PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2357
DIANE RUSSELL,
Plaintiff - Appellee,
v.
ABSOLUTE COLLECTION SERVICES, INC.,
Defendant – Appellant,
and
CHARLTON CLARKSON,
Defendant.
Appeal from the United States District Court for the Middle
District of North Carolina, at Greensboro. William L. Osteen,
Jr., Chief District Judge. (1:09-cv-00515-WO-WWD)
Argued: April 11, 2014 Decided: August 15, 2014
Before MOTZ, DIAZ, and FLOYD, Circuit Judges.
Affirmed by published opinion. Judge Floyd wrote the opinion,
in which Judge Motz and Judge Diaz joined.
ARGUED: Sean T. Partrick, YATES, MCLAMB & WEYHER, LLP, Raleigh,
North Carolina, for Appellant. Deepak Gupta, GUPTA BECK PLLC,
Washington, D.C., for Appellee. ON BRIEF: Allison J. Becker,
Jennifer D. Maldonado, YATES, MCLAMB & WEYHER, LLP, Raleigh,
North Carolina, for Appellant. Joanne Faulkner, New Haven,
Connecticut; Suzanne R. Begnoche, Chapel Hill, North Carolina,
for Appellee.
2
FLOYD, Circuit Judge:
Diane Russell was the target of a dunning campaign waged by
Absolute Collection Services, Inc. (Absolute Collection),
wherein Absolute Collection made repeated collection demands to
Russell for a debt that she incurred in 2008. Within one month
of receiving Absolute Collection’s first collection letter,
Russell paid the outstanding bill in full. Although the
collection letter instructed Russell to send payment for the
debt to Absolute Collection, she instead paid the creditor
directly and notified Absolute Collection of her payment during
two telephone conversations with collection agents. Yet, over
the next few months, Absolute Collection continued sending
Russell demand letters falsely asserting that the already-paid
debt remained due and threatening to report it to credit bureaus
as “past due.”
Russell filed suit against Absolute Collection in federal
district court in North Carolina, alleging that Absolute
Collection’s conduct violated the Fair Debt Collection Practices
Act (FDCPA), 15 U.S.C. § 1692-1692p, and the North Carolina
Collection Agency Act, N.C. Gen. Stat. § 58-70-1 et seq., by,
inter alia, falsely reporting the status of the debt and
threatening to report the paid-off debt to credit bureaus as
“past due.” Following a five-day jury trial, the district court
3
granted Russell’s motion for judgment as a matter of law with
respect to certain claims under the FDCPA and allowed the state
claims to go to the jury, which found in favor of Russell and
awarded to her $37,501.00.
Absolute Collection now appeals the district court’s orders
(1) denying Absolute Collection’s motion for judgment as a
matter of law; (2) granting Russell’s motion for judgment as a
matter of law; (3) excluding certain evidence relevant to
Absolute Collection’s bona-fide-error defense; and (4) denying
Absolute Collection’s post-trial motions. We reject each of
Absolute Collection’s challenges and affirm the district court’s
judgment in its entirety.
I.
A.
We begin with the salient portions of the FDCPA’s statutory
framework and then survey the factual and procedural history
before turning to the merits of Absolute Collection’s claims.
Congress enacted the FDCPA “to eliminate abusive debt collection
practices by debt collectors.” 15 U.S.C. § 1692(e). To
effectuate this purpose, the FDCPA regulates interactions
between consumers and debt collectors by imposing affirmative
statutory obligations upon debt collectors and proscribing
4
certain abusive conduct. See, e.g., id. § 1692b (setting forth
debt collectors’ obligations when acquiring location information
about consumers); id. § 1692d (prohibiting “any conduct the
natural consequence of which is to harass, oppress, or abuse any
person”); Clark v. Absolute Collection Serv., Inc., 741 F.3d
487, 490-91 (4th Cir. 2014) (per curiam) (explaining obligations
triggered by a debtor’s oral dispute under § 1692g(a)(3)). As
relevant here, the FDCPA makes it unlawful for debt collectors
to make false or deceptive statements in the course of their
collection activities. See 15 U.S.C. § 1692e.
Debt collectors that violate the FDCPA are liable to the
debtor for actual damages, costs, and reasonable attorney’s
fees. 15 U.S.C. § 1692k(a)(1), (a)(3). The FDCPA also provides
the potential for statutory damages up to $1,000 subject to the
district court’s discretion. Id. § 1692k(a)(2)(A). A debtor
generally is not required to show an intentional or knowing
violation on the part of the debt collector to recover damages
under the FDCPA. Warren v. Sessoms & Rogers, P.A., 676 F.3d
365, 375 (4th Cir. 2012) (“[T]he FDCPA ‘imposes liability
without proof of an intentional violation.’” (quoting Allen ex
rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d Cir.
2011))). The statute, however, excludes from liability
violations that were the result of bona fide errors.
5
See 15 U.S.C. § 1692k(c). To qualify for the bona-fide-error
defense, a defendant is required to show, by a preponderance of
the evidence, that (1) it unintentionally violated the FDCPA;
(2) the violation resulted from a bona fide error; and (3) it
maintained procedures reasonably adapted to avoid the violation.
Id.
B.
This appeal has its genesis in a $501 medical bill. After
Diane Russell failed to remit payment for medical services
rendered to her husband, Sandhills Emergency Physicians
(Sandhills) enlisted Absolute Collection to recover the
outstanding $501 balance. On December 8, 2008, Absolute
Collection sent Russell an initial collection letter advising
her that Sandhills “authorized us to extend to you a courtesy
which allows you thirty (30) days in order to pay the balance on
your account and prevent further, more serious collection
activity.” Absolute Collection followed its initial demand
letter with five telephone calls to Russell over the next couple
of weeks. On December 30, 2008, Russell paid the entire balance
owed by mailing a check directly to Sandhills, which applied the
payment to her account on January 8, 2009.
6
A collection agent from Absolute Collection telephoned
Russell on February 6, 2009, seeking to collect on the Sandhills
bill. Russell informed the agent that she paid the entire $501
debt directly to Sandhills and that the check had cleared her
bank account. The agent noted Russell’s response in her call
notes and ended the call without asking for proof of payment.
Later that month, however, Russell received another demand
letter, stating, “We are dismayed by your inaction with respect
to our previous requests that you settle your account with
Sandhills Emergency Physicians. Our records indicate that you
still owe $501.00 for services which were rendered to you.”
Russell telephoned Absolute Collection and again reported her
payment to Sandhills. The collection agent advised Russell to
send proof of her payment and suggested that she could set up a
payment plan to pay the bill. Russell did neither.
On March 31, 2009, Absolute Collection sent Russell another
collection letter, stating, “As you are aware, your account with
Sandhills Emergency Physicians has not been satisfied.” The
letter also threatened, “[W]e will be reporting your past due
account to national credit bureaus. This information will
remain on your credit file for the next seven (7) years. You
may be denied credit in the future as a result.” Fearful that
her credit would be ruined, Russell filed a complaint with the
7
Better Business Bureau. When the complaint was transmitted to
Absolute Collection, an employee from Absolute Collection
contacted Sandhills and verified that Russell had paid the
entire balance on the bill. Absolute Collection thereafter
ceased its collection efforts with respect to Russell.
C.
Russell filed a complaint against Absolute Collection in
federal district court, alleging violations of the FDCPA and
parallel North Carolina consumer-protection laws. Absolute
Collection denied liability and raised a bona-fide-error defense
to the FDCPA claims. In March 2010, after the discovery period
closed, Russell filed a motion for summary judgment on liability
against Absolute Collection under the FDCPA. Absolute
Collection opposed the motion, maintaining that Russell’s claims
under the FDCPA failed as a matter of law because she never
disputed the debt in writing. Alternatively, Absolute
Collection argued that it presented sufficient evidence to
create a genuine issue of material fact pertaining to its
defense of bona fide error. Relying upon an affidavit from its
chief operating officer, Absolute Collection explained that its
bona-fide-error defense was based on its practice of asking
debtors for proof of payment as well as its reliance upon
8
Sandhills to report subsequent payments on accounts that have
been referred for collection.
The case was scheduled for trial during the district
court’s November 2010 term of court. That month, with Russell’s
summary judgment motion still pending, the district court held a
pretrial conference. During the hearing, Absolute Collection
clarified that it intended to base its bona-fide-error defense
on the failure of its internal systems to receive payment
information that Sandhills was contractually obligated to
report. Following the conference, Russell filed a motion in
limine, requesting the district court to exclude evidence of any
procedures between Absolute Collection and Sandhills that
Absolute Collection failed to disclose during the discovery
period. The district court postponed the trial until
January 2011.
The district court denied Russell’s motion for summary
judgment on January 10, 2011. Although it rejected Absolute
Collection’s contention that Russell’s claims failed as a matter
of law because she did not dispute the debt in writing, the
district court nevertheless found that there were genuine issues
of material fact regarding Absolute Collection’s bona-fide-error
defense. That same day, the district court issued a separate
order continuing the trial to April 2011, due to inclement
9
weather, and reopening discovery on the limited issue of
Absolute Collection’s assertion of bona fide error,
“specifically with respect to any procedures that existed
between [Absolute Collection] and Sandhills . . . requiring
notice to [Absolute Collection] of payments made to an account.”
During the reopened discovery period, Absolute Collection’s
discovery responses revealed that the facts supporting its bona-
fide-error defense had changed once again. Absolute Collection
claimed that McKesson Corporation—a previously undisclosed
third-party—(or one of McKesson’s subsidiaries) was responsible
for sending Absolute Collection weekly reports showing payments
made directly to Sandhills, and it provided Russell with the
payment reports it received from McKesson between December 2008
and February 2009, the period during which Russell’s account was
referred for collection and when she made payment to Sandhills.
Absolute Collection also identified, for the first time, the
manager of its payment processing department, Laura Pavesi, as a
witness with knowledge who could testify about the payment
posting procedure between McKesson and Absolute Collection.
On March 22, 2011, Russell filed another motion in limine
requesting the district court to prohibit Absolute Collection
from introducing any evidence relating to its practice of
relying upon McKesson to provide payment reports and blaming
10
McKesson for not providing the payment report reflecting
Russell’s payment to Sandhills. Following a hearing, the
district court found that Absolute Collection’s untimely
disclosure of evidence pertaining to the factual basis for its
bona-fide-error defense was neither substantially justified nor
harmless, and, therefore, it excluded Pavesi’s testimony as well
as all evidence related to McKesson and the duty of any third
party to provide to Absolute Collection payment reports.
The case was tried before a jury over the course of five
days. At the close of Russell’s evidence, Absolute Collection
moved for judgment as a matter of law, which the district court
denied. At the close of all evidence, Russell moved for
judgment as a matter of law on her claims under 15 U.S.C.
§ 1692e(2)(A), (8), and (10). The district court granted
Russell’s motion for judgment as a matter of law, finding that
the representations in Absolute Collection’s dunning letters
were “objectively false” and that the March 31 letter contained
a “threat to communicate false information to a credit bureau.”
The district court also found that Absolute Collection failed to
present any evidence from which the jury could reasonably
conclude that the mistakes giving rise to Absolute Collection’s
FDCPA violations were the result of a bona fide error, and,
therefore, it determined that Russell was entitled to judgment
11
as a matter of law on Absolute Collection’s bona-fide-error
defense. The jury found in favor of Russell on her state law
claims and awarded her $1,000 in statutory damages under the
FDCPA, $6,000 in statutory damages under state law, and $30,501
in actual damages.
Absolute Collection filed motions for a new trial and
relief from the judgment. When the district court denied those
motions, Absolute Collection timely appealed.
II.
We first address Absolute Collection’s contention that the
district court erred in denying its motion for judgment as a
matter of law, a ruling we review de novo, viewing the evidence
and all inferences reasonably drawn therefrom in the light most
favorable to Russell. See Myrick v. Prime Ins. Syndicate, Inc.,
395 F.3d 485, 489-90 (4th Cir. 2005).
Federal Rule of Civil Procedure 50 authorizes a district
court to enter judgment as a matter of law when “a party has
been fully heard on an issue during a jury trial and the court
finds that a reasonable jury would not have a legally sufficient
evidentiary basis to find for the party on that issue.” Fed. R.
Civ. P. 50(a)(1). Judgment as a matter of law “is properly
granted if the nonmoving party failed to make a showing on an
12
essential element of his case with respect to which he had the
burden of proof.” Wheatley v. Wicomico Cnty., 390 F.3d 328, 332
(4th Cir. 2004) (quoting Singer v. Dungan, 45 F.3d 823, 827 (4th
Cir. 1995)) (internal quotation marks omitted).
Absolute Collection argues that it was entitled to judgment
as a matter of law because Russell failed to present any
evidence showing that she disputed the debt in writing and
within thirty days of receiving the initial collection letter.
Russell concedes that she did not dispute the validity of the
debt in writing and within thirty days of receiving Absolute
Collection’s first demand letter but submits that such steps are
unnecessary to state a claim under § 1692e. Whether a debtor
must dispute the validity of a debt as a condition to bringing
suit under the FDCPA presents an issue of statutory
interpretation, and we turn first to the relevant section of the
statute.
Section 1692g requires debt collectors to send written
“validation notices” to debtors informing them of their rights
to require verification and dispute a debt. Pursuant to
§ 1692g, the validation notice must include the amount of the
debt, the name of the creditor, and “a statement that unless the
consumer, within thirty days after receipt of the notice,
disputes the validity of the debt, or any portion thereof, the
13
debt will be assumed to be valid by the debt collector.” 15
U.S.C. § 1692g(a)(1)-(3). The notice also must apprise the
debtor that, upon written request within thirty days, the debt
collector will provide verification of the debt and the name and
address information of the original creditor if different from
the current creditor. Id. § 1692g(a)(4)-(5). If, within the
thirty-day period, the debtor notifies the debt collector in
writing that the debt is disputed or requests the name and
address of the original creditor, the debt collector must
suspend collection activity until it obtains verification of the
debt or the requested information is mailed to the consumer.
Id. § 1692g(b).
In Absolute Collection’s view, a debt collector cannot be
liable under § 1692e for false, deceptive, or misleading
representations unless the debtor disputes the debt in
accordance with the validation procedures outlined in 15 U.S.C.
§ 1692g. According to Absolute Collection, the permission
afforded by § 1692g to “assume[]” the validity of an undisputed
debt must necessarily authorize a debt collector to continue
seeking collection of such a debt. Because Russell failed to
dispute her debt in writing and within thirty days of receiving
the initial collection letter, Absolute Collection contends that
14
it was entitled to judgment as a matter of law on Russell’s
§ 1692e claims. We reject this interpretation of the law.
Nothing in the text of the FDCPA suggests that a debtor’s
ability to state a claim under § 1692e is dependent upon the
debtor first disputing the validity of the debt in accordance
with § 1692g. Given the FDCPA’s “comprehensive and reticulated
statutory scheme, involving clear definitions, precise
requirements, and particularized remedies,” Sayyed v. Wolpoff &
Abramson, 485 F.3d 226, 233 (4th Cir. 2007) (internal quotation
marks omitted), the absence of an explicit pre-suit validation
requirement is telling. Put simply, had Congress intended for a
debt collector’s liability under the FDCPA to hinge upon a
debtor’s compliance with the validation provisions found in
§ 1692g, we suspect that it would have so indicated with
conspicuous language to that effect.
We need not rely exclusively upon the statute’s silence,
however, because both the express language and the remedial
nature of the FDCPA persuade us that a consumer is not required
to dispute the debt before bringing suit under § 1692e. As our
colleagues on the Third Circuit recently observed when rejecting
the very argument Absolute Collection advances here:
The language of § 1692g indicates that disputing a
debt is optional. The statute lists consequences “if
the consumer” disputes a debt, 15 U.S.C. § 1692g(b)
(emphasis added), and it makes clear that failure to
15
dispute a debt cannot be construed as an admission of
liability. Thus, the statute protects a prospective
litigant from being penalized in a lawsuit if he or
she chooses not to seek validation.
McLaughlin v. Phelan Hallinan & Schmieg, LLP, __ F.3d __, 2014
WL 2883891, at *4 (3d Cir. June 26, 2014) (brackets omitted)
(footnote omitted) (citation omitted). Given the explicit
protection conferred upon debtors who choose not to dispute
their debts, it would be anomalous to conclude that a debtor
forfeits his or her ability to bring a lawsuit under the FDCPA
simply because the debtor failed to invoke § 1692g’s
discretionary validation procedures.
Further, allowing debtors to raise claims under § 1692e
without first contesting the debt best promotes the remedial
nature of the FDCPA because it preserves debtors’ abilities to
obtain a remedy for violations of the statute. See Atchison,
Topeka & Santa Fe Ry. Co. v. Buell, 480 U.S. 557, 561-62 (1987)
(recognizing the canon of statutory interpretation that remedial
statutes are to be construed liberally). Although the statute
authorizes enforcement of the FDCPA through the Federal Trade
Commission, it also facilitates private enforcement by allowing
aggrieved consumers to bring suit. 15 U.S.C. §§ 1692k(a),
1692l. By providing prevailing plaintiffs statutory and actual
damages, as well as reasonable attorney’s fees, Congress plainly
intended to regulate unscrupulous conduct by encouraging
16
consumers who were the target of unlawful collection efforts to
bring civil actions. See id. § 1692k(a); Tolentino v. Friedman,
46 F.3d 645, 651 (7th Cir. 1995) (“The reason for mandatory fees
is that congress chose a ‘private attorney general’ approach to
assume enforcement of the FDCPA.”). To require debtors to
dispute their debts under § 1692g before bringing suit, absent
an explicit statutory directive requiring them to undertake such
action, would frustrate debtors’ abilities to vindicate their
statutory rights and “undermine the FDCPA’s protection of
unsophisticated debtors, who would have no reason to suspect
that they would be prevented from filing suit concerning
deceptive communications as a consequence of failing to invoke
the optional statutory validation procedure.” McLaughlin, 2014
WL 2883891, at *4. The incongruity of Absolute Collection’s
interpretation is evident in this case: Russell had no reason to
challenge the validity of the debt within the first thirty days
of receiving the initial collection letter because the debt was
indeed valid. Instead, she paid the bill and notified Absolute
Collection of her payment. It would be inconsistent with the
FDCPA’s remedial scheme to hold that a plaintiff’s ability to
state a claim under the FDCPA is extinguished because the
plaintiff failed to dispute the validity of the debt when he or
she had no reason to seek validation in the first place.
17
Moreover, requiring debtors to dispute their debts as a
condition to filing suit would produce consequences squarely at
odds with the FDCPA’s essential purpose of preventing “abusive,
deceptive, and unfair debt collection practices.” 15 U.S.C.
§ 1692(a). Under Absolute Collection’s construction of the
statute, a debt collector would have free rein to make false or
deceptive representations about the status of a debt if the
debtor failed to dispute its validity within thirty days of
receiving the initial collection letter. Shielding debt
collectors from liability for their falsehoods would thwart the
statute’s objective of curtailing abusive and deceptive
collection practices and would contravene the FDCPA’s express
command that debt collectors be liable for violations of “any
provision” of the statute. Id. § 1692k (“[A]ny debt collector
who fails to comply with any provision of th[e] [FDCPA] with
respect to any person is liable to such person . . . .”).
Congress obviously did not intend to immunize debt collectors
from liability for violations of the FDCPA while concomitantly
depriving debtors of a remedy under the statute. Indeed, the
FDCPA’s legislative history suggests that the purpose of the
validation notice requirement was to “eliminate the recurring
problem of debt collectors dunning the wrong person or
attempting to collect debts which the consumer has already
18
paid.” S. Rep. No. 382, 95th Cong. at 4 (1977) (emphasis
added).
Finally, contrary to Absolute Collection’s protestations,
construing the FDCPA as permitting a consumer to bring a civil
action without first disputing the debt would not drain § 1692g
of meaning. The debt validation provisions of § 1692g still
serve the important purpose of ensuring that consumers receive
notice of their rights of verification and to dispute the debt.
See Miller v. Payco-Gen. Am. Credits, Inc., 943 F.2d 482, 484
(4th Cir. 1991). Further, many debtors will prefer to avail
themselves of the prompt and inexpensive validation procedures
as an alternative to the costly and time-consuming method of
filing a claim in federal court. Thus, allowing debtors to seek
relief for violations of § 1692e without disputing their debts
does not render the statute’s validation procedures superfluous.
In sum, a pre-suit validation requirement is unfounded in
the text of the statute, contrary to the remedial nature of the
FDCPA, and inconsistent with the FDCPA’s legislative purpose of
eradicating abusive collection practices. We therefore hold
that a debtor is not required to dispute his or her debt
pursuant to § 1692g as a condition to filing suit under § 1692e.
Thus, we affirm the district court’s denial of Absolute
Collection’s motion for judgment as a matter of law.
19
III.
Absolute Collection also assigns error to the district
court’s granting of Russell’s motion for judgment as a matter of
law on her claims under 15 U.S.C. § 1692e. Aside from the
arguments we have rejected above, Absolute Collection contends
that Russell was not entitled to judgment as a matter of law
because her claims under § 1692e hinged upon unresolved factual
issues that should have been submitted to the jury. We
disagree.
Section 1692e broadly prohibits debt collectors from making
“false, deceptive, or misleading” statements in the course of
their collection activities, and it includes sixteen
illustrative examples of prohibited conduct. In this case,
Russell relied upon three subsections: (1) § 1692e(2)(A), which
makes it unlawful to misrepresent “the character, amount, or
legal status of any debt”; (2) § 1692e(8), which prohibits a
debt collector from “threatening to communicate to any person
credit information which is known or which should be known to be
false”; and (3) § 1692e(10), which proscribes “[t]he use of any
false representation or deceptive means to collect or attempt to
collect any debt.”
Whether a communication is false, misleading, or deceptive
in violation of § 1692e is determined from the vantage of the
20
“least sophisticated consumer.” United States v. Nat’l Fin.
Servs., Inc., 98 F.3d 131, 136 (4th Cir. 1996). The least-
sophisticated-consumer test is an objective standard that
evaluates § 1692e claims based upon how the least sophisticated
consumer would interpret the allegedly offensive language. See
Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir.
2010) (“[The least-sophisticated-consumer test] is an objective
standard, designed to protect all consumers . . . .”); Barany-
Snyder v. Weiner, 539 F.3d 327, 333 (6th Cir. 2008) (“Courts use
the ‘least sophisticated consumer’ standard, an objective test,
when assessing whether particular conduct violates the FDCPA.”).
Although we have never directly addressed whether application of
the objective least-sophisticated-consumer test to the language
of a dunning letter is a question of law, we have assumed that
to be the case. See Nat’l Fin. Servs., Inc., 98 F.3d at 135-39
(concluding that the debtor was entitled to summary judgment
when the least sophisticated consumer would interpret the
collection letter as falsely threatening legal action in
violation of § 1692e(5), (10)). We recognize, however, that
the decisions of our sister circuits that have directly
confronted the issue are not harmonious. Compare Gonzales v.
Arrow Fin. Servs., LLC, 660 F.3d 1055, 1060-01 (9th Cir. 2011)
(a debt collector’s liability under § 1692e should be resolved
21
as an issue of law), and Russell v. Equifax A.R.S., 74 F.3d 30,
36 (2d Cir. 1996) (same), with Gonzalez v. Kay, 577 F.3d 600,
606-07 (5th Cir. 2009) (whether communication was false or
deceptive in violation of § 1692e is a question of fact for the
jury), and Kistner v. Law Offices of Michael P. Margelefsky,
LLC, 518 F.3d 433, 441 (6th Cir. 2008) (same).
Here, we believe that the collection notices are so plainly
false and misleading that the district court was justified in
concluding, as a matter of law, that the communications violated
§ 1692e. The March 31 dunning letter represents that “your
account with Sandhills Emergency Physicians has not been
satisfied.” Upon receiving the collection letter, the
hypothetical least sophisticated consumer undoubtedly would
interpret this statement to mean that the debt remains legally
due and owing. Yet, it is undisputed that Russell had fully
paid her debt with Sandhills at the time Absolute Collection
sent the demand letter. A debt collector’s false representation
of the character or legal status of a debt violates the FDCPA.
See 15 U.S.C. § 1692e(2)(A). Because the statement that
Russell’s debt “has not been satisfied” is false on its face and
misrepresents “the character, amount, [and] legal status of
[the] debt,” the district court correctly concluded that Russell
22
was entitled to judgment as a matter of law for her claim under
§ 1692e(2)(A).
We further agree with the district court’s determination
that the March 31 dunning letter threatened to communicate
“credit information which is known or which should be known to
be false,” in violation of § 1692e(8), and that in doing so,
Absolute Collection engaged in a “deceptive means to collect or
attempt to collect any debt,” in violation of § 1692e(10). The
collection letter expresses Absolute Collection’s intent to
“report[] [the] past due account to national credit bureaus.”
The only reasonable interpretation that the least sophisticated
consumer could reach after reading this statement is that
Absolute Collection was threatening to refer the debt to credit
bureaus as delinquent if it did not receive payment from
Russell. At the time Absolute Collection sent the letter,
however, it had in its files documentation of Russell’s oral
reports that she paid the debt and that the check had cleared
the bank. Based upon Russell’s representations to collection
agents, Absolute Collection knew or should have known that the
information contained in the letter was false. See Clark, 741
F.3d at 491 (explaining that § 1692e(8)’s protections are
triggered upon a debtor’s oral dispute of the debt). Thus, the
district court correctly determined that, as a matter of law,
23
the March 31 collection letter constitutes a “threat[] to
communicate . . . credit information which is known or which
should be known to be false,” id. § 1692e(8), and a “false
representation or deceptive means to collect or attempt to
collect any debt,” id. § 1692e(10). ∗
IV.
We turn next to the district court’s determination that
Absolute Collection violated the disclosure requirements of
Federal Rules of Civil Procedure 26(a) and (e) and its
corresponding decision to exclude evidence relevant to Absolute
Collection’s bona-fide-error defense under Federal Rule of Civil
Procedure 37. We review for an abuse of discretion both the
district court’s finding of a disclosure violation and its
∗
Absolute Collection asserts in passing that the district
court erred in granting Russell’s motion for judgment as a
matter of law regarding Absolute Collection’s bona-fide-error
defense, claiming that the jury had sufficient evidence
(notwithstanding the exclusion of evidence pertaining to
McKesson) to find that Absolute Collection’s FDCPA violations
were the result of a bona fide error. Absolute Collection’s
opening brief does not contain any legal argument as to how the
evidence Absolute Collection submitted at trial could support a
valid bona-fide-error defense, nor does it include any record
citations or pertinent legal authority supporting such a claim.
We deem this perfunctory and undeveloped claim waived. See
Eriline Co. S.A. v. Johnson, 440 F.3d 648, 653 n.7 (4th Cir.
2006) (conclusorily assigning error without providing supporting
argument is insufficient to raise issue).
24
decision to exclude evidence as a discovery sanction. See
Rowland v. Am. Gen. Fin., Inc., 340 F.3d 187, 195 (4th Cir.
2003); Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d
505, 512 n.10 (4th Cir. 2002). In doing so, we are mindful of
the broad discretion accorded to district courts to supervise
discovery, including the imposition of sanctions for discovery
abuses, as part of their case-management authority. See Saudi
v. Northrop Grumman Corp., 427 F.3d 271, 278-79 (4th Cir. 2005).
Unless stipulated by the parties or otherwise ordered by
the court, Federal Rule of Civil Procedure 26(a) requires the
parties to disclose the identities “of each individual likely to
have discoverable information . . . that the disclosing party
may use to support its claims or defenses,” as well as “all
documents . . . that the disclosing party has in its possession,
custody, or control and may use to support its claims or
defenses.” Fed. R. Civ. P. 26(a)(1)(A)(i), (ii). The purpose
of Rule 26(a) is to allow the parties to adequately prepare
their cases for trial and to avoid unfair surprise. See Wilkins
v. Montgomery, 751 F.3d 214, 221 (4th Cir. 2014). Under
Rule 26(e), a party who has made a Rule 26(a) disclosure or
responded to discovery must provide timely supplementation “if
the party learns that in some material respect the disclosure or
response is incomplete or incorrect, and if the additional or
25
corrective information has not otherwise been made known to the
other parties during the discovery process or in writing.” Fed.
R. Civ. P. 26(e)(1)(A).
Pursuant to Federal Rule of Civil Procedure 37, a party who
fails to comply with the disclosure requirements of Rule 26(a)
or the supplementation requirement of Rule 26(e) “is not allowed
to use that information or witness to supply evidence on a
motion, at a hearing, or at a trial, unless the failure was
substantially justified or is harmless.” Fed. R. Civ. P.
37(c)(1). In determining whether a party’s non-disclosure is
substantially justified or harmless, thereby excusing a
disclosure violation, a district court is guided by the
following factors:
(1) the surprise to the party against whom the
evidence would be offered; (2) the ability of that
party to cure the surprise; (3) the extent to which
allowing the evidence would disrupt the trial; (4) the
importance of the evidence; and (5) the nondisclosing
party’s explanation for its failure to disclose the
evidence.
S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d
592, 597 (4th Cir. 2003).
Here, the district court found that Absolute Collection
violated Rule 26(a) and (e)’s disclosure requirements by failing
to disclose both the payment reports from McKesson and Pavesi as
a witness during the initial twenty months of litigation.
26
Because the belated information revealed a new factual basis for
Absolute Collection’s bona-fide-error defense and much of the
information Absolute Collection had either known or should have
known throughout the initial discovery period, the district
court found that Absolute Collection’s disclosure violations
were neither substantially justified nor harmless. Thus, it
excluded Pavesi’s testimony and all evidence related to
McKesson, including the collection payment reports.
Absolute Collection’s principal argument on appeal—that its
identification of Pavesi as a witness and its disclosure of the
McKesson information were timely because they were made during
the reopened discovery period—cannot survive scrutiny. The
district court’s January 10 order reopening discovery did not
authorize the parties to conduct the broad discovery Absolute
Collection suggests. To the contrary, the order, by its own
terms, was limited to information “specifically with respect to
any procedures that existed between [Absolute Collection] and
Sandhills . . . requiring notice to [Absolute Collection] of
payments made.” Significantly, the January 2011 order was
predicated upon Absolute Collection’s prior representation
during the November 2010 pretrial conference that its claim of
bona fide error was based upon its failure to receive updated
payment information that Sandhills, its client, was
27
contractually obligated to provide. The information Absolute
Collection produced during the reopened discovery period
relating to McKesson, however, revealed a different factual
basis for the bona-fide-error defense altogether. Contrary to
Absolute Collection’s assertion, therefore, nothing in the
district court’s January 2011 order reopening discovery supports
Absolute Collection’s contention that its belated disclosures
were approved by the district court’s decision to reopen limited
discovery. See Saudi, 427 F.3d at 279 (“The district court
should not be a victim of its own lenity, nor should [a party]
capitalize on his noncompliance with the court’s rules.”).
It is undisputed that Absolute Collection failed to
disclose Pavesi as a witness related to its bona-fide-error
defense or the McKesson payment reports during the initial
discovery period or at any time before the first trial date of
November 2010 or the second trial date in January 2011. Given
the broad discretion accorded to district courts to supervise
discovery, we conclude that the district court did not abuse its
discretion in finding that Absolute Collection failed to satisfy
its disclosure obligations under Rules 26(a) and (e).
We further conclude that the district court acted within
its discretion in excluding Absolute Collection’s evidence
relating to its claim of bona fide error to ensure that there
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would be no unfair surprise at trial. The district court
discussed each of the Southern States factors and reasonably
concluded that Absolute Collection’s disclosure violations were
neither substantially justified nor harmless. Throughout the
year and a half of litigation leading up to trial, including
(1) Absolute Collection’s responses to Russell’s first discovery
requests in November 2009, (2) its amendment to those responses,
(3) its initial disclosures in December 2009, (4) its response
to Russell’s motion for summary judgment, and (5) its pretrial
disclosures filed before the anticipated November 2010 and
January 2011 trial dates, Absolute Collection failed to identify
Pavesi—its own employee—as a potential witness or disclose the
McKesson payment reports. Not only was the information
pertaining to McKesson disclosed to Russell just two months
before trial, but the belated discovery materials presented an
entirely new factual basis as to Absolute Collection’s bona-
fide-error defense. Given the advanced stage of the litigation
and the significance of the evidence to Russell’s case, the
district court justifiably concluded that the late disclosures
were not harmless. See NutraSweet Co. v. X-L Eng’g Co., 227
F.3d 776, 786 (7th Cir. 2000) (finding harm when disclosure was
made after the district court postponed the trial date once and
trial was set to begin in six weeks). Further, Absolute
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Collection has failed to provide any justification—much less a
substantially justified one—for the late disclosures. Without
any legitimate reason for the disclosure violations, we are
unable to conclude that the district court abused its discretion
in excluding the evidence under Rule 37 of the Federal Rules of
Civil Procedure.
V.
Last, Absolute Collection appeals the denial of its motions
for a new trial under Federal Rule of Civil Procedure 59 and for
relief from the judgment under Federal Rule of Civil Procedure
60(b). Because Absolute Collection’s assignments of error with
respect to its post-trial motions rest upon identical arguments
rejected above, we affirm the district court’s denial of those
motions.
VI.
Accordingly, for the reasons set forth above, we affirm the
judgment of the district court in its entirety.
AFFIRMED
30
Diane Russell v. Absolute Collection Services
Court: Court of Appeals for the Fourth Circuit
Date filed: 2014-08-15
Citations: 763 F.3d 385, 2014 WL 3973792
Copy CitationsCombined Opinion