Terry Klotz v. Celentano Stadtmauer and Wale
991 F.3d 458
| 3rd Cir. | 2021Background
- Plaintiff Terry Klotz’s husband received treatment at Hackensack University Medical Center and incurred a $1,580 medical bill; he died without leaving an estate.
- The Hospital retained collection firm Celentano, Stadtmauer & Walentowicz, LLP (CSW), which sent two collection letters seeking payment from Klotz.
- Klotz sued CSW under the FDCPA (§§ 1692e and 1692f), alleging the letters falsely sought payment from her for a debt she did not owe.
- CSW moved to dismiss, arguing New Jersey’s common-law doctrine of necessaries makes a spouse liable for necessary expenses when the debtor spouse’s assets are insufficient; the District Court dismissed with prejudice and denied leave to amend.
- On appeal, the Third Circuit affirmed: it held the ECOA does not preempt New Jersey’s doctrine (medical debts count as "incidental credit" exempting the spousal-signature rule), found CSW complied with the doctrine’s procedural prerequisites, and ruled amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the ECOA preempts NJ's doctrine of necessaries | ECOA's spousal-signature prohibition makes Klotz immune from liability; state doctrine conflicts with federal law | Doctrine is compatible; even if relevant, medical debt is "incidental credit" exempt from the spousal-signature rule | ECOA does not preempt the doctrine; medical debt is incidental credit exempting the spousal-signature prohibition |
| Whether CSW complied with the doctrine's procedural requirement to seek payment from the debtor spouse/estate first | CSW failed to seek satisfaction from the husband or his estate before contacting Klotz | Husband left no estate; complaint contains no allegations that CSW skipped required steps | Complaint lacked allegations and public records show no estate; Jersey Shore permits creditor recourse against surviving spouse when estate is insolvent |
| Whether the District Court abused discretion by denying leave to amend (futility) | Proposed amendments would show CSW sought amounts beyond what necessaries permits and thus state a FDCPA claim | Even with new allegations, the charges arise from necessary medical services and amendment would be futile | Denial affirmed: proposed facts insufficient to plausibly show the debt fell outside New Jersey's definition of necessaries; amendment would be futile |
Key Cases Cited
- Jersey Shore Medical Center-Fitkin Hosp. v. Estate of Baum, 417 A.2d 1003 (N.J. 1980) (establishes New Jersey doctrine of necessaries: spouses liable for necessary expenses when debtor spouse's assets are insufficient)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (articulates the plausibility standard for pleading)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (clarifies factual-pleading requirements to show plausible entitlement to relief)
- Oneok, Inc. v. Learjet, Inc., 575 U.S. 373 (U.S. 2015) (sets standard for conflict preemption: impossibility or obstacle to congressional objectives)
- Kansas v. Garcia, 140 S. Ct. 791 (2020) (preemption analysis must be grounded in the statute's text and structure)
- Moran Foods, Inc. v. Mid-Atlantic Mkt. Dev. Co., LLC, 476 F.3d 436 (7th Cir. 2007) (ECOA focused on availability of credit, not allocation of spousal liability)