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Seventh Circuit Holds Plaintiff Who Was Not Debtor Still Had Standing to Bring FDCPA Action Banner Image

Seventh Circuit Holds Plaintiff Who Was Not Debtor Still Had Standing to Bring FDCPA Action

Month: October 2018

Seventh Circuit Holds Plaintiff Who Was Not Debtor Still Had Standing to Bring FDCPA Action

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The United States Court of Appeals for the Seventh Circuit recently reversed a district court’s decision dismissing a complaint and held that a plaintiff may have a claim under the Fair Debt Collection Practices Act (“FDCPA”) even if he denies owing the debt at issue.  See Loja v. Main St. Acquisition Corp., 2018 WL 5077679 (7th Cir. Oct. 18, 2018).  In the case, the defendant debt collector retained the defendant law firm to file a complaint against the plaintiff arising out of an unpaid credit card debt.  Plaintiff denied owing the debt and that lawsuit ultimately was dismissed.  Plaintiff then brought this action under the FDCPA alleging that the defendants continued pursuing a lawsuit against him even after being informed that he was not obligated on the debt at issue.  Under the FDCPA, a “consumer” is defined as one who is “obligated or allegedly obligated to pay any debt.”  Based on this definition, the district court dismissed the complaint, holding that plaintiff did not have standing to bring the action as long as he denied owing the debt because he was not “obligated or allegedly obligated” on the debt.

On appeal, the Seventh Circuit reversed, giving plaintiff leave to amend his complaint if necessary.  The Court found that a plain reading of the FDCPA demonstrates that the phrase “obligated or allegedly obligated” did not require the plaintiff to allege he or she was obligated on the debt.  Instead, “the definition of ‘consumer’ under the FDCPA includes consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe. This interpretation conforms to the structure and text of the rest of the FDCPA, which focuses primarily on the conduct of debt collectors, not consumers.”  Based on this reading of the statute, the Court reversed and remanded.

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

New Jersey Appellate Court Holds Fair Foreclosure Act Violation Might Trigger TCCWNA Liability

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In a decision approved for publication, New Jersey’s Appellate Division recently vacated and remanded a trial court’s order dismissing a borrower’s complaint and held that a lender’s violation of the Fair Foreclosure Act (the “FFA”) might constitute a violation of the Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”).  See Wright v. Bank of Am., N.A., 2018 WL 4779028 (N.J. Super. Ct. App. Div. Oct. 4, 2018).  In the case, the lender sent five notices of intention to foreclose to the borrower in 2010, but none of the notices included the lender’s name and address as required by the FFA.  Although the lender never filed a foreclosure action, plaintiff filed a complaint alleging that these omissions violated TCCWNA.  The trial court dismissed the complaint, finding that FFA violations cannot support a TCCWNA claim.

On appeal, the Court vacated and remanded.  The Court found that “[e]ven though there is no suggestion that the content of the notices was false or misleading – only that a legal requirement was omitted – we assume this type of FFA violation may support a TCCWNA claim” because TCCWNA should be interpreted expansively.  The FFA is a consumer protection statute, and the departure from any of its regulations may “fall within TCCWNA’s scope.”  Nonetheless, the Court found that it was not clear whether the borrower was an “aggrieved consumer” under TCCWNA because the record did not show whether he suffered any damages from this alleged violation, a requirement solidified in the New Jersey Supreme Court’s recent decision, Spade v. Select Comfort Corp., 232 N.J. 504 (2018).  Thus, because neither the trial court nor the parties had the benefit of the Spade decision, the Court remanded this action so that plaintiff could amend his complaint and identify any alleged damages.

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

Motion for Reconsideration of Another Judge’s Order: What Happens When the Judge Presiding Over a Family Law Case Retires

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It happens more frequently than one would think: the judge presiding over a family law matter either retires or in many cases is moved to another division within the court system.  For many years, family practitioners have been aware of the “one family/one judge” rule and the directives set forth by the administrative office of courts; there is a time-honored tradition of having one judge preside over a family matter for as long as the matter is active. In fact, it is an axiomatic premise that family court judges are well acquainted with the parties and for that reason appellate courts often do not like to disturb the findings of a family judge absent abusive discretion.  In other words, the standard of review of the family trial court is limited.  Cesare v. Cesare, 154 N.J. 394, 411 (1998).  The Appellate Division gives deference to family judges because they are well acquainted with the various idiosyncrasies and facts of the families involved in the matter. Donnelly v. Donnelly, 405 N.J. Super. 117 (App. Div. 2009).

The above was likely more true years ago than it is today considering judges spent most of their careers in the same division.  Today, in New Jersey, judges who are assigned cases in the family division are frequently moved from the family division to another division, such as the law division or criminal division, at some point during their tenure.  Due to the docket demands and lack of judicial resources, various vicinages move judges around throughout the different divisions within the courthouse.  Additionally, it is not uncommon for judges to retire in the middle of a case or in the middle of an existing family law matter.  When that occurs, those dockets are assigned to a new judge.

In some instances, the retiring judge may come back on recall and the cases that the judge presided over during their time on the bench will be reassigned to them for post judgment matters.  That said, however, recently this issue was addressed in the matter of T.E.J. v, H.A.W., 2018 WL 4839118.  In this case, the plaintiff appealed an order denying reconsideration of a previous order that granted the defendant residential custody of the parties’ daughter and allowed the relocation to another state.  Defendant had filed an application to relocate to Georgia and the trial court conducted a custody and relocation hearing.  The trial judge granted residential custody and allowed for the relocation to occur.  Thereafter, the plaintiff filed a motion for reconsideration, but the trial judge retired and the motion was then assigned to a new judge who had not presided over the relocation trial where the original extensive motion practice that had occurred previously.  The new judge assigned to the matter concluded that only the judge that made the custody and removal decision could order reconsideration.  Plaintiff then appealed the issue as to whether or not the motion judge erred when she denied reconsideration based on that premise.

The Appellate Division disagreed with the motion judge and determined that the motion judge was not procedurally barred from reconsidering the trial court’s custody and relocation order so long as the appropriate reconsideration standards were applied.  Therefore, the Appellate Division vacated the order denying reconsideration solely on those procedural grounds and remanded the issue back to the trial court and the new motion judge.

The Appellate Division did not address any of the merits regarding the custody and relocation order but, instead, restricted its decision to the procedural issue of whether or not a new motion judge could and should hear the motion to reconsider the order of a retiring judge.

It may seem that this particular issue, at least at first blush, is an anomaly or perhaps not even significant enough to address, but rest assured disagreement regarding the procedural issues surrounding one judge reconsidering the motion of another judge who is unavailable happens frequently. T.E.J. v, H.A.W. is a case that every family law practitioner should be mindful of when this issue arises.  Whether it is the adversary that argues against it, or the judge who is refusing, it is now clear that the Appellate Division, after having this issue raised numerous times and in an effort to quell any confusion, has unequivocally indicated that where an order is issued by a retiring judge, a new judge has the procedural authority to decide a motion for reconsideration.  It stands to reason that this does not just apply to motions for reconsideration but also applies to trials, new trials, other issues remanded by the Appellate Division and all issues regarding the review of orders issued by a judge who is no longer available and even judges that presumably have been transferred to another division.

Missouri Appellate Court Affirms Summary Judgment Decision in Favor of Title Insurance Company Based on Late Notice

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The Court of Appeals of Missouri recently affirmed that a title insurance company was entitled to summary judgment dismissing the claims against it when the insured failed to notify the insurer of a litigation until years after it settled.  See Lurie v. Commonwealth Land Title Co., LLC, 2018 WL 4087384 (Mo. Ct. App. Aug. 28, 2018).  In the case, the insured filed a lawsuit against his neighbor in 2008 based on the claim that the neighbor’s fence encroached onto the insured’s property.  The insured voluntarily dismissed the lawsuit in 2009, then brought a second action in 2010.  In 2012, he again voluntarily dismissed the action and settled with his neighbor.  In 2015, he brought a claim with the title insurance company seeking reimbursement for the $68,000 in legal fees he expended in his two actions and brought an action against the title insurance company alleging breach of contract, unjust enrichment and vexatious refusal to pay.  The title insurance company moved for summary judgment, and the trial court granted the motion.

On appeal, the Court affirmed.  The title insurance policy requires that the insured notify the insurer “promptly in writing in case of any litigation.”  In this case, the insured waited until eight years after he brought his first action and three years after he settled the claim with his neighbor to notify the title insurance company.  The Court held, “[t]here can be no reasonable conclusion this notice of litigation was prompt in any circumstance; therefore, it ceases to be a question of fact and becomes a determination of law for the court.”  Further, the policy gives the title insurance company the right to choose counsel and control the litigation, and the insured’s late notice of the claim prejudiced this right.  Thus, the Court affirmed the decision.

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

New Jersey Takes the Lead in Setting Drinking Water Standard for PFNA

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The New Jersey Department of Environmental Protection (“NJDEP”) continues to take action on emerging contaminants, and, as of September 4th, adopted a maximum contaminant level (“MCL”) for perflourononanoic acid (“PFNA”) in drinking water.  PFNA is not regulated at the federal level, and New Jersey is the first state to set an enforceable standard for PFNA in drinking water.  The new MCL is 0.013 micrograms per liter, that is, 13 parts per trillion, an extraordinarily low level.  MCLs for other substances are measured in the parts per billion, so, for example, the new MCL for PFNA is nearly one hundred times lower than the MCL for benzene, which is one part per billion.  If water systems detect the presence of this previously unregulated chemical above the very low new MCL, they will be required to implement new treatment—at the steep cost of $500,000 to $1 million per million gallons of water treated per NJDEP’s estimate—or find alternate water supplies.  In addition, testing water supplies for PFNA on a statewide basis, as compared to earlier sporadic efforts to detect PFNA, could unearth previously unknown sources of PFNA contamination that would have to be remediated under New Jersey’s site remediation program.

PFNA is one member of a class of chemicals called per- and polyflouroalkyl substances (“PFAS”) that have been used in numerous industrial applications and in consumer products for decades, but that have come under increasing regulatory scrutiny in recent years.  PFNA in particular was used in the manufacture of high-performance plastics.  PFAS resist natural degradation when released into the environment and remain in the body after being consumed; studies also have linked certain PFAS to various health risks, including cancer.  Because of these health risks and the persistence of PFNA in the environment, earlier this year NJDEP listed PFNA as a “hazardous substance” under its regulations promulgating the Spill Compensation and Control Act.  PFNA in groundwater now must be remediated when its concentration exceeds 13 parts per trillion as a consequence of the hazardous substance listing.

Under NJDEP’s new MCL rule, water systems will need to start testing for PFNA as soon as the first quarter of 2019.  Smaller water systems must test for PFNA first.  The PFNA testing requirement is triggered in 2019 for public water systems that use groundwater as their source and that serve less than 10,000 people, as well as water systems that do not serve the general public in their homes, such as a water system supplying a commercial building.  For water systems using surface water or larger water systems using groundwater, the requirement is not triggered until 2020.

Because PFNA was not listed as a hazardous substance until this year, parties remediating contaminated sites typically have not investigated for PFNA.  Parties responsible for PFNA found in drinking water will be exposed to claims not only for the costs of treating drinking water found to be contaminated, but also will be required to remediate the source of PFNA contamination, whether that source is a site already subject to remediation for other hazardous substances or a site that heretofore was not known to be contaminated.  NJDEP optimistically predicted that the new PFNA testing regime would not disclose water systems impacted by PFNA beyond the thirteen water systems now known to be impacted based on earlier, piecemeal testing efforts.  Several commenters on the proposed rule doubted NJDEP’s assessment before the MCL was adopted and predicted that currently unknown contamination will be discovered.

The immediate consequence of New Jersey’s first-in-the-nation MCL for PFNA is to impose new testing requirements and, potentially, costly treatment obligations on water systems.  In the long term, testing drinking water for PFNA may uncover contamination that has long remained hidden.  NJDEP also can be expected to establish MCLs for other PFAS compounds in the future if current trends continue. 

For more information, please contact the author Michael S. Kettler at mkettler@riker.com or any attorney in our Environmental Practice Group.

New Jersey Appellate Court Affirms Holding That Assignee Lender Was Not Required to Resend Notice of Intention to Foreclose

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New Jersey’s Appellate Division recently affirmed a trial court’s order granting a lender summary judgment on its foreclosure action and holding that the lender was not required to resend a notice of intention to foreclose (“NOI”) after being assigned the mortgage.  See U.S. Bank Trust, N.A., as Trustee for LSF9 Master Participation Trust v. Thomas, 2018 WL 4924377 (N.J. Super. Ct. App. Div. Oct. 11, 2018).  In the case, the defendant borrower defaulted on his loan in 2012, and in 2013, the loan servicer for the mortgagee at the time sent an NOI.  The mortgage was later assigned to plaintiff, who commenced the foreclosure action in December 2015.  The trial court granted plaintiff’s motion for summary judgment and defendant appealed, arguing, among other things, that plaintiff was required to send its own NOI before foreclosing and could not rely on one sent by its assignor.  After the Appellate Division remanded to make additional factual findings, the trial court again found that plaintiff was entitled to summary judgment, and defendant appealed.

On appeal, the Appellate Division affirmed the trial court’s decision.  The Fair Foreclosure Act (the “FFA”) requires that a residential mortgage lender send an NOI to a debtor before bringing a foreclosure action, and the NOI must include the lender’s name, address, and telephone number in case the debtor “disagrees with the lender’s assertion that a default has occurred or the correctness of the mortgage lender’s calculation of the amount required to cure the default.”  Defendant argued that plaintiff’s failure to reissue an NOI with plaintiff’s contact information meant it could not foreclose under the FFA.  The Court disagreed.  Although the FFA “is silent as to whether a subsequent assignee lender may rely upon an NOI sent by a predecessor lender,” the Court found that plaintiff was entitled to rely on its assignor’s NOI based on “the unique factual circumstances of this case.”  Specifically, the Court noted that more than two years had passed since the NOI in 2013, during which defendant made no attempt to either cure his default or seek a modification.  Thus, “the NOI did not pose a barrier to defendant curing, or attempting to cure, his default. Defendant had ample notice of an impending foreclosure action and simply failed to act.”

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

New Jersey Federal Court Dismisses RESPA Claim Against Loan Servicer, Holds Servicer Was Not Required to Terminate Foreclosure Action While Modification Application Was Pending

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The United States District Court for the District of New Jersey recently dismissed an action brought by a borrower against a loan servicer in which she alleged that the servicer had violated the Real Estate Settlement Procedures Act (“RESPA”) by denying her loan modification application and continuing a foreclosure action against her property.  See Bello v. Bayview Loan Servicing, LLC, 2018 WL 4380996 (D.N.J. Sept. 14, 2018).  In the case, the borrower defaulted on her mortgage and the servicer commenced a foreclosure action in 2014.  In March of 2017, a final judgment of foreclosure was entered in the action.  In April of 2017, the borrower submitted an application to the servicer seeking to modify her loan, and the servicer denied the application the next month based on the borrower’s income.  The borrower then sent a letter in June of 2017 challenging the rejection, which the servicer again rejected.  The borrower brought this action, alleging that the servicer violated RESPA by denying the modification and by “failing to take any action to cancel the foreclosure” while the application was pending, among other claims.  The servicer moved to dismiss the complaint.

The Court granted the servicer’s motion.  First, it held that RESPA only mandates that a servicer consider a modification application, but does not require that it accept it.  In this case, the servicer reviewed the application but made the determination that the borrower’s income was insufficient to modify the loan, and therefore it met its duty under RESPA.  Second, the Court held that RESPA only prevents servicers from conducting sales while a modification application is pending, and does not require that the servicer terminate the action.  See 12 CFR 1024.41 (preventing a servicer from “mov[ing] for foreclosure judgment or order of sale, or conduct[ing] a foreclosure sale” while the modification application is pending unless certain conditions are met).  Because the servicer did not conduct the sale while the application was pending, the Court dismissed the RESPA claim.

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

New York Federal Court Holds Property Reverted to Government When Purchaser Failed to Meet Conditions Subsequent Due to Zoning Restrictions

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The United States District Court for the Eastern District of New York recently held that title to a property reverted to the government when the purchaser was unable to meet the deed’s conditions subsequent due to zoning restrictions that prevented the purchaser from opening a homeless shelter.  See United States v. Overcoming Love Ministries, Inc., 2018 WL 4054867 (E.D.N.Y. Aug. 24, 2018).  As part of the McKinney-Vento Homeless Assistance Act, the government conveyed a property to defendant in 2011 so that defendant could convert it into a 200-unit housing facility for homeless families.  The conveyance was via a quitclaim deed that contained conditions subsequent, including a requirement that the property be used for “health purposes” for 30 years and that defendant place the property into use within three years of the date of the deed.  The deed—which defendant never signed—further provided an automatic right of reversion to the government if defendant failed to abide by any of these conditions.  After the sale, however, defendant learned that the property was zoned “Industrial/Commercial” and was unable to rezone it despite spending over $200,000 in attempting to do so.  Although the government allowed defendant to make additional proposals for how to utilize the property, it ultimately brought this action seeking reversion of the property.  Defendant responded by arguing that the government breached the implied covenant of good faith and fair dealing by offering the property for a purpose that was legally impossible to comply with, and that it waived the conditions subsequent.

The government moved for summary judgment, and the Court granted the motion.  First, it found that the government had not breached the implied covenant of good faith and fair dealing because the deed includes a reversionary right to the government if defendant breached a condition subsequent, and the Court will not imply any obligation inconsistent with the express contractual terms.  Additionally, “the Deed explicitly states that Defendant bears the risk of nonperformance in the event of legal impossibility.”  Second, the Court held that the government did not waive its rights, as the deed contains an express condition that “the failure of [the government] . . . to insist in any one or more instance upon complete performance of any of the said conditions subsequent shall not be construed as a waiver of or a relinquishment of the future performance of any of said conditions subsequent.”  Finally, the fact that defendant never signed the deed did not result in a waiver because the Court found that the deed was presented and accepted by defendant, who submitted it for recording.  “In fact, the more logical effect, if any, of the missing signature page would be that Defendant never accepted the Deed, and that the Property never transferred to Defendant in the first place.”

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 Statement That a Forgiveness of Debt Might Be Reported to the IRS May Have Violated the FDCPA

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The United States Court of Appeals for the Third Circuit recently reversed a lower court and held that a dunning letter stating that the forgiveness of debt might be reported to the IRS may violate the Fair Debt Collection Practices Act (“FDCPA”) when there is no chance of such a reporting.  See Schultz v. Midland Credit Mgmt., Inc., 2018 WL 4558595 (3d Cir. Sept. 24, 2018).  In the case, the defendant debt collector sent letters to the plaintiffs—a husband and wife—regarding four outstanding debts, none of which exceeded $600.  Each letter offered to settle the debt for a discounted amount and stated, “[w]e will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.”  Plaintiffs then filed a putative class action, arguing that this language was “false, deceptive and misleading” because the Department of the Treasury only requires the reporting of a discharge of indebtedness of $600 or more.  The District Court dismissed the action, finding that the statement that the debt forgiveness may be reported did not violate the FDCPA.

On appeal, the Third Circuit reversed the lower court’s decision.  Using the standard of whether the least sophisticated consumer might be misled by the statement, the Court found that plaintiffs had properly pled a claim under the FDCPA.  Specifically, the Court rejected defendant’s argument that even the least sophisticated consumer would interpret the statement that reporting “might not be required in your case” meant that the reporting might not occur, and that the statement therefore was not misleading.  To the contrary, the Court found that “there was no possibility of IRS reporting in light of the fact that the debt was less than $600, [and] use of the conditional ‘might’ suggested that reporting was a possibility.”  The Court also acknowledged that defendant likely sent form letters to debtors that included this language, but stated that “convenience does not excuse a potential violation of the FDCPA.”  Thus, the Court reinstated and remanded the action.

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

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