Philadelphia partner and Appellate Practice Group Co-Chair Jack Cohn, New Jersey/Charleston partner Peter Siachos, and New Jersey Senior Counsel Stephanie Imbornone scored a victory in the Third Circuit Court of Appeals on January 11, 2023. There, the Court affirmed the District Court’s dismissal of a Fair Debt Collection Practices Act ("FDCPA") lawsuit against a debt owner and a debt servicer who sought to collect on a state court default judgment obtained by prior counsel that was later vacated and declared void ab initio by the state court after plaintiff filed her FDCPA action.
The central issue was whether the defendants used “false, deceptive, or misleading” representations in connection with collecting the judgment in violation of FDCPA § 1692e by seeking to collect on the subsequently vacated default judgment. The plaintiff argued that the subsequent declaration that the judgment was void ab initio retroactively made the defendants’ representations misleading because the judgment never existed. The District Court disagreed and granted summary judgment in the defendant’s favor.
Like the District Court, the Third Circuit rejected the plaintiff’s argument that because the judgment was declared void ab initio—“null from the beginning” as if it were never in effect—that any collection action related to the judgment necessarily was unauthorized and violated the FDCPA. The Court held that, although the state court eventually vacated and declared the default judgment void ab initio, the default judgment order was in effect at the time of the defendants’ alleged collection attempts. If the defendants attempted to collect on the default judgment before the state court’s vacatur order, such action would not misrepresent the “legal status” of the judgment, 15 U.S.C. § 1692e(2)(A), or constitute a “threat to take any action that cannot legally be taken,” id. § 1692e(5), because at the time of the alleged collection communications, the judgment existed, and the fact that it was later vacated and declared void ab initio did not retroactively transmute what were accurate representations at the time the defendants made them into false ones.