Author Archive for Allison Hayes

MD Pa. Holds Initiation of a Call is Enough for TCPA Liability

The United States District Court for the Middle District of Pennsylvania recently determined that the sole issue for trial was whether the consumer should be awarded treble damages in his complaint alleging a violation of the Telephone Consumer Protection Act because “a plaintiff need not answer or hear a call to prove prohibited conduct under the TCPA, but need only prove the act of placing the call itself.”

A copy of the opinion in Manuel v. NRA Group, LLC is available at:  Link to Opinion.

The consumer alleged that the issue of statutory damages was resolved by the Court during the summary judgment phase when the Court held that “[u]ncontroverted record evidence establishes that Mercury Dialer placed 146 calls to [the consumer].”

The defendant argued that the Court’s ruling during the summary judgment phase did not resolve the issue of statutory damages because the consumer must further demonstrate that he either answered his phone or heard it ring for each of the subject calls.

While the Third Circuit had not addressed the issue at hand, the Ninth Circuit has found that a “call” within the TCPA means “to communicate with or try to get into communication with a person by telephone.”  Satterfield v. Simon & Schuster, Inc., 569 F.3d 946, 954 (9th Cir. 2009).

The Court relied on the Ninth Circuit’s holding and other district courts’ decisions in finding that “a plaintiff need not answer or hear a call to prove prohibited conduct under the TCPA, but need only prove the act of placing the call itself.” See, e.g., King v. Time Warner Cable, 113 F. Supp. 3d 718, 725 (S.D.N.Y. 2015); Fillichio v. M.R.S. Assocs., Inc., No. 09-61629, 2010 WL 4261442, at *3 (S.D. Fla. Oct. 19, 2010); see also Forrest v. Genpact Servs., LLC, 962 F. Supp. 2d 734, 737 (M.D. Pa. 2013),

The Court clarified for the parties that the sole issue at trial was whether the consumer should be awarded treble damages.

Fla. App. Court Reverses Foreclosure Dismissal on ‘Substantial Compliance,’ ‘Admissibility of Prior Records’ Issues

The District Court of Appeal of Florida, Fifth District, recently held that the trial court erred in ruling that a mortgagee failed to comply with the pre-foreclosure notice requirements of the mortgage, as the mortgagee’s default notice substantially complied with the mortgage and did not prejudice the borrower.

The Court also held that testimony by the current loan servicer’s employee with regard to a prior loan servicer’s business records established sufficient foundation for the prior servicer’s records to be admitted into evidence as business records under Florida law.

A copy of the opinion in The Bank of New York Mellon v. Johnson is available at:  Link to Opinion.

In July 2006, the borrower executed a promissory note and accompanying mortgage for $187,000.  She defaulted on the mortgage beginning in August 2009.  In May 2010, the mortgagee filed a complaint to foreclose, and the case proceeded to a non-jury trial in September 2014.

At trial, an employee of the loan servicer testified for the mortgagee regarding various records it obtained from the prior loan servicer, including a foreclosure referral document and loan payment history.  Despite the employee’s testimony, the trial court sustained the borrower’s objections, finding that the employee failed to establish a proper foundation for the records’ admissibility under the business records exception to the hearsay rule.  See § 90.803(6), Fla. Stat.  The trial court explained that the business records exception “was based upon a party’s own records, not someone else’s records.”

Although the trial court excluded these records, it admitted a notice of default and intent to accelerate sent by the prior servicer in November 2009. The default letter provided, in relevant part:

You may, if required by law or your loan documents, have the right to cure the default after the acceleration of the mortgage payments and prior to the foreclosure sale of your property if all amounts past due are paid within the time permitted by law. However, BAC Home Loans Servicing, LP and the Noteholder shall be entitled to collect all fees and costs incurred by BAC Home Loans Servicing, LP and the Noteholder in pursuing any of their remedies, including but not limited to reasonable attorney’s fees, to full extent permitted by law. Further, you may have the right to bring a court action to assert the non-existence of a default or any other defense you may have to acceleration and foreclosure.

After the mortgagee rested its case, the borrower moved for an involuntary dismissal, arguing the default letter failed to comply with paragraph 22 of the mortgage.

As you may recall, Paragraph 22 of the Fannie Mae/Freddie Mac Uniform Security Instrument provides, in pertinent part, that the default letter shall specify:

(a) the default, (b) the action required to cure the default, (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured, and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure.

The borrower argued that, because the default letter stated the borrower would have to file an action to stop foreclosure, rather than raising any defenses in the mortgagee’s foreclosure case, it supposedly did not properly inform the borrower of her rights with respect to foreclosure. The trial court agreed and granted the borrower’s request for involuntary dismissal.

The Fifth District reversed on appeal.  The Appellate Court ruled that the prior servicer’s default letter substantially complied with paragraph 22 of the mortgage and caused no prejudice to the borrower.

Additionally, the Fifth District agreed with the mortgagee that the trial court erred by excluding various records obtained from the prior servicer.

In a prior ruling, the Appellate Court held that a current servicer can establish a proper foundation for admission of a prior servicer’s records “so long as all the requirements of the business records exception are satisfied, the witness can testify that the successor business relies upon those records, and the circumstances indicate the records are trustworthy.” Berdecia, 169 So. 3d at 216 (citing Le v. U.S. Bank, 165 So. 3d 776 (Fla. 5th DCA 2015); Calloway, 157 So. 3d at 1074)).  Following this prior ruling, the Fifth District here held that the trial court abused its discretion by excluding business records obtained from the prior servicer.

Thus, the Fifth District reversed the trial court’s entry of involuntary dismissal and remanded for a new trial.

Illinois App. Court Rejects Challenge to Foreclosure Based on Alleged HAMP Non-Compliance

The Illinois Appellate Court, First District, recently affirmed a trial court’s denial of a borrower’s motion to vacate a default judgment of foreclosure and sale, rejecting the borrower’s argument that the mortgagee failed to comply with certain Home Affordable Modification Program (HAMP) guidelines.

A copy of the opinion in Wells Fargo Bank, N.A. v. Hansen is available at:  Link to Opinion.

In January 2007, the borrower executed a mortgage in the amount of $360,000, which was later assigned to the mortgagee.  In December 2008, the mortgage filed a complaint seeking to foreclose due to default beginning in August 2008.

The mortgagee amended the complaint in February 2009, and the trial court allowed service by publication after several personal service attempts failed.  In May 2009, the mortgagee moved for default judgment as the borrower neither answered the complaint nor appeared.  The mortgagee provided an affidavit stating that $398,386 was due and owing as of September 2009, and the trial court granted the motion and entered a judgment of foreclosure and sale of the property.

In June 2012, the mortgagee moved to vacate the judgment of foreclosure “due to an [undisclosed] error.”  However, in July 2012, the mortgagee withdrew its motion without prejudice.  Two days later, the borrower entered an appearance through counsel.

No further action was taken until April 2013, when the mortgagee again moved for entry of an order of default and judgment of foreclosure and sale.  The April 2013 affidavit in support stated that the amount due and owing was now $487,094.  After the borrower failed to file an answer, the trial court granted the motion and entered judgment of foreclosure and sale in favor of the mortgagee.

In August 2013, the trial court granted the mortgagee’s motion to set aside the default judgment of foreclosure and sale entered in September 2009 nunc pro tunc to April 2013, the date the court granted default judgment for the second time.

In September 2013, the borrower moved to vacate the order of default and filed an amended motion in October 2013, alleging: 1) the borrower qualified for a HAMP loan modification in 2010 and other loss mitigation programs; 2) the mortgagee informed him that his loan was still active as of 2013; 3) the judgment amount was wrongly inflated; 4) the mortgagee lacked standing; and 5) judgment was erroneously entered on the mortgagee’s original complaint when an amended complaint had been filed.  Finally, the borrower argued that the mortgagee’s motion for the nunc pro tunc order did not comply with the requirements for notice under Illinois Supreme Court Rules 12, 131 (eff. Jan. 4, 2013), and Rule 105 (eff. Jan. 1, 1989).

In December 2013, after briefing, the trial court denied the borrower’s motion to vacate the default judgment.

After several months of back and forth of scheduling judicial sales and stays of the sale, the sale was held in June 2014.  In November 2014, the trial court granted the mortgagee’s motion to confirm sale, holding that the mortgagee did not “establish that this property was sold in material violation of any of the HAMP regulations.”  The borrower then appealed.

On appeal, the borrower challenged the trial court’s denial of his motion to vacate the April 2013 default judgment brought pursuant to 2-1301(e) of the Illinois Code of Civil Procedure, 735 ILCS 5/2-1301(e) (West 2012)).

In evaluating a section 2-1301(e) motion, the trial court considers the moving party’s due diligence and the existence of a meritorious defense. Wells Fargo Bank, N.A. v. McCluskey, 2013 IL 115469, ¶ 27.

The Appellate Court noted that it was the borrower’s burden, as appellant, to provide a sufficiently complete record to support a claim of error, and in the absence of that record, the Appellate Court must presume that the trial court’s order conformed to the law and had a sufficient factual basis. Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92 (1984).

The First District found that the borrower did not provide a report of proceedings of the hearing on the motion to vacate nor a sufficient substitute.  Because the record did not reflect the reasons the trial court denied the motion to vacate, the Appellate Court held the borrower could only prevail if he demonstrated that he was entitled to have the default judgment vacated as a matter of law.

The First District held that the borrower failed to meet that burden because a number of the debtor’s contentions of error were patently frivolous, such as omission of attorney’s phone number on motion for default.  The First District additionally held that none of the alleged errors mandated the conclusion that the trial court abused its discretion or otherwise erred in denying the borrower’s motion to vacate.

The last basis of the borrower’s appeal was his challenging the order confirming the sale.  Section 15-1508(d-5) of the Illinois Mortgage Foreclosure Law provides that a sale shall be set aside if the mortgagor proves “by a preponderance of the evidence that (i) the mortgagor has applied for assistance under the Making Home Affordable Program * * * and (ii) the mortgaged real estate was sold in material violation of the program’s requirements for proceeding to a judicial sale.” 735 ILCS 5/15-1508(d-5) (West 2012).

The borrower alleged that the mortgagee “illegally revoked” a loan modification under HAMP in 2010.  Under HAMP guidelines, “[b]orrowers who make all trial period payments timely and who satisfy all other trial period requirements will be offered a permanent modification.”  Making Home Affordable Program, Handbook for Servicers of Non-GSE Mortgages 46 (Aug. 19, 2010).  Despite allegedly making timely payments during his trial period, the borrower claimed he was denied a permanent modification.

The Appellate Court initially noted that the borrower failed to demonstrate that the decision to deny a permanent loan modification prevented the judicial sale of a foreclosed property, as HAMP guidelines require the suspension of a sale only where a HAMP application is pending.  But here, the borrower abandoned his argument that a HAMP application was pending at the time of the judicial sale.

But, more importantly, the First District held that the borrower did not meet his burden to show that the mortgagee’s denial of a permanent modification was contrary to HAMP guidelines.

In the borrower’s motions to stay the sale, he never alleged that he had satisfied HAMP’s trial period requirements.  The Appellate Court noted that the borrower never provided the trial court with a copy of his HAMP application or any documents from the mortgagee establishing the terms on which his loan had been approved.  Therefore, the Court held that pursuant to the HAMP guidelines, the mortgagee was not required to make the modification permanent.

Accordingly, the Appellate Court affirmed the trial court’s orders entering the default judgment of foreclosure and confirming the sale because the borrower failed to sustain his burden to demonstrate any HAMP violations that would have precluded confirmation of the judicial sale.

Fla. App. Court Holds ‘Force-Placed Insurance’ Counterclaims in Foreclosure Were Time-Barred

The District Court of Appeal of the State of Florida, Fourth District, recently affirmed the trial court’s dismissal of the borrowers’ permissive counterclaims based on violations of the Florida Unfair Trade Insurance Practices Act (FUTIPA) in connection with an alleged “force-placed insurance scheme,” as the allegations were barred by the applicable four-year statute of limitations.

The Court upheld the dismissal of the borrowers’ remaining compulsory counterclaims without prejudice for lack of jurisdiction, as the compulsory counterclaims were not appealable until a final disposition of the original case was obtained on the merits.

A copy of the opinion in 4040 Ibis Circle, LLC and Shlomo Rasabi v. JPMorgan Chase Bank, National Association and WAMU Insurance Services, Inc. is available at: Link to Opinion.

In 2009, a mortgagee brought a foreclosure action against the borrowers. The borrowers filed their answer, affirmative defenses, and two counterclaims for breach of contract and defamation.

The borrowers alleged that mortgagee’s predecessor improperly purchased so-called “force-placed insurance” on the property and created an impound/escrow account with a deficit exceeding $15,000 (the price of the insurance). The borrowers alleged that mortgagee’s predecessor then misapplied the borrowers’ principal and interest payments to pay down the escrow account.

In their counterclaims, the borrowers alleged that after mortgagee acquired the loan, it exacerbated the problem by increasing the deficit in the impound/escrow account for the payment of property taxes that had already been paid, which supposedly created a “phantom default.”

Subsequently, in 2014, the borrowers filed an amended answer, which included nine counterclaims.   The counterclaims set forth additional facts regarding an alleged “Illegal Force-Placed Insurance Scheme,” which the borrower claimed was “the unconscionable above-market premiums, undisclosed commissions, and illegal kickbacks in the nature of reinsurance premiums and subsidized administrative services.”

Thereafter, the mortgagee moved to dismiss all of the borrowers’ counterclaims with prejudice.  After a hearing, the trial court granted the motion to dismiss.  The borrowers appealed despite mortgagee’s foreclosure claims remaining pending.

On appeal, the Fourth District sua sponte raised the issue of whether the trial court granting the borrowers’ counterclaims constituted a final appealable order.  “An order is considered final if it ‘disposes of the cause on its merits leaving no questions open for judicial determination except for the execution or enforcement of the decree if necessary.’” Nero v. Cont’l Country Club R.O., Inc., 979 So. 2d 263, 266 (Fla. 5th DCA 2007) (quoting Welch v. Resolution Tr. Corp., 590 So. 2d 1098, 1099 (Fla. 5th DCA 1991)).

The Appellate Court determined that the borrowers’ appeal from the order dismissing their counterclaims was not considered a “final order” because it did not dispose of the case on the merits, as mortgagee’s foreclosure was still pending.

However, the Fourth District exercised jurisdiction based upon the trial court’s dismissal of a counterclaim “adjudicat[ing] a distinct and severable cause of action.” S.L.T. Warehouse Co. v. Webb, 304 So. 2d 97, 100 (Fla. 1974); accord Agriesti v. Clevetrust Realty Inv’rs, 381 So. 2d 753, 753-54 (Fla. 4th DCA 1980).

In determining whether the trial court’s order was appealable, the Appellate Court looked to distinctions between permissive and compulsory counterclaims.  If the court found that the counterclaims were permissive, then the partial final judgment adjudicating the counterclaims were immediately appealable.  On the other hand, if the court found the dismissed counterclaims were compulsory, then the order dismissing the counterclaim was not appealable until a final disposition of the original case had been obtained on the merits.  Johnson v. Allen, Knudsen, DeBoest, Edwards & Rhodes, P.A., 621 So. 2d 507, 509 (Fla. 2d DCA 1993).

By definition, a permissive counterclaim does not arise out of the transaction or occurrence that is the subject matter of the main claim.  Fla. R. Civ. P. 1.170(b).

Compulsory counterclaims bear a “logical relationship” to the plaintiff’s claims in that they arise out of the “same aggregate of operative facts as the original claim.” Londono v. Turkey Creek, Inc., 609 So. 2d 14, 20 (Fla. 1992) (quoting Neil v. S. Fla. Auto Painters, Inc., 397 So. 2d 1160, 1164 (Fla. 3d DCA 1981)).

Here, the Fourth District found that the borrowers’ counterclaims for breach of contract, breach of implied covenant of good faith and fair dealing, unconscionability, violation of the FCRCPA, conspiracy to violate the FCRCPA, defamation per se, and violation of the FCCPA were compulsory because they each bore a logical relationship to the foreclosure.  Having found those counterclaims compulsory, the Appellate Court dismissed the appeal without prejudice for lack of jurisdiction because the trial court did not reach a disposition on the merits.

Turning to the borrowers’ two counterclaims based upon an alleged violation of the FUITPA, the Appellate Court found these counterclaims permissive as they were based on allegations that mortgagee’s predecessor participated in a force-placed insurance scheme.

The Fourth District held that “[t]he ‘purchase of insurance at above-market premiums, undisclosed commissions, and illegal kickbacks’ constitutes separate and distinct activity that does not arise out of the ‘same aggregate of operative facts’ as the acts giving rise to the foreclosure”  (quoting Neil, 397 So. 2d at 1164).  As a result, the Appellate Court held that it had jurisdiction to reach the merits of the dismissal of those two counterclaims.

In assessing the merits of the borrowers’ permissive counterclaims appeal, the Appellate Court affirmed the trial court’s dismissal because the counterclaims were not timely filed.  The statute of limitations to bring an action under the FUITPA is four years.  § 95.11(3)(f), Fla. Stat. (2014).

The facts giving rise to the borrowers’ FUITPA claims occurred between 2005 and 2008, and the borrowers did not plead their FUITPA claims until 2014.  Thus, the Appellate Court held that the four-year statute of limitations barred the borrowers’ FUITPA counterclaims as a matter of law, and affirmed the trial court’s order dismissing those claims.

N.C. Fed. Court Rejects Defendant’s TCPA Arguments as to ‘Revocation of Consent,’ ‘ATDS’

The U.S. District Court for the Eastern District of North Carolina recently rejected a defendant’s arguments that its contract with the plaintiff did not allow revocation of prior express consent under the federal Telephone Consumer Protection Act (TCPA), and that the defendant’s telephone communication system was not an “automatic telephone dialing system” under the TCPA.

A copy of the opinion in Cartrette v. Time Warner Cable, Inc. is available at:  Link to Opinion.

In 2013, the plaintiff requested that the defendant install cable services at her home, and agreed to a services agreement that included a paragraph titled, “Robo-Calls,” stating: “[Defendant] (or persons acting on our behalf) may use automated dialing systems or artificial or recorded voices to contact you or leave you messages if you do not answer.”  The plaintiff also provided the defendant with her cell phone number.

In October 2013, the defendant began calling the plaintiff’s cell phone regarding an unpaid installation fee. The plaintiff disputed the debt, and during a live telephone conversation on Jan. 14, 2014, the plaintiff claimed she instructed the defendant to cease all calls to her cell phone.

However, between Jan. 29 and Feb. 11, 2014, the plaintiff received on her cell phone six additional calls from the defendant, four of which she answered and two of which were voicemail messages. Approximately one month thereafter, on March 10, 2014, the plaintiff brought this action against the defendant.

The defendant called the plaintiff using its proprietary communication system, the Outbound Enterprise Interactive Voice Response (IVR). The IVR was integrated with the defendant’s billing system, which contained information about customer accounts, including customers’ telephone numbers.

Each day, the IVR reviewed the billing system to identify overdue accounts and call the telephone numbers associated with those accounts. If a call was not answered, the IVR left a voicemail message asking the customer to return the call. If a call was answered, the IVR played a message asking to speak with the account holder, and if the call recipient indicated that she was the account holder then the IVR played another message providing information about the overdue account.

The plaintiff alleged that the defendant committed six violations of 47 U.S.C. § 227(b) through calls placed to her cell phone between Jan. 29 and Feb. 11, 2014.

As you may recall, the TCPA imposes liability as follows:

It shall be unlawful . . . to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a paging service, cellular telephone service, . . . or any service for which the called party is charged for the call.

47 U.S.C. § 227(b)(1)(A)(iii).

The TCPA, at 47 U.S.C. § 227(b), allows calls made with “prior express consent of the called party.”  Accordingly, prior express consent is an affirmative defense to liability under the TCPA.

With respect to revocation of prior express consent, the Federal Communications Commission (FCC) recently issued a Declaratory Ruling and Order (“2015 FCC Ruling”), clarifying that under the TCPA “[c]onsumers have a right to revoke consent, using any reasonable method including orally or in writing. Consumers generally may revoke, for example, by way of a consumer-initiated call, directly in response to a call initiated or made by a caller.”  In the Matter of Rules and Regulations Implementing the Tel. Consumer Protection Act of 1991, 30 FCC Rcd. 7961, 7996 ¶ 64, 2015 WL 4387780 (2015).

The defendant telecommunications service company argued that the TCPA and the defendant’s services agreement afforded the plaintiff no right to revoke her prior consent to receive autodialed telephone calls from the defendant.  The defendant also argued it did not use an automated telephone dialing system (ATDS) as defined in the TCPA, and that the content of its calls fell outside the scope of the TCPA.

The defendant sought summary judgment regarding the issue of revocation of prior consent on two bases: first, that the TCPA does not provide the plaintiff the right to revoke her prior consent to autodialed calls; and second, that the parties’ services agreement precludes such revocation.  The plaintiff countered that she revoked her prior consent through oral instructions to the defendant on Jan. 14, 2015, as well as through 17 subsequent calls to the defendant.

The Fourth Circuit Court of Appeals had not yet ruled on the issue of revocation of consent under the TCPA.  Accordingly, the Court looked to the Third and Eleventh Circuit Courts of Appeals’ rulings that consent is revocable under the TCPA.

The District Court here reasoned that in cases involving revocation of consent under the TCPA, a consumer complaining about unwanted telephone calls often has a contractual relationship with the company placing those calls.  When a consumer enters into a contract with a service provider, the contract may require that the consumer provide her telephone number and consent to receiving automated or prerecorded calls.  Provision of a cell phone number demonstrates express consent by the cell phone subscriber to be contacted at that number.

However, the Court held, such a contract does not prevent a consumer from revoking her prior express consent pursuant to the TCPA. The District Court noted that other courts have held that parties lack legal authority to contract around rights provided by the TCPA.

Here, the parties agreed that the plaintiff gave her prior express consent to receive calls from the defendant’s IVR system.  The defendant also did not dispute that the plaintiff instructed the defendant to discontinue telephone calls regarding the disputed debt. However, the defendant disputed whether such instructions effected a valid revocation under the TCPA and the services agreement.

In light of the FCC Ruling and existing case precedent, the Court held that there was a genuine issue of material fact regarding whether the plaintiff’s instructions to the defendant constituted a valid revocation.

The District Court further held that the defendant’s position that the TCPA affords no right to revoke consent was “ill-founded,” because the defendant’s motion for summary judgment was filed without benefit of the recent 2015 FCC Ruling, and because the defendant’s argument relied upon a handful of non-binding district court opinions that themselves acknowledge other courts’ recognition of revocation. The District Court further noted that the validity of these cases is called into question by the 2015 FCC Ruling.

The Court additionally held that the defendant’s other argument, that its services agreement prevented the plaintiff’s revocation under the TCPA, also lacked legal support.  The defendant attempted to distinguish its services agreement from courts’ readings of other contracts on the basis that it contains a clause explicitly addressing autodialing.  The Court disagreed that the distinction was remarkable where consumers’ provision of their telephone numbers represents the same express consent as their signature on a contract.

The District Court reasoned that the plain language of the services agreement is silent with respect to revocation of consent to autodialed and prerecorded voice calls.  Moreover, the defendant presented an unsigned, form copy of the agreement, which it uses for all of its customers, and the terms appear not to be negotiable; and use of an autodialing system is not an essential term of the agreement.

For all of these reasons, the Court held that the plaintiff had a valid right to revoke her prior express consent pursuant to the TCPA.

Regarding whether the defendant’s IVR was an ATDS, the defendant contended that the “present capacity” of the IVR did not include the ability to use a random or sequential number generator.  The plaintiff disagreed, pointing to the IVR’s present and potential ability to dial telephone numbers from a preprogrammed calling list without human intervention.  The Court agreed with the plaintiff, holding that the defendant’s IVR was an ATDS as that term is used for purposes of the TCPA. See § 227(a)(1).

The District Court further noted that independent of the TCPA’s prohibition on nonconsensual telephone calls made using an ATDS, the TCPA also imposes liability on parties that use an artificial or prerecorded voice to call a cell phone without prior consent. § 227(b)(1)(A)(iii).  Therefore, independent of the Court’s determination regarding the defendant’s use of an ATDS, the Court ruled that the plaintiff established a genuine issue of material fact that defendant’s IVR satisfies § 227(b)(1)(A) through its use of prerecorded voice messages.

Finally, the Court held that the defendant’s argument that the content of its call fell outside the scope of the TCPA was without merit.  The defendant argued that its calls related to an overdue account, and not to telemarketing.  The Court held that “calls concerning plaintiff’s disputed debt were analogous to debt-collection calls, which fall within the scope of the TCPA.”

The Court concluded by noting that it was considering entering summary judgment in the plaintiff’s favor, and ordered the defendant to show why summary judgment should not be entered against it.

SDNY Allows Defendant’s Offer of Full Relief to Moot TCPA Action

In a putative class action for alleged violation of the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227 et seq.,  and notwithstanding the recent ruling by the Supreme Court of the United States in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), the U.S. District Court for the Southern District of New York recently granted a defendant’s request to enter judgment in the consumer’s favor providing all relief sought only by the plaintiff in his individual capacity.

A copy of the opinion in Leyse v. Lifetime Entertainment Services, LLC is available at: Link to Opinion. Since the time of this ruling, the plaintiff filed an appeal to the U.S. Court of Appeals for the Second Circuit.

A plaintiff sued an entertainment services company for alleged violation of the TCPA.  The district court denied the consumer’s motion for class certification and related motion for reconsideration.  Thus, only the plaintiff’s individual TCPA claim for $500 in statutory damages or a maximum award of $1,500 if the violation was willful or knowing remained at issue.

The defendant offered the consumer $1,503 plus costs, and moved for an entry of judgment in favor of the plaintiff.  The district court granted the defendant’s motion, holding that the U.S. Supreme Court’s decision in Campbell-Ewald did not reach the question of whether the district court had authority to enter a judgment for the plaintiff over the plaintiff’s objections and dismiss the action if the full amount in controversy were actually paid.

As you may recall, in Campbell-Ewald v. Gomez, 136 S. Ct. 663 (2016), the Supreme Court of the United States recently held that a lawsuit is not mooted when a plaintiff refuses to accept an offer of judgment.  The Supreme Court expressly did not address the question of what happens when a defendant follows through with its offer by tendering complete individual relief, depositing the monetary relief with the court, and moving for entry of judgment.

Here, the District Court held that Campbell-Ewald did not “disrupt the Second Circuit’s precedent allowing for the entry of judgment for the plaintiff over plaintiff’s objections.”  Instead, the Court held that Campbell-Ewald precludes a dismissal in favor of the defendant because of unaccepted, offered relief that obliges the defendant to pay nothing, where such offered relief is “only a proposal” with “no continuing efficacy.” 136 S. Ct. at 670.

The District Court looked to Second Circuit precedent which comported with this principal and made judgment and full relief in favor of the plaintiff necessary precursors to the dismissal of an action in the event of an unaccepted settlement offer.  See, e.g., Tanasi v. New Alliance Bank, 786 F.3d 195, 200 (2d Cir. 2015) (“Absent [an] agreement, however, the district court should not enter judgment against the defendant if it does not provide complete relief.”); McCauley v. Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005) (vacating dismissal in defendant’s favor, which relieved it of the obligation to pay an unaccepted settlement, and remanding for entry of default judgment in favor of plaintiff); Bank v. Caribbean Cruise Line, Inc., 606 F. App’x 30, 31 (2d Cir. 2015) (“Under the law of our Circuit, an unaccepted Rule 68 offer alone does not render a plaintiff’s individual claims moot before the entry of judgment against the defendant but rather, only after the entry of judgment in the plaintiff’s favor is the controversy resolved such that the court lacks further jurisdiction.”)(internal citations omitted).

Therefore, the District Court concluded that “once the defendant has furnished full relief, there is no basis for the plaintiff to object to the entry of judgment in its favor. A plaintiff has no entitlement to an admission of liability, as a party can always incur a default judgment and liability without any factual findings.”  The Court held that a defendant’s deposit of a full settlement with the court, and consent to entry of judgment against it, will eliminate the live controversy before a court.

The District Court ruled that it would enter judgment in the plaintiff’s favor upon the defendant’s deposit of a bank or certified check in the amount of $1,503 plus $400 in court costs, and issue an injunction as requested by the plaintiff.  The District Court also ordered the clerk to mark the case closed upon the defendant’s submission of the judgment.

Colorado Fed. Court Holds Statements Directed to Non-Debtor Third Parties May Violate FDCPA

The U.S. District Court for the District of Colorado recently denied a debt collector’s motions to dismiss FDCPA allegations that the debt collector’s statements made to the borrower’s attorney during settlement negotiations and statements made to the state court in court filings constitute a violation of the FDCPA, ruling that “none of the provisions implicated in [the borrower’s] claim should be dismissed on the basis that the alleged abusive conduct was communicated to third parties other than the consumer.”

A copy of the opinion in Chung v. Lamb is available at: Link to Opinion.

The debt collector’s employee contacted the borrower trying to collect.  In an underlying state court action to recover the amounts due, the parties discussed a settlement agreement via phone and email.  The parties reached a settlement agreement that did not include a provision releasing the debt collector from future claims.

Subsequent to the parties’ agreement, the debt collector sought to add a provision releasing it from all future claims.  The borrower refused, asserting that a final agreement had already been reached.  The state court granted the borrower’s motion to enforce the settlement agreement.

Almost a year later, the borrower filed an FDCPA claim, asserting that the debt collector’s activities violated the FDCPA.  Specifically, the borrower alleged that the debt collector pursued legal action against her even after the settlement agreement was reached; it refused to accept the borrower’s tendered payment in full performance of her obligations under the settlement agreement; it misrepresented to the Court that no settlement agreement had been reached and that the debt was still owed; and, it failed to include in the state court status report that the borrower attempted to pay the settlement agreement amount.

The borrower also alleged that the debt collector violated the FDCPA by “falsely informing the police that [the borrower’s] counsel had attempted to remove the original note from his office and falsely informing police that [the borrower] had no grounds for asserting her right to retain possession” of the note.  The borrower sought damages, punitive damages, and attorney’s fees.

As you may recall, to assert a claim under the FDCPA, a borrower must show that (1) she is a consumer under the Act; (2) the debt is one for personal, family, or household purposes; (3) the defendant is a debt collector under the Act; and (4) the defendant violated a provision of the FDCPA.

Here, the debt collector argued that, in order to meet the first element, the borrower must show that the alleged misrepresentations or threats of arrest or legal action were made to a “consumer.” The debt collector argued that, because the alleged communications were made to the borrower’s attorney, the state court judge, and to police officers, the borrower could not maintain a claim against the debt collector for any FDCPA violations. Accordingly, the debt collector argued that the sole issue before the Court is “whether an alleged misstatement to an attorney representing a party or to the court is cognizable under the FDCPA.”

The debt collector relied upon a Tenth Circuit ruling for support.  In Dikeman v. National Educators, a debt collector did not include in communications to the consumer’s lawyer a verification disclosing that the debt collector was attempting to collect a debt and that any information obtained would be used for that purpose.  The Court noted in a footnote that a lawyer acting as the representative of a consumer is not a consumer under the FDCPA.  Dikeman v. Nat’l Educators Inc., 81 F.3d 949, 955 n.14 (10th Cir. 1996).  However, in the next footnote, the Court noted that it was limiting its holding to the facts of that case and its specific application to 1692e(11), a provision which is not implicated in the present case.

However, the district court here found more instructive a recent ruling by another judge in the U.S. District Court for the District of Colorado.  In Schendzielos v. Silverman, a consumer brought an action against a debt collector for violations of the FDCPA.  The debt collector in the other case brought an action in state court for the amounts owed by the consumer.  Prior to trial, the parties settled, and the consumer agreed to pay the bank a settlement amount.  After the consumer allegedly failed to pay the settlement amount, the debt collector filed a motion for a default judgment against him.

The consumer in Schendzielos alleged that the debt collector made misrepresentations to the court in violation of the FDCPA about the status of the debt, including a failure to mention that the consumer had attempted to pay for the alleged default, and for falsely representing to the court that the consumer was in default.  The debt collector filed a motion to dismiss on the theory that “a false statement violates the FDCPA only if it is made to the consumer . . . [and that] a false statement made to a state court judge is not actionable” under the FDCPA.  Schendzielos v. Silverman, 2015 WL 5964882, at *2 (D. Colo. Oct. 14, 2015).

The court in Schendzielos held that the FDCPA prohibits abusive conduct in the name of debt collection, even when the audience for such conduct is someone other than the consumer.  The Schendzielos court noted that “the express purpose of the FDCPA is very broad,” and that “no language in [section 1692e] reserves this ban [of abusive conduct] for communications made only to consumers nor is there any express exemption of a debt collector’s communications to a judge.”  Id. at *3.  The court in Schendzielos further held that section 1692e “should be read to prohibit any deceptive representation if it is made during the process of debt collection without regard for the identity of the audience.”  Id.

The court in Schendzielos noted that in other sections of the FDCPA, Congress expressly limited its breadth by distinguishing between consumers and third parties as audiences. Id. (noting that section 1692c narrowly confines the audience to consumers only; and 1692b defines the audience as any person other than the consumer).

The Court in this case was further persuaded by the Schendzielos holding that “[g]iven the central role that judges play in debt collection, it would in my view be incongruous to permit debt collectors more latitude solely because they are communicating to a judge. The involvement of a judge does not change the essence of the dynamic: the debt collector is attempting to collect a debt owed by the consumer. In that process, there are many opportunities for abusive practices, which Congress so clearly intended to eliminate.”  Id. at *7.  Additionally, the FDCPA is a remedial statute, which “should be construed liberally in favor of the consumer,” and “the importance of prohibiting false or deceptive representations does not fade solely because the collector is speaking to the judge and not directly to the consumer.”  Id.

In this case, the borrower alleged violations of FDCPA provisions 1692d, 1692e(2)(a), 1692e(5), 1692e(8), 1692e(10), and 1692f.  The Court held that section 1692e, 1692d, and 1692f does not include any limitation on the audience of abusive conduct.  Specifically, section 1692d states “[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.”  Section 1692f states “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”

Here, the borrower alleged that the debt collector violated section 1692d by “threatening to — and attempting to — force [the borrower] into a trial on an alleged debt that had already been resolved through a settlement agreement.”  She alleged that the debt collector violated section 1692e(2)(a) by portraying the status of the debt as not being settled, and therefore, falsely inflating the amount of debt owed.  She also alleged that the debt collector violated section 1692e(5) by threatening legal action to pursue a debt that was already settled, and by refusing to accept her payment of the settlement amount.  The consumer further alleged that the debt collector violated section 1692e(8) by falsely advising the court that the debt remained subject to collection.  The debtor also alleges that the debt collector violated section 1692e(10) by misrepresenting to the court the status of the negotiations in its state court status report.  Finally, the borrower alleged that the debt collector violated section 1692f by falsely informing the police that her attorney had attempted to remove the original note from the debt collector’s office and that she had no right to do so.

The U.S. District Court for the District of Colorado here ruled that all of the debt collector’s alleged conduct was in connection with debt collection activity, as the debt allegedly owed by the borrower, which was resolved through a settlement agreement.  The Court held that the borrower’s allegations implicated conduct that Congress sought to eliminate “across the entire debt collection landscape,” which can necessarily include various audiences other than the consumer herself.

The Court concluded that “[i]n accordance with case law on this matter, and in the interest of liberally construing the FDCPA in favor of the consumer, I find that none of the provisions implicated in [the borrower’s] claim should be dismissed on the basis that the alleged abusive conduct was communicated to third parties other than the consumer.”

Accordingly, the U.S. District Court for the District of Colorado denied the debt collector’s Motion to Dismiss.

11th Cir. Upholds Dismissal of FDCPA, FCCPA Complaint for Failure to State Claims

The U.S. Court of Appeals for the Eleventh Circuit recently upheld the district court’s dismissal of a borrower’s amended complaint against a loan servicer alleging claims under the Fair Debt Collection Practices Act (FDCPA)  and the Florida Consumer Collection Practices Act (FCCPA) for leaving a letter in the borrower’s mailbox, posting a letter to his front door, and sending a letter via registered mail offering the borrower various sums of financial assistance if he vacated the property.

The Court held that the servicer’s actions did not constitute a demand for payment under the FDCPA and FCCPA and upheld the district court’s dismissal of the borrower’s complaint.

A copy of the opinion in Kinlock v. Wells Fargo Bank, NA can be found here:  Link to Opinion.

The borrower had a loan with the bank, secured by his residence.  The borrower defaulted and the bank foreclosed in November 2009.  After several delays, including the filing and administration of the borrower’s petition for bankruptcy relief, the property was sold in a foreclosure sale in November 2013.  A writ of possession was issued in August 2014.

After the property was sold, the loan servicer’s employee left a letter in the borrower’s mailbox offering various sums of financial assistance if the borrower vacated the property by a certain date.  The employee returned to the residence the next day and posted the letter on the front door, and the day after that sent the letter to the borrower via registered mail.

The Eleventh Circuit held that the facts asserted in the borrower’s amended complaint failed to state a claim against the loan servicer or any of the other defendants.  The servicer offered to provide the borrower funds if he would vacate the property.  The Court held that these actions did not constitute a demand for payment under the FDCPA and FCCPA.

The FDCPA imposes civil liability on “debt collectors” for certain prohibited debt-collection practices.  In order to state a plausible FDCPA claim, “a plaintiff must allege, among other things, (1) that the defendant is a debt collector and (2) that the challenged conduct is related to debt collection.”  Reese v. Ellis, Painter & Adams LLP, 678 F.3d 1211, 1215 (11th Cir. 2012) (quotation omitted).

The FDCPA and the FCCPA have certain parallels, including nearly identical definitions of “communication,” “debt,” and “debt collector.” 15 U.S.C. §§ 1692a(2), (5)-(6); FLA. STAT. §§ 559.55(2), (6)-(7).

The FDCPA and FCCPA define a “debt collector,” in relevant part, as one who engages “in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6); FLA. STAT. § 559.55(7).

The FDCPA prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  15 U.S.C. § 1692e. When determining whether a letter is “in connection with the collection of any debt,” courts look to the language of the letter, specifically to statements that demand payment and mention additional fees if payment is not tendered.  Caceres v. McCalla Raymer, LLC, 755 F.3d 1299, 1302 (11th Cir. 2014).  A demand for payment need not be express.  A demand may be implicit. An example of the latter is a letter that indicates that it is being sent to collect a debt, states the amount of the debt, describes how the debt may be paid, and provides the address to which the payment should be sent and a phone number.  Id. at 1303 n.2.

The FCCPA prohibits anyone, in the course of collecting debts, from using threats or force, and from disclosing information concerning the existence of a debt known to be reasonably disputed. FLA. STAT. §§ 559.72(2), (6).  “Debt” is defined as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.”  FLA. STAT. § 559.55(6).

In ruling upon the servicer’s motion to dismiss, the Court held that even if it accepted all of the borrower’s allegations as true, he nonetheless failed to state a claim.  The servicer offered the borrower money to vacate the property.  The Court held: “While a demand for payment need not be express to fall under the protections of the FDCPA, the facts alleged show no demand of any sort.”

As to the borrower’s FCCPA claim, the Court held that the amended complaint failed to allege facts showing that the servicer was collecting a consumer debt, as defined in the FCCPA.  See FLA. STAT. §§ 559.55, 559.72.  All the facts showed is that the servicer, through its employee, attempted to leave notices informing the borrower that he was eligible to receive financial relocation assistance.  The borrower did not allege that anyone ever asked him for payment for a debt, or told him he had an obligation to pay the servicer for a debt.

Finally, the Eleventh Circuit rejected the borrower’s argument that the district court abused its discretion in failing to grant him leave to file a second amended complaint, holding: “The argument is frivolous.  Filing a second amended complaint would be a futile exercise.”

The Eleventh Circuit affirmed the district court’s dismissal of the borrower’s amended complaint.

11th Cir. Refuses to Hold Assignee Liable Under TILA for Failing to Provide Payoff Statement

The U.S. Court of Appeals for the Eleventh Circuit recently upheld the dismissal of federal Truth in Lending Act (TILA) allegations that sought to hold the assignee of a mortgage loan liable for the mortgage loan servicer’s supposed failure to comply with the borrower’s written request for a payoff statement.

In so ruling, the Court held that TILA creates a cause of action against an assignee where violation is “apparent on the face of the disclosure statement provided in connection with [a mortgage loan] transaction pursuant to this subchapter,” and that an alleged failure to provide a payoff statement is not a violation apparent on the face of the TILA disclosure statement.

A copy of the opinion in Evanto v. Federal National Mortgage Association is available at:  Link to Opinion.

The borrower obtained a home mortgage loan in 2003.  The loan was subsequently sold and assigned.  The loan servicer serviced the mortgage at all relevant times.  After foreclosure proceedings began, the borrower supposedly requested a payoff statement from the servicer, but the borrower alleged that the servicer never provided it.

The borrower sued the assignee for the servicer’s alleged failure to timely provide the payoff statement.  The assignee moved to dismiss the borrower’s allegations, and the district court granted the motion.

On appeal, the Eleventh Circuit noted that the issue in this appeal was a matter of first impression for any circuit.

As you may recall, TILA provides:

A creditor or servicer of a home loan shall send an accurate payoff balance within a reasonable time, but in no case more than 7 business days, after the receipt of a written request for such balance from or on behalf of the borrower.

15 U.S.C. § 1639g.  “[A]ny creditor who fails to comply” is liable for certain remedies.  Id. at § 1640(a).

However, the remedies against an assignee of a creditor are more limited.  TILA provides that an action with respect to a consumer credit transaction secured by real property may be maintained against any assignee of such creditor only if two requirements are met: 1) “the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement provided in connection with such transaction pursuant to this subchapter;” and 2) “the assignment to the assignee was voluntary.”  See 15 U.S.C. §  1641(e)(1).

TILA does not define “disclosure statement.”  On this issue, the Court reasoned that section 1638 (15 U.S.C. § 1638) uses the term “the disclosure statement” to refer to disclosures that “shall be made before the credit is extended,” which excludes the payoff balance.  In contrast, section 1639g does not use the term “the disclosure statement” or even the word “disclosure.”

The Eleventh Circuit observed that TILA uses the term “disclosure statement” consistently, especially because sections 1638 and 1641 reference one particular document by using a definite article (“the”) and a singular noun (“disclosure statement”).

The Eleventh Circuit turned to the Consumer Financial Protection Bureau (CFPB), the agency responsible for administering TILA.  The CFPB’s website states that a “Truth-in-Lending Disclosure Statement provides information about the costs of your credit. . . You receive a Truth-in-Lending disclosure twice: an initial disclosure when you apply for a mortgage loan, and a final disclosure before closing.”  What Is a Truth-in-Lending Disclosure?, Consumer Fin. Prot. Bureau, http://www.consumerfinance.gov/askcfpb/180/what-is-a-truth-in-lending-disclosure.html (last updated Oct. 26, 2015).

The Court also noted that the National Consumer Law Center similarly explains, “[t]he statute requires that closed-end [credit] disclosures be made ‘before the credit is extended.’ ” Nat’l Consumer Law Ctr., Truth in Lending § 4.4.1 (quoting 15 U.S.C. § 1638(b)(1)).

Thus, the Court held:

A disclosure statement is a document provided before the extension of credit that sets out the terms of the loan.  But a payoff balance can be provided only after a loan has been made and contains the amount yet to be repaid.  There is no way that the failure to provide a payoff balance can appear on the face of the disclosure statement.  We reach our conclusion based on the plain meaning of the text, and we reject [the borrower’s] argument that we should fix a supposed “loophole” in the statute.

The Eleventh Circuit supported its interpretation of “the disclosure statement” by showing its consistency with how other courts have used the term.

For example, the Third Circuit explained in dicta that TILA “provide[s] that as an incident to the extension of credit, the creditor must, in most instances, furnish the credit customer with a separate disclosure statement.”  Johnson v. McCrackin-Sturman Ford, Inc., 527 F.2d 257, 262 (3d Cir. 1975) (emphasis added).  In addition, several circuits, including the Eleventh Circuit, also have used the term “disclosure statement” to refer to a document provided at or before closing. See, e.g., Rodash v. AIB Mortg. Co., 16 F.3d 1142, 1143–44 (11th Cir. 1994), abrogated in part on other grounds, Veale v. Citibank, F.S.B., 85 F.3d 577 (11th Cir. 1996); Iroanyah v. Bank of Am., 753 F.3d 686, 688–89 (7th Cir. 2014); Vincent v. The Money Store, 736 F.3d 88, 92 (2d Cir. 2013); Keiran v. Home Capital, Inc., 720 F.3d 721, 724–25 (8th Cir. 2013), vacated on other grounds, 135 S. Ct. 1152 (2015).

Finally, the Eleventh Circuit rejected the borrower’s policy arguments to extend TILA to include a cause of action against assignees to include violations of section 1639g because the plain meaning of the statute forecloses the borrower’s action, and the Court’s job “is to follow the text even if doing so will supposedly ‘undercut a basic objective of the statute,’ ” Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2169 (2015) (quoting Baker Botts, 135 S. Ct. at 2170 (Breyer, J., dissenting)).  “It is a well-established principle of statutory construction that ‘when legislation expressly provides a particular remedy or remedies, courts should not expand the coverage of the statute to subsume other remedies.’ ” Florida v. Seminole Tribe of Fla., 181 F.3d 1237, 1248 (11th Cir. 1999) (quoting Tamiami Partners, Ltd. v. Miccosukee Tribe of Indians, 63 F.3d 1030, 1049 (11th Cir. 1995)).

Accordingly, the Eleventh Circuit affirmed the district court’s dismissal of the borrower’s TILA allegations.

Arizona Fed. Court Holds No FDCPA Violation for Collecting on Ex-Spouse’s Discharged Debt

Arizona.The U.S. District Court for the District of Arizona recently held that a debt collector did not violate the federal Fair Debt Collection Practices Act (FDCPA) by attempting to collect on a debt because a debtor’s spouse’s bankruptcy proceedings did not discharge the debt to the extent that the debtor himself may be liable for it.

A copy of the opinion in Parker v. First Step Group of Minnesota LLC is available at:  Link to Opinion.

The debt at issue arose prior to June 2010, and both the debtor and his wife were liable on the debt.  In June 2010, the debtor’s wife filed for Chapter 7 bankruptcy.  In October 2010, his wife received her Chapter 7 discharge.  In June 2011, the couple divorced.  In February 2014, a debt collector sent the debtor a demand letter stating the debtor owed a balance of $3,527.37.

The debtor alleged that the debt collector violated the FDCPA by attempting to collect a debt that was no longer valid because it was discharged in the debtor’s ex-wife’s bankruptcy.  More specifically, the debtor claimed that the debt collector “used false, deceptive, or misleading representations or means in connection with the collection of a debt . . . by . . . attempting to collect a debt that is no longer valid.”

The Court held that the debtor’s allegations failed because the debtor’s spouse’s bankruptcy “did not discharge the debt to the extent he may be liable for it.”

The general rule is that, when one spouse files for bankruptcy, the other spouse is not discharged of liability. In re Kimmel, 378 B.R. 630, 636 (B.A.P. 9th Cir. 2007) aff’d, 302 F. App’x 518 (9th Cir. 2008).

“Pursuant to 11 U.S.C. § 524(a), a discharge under Chapter 11 releases the debtor from personal liability for any debts. Section 524 does not, however, provide for the release of third parties from liability.”  In re Lowenschuss, 67 F.3d 1394, 1401 (9th Cir. 1995).

The Bankruptcy Code, at 11 U.S.C. § 524(e), provides that “[e]xcept as provided in subsection (a)(3) of this section, discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.”  In turn, subsection (a)(3) provides in relevant part that a creditor cannot recover from the “interests of the debtor and the debtor’s spouse in community property that is under the . . . joint management and control of the debtor.” 11 U.S.C. § 524(a)(3), 541(a)(2).

Under Arizona law, “spouses have equal management, control and disposition rights over their community property.” A.R.S. § 25-214(B).  Thus, “the effect of § 524(a)(3) is that all community property acquired post-bankruptcy is protected by the discharge.”  In re Kimmel, 378 B.R. 630, 636 (B.A.P. 9th Cir. 2007) aff’d, 302 F. App’x 518 (9th Cir. 2008).

Thus, the Court noted that, for the duration of the marriage, “§ 524(a)(3) can operate to provide nondebtor spouses with a de facto partial discharge of their separate debts by enjoining a creditor from attaching community property in which the nondebtor spouse has an interest.”  Id.

The Court also noted that, “[a]lthough the personal liability of a nondebtor spouse survives the bankruptcy, this liability can only be enforced against separate property, not community property” because “a judgment creditor of the nondebtor spouse on a community claim loses the ability to collect from anything other than the judgment debtor’s separate property.” Id.

However, the Court further noted that this protection “applies only so long as there is community property,” and “[d]issolution of the marriage . . . terminates the community, at which point after-acquired community property loses its § 524(a)(3) protection.” Id.

Here, when the debt collector attempted to collect the debt, the debtor was no longer married to the ex-wife who received the bankruptcy discharge.  Accordingly, the Court found that the debtor no longer had any community property for section 524(a)(3) to protect.

Therefore, the Court held that the debtor remained liable for debts discharged as to his ex-wife in his ex-wife’s bankruptcy, and that the debt collector did not violate FDCPA by attempting to collect on the debt.

However, the Court also denied the debt collector’s motion for attorney’s fees and costs because it found that the debtor did not bring the action in bad faith or for the purpose of harassment.

EDNY Holds Providing Callback Information to Third Party Violated FDCPA

The U.S. District Court for the Eastern District of New York recently granted summary judgment in favor of a debtor in his claim that a debt collector violated the FDCPA when the debt collector, in attempting to reach the debtor by telephone, left a message with a third party providing the debt collector’s callback information.

The Court held that because the undisclosed nature of the call may induce the debtor to contact a debt collector when he does not wish to do so, the debt collector must refrain from leaving callback information and attempt the call at a later time in order to avoid violating the FDCPA.

A copy of the opinion in Halberstam v. Global Credit and Collection Corp. is available at:  Link to Opinion.

A debt collector telephoned the debtor about his debt.  An undisclosed person answering the phone responded that the debtor was not in yet and asked to take a message.  The collection agent responded: “Name is Eric Panganiban. Callback number is 1-866-277-1877. . .direct extension is 6929. Regarding a personal business matter.”

The debtor filed suit, alleging that the debt collector violated the FDCPA’s provisions addressing communications between a debt collector and a third party, at 15 U.S.C. § 1692c(b):

Except as provided in section 1692b of this title …a debt collector may not communicate, in connection with the collection of any debt, with any person other than the consumer, his attorney, a consumer reporting agency if otherwise permitted by law, the creditor, the attorney of the creditor, or the attorney of the debt collector.

The reference to § 1692b allows the debt collector to confirm that it has the correct contact information for the debtor:  “Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer shall … identify himself, state that he is confirming or correcting location information concerning the consumer, and, only if expressly requested, identify his employer.” 15 U.S.C. § 1692b(1).

The debtor also alleged that the debt collector violated the FDCPA’s so-called “mini-Miranda” disclosure requirement, which deems it a “false or misleading representation” if a debt collector fails to disclose:

in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector. . . .15 U.S.C. § 1692e(11).

Here, the Court held there was no need for the debt collector to confirm contact information as allowed under 15 U.S.C. § 1692b(1), as the third party who answered the telephone did it for him when he told the debt collector that the debtor “is not yet in.”  The Court also held that “§ 1692b(1) does not say anything about leaving a callback number. That is not part of the exempted information that the statute allows the debt collector to provide to the third party.”

The debt collector argued that the phone call did not fall under the statutory definition of a “communicat[ion] … in connection with the collection of any debt …”, as used in 1692c(b). The debt collector reasoned that when its employee merely left his contact information with a third party, it was not collecting a debt.

The Court interpreted this argument as “inherently circular” – i.e., the Court restated the debt collector’s argument as being that the call was not a communication in connection with the collection of a debt because a communication in connection with the collection of a debt requires disclosures, and because the debt collector did not give disclosures, it was not a communication in connection with the collection of a debt. Stated differently, the Court noted that if the call to the third party is a “communication,” then the debt collector had to give the § 1692e “mini-Miranda” disclosure, but if the debt collector gave those disclosures to the third party, or even mentioned that it was a debt collector, then it would be violating § 1692c(b).

The debt collector further argued that there was nothing wrong with placing the call as Congress expected, and the debtor had authorized the use of a telephone to collect debts.  The debt collector urged that it would have been “rude to simply hang up.”

Although the Court agreed, the Court held that there is nothing in § 1692c(b) that permitted the debt collector to leave a response with the third party that will induce the debtor to call him back.  More specifically, the Court held that “soliciting a call back to a collection agency unidentified as such through a third party is simply not a means of collection that is permitted under the restrictive statutory scope of a collector’s efforts.”

The Court ruled that the debt collector “seized upon the opportunity presented by the third party to obtain a debtor-initiated contact, something the debtor may or may not have done on his own, or in response to a dunning letter with full disclosures, in contrast to an unadorned callback message about a ‘personal business matter.’ Nothing required [the debt collector] to seize that opportunity, and the prohibition on relaying information through a third party prohibited it.”

The Court ruled that the only way to avoid violating the FDCPA would have been for the debt collector to make a different decision by politely declining to leave a message, and perhaps trying again at some point in the future.

9th Cir. Rules in Favor of Defendant in Putative TCPA Class Action Involving Third Party Consent

Notification of SMS on display modern touchscreen smartphoneIn an unreported ruling, the U.S. Court of Appeals for the Ninth Circuit recently affirmed summary judgment for the defendant in a putative class action for alleged violation of the federal Telephone Consumer Protection Act (TCPA).

The Court held that the named plaintiff expressly consented to the text message in question when she provided her cell phone number to a third party contracting with the defendant while using the third party’s services.

A link to the opinion in Baird v. Sabre, Inc. can be found here:  Link to Opinion.

The named plaintiff booked flights online for herself and her family on an airline website.  A section of the website entitled “Contact Information” provided spaces to enter various phone numbers, noting that at least one was required.  The plaintiff entered her cell phone number.

The defendant contracts with airlines to provide traveler notification services to passengers.  Three weeks after the named plaintiff made her reservation with the airline, and about a month before her scheduled departure, the defendant sent a text message to the consumer’s cell phone.  The text message invited the named plaintiff to reply “yes” to receive flight notification services.  The named plaintiff did not respond and the defendant sent her no more messages.

The named plaintiff brought this action, alleging that the defendant violated the TCPA by sending her the unsolicited text message.  She sought to represent a class of people who received similar text messages from the defendant.

As you may recall, the TCPA restricts calls and text messages made using an automatic dialing system or an artificial or prerecorded voice absent “prior express consent” from the called party.  47 U.S.C. § 227(b)(1)(A).

The Federal Communications Commission (FCC), having authority to prescribe regulations to implement specific parts of the TCPA, determined that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”  In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, Report and Order, 7 FCC Rcd. 8752, 8769 (Oct. 16, 1992) (“1992 Order”).  The Ninth Circuit noted that the defendant’s assertion that the named plaintiff consented to receive the text message is an affirmative defense to liability under the TCPA.

The district court relied upon the 1992 Order, stating that “[i]f a call is otherwise subject to the prohibitions [against using an autodialer, and other rules targeting telemarketing], persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.” 1992 FCC Order ¶ 31.

The district court reasoned that the FCC appeared to have intended its 1992 Order to provide a definition of “prior express consent” in Paragraph 31, which states, in its entirety:

  1. We emphasize that under the prohibitions set forth in [47 U.S.C.] § 227(b)(1) and in [47 C.F.R.]§§ 64.1200(a)-(d) of our rules, only calls placed by automatic telephone dialing systems or using an artificial or prerecorded voice are prohibited. If a call is otherwise subject to the prohibitions of § 64.1200, persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary. Hence, telemarketers will not violate our rules by calling a number which was provided as one at which the called party wishes to be reached. However, if a caller’s number is “captured” by a Caller ID or an ANI device without notice to the residential telephone subscriber, the caller cannot be considered to have given an invitation or permission to receive autodialer or prerecorded voice message calls. Therefore, calls may be placed to “captured” numbers only if such calls fall under the existing exemptions to the restrictions on autodialer and prerecorded message calls.

2008 FCC Order ¶ 31 (footnote citing H.R. Rep. No. 102-317 omitted).

The district court noted that, although “Paragraph 31 of the 1992 FCC Order is not a model of clarity,” the statement that “telemarketers will not violate our rules by calling a number which was provided as one at which the called party wishes to be reached” begs the question of whether merely providing a cellphone number demonstrates that the number is “one at which the called party wishes to be reached” by an automated telephone dialing system, instead of a number at which the called party wishes to be reached by a human being.

Nevertheless, the district court held that Paragraph 7 of the 1992 FCC Order showed that the FCC intended to provide a definition of the term “prior express consent,” and that definition governed the district court’s analysis of whether the plaintiff could prevail on her claim that the defendant’s text message to her cell phone violated the TCPA.  The district court held that under the FCC’s definition, the plaintiff “knowingly release[d]” her cellphone number to the airline when she booked her tickets, and by doing so gave permission to be called at that number by an automated dialing machine. See 1992 FCC Order ¶ 7, 31.

The named plaintiff appealed.  The Ninth Circuit’s ruling affirming the lower court’s judgment in favor of the defendant was twofold:

First, the Ninth Circuit held that the named plaintiff’s argument that providing her phone number did not constitute “prior express consent” “may not be challenged in the context of this appeal” because her lawsuit was not brought pursuant to the Hobbs Act.

The Ninth Circuit noted that the Hobbs Act provides the court of appeals with exclusive jurisdiction to determine the validity of all final orders of the FCC.  A party may invoke this appellate jurisdiction “only by filing a petition for review of the FCC’s final order in a court of appeals naming the United States as a party.” US W. Commc’ns v. MFS Intelenet, Inc., 193 F.3d 1112, 1120 (9th Cir. 1999).  Because the named plaintiff did not bring suit pursuant to the Hobbs Act, the Court held that the validity of the FCC’s interpretation of “prior express consent” must be presumed valid.

Second, the Ninth Circuit held that when the named plaintiff released her phone number to the airline while making a flight reservation, she expressly consented to the text message in question.  The Court noted that she did not provide the airline any “instructions to the contrary” indicating that she did not “wish[] to be reached” at that number.  See 1992 Order, 7 FCC Rcd. at 8769.

Accordingly, the Ninth Circuit affirmed the district court’s order granting summary judgment in favor of the defendant.