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.
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.
Klotz claims she is not liable for the debt and asks us to hold that the Equal Credit Opportunity Act (“ECOA”),
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
III
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. Estate of Bаum, 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)
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, “thеre is a 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)).
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 thаt the application of . . . any
Klotz’s medical debt qualifies as incidеntal credit because it satisfies 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 dеbt from a hospital or doctor that “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 that 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-
CSW’s use of the doctrine of necessaries complies with the ECOA because the medical debt is incidental credit exempt from the spousal-signature prohibition. Further, Klotz’s attempt to invoke the general objectives of the ECOA fails, as the statute was focused on ensuring the availability of credit rather than the allocation of liability between spouses. See Moran Foods, Inc. v. Mid-Atlantic Mkt. Dev. Co., LLC, 476 F.3d 436, 441 (7th Cir. 2007) (“[I]t is apparent that what the Act was intended to dо was to forbid a creditor to deny credit to a [married] woman on the basis of a belief that she would not be a good credit risk.”). Because CSW’s use of the doctrine of necessaries complies with the ECOA and does not frustrate the purpose of the ECOA, we hold the ECOA has nоt preempted the doctrine. Garcia, 140 S. Ct. at 804.
B
Klotz next argues that CSW failed to comply with the requirements of the doctrine of necessaries. But she did not plead adequate facts to support her argument, and her husband
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 hеr husband’s estate possessed funds to cover the debt. Public records—which we may consider when reviewing the grant of a
Klotz argues that CSW should have sought administration of her husband’s estate under
Third, Klotz argues that the District Court abused its discretion by denying her motion fоr leave to file an amended complaint. The District Court denied Klotz’s motion because 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 reliеf could be granted. See Suzuki, 227 F.3d at 121. Klotz argues that her proposed amended complaint 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 dеbt of $1,580. Klotz pleads that her husband was a Medicare beneficiary with a Medicare deductible of $1,316, thus implying that some amount of the debt in the collection letter was not covered by Medicare. She also pleads that the collection amount “included cоpayments, expenses, fees, costs and/or other charges incurred on additional dates beyond the ‘Date of Service’ specified in the [collection letters].” App. at 123.
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 оr to permit [a debtor spouse] to continue his normal life, including the ability to make income and support 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
* * *
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.