TERRY L. KLOTZ, on behalf of herself and those similarly situated, Appellant v. CELENTANO STADTMAUER AND WALENTOWICZ LLP
No. 19-3703
United States Court of Appeals for the Third Circuit
March 16, 2021
2021 Decisions 251
Before: AMBRO, PORTER, and ROTH, Circuit Judges.
PRECEDENTIAL. Argued: September 24, 2020. On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 2-19-cv-00248). District Judge: Honorable Susan D. Wigenton.
Scott C. Borison [ARGUED]
BORISON FIRM
30 North Gould Street
Sheridan, WY 82801
Yongmoon Kim
KIM LAW FIRM
411 Hackensack Avenue
Hackensack, NJ 07601
Counsel for Plaintiff-Appellant Terry L. Klotz
Lawrence J. Bartel [ARGUED]
Andrew M. Schwartz
GORDON REES SCULLY MANSUKHANI
Three Logan Square
1717 Arch Street
Philadelphia, PA 19103
Counsel for Defendant-Appellee Celentano Stadtmauer and Walentowicz LLP
PORTER, Circuit Judge.
Terry Klotz’s now-deceased husband received medical services from Hackensack University Medical Center (the “Hospital”) and incurred a $1,580 debt. Klotz’s husband did not pay the medical debt before he died, and he left no estate. The Hospital retained Celentano, Stadtmauer and Walentowicz, LLP (“CSW”) to collect the debt, and it mailed two collection letters to Klotz.
I
Klotz believed that she was not liable for the debt, so she sued CSW for violating
II
The District Court had subject-matter jurisdiction under
We review de novo a district court’s grant of a motion to dismiss for failure to state a claim under
We review a district court’s denial of a
The FDCPA prohibits debt collectors from using false, misleading, and unfair debt-collection practices by seeking to collect on a debt that is not authorized by law. See
In response, CSW argues that Klotz had a legal obligation to pay the debt under New Jersey’s common-law doctrine of necessaries. In Jersey Shore Medical Center-Fitkin Hospital v. Estаte of Baum, the Supreme Court of New Jersey held that “both spouses are liable for necessary expenses incurred by either spouse in the course of the marriage.” 417 A.2d 1003, 1005 (N.J. 1980). Additionally, a non-debtor is liable for the debts of her spouse only if “the assets of the spouse who incurred the debt are insufficient.” Id. at 1010. CSW’s arguments prevailed in the District Court.
Klotz argues the following on appeal: (1) federal law preempts the doctrine of necessaries, and thus CSW’s collection effort violated the FDCPA; (2) CSW failed to follow the doctrine’s procedural requirement that CSW seek repayment from her husband before seeking repayment from her; and (3) she should be permitted to amend her complaint. All three arguments fail.
A
First, Klotz argues that the ECOA preempts the doctrine of necessaries. Federal law1 can preempt state law in three ways: (1) express preemption; (2) field preemption; or (3) conflict preemption. Farina v. Nokia Inc., 625 F.3d 97, 115 (3d Cir. 2010). Conflict preemption, the only type of preemption relevant here, “exists where compliance with both state and federal law is impossible, or where the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 377 (2015) (internal quotation marks omitted) (quoting California v. ARC Am. Corp., 490 U.S. 93, 100–01 (1989)).
Two principles guide a conflict-preemption analysis. First, “all preemption arguments[] must be grounded in the text and structure of the [federal] statute at issue.” Kansas v. Garcia, 140 S. Ct. 791, 804 (2020) (internal quotation marks omitted) (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993)). Second, “there is а strong presumption against preemption in areas of the law that States have traditionally occupied.” Sikkelee v. Precision Airmotive Corp., 822 F.3d 680, 687 (3d Cir. 2016) (citing Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996)).
The ECOA prohibits “any creditor” from “discrimi nat[ing] against any applicant, with respect to any aspect of a credit transaction[] on the basis of . . . marital stаtus.”
Klotz argues that the doctrine of necessaries conflicts with the spousal-signature prohibition found at
Putting aside questions such as whether CSW is a “cred itor” and Klotz an “applicant” under the spousal-signature prohibition, we hold that the ECOA does not preempt the doctrine of necessaries because the debt is “incidental credit” exempt from the prohibition. The Federal Reserve Board may exempt certain categories of transactions from the scope of the ECOA “after making an express finding that the applicatiоn of . . . any provision . . . would not contribute substantially to effecting the purposes of [the ECOA].”
Klotz’s medical debt qualifies as incidental credit because it satisfiеs all three criteria. She does not dispute that the debt is not related to a credit card account, not subject to a finance charge, and not subject to installment payments. See Equal Credit Opportunity, 68 Fed. Reg. at 13,188 (listing medical debt from a hospital or doctor thаt “allows the client or customer to defer the payment of a bill” as an example of incidental credit); Mays v. Buckeye Rural Elec. Coop., Inc., 277 F.3d 873, 877–79 (6th Cir. 2002) (holding that money owed to an electrical utility was incidental credit under
Given thаt the spousal-signature prohibition does not apply, we hold the ECOA and its regulations do not conflict-preempt the doctrine of necessaries. To succeed on a conflict-preemption argument, Klotz must demonstrate that the doc- trine of necessaries either (1) makes compliance with the ECOA impossible or (2) “stand[s] as an obstacle to the accomplishment and execution of the full purposes” of the ECOA. Garcia, 140 S. Ct. at 806 (internal quotation marks omitted). The identification of the purpose “cannot be based on a freewheeling judicial inquiry into whether a state statute is in tension with federal objectives.” Id. at 801 (internal quotation marks and citation omitted).
B
Klotz next argues that CSW failed tо comply with the requirements of the doctrine of necessaries. But she did not plead adequate facts to support her argument, and her husband does not have an estate that could pay the debt, so the argument fails.
Before resorting to the doctrine of necessaries, a creditor must “first seek satisfaction from the income and other property of the spouse who incurred the debt.” Jersey Shore, 417 A.2d at 1005. This step ensures that the doctrine applies “only where the financial resources of the spouse who incurred the necessary expense are insufficient.” Id. at 1010. Klotz’s complaint does not allege that CSW flouted the doctrine’s requirement that it first seek satisfaction from her deceased husband. Nor does the complaint allege that her husband’s estate possessed funds to cover the debt. Public records—which wе may consider when reviewing the grant of a
Klotz argues that CSW should have sought administration of her husband’s estate under
C
Third, Klotz argues that the District Court abused its discretion by denying her motion for leave to file an amended complaint. The District Court denied Klotz’s motion beсause the amendment would be futile. We agree.
A proposed amendment to a complaint is futile if the complaint, as amended, would fail to state a claim upon which relief could be granted. See Suzuki, 227 F.3d at 121. Klotz argues that her proposed amended complаint would not be futile because it would plead that CSW’s letters sought to collect an amount beyond what the doctrine of necessaries permits. CSW’s letters sought to collect a debt of $1,580. Klotz pleads that her husband was a Medicare beneficiary with a Medicare deduсtible of $1,316, thus implying that some amount of
Even if the debt included a small amount of ancillary charges beyond the Medicare deductible of Klotz’s husband, these allegations do not change whether the debt resulted from the provision of a necessary service. Indeed, necessaries can be costs that “directly or indirectly are designed to preserve the assets of [a] marriage or to permit [a debtor spouse] to continue his normal life, including the ability to make income and supрort the family either through employment or providing services or emotional well-being in the household.” See DuBois v. DeLarm, 578 A.2d 1250, 1255 (N.J. Super. Ct. App. Div. 1990) (emphasis added). None of Klotz’s proposed allegations challenge whether the debt incurred falls outside the definition of a necessary under New Jersey law. Her “complaint pleads facts that are ‘merely consistent with’ [CSW]’s liability” but “stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted). The District Court did not abuse its discretion when it denied Klotz’s request for leave to amend for futility.
* * *
The ECOA does not preempt New Jersey’s doctrine of necessaries, so the doctrine permitted CSW to send its collection letters to Klotz without violating the FDCPA. Additionally, CSW followed the procedural requirements of the doctrine, and Klotz’s filing an amended complaint would be futile. So we will affirm the District Court’s judgment dismissing Klotz’s complaint.