Opinion ID: 2561867
Heading Depth: 4
Heading Rank: 1

Heading: injury in the context of HRS chapter 443B

Text: As our caselaw commands, in interpreting the standing requirements of HRS § 480-13(b), we must start with the language of the statute, which allows [a]ny consumer who is injured by any unfair or deceptive act or practice forbidden or declared unlawful by section 480-2 to sue for damages or injunctive relief. The statute does not define the term injury. Accord Zanakis-Pico v. Cutter Dodge, Inc., 98 Hawai`i 309, 316, 47 P.3d 1222, 1229 (2002) (HRS chapter 480 defines neither `injury' nor `damages,'. . . .). Rawlings and Plaintiffs put forth two different interpretations of what it means for a consumer to be injured in the context of claims based on a violation of the registration requirement of HRS § 443B-3. Plaintiffs point to the statute, which states that [n]o collection agency shall collect or' attempt to collect any money . . . from any person who resides . . . in this State without first registering, HRS § 443B-3, in support of their argument that the act of paying money to, or being collected upon by, an unregistered collection agency caused injury to Plaintiffs. Rawlings posits a narrower view, that one is not injured when one pays a valid obligation to a collection agency that has committed the unfair trade practice of collecting money without registering. As none of our cases have dealt with injury in this precise context, this court must draw on the concept of injury in analogous cases. As a general matter, injury means a judicially-cognizable injury, that is, a harm to some legally-protected interest. Sierra Club v. Dep't of Transp., 115 Hawai`i 299, 321, 167 P.3d 292, 314 (2007). [23] Our caselaw on HRS § 480-13 elucidates the nature of the injuries cognizable under that statute. As we stated in Ai v. Frank Huff Agency, Ltd., [w]hile proof of a violation of chapter 480 is an essential element of an action under Sec. 480-13, the mere existence of a violation is not sufficient ipso facto to support the action; forbidden acts cannot be relevant unless they cause private damage. 61 Haw. 607, 618, 607 P.2d 1304, 1312 (1980) (emphasis added), overruled in part on other grounds by Robert's Haw. Sch. Bus. Inc. v. Laupahoehoe Transp. Co., 91 Hawaii 224, 982 P.2d 853 (1999); accord Sambor v. Omnia Credit Servs., Inc., 183 F.Supp.2d. 1234, 1244 (D.Haw.2002). Although these cases suggest that Plaintiffs' allegation of injury is insufficient, because of the varying factual contexts of these cases a further examination of Ai and Sambor is in order.
Rawlings contends that based on Ai, there is no cognizable injury under HRS § 480-13 when plaintiffs are not required to make payments beyond the amount of their existing obligation. (Citing Ai, 61 Haw. at 620, 607 P.2d at 1312). In Ai, the plaintiffs brought suit against a collection agency for preparing a promissory note, which the plaintiffs executed and delivered to the defendant agency, that contained an attorney's fees provision that violated the debt collection laws. [24] The note provided that in the case of default, if the note were placed in the hands of an attorney for collection, the plaintiffs would have to pay an attorney's fee rate of 33 1/3% of the amount due thereon. Ai, 61 Haw. at 610, 607 P.2d at 1307. After making nineteen payments, the plaintiffs filed a complaint for declaratory judgment, alleging, inter alia, that the defendant had represented in the August promissory note that the existing obligation of the plaintiffs might be increased by the addition of attorney's fees when in fact such fees could not legally be added to the existing obligation, in violation of the former law on collection agencies, [25] and HRS chapter 480. Id. The circuit court granted the plaintiffs' motion for summary judgment on this count, declared the promissory note null, void, and unenforceable under HRS § 480-12, [26] and awarded damages to the plaintiffs in the amount of $1,000 plus costs as provided by HRS § 480-13(a)(1). Id. The holder of the promissory note appealed. On appeal, the court reviewed both whether the plaintiffs had standing to bring the claim and whether they should recover on the merits. With respect to standing, the defendants had claimed that private persons did not have standing under chapter 480 to sue, and that even if they did, a private plaintiff must allege and prove that he was injured in his business or property before damages will be assessed. Id. at 612, 607 P.2d at 1309. Taking a broad view of injury in property, the court held that it is sufficient that plaintiffs allege that injury occurred to personal property through a payment of money wrongfully induced and accordingly [found] plaintiffs' allegation of ` injury in their property sufficient for standing purposes under § 480-18. Id. at 613, 607 P.2d at 1310. Proceeding to the merits, the court concluded that the representation in the promissory note indeed violated HRS § 443-44(8). However, the court stated: While proof of a violation of chapter 480 is an essential element of an action under § 480-13, the mere existence of a violation is not sufficient ipso facto to support the action; forbidden acts cannot be relevant unless they cause private damage. Plaintiffs accordingly allege private injury in having made payments to defendant under a void promissory note. Id. at 618, 607 P.2d at 1312 (citation omitted) (emphasis added). In considering this allegation of injury, the court then turned to the enforceability of the promissory note under the voidness provision of HRS § 480-12, holding that while the attorney's fee clause was unenforceable, it could be severed and the remainder of the note enforced. Id. at 620, 607 P.2d at 1312. With respect to this remainder, the court stated: In view of the continuing obligation of the plaintiffs to make payments under the note severed of its offending clause, and in view of the fact plaintiffs have actually made no payments beyond the amount of their existing obligation, we find no legal injury to plaintiffs cognizable under HRS § 480-13; hence, plaintiffs were not entitled to an award of $1,000. Id. at 620-21, 607 P.2d at 1312 (emphasis added). [27] The court thus affirmed the grant of declaratory judgment regarding the offending clause, but reversed and remanded for further proceedings based on its finding of no damages. Id. at 621, 607 P.2d at 1312. Therefore, Ai tells us two things about the injury requirement under FIRS § 480-13. First, a plaintiff sufficiently alleges injury for purposes of standing by alleging that the plaintiff was made to pay money that was wrongfully induced, such as because the promissory note requiring payment included illegal terms. Id. at 614, 607 P.2d at 1310. Second, an individual suffers a cognizable injury allowing the recovery of damages under FIRS § 480-13 when the individual is made to make payments pursuant to a void or illegal provision of some agreement. Neither theory of injury applies to Plaintiffs in this case. Unlike Ai, where the lower court had ruled that the promissory note was void, Plaintiffs do not assert that any agreement between it and Rawlings violated the law. Rather, they focus on the mere fact that Rawlings attempted to collect, and Plaintiffs accordingly paid, some portion of the Plaintiffs' debts to HMSA. Because nothing in the underlying obligation was void, nor is it alleged that Rawlings's methods of collection were wrongful, [28] Plaintiffs' payment of the sums did not cause them any injury. The essential difference between this case and Ai lies in the nature of the unfair trade practice at issue. In Ai, the collection agency had made, in the promissory note it prepared for the plaintiffs in that case to sign, a representation regarding attorney's fees that was not legally allowable under another provisionHRS § 443-23, see supra note 25 governing the collection of attorney's fees by collection agencies. The representation therefore violated HRS § 443-44(8), see supra note 25, and the promissory agreement was partially voided under HRS § 480-12. The underlying obligation was thus tainted by an illegal provision which would have extracted an illegal profit for the note holder. Once this provision was removed, the plaintiffs in Ai were required to pay on the remaining obligations of the note. In contrast to the prohibition in Ai under the former collection agencies statute, the provision at issue here does not bear on the validity of the underlying obligation and involved no illegal representations by Rawlings such that payment on the obligation would have caused Plaintiffs to incur private damage. Rather, Plaintiffs had a valid loan agreement with HMSA, which was settled through Rawlings. Although Rawlings's activities in collecting money were in violation of HRS chapter 443B, the collection cannot be said to have injured Plaintiffs under Ai. Cf. Zanakis-Pico, 98 Hawai`i at 318, 47 P.3d at 1231 (Deception [is] the evil that consumer fraud statutes seek to rectify. . . . ).
Although factually different from the instant case, Sambor confirms this view. In Sambor, the plaintiff asserted various violations of the FDCPA, and also argued that the defendant collection agency, Omnia, violated HRS chapter 44313 by failing to register as a collection agency. 183 F.Supp.2d at 1235. Sambor had an account with Capital One Services, which was referred to Omnia for collection. Omnia called Sambor regarding her delinquent account and sent a follow-up letter indicating a balance due. Id. at 1236. After Omnia sent a return letter disputing the debt, Omnia stopped all further collection activity on her account, Id. The court found that Omnia's letter violated the FDCPA and awarded statutory damages. The court also noted that Sambor had not shown that she suffered any actual damages, discounting the expenses she incurred in determining whether Omnia's activity was illegal as well as the, postage costs incurred in sending Omnia a letter. Id. at 1241. Finding that Omnia had violated the registration requirement, the District Court stated that [t]o recover under section 480-13, however, a plaintiff must demonstrate damages caused by the violation. Id. at 1244 (citing Ai) (emphasis added). Because Sambor had not established any actual damages as a result of Omnia's violation, the court denied her HRS § 480-13 claim. Id. at 1245. Plaintiffs point out that Sambor is distinguishable from the present case because Sambor did not pay any money to the collection agent. While this is true, Plaintiffs nevertheless fail to show any damages as a result of their payment to Rawlings based on their obligations to HMSA. Just as the attempt to collect money in Sambor did not, without more, cause any damage to Sambor, likewise the actual collection, by Rawlings, of amounts Plaintiffs owed to HMSA did not cause any damage to Plaintiffs. [29] Therefore, Plaintiffs have not demonstrated that they were injured as a result of Rawlings's violation of HRS § 443B-3. [30] See also Wiginton v. Pacific Credit Corp., 2 Haw.App. 435, 444, 445, 634 P.2d 111, 118, 119 (1981) (stating that injury exists, under prior version of HRS § 480-13, if expenses were incurred because of the statutory violation and not because of a valid debt and framing the issue in that case as whether the plaintiff was wrongfully induced by the statutory violation(s) to pay money on a debt that was not owed or to incur expenses that would not otherwise have been incurred); cf. Fuller v. Pac. Med. Collections, Inc., 78 Hawai`i 213, 221, 891 P.2d 300, 308 (App.1995) (Acoba, J., dissenting in part) (Because there can be no injury to Plaintiffs by the collection agency's failure to remit all attorney's fees collected on the judgment to its own attorney, the requirement that there be such injury under HRS 480-13(b) is not satisfied.).