PETER J. MESSITTE, District Judge.
Farid M. Sayyed (Sayyed) has sued the law firm of Wolpoff and Abramson LLP (W & A), alleging multiple violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et. seq. (2000). The suit proceeds in five Counts:
Count I—Failure to state in interrogatories that they were a communication from a debt collector, in violation of 15 U.S.C. § 1692e(11).
Count II—Making false statements in interrogatories (a) with respect to the date of trial; (b) by stating that objections to the interrogatories must be under oath; and (c) by stating that responses were due in 30 days, in violation of 15 U.S.C. § 1692e(10).
Count III—Violation of the Maryland Rules of Professional Conduct by making false statements which constitute an unfair or unconscionable means to collect a debt, in violation of 15 U.S.C. § 1692f.
Count IV—Making a false statement as to the amount of debt owed, in violation of 15 U.S.C. § 1692e(2)(A).
Count V—Making a false representation as to the amount of attorneys fees owed, in violation of 15 U.S.C. § 1692e(2)(B) and 1692f(1).
Sayyed asks for actual damages, statutory damages, prejudgment interest, and attorneys fees and costs.
The Court initially granted W & A's Motion to Dismiss on the grounds that, as a law firm, W & A enjoyed full immunity with respect to statements made in in-court pleadings. On appeal, the Fourth Circuit reversed and remanded.
The matter is now before the Court on W & A's Motion for Summary Judgment and Sayyed's Cross-Motion for Partial
The Court relates the facts of the case as found by the Fourth Circuit on appeal, supplemented by its own findings:
W & A is a law firm regularly practicing in the field of consumer debt collection. Discover Bank, the issuer of the Discover Credit Card, retained W & A to pursue an action against Sayyed for defaulted credit card debt. On March 16, 2004, on behalf of Discover Bank, W & A sued Sayyed in the District Court for Prince George's County, Maryland to collect the balance due.
Through counsel (the same counsel who now represents him in this proceeding),
On April 22, 2004, with the case now in the Circuit Court, W & A served interrogatories on Sayyed's counsel. The interrogatories stated in the caption: "TRIAL DATE 06/11/04." Further, a preliminary instruction to the interrogatories stated, inter alia, that "(e)ach of the following interrogatories shall be answered separately and FULLY IN WRITING and UNDER OATH or the grounds of refusal to answer shall be fully stated under oath." Finally, the instructions to the interrogatories stated that "[i]f the answer to these Interrogatories is not mailed to counsel for Plaintiff [W & A] within thirty (30) days after the date on which they have been served upon you," the court might make appropriate orders, including rendering a default judgment in favor of Discover Bank.
On July 9, 2004, W & A filed a motion for summary judgment against Sayyed. In it W & A alleged there was no genuine issue of fact that Sayyed owed Discover Bank "the sum of $13,983.50, plus court costs, plus 15% attorneys' fees."
On or about July 28, 2004, in the Prince George's County Circuit Court suit, Sayyed filed a counter-claim against Discover Bank, alleging usury, defamation, and violation of the Truth-in-Lending Law. With the filing of the counter-claim, W & A withdrew its appearance as counsel for Discover Bank and substitute counsel entered their appearance.
By Agreement dated December 31, 2004, Sayyed settled his case with Discover Bank, agreeing to pay $7,000, and releasing
On April 22, 2005, Sayyed initiated his claim against W & A in this Court.
These further allegations are also relevant:
As to Count II, Sayyed says that in its interrogatories W & A misrepresented (1) that the trial date of his case in the Prince George's County Circuit Court was June 11, 2004, when, in fact, following removal of the case to that court, no trial date had been set; (2) that any refusal on Sayyed's part to answer interrogatories had to be under oath when, in fact, only answers— not the refusals to answer—have to be under oath; and (3) that there were only thirty days after the interrogatories were mailed to the party answering before a court might enter orders against the party when, in fact, the Maryland Rules of Procedure give respondents thirty three to respond.
As to Count IV, Sayyed submits that he did not owe $13,983.50, because that amount included interest on amounts as to which Discover Bank had promised that the interest rate would be zero percent.
As to Count V, Sayyed denies that he entered into an agreement to pay attorneys fees to Discover Bank in any amount.
W & A raises several defenses.
As to Counts I and II, pertaining to the interrogatories, W & A contends that they were "a formal pleading made in connection with a legal action and as such exempt by reason of § 1692e(11).
As to all counts, W & A argues that, in a case such as this—where Sayyed was represented by counsel and where Sayyed himself cannot even say that he personally saw either the interrogatories or motion for summary judgment during the state court proceedings
Also as to all counts, W & A pleads the bona fide error defense, to the effect that any FDCPA violations were not intentional and occurred despite the law firm's procedures reasonably adapted to avoid error. Among other things, this defense, says W & A, extends to bona fide errors of law.
As to Count III, the cause of action based on the Maryland Rules of Professional Conduct, W & A submits that the Rules expressly "are not designed to be a basis for civil liability."
As to Count IV, W & A pleads good faith reliance on information furnished by its client, Discover Bank.
As to Count V, W & A says that merely praying for an award of 15% attorney's fee does not violate the FDCPA.
The Court considers W & A's Motion for Summary Judgment and Sayyed's Cross-Motion for Partial Summary Judgment as to Liability.
A further review of the procedural history of the case will sharpen the issues currently before the Court for decision.
The Court initially granted W & A's Motion to Dismiss on the grounds that W & A enjoyed absolute immunity from FDCPA for its interrogatories and summary judgment motion. The Fourth Circuit reversed, holding that the Act applies to the litigating activities of lawyers who qualify as debt collectors, including their in-court pleadings. One of the arguments that the Fourth Circuit felt "fortified" its conclusion was the existence of the "bona fide error defense" provision of the Act, Section 1692k(c), to this effect:
Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 231-32 (4th Cir.2007).
The Fourth Circuit also rejected W & A's argument that there can be no FDCPA liability where communications are sent to counsel representing a debtor rather than to the debtor directly, id. at 228-29. It also held that, while an attorney's reliance on the affidavit of his client may be a defense against legally cognizable claims under the FDCPA, that is not a reason to grant a motion to dismiss for failure to state a claim, id. at 235. The Fourth Circuit expressed no opinion as to whether interrogatories fall into § 1692e(11)'s exemption for a "formal pleading made in a legal action," id. at 235, n. 2, or whether attorneys fees for collection that are set forth as a percentage of the principal debt (in this case 15%) may be deemed per se "reasonable" under a contractual provision allowing for recovery of "reasonable" attorneys fees. Id.
A motion for summary judgment will be granted where there are no genuine issues of fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party bears the burden of showing the absence of any material facts for trial. Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987).
When ruling on a motion for summary judgment, the court must draw all reasonable inferences in favor of and construe the facts in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see also E.E.O.C. v. Navy Federal Credit Union, 424 F.3d 397, 405 (4th Cir. 2005). However, "a complete failure of proof concerning an essential element . . . necessarily renders all other facts immaterial." Christian v. Minnesota Mining and Manufacturing Co., 126 F.Supp.2d 951, 956 (D.Md.2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Thus, on the issues which the nonmoving party has the burden of proof, "it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence." Id., (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).
When both parties file motions for summary judgment, as here, the court applies the same standards of review. Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir.1991); ITCO Corp. v. Michelin Tire Corp., 722 F.2d 42, 45 n. 3 (4th Cir.1983) ("The court is not permitted to resolve genuine issues of material fact on a
Count I of the Complaint pertains to W & A's alleged failure in the interrogatories sent to Sayyed's attorney to state that the interrogatories were a communication from a "debt collector," as defined by 15 U.S.C. § 1692a(6). It is undisputed that W & A was and is a "debt collector" within the meaning of the Act.
Although W & A argues that the interrogatories are "formal pleadings" which are expressly exempt from the Act pursuant to 15 U.S.C. § 1692e(11), the Court need not address the question at this time.
Summary Judgment is granted in favor of W & A and against Sayyed as to Count I of the Complaint.
Count II of the Complaint alleges that W & A violated 15 U.S.C. § 1692e(10)
Section 1692e(10) of the FDCPA prohibits "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer."
The Seventh Circuit's decision in Evory, et al. v. RJM Acquisitions Funding L.L.C., et al., 505 F.3d 769, 774 (7th Cir. 2007), is highly significant in this regard. In a unanimous decision authored by Judge Posner, the court agreed with the Fourth Circuit that the FDCPA extends to represented consumers, particularly with respect to required notices or false claims that might be as difficult for an attorney to discern as a consumer. Id. at 775. But, said the court, "a representation by a debt collector that would be unlikely to deceive a competent lawyer, even if he is not a specialist in consumer debt law, should not be actionable." Id. Even the non-expert should be able to consult law and compare the requirements of the law with the contents of the communication he has received on his client's behalf. Id. at 774. In other words, at least as to certain communications, the standard of review differs if the representations at issue are made to a consumer's attorney, as opposed to the consumer. Accord Dikeman v. Nat. Educators, Inc., 81 F.3d 949 (10th Cir.1996); Davis v. R & R Professional Recovery, Inc., No. 07-2772, 2009 WL 400627 at *4, n. 4 (D.Md. Feb. 17, 2009).
Sayyed submits that application of the reasonably competent attorney standard is foreclosed in this Circuit by reason of United States v. Nat. Fin. Servs. Inc., 98 F.3d 131 (4th Cir.1996). That was a suit for civil penalties brought by the federal government against a debt collection firm and two individual debt collectors for sending out computer-generated dunning letters en masse, threatening legal action that was not intended to be taken, in violation of § 1692e(5). As far as can be discerned, all such mailings went to a large number of unrepresented individuals; none were sent to lawyers representing the individuals. In that context, the Fourth Circuit, not unreasonably, embraced "the least sophisticated consumer standard . . . to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd." Nat. Fin. Servs. Inc., 98 F.3d at 136 (citing Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir.1993)).
The Court finds such an extension unwarranted. In the earlier phase of the present case, eleven years after it decision in the National Financial Services case, the Fourth Circuit did not address the applicability vel non of the competent attorney standard. The Court understands the Fourth Circuit, citing Heintz v. Jenkins, 514 U.S. 291, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995), to have held that communications sent to debtors' attorneys in the course of litigation are not ipso facto outside the scope of the FDCPA. Although Heintz found potential liability with respect to a letter sent to debtor's counsel outside of court proceedings in an effort to settle the suit, the Fourth Circuit in this case extended that general principle to include communications to a debtor's attorney contained in pleadings filed in court. That is, communications made to debtor's attorneys contained within court pleadings (as opposed to those merely made "in the course of litigation," Heintz's words) are not ipso facto be immunized. But that is not to say that every communication to a debtor's attorney is actionable, a distinction the Evory court was careful to make. This Court finds the Seventh Circuit's refinement of the Fourth Circuit's holding in Sayyed appropriate and adopts it here.
The problem with Sayyed's suggestion that the least sophisticated consumer standard applies, notwithstanding the fact that he was represented by counsel, is well-illustrated by his challenges to W & A's alleged transgressions in the present case.
Start with the allegedly "false" trial date of June 11, 2004. When the case against Sayyed was pending in the District Court for Prince George's County, that was indeed the correct trial date. It was Sayyed's own attorney (the same attorney who represents him in the present case) who removed the case from the District Court to the Circuit Court by praying a jury trial. Jury trials are not within the jurisdiction of district courts in Maryland and can only be held in the Circuit Courts. See Md. Code. Ann., Courts and Judicial Proceedings, §§ 1-502, 4-201. Not only would any reasonably competent member of the Maryland bar know that to be the case; it is quite likely that Sayyed's attorney prayed for a jury trial, hence for removal of the case to the Circuit Court, precisely in order to postpone the imminent June 11 trial date, a ploy that this member of the federal bench judicially notices as having been a common tactic during his days as a Maryland practitioner and Circuit Court Judge. To allow Sayyed—who apparently never saw the interrogatories until the present suit came about—to argue that he, as a least sophisticated consumer, might have been deceived or misled by the trial date misstatement when his own lawyer engineered the change of the trial date would be a true perversion of everything the FDCPA stands for.
W & A's other alleged missteps in the interrogatories, even if technically erroneous—although the Court finds in fact that they were not—would also have been immediately apparent to even the least competent member of the Maryland bar. Sayyed complains that the interrogatories "falsely state that the grounds of refusal to answer the interrogatories must be stated under oath; [whereas] in fact objections do not need to be stated under oath." It is true that W & A's instructions to the interrogatories indicated that "[e]ach of the following Interrogatories (questions) shall be answered separately and fully in writing and under oath or the grounds of
To be sure, the Supreme Court recently put to rest W & A's argument that errors of law—at least errors of law with respect to the Act itself—are not covered by the FDCPA, See Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, ___ U.S. ___, 130 S.Ct. 1605, 1611 n. 4, 176 L.Ed.2d 519 (2010).
Then there is the matter of the third alleged deception in the interrogatories regarding the time for Sayyed to respond. This part of W & A's instructions stated:
Sayyed says this directive was false in two respects. Primarily, he says, the statement that the court could enter orders against him for failure to serve answers to the interrogatories if he failed to serve an answer within 30 days after service of the interrogatories was false because Sayyed actually had 33 days to serve his answers or response without being subject to any orders of the court.
Again, bearing in mind that Sayyed would have to demonstrate that the trier of fact could conclude that it is more likely than not that this statement was false, misleading or deceptive, he has not done so. Maryland Rule 2-421(b) expressly states that the party responding to the interrogatories "shall serve a response within thirty days after service of the interrogatories." Sayyed says he actually "had thirty-three days to serve his answers" because Maryland Rule 1-203(c) provides that three days shall be added to a prescribed period when "service is made by mail." That is not correct. In fact, Sayyed's counsel could not have walked into W & A's office on the thirty-first day after Sayyed was sent the interrogatories, handed over Sayyed's answers to W & A and claimed he was making a timely filing. Only if Sayyed or his counsel mailed his responses by the 30th day would he get the benefit of the additional three days for service. As such, it was correct for W & A to say that certain consequences might follow if the answers were not "mailed" to W & A within 30 days. Not having even seen the pleading, Sayyed would not have been misled, much less would his attorney have been.
Finally, the Court's conclusion that a competent attorney would not be confused or misled by any of the alleged misrepresentations at issue in the interrogatories is buttressed by the opinion of W & A's expert, Mark Scurti, Esquire. Scurti, a practicing attorney for nineteen years who has previously been designated as an expert in consumer and bankruptcy issues, has submitted an affidavit on behalf of W & A. Scurti opines that a competent lawyer would not have been misled by what Sayyed alleges are W & A's misrepresentations because a competent lawyer would
For all these reasons, summary judgment is granted in favor of W & A as to Count II.
In Count III Sayyed claims that the allegedly false statements in the interrogatories violate the "Maryland Rules of Professional Conduct on making a false statement of material fact or law" and therefore operate as an unconscionable or unfair means to collect the debt in violation of 15 U.S.C. § 1692f.
The Court has already concluded above that the misrepresentations alleged by Sayyed are not actionable under the FDCPA. Alleging that the same communications violate the Maryland Rules of Professional Conduct does not alter the Court's conclusion or create a separate actionable claim under the FDCPA. The Preamble to the Maryland Rules of Professional Conduct itself specifically provides that: "Violation of a Rule does not itself give rise to a cause of action against a lawyer." Moreover, several courts have held that a debtor cannot maintain a cause of action under the FDCPA based on a claim that a debt collection attorney violated a state rule of ethical conduct. See Heard v. Bonneville Billing and Collections, 216 F.3d 1087 (10th Cir.2000); Reade-Alvarez v. Eltman, Eltman and Cooper, P.C., 369 F.Supp.2d 353, 361 (E.D.N.Y.2005); Bass v. Arrow Financial Services, L.L.C., No. 8595, 2002 WL 1559635 (N.D.Ill. July 16, 2002).
Summary judgment is granted in favor of W & A as to Count III.
Count IV is Sayyed's claim that W & A violated 15 U.S.C. § 1692e(2)(A) by filing a motion for summary judgment in the State Circuit Court which falsely represented that he was indebted to Discover Card in the amount of $13,983.05. Sayyed alleges the amount sought by W & A was inaccurate because it included interest on amounts that Discover Bank had promised it would not charge any interest on. The Court has acknowledged that this type of statement by a debt collector to a debtor's attorney might well be actionable. W & A responds, however, that in its pleadings it was relying upon the information provided to it by its client and asserts the bona fide error defense provided for by the FDCPA. The Court agrees that this defense prevails.
The FDCPA does not require a debt collector to engage in an independent investigation of the debt referred for collection. See Jenkins v. Heintz, 124 F.3d 824, 834 (7th Cir.1997) (holding that a debt collector has no obligation to conduct an independent debt validity investigation); Elane v. Revenue Maximization Group, 233 F.Supp.2d 496, 500 (E.D.N.Y.2002) (noting that defendant was entitled to rely on its client's representation that the debt was valid); see also Jenkins v. Union Corp., 999 F.Supp. 1120, 1140-41 (N.D.Ill. 1998); Ducrest v. Alco Collections, Inc., 931 F.Supp. 459, 462 (M.D.La.1996).
In its oral opinion on W & A's Motion to Dismiss, the Court observed that W & A's reliance on its client as to the amount of the debt owed was another reason why W & A could not be held liable under the FDCPA. See Sayyed, 485 F.3d at 235. The Fourth Circuit held that it was error to consider this argument at the motion to dismiss stage but held that on remand "W & A may of course . . . avail itself of the § 1692k(c) defense" and that "W & A's reliance on its client may well be relevant to that inquiry." Id.
With the benefit of the briefing and affidavits submitted by the parties on summary judgment now complete, the Court concludes that the bona fide error defense does indeed bar Sayyed's claim in Count IV of the Complaint. In an affidavit, Barry E. Gordon, the W & A attorney responsible for drafting the challenged pleadings in this case, sets out the firm's procedures both for complying with court rules and for filing summary judgment motions with supporting affidavits. Gordon states that all W & A attorneys regularly review the Maryland Rules of Procedure, including all amendments thereto, to ensure that all pleadings filed by the firm are in full compliance with those rules. Additionally he explains that in every summary judgment motion filed by the firm in a debt collection action, the amount requested in the motion is verified under oath by the client in an accompanying affidavit and must supported by documentation provided by the client.
Indeed, W & A has furnished the Court with the sworn affidavit of the account manager at Discover Bank as well as the underlying account statements that W & A attached to its summary judgment motion in the state court. Sayyed does not dispute that these documents in fact accompanied the motion in state court. Rather, he says, W & A has failed to demonstrate that W & A's procedure is one that a reasonable debt collector would follow. The Court disagrees. As noted, W & A was not required to engage in an independent investigation of the debt referred for collection. In claiming the amount of the debt owed in the motion for summary judgment in state court, W & A provided both the underlying documentation from its client, as well as a sworn affidavit from its client stating that the records were accurate. The Court finds no fault with such a procedure and holds that it was and is entirely reasonable under the circumstances. Sayyed seems to suggest that W & A had an obligation to review the entirety of his history with Discover Bank, in considerable detail, and to confirm that Discover Bank had never charged an incorrect interest rate or made any other clerical error in the maintenance of his account. It is clear that a debt collector has no such obligation under the law. See Transworld Systems, Inc., 953 F.2d at 1032.
Summary judgment is granted in favor of W & A and against Sayyed, as to Count IV of the Complaint.
In Count V, Sayyed claims that W & A's request for fifteen percent (15%) attorneys fees in its motion for summary judgment amounted to a false representation
Numerous courts have held that a debt collector's request for attorneys' fees directed to the court in its pleadings is not an actionable representation under the FDCPA. See Reyes v. Kenosian & Miele, LLP, 619 F.Supp.2d 796, 808 (N.D.Cal. 2008) (holding a request for attorney fees did not violate the FDCPA since an allegation of an alternative statutory basis for an award of attorney fees that is not unlawful does not violate the FDCPA); Bull v. Asset Acceptance, LLC, 444 F.Supp.2d 946, 950 (N.D.Ind.2006) (noting that if an agreement authorizes collection of reasonable attorney fees, a request for a specific amount is not actionable under the FDCPA); Rael v. Davis, No. 06-0081, 2006 WL 2346396 at *4-5 (S.D.Ind. Aug. 11, 2006) (holding that "even though there was no contractual basis for the fee request and a fee award may have been unlikely given the limited exceptions to the American Rule regarding payment of fees. . . the mere request for attorney's fees did not violate the FDCPA").
In holding that it was "abundantly clear" that such a fee request is not actionable under the FDCPA, the court in Argentieri v. Fisher Landscapes, Inc. provided a succinct justification for applying such a rule:
15 F.Supp.2d 55, 61-62 (D.Mass.1998).
The Court finds the holdings and rationale of these courts compelling.
Sayyed's agreement with Discover Bank provided for the recovery of "reasonable attorneys fees" in the event of a collection suit. The ad damnum clause in W & A's summary judgment motion before the state court read:
In the state proceeding, W & A attorney Ronald Canter attached an affidavit to the motion for summary judgment attesting that a fee of 15% was "fair and reasonable" in the matter, given, among other services, the law firm's review of the client's data, pre-suit correspondence with Sayyed, and preparation of the pleadings (complaint, summons, interrogatories, and correspondence with Sayyed's attorney). The sheer bulk of the correspondence and pleadings before the state courts—which have been submitted to this Court—confirms that a 15% fee request would have been fair and reasonable.
Summary judgment is granted in favor of W & A and against Sayyed as to Count V.
For all the foregoing reasons, the Court
A separate Order will
Upon consideration of the various pending motions in this case, and the respective Oppositions thereto, oral argument having been held thereon, it is for the reasons stated in the accompanying Opinion, this 20th day of August, 2010
Q: Can you testify under oath that you saw Plaintiff's Interrogatories Pursuant to Maryland Rule 2-421 before the federal lawsuit was filed?
A: I can't swear to it.
Q: Okay.
A: I can't remember.
The parties have now briefed this issue— albeit summarily—but, as indicated in the text, it has become unnecessary to decide the question.
The mistake of law in Jerman was that the notice accompanying the complaint filed in court stated that the debt would be assumed valid unless the debtor disputed it in writing. Section 1692g(a)(3) of the FDCPA requires that the notice from the debt collector to the consumer must be in writing and must contain "a statement that unless the consumer, within 30 days after receipt of the notice, disputes the validity of the debt, or any portions thereof, the debt will be assumed to be valid by the debt collector." The issue was whether the consumer has to dispute the debt in writing.
Although authority from the lower courts was divided as to this issue, 130 S.Ct. at 1606, the Supreme Court ultimately held that the consumer's dispute did not need to be in writing.
The Supreme Court obviously has the final word as to the meaning of the FDCPA. Errors of state law present a different problem. Where, as here, errors of state law are alleged and no Maryland Court has opined as to whether these are in fact errors, who is to judge? Presumably the federal district court must try, and the federal appeals court will review the case, but the unseen hazards to the collecting attorney would seem to be considerable.
