The Ninth Circuit in Tourgeman v. Nelson & Kennard, 900 F.3d 1105 (9th Cir. Aug. 20 2018) held that it is the plaintiff’s burden to prove defendant’s net worth in an FDCPA class action. Because the plaintiff lacked evidence of the defendant’s net worth the appellate court affirmed the dismissal of the suit.
The plaintiff in the case brought a consumer class action under the FDCPA against the defendant debt collector contending the debt collector violated the FDCPA by misidentifying the original creditor. A class was certified after the case was removed to federal court. The case proceeded to trial where the debt collector filed a motion in limine to exclude evidence and argument regarding its net worth. The district court instructed the parties to address a related issue: which party carries the burden at trial of introducing evidence regarding defendant’s net worth? The district court ultimately held that the plaintiff carried this burden and because he lacked competent evidence of defendant’s net worth, it dismissed the suit.
On appeal, the plaintiff argued that the district court misallocated the burden of proof as to net worth. The Ninth Circuit affirmed and held that the plaintiff has to carry the burden at trial of introducing evidence of the defendant’s net worth.
The FDCPA provides a two-step determination for awarding statutory damages to class members, excluding named plaintiffs. First, the factfinder determines the damages ceiling: a class may recover statutory damages “not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector[.]”Within that range, the exact amount of damages is determined based on various non-exhaustive factors. The damages provision is silent, however, as to which party carries the burden of producing evidence at trial of the defendant’s net worth.
Where the plain text of the statute is silent as to which party carries the burden of proof, courts begin with the ordinary default rule that plaintiffs bear the risk of failing to prove their claims. Section 1692k limits statutory damages for the class to “the lesser of” $500,000 or one percent of the defendant’s net worth. Congress’s use of “the lesser of” is key because it requires the factfinder to determine the defendant’s net worth in calculating statutory damages. In other words, Congress made evidence of the defendant’s net worth a prerequisite to establishing statutory damages. If Congress had intended to depart from the default rule and make net worth an affirmative defense or exemption, it could have limited liability to $500,000 unless the defendant could establish that one percent of its net worth is less than that amount. It did not do so. Instead, Congress made evidence of the defendant’s net worth essential to establishing the statutory damages cap.
The structure of § 1692k further supports the conclusion that Congress did not intend to shift the burden of production to the debt collector. The FDCPA provides a dual-step formula for calculating class statutory damages. The factfinder first determines the defendant’s maximum liability. It next “determin[es] the amount of liability in any action under subsection (a)” based on a non-exhaustive list of factors. The factfinder thus determines the appropriate award of statutory damages within the permissible range first established under subsection (a).
The two exceptions to liability that are delineated in § 1692k – the bona fide error and compliance with CFPB advisory opinion – are affirmative defenses that by the express terms of the statute the defendant must prove. “The statute—its text and structure—makes evidence of net worth essential to a class statutory damages award; it is not an affirmative defense. If a plaintiff seeks class statutory damages, it carries the burden of introducing such evidence at trial.”
Author
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Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.
