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Maryland's highest court orders retrial on damages after debt collector was hit with $25M verdict

By Brian Brueggemann | May 3, 2019

ANNAPOLIS, Md. (Legal Newsline) – The Maryland Court of Appeals has remanded a case against a debt collector that previously resulted in a $25 million judgment back for a retrial on the issue of damages.

The court vacated a previous ruling by the Special Court of Appeals and remanded the case back to the Baltimore City Circuit Court for further proceedings on April 22.

"The Court of Special Appeals erred in holding the district court judgments void. Collateral attacks on enrolled judgments are not allowed unless the court that entered the judgment had no fundamental jurisdiction to do so, and that was not the case with respect to the judgments in question," the ruling states.

The debt collector, LVNV Funding, was in the business of buying bad debts for pennies on the dollar and then seeking judgments against the debtors. Usually, the debtors did not challenge the suits and LVNV obtained judgments by default against hundreds of debtors.

However, LVNV was not licensed in Maryland as a debt collector.

The suit was brought in 2011 by Larry Finch and Kurt Dorsey on behalf of people who were sued by LVNV in Maryland and those persons sued by LVNV in Maryland courts and against whom LVNV obtained a judgment. The action was dismissed by the circuit court, which cited that it was an "impermissible collateral attack on enrolled judgments," the ruling states. 

The Special Court of Appeals reversed the circuit court's ruling and remanded it for trial, stating that the judgments obtained by LVNV against the debtors were void due to LVNV not being licensed as a debt collector. The trial court granted a $25 million judgment in favor of the class.

An appeal followed, with LVNV arguing that those judgments could not be declared void because those cases were already resolved. LVNV also argued that declaring the original judgments void would be an impermissible "collateral attack" on resolved cases.

"In a second appeal, the Court of Special Appeals again held the district court judgments void but remanded for a new trial on damages," the ruling states.

The Court of Appeals wrote: "LVNV is correct in asserting that 'this case went to the jury on the mistaken theory that the underlying debts owned by LVNV were void.' It must be remanded, once again, for a reassessment of damages ... which, as happened in the earlier remand, may involve the filing of an amended complaint and, absent a settlement, will require a retrial on the damages issues."

The court also wrote that although LVNV's original judgments against the debtors cannot be declared void, the law "would permit declaratory and injunctive relief precluding LVNV from taking any action to enforce those judgments and for any damages incurred by the plaintiffs as the result of LVNV’s collection efforts."

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