Elizarov v. Equity Experts LLC
Filing
28
OPINION AND ORDER denying 15 Plaintiff's Motion for Summary Judgment; granting Defendant's Oral Motion for Summary Judgment. Signed by District Judge Paul D. Borman. (DTof)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
YAKOV ELIZAROV,
Case No. 16-13285
Plaintiff,
Paul D. Borman
United States District Judge
v.
EQUITY EXPERTS LLC,
Stephanie Dawkins Davis
United States Magistrate Judge
Defendant.
_____________________________/
OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR
SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT
Plaintiff Yakov Elizarov brought this action against Defendant Equity
Experts, LLC, alleging violations of both the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq., and the Michigan Regulation of Collection Practices Act,
Mich. Comp. Laws § 445.251 et seq.
Defendant purchased debt that Plaintiff incurred for failing to pay
condominium assessments on a Waterford, Michigan unit that he ultimately lost to
foreclosure. The specific conduct that Plaintiff challenges in this lawsuit is
Defendant’s filing of a collection action in the 51st Judicial District in Waterford,
Michigan (where the condominium is located), rather than the 52nd Judicial District
in Troy, Michigan (where certain relevant contracts were signed), or alternatively in
a court in Maryland (where Plaintiff now resides). The 51st Judicial District and the
52nd Judicial District are both within Oakland County, Michigan, and relatively
close to one another.
Both parties have moved for summary judgment. For the reasons below, the
Court will deny Plaintiff’s Motion for Summary Judgment, and grant Defendant’s
Motion for Summary Judgment.
I.
A.
BACKGROUND
Factual Background
Plaintiff incurred the alleged debt at the center of this lawsuit in connection
with his ownership of a condominium unit (the “subject property”) in the Fountain
Park South development in Waterford, Michigan.
Fountain Park South was formally established pursuant to the Michigan
Condominium Act, Mich. Comp. Laws § 559.101 et seq., with the execution of a
Master Deed on March 28, 2006, and the recording of that Master Deed in Oakland
County, Michigan on April 5, 2006. (Def.’s Resp. Ex. A, Master Deed.) The Master
Deed provides, relevantly, on its first page that Fountain Park South is subject to
the covenants, conditions, restrictions, uses, limitations, and affirmative
obligations set forth in this Master Deed and the Exhibits hereto, all of
which shall be deemed to run with the land and shall be a burden and a
benefit to the Developer, its successors and assigns, and any persons
acquiring or owning an interest in the said real property, their grantees,
successors, heirs, executors, administrators and assigns.
(Master Deed at 2, Pg ID 181.)
2
The Master Deed has two Exhibits: the by-laws of the Fountain Park South
Condominium Association (the “Association”) (see Master Deed at 19-59, Pg ID
198-238); and a series of surveys and maps that together constitute the
Condominium Subdivision Plan (see Master Deed at 60-67, Pg ID 239-246). Article
II of the by-laws governs monetary assessments by the Association against unit
owners. Specifically, Article II empowers the Association to levy (and requires unit
owners to pay) annual assessments, and provides for the levying of both
discretionary and unit-owner-approved assessments by the Association. Article II of
the by-laws also provides that unpaid assessments shall constitute liens upon the
units of delinquent unit owners, and authorizes various enforcement mechanisms
including collection and lien foreclosure lawsuits. (See id. at 19-23, Pg ID 198-202.)
In February 2007, Plaintiff purchased the subject property by warranty deed.
(ECF No. 15, Pl.’s Mot. Ex. 1, Warranty Deed.) The final clause of the warranty
deed provides as follows:
Subject to easements, reservations and restrictions of record, and
further subject to, [sic] this deed is given in fulfillment of a certain Land
Contract dated 8/22/2006 between the parties hereto and is further
subject to such encumbrances which may have attached or accrued
since the date of said contract through the acts or ommissions [sic] of
persons other than the grantors herein.
(Id. at 3, Pg ID 144.)
3
Plaintiff financed the purchase with a $172,475.00 loan from non-party
Quicken Loans, Inc., which was secured by a mortgage on the condominium. The
mortgage was recorded in Oakland County, Michigan on February 13, 2007. (ECF
No. 21, Def.’s Resp. Ex. B, Mortgage.) The mortgage had several attachments,
including a Condominium Rider which Plaintiff signed separately, and which
provides that Plaintiff (identified in the Condominium Rider as “Borrower”)
shall perform all of Borrower's obligations under the Condominium
Project's Constituent Documents. The "Constituent Documents" are
the: (i) Declaration or any other document which creates the
Condominium Project; (ii) by-laws; (iii) code of regulations; and (iv)
other equivalent documents. Borrower shall promptly pay, when due,
all dues and assessments imposed pursuant to the Constituent
Documents.
(Id. at 23, Pg ID 269.)
Plaintiff represents that in October 2009, he “left the State of Michigan and
his Condominium [and] subsequently moved to Maryland where he maintains
employment and residency.” (Pl.’s Mot. at 2, Pg ID 123.)
On November 19, 2010, a lien was recorded against the subject property for
nonpayment of assessments. The lien specified that the amount due to the
Association was $770, “exclusive of interest, costs, attorney fees, and future
assessments, which are also secured by this lien and must be paid in full to discharge
the obligation.” (Def.’s Resp. Ex. C, Lien.) Plaintiff defaulted on his mortgage
shortly thereafter, and after foreclosure proceedings, he relinquished the
4
condominium pursuant to a sheriff’s sale in December 2010. Approximately four
years later, on December 11, 2015, the Association assigned to Defendant Equity
Experts, LLC “all of [the] Association's right, title, interest, powers and options” in
any unpaid sums owed by Plaintiff along with other unit owners, as well as any
interest, collection and late charges, attorney fees, fines, and liens associated with
the unpaid assessment. (Def.’s Resp. Ex. D, Assignment.)
On March 4, 2016, Defendant initiated a collection action against Plaintiff in
the 51st Judicial District Court in Waterford, Michigan, where the property was
located. In connection with that action, Defendant sent a summons and complaint by
certified mail to Plaintiff at his Maryland address. (Pl.’s Mot. Ex. 2, Summons and
Complaint.) The complaint alleged that Plaintiff (named as the defendant in that
action) failed to pay his “share of assessments, special assessments, fines, and late
fees,” and that the sum of his deficiency plus accrued interest was $1204.47. (Id. at
4-5, Pg ID 148-49.)
On May 11, 2016, Defendant moved in the 51st Judicial District Court for a
determination that Plaintiff had been served, representing in its motion that Plaintiff
had informed Defendant’s counsel of his receipt of the summons and complaint, and
that Plaintiff rejected an initial settlement offer. (Pl.’s Mot. Ex. 3, Request for
Special Consideration and Order Determining Proof of Service.)
5
The foregoing is all that the record contains regarding the collection action,
and there is no indication of how, when, or even whether the action was terminated.
B.
Procedural History
Plaintiff filed the instant two-count lawsuit on September 12, 2016 (ECF No.
1, Compl.), alleging that Defendant’s prosecution of the collection action in the 51st
Judicial District, where the condo was located, rather than in a venue in his nowhome state of Maryland violated both the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq., and the Michigan Regulation of Collection
Practices Act (“MRCPA”), Mich. Comp. Laws § 445.251 et seq. The gravamen of
Plaintiff’s allegations is that even after Plaintiff notified Defendant’s counsel that
the assessments had already been paid, and despite Defendant’s knowledge that
Plaintiff no longer lived in Michigan, Defendant brought the collection action in an
inconvenient forum in hopes of securing a default judgment against him.1 Defendant
answered the Complaint on October 5, 2016. (ECF No. 8, Answer.) Defendant
denies that Plaintiff had paid the assessments. (Answer ¶ 11; ECF No. 21, Def.’s
Resp. at Pg ID 169-70.) Plaintiff has provided no evidence that he paid the
1
The Complaint also alleges that Defendant engaged and engages in “deceptive
practices . . . by using false representations and deceptive means” in violation of 15
U.S.C. § 1692e, a separate provision of the FDCPA. (Compl. ¶ 27-28.) Plaintiff does
not make any specific argument regarding these allegations in his Motion for
Summary Judgment, however, and so the Court treats the Motion as seeking
summary judgment on Plaintiff’s FDCPA claim only on an improper-venue theory.
6
assessments.
After the close of discovery, Plaintiff moved for summary judgment on May
1, 2017. (ECF No. 15, Pl.’s Mot.) Defendant filed a response brief on June 1, 2017
(ECF No. 21, Def.’s Resp.). Plaintiff did not file a reply brief.
This Court held a hearing on Plaintiff’s Motion for Summary Judgment on
June 27, 2017. At that hearing, Defendant’s counsel orally moved for summary
judgment, and the Court permitted Plaintiff to file a brief in response to Defendant’s
oral motion. Plaintiff did so on July 13, 2017. (ECF No. 22, Pl.’s Resp.)
II.
LEGAL STANDARDS
Summary judgment is appropriate where the moving party demonstrates that
there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); Fed. R. Civ. P. 56(a). “A fact is ‘material’ for purposes of a motion
for summary judgment where proof of that fact ‘would have [the] effect of
establishing or refuting one of the essential elements of a cause of action or defense
asserted by the parties.’” Dekarske v. Fed. Exp. Corp., 294 F.R.D. 68, 77 (E.D. Mich.
2013) (Borman, J.) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir.
1984)). A dispute is genuine “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247-48 (1986).
7
“In deciding a motion for summary judgment, the court must draw all
reasonable inferences in favor of the nonmoving party.” Perry v. Jaguar of Troy,
353 F.3d 510, 513 (6th Cir. 2003) (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). At the same time, the non-movant must
produce enough evidence to allow a reasonable jury to find in his or her favor by a
preponderance of the evidence, Anderson, 477 U.S. at 252, and “[t]he ‘mere
possibility’ of a factual dispute does not suffice to create a triable case.” Combs v.
Int'l Ins. Co., 354 F.3d 568, 576 (6th Cir. 2004) (quoting Gregg v. Allen–Bradley
Co., 801 F.2d 859, 863 (6th Cir. 1986)). Instead, “the non-moving party must be able
to show sufficient probative evidence [that] would permit a finding in [his] favor on
more than mere speculation, conjecture, or fantasy.” Arendale v. City of Memphis,
519 F.3d 587, 601 (6th Cir. 2008) (alterations in original) (quoting Lewis v. Philip
Morris Inc., 355 F.3d 515, 533 (6th Cir. 2004)).
When presented with cross-motions for summary judgment, the Court “must
evaluate each motion on its own merits and view all facts and inferences in the light
most favorable to the nonmoving party.” Westfield Ins. Co. v. Tech Dry, Inc., 336
F.3d 503, 506 (6th Cir. 2003). “The fact that the parties have filed cross motions for
summary judgment does not automatically justify the conclusion that there are no
facts in dispute.” Ely v. Dearborn Heights School Dist. No. 7, 150 F. Supp. 3d 842,
849-50 (E.D. Mich. 2015) (citing Parks v. LaFace Records, 329 F.3d 437, 444 (6th
8
Cir. 2003). In this context, a plaintiff and a defendant have different burdens:
In a defensive motion for summary judgment, the party who bears the
burden of proof must present a jury question as to each element of the
claim. Davis v. McCourt, 226 F.3d 506, 511 (6th Cir. 2000). Failure to
prove an essential element of a claim renders all other facts immaterial
for summary judgment purposes. Elvis Presley Enters., Inc. v. Elvisly
Yours, Inc., 936 F.2d 889, 895 (6th Cir. 1991).
When the moving party also bears the ultimate burden of persuasion,
the movant's affidavits and other evidence not only must show the
absence of a material fact issue, they also must carry that burden. Vance
v. Latimer, 648 F.Supp.2d 914, 919 (E.D. Mich. 2009); see
also Resolution Trust Corp. v. Gill, 960 F.2d 336, 340 (3d Cir.
1992); Stat–Tech Liquidating Trust v. Fenster, 981 F.Supp. 1325, 1335
(D. Colo. 1997) (stating that where “the crucial issue is one on which
the movant will bear the ultimate burden of proof at
trial, summary judgment can be entered only if the movant submits
evidentiary materials to establish all of the elements of the claim or
defense”).
The plaintiff therefore “must sustain that burden as well as demonstrate
the absence of a genuine dispute. Thus, it must satisfy both the initial
burden of production on the summary judgment motion—by showing
that no genuine dispute exists as to any material fact—and the ultimate
burden of persuasion on the claim—by showing that it would entitled
to a directed verdict at trial.” William W. Schwarzer, et al., The
Analysis and Decision of Summary Judgment Motions, 139 F.R.D.
441, 477-78 (1992) (footnotes omitted).
Ely, 150 F. Supp. 3d at 849-50.
Finally, all evidence in opposition to a motion for summary judgment must be
capable of presentation in a form that would be admissible at trial. See Alexander v.
CareSource, 576 F.3d 551, 558–59 (6th Cir. 2009) (“[T]he party opposing summary
9
judgment must show that she can make good on the promise of the pleadings by
laying out enough evidence that will be admissible at trial to demonstrate that a
genuine issue on a material fact exists, and that a trial is necessary.”).
III.
DISCUSSION
Plaintiff is not entitled to summary judgment on the FDCPA claim asserted in
Count I of the Complaint for two reasons. First, there are genuine issues of material
fact concerning the threshold question of whether Defendant is a “debt collector”
under the FDCPA. Second, the record establishes that Defendant’s choice of forum
for the collection action was permissible under 15 U.S.C. § 1692i, which, depending
on the nature of the debt sued upon, requires a debt collector to bring a collection
action against a consumer only in the “judicial district or similar legal entity” where
the real property at issue is located, where the contract sued upon was signed, or
where the consumer resides at the commencement of the action.
As to the MRCPA claim asserted in Count II of the Complaint, Plaintiff’s
failure to prove—or even allege—conduct by Defendant that violates any provision
of the MRCPA both precludes summary judgment for Plaintiff and warrants
summary judgment for Defendant.
Consequently, the Court will deny Plaintiff’s Motion for Summary Judgment,
and grant Defendant’s Motion for Summary Judgment.
10
A.
Plaintiff’s Motion for Summary Judgment
1.
FDCPA Claim (Count I)
Congress’s stated purpose in enacting the FDCPA was “to eliminate abusive
debt collection practices by debt collectors, to insure that those debt collectors who
refrain from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers against
debt collection abuses.” 15 U.S.C. § 1692(e). Accordingly, the FDCPA operates as
“a strict-liability statute: [a] plaintiff does not need to prove knowledge or intent,
and does not have to have suffered actual damages. Structured as such, the FDCPA
functions both to protect the individual debtor and advance the declared federal
interest in ‘eliminat[ing] abusive debt collection practices.’” Stratton v. Portfolio
Recovery Assocs., LLC, 770 F.3d 443, 448–49 (6th Cir. 2014) (quoting 15 U.S.C. §
1692(e)). “Strict liability places the risk of penalties on the debt collector that
engages in activities which are not entirely lawful, rather than exposing consumers
to unlawful debt-collector behavior without a possibility for relief.” Id. at 449.
Central to this case is the FDCPA’s “fair venue” provision, which imposes the
following venue requirements on actions by debt collectors against consumers:
Any debt collector who brings any legal action on a debt against any
consumer shall-(1) in the case of an action to enforce an interest in real property
securing the consumer's obligation, bring such action only in a judicial
district or similar legal entity in which such real property is located; or
11
(2) in the case of an action not described in paragraph (1), bring such
action only in the judicial district or similar legal entity-(A) in which such consumer signed the contract sued upon; or
(B) in which such consumer resides at the commencement of the
action.
15 U.S.C. § 1692i(a).
In other words, § 1692i(a)(1) first establishes a “site of the property” rule for
determining the proper venue in an action brought “to enforce an interest in real
property securing the consumer's obligation,” and the statute then sets forth two
permissible venue options for all other debt-collection actions: the place where the
consumer signed the subject contract (§ 1692i(a)(2)(A)), or the consumer’s place of
residence at the time the debt collector initiated the action (§ 1692i(a)(2)(B)).
A debt collector that brings an action against a consumer in a venue other than
a “judicial district or similar entity” that corresponds to one of those three locations
may be liable under the enforcement provisions of 15 U.S.C. § 1692k. The FDCPA
creates one exception to this by way of an affirmative defense: a debt collector who
violates § 1692i or any other provision of the statute may not be held liable if it
“shows by a preponderance of evidence that the violation was not intentional and
resulted from a bona fide error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c).
12
As discussed infra, there are genuine issues of material fact as to whether
Defendant is a “debt collector” under the statute, and these issues are enough by
themselves to preclude summary judgment in Plaintiff’s favor. Even assuming that
Defendant was a debt collector at the relevant times, the Court finds that while
Defendant’s initiation of a collection action in the 51st Judicial District may not have
been permissible under the “real property” subprovision of 15 U.S.C. § 1692i(a)(1),
it was permissible under the “contract” subprovision of 15 U.S.C. § 1692i(a)(2)(A).
For that reason too, the Court will deny Plaintiff’s Motion for Summary Judgment.
i. There is a genuine issue of material fact as to whether Defendant
is a “debt collector” under the FDCPA.
The venue requirements in 15 U.S.C. § 1692i apply to “debt collectors.”
Subject to a handful of exceptions not relevant here, the FDCPA provides two
alternative definitions of “debt collector”: (1) “any person who uses any
instrumentality of interstate commerce or the mails in any business the principal
purpose of which is the collection of any debts,” and (2) any person “who regularly
collects or attempts to collect, directly or indirectly, debts owed or due or asserted
to be owed or due another.” Id. § 1692a(6).
In Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017), the
United States Supreme Court gave further definition to the second of the FDCPA’s
two alternative definitions of “debt collector”—that is, a person who “regularly
13
collects or attempts to collect, directly or indirectly, debts owed or due or asserted
to be owed or due another.” 15 U.S.C. § 1692a(6). At issue in Henson were FDCPA
claims asserted against a company that purchased defaulted loans and then sought to
collect on them for itself. The Court distinguished debt collectors from debt
originators, explaining that “third party debt collection agents generally qualify as
‘debt collectors’ under the relevant statutory language, while those who seek only to
collect for themselves loans they originated generally do not.” Henson, 137 S. Ct. at
1721. The question before the Henson Court was “how to classify individuals and
entities who regularly purchase debts originated by someone else and then seek to
collect those debts for their own account.” Id. Analyzing both the specific statutory
text and the broader statutory context, the Court concluded that such individuals and
entities are not “debt collectors” under the FDCPA. See id. at 1721-26. Before doing
so, the Court paused to clarify that its holding did not extend to the “alternative
definition” of “debt collector” set forth in the statute: “any person who uses any
instrumentality of interstate commerce or the mails in any business the principal
purpose of which is the collection of any debts.” Id. at 1721. “Principal purpose”
debt collectors, in other words, were outside of Henson’s scope altogether.
Based on the record before this Court, Defendant clearly falls within the class
of persons or entities that the Supreme Court held in Henson do not count as debt
collectors under the FDCPA. It is undisputed that Defendant purchased the debt at
14
issue in this case, and then brought the action in the 51st Judicial District Court to
collect on the debt for its own account. Moreover, Plaintiff alleged in the Complaint
that Defendant “is in the business of purchasing defaulted homeowners association
fees from local associations at a discount, and them [sic] initiates collection actions
in state court as an effort to collect said accounts.” (Compl. ¶ 8.) Defendant admitted
that “it purchases defaulted homeowners’ association debts and pursues recovery of
those outstanding debts” but denied the remainder of the allegation. (Answer ¶ 8.)
Defendant also admitted that it “regularly attempts to collect defaulted debts in the
form of defaulted homeowner association fees in the ordinary course of its business,”
and that it “regularly uses the state courts of Michigan to sue consumers and obtain
judgements [sic] in the ordinary course of its business of collecting debts.” (Compl.
¶¶ 6-7; Answer ¶¶ 6-7.) There is no real dispute that Defendant regularly purchases
defaulted debts and collects them for its own account, and is therefore an entity
which, under Henson, does not meet the “regularly collects . . . debts . . . owed or
due another” prong of the FDCPA’s definition of “debt collector.”
Plaintiff must therefore show that Defendant meets the other prong of the
definition of “debt collector”: “any person who uses any instrumentality of interstate
commerce or the mails in any business the principal purpose of which is the
collection of any debts.” 15 U.S.C. § 1692a(6) (emphasis added). The Sixth Circuit
has held that the FDCPA’s two definitions of this term have distinct meanings:
15
[C]onsidering § 1692a(6) as a whole, it is clear that Congress intended
the “principal purpose” prong to differ from the “regularly” prong of its
definition of “debt collector.” See Garrett v. Derbes, 110 F.3d 317, 318
(5th Cir.1997) (per curiam). Thus, one “may regularly render debt
collection services, even if these services are not a principal purpose of
his business.” Id. As another court has explained, “the word ‘regular’ is
not synonymous with the word ‘substantial.’ Debt collection services
may be rendered ‘regularly’ even though these services may amount to
a small fraction of the firm's total activity.” Stojanovski v. Strobl &
Manoogian, P.C., 783 F.Supp. 319, 322 (E.D.Mich.1992). Under this
interpretation of “regular” or “regularly,” an attorney may be a “debt
collector” under the FDCPA even when the ratio of his debt collection
efforts to other legal efforts is small. Id.
Schroyer v. Frankel, 197 F.3d 1170, 1174 (6th Cir. 1999). “To determine whether a
defendant is a debt collector, the Court must ‘look beyond the facts of the particular
case . . .’ [and] must not focus on ‘the events of the particular transaction but on the
principal purpose of the defendant's business and/or the defendant[’]s regular
activities.’” Rogers v. RBC Mortg. Co., No. 11-11167, 2011 WL 3497432, at *6
(E.D. Mich. Aug. 10, 2011) (quoting Golliday v. Chase Home Fin., LLC, 761
F.Supp.2d 629, 635 (W.D. Mich. 2011)).
The record before this Court is silent on whether the “principal purpose” of
Defendant’s business is the collection of debts. Because the Supreme Court’s
decision in Henson precludes this Court from finding that Defendant is a “debt
collector” under the “regularly collects” prong of the definition expressly invoked
by Plaintiff, and because the record sheds no light on whether Defendant qualifies
16
under the “principal purpose” prong, the Court concludes that there is a genuine issue
of material fact over whether Defendant can be sued under the FDCPA to begin with.
Plaintiff cannot obtain summary judgment for that reason.
For a separate reason, as set forth below, even if Defendant is in fact a debt
collector under the FDCPA, its decision to prosecute a collection action in the
Michigan 51st District Court, while it may not have been permissible under the “real
property” subprovision of 15 U.S.C. 1692i(a)(1), was permissible under the
“contract” subprovision of 15 U.S.C. § 1692i(a)(2)(A), as discussed infra.
ii. The 51st Judicial District Court may not have been a proper
venue under the “real property” subprovision of 15 U.S.C. §
1692i(a)(1).
The real property subprovision of 15 U.S.C. § 1692i requires that a debt
collector, “in the case of an action to enforce an interest in real property securing the
consumer's obligation, bring such action only in a judicial district or similar legal
entity in which such real property is located . . . .” 15 U.S.C. § 1692i(a)(1).
Plaintiff argues that § 1692i’s real property subprovision is irrelevant here,
since the association fees that Defendant attempted to collect constituted unsecured
consumer debt rather than an enforceable legal interest in real property. However,
Defendant counters that Michigan law expressly recognizes condominium
association fees as a property right. To bolster this argument, Defendant cites In re
Spencer, 457 B.R. 601 (E.D. Mich. 2011), in which the court held that for the
17
purposes of determining its dischargeability in bankruptcy, a debtor’s obligation to
pay condominium association fees was a property interest that arose from a covenant
running with the land. See id. at 613-15. In Spencer, the court’s conclusion relied in
part on the principle, recognized in Michigan law, that a covenant will be found to
run with the land “(1) when the parties intended the covenant to run with land, (2)
when the covenant will ‘affect or concern the land with which it runs,’ and (3) when
privity exists between the party claiming its benefit and the party burdened by it.”
Id. at 610 (quoting Greenspan v. Rehberg, 56 Mich. App. 310, 320-21 (1974)). As
these three elements are present here, Defendant contends, the obligation that it
sought to enforce in 2016 was a real property interest, and its choice of the 51st
Judicial District Court as a venue for the action was proper under 15 U.S.C. §
1692i(a)(1).
This argument reads an important component out of the statute. The real
property subprovision applies “in the case of an action to enforce an interest in real
property securing the consumer's obligation.” 15 U.S.C. § 1692i(a)(1) (emphasis
added). Decisions both from the Sixth Circuit and from other circuits suggest that
courts commonly understand this phrase to refer to mortgage foreclosure
proceedings. See, e.g., Glazer v. Chase Home Fin. LLC, 704 F.3d 453, 462 (6th Cir.
2013) (“This section requires a debt collector bringing a legal action against a
consumer ‘to enforce an interest in real property securing the consumer's
18
obligation’—e.g., a mortgage foreclosure action—to file in the judicial district
where the property is located.”); Vien-Phuong Thi Ho v. ReconTrust Co., NA, 858
F.3d 568, 584 (9th Cir. 2016) (discussing indications in the text of the FDCPA “that
Congress understood that a mortgage foreclosure proceeding—an action to enforce
an interest in real property securing the debtor's obligation—constitutes debt
collection within the meaning of the FDCPA”); Kaymark v. Bank of Am., N.A., 783
F.3d 168, 179 (3d Cir. 2015) (explaining that “foreclosure meets the broad definition
of ‘debt collection’ under the FDCPA” and noting that “it is even contemplated in
various places in the statute” while citing § 1692i(a)(1) as an example); Suesz v.
Med-1 Sols., LLC, 757 F.3d 636, 639 (7th Cir. 2014) (reading § 1692i(a)(1) to
provide that “[i]f real estate is security for the loan, the suit must be brought where
the property is located”). Neither the FDCPA’s text nor the case law interpreting it
expressly limits the scope of § 1692i(a)(1) to mortgage foreclosures. The issue is
whether Defendant has shown that that the 2016 collection action was a proceeding
to enforce a security interest in real property, as contemplated by § 1692i(a)(1).
Defendant admits that Plaintiff “defaulted on his Mortgage and it was
foreclosed upon, culminating in a sheriff’s sale in December 2010.” (Def.’s Resp. at
3, Pg ID 170.) The record contains no documentation of the foreclosure or the
sheriff’s sale. But importantly, it also lacks any indication that any of those
proceedings was legally deficient; that the foreclosure and sheriff’s sale were void
19
or voidable for any other reason; or that the subject property was redeemed pursuant
to Mich. Comp. Laws § 600.3240.2 Absent any of these circumstances, the sheriff’s
deed vested in Quicken Loans, Inc., the purchaser of the subject property, “all the
right, title, and interest which [Plaintiff] had at the time of the execution of the
mortgage, or at any time thereafter . . . .” Mich. Comp. Laws § 600.3236.
While Defendant may have no longer possessed an “interest in [the subject]
real property” that could be enforced against Plaintiff after Elizarov lost title to the
property at the sheriff’s sale in December 2010, the basis for the 2016 lawsuit related
to “real property”: real estate condominium debt. Thus, an interest in real property
enforceable against Plaintiff’s obligation to pay his assessments was created when
the lien was entered against the subject real estate property in November 2010.
Although the real property interest was extinguished, and the debt obligation
morphed into unsecured debt when Plaintiff lost all “right, title, and interest” as a
result of the sheriff’s sale the following month, the Court finds it significant that the
debt at issue was based upon real estate debt and not consumer debt.
2
Under that statute, a purchaser’s deed for a foreclosed property is void if the
mortgagor or certain other parties in interest “redeem[] the entire premises sold by
paying” the purchaser “the amount that was bid for the entire premises sold” plus
interest and fees within a specified time. Mich. Comp. Laws § 600.3240(1)-(2).
20
iii. The 51st Judicial District Court was a proper venue under the
“contract” subprovision of 15 U.S.C. § 1692i(a)(2)(A).
While Defendant’s choice of Michigan’s 51st Judicial District Court as a
forum for its 2016 collection action may not have been justifiable under
§ 1692i(a)(1), and it is undisputed that Plaintiff no longer resided in the 51st Judicial
District at the time the collection action was commenced, more analysis is required
with regard to the “contract” subprovision of § 1692i(a)(2)(B). If Defendant was in
fact a “debt collector” under the FDCPA and Henson, Plaintiff would be entitled to
summary judgment only if no reasonable jury could find that Defendant’s filing the
collection action in the 51st Judicial District Court was permissible under that
subprovision. Plaintiff cannot make this showing.
Actions by debt collectors that do not fall within § 1692i(a)(1)’s real property
subprovision, and that are not initiated in the consumer’s home forum under 15
U.S.C. § 1692i(a)(2)(B), must be brought “in the judicial district or similar legal
entity . . . in which [the] consumer signed the contract sued upon.” 15 U.S.C. §
1692i(a)(2)(A). Plaintiff argues that the 51st Judicial District Court was not a proper
venue for Defendant’s collection action under this subprovision because Plaintiff
“has never signed a contract obligating him to pay condominium association dues.”
(Pl.’s Mot. at 5, Pg ID 126.) Instead, Plaintiff argues, Defendant merely “relies upon
a deed, unsigned by the Plaintiff” in attempting to justify filing the action in the 51st
Judicial District Court under the contract subprovision. (Pl.’s Mot. at 6, Pg ID 127.)
21
Plaintiff’s assertion that he never signed a contract obligating him to pay
assessments is frivolous and belied by the record. Plaintiff appears to refer to the
Warranty Deed by which he was granted the subject property in 2007, and it is true
that that document does not bear his signature. But Plaintiff did sign the mortgage
contract (see Def.’s Resp. Ex. B, Mortgage at Pg ID 261), which incorporates the
Condominium Rider, and he separately signed the Condominium Rider itself (see
id. at Pg ID 269-71). The Condominium Rider contains a covenant in which Plaintiff
agreed to “perform all of [his] obligations under the Condominium Project's
Constituent Documents.” (Id. at Pg ID 269.) The Constituent Documents, in turn,
include both the Association’s by-laws (which obligated Plaintiff to pay
assessments) and the Master Deed (which incorporates the by-laws). (See id.) Apart
from this, Plaintiff specifically covenanted in the Condominium Rider that he would
“promptly pay, when due, all dues and assessments imposed pursuant to the
Constituent Documents.” (Id.) Plaintiff’s contention that no signed document
obligated him to pay assessments is incorrect on its face.
The relevant question then becomes in what “judicial district or similar legal
entity” the contracts mentioned above were signed. The record is clear that the
mortgage was both notarized and recorded in Oakland County, Michigan (see Def.’s
Resp. Ex. B, Mortgage at Pg ID 248, 262), and the parties do not appear to dispute
this fact. Instead, Plaintiff maintains that Defendant sued him in the wrong venue
22
within Oakland County, which contains nine judicial districts. See Mich. Comp.
Laws § 600.8123. One of these is the 51st Judicial District, which consists of the
township of Waterford, Michigan, the location of the condominium unit, and which
is the forum in which Defendant brought its collection action in 2016. See id. §
600.8123(8). Another district is the 52nd Judicial District, which contains (among
other municipalities) the city of Troy, Michigan. See id. § 600.8123(9)(d). Plaintiff’s
position appears to be that only the 52nd Judicial District Court would have been a
proper venue under the contract subprovision: his counsel represented at the June
27, 2017 hearing that the relevant contracts were signed in Troy, and he argued in
the Response to Defendant’s Motion for Summary Judgment that “[t]he only District
that was proper for Defendant to sue Plaintiff in for the unsecured defaulted
association fees that it attempted to collect was: a) in the 52nd District Court of Troy,
or b) in the Rockwood District Court in the State of Maryland where [Plaintiff]
resides.” (Pl.’s Resp. at 3, Pg ID 284.) However, these on-the-fly oral representations
by Plaintiff’s attorney are not competent evidence as to where the contract was
signed.
In addition, for a separate reason, this Court is not persuaded that Defendant
was required to file suit in the 52nd Judicial District in order to comply with the
contract subprovision of the FDCPA’s fair-venue provision.
23
The FDCPA does not define “judicial district or similar legal entity,” and
federal courts have not settled on a definition of the term. Indeed, only three of the
federal circuits appear to have weighed in on the question at all. The Ninth Circuit
held in 1994 that two Arizona counties were different “judicial districts” under the
FDCPA because the state had “provided a formal transfer mechanism . . . between
courts in the two counties,” notwithstanding that Arizona “constitutes a single
federal judicial district and has a unitary state superior court.” Fox v. Citicorp Credit
Servs., Inc., 15 F.3d 1507, 1515 (9th Cir. 1994). More recently, the Second Circuit
held that a debt collector violates the FDCPA’s fair-venue provision “by suing a
consumer in a city court . . . when that court lacks power to hear the action because
the consumer does not reside in that city or a town contiguous thereto.” Hess v.
Cohen & Slamowitz LLP, 637 F.3d 117, 119 (2d Cir. 2011). More specifically, the
court in Hess determined that “[b]ecause the court system of which [the defendant
debt collector] availed itself is governed by laws that limit the territorial extent of
those courts based on, inter alia, a defendant's contacts with the forum, . . . those
laws delimit the ‘judicial district’ by which compliance with the FDCPA's venue
provisions must be measured.” Id. at 123. In arriving at this result, the Second Circuit
“join[ed] a number of . . . federal district courts that have held that territorial
subdivisions that are smaller than counties can form the pertinent ‘judicial district’
for FDCPA venue purposes.” Id. at 126 n.8 (collecting cases).
24
In Suesz v. Med-1 Sols., LLC, 757 F.3d 636 (7th Cir. 2014) (en banc), the
Seventh Circuit approvingly cited the Second Circuit’s decision in Hess, and held
that “the correct interpretation of ‘judicial district or similar legal entity’ in § 1692i
is the smallest geographic area that is relevant for determining venue in the court
system in which the case is filed.” Id. at 638.
Under the Suesz approach, Michigan’s district courts (rather than its circuit
courts) would be its “judicial districts” for FDCPA purposes, since the smaller
district courts are “relevant for determining venue” under Michigan law. See Mich.
Comp. Laws § 600.8312(5). Under Suesz, then, Plaintiff’s argument that Defendant
violated the FDCPA by filing suit in the 51st Judicial District rather than the 52nd
Judicial District would have some heft.
The Sixth Circuit has not adopted the Suesz test—or indeed any other test—
for defining a court system’s “judicial districts” under the FDCPA. The Sixth Circuit
has, however, described the FDCPA’s fair-venue provision broadly as having been
enacted by Congress “to combat ‘the problem of “forum abuse,” an unfair practice
in which debt collectors file suit ... in courts which are so distant or inconvenient
that consumers are unable to appear’ in order for the debt collector to a obtain default
judgment against the consumer.” Stratton v. Portfolio Recovery Assocs., LLC, 770
F.3d 443, 449–50 (6th Cir. 2014) (quoting S. REP. 95-382, 5, 1977 U.S.C.C.A.N.
1695, 1699). The Sixth Circuit has also made clear that “[t]o determine whether a
25
debt collector's conduct runs afoul of the FDCPA, ‘[c]ourts must view any alleged
violation through the lens of the “least sophisticated consumer”—the usual objective
legal standard in consumer protection cases.’” Id. at 450 (alteration in original)
(quoting Gionis v. Javitch, Block, Rathbone, LLP, 238 F. App’x 24, 28 (6th Cir.
2007)). As the court has explained,
[t]he basic purpose of the least-sophisticated-consumer standard is to
ensure that the FDCPA protects all consumers, the gullible as well as
the shrewd. This effort is grounded, quite sensibly, in the assumption
that consumers of below-average sophistication or intelligence are
especially vulnerable to fraudulent schemes. The standard thus serves
a dual purpose: it (1) ensures the protection of all consumers, even the
naive and the trusting, against deceptive debt collection practices, and
(2) protects debt collectors against liability for bizarre or idiosyncratic
interpretations of collection notices.
Id. (internal quotation marks omitted) (quoting Gionis, 238 F. App’x at 28).
In light of these principles, this Court is not persuaded that Defendant’s filing
the collection action in the 51st Judicial District, the location of the subject condo
unit, rather than the 52nd District amounted to a violation of the FDCPA’s fair-venue
provision, given the factual location realities in the instant case, which are far
different from the facts in the Second and Seventh Circuit decisions.
Defendant filed suit to collect Plaintiff’s allegedly unpaid condominium
association fees in a forum that was the forum in which the subject condominium
was situated, near the district in which Plaintiff alleges, without evidence, that the
governing contracts were signed. The contract subprovision of § 1692i(a)(2)(A) is
26
still in play, and whatever the proper test for “judicial district or similar legal entity”
under the FDCPA, it is clear that the circumstances in this case do not involve the
animating purposes behind the statute that the Sixth Circuit recognized in Stratton.
Even viewed through the lens of the least sophisticated consumer, the forum in
which Defendant filed the collection action cannot be fairly characterized as “so
distant or inconvenient that [Plaintiff was] unable to appear,” Stratton, 770 F.3d at
449, as would make clear that Defendant was attempting to obtain a default
judgment, or otherwise engaging in deceptive collection practices.
Moreover, the decisions discussed above that would suggest that Michigan’s
district courts are the relevant “judicial districts” for FDCPA purposes are both
nonprecedential in this Circuit and distinguishable from the instant fact situation. In
Hess, the Second Circuit found it relevant that the forum chosen by the debt collector
did not actually have jurisdiction over the collection action because of the
consumer’s lack of connections to the forum, and noted that the city court had
dismissed the action for that reason. See Hess, 637 F.3d at 122–23. And in Suesz, the
Seventh Circuit prefaced its analysis as follows:
As this case illustrates, one common tactic for debt collectors is to sue
in a court that is not convenient to the debtor, as this makes default more
likely; or in a court perceived to be friendly to such claims; or, ideally,
in a court having both of these characteristics. In short, debt collectors
shop for the most advantageous forum. By imposing an inconvenient
forum on a debtor who may be impecunious, unfamiliar with law and
legal processes, and in no position to retain a lawyer (and even if he can
27
afford one, the lawyer's fee is bound to exceed the debt itself), the debt
collector may be able to obtain through default a remedy for a debt that
the defendant doesn't actually owe.
Suesz, 757 F.3d at 639.
The concerns that were identified in the Hess and Suesz decisions do not
appear to be present here. Indeed, one critical distinction between those two cases
and the instant case is the nature of the debt sued upon. Hess concerned credit-card
debt, and Suesz involved medical bills. Compare Hess, 637 F.3d at 119, with Suesz,
757 F.3d at 638. Neither of them addressed a debt like that at issue here: that is, a
debt arising from a contract signed by the debtor, but also one which (unlike the
debts in Hess and Suesz) is inherently connected to a specific piece of real property.
Therefore, even though the FDCPA’s real property subdivision does not literally
apply to this case, the debt that was the subject of Defendant’s collection action was
more akin to a debt relating to real estate than it was to the strictly consumer debts
in Hess and Suesz. The risk of prejudice to the debtor is measurably less in a situation
like this: even the least sophisticated consumer could more reasonably anticipate
being sued for condominium fees in the district where the condominium sits (and
which is proximate to the place of contracting), than he or she could expect to be
sued in a district with no more connection to his or her debt than the fact that it is
located in the same county as the building where the contract may have been signed.
28
The unique facts of this specific case support the Court’s conclusion that
Defendant’s prosecution of the collection action in the 51st Judicial District Court
did not run afoul of the contract subprovision of 15 U.S.C. § 1692i(a)(2)(A). The
Court will deny Plaintiff’s Motion for Summary Judgment as to his FDCPA claim
for this reason.
2.
MRCPA Claim (Count II)
Count II of the Complaint asserts a claim under the Michigan Regulation of
Collection Practices Act (“MRCPA”), Mich. Comp. Laws § 445.252. Plaintiff
appears to request summary judgment on this claim as well, but his Motion for
Summary Judgment does not set forth any specific factual or legal basis to justify
this. In fact, Plaintiff does not discuss the claim in the Motion at all besides stating
summarily that Defendant meets the MRCPA’s definition of “regulated person.”
(Pl.’s Mot. at 3, Pg ID 124 (citing Mich. Comp. Laws § 445.251(g)).)
Defendant disputes that it falls within this definition, but whether it does or
not is immaterial given Plaintiff’s failure to make any argument justifying summary
judgment on his MRCPA claim. This Court has no obligation to “sua sponte comb
the record from the partisan perspective of an advocate for the non-moving party”
in order to determine whether grounds for summary judgment exist. F.T.C. v. E.M.A.
Nationwide, Inc., 767 F.3d 611, 630 n.11 (6th Cir. 2014) (quoting Guarino v.
Brookfield Tp. Trs., 980 F.2d 399, 410 (6th Cir. 1992)). To the extent Plaintiff
29
requests summary judgment on his MRCPA claim, that request is denied.
For the reasons stated above, the Court will deny Plaintiff’s Motion for
Summary Judgment as to both claims that Plaintiff has asserted in this action.
B.
Defendant’s Motion for Summary Judgment
Defendant’s counsel made an oral Motion for Summary Judgment at the June
27, 2017 hearing, arguing that there are no factual disputes and that the case should
be dismissed as a matter of law. The Court provided Plaintiff with an opportunity to
file a written response to that Motion, and Plaintiff did so shortly after the hearing.
(ECF No. 22, Pl.’s Resp.)
It is undisputed that the contracts which generated the legal obligation on
which Defendant sued Plaintiff in the 51st Judicial District Court were signed in
Oakland County, Michigan. For the reasons discussed supra, even assuming the
truth of Plaintiff’s unsupported statements that the contracts were signed in Troy,
Michigan (and therefore within the state’s 52nd Judicial District), the Court finds
that Defendant’s choice of the Waterford 51st Judicial District Court, where the
condo unit was located, as a forum for its collection action was permissible under
the contract subprovision of the FDCPA’s venue statute, 15 U.S.C. § 1692i(a)(2)(A).
For that reason, the Court will grant Defendant’s Motion for Summary Judgment as
to Plaintiff’s FDCPA claim.
30
As to Plaintiff’s MRCPA claim, Plaintiff alleged in his Complaint that the
specific MRCPA provisions that Defendant violated were Mich. Comp. Laws §§
445.252(f)(i)-(ii). (Compl. ¶ 32.) Those provisions prohibit debt collectors from
“[m]isrepresenting in a communication with a debtor . . . (i) [t]he legal status of a
legal action being taken or threatened[; or] (ii) [t]he legal rights of the creditor or
debtor.” Id. Plaintiff has not proven or even alleged conduct by Defendant that
violates this or any other provision of the MRCPA. The Court will grant Defendant’s
Motion for Summary Judgment as to Plaintiff’s MRCPA claim as well.
IV.
CONCLUSION
The debt collection lawsuit in the instant case was not filed in a distant or
inconvenient forum; it was filed in the district court where Plaintiff’s subject
condominium was located. This is not a case where the debt collector is using
litigation as a vehicle for “abusive and unfair practices.” Stratton, 770 F.3d at 451.
Nor is it a case where the “least sophisticated consumer,” id. at 450, would be
prejudiced.
Accordingly, the Court hereby DENIES Plaintiff’s Motion for Summary
Judgment, and GRANTS Defendant’s Motion for Summary Judgment.
IT IS SO ORDERED.
Dated: May 9, 2018
s/Paul D. Borman
Paul D. Borman
United States District Judge
31
CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing order was served upon each
attorney or party of record herein by electronic means or first class U.S. mail on May 9, 2018.
s/D. Tofil
Deborah Tofil, Case Manager
32
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?