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From Banking and Finance Law Daily, April 28, 2017

Debt collecting law firm subject to Oregon’s Unlawful Trade Practices Act

By Thomas G. Wolfe, J.D.

The provisions of Oregon’s Unlawful Trade Practices Act (UTPA) that prohibit using "unconscionable tactics" to collect certain debts and causing likely "confusion" or "misunderstanding" regarding loans and credit apply to the debt collection activities of an attorney and his law firm, the Oregon Supreme Court has ruled. In reaching its decision in favor of the Oregon Attorney General and the Oregon Department of Justice, the court rejected the attorney’s and law firm’s contention that the pertinent UTPA provisions applied only to certain consumer relationships and that their roles as attorney and law firm engaged in debt collection activities on behalf of clients—and not as lender or debt owner—removed their activities from the scope of the UTPA (Daniel N. Gordon, P.C. v. Rosenblum, April 27, 2017, Balmer, T.).

According to the court’s opinion, the attorney, Daniel N. Gordon, and his law firm, Daniel N. Gordon, P.C., "represent creditors and debt buyers in their attempts to collect debt, often defaulted consumer credit card debt." The firm conducts a high-volume business assisting these creditor and debt buyer clients with "pre-litigation, collection activity, civil litigation, and post-judgment collection efforts."

Oregon DOJ investigation. After receiving a number of complaints, the Oregon Department of Justice investigated the firm’s practices. The Oregon DOJ concluded that the law firm exhibited a "pattern and practice of filing thousands of breach of contract actions against credit card debtors and obtaining default judgments for attorneys’ fees and interest in a manner that apparently took advantage of the debtors’ legal ignorance, lack of resources and general belief that they could not fight the claim."

Determining that it had probable cause to enjoin the law firm and its attorneys from engaging in trade practices prohibited under certain UTPA provisions (ORS 646.607(1) and ORS 646.608(1)), the Oregon DOJ demanded that the law firm execute an agreement, titled "Assurance of Voluntary Compliance." However, the law firm refused to execute the proposed agreement.

Firm’s declaratory action. Instead, Gordon and his law firm filed a lawsuit in Oregon state court against the Oregon DOJ and the Oregon Attorney General. Seeking a declaratory judgment and an injunction preventing the enforcement of the UTPA by the state officials, the complaint maintained that the UTPA did not apply to the attorney and law firm.

While the Oregon trial court granted the firm’s request for a declaratory judgment and an injunction, the Oregon Court of Appeals reversed the declarations of law and the injunction approval. The attorney and firm then appealed the intermediate appellate court’s decision to the Oregon Supreme Court.

UTPA: unconscionable tactics. As set forth by the court, section 646.607(1) of the UTPA provides that: "A person engages in an unlawful trade practice if in the course of the person’s business, vocation or occupation the person: (1) Employs any unconscionable tactic in connection with selling, renting or disposing of real estate, goods or services, or collecting or enforcing an obligation."

Essentially, the attorney and law firm argued that the UTPA provision did not apply to them because their relationship with the applicable debtors was not a "customer relationship," based on the meaning of "unconscionable tactics" in the provision and defined elsewhere in the UTPA. The Oregon Supreme Court disagreed.

Construing the statutory provision, the court determined that "the term ‘unconscionable tactic’ in ORS 646.607(1) takes its meaning from the legal doctrine of unconscionability, a doctrine that has been applied to many areas of law where there is no customer relationship of the sort urged by plaintiffs." In the court’s view, a transaction or agreement is not required between an attorney or law firm and the "persons from whom they seek to collect debts." Ultimately, the court determined that the alleged conduct by the attorney and law firm constituted the "use of unconscionable tactics" under the UTPA.

UTPA: confusion, misunderstanding. As observed by the court, section 646.608(1)(b) of the UTPA provides: "(1) A person engages in an unlawful practice if in the course of the person’s business, vocation or occupation the person does any of the following: … (b) Causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of real estate, goods or services."

Gordon and his law firm contended that the UTPA provision did not apply to them because the statute’s purpose is to "regulate the provision of real estate, goods, and services to consumers" and only applied to businesses that make "false or misleading representations to consumers about their own goods or services." Again, the firm’s argument did not prevail.

The court agreed with the Oregon DOJ and Attorney General that the alleged conduct of the attorney and law firm "comes within a straightforward interpretation of ORS 646.608(1)(b): a person who causes a likelihood of confusion or misunderstanding as to the source, sponsorship, approval, or certification of any real estate, goods, or services (including loans or extension of credit) may be liable under ORS 646.608(1) if that person satisfies the rest of the subsection." The court determined that the rest of the subsection was satisfied because the attorney and law firm were alleged to have "caused the likelihood of confusion or misunderstanding and to have done so in the course of their business."

Final Disposition. In concluding that the attorney’s and law firm’s debt collection activities were subject to the UTPA provisions, the court affirmed the intermediate appellate court’s decision. The state trial court’s judgment was affirmed in part and reversed in part, and the case was remanded to that court for further proceedings.

The case is No. SC S063978.

Attorneys: R. Daniel Lindahl (Bullivant Houser Bailey PC) and Daniel N. Gordon (Gordon Aylworth & Tami PC) for Daniel N. Gordon and Daniel N. Gordon, PC Michael A. Casper, Assistant Attorney General, Ellen F. Rosenblum, Oregon Attorney General, and Benjamin Gutman, Solicitor General, for the Oregon Attorney General and Oregon Department of Justice. Jonathan P. Strauhull and Phil Goldsmith as amicus curiae for the Oregon Trial Lawyers Association.

Companies: Daniel N. Gordon, PC

MainStory: TopStory ConsumerCredit DebtCollection EnforcementActions OregonNews UDAAP

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