The Eastern District of Texas recently denied a motion to dismiss for alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), holding that a garnishment action initiated eight years after the plaintiff had obtained a default judgment was not subject to the FDCPA’s one-year statute of limitations provision because the default judgment was obtained in the wrong venue.
Mario Barboza was a resident of Collin County, Texas when Pharia, LLC, successor in interest to defendant Pallida LLC, filed a collections action in 2010 in Denton County, Texas to recover the balance due on Barboza’s credit card. In early 2011, a default judgment was obtained against Barboza.
In early 2019, a garnishment action was filed by Pallida in Denton County, Texas to collect on the default judgment. Shortly after, Barboza filed the instant lawsuit alleging that in filing the garnishment action, Pallida and the law firm representing it violated section 1692i of the FDCPA, which dictates how debt collectors must choose the venue for a collection lawsuit, along with the Texas Deceptive Trade Practices Act.
The defendants argued Barboza failed to state a claim under the FDCPA because the one-year statute of limitations had expired. For example, they argued the 2010 suit to recover the credit card balance would have expired more than eight years ago and the garnishment action did not start a new running of the statute of limitations because the garnishment action was not a legal action against a consumer (i.e. Barboza), thus 1692i(a) did not apply.
The court’s analysis relied heavily on an Idaho district court decision, Cole v. Cardez Credit Affiliates, LLC, No. 1:14-CV-00077, 2015 WL 1281651 (D. Idaho Mar. 19, 2015), which held that section 1692i of the FDCPA should be “broadly interpreted.” Otherwise, in theory, a debt collection suit could be filed in the improper venue, resulting in a default judgment against a debtor who was unaware a suit was filed against him or her, and then a garnishment action could be filed after the statute of limitations expired.
The court further relied on Cole to hold that when a debt collector brings a garnishment action based on a default judgment obtained in the wrong venue, it’s reasonable to interpret the action as being “against any consumer” because the consumer does not have the ability to defend him or herself on the merits in a proper venue. The court also found that the 2010 collection action was filed in the wrong venue and as such, the default judgment was obtained in an improper venue. Thus, the court held the defendants failed to demonstrate the statute of limitations barred plaintiff’s FDCPA claims, allowing plaintiff to bring claims as to both the 2010 collections action and the 2019 garnishment action.
The court’s reliance on a decision from the 9th Circuit, coupled with an absence of established case law on this issue in the 5th Circuit, could indicate the 5th Circuit intends to adopt a broad interpretation of FDCPA’s venue provision.