Estep et al v. Manley Deas Kochalski, LLC
Filing
16
OPINION AND ORDER granting 9 Motion to Dismiss for Failure to State a Claim. Signed by Judge James L Graham on 4/29/2013. (ds)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Jerry S. Estep, et al.,
Plaintiffs,
v.
Case No. 2:12-cv-1127
Manley Deas Kochalski, LLC,
Defendant.
OPINION AND ORDER
This is an action brought pursuant to the Fair Debt Collection
Practices Act (“FDCPA”), by plaintiffs Jerry S. Estep and Amber
Estep against defendant Manly Deas Kochalski, LLC, an Ohio law
firm.
Plaintiffs allege that on March 29, 2011, defendant filed a
complaint in foreclosure against them on behalf of Wells Fargo
Bank, N.A., in the Court of Common Pleas of Franklin County, Ohio,
styled as Case No. 11-CV-004005.
Complaint, ¶ 5.
Plaintiffs
further allege that on December 12, 2011, they received a form
letter from defendant, attached as Exhibit A to the complaint in
the instant case, advising them of the requirements for continued
occupancy of the property upon transfer of title to the Department
of Housing and Urban Development (“HUD”).
Plaintiffs
contend
that
provisions of the FDCPA.
this
correspondence
Complaint, ¶ 6.
violated
several
This matter is before the court on
defendant’s motion pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss
the complaint for failure to state a claim for which relief may be
granted.
I. Rule 12(b)(6) Standards
In ruling on a motion to dismiss under Rule 12(b)(6), the
court must construe the complaint in a light most favorable to the
plaintiffs, accept all well-pleaded allegations in the complaint as
true, and determine whether plaintiffs undoubtedly can prove no set
of facts in support of those allegations that would entitle him to
Erickson v. Pardus, 551 U.S. 89, 94 (2007); Bishop v.
relief.
Lucent Technologies, Inc., 520 F.3d 516, 519 (6th Cir. 2008);
Harbin-Bey v. Rutter, 420 F.3d 571, 575 (6th Cir. 2005).
To
survive a motion to dismiss, the “complaint must contain either
direct or inferential allegations with respect to all material
elements necessary to sustain a recovery under some viable legal
theory.”
Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005).
Conclusory allegations or legal conclusions masquerading as factual
allegations will not suffice.
While
the
complaint
Id.
need
not
contain
detailed
factual
allegations, the “[f]actual allegations must be enough to raise the
claimed right to relief above the speculative level,” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007), and must create a
reasonable expectation that discovery will reveal evidence to
support the claim. Campbell v. PMI Food Equipment Group, Inc., 509
F.3d 776, 780 (6th Cir. 2007).
A complaint must contain facts
sufficient to “state a claim to relief that is plausible on its
face.”
Twombly, 550 U.S. at 570.
“The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than
a sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
pleads
facts
that
are
merely
consistent
Where a complaint
with
a
defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.
Id.
Determining whether a
complaint states a plausible claim for relief is “a context-
2
specific task that requires the reviewing court to draw on its
judicial experience and common sense.”
Id. at 679.
Where the
facts pleaded do not permit the court to infer more than the mere
possibility of misconduct, the complaint has not shown that the
pleader is entitled to relief as required under Fed.R.Civ.P.
8(a)(2).
Id.
Plaintiffs must provide “more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action will
not do.”
Twombly, 550 U.S. at 555; see also Ashcroft, 129 S.Ct. at
1949 (“Threadbare recitals of the elements of a cause of action,
supported
by
mere
conclusory
statements,
do
not
suffice.”);
Association of Cleveland Fire Fighters v. City of Cleveland, Ohio,
502 F.3d 545, 548 (6th Cir. 2007).
II. Plaintiffs’ Claims
Plaintiffs’ claims are based on a form letter attached as
Exhibit A to their complaint.
This letter, dated December 12,
2011, is addressed to “OCCUPANT” at 388 Murray Hill Road North,
Columbus, OH 43228, which is also the address where plaintiffs
allegedly reside.
See Complaint, ¶ 3.
Below the address, the
letter states “Re:” followed by the case caption and number of the
foreclosure action in the common pleas court filed by Wells Fargo
against plaintiffs, the FHA case number, the loan number, and
defendant’s file number.
The text of the letter states:
The mortgage for the property in which you are living is
about to be foreclosed (sometimes referred to as
repossessed). We expect that ownership of the property
will be transferred to Wells Fargo probably within the
next 60 to 90 days. Shortly thereafter, it is probable
that ownership will be transferred to the Secretary of
Housing and Urban Development (HUD).
HUD generally requires that there be no one living in
3
properties for which it accepts ownership unless certain
conditions are met. We have enclosed a copy of those
conditions in Attachment 1. These conditions should be
read carefully to help you decide whether you wish to
apply to continue living in the house.
If you wish to submit a request to continue to live in
this property after HUD becomes owner, your written
request must be received by HUD within 20 days of the
date at the top of this letter. Oral requests are not
permitted.
We recommend that you use the enclosed
Attachment 2, “Request for Occupied Conveyance,” in
making your request as it gives HUD information it needs
to make its decision. Also, complete boxes 1, 7 and 8 on
Attachment 3, “Request for Verification of Employment,”
and send it to HUD with your request.
If you have
additional information which you wish to include with
your request you may write it on additional pages which
can be attached to the form.... If you believe that you
can meet the condition for temporary, permanent, or longterm illness or injury ... you should say so in your
request and include documentation supporting your claim.
Complaint, Ex. A.
The letter goes on to advise that if “HUD
approves your request for occupancy, it will be for a temporary
period.” The letter further states that if HUD denies the request,
that denial may be appealed.
The letter then states, under the
heading “IMPORTANT NOTICE,” that “YOU MUST REPLY TO THE HUD OFFICE
IN WRITING WITHIN 20 DAYS OF THE DATE ON THIS LETTER OR YOU WILL BE
REQUIRED TO MOVE FROM THE PROPERTY.”
Complaint, Ex. A.
Attached
to the letter are HUD forms for requesting occupancy of a conveyed
residence.
Plaintiffs allege that the HUD letter: 1) constituted a
communication with plaintiffs by defendant knowing that plaintiffs
were
represented
by
counsel,
in
violation
of
15
U.S.C.
§1692c(a)(2); 2) threatened to take action that cannot be legally
taken or that is not intended to be taken in connection with the
collection of any debt, in violation of 15 U.S.C. §1692e(5); 3)
4
falsely represented that within 60 to 90 days, ownership of the
property would transfer to Wells Fargo, in violation of 15 U.S.C.
§1692e(10); 4) falsely represented that if plaintiffs did not send
in the enclosed documents within 20 days of the date of the letter,
they would be required to move from their home, in violation of
§1692e(10); and 5) threatened to take possession of plaintiffs’
property when there was no present right to possession of the
property, in violation of 15 U.S.C. §1692f.
III. Motion to Dismiss
A. HUD Letter Not a “Communication” Within Scope of the FDCPA
Defendant first argues that all of plaintiffs’ claims under
the
FDCPA
fail
because
the
HUD
occupant
“communication” within the scope of the FDCPA.
letter
was
not
a
The purpose of the
FDCPA is “to eliminate abusive debt collection practices by debt
collectors[.]”
15 U.S.C. §1692(e); Gionis v. Javitch, Block,
Rathbone, LLP, 238 F.App’x 24, 27 (6th Cir. 2007).
under
the
FDCPA
consumer” test.
are
analyzed
Id. at 28.
under
the
“least
Violations
sophisticated
This test is objective, and asks
whether there is a reasonable likelihood that an unsophisticated
consumer who is willing to consider carefully the contents of a
communication might yet be misled by them.
Grden v. Leikin Ingber
& Winters PC, 643 F.3d 169, 172 (6th Cir. 2011).
“The FDCPA speaks in terms of debt collection.”
Glazer v.
Chase Home Finance LLC, 704 F.3d 453, 459 (6th Cir. 2013).
Thus,
to be liable under the statute’s substantive provisions, a debt
collector’s targeted conduct must have been taken “in connection
with the collection of any debt,” see §§1692c(a)(2) and 1692e, or
in order “to collect or attempt to collect any debt,” see §1692f.
5
Id. at 459-60.
If a purpose of an activity taken in relation to a
debt is to obtain payment of the debt, the activity is properly
considered debt collection.
Id. at 461.
The term “communication” is defined as “the conveying of
information regarding a debt directly or indirectly to any person
through any medium.” 15 U.S.C. §1692a(2).
To be actionable under
the FDCPA, “a communication need not itself be a collection
attempt; it need only be ‘connect[ed]’ with one.”
at 173.
Grden, 643 F.3d
Thus, an explicit demand for payment is not always
necessary for the statute to apply.
Id. (citing Gburek v. Litton
Loan Serv. LP, 614 F.3d 380, 385 (7th Cir. 2010)).
On the other
hand, the statute does not apply to every communication between a
debt collector and a debtor.
Id.
Rather, “for a communication to
be in connection with the collection of a debt, an animating
purpose of the communication must be to induce payment by the
debtor.”
Id.
(noting that a letter that is not itself a
collection attempt but that aims to make such an attempt more
likely to succeed is one that has the requisite connection).
For example, in Grden, the debt collector sent loan balance
statements to plaintiff after plaintiff requested those statements.
The statements showed the balance due on the loan but did not
demand payment or threaten any consequences if plaintiff did not
pay.
The court held that the balance statements were not a
“communication” within the meaning of the FDCPA.
Id.
Rather, the
court concluded that they were merely a ministerial response to a
debtor inquiry, not part of a strategy to make payment more likely,
and that no reasonable jury could find that an animating purpose of
the balance statements was to induce payment by plaintiff.
6
Id.;
see also Santoro v. CTC Foreclosure Service, 12 F.App’x 476, 480
(9th Cir. 2001)(statutorily required notice of pending foreclosure
sale of property sent by debt collector did not seek to collect
debt, and was not forbidden under FDCPA); Bailey v. Security Nat’l
Servicing
Corp.,
154
F.3d
384,
389
(7th
Cir.
1998)(letter
suggesting loan workout options is not seeking to collect a debt;
“A warning that something bad might happen if payment is not kept
current is not a dun, nor does it seek to collect any debt, but
rather the opposite because it tries to prevent the circumstances
wherein payments are missed and a real dun must be mailed.”);
Knight
v.
Schulman,
102
F.Supp.2d
867,
872-73
(S.D.Ohio
1999)(letter from debt collector to plaintiff acknowledging receipt
of payment in full of amount of judgment was not a communication
“made to collect a debt”).
The HUD notice letter in this case is a requirement under
HUD’s
regulatory
scheme
governing
the
conveyance
of
occupied
property. See 24 C.F.R. §203.675. These regulations further HUD’s
“policy to reduce the inventory of acquired properties in a manner
that expands homeownership opportunities, strengthens neighborhoods
and communities, and ensures a maximum return to the mortgage
insurance fund.”
24 C.F.R. §203.670.
HUD usually requires that
any property conveyed to it be conveyed vacant unless the occupant
makes a timely request for permission to continue to occupy the
property.
24
C.F.R.
§203.678(a).
Permission
for
continued
occupancy may be sought under certain circumstances, including
where: (1) the occupant has an illness or injury which would be
aggravated by moving from the property, 24 C.F.R. §203.670(b)(1);
(2) state law prohibits eviction of a tenant who is making monthly
7
payments, 24 C.F.R. §203.670(b)(2); or (3) it is otherwise in the
interest of HUD to accept conveyance of occupied property.
C.F.R.
§203.670(b)(3).
It
is
in
HUD’s
interest
to
24
accept
conveyance of occupied property where occupancy of the property is
essential to protect it from vandalism, where property in the area
remains on HUD’s unsold inventory for over six months, or where the
high
cost
of
impractical.
eviction
or
relocation
expenses
makes
eviction
24 C.F.R. §203.671(a), (b) and (d).
The regulations further provide:
(a) At least 60 days, but not more than 90 days, before
the date on which the mortgagee reasonably expects to
acquire title to the property, the mortgagee shall notify
the mortgagor and each head of household who is actually
occupying a unit of the property of its potential
acquisition by HUD. The mortgagee shall send a copy of
this notification to the appropriate HUD Field Office.
(b) The notice shall provide a brief summary of the
conditions under which continued occupancy is permissible
and advise them that:
(1) Potential acquisition of the property by the
Secretary is pending;
(2) The Secretary requires that properties be vacant at
the time of conveyance to the Secretary, unless the
mortgagor or other occupant can meet the conditions for
continued occupancy in §203.670, the habitability
criteria in §203.673, and the eligibility criteria in
§203.674;
(3) An occupant may request permission to remain in
occupancy in the event of acquisition of the property by
the Secretary by notifying the HUD Field Office in
writing, with any required documentation, within 20 days
of the date of the mortgagee’s notice to the occupant[.]
24 C.F.R. §203.675(a), (b)(1)-(3).
The notice must advise the
occupant of the requirements for requesting continued occupancy due
to illness or injury, and must also state that “[i]f an occupant
fails to make a timely request, the property must be vacated before
the scheduled time of acquisition.” 24 C.F.R. §203.675(b)(4)-(5).
8
The Eleventh Circuit has held that the notice letter required under
§203.675(b) is not a “communication” regarding the collection of a
debt within the scope of the FDCPA.
See Clark v. Shapiro and
Pickett, LLP, 452 F.App’x 890, 895 (11th Cir. 2012).
There
is
no
language
in
the
letter
sent
by
defendant
suggesting that its purpose was to collect on the debt owed by
plaintiffs.
The letter is addressed to “OCCUPANT” and makes no
reference to payment of the amount owed by plaintiffs on the loan.
After the introductory “Re:” the letter identifies the caption of
the state court foreclosure action and provides the FHA case
number, the loan number, and defendant’s file number. However, the
text of the letter does not demand payment, and it only refers to
the foreclosure action in connection with the possible eventual
transfer of the property to HUD.
This introductory information is
provided to assist the occupant in completing the HUD form for
requesting an occupied conveyance.
The HUD form requires the
occupant to provide the name of the mortgage company or lender, the
mortgage
loan
number,
and
the
FHA
case
number.
Including
defendant’s file number on the letter would assist defendant in
answering inquiries concerning the letter.
The case number and
caption of the foreclosure action would be helpful to an occupant
who wishes to verify that a foreclosure action is pending or to
seek additional information concerning the foreclosure action. For
example,
such
information
would
assist
a
tenant
occupant
in
deciding whether to exercise the tenant’s right of first refusal to
purchase the property from HUD under 24 C.F.R. §291.100(a)(4).
Plaintiffs argue that the HUD letter is a communication in
regard to the debt because it did not track the exact language of
9
§203.675(b).
In
particular,
plaintiffs
note
that the letter
contains the following notice: “YOU MUST REPLY TO THE HUD OFFICE IN
WRITING WITHIN 20 DAYS OF THE DATE ON THIS LETTER OR YOU WILL BE
REQUIRED TO MOVE FROM THE PROPERTY.”
Plaintiffs contend that this
notice
found
deviates
from
the
language
in
§203.675(b)(5).
However, §203.675(b) does not require that the mortgagee use the
precise regulatory language in the required notice.
It simply
states that the mortgagee must provide “a brief summary of the
conditions under which continued occupancy is permissible[.]”
§203.675(b)(1).
Although the language of the above notice does not repeat the
exact language used in §203.675(b)(5), it is not inconsistent with
that section or the HUD regulations.
Section 203.675(b)(5) states
that the occupant must be advised that “[i]f an occupant fails to
make a timely request, the property must be vacated before the
scheduled time of acquisition.”
Under §203.676, a request for
continued occupancy must be made by notifying the HUD Field Office
in writing “within 20 days of the date of the mortgagee’s notice of
pending acquisition.”
The HUD regulations further provide that
“HUD will require that the property be conveyed vacant if the
occupant fails to request permission to continue to occupy with the
time period specified in §203.676[.]” Thus, the letter was correct
when it advised that failure to contact the HUD office within 20
days of the date of the letter would result in the occupant being
required to move from the property.
Plaintiffs contend that the letter was intended to assist in
the collection of a debt by pressuring them to vacate the property,
arguing that the notice suggests that the occupant would be
10
required to vacate the premises within 20 days of the date on the
letter if application to HUD is not made.
Again, the notice
states, “YOU MUST REPLY TO THE HUD OFFICE IN WRITING WITHIN 20 DAYS
OF THE DATE ON THIS LETTER OR YOU WILL BE REQUIRED TO MOVE FROM THE
PROPERTY.”
The notice clearly indicates that it is the reply to
the HUD office which is due within 20 days.
The notice says
nothing about the occupant being required to move from the property
within 20 days, and the remainder of the letter suggests otherwise.
The first paragraph of the letter states that ownership of the
property was expected to be transferred to Wells Fargo “within the
next 60 to 90 days” and that “[s]hortly thereafter, it is probable
that ownership will be transferred” to HUD.
after the words “Sale Date.”
No date was specified
The letter indicates that ownership
of the property had not yet been transferred to Wells Fargo, and
that the transfer to HUD would not occur until after the transfer
of the property to Wells Fargo.
The letter also clearly states
that it is HUD (not Wells Fargo or defendant) which “generally
requires that there be no one living in properties for which it
accepts ownership” unless certain conditions are met.
Even the
least sophisticated consumer would be able to glean from the letter
as a whole that because no definite date had been set for the
acquisition of the property by HUD, there was also no definite date
for vacating the property.
Plaintiffs
further
argue
that
the
letter
was
sent
“in
connection with the collection of any debt” or for the purpose of
“collect[ing] or attempt[ing] to collect any debt” because it can
be
construed
as
an
attempt
on
defendant’s
part
to
convince
plaintiffs to vacate the premises voluntarily to save Wells Fargo
11
the costs of an eviction.
However, there is no language in the
letter which could reasonably be construed as encouraging the
occupant to leave the property, or as evidencing any intent on the
part of defendant to so influence the occupant.
Rather, the text
of the letter indicates that its sole purpose is to inform the
occupant of what he or she needed to do to apply to HUD to remain
in the property.
For example, the letter invites the occupant to
carefully read the conditions for continued occupancy “to help you
decide whether you wish to apply to continue living in the house.”
The letter recommends that the occupant use the enclosed HUD forms
to make a request for continued occupancy.
The letter further
states that “[i]f you believe that you can meet the condition for
a temporary, permanent, or long-term illness or injury ... you
should say so in your request and include documentation supporting
your claim.”
Even the least sophisticated consumer would not
construe this letter as one encouraging the occupant to voluntarily
vacate the property; rather, the letter provides the necessary
information for applying to HUD to remain on the property.
Important policy considerations also weigh against broadly
construing the HUD notice in this case as a per se prohibited
“communication” under the FDCPA. It makes sense for a mortgagee to
assign its noticing obligation under §203.675 to the law firm
familiar with the foreclosure action to ensure compliance with
HUD’s regulations, which serve a valuable public purpose of their
own.
Law firms acting as debt collectors should not be wary of
undertaking this task for fear of violating the FDCPA while
satisfying HUD’s notice requirements, which are triggered during a
foreclosure action.
That is not to say that debt collectors can
12
use the HUD notice letter as a vehicle for making extraneous
dunning statements clearly outside the scope of HUD’s regulations
which are intended to prompt payment of the debt.
However, the
text of the letter in this case contains no such statements, and
plaintiffs have otherwise pleaded no facts sufficient to indicate
that the purpose of the letter was anything other than compliance
with the notice requirements of §203.675.
The court concludes that plaintiffs have failed to plead the
existence of an unlawful communication
“in connection with the
collection of any debt” or for the purpose of “collect[ing] or
attempt[ing] to collect any debt” as required to state a claim
under the FDCPA, and that all of plaintiffs’ claims must be
dismissed on this ground.
B. Failure to Plead a “Debt” under the FDCPA
Defendant also argues that plaintiffs have failed to plead the
existence of a “debt” as that term is defined under the FDCPA.
The
term “debt” is defined 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[.]”
15 U.S.C. §1692a(5).
To prove a claim under the
FDCPA, a plaintiff must show: (1) that he is a “consumer” as
defined in 15 U.S.C. §1692a(3); (2) that the “debt” arises out of
a transaction which is “primarily for personal, family or household
purposes; (3) defendant is a “debt collector” as defined in the
FDCPA; and (4) defendant has violated one of the prohibitions in
the FDCPA.
See Wallace v. Washington Mutual Bank, F.A., 683 F.3d
323, 326 (6th Cir. 2012); Whittiker v. Deutsche Bank Nat’l Trust
13
Co., 605 F.Supp.2d 914, 928 (N.D.Ohio 2009)(to state a claim under
the
FDCPA,
plaintiff
must
allege
that
the
debt
was
primarily for personal, family or household purposes).
created
Defendant
contends that the plaintiffs have failed to allege that the
property in the foreclosure action was purchased primarily for
personal, family, or household purposes.
Plaintiffs alleged in their complaint that they reside at the
premises.
However, they have not alleged that they incurred the
debt to purchase the property primarily for personal, family, or
household purposes, as opposed to some other purpose, such as for
a business investment.
The fact that they are currently residing
at the property is not sufficient to allege that they acquired the
property primarily for personal, family, or household purposes.
For example, it is possible for a consumer to acquire property
primarily to generate income as rental property, but then to use it
later as a temporary residence while moving from one residence to
another or while awaiting the construction of the consumer’s
primary residence.
Plaintiffs allege that they are “consumers as defined in 15
U.S.C. §1692a(3).”
Complaint, ¶ 3.
However, they do not allege
that they are consumers in relation to the debt which is the
subject of the foreclosure action.
“Threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice” to survive a motion to dismiss.
Association of Cleveland Fire Fighters, 502 F.3d at 548.
In
addition, being a “consumer” is only one element of an FDCPA claim.
See Whittiker, 605 F.Supp.2d at 926 (noting elements of a §1692e
claim).
The term “consumer” is defined as “any natural person
14
obligated or allegedly obligated to pay any debt.”
§1692a(3)(emphasis
supplied).
The
statute
then
15 U.S.C.
goes
on
in
§1692a(5) to narrow the type of debt which qualifies for protection
under the FDCPA, that being debts “primarily for personal, family,
or household purposes.”
The existence of this type of a debt is a
distinct element of an FDCPA claim.
at 926.
See Whittiker, 605 F.Supp.2d
Thus, the fact that plaintiffs are allegedly “consumers”
does not suffice to allege the additional element that their debt
was primarily for personal, family, or household purposes.
Plaintiffs note that under §203.675, the mortgagee is required
to send the notice letter to the mortgagor and to “each head of
household who is actually occupying the unit.”
§203.675(a).
Plaintiffs note that the notice letter was addressed to “OCCUPANT,”
and that they received it because they were residing at the
property at the time.
They argue that because they received the
occupant letter as a “head of household” under §203.675(a), they
also must have been occupying the property for “household purposes”
as that term is used in §1692a(5).
However, the HUD regulations
have nothing to do with the FDCPA, and §203.675(a) has nothing to
do with the purposes of the debt incurred to purchase the property.
The purpose of §203.675(a) is to ensure that occupants of a
foreclosed property are aware of their right to petition HUD for
continued occupancy after the property is transferred to HUD.
Section §203.675(a) specifies that the notice letter be sent to
“each head of household who is actually occupying a unit,” as
distinguished from requiring that the letter be sent to every
individual occupying the premises.
The fact that a mortgagor
currently occupying the property happens to receive an occupant
15
letter as a “head of household” is not sufficient to allege that
the debt stemming from the purchase of the property was incurred by
the mortgagor primarily for household purposes.
The court concludes that plaintiffs have failed to allege
facts showing that the purpose of their debt was primarily for
personal, family, or household purposes, a necessary element of
their FDCPA claim.
Even assuming that plaintiffs could allege
facts sufficient to plead this element, plaintiffs’ claims would
still fail because, as discussed in Section III.A., the HUD letter
was not sent “in connection with the collection of any debt” or
taken in order “to collect or attempt to collect any debt.”
C. Failure to Plead a Claim under §1692c(a)(2)
Plaintiffs allege that defendant violated §1692c(a)(2), which
prohibits a debt collector from communicating with a consumer in
connection with the collection of any debt “if the debt collector
knows the consumer is represented by an attorney with respect to
such debt[.]”
§1692c(a)(2); Complaint, ¶ 11(a).
In order for a
violation to occur, §1692c(a)(2) requires that the debt collector
have actual knowledge that it was communicating with a consumer who
was represented by counsel when it sent the communication to that
consumer. See Schmitt v. FMA Alliance, 398 F.3d 995, 997 (8th Cir.
2005); Randolph v. IMBS, Inc., 368 F.3d 726, 729 (7th Cir. 2004);
Bacelli v. MFP, Inc., 729 F.Supp.2d 1328, 1334 (M.D.Fla. 2010).
Defendant contends that plaintiffs have failed to plead sufficient
facts to show that defendant knew it was communicating with
plaintiffs in sending the HUD letter addressed to “OCCUPANT”
because plaintiffs have not alleged that defendant knew that
plaintiffs were occupying the property.
16
Plaintiffs have pleaded that they reside at 388 North Murray
Hill Road, that defendant filed a complaint for foreclosure on
behalf
of
Wells
Fargo
in
state
court,
and
that
plaintiffs,
represented by counsel, filed an answer in that case on September
30, 2011.
Complaint, ¶¶ 3, 5.
Thus, the complaint pleads
sufficient facts to indicate that defendant knew that plaintiffs
were represented by counsel in the foreclosure action.
However,
plaintiffs have not pleaded facts showing that defendant knew that
plaintiffs were residing at the property which was the subject of
the foreclosure action, and would therefore receive the occupant
letter. The fact that plaintiffs allegedly reside at the property,
or that one or both of the plaintiffs had signed the mortgage and
note for the property under foreclosure, does not mean that
defendant should have known that they were actually living at the
property.
It is conceivable that the property could have been
purchased by plaintiffs for use as rental property or for the use
of some other family member. The letter itself, which is addressed
to “OCCUPANT,” raises no inference that defendant knew who was
actually occupying the property.
Plaintiffs have not alleged facts sufficient to show that
defendant had actual knowledge that plaintiffs were residing at the
property being foreclosed or that the occupant letter would be
received by plaintiffs so as to state a claim under §1692c(a)(2).
However, even if plaintiffs could plead additional facts showing
such knowledge, that would not be enough to save their §1692(a)(2)
claim.
Plaintiffs would also have to allege facts showing that
defendant knew that no other head of household was occupying the
property or a portion of the property, as defendant would be
17
required to send notice to any other head of household.
See
§203.675 (notice must be sent to “each head of household who is
actually
occupying
a
unit
of
the
property”).
There
is
no
prohibition in the HUD regulations against sending the §203.675
notice letter to an occupant known by the lender or its agent to be
represented by counsel. In any event, plaintiffs’ §1692c(a)(2)
claim would still fail because, as discussed in Section III.A.
above, the HUD letter in this case is not a communication “in
connection with the collection of any debt[.]”
D. Alleged Violations of §1692e
Defendant further argues that the complaint fails to state
claims under §1692e, which provides that “[a] debt collector may
not use any false, deceptive, or misleading representations or
means in connection with the collection of any debt.”
§1692e.
“Whether a debt collector’s actions are false, deceptive, or
misleading
under
§1692e
is
based
on
whether
the
‘least
sophisticated consumer’ would be misled by defendant’s actions.”
Wallace, 683 F.3d at 326.
The statement must be materially false
or misleading, that is, the statement must be technically false,
and one which would tend to mislead or confuse the reasonable
unsophisticated consumer.
Id. at 326-27.
Defendant argues that plaintiffs’ complaint fails to state a
claim under §1692e(5), which prohibits conduct involving “[t]he
threat to take any action that cannot legally be taken or that is
not intended to be taken.”
§1692e(5).
The allegations in the
complaint, see Complaint, ¶ 11(b), simply repeat the language of
the statute and do not specify what the nature of the threatened
action was.
Plaintiffs claim in their memorandum contra that the
18
letter threatens to dispossess them of their property.
However,
the HUD notice letter contains no statements by Wells Fargo or
defendant threatening to take any action, legal or illegal, to
evict plaintiffs.
The letter simply provides notice of HUD
policies to the occupant of the property in the event that the
property is acquired by HUD, and advises the occupant about
applying to HUD to remain in the property.
No claim under
§1692e(5) has been stated in the complaint.
Defendant also argues that plaintiffs have failed to allege a
violation of §1692e(10), which prohibits “[t]he use of any false
representation or deceptive means to collect or attempt to collect
any debt[.]”
§1692e(10).
Plaintiffs first allege that defendant
violated §1692e(10) by falsely representing that within 60 to 90
days, ownership of plaintiff’s house would transfer to Wells
Fargo.1
Complaint, ¶ 11(c).
Plaintiffs allege that defendant
served discovery requests in the foreclosure action on plaintiffs
on November 22, 2011.
Complaint, ¶ 5.
Plaintiffs further allege
that on December 12, 2011, the date of the HUD letter, discovery
responses
from
Wells
Fargo
were
still
outstanding,
and
that
plaintiffs were awaiting a decision on their request for a loan
modification.
Complaint, ¶ 7.
Plaintiffs then summarily allege
that defendant had no reasonable basis to believe that a judgment
would be entered in the foreclosure action within 60 to 90 days.
Complaint, ¶ 8.
The HUD letter itself was not phrased in definite terms.
1
Section 203.675 requires the mortgagee to send the HUD notice at least 60
days, but not more than 90 days, “before the mortgagee reasonably expects to
acquire title to the property[.]” §203.675(a). Thus, the regulations gives some
discretion to the mortgagee in determining when to send the letter.
19
Rather, the letter stated, “We expect
that ownership of the
property will be transferred to Wells Fargo probably within the
next 60 to 90 days.
ownership
will
be
Shortly thereafter, it is probable that
transferred
(emphasis supplied).
to
[HUD].”
Complaint,
Ex.
A
These statements amount to no more than
opinions or expectations of future events.
Even assuming that
plaintiffs could allege facts sufficient to show that defendant
could not have reasonably expected a foreclosure decree to be
entered within the next 60 to 90 days, their
§1692e(10) claim in
that respect would still fail, as the HUD letter was not a
communication
“in
connection with the collection of any debt.”
Plaintiffs also allege that the letter falsely represented
that if plaintiffs did not send in the enclosed documents within 20
days of the date of the letter, they would be required to move from
their home.
Complaint, ¶ 11(d).
The statements in the letter
speak for themselves and are not false.
reflects the pertinent regulations.
The letter accurately
The letter correctly stated
that if the occupant wished to remain in the house, a written
request had to be received by HUD within 20 days from the date of
the letter.
See §203.676.
The letter also correctly stated that
if the occupant did not reply to the HUD office in writing within
20 days from the date of the letter, the occupant would be required
to move from the property on some future unspecified date.
See
§203.678 (“HUD will require that the property be conveyed vacant if
the occupant fails to request permission to continue to occupy
within the time period specified in §203.676[.]”).
In their memorandum, plaintiffs also argue that the letter
falsely represented that plaintiffs would be required to move from
20
their home within 20 days if they failed to file a petition with
HUD.
As discussed previously, the letter specified no time limit
for vacating the property, as no date had been set for the
acquisition of the property by HUD.
The complaint fails to allege facts sufficient to state a
violation of §1692e.
Plaintiffs’ §1692e claims do not survive in
any event due to the fact that the HUD letter was not conduct taken
“in connection with the collection of any debt.”
3. Alleged Violations of §1692f
Defendant
argues
that
plaintiff
has
failed
to
allege
a
violation of §1692f, which states that a “debt collector may not
use unfair or unconscionable means to collect or attempt to collect
any debt.”
Complaint, ¶ 11(e).
Plaintiffs allege that defendant
violated §1692f(6)(A), which prohibits “[t]aking or threatening to
take any nonjudicial action to effect dispossession or disablement
of property if– (A) there is no present right to possession of the
property claimed as collateral through an enforceable security
interest[.]”
§1692f(6)(A).
The complaint itself does not specify
the nature of the alleged nonjudicial action. In their memorandum,
plaintiffs contend that the nonjudicial means used by defendant was
the HUD letter.
The HUD letter, addressed to “OCCUPANT,” contains no threats
that defendant or Wells Fargo would take possession of plaintiffs’
property by nonjudicial means.
The letter only referred to the
pending foreclosure action, a judicial proceeding.
The letter
itself did nothing to achieve possession of the property.
The
letter did not encourage or threaten the occupant to leave the
property.
It simply provided notice, as required under §203.675,
21
to the occupant of the property about HUD’s policies regarding the
continued occupancy of property conveyed to HUD, and provided
relevant information about how the occupant could apply to remain
in the property.
In addition, as noted previously in Section
III.A., the notice does not take or threaten any action in order
“to collect or attempt to collect any debt.”
See §1692f(6)(A).
The complaint fails to state a claim under §1692f(6)(A).
IV. Conclusion
In
accordance
with
the
foregoing,
defendant’s
motion
to
dismiss (Doc. 9) is granted, and plaintiffs’ complaint is dismissed
for failure to state a claim for which relief may be granted.
Date: April 29, 2013
s/James L. Graham
James L. Graham
United States District Judge
22
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