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Chapter 8 Complaint and Briefs Arguing that the Fair Debt
Collection Practices Act Applies to the Foreclosure
of a Deed of Trust
Robert Erwin founded the Erwin Law Firm, P.A., in Baltimore, MD, to help individualswith consumer litigation. The firm accepts referrals of cases involving automobile sales/leasingfraud, auto lemon laws, odometer roll backs, breach of warranty, Fair Debt Collection, FairCredit Reporting, Truth-in-Lending, defective products, bankruptcies, and class actions. Prior toprivate practice he worked with the Maryland Office of the Attorney General and the Legal AidBureau.
This chapter contains the complaint ( 8.1), brief ( 8.2), and reply brief ( 8.3) in a caseunder the Fair Debt Collection Practices Act arguing that the attorneys foreclosing on a deed oftrust violated the FDCPA by continuing the foreclosure without responding to a request to
verify the debt and by continuing to contact the consumer directly when they knew he wasrepresented by counsel.1 The Fourth Circuit sided with the consumers interpretation of theFDCPA that the foreclosure attorneys were covered by the FDCPA as they were seekingpayment and debt collection was central, and not incidental, to their fiduciary duties astrustees.2
1 Seegenerally NCLC's Fair Debt Collection 4.2.5 (5th Ed. 2004)2Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006).
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8.1 Complaint
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
(NORTHERN DIVISION)
[PLAINTIFF] *[Address][Address] *
Plaintiff *
v. * Civil Action No.
DRAPER & GOLDBERG, PLLC *SUITE 301803 SYCOLIN ROAD *LEESBURG VA 20175
*Serve On:
AMANDA SMITH, RESIDENT AGENT *[Address]FREDERICK, MD 21701 *
And *
L. DARREN GOLDBERG *SUITE 301 *803 SYCOLIN ROADLEESBURG VA 20175 *
*
Defendants* * * * * * * * * * * *COMPLAINT
Plaintiff, [Plaintiff], by her attorneys The Erwin Law Firm, P.A., sues Draper &
Goldberg, PLLC and L. Darren Goldberg and says:
Parties
1. Plaintiff, [Plaintiff] is an adult citizen of the State of Maryland residing at [Address], inColumbia Maryland.
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2. Defendant Draper & Goldberg, PLLC is a Virginia professional limited liability corporationwith its principal place of business in Leesburg, Virginia. At all times relevant hereto,
defendant Draper & Goldberg, was engaged in the business of collecting debts in the state of
Maryland and made use of the United States mail in regularly collecting or attempting to
collect debts owed or due or asserted to be owed or due to other entities. Defendant Draper &
Goldberg regularly attempts to collect debts from Maryland citizens allegedly to be due to
others.
3. Defendant Draper & Goldberg is a debt collector as defined by the Fair Debt CollectionPractices Act, 15 U.S.C. 1692(a)(6).
4. Defendant L. Darren Goldberg is an adult citizen engaged in the practice of law in Leesburg,Virginia. Defendant L. Darren Goldberg manages defendant Draper & Goldbergs litigation
practice as well as all contested foreclosures, and is a principal of defendant Draper &
Goldberg, PLLC. At all times relevant hereto, defendant L. Darren Goldberg was engaged in
the business of collecting debts in the state of Maryland and made use of the United States
mail in regularly collecting or attempting to collect debts owed or due or asserted to be owed
or due to other entities. Defendant Goldberg regularly attempts to collect debts from
Maryland citizens allegedly to be due to others.
5. Defendant L. Darren Goldberg is a debt collector as defined by the Fair Debt CollectionPractices Act, 15 U.S.C. 1692(a)(6).
Jurisdiction
6. Jurisdiction of this Court arises under 15 U.S.C. 1692(k)(d) and 28 U.S.C. 1337. At alltimes relevant hereto, defendant Draper & Goldberg transacted substantial business in
collecting debts from Maryland citizens, regularly made telephone calls to Maryland citizens
and used the U.S. mail to contact Maryland citizens, and made use of the Courts of the state of
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Maryland in attempting to collect debts from Maryland citizens, out of which activities
plaintiffs cause of action arose. At all times relevant hereto, Defendant L. Darren Goldberg
was a member of the Maryland State Bar and transacted substantial business in collecting
debts in the state of Maryland and made use of the United States mail in regularly collecting or
attempting to collect debts owed or due or asserted to be owed or due to other entities.
Defendant Goldberg regularly attempts to collect debts from Maryland citizens allegedly to be
due to others.
Actual Allegations
8. On or about September 2, 2003, defendants Draper & Goldberg, PLLC and L. DarrenGoldberg mailed to plaintiff a collection letter demanding payment for an alleged debt in the
original principal amount of $43,191.90 allegedly due to Chase Manhattan Mortgage
Corporation and advising plaintiff of her right to dispute the validity of the debt within thirty
(30) days.
9. The alleged debt of plaintiff, [Plaintiff], to Chase Manhattan Mortgage Corporation wasincurred for personal, family, or household services, i.e. a purchase money mortgage for her
principle residence.
10.Defendants letter dated September 2, 2003, was received by plaintiff at her residence inColumbia, Maryland.
11.On or about September 6, 2003, plaintiff wrote defendants that she did dispute the validityof the debt and requested that defendants verify the debt with Chase Manhattan as required by
the Fair Debt Collection Practices Act.
12.Plaintiffs letter was received by defendants on or about September 8, 2003.13.In spite of plaintiffs letter dated September 6, 2003, defendants instituted a foreclosure
action on behalf of Chase Manhattan Mortgage Corporation in the Circuit Court for Howard
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County on September 11, 2003, Case No. [No.]. Defendant L. Darren Goldberg was an
attorney filing the foreclosure action in Circuit Court.
14.On September 18, 2003, plaintiffs attorney wrote defendants advising defendants that itrepresented plaintiff and requested all further communications be with counsel and not with
[Plaintiff].
15.On October 6, 2003, defendant Draper & Goldberg wrote plaintiff directly at her homeadvising her that her home would be sold at a foreclosure sale on October 17, 2003.
Defendant L. Darren Goldberg authorized the sending of this letter.
16.Defendants caused notice of the foreclosure of plaintiffs residence to be published in the
Howard County Times on multiple occasions creating ridicule among plaintiffs neighbors and
acquaintances, and causing plaintiff extreme embarrassment.
17.As a result of the defendants actions causing publication of the foreclosure, plaintiffreceived numerous annoying phone calls from various companies offering debt counseling and
management services, resulting in plaintiff not wanting to answer her own home phone
18.Defendants caused plaintiffs residence to be posted with a sign advertising the foreclosuresale, causing plaintiff further embarrassment before her minor children, and her friends and
neighbors became aware of the alleged foreclosure sale.
19.As a result of the acts alleged above, plaintiff incurred attorneys fees in the amount of$1,780 to defend and resolve the foreclosure action in the Circuit Court for Howard County.
20.As a result of the acts alleged above, plaintiff suffered headache, nausea, embarrassment,and lost weight and incurred additional expenses in contesting the alleged debt.
Count I
17.Plaintiff repeats and re-alleges and incorporates by reference paragraphs 1-20 as though theywere set forth in full herein and further alleges:
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18.Defendants failed to obtain verification of plaintiffs alleged debt from Chase ManhattanMortgage Corporation.
19.Defendants failed to mail plaintiff written verification of the alleged debt.20.Defendants did not cease its efforts to collect the alleged debt from plaintiff following
defendants receipt of her letter dated September 6, 2003.
21.Defendants violated the Fair Debt Collection Practices Act. Defendantss violations includebut are not limited to the following:
(a)Defendants violated 15 U.S.C. 1692(g)(b), in failing to verify the debt with ChaseManhattan Mortgage Corporation and mail such verification to the plaintiff;
(b)Defendants violated 15 U.S.C. 1692(g)(b) in failing to cease collection of the debt andinstead filed a foreclosure proceeding in the Circuit Court for Howard County;
(c)Defendants violated 15 U.S.C. 1692(c)(a)(2) by communicating directly to the plaintiffwhen theyknew that plaintiff was represented by an attorney with respect to the alleged
debt.
22.As a result of the foregoing violations of the Fair Debt Collection Practices Act, defendantsare liable to the plaintiff for her actual damages as are determined by the jury, statutory
damages in the amount of $1,000, and costs and reasonable attorneys fees.
WHEREFORE, plaintiff [Plaintiff] demands judgment against defendants Draper & Goldberg,
PLLC and L. Darren Goldberg, jointly and severally, for her actual damages, statutory
damages, plus costs and reasonable attorneys fees.
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___________________H. Robert Erwin, Jr.The Erwin Law Firm, P.A.111 West Monument StreetBaltimore, MD 21201
(410) 385-6000
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IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF MARYLAND
(NORTHERN DIVISION)
[PLAINTIFF] *[Address]COLUMBIA MD 21045 *
Plaintiff *
v. * Civil Action No.
DRAPER & GOLDBERG, PLLC *SUITE 301
803 SYCOLIN ROAD *LEESBURG VA 20175*
Serve On:
AMANDA SMITH, RESIDENT AGENT *[Address]FREDERICK, MD 21701 *
And *
L. DARREN GOLDBERG *SUITE 301803 SYCOLIN ROAD *LEESBURG VA 20175
*Defendants
* * * * * * * * * * * *DEMAND FOR JURY TRIAL
Plaintiff [Plaintiff] hereby demands trial by jury on all issues in the above captioned
case.
___________________H. Robert Erwin, Jr.The Erwin Law Firm, P.A.10 West Madison StreetBaltimore, MD 21201(410) 385-6000
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8.2 Brief
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
[PLAINTIFF] *
Appellant *
v. * Case No.: [No.]
DRAPER & GOLDBERG, PLLC, et al *
Appellees *
* * * * * * * * * * * *ON APPEAL FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF MARYLANDBALTIMORE DIVISION
BRIEF OF APPELLANT
I.
STATEMENT OF JURISDICTION
Plaintiff [Plaintiff] filed this case in the United States District Court for the District of
Maryland (Northern Division) alleging violations of the Fair Debt Collection Practices Act
(FDCPA) and asserting jurisdiction pursuant to 15 U.S.C. 1692(k)(d) and 28 U.S.C. 1337.
Defendants Draper & Goldberg, PLLC, and one of its attorneys, L. Darrin Goldberg, filed a
Motion to Dismiss supported by an Affidavit on October 18, 2004. Treating this as a Motion
for Summary Judgment, the trial Court entered a final Order granting summary judgment in
favor of defendants on March 3, 2005. On March 29, 2005, plaintiff filed this appeal pursuant
to 28 U.S.C. 1291.
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II.
STATEMENT OF ISSUES
A. Whether the trial Court erred in holding, under the facts of this case, that defendantswere not debt collectors under the Fair Debt Collection Practices Act.
B. Whether the trial Court erred in determining that there were no disputes of materialfact preventing the entry of summary judgment.
III.
STANDARD OF REVIEW
The standard of review to be applied by this Court in reviewing a grant of summary
judgment by a lower Court is de novo. Motor Club of America Insurance Co. v. Hanifi, 145 F.
3rd 170 (4th Cir. 1998), cert. den. 525 U.S. 101; Sempione v. Provident Bank of Maryland, 75
F. 3rd 951 (4th Cir. 1996).
IV.
STATEMENT OF CASE
On September 9, 2004, plaintiff [Plaintiff] filed her Complaint alleging that Draper &
Goldberg, PLLC and L. Darrin Goldberg had violated the Fair Debt Collection Practices Act in
the course of instituting foreclosure proceedings in the Circuit Court for Howard County
pursuant to the Deed of Trust in favor of Chase Manhattan Mortgage Corporation. (A. 4-9)
Specifically, plaintiff alleged that defendants had failed to verify the debt as required by Section
1692g(b) of the Act; that defendants had failed to cease collection of the debt after receiving
plaintiffs written dispute of its validity as required by Section 1692g(b) of the Act; and finally
that defendants communicated directly with the plaintiff when they knew that plaintiff was
represented by counsel in violation of Section 1692c(a)(2) of the Act. (A. 8)
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In lieu of an Answer, on October 18, 2004, defendants filed a Motion to Dismiss the
Complaint for failure to state a claim upon which relief can be granted. (A. 10-11) Defendants
Motion argued that they were not debt collectors because their activities were incidental to a
bona fide fiduciary obligation and thereby excluded by Section 1692a(6)(F)(i) of the Act; that
they were enforcers of a security interest and thereby subject only to the substantive
provisions of Section 1692f(6) of the Act; and finally that foreclosing on a Deed of Trust is not
collecting a debt within the meaning of Section 1692a(5) of the Act. (A. 14-18) Defendants
supported their Motion with the Affidavit of L. Darrin Goldberg and certain other exhibits (A.
20-27), thereby requiring that the Motion to Dismiss be treated as a Motion for Summary
Judgment. FRCP 56.
Plaintiff opposed defendants Motion to Dismiss arguing that defendants were not
merely foreclosing on a Deed of Trust, but in fact, were attempting to collect a debt. In support
of her Opposition, plaintiff included letters from defendants inviting her to contact them and
demanding payment of $7,392.36 to bring her account current. (A. 47) Plaintiff also
demonstrated that defendants activities were regular, having filed over 2300 foreclosure actions
throughout Maryland in 2003, and used similar collection letters in all of them. (A. 41-42)
Most importantly, plaintiff demonstrated that defendants foreclosure actions rarely resulted
in the sale of the property and transfer of title. Indeed, in the four month period of June through
September 2003, defendants filed twenty-three foreclosure actions in the Circuit Court for
Howard County but only one resulted in the sale of the property and ratification of the sale by
the Circuit Court, and in one other action, the sale was conducted but not ratified. In twenty
actions, including plaintiffs foreclosure proceeding, the home owner took steps to avoid having
their house sold by paying arrearages, making future payment arrangements, or in paying off the
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delinquent mortgage. (A. 41-42; 49-123) In her Opposition, plaintiff argued that these facts
demonstrated that defendants activities were in fact collecting arrearages on delinquent Deeds
of Trust by using the threat of foreclosure and sale. (A. 35-36)
On March 3, 2005, the District Court entered a five page Memorandum Opinion and
Order granting defendants Motion for Summary Judgment pointing only to the factual
assertions in defendants Affidavit (A. 153) and holding that any actions taken by a Trustee in
foreclosing on a property pursuant to a Deed of Trust may not be challenged as FDCPA
violations. (A. 154) Nowhere in the lower Courts decision was there any reference to any of
the facts raised by the plaintiff in her Opposition to the Motion.
Plaintiff filed her timely Notice of Appeal of the District Courts Opinion and Order on
March 29, 2005. (A. 156)
IV.
ARGUMENT
A. THE TRIAL COURT ERRED IN HOLDING, UNDER THE FACTS OF THIS CASE,THAT DEFENDANTS WERE NOT DEBT COLLECTORS UNDER THE FAIR DEBTCOLLECTION PRACTICES ACT.
The trial Courts Memorandum Opinion in this case makes no findings concerning
whether defendants activities were exempt from the FDCPA because their activities were
incidental to a bona fide fiduciary obligation or because, although debt collectors, they were
subject to only one section of the Act because they were enforcers of a security interest. Nor
did the Court cite to those sections of the FDCPA. Instead, without any factual analysis, the
lower Court reached the tautological conclusion, Trustees foreclosing on a property pursuant to
a Deed of Trust are not debt collectors under the FDCPA. (A. 153) citing Heinemann v. Jim
Walter Homes, Inc., 47 F. Supp. 2nd 716, 722 (N.D.W. Va. 1998). Quoting Hulse v. Ocwen
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Federal Bank FSB, 195 F. Supp. 2nd 1188, 1204 (D. Ore. 2002) the lower Court determined,
Foreclosing on a Deed of Trust is distinct from the collection of the obligation to pay money...
payment of funds is not the object of the foreclosure action. Rather, the lender is foreclosing its
interest in the property. (A. 154) The lower Court then provides carte blanche to all firms
foreclosing Deeds of Trust to engage in any and all manner of collection activity in its ultimate
holding, Any actions taken by a Trustee in foreclosing on a property pursuant to a Deed of
Trust may not be challenged as FDCPA violations. (A. 154)
The Fair Debt Collection Practices Act defines debt collector as,
Any person who uses any instrumentality of interstate commerce or themails in any business the principal purpose of which is the collection of anydebts, or who regularly collects or attempts to collect, directly or indirectly, debtsowed or due or asserted to be owed or due to another.
15 U.S.C. 1692a(6) It is undisputed that plaintiff owed no monies to defendants, rather the
underlying obligation was to Chase Manhattan Mortgage Corp, defendants client. The Act
defines debt as,
Any obligation or alleged obligations of a consumer to pay money arisingout of a transaction in which the money, property, insurance, where serviceswhich are the subject of the transaction are primarily for personal, family, orhousehold purposes, whether or not such obligation has been reduced tojudgment.
15 U.S.C. 1692a(5) It is equally undisputed that defendants foreclosure action in the Circuit
Court for Howard County involved plaintiffs home, an alleged obligation primarily for
personal, family, or household purposes.
The lower Court went astray in its uncritical reliance on the Hulse assertion that the
object of foreclosure actions is not the collection of funds. The facts in this case demonstrate
precisely the opposite. Defendants initiated their contacts with the plaintiff through the mail by
advising her they were in the process of preparing foreclosure papers and advised if you have
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any questions, do not hesitate to contact me. (A. 43) Surely one such question would have
been, How can I avoid having my house sold? leading to a discussion of bringing her
mortgage current. This conclusion is reinforced by defendants subsequent communication to
plaintiff again by mail in which it demanded $7,392.36 by cashiers check payable to Chase
Manhattan Mortgage Corporation in order to reinstate the above account. (A. 47) This was
clearly the use of United States mails to collect a debt asserted to be owed or due to another.
The real purpose of defendants foreclosure activity is amply demonstrated by the
analysis of the docket entries of defendants foreclosure suits in the Circuit Court for Howard
County. In the four month period of June September 2003, defendants filed twenty-three
such foreclosure actions in the Circuit Court for Howard County, including the action
underlying this case. (A. 49-123) Of these twenty-three foreclosure actions, only one resulted
in the sale of the property and ratification of the sale by the Circuit Court. (A. 113-117) Two
other foreclosure actions from this period remain open, and in one of those two a sale was
conducted but not yet ratified. (A. 55-58) In the other twenty actions, including plaintiffs, the
homeowner took sufficient steps to avoid having their house sold at foreclosure by paying
arrearages, making future payment arrangements, or even paying off the delinquent mortgage.
(A. 41-42, Stipulation 4) Thus, it is clear under the facts of this case, defendants activities in
foreclosing Deeds of Trust was not for purposes of sale of the property and transfer of title (as
assumed by the lower Court and the Court in Hulse) but rather was the collection of funds due
to Chase Manhattan Mortgage Corporation. The District Courts Memorandum Opinion failed
to address any of these underlying facts in this case.
The necessity of careful factual analysis has been demonstrated by several Courts in
distinguishing form from substance in FDCPA cases. In Piper v. Portnoff Law Associates Ltd.,
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396 F. 3rd 272 (3rd Cir. 2005) defendant law firm argued that it was not subject to the FDCPA
because it initiated Court actions to enforce a lien on real property in an effort to collect water
and sewer charges due to the City of Bethlehem, Pennsylvania. After a careful analysis of the
defendants activities, the Third Circuit noted:
We are unpersuaded by PLAs argument that its practices cannot befound to be covered by the FDCPA because all it ever tried to do was enforce alien in a manner dictated by the [Municipal Claims and Tax Liens Act]. PLAsletters and calls prior to filing suit, as we have demonstrated, come within thesame meaning and text of the FDCPA. The same can be said about any of thepapers that PLA sent to the Pipers in the course of litigation. This settles thematter. As PLA acknowledges, the Pipers consumption of water created apersonal debt that could be collected in an action in assumption. The fact that
the MCTLA provided a lien to secure the Pipers debt does not change itscharacter as a debt or turn PLAs communications to the Pipers into somethingother than an effort to collect that debt.
We have already noted that, if a communication meets the Actsdefinitions of an effort by a debt collector to collect a debt from aconsumer, it is not relevant that it comes the context of litigation. Heintz v.Jenkins, 514 U.S.C. 291, 115 S. Ct. 1489, 131 L. Ed. 2nd 395 (1995). The sameis true where the communication comes in the context of in rem litigation.
* * * *
More directly on point, we held in Crossley v. Leiberman, 868 F. 2nd 566(3rd Cir. 1989), that defendant was a debt collector based on the volume of inrem mortgage foreclosure actions he had filed in the Court of Common Pleas.The letters found in Crossley constitute efforts to collect a debt that are notmaterially distinguishable from those sent by PLA.
396 F. 3rd at 234.
The United States Court of Appeals for the Second Circuit also recognized the need to
carefully evaluate litigation efforts in order to determine what constitutes debt collection. In
Romea v. Heiberger & Associates, 163 F. 3rd
111 (2nd
Cir 1998) the attorney-defendants argued
they were not subject to the provisions of the Fair Debt Collection Practices Act because they
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were merely providing the notice of eviction required by the New York statute regarding
summary eviction proceedings. In analyzing the attorneys claim, the Second Circuit noted:
Although Heiberger is correct that the notice required by 711 is a
statutory condition precedent to commencing a summary eviction proceedingthat is possessory in nature, this does not mean that the notice is mutuallyexclusive with debt collection.
The facts surrounding an Article 7 summary proceeding prove nothingabout whether the notice that Romea received from Heiberger was or was not acommunication sent in connection with the collection of any debt, 15 U.S.C. 1692e (1994). Whatever else it was, the 711 letter that Heiberger sent toRomea was undeniably a communication as defined by the FDCPA in that itconveyed information regarding a debt to another person, Id. 1692a(2). AndHeiberger makes no attempt to deny that his aim in sending the letter was at least
in part to induce Romea to pay the back rent she allegedly owed. As a result, thefact that the letter also served as a pre-requisite to commencement of the Article7 process is wholly irrelevant to the requirements and applicability of theFDCPA.
We therefore hold that the 711 notice that Heiberger sent to Romea wasa communication under 15 U.S.C. 1692g(a) and as such, must comply withthe FDCPAs requirements.
163 F. 3rd
at 116.
In addition to the Second and Third Circuits, the Supreme Court of Colorado likewise
recognized the need for careful factual analysis when examining attorneys claims of
exemptions from the FDCPA when asserting liens in litigation. In a decision which presaged
the United States Supreme Courts holding in Heintz v. Jenkins, 514 U.S.C. 291, (1995), the
Colorado Supreme Court closely examined defendant attorneys claims of exemption from the
FDCPA when filing foreclosure proceedings pursuant to a Deed of Trust in counties other than
that in which the properties were located. The Colorado Supreme Court held:
If the definition of debt collectors is construed liberally,with the remedial purpose of the statute in mind, the attorneys arenot exempt merely because their collection activities are primarilylimited to foreclosures. The section 1692a(6) definition of theterm debt collector includes one who directly or indirectly
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engages in debt collection activities on behalf of others. Since aforeclosure is a method of collecting a debt by acquiring andselling secured property to satisfy a debt, those who engage insuch foreclosures are included within the definition of debtcollectors if they otherwise fit the statutory definition.
Our interpretation of section 1692a(6) is consistent withCrossley v. Lieberman, 868 F.2d 566 (3rd Cir. 1989). In Crossleythe Court held that an attorney who regularly engaged in debtcollection activities was a debt collector under Section 1692a(6),even though twenty two of the thirty two cases the attorney filedin the Court of Common Pleas were mortgage foreclosures. Id. at569-70.
Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Co. 1992). See also Galuska v.
Blumenthal, 1994 WL 323121 (N.D. IL. June 26, 1994) (Attorneys engaged in debt collection
activities by pursuing foreclosure and negotiating settlements are debt collectors within Section
1692a(6) and are covered by the FDCPA.);
Sandlin v. Shapiro & Fishman, 919 F. Supp. 1564 (N.D. Fl. 1996) (Law firm was acting as a
debt collector by requesting the consumer to pay a mortgage debt.)
The cases relied upon by the lower Court completely fail to engage in this critical factual
distinction. In Henneman v. Jim Walters Homes, Inc., 47 F. Supp 2nd 716 (N.D. W. Va. 1998),
the plaintiffs, proceeding Pro Se, did not even assert an FDCPA count. However, in dicta, the
Court noted in passing that the plaintiffs may be attempting to assert such a claim and asserted
without analysis or discussion the trustees were not collecting on the debt at that time, but
merely foreclosing on the property pursuant to a Deed of Trust. 47 F. Supp at 722 . Unlike the
present case, in Hennemann there was absolutely no analysis of whether defendants activities
in that case or other cases resulted in the sale of property, or as here, resulted in the collection of
a debt.
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The decision Hulse v. Ocwen Federal Bank, FSB, 195 F. Supp 2nd 1188 (D. Or. 2002) is
likewise void of factual analysis. Relying heavily on the decision in Heinemann, the District
Court in Hulse focused solely on the foreclosure proceeding and concluded the purpose of such
litigation is the sale of the property rather than the collection of money. 195 F. Supp 2nd at 1204.
Setting aside for the moment that the collection of a debt owed to another by means of the sale
of property as a result of executing a lien is little different from a debtor writing a check, in
neither Hulse nor Hennemann was there any showing the foreclosure proceedings were actually
a club being used by defendants as the ultimate threat to motivate consumers in arrears to bring
their mortgages current.
If affirmed by this Court, the lower Courts holding in this case that, any actions taken
by a Trustee in foreclosing on a property pursuant to a Deed of Trust may not be challenged as
FDCPA violations, would eviscerate the Fair Debt Collection Practices Act by carving out a
section of activity where anything is fair game. Few things are as important to consumers as the
ownership of their home. Exempting attorney/trustees completely from the requirements of the
FDCPA would open the door for the very abuses Congress sought to eliminate by passing the
FDCPA. Even the Court in Hulse stopped short of the Courts sweeping ruling in this case,
...plaintiffs may maintain any FDCPA claims based on alleged actions by OFD in collecting a
debt, but not maintain any FDCPA claims based on the alleged actions made in pursuant of the
actual foreclosure. 195 F. Supp. 2nd at 1204. Applying this distinction to the facts of the
present case, it would appear that under this reasoning in Hulse only the October 6, 2003,
communication from defendants to plaintiff would be sheltered by actual foreclosure activity
and the September 5 and October 15th communications from defendants to plaintiff would not
be. Such distinctions highlight the necessity of a careful factual analysis, omitted by the lower
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Court herein, required to distinguish form from substance and accomplish the purpose of the
FDCPA.
B. THE TRIAL COURT ERRED IN DETERMINING THERE WERE NO DISPUTES OFMATERIAL FACT PREVENTING THE ENTRY OF SUMMARY JUDGMENT.
Summary Judgment should be granted only where there is no dispute of material
fact and the moving party is entitled to judgment as a matter of law. Randall v. Prince
Georges County, 303 F. 3rd 188 (4th Cir. 2002). In deciding a Motion for Summary Judgement
the facts must be viewed in a light most favorable to the non-moving party. Hooven-Lewis v.
Caldera, 249 F. 3rd
259 (4th
Cir. 2001). Inferences drawn from the underlying facts are also to be
viewed in the light most favorable to the non-moving party. Summerville v. Microcom Corp.,
42 F. 3rd 891 (4th Cir. 1994). On a summary judgment motion, the courts function is not to
weigh the evidence and determine the truth of the matter, but to determine whether there is a
genuine issue of fact for trial. American Metal Forming Corp. v. Pittman, 52 F. 3rd 504 (4th Cir.
1995).
The District Courts Memorandum Opinion and Order relies entirely for its factual
findings on the self-serving, conclusory Affidavit of defendant L. Darrin Goldberg that
defendants principal business is the foreclosure of mortgages and Deeds of Trust and that is
what it was doing in the present case. (A. 153) Nowhere in the memorandum Opinion and
Order does the Court acknowledge the existence of the factual matters raised in the Exhibits 1
and 2 to Plaintiffs Opposition to Defendants Motion to Dismiss. (A. 41-123)
Thus, the District Court overlooked the fact that defendants had invited the
plaintiff to contact them about the outstanding balance due on her mortgage in their letter of
September 2, 2003 (A. 43), and had made a specific demand for payment of $7,392.36 on
October 15, 2003. (A. 47) Most significantly, the District Court failed to undertake any analysis
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CONCLUSION
Because the lower Court erred in holding, under the facts of this case, that defendants
were not debt collectors within the meaning of the Fair Debt Collection Practices Act or, in the
alternative, because the lower Court in this case erred in determining there were no disputes of
material fact concerning defendants activities when there was evidence in the record from which
reasonable minds could infer that defendants were, in fact, engaging in activities as debt
collectors, thus making summary judgment inappropriate, this Court should reverse the District
Courts Order granting Summary Judgment dated March 3, 2005, and should remand this case
to the United States District Court for the District of Maryland (Northern Division) for further
proceedings.
_______________________H. Robert Erwin, Jr.The Erwin Law Firm, P.A.1o West Madison StreetBaltimore, MD 21201(410) 385-6000
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8.3 Reply Brief
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
[PLAINTIFF] *
Appellant *
v. * Docket number [No.]
DRAPER & GOLDBERG, PLLC, et al *
Appellees *
* * * * * * * * * * * *REPLY BRIEF OF APPELLANT
Contrary to Appellees' assertion, the issue in this case is not whether a law firm
foreclosing a Deed of Trust is a debt collector within the meaning of the Fair Debt Collection
Practices Act (FDCPA). Rather, the issue posed is whether a law firm demanding money from
a consumer on behalf of its client is a debt collector within the meaning of the FDCPA.
I. BECAUSE DEFENDANTS DEMANDED MONEY FROM THE PLAINTIFF, THEYARE DEBT COLLECTORS WITHIN THE MEANING OF THE FDCPA AND NOTMERELY ENFORCERS OF SECURITY INTERESTS.
An analysis of this issue must start with the plain language of the Fair Debt Collection
Practices Act itself. The FDCPA defines debt collector as:
Any person who uses any instrumentality of interstate commerce or themails in any business the principal purpose of which is the collection of any
debts, or who regularly collects or attempts to collect, directly or indirectly, debtsowed or due or asserted to be owed or due to another.
15 U.S.C. 1692a(6) The Act also defines debt as:
...any obligation or alleged obligations of a consumer to pay moneyarising out of a transaction in which the money, property, insurance, or services
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which are the subject of the transaction are primarily for personal, family, orhousehold purposes, whether or not such obligation has been reduced tojudgment.
15 U.S.C. 1692a(5). Thus, under the plain language of the Act itself, when a person uses the
mail to demand money due to a third party from a consumer they are clearly acting as a debt
collector within the meaning of the Act. It is the direct or indirect demand for money from a
consumer that distinguishes the debt collector from the mere enforcer of security interests.
As the definition of debt collector explains, For the purposes of Section 1692f(6) of this
Title, such term also includes any person who uses any instrumentality of interstate commerce
or the mails in any business the principal purpose of which is the enforcement of security
interests. Although the term enforcement of security interests is not further defined, it is
apparent that such activity would not be included as a debt collector because, for example, the
repossession of a car is not a demand for money. Hence, there was the need to make clear that
such activity is subject to Section 1692f(6) of the Act even where there was no demand for
money from a consumer. The Sixth Circuit has made clear that in the FDCPA Congress made
a distinction between debt collector and an enforcer of security interest because a debt
collector is seeking money the consumer lacks whereas an enforcer of security interest is
seeking only the recovery of property still in possession of the consumer.
The Court further indicated that when 1692f(6) is read inconjunction with its legislative history the two provide the key tounderstanding the reason Congress drew a distinction between adebt collector and an enforcer of a security interest.Id.It went on to find that the FDCPA was enacted in order toprevent the suffering and anguish which occur when a debtcollector attempts to collect money which the debtor, through nofault of his own, does not have.Id. At 658 (citation omitted). Incontrast, the Court found that the evil sought to be prevented byproscribing the conduct of debt collectors, namely, harassingattempts to collect money which the debtor does not have due tomisfortune, is not implicated in the situation of a repossession
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agency that enforces a present right to a security interestbecause in the latter context, an enforcer of a security interestwith a present right to a piece of secured property attempts toretrieve something which another person possess but which theholder of the security interest still owns.Id.
Montgomery v. Huntington Bank & Silver Shadow Recovery, Inc. , 346 F. 3rd 693, 700 (6th Cir
2003) citing Jordon v. Kent Recovery Services, Inc. 731 F. Supp 652 (D.Del. 1990).
This distinction, the demand for money, is precisely the distinction made by the Third
Circuit in Piper v. Portnoff Law Associates Ltd., 396 F. 3rd
272 (3rd
Cir. 2005) and by the
Second Circuit in Romea v. Heiberger & Associates, 163 F. 3rd 111 (2nd Cir 1998).
Significantly, even though these two cases were cited and relied on in Appellants opening
Brief, Appellees' Brief neither distinguishes them on the facts nor discusses why the holding of
these two Circuits should not be followed in this case. (See discussion pp. 10-12 of Appellants
Brief)
It is also this key distinction that explains the Courts holding in Bergs v. Hoover, Bax &
Slovacek, LLP, 2003 U.S. Dist. Lexis 16827, 16 (N.D. Tex. 2003). Under the facts of that case,
the defendant law firm never made a demand for the payment of money directly from the
plaintiff. Thus, the District Courts holding in Bergs is perfectly consistent with the holdings in
Piper and Romea.
It is beyond dispute that the defendants in this case used the United States mail to
demand payment of money, $7,392.36, directly from the plaintiff in its October 15, 2003 letter.
(A. 47) Contrary to the assertion at pages 2 and 14 of Appellees Brief, the October 15th letter
was not in response to counsels letter of October 9th. It was not in response to counsels
letter because the October 15th letter was addressed and mailed to the plaintiff, not to counsel. It
was also not in response to counsels letter of October 9th because it did not provide the
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information counsel had requested. In the October 9th letter, counsel requested, a complete
statement of [Plaintiff]s account indicating all interest, late charges, and other charges, the
interest rate and all payments since the inception of the mortgage. (A. 147) None of that
information was provided in defendants letter to plaintiff dated October 15th which was purely
a demand for a specific balance allegedly due at that time. (A. 47) Consequently, the
assertions at p. 15 of Appellees Brief that the October 15 th letter provided, monthly payment
records and a loan transaction history and that the information provided in the October 15th
letter was sent to the Appellant at the Appellants request are quite simply inaccurate. These
are key distinctions from the facts in Bergs v. Hoover, Bax & Slovacek, LLP, Supra, where
plaintiffs counsel did request a reinstatement quote and the quote was supplied to counsel,
and not directly to the consumer. The October 15th letter demanding the payment of money from
the plaintiff brings defendants squarely within the plain language definition of debt collector
in the FDCPA and prevents them from being a mere enforcer of security interests.
In its Brief, Appellee notes that the September 2, 2003, letter to the plaintiff does not
contain an explicit demand for the payment of a specific amount of money. (Appellees' Brief at
13-14) This argument likewise ignores the plain language of the definition of debt collector
in the FDCPA. The Act includes under the definition of debt collector anyone who attempts
to collect, directly or indirectly, money from a consumer. As was pointed out at page 8 of
Appellants Brief, the September 2nd letter was an indirect demand for the payment of money.
(A 43)
II. DEFENDANTS ACTIVITIES IN THIS CASE ARE NOT EXEMPT FROM THEFDCPA BECAUSE THEY ARE INCIDENTAL TO A BONA FIDE FIDUCIARYOBLIGATION.
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In an attempt to bolster the District Courts Order granting Summary Judgment of
March 3, 2005, Appellees Brief argues that it is not a debt collector because their foreclosure
activities were incidental to a bona fide fiduciary obligation. (Appellees Brief, pp. 7-10) The
trial Court made no such finding in its Memorandum and Order granting Summary Judgment,
and this Court should likewise not find that defendants activities exclude them from the
definition of debt collector in the FDCPA.
Section 1692a(6) provides in part:
The term [debt collector] does not include... (F) any person collecting orattempting to collect any debt owed or due or asserted to be owed or due to
another to the extent such activity (i) is incidental to a bona fide fiduciaryobligation or a bona fide escrow agreement....
This section was created to exclude the activities of bank trust departments, escrow companies
and other bona fide fiduciaries. Senate Report No. 95-382, p. 572 (A 127). The exemption
provided by this section does not apply to trustees in foreclosure:
The exemption (i) for bona fide fiduciary obligations or escrowarrangements applies to entities such as trust departments ofbanks and escrow companies. It does not include a party who isnamed as a debtors trustee solely for the purpose of conducting aforeclosure sale (i.e. exercising a power of sale in the event ofdefault on a loan).
FTC Official Staff Commentary 803(6)(4)(f). (A 134) Defendants Memorandum cites no
cases in support of its position that lawyers foreclosing Deeds of Trust are exempt pursuant to
the fiduciary exclusion. To the contrary, in Reed v. Smith, 1994 U.S. Dist. LEXIS 21463 (M.D.
AL. July 25, 1994) the Court held that where attorneys were engaged primarily to collect a debt,
their activities were not exempted from the FDCPA by reason of their acting in a fiduciary
capacity.
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Defendants argue that Section 15-101(g) of the Maryland Estates and Trusts Article
defines the term fiduciary to include a trustee acting under a deed of trust. However, under
Maryland law, every attorney has a fiduciary relationship with his or her clients. Buxton v.
Buxton, 363 Md. 634, 770 A.2d 152, 164 (2001); Homa v. Friendly Mobile Manor, Inc., 93 Md.
App. 337, 612 A.2d 322, cert. granted 329 Md. 168, 617 A.2d 1085 (Md. App. 1992.)
Under defendants reading, every attorney attempting to collect a debt on behalf of his client
could argue that their activity was incidental to a bona fide fiduciary obligation and they are
therefore not a debt collector as defined in the FDCPA. But it is now beyond question that
the FDCPA applies to attorneys collecting consumer debts even in their litigation activities.
Heintz v. Jenkins, 514 U.S.C. 291 (1995) ; Scott v. Jones, 964 F.2d 314 (4th Cir. 1992).
Appellees cite no cases which have adopted the position they espouse, and this court should not
be the first to do so.
III. WHETHER DEFENDANTS WERE ACTING AS A DEBT COLLECTOR UNDERTHE FACTS OF THIS CASE WAS A DISPUTED FACT MAKING SUMMARYJUDGMENT INAPPROPRIATE.
Attempting to elevate form over substance, Appellees Brief argues the only facts that
are material to the outcome of this matter are whether the Appellees were acting as trustee in
foreclosing on the Appellants property pursuant to a deed of trust. (Appellees Brief at p. 16)
This argument ignores the plain language of the definition of debt collector in Section
1692a(6) of the FDCPA and the plain language of the definition of debt in Section 1692a(5)
of the Act. This argument also conveniently requests that the Court overlook the fact that
defendant used the U.S. mail to demand the payment of money by the plaintiff to its client,
Chase Manhattan Mortgage Corporation, thereby bringing it squarely within the meaning of
debt collector within the meaning of the Act. Defendants argument also ignores the
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language of the definition of debt collector in the FDCPA that requires a showing that the
person regularly collects or attempts to collect, directly or indirectly, debts owed or due or
asserted to be owed or due to another. Section 1692a(6) (emphasis added).
In this case, the defendants stipulated that the October 15 th letter to the plaintiff
demanding the payment of money was a regular part of the handling of their cases. (A 42, 7)
Thus, contrary to Appellees assertion, there are far more facts to be considered than merely
defendants self-serving characterization in its Affidavit that the principal business of the
defendant law firm is enforcement of security interest. (A 20) Rather, a finder of fact in
determining whether defendants activities meet the definition of debt collector must consider
(A) that defendants made a demand of money from the plaintiff to its client; (B) that defendants
regularly make such demands to other individuals in the course of their collection activities; and
(C) in the vast majority of instances such demands result in the security interest not being
enforced by the sale of the property at auction. All of these facts are material and must be
considered in determining whether defendants activities meet the definition of debt collector
under the FDCPA. Because of this dispute of material fact, the lower Courts Order granting
Summary Judgement in favor of defendant must be reversed.
IV. CONCLUSION
Because the defendants made a demand for the payment of money allegedly due to its
client from plaintiff, its activities meet the plain language of the definition of debt collector in
the Fair Debt Collection Practices Act. By seeking the payment of money instead of merely
possession of property, the defendants are not merely an enforcer of security interests. Nor
were defendants acting incidental to a bona fide fiduciary obligation. The lower Courts Order
finding that defendants are not a debt collector must be reversed.
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In the alternative, whether defendants activities qualify it as a debt collector under the
FDCPA is clearly a question of fact. Because their were material facts in dispute on this issue,
the lower Court should not have granted Summary Judgment and its Order dated March 3,
2005, should be reversed and the case should be remanded to the District Court of Maryland
(Northern Division) for further proceedings.
____________________H. Robert Erwin, Jr.The Erwin Law Firm, P.A.1o West Madison StreetBaltimore, MD 21201
(410) 385-6000