Obduskey v. McCarthy & Holthus LLP
139 S. Ct. 1029
| SCOTUS | 2019Background
- Dennis Obduskey bought a Colorado home, defaulted on his mortgage, and Wells Fargo hired law firm McCarthy & Holthus to initiate a nonjudicial foreclosure.
- McCarthy sent statutorily required foreclosure notices and, after Obduskey disputed the debt under 15 U.S.C. § 1692g(b), proceeded to file a notice of election and demand with the public trustee.
- Obduskey sued in federal court alleging McCarthy violated the Fair Debt Collection Practices Act (FDCPA) by failing to cease collection and provide verification after the dispute.
- The District Court dismissed, and the Tenth Circuit affirmed, finding McCarthy was not a "debt collector" under the FDCPA for engaging only in nonjudicial foreclosure.
- The Supreme Court granted certiorari to resolve circuit splits over whether entities whose principal business is enforcement of security interests fall within the FDCPA's definition of "debt collector."
Issues
| Issue | Plaintiff's Argument (Obduskey) | Defendant's Argument (McCarthy / Wells Fargo) | Held |
|---|---|---|---|
| Whether a person whose principal purpose is enforcement of security interests (via nonjudicial foreclosure) is a "debt collector" under 15 U.S.C. § 1692a(6) for all FDCPA provisions | Nonjudicial foreclosure is a form of debt collection; enforcing security interests should make McCarthy a debt collector subject to the FDCPA (including verification duties) | The statute's second sentence narrows the primary definition: those whose principal purpose is enforcement of security interests are excluded from the primary definition except for §1692f(6) | Held: Entities engaged only in enforcement of security interests (as in nonjudicial foreclosure) are not "debt collectors" under the FDCPA's primary definition; they are covered only for §1692f(6) |
| Whether the limited-purpose clause is surplusage if security-interest enforcers are already within the primary definition | The venue provision and practical effect of foreclosure notices show enforcement actors are covered | The text, structure, and legislative history show Congress intended to exclude pure security-interest enforcers from most FDCPA provisions; the limited clause would not be needed otherwise | Held: The limited-purpose clause is meaningful and indicates a partial exclusion from the primary definition |
| Whether state nonjudicial foreclosure procedures conflict with FDCPA application, justifying a narrower reading | FDCPA protections should govern to prevent abuses regardless of state foreclosure scheme | Applying all FDCPA provisions to nonjudicial foreclosure could conflict with state foreclosure practices (e.g., public sale advertising, required third‑party communications) | Held: A narrower reading avoids potential conflicts with state foreclosure schemes and is plausible given statutory text |
| Whether McCarthy's required pre-foreclosure notices converted it into a "debt collector" because they communicated an attempt to collect | Notices threatening foreclosure are attempts to collect and thus make McCarthy a debt collector | Notices were steps required by state law to enforce a security interest; such required steps are encompassed by the statutory exception and do not automatically convert the actor into a debt collector | Held: Court assumes notices were state-law antecedent steps and does not treat them as transforming McCarthy into a debt collector for the FDCPA's main coverage |
Key Cases Cited
- Heintz v. Jenkins, 514 U.S. 291 (1995) (FDCPA applies to attorneys who regularly collect debts)
- Glazer v. Chase Home Fin. LLC, 704 F.3d 453 (6th Cir.) (entity enforcing security interests treated as debt collector for FDCPA purposes)
- Kaymark v. Bank of America, N.A., 783 F.3d 168 (3d Cir.) (security‑interest enforcers are debt collectors under FDCPA)
- Vien‑Phuong Thi Ho v. ReconTrust Co., N.A., 858 F.3d 568 (9th Cir.) (enforcement‑only actors not debt collectors under FDCPA)
- Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir.) (security‑interest enforcers treated as debt collectors)
- Obduskey v. Wells Fargo, 879 F.3d 1216 (10th Cir.) (affirmed dismissal: nonjudicial foreclosure not covered by FDCPA)
- Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy, 548 U.S. 291 (2006) (statutory interpretation presumes avoiding surplusage)