Federal Jury Awards $311,000 to Montana Man Targeted by Time-Barred Debt Lawsuit

In 1999, Timothy McCollough made his last payment on a Chase Manhattan credit card carrying roughly $3,000 in unpaid charges. The account was charged off in 2000 and eventually sold to a debt buyer. Under Montana law, a creditor has five years to sue on a written contract. That window closed years before anyone came looking.

In April 2007, Johnson, Rodenburg and Lauinger (JRL), a law firm in North Dakota that collected debts on behalf of buyers, filed suit against McCollough in Montana state court. The firm obtained a summons and served McCollough, who had no attorney. Within months, JRL's own records showed the debt was time-barred. The firm dismissed the state case in December 2007 only after continuing to press McCollough for payment, sending requests for admission that did not disclose the 30-day consequence of failing to respond.

McCollough retained Billings attorney John Heenan and brought a federal claim under the Fair Debt Collection Practices Act. The FDCPA prohibits debt collectors, including law firms acting as collectors, from filing lawsuits on debts they know or should know are time-barred, from seeking fees not authorized by the underlying agreement, and from using false or misleading collection methods.

At a three-day jury trial in federal district court in Montana, Heenan presented testimony from other debtors who had faced similar suits from JRL, along with a consumer law attorney and a collection-practices expert. The jury heard that JRL had relied on representations from its client about the debt's validity without any independent check, even after internal documents flagged the limitations problem. The jury found JRL liable on multiple FDCPA counts and also found for McCollough on state-law claims of malicious prosecution and abuse of process.

The jury awarded $1,000 in FDCPA statutory damages, $250,000 for emotional distress, and $60,000 in punitive damages, for a total of $311,000. JRL appealed, arguing it qualified for the FDCPA's bona fide error defense on the ground that it had relied on its client's representations. The Ninth Circuit rejected that argument on March 4, 2011, holding that reliance on a creditor's unverified representations is unreasonable as a matter of law when the firm has no procedures designed to catch such errors. The court affirmed the full verdict without reduction.