Yu v. Kevin B. Wilson Law Offices, No. 8:2011cv03472 - Document 22 (D. Md. 2013)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 1/23/13. (sat, Chambers)
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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : JONATHAN K. YU : v. : Civil Action No. DKC 11-3472 : KEVIN B. WILSON LAW OFFICES, et al. : MEMORANDUM OPINION Presently pending and ready for review in this Fair Debt Collection Practices Act ( FDCPA ) case are cross motions for summary judgment. (ECF Nos. 12 & 15). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion for summary judgment filed by Plaintiff Jonathan K. Yu will be denied (ECF No. 12), and the motion for summary judgment filed by Defendants Kevin B. Wilson Law Offices, Rhonda Clark, and Patricia Staples will be granted (ECF No. 15). I. Background The underlying facts of this case are undisputed. In January 2011, Plaintiff s minor son received medical care from Shady Grove Adventist Hospital ( Shady Grove ). 7). (ECF No. 1 ¶ Plaintiff was unable to pay the $548.02 bill. (ECF No. 12, at 1). This debt was referred for collection to North American Credit Services ( NACS ) on May 5, 2011. On August 22, 2011, Plaintiff filed for bankruptcy with the U.S. Bankruptcy Court for the District of Maryland. listed Shady Grove as a (ECF No. 1 ¶ 9). creditor to Plaintiff receive notice of Plaintiff s bankruptcy from the court, but NACS was not listed as a creditor. On October 25, 2011, the debt was transferred from NACS to Kevin B. Wilson Law Offices ( KWLO ). KWLO did not receive notice of Plaintiff s bankruptcy when it received the account. KWLO Plaintiff: made three attempts to collect the debt a letter dated October 26, and telephone calls of November 3 and 28, 2011. During the telephone call of November 28, Plaintiff told KWLO that he had filed for bankruptcy. verifying from Plaintiff s bankruptcy through his attorney, After KWLO closed Plaintiff s account and stopped trying to collect the debt. Representatives of KWLO and its clients, Shady Grove and NACS, aver that the entities operate with an acknowledged understanding that they will not transfer debts for collection to one another where the debtor is in bankruptcy. Further, they share all information regarding bankruptcy with one another as they become aware of it. In addition to receiving information from clients, KWLO receives information regarding bankruptcies from debtors, courts. debtors counsel, and directly from bankruptcy KWLO also trains staff regarding procedures to verify a debtor s bankruptcy and close those accounts when appropriate. 2 In this instance, Shady Grove declares that it never received notice of Yu s bankruptcy prior to the November 28 phone call, which is why KWLO never received notice and pursued collection of the debt. A. Procedural Background Plaintiff filed a complaint against KWLO and its two employees who called him, Rhonda Clark and Patricia Staples. (ECF No. 1). Plaintiff asserted claims for violations of the FDCPA and common law intrusion upon seclusion. After discovery, the parties filed cross motions for summary judgment. 12, 15). intrusion The upon parties seclusion stipulated claim briefing on the FDCPA claim. II. to with the (ECF Nos. dismissal prejudice and of the completed (ECF Nos. 17 through 20). Standard of Review Summary judgment may be entered only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). Summary judgment is inappropriate if any material factual issue may reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); JKC Holding Co. LLC v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). 3 A party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of [his] pleadings, but rather must set forth specific showing that there is a genuine issue for trial. facts Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003) (quoting former Fed.R.Civ.P. 56(e)). proof . . . will not suffice to A mere scintilla of prevent summary Peters v. Jenney, 327 F.3d 307, 314 (4th Cir. 2003). judgment. If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. 249 50 (citations omitted). Liberty Lobby, 477 U.S. at At the same time, the facts that are presented must be construed in the light most favorable to the party opposing the motion. Scott v. Harris, 550 U.S. 372, 378 (2007); Emmett, 532 F.3d at 297. III. Analysis A. Bona Fide Error Defense Plaintiff argues that Defendants conduct in attempting to collect a debt from him after he filed for bankruptcy constitutes a violation per se of the FDCPA, because it is a strict liability statute. The portion of the statute that Defendants violated is 15 U.S.C. § 1692e(2)(a), which prohibits falsely representing the character, amount, or legal status of any debt. Defendants assert a defense of bona fide error. 4 A bona fide error defense is available to debt collectors under the FDCPA. Specifically, the statute requires the debt collector to prove by a preponderance of evidence that: (1) the violation was not intentional ; (2) it resulted from a bona fide error ; and (3) the error occurred in spite of the debt collector s maintenance of procedures reasonably adapted to avoid any such error. 15 U.S.C. § 1692k(c). The mere assertion of good intent, absent a factual showing of actual safeguards reasonably adopted to avoid violations of the FDCPA, is insufficient to establish the bona fide error defense. Jenkins v. Union Corp., 999 F.Supp. 1120, 1141 (N.D.Ill. 1998); see also Green v. Hocking, 792 F.Supp. 1064, 1066 n. 5 (E.D.Mich. 1992) (rejecting a bona fide error defense where the defendant debt unintentional collector without merely asserted supplying that evidence the of error was procedural safeguards). On the other hand, debt collectors are not required to engage in independent investigations of all debts referred to them for collection. Sayyed v. Wolpoff & Abramson, LLP, 733 F.Supp.2d 635, 646 (D.Md. 2012); see also Jenkins v. Heintz, 124 F.3d 824, 834 (7th Cir. 1997) (refusing to require debt collector to routinely investigate and evaluate the legal liability of the debtor Furthermore, for a charged imposed misrepresentation 5 by made defendants by the debt clients ). collector solely as a result of inaccurate information provided by its client would be a bona fide error as defined under [the FDCPA] . Sayyed, 733 F.Supp.2d at 647 (citing Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1032 (6th Cir. 1992)). Plaintiff argues that Defendants cannot establish a bona fide error defense because they failed to maintain any procedures to avoid collecting debts that are pending discharge in bankruptcy. Rather, Plaintiff argues, they merely relied on the unfounded assumption that KWLO s clients would not forward debts for debtors in bankruptcy, and this assumption does not constitute a procedure Defendants disagree, for asserting purposes that of KWLO s this defense. procedures are sufficient to meet the requirements of the FDCPA. In support of their position, Defendants principally rely on Hyman v. Tate, 362 F.3d 965 (7th Cir. 2004). There, the district court held a bench trial and heard evidence that it concluded established a bona fide error defense for the debt collector. The Seventh Circuit affirmed. The evidence established that the debt collector had a written contract with the creditor client. That contract, however, was silent as to procedures regarding debts in bankruptcy. Rather, the creditor and the debt collector operated with an understanding that the creditor would not forward debts that were in bankruptcy. at 967. Further, in Hyman, the 6 collector s clients Id. rarely forwarded accounts that were actually in bankruptcy, and, when they did, they immediately notified the collector of the bankruptcy. Plaintiff attempts to distinguish Hyman and instead analogize this case to Turner v. J.V.D.B. & Assocs., Inc., 318 F.Supp.2d 681 (N.D.Ill. 2004). There, the debt collector never alleged that it had any type of understanding with its clients that they would not forward accounts in bankruptcy. It further offered no evidence that its Id. at 687. clients would immediately notify the collector of accounts in bankruptcy, or that such suggested informal accounts that if were the understanding infrequently debt to forwarded. collector this had effect The court demonstrated between it and an its clients, this evidence could have met its burden to establish a bona fide error defense. Id. at 686. For those reasons, the court concluded that the debt collector did not establish a defense of bona fide error because its reliance on its clients to avoid pursuing debts in bankruptcy was self-proclaimed but baseless, not reasonable, and created to avoid FDCPA violations. not a procedure reasonably Id. Here, the undisputed evidence establishes that KWLO has an understanding with clients Shady Grove and NACS that they all exchange information regarding accounts in bankruptcy with one another. Dallas Bunton, CEO 7 of NACS, Eboneese Thompson, Accounts Manager of Shady Grove, and Kevin Wilson all affirm that such an understanding and practice was in place. (ECF No. 15-2, Thompson Aff. ¶ 4; 15-3, Bunton Aff. ¶ 8; 15-9, Wilson Aff. ¶¶ 9 & 10; 15-12, Wilson Depo. 23:3-25:14). Plaintiff does not dispute these facts, but characterizes them as assumptions rather than a mutual understanding that would constitute a procedure for purposes of the FDCPA. Unlike Turner, KWLO demonstrates through uncontested evidence, that based upon nearly thirty years of doing business together, KWLO, Shady Grove and NACS operated with, at minimum, an informal agreement that none would forward an account for collection where the underlying debt was subject to discharge in bankruptcy. They further agreed promptly to share knowledge of bankruptcy with one another if it was later discovered, as they did in this case. Finally, KWLO ceased collection of the debt immediately after learning of Plaintiff s bankruptcy, after only sending one letter and placing two telephone calls. procedures violation and of practices the FDCPA. are reasonably For this adopted reason, to KWLO s avoid Defendants a have established a defense of bona fide error, and summary judgment is appropriate in their favor.1 1 As an alternative to their bona fide error defense, Defendants assert that because Plaintiff s complaint is based on their attempts to collect a debt that was subject to the stay 8 IV. Conclusion For the foregoing reasons, the motion for summary judgment filed by Defendants KWLO, Rhonda Clark, and Patricia Staples will be granted, and the motion for summary judgment filed by Plaintiff Jonathan Yu will be denied. A separate Order will follow. /s/ DEBORAH K. CHASANOW United States District Judge created by his bankruptcy filing, the Bankruptcy Code precludes his FDCPA claim. Because Defendants have established a defense of bona fide error, however, this argument need not be reached. 9
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