintiff.

Charity A. Olson, Varnum LLP, Ann Arbor, MI, Douglas W. Van Essen, Silver & Van Essen PC, Grand Rapids, MI, Kathleen H. Klaus, Maddin Hauser Wartell Roth & Heller PC, Southfield, MI, for Defendants Buckles & Buckles, P.L.C., Geraldine C. Buckles.

Charity A. Olson, Varnum LLP, Ann Arbor, MI, Douglas W. Van Essen, Silver & Van Essen PC, Grand Rapids, MI, Kathleen H. Klaus, Maddin Hauser Wartell Roth & Heller PC, Southfield, MI, Michael H.R. Buckles, Buckles & Buckles PLC, Birmingham, MI, for Defendant Michael H. R. Buckles.

OPINION AND ORDER

ROBERT J. JONKER, CHIEF UNITED STATES DISTRICT JUDGE

INTRODUCTION

This case was one of about sixteen cognate FDCPA cases addressing whether and how a judgment creditor could assess and attempt to collect costs of unsuccessful garnishments in Michigan. This is the only one that remains open. The Court certified a class challenging two particular practices: 1) frontloading the cost of garnishment in the initial request before the creditor knew whether the garnishment would succeed; and 2) including the costs of an unsuccessful garnishment in a subsequent garnishment request.¹ This Court ultimately entered Judgment for the plaintiff class and against the defendants. The Court of Appeals vacated and remanded for further proceedings, including without limitation, determination of the bona fide error defense. The parties have filed cross-motions for summary judgment on the issue. (ECF Nos. 266 & 271)

BACKGROUND

Plaintiff Van Hoven owed a consumer debt on her Discover credit card. Discover hired defendant Buckles to collect the debt. Defendants filed and obtained a judgment in the principal amount of $6,198.16. Defendants then attempted to collect the debt. Their collection effort included two garnishments that form the factual foundation for the FDCPA claims here. The first was a garnishment to Huntington Bank. Defendants frontloaded the cost of the garnishment, and the garnishment came back unsuccessful.² A few days later, defendants applied for a garnishment to Chemical Bank. They again frontloaded the costs of the new garnishment. In addition, they included the cost of the unsuccessful Huntington garnishment. The Chemical Bank garnishment was also unsuccessful. No other garnishments were attempted before this case began a few months later.

All parties agree that the frontloading in and of itself is not an FDCPA violation based on the holding of the Court of Appeals. The only issue, then, is the $15 cost of the unsuccessful Huntington garnishment that defendants included in the later Chemical Bank garnishment. Defendants acknowledge that was a mistake that could form the basis for FDCPA liability. However, defendants say they had and have a "back out" policy designed to prevent the mistake; that they follow the policy; and that it is reasonably designed to prevent mistakes like this, but just failed to do so in this case. In fact, according to the defendants, the total error rate of the policy amounted to only .02 percent (or two-tenths of one percent).³ Accordingly, defendants move for summary judgment on the good faith error defense. (ECF No. 266).

Plaintiff opposes the motion and cross moves for summary judgment. (ECF Nos. 270 & 271). Plaintiff says the defendants violated the FDCPA with the Chemical Bank garnishment, subject only to the bona fide error defense, and that defendants fail as a matter of law to establish that defense. In particular, plaintiff says the "back out" policy is not reasonably designed to prevent mistakes like this, and that it failed to do so on multiple occasions. Plaintiff also says defendants did not actually follow the policy in this and many other cases. To be effective, plaintiff says the policy would have to "back out" the cost of the failed garnishment as soon as defendants learned of it, and not simply at some indeterminate later time before defendants decide to try another garnishment. In addition, plaintiff says the "back out" policy should apply not simply at the time the defendants decide to request a new garnishment from the court, but also at the later time they serve the garnishment (assuming the court grants it) on the garnishee. Finally, plaintiff says the defense calculation of an error rate of .02 percent (or two-tenths of one percent) misrepresents the actual number of times the policy actually failed to prevent an attempt to collect the cost of a failed garnishment.

The calculation issue has spawned a side controversy between the parties over whether Plaintiff's position on the issue requires expert testimony, which Plaintiff has not provided. In the Court's view, some of what Plaintiff submits on the issue is fair argument and straightforward math. Plaintiff points out, for example, that the $1.5 million figure used in the denominator includes not simply the costs of failed garnishments, but also all front-loaded garnishment costs, thus understating the actual error rate on failed garnishments. In addition, plaintiff argues that using dollar amounts is not the best method of assessing error rate. However, plaintiff then goes on to suggest its own model for calculating the actual error rate. The model rests on counsel's sampling of data from defendants’ records. Defendants object that an analysis based on sampling data requires more than counsel's argument and should rest on expert testimony, something plaintiff has not provided. (ECF No. 276).

The Court concludes that plaintiff's overall critique of the method used by defendants is fair argument. However, plaintiff's attempt to create its own model of error rate based on counsel's own sampling of a defense data set requires expert analysis to support it. In the end the issue is not dispositive. Regardless of how the Court looks at the matter, the pattern and quantum of defendants’ failures to back out the costs of failed garnishments as required by its policy is not sufficient enough to undermine its bona fide error defense on this record, as the Court points out in its analysis to follow.

DISCUSSION

1. Legal Standards

The "bona fide error" defense of the FDCPA is an affirmative defense on which the debt collector bears the burden of proof. Smith v. Transworld Sys., Inc. , 953 F.2d 1025, 1034 (6th Cir. 1992). It "protects debt collectors from liability if they can show ‘by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.’ " Van Hoven v. Buckles & Buckles, P.L.C. , 947 F.3d 889, 899 (6th Cir. 2020) (quoting 15 U.S.C. § 1692k(c) ). Accordingly, a defendant debt collector who wishes to raise a bona fide error defense must prove three elements: "(1) the violation was unintentional; (2) the violation was a result of a bona fide error; and (3) the debt collector maintained procedures reasonably adapted to avoid any such error." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 538 F.3d 469, 476-77 (6th Cir. 2008) ( Jerman I ), rev'd on other grounds , 559 U.S. 573, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010). The first of these three elements amounts to a subjective test that assesses the credibility of the debt collector's assertions that the FDCPA violation was not intentional. Montgomery v. Shermeta, Adams & Von Allmen, P.C. , 885 F. Supp. 2d 849, 857 (W.D. Mich. 2012) (citing Richburg v. Palisades Collection LLC, 247 F.R.D. 457, 467 (E.D. Pa. 2008) ). The remaining elements are objective inquiries. Id. "Where the undisputed record establishes that the procedures in place are extensive and were adhered to, the matter may be resolved as a question of law." Id. At bottom, then, what the defense requires for a summary judgment is that the defendants: 1) have a policy; 2) that is reasonably designed to prevent error; and 3) that the defendants followed that policy. Under such circumstances, there is no genuine question for the fact-finder about defendants’ claim that the admitted error was unintentional. The record here supports summary judgment for defendants.

2. Analysis

Defendants have met the first hurdle of showing the existence of procedures designed to prevent the errors at issue. Indeed, the Court of Appeals concluded as much in its opinion. The Court of Appeals summarized the measures and how the defendants applied those procedures to plaintiff's case as follows:

The law firm avoids failed garnishments by carefully picking its targets and seeking garnishment only if it "knows or has good reason to believe" the third party is an appropriate garnishee. When garnishments nonetheless fail, it has "written procedures in place to record, track, and, if and as appropriate, back out postjudgment garnishment costs that are not recoverable"—procedures "designed to prevent" seeking costs of failed garnishments. Those general contours are fleshed out by a description of the specific actions it took in Van Hoven's case to avoid charging her for failed garnishment costs. When a garnishment request against Van Hoven's old bank failed, a firm employee "printed a copy of the [bank's] disclosure" showing the failure. The employee then "delivered [it] to another Firm employee" who was responsible for updating Buckles & Buckles’ records to subtract the filing fee associated with the failed garnishment. Unfortunately, the employee hadn't yet updated the records two days later, so Buckles & Buckles accidentally included the $15 filing fee in one more garnishment request. No one disputes the existence of this procedure.

Van Hoven , 947 F.3d at 900 (internal citations omitted). Following the Court of Appeal's decision that frontloading in and...