MCLAUGHLIN v. PHELAN HALLINAN & SCHMIEG, LLP. et al
Filing
105
MEMORANDUM and ORDER denying 95 Motion for Reconsideration; A separate order entering final judgment pursuant to Federal Rule 58, as referenced in this Court's order of 9/7/2012, will now be issued; As a sanction for failing to fulfill their discovery obligations, and to obey this Court's order of 12/19/2011, defendants must reimburse plaintiff for all reasonable expenses, including attorneys' fees, caused by their failure to comply; Counsel for plaintiff is to submit a bill of costs for all reasonable fees incurred in connection with the preparation of the motion for reconsideration, brief in support, and reply brief within 14 days from the date of this order. Signed by Chief Judge Gary L. Lancaster on 3/11/13. (map)
IN THE UNITED STJI.TES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
TIMOTHY MCLAUGHLIN on behalf of
himself and others similarly
situated,
)
)
)
)
Plaintiff,
)
)
v.
)
Civil A.ction No. 10 1406
)
)
)
PHELAN HALLINAN & SCHIMEG, LLP.,
LAWRENCE T. PHELAN, FRANCIS S.
HALLINAN, AND ROSEMARIE DIAMOND,
)
)
)
Defendants.
MEMORANDUM
Gary L. Lancaster,
Chief Judge.
March
IL,
2013
This is an action brought under the Fair Debt Collection
Practices
1692").
Act
("FDCPA"),
15
U . S.C.
§
1692,
et
seq.
("section
Before the court is plaintiff Timothy McLaughlin's motion
for reconsideration of the court's April 15, 2011 and December 20,
2011 orders dismissing all but McLaughlin's claim under section
1692e (3) of the FDCPA.
will be denied.
consisting
incurred
of
by
For the rea.sons set fort:h below, the motion
However,
the court
imposes discovery sanctions
reasonable
expenses,
includinsr
McLaughlin
in
connection
with
attorneys'
this
fees,
motion
for
reconsideration against defendants Phelan Hallinan & Schmieg, LLP,
Lawrence T.
Phelan,
Francis S.
Hallinan,
Daniel G.
Schmieg,
and
Rosemarie Diamond (collectively, "PHS") for vio:.. ating its discovery
obligations and this court's order of December 19, 2011.
PROCEDURAL HISTORY
I.
McLaughlin filed his initial complaint on October 22,
2010
[doc. no. 1].
On November 19, 2010, PHS filed a motion to
dismiss [doc. no. 11]
The court granted the rr.otion and dismissed
the complaint in its entirety without prejudic:= on April 17, 2011
[doc. no. 36].
McLaughlin filed an amended corrplaint on April 29,
2011 asserting claims under sections 1692e(2), 1692f(1), 1692e(3),
and 1692e(10)
of the FDCPA
[doc.
no.
38].
PHS filed a second
motion to dismiss on May 19, 2011 [doc. no. 39].
On September 9,
2011, the court dismissed each of McLaughlin's claims except the
1693e(3)
claim
[doc.
no.
53].
At
the
post-discovery
status
conference, McLaughlin requested clarification as to the effect of
this court's order.
In a memorandum order dated December 20, 2011
[doc. no. 72], the court explained that, consiE:tent with its prior
opinions,
McLaughlin
could
not
pursue
a
sE~ction
16 92e (2)
or
1692e(10) claim because he did not challenge the validity of the
debt prior to filing suit and because a debt collector is allowed
to
estimate
attorneys'
fees.
The
order
address McLaughlin's section H:92f (1)
state
that
"the
matter
proceeds
section 1692e(3) claim only"
On February 14,
did not
claim,
with
specifically
but did explicitly
respec.:::t
to
McLaughlin's
[doc. no. 72 at 3].
2012,
PHS filed a motion for summary
judgment [doc. no. 73] as to the remaining claim that PHS falsely
represented
that
the
June
7,
2010
2
debt
collection
letter
to
McLaughlin (the "Letter") was t:'1e product of m.eaningful attorney
involvement in violation of section 1692e(3)
court granted PHS
I
of the FDCPA.
The
motion because McLaughlin failed to adduce
S
sufficient evidence to support his allegation that attorneys had
not reviewed the Letter
however
I
briefing
that
PHS
(the
[doc.
submitted
"Invoices")
I
no.
94 at 2].
invoices
which
The court found
durinsr
had
summary
been
discoverYI that could support a reasonable
I
judgment
withheld
during
finding that PHS
jU]~y
misstated the amount of the debt in the Letter in violation of
section 1692e(2).
Because we previously dismissed McLaughlin/s
claim under section 1692e(2)1 we provided Mclaughlin 30 days to
file a motion for relief from our prior orders.
McLaughlin filed
this motion for reconsideration on October 5, 2012
[doc. no. 95].
II. FACTUAL BACKGROUND
Because we write solely for the parties
with the facts
l
we need not reiterate them here.
referred to our prior opinions [doc. nos. 36
III.
1
l
who are familiar
Other readers are
33, and 72] .
LEGAL AUTHORITY
A.
Standard of Review
The
purpose
"correct manifest
of
errors
discovered evidence."
a
of
motion
law
or
for
fact
reconsideration
or
to
present
Maxis Sea.food Cafe ex rEI. Lou-Ann
3
is
I
to
newly
Inc. v.
Quinteros,
176 F.3d 669,
677
(3d Cir.
1999)
{citation omitted).
Accordingly, a court may alter or amend its judgment if the movant
demonstrates at least one of tl'l.e following:
controlling lawi
(1)
a change in the
(2) availability of new evidence, which was not
previously available; or (3) a need to correct a clear error of law
or fact or to prevent manifest inju.stice.
a~::
interest in finality, at least
See :.. d.
"Because of the
the district court level, motions
for reconsideration should be granted sparing:Yi the parties are
not free to relitigate issues the court has previously decided."
Williams v.
City of Pittsburgh,
32 F.Supp.2d 236,
238
(W.D.
Pa.
1996) .
B.
Fair Debt Collection Practices J\.ct
Congress enacted the FDCPA in 1977 based on "abundant
evidence
of
the
use
collection practices
1692(a).
of
by
abus:,.ve,
many
deceptive,
debt
and
collecto:r s .
II
unfair
15
debt
U. S . C.
§
The FDCPA aims "not only to eliminat:: abusive practices
by debt collectors, but 'to insure that those debt collectors who
refrain
from
using
abusive
debt
competitively disadvantaged. '"
F.3d 450, 453 (3d Cir. 2006)
collection
practices
are
not
Brown v. Card Service Center, 464
(quoting 15 U.S.C.
§
1692e).
Congress
gave consumers a private cause of action against debt collectors
who violate
the
FDCPA because
protections insufficient.
it
considered existing consumer
Lesher v.
Law Offices of Mitchell N.
Kay, PC, 650 F.3d 993, 996-97 (3d Cir. 2011).
4
The FDCPA is to be
construed broadly to achieve its remedial purpose.
ensure that all consumers are protected,
Id. at 997.
To
courts are to "analyze
communications from lenders to debtors from the perspective of the
least sophisticated debtor."
Id.
(internal quotation omitted) .
Section 1692e of the FDCPA generally prohibits the use of
"false ,
deceptive,
or
misleading
representa.tion
connection with the collection of any debt."
or
means
15 U.S.C.
§
in
1692e.
The sixteen subsections of section 1692e set forth a non-exhaustive
list of
specific practices
that
fall
within
this ban.
These
subsections include:
(2) The false representation of
(A) the charactel:-, amount,
or legal status of any
debt; or
(B) any services rendered or compensation which may
be lawfully received by any debt collector for
the collection of a debt.
(10) The use of any :alse represent.ation or deceptive
means to collect or attempt to collect any debt or
to obtain information concerning a consumer."
15 U.S.C.
Kay, PC
under
§
I
§
1692e.
See also Lesher v. Law Offices Of Mitchell N.
650 F.3d 993
1692e l
1
997 (3d Cir. 2011).
When addressing claims
the question is whether the allegedly deceptive
communication "can be reasonably read [by the least sophisticated
5
debtor]
to
inaccurate.
2008)
II
have
two
different
meanings,
Rosenau v. Unifund
one
of
which
is
, 539 F.3d 218, 222 (3d Cir.
(citation omitted)
IV.
DISCUSSION
A.
Section 1692e 2
McLaughlin
asks
the
Claim
court
to
reconsider
its
prior
dismissal of his section 1692e(2) claiml because, when the court
dismissed that claim,
it did not have access
to the
Invoices.
According to McLaughlin, the Invoices reflect a discrepancy between
the amounts PHS charged CitiMort9ag'e, Inc.
("CitiMortgage") for its
work on McLaughlin's file and the amount of costs and attorneys'
fees PHS sought to recover from McLaughlin in the Letter.
instance,
the Letter lists $55D. 00 for costs of suit and title
search as of May 18, 2010.
invoice,
For
PHS
However, according to the June 8, 2010
charged CitiMortgage only $440.00
through June 7, 2010.
in total
costs
The Letter also lists attorneys' fees in the
amount of $650.00 as of May 18, 2010.
Yet as of the June 8, 2010
invoice, the amount of "foreclosure fees" was only $625.00. 2
1 Although McLaughlin did not ask that we revive his section 1692e(10)
claim,
a claim under this section could arguclbly be valid for ':he same reasons
McLaughlin asserts support revival of his section 1692e(2) claim.
Section
1692e(10) prohibits "[t]he use of any false representation or deceptive means
to collect or attempt to collect any debt or to obtain information concerning
a consumer.
However, because the court's analysis of d. possible revival of
McLaughlin's section 1692e(10) would be the same as tha' for his section
1692e (2) claim, the court will not address section 16921~ (10) separately.
tr
Based on PHS's brief, we find that "foreclosure fees" and "attorney's fees"
refer to the same fees [doc. no. 101 at pp. 11-12].
2
6
According to McLaughlin,
the availability of this new
evidence justifies reconsideration of the
co~rt's
prior orders.
Specifically, McLaughlin claims that this new evidence reveals that
PHS "misrepresented the actual amount of attorney's fees that were
ultimately incurred,"
"inflate [d]
the amount of the costs," and
"mischaracterized the nature of the costs"
The court disagrees.
Even
assu~ing
that
[doc. no.
McL~lghlin's
96 at 5-6].
failure to
dispute the Letter is not fatal to his claim,3 his section 1692e(2)
claim still fails because the attorneys' fees and costs stated in
the Letter were estimates of amounts that PHS actually incurred and
that PHS was entitled to collect.
Thus, the Letter's statement of
attorneys' fees and costs did not deceive or mislead McLaughlin in
any way.
The court previously held that estimi3.ting the amount of
attorneys'
fees
in an itemized debt collection notice does not
violate the FDCPA [doc. no. 72 at p. 3 (citing yields v. Wilber Law
Firm,
P.C.,
383 F.3d 562,
565-66
(7th Cir.
2C04))].
However,
a
debt collector may not charge additional unaut.horized collection
fees.
In fact, some courts have held that listing fees in a debt
3 As the court previously recognized, numerous courts have held that a plaintiff
who does not follow the statutory debt validation procedure may not assert an
FDCPA claim based solely on an allegation that the debt collector has attempted
to collect an invalid debt (see doc. nos. 36 at 8, 72 at 2J.
See,~,
Lorandeau v. C<:lpital Collection Serv., CIV.A. 10-3807, 2011 WL 4018248(E.D. Pa.
Sept. 8, 2011) ; Bleich v. Revenue Maximization Grou~1c., 233 F.Supp.2d 496,
501 (E.D.N.Y. 2002); Koller v. West f~~ Acquisitions, LLC, Civ. A. No. C 12
00117, 2012 WL 1189481, at *3 (N.D. Cal. Apr. 9, 2012).
Here, however,
McLaughlin does not dispute the underlying debt, but rather PHS's practice of
charging fees and costs that had not yet been incurred.
7
collection
letter,
where
violates the FDCPA.
no
S".lch
amounts
have
See Lorandeau
been
lection Serv., No.
10 -cv-38 07, 2011 WL 4018248 (E. D. Pa. Sept. 8, 2011)
v. AFNI,
Inc.,
Veach v.
Sheeks,
548 F.3d 1107, 1113
316 F.3d 690,
where
a
debtor
is
representations of a
occurs.
not
693
(7th Cir.
bi~ding
actually
(citing Seeger
(7th Cir. 2008)).
Harmon, No. 03-CV-10932, 2005 WL 2365331 (D.
None of these authorities is
incurred,
2003)
Ma~.;s.
i
debt collector,
or
Pettway v.
Sept. 27, 2005).
on this court.
misled
See also,
Ultimately,
deceived
by
the
no viol3.tion of the FDCPA
See Duraney v. Washington Mut. Bank F.A., No. 07-cv 13,
2008 WL 4204821 (W.D. Pa. Sept. 11, 2008), aff'd sub nom., Duraney
v.
F.D.I.C.,
388 F.
App'x 102
(3d Cir.
2010)
(citing Si:r'lger v.
Pierce & Assocs., P.C., 383 F.3d 596, 598 (7th Cir. 2004)).
Here,
MCLaughlin
argues
that
PHS
violated
section
1692e(2} of the FDCPA because the attorneys' fees and costs stated
in the Letter do not match the attorneys' fees and costs stated in
contemporaneous invoices.
According to PHS, 1:he attorneys'
fees
and costs were legally permissible estimates.
Specifically, PHS
argues
in the amount of
that
its inclusion of attorneys'
feef:!
$650.00 in the Letter constituted a. good faith pro rata estimate of
one-half
of
entitled to
the
attorneys'
receive.
PHS
fees
that
contends
PHS
that,
would be
b€ ! cause
ultimately
McLaughlin's
mortgage was owned by Fannie Mae, it based its estimate on Fannie
Mae's authorized attorneys' fees. of $1,300.00, which are published
8
and a matter of public record.
PHS's brief does not address the
$110.00 discrepancy between the costs of sui: and title search
listed in the Letter and Invoices.
However,
costs" listed in the Invoice dated June 8,
report in the amount of $325.00 incurred on
the
"foreclosure
2010 include a title
~ay
19, 2010, a due
diligence inquiry as to McLaughlin's whereabou:s in the amount of
$25.00 also incurred on May 19, 2010, a Freedorr of Information Act
letter in the amount of $15.00 incurred on May 19, 2010, and a fee
for service of the complaint for $75.00 incurn:!d on June 7, 2010.
The Invoice dated August 26,
2010 adds an additional $200.00 in
costs for filing an amended complaint.
The Invoice dated March 7,
2011 lists an additional $150.50 for filing the complaint on June
7, 2010, and a $5.00 Soldiers and Sailors Civil Relief Act Search
fee.
Thus, based on the record . the amount in "costs of suit and
title search" that McLaughlin actually owes in $795.50, which is
more than the $550.00 stated in the Letter.
From our independent review of the Letter and Invoices,
the court finds that the amounts listed in the Letter,
based on estimates at the time it was sent,
although
were not actually
false, deceptive, or misleading and, thus, do not violate section
1692e(2) of the FDCPA.
McLaughlin owed at least $550.00 in costs
and $650.00 in attorneys' fees as a result of PHS's debt collection
efforts.
The
FDCPA
information about
requires
debt
the amount of
9
collectors
the debt
in a
to
communicate
fair and clear
manner.
Here,
the court
finds
that
PHS properly itemized the
amount of attorneys' fees and costs in the Letter and based those
amounts
on
reasonable
estimates.
We
have
already
held
that
estimates are proper, especially in a situatior:. where the attorney
is charging a flat fee for its services.
Indeed, some courts have
held that failing to itemize the various charges that comprise the
total amount of debt could be construed as falsely stating the
amount of the debt.
(citing Fields
l
See,
~.,
Duraney,
2008 WL 4204821 at *17
383 F.3d at 565}.
Moreover, the costs and fees listed in the Letter were
authorized
by
contract.
According
to
the
mortgage
agreement
between McLaughlin and CitiMortgagE!, McLaughlin agreed to reimburse
CitiMortgage,
expenses
in the
incurred
agreement],
in
including,
event
a
default
pursuing
the
was
not
remedies
but not limited to,
cured,
for
"all
provided
in
[the
attorneys'
fees and
costs of title evidence to the extent permittee. by Applicable Law"
[doc. no. 11-3 at p. 28
§
22].
Based on this language, there is no
question that McLaughlin is obligated to pay ,attorneys' fees and
title costs, as well as other expenses incurred in pursuing the
foreclosure action.
Even applying the least sophisticated debtor standard,
McLaughlin cannot maintain that the Letter was deceptive.
Here,
the Letter clearly itemized the amounts compris:_ng the overall debt
and did not mislead MCLaughlin into believing l:":.e would have to pay
10
amounts that were not owed and could not be collected.
Therefore,
McLaughlin cannot maintain a claim under sect:Lon 1692e (2) of the
FDCPA arising out of the Letter.
B.
Discovery Sanctions
Although the court finds that McLaugblin cannot maintain
a section 1692e(2) claim, we also recognize that PHS's failure to
produce
the
Invoices
obligations
as
during
well
as
this
discovery
court's
violci,ted
Decemh:=r
its
19,
discovery
2011
order
directing PHS to produce these very documents [doc. no. 70].
Federal Rule of Civil Procedure 37(b) :2) (A) provides that
"[i]f a party [ . . . J fails to obey an order
t~
provide or permit
discovery [ . . . ], the court where the action is pending may issue
further
just
orders.
striking
of
pleadings,
disobedient party,
orders
renderi.ng
may
default
include,
inter
judgment
against
or dismissing the action.
37 (b) (2) (A) (i) - (vii).
or in addition to
Such
It
FED.
R.
alia,
CIV.
the
P.
Pursuant to Rule 37 (b) (2) (C), "[i) nstead of
the orders above,
the court must order the
disobedient party, the attorney advising that party, or both to pay
the reasonable expenses, including attorney's fees, caused by the
failure,
unless the failure was substantially justified or other
circumstances make an award of expenses unjust."
37 (b) (2) (C)
for
the
(emphasis added).
Third
Circuit,
discovery violations,
the
FED. R. CIV. P.
.!\ccording to the Court of Appeals
decision
to
impose
sanctions
as well as any determ:.cnation as
11
for
to what
sanctions are appropriate, are matters generally entrusted to the
discretion of
the district
court.
Athletic Ass'n, 475 F.3d 524, 538
Bowers v.
Nat' 1 Collegiate
(3d Cir. 2007).
On December 19, 2011, the court issued an order directing
PHS to produce documents in response to Plaintiff's First Request
for
Production
of
Documents
#!3
[doc.
no.
66 5
at
10],
which
requested \\ [a] 11 invoices for professional services rendered by
[PHS] in relation to the loan of Timothy McLaughlin."
directive,
Despite this
PHS did not produce the Invoices in discovery.
In an
affidavit attached to PHS's reply in support of its motion for
summary judgment t PHS states that "[a]t no timet was it understood
that the information being requested related to the attorneys [sic]
fees assessed by the law firm to its client, ,;:i tiMortgage"
no.
80-1 at
~
9].
Moreover,
This argument is untenable.
Invoices themselves reflect charges other thc.n attorneys'
making the statement factually incorrect on its face.
of
McLaughlin's
First
Request
for
Production
[doc.
of
the
fees t
The scope
Documents
#5
clearly contemplates the Invoices, thus making PHS explanation for
failing to produce these documents implausible.
We find that PHS's actions are sanctionable under Federal
Rule
of
Civil
Procedure
37 (b) (2;' (A) .
As
such,
we
may
issue
appropriate "just orders" and must order PHS to pay the reasonable
expenses incurred by McLaughlin resulting from PHS's failure to
comply.
As the result of PHSts ',vithholding of discovery documents,
12
all parties were denied the ability to fully ir..vestigate the facts
of this case in a timely manner.
This,
need
Thus,
for
incurred
additional
by
briefing.
McLaughlin
in
in turn, resulted in the
1
connection
costs
with
subsequently
this
motion
for
reconsideration are the direct result of PHS's failure to produce
the Invoices during discovery.
As such,
an award of attorneys'
fees is proper and no circumstances exist that would make such an
award unjust.
Had PHS produced the Invoices during discovery as
required, McLaughlin would have had the opportunity to address them
during summary
attached
discovery
to
judgment briefing.
PHS's
had
summary
closed.
Instead,
judgment
Accordingly,
reply
the
Invoices were
brief,
PHS's
well
actions,
after
whether
intentional or merely negligent, warrant the :_mposition of costs
against PHS, including attorneys' fees,
all expenses incurred by
McLaughlin in connection with his motion for reconsideration.
v.
CONCLUSION
For
the
reconsideration.
foregoing
reasons,
we
deny
the
motion
for
However, PHS is ordered to reimburse McLaughlin
for all reasonable expenses, inc:"uding attorneys' fees, incurred in
connection with McLaughlin's motion for reconsideration, brief in
support, and reply brief.
An
appropriate order follows.
13
IN THE UNITED STi;'TES DISTRICT COURT
FOR THE WESTERN DIE;TRICT OF PENNSYLVANIA
TIMOTHY MCLAUGHLIN on behalf of
himself and others similarly
situated,
Plaintiff,
v.
Civil Action No. 10-1406
PHELAN HALLINAN & SCHIMEG, LLP.,
LAWRENCE T. PHELAN, FRANCIS S.
HALLINAN, AND ROSEMARIE DIAMOND,
Defendants.
ORDER
AND NOW, this
of
plaintiff's
motion
II
for
day of March, 2013, upon consideration
reconsideration
Idoc.
no.
95],
and
defendants' response thereto, IT IS HEREBY ORDERED THAT plaintiff's
motion
is
DENIED.
A
separate
order
entering
final
judgment
pursuant to Federal Rule 58, as referenced in t3is court's order of
September 7, 2012, will now be issued.
IT IS FURTHER ORDERED that, as a sanction for failing to
fulfill their discovery obligations, and to obey this court's order
of December 19, 2011, defendants must reimburse plaintiff for all
reasonable expenses,
failure to comply.
costs
for
all
including attorneys'
fees,
Counsel for plaintiff is
reasonable
fees
=0
caused by their
submit a bill of
incurred in connection with the
preparation of the motion for reconsideration, brief in support,
and reply brief within 14 days :Erom the date cf this order.
BY THE COURT:
,,~~
-------I
cc:
All Counsel of Record
C. J.
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