Oral Arguments in CFPB v. Hanna Suggest Long Road Ahead

Oral arguments on the Defendant’s Motion to Dismiss the Consumer Financial Protection Bureaus (CFPB) action against the Georgia law firm Frederick J Hanna & Associates P.C. were held on June 3^rd in Atlanta.

insideARM has reviewed the 65 page transcript from the hearing. The hearing was clearly interesting for attendees with a deep legal background but, perhaps, unintelligible for the lay person in attendance. The case is highlighted by esoteric legal issues.

The stakes are high, not only for the Hanna law firm, but also any law firm that handles a high volume of consumer debt collection matters. The case should be front and center for all law firms practicing in this space.

In our May 8, 2015 article insideARM discussed the procedural history of the case and the various pleadings that had been filed by the parties. Links to all of the pleadings were included in that article.

At the outset it is important to note that the CFPB action was brought under both the Consumer Financial Protection Act (CFPA) and the Fair Debt Collection Practices Act (FDCPA).

In that initial Complaint the CFPB alleged that the Hanna law firm filed large numbers of lawsuits without “significant attorney involvement” and as a result violated section 807(3) of the FDPCA by falsely representing or implying that the communication was from an attorney and violated the CFPA for the same reasons.

The significance and differences between the two separate laws underlying the CFPB action permeated the pleading and arguments.

This article will summarize, and attempt to simplify, some of the key positons of both parties.

The primary argument raised by Hanna was that the CFPA expressly prohibits the CFPB from enforcing the CFPA “with respect to activity performed by a lawyer as part of the practice of law.” The Hanna position is that states have exclusive authority to regulate the practice of law. In this instance, Hanna alleges that the Supreme Court for the State of Georgia has the exclusive jurisdiction.

The CFPB acknowledges that the CFPA has a “practice of law” exclusion, but that the exclusion covers only attorneys providing legal advice or services to consumers, not in this instance where Hanna provides services to banks or debt buyers and initiates litigation against consumers.

During the oral argument attorneys for Hanna seemed to concede that the CFPB does have the authority to regulate attorneys under the FDCPA.  That distinction is critical when it comes to discussion on potential remedies available to the CFPB under each statute and the applicable statute of limitations under each statute.

There was considerable disagreement and debate regarding the “significant meaningful involvement” standard and its applicability to this case in both the pleadings and at the oral argument.  The “significant meaningful involvement” standard for attorneys was originally outlined by the United States Supreme Court in the 1995 landmark case, Heintz v. Jenkins.

The Hanna positon is that there is no “meaningful attorney involvement” standard for preparing and filing lawsuits. The CFPB position is that the filing of complaints is a communication requiring the same “significant meaningful involvement” that is required of when an attorney sends a letter to a consumer.

For the hardcore legal scholar there was an extended discussion on the obscure Noerr- Pennington Doctrine. [Editor’s Note: Most practicing attorneys would need to go back to year one of law school for any recollection of the Noerr-Pennington Doctrine. It is based on the First Amendment’s Petition Clause, and the Fifth Amendment’s Equal Protection Clause.]

Hanna argued that Noerr-Pennington Doctrine prohibits the CFPB from burdening or limiting their rights to file lawsuits. The CFPB countered that the Doctrine was not applicable under the facts of the case.

Finally, a significant portion of the written briefs and oral arguments related to the applicable statute of limitations for this type of action.  This discussion also requires more background. As noted earlier, the CFPB action was brought under the CFPA and the FDCPA. Thus, there was a discussion on the limitations period for both statutes.

Hanna argued that the applicable statute was one year, the same as the statute for any civil action under the FDCPA. The CFPB position is that that there are two different limitations provisions under the FDCPA: one-year for civil liability claims, and no statute of limitations for an enforcement action under the FDCPA. Additionally, the CFPB argues that the CFPA statute of limitations is three years.

It seems clear that this case is going to be proceeding for quite a while. First, the presiding Judge (The Honorable Amy Totenberg) indicated that she may be requesting additional briefing on some of the issues raised during the oral arguments.  Second, based upon our review of the pleadings and transcript the case does not appear to be one that will be resolved short of a trial.

insideARM will continue to monitor this matter and provide updates when available.