Pilalas v. The Cadle Co , 695 F.3d 12 ( 2012 )

United States Court of Appeals
For the First Circuit
No. 11-2274
MARILYNN PILALAS,
Plaintiff, Appellant,
v.
THE CADLE COMPANY and CADLEROCK JV II, LP,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Boudin, Hawkins* and Dyk,
Circuit Judges.
Jan R. Schlichtmann for appellant.
David H. Rich with whom Michael Thad Allen, Todd & Weld, LLP,
Mark H. Bluver and Law Office of Mark H. Gluver LLC were on brief
for appellees.
September 12, 2012
*
Of the Ninth Circuit, sitting by designation.
BOUDIN, Circuit Judge. Marilynn Pilalas, a resident of
Pembroke, Massachusetts, challenges the district court's grant of
summary judgment dismissing claims she brought against the Cadle
Company ("Cadle Company") and its corporate sibling CadleRock Joint
Venture II, L.P. ("CadleRock") for unlawful debt collection under
Massachusetts law; collectively, we refer to them both as "Cadle"
where the distinction does not matter. The facts of this case are
not seriously at issue and may be summarized briefly.
Some time before 1998, Marilynn Pilalas' husband,
Nicholas Pilalas, opened a credit card account with Bank of New
York. The account eventually became delinquent and was ultimately
purchased by the Cadle Company, which assigned it to a closely
related entity, CadleRock. Cadle began telephoning Nicholas
Pilalas to demand that he pay what was due. Despite occasional
partial payments, he died on December 10, 2002, leaving an unpaid
balance of somewhat more than $5,000.
Cadle took the position that Marilynn Pilalas was
responsible for the balance, although (according to Marilynn
Pilalas) Cadle refused to explain why.1 She paid installments but
only sporadically for several years; eventually, in May 2005,
CadleRock sued her in Massachusetts state court for "the principal
1
CadleRock's state-court complaint can be read as saying that
Marilynn Pilalas was a co-signatory to the credit card agreement;
it says that "Pilalas"--referring to Marilynn--"entered into a
credit agreement." Whatever the explanation, neither side offers
any illumination and it is not an issue on this appeal.
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balance of $5,534.28 and accrued interest due through March 7, 2005
of $3,136.93," plus costs and attorney's fees.
After discovery began, CadleRock offered to settle based
on an extended payment plan under which Pilalas would pay $4,400.00
in consecutive monthly installments of $100--just over 50 percent
of what the company claimed she owed including accrued interest; in
addition to the reduced payments, CadleRock sought a release that
barred all actions against CadleRock and its affiliated companies
for any claims "remotely attributable or related to" the debt.
Specifically, the release provided that Pilalas, as the obligor,
agree(s) to execute this Release in favor of
[Bank of New York Delaware], CadleRock Joint
Venture II, L.P. and its affiliates ("Released
Parties"), as third-party beneficiaries.
Obligor(s), his/her/their, heirs and assigns,
for itself, its successors and assigns (as the
appropriate case may be), hereby releases,
acquits and forever discharges the Released
Parties, their agents, servants and employees,
and all persons and entities in privity with
them or any of them, from any and all claims
or causes of action of any kind whatsoever, at
common law, statutory or otherwise, which
Obligor(s) and those on whose behalf
Obligor(s) sign(s) has, have or might have,
whether known or unknown, now existing or
arising hereafter, directly, indirectly, or
remotely attributable or related to the above
described Note(s) and/or Judgment(s), this
Release being intended and understood to
release all present and future claims of any
kind which Obligor(s) and those on whose
behalf Obligor(s) sign(s) might have against
those hereby released, arising from or growing
out of any act or omission occurring prior to
the date of this Release.
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Acting without counsel, Marilynn Pilalas signed the
release on August 9, 2005, and a week later she and CadleRock's
attorney signed a stipulation of dismissal of the pending state
court suit. Over the next two and a half years, Marilynn Pilalas
continued making regular payments. She missed a few payments, but
largely performed as agreed and did not hear from any of the Cadle
entities.
Then, in April 2008, Marilynn Pilalas lost her job. She
failed to make a payment that month, and in July, she stopped
sending payments entirely. At that point, she had paid 31 of the
44 agreed-upon installments. Again, Marilynn Pilalas heard nothing
from the Cadle entities despite her outstanding obligation of
$1,300 under the settlement. Indeed, the Cadle entities have not
contacted Marilynn Pilalas at all following their August 2005
settlement.
Sixteen months after sending her last payment, on
November 16, 2009, Marilynn Pilalas filed a putative class action
suit in Massachusetts Superior Court, naming Cadle, CadleRock,
their common principal Daniel Cadle, and a host of related entities
as defendants. She advanced a series of charges under state law
and sought restitution, damages of various kinds including treble
damages, declaratory and injunctive relief, and costs and
attorneys' fees.
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The defendants removed the case to federal court.
Marilynn Pilalas' effort to have the matter remanded to state court
failed and the defendants were whittled down to the Cadle Company
and CadleRock, but the details do not matter as neither is an issue
on appeal. The two defendants moved for summary judgment which,
accepting the recommendation of the magistrate judge, the district
court eventually granted. Marilynn Pilalas now appeals to this
court.
We review de novo the issues of law on which this case
turns. Vélez v. Thermo King de Puerto Rico, Inc., 585 F.3d 441,
446 (1st Cir. 2009). Those issues arise under provisions of
Massachusetts law that govern both consumer fraud, Mass. Gen. Laws
ch. 93A, § 2 (2010), and debt collection, id. ch. 93, §§ 24-24A, as
well as a closely related provision establishing civil remedies for
consumer fraud, id. ch. 93A, § 9, specifically including unlawful
debt collection, id. ch 93, § 28. Also pertinent are statutes of
limitation that govern potential claims. Id. ch. 260, §§ 2A, 5A.
A central aspect of the debt collection provisions makes unlawful
"debt collection" (as defined in the statute) except when carried
out by certain exempted parties. Id. ch. 93, §§ 24-24A.
Marilynn Pilalas' position throughout has been that Cadle
engaged in unlawful debt collection and that the release itself was
obtained by fraud and illegal debt collection. However, the
limitations period under state law is three years for fraud claims,
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Mass. Gen. Laws ch. 260, § 2A, and four years for chapter 93A
claims, id., § 5A. Marilynn Pilalas filed her complaint on
November 16, 2009, so the four-year statute reaches back only to
November 2005.
It is quite possible--and we will assume arguendo in
Marilynn Pilalas' favor--that Cadle engaged in unlawful debt
collection by pursuing Marilynn Pilalas prior to its collection
lawsuit and the release that followed. Broadly speaking, the
statute, described in more detail below, forbids unlicensed debt
collection by anyone whose "principal" business is debt collection
and who seeks to collect by use of telephone or mails; it arguably
applies as well to anyone seeking to collect a debt in default
purchased from the original creditor. Mass. Div. of Banks,
Industry Letter Concerning the Massachusetts Debt Collection
Statutes, and its Applicability to Debt Buyers, So Called (June 16,
2006).
At the time it sought to collect from Marilynn Pilalas,
Cadle (it appears) was neither licensed nor within a statutory
exception. It had been sent a cease-and-desist letter for
unlicensed debt collection in 2003 and later denied a license. The
Cadle Co. v. Mass. Div. of Banks, SUCV2004-0101C, 2006 WL 4119647,
at *2 (Mass. Super. Ct. Nov. 17, 2006), aff'd, 888 N.E.2d 385(Mass. App. Ct. 2008) (table). Ultimately, the attorney general
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secured a consent judgment against it. Commonwealth v. The Cadle
Co., No. 07-05359-D (Mass. Super. Ct. Nov. 17, 2009).
Nevertheless, Marilynn Pilalas chose to settle the
lawsuit, agreeing to pay about half of the claimed debt and giving
a release to the defendants from all claims she might have against
them, present and future. The release might be unenforceable under
state law as to claims arising after the release, at least for
regulatory and fraud claims. See Feeney v. Dell Inc., 908 N.E.2d
753, 761-66 (Mass. 2009); Bates v. Southgate, 31 N.E.2d 551, 558
(Mass. 1941). However, the release by its terms does extinguish
pre-release claims by Marilynn Pilalas, including civil claims for
unlawful debt collection, unless it is somehow invalid.
Had Cadle secured the release through fraudulent
misrepresentation, it would be voidable, Shaw's Supermarkets, Inc.
v. Delgiacco, 575 N.E.2d 1115, 1117 (Mass. 1991), but the district
court found no basis for Marilynn Pilalas' allegations that the
release was secured by fraud. Similarly, some forms of coercion
conceivably might render the release voidable, see Cabot Corp. v.
AVX Corp., 863 N.E.2d 503, 511-12 (Mass. 2007), but Marilynn
Pilalas does not attempt to make any detailed showing along these
lines.
In all events, "one seeking to repudiate an agreement
allegedly entered into under duress must promptly complain of the
circumstances under which the document was signed." In re Bos.
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Shipyard Corp., 886 F.2d 451, 455 (1st Cir. 1989). Here, Marilynn
Pilalas entered into the release in 2005, performed under it for
several years, was not again approached by the company even when
she ceased to perform, and waited over four years before bringing
the present suit, thereby attacking the release. Courts have
rejected such claims as untimely even with much shorter delays.
E.g., id. (eighteen month delay deemed untimely).
Marilynn Pilalas settled Cadle's suit apparently without
advice from counsel, and it is a defect of our legal system that,
absent attorneys' fee provisions (rarely of much help to those who
are sued), only the well-to-do, or the very poor who may get legal
aid, can afford complex civil litigation. But Massachusetts is not
claimed to have any rule against a pro se litigant litigating or
settling a consumer claim or lawsuit, even though such litigants
rarely understand fully or even adequately their legal rights. And
the inability to settle would in some cases disadvantage pro se
litigants.
Marilynn Pilalas says that she did not know that Cadle's
original debt collection efforts were unlawful; but the release on
its face embraced all claims "whether known or unknown, now
existing or arising hereafter, directly, indirectly, or remotely
attributable or related to the above described Note(s) and/or
Judgment(s) . . . ." Such "broad wording" releases all claims,
"even if they were not specifically in the parties' minds at the
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time the release was executed." Eck v. Godbout, 831 N.E.2d 296,
300-01 (Mass. 2005); see also Naukeag Inn, Inc. v. Rideout, 220
N.E.2d 916, 918 (Mass. 1966).2
This brings us to the question whether, given the release
of past claims, anything that occurred in or after November 2005,
restores or gives rise to a claim by Marilynn Pilalas.
Massachusetts defines a debt collector as
any person who uses an instrumentality of
interstate commerce or the mails in any
business the principal purpose of which is the
collection of a debt, or who regularly
collects or attempts to collect, directly or
indirectly, a debt owed or due or asserted to
be owed or due another.
Mass. Gen. Laws ch. 93, § 24. Those not subject to an exception
(e.g., attorneys collecting on behalf of clients, id., § 24(g)) may
not "directly or indirectly engage in the commonwealth in the
business of a debt collector" unless licensed, id. § 24A(a).
The aim of the statute is to bring such non-exempt debt
collectors within a regulatory regime, primarily under the
supervision of the Massachusetts banking regulators, Mass. Gen.
Laws ch. 93, § 24A(d), with further enforcement by the
Commonwealth's attorney general, id., §§ 28, 49; id. ch. 93A,
§ 2(c). On a more practical plane, the statute aims to curb the
2
There is no exemption from ordinary rules and practices in
Massachusetts for pro se litigants, whether in criminal or civil
cases. Commonwealth v. Jackson, 647 N.E.2d 401, 405 (Mass. 1995);
Leblanc v. Friedman, 781 N.E.2d 1283, 1288-89 (Mass. 2003).
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incessant telephone calls, mailings, and even home visits
associated with aggressive debt collection. Cf. Baldassari v. Pub.
Fin. Trust, 337 N.E.2d 701, 703-04 (Mass. 1975) (superseded by
statute, St. 1979, c. 406, § 1, as recognized in Leardi v. Brown,
474 N.E.2d 1094, 1100-01 (Mass. 1985)).
Standing alone, passively receiving a payment is
seemingly not within the Massachusetts statute. Although the term
"collect" could be extended from demanding payment to merely
receiving it, see, e.g., Collins English Dictionary (10th ed.
2009), passive receipt does not involve the vices of harassment
that the statute aims to suppress and, more important, the
Massachusetts banking authorities who enforce the statute have read
it more narrowly, explaining that
a debt buyer who purchases debt in default but
is not directly engaged in the collection of
these purchased debts is not required to
obtain a debt collector license provided that
all collection activity performed on behalf of
such debt buyer is done by a properly licensed
debt collector in the Commonwealth or an
attorney-at-law licensed to practice law in
the Commonwealth.
Mass. Div. of Banks, Op. Letter 06-060 (Oct. 13, 2006) (second
emphasis added).
However, passive receipt might be deemed tainted if
prompted by prior unlawful collection efforts by the creditor, and
this appears to be the position of the Massachusetts attorney
general: the later consent judgment against Cadle prohibited
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unlicensed debt collection, defined primarily as "request[ing]
payment on a debt," while allowing "accepting payment on a debt,
provided that such payment has not been preceded by unlicensed debt
collection." Commonwealth v. The Cadle Co., No. 07-05359-D (Mass.
Super. Ct. Nov. 17, 2009).
The present suit is not one by the attorney general to
enforce the consent decree; nor is Marilynn Pilalas faced merely
with a statute of limitations objection that she might overcome
(some might think oddly) by herself making payments to Cadle under
the settlement as late as 2008, the year before she began the
present suit. For in both cases the lynchpin of the argument
against Cadle would be the wrongfulness of Cadle's active debt
collection efforts prior to the 2005 lawsuit and the
impermissibility of reaping the fruits afterwards.
However, this case is different because Marilynn Pilalas
entered into a settlement and furnished a release. The settlement
created a new obligation to pay $4,400; the release surrendered,
from the standpoint of any further civil recovery by Marilynn
Pilalas, any damages from any wrongful active debt collection
activity by Cadle that preceded the release. And the settlement
and release are no longer vulnerable to attack by her--or at least
Marilynn Pilalas has offered no convincing conventional basis
(fraud, duress) and no ground for her delay in asserting any basis
she had.
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Thus, the present lawsuit is simply a back-door attack on
and disregard of both the settlement and the release. Agreeing to
pay a much reduced claim against her and granting a release to
Cadle for any pre-release wrongful debt collection were the price
she chose to pay to forestall Cadle's own larger claim and achieve
the dismissal of its lawsuit against her. It is too late now to
resuscitate claims that ultimately depend on the wrongfulness of
the original debt collection efforts.
Whether any acceptance now of further payments by Cadle
would get it in trouble with the attorney general under either the
consent decree or the statute is not at issue; nor is it certain
how a Massachusetts court would react if Cadle sought to sue to
collect further payments, which it has not sought to do. As for
other members of the uncertified class who may have made no
settlement and granted no release, they must seek a new champion.
Affirmed.
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