FYI: 5th Cir Holds Call That Did Not Mention Debt Not FDCPA "Communication"

The U.S. Court of Appeals for the Fifth Circuit recently affirmed the dismissal of a debtor's claims against a debt collector alleging that a telephone call placed to his sister constituted an improper third-party communication in connection with the collection of a debt, in violation of the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA").  

 

In so ruling, the Fifth Circuit concluded that the conversation between the debtor's sister and the debt collector representative was not a "communication" subject to the FDCPA, because the representative's mere identification of the debt collector's name and mentioning of "an important personal business matter" did not convey any information regarding a debt or suggest its existence.

 

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

 

After failing to reach a debtor ("Debtor") to discuss a consumer debt allegedly owed, a telephone representative of a debt collection agency ("Debt Collector") dialed a phone number owned by the Debtor's sister, who answered. 

 

The representative asked if she was speaking to the Debtor, and was informed that the dialed phone number belonged to the Debtor's sister.  The representative then identified herself as calling on behalf of the Debt Collector, without conveying any information regarding the debt at issue, and requested that the Debtor call the Debt Collector back at the number that appeared on the sister's caller ID. 

 

When the Debtor called back, the Debt Collector attempted to collect the Debtor's medical debt at issue.

 

Feeling "concerned and harassed" by the Debt Collector's call to his sister, the Debtor filed suit in federal court alleging that the Debt Collector violated subsection 1692c(b), which prohibits debt collectors from "communicat[ing], in connection with the collection of any debt, with any person other than the consumer" or certain other prescribed parties to the debt "without the prior consent of the consumer." 15 U.S.C. § 1692c(b).

 

The Debt Collector's moved to dismiss the complaint for failure to state a claim, and the motion was granted with prejudice.  The instant appeal followed.

 

On appeal, the Debtor argued that the Debt Collector violated § 1692c(b) when it left a message with his sister asking her to have him return the collector's call.  The Debtor further contended that the Debt Collector called his sister intending to contact him, not merely to confirm his phone number, because the representative asked to speak with him and requested that the Debtor return its call, rather than merely seek to update the Debtor's contact information.

 

Accordingly, the Debtor argued that the exception under section 1692b that permits debt collectors to communicate with third parties "for the purpose of acquiring location information about the consumer" — his "place of abode… telephone number… or [] place of employment" — did not apply.  § 1692b; § 1692a(7).

 

Before addressing whether the alleged conversation was a permissible attempt to obtain the Debtor's location information, the Fifth Circuit analyzed whether the call even constituted a "communication" subject to the purview of the FDCPA. 

 

Reviewing the transcript of the call at issue, the Court noted that the Debt Collector representative did not mention the debt or provide any information about it, instead merely mentioning that she was calling for "an important personal business matter" and providing the Debt Collector's name.  Although the Debt Collector's name includes the word "Credit," other courts have held that knowing the name of a debt collector does not imply the existence of a debt.  Brown v. Van Ru Credit Corp., 804 F.3d 740, 742 (6th Cir. 2015) ("the word 'credit' refers to a category of financial activities far broader than debt collection"). 

 

The Fifth Circuit further noted that the limited information provided by the Debt Collector's representative during the call did not indirectly convey any information that a debt existed or imply that the call was in connection with the debt, and was thus distinguishable from the Eleventh Circuit's ruling in Hart v. Credit Control, LLC, wherein a message stating, "This call is from a debt collector" qualified as a "communication" because it "indicated that a debt collector was seeking to speak with [the person] as a part of its efforts to collect a debt."  Hart v. Credit Control, LLC, 871 F.3d 1255, 1256, 1258 (11th Cir. 2017); see also, Lavallee v. Med-1 Sols., LLC, 932 F.3d 1049, 1055 (7th Cir. 2019) (holding that a message that contained only the name of the debt collector was not a "communication" under the Act); accord Marx v. Gen. Revenue Corp., 668 F.3d 1174, 1177 (10th Cir. 2011) (holding that a fax that contained the name of the debt collector and the debtor's account number was not a "communication" because it could not "reasonably be construed to imply a debt").

 

Because the Debt Collector's call did not convey "information regarding a debt," nor even imply the existence of a debt to constitute a "communication" under the FDCPA, the Fifth Circuit held that the Debtor failed to plead sufficient facts to establish an FDCPA violation, and affirmed the trial court's dismissal.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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: 8th Cir Confirms Court Costs and Attorney's Fees Not Sufficient for Actual Damages Under RESPA or MOSLA

The U.S. Eighth Circuit Court of Appeals recently upheld a trial court's summary judgment ruling against a borrower on a claim alleging a violation of the Minnesota Mortgage Originator and Servicer Licensing Act ("MOSLA") due to his failure to prevail on his claims asserted under the federal Real Estate Settlement Procedures Act ("RESPA") upon which the borrower's MOSLA claims were predicated.

 

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

 

This matter arose from the borrower's qualified written requests ("QWR") submitted pursuant to RESPA to his loan servicer following the borrower's receipt of a notice of default.  The borrower requested information concerning the servicer's default claim and requested a complete copy of the transaction history for the loan including the history prior to the transfer to the current servicer. 

 

As noted by the Eighth Circuit, the servicer failed to provide all the requested information in response to the borrower's QWR, and in particular, the servicer failed to provide the requested transaction history prior to the service transfer. 

 

This is the second appeal to be considered by the Court in this matter.  Previously, the matter was before the Court following the trial court's grant of summary judgment in favor of the borrower on both claims under RESPA and MOSLA.  In its prior ruling, the Eighth Circuit determined that although the servicer violated RESPA, summary judgment in favor of the borrower was inappropriate because the borrower failed to present evidence of actual damages. 

 

As to damages, the borrower alleged and presented evidence that he had expended $80 to obtain copies of bank records which he supplied to the servicer as part of his multiple QWRs.  However, the funds expended by the borrower only concerned records which related to loan transactions after the servicer transfer to the current servicer.  And, as noted by the Court, the servicer actually responded and provided that information in its responses, and therefore, the Court determined that the borrower failed to prove damages arising directly from the RESPA violation.

 

However, the matter was remanded to the trial court for further proceedings as to whether or not the borrower could maintain a claim under MOSLA despite the failure of his RESPA claim.

 

As you may recall, MOSLA provides that no residential mortgage servicer shall "violate any provision of any ... federal law regulating residential mortgage loans." Minn. Stat. s. 58.13, sub. 1(a)(8).  "A borrower injured by a violation of" any federal law regulating mortgage loans "shall have a private right of action" and can recover (1) actual, incidental and consequential damages, (2) statutory damages, (3) punitive damages, if appropriate, and (4) court costs and reasonable attorney's fees. Minn. Stat. s. 58.18, sub. 1. 

 

In the case at hand, the borrower's claim under MOSLA was premised entirely upon the alleged violation of RESPA.  And on remand, the trial court granted summary judgment in favor of the servicer determining that because the MOSLA claim is "predicated solely on the RESPA violation" and if there "were no actual damages under RESPA, then there are no actual damages under MOSLA."

 

The borrower appealed this decision, and argued that he was entitled to statutory remedies under MOSLA simply because the servicer violated RESPA and regardless as to whether or not he was damaged, and that the borrower may sustain an injury as a result of the violation even if he did not sustain any actual damages.

 

The Eighth Circuit rejected the borrower's arguments. 

 

The Court determined that the more reasonably interpretation of the term "injured by" used in the MOSLA was as an "umbrella term that encompasses several types of damages" and it was not proper to read the statute, as argued by borrower, to mean that "injured by" and damages were two separate terms with "injured by" not requiring any actual injury.  

 

In short, the Eighth Circuit opined that MOSLA required that the borrower's "injury must be something more than court costs and reasonable attorney's fees that are generated in litigation under MOSLA. Otherwise, the statute would permit a borrower to create an injury by filing a lawsuit based on a violation that caused no injury." 

 

The borrower also argued that the $80 cost for the bank records could constitute actual damages.  The Court rejected this argument as well because it had already decided this decision in its prior determination that these funds did not pertain to the actual violation of RESPA by the servicer.

 

Finally, the Eighth Circuit determined that the borrower had waived his claims and arguments that he had been damaged by the servicer's charges to his account for late fees and corporate advances.  As noted by the Court, the borrower had conceded that the servicer had credited back these fees in his summary judgment briefing, and thus, the borrower could not attempt to argue otherwise on appeal. 

 

Accordingly, the Eighth Circuit determined that the borrower failed to establish that any question of material fact existed as to whether he was "injured by" the servicer's violation of RESPA, and affirmed the trial court's entry of summary judgment in favor of the servicer on the borrower's claim under MOSLA.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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: 9th Cir Holds Anti-Joinder and Class Action Waiver Provisions Did Not Violate CA Law

The U.S. Court of Appeals for the Ninth Circuit recently affirmed an order compelling arbitration even though the arbitration clause contained a class action waiver and an anti-joinder provision.

 

In so ruling, the Ninth Circuit held that:

 

(1) The arbitration agreement allowed injunctive relief under California law, and that

(2) Public injunctive relief under the various California consumer protection statutes at issue is available in an individual lawsuit without a plaintiff acting as a private attorney general.

 

This meant that the arbitration clause did not violate the California Supreme Court's ruling in McGill v. Citibank, N.A., 393 P.3d 85 (Cal. 2017), which held that no one can contractually waive all rights to seek public injunctive relief, and therefore that any contract that bars public injunctive relief in both court and arbitration is invalid.

 

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

 

The defendant financial technology company operates a smartphone app that offers various financial services to its customers.

 

The plaintiff enrolled in defendant's Plus program, which offers a $500 credit-builder loan. Plaintiff signed a Membership Agreement ("Agreement") that explained that Plus members owe monthly fees, monthly investment deposits and, if applicable, monthly loan payments.

 

The Agreement also had a provision that gave each party the right to demand arbitration if a dispute arose, and authorized the arbitrator to award all injunctive remedies available in an individual lawsuit under California law. 

 

In addition, the Agreement prohibited class actions as well as claim joinder, under which the plaintiff could not "join or consolidate claim(s) involving you with claims involving any other person."  In other words, each plaintiff would have to arbitrate separately.

 

Plaintiff fell behind on her fees, deposits, and loan payments and tried to cancel her the Agreement, but defendant refused. In order to cancel, defendant required that plaintiff first pay off her membership fees followed by paying her loan in full. Plaintiff allegedly could not afford to pay her accumulated fees and loan.

 

Plaintiff filed a putative class action alleging that defendant violated California's Unfair Competition Law ("UCL"), False Advertising Law ("FAL"), and Consumers Legal Remedies Act ("CLRA") for, among other things, "[f]alsely advertising to the general public within the State of California that the [credit-builder] Loans contain 'no hidden fees.'"

 

The trial court granted defendant's motion to compel arbitration and dismissed plaintiff's complaint.  This appeal followed.

 

Plaintiff asserted that the arbitration provision was invalid because it violated California law requiring contracts to allow public injunctive relief.  Specifically, plaintiff argued she could secure public injunctive relief only by acting as a private attorney general, which the arbitration agreement supposedly prohibited.

 

Thus, one of the questions to be answered on appeal was whether or not public injunctive relief under the relevant statutes was available in an "individual lawsuit" without plaintiff "act[ing] as a private attorney general." To answer that question, the Court noted that it had to determine (A) the scope of an individual lawsuit, and (B) when someone acts as a private attorney general.

 

California's legal requirement that contracts allow public injunctive relief is known as the McGill rule. See, McGill v. Citibank, N.A., 393 P.3d 85 (Cal.  2017).  Public injunctive relief is "relief that by and large benefits the general public…and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public." Id. at 89.

 

In McGill, the California Supreme Court held that no one can contractually waive all rights to seek public injunctive relief. Id. at 94. Thus, any contract that bars public injunctive relief in both court and arbitration is invalid. Id. at 94.

 

Plaintiff argued that the joinder clause contained in the Agreement, prohibiting her from "join[ing] or consolidat[ing] claims involving you with claims involving any other person[,]" restricted an individual lawsuit to one that has no substantial impact on others.

 

According to plaintiff, this would mean that a claim for public injunctive relief, which impacts others, would violate the joinder clause and therefore fall outside an individual lawsuit.  This, the plaintiff argued, caused the arbitration provision to fail under McGill.

 

The Ninth Circuit disagreed, holding the arbitration and anti-joinder clause did not prohibit all claims that impact other people. Instead, the Court explained, it draws a line between two distinct types of claims – those "involving you" and those "involving any other person" – and prohibits bringing one of each type in the same proceeding.

 

To demonstrate, the Court used an example of an individual named John who received a large number of automated telephone calls. He sues the company responsible for making his contact information public – a claim that "involves him."

 

His neighbor, who has also received constant calls, hears about the lawsuit and wants to get involved. If John brings a second claim in his lawsuit that relies on robocalls to his neighbor, that claim would "involve any other person" (his neighbor) and would not be his own claim.

 

The joinder clause provides that John and his neighbor may each bring claims against the company, but must do so individually. John's victory could theoretically result in an injunction that broadly affects others, which would have an impact on others, including his neighbor, but it is still John's claim.

 

The Court noted that California has identified two distinct concepts of a "private attorney general": the standing-to-sue private attorney general, and the fee-shifting private attorney general.

 

The standing-to-sue private attorney general did not need to suffer even a factual injury in order to bring a lawsuit under certain statutes. See, Californians for Disability Rts. v. Mervyn's, LLC, 138 P.3d 207, 209 (Cal. 2006).

 

The "fee-shifting" private attorney general is an equitable practice created by statute to incentivize private enforcement of civil-rights legislation, making attorney fees available to the prevailing plaintiff. The fee-shifting provisions act as "a tool that ensures the vindication of important rights, even when large sums of money are not at stake, by making attorney's fees available under a private attorney general theory." Farrar v. Hobby, 506 U.S. 103, 122 (1992).

 

However, when California passed Proposition 64, it decided "that only the California Attorney General and local public officials [should] prosecute actions on behalf of the general public." Prop. 64, § 1(f). After Proposition 64, individuals must suffer their own injuries to sue. Moreover, they can no longer bring a UCL or FAL claim "for the interest of…the general public" without being a victim of the conduct at issue.  Prop. 64, §§ 3, 5. Thus, Proposition 64 effectively limited standing-to-sue private attorneys general. 

 

This led to a question for the California Supreme Court in McGill – without the ability to act for the interest of the general public, can individual UCL and FAL litigants still seek public injunctive relief in individual lawsuits? McGill, 393 P.3d at 92. The McGill court held that, because individuals seeking public injunctive relief under the UCL and FAL do so "on [their] own behalf" and not "on behalf of the general public," the relief remains available.

 

Although McGill did not discuss the CLRA, the Ninth Circuit believed there is no apparent reason why suit under the CLRA for the same relief could not just as plausibly be brought "on [the plaintiff's] own behalf."

 

The Court noted that plaintiff's argument that public injunctive relief was categorically unavailable could not be squared away with the clear text of the all-remedies clause providing that "[t]he arbitrator…shall be authorized to award all remedies available in an individual lawsuit…, including, without limitation, …injunctive…relief."

 

Accordingly, the Ninth Circuit held that, under the Agreement at issue, litigants proceeding in individual lawsuits could request public injunctive relief in arbitration with defendant. Therefore, the Agreement did not violate the McGill rule and was valid and enforceable.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6^th 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

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   Texas   |   Washington, DC

 

 

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