Aleta POWELL, Plaintiff-Appellant, v. PALISADES ACQUISITION XVI, LLC; Fulton Friedman & Gullace, LLP; John Does 1-10, Defendants-Appellees.
No. 14-1171
United States Court of Appeals, Fourth Circuit
Argued: Oct. 30, 2014. Decided: Dec. 18, 2014.
782 F.3d 119
Before NIEMEYER and GREGORY, Circuit Judges, and DAVIS, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded by published opinion. Judge NIEMEYER wrote the opinion, in which Judge GREGORY and Senior Judge DAVIS joined.
Aleta Powell, a credit card debtor, commenced this action against Palisades Acquisition XVI, LLC, and its attorneys, Fulton Friedman & Gullace, LLP, as debt collectors, alleging violations of two provisions of the Fair Debt Collection Practices Act (FDCPA),
The district court granted summary judgment to Palisades and Fulton Friedman & Gullace, concluding that the filing of the Assignment of Judgmеnt did not qualify as debt collection activity that implicated the protections of the FDCPA and that, in any event, the misrepresentations made in the document were not material. It also concluded that Powell failed to produce sufficient evidence to support a claim under
I
Powell, a resident of Baltimore, Maryland, incurred a credit card debt of $8,205.24, payable to Direct Merchants Bank, N.A., and defaultеd on the debt after losing her job in 2000. The Bank assigned the debt to Platinum Financial Services Corp., which filed an action in November 2001 in the District Court of Maryland for Baltimore City (“Baltimore City District Court“) to collect the debt. In response to the suit, Powell agreed to a payment schedule, subject to the entry of a consent judgment in the event of default. On June 24, 2003, after Powell defaulted again, the Baltimore City District Court entered judgment in favor of Platinum Financial in the amount of $10,497.21, which included $9,216.43 for principal and prejudgment interest, $1,230.78 in attorney‘s fees, and $50 in costs, and which provided for post-judgment interest at the statutory rate of 10%. When Platinum Financial began garnishment proceedings to collect on its judgment, Powell again agreed to make payments, and she did so until May 2005, making monthly payments totaling $2,700. She later stated that she stopped making payments because she thought she had paid off the debt.
In March 2007, Platinum Financial sold its judgment against Powell to Palisades Acquisition XV, LLC, which, on the same day, sold it to Palisades Acquisition XVI, LLC (“Palisades“). Palisades later retained the law firm of Fulton Friedman & Gullace, LLP, to help it collect the debt. Pursuing its collection effort, Fulton Friedman & Gullace entered an appearance in the debt collection action pending in the Baltimore City District Court, prepared an Assignment of Judgment, served a copy of it on Powell, and, on June 29, 2012, filed it in the pending action. The Assignment of Judgment, which included the caption of the action, indicated that it was prepared pursuant to Md. Rule 3-624, which authorizes an assignee who files an assignment of judgment to enforce the judgment in its own name. The Assignment of Judgment that Fulton Friedman & Gullace filed provided in relevant part:
A Judgment in the above case was еntered on June 24, 2003 in the amount of $10497.21 plus attorney‘s fees of $1230.78 and costs of $0.00. Payments totaling $0.00. PLATINUM FINANCIAL SERVICES CORP was the judgment creditor in this case. PLATINUM FINANCIAL SERVICES CORP transferred and assigned all title, rights, and interest in said judgment on or about March 5, 2007 to:
Palisades Acquisition XVI, LLC
210 Sylvan Avenue
Englewood Cliffs, NJ 07632
The Bill of Sales for said assignment are attached hereto reflecting Judgment Creditor‘s assignment.
As it turned out, the Assignment of Judgment was erroneous in two respects. First, it reported a judgment in the total amount of $11,727.99, instead of the correct amount of $10,497.21. Apparently, the preparer of the document double counted the $1,230.78 award for attorney‘s fees. Second, it reported that Powell had made no payments on the judgment when, in fact, she had made $2,700 in payments.
The Assignment of Judgment indicated that bills of sale reflecting the assignment of the judgment to Palisades were attached, but as the Baltimore City District Court later found, the attached bills of sale simply referenсed “accounts” and were not sufficiently specific to demonstrate the assignment of Powell‘s judgment.
In response to the Assignment of Judgment, Powell filed a motion in the Baltimore City District Court to vacate the judgment on the ground of “fraud, mistake, or irregularity.” At the hearing on the motion, an attorney from Fulton Friedman & Gullace acknowledged that the Assignment of Judgment that had been filed was erroneous, and he submitted an amended Assignment of Judgment to correct the errors. Nonetheless, the court vacated the judgment because the bills of sale attached tо the Assignment of Judgment were insufficient to indicate Palisades’ ownership and because Palisades lacked records documenting Powell‘s payments on the debt. The Circuit Court for Baltimore City affirmed the ruling on appeal, and the Maryland Court of Appeals denied discretionary review.
After her judgment had been vacated by the Maryland court, Powell commenced this action against Palisades and Fulton Friedman & Gullace, asserting claims under the FDCPA,
On cross-motions for summary judgment, the district court entered judgment in favor of the defendants on January 29, 2014. With respect to the FDCPA claims, the court concluded that the representations that Palisades made in the Assignment of Judgment did not implicate the FDCPA because the filing of an assignment of judgment did not qualify as conduct taken “in connection with the collection of any debt,”
From the final judgment, Powell took this appeal.
II
Powell contends first that the district court erred in concluding that the filing of an assignment of judgment in a debt collection action does not constitute debt collection activity that implicates the FDCPA. In reaching its conclusion, the district court considered three factors: “(1) whether the communication included a demand for payment or had the ‘animating purpose’ to induce payment; (2) the relationship between the parties; and (3) the purpose аnd context of the communication.” While the court acknowledged that the relationship between the parties was that of debtor and debt collector, it found that the Assignment of Judgment did not contain a demand for payment and was not filed to induce payment. Moreover, although the court recognized that the Assignment of Judgment “was a step to ultimately collecting the debt,” it nonetheless emphasized that “the Defendants would [still] have had to take separate action to collect any money from Powell.” It thus concluded that “filing the Assignment was not an action to collect a debt” and that it therefore was “not subject to the [FDCPA].” Challenging the court‘s conclusion, Powell argues that the standard applied by the court is not supported by the statutory language and, in any event, has been employed by other courts only to evaluate informal communications from debt collectors, such as letters or telephone calls, but not debt collectors’ litigation activities.
The defendants, on the other hand, assert that the district court correctly concluded that “the Assignmеnt was not a collection activity, because [it] contained no demand for payment and was not an action against the consumer capable of inducing payment but rather served to establish a right of the filing party with the court.”
To determine whether the filing of an assignment of judgment in a debt collection action triggers application of the FDCPA, we look first to the text of the statute—in this case,
The defendants do not take issue with the fact that the Assignment of Judgment filed in the Baltimore City District Court misrepresented the amount of the judgment and the amount of payments made toward its satisfaction; indeed, they pleaded that the misrepresentation was an unintentional clerical error. Rather, they argue that because of its purpose and function, an assignment of judgment is not filed “in connection with the collection of any debt,” nor as an “attеmpt to collect any debt.” To address that argument, we turn to the nature and role of the Assignment of Judgment filed in the Baltimore City District Court.
After Powell defaulted on her credit card debt, Platinum Financial filed an action in the Baltimore City District Court to collect the debt. Following Powell‘s agreement to make payments and her subsequent default on that agreement, the Baltimore City District Court entered a judgment in the action against Powell, dated June 24, 2003. When Platinum Financial sought to enforce the judgment through garnishment proceedings under
Thus, it can hardly be disputed that when a person files an assignment of judgment in a debt collection action so as to be able to execute on the judgment, the person has taken aсtion in connection with the collection of the judgment debt or as part of an attempt to collect the judgment debt.
This inevitable conclusion is further reinforced by the factual context of the actions taken by Palisades in this case. First, Palisades was in the business of collecting debts, and it purchased the judgment in this case pursuant to that business purpose. Thus, when Palisades filed the Assignment of Judgment and served a copy on Powell, it included on the document, “This communication is from a debt collector.” Moreover, counsel for Palisades stated in his deposition that the company thought it had “found some recoverable asset” and so decided to pursue
In reaching its contrary conclusion, the district court emphasized that the filing of an assignment of judgment “simply preserves the rights of the assignee by establishing [that it is] the rightful owner of a judgment.” This characterization, however, was too cramped and overlooked the crucial role that the filing of an assignment of judgment plays in giving the assignee access to court-sanctioned enforcement procedures. Indeed, while the district court recognized that “filing the Assignment was a step to ultimately collecting the debt,” it nonetheless concluded that such a filing was not itself done to collect a debt because “the Defendants would have had to take separate action to collect any money from Powell.” Such reasoning, however, would exclude a large range of collection activities from the FDCPA‘s protections, including activity that we have already recognized as falling within the purview of the statute. For example, in Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 234 (4th Cir.2007), we held that a motion for summary judgment filed in a debt collection action was “subject to the provisions of [the] FDCPA.” It would be incongruous now to hold that an assignment of judgment filed in a debt collection action is not similarly subject to the FDCPA, given that a debt collector who obtains a judgment through a successful summary judgment motion stands in exactly the same position as a debt collector who files an assignment of judgment. Both have the right to collect on their judgments, and both must take additional steps to do so.
Accordingly, we conclude that the district court erred in dismissing Powell‘s FDCPA claims based on its holding that the filing of an assignment of judgment is not debt collection activity.
III
Powell contends that the district court also erred in concluding that the defendants’ misrepresentations in the Assignment of Judgment were not material. She argues that the defendants falsely represented (1) that Palisades was the owner of the judgment, and (2) both the аmount of the judgment and her payments on it. She maintains that these misrepresentations were material.
As to the first alleged misrepresentation, we conclude that the record clearly shows that the judgment against Powell had indeed been assigned by Platinum Financial to Palisades and that the defendants’ representation of this fact was therefore not false. To be sure, the Baltimore City District Court found that Palisades failed adequately to document the assignment in the proceeding before that court, since Palisades attached only gеneric bills of sale that were not specific as to Powell‘s debt. But Palisades has rectified that problem in this litigation, providing the relevant records that show that Powell‘s judgment was one of the many “accounts” that Platinum Financial assigned to Palisades in March 2007.
Powell argues nonetheless that the doctrine of collateral estoppel requires us to conclude that Palisades lacked a valid assignment and was not the true owner of the judgment. Collateral estoppel, however, “only bars relitigation of issues actually resolved in a previous suit.” Bethel World Outreach Ministries v. Montgomery Cnty. Council, 706 F.3d 548, 554 n. 2 (4th Cir. 2013) (citing Colandrea v. Wilde Lake Community Ass‘n, 361 Md. 371, 761 A.2d 899, 907 (2000)). In the collection action, the Baltimore City District Court held only that Palisades had failed to produce records documenting the assignment, not that there had been no assignment to Palisades at all. Therefore, the district court in this case correctly ruled against Powell on her claim that the defendants falsely represented Palisades’ ownership of the judgment.
On the second alleged misrepresentation, it is undisputed that the original Assignment of Judgment inaccurately reported both the amount of the judgment and the amount of Powell‘s payments toward satisfaction of it. The district court nonetheless held that the false representation did not violate
“Whether a communication is false, misleading, or deceptive in violation of
The materiality requirement limits liability under the FDCPA to genuinely false or misleading statements that “may frustrate а consumer‘s ability to intelligently choose his or her response.” Donohue, 592 F.3d at 1034; see also Hahn, 557 F.3d at 758 (“The statute is designed to provide information that helps consumers to choose intelligently ...“). Thus, only misstatements that are important in the sense that they could objectively affect the least sophisticated consumer‘s decisionmaking are actionable. See Black‘s Law Dictionary 1124 (10th ed.2014) (defining “material“); cf. TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976) (“An omitted fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote,” even if “disclosure of thе omitted fact would [not] have caused the reasonable investor to change his vote” (emphasis added)). In assessing materiality, “we are not concerned with mere technical falsehoods that mislead no one.” Donohue, 592 F.3d at 1034. For example, where a demand letter misstates interest as principal but accurately states the total amount owed, such a technical error is not materi-
In this case, the Assignment of Judgment falsely stated that the judgment against Powell was “in the amount of $10497.21 plus attorney‘s fees of $1230.78 and costs of $0.00,” for a total of $11,727.99. It also erroneously stated that Powell had made no payments toward satisfaction of this judgment. The amended Assignment of Judgment corrected these errors, stating instead that the judgment was for “$9,216.43 plus attorney‘s fees of $1,230.78 and costs of $50.00.” It also stated that Powell had made $2,700 in payments. The difference between the erroneous judgment total of $11,727.99 and the correct judgment total of $10,497.21 and the erroneous statement of no payments and $2,700 in payments was $3,930.78. This overstatement—more than 50 percent—was material under any standard.
The fact that Powell mistakenly thought that she had paid off the debt in full does not render the false representation immaterial. The district court presumed that an unsophisticated consumer in Powell‘s position would not “act differently based on whether the judgment amount was stated with exact precision.” (Emphasis added). But the least sophisticated consumer who previously believed that she had paid her debt in full could, upon receiving a coрy of an assignment of judgment, be led to realize that she did indeed have a debt outstanding. And when that assignment contained an overstatement in excess of 50 percent, the least sophisticated consumer could be led to decide to pay far more than she otherwise would have paid. Moreover, even were we to assume the contrary, the inquiry is not whether the least sophisticated consumer would have acted differently upon receiving Palisades’ Assignment of Judgment. Instead, it is whether the information would have been important to thе consumer in deciding how to respond to efforts to collect the debt. Given the importance of the figures that were inaccurately reported in the Assignment of Judgment and the degree to which they were misstated, the misrepresentations here easily satisfy that test.
Accordingly, we conclude that the district court erred in its materiality conclusion with respect to Powell‘s
IV
While Powell‘s claim under
Finally, with respect to Powell‘s claims under the MCDCA and the MCPA, we affirm the judgment of the district court. Powell alleged that the defendants violated a provision of the MCDCA that specifies that “[i]n collecting or attempting to collect an alleged debt a collector may not ... [c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist.”
Unlike the FDCPA, the MCDCA contains a “with knowledge” element, which Powell did not establish. See Spencer v. Henderson-Webb, Inc., 81 F.Supp.2d 582, 595 (D.Md.1999) (interpreting
VI
In sum, while we affirm the summary judgment on the
The bona fide error defense allows a defendant to avoid liability by “show[ing] by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.”
Accordingly, we vacate the summary judgment entered in favor of the defendants on Powell‘s
AFFIRMED IN PART, VACATED IN PART, AND REMANDED