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Ogbin v. Fein, Such, Kahn and Shepard, P.C.

2011 WL 596898 (U.S. Ct. App. 3d Cir. N.J. 2011) (Unpublished)

FDCPA; MORTGAGES; ATTORNEYS — Although attorneys are generally protected against Fair Debt Collection Fee Practices Act violations by New Jersey’s litigation privilege, if an attorney’s letter attempts to collect any amount not expressly authorized by the agreement creating the debt or permitted by law, the New Jersey litigation privilege cannot absolve the attorney, as a debt collector, from liability under the Act.

A law firm filed a foreclosure action on behalf of a loan servicer against homeowners who had defaulted on their second mortgage. At the request of the homeowners’ own attorney, the collection firm sent two letters to the homeowner’s attorney during the pendency of the foreclosure proceedings. The first letter set forth the amount of outstanding principal and interest owed on the loans as well as the law firm’s attorney’s fees and costs. The second letter revised the first. It itemized the law firm’s attorney’s fees and costs associated with the foreclosure action.

The parties settled the foreclosure action. The homeowners, however, filed a class action complaint against the law firm, alleging the firm had violated the Fair Debt Collection Practices Act (FDCPA) because the payoff letters contained charges (attorneys fees and costs) that were not legally collectable under New Jersey law or under the mortgage. The lawsuit also alleged negligence and intentional misrepresentation based upon the alleged misstatements in the payoff letters.

The United States District Court dismissed the complaint, holding that the common law claims of intentional misrepresentation and negligence were barred by the New Jersey litigation privilege, and that the FDCPA claims were barred by the same privilege and were not actionable under the FDCPA. The homeowners appealed.

The Court of Appeals first held there was no lower court error in finding the common law claims fell squarely within the scope of the New Jersey litigation privilege and could not be the source of liability against the law firm. The Court explained that an absolute privilege applies to any communication made in a judicial proceeding by litigants to achieve the objects of the litigation.

However, the Court reversed and remanded as to the homeowners’ FDCPA claims. The Court reaffirmed earlier findings in a similar case that a letter to a debtor’s attorney can be actionable under the FDCPA if the letter attempts to collect any amount not expressly authorized by the agreement creating the debt or permitted by law, and that the New Jersey litigation privilege cannot absolve a debt collector from FDCPA liability. The Court directed the lower court to determine whether the amounts the law firm sought in the payoff letters were permitted by the loan agreement or by state law.


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