IRIS CALOGERO, on her own behalf and on behalf of all others similarly situated, Plaintiff - Appellant v. SHOWS, CALI & WALSH, L.L.P., a Louisiana Limited Liability Partnership; MARY CATHERINE CALI; JOHN C. WALSH, Defendants - Appellees
No. 19-30558
United States Court of Appeals, Fifth Circuit
August 17, 2020
IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 19-30558
IRIS CALOGERO, on her own behalf and on behalf of all others similarly situated,
Plaintiff - Appellant
v.
SHOWS, CALI & WALSH, L.L.P., a Louisiana Limited Liability Partnership; MARY CATHERINE CALI; JOHN C. WALSH,
Defendants - Appellees
Appeal from the United States District Court for the Eastern District of Louisiana
Before WIENER, GRAVES, and WILLETT, Circuit Judges.
Appellant-Plaintiff Iris Calogero appeals from the dismissal of her Fair
Debt Collection Practices Act (“FDCPA”),
I. BACKGROUND
In the aftermath of Hurricanes Katrina and Rita’s devastation to displaced homeowners whose primary residences were either destroyed or severely damaged, Congress appropriated billions of dollars through the Community Development Block Grant program (“CDBG”) of the Department of Housing and Urban Development (“HUD”). In 2006, Louisiana applied for CDBG funds for the Road Home Program (“Road Home”) to provide grants for home repair and rebuilding, support affordable rental housing, and offer housing support services. Upon HUD’s approval of the largest single housing recovery program in the United States, the Louisiana Office of Community Development (“OCD”) and Louisiana Recovery Authority (“LRA”) were tasked with implementing Road Home.
Calogero resides in Slidell, Louisiana, and her home was significantly damaged by Hurricanes Katrina and Rita. Calogero applied for a Road Home grant used as “compensation for damages suffered [by homeowners] from the Hurricanes.” Once approved as a Road Home recipient, Calogero entered into an agreement1 with the OCD and received $33,392.68 disbursed in one lump sum. The agreement consisted of four parts—the Road Home Declaration of Covenants Running with the Land; the Road Home Program Grant Agreement; the Road Home Limited Subrogation/Assignment Agreement; and the Road Home Grant Recipient Affidavit. As part of the Declaration of Covenants, Calogero agreed to several terms, including limitations on the transfer and sale of her property, occupancy of the Slidell property as her primary residence for three years after the execution of the agreement, maintenance of casualty and flood insurance, documentation demonstrating compliance with the agreement, and a waiver disclaiming Louisiana, the
United States, or any other government branch or agency’s liability for actions
relating to the grant. Under the Limited Subrogation/Assignment Agreement
Over a decade after Calogero received the Road Home grant, Appellee
SCW sent a letter to Calogero seeking $4,598.89 as repayment for an alleged
grant overpayment per the Road Home Program Agreement. SCW identified
itself as a “debt collector” representing Louisiana and Road Home in connection
with the hurricane relief grant Calogero received. After Calogero disputed the
overpayment, SCW sent another letter providing a breakdown of the amount,
including $5,300 owed in duplicated FEMA benefits, $1,269.85 owed in
overpaid homeowner insurance proceeds, and a $1,970.96 credit due to a
recalculated insurance penalty.2 Calogero then initiated this federal suit
against SCW in the Eastern District of Louisiana. Calogero alleged on behalf
of herself and a proposed class that SCW violated the FDCPA for its purported
use of misrepresentation, false or deceptive means, and unfair or
unconscionable means to collect a debt that cannot be legally taken. See
U.S.C. §§ 1692e(2)(A), 1692e(5), 1692e(10), 1692f. Calogero also brought claims
individually against SCW for using deceptive means or unfair or
unconscionable means to collect or attempt to collect $4,598.89 in violation of
the FDCPA. See
SCW subsequently filed a Rule 12(b)(6) motion to dismiss for failure to
state a claim, contending that the FDCPA is inapplicable to Calogero’s claims
because the Road Home money was a form of disaster compensation and
Calogero failed to establish that the money being collected qualified as “debt”
under
II. STANDARD OF REVIEW
We review a district court’s order granting a motion to dismiss for failure to state a claim de novo. Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013). We view the well-pleaded facts in the light most favorable to the nonmoving party. Turbomeca, S.A. v. Era Helicopters, LLC, 536 F.3d 351, 354 (5th Cir. 2008). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
III. DISCUSSION
The FDCPA was enacted in part “to eliminate abusive debt collection
practices by collectors.”
the collection of a debt,”
“To state an FDCPA claim, Plaintiffs must first allege that they have
been the object of collection activity arising from ‘debt.’” Hall v. Phenix
Investigations, Inc., 642 F. App’x 402, 405 (5th Cir. 2016) (citing Douglas v.
Select Portfolio Servicing, Inc., No. 4:14-1329, 2015 WL 1064623, at *4 (S.D.
Tex. Mar. 11, 2015) (setting forth the elements of a FDCPA claim)). The
FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to
pay money arising out of a transaction in which the money, property,
insurance, or services which are the subject of the transaction are primarily
for personal, family, or household purposes, whether or not such obligation has
been reduced to judgment.”
To assist in making this determination, the Third Circuit has helpfully “distill[ed] a three-part test to evaluate whether an obligation constitutes ‘debt’ under the FDCPA.” St. Pierre v. Retrieval-Masters Creditors Bureau, Inc., 898
F.3d 351, 360 (3d Cir. 2018). First, we determine if the “underlying obligation
arises out of a transaction” meaning the “consensual exchange involv[es] an
affirmative request and the rendition of a service or purchase of property or
other item of value, such as a contract.” Id. (internal citations and quotations
omitted). Second, if we affirmatively answer the first question, we “next
identify what money, property, insurance, or services . . . are the subject of the
transaction, i.e., what it is that is being rendered in exchange for the monetary
payment.” Id. at 361 (internal citation and quotation omitted). Third, “we
consider the characteristics of that ‘money, property, insurance, or services’ to
ascertain whether they are ‘primarily for personal, family, or household
purposes.’” Id. (quoting
A. Whether the obligation to repay Road Home money arises out of a “transaction”?
i. Statutory Interpretation of “Transaction”
“When interpreting a statute, we look first and foremost to its text.” United States v. Alvarez-Sanchez, 511 U.S. 350, 356 (1994). The term “transaction” is not defined in the FDCPA or in any other relevant statutory provision. See Barlow v. Safety Nat. Cas. Corp., 856 F. Supp. 2d 828, 834 (M.D. La. 2012) (acknowledging that FDCPA cases can create close calls when the “facts hardly constitute the quintessential consumer debt”).
Accordingly, we apply the “fundamental canon of statutory construction” which instructs that “words generally should be interpreted as taking their ordinary . . . meaning . . . at the time Congress enacted the statute.” New Prime Inc. v. Oliveira, 139 S. Ct. 532, 535 (2019) (internal quotations and citations omitted). We are prohibited from “freely invest[ing] old statutory terms with new meanings” as it risks courts “amending legislation outside the ‘single,
finely wrought and exhaustively considered, procedure’ the Constitution commands.” Id. at 532 (emphasis added) (quoting I.N.S. v. Chadha, 462 U.S. 919, 951 (1983)).
When Congress passed the FDCPA in 1978, many dictionaries defined “transaction” as an agreement, negotiation, or business dealing. See, e.g., Oxford English Dictionary 251 (1933) (defining “transaction” as “the adjustment of dispute between parties by mutual concession, compromise; hence gen, an arrangement, an agreement, a covenant”); American College Dictionary 1285 (1970) (defining “transaction” as “an act of transacting” and defining “transact” as “to carry through (affairs, business, etc.) to a conclusion or settlement” or “to carry through affairs or negotiations”); Random House’s College Dictionary 1394 (1973) (defining transaction as “an act of transacting” and defining “transact” as “to carry on or conduct (business, negotiations, activities, etc.) to a conclusion of a settlement”); Webster’s Third New International Dictionary of the English Language 2425-26 (1976) (defining “transaction” as “an adjustment or compromise in Roman or civil law of a disputed claim effected by mutual agreement and resembling the accord and satisfaction of the common law” or “a communicative action or activity involving two parties or two things reciprocally affecting or influencing each other”); Webster’s New Collegiate Dictionary 1239 (1977) (indicating that the most common meaning4 of the term “transaction” is “a business deal” but that meaning is subsumed within the more general definition “an act, process, or instance of transacting”). Black’s Law Dictionary defined “transaction” as “act of transacting or conducting any business; negotiation, management; proceeding that which is done” and said that the term “may involve selling,
leasing, borrowing, mortgaging, or lending.” Black’s Law Dictionary 1341 (5th ed. 1979). It further noted that the word “is a broader term than ‘contract’” and “must therefore consist of an act or agreement, or several acts or agreements having some connection with each other, in which more than one person is concerned, and by which the legal relations of such persons between themselves are altered.” Id.
We have also determined that the “ordinary meaning of the term ‘transaction’ is a broad reference to many different types of business dealings between parties, and does not connote any specific form of payment.” Hamilton v. United Healthcare of La., Inc., 310 F.3d 385, 392 (5th Cir. 2002) (citing one definition of “transaction” from a 1986 version of Webster’s New World Dictionary but interchangeably using the word “contract”); see also Oppenheim, 627 F.3d at 837 (recognizing “the broad scope of ‘debt’ in the FDCPA” as long as the “transaction creates an obligation to pay” (internal citation omitted)). The consensus among circuit courts also strengthens our view that the term “transactions” refers to business dealings best characterized as “a consensual exchange involving an affirmative request” and “the rendition of a service or purchase of property or other item of value.” St. Pierre, 898 F.3d at 360 (internal citations and quotations omitted); see also Turner v. Cook, 362 F.3d 1219, 1227 (9th Cir. 2004) (limiting FDCPA’s reach “to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services” (quoting Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir. 1997))); Hawthorne v. Mac Adjustment, Inc., 140 F.3d 1367, 1371 (11th Cir. 1998) (“[A]t a minimum, a ‘transaction’ under the FDCPA must involve some kind of business dealing or other consensual obligation . . . .”).
ii. The Road Home Program Agreement
Turning to the facts here, the district court determined that “the precise transaction that created the [repayment] obligation was OCD’s issuing a grant to Calogero under the Road Home Program, a condition of which was that she agreed to repay any overpayments.”
On appeal, SCW mischaracterizes the Road Home grant as simply an unreciprocated donation for which Louisiana and OCD received nothing in return for issuing hurricane disaster relief grants. That description is an oversimplification of the thirteen-page agreement—including a declaration of covenants, limited subrogation, and affidavit—voluntarily signed by Calogero and OCD representatives. It is evident that there was a mutual exchange of value that reciprocally affected and influenced both Calogero and OCD. Through the Road Home Program, OCD provided hurricane relief money to encourage Calogero and many homeowners to return to and reside in Louisiana in the wake of Hurricanes Katrina and Rita. Specifically, in exchange for the OCD grant payment of $33,392.68, Calogero agreed to several conditions that aided Louisiana, such as occupying her property as her primary residence for a period of three years5; promising to not sell her property except to a buyer who agreed to abide by the covenants; maintaining property insurance against wind, hail, and flood damage6; recording these covenants in the parish records; and providing the State with evidence of her compliance with these covenants. At the very least, the Road Home grant contract between
Calogero and Louisiana did involve a “consensual exchange”: Louisiana gave
Calogero money to repair her home, and Calogero gave Louisiana her word
that
We have previously held that a group health insurer’s contract-based subrogation claim for reimbursement of benefits it had paid the plaintiff was a “debt” under the FDCPA. Hamilton, 310 F.3d at 385. The consumer in Hamilton was covered under an insurance policy that required him to reimburse the insurer for duplicate payments received from another company for the same coverage. Id. at 392. We found that the consumer’s obligation to pay arose from the consumer’s purchase of insurance even though, as the district court observed, “had [the consumer] not engaged in another transaction wholly unrelated to his contract with United, i.e., obtaining his own [underinsured motorist] policy through another insurer, no obligation would exist.” Id. at 395 n.2 (quoting Hamilton v. United Healthcare of La., Inc., Nos. Civ. A. 01-585, 01-650, 2001 WL 812076, at *3 (E.D. La. July 16, 2001)). It logically follows that Road Home’s subrogation claim for reimbursement arises out of Calogero’s direct voluntary acceptance of the program’s terms, especially when there is no unrelated, separate contract at issue here. See id. at 395-98 (Garza, J. dissenting in part) (emphasizing that United’s subrogation claim was too attenuated from the underlying contract or transaction).
SCW also urges us to adopt the district court’s reasoning which likened Calogero’s obligation to repay excess relief funds to an employee’s obligation to
repay a salary overpayment due to a unilateral accounting error. See Orenbuch v. Leopold, Gross & Sommers, P.C., 586 F. Supp. 2d 105, 108 (E.D.N.Y. 2008) (analyzing an FDCPA claim premised on an employer’s attempt to recollect over $2,000 as overpaid salary to an employee); see also Arnold v. Truemper, 833 F. Supp. 678, 683 (N.D. Ill. 1993) (concluding that a bank customer’s obligation to repay a deposit mistakenly transferred into a bank account was not considered an FDCPA debt because there was no transaction involving an obligation to repay and there was no source of the debt beyond an accounting error). However, the district court overlooked a critical distinction in these cases. Indeed, the Eleventh Circuit importantly noted that neither Arnold nor Orenbuch involved a contract that created a specific obligation dictating the plaintiffs’ liability in the event of any overpayment. See Oppenheim, 627 F.3d at 838 (“Arnold and Orenbuch do not stand for the proposition that one who improperly receives money does not incur a ‘debt’ subject to the FDCPA. Rather, they stand for the proposition that a consumer’s obligation must arise from a ‘transaction’ in order for the FDCPA to apply.”). In this case, Calogero’s consent to her obligation to repay excess funds amply meets the “transaction” test and distinguishes it from the cases of overpayment in which there was no explicit consent to repay an erroneous deposit of money.
We of course do not read the term “transaction” in a vacuum. Reed v.
Taylor, 923 F.3d 411, 415 (5th Cir. 2019) (“[J]udges, like all readers, must be
attentive not to words standing alone but to surrounding structure and other
contextual cues that illuminate meaning.”). “Interpretation
Therefore, we find that Calogero’s obligation of repayment for excess grant money arises from a “transaction,” which encompasses consensual agreements and negotiations like this one. See Bass, 111 F.3d at 1326 (holding that an FDCPA transaction encompasses “consensual” exchanges “where parties negotiate or contract for consumer-related goods or services”). Compare Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D. Ohio 1994) (obligation to pay for shoplifted merchandise not a “debt” under the FDCPA because “plaintiff has never had a contractual arrangement of any kind with any of the defendants”), with Romea v. Heiberger & Assocs., 163 F.3d 111, 115 (2d Cir. 1998) (“Back rent by its nature is an obligation that arises only from the tenant’s failure to pay the amounts due under the contractual lease transaction” and the tenant’s “breach” of “its payment obligations in the contract between the parties”). We turn to the next step of the St. Pierre inquiry.
B. The Subject of the Road Home Transaction between Calogero and OCD.
To identify what “money, property, insurance, or services are the subject of the transaction,” we must ask “what is being rendered in exchange for payment[.]” St. Pierre, 898 F.3d at 362. The district court concluded that “there was no consumer transaction between Calogero and OCD” because “Calogero did not give OCD money for goods or services, or vice versa” and Calogero “would never be obligated to repay unless she broke one of the covenants or received an overpayment.”
This is incorrect. Calogero received funds from the government in exchange for contractual obligations, including a promise to repay excess grant money. This exchange of government-backed funds for promises comports with other cases in which we have assumed the FDCPA applies. See generally Peter
v. GC Serv. L.P., 310 F.3d 344 (5th Cir. 2002) (applying the FDCPA in the context of collecting student loan payments owed to the federal government).
SCW also maintains that the FDCPA’s reach is limited to transactions
involving the “normal creditor/debtor relationship.” However, such a narrow
reading of the FDCPA prohibitively restricts the plain meaning of
“transaction.” Hamilton, 310 F.3d at 390. If Congress had intended to limit
FDCPA’s definition of “debt” to repayments to creditors or obligations arising
out of the exchange of tangible goods, “it could have and would have drafted
the statute to demonstrate that intention.” Chance v. Dallas Cty. Hosp. Dist.,
176 F.3d 294, 296 (5th Cir. 1999); see also Brown v. Budget Rent-A-Car Sys.,
Inc., 119 F.3d 922, 924 (11th Cir. 1997) (An “extension of credit is not a
prerequisite to the existence of a debt covered by the FDCPA”); Romea, 163
F.3d at 114 n.4 (noting that several circuits have “disavowed” the “dicta” that
the FDCPA applies only to transactions involving the “offer or extension of
credit”). The principles of statutory interpretation prohibit us from reading
into the FDCPA’s clear statutory language a restriction that Congress itself
did not include. See Hubbard v. United States, 514 U.S. 695, 703 (1995).
Accordingly, we
C. Whether the grant money from the Road Home Program Agreement was “primarily for personal, family, or household purposes”?
Having identified what Calogero rendered in exchange for the grant money, we next determine if the money Calogero received in exchange for compliance with Road Home’s terms was for the private benefit of a “personal,
family, or household” service or good. St. Pierre, 898 F.3d at 363 (citing
In sum, we hold that the district court erred in concluding that Calogero’s obligation to pay the Road Home Program did not fall under the FDCPA. We make no comment on whether Calogero’s claim will satisfy the other required elements to ultimately prevail on her FDCPA claim as those issues were not under consideration of this appeal.7
IV. CONCLUSION
For these reasons, we REVERSE the district court’s determination that the obligation of repayment at issue in this case does not qualify as a “debt” under the FDCPA and REMAND for further proceedings consistent with this opinion.