A recent Eleventh Circuit decision responded to this question in the affirmative. In Reese v. Ellis, Painter, Ratterree & Adams LLP, 678 F.3d 1211 (11th Cir. 2012) the Reeses defaulted on a loan and mortgage. A law firm representing the lender sent the Reeses a letter and documents demanding payment of the debt and threatening to foreclose on the property if they did not pay it. The Reeses then filed a lawsuit against the law firm alleging that the communication violated the Federal Debt Collection Practices Act. The district court dismissed the complaint finding that the law firm was not a “debt collector” under the Fair Debt Collection Practices Act and that the letter and documents it sent were not covered by the FDCPA. The basis for the trial Court’s dismissal was, in part, based on the decision in Warren v. Countrywide Home Loans, 342 Fed. Appx. 458 (11th Cir. Ga. 2009) which held that the FDCPA, except for limited circumstances, does not apply to mortgage foreclosures and such collection activity does not constitute debt collection activities governed by the FDCPA. In holding that the FDCPA applied to the collection efforts of the lender’s law firm, the Court rejected defendant’s arguments that the purpose of the letter was to inform the Reeses that the lender intended to enforce its security deed. That argument, the Court observed, wrongly assumed that the letter could not have had a dual purpose – to give notice of foreclose and to demand payment on the note. The Court went on to state that the rule the law firm was asking the Court to adopt would exempt from the provisions of the FDCPA any communication that attempted to enforce a security interest regardless of whether it also attempted to collect the underlying debt. That rule, the Court said, would create a loophole in the FDCPA and the practical result of such a rule would be that the FDCPA would apply only to efforts to collect unsecured debts. Under such a rule, the court noted, a lender (or its law firm) could harass or mislead a debtor without violating the FDCPA as long as a debt was secured. That, the Court said: “can’t be right.” In summarizing its ruling on this point, the Court said: “A communication related to debt collection does not become unrelated to debt collection simply because it also relates to the enforcement of a security interest.”
The FDCPA, among other things, mandates that, as part of noticing a debt, a “debt collector” must send the consumer a written notice containing — along with other information – “the name of the creditor to whom the debt is owed.” In addition, the Act prohibits a “debt collector” from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” For purposes of the FDCPA, a false representation in connection with the collection of a debt is sufficient to violate the FDCPA facially, even where no misleading or deception is claimed. In Bourff v. Rubin Lublin, LLC., 674 F.3d 1238 (11th Cir. 2012), the plaintiff claimed that the creditor’s law firm violated the prohibition on false, deceptive, or misleading representations by falsely stating in its collection statutory notice that BAC was the creditor when it was really the assignee of the original creditor – America’s Wholesale Lender (AWL). The facts of the case are that when the debtor failed to make a payment on the loan causing a default, AWL assigned the loan and security agreement to BAC. The law firm hired by BAC sent the debtor a letter stating that it was notice pursuant to the FDCPA and that it was an attempt to collect a debt; the notice identified BAC as the creditor. In his suit, the debtor claimed that the notice violated the FDCPA because it falsely represented that the company, BAC, was the creditor on the loan. The district court concluded that the error was a harmless mistake and dismissed the Complaint. In reversing the trial court and vacating the order of dismissal, the Court found that the statement in the notice that BAC was the creditor was a false representation and that it was made by a debt collector under the FDCPA. The Court considered that the identity of the “creditor” in the statutory notices is “a serious matter.”
James and Shannon Humphrey filed bankruptcy on October 4, 2010 listing Bank of America as a creditor. After the bankruptcy was filed, Bank of America, illegally contacted the Humphreys on 38 separate occasions. Bank of America ignored protests from the Humphreys and their lawyer, telling them they didn’t care about the bankruptcy and that phone calls would continue until the Humphreys contacted the bankruptcy department so Bank of America could update its computer system. The Court only penalized Bank of America $10,000 plus attorney’s fees for these violations.
Portfolio Recovery, a debt collector, purchased $1.52 billion of bankruptcy debt in 2011 for 9 cents on the dollar. In the first quarter of 2012 alone, Portfolio Recovery reported earnings of $79,994,000 in fees collecting on bankruptcy debt. In 2011, Capital One had to refund $2.35 million for illegally collecting on 15,500 claims already discharged in bankruptcy. Capital One received $3.55 billion in bailout money from the federal government in 2008. EMC Mortgage — a company purchased by JP Morgan Chase from Bear Stearns — has illegally billed debtors in bankruptcy so often that bankruptcy judges have assessed punitive damages against it in four different court cases. Gagliardi v. EMC Mortgage, 290 B.R. 808 (Bankr.D.Colo. 2003); Curtis v. EMC Mortgage, 322 B.R. 470 (Bankr.D.Mass.2005); Castro v. EMC Mortgage, 08-01135 (Bankr.D.N.C. 2008); Harlan v. EMC Mortgage, 402 B.R. 703 (Bankr.W.D.Va.2009). JP Morgan Chase obtained a bailout of $25 billion. Despite reliance on the public dole to cure their own financial problems, banks have become more voracious in collecting consumer debt.
Excerpted from article written by Richard Gaudreau of the Huffington Post.
A Property Owners Association (Alaqua) retained a law firm to recover delinquent homeowner association maintenance assessments from plaintiff. The law firm mailed to plaintiff a letter demanding payment of the assessments, interest, and other charges. The debt remained unpaid so the law firm sued the plaintiff Acosta on behalf of Alaqua in Florida state court to foreclose a lien on Acosta’s property or recover a money judgment (the “State Action”). Alaqua later replaced the first law firm with James A. Gustino and his law firm to litigate the State Action.
While the State Action was pending against him, Acosta filed suit in federal court alleging that Alaqua, the first law firm and Gustino, violated, among other state and federal statutes, the Fair Debt Collection Practices Act in attempting to collect the assessments. The defendants filed a motion to dismiss the amended complaint. In the alternative, the motion asked the court to stay the action pursuant to the Colorado River abstention doctrine pending the outcome of the State Action.
The district court granted the motion insofar as it sought dismissal pursuant to the Colorado River doctrine and dismissed the case without prejudice. Acosta appealed and the Court of Appeals framed the issue as having to decide whether the federal and state proceedings were parallel for purposes of the Colorado River abstention doctrine. The court concluded they were not parallel and reversed the trial court’s dismissal, without prejudice.
The Court first emphasized the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them. It stated that “The doctrine of abstention . . . is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it.” Furthermore, the Court stated, that the threshold requirement for application of the Colorado River doctrine is that the federal and state cases be sufficiently parallel. In other words, whether the cases “involve substantially the same parties and substantially the same issues.” And, if the federal and state proceedings are not parallel, then, the Court opined, that the Colorado River doctrine should not apply.
On appeal, plaintiff, Acosta, argued that the district court erred by applying the Colorado River doctrine because the State Action and his federal suit were not parallel because, the two actions involve different parties because the federal action is against Alaqua’s attorneys, not Alaqua. He also maintained that the two cases presented different legal issues.
The Court of Appeals stated that the district court’s decision depended on its conclusion that if the State Action were decided against Acosta, he would have no viable claims in federal court. However, the appellate Court observed that the key to the federal case is not only whether the debt was enforceable but also whether the defendants’ conduct when collecting that debt complied with the Fair Debt Collection Practices Act. This, according to the reviewing panel, raises some doubt about whether resolution of the State Action would decide the FDCPA issues along with the other federal claims that were brought. Based on its analysis, the Court of Appeals reversed the trial court’s order dismissing the complaint, without prejudice.
Acosta v. Gustino, 2012 U.S. App. LEXIS 11339 (11th Cir. Fla. June 6, 2012)
Plaintiff incurred a debt on a Target National Bank credit card which transferred plaintiff’s debt to Defendant for collection. Plaintiff filed a lawsuit alleging violations of the FDCPA for conduct in collecting this debt. Approximately 6 months after filing the FDCPA lawsuit, plaintiff filed for bankruptcy using different counsel. Plaintiff failed to list FDCPA suit as an asset in his bankruptcy Schedule B or otherwise indicate to the court or the trustee that such lawsuit existed. In the State of Financial Affairs, the form requested plaintiff to List all suits, etc. to which the debtor is or was a party within one year immediately preceding the filing of the bankruptcy case. Plaintiff checked “None.” Additionally, plaintiff did not list defendant as either a secured or unsecured creditor, but did list Target National Bank as a creditor with an unknown credit card claim. Defendant filed its motion for summary judgment on the grounds, among others, that judicial estoppel bars plaintiff from proceeding on his FDCPA.
The U.S. District Court judge granted the defendant’s motion for summary judgment on the grounds of judicial estoppels finding that the plaintiff’s actions were a deliberate attempt to deceive the bankruptcy court and manipulate the judicial system to gain an unfair advantage over his creditors, including defendant, which is exactly what judicial estoppel is designed to prevent.
Plaintiff paid a bail bondsman a premium for a bond to bail her son out of jail. At the time she obtained the bond, she signed papers which had the legal effect of holding her responsible for the full amount of the bond, $3,500, if her son failed to appear. Plaintiff’s son failed to appear for his arraignment and he bond was revoked. Thereafter, the Court executed a judgment against plaintiff’s son as principal and National Casualty Corporation as surety for $3,500. However, plaintiff’s son eventually appeared in court and the bond forfeiture judgment was set aside.
A law firm and two collection agencies sent correspondence and made telephone calls to the plaintiff claiming that she owed National Casualty Corp. $3,500.00. The law firm later sued the plaintiff on this alleged debt.
Plaintiff filed suit against National Casualty, the law firm and the debt collectors for violations of the Fair Debt Collection Practices Act principally because they were trying to collect a debt that, as she alleged, did not exist. The Defendants moved to dismiss on various grounds.
The Court, in denying the motions to dismiss the FDCPA claims stated that it was bound to accept as true all of the allegations in the plaintiff’s complaint and that if true, would constitute violations of the FDCPA. In its ruling, the Court stated:
“An amount misstated by the debt collector need not be deliberate, reckless, or even negligent to trigger liability – it need only be false. Id. In other words, the FDCPA recognizes a strict liability approach.”
Barlow v. Safety Nat’l Cas. Corp., 2012 U.S. Dist. LEXIS 75585 (decided May 30, 2012)