MCLAUGHLIN v. PHELAN HALLINAN & SCHMIEG, LLP. et al, No. 2:2010cv01406 - Document 105 (W.D. Pa. 2013)

Court Description: 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)

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MCLAUGHLIN v. PHELAN HALLINAN & SCHMIEG, LLP. et al Doc. 105 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. Dockets.Justia.com 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 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 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 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. [doc. no. 95]. 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. 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 Claim the 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 (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 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 that [doc. no. 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. Lorandeau v. C<:lpital Collection Serv., CIV.A. 10-3807, 2011 WL 4018248(E.D. Pa. Sept. 8, 2011) ; Bleich v. Revenue Maximization 233 F.Supp.2d 496, 501 (E.D.N.Y. 2002); Koller v. West Acquisitions, LLC, Civ. A. No. C 1200117, 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 (citing Seeger (7th Cir. 2008)). 693 (7th Cir. Harmon, No. 03-CV-10932, 2005 WL 2365331 (D. None of these authorities is incurred, 2003) i misled debt collector, Pettway v. Sept. 27, 2005). on this court. actually See also, or 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 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 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: cc: All Counsel of Record -------I C. J.

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