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Via: Attorney April Charney
Helpful quotes/information from this Order: US Dist Ct MD – ADEMILUYI v. PennyMAC CLASS ACTION – FDCPA – Failure to Register to do Conduct Business in a State
1. According to the Complaint, in early April 2011, PennyMac Holdings transferred the servicing of the Note to PennyMac Loan Services, LLC (“PennyMac Services”). … However, PennyMac Services refused Ademiluyi’s April mortgage payment, submitted pursuant to the forbearance agreement, and subsequently represented to plaintiff’s attorney that it was not bound by the forbearance agreement.
I point out the above because this sharp and deceptive practice is becoming a pattern/practice problem in many cases, not related to PennyMac.
2. Plaintiff claims damages resulting from “her attempts to remedy her loan modification dispute and to avoid foreclosure…in the form of attorney’s fees, emotional distress, and monetary loss for the mortgage payments made to defendants.”
3. The court advises that per the complaint, “each class member reasonably relied upon PennyMac [Holdings’] and PennyMac Trust’s direct and indirect representations that each was licensed and permitted to operate legally in the state of Maryland.”
4. These debts are allegedly in default at the time they are acquired by PennyMac Holdings.
5. Neither PennyMac Holdings nor PennyMac Trust is licensed as a debt collection agency in the State of Maryland…
6. “In a federal question [claim] that incorporates a state law issue, a district court applies the choice-of-law rules of the state in which it sits unless a compelling federal interest directs otherwise.”
7. Insofar as plaintiff is alleging damages for statutory violations of the FDCPA and the MMFPA, premised on violations of the MCALA, her claims sound in tort.
8. A damages action under the [the Fair Housing Act] sounds basically in tort—the statute merely defines a new legal duty, and authorizes the courts to compensate a plaintiff for the injury caused by the defendant’s wrongful breach.”
9. “A cause of action for breach of a duty imposed by statute or case law, and not by contract, is a tort action.”
10. “Because plaintiff’s mortgage was executed in Maryland and relates to real property located in Maryland…plaintiff’s claim for unjust enrichment is governed by Maryland law.”
11. As concerns “piercing the corporate veil” …”the law of the jurisdiction in which the corporation subject to “piercing” is incorporated is applied per choice-of-law principles.
12. “Piercing the corporate veil is not an independent cause of action, “`but rather is a means of imposing liability on an underlying cause of action.”
13. “Plaintiff claims that, because defendants engaged in unlicensed debt collection activity in violation of Maryland law, they also violated the FDCPA; that defendants’ unlicensed debt collection activities constituted mortgage fraud; and that defendants were unjustly enriched as a result of their unlawful activity.”
14. The FDCPA prohibits a debt collector from, inter alia, making a “threat to take any action that cannot legally be taken,” 15 U.S.C. § 1692e(5), or “us[ing] unfair or unconscionable means to collect or attempt to collect any debt.” Id. § 1692f.
15. Violations of a state collection licensing law such as the MCALA may support a claim under the FDCPA….including when an unlicensed debt purchaser files lawsuits to collect on debt in default, as a threat to take an action that cannot legally be taken…
16. …”a debt collector’s failure to register under state collection law is pertinent to whether it used unfair or unconscionable means to collect a debt”… see also LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200 (11th Cir. 2010) (holding that defendant’s “lack of registration with the State of Florida is an appropriate consideration in deciding whether [defendant’s] `means’ of collection were `unfair or unconscionable”
17. However, doing business in violation of the state licensing requirement does not constitute a “per se” violation of the FDPCA. See, e.g., Wade v. Reg’l Credit Ass’n, 87 F.3d 1098, 1100-01 (9th Cir. 1996); Bradshaw, 765 F. Supp. 2d at 728-29. Rather, “the conduct or communication at issue must also violate the relevant provision of the FDCPA.” LeBlanc, 601 F.3d at 1192 n.13.
18. In Bradshaw, 765 F. Supp. 2d at 726, the court said: “MCALA is clear on its face—it requires that any person who directly or indirectly engages in collecting debts must be licensed.”
19. Recently, in Glazer v. Chase Home Finance LLC, 704 F.3d 453, 460 (6th Cir. 2013), the Sixth Circuit observed that “confusion has arisen on the question [of] whether mortgage foreclosure is debt collection under the [FDCPA].” …The Glazer Court… concluded that mortgage foreclosure qualifies as debt collection under the FDCPA. It reasoned that “whether an obligation is a `debt’ depends not on whether the obligation is secured, but rather upon the purpose for which it was incurred.”
20. Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227, 234 (3d Cir. 2005) (concluding that pre-suit calls and demand letters for payment on debt secured by lien on home did not “change its character as a debt or turn [the] communications into something other than an effort to collect that debt”).
21. …plaintiff sufficiently alleges that PennyMac Holdings operates as a “passive” purchaser of debts in default, by virtue of its indirect collection activity, i.e., collection of mortgage debts through servicing…
22. …a “passive” debt purchaser qualifies as a collection agency by pursuing collection activities, even through a third party, such as an attorney.”
23. …when interpreting a statute, a court should “`give the terms their ordinary, contemporary, common meaning, absent an indication [that the legislature] intended [the terms] to bear some different import.'” In re Total Realty Mgmt., LLC, 706 F.3d 245, 251 (4th Cir. 2013) (quoting Crespo v. Holder, 631 F.3d 130, 133 (4th Cir. 2011)). “[I]f the plain meaning of the statutory language is clear and unambiguous, and consistent with both the broad purposes of the legislation, and the specific purpose of the provision being interpreted, [the court’s] inquiry is at an end.” Johnson, 2013 WL 656613 at *3. Only if the statutory language is ambiguous is it appropriate to look to legislative history. Johnson v. Zimmer, 686 F.3d 224, 235 (4th Cir. 2012).
24. The FDCPA.provides that a debt collector may not “threat[en] to take any action that cannot legally be taken,” and that “[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt.”
25. “The creditor exception does not include “any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.” 15 U.S.C. § 1692a(4).
26. “Clearly, a fact-intensive inquiry is necessary to determine whether plaintiff is correct that defendants purchase debts in default “solely” for collection, or whether, as defendants contend, they do not purchase debts in default “solely” for the purpose of collection, but rather for servicing.”
27. With respect to plaintiff’s claims under 15 U.S.C. § 1692e(5), plaintiff alleges that the Notice represented a “threat” by a debt purchaser to foreclose on plaintiff’s mortgage, for which…a collection agency license was required by Maryland law.
28. …the theory is that if a debt collector cannot bring suit for whatever reason, it should not represent to the consumer, even implicitly, that it will sue….
29. “Accordingly, the Notice at issue could constitute a threat to take action, in violation of 15 U.S.C. § 1692e(5).”
30. “With respect to the alleged direct collection practices for claims under 15 U.S.C. § 1692f, “a debt collector’s failure to register under a state debt collection law `is an appropriate consideration in deciding whether [its] means of collection were unfair or unconscionable.”
31. …”the allegations are sufficient to show that it was sent “in connection with” the collection of a debt, which is all that the FDCPA requires.”
32. “In sum, with respect to the Notice of Intent to Foreclose—the direct collection activity alleged in the Complaint—I am persuaded that the Notice could constitute both “a threat to take an action that cannot legally be taken,” in violation of 15 U.S.C. § 1692e(5), and “unfair or unconscionable means” of collecting a debt, in violation of 15 U.S.C. § 1692f.”
33. “A debt collector is not immunized from liability for collection activities merely because such actions are undertaken indirectly through an agent.”
34. “So far as the Court is aware, the text of the FDCPA does not differentiate between a debt collector acting through affiliated and unaffiliated third-party intermediaries.”
35. …”permitting a corporate entity to evade liability for indirect collection activity undertaken through a corporate affiliate would allow corporate entities to circumvent the FDCPA by relying on affiliated entities, as opposed to third parties. Such a result contradicts this Court’s obligation to construe broadly the FDCPA to effectuate its remedial purpose.” Glover v. F.D.I.C., 698 F.3d 139, 149 (3d Cir. 2012).
36. Courts have found that damages for emotional distress are available as actual damages under the FDCPA. See, e.g., McCullough v. Johnson, Rodenburgh & Lauinger, LLC, 637 F.3d 939, 957-58 (9th Cir. 2011)
37. Maryland follows the “American Rule” for recovery of attorney’s fees as an element of damages, under which recovery is available when “the wrongful conduct of a defendant forces a plaintiff into litigation with a third party.”
38. Delaware applies an equally strict standard, under which “a corporate parent will only be held liable for the obligations of its subsidiaries `upon a showing of fraud or some inequity.'” Grasty v. Michail, No. Civ. A. 02C-05-89, 2004 WL 396388, at *1 (Del. Super. Ct. Feb. 24, 2004) (quoting Mobil Oil Corp. v. Linear Films, Inc., 718 F. Supp. 260, 266 (D. Del. 1989)). Under Delaware law, “[t]he degree of control that would be required to `pierce the veil’ and hold the parent corporation liable would be a degree of control by the parent corporation that the subsidiary no longer has legal or independent significance of its own.” O’Leary v. Telecom Res. Serv., LLC, Civ. No. 10C-03-108-JOH, 2011 WL 379300, at *7 (Del. Super. Ct. Jan. 14, 2011).
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