Debt collector cannot invoke FDIC’s safe harbor when relying on precedent that is later overturned

The issue in *Oliva v Blatt, Hasenmiller, Leibsker & Moore*, No. 15-2516 (7th Cir. July 24, 2017) (en banc) was whether a debt collector who violated the venue provision of the FDCPA can avoid liability on the ground that it was relying on controlling circuit precedent interpreting the statute when it committed the violation. The answer, the Seventh Circuit en banc gave, is no.

In *Suesz v. Med-1 Solutions, LLC*, 757 F.3d 636 (7th Cir. 2014) (en banc), the Seventh Circuit decided that the “judicial district or similar legal entity” of the FDCPA is the smallest geographic area that is relevant for determining venue in the court system in which the suit is filed. That geographic area can be smaller than a county where the court system uses such smaller districts. *Suesz* overruled an earlier decision in *Newsom v. Friedman*, 76 F.3d 813, 819 (7th Cir. 1996) which held that for consumer debt collection suits in Cook County, Illinois, the relevant “judicial district” was the entire county and not the smaller municipal districts within the county.

The debt collector in *Oliva* made two main points why it should excused for not filing suit in the smallest geographical area. Since *Suesz* overruled *Newsom*, the debt collector argued that *Suesz* should be given only prospective effect. The Seventh Circuit noted that judicial decisions are not typically given retroactive effect. Thus, a prior decision of one intermediate appellate court does not ordinarily produce the degree of certainty concerning an issue of federal law that might justify a rare prospective-only ruling.

The panel opinion then considered the FDCPA safe harbor for good-faith mistakes under § 1692k(c), which had not been argued in *Suesz*. The debt collector argued, and the district court and panel agreed, that the safe harbor protected it from liability because it relied in good faith upon Newsom in choosing venue. The panel concluded that the Supreme Court decision *Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA*, which held that § 1692k(c) did not apply to errors of law in interpreting the Act, did not bar the safe harbor defense.

The full court said the panel read *Jerman* too narrowly as applying only to the debt collector’s own mistaken interpretation of the law but not to reliance on a precedent that was later overruled as mistaken. There were no indications in *Jerman* that the Court intended to allow § 1692k(c) to protect some mistakes of law about the Act but not others. “The opinion includes no indication of how courts might distinguish between protected and unprotected mistakes of law, nor do we see a workable line between protected and unprotected mistakes of law.” There is no manageable way to distinguish between mistakes supported by “controlling” legal authority and those supported by “substantial” legal authority.

The Court did acknowledge that if any mistaken interpretations of the FDCPA were made in good faith it was in cases like this.

A strongly worded dissent criticized the holding as “announc[ing] an unprecedented new rule—one that punishes debt collectors for doing *exactly* what the controlling law explicitly authorizes them to do at the time they do it.”

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