FYI: Oregon Fed Ct Holds Voicemail Messages on Debtor's Cell Phone Did Not Violate FDCPA

The U.S. District Court for the District of Oregon recently granted summary judgment in favor of a debt collector, ruling that the collector's voice mail messages for the debtor did not unlawfully communicate with a third party under the federal Fair Debt Collection Practices Act ("FDCPA") and related state law, because the collector could not "reasonably foresee" that debtor's boyfriend and manager would overhear the voicemail messages left on her cell phone.

 

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

 

A consumer's ("Debtor") unpaid account was referred to a debt collector ("Collector").  Debtor negotiated a payment arrangement with Collector through automatic debit payments.  Debtor's boyfriend regularly used and checked the messages on her cell phone.  Collector called Debtor's cell phone to update the debit card information.  Debtor confirmed to collector that the cell phone was the "best number" to reach her.  Collector called the next day and left a message identifying itself as a debt collector.

 

Debtor's voicemail message gave Debtor's name, but gave no indication the phone was shared with her boyfriend.  Debtor's boyfriend heard the message and confronted her about the debt.  One month later, Collector called the debtor's cell phone and left a message identical to the previous message.  Debtor's manager overhead the message when Debtor used the speaker function on her cell phone to check the message at work.

 

Debtor alleged Collector violated § 1692c(b) and § 1692d of the FDCPA and the Oregon Unfair Debt Collection Practices Act ("OUDCPA"), when two third parties overheard messages the Collector left on Debtor's cell phone voicemail.  Debtor moved for partial summary judgment on liability and Collector moved for summary judgment on all claims. 

 

The court disagreed with Collector's argument that the Debtor consented to Collector's communication with her boyfriend and manager by allowing them to overhear the voicemail messages. The court found that the Debtor had not given consent for the Collector to communicate with a third party.  The court noted that § 1692c(b) requires "prior consent of the consumer given directly to the debt collector." The court found that the Debtor never directly gave the Collector consent to communicate with her boyfriend or manager.

 

The court also disagreed with the Collector's argument that the messages were not a communication conveying information regarding a debt under 15 U.S.C. § 1692a(2). The court explained that the majority of courts interpret § 1692a(2) broadly to include any oral or written communication so long as the intent of the contact is to further the debt collector's efforts to collect a debt, noting that the Ninth Circuit recently adopted the majority approach in an unpublished opinion. The court noted that the minority position interprets § 1692a(2) more narrowly, requiring the message to indicate to the recipient that it relates to the collection of a debt.

 

The court avoided adopting either the majority or minority position by finding that the Collector's messages were a communication under both interpretations. The court explained that there was no doubt that the purpose of the message was to further collection of a debt and that the message also conveyed information about the debt -- for example, that it existed.

 

However, the court agreed with the Collector's argument that the messages were not communications with a third party under § 1692c(b).

 

More specifically, the court held that there is a communication with a third party only if it is "reasonably foreseeable" that the third party would receive the communication. The court declined to adopt a true strict liability standard that would invite abuse by debtors. Instead, the court reasoned that the negligence standard, supported by Federal Trade Commission commentary, struck a better balance by requiring debt collectors to take reasonable measures to avoid disclosure to third parties, but not requiring them to avoid such disclosures at all costs.

 

In this case, the court determined that the Collector's messages were not unlawful communications with third parties under the "reasonable foreseeability" standard of § 1692c(b).  The court explained there was an important distinction between the Debtor's use of a cell phone rather than a landline, noting that the Collector could reasonably foresee that a message left on the Debtor's cell phone would only be accessed by the Debtor.

 

In addition, the Debtor's personalized voicemail greeting gave no indication the line was shared.  Moreover, Debtor informed the Collector that the cell phone number was the "best number" to contact her and did not instruct the Collector to not leave messages.

 

The court disagreed with Debtor's argument that Collector violated § 1692d of the FDCPA by engaging in conduct the natural consequence of which is to harass, oppress, or abuse the Debtor in connection with the collection of a debt. The court noted that the Collector did not engage in any conduct described in § 1692d, and that two brief, polite messages one month apart hardly rose to a level of harassment.

 

The court also disagreed with the Debtor's argument that the Collector violated the OUDCPA by communicating repeatedly with Debtor with intent to harass or annoy. The court explained that the FDCPA's "harass, oppress, or abuse" standard is more demanding than the OUDCPA "harass or annoy" standard.  Although the court found that the Collector's two phone messages qualified as repeated communications, the court held there was no evidence or argument that the calls were made with the intent to harass or annoy.

 

Accordingly, the court granted the Collector's motion for summary judgment and dismissed the case.

 

 

 

 

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: 6th Cir Rejects Debtor's Chpt 11 BK Plan As Not Proposed in Good Faith

The U.S. Court of Appeals for the Sixth Circuit recently held that a bankruptcy court clearly erred in its finding that a debtor proposed a Chapter 11 plan in good faith, when the secured mortgagee would be paid only in part and very slowly after 10 years with no obligation by the debtor to maintain the building and obtain insurance, while a second class would be paid in full in two payments of $1,200 each over 60 days.

 

In so ruling, the Sixth Circuit held that the artificial creation of an "impaired" class under section 1124(1) of the Bankruptcy Code, 11 U.S.C. § 1124(1), must pass muster under a "good faith" analysis under 11 U.SC. § 1129(a)(3).

 

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

 

The debtor in this case defaulted on its monthly mortgage payment for an apartment building that it financed with the secured creditor.  Shortly after default, the debtor filed Chapter 11 bankruptcy to halt the secured creditor's foreclosure action.  Aside from the $8.6 million owed to the secured creditor, the only other debts provided for in the proposed plan of reorganization was less than $2,400 owed in total to the debtor's former attorney and accountant.

 

Debtor proposed two classes of claims in its plan of reorganization.  The secured creditor would be paid very slowly leaving a balance of $6.6 million after 10 years and the proposed plan removed the debtor's obligation to maintain the building and obtain insurance.  The second class would be paid in full in two payments of $1,200 each over 60 days.

 

Because the second class was technically "impaired" (because they were entitled to be paid on their claims immediately), the bankruptcy court held that the second class satisfied the requirements of 11 U.S.C. § 1124(1).  Because the second class voted to accept the plan of reorganization, the bankruptcy court confirmed the plan pursuant to 11 U.S.C. § 1129(a)(10).

 

The secured creditor appealed to the district court, which vacated the bankruptcy court's confirmation of the plan and remanded for a determination as to whether the plan was proposed in good faith pursuant to 11 U.S.C. § 1129(a)(3).  On remand the bankruptcy court held that the plan was proposed in good faith, and the secured creditor again appealed to the district court who in turn vacated and remanded.  This led to the dismissal of the case by the bankruptcy court and the subsequent appeal to the Sixth Circuit.

 

The Sixth Circuit recognized that the "impairment" of the minor second class claims was impaired only in a technical sense, but noted "that this impairment seems contrived to create a class to vote in favor of the plan is immaterial" citing a Fifth Circuit opinion in In re Village at Camp Bowie, 710 F.3d 239, 245-46 (5th Cir. 2013). 

 

However, the Sixth Circuit also found the debtor's motives to be expressly relevant when analyzing a plan under the good faith standard of 11 U.S.C. § 1129(a)(3).

 

When analyzing the plan for good faith, the Sixth Circuit cited the bankruptcy court's findings that the debtor had net income of $71,400 per month "which renders dubious at best [its] assertion that it could not safely pay off the minor claims (total value: less than $2,400) up front rather than over 60 days." 

 

Considering also that the "impaired" claimants were also closely allied with the debtor increased the appearance that the "impairment" was contrived solely for the purpose of circumventing the purposes of 11 U.S.C. § 1129(a)(10).

 

Accordingly, the Sixth Circuit affirmed the district court's ruling, and held that the bankruptcy court clearly erred when it found that the debtor proposed its plan in good faith. 

 

Interestingly, although the Sixth Circuit agreed with the Fifth Circuit on the artificial impairment analysis, it parted ways with the Fifth Circuit on the good faith analysis.  The Camp Bowie opinion from the Fifth Circuit does not contain a significant good faith analysis of the plan at issue but rather only affirmed the bankruptcy court in the absence of clear error.

 

 

 

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 App Ct (2d DCA) Holds Foreclosure Not Barred by Lack of FCCPA "Notice of Assignment," Certifies Issue to Fla Sup Ct

The District Court of Appeal of Florida, Second District ("Second DCA"), recently held that a notice of assignment of a mortgage loan pursuant to the Florida Consumer Collection Practices Act ("FCCPA"), § 559.715, Florida Statutes, is not a condition precedent to filing a mortgage foreclosure action, but certified the question to the Florida Supreme Court for resolution as one of great public importance. 

 

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

 

Husband and wife borrowers obtained a mortgage loan in 2005, which was later transferred to a new holder via "blank endorsement," which under section 673.205(2) of Florida's Uniform Commercial Code means that the note becomes "payable to bearer and may be negotiated by transfer of possession alone until specially endorsed."

 

The borrowers defaulted in 2010 and the mortgagee sued to foreclose and for a money judgment in 2012.

 

In defense, the borrowers argued that the mortgagee had to provide notice that it had become the holder of the mortgage at least 30 days prior to filing suit pursuant to § 559.715, Florida Statutes, part of the FCCPA. The trial court rejected this argument and denied the borrowers' motion for involuntary dismissal.

 

The case went to trial and the judge entered final judgment of foreclosure in the mortgagee's favor. The borrowers appealed.

 

On appeal, the Second DCA began by analyzing the text of § 559.715, which the Court noted "does not prohibit the assignment, by a creditor, of the right to bill and collect a consumer debt," but instead requires that "the assignee must give the debtor written notice of such assignment as soon as practical" and "at least 30 days before any action to collect the debt."  The statute also provides that the "assignee is a real party in interest and may bring action to collect a debt that has been assigned to the assignee and is in default."

 

The Court explained that "[t]he legislature intended the statute to streamline the collection of consumer debts" in order to "reduce the number of lawsuits that collection agencies must pursue", and this "assignment and consolidation process allows a stranger to the initial financing transaction, typically a collection agency, to proceed more efficiently to obtain payment of delinquent obligations from a single debtor for the benefit of multiple creditors."

 

The Court went on to explain, however, that the statute does not "appl[y] neatly in the mortgage foreclosure context where, more often than not, a single note holder seeks to foreclose on a single mortgage and note upon the mortgagor's default. The assignee of the note is not a collection agent for others."

 

The parties' central dispute was "whether a foreclosure suit is an effort to collect a consumer debt" to which § 559.715 applies.

 

Noting that the federal cases cited by the parties offered no consistent guidance on the question presented, the Second DCA refused "to become ensnared unnecessarily in a briar patch" and concluded that "the trial court did not err."

 

The Court reasoned that § 559.75 "has no language making written notice of assignment a condition precedent to suit" and, because the legislature knew how to "condition the filing of a lawsuit on some prior occurrence", citing the examples of the presuit notice required in libel and slander actions, the presuit investigation and discovery process required before suing for medical malpractice, and arbitration as a condition precedent to suing in certain condominium disputes, the Court refused to "expand the statute to include language the Legislature did not enact."

 

The Court also reasoned that the use of "a" instead of "the" in the language of the statute when referring to the real party in interest meant that "the assignee is not the only real party in interest" and that "the assignor retains rights against the debtor."  The Court noted that, "[i]n such a situation, requiring written notice from the assignee makes perfect sense; notice alerts the debtor that multiple parties may seek to collect a delinquent debt."

 

The Second DCA rejected the borrowers' argument that they would be left with no remedy for failure to give the notice of assignment required by § 559.75 unless the notice is a condition precedent to a foreclosure action, explaining that "the prohibitions in section 559.72 [of the FCCPA] do not include the alleged failure to give notice."

 

In addition, while the FCCPA "prohibits egregious debt collection practices and provides legal remedies to protect consumers from harassing collection efforts", the borrowers failed to show "that the mere filing of a foreclosure suit, even one seeking money damages, implicates those concerns."  The Court also noted that, because the FCCPA contains, in addition to a private right of action, "a sweeping scheme of administrative enforcement," the Court concluded that "where administrative enforcement mechanisms exist, making section 559.715 a condition precedent is not necessary to the primary purpose of the FCCPA."

 

The Court stressed that the borrowers "ignore the fact that the lender could transfer the note without prior notice to them" under paragraph 20 of the mortgage and, thus, found that "[a]s a matter of contract, section 559.715 is inapplicable."

 

It also considered it "significant that the [borrowers] contractually agreed with their lender on the procedure by which they would receive notice of any default and the manner in which the lender could accelerate all payments due."  Because the borrowers were not arguing that they failed to receive the default notice or that the notice of default was deficient, the Court found that under paragraph 20 of the mortgage, the borrowers were "not entitled the notice they claim is due under section 559.715" and, moreover, "in the event of default, they agreed to a notice method independent of section 559.715."

 

Concluding that "failure to provide written notice under section 559.715 did not bar [a mortgagee's] foreclosure suit, nor did it create a condition precedent to the institution of the foreclosure suit" the Court affirmed the trial court's final judgment of foreclosure.

 

However, given the large number of foreclosure cases pending in Florida's courts "where defendants have raised section 559.715 as a bar to foreclosure," the Court certified the following question to the Florida Supreme Court as one of great public importance: "Is the provision of written notice of assignment under section 559.715 a condition precedent to the institution of a foreclosure lawsuit by the holder of the note?"

 

 

 

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: SD Fla Bankr Denies Mortgagee's Motion to Reopen Chapter 7 Case to Compel Surrender of Real Property

The U.S. Bankruptcy Court for the Southern District of Florida recently denied a mortgagee's motion to reopen a Chapter 7 case to compel the surrender of real property, citing a five-year delay in filing the motion.

 

In so ruling, the Court agreed with an earlier ruling from the U.S. Bankruptcy Court for the Middle District of Florida (In re Plummer, 513 B.R. 135 (Bankr. M.D. Fla. 2014)), distinguishing "surrender" from "foreclosure," and holding that a creditor cannot use the Bankruptcy Code to circumvent the obligations imposed by state law. 

 

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

 

The debtor filed a Chapter 7 case in October 2009 and stated an intent to surrender her real property on her schedules.  The debtor received her discharge in February 2010 and the case was closed in April 2010. 

 

Five years later, the mortgagee sought to reopen the bankruptcy case to compel the debtor to surrender the real property and preclude her from contesting a foreclosure action pending in state court.

 

The mortgagee argued that section 521(a)(2)(B) of the bankruptcy code, 11 U.S.C. § 521(a)(2)(B), requires a debtor to perform her intention with regard to property as specified in her schedules within 30 days after the date first set for the meeting of creditors. 

 

However, the bankruptcy court noted that the mortgagee delayed in asserting its rights for five years, and the doctrine of laches barred any argument that the mortgagee had to enforce the 30 day period.

 

The bankruptcy court further opined that "surrender" as that term is used in section 521(a)(2)(A) does not require the debtor to physically deliver the property to the creditor. 

 

Agreeing with an earlier opinion from a bankruptcy court in the Middle District of Florida (In re Plummer, 513 B.R. 135 (Bankr. M.D. Fla. 2014)), the judge distinguished "surrender" from "foreclosure" and held that a creditor cannot use section 521 to circumvent the obligations imposed by state law.  The court noted that both opinions however are at odds with other cases requiring a debtor who "surrenders" property to "refrain from taking any overt act that impedes a secured creditor's ability to foreclose its interest in the secured property."  See in re Metzler, 530 B.R. 894 (Bankr. M.D. Fla. 2015).

 

Ultimately, the court concluded that a borrower who indicates an intent to surrender will not necessarily receive a free pass in state court.  Specifically, the court noted that judicial estoppel could very well apply to bar a debtor from challenging the foreclosure in state court after the debtor surrendered the property in bankruptcy court.

 

 

 

 

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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