Peckey v. Bank of America, N.A. (Maryland U.S.D.C.)

Filed: April 10, 2015

Opinion by: Richard D. Bennett

Holdings:  The Court denied Defendant Loan Servicer’s motion to dismiss Plaintiff’s claims for violations of three statutes: 1) the Fair Debt Collection Practices Act (“FDCPA”); 2) the Maryland Consumer Debt Collection Act (“MCDCA”); 3) and the Maryland Consumer Protection Act (“MCPA”).

While Defendant Loan Servicer’s communication to collect Plaintiff’s non-existent mortgage debt was time barred under the FDCPA, the Defendant’s more recent false representation regarding the non-existent debt was not time barred.  The Court held Plaintiff sufficiently pled that Defendant Loan Servicer possessed the requisite knowledge to violate the MCDCA.  The Court also held Defendant Loan Servicer’s alleged false reporting of delinquencies plausibly harmed Plaintiff’s credit score and caused him stress and anxiety.  Further, the Court held that Plaintiff sufficiently pled a violation of the MCPA. 

Facts:  Plaintiff defaulted on a loan from Defendant Bank to purchase property (the “Loan”).  To avoid foreclosure, Plaintiff agreed to a Deed in Lieu of Foreclosure transaction (“DIL”) conveying the property to Defendant Bank.  Plaintiff fulfilled all of the requisite steps to complete the DIL.  Shortly thereafter, however, Defendant Bank sent Plaintiff a letter stating his loan would be serviced by Defendant Loan Servicer and Defendant Bank sent Plaintiff another letter stating it was unable to offer Plaintiff a DIL. 

Then, Defendant Loan Servicer sent Plaintiff a letter stating it had taken over loan servicing for Plaintiff’s property and sent Plaintiff a monthly payment notice demanding $55,190.29 for the current payment, past due payment, and late charges/fees.  In response, Plaintiff sent a letter to Defendant Loan Servicer stating that he successfully completed a DIL with Defendant Bank and requested that it cease and desist making debt collection phone calls to him. Defendant Loan Servicer nevertheless continued to demand payment.  Plaintiff’s credit reports showed the DIL terminated the Loan, but that Plaintiff had a deficiency with Defendant Loan Servicer.

Defendant Loan Servicer filed a Motion to Dismiss in response to Plaintiff’s claims under the FDCPA, MCDCA, and MCPA.

Analysis:  FDCPA:  The FDCPA requires that a plaintiff bring a claim within one year from the date on which a violation occurs (15 U.S.C.A. 1692k(d)).  Defendant Loan Servicer’s communication to collect Plaintiff’s non-existent debt occurred more than one year before suit was filed.  However, Defendant Loan Servicer’s false delinquency report to the credit bureaus and Plaintiff’s accessing of his credit reports occurred within one year before filing suit.  Thus, the Court determined that Plaintiff’s FDCPA claim was not barred by the FDCPA’s one-year statute of limitations.       

MCDCA:  Liability arises under Md. Code Ann., Com. Law § 14-202(8) when a defendant acted “with actual knowledge or reckless disregard as to the falsity of the information . . .”  Plaintiff’s allegation that he provided the DIL and other documentation to Defendant Loan Servicer was sufficient to plead that Defendant had “actual knowledge.”  Plaintiff alleged he sent a message to Defendant Loan Servicer indicating the Loan had been satisfied with title transferring by the DIL, that it failed to investigate Plaintiff’s response, and it failed to consider information readily available in Plaintiff’s credit history.  The Court ruled that this was sufficient to plead Defendant Loan Servicer acted with “reckless disregard.”  The Court further stated that, although Plaintiff bears the burden to prove Defendant Loan Servicer’s actions proximately caused his damages, it is plausible its action caused the harm to Plaintiff’s credit score as well as stress and anxiety.  

MCPA: The Court determined that because Plaintiff sufficiently alleged a violation of the MCDCA and a violation of the MCDCA is a per se violation of the MCPA, Plaintiff sufficiently pled a violation of the MCPA.

The full opinion is available in PDF.

Allstate Lien & Recovery Corp. v. Stansbury (Ct. of Spec.Appeals)

Filed: October 7, 2014

Opinion by: Kathryn Grill Graeff

Holdings: A fee charged for processing a garageman’s lien is not part of the garageman’s lien per Md. Code, Comm. Law § 16-202 and cannot be included in the amount necessary to redeem a vehicle.

As a result, the jury properly found that including the processing fee in the amount needed to redeem a vehicle violates the Maryland Debt Collection Act (Md. Code, Comm. Law §§ 14-201, et seq.) and the Maryland Consumer Protection Act (Md. Code, Comm. Law §§ 13-301, et seq.).

Facts: Plaintiff authorized in writing some needed repairs to his vehicle by the defendant garage, which charged Plaintiff $6,330.37 for the repairs. After Plaintiff failed to timely pay, the Defendant garage and its manager engaged the Defendant lien and recovery company to begin the process of selling Plaintiff’s vehicle in execution of the Defendant garage’s repair lien.

Plaintiff was sent a lien notice which provided that Plaintiff’s vehicle would be sold at public auction to satisfy the garage’s lien unless Plaintiff paid the $6,330.37 costs of repair, plus a storage fee of $300, plus a processing fee of $1,000, for a total of $7,630.37. Plaintiff had not agreed to any storage fees in his written repair authorization. The Defendant lien and recovery company asserted that although the actual costs incurred may vary from lien to lien, the $1,000 fee was its standard charge for collecting debts and was “front-loaded” to become part of the lien. Plaintiff failed to pay the full lien amount claimed, including the $1,000, and Plaintiff’s vehicle was sold at auction for $7,730.

Analysis: The Court determined that the plain language of the garageman’s lien statute, Md. Code, Comm. Law § 16-202, clearly and unambiguously states that a person who provides a service to, or materials for, a vehicle has a “motor vehicle lien” only for those charges incurred for repair or rebuilding, storage, or tires or other parts or accessories. As a result, a processing fee is not included as part of the lien. The Court reviewed the statutory scheme as a whole and held that, although processing fees may be recovered if the vehicle is sold or if judicial proceedings are instituted, the statutory scheme does not suggest that processing fees are part of the lien that may be included as part of the amount the consumer must pay to redeem the vehicle.

The Maryland Consumer Debt Collection Act, specifically Md. Code, Comm. Law § 14-202, provides that a debt collector may not “[c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist.” The Court held that Defendants attempted to enforce a right that did not exist by requiring Plaintiff to pay the $1,000.00 processing fee to redeem the vehicle. Defendants had no right to front-load the processing fee and include those fees as part of the lien. Consequently, the Court held the jury properly found that Defendants violated the Maryland Consumer Debt Collection Act and, because such a violation constitutes an unfair or deceptive trade practice, Defendants also violated the Maryland Consumer Protection Act.

The full opinion is available in PDF.  

Walton v. Network Solutions (Ct. of Special Appeals)

Filed: February 26, 2015

Opinion By: Michael W. Reed

Holding: Appellant, Jeffrey Walton, failed to allege facts sufficiently specific to substantiate his claims against Appellee, Network Solutions, for violating either the Maryland Commercial Electronic Mail Act (“MCEMA”) or the Maryland Consumer Protection Act (“MCPA”), and his claims were timed barred under the applicable three year statute of limitations.

Facts: Appellant was the recipient of certain unsolicited commercial email (“spam”) from Appellee starting in 2009.  Appellant complained twice to Appellee, but continued to receive spam, which he alleged in his complaint was false or misleading as to where the spam came from and the information provided in the subject line of each email message.

Analysis: The Court began with the language of MCEMA, which specifically bars sending commercial emails that contain unauthorized, false or misleading information under section 14-3002.  Md. Com. Law Code Ann. § 14-3002 (2014).  Section 14-3002(b)(2)(ii) specifically bars “sending a message that contains false or misleading information about the origin or the transmission path of the commercial electronic mail.”  Appellant had asserted that Appellee had violated this provision because when Appellant sent a message to the reply-to address of Appellee, the message was returned indicating that the destination mailbox was full.  The Court concluded that this was not prohibited conduct under the statute because the statute did not require the mailbox to accept messages, only that it be a misrepresentation of where the spam originated from.  Moreover, the Appellant was able to determine from the sending email address to contact Appellee

Section 14-3002(b)(2)(iii) prohibits sending a message that contains false or misleading information in the subject line of the message.  The Court examined the subject lines of the emails attached to Appellant’s complaint, and concluded that because the subject lines of each such message were related to Appellee’s business of selling domain names, the subject lines did not, as a matter of law, have “the capacity, tendency, or effect of deceiving” the Appellant.  Instead, the case before the Court was factually distinguishable from a California case, Hypertouch, Inc. v. ValueClick, Inc., 123 Cal. Rptr. 3d 8 (Ct. App. 2011), because the subject lines in Hypertouchoffered free gifts without any limitation when the offer was actually far more limited.

Finally, the Court determined that Appellant’s claims under MCPA were time barred, holding that Appellant was aware on December 1, 2009 that Appellee had failed to remove him from Appellee’s email list, but failed to file a claim against Appellee until March 7, 2013 – more than three years from when he knew or should have known of the allegedly false or misleading conduct of Appellee.  Appellant’s claim here is premised on the statements of Appellee’s employees that Appellant was removed from the mailing list, but continued to receive spam after being told he was removed.  The Court concluded that such a claim had to be filed within three years, and that the continuing harm doctrine, which if applicable, might extend the limitations period for each new spam message received, was not applicable to the present matter.  The Court held that this argument was waived by not being raised and decided by the trial court at the hearing on the motion to dismiss, but that even if not waived, the continuing harm doctrine should not be applied to alleged violations of MCEMA.

The full opinion is available in PDF.

MRA Property Management, Inc. v. Armstrong (Ct. of Appeals)

Filed: April 30, 2012

Opinion by Judge Lynne Battaglia

Held:  The Maryland Consumer Protection Act (“MCPA”) could apply to disclosures made in a resale certificate by a condominium association and its management company during the sale of a condominium if the information provided is essential to the transaction, even though neither entity is a direct seller.  A disclosure could also violate the MCPA if it is false or misleading, or had the capacity, tendency, or capability of misleading even if it complies with the Maryland Condominium Act.

Facts:  This case arises from a special assessment imposed on all unit owners of the Tomes Landing Condominiums to pay for water damage to the buildings allegedly caused by improper construction of the buildings and incorrect installation of flashing that allowed water to seep behind the building facades and possibly compromise the structural integrity of the condominiums.  The unit purchasers alleged that the extent of the water damage had been known by the condominium association (the "Association") and its management company ("MRA") since 1996 and they failed to disclose such information in the resale package.  The unit purchasers were granted partial summary judgment in the amount of $1,000,000 against the Association and MRA in circuit court.  The basis for the award was that the operating budget the Association and MRA provided as part of a resale package to unit purchasers violated the MCPA because the budgets “had the capacity, tendency and effect of misleading the movants in connection with their purchases of the condominiums in Tomes Landing….”

The Court of Appeals granted petitions for writ of certiorari and vacated the circuit court’s grant of summary judgment saying that the MCPA does apply, but the Association and MRA were required to disclose only approved, not proposed or contemplated, capital expenditures in the operating budgets they provided to prospective purchasers.  The Court of Appeals remanded the case to consider whether the Association and MRA violated § 11-135(a)(4)(x) of the Maryland Condominium Act pertaining to disclosing whether the Association had “knowledge of any violation of the health or building codes with respect to the unit, the limited common elements assigned to the unit, or any other portion of the condominium.”

Both parties filed Motions for Reconsideration of the Court of Appeals decision.

Analysis:  The Court of Appeals granted the motions and decided there could be no violation of §11-135(a)(4)(x) because it is “knowledge of a charged violation…rather than the conduct underlying the violation, that requires disclosure” under that section.  As a result the Court found that “[b]ecause they were never issued a notice of any such violations, MRA and the Association could not have violated §11-135(a)(4)(x).”

The Court held that the MCPA may extend to one who is not the direct seller because “[i]t is quite possible that a deceptive trade practice committed by someone who is not the seller would so infect the sale or offer for sale to a consumer that the law would deem the practice to have been committed ‘in’ the sale or offer for sale.”  Hoffman v. Stamper, 385 Md. 1, 32 (2005).  Under the principles espoused in Hoffman, the Court found that the operating budgets provided by the Association and MRA “could have sufficiently implicated them in the entire transaction so as to impose liability under the [MCPA], given that every plaintiff averred in his or her affidavit that he or she would not have purchased a unit if the budget…had disclosed the expenses necessary to correct the problems with the condominium buildings.” 

In addition, the Court found that the statutory requirement to make certain disclosures to potential unit owners “injects MRA and the Association into the sale transaction as central participants because, were they to have failed to provide these materials, the contract for sale would not have been enforceable.”

The Court overruled the trial judge’s entry of summary judgment as a matter of law and remanded the case to the Circuit Court for Cecil County to decide whether the mandatory disclosures made by the Association and MRA were false or misleading, or had the capacity, tendency, or capability of misleading in violation of the MCPA.

The full opinion is available in PDF.

Bradshaw v. Hillco Receivables, LLC (Maryland U.S.D.C.)

Filed: February 23, 2011

Opinion by: Judge Richard D. Bennett

Held: A debt collector violates the Fair Debt Collection Practices Act (“FDCPA”) by violating State law for failing to register as a debt collector. In addition, the unlicensed filing of lawsuits to collect debts purchased from original creditors is violative of the FDCPA. Both questions are issues of first impression in this district and in the Fourth Circuit.

Facts: On June 17, 2009, the creditor (Defendant in the underlying case) filed suit against the debtor in the District Court of Maryland for Frederick County in order to collect a debt that it purchased from the debtor's original creditors after the debt went into default. The debtor then brought a separate class action against the creditor, asserting claims that the creditor acted as a debt collector in the State of Maryland without a license and that the creditor unlawfully filed lawsuits against the debtor and others as part of its debt collection practices. The debtor contends that the creditor, through its actions, violated the FDCPA, 15 U.S.C. § 1692 et seq., the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code Ann., Com. Law § 14-201 et seq., and the Maryland Consumer Protection Act (“MCPA”), Md. Code Ann., Com. Law § 13-101 et seq.

Analysis: The creditor acquired the debtor's delinquent account while it was in default, and the creditor is a person who engages directly or indirectly in the business of collecting such consumer claims. According to the Court, the creditor is therefore a "collection agency" within the meaning of the Maryland Collection Agency Licensing Act, Md. Code Ann., Bus. Reg. § 7-101, et seq. ("MCALA"). In the Court's view, the statutory scheme and its legislative history confirm that the statute is intended to cover not only agents of the original owners of consumer debts but also purchasers of such debt such as the creditor here. Debt purchasers who collect consumer claims through civil litigation are therefore subject to the licensing requirement. The Court found that the creditor violated this requirement when it failed to obtain a collection agency license prior to suing the debtor to collect a debt purchased from the debtor's original creditor. According to the Court, although the creditor's violation of MCALA's licensing requirement does not itself give rise to a private right of action, it may support a cause of action under the FDCPA. The Court specifically declined to hold that any violation of state law, no matter how trivial, constitutes a per se violation of the FDCPA. The FDCPA prohibits the use of any “false, deceptive, or misleading representation or means in connection with the collection of any debt,” 15 U.S.C. §1692e, and provides a non-exhaustive list of conduct that violates the FDCPA, including “[t]he threat to take any action that cannot legally be taken.” 15 U.S.C. § 1692e(5).

The creditor argued that it was not liable for violating the FDCPA because it did not threaten to take illegal action against the debtor but, rather, merely filed an illegal lawsuit against him. Although noting a split of authority among the circuits, the Court adopted the majority view, holding that the relevant section of the FDCPA prohibits the taking of “action that cannot legally be taken,” as well as the threatening of such action. Furthermore, under the "least sophisticated debtor" standard prevailing in the Fourth Circuit, the Court held that the filing of an illegal collection lawsuit would reasonably be construed by such a debtor as a threat to take illegal action.

The Court also held that the creditor was also not protected by the "bona fide error" defense, namely, 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). The Court held that this defense was not available to the creditor because of the Supreme Court's recent holding in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S. Ct. 1605, 1608 (2010) that it does not apply to a violation resulting from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA.

For essentially the same reasons as it found the creditor liable for violating the FDCPA, the Court also determined, on summary judgment, that the creditor had violated the MCDCA and the MCPA. Similar in purpose and scope to the FDCPA, the MCDCA states that a “person collecting or attempting to collect an alleged debt arising out of a consumer transaction” may not “[c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist.” Md. Code Ann., Com. Law §§ 14-201(b) & 14-202(8). The MCPA prohibits “unfair or deceptive trade practices,” Md. Code Ann., Com. Law § 13-301, and expressly designates as “unfair or deceptive trade practices” those that constitute any violation of the MCDCA. Each statute provides for a private right of action for its violation. The Court determined that because the creditor was not immunized from its conduct based on a mistake of law (i.e., that it was not required to be licensed under the MCALA), and because the creditor actually violated that law and was reckless as to whether its conduct was proscribed, the knowledge element of the MCDCA was satisfied. For the foregoing reasons, the Court ruled that the debtor was entitled to partial summary judgment, on liability only, on its claims for damages under the FDCPA, the MCDCA, and the MCPA (Counts II, III, and IV).

As a result of Judge Blake's recent opinion in Hauk v. LVNV Funding, LLC, __ F. Supp. 2d __, 2010 WL 4395395 (D. Md. Nov. 5, 2010), the Court held that declaratory and injunctive relief was not available to the debtor in the case at bar. The Court therefore found that the creditor was entitled to summary judgment on the debtor's Count I, which sought such relief.

Practice Tip: Judge Bennett specifically noted that the "FDCPA is a strict liability statute and a consumer has only to prove one violation in order to trigger liability." Consumer debt purchasers would therefore be wise to comply fully with this statute and its Maryland counterpart in order to avoid liability to consumers, including those, like the debtor in this case, who do not dispute the validity or amount of the underlying debt.

Related Opinion: In an earlier opinion granting the debtor's motion to strike the creditor's affirmative defenses, Judge Bennett held that the plausibility standard set forth in Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) and Ashcroft v. Iqbal, 566 U.S.__, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) applies to the pleading of affirmative defenses.

The full opinion is available in pdf..