Saturday, August 27, 2022

FYI: Federal Court Holds a Constable Qualifies as a 'Debt Collector' Under FDCPA and a 'Creditor' Under Massachusetts Law

The U.S. District Court for the District of Massachusetts recently denied a motion to dismiss federal Fair Debt Collection Practices Act (FDCPA) and Mass. Gen. Law. Ch. 93 and 93A claims, holding that a constable qualifies as a "debt collector" under the Fair Debt Collection Practices Act and a "creditor" under Mass. Gen. Laws ch. 93.

 

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

 

The plaintiffs filed suit against several debt collectors -- and two constables -- alleging, amongst other things, violations of the FDCPA and Mass. Gen. Laws ch. 93 and 93A arising from an attempted debt collection.

 

Under Massachusetts law constables are either elected or appointed to serve a specific municipality. Within their designated area, they can serve process and even make arrests. Here, the constables filed a motion to dismiss the claims asserted against them.

 

One of the defendant debt collectors obtained a judgment in 2006 against one of the plaintiffs relating to a credit card debt. The judgment debtor plaintiff's son was a minor at the time and had no connection to the debt. Several years later, the debt buyer hired two of the other debt collectors to collect the judgment. These debt collectors subsequently hired the constables to seize vehicles belonging to the plaintiffs.

 

At approximately 3:30 a.m. on Sept. 22, 2020, the plaintiffs awoke to a truck in their driveway trying to tow the son's vehicle. The constables oversaw the seizure. The plaintiff son advised that he was the sole owner of the vehicle and presented registration demonstrating the same. The defendant constables claimed they had a right to seize the vehicle and drove off with it.

 

The next day the plaintiff son contacted the debt collectors, allegedly advising them that they had no right to take his vehicle. One of the debt collectors allegedly responded, "you are lying," "I deal with liars every day" and that the vehicle was in fact registered to the plaintiff father. The vehicle was in fact registered to the plaintiff son, not the plaintiff father, who leased a Honda Accord through Honda Financial.

 

Even after allegedly being advised they seized the wrong vehicle, the debt collectors allegedly said they would "settle" for $4,000 and refused to return the plaintiff son's vehicle for 16 days. When they finally returned the vehicle, they immediately seized the plaintiff father's leased Honda. The plaintiff father and Honda Financial repeatedly advised the defendants they could not legally seize the Honda as the plaintiff father did not own it and provided a copy of the lease. The defendants refused to return the plaintiff father's vehicle unless he paid thousands of dollars in storage fees.

 

The constables argued the plaintiffs' FDCPA claims should be dismissed because the constables are excluded from the definition of "debt collector," relying on Section 1692a(6)(D), which excludes "any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt." According to the constables, they fell under the "legal process" exclusion because, at all relevant times, they acted "in connection with the judicial enforcement of the debt as ordered by the [e]xecution granted to [the debt buyer] in 2006."

 

The Court held the exclusion did not apply because the complaint does not allege that the constables attempted to serve process to plaintiffs.

 

In addition, to the extent the complaint alleges the constables attempted to collect the 2006 judgment, the Court held this would disqualify them from the legal process server exclusion because "a person who goes beyond being merely a messenger in serving legal process and engages in prohibited abusive or harassing activities to force an individual to repay a debt is no longer exempt under the legal process server exception" because "he steps beyond the bounds of the official duties inherent in serving process and takes on a secondary role of 'debt collector.'" Andrews v. S. Coast Legal Servs., Inc., 582 F. Supp. 2d 82, 88 (D. Mass. 2008).

 

Concluding that the constables plausibly constitute "debt collectors," the Court next held that the complaint sufficiently pleaded violations of Sections 1692d and 1692e of the FDCPA. Section 1692d provides that a "debt collector may not engage in any conduct the natural consequences of which is to harass, oppress, or abuse any person in connection with the collection of a debt." 15 U.S.C. §. 1692d.

 

Despite allegedly being informed that the vehicle belonged to the plaintiff's son, defendant constables nevertheless insisted they were taking it. The defendant constables also allegedly advised one of the debt collectors to continue charging storage fees in connection with the illegal seizures of both vehicles. The Court held that such knowing misconduct plausibly qualifies as harassing, oppressing or abusive behavior under Section 1692d.

 

Section 1692e prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. §. 1692e. The Court held the defendants' threats to sell the plaintiff father's leased vehicle even after learning he did not own it to induce him to pay thousands of dollars of storage fees established a reasonable inference that the defendants were liable for violating Section 1692e. Similarly, the defendants' claim they had the right to seize the plaintiff son's vehicle even after being advised that he was the sole owner plausibly constituted a false, deceptive or misleading representation.

 

Regarding the plaintiffs' claims for violation of Mass. Gen Laws ch. 93 and 93A, the Court noted that the Attorney General's debt collection regulations defined a "creditor" as "any person and his or her agents, servants, employees, or attorneys engaged in collecting a debt owed or alleged to be owed to him or her by a debtor and shall also include a buyer of delinquent debt who hires a third party or an attorney to collect such debt[,]" but not "if his or her activities are solely for the purpose of serving legal process on another person in connection with the judicial enforcement of a debt." 940 C.M.R. § 7.03.

 

For the reasons already discussed, the Court held the defendants did not fall under the exception for "person[s]" whose "activities are solely for the purpose of serving legal process." Further, the Massachusetts definition of "creditor" also includes "agents" and "servants" of creditors, which encompasses the constables acting on behalf of the debt collectors.

 

Finally, the defendants argued that, even if they constitute "creditors" under the Attorney General's debt collection regulations, the plaintiffs' claim should be dismissed because the complaint failed to allege sufficient facts to suggest a violation of such regulations. The Court rejected their argument for virtually the same reasons it rejected their attempt to dismiss the plaintiffs' FDCPA claims, holding that the complaint adequately pleaded various violations of 940 C.M.R. § 7.07.

 

Accordingly, the Court denied the defendant constables' motion to dismiss.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th 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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Wednesday, August 24, 2022

FYI: 5th Cir Dismisses FDCPA Case On Standing Grounds in Class Cert Appeal

The U.S. Court of Appeals for the Fifth Circuit recently reversed the class certification order of a trial court, finding sua sponte that the plaintiff lacked standing to bring a claim against a debt collection law firm under the federal Fair Debt Collection Practices Act (FDCPA).

 

In so ruling, the Fifth Circuit held that the plaintiff failed to establish that the law firm's debt collection letter inflicted an injury with a "close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts." Without this showing, the Court held that the plaintiff could not establish the first element of standing: that she suffered a concrete harm.

 

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

 

The plaintiff received a debt collection letter from a law firm that specialized in collecting debt on behalf of the Texas state government. However, the limitations period for the debt mentioned in the letter had run. The plaintiff then filed a claim against the law firm under the FDCPA. The plaintiff also sought and obtained class certification. The law firm timely appealed the trial court's certification order.

 

Federal courts are courts of limited subject matter jurisdiction. A court's power to resolve disputes is limited to "Cases" and "Controversies," U.S. Const. art. III, § 2. A lawsuit is not a "Case[ ]" or "Controvers[y]" unless the plaintiff can prove that he has standing to bring suit. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992).

 

Standing requires the plaintiff to "show (i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief." TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2203 (2021),

 

This case involved the first element of standing: the requirement that the plaintiff show he has suffered a concrete injury-in-fact. A purported injury is not concrete for purposes of Article III unless it has a "╩╗close relationship' to a harm traditionally recognized as providing a basis for a lawsuit in American courts." Id., at 2200.

 

Even though the law firm failed to allege on appeal that the plaintiff did not suffer a concrete injury, the Fifth Circuit decided to analyze this question anyway because it noted that appellate courts have an obligation to assure themselves of jurisdiction — even in "limited" Rule 23(f) interlocutory appeals that typically embrace "only the issue of class certification." Bertulli v. Indep. Ass'n of Cont'l Pilots, 242 F.3d 290, 294 (5th Cir. 2001).

 

The plaintiff advanced five theories for the assertion that she suffered a concrete injury-in-fact. First, she claimed that the violation of her statutory rights under the FDCPA itself qualified as a concrete injury. However, the Fifth Circuit noted that TransUnion explicitly held that "Article III standing requires a concrete injury even in the context of a statutory violation." 141 S. Ct. at 2205 (quoting Spokeo, 578 U.S. at 341).

 

Second, the plaintiff maintained that the law firm's letter subjected her to a material risk of financial harm and that this exposure qualified as a concrete injury. Specifically, the plaintiff claimed that her receipt of the letter subjected her to a risk that she might accidentally pay her time-barred debts. But the Fifth Circuit determined that this theory too was foreclosed by TransUnion, which held that merely being subjected to a risk of future harm cannot support a suit for damages. 141 S. Ct. at 2210–11.

 

Third, the plaintiff argued that the confusion she experienced from the law firm's letter qualified as a concrete injury, which the Fifth Circuit analogized to the common law tort of fraudulent misrepresentation. Restatement (First) of Torts §§ 525, 549, 553 (Am. L. Inst. 1938). The Fifth Circuit again disagreed with the plaintiff because the nature of the harm recognized by fraudulent misrepresentation is a traditional, tangible harm: the "pecuniary loss" the plaintiff sustains. The Court reasoned that confusion can only be an intangible harm, so it is necessarily different "in kind" from the common-law analog of fraudulent misrepresentation. Gadelhak v. AT&T Services Inc., 950 F.3d 458, 462 (7th Cir. 2020).

 

Fourth, the plaintiff alleged the time she wasted by consulting with her lawyer after receiving the letter qualified as a concrete injury. Absent an allegation that the plaintiff paid her attorney anything for the consultation, the Fifth Circuit assumed that the purported injury was solely lost time. However, the plaintiff did not offer a common-law analog to the time-based injury she claimed to have suffered, so the Court held that she did not meet her "burden [to] demonstrate[e] that [she has] standing" based on that theory. TransUnion, 141 S. Ct. at 2207.

 

Lastly, the plaintiff claimed that her receipt of an unwanted letter caused her to suffer a concrete injury analogous to the tort of intrusion upon seclusion. Once again, the Fifth Circuit disagreed.

 

A person commits the tort of intrusion upon seclusion by "intentionally intrud[ing], physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns . . . if the intrusion would be highly offensive to a reasonable person." Restatement (Second) § 652B. One pattern of liability is for repeated, harassing communications. See id. cmt. d; Gadelhak, 950 F.3d at 462.

 

The Fifth Circuit recognized that harms analogous to this tort can qualify as concrete. See TransUnion, 141 S. Ct. at 2204 (citing Gadelhak, 950 F.3d at 462). However, the Court also concluded that Congress did not elevate the receipt of a single, unwanted message to the status of a legally cognizable injury in the FDCPA. Instead, its closest analog to an unwanted letter—unwanted telephone calls—must be made "repeatedly or continuously." 15 U.S.C. § 1692d(5).

 

Accordingly, the Fifth Circuit vacated the trial court's class certification order and remanded the case with instructions to dismiss for want of jurisdiction.

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th 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   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   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.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

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