Dorothy Allen v. LaSalle Bank ( 2011 )

  •                                   PRECEDENTIAL
                       No. 09-1466
               DOROTHY RHUE ALLEN,
          by her Attorney in fact, James Martin,
    Individually and as a class representative on behalf
                of others similarly situated,
               LASALLE BANK, N.A;
           JOHN DOE SERVICERS 1-100;
            JOHN DOE LAW FIRMS 1-100
     On Appeal from the United States District Court
               for the District of New Jersey
                 (D.C. No. 3-08-cv-02240)
      District Judge: Honorable Anne E. Thompson
               Argued September 14, 2010
       Before: SLOVITER, BARRY, and SMITH
                   Circuit Judges
                (Filed: January 12, 2011)
      Lewis G. Adler (Argued)
      Woodbury, N.J. 08096
      Roger C. Mattson
      Woodbury, N.J. 08096
         Attorneys for Appellant
      Andrew C. Sayles (Argued)
      Gregory E. Peterson
      Connell Foley
      Roseland, N.J. 08068
         Attorneys for Appellee Fein, Such, Kahn and Shepard,
      Daniel C. Green
      Vedder Price
      New York, N.Y. 10019
      Chad A. Schiefelbein (Argued)
      Vedder Price
      Chicago, IL 60601
         Attorneys for Appellee LaSalle Bank
      Gregory A. Lomax
      Christopher L. Soriano
      Morgan J. Zucker
      Duane Morris
      Cherry Hill, N.J. 08003
         Attorneys for Appellee Cenlar Federal Savings Bank
                    OPINION OF THE COURT
    SLOVITER, Circuit Judge.
           This appeal presents the question whether a
    communication from a debt collector to a consumer‟s
    attorney is actionable under the Federal Debt Collection
    Practices Act (“FDCPA”), 15 U.S.C. § 1692f(1).
                  Factual and Procedural History
           In 1976, Dorothy Rhue Allen purchased her home with
    a 30-year mortgage. After Allen failed to make the last
    payment due, she was declared in default. On May 7, 2007,
    Fein, Such, Kahn & Shepard, PC (“FSKS”), a law firm,
    brought a mortgage foreclosure action against Allen on behalf
    of LaSalle Bank. 1
           At the request of Allen‟s attorney, FSKS sent a letter
    to Allen‟s attorney on June 7, 2007 that set forth a payoff
    quote for the principal balance remaining on the loan and
    other charges due to the servicer of Allen‟s loan, Cenlar
    Federal Savings Bank (“Cenlar”), as well as charges for
    FSKS‟s attorney fees and costs. The same day, FSKS sent a
    second letter to Allen‟s attorney itemizing the attorney fees
    and costs referred to in its previous letter. Less than three
    weeks later, Allen filed a class action counterclaim and third
    party complaint in the foreclosure action, asserting that
    FSKS‟s response violated the FDCPA and state law. LaSalle
    and FSKS then released the mortgage and moved to dismiss
    the foreclosure action, after which the New Jersey Superior
    Court dismissed Allen‟s claims without prejudice.
          Some time thereafter, Allen filed a class action against
    FSKS, LaSalle, and Cenlar in the United States District Court
         Although Allen alleged in her Complaint that LaSalle
    Bank was her mortgage lender at the time of her default, she
    also asserted that LaSalle took assignment of Allen‟s
    mortgage from Security Pacific National Bank on June 12,
    2007, after FSKS filed the mortgage foreclosure action.
    for the District of New Jersey. In the Complaint, Allen
    alleged that FSKS and LaSalle violated the FDCPA and state
    law, and that Cenlar also violated state law. For example,
    Allen alleged that FSKS demanded: $910 in attorney fees
    when court rule permits only $15.43, $335 for searches when
    court rule permits only $75, $160 for recording fees when the
    actual fee was only $60, and $475 for service of process when
    statute and court rule limit reimbursement to $175. Although
    she made other specific and general FDCPA allegations in her
    Complaint, Allen conceded at oral argument that her FDCPA
    claims were predicated only upon alleged violations of 15
    U.S.C. § 1692f(1).
           FSKS moved to dismiss the complaint pursuant to
    Federal Rule of Civil Procedure 12(b)(6), contending that
    Allen had failed to state a claim upo n which relief could be
    granted. FSKS asserted that a communication from a debt
    collector to a consumer‟s attorney is not covered by the
    FDCPA. 2
            The District Court noted that the courts of appeals are
    divided on this issue. The Fourth Circuit has held that a
    communication with a debtor‟s attorney is to be treated as an
    indirect communication with the debtor and therefore
    actionable. Sayyed v. Wolfpoff & Abramson, 
    485 F.3d 226
    232-33 (4th Cir. 2007). In contrast, the Second Circuit has
    stated in dicta and the Ninth Circuit has concluded that
    because an attorney will protect a consumer from a debt
    collector‟s behavior, statements made only to a consumer‟s
    attorney are not actionable per se. Guerrero v. RJM
    Acquisitions LLC, 
    499 F.3d 926
    , 934-39 (9th Cir. 2007);
    Kropelnicki v. Siegel, 
    290 F.3d 118
    , 129-31 (2d Cir. 2002).
          Cenlar and LaSalle independently moved to dismiss.
    LaSalle moved to dismiss on the ground that Allen had failed
    to state an agency relationship between it and FSKS because
    LaSalle took assignment of Allen‟s mortgage only after FSKS
    sent the letters to Allen‟s attorney. Cenlar moved to dismiss
    the state law claims because of the lack of contract between
    Allen and Cenlar and because Allen alleged no damages.
            Eschewing either approach, the District Court found
    persuasive the Seventh Circuit‟s analysis in Evory v. RJM
    Acquisitions Funding L.L.C., 
    505 F.3d 769
     (7th Cir. 2007),
    where the court held that although a communication from a
    debt collector to a consumer‟s attorney is governed by the
    FDCPA, it is to be analyzed from the perspective of a
    competent attorney. Using that reasoning, the District Court
    held that a competent attorney would have readily recognized
    the overcharges that FSKS sought. The Court concluded that
    because Allen‟s attorney protected her from any unfair or
    unconscionable means used to collect the debt, Allen had
    failed to state viable FDCPA claims. The Court thus
    dismissed those claims and abstained from passing on the
    alternative arguments set forth by FSKS and LaSalle in
    support of their motions to dismiss. With no federal claims
    remaining, the Court declined to exercise supplemental
    jurisdiction over Allen‟s state law claims. Allen appeals. 3
                Jurisdiction and Standard of Review
           We conduct a plenary review of the District Court‟s
    order granting a motion to dismiss for failure to state a claim.
    Gelman v. State Farm Mut. Auto. Ins. Co., 
    583 F.3d 187
    , 190
    (3d Cir. 2009). We accept all factual allegations in the
    Complaint as true, construe it in the light most favorable to
    Allen, and determine whether, under any reasonable reading
    of the Complaint, Allen may be entitled to relief. See id.
           Because this case requires us to construe a
    congressional statute, principles of statutory construction
    apply. To discern Congress‟ intent we begin with the text. In
    re Lord Abbett Mut. Funds Fee Litig., 
    553 F.3d 248
    , 254 (3d
    Cir. 2009). If the statute‟s plain language is unambiguous
            The District Court had jurisdiction under 28 U.S.C. §
    1331, and we have jurisdiction under 28 U.S.C. § 1291.
    and expresses that intent with sufficient precision, we need
    not look further. Id. If the plain language fails to express
    Congress‟ intent unequivocally, however, we will examine
    the surrounding words and provisions in their context.
    Tavarez v. Klingensmith, 
    372 F.3d 188
    , 190 (3d Cir. 2004).
    Assuming that every word in a statute has meaning, we avoid
    interpreting part of a statute so as to render another part
    superfluous. Rosenberg v. XM Ventures, 
    274 F.3d 137
    , 141
    (3d Cir. 2001).
           Congress made its purpose in enacting the FDCPA
    explicit: “to eliminate abusive debt collection practices by
    debt collectors, to insure that those debt collectors who
    refrain from using abusive debt collection practices are not
    competitively disadvantaged, and to promote consistent State
    action to protect consumers against debt collection abuses.”
    15 U.S.C. § 1692(e). Section 1692f(1) on which Allen relies
             A debt collector may not use unfair or unconscionable
             means to collect or attempt to collect any debt.
             Without limiting the general application of the
             foregoing, the following conduct is a violation of this
             (1) The collection of any amount (including any
             interest, fee, charge, or expense incidental to the
             principal obligation) unless such amount is expressly
             authorized by the agreement creating the debt or
             permitted by law.
    15 U.S.C. § 1692f.4
           Notably, § 1692f(1) specifically prohibits the
    “collection” of any unauthorized amount and Allen alleges
    only that FSKS and LaSalle attempted to collect such
            Attorneys, such as FSKS, are regarded as debt
    collectors, and their conduct as such is regulated by the
    FDCPA. See Heintz v. Jenkins, 
    514 U.S. 291
    , 292 (1995)
    (“the term „debt collector‟ . . . applies to [attorneys] who
    „regularly,‟ through litigation, tr[y] to collect consumer
    debts”). The Act entitles consumers to certain information
    regarding the nature of their debts, § 1692g, and prohibits
    debt collectors from engaging in certain conduct, see §§
    1692c-1692f, 1692j-1692k. The FDCPA is a remedial
    statute, and we construe its language broadly so as to effect
    its purposes. Brown v. Card Serv. Ctr., 
    464 F.3d 450
    , 453 (3d
    Cir. 2006). Section 1692e proscribes “any false, deceptive or
    misleading representation,” (emphasis added), and § 1692d
    similarly condemns “any conduct the natural consequence of
    which is to harass, oppress, or abuse any person,” (emphasis
            A “consumer” includes “any natural person obligated
    or allegedly obligated to pay any debt.” § 1692a(3). A
    “communication” constitutes “the conveying of information
    regarding a debt directly or indirectly to any person through
    any medium.” 5 § 1692a(2) (emphasis added). The focus of §
    1692f is on the conduct of the debt collector.
    amounts from her. Section 1692f, however, broadly prohibits
    improper means “to collect or attempt to collect” any debt,
    and its list of violative conduct in § 1692f is not exhaustive.
    Thus, “collection” in § 1692f(1) includes attempted collection
    as well as actual collection.
          The two letters FSKS sent on June 7, 2007 undoubtedl y
    fall within this definition. FSKS disputes in a footnote the
    characterization of the third letter, which was sent the next
    day and itemized FSKS‟s fees and costs, as a communication
    within the meaning of the FDCPA because it “does not make
    any specific request for payment.” Br. of Appellee FSKS at
    26 n.9. A communication, however, is “the conveying of
    information regarding a debt” and is not limited to specific
    requests for payment. § 1692a(2).
            As noted above, the issue here is whether § 1692f(1)
    governs communications from a debt collector to a
    consumer‟s attorney, such as FSKS‟s letters to Allen‟s
    attorney. The attorney for FSKS conceded at oral argument
    that there is nothing in the FDCPA that explicitly exempts
    communications to an attorney. Unquestionably, the scope of
    the FDCPA is broad. Indeed, § 1692f(1) prohibits “unfair or
    unconscionable means,” regardless of the person to whom the
    communication was directed. The FDCPA similarly defines a
    “communication” expansively. A communication to a
    consumer‟s attorney is undoubtedly an indirect
    communication to the consumer. Evory, 505 F.3d at 773
    (quoting § 1692a(2)); see also Sayyed, 485 F.3d at 232-33.6
          The FDCPA is a strict liability statute to the extent it
    imposes liability without proof of an intentional violation. 7
          We depart from the reasoning of the Fourth Circuit in
    Sayyed that the Supreme Court‟s decision in Heintz supported
    its conclusion that communications from a debt collector to a
    consumer‟s attorney are governed by the FDCPA. See
    Sayyed, 485 F.3d at 230. The Court in Heintz addressed the
    narrow issue of whether the term “debt collector” in the
    FDCPA applies to attorneys who regularly, through litigation,
    try to collect consumer debts. Heintz, 514 U.S. at 292.
    Although the Heintz opinion referred to the fact that the
    communication there had been sent to the consumer‟s
    attorney, the Court did not pass on the precise question before
    us. See Guerrero, 499 F.3d at 937-38 (criticizing Sayyed‟s
    use of Heintz).
          The characterization of the FDCPA as a strict liability
    statute is generally accepted. See, e.g., LeBlanc v. Unifund
    CCR Partners, 
    601 F.3d 1185
    , 1190 (11th Cir. 2010);
    Donohue v. Quick Collect, Inc., 
    592 F.3d 1027
    , 1030 (9th Cir.
    2010); Ellis v. Solomon and Solomon, P.C., 
    591 F.3d 130
    135 (2d Cir. 2010); Ruth v. Triumph P’ships, 
    577 F.3d 790
    805 (7th Cir. 2009).
    See § 1692k. If an otherwise improper communication would
    escape FDCPA liability simply because that communication
    was directed to a consumer‟s attorney, it would undermine
    the deterrent effect of strict liability.
            In this case, the District Court sub silentio concluded
    that a communication from a debt collector to a consumer‟s
    attorney was generally covered by the FDCPA but that it is to
    be analyzed from the perspective of a competent attorney.
    The District Court, however, did not have the benefit of
    Allen‟s concession that her claims were predicated only upon
    § 1692f(1), which defines the collection of an unauthorized
    debt as a per se “unfair or unconscionable” debt collection
    method. The only inquiry under § 1692f(1) is whether the
    amount collected was expressly authorized by the agreement
    creating the debt or permitted by law, an issue we leave for
    the District Court.
           Given the nature of its disposition, the District Court
    did not address any of the other issues raised by the parties,
    including whether New Jersey‟s litigation privilege creates an
    exemption to FDCPA liability, an issue raised by FSKS. We
    address this argument briefly because it raises an issue of law
    which is likely to arise on remand.
            New Jersey‟s litigation privilege applies to “any
    communication (1) made in judicial or quasi-judicial
    proceedings; (2) by litigants or other participants authorized
    by law; (3) to achieve the objects of the litigation; and (4) that
    have some connection or logical relation to the action.”
    Hawkins v. Harris, 
    661 A.2d 284
    , 289 (N.J. 1995) (internal
    quotations and citations omitted). FSKS‟s letters here
    undoubtedly fall within this definition. Nonetheless, the
    FDCPA does not contain an exemption from liability for
    common law privileges. “[C]ommon law immunities cannot
    trump the [FDCPA]‟s clear application to the litigating
    activities of attorneys,” Sayyed, 485 F.3d at 231, and, like the
    Fourth Circuit, we will not “disregard the statutory text in
    order to imply some sort of common law privilege,” id. at
    229; see also Hartman v. Great Seneca Fin. Corp., 
    569 F.3d 9
    606, 615-17 (6th Cir. 2009). The application of the New
    Jersey litigation privilege does not absolve a debt collector
    from liability under the FDCPA.
            Although we remand this case to the District Court, we
    reiterate that we express no opinion as to whether Allen has
    alleged a viable claim. If the agreement does not expressly
    authorize or state law does not permit the amounts sought,
    Allen has stated a viable claim under § 1692f(1).
            In light of our disposition, on remand the District
    Court should reconsider whether to exercise supplemental
    jurisdiction over Allen‟s state law claims, whether to consider
    the alternative grounds for dismissal set forth in the motions
    to dismiss, and whether to certify a class, as requested by
           For the foregoing reasons, we will vacate the judgment
    of the District Court and remand for proceedings consistent
    with this decision.