The Court in Patterson v. Peterson Enterprises, Inc., No. 2:18-cv-161-RMP (E.D. Wash. Oct. 23, 2018) recently denied a motion to dismiss seeking dismissal of a Fair Debt Collection Practices Act (“FDCPA”) claim due to the consumer plaintiff’s assertions that counterclaims in a previous collections lawsuit indicated that a debt was being disputed.  The Court ran with the plaintiff’s theory.  A copy of the opinion can be found here.

Plaintiff Latalia Patterson alleges in her complaint that her child’s medical providers failed to properly bill her insurance and, as a result, medical accounts went unpaid, there was a default, and the medical account were transferred to Valley Empire Collection, after which a collections lawsuit ensued.  Patterson also alleges that Valley Empire “failed to report the medical accounts as disputed after Patterson’s opposition to the debt collection lawsuit.”  Additionally, as alleged in the complaint, the “failure to report the credit accounts as disputed violates the [FDCPA], 15 U.S.C. § 1692 et seq.,” as well as other state laws.

In citing Turner v. Cook, 362 F.3d 1219, 1227–28 (9th Cir. 2004) and Heejon Chung v. U.S. Bank, N.A., 250 F. Supp. 3d 658, 680 (D. Haw. 2017), the Court noted that “a plaintiff alleges an FDCPA claim by alleging: (1) the plaintiff is a consumer; (2) the debt involved meets the definition of debt in the FDCPA; (3) the defendant is a debt collector; and (4) the defendant committed an act prohibited by the FDCPA.”  The Court held that Patterson easily satisfied the first three elements of an FDCPA claim.  However, the fourth element—that Valley Empire “committed an act prohibited by the FDCPA”—warranted additional analysis, in addition to a determination as to whether the debt collector’s “failure to communicate with credit reporting agencies [concerning Patterson’s dispute] was material.”

First, with respect to the fourth element of a FDCPA claim, the Court found:

Ms. Patterson alleges that Valley Empire failed to report [her] dispute of the amount due on the medical account to credit reporting agencies in violation of section 1692e(8).  She alleges to have disputed the account by denying liability on the account in her answer to Valley Empire’s debt collection lawsuit and her opposition to Valley Empire’s summary judgment motion.  Id.  Therefore, Ms. Patterson has alleged that she disputed the credit account, and that Valley Empire failed to tell credit reporting agencies that the account was disputed.

Second, with respect to the materiality of Valley Empire’s alleged failure to communicate Patterson’s dispute vis-à-vis her response in the collections lawsuit, the Court reasoned:

Here, Ms. Patterson alleges that Valley Empire elected to report the unpaid medical accounts to credit reporting agencies.  Because Valley Empire elected to report the medical account, if Valley Empire did not disclose that the account was disputed, that failure to disclose would be material. Ms. Patterson’s complaint therefore alleges that Valley Empire failed to report the credit account as disputed, and that such a failure would be material under section 1692e.  Thus, Ms. Patterson’s complaint sufficiently states a FDCPA claim.

At the very least, the Patterson decision sends a clear signal that debt collectors, when defending themselves (and positioned to make a motion to dismiss), need to consider the entire relationship and history of their interactions with their consumers, the debts at issue, and all collection efforts, including previous lawsuits.