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Ninth Circuit Holds Company Collecting Debts for Hospital Did Not Violate FDCPA Because It Was Meaningfully Involved in the Process Banner Image

Ninth Circuit Holds Company Collecting Debts for Hospital Did Not Violate FDCPA Because It Was Meaningfully Involved in the Process

Month: May 2018

Ninth Circuit Holds Company Collecting Debts for Hospital Did Not Violate FDCPA Because It Was Meaningfully Involved in the Process

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The United States Court of Appeals for the Ninth Circuit recently affirmed a district court’s grant of defendants’ motion for summary judgment and held that the defendant debt collection agency was meaningfully involved in the debt collection process and, as such, did not violate the Fair Debt Collection Practices Act (“FDCPA”).  See Echlin v. PeaceHealth, 887 F.3d 967 (9th Cir. 2018).  There, defendant Computer Credit, Inc.  (“CCI”) worked with a hospital to collect on the hospital’s debts.  The hospital would refer delinquent accounts to CCI, who would screen the files for any barriers for collection and, assuming there were none, would mail up to two letters to debtors demanding payments.  CCI would handle phone calls and correspondence from the debtors, but did not have the authority to process or negotiate payments.  If CCI did not get a response after the two letters, it would send the account back to the hospital for further collection.  Plaintiff, who had been a patient at the hospital and had received collection letters from CCI, brought a putative class action under the FDCPA.  In the complaint, plaintiff alleged that CCI’s letters “created a false or misleading belief that Defendant CCI was meaningfully involved in the collection of a debt prior to the debt actually being sent to collections,” a process known as “flat-rating” that violated the FDCPA.  See 15 U.S.C. 1692j.  Defendants moved for summary judgment and, in opposition, plaintiff made the additional argument that CCI also violated the FDCPA by threatening further action when it had no authority to do so.  The district court granted defendants’ motion for summary judgment, finding both that CCI meaningfully participated in the collection of the debt and that plaintiff could not allege new violations in her opposition papers because defendants had no notice of the claim and would be prejudiced by its introduction so late into the litigation.

On appeal, the Ninth Circuit affirmed.  First, it agreed that defendants were not involved in flat-rating.  The Court held that “[t]he key is whether, in consideration of all that an entity does in the collection process, it genuinely contributes to an effort to collect another’s debt, or instead does little more than act as a mailing service for the creditor.”  Although CCI did not have full control over the debt collection process and could not negotiate the debt, it still screened the accounts, independently composed and sent the letters, handled debtor responses, and maintained a website allowing debtors to access information about their debts.  Second, the Court held that the complaint did not allege that CCI had threatened to take an action that was not intended or legally authorized and that this new argument could not be raised in opposition to a summary judgment motion because it failed to give CCI fair notice of the claim.  Additionally, plaintiff could not amend her complaint to add this allegation because the FDCPA’s one-year statute of limitations had run and these new allegations did not relate back to the original complaint.  Accordingly, the Court affirmed the district court’s grant of defendants’ motion for summary judgment.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Seventh Circuit Holds Debt Collector Violated FDCPA by Reporting Debts to Credit Reporting Agencies Without Informing Agencies That Debts Were Disputed

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The United States Court of Appeals for the Seventh Circuit recently affirmed a district court’s grant of plaintiffs’ motions for summary judgment and held that the defendant debt collector violated the Fair Debt Collection Practices Act (“FDCPA”) by communicating plaintiffs’ debts to credit reporting agencies without stating that plaintiffs disputed the debts.  See Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337 (7th Cir. 2018).  In the case, defendant attempted to collect debts owed by plaintiffs, and plaintiffs’ counsel sent a letter to defendant in response.  Each letter stated: “This client regrets not being able to pay, however, at this time they are insolvent, as their monthly expenses exceed the amount of income they receive, and the amount reported is not accurate.”  Defendant nonetheless reported the debts to credit reporting agencies but did not indicate that plaintiffs disputed the debt.  Plaintiffs then brought these actions alleging violations of the FDCPA.  See 15 USC 1692e(8) (prohibiting debt collectors from “[c]ommunicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.”).  Plaintiffs moved for summary judgment and, in opposition, defendant argued: (i) plaintiffs lacked standing; (ii) plaintiffs never disputed the debt; (iii) the alleged FDCPA violations were not material; and (iv) any alleged violations were the result of a bona fide error.  The district court granted plaintiffs’ motions for summary judgment.

On appeal, the Seventh Circuit affirmed.  First, it held that plaintiffs had standing to bring this action.  Despite defendant’s argument that plaintiffs did not suffer an injury, plaintiffs suffered “‘a real risk of financial harm caused by an inaccurate credit rating.’”  Second, the Court held that the letters sent by plaintiffs’ counsel properly disputed the debt under the FDCPA.  The fact that the letters did not include the word “dispute” was irrelevant.  Likewise, defendant’s argument that it accurately calculated the debt did not change the outcome because “Section 1692e(8) does not require an individual’s dispute be valid or even reasonable. Instead, the plaintiff must simply make clear that he or she disputes the debt.”  Third, the Court found that any failure to inform a credit reporting agency that a debt is disputed is always material under the FDCPA because “this information will be used to determine the debtor’s credit score.”  Finally, the Court rejected the argument that the violations were a result of a bona fide error because the FDCPA’s bona fide error defense only applies to an error of fact, not an error of law.  Here, defendant’s error was its interpretation of the FDCPA and what constituted a disputed debt, which was an error of law.  As such, the Court affirmed the district court’s decisions granting plaintiffs’ motions for summary judgment.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

NYSDEC Requiring Site Owners to Investigate Emerging Contaminants

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Over the past few years, a number of state agencies have begun to take steps to address emerging contaminants like per- and -polyfluororalkyl substances (“PFAS”) and 1,4 dioxane.  Just this past January, we reported on our blog that the New Jersey Department of Environmental Protection (“NJDEP”) set the most stringent limits in the country for perfluorooctanoic acid (“PFOA”) and perfluorononanoic acid (“PFNA”) in drinking water and adopted a regulation that added PFNA to the List of Hazardous Substances under the New Jersey Spill Compensation and Control Act (See our January 30, 2018 Blog Article – NJDEP Takes Further Step In Regulating Emerging Contaminants).  Now the New York State Department of Environmental Conservation (“NYSDEC”) is undertaking a statewide evaluation of remediation sites to better understand the risk posed by certain emerging contaminants.  As part of this effort, the NYSDEC is requesting that owners of certain remediation sites throughout New York investigate the presence of PFAS and 1,4 dioxane in groundwater.  The NYSDEC has specifically noted that sampling and analysis of these compounds also has been integrated into standard practice for all environmental site remediations going forward. 

The NYSDEC has begun issuing letters to notify owners of remediation sites of the new investigation requirements and to request that site owners sample their properties for certain emerging contaminants within a specified timeframe.  Attached to the letters is a guidance document (Groundwater Sampling for Emerging Contaminants – February 2018) that describes the NYSDEC’s implementation of this new program and sets forth recommended sampling analysis and reporting protocols and procedures.  The letters ask the owners to contact the NYSDEC to discuss the scope of the requested groundwater sampling within ten (10) business days after receipt.  If the owner declines, the NYSDEC may perform the sampling itself. 

This new initiative has the potential to significantly impact a party’s remediation obligations if emerging contaminants are found above reporting limits.  The NYSDEC may seek to reopen closed sites or expand the scope of existing investigations and cleanups.  The sites that are the most likely to be identified by the NYSDEC for sampling are those sites that have the potential for emerging contaminant contamination, like fire training centers, bulk storage facilities, landfills, airports, and Department of Defense (DoD) facilities.  As the NYSDEC continues to develop its understanding of the potential risks associated with emerging contaminants, new requirements may be on the horizon.

For more information, please contact the author Jaan M. Haus at jhaus@riker.com or any attorney in our Environmental Practice Group.

Changes to HDSRF Limit Funds Available for Site Remediation

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Earlier this year, New Jersey passed legislation (Assembly Bill 1954) that changed the availability of certain funding to public and private entities under the Hazardous Discharge Site Remediation Fund (“HDSRF” or the “Fund”).  The HDSRF program provides grants and loans to public entities and certain private entities that require financial assistance to investigate and remediate suspected or known contaminated sites.  The HDSRF program is funded through the New Jersey Corporate Business Tax and is jointly administered through a partnership between the New Jersey Department of Environmental Protection (“NJDEP”) and the New Jersey Economic Development Authority (“NJEDA”). 

 Below is a list of notable changes to the HDSRF program as a result of Assembly Bill 1954:

  • The 50% matching grants for “innocent parties” to complete site remediation activities (i.e. preliminary assessment, site investigation, remedial investigation and remedial action), which were previously capped at $1 million, have been completely eliminated from the program.
  • The 25% matching grants previously available for “innovative technology” and “limited restricted use” remedial actions have been eliminated from the program.
  • The amount of annual grant funding available to municipalities, counties and redevelopment entities has been reduced from $3 million to $2 million. 
  • The additional annual grant funding available for projects in a Brownfield Development Area (“BDA”) has been reduced from $2 million to $1 million.
  • The statewide annual award for projects involving redevelopment of property for recreation and conservation, affordable housing and renewable energy, previously capped at $5 million, has been reduced to $2.5 million.
  • The annual loan cap for any person that is not a municipality, county or redevelopment entity, which was previously set at $1 million, has been reduced to $500,000.
  • For previous applicants, no new awards will be approved until the applicant demonstrates that it has expended or will expend the full amount of any previous funding awarded for the same property.

The amendments to the HDSRF program also place timeframes on the completion of certain remediation tasks for which the funds were awarded, including a requirement to expend the funds for a preliminary assessment or site investigation within two (2) years of the date of the award and to expend the funds for a remedial investigation within five (5) years of the award date.  If the funding is not used within these timeframes, the award will be cancelled.  In addition, the new law has changed the priority of funding awarded from the HDSRF so that properties owned by municipalities in BDAs are given priority over sites in Planning Area 1 (Metropolitan) and Planning Area 2 (Suburban) pursuant to the State Planning Act.  Properties where contamination poses an imminent and significant threat to human health, a drinking water source or a sensitive or significant ecological resource are still given first priority.  The NJEDA has also been tasked with developing criteria requiring municipalities, counties and redevelopment entities to develop a property within three (3) years of the completion of the remediation.  Interested parties should review these changes carefully to determine how they may impact their ability to finance remediation and brownfields redevelopment.

For more information, please contact the author Jaan M. Haus at jhaus@riker.com or any attorney in our Environmental Practice Group.

New York Supreme Court Holds Mortgagee Does Not Need to Send 90-Day Foreclosure Notice if Mortgagee Is Not a “Lender, an Assignee, or a Mortgage Loan Servicer”

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The Supreme Court of New York, Suffolk County, recently granted a foreclosing plaintiff summary judgment and held that plaintiff did not need to send a 90-day notice pursuant to RPAPL 1304 because plaintiff was not a lender, assignee, or mortgage loan servicer.  See NIC Holding Corp. v. Eisenegger, 59 Misc. 3d 1221(A) (N.Y. Sup. Ct. 2018).  In the case, one of plaintiff’s employees was relocating and defendant wanted to purchase the employee’s home.  In order to expedite the sale, plaintiff, who is “in the petroleum business and is not in the business of giving loans collateralized by mortgages for the purchase of residential homes,” agreed to provide the funds for defendant to purchase the home.  Defendant eventually defaulted, and plaintiff brought this foreclosure action.  Plaintiff moved for summary judgment and defendant opposed, arguing that plaintiff had not provided him with a 90-day notice before bringing the action pursuant to RPAPL 1304.

The Court rejected defendant’s argument and granted the motion for summary judgment.  RPAPL 1304 only requires “a lender, an assignee or a mortgage loan servicer” to send this notice.  A lender is further defined as either (i) a mortgage banker, which is “a person or entity who or which is licensed pursuant to [Banking Law § 591] to engage in the business of making mortgage loans in this state”; or (ii) an “exempt organization,” which is defined as:

any insurance company, banking organization, foreign banking corporation licensed by the superintendent or the comptroller of the currency to transact business in this state, national bank, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association, or credit union organized under the laws of any other state, or any instrumentality created by the United States or any state with the power to make mortgage loans . . .

In this case, plaintiff did not fit either of these definitions.  “Accordingly, where a private lender as mortgagee is not a lender, assignee, or mortgage loan servicer within meaning of statute governing mortgage foreclosure requirements, such mortgagee is not required to serve mortgagors with statutory 90-day notice prior to commencement of foreclosure action.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Third Circuit Holds One-Year FDCPA Statute of Limitations Begins to Run Upon Violation, Not When Consumer Discovers or Should Have Discovered It

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In a decision contrary to the holdings of two other circuit courts, the United States Court of Appeals for the Third Circuit recently affirmed a district court’s decision and held that a plaintiff’s claim under the Fair Debt Collection Practices Act (“FDCPA”) was time barred because he brought his action more than one year after the violation occurred, despite the fact that he brought it within one year of discovering it.  See Rotkiske v. Klemm, 2018 WL 2209120 (3d Cir. May 15, 2018).  In the case, defendant sued plaintiff over an unpaid credit card debt in 2009.  Although plaintiff had changed addresses, defendant served someone at his former address who accepted service on plaintiff’s behalf, and defendant obtained a default judgment.  Plaintiff discovered the judgment years later when applying for a mortgage and, within a year, filed an action claiming that defendant’s collection efforts violated the FDCPA.  The district court dismissed the action, holding that the FDCPA’s one-year statute of limitations barred the claims.  Plaintiff appealed, arguing that the FDCPA incorporates a discovery rule that delays the limitations period from running until plaintiff discovers or should have discovered the violation.

On appeal, the Third Circuit affirmed the lower court’s decision.  Although it acknowledged that the Fourth and Ninth Circuits had applied a discovery rule to the FDCPA’s statute of limitations, it nonetheless held that “the Act says what it means and means what it says: the statute of limitations runs from ‘the date on which the violation occurs.’”  Contra Lembach v. Bierman, 528 Fed. Appx. 297 (4th Cir. 2013) (per curiam); Mangum v. Action Collection Serv., Inc., 575 F.3d 935 (9th Cir. 2009).  The Court also acknowledged previous decisions in which it applied a discovery rule to federal statutes, but held that the Supreme Court’s decision in TRW Inc. v. Andrews, 534 U.S. 19, 28 (2001) “counsels in favor of reconsidering our earlier practice of presuming that federal statutes of limitations include an implied discovery rule.”  Finally, the Court held that its decision did not undermine the doctrine of equitable tolling in situations involving “fraudulent, misleading, or self-concealing” conduct, but that plaintiff failed to raise the tolling issue on appeal.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

New York Appellate Court Dismisses Claim Against Title Agent Based on Title Policy’s Merger Clause

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New York’s Appellate Division recently affirmed a lower court’s dismissal of an insured’s claim against a title agent because, among other things, the insured’s claim of a breach of an oral contract was barred by the title insurance policy’s merger clause.  See Union St. Tower, LLC v. First Am. Title Co., 2018 WL 2123717 (2d Dept. May 9, 2018).  In the case, the insured purchased two properties in 2003 and received a title insurance policy issued by the title agent.  In 2013, the insured brought this action against the agent, among others, alleging that the agent was negligent in failing to record documents, the agent was negligent in failing to obtain “proper title insurance,” and the agent had breached an oral contract.  The agent moved to dismiss and the trial court granted the motion.

On appeal, the Appellate Division affirmed the dismissal of the claims.  First, it affirmed the dismissal of the insured’s tort claims against the title agent because the statute of limitations had run and the claims were time-barred.  Second, the Court held that the title insurance policy contained a merger clause stating that the policy “is the entire policy and contract between the insured and the Company.”  This clause barred the insured’s claim regarding any additional oral agreement between the parties.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Environmental Group Ranked In Band One In Chambers USA 2018 Rankings

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Riker Danzig’s Environmental Practice has again been honored with a Band 1 ranking in the Chambers USA Guide this year.  Our group has been consistently ranked in the top tiers of Chambers USA since the publication’s inception and in “Band 1” since 2010.  Many of our environmental attorneys are also recognized individually in the Guide.  Chambers continues to be one of the most well-respected attorney ranking guides, due to its in-depth research and the unbiased and independent nature of its reporting.

Individual Attorney Rankings:

Dennis Krumholz (Band 1) 

Samuel Moulthrop (Band 1) 

Steve Senior (Band 2)  

Jeff Wagenbach (Band 3) 

Marilynn Greenberg (Band 3)  

Alexa Richman-La Londe (Band 3)

Jaan Haus (Associates to watch)  

Many of Riker Danzig’s other practice areas and attorneys have also been ranked in the prestigious guide. Full rankings, commentary, and methodology are available at Chambers.

See Awards and Honors Methodology. 

No aspect of this communication has been approved by the Supreme Court of New Jersey.

Seventh Circuit Affirms Dismissal of RESPA Claim for Lack of Actual Damages

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The United States Court of Appeals for the Seventh Circuit recently affirmed a district court’s decision granting a loan servicer summary judgment dismissing a claim under the Real Estate Settlement Procedures Act (“RESPA”) because the plaintiff borrower did not suffer any actual damages.  See Linderman v. U.S. Bank Nat’l Ass’n, 887 F.3d 319 (7th Cir. 2018).  In the case, the borrower purchased a home that she and her family eventually abandoned.  While vacant, the property was vandalized.  The borrower hired a contractor to repair the vandalism and the servicer paid $10,000 towards the cost of repairs from insurance money that it had received, but the contractor eventually abandoned the job due to concerns about whether he would be paid in full.  Five months later, the borrower sent the servicer a letter asking about the status of the loan and how the servicer was handling the insurance money.  Although the servicer sent a response, the borrower claimed she never received it and filed this RESPA action for the servicer’s alleged failure to respond to a qualified written request.  The district court granted the servicer’s motion for summary judgment because the borrower did not prove any actual damages, and the borrower appealed.

On appeal, the Court affirmed.  Although the borrower had alleged numerous ways in which she had been damaged, including a divorce allegedly caused by her financial issues and personal monies expended to repair the house, none of these damages were related to the alleged non-receipt of the servicer’s response to her qualified written request.  The Court held that “[t]he lack of money disbursed from the escrow may be a cause of continuing loss,” but that RESPA “does not require a servicer to pay money in response to a written request.” (emphasis in original.)  The Court also noted that the borrower may have had claims against the contractor for abandoning the job and her family members for failing to pay the mortgage, but that “[a] focus on federal rules can distract people (including lawyers) from the more mundane doctrines of state law that may offer greater prospect of success.”  As such, the Court affirmed the district court’s decision granting summary judgment to the servicer.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

New Jersey’s Department of Banking and Insurance Adopts New Mortgage Processing Requirements

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Riker Danzig Partner Michael O’Donnell and associates Michael Crowley and Clarissa Gomez co-authored an article in the Spring 2018 issue of New Jersey Banker Magazine entitled “New Jersey’s Department of Banking and Insurance Adopts New Mortgage Processing Requirements.”  The article discusses two changes regarding residential mortgages and how these changes will affect residential lenders.   

Please note that the disclosure of mortgage loan application fees issue is still evolving.  After publication of this article, the Department of Banking and Insurance determined that the disclosures will not currently be mandatory and financial institutions are currently free to decide on their own whether to incorporate such disclosures in their forms.   

Click here to read the entire article.

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