Turner v. Universal Debt Solutions, Inc.

Filing 6

OPINION. Signed by Honorable Myron H. Thompson on 8/13/2010. (dmn)

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION IN RE: HASSON TURNER Debtor. HASSON TURNER, Plaintiff, v. UNIVERSAL DEBT SOLUTIONS, INC., Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

CIVIL ACTION NO. 2:08cv732-MHT (WO)

OPINION Plaintiff-debtor Hasson Turner initiated this

adversary proceeding against defendant Universal Debt Solutions, Inc. ("UDS") in the United States Bankruptcy Court for the Middle District of Alabama, alleging

violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"). The parties filed

cross-motions for summary judgment and the bankruptcy

court issued a recommendation that each party's motion be granted in part and denied in part. This lawsuit is now before the court on the

recommendation of the bankruptcy court and the objections filed by UDS.1 For the reasons that follow, the court

will overrule each of UDS's objections, except for its objection to the recommended award of attorney's fees and damages, and will adopt the recommendation of the

bankruptcy judge, except on the issue of attorney's fees and damages. I. STANDARD OF REVIEW

28 U.S.C. § 157(c)(1) authorizes "[a] bankruptcy judge [to] hear a proceeding that is ... related to a case under title 11."2 The statute further states that,

"In such a proceeding, the bankruptcy judge shall submit

1. Turner has filed no objections recommendation of the bankruptcy court.

to

the

2. Title 11 of the United States Code is commonly referred to as the Bankruptcy Code. 2

proposed findings of fact and conclusions of law to the district court." Id. "[A]ny final order or judgment

shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." Id.

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2); see also

Fed. R. Bankr. P. 7056 (applying Fed. R. Civ. P. 56 to adversary proceedings). In conducting its analysis, the

court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 587 (1986).

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II.

BACKGROUND

The relevant factual background of this lawsuit is described by the bankruptcy court in its proposed

findings of fact, Rec. at 2-3 (doc. no. 1-9), which will be adopted by this court. This lawsuit arises from "two

collection notices, identical in material respects," that UDS mailed to Turner "on or about August 30, 2007, seeking to collect an alleged consumer debt." "The body of each letter contained the Id. at 2. following

language: If we do not receive payment or you do not notify us in writing, that you dispute this debt within thirty (30) days from the date of this letter, we will proceed with recovery of the debt based on the laws allowed in your state." Id. "The two letters are the only communication sent by Id.

[UDS] to [Turner]."

Less than two months after he received the abovedescribed letters from UDS, Turner filed a petition for relief under chapter 13 of the bankruptcy code in the

4

bankruptcy court for this district.

He later filed the

complaint that forms the basis of this lawsuit in that same court, alleging that UDS had "violated various

provisions of the FDCPA" and that he had "been damaged as a result of [UDS's] actions." The parties subsequently Compl. at ¶¶ 11-12. filed cross-motions for

summary judgment, and the bankruptcy court reviewed their arguments and submitted the instant recommendation to this court. UDS raises four objections to the

recommendation: (1) it argues that the bankruptcy court lacked jurisdiction over this lawsuit; (2) it objects to the § proposed finding by that it that violated Turner 15 U.S.C. his

1692g(a)(3)

requiring

dispute

alleged debt "in writing"; (3) it objects to the proposed finding that it violated 15 U.S.C. § 1692g(a)(3) by requiring that Turner provide notice of dispute "within thirty (30) days from the date of this letter"; and (4) it objects to the recommendation that judgment enter in

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favor of Turner in the amount of $ 1,000 plus reasonable attorney's fees. III. A. DISCUSSION Jurisdiction

UDS contends that Turner's claims "should have been dismissed and/or transferred to the District Court ... [because] the Bankruptcy Court was without jurisdiction to enter a report or to make any recommendations pursuant to 28 U.S.C. § 157(c)(1)." 3). As noted above, a bankruptcy court is authorized to "hear a proceeding that is ... related to a case under title 11." 28 U.S.C. § 157(c)(1). "The ... test for Def.'s Obj. at 2 (Doc. No.

determining whether a civil proceeding is related to bankruptcy is whether the outcome of the proceeding could conceivably have an effect on the estate being

administered in bankruptcy."

Lawrence v. Goldberg, 573

F.3d 1265, 1270 (11th Cir. 2009) (citations omitted). "The proceeding need not necessarily 6 be against the

debtor or against the debtor's property." omitted). if the

Id. (citations

Indeed, "[a]n action is related to bankruptcy outcome could or alter the debtor's of action rights, (either

liabilities,

options,

freedom

positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate." Id. at 1270-71 (citations omitted).

UDS "acknowledges [that] the phrase `related to' has been interpreted broadly, [but] submits that any

relationship between [this] matter and the Chapter 13 case is simply too tenuous to be considered `related.'" Def.'s Obj. at 2. argues that: "[It] did not participate in any fashion in the Chapter 13 case. [It] was not identified as a creditor[,] ... did not attend the creditors' meetings, [and] has not made any efforts to lift the [automatic] stay or otherwise participate in the Chapter 13 case. [This] action was not brought by the Trustee, but rather directly by Plaintiff Hasson Turner. The only relation between this case and the In support of this contention, UDS

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Chapter 13 case is [Turner]. connection exists." Id. UDS's arguments have no merit. not participate in Turner's

No other

The fact that it did 13 case has no

chapter

bearing on whether Turner's claims are "related to" that case. The same goes for the fact that Turner, rather

than the trustee, brought the claims against UDS. What does matter is that the outcome of this case "could conceivably have an effect on the estate being administered in bankruptcy." (citations omitted). Lawrence, 573 F.3d at 1270 "estate is

A chapter 13 debtor's

comprised of ... all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1); 11 U.S.C. § 1306(a) ("Property of the estate includes ... the property specified in [11 U.S.C. § 541]."). It also includes all such property

"that the debtor acquires after the commencement of the case but before the case is closed, dismissed or

converted."

11 U.S.C. § 1306(a)(1). 8

And it is well-

established that such property "includes legal causes of action the debtor ha[s] against others." In re Icarus

Holding, LLC, 391 F.3d 1315, 1319 (11th Cir. 2004). For these reasons, the bankruptcy court was correct to conclude that it had jurisdiction over Turner's claims and UDS's objection will be overruled. B. "In Writing"

The bankruptcy court recommends a finding that UDS violated 15 U.S.C. § 1692g(a)(3) by "requiring written notice that a debt is disputed." Rec. at 5.3 UDS

correctly notes that the "interpretation of § 1692g(a)(3) appears to be an issue of first impression in this District," and that the "Bankruptcy Court acknowledged ... [an existing circuit split] regarding whether a

creditor may require written notice by a debtor who

3. 15 U.S.C. § 1692g(a)(3) directs debt collectors to "send [a debtor] a written notice containing ... a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector." 9

desires

to

dispute

the

debt."

Def.'s

Obj.

at

3.4

According to UDS, the bankruptcy court recommends joining the wrong side of this split, but it offers no new arguments to support its objection. Having considered the bankruptcy court's thorough analysis and UDS's objection, and having conducted a de novo review of the record, the court will overrule UDS's objection and adopt the well-reasoned recommendation of the bankruptcy court. comments: As explained by the bankruptcy court, "[this] issue has been examined ... by two circuit courts reaching The court adds the following

4. Since the bankruptcy court issued its recommendation, the United States Supreme Court has taken note of the circuit split on the question of "whether inclusion of an `in writing' requirement in a notice to a consumer violates § 1692g." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, -- U.S. --, 130 S.Ct. 1605, 1610 n.3 (2010) (citing Graziano v. Harrison, 950 F.2d 107, 112 (3rd Cir. 1991) and Camacho v. Bridgeport Fin., Inc., 430 F.3d 1078, 1080-82 (9th Cir. 2005)). Unfortunately, the Court "express[ed] no view" on this matter, "as that question was not presented in the petition for certiorari." Id. 10

opposite conclusions."

Rec. at 5.

In Graziano v.

Harrison, 950 F.2d 107 (3rd Cir. 1991), the court held that 15 U.S.C. § 1692g(a)(3) "contemplates that any

dispute, to be effective must be in writing."

The Ninth

Circuit Court of Appeals respectfully disagreed, finding that § "there is no ... writing [and requirement a] implicit in

1692g(a)(3)

thus

collection

notice

violate[s] § 1692g insofar as it state[s] that disputes must be made in writing." Camacho v. Bridgeport Fin., For reasons

Inc., 430 F.3d 1078, 1082 (9th Cir. 2005).

discussed in its recommendation, the bankruptcy court "finds the reasoning of Camacho persuasive." As stated above, this court agrees. The bankruptcy court also indicated that "[o]ther district courts have [adopted the Camacho court's Rec. at 7.

position]."

Id. (citing multiple cases).5

This court

5. The court adds the following cases to those cited by the bankruptcy court: Register v. Reiner, Reiner & Bendett, PC, 488 F. Supp. 2d 143, 147 (D. Conn. 2007) (Hall, J.) (citing Camacho and finding that a "letter (continued...) 11

adds

that,

since

the

bankruptcy

court

issued

its

recommendation, district courts have continued to side with the Camacho court. See, e.g., Campbell v. Hall, 624

F. Supp. 2d 991, 1000 (N.D. Ind. 2009) (Van Bokkelen, J.) ("This Court agrees with the reasoning of the Ninth Circuit in Camacho and the weight of the authority from district courts which have held that § 1692g(a)(3) of the FDCPA should be interpreted to allow consumers to dispute the validity of their debt in ways other than writing." (citing multiple cases)). There is no similar recent

trend of support for the Graziano court's position. C. "Date of this Letter"

The bankruptcy court recommends a finding that UDS (...continued) violated section 1692g(a)(3) by requiring [the plaintiff] to submit any dispute to his debt in writing"); Jerman v. Carlisle, 464 F. Supp. 2d 720, 725 (N.D. Ohio 2006) (Gaughan, J.) (reversed on other grounds) ("This Court agrees with the majority of the district courts which have rejected Graziano, and it agrees with and adopts the reasoning of the Ninth Circuit in Camacho. ... [D]efendant's form validation notice violates the FDCPA in so far as it states that disputes must be made in writing."). 12

violated 15 U.S.C. § 1692g(a)(3) by "requiring [Turner] to dispute the debts ... within thirty days from the date of the letter" rather than thirty days from his receipt of the letter. "regard [this] Id. Rec. at 9. violation It declined UDS's request to as merely technical or de

minimis."

UDS objects, making the same request of

this court, and with no new argument. Having considered the bankruptcy court's

recommendation and UDS's objection, and having conducted a de novo review of the record, the court will overrule UDS's objection and adopt the recommendation of the

bankruptcy court. D. Attorney's Fees and Damages

Having recommended that this court find that UDS violated the FDCPA, the bankruptcy court further

recommends, "that judgment enter in favor of [Turner] in the amount of $ 1,000 plus reasonable attorney's fees." Rec. at 10. UDS objects to the award of maximum

statutory damages and attorney's fees and "seeks a de 13

novo review of the Bankruptcy Court's recommended entry of judgment." 15 U.S.C. Def.'s Obj. at 5. § 1692k(a) provides that, "any debt

collector who fails to comply with any provision of [15 U.S.C. §§ 1692 et seq.] with respect to any person is liable to such to person." "Successful plus plaintiffs costs and are `a

entitled

`actual

damage[s],'

reasonable attorney's fee as determined by the court.'" Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, -- U.S. --, 130 S. Ct. 1605, 1609 (2010) (quoting 15 U.S.C. § 1692k(a)). "A court may also award `additional

damages,' subject to a statutory cap of $ 1,000 for individual actions." Id. (quoting § 1692k(a)(2)(A)). In

"determining the amount of [additional damages] ... the court shall consider ... the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional." 15 U.S.C. § 1692k(b)(1).

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The

court's

review

of no

the

bankruptcy of fact

court's on the

recommendation

uncovered

findings

statutory factors listed above, nor does the bankruptcy court otherwise explain its recommended award. Thus, the

court will sustain UDS's objection to the recommended award of maximum statutory damages, and will remand this lawsuit to the bankruptcy court to re-evaluate its

recommendation and to submit proposed findings on the factors stated in 15 U.S.C. § 1692k(b)(1). "[C]ourts have taken different views about when, and whether, § 1692k requires an award of attorneys fees." Jerman, 130 S. Ct. at 1621 n.16. The statute authorizes

attorney's fees only "in the case of ... [a] successful action to enforce ... liability," 15 U.S.C. an action

§ 1692k(a)(3), and some courts have held that

is successful only if a plaintiff is awarded actual or additional damages. In an unpublished (and therefore

non-binding) opinion, a panel of the Eleventh Circuit Court of Appeals adopted that position, stating that,

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"The difference between zero dollars [in damages] and one dollar [in damages] is the difference between an

unsuccessful action and a successful action."

Thornton

v. Wolpoff & Abramson, L.L.P., 312 Fed. Appx. 161, 164 (11th Cir. 2008) (unpublished). That court had

previously interpreted a similar provision in another statute and held that "to be `successful' the plaintiff must receive some relief beyond mere entry of judgment." Nagle v. Experian Info. Solutions, Inc., 297 F.3d 1305, 1306 (11th Cir. 2002). explicitly "recognize[d] But it so doing, that court that the [FDCPA] contains

[similar] language[,] ... and that there is a split amongst the Circuits as to whether or not to require actual damages before an award of attorney's fees is Id. at

appropriate," and declined to address the split. 1308 n.7 (citing cases).

The Supreme Court has also Jerman, 130 S.Ct. at

declined to "resolve these issues." 1621 n.16.

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This court also need not (and thus will not) address this issue unless it determines that no damages are appropriate. That determination will be made, if it is

made at all, only after the court considers the new findings and recommendation of the bankruptcy court. *** For the foregoing reasons, the court will overrule each of UDS's objections, except for its objection to the recommended award of attorney's fees and damages, and will adopt the recommendation of the bankruptcy judge, except on the issue of attorney's fees and damages. appropriate judgment will be entered. DONE, this the 13th day of August, 2010. /s/ Myron H. Thompson UNITED STATES DISTRICT JUDGE An