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If you sue JDB for FDCPA violations, can they counterclaim the underlying debt?


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If a debt the JDB is trying to collect is still within the sol, can the JDB use counterclaims to collect the debt if you sue for FDCPA violations? I remember reading somewhere that they cannot but I don't know where to look for that source.

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I have an absoulte a$$ load of case law that says they can't already in a motion to dismiss a counter claim for this very thing. About a dozen different cases. PM your email and I'll forward it to you if you like. It's already in motion form for this exact issue complete with full case citations.

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In my case, I sued the JDB for a 1692g and a 1692i violation...about 6 weeks after they filed a counterclaim against me for the debt.

I had to file the 12(B)(1) motion to get their counterclaim dismissed - which it was with prejudice (they were also stupid enough to sue in state court using different attorneys) and I got that case dismissed by submitting the 12(B)(1) dismissal. Then I sued the law firm for FDCPA violations.

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Congress intended that the FDCPA be enforced by private attorneys general; See, Wright V Finance Service of Norwalk, Inc., 22F.3d 647, 650 (6th Cir. 1994).

Now when is the last time you've heard about a counter suit against the attorney general. :D

And to our good friends lurking from the collection side that like to refer to us as "dead beats" I'll simply yield to congress on this one.

"One of the most frequent fallacies concerning debt collection litigation is the

contention that the primary beneficiaries are deadbeats. Not only is this speculative, but the argument is nonsensical." See, S. Rep. No. 382, 95th Congress., 1st Session 3 (1977).

Those silly nonsensical collectors.

And we can always chime in with some good ole federal case precedent.

Sparrow V Mazda American Credit, F.Supp.2d, 2005 Westlaw 18459 (USDC E.D.2005) "The court declines to hear the Defendant's counterclaim due to the "Chilling affect it would have on litigants pursing their rights under the FDCPA."

Burrr you can just feel the chill when they hit you with that counter claim. :ROFLMAO2:

Collector as a last ditch effort- Oh, but your honor, these are professional debtors that are twisting the FDCPA and using it as a sword and not a shield.

Me- Yeah pretty much your honor, might I just add one other thing judge.

"No section of the FDCPA requires an inquiry into the worthiness of the debtor or purports to protect only deserving debtors. The FDCPA protects all

consumers from the gullible to the shrewd."

Bass vs Stolper, Koritzinsky, Brewster, and Neider, S.C. 111 f3d. 1322, 1330, 7th Circuit, 1997.

So Mr. Collector, please tell us again why your counter claim is proper in an FDCPA enforcement action? :twisted:

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In my case, I sued the JDB for a 1692g and a 1692i violation...about 6 weeks after they filed a counterclaim against me for the debt.

I had to file the 12(B)(1) motion to get their counterclaim dismissed - which it was with prejudice (they were also stupid enough to sue in state court using different attorneys) and I got that case dismissed by submitting the 12(B)(1) dismissal. Then I sued the law firm for FDCPA violations.

That's brilliant!

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I should think that you would be the one filing the conterclaim, not them.

I reread my first post and I see where you got this. The CA (not a JDB) is still trying to collect a debt for an OC via dunning letters, not through court action. I've done a little research and this CA never seems to sue but they haven't given up the collection of the debt either. It's been over 3 years since they last contacted me and now they are dunning me again.This does not bother me as they don't sue. This type of collector is harmless.

However, I recently noticed that the collector is making a major violation that will cause them to have to change their name. I found this solid violation by pure chance while researching something completely different.

I could wait a couple of years until the debt goes outside of sol but I'm contemplating suing now if the collector can not counterclaim the underlying debt.

I had to file the 12(B)(1) motion to get their counterclaim dismissed

What's this?

Coltfan, I might have to go with one of the cases outside of the 8th district as the one you sent did not seem to decide that a debt collector cannot counterclaim an underlying debt. There were different issues involved.

I'll be reading some of the other cases.

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I believe he's talking about Federal Rule of Civil Procedure 12(B)(1). In other words, if the counterclaim isn't a claim that the Federal Court has jurisdiction over, bye-bye!

(B) How to Present Defenses. Every defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required. But a party may assert the following defenses by motion:

(1) lack of subject-matter jurisdiction;

(2) lack of personal jurisdiction;

(3) improper venue;

(4) insufficient process;

(5) insufficient service of process;

(6) failure to state a claim upon which relief can be granted; and

(7) failure to join a party under Rule 19.

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Here's my MTD in a nutshell:

1. Rule 12(B)(1) - court lacks subject matter jurisdiction through a challenge both facially and substantively (Gould Electrics v US (220 F.3d 169,176)) (Scarfo v Ginsberg (175 F.3d 957,960-961)). The non-moving party must establish jurisdiction (Lujan v Defenders of Wildlife (550 US 555,561 (1992)) (Thomson v Haskell (315 US 442, 446 (1942)) and the Court must presume it lacks jurisdiction until the non-moving party proves it exists (Pavone v Citicorp Credit Services (60F.Supp.2d 1040) quoting Stock West Inc v Conferderated Tribes (873 F.2d 1221, 1225 (9th Circuit 1989)))

Per FRCP 12(h)(3), a court that lacks subject matter jurisdiction “shall dismiss the action."

Also see 28 USC 1367 - (a) Except as provided in subsections (B) and © or as expressly provided otherwise by Federal statute, in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or

intervention of additional parties.

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THE COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER

DEFENDANT’S COUNTERCLAIM

Defendant JDBs' claims of breach of contract, open book account, account stated,and reasonable value are based on a state law causes of action. It is based neither on a federal question nor a diversity suit for damages in excess of $75,000. Thus, there is no independent basis for subject matter jurisdiction over the Defendant’s counterclaim.

THE COURT DOES NOT HAVE SUPPLEMENTAL JURISDICTION OVER

DEFENDANT’S COUNTERCLAIM

The court lacks supplemental jurisdiction over the Defendant’s counterclaim.

28 USC 1367(a) allows the court to exercise supplemental jurisdiction over a counterclaim only when the claims are “so related ... that they form part of the same case or controversy.” Defendant’s state-law breach of contract counterclaim does not form the same case or controversy as Plaintiff’s federal claim.

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1stStep, I love it! Sue the JDB in Federal before the JDB sues you and you don't even have to argue standing. It just goes to show how well your typical DC attorneys knows any law outside of "Use of the card constitutes acceptance of the terms." I bet there are many instances where a similar strategy would work against an OC if you could find some claims where the federal court does have jurisdiction.

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Well my case was kind of an odyssey...

I learned that a certain JDB (Arrow) filed suit against me in Los Angeles - even though I was not living there and had not lived there at least 5 years...

So I sued Arrow and the law firm in Federal here in AZ...which had them scrambling...at one point they tried to claim they got bad info from Experian...

Then they counterclaimed, and I filed this MTD and got it granted w/prejudice.

Then Arrow got a local lawyer to file suit in AZ. All I had to do was provide the Federal order dismissing w/prejudice - the local guy said "Dismissed w/prejudice per Federal court order."

Then I sued the AZ law firm for an FDCPA violation - all told, Arrow and 2 law firms paid me some major $$$$

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Well my case was kind of an odyssey...

I learned that a certain JDB (Arrow) filed suit against me in Los Angeles - even though I was not living there and had not lived there at least 5 years...

So I sued Arrow and the law firm in Federal here in AZ...which had them scrambling...at one point they tried to claim they got bad info from Experian...

Then they counterclaimed, and I filed this MTD and got it granted w/prejudice.

Then Arrow got a local lawyer to file suit in AZ. All I had to do was provide the Federal order dismissing w/prejudice - the local guy said "Dismissed w/prejudice per Federal court order."

Then I sued the AZ law firm for an FDCPA violation - all told, Arrow and 2 law firms paid me some major $$$$

Maybe it was an oddesy, but I think it would work so long as you had two essential ingredients. A legitimate federal claim based on an underlying body of law where the claims would stand regardless of the legitimacy of the underlying debt and a bunch collection attorneys who's intellegence and scruples are about par for the collection attorney course.

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If I am understanding this correctly, this works just for Federal court. If a debtor were to file FDCPA violations in State court then the CA could file counterclaims for the underlying debt?

And as a given, even though the CA could not file counterclaims in Federal court they could still start their own action to collect the debt in state court, right? Then, if the CA did start an action in State court, the debtor could not use the same FDCPA violations for counterclaims, correct again?

But, could the debtor file counterclaims for new FDCPA violations committed by the same CA attempting to collect the same debt because those violations occured after the debtor filed in Federal court? Or is there such a thing that all FDCPA violations for the same debt must go to the same court in the form of amended claims?

The reason I am asking is because a certain CA I know has something in their name that is definately a FDCPA violation. If I file FDCPA violations in Federal court about the name, the CA files an action in State court to collect the same debt, using the same name, can I counterclaim in State court the new violations of the CA using the same illegal name even though nothing has been decided in Federal court?

Edited by Downto0
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If they haven't filed suit, I think their counterclaim would be DOA. As I understand counterclaims, they are similar to joinder and consolidation cases where the CC has to be based on facts and circumstances arising out of the same case. If there is no same case, where does the CC come from? Also, the statutes we frequently use here, TILA, RESPA, FDCPA, FCRA, the telephone one that skips my mind right now, these are statutes designed to regulate lenders and debt collectors, not the consumer. I don't see where there is any provision for a counterclaim in a consumer protection law.

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Okay, so let me put these questions in statement form.

1) CA cannot counterclaim underlying debt when debtor files a FDCPA claim in Federal court.

2) CA could counterclaim underlying debt when debtor files a FDCPA claim in State court.

3) If debtor files FDCPA violations in Federal court, the CA could still file a separate claim for underlying debt in State court.

4) If CA files separate claim in State court for underlying debt, the debtor could not counterclaim the same violations for FDCPA violations that the debtor has already filed a claim for in Federal court.

5) If CA files separate claim in State court for underlying debt, the debtor could counterclaim new FDCPA violations which occurred after the debtor filed in Federal court for previous FDCPA violations.

I'm asking these questions and stating my opinion because all of these things could occur if I decided to file FDCPA violations against the CA where the debt is not outside of sol.

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Okay, so let me put these questions in statement form.

1) CA cannot counterclaim underlying debt when debtor files a FDCPA claim in Federal court.

According to 1stStep's win, no, unless their counterclaims have some basis in federal law. I seriously doubt they could come up with a federal cause of action regarding a debt that isn't frivilous. IMO, this for the same reasons that FDCPA claims are not compulsory counter claims.

2) CA could counterclaim underlying debt when debtor files a FDCPA claim in State court.

I would guess yes, but do not quote me on that. IMO, it would be a permissive counter claim, but there's no telling how a state judge is going to interpret that, and there may also be some state laws that change the answer depending on what state you are in.

3) If debtor files FDCPA violations in Federal court, the CA could still file a separate claim for underlying debt in State court.

I would honestly be surprised if the answer was no here. FDCPA claims are independent from the validity of the underlying validity of the debt.

4) If CA files separate claim in State court for underlying debt, the debtor could not counterclaim the same violations for FDCPA violations that the debtor has already filed a claim for in Federal court.

That would be a second bite at the apple, so no. The FDCPA claims are only going to be heard once, barring a dismissal without prejudice.

5) If CA files separate claim in State court for underlying debt, the debtor could counterclaim new FDCPA violations which occurred after the debtor filed in Federal court for previous FDCPA violations.

IMO, you could be getting into some grey areas here, depending on the particular circumstances. If your case in federal is still ongoing and it hasn't passed the deadline for amending your answer, that may be the best route if the same party has committed further FDCPA violations. If your FDCPA suit is done with, then sure, counter claim away.

I'm asking these questions and stating my opinion because all of these things could occur if I decided to file FDCPA violations against the CA where the debt is not outside of sol.
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1) CA cannot counterclaim underlying debt when debtor files a FDCPA claim in Federal court.

Correct

2) CA could counterclaim underlying debt when debtor files a FDCPA claim in State court.

Yes, they have a better shot but I'd argue the congressional intent of the FDCPA was to have an FDCPA action only. In other words, private attorneys general don't get counterclaimed and there is still a chilling effect on a debtor enforcing their FDCPA rights, if a counterclaim can move forward, and federal or state is irrelevant.

I think you're focusing more on the jurisdiction issue when you can go with the yeah we have jurisdiction, but counterclaiming on an FDCPA, if allowed, will discourage debtors from enforcing their right.

In other words, if a debtor goes pro-se to enforce their FDCPA rights and the FDCPA is strict liability, it's not to hard to pull out a letter and say look judge, this letter has no mini-miranda on it. Not a lot of arguing on that. It's strict liability. Other than bona fide error, which is an affirmative defense so they would have to prove it was a bona fide error, there is nothing for the debtor to prove. In fact, the damages are statutory so other than actual damages the debtor does not even have to prove their damages.

Now throw into the mix a counterclaim for a contract law case, which is not strict liability, and there are many elements that have to be proven for victory by the other side. In other words a much more complex case is being counterclaimed, contract law as opposed to a basic he/she did this, yes/no, if yes, case over here is your statutory damages.

Allowing the counterclaim, in theory for most, would almost guarantee the debtor needs an attorney. Also in a contract credit card case there are atty fees the other side can collect upon victory. Now that is a legit chilling effect of losing a credit card contract case. With the FDCPA unless the claim brought is frivilous and only brought to harass, you can't be hit with the other sides attorney fees.

In other words, creditors and collectors could bully debtors out of FDCPA claims by making it impossible (for most) to enforce their rights. They can just counterclaim and run the debtors atty fees up so much a debtor can't afford to go to court.

So you throw all those arguments out there and I don't see how a court can say the debtor should have to face a counterclaim for the underlying debt.

I'd argue the court has jurisdiction, but should not hear the claim anyway for the above stated reasons.

3) If debtor files FDCPA violations in Federal court, the CA could still file a separate claim for underlying debt in State court.

In my opinion, exactly how it is supposed to work.

4) If CA files separate claim in State court for underlying debt, the debtor could not counterclaim the same violations for FDCPA violations that the debtor has already filed a claim for in Federal court.

Correct, you would already have your case being heard by one court and you can't double dip on FDCPA cases.

5) If CA files separate claim in State court for underlying debt, the debtor could counterclaim new FDCPA violations which occurred after the debtor filed in Federal court for previous FDCPA violations.

I think they could argue and win the argument those new claims should be joined with the federal case. If not, a shrewd debtor (not that we have any on this board) could always hold back a claim for an ace in the hole.

If it is truly a brand new violation which there was no way the debtor could have known about, I still think they would have to be joined with the federal suit. I don't really know on this one, just my opinion.

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Correct

Yes, they have a better shot but I'd argue the congressional intent of the FDCPA was to have an FDCPA action only. In other words, private attorneys general don't get counterclaimed and there is still a chilling effect on a debtor enforcing their FDCPA rights, if a counterclaim can move forward, and federal or state is irrelevant.

This is another point I addressed in my MTD:

THE COURT SHOULD DECLINE TO EXERCISE JURISDICTION OVER

DEFENDANT’S CLAIM FOR POLICY REASONS PURSUANT TO 28 USC 1367©(4)

Even if the court were to hold that Defendant’s state-law breach of contract

counterclaim and Plaintiff’s underlying FDCPA claim arise from the same case or controversy, the court should decline to exercise supplemental jurisdiction over Defendant’s claim for policy reasons. The court has the authority to decline supplemental jurisdiction over a defendant’s counterclaim when there are “compelling reasons for declining jurisdiction.” (28 USC 1367 ©(4)).

Plaintiff believes that Defendant has filed this state law contract counterclaim merely to intimidate and harass. Further, allowing defendant to bring counterclaims under state law breach of contract claims has a chilling effect on plaintiff’s federal rights.

ALLOWING STATE-LAW BASED COUNTERCLAIMS DISCOURAGES PLAINTIFF’S

FROM FILING SUIT AND UNDERMINES CONGRESSIONAL INTENT

The FDCPA was passed by Congress to protect consumers from unfair, deceptive and/or abusive collection practices (15 USC 1692a). However, many abusive debt collectors may soon find the FDCPA as a minor impediment in their attempt to collect by any means. Plaintiff believes that other victims of abusive debt collectors will be discouraged from filing suit under FDCPA from fear of facing counterclaims asserting outrageous interests and penalties on the underlying debt.Thus, allowing Defendant and other debt collectors to bring unrelated counterclaims for the underlying debt in FDCPA suits would undermine congressional efforts to protect consumers by discouraging victims from asserting their rights under the FDCPA.

Edited by 1stStep
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This is another point I addressed in my MTD:

THE COURT SHOULD DECLINE TO EXERCISE JURISDICTION OVER

DEFENDANT’S CLAIM FOR POLICY REASONS PURSUANT TO 28 USC 1367©(4)

Even if the court were to hold that Defendant’s state-law breach of contract

counterclaim and Plaintiff’s underlying FDCPA claim arise from the same case or controversy, the court should decline to exercise supplemental jurisdiction over Defendant’s claim for policy reasons. The court has the authority to decline supplemental jurisdiction over a defendant’s counterclaim when there are “compelling reasons for declining jurisdiction.” (28 USC 1367 ©(4)).

Plaintiff believes that Defendant has filed this state law contract counterclaim merely to intimidate and harass. Further, allowing defendant to bring counterclaims under state law breach of contract claims has a chilling effect on plaintiff’s federal rights.

ALLOWING STATE-LAW BASED COUNTERCLAIMS DISCOURAGES PLAINTIFF’S

FROM FILING SUIT AND UNDERMINES CONGRESSIONAL INTENT

The FDCPA was passed by Congress to protect consumers from unfair, deceptive and/or abusive collection practices (15 USC 1692a). However, many abusive debt collectors may soon find the FDCPA as a minor impediment in their attempt to collect by any means. Plaintiff believes that other victims of abusive debt collectors will be discouraged from filing suit under FDCPA from fear of facing counterclaims asserting outrageous interests and penalties on the underlying debt.Thus, allowing Defendant and other debt collectors to bring unrelated counterclaims for the underlying debt in FDCPA suits would undermine congressional efforts to protect consumers by discouraging victims from asserting their rights under the FDCPA.

Right and this is the case where the court actually used the phrase "chilling effect." Sparrow V Mazda American Credit, F.Supp.2d, 2005 Westlaw 18459 (USDC E.D.2005)

OP,

I'd argue the court defiantly has jurisdiction, but should decline to hear the case anyway.

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I'd differ slightly Coltfan...I'd say if the JDB counterclaims, I'd stick with my guns - the Court could exercise jurisdiction but must decline for the following reasons:

*Rule 12(B)(1) - the court lacks subject matter jurisdiction and the non-moving party must show that it exists;

*The counterclaim is not based on a federal question, nor is there diversity in excess of $75k;

*There's no supplemental jurisdiction pursuant to 28 USC 1367a since the counterclaims on state law do not arise from this same case;

*Policy reasons pursuant to 28 USC 1367 ©(4);

*Hearing the counterclaim undermines Congressional intent in 15 USC 1692(a)

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