FYI: MD Fla Holds V-Mail Message Asking Return Call Can Be Debt Collection Communication, No Precise Language Needed for Notice of Representation by Counsel

The U.S. District Court for the Middle District of Florida recently denied a motion to dismiss an amended complaint alleging that a time-share association violated the Florida Consumer Collection Practices Act ("FCCPA") and the federal Telephone Consumer Protection Act ("TCPA"), holding that:

 

1.  A debtor need not use any precise language or magic word to notify a debt collector that the debtor is represented by legal counsel with respect to a debt;

 

2.  A voicemail message merely asking the debtor to return the call to discuss the debt was a debt collection communication; and

 

3.  Declaratory relief may be available under the TCPA.

 

A copy of the opinion is available at:  Link to Opinion

 

A man and a woman owed time-share maintenance fees and retained counsel, who allegedly sent a letter to the time-share association requesting that any future communication regarding the debt be directed to counsel. The letter allegedly also revoked any prior consent to call the woman's cell phone and enclosed a limited power of attorney for the man.

 

The time-share association then supposedly sent to the man, over a period of four months, 13 e-mails trying to collect the debt, called his cell phone at least 8 times and called the woman's cell phone at least 5 times using an automatic telephone dialing system ("ATDS"). The association also supposedly sent a billing statement addressed to both the man and woman.

 

The plaintiffs sued, alleging violations of the Florida Consumer Collection Practices Act ("FCCPA") and the federal Telephone Consumer Protection Act ("TCPA").  The time-share association moved to dismiss.

 

The Court first addressed the FCCPA claims, noting that subsection 559.72(18) of the FCCPA "prohibits a debt collector from '[c]ommunicat[ing] with a debtor if the person knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address.'"

 

The Court rejected the time-share association's "hypertechnical" argument that because the word "debt" did not appear in the attorney's letter, it did not put the time-share association on notice that plaintiffs were represented as to the debt. 

 

The Court noted that the word "debt" was, in fact, mentioned in the letter, but even it was not, the Court reasoned that "there is no requirement that a debtor use any precise language or magic word to notify a debt collector that the debtor is represented by legal counsel with respect to a debt."  The Court held that the language of the letter and context were enough under the circumstances to convey the message that the plaintiffs had counsel with respect to the debt.

 

The Court also found that the voicemail message left on the plaintiffs' cellular phones requesting that either the man or woman return the call to discuss the debt constituted prohibited "indirect communications" under both subsections of the FCCPA.

 

The Court then turned to whether the complaint stated a claim under FCCPA subsection 559.72(7), which "prohibits a debt collector from '[w]illfully communicat[ing] with the debtor or any member of her or his family with such frequency as can reasonably be expected to harass the debtor or her or his family, or willfully engag[ing] in other conduct which can reasonably be expected to abuse or harass the debtor or any member of her of his family."

 

The Court rejected as meritless the time-share association's argument that the complaint failed to state a claim under subsection 559.72(7) of the FCCPA because only conduct specifically mentioned in section 1692d of the federal Fair Debt Collection Practices Act ("FDCPA") can form the basis for plaintiffs' claim and they did not allege any such conduct. The Court reasoned that "[a]lthough interpretations of the FDCPA are helpful where the statutes closely mirror one another, 'the laws are not identical, and this Court must be conscious of the differences between the two.'" Moreover, the FCCPA "intentionally left out any such list … [and] this list is not even exclusive under the FDCPA."

 

Based on the "twenty-seven specific contacts, plus many more of which they believe Defendant has evidence, in conjunction with Defendant willfully contacting Plaintiffs after they had retained legal representation," the Court found that the plaintiffs' allegations "are sufficient and supported by more than conclusory allegations" and, "[t]aking all inferences in favor of Plaintiffs, the Amended Complaint sufficiently states a claim under subsection 559.72(7)."

 

Turning to the TCPA claim, the Court noted that the Act imposes "[r]estrictions on use of automated telephone equipment … and provides a damages remedy for cellular-phone subscribers who receive autodialed phone calls without having given prior express consent to receive such calls."

 

The parties agreed that the male plaintiff gave his consent to call his cell phone. The issue was whether he sufficiently alleged revocation of consent. Relying on the Eleventh Circuit's decision in Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Circ. 2014), the Court concluded that the amended complaint sufficiently alleged that the attorney's letter of representation revoked consent and that the plaintiffs "have also sufficiently stated a claim for a willful or knowing violation of the TCPA."

 

The Court rejected the time-share association's argument that "Plaintiffs cannot plead declaratory relief as a remedy but must instead plead it as a separate cause of action" because the "FCCPA expressly provides that declaratory relief may be pleaded as a remedy" and, as to the TCPA, "declaratory relief is available under 28 U.S.C. § 2201." Moreover, the Court noted that "[d]efendant has provided no authority supporting its argument that declaratory relief under the TCPA requires a separate cause of action."

 

Finally, the Court disagreed with the time-share association's argument that that even if the plaintiffs could plead declaratory relief as a remedy, they lacked standing because as a precondition to declaratory relief "a plaintiff must allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future." The Court found that the plaintiffs had "sufficiently alleged likelihood of injury in the future…" because the amended complaint expressly alleged that the defendant "continues" to attempt to collect the debt, which is sufficient at the pleading stage to allege a likelihood of future injury.

 

The Court denied the defendant's motion to dismiss and motion to strike, and also denied the defendant's motion for leave to file a reply.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

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FYI: 3rd Cir Holds TCPA "Called Party" Includes Regular User and Roommate of Subscriber

The U.S. Court of Appeals for the Third Circuit recently vacated an order of dismissal based on lack of statutory standing under the federal Telephone Consumer Protection Act ("TCPA"), holding that a regular user of a phone line and occupant of the residence of the subscriber has standing to bring an action under the TCPA.

 

In so ruling, the Court held that a caller may invoke the consent of the "called party" as a defense even if the plaintiff is someone other than the "called party."

 

The Court also held that, under Fed. R. Civ. P. 12(g)(2), it was error for the district court to consider the motion to dismiss when the standing issue should have been raised in a previously filed motion to dismiss.

A copy of the opinion is available at: Link to Opinion

A telemarketer, seeking to advertise credit cards, called the phone shared by the intended recipient of the call and her roommate using a prerecorded message.

 

The roommate filed suit, alleging that the message violated the advertising restrictions of the federal Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227, which among other things prohibits any person from "initiat[ing] any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party, unless the call is initiated for emergency purposes or is exempted by rule or order by the [Federal Communications] Commission." 47 U.S.C. § 227(b)(1)(B).

 

The bank filed a motion to dismiss asserting collateral estoppel, and subsequently filed another motion to dismiss asserting lack of standing.

 

The district court granted defendant bank's second motion to dismiss, reasoning that the roommate was not the "called party" under §227(b)(1)(B) of the TCPA, and therefore did not have statutory standing to sue.

 

On appeal, the Third Circuit first addressed whether the bank's second motion to dismiss violated Fed. R. Civ. P. 12(g)(2), which imposes restrictions on the filing of successive motions to dismiss and states that a party that makes a motion under Rule 12 must not make another motion under Rule 12 raising a defense or objection that was available to the party but omitted from its earlier motion.

 

The Court stated that the purpose of Fed. R. Civ. P. 12(g)(2), also known as the "consolidation rule," is to eliminate unnecessary delay.  The Court held that the bank could have included its statutory standing argument in the same motion as its collateral estoppel argument, which is the sort of consolidation that Rule 12(g)(2) is meant to encourage.

 

Consequently, the Third Circuit held that it was error for the trial court to consider the bank's second motion to dismiss.  Nevertheless, it found the error to be harmless because as long as the trial court accepts all of the allegations in the complaint as true, the result is the same as if the defendant had filed an answer admitting these allegations and then filed a Rule 12(c) motion for judgment on the pleadings, which Rule 12(h)(2)(B) expressly permits.

 

Proceeding to the merits, the Third Circuit addressed whether the roommate had standing to sue, analyzing the Congressional intent of the TCPA.

 

The Court employed the zone-of-interests test from Lexmark Int'l v. Static Control Components, Inc., 134 S. Ct. 1377 (2014), whereby a statutory cause of action extends only to plaintiffs whose interests fall within the zone of interests protected by the law invoked.

 

The Third Circuit noted that, although Congress did not expressly limit standing to the "called party," its primary concern in enacting § 227(b)(1)(B) was to protect that party from unwanted robocalls, thus placing a "called party" within the zone of interest.

 

The Court held that the roommate would fall into the "called party" definition, as a regular user of the phone line who occupies a residence with the subscriber of the number being called, and has an interest in privacy, peace and quiet that Congress intended to protect.

 

The Third Circuit rejected the trial court's reasoning that a bank who has the consent of the subscriber would face liability whenever any person answers the phone, noting that the called could still raise consent as a defense to such a TCPA action.  In the Court's words, "[t]he caller may invoke the consent of the 'called party' as a defense even if the plaintiff is someone other than the 'called party.'"

 

In concluding, the Court observed that the TCPA is a remedial statute that should be construed to benefit consumers.  Because it held that the roommate was in the zone of interests that Congress intended to protect when it enacted the TCPA, the Third Circuit vacated the district court's order of dismissal and remanded for further proceedings.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: Fla Bankr Court Holds Debtor Who "Surrenders" Property in BK Cannot Impede Foreclosure

The U.S. Bankruptcy Court for the Middle District of Florida recently held that, at a minimum, "surrender" under Bankruptcy Code §§ 521 and 1325 means a debtor cannot take an overt act that impedes a secured creditor from foreclosing its interest in secured property.

 

In so holding, the Court found that actively contesting a post-bankruptcy foreclosure case is inconsistent with a "surrender" of the property.

 

A copy of the opinion is available at:  Link to Opinion

 

The Court addressed two separate bankruptcy cases.  The first was a Chapter 7 bankruptcy case, in which the mortgagee instituted a foreclosure action five years before the bankruptcy case, but the foreclosure case had not concluded by the time the debtor filed bankruptcy.  

 

In the Chapter 7 bankruptcy case, the debtor mistakenly believed she did not own the property at issue.  Accordingly, although she listed the mortgage debt on her bankruptcy schedules, she did not state that she owned the property.  Because of the debtor's mistake about ownership of the property, she never filed a statement of intention regarding the property and never elected to surrender the property.

 

After the debtor received her Chapter 7 discharge, the mortgagee began prosecuting the foreclosure suit again.  An attorney began defending that foreclosure suit.  The Court's opinion implies that it believed the debtor was not aware that the attorney had been contesting the foreclosure suit on her behalf.

 

The mortgagee moved to reopen the Chapter 7 bankruptcy case and compel the debtor to surrender the property, as the debtor had neither reaffirmed the mortgage debt nor redeemed the property.

 

The second case was a Chapter 13 bankruptcy with more straightforward facts.  Prior to the debtor's filing the Chapter 13 case, the mortgagee had also instituted a foreclosure proceeding against the property at issue. 

 

In the Chapter 13 bankruptcy case, the debtor submitted a plan — which the court confirmed — in which she stated an intent to surrender the property at issue.  In spite of this, the debtor contested the state-court foreclosure action the mortgagee began prosecuting post-confirmation.

 

The Court's legal analysis began with a discussion of the actions Chapter 7 and Chapter 13 debtors must take regarding secured property.

 

For secured property, real or otherwise, Chapter 7 debtors must file a "statement of intention."  This statement declares whether a borrower will (1) redeem – i.e., pay the present value for -- the property, (2) reaffirm the debt, or (3) "surrender" the property.  The debtor must then perform her stated intention, usually within thirty days after the date first set for the meeting of creditors.  The Eleventh Circuit has interpreted these requirements to mean that a debtor cannot retain collateral unless he or she redeems it or reaffirms the debt it secures.  See, e.g., Taylor v. AGE Fed. Credit Union (In re Taylor), 3 F.3d 1512 (11th Cir. 1993).

 

A Chapter 13 debtor does not need to file a statement of intentions.  However, the debtor must file a plan of reorganization that addresses how the debtor would like to treat secured property.  A Chapter 13 debtor can (1) get the secured creditor's consent to the plan, (2) "cram down" the secured debt – i.e., pay the total present value of the allowed secured claim over the life of the plan, or (3) surrender the secured property.  Absent consent from a secured creditor, a chapter 13 debtor cannot retain collateral without paying for it.

 

Although the facts of each case differ, at issue in both the Chapter 7 and Chapter 13 was the effect of a debtor's surrender of the secured real property, when the debtor still contested the post-bankruptcy foreclosure proceedings.

 

The Bankruptcy Code does not define the term "surrender."  For guidance, the Court looked to opinions from the First and Fourth Circuits, which held that a debtor needed to relinquish all rights in the collateral, including the right to possess the collateral, to surrender it.

 

Applying that logic to the foreclosure context, the Court held that, to surrender a property, a debtor must "not tak[e] an overt act to prevent the secured creditor from foreclosing its interest in the secured property."  Put another way, a debtor cannot contest a foreclosure after "surrendering" a property in bankruptcy.

 

In making this ruling, the Court rejected the debtor's argument that "surrendering" a property simply meant allowing the Bankruptcy Code's automatic stay to dissolve.  The Court found that adopting the debtor's reasoning would result in a windfall to debtors. 

 

The Court held that "simply dissolving the automatic stay cannot be what 'surrender' means because it would effectively permit the type of 'ride through' that the Eleventh Circuit held was impermissible in In re Taylor." 

 

The issue in Taylor was whether a chapter 7 debtor could retain possession of collateral property by staying current on his or her obligation to the secured creditor, but without reaffirming or redeeming the underlying debt – what in bankruptcy is known as a "ride through." The Eleventh Circuit held that the plain language of 11 U.S.C. § 521 did not provide for a ride-through option, and besides, permitting a "ride through" would give the debtor a "head start"—not a "fresh start."  The Eleventh Circuit also reasoned that if a ride-through option existed, it would render the other alternatives in 11 U.S.C. § 521 "nugatory.

 

In addition, under the debtor's theory, a debtor could do exactly what the debtor did here: "surrender" a property then delay the state-court foreclosure process, all while living in the house for free.

 

The Court found that both the Chapter 7 and Chapter 13 debtors had failed to "surrender" the respective properties at issue.  Not surprisingly, the Court found that the Chapter 7 debtor's actions were forgivable, given the Court's conclusion that the attorney had acted without the Chapter 7 debtor's authorization.

 

In concluding, the Court held that, to surrender a property, "a debtor must relinquish [the] secured property and make it available to the secured creditor by refraining from taking any overt act that impedes a secured creditor's ability to foreclose its interest in secured property."

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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FYI: Ill App Ct Holds Borrower Waived Challenge to Trial Court's Jurisdiction, Failed to Present Basis to Vacate Default Foreclosure Judgment

The Illinois Appellate Court, First District, recently affirmed dismissal of the last of several post-judgment challenges to a default foreclosure judgment, holding that the borrower failed to present a sufficient record on appeal, failed to present sufficient evidence to vacate the default judgment, and also waived any objection to the jurisdiction of the trial court.

 

A copy of the opinion is available here:  http://www.illinoiscourts.gov/Opinions/AppellateCourt/2015/1stDistrict/1141272.pdf

 

In November 2011, a bank filed a complaint for foreclosure against the borrower for defaulting on his mortgage.  The borrower was served in December 2011, but never answered.  The bank filed a motion for default judgment of foreclosure and presented the motion to the trial court in May 2012. 

 

The borrower appeared at the hearing on the motion for default judgment.  The court granted the borrower's request for 28 days to file his appearance and respond to the complaint for foreclosure.  The bank withdrew its motion for default judgment.

 

Despite the extension of time, the borrower failed to answer or otherwise respond to the complaint.  On the bank's renewed motion, the trial court entered default judgment of foreclosure in July of 2012—almost two months after the borrower should have responded.

 

After that, the borrower filed a series of post-judgment challenges to the default judgment and order approving the sale of the property. 

 

In August of 2012 he filed a motion to vacate the default judgment, but failed to cite any authority in support of his motion and it was denied. 

 

The property was also sold at a judicial sale in October 2012.  In November of 2012 the borrower contested the order approving the sale, but after several continuances failed to appear at a March 2013 hearing to contest the order.  The trial court entered an order approving the sale.

 

Still, in April 2013, the borrower filed a motion "to reconsider and vacate" the March 2013 confirming the sale.  Later, in July 2013, the borrower withdrew that motion with leave to re-file.  He never re-filed the motion.  Instead he filed numerous pro se motions from July 2013 and March 2014. 

 

Then, with a new attorney, he filed a petition to vacate the default judgment and order of sale in March 2014 where he made a number of ultimately meritless arguments. An emergency hearing was set in April 2014.  It is unclear what transpired at the hearing because the borrower failed to provide a transcript or bystander's report on appeal.

 

The trial court dismissed the petition in April 2014, just 15 days after it was filed.  It held that the petition was procedurally improper.  Substantively, the trial court held that the borrower's lack-of-personal-jurisdiction argument (upon which his petition was based) lacked merit because he waived any objection to jurisdiction by participating in the original action without objecting.  Also, substantively, the trial court held that the petition lacked merit because the borrower failed to present "new facts" that were "undiscoverable" at the time of the original action.

 

The borrower appealed, arguing the trial court's sua sponte dismissal of his petition to vacate the default judgment violated a statutorily set 30 day period for the mortgagee to answer his petition.  Therefore, he argued, the "sua sponte" dismissal was improper in light of the Illinois Supreme Court's holding in People v. Laugharn, 233 Ill 2.d 318 (2009).  On appeal, he also argued that his petition had merit and that the default foreclosure was void for lack of personal jurisdiction.

 

The Appellate Court disagreed with all of these arguments, and affirmed the trial court's judgment.

 

The Court distinguished the borrower's case from Laugharn.  In Laugharn, a defendant filed a post-judgment petition to vacate a judgment, and nine days later the court dismissed it sua sponte.  In that case, the Illinois Supreme Court reversed, and held that sua sponte dismissal of a post-judgment petition to vacate a judgment before the expiration of the 30 day period allowed under Illinois law was improper.

 

Here, the Appellate Court held that, unlike in Laugharn, there was no evidence that the trial court dismissed the petition sua sponte.  Rather, the Appellate Court noted that the trial court apparently dismissed the petition following an appearance and argument from the respondent at the April 2014 hearing, which was within 30 day period.  The Appellate Court acknowledged that it was unclear who appeared at the hearing or what transpired at the hearing because there was no bystander's report or transcript provided in the record on appeal other than the trial court's written order and memorandum dismissing the petition.

 

Nevertheless, the Appellate Court held that it was the borrower's burden as appellant to provide a transcript, bystander's report, or some other record of what occurred at the April 2014 hearing.  Yet, the memorandum and order dismissing the petition was the only document related to that hearing that was provided in the record. 

 

Accordingly, because the borrower failed to meet his burden to "provide a complete record," the Appellate Court held that it "must presume" that the trial court properly considered petition to vacate the default judgment and that the petition to vacate the default judgment was ripe for adjudication.  Thus, the Appellate Court held that there was no evidence showing that the trial court dismissed the petition "sua sponte," violated the 30 day rule or violated the holding in Laugharn.

 

Moreover, having held that the petition to vacate the default judgment was procedurally proper, the Appellate Court turned to the merits of that petition.   As a preliminary matter, the court explained that the purpose of a petition to vacate default judgment in Illinois is to bring facts to the attention of the trial court which, if known at the time of judgment, would have precluded its entry.

 

The Appellate Court held that the borrower failed to provide sufficient evidence -- or really any evidence -- that would have precluded entry of default judgment at the time it was entered. 

 

Moreover, the Appellate Court held that, even if he had presented some evidence, the borrower failed to argue in his petition or on appeal that he "was diligent in discovering and presenting his defenses to the trial court in the original action or in filing" his petition to vacate default judgment as required. 

 

Finally, the Appellate Court held that the borrower's argument that the foreclosure was void for lack of personal jurisdiction lacked merit.  It held that because the borrower participated in the May 2012 hearing on the motion for default judgment, and did not object within 60 days to jurisdiction as required by 735 ILCS 5/15-1505.6, the waived any jurisdictional argument.

 

Consequently, for all of these reasons, the court affirmed the circuit court's order dismissing the petition.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

California   |   Florida   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

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