DANIEL N. GORDON, an Oregon professional corporation; and Daniel N. Gordon, individually, Petitioners on Review, v. Ellen ROSENBLUM, Attorney General; and Oregon
CC 161208399; CA A154184; SC S063978
IN THE SUPREME COURT OF THE STATE OF OREGON
April 27, 2017
361 Or 352 (2017)
No. 21
On review from the Court of Appeals.*
Argued and submitted November 10, 2016.
R. Daniel Lindahl, Bullivant Houser Bailey PC, Portland, argued the cause and filed the brief for petitioners on review. Daniel N. Gordon, Gordon Aylworth & Tami PC, Eugene, also argued the cause on behalf of himself.
Michael A. Casper, Assistant Attorney General, Salem, argued the cause and filed
Jonathan P. Strauhull, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association. Also on the brief was Phil Goldsmith, Portland.
Before Balmer, Chief Justice, and Kistler, Wаlters, Landau, Brewer, and Nakamoto, Justices, and Baldwin, Senior Justice, Justice pro tempore.**
BALMER, C. J.
The decision of the Court of Appeals is affirmed. The judgment of the circuit court is affirmed in part and reversed in part, and the case is remanded to the circuit court for further proceedings.
BALMER, C. J.
In this declaratory judgment action, we consider whether provisions of Oregon‘s Unlawful Trade Practices Act (UTPA) that prohibit using “unconscionable tactic[s]” to collect certain debts,
I. FACTUAL AND PROCEDURAL BACKGROUND
Daniel N. Gordon, P.C. and Daniel N. Gordon (“law firm” or “plaintiffs“) represent creditors and debt buyers in their attempts to collect debt, often defaulted consumer credit card debt. The law firm assists its clients with pre-litigation collection activity, civil litigation, and post-judgment collection efforts. The business is high-volume: In 2010, the law firm pursued collection of more than 16,000 accounts, obtained judgments with respect to approximately 9,000 of those accounts, and collected on approximately 4,000.
In 2011, acting on several years of complaints about the practices of the law firm, the Oregon Department of Justice (“DOJ” or “defendant“) investigated the law firm. The investigation revealed a number of practices that DOJ determined might violate the UTPA. For example, in every collection complaint examined by DOJ, the law firm alleged a right to attorneys’ fees and interest on the debt, despite in many cases not attaching a contract showing those rights.
Additionally, DOJ found evidence that the law firm failed to follow choice of law provisions in applicable contracts and, as a result, sometimes pursued debts that were barred by the relevant statute of limitations. In the many cases resolved by default judgment, the veracity of the contents of the complaint—and the debtor‘s obligation to pay—was never established in an adversarial process. As a result of those and other findings, DOJ concluded that the law firm
“had a pattern and practice of filing thousands of breach of contract actions against credit card debtors and obtaining default judgments for attorneys’ fees and interest in a manner that apparently took advantage of the debtors’ legal ignorance, lack of resources and general belief that they could not fight the claim.”
DOJ determined that it had probable cause to sue to enjoin the law firm and its attorneys from engaging in trade practices prohibited under sections
Based on that conclusion, DOJ served the law firm with a proposed Assurance of Voluntary Compliance (AVC) and demanded that the law firm execute the agreement. Under the AVC, the law firm would change its behavior as specified in the agreement and DOJ would release the law firm from any liability under the UTPA. The remedies
Plaintiffs refused to execute the agreement and instead initiated this declaratory judgment action. Plaintiffs’ complaint contended that the UTPA and the Unlawful Debt Collection Practices Act (UDCPA),
apply to their actions while representing clients in debt collection activities and sought an injunction preventing DOJ from enforcing those statutes against plaintiffs. On cross motions for summary judgment, the trial court entered judgment for plaintiffs and issued an injunction.1
DOJ appealed. The Court of Appeals affirmed the trial court‘s holding that the UDCPA did nоt apply to plaintiffs’ debt collection activities. Daniel N. Gordon, PC, 276 Or App at 814-22. Neither party challenges that holding before this court, and we do not address it. The Court of Appeals, however, reversed the trial court‘s decision that the UTPA did not apply to plaintiffs’ debt collection activities. In analyzing the UTPA, the court first construed
Next, the court construed
The Court of Appeals thus concluded that the trial court had erred in holding that
II. ANALYSIS
On review, the parties reprise their arguments over whether two provisions of the UTPA should be interpreted to apply to plaintiffs’ alleged conduct. We interpret the statutes by examining their text, context, and legislative history. State v. Gaines, 346 Or 160, 206 P3d 1042 (2009).
A. ORS 646.607(1)
“A person engages in an unlawful trade practice if in the course of the person‘s business, vocation or occupation the person:
“(1) Employs any unconscionable tactic in connection with selling, renting or disposing of real estate, goods or services, or collecting or enforcing an obligation.”
Plaintiffs argue that the statute does not apply to their debt collection activities because their relationship with the debtors is not a customer relationship—that is, it is not a relationship between plaintiffs as a business and debtors
as direct customers of that business. Plaintiffs base that argument on the meaning of “unconscionable tactics.”
“‘Unconscionable tactics’ include, but are not limited to, actions by which a person:
“(a) Knowingly takes advantage of a customer‘s physical infirmity, ignorance, illiteracy or inability to understand the language of the agreement;
“(b) Knowingly permits a customer to enter into a transaction from which the customer will derive no material benefit;
“(c) Permits a customer to enter into a transaction with knowledge that there is no reasonable probability of payment of the attendant financial obligation in full by the customer when due; or
“(d) Knowingly takes advantage of a customer who is a disabled veteran, a disabled servicemember or a servicemember in active service, or the spouse of a disabled veteran, disabled servicemember or servicemember in active service.”
Plaintiffs construe
The state‘s construction of the term is more straightforward. Similar to the plaintiffs’ proffered construction, it also gives “unconscionable” and “tactics” their ordinary meanings, taken from dictionary definitions, and simply concludes that “the phrase ‘any unconscionable tactic’ refers broadly to whatever kind of unscrupulous or unreasonable maneuvers a person might employ to achieve some end.” The state rejects the more limited construction offered by plaintiffs, arguing first that the statute‘s reference to “any unconscionable tactic,”
We find the parties’ exclusive focus on the meaning of the term “unconscionable tactics” in
principle ejusdem generis. Finally, we apply our understanding of the statute to the facts of this case.
The statutory analysis in State v. Kurtz, 350 Or 65, 249 P3d 1271 (2011), is instructive in our effort to interpret “unconscionable tactics” as that term is used in
Our analysis here follows a similar path.
To determine the meaning of words that are not otherwise defined in a statute, we look first to their “plain, natural, and ordinary” meaning. DCBS v. Muliro, 359 Or 736, 745-46, 380 P3d 270 (2016) (internal quotation marks omitted); Kurtz, 350 Or at 72. Words that are legal terms of art are exceptions to that rule; we give those words their established legal meaning, often beginning our analysis with Black‘s Law Dictionary. Muliro, 359 Or at 746; State v. Dickerson, 356 Or 822, 829, 345 P3d 447 (2015) (interpreting statutes by giving “legal terms *** their established legal meanings“). In consulting external sources, we are mindful that sources contemporaneous with the enactment of the
We begin with the nonlegal word: “tactics.” We understand “tactics” to mean actions taken as means towards an end. See Webster‘s Third Int‘l Dictionary 2327 (unabridged ed 2002) (defining “tactic” as “a device or expedient for accomplishing an end“). In the context of the UTPA, however, the word has little substantive content independent of the word “unconscionable.” “Unconscionable,” in contrast, is a legal term of art requiring a more extensive analysis. Both legal and lay dictionaries definе “unconscionable” similarly: circumstances that are “unfair,” “unjust,” or “shocking to the conscience.” Black‘s at 1694 (4th ed 1968); Webster‘s at 2486. Those familiar definitions, however, are incomplete portrayals of the meaning of the term.
A look at the common-law doctrine of unconscionability is more useful. Broadly described, unconscionability is an equitable doctrine that allows courts to avoid enforcing or creating circumstances that are unfair, unjust, or
shocking to the conscience, such as when one person exploits a more favorable bargaining position to take advantage of another. Although today the doctrine appears most often in contract law, historically the doctrine has been applied in many areas of law where courts sought to avoid what they perceived as unfair outcomes. See generally Anne Fleming, The Rise and Fall of Unconscionability as the “Law of the Poor,” 102 Geo L J 1383 (2014).
This court has followed that pattern and has applied the doctrine in a variety of contexts. For example, we have held that a court may provide a remedy when a person “takes unconscionable and inequitable advantage” of another by appropriating information learned through a contractual relationship. Kamin v. Kuhnau, 232 Or 139, 155, 374 P2d 912 (1962) (internal quotation marks omitted). In probate proceedings, a court may consider as void disрositions in a will that result from a person taking “unconscionable advantage” of the testator. Moran v. Bank of Calif., N.A., 206 Or 358, 371, 292 P2d 504 (1956). When sitting in equity, a court may deny relief to a party whose unconscionable conduct constitutes “unclean hands.” Taylor et ux v. Grant et al, 204 Or 10, 26, 279 P2d 479, clarified, 204 Or 35, 279 P2d 1037, reh‘g den, 204 Or 36, 281 P2d 704 (1955) (internal quotation marks omitted). In property disputes, “any form of unconscionable conduct, artifice, concealment, or questionable means” may justify imposing a constructive trust. Marston v. Myers et ux, 217 Or 498, 509, 342 P2d 1111 (1959) (internal quotation marks omitted). And when construing statutes, a court may seek to avoid “unconscionable results.” Parr v. Dept. of Revenue, 276 Or 113, 116, 553 P2d 1051 (1976) (internal quotation marks omitted).
Those varied applications of the doctrine of unconscionability are less familiar than the iteration most common today: unconscionability in the formation or substantive terms of a contract (known respectively as “procedural” and “substantive” unconscionability) raised as a defense in a contract enforcement action. See, e.g., Bagley v. Mt. Bachelor, Inc., 356 Or 543, 554, 340 P3d 27 (2014) (discussing court‘s authority to refuse to enforce unconscionable contracts). That formulation rose in prominence when it was codified in Uniform Commercial Code section 2-302 and widely
adopted by states during the 1960s. Fleming, 102 Geo L J at 1422 n 249 (noting that by 1967 every state except Louisiana had adopted the UCC); see Or Laws 1961, ch 726, § 72.3020 (adopting section 2-302). Later uniform laws regulating other fields of activity included unconscionability provisions similar to section 2-302. Howard J. Alperin & Roland F. Chase, Consumer Law: Sales Practices and Credit Regulation § 174, 249
Unconscionability thus was a doctrine in flux in 1977. It had a long history of broad, if uneven, applicability in the common law, and the contours of the doctrine were never particularly clear, given the diverse circumstances in which it arose. That dynamism complicates an effort to construct a complete explanation of the term‘s meaning at that time. Fortunately, that is not our task. The questions before us are more limited: Does the doctrine of unconscionability apply only to certain types of relationships, thereby limiting the applicability of the term “unconscionable tactic” in
the term “unconscionable tactics” itself provides no basis for excluding plaintiffs’ conduct from the reach of the UTPA.
We turn to the remainder of the text to determine whether the legislature intended that
As described above, plaintiffs argue that the canon of construction ejusdem generis informs the meaning of “unconscionable tactics.” We think plaintiffs have improperly applied that canon. Ejusdem generis is an interpretive rule requiring “a nonspecific or general phrase that appears at the end of a list of items in a statute *** to be read as referring only to other items of the same kind” as the items in the list. Vannatta v. Keisling, 324 Or 514, 533, 931 P2d 770 (1997).
Again, Kurtz is instructive and demonstrates when ejusdem generis does not apply. In that case, the Court of Appeals had applied ejusdem generis in its interpretation of the statute, which provided in part: “‘Police officer’ includes [listing types of officials].” Kurtz, 350 Or at 71, 73-74 (internal quotation marks and citation omitted; emphasis in Kurtz). This court disagreed with that approach, explaining that ejusdem generis does not apply when the legislature “signal[s] that it does not intend to confine the scope of a general term in a statute according to the characteristics of listed examples” through “statutory terms such as ‘including’ and ‘including but not limited to.‘” Id. at 75.
In this case, plaintiffs would apply ejusdem generis to argue that the rеferences to “a customer” in the examples mean that the general term “unconscionable tactics” requires a customer relationship. We disagree. As in Kurtz,
the phrase “include, but are not limited to,”
The text of the statute surrounding “unconscionable tactic” also helps interpret that term. Prohibited unconscionable tactics are those that are used “in connection with *** collecting or enforcing an obligation.”
unconscionable tactics need not occur specifically within an obligor/obligee relationship—they come within the statute if they are connected to that relationship.
Here, plaintiffs are neither obligors nor obligees. They do not own the debt or owe the money. The debtors, however, are obligors who owe an obligation to the debt owners—and plaintiffs are a lawyer and law firm that were retained to collect the debt on behalf of the debt owners. In short, there is a “connection” between plaintiffs and the debtors’ underlying obligations. With these facts, we have no trouble concluding that plaintiffs’ relationship to the debtors and debt owners satisfies the “in connection with” requirement of
We also note that the UTPA applies to—and is limited to—unconscionable tactics employed “in the course of the person‘s business, vocation or occupation.”
In sum, the term “unconscionable tactic” in
B. ORS 646.608(1)
Plaintiffs also argue that the other provision of the UTPA that DOJ relies on,
“(1) A person engages in an unlawful practice if in the course of the person‘s business, vocation or occupation the person does any of the following:
“*****
“(b) Causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of real estate, goods or services.”
“Real estate, goods or services” are defined as “those that are or may be obtained primarily for personal, family or household purposes *** and includes loans and extensions of credit.”
The state, focusing on the statutory text, argues that a violation of
Plaintiffs’ argument again emphasizes their understanding of the UTPA‘s purpose, which they describe as “to regulate the provision of real estate, goods, and services to consumers.” That purpose, they argue, constrains the reach of the UTPA such that
We agree with the state that the elements constituting a violation of
Our analysis of the second element, “in the course of the person‘s business, vocation or occupation,” is aided by this
court‘s decision in Wolverton v. Stanwood, 278 Or 341, 563 P2d 1203, reh‘g den, 278 Or 709, 565 P2d 755 (1977), where we considered the meaning of that phrase. In Wolverton, the owner of a car service station sold a car engine to a customer. Id. at 343. In the course of the sale, the seller made several representations about the engine that were false. Id. The buyer sued for damages under
The second element thus requires an “indirect connect[ion]” between the unconscionable tactic and the person‘s business, vocation, or occupation. But neither the text nor Wolverton requires the relationship that plaintiffs posit, i.e., that a person only violates the UTPA if the person causes confusion or misunderstanding about that person‘s own “real estate, goods or services.”
Nor does the text of the third element support the plaintiffs’ proposed limitation. The third element requires a causal relationship: a person subject to the statute must have actually caused “likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification” of “loans or extensions of credit.” That causal
could have caused debtors to have likely confusion or misunderstanding about, for example, the interest rate applicable to the debt or whether the debtors would have to pay the debt owners’ attorneys’ fees.
We agree with the state and the Court of Appeals that plaintiffs’ alleged conduct comes within a straightforward interpretation of
The decision of the Court of Appeals is affirmed. The judgment of the circuit court is affirmed in part and reversed in part, and the case is remanded to the circuit court for further proceedings.