Dale KAYMARK, individually and on behalf of other similarly situated current and former homeowners in Pennsylvania, Appellant v. BANK OF AMERICA, N.A.; Udren Law Offices, P.C.
No. 14-1816
United States Court of Appeals, Third Circuit
April 7, 2015
Argued Dec. 10, 2014.
783 F.3d 168
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For these reasons, we will affirm that portion of the District Court‘s order granting summary judgment and striking
Thomas L. Allen, Esq., Argued, Nellie E. Hestin, Esq., Reed Smith, Pittsburgh, PA, Marc A. Goldich, Esq., Andrew J. Soven, Esq., Reed Smith, Philadelphia, PA, for Appellee Bank of America, N.A.
Jonathan J. Bart, Esq., Argued, Wilentz, Goldman & Spitzer, Philadelphia, PA, for Appellee Udren Law Offices, P.C.
Before: FUENTES, FISHER and KRAUSE, Circuit Judges.
OPINION OF THE COURT
FISHER, Circuit Judge.
Dale Kaymark defaulted on a mortgage held by Bank of America, N.A. (“BOA“). On behalf of BOA, Udren Law Offices, P.C. (“Udren“) initiated foreclosure proceedings against Kaymark in state court. The body of the Foreclosure Complaint listed certain not-yet-incurred fees as due and owing, which Kaymark alleges violated several state and federal fair debt collec-
I.
A.
Kaymark refinanced his home in Coraopolis, Pennsylvania, in December 2006, executing a note for $245,600 and granting BOA a mortgage. The mortgage was insured by Fannie Mae (“FNMA“). The terms of the mortgage state, in pertinent part:
Lender may charge Borrower fees for services performed in connection with Borrower‘s default and for the purpose of protecting Lender‘s interest in the Property and rights under this Security Agreement, including, but not limited to, attorneys’ fees, property inspection and valuation fees.
....
If the default is not cured as specified.... Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section [], including, but not limited to, attornеys’ fees and costs of title evidence to the extent permitted by Applicable Law.
App. 72a (¶ 14), 75a (¶ 22) (emphases added).
Kaymark experienced a drop in income in June 2011 and failed to make his mortgage payments. On August 1, 2011, BOA sent Kaymark an “Act 91 Notice” of pre-foreclosure delinquency pursuant to Pennsylvania‘s Housing Finance Agency Law,
Over a year later, on September 13, 2012, Udren, on behalf of BOA, filed a verified Foreclosure Complaint against Kaymark in the Court of Common Pleas of Allegheny County, Pennsylvania. The body of the Foreclosure Complaint included an itemized list of the total debt, stating that the following items were due and owing as of July 12, 2012:
| Unpaid Principal Balance | $213,224.26 |
| Accumulated Interest (07/01/2011-07/12/2012) | $13,452.47 |
| Accumulated Late Charges | $177.74 |
| Escrow Deficit / (Reserve) | $1,935.45 |
| Title Report | $325.00 |
| Attorney Fees | $1,650.00 |
| Property Inspection | $75.00 |
| Grand Total | $230,839.92 |
Kaymark alleges that the $1,650 in attorneys’ fees, $325 in title report fees, and $75 in property inspection fees (or $2,050 total) were not actually incurred as of July 12, two months before the foreclosure action was filed on September 13. Kaymark also alleges that the fees were improperly calculated on a fixed basis. Appellees retort that fixed fees are contemplated under the FNMA servicing guide, which sets the maximum foreclosure fee, or cap, for attorneys’ fees at $1,650. See App. 85a-86a.
Kaymark contested the foreclosure action, which is still pending in the Allegheny County Court of Common Pleas. As such, Kaymark has never paid the disputed fees. The parties do not dispute that these fees were ultimately incurred in the course of the foreclosure action or that the fees were ultimately reasonable. See App. 6a n. 4.
B.
In February 2013, Kaymark filed a complaint on behalf of himself and a putative class against BOA and Udren (collectively, “Appellees“) in the Court of Common Pleas of Allegheny County. In the original complaint, Kaymark alleged that Appellees violated the Pennsylvania Loan Interest and Protection Law (“Act 6“),
In response, Kaymark filed an amended complaint, asserting the following four counts on the bases of the alleged misrepresentations in the Foreclosure Complaint and/or Act 91 Notice: Count I, against BOA, for violating
BOA and Udren again moved to dismiss for failure to state a claim under
The District Court adopted the R & R and granted the motions to dismiss in their entirety, with prejudice, on March 31, 2014. Agreeing that the inclusion of not-yet-incurred fees was not prohibited by the mortgage contract or other state or federal laws, the District Court dismissed the
II.
The District Court exercised jurisdiction over Kaymark‘s FDCPA claim under
We exercise plenary review over a district court‘s grant of a motion to dismiss under
III.
A.
Congress enacted the FDCPA in 1977 “to eliminate abusive debt collection practices by debt collectors.”
Kaymark alleges that, by attempting to collect fees for legal services not yet performed in the mortgage foreclosure, Udren violated
Bearing on these claims, the parties dispute the relevance of our intervening decision in McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240 (3d Cir. 2014)--decided by this Court after the District Court‘s order. In McLaughlin, we held that nearly-indistinguishable conduct in a debt collection demand letter, rather than a foreclosure complaint, violated the FDCPA. We now conclude that McLaughlin‘s holding extends to foreclosure complaints, and we reverse the District Court‘s order dismissing certain FDCPA claims against Udren.
1.
Timothy McLaughlin defaulted on a mortgage held by CitiMortgage. CitiMortgage referred the issue to Phelan Hallinan & Schmieg, LLP (“PHS“), which sent McLaughlin a demand letter on June 7, 2010, itemizing the total amount of debt due as of May 18, 2010, as $365,488.40. Id. at 243. The debt included two line items relevant here: $650 in “Attorney‘s Fees”
When McLaughlin filed a class action complaint, thе district court held, among other things, that “estimating the amount of attorneys’ fees in an itemized debt collection notice does not violate the FDCPA,” id. (internal quotation marks omitted), and dismissed McLaughlin‘s claims. On appeal, this Court reversed:
Nothing [in the Letter] says [the amount owed on the debt] is an estimate or in any way suggests that it was not a precise amount. As the drafter of the Letter, PHS is responsible for its content and for what the least sophisticated debtor would have understood from it. If PHS wanted to convey that the amounts in the Letter were estimates, then it could have said so. It did not. Instead, its language informs the reader of the specific amounts due for specific items as of a particular datе. If the amount actually owed as of that date was less than the amount listed, then, construing the facts in the light most favorable to McLaughlin as we must when reviewing the dismissal under
Rule 12(b)(6) , McLaughlin has stated a claim that the Letter misrepresents the amount of the debt in violation of§ 1692e(2) and (10).
Id. at 246 (internal citations omitted).
The facts in McLaughlin are virtually indistinguishable from the case at bar. Here, the Foreclosure Complaint also plainly “inform[ed] the reader of the specific amounts due for specific items as of a particular date,” id., two months prior to the date the Foreclosure Complaint was filed. Udren also did not convey that the disputed fees were estimates or imprecise amounts. Thus, pursuant to McLaughlin, the Foreclosure Complaint conceivably misrepresented the amount of the debt owed, forming a basis for violations of
By extension, it follows that Kaymark has sufficiently alleged that Udren‘s attempt to collect those misrepresented fees was not “expressly authorized” by the mortgage contract or permitted by law.
This conclusion is not a departure from our sister Circuits, which have held that demanding fees in the collection of debts in a way contrary to the underlying agreement is actionable under the FDCPA. See Kojetin v. CU Recovery, Inc., 212 F.3d 1318 (8th Cir. 2000) (per curiam) (finding FDCPA violation where the debt collector charged a collection fee based on a percеntage of the principal balance of the debt due rather than the “actual cost[]” of collection as stipulated in the loan agreement); Bradley v. Franklin Collection Serv., Inc., 739 F.3d 606, 610 (11th Cir. 2014) (finding
However, because Udren did not “threat[en] to take an[] action that cannot legally be taken,”
The false communication in McLaughlin was a debt collection letter; here, of course, it is a Foreclosure Complaint. Accordingly, to determine whether Kaymark has sufficiently stated an FDCPA claim, we must decide whether this distinction is fatal.
2.
The thrust of Udren‘s argument is that pleadings--in particular, foreclosure complaints--cannot be the basis of FDCPA claims. However, the statutory text, as well as the case law interpreting the text, renders this argument meritless.
In Heintz v. Jenkins, the Supreme Court established that attorneys “engage[d] in consumer-debt-collection activity, even when that activity consists of litigation” are covered by the FDCPA. 514 U.S. 291, 299, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995). In so holding, the Court explained that Congress repealed an express exemption from the definition of “debt collector” in an earlier version of the statute for “any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client.” Id. at 294, 115 S.Ct. 1489 (quoting Pub.L. No. 95-109, § 803(6)(F), 91 Stat. 874, 875 (1977)). Once Congress amended the law without creating another exemption to fill its void, the Court explained, “Congress intended that lawyers be subject to the [FDCPA] whenever they meet the general ‘debt collector’ definition.” Id. at 295, 115 S.Ct. 1489; see
But Congress did not stop there. Subsequent to Heintz, Congress twice amended the statute and exempted “formal pleading[s] made in connection with a legal action” from
We conclude that a communication cannot be uniquely exempted from the FDCPA because it is a formal pleading or, in particular, a complaint. This principle is widely accepted by our sister Circuits. See, e.g., Currier v. First Resolution Inv. Corp., 762 F.3d 529, 535 (6th Cir. 2014) (“The fact that the [alleged violation] appears in a lawsuit or other court filing does not diminish the threatening nature of the communication for purposes of the FDCPA.“); James v. Wadas, 724 F.3d 1312, 1316 (10th Cir. 2013) (“[T]he FDCPA ‘applies to the litigating activities of lawyers,’ which, as other circuits have held, may include the service upon a debtor of a complaint to facilitate debt collection efforts....“) (quoting Heintz, 514 U.S. at 294, 115 S.Ct. 1489); Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1032 (9th Cir. 2010) (“To limit the litigation activities that may form the basis of FDCPA liability to exclude complaints served personally on consumers to facilitate debt collection, the very act that formally commences such a litigation, would require a nonsensical narrowing of the common understanding of the word ‘litigation’ that we decline to adopt.“); Sayyed, 485 F.3d at 229 (subjecting interrogatories and summary judgment motions to the FDCPA); Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000) (finding
Udren makes two further attempts to distinguish foreclosure complaints from debt collection letters, both of which must fail.
First, Udren contends that a complaint, because it is directed to the court, is not a communication to the consumer subject to
So too for pleadings filed with the court and served on the consumer. Because the Foreclosure Complaint was served on Kaymark (directly or indirectly through his attornеy), he was the intended recipient of the communication. See Donohue, 592 F.3d at 1031-32 (holding that a complaint served on the debtor is a communication subject to the FDCPA).3 Courts have only held that a complaint misleads the judge, rather than the consumer, when, for instance, the plaintiff specifically pled that a materially-false attachment to a complaint “would mislead the Cook County judge handling his case.” O‘Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 941 (7th Cir. 2011); see id. at 939 (noting that this allegation was “[u]nlike most lawsuits under the [FDCPA]“). This is not that case. Here, the Foreclosure Complaint was unquestionably a communication directed at Kaymark in attempt to collect on his debt.
Udren‘s second argument is that foreclosure actions cannot be the basis of FDCPA claims beсause Kaymark has to his avail the protections of the Pennsylvania Rules of Civil Procedure and because the Heintz Court noted that the FDCPA has the “apparent objective of preserving creditors’ judicial remedies.” 514 U.S. at 296, 115 S.Ct. 1489.
Nowhere does the FDCPA exclude foreclosure actions from its reach. On the contrary, foreclosure meets the broad definition of “debt collection” under the FDCPA, see McLaughlin, 756 F.3d at 245 (defining “debt collection” as “activity undertaken for the general purpose of inducing payment“), and it is even contemplated in various places in the statute, see, e.g.,
In any event, the prudence of maintaining parallel FDCPA claims is not ours to decide; it is Congress‘s, and its intent is clear for the reasons discussed. Absent a finding that “the result [will be] so absurd as to warrant implying an exemption for” FDCPA claims involving foreclosure actions, we are not empowered to disregard the plain language of the statute. Heintz, 514 U.S. at 295, 115 S.Ct. 1489. Thus, Udren‘s arguments are more “properly addressed to Congress,” which “is, of course, free to amend the statute accordingly.” Jerman, 559 U.S. at 604, 130 S.Ct. 1605.
Given our holding in McLaughlin based on nearly-indistinguishable facts, we conclude that the fact that the debt collection activity at issue here involves a foreclosure complaint, rather than a debt collection letter, does not remove it from the FDCPA‘s purview under McLaughlin. We will reverse the order dismissing Kaymark‘s
B.
Kaymark next alleges that, by misrepresenting or overcharging fees in the Foreclosure Complaint, BOA and Udren4 violated the UTPCPL by virtue of
To maintain a private right of action under the UTPCPL, a plaintiff must demonstrate (1) “ascertainable loss of money or property, real or personal,” id.
The crux of Kaymark‘s theory of ascertainable loss is that the “lien” on his property from the mortgage was inflated by not-yet-performed services, “resulting in a corresponding, precisely quantifiable, diminishment in his interests in property.” Appellant‘s Br. at 38. He reasons that, for a period of time before any services were performed, he had to pay $2,050 extra--the total overcharged amount on the debt--to cure his default and avoid foreclosure. The District Court rejected Kaymark‘s so-called “lien” theory, сoncluding that his “argument is couched in forward-looking speculative terms.” App. 5a. On the facts presented in this case, we agree.
Because the Pennsylvania Supreme Court has not definitively addressed what constitutes ascertainable loss under the statute, “we must predict how that court would rule if faced with the issue,” and, in doing so, “[t]he decision of an intermediate state court is particularly relevant.” Covington v. Cont‘l Gen. Tire, Inc., 381 F.3d 216, 218 (3d Cir. 2004). Lower state courts reason that “[a]scertainable loss must be established from the factual circumstances surrounding each case,” Agliori v. Metro. Life Ins. Co., 879 A.2d 315, 321 (Pa. Super. 2005), but that the loss must be non-speculative, Schwarzwaelder v. Fox, 895 A.2d 614, 619 (Pa. Super. 2006); see also Benner v. Bank of America, N.A., 917 F. Supp. 2d 338, 360 (E.D. Pa. 2013) (“[A]n actual loss of money or property must have occurred to state a cognizable UTPCPL claim.“). Based on the plain language of the statute, we find this interpretation persuasive.
The statute explicitly provides that any person who suffers an ascertainable loss “may bring a private action to recover actual damages.”
Of course, the statute references “ascertainable loss of money or property, real or personal,”
The recent decision by the Supreme Court of Pennsylvania interpreting the case law on a closely-related issue lends further support to this conclusion. In Grimes v. Enterprise Leasing Co., LLC, 105 A.3d 1188 (Pa. 2014), a plaintiff brought, among other things, a UTPCPL claim against the Enterprise Leasing Company of Philadelphia (“Enterprise“) for seeking allegedly fraudulent and excessive fees that, like here, she did not pay. The Superior Court held that the plaintiff suffered an ascertainable loss by incurring costs to retain an attorney to prevent Enterprise from collecting the debt. Enterprise argued on appeal that, if the Superior Court was correct, any plaintiff could show ascertainable loss by merely hiring a lawyer “without actually suffering a loss of money or property.” Id. at 1192. The Supreme Court agreed with Enterprise for two primary reasons. First, it did not want to allow a plaintiff to “manufacture the ‘ascertainable loss’ required to bring a private UTPCPL claim simply by obtaining counsel.” Id. at 1193. Second, confirming our analysis above, it distinguished the case law on which the Superior Court relied because “[i]n [those] cases, the plаintiff had alleged a specific loss of money.” Id. at 1194 (emphasis added).5
Because Kaymark has not adequately pled ascertainable loss from the fees he did not pay and currently disputes, his claim fails. We therefore affirm the Dis-
C.
The FCEUA, Pennsylvania‘s analogue to the FDCPA, prohibits “unfair methods of competition and unfair or deceptive acts or practices with regard to the collection of debts.”
The text of the FCEUA‘s enforcement provision reads: “If a debt collector or сreditor engages in an unfair or deceptive debt collection act or practice under this act, it shall constitute a violation of the [UTPCPL].”
As discussed, Kaymark failed to allege ascertainable loss because he cannot point to actual damages as a result of the disputed fees listed in the Foreclosure Complaint. Much less can the alleged deficiеncies in the pre-foreclosure Act 91 Notice--the purpose of which is to provide debtors with information about programs to support them in their debt--form the basis of any such loss.7 Therefore, we affirm the District Court‘s order dismissing Kaymark‘s FCEUA claim against BOA.
D.
Finally, we affirm the District Court‘s order dismissing Kaymark‘s breach of contract claim against BOA for failure to plead resultant damages. To allege breach of contract in Pennsylvania, a plaintiff must show “(1) the existence of a contract, including its essential terms, (2) a breach of a duty imposed by the contract and (3) resultant damages.” Omicron Sys., Inc. v. Weiner, 860 A.2d 554, 564 (Pa. Super. 2004) (internal quotation marks omitted).
IV.
For the reasons set forth above, we will reverse the District Court‘s order dismissing Kaymark‘s
Notes
[Defendant] Quick Collect suggests that a complaint, because it can be corrected by amending the offending pleading, should not constitute an actionable communication. But all communications can be “amended” in this way by simply sending out a subsequent communication correcting the error. Sections 1692e and 1692f do not suggest that otherwise unlawful representations are permitted so long as they are followed up, аt some later time, with a communication correcting the statements that gave rise to the communication‘s unlawful nature. We see no reason to treat complaints differently where there was no effort to correct the error before an answer was filed.
Donohue, 592 F.3d at 1032 n. 1. We agree that simply because a complaint is amendable is not a justification for removing it from the protections of the FDCPA.