Nursing home debt collection abuse

 

Photo 106271439 / Nursing Home © motortion | Dreamstime.com

Illegal nursing home debt collection abuse

Photo 88435502 / Nursing Home © Katarzyna Bialasiewicz | Dreamstime.com

FDCPA Affirmative Defenses and Motions to Strike

 The US Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)  and Ashcroft v. lqbal, 556 U.S. 662 (2009) to tighten the relaxed standards of “notice pleading” in federal civil action resolved a pre-existing split in the lower courts. But, the split continued after Towmby over whether to apply a “plausibility standard” to the pleading of affirmative defenses. Many district courts extended Twombly to defense pleadings, but the courts that have declined to extend the plausibility standard have gained ground and the split remains.

Federal Rules of Civil Procedure (FRCP), Rule 8(c)(1) requires a party to “affirmatively state any avoidance or affirmative defense” when responding to a pleading. The party asserting an affirmative defense generally has the burden of proof. If not appropriately and timely presented, the defense might be waived.

It is not unusual for lawyers to plead every potential affirmative defense to prevent a waiver. However, the Federal Rules of Civil Procedure do not allow this tactic or the assertion of boilerplate affirmative defenses. 

Specifically, Rule 11 of the FRCP states that a lawyer who presents to the court a “pleading, written motion, and other paper” confirms “to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances” that the “claims defenses and other legal contentions are warranted by existing law” and that the “factual contentions have evidentiary support after a reasonable opportunity for further investigation or discovery.”

FRCP Rule 11(b) Representations to the Court. 

By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

If Rule 11 is violated, the court may sanction a lawyer. See Fed. R. Civ. P. 11(c)(1), (3).

Rule 12(f) motions to strike have been used to eliminate non-complying affirmative defenses.

FRCP Rule 12(f) provides:

“The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act:

(1) on its own; or

(2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading.”

When a court strikes an affirmative defense, leave to amend should be freely given so long as there is no prejudice to the moving party. Wyshak v. City Nat’l Bank, 607 F.2d 824, 826 (9th Cir. 1979); see also Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave [to amend] when justice so requires.”).

“The Ninth Circuit has long held that “[t]he key to determining the sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice of the defense. Wyshak, 607 F.2d at 827.

“Following the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which announced a heightened pleading standard for complaints, the courts in this district have generally applied the Twombly/Iqbal pleading standard to affirmative defenses.”

Goobich v. Excelligence Learning Corp., 482 F. Supp. 3d 986 (N.D. Cal. 2020)

Using this standard, affirmative defenses must contain sufficient facts to state a

defense “that is plausible on its face.”

“This standard serves to weed out the boilerplate listing of affirmative defenses which is commonplace in most defendants’ pleadings where many of the defenses alleged are irrelevant to the claims asserted.”

Barnes v. AT&T Pension Benefit Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1172 (N.D. Cal. 2010)

In United States ex rel. Patzer v. Sikorsky Aircraft Corp., 382 F. Supp. 3d 860, 868 (E.D. Wis. 2019), a US District Court in Wisconsin struck boilerplate affirmative defenses that lacked a “short and plain statement of the facts and...the necessary elements of the defenses.”

The District Court was following the Seventh Circuit Court of Appeals precedent that required defendants to allege the factual basis for the defense. Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989).

District Court Judge Adelman struck the defendant’s affirmative defenses reluctantly, stating:

“I would like to find that the defendants have adequately pleaded their defenses. However, under Seventh Circuit precedent, affirmative defenses must be pleaded with more detail than the defendants have supplied here. Therefore, I will strike the defenses. But because the defendants could cure this pleading deficiency, I will grant them leave to amend.”

Although the Sixth Circuit Court of Appeals has not expressly followed the Seventh Circuit’s strict position on pleading affirmative defenses, Williams v. Provident Inv. Counsel, Inc., 279 F. Supp. 2d 894 (US Dist. Court, ND Ohio 2003) adopted the test found in Renalds v. S.R.G. Restaurant Group, Chicago, LLC, 119 F.Supp.2d 800, 802 (N.D.Ill.2000) (citing Heller, supra at 1294).

(1) the matter must be properly pleaded as an affirmative defense; (2) the matter must be adequately pleaded under the requirements of Federal Rules of Civil Procedure 8 and 9; and (3) the matter must withstand a Rule 12(b)(6) challenge —in other words, if it is impossible for defendants to prove a set of facts in support of the affirmative defense that would defeat the complaint, the matter must be stricken as legally insufficient.

In the case of Greenspan v. Platinum Healthcare Group, LLC., No. 2: CV-05874-JDW (E.D. Pa. March 16, 2021 Wolson, J.) the court struck Affirmative Defenses from a Federal Court Answer filed by a Defendant in a case where the defendant failed to assert any allegations or cite any facts or evidence that would give rise to a good faith basis to plead the defenses that were asserted.

The court found that Defendant's Affirmative Defenses violated Rule 11 as they were pled with conditional language ("[t]o the extent that discovery and/or investigation may reveal.") that indicated that Defendant did not have evidence to support the assertion of the defenses at the time. Rather, the court seems to indicate that it felt that boilerplate defenses had been pled in the case.

The court ended the opinion by noting that “Pleadings are not an opportunity for lawyers to throw things against the wall and see what sticks.” The court noted that Rule 11 requires lawyers to give some thought to the assertions included in pleading before they are filed.

“The assertion of prophylactic affirmative defenses is not harmless. It expands discovery in the case and makes it harder to get cases to resolution. A plaintiff's lawyer faced with a multitude of prophylactic affirmative defenses has to serve interrogatories to ferret out the factual basis for each defense.”

It's not entirely clear how useful a plaintiff's motion to strike might be.

Credit repair services

Credit Repair Organizations Act 

This Act, Title IV of the Consumer Credit Protection Act, prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of "credit repair" services. The Act bars companies offering credit repair services from demanding advance payment, requires that credit repair contracts be in writing, and gives consumers certain contract cancellation rights. 

15 U.S. Code § 1679 - Findings and purposes 

 (a) Findings The Congress makes the following findings: 

 (1) Consumers have a vital interest in establishing and maintaining their credit worthiness and credit standing in order to obtain and use credit. As a result, consumers who have experienced credit problems may seek assistance from credit repair organizations which offer to improve the credit standing of such consumers. 

 (2) Certain advertising and business practices of some companies engaged in the business of credit repair services have worked a financial hardship upon consumers, particularly those of limited economic means and who are inexperienced in credit matters. 

(b) Purposes The purposes of this subchapter are— 

(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and 

(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.

In FTC v. Gill, 265 F.3d 944 (9th Cir. 2001) Circuit Judge Paez wrote:

 "It has been said that bad credit is like a "Scarlet Letter." As Americans' reliance on credit has increased, so-called "credit repair clinics" have emerged, preying on individuals desperate to improve their credit records. These organizations typically promise they can have any negative information removed permanently from any credit report ... for a fee. On September 30, 1996, Congress enacted the Credit Repair Organizations Act ("CRO Act"), 15 U.S.C. §§ 1679-1679j, to ensure that the clinics provide potential customers with the information needed to decide whether to employ the services of such an organization and "to protect the public from unfair or deceptive advertising and business practices by credit repair organizations." 15 U.S.C. § 1679(b)."

The three levels of debt collection

 There are three levels to debt collection

The foundation level is the original debt. It might be a credit card debt, a student loan, a medical debt, or any other type of consumer debt obligation. The original creditor is the credit card company, the bank that made the loan, or the hospital that provided medical services.

The next level is the debt collection agency or the debt buyer who purchased the original debt.

Finally, there are the credit reporting agencies such as Equifax, TransUnion, and Experian.

A debt collection can impact you on each of these three different levels The problems caused by a debt collection must be solved on the level where the problem arose. For example, if a debt collection is time-barred by the statute of limitations on the first level it can still legally stay on your credit report for seven years.  But, if a collection agency improperly threatens to sue on this old “zombie debt”, it is possible to go after the debt collector directly in court for a Fair Debt Collection Practices Act violation and clean up your credit report in the process.

Never underestimate the power of litigation in the hands of a wizard attorney.