COLLINS v. PHELAN HALLINAN DIAMOND & JONES, LLP
2:17-cv-03727
| E.D. Pa. | Mar 1, 2018Background
- Plaintiffs (Collins and Walker) received a dunning/foreclosure notice from Phelan Hallinan Diamond & Jones, LLP (Phelan) regarding a defaulted Wells Fargo mortgage.
- Plaintiffs sent a written dispute/verification request on October 26, 2016.
- Phelan filed a state-court in rem foreclosure complaint on October 30, 2016 and served it November 3, 2016, before sending a verification letter on November 28, 2016 with copies of loan documents.
- Plaintiffs sued under the FDCPA alleging violations of §§ 1692e(2)(A), (5), (10), 1692j(a), and § 1692g(b) (failure to cease collection after dispute and before verification).
- District court evaluated a Rule 12(b)(6) motion to dismiss, accepting well-pleaded facts and assessing plausibility.
- Court found no plausible misrepresentation or deceptive-identification claims but held plaintiffs plausibly alleged a § 1692g(b) violation because foreclosure is debt-collection activity and filing occurred after the dispute but before verification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Phelan’s communications and foreclosure filing were false, misleading, or deceptive under § 1692e / § 1692j | Phelan misrepresented the debt and its role, falsely implied affiliation with Wells Fargo, and used deceptive means to collect | Communications plainly identified Phelan as counsel for Wells Fargo; statements were not false or misleading to a reasonable debtor | Dismissed — plaintiffs failed to plausibly allege § 1692e or § 1692j violations |
| Whether Phelan violated § 1692g(b) by filing foreclosure after plaintiffs disputed the debt but before providing verification | Filing foreclosure after dispute, before verification, violates § 1692g(b)’s requirement to "cease collection" until verification is mailed | Foreclosure is an in rem legal action and not subject to FDCPA collection rules | Denied dismissal as to § 1692g(b) — foreclosure is debt-collection activity; filing before verification can state a claim |
| Whether Phelan’s later verification letter satisfied § 1692g(b) | Verification letter (Nov. 28) did substantively verify the debt | — | Verified letter adequate as to content, but timing issue remains because collection (filing) occurred before verification |
| Scope of damages if § 1692g(b) proven | Plaintiffs seek relief for FDCPA violations | Phelan disputes liability | Court notes statutory cap: actual damages plus statutory up to $1,000 under § 1692k(a)(2)(A) |
Key Cases Cited
- Kaymark v. Bank of Am., N.A., 783 F.3d 168 (3d Cir.) (foreclosure qualifies as debt-collection activity under the FDCPA)
- McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240 (3d Cir.) (FDCPA covers in rem foreclosure activity)
- Glazer v. Chase Home Fin. LLC, 704 F.3d 453 (6th Cir.) (foreclosure is debt collection aimed at inducing payment)
- Graziano v. Harrison, 950 F.2d 107 (3d Cir.) (verification under § 1692g should state date and nature of transaction)
- Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 758 F.3d 777 (6th Cir.) (verification need not be extensive; should provide date and nature of transaction)