On August 6, 2021, the federal district court in Utah granted a motion to dismiss that Salt Lake City Partner Mark Nickel and Associate David Garner filed on behalf of a national debt buyer. The plaintiffs had brought a class action against the firm’s client, alleging that it violated provisions of the Fair Debt Collection Practices Act (“FDCPA”) that prohibit debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” including “[t]he threat to take any action that cannot legally be taken” and “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt.” 15 U.S.C. § 1692e. The plaintiffs also alleged that the firm’s client violated Section 1692f of the FDCPA, which prohibits the use of “unfair or unconscionable means to collect or attempt to collect any debt.” Plaintiffs argued that the firm’s client violated these provisions when it filed the underlying debt collections actions while purportedly not being registered in accordance with the Utah Collection Agency Act (“UCAA”).
Nickel and Garner convinced the federal district court that plaintiffs’ FDCPA claims were barred by the First Amendment to the Constitution, specifically the Petition Clause. The court held that the First Amendment guarantees the people a right to petition the Government for a redress of grievances, and that immunity flows from this right, protecting those who seek redress through the courts from liability for petitioning activities. The plaintiffs had argued that other courts have held that Petition Clause immunity (as it is referred to by the Tenth Circuit) cannot be applied to bar an FDCPA claim. The federal district court rejected that argument, holding that the Supreme Court cases on which those other courts relied did not address Petition Clause immunity and nothing in their analysis suggests that the FDCPA eliminates this immunity—especially when the immunity applies as a matter of constitutional right. See, e.g., CSMN Investments, LLC v. Cordillera Metropolitan District, 956 F.3d 1276, 1282 (10th Cir. 2020) (“The Supreme Court has recognized this right to petition as one of the most precious of the liberties safeguarded by the Bill of Rights.”).
The federal district court in Utah stated that it had “little difficulty concluding that a lawsuit to recover a debt is a petition for redress of grievances within the meaning of Petition Clause immunity. It follows that Defendant cannot be held liable under the FDCPA for seeking to recover debts through the state courts unless its lawsuits constituted sham petitions.”
The court then held that because the firm’s client had prevailed in the underlying state court debt collection lawsuits, that petitioning could not have been a sham. This is because “[a] winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham.” Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 60 n.5 (1993). But even if the firm’s client had not prevailed in its state court petitioning against the plaintiffs, the federal district court held that it was reasonable for the firm’s client to have believed that the UCAA did not require it to register as a debt collector in Utah—especially where the firm’s client is collecting on debts it owns. In other words, even if the firm’s client’s petitioning activities hadn’t been successful, the client still would not have engaged in sham petitioning merely by pursuing their claims against the plaintiffs. Indeed, when the firm’s client filed its debt collection lawsuits against the plaintiffs, it “could realistically expect success on the merits.” See Professional Real Estate Investors, 508 U.S. at 50. Therefore, its petitioning was not a sham.
On behalf of other clients of the firm, Nickel and Garner previously defeated different state court class actions brought by the same attorneys who represented the plaintiffs in the above federal class action. In those state court cases, Nickel and Garner convinced the courts that a debt collector’s purported failure to register under the UCAA cannot be transformed into a claim under the Utah Consumer Sales Practices Act—or into any other state law claim—because the UCAA does not provide for a private remedy for a violation thereof. This is because Utah’s “long-standing approach to statutory interpretation [which] prevents courts from creating a private right of action when a statute makes certain acts unlawful and provides criminal penalties for such acts, but does not specifically provide for a private right of action.” Puttuck v. Gendron, 2008 UT App. 362, ¶ 18, 199 P.3d 971, 978 (internal citation omitted).