A federal judge has given the green light to a suit alleging that a debt collection law firm violated the Fair Debt Collection Practices Act by seeking unincurred attorney fees in its debt collection action.

U.S. District Judge Richard Caputo of the Middle District of Pennsylvania on Wednesday denied attempts by the Arkansas firm Hayes, Johnson & Conley to dismiss the lawsuit Bargeski v. Hayes, Johnson & Conley.

Although the judge agreed with the firm that the plaintiffs could not make a claim that the firm's lawsuit violated the FDCPA due to the venue it was filed in, Caputo agreed that Jeffrey and Diane Bargeski could proceed on claims for seeking unincurred attorney fees and late fees that the firm was not authorized to collect.

Regarding the attorney fees, the law firm argued that, by including the unincurred fees, it wasn't misrepresenting the amount owed, but instead informing the debtors about fees that "'will' be, but have not yet been incurred.'"

But Caputo reasoned that including unincurred attorney fees in a collection notice violated federal law by misrepresenting the amount of debt owed.

"The message that conveys to the reader is that, at the time the defendants demanded judgment for $1,871.70, they were requesting payment for work they had not yet completed," Caputo said. "This action mischaracterizes the total amount of debt that the plaintiffs owed to the defendants for their services on the date that the underlying complaint was filed."

The ruling came in one of three related cases pending against the law firm in the Middle District. Cary Flitter of Flitter Milz, who represented the Bargeskis, said there are no significant factual differences between the three lawsuits, so he expects the same reasoning will be applied to all three cases.

"It's been the rule in the Third Circuit for several years now that you can't chuck in lump sum the unearned attorneys fees," he said. "They shouldn't be suing for amounts they're not entitled to get."

Paul Troy of Kane, Pugh, Knoell, Troy & Kramer, who represented the defendants, did not return a message seeking comment.

According to Caputo, the facts of the case date back to September 1981 when the Bargeskis purchased a timeshare in Monroe County in the Poconos region of northeastern Pennsylvania. The couple allegedly fell behind on fees, and in October 2018, Hayes Johnson brought suit on behalf of the timeshare association, seeking $861.70 in unpaid association and late fees, as well as $1,000 in attorney fees and costs. The plaintiffs filed their suit alleging FDCPA violations in May.

Along with raising claims about the attorney fees, the lawsuit contended that, because the firm filed the lawsuit in Monroe County, rather than New York where the couple lives, it violated provisions against bringing claims in an improper venue. The plaintiffs also argued that, since their timeshare agreement did not allow for late fees, the demand for late fees violated FDCPA's ban against using "false, deceptive, or misleading" means in collecting a debt.

The defendants filed a motion to dismiss in early August, contending that the plaintiffs failed to raise a claim. Regarding the late fee issue, the firm argued that the late fees it requested were in fact "interest accrued on the delinquent payments," which are allowed under the agreement.

Caputo ultimately determined that, because the timeshare was located in Monroe County, bringing the underlying action in the Monroe County court did not violate the FDCPA. However, he said the firm shouldn't have requested potential future attorney fees, and that, given the distinction between "late fees" and interests, the plaintiffs' claims could proceed.

"As drafters of the underlying complaint, the defendants should have specified that the 'late fees' were 'interest accrued' on the unpaid association fees in the underlying complaint," Caputo said.

In citing the U.S. Court of Appeals for the Third Circuit's 2014 decision in McLaughlin v. Phelan Hallinan & Schmieg, Caputo summed the issue up for the parties.

"If the defendant wanted to convey that an amount in the demand letter was 'an estimate,' then it should have done so," Caputo said.