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17.5.2.3 Choice of Federal or State Court

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  6. 17.5.2.3 Choice of Federal or State Court

17.5.2.3 Choice of Federal or State Court

The consumer who wants to litigate FDCPA claims in federal court will have no choice but to bring a separate action for litigation misconduct, instead of raising FDCPA counterclaims in the collection action. Except under very unusual circumstances, the consumer cannot remove a state court collection action to federal court because the existence of a counterclaim based on federal law does not create federal jurisdiction.140

On the other hand, the consumer may wish to litigate the follow-up claims in state court. There are important reasons to do so. As described in § 17.5.2.5, infra, one consideration in any subsequent lawsuit is whether the consumer’s case will be forced into arbitration. State courts in many states are more likely to find an arbitration requirement unenforceable than are federal courts. State courts may also be more concerned about litigation abuses in their own court system.

The consumer who wishes to stay in state court runs the risk, when bringing an affirmative state court FDCPA action, that the case will be removed to federal court. The safer course is either to bring the FDCPA violation as a counterclaim in the collection action or to bring an affirmative action based upon only state law. State UDAP, debt collection, and tort claims may be available.141

Footnotes

  • 140 See, e.g., Chase Manhattan Mortg. Corp. v. Smith, 507 F.3d 910 (6th Cir. 2007) (case remanded after consumer improperly removed foreclosure action on basis of FDCPA counterclaim).

  • 141 See National Consumer Law Center, Fair Debt Collection Chs. 15, 16 (9th ed. 2018), updated at www.nclc.org/library. See also Midland Funding, L.L.C. v. Giraldo, 961 N.Y.S.2d 743 (N.Y. Dist. Ct. 2013) (UDAP claim for deceptive collection litigation conduct).