Jury Sends Message to Debt Buyer: Get Your Facts, And Your Process, Straight

Last week insideARM reported on a sharp rise in first quarter earnings for PRA Group (PRAA).

On Tuesday of this week (May 12^th) in a Form 8-K (Other Events) filing with the Securities and Exchange Commission PRAA reported the following:

On May 11, 2015, an unfavorable jury verdict was delivered against Portfolio Recovery Associates, LLC (the “Company”), a wholly owned subsidiary of PRA Group, Inc., in a matter pending in Jackson County, Missouri. The jury awarded Guadalupe Mejia $251,000 in compensatory damages and $82,999,000 in punitive damages for her counter-claim against the Company, alleging malicious prosecution and impermissible collection practices. Although the Company appreciates the jury’s service, it believes the verdict and magnitude of the award to be erroneous and intends to promptly request that the court set aside such an inappropriate award. Unless reduced or overturned, the verdict could have a material adverse effect on the Company’s financial condition and/or operations.

Form 8-K is a report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission. Obviously, PRAA management felt that a verdict of this amount is a material event.

This case started as a simple collection lawsuit.  Portfolio Recovery Associates, LLC brought suit against a Guadalupe Mejia on a purchased credit card debt for approximately $1100.  The Defendant (Mejia) filed a Counterclaim alleging FDCPA violations and malicious prosecution. The consumer claimed that she was not the right Guadalupe Mejia. The case proceeded for over a year before PRAA agreed to dismiss the collection action (without prejudice).  However, the counterclaim proceeded.

In reviewing the court docket it is clear that the case was vigorously pursued and defended by both parties. The numerous filings hint at contempt for the other side by both parties. A critical point in the case involved an Order striking all pleadings by PRAA, entering judgment in favor of the consumer on all counterclaims, and directing the trial to proceed solely on the issue of damages. It is that trial that produced this verdict.

The status of this case needs to be recognized.  At this point in time there is only a jury verdict.  No final judgment has been entered yet. There will be additional evidence presented on a potential attorney fees award. Further, there will likely be motions filed for a new trial or to reduce or set aside the verdict and/or other possible legal strategies.

insideARM contacted both the attorney for the consumer and a representative for PRAA to obtain comment on the verdict.

Gina Chiala, the attorney for Mejia commented: “I sincerely hope the jury’s verdict in this case acts as a wake-up call to the debt buying industry.  Consumers deserve to have their disputes taken very seriously, especially when the consumer reports he or she is being wrongfully sued.  Unfortunately, Portfolio did not take our client’s dispute seriously and our evidence showed that Portfolio had a pattern and practice for rejecting valid disputes.  This verdict would never have occurred had Portfolio simply admitted its error early on and stopped its prosecution.”

Michael McKeon of Mercury LLC, spokesperson for PRAA countered:  “This outlandish verdict defies all common sense. We hope and expect the judge will set aside this inappropriate award, and we plan to file motions to make the request formally in the very near term. Any fair reading of the facts of this case makes plain that a verdict of this size is not justice by any means, and cannot stand.”

insideARM will continue to monitor this story and provide updates as developments dictate.