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Class Action Defense Issues–Gorman v. Wolpoff & Abramson: Law Firm Again Prevails In Action Alleging Violations of FCRA (Fair Credit Reporting Act) and FDCPA (Fair Debt Collection Practices Act)

California Federal Court Grants Summary Judgment in Favor of Wolpoff & Abramson and Client MBNA, and Issues Order to Show Cause re Rule 11 Sanctions Against Plaintiff

The law firm of Wolpoff & Abramson LLP is no stranger to litigation: it routinely prosecutes debt collection actions on behalf of national retail and banking clients; and it has been named in many individual and class action lawsuits by people upset at the Wolpoff firm’s efforts to collect on delinquent accounts. According to a lawyer at Wolpoff & Abramson, the law firm aggressively defends lawsuits filed against it, and statistically it appears to do a very good job in presenting its defense. The most recent court ruling concerning the firm comes out of a California federal court, which granted the defense motions for summary judgment. Gorman v. Wolpoff & Abramson, ___ F.Supp.2d ___, 2006 WL 1728915 (N.D. Cal. June 23, 2006). The action was filed by a lawyer (John Gorman) against MNBA and its attorneys, the Wolpoff firm, asserting causes of action under the federal Fair Credit Reporting Act (FCRA), the federal Fair Debt Collection Practices Act (FDCPA), and libel. (The claims under California state law that existed in Gorman’s original complaint were dismissed without leave to amend in response to an earlier defense motion. See Gorman v. Wolpoff & Abramson, 370 F.Supp.2d 1005, 1010-11 (N.D. Cal. 2005).)

Gorman’s action was precipitated by a contested credit card charge of roughly $760 that MBNA initially removed but then reposted. The federal court found that Gorman stopped making payments to MBNA in May 2003, “but then deliberately charged thousands of dollars more on his MBNA credit card” and then in August 2003 demanded that MBNA write off “the entirety of his balance of over $5000.” Instead, MBNA retained Wolpoff to file a debt collection suit against Gorman.

In Gorman’s action against MNBA and Wolpoff, the operative complaint at the time of the June 2006 court hearing involved an FCRA claim and a California state law libel claim against MNBA, and an FDCPA claim against Wolpoff & Abramson. As to the FCRA claim, based on a claim that MNBA failed to adequately investigate Gorman’s challenge to the credit card charge, the district court explained that Gorman had to establish a violation of 15 U.S.C. § 1681s-2(b):

Because there is no private right of action under § 1681s-2(a) . . ., Gorman’s § 1681n and § 1681o claims survive summary judgment only if Gorman can base them on willful and negligent violations of § 1681s-2(b). . . . Unlike § 1681s-2(a) which imposes a “duty of furnishers of information to provide accurate information,” § 1681s-2(b) is directed to the “duties of furnishers of information upon notice of dispute.”

The district court concluded that Gorman failed to present any evidence to support his claim. In particular, the court rejected two theories. First, it dismissed Gorman’s claim that MBNA failed to conduct a reasonable investigation because it “did not resolve the dispute in his favor”: the court observed that the claim is not only circular, but that “the reasonableness of the investigation address[es] the procedure of the investigation and is not an assessment of the outcome.” Second, it disagreed with Gorman’s claim that MBNA (as a furnisher of credit information) was required to contact him (as the debtor) because he disputed a debt: while the Ninth Circuit has not addressed the issue, the district court found persuasive a Seventh Circuit opinion rejecting a similar claim.

As to the libel claim, the court noted that while 15 U.S.C. § 1681t(b) generally preempts regulation of the responsibilities of the furnisher of information to credit reporting agencies, “§ 1681h(e) permits Gorman to state a cognizable libel claim by alleging ‘malice’ or ‘willful intent to injure.’ Gorman, 370 F.Supp.2d at 1009-10.” Again, the court found that Gorman had failed to raise a triable issue of fact as to whether MBNA acted with the requisite intent.

The district court finally turned its attention to the claim against Wolpoff & Abramson. We do not review the court’s responses to the litany of arguments Gorman raised in opposition to the summary judgment motion. We note, however, that among the court court’s findings were (1) that Gorman’s claims of “hundreds” of telephone calls, even after his request that they stop, were contracted by Wolpoff’s telephone records, and (2) that Gorman could not establish an FDCPA violation by Wolpoff based on statements Gorman made to MBNA.

Finally, while the district court denied Wolpoff’s motion for a finding that Gorman had acted in bad faith within the meaning of the FDCPA (even though it found “Gorman’s actions . . . not entirely above suspicion”), it did issue an order to show cause to Gorman as to why sanctions should not be imposed under Rule 11.