On October 15, the Colorado Supreme Court affirmed that state’s Court of Appeals’ decision upholding a trial court’s granting dismissal of a plaintiff’s Colorado Fair Debt Collection Practices Act (“CFDCPA”) action.  The central issue in the case was whether a default judgment obtained against a tortfeasor by a law firm on behalf of its client constitutes debt collection within the statutory framework of the CFDCPA.  The decision falls in line with other courts across the country that have rejected similar FDCPA claims.

Consumer plaintiff Francis Ybarra had filed suit against the law firm of Greenberg & Sada, P.C., alleging that the firm had violated the CFDCPA by, among other things, making false and deceptive representations in an effort to collect upon a debt.  The complaint filed by Ybarra stemmed from a prior action where Greenberg & Sada obtained default judgment against Ybarra on behalf of its client, State Farm Auto Insurance Company, as subrogee of an insured to whom State Farm had paid a claim for damages caused by Ybarra in a motor vehicle accident.

The trial court subsequently granted dismissal of Ybarra’s complaint for failure to state a claim upon which relief could be granted, ruling that the subrogated tort claim upon which State Farm took default judgment against Ybarra was not a “debt” as defined by the CFDCPA and therefore the requirements for collection of a debt imposed by the Act did not apply to Greenberg & Sada.  On appeal by Ybarra, the Court of Appeals affirmed the trial court’s decision finding that the CFDCPA regulates only the collection of obligations to pay money arising from consumer transactions.

In upholding both lower courts’ decisions, the Colorado Supreme Court distinguished claims arising from tort and found that such claims do not obligate a tortfeasor to pay monetary damages and, therefore, do not constitute a debt within the contemplation of the CFDCPA.  The Supreme Court ruled that an insurance contract providing for the subrogation of the rights of an injured insured is not a transaction giving rise to an obligation of the tortfeasor to pay money; rather it is a change in the person to whom the obligation to pay is owed.  Consequently, it cannot constitute a transaction creating debt within the contemplation of the CFDCPA.

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Photo of David M. Gettings David M. Gettings

Dave is a partner of the firm who focuses on defending clients in consumer class actions and complex commercial litigation nationwide, particularly cases involving a variety of federal and state laws and regulations, including the Fair Credit Reporting Act (FCRA), the Telephone Consumer

Dave is a partner of the firm who focuses on defending clients in consumer class actions and complex commercial litigation nationwide, particularly cases involving a variety of federal and state laws and regulations, including the Fair Credit Reporting Act (FCRA), the Telephone Consumer Protection Act (TCPA) and associated FCC regulations, the Fair Debt Collection Practices Act, the Truth in Lending Act, the Electronic Fund Transfer Act, and many similar state consumer protection statutes.

Photo of Ronald I. Raether, Jr. Ronald I. Raether, Jr.

Ron leads the firm’s Privacy + Cyber team. Drawing from nearly 30 years of experience, he provides comprehensive services to companies in all aspects of privacy, security, data use, and risk mitigation. Clients rely on his in-depth understanding of technology and its application

Ron leads the firm’s Privacy + Cyber team. Drawing from nearly 30 years of experience, he provides comprehensive services to companies in all aspects of privacy, security, data use, and risk mitigation. Clients rely on his in-depth understanding of technology and its application to their business to solve their most important challenges — from implementation and strategy to litigation and incident response. Ron and his team have redefined the boundaries of typical law firm privacy and cyber services in offering a 360 degree approach to tackling information governance issues. Their holistic services include drafting and implementing bespoke privacy programs, program implementation, licensing, financing and M&A transactions, incident response, privacy and cyber litigation, regulatory investigations, and enforcement experience.

Photo of David N. Anthony David N. Anthony

David Anthony handles litigation against consumer financial services businesses and other highly regulated companies across the United States. He is a strategic thinker who balances his extensive litigation experience with practical business advice to solve companies’ hardest problems.