Opinion ID: 662461
Heading Depth: 1
Heading Rank: 2

Heading: Violation of FDCPA Venue Provision

Text: 9 Claim one in the Foxes' complaint alleges that both Citicorp and Kaplan violated the FDCPA by filing the March 1990 application for a writ of garnishment in the Maricopa County Superior Court rather than in Pima County where the Foxes reside. 3 The parties agree that a violation of the venue provision may support civil liability. See 15 U.S.C. Sec. 1692k. Section 1692i requires that a debt collector's legal action on a debt against a consumer be brought: 10 ... only in the judicial district or similar legal entity-- 11 (A) in which such consumer signed the contract sued upon; or 12 (B) in which such consumer resides at the commencement of the action. 13 15 U.S.C. Sec. 1692i(a)(2). The defendants concede that Maricopa County is neither the county in which the Foxes reside nor the county in which they signed any contract sued upon. 14 Nonetheless, the defendants raise several arguments in support of the entry of summary judgment on claim one. Some of these defenses are generally applicable to all FDCPA claims, while others are defenses specific to the venue claim. We address each of these contentions in turn, beginning with the theory adopted by the district court. 15
16 Expressing concern that Kaplan may have violated the venue provision, the district court stated in its order that the FDCPA does not reach a pure legal action. Of course, as a general matter, 15 U.S.C. Sec. 1692i plainly reaches legal actions, specifying that actions by debt collectors against consumers must be brought in judicial districts to which the consumer has a specified tie. It is clear from the record, however, that what the district court had in mind was that attorneys engaged in activity of a purely legal nature were exempted from the statutory prohibitions. That is the theory upon which Kaplan relied. The argued exemption has its roots in the now-defunct all-purpose FDCPA attorney exemption. 17 As originally enacted in 1977, the FDCPA specifically excluded from the definition of debt collector any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client. 15 U.S.C. Sec. 1692a(6)(F) (repealed 1986). In 1986, however, concerned that attorneys have increasingly entered the debt collection business and used the exemption to evade compliance with the Act, Congress deleted the attorney provision. H.Rep. No. 405, 99th Cong., 1st Sess. 1-2 (1985), reprinted in 1986 U.S.C.C.A.N. 1752, 1752. Kaplan argues that, in repealing the provision, the legislature intended that the statute would thereafter apply to attorneys engaged in traditional collection practices of a non-legal nature but not to those engaged in purely legal activities--activities that can only be performed by an attorney--such as the filing of an application for a writ of garnishment. 18 Kaplan relies upon two district court decisions interpreting the legislative history of the 1986 attorney-exemption repeal. See Firemen's Ins. Co. v. Keating, 753 F.Supp. 1137, 1141-44 (S.D.N.Y.1990); National Union Fire Ins. Co. v. Hartel, 741 F.Supp. 1139, 1140-41 (S.D.N.Y.1990); see also Green v. Hocking, 792 F.Supp. 1064, 1065-66 (E.D.Mich.1992). These cases conclude that the Congress did not intend to expose to FDCPA liability those attorneys acting in the role of legal counsel while representing clients. Keating, 753 F.Supp. at 1142; see also Green, 792 F.Supp. at 1065 (concluding that literal application of debt collector definition is at odds with legislative intent). On the basis of this perceived congressional intent, these cases hold that attorneys engaged in activities only of a purely legal nature are not debt collectors under the FDCPA. Hartel, 741 F.Supp. at 1141. 19 We decline to adopt this phantom limb theory of statutory interpretation--allowing an excised provision to continue to determine the scope of a statute. We are unwilling to assume that the Congress acted contrary to its intentions when it repealed the attorney exemption and enacted no substitute. Like the only other circuit to consider this creative residual attorney-exception, we conclude that it simply does not exist. The plain language of the statute unambiguously precludes any continued doctrine of special treatment for attorneys under the FDCPA. See Scott v. Jones, 964 F.2d 314 (4th Cir.1992). 20 In short, the attorney exemption is no longer a part of the statute; the fact that it was once a part of the statute does not alter the required approach to statutory construction. Applying our general rules of statutory construction to the FDCPA freed from the repealed limitation, neither the plain language of the Act nor its structure supports any exemption for attorneys' purely legal debt collection activities. See, e.g., Sacramento Regional County Sanitation Dist. v. Reilly, 905 F.2d 1262, 1268 (9th Cir.1990) (plain language is starting point of statutory construction); Seldovia Native Ass'n v. Lujan, 904 F.2d 1335, 1341 (9th Cir.1990) (to determine plain meaning court must look to language and design of statute as whole). There is simply no mention of attorneys in the current definition of debt collector or its exceptions; nor is there any distinction drawn between legal and non-legal activities. Nothing currently in the text of the FDCPA hints at the conspicuous solicitude for the legal profession that Kaplan proposes. 21 Looking to the legislative history of the 1986 repeal, we do not find the clearly-expressed contrary intention necessary to overcome the strong presumption that Congress expresses its intent through the language it chooses. INS v. Cardoza-Fonseca, 480 U.S. 421, 432 n. 12, 107 S.Ct. 1207, 1214 n. 12, 94 L.Ed.2d 434 (1987). The district court decisions cited by Kaplan rely primarily upon an individual legislator's statements that the repeal would not interfere with the practice of law. See Keating, 753 F.Supp. at 1142-43; Hartel, 741 F.Supp. at 1141. These isolated statements, however, cannot reintroduce what the Congress has eliminated; if the legislature intended some residuum of the attorney exemption to remain valid, it is very unlikely that it would have entirely excised the provision without enacting any substitute. Moreover, Congress was almost certainly aware that the general definition of debt collector, requiring that debt collection be either a principal purpose or a regular part of the collector's business, would protect a substantial percentage of attorneys in ordinary legal practice, and that adding a special protection for purely legal activity would undermine its efforts to curb the unfair practices of those engaged in the business of debt collection. 22 Indeed, other portions of the legislative history make it clear that Congress intended purely legal activities of attorneys who fall within the definition of debt collector to be subject to the FDCPA. Specifically, Kaplan's proposed exemption would effectively immunize attorneys from liability under the venue provision, which solely applies to legal actions; however, the Congress intended that attorneys in the business of collecting debts be subject to all provisions of the Act, if they meet the definition of debt collector. House Report 405, at 3, 1986 U.S.C.C.A.N. at 1754. Moreover, in describing the need for repeal of the attorney exemption, the House Committee excerpted, as an example of attorneys' unfair competitive advantage over lay collectors, an advertisement by a lawyer emphasizing his ability, as a result of his exemption from the venue provision, to file suits in courts more convenient for the creditor. See House Report 405, at 5. The committee's interest in eliminating the type of unfair competition exemplified by this advertisement is inconsistent with the residual exemption urged by Kaplan. 23 Of somewhat more concern than the equivocal legislative history of the 1986 FDCPA amendment is commentary issued by the Federal Trade Commission (FTC) concluding that attorneys that engage in traditional debt collection activities (sending dunning letters, making collection calls to consumers) are covered by the FDCPA, but those whose practice is limited to legal activities are not covered. 53 Fed.Reg. 50,097, 50,100 (1988). Initially, we note that this commentary supports the exemption adopted by the trial court only obliquely. There is a distinction between the contention that any attorney is exempt from FDCPA liability for a purely legal act and the contention that an attorney is exempt from all FDCPA liability only if he never engages in any acts other than purely legal actions. We address the former, which is the argument made by Kaplan and accepted by the district court, while the FTC commentary seems to endorse the latter. Kaplan did not contend nor present evidence that he never engages in debt collection activities that are not purely legal. Nonetheless, even if the FTC commentary offers some support for Kaplan's contention, we join the Fourth Circuit in declining to adopt the position in the FTC commentary because it conflicts with the plain language of the statute. 4 See Scott, 964 F.2d at 317. 24 We thus reject the district court's conclusion that Kaplan is not covered by the FDCPA because the filing of an application for a writ of garnishment is a pure legal action. Attorneys, like all other persons, are subject to the definition of debt collector in 15 U.S.C. Sec. 1692a(6). Here, there is no question that Kaplan regularly collects or attempts to collect, directly or indirectly, debts owed or due ... another. 5 Kaplan falls within the definition of debt collector under the FDCPA.
25 The defendants argue that no FDCPA claims based on the application for a writ of garnishment can survive because their actions fall under the Act's bona fide error exception. 15 U.S.C. Sec. 1692k(c) provides that a debt collector may not be held liable if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such an error. 6 26 Citicorp argues that the application for a writ of garnishment would not even have been filed had Pat Sanchez, the Citicorp agent assigned to the Fox account after Marshall, been aware that Marshall had instructed Kaplan to proceed with garnishment if not notified otherwise by January 31, 1990. Sanchez succeeded Marshall as the agent assigned to the Foxes when Citicorp transferred all Arizona accounts from its San Mateo, California office to its Albuquerque office. Citicorp contends that Sanchez was not aware of Marshall's instruction to Kaplan because the computerized account notes did not indicate the instruction, and because the arrival of the hard-copy account file was delayed during the February 1990 transfer of accounts from San Mateo to Albuquerque. But for this inadvertent delay, according to Citicorp, Sanchez would have cancelled the garnishment once she determined that the Foxes were making payments. 27 The language of section 1692k(c) indicates that the bona fide error exception is an affirmative defense, for which Citicorp has the burden of proof at trial. However, Citicorp failed to produce any evidence showing the maintenance of procedures reasonably adapted to avoid any such error. See 15 U.S.C. Sec. 1692k(c). For example, it provided no indication of any procedure to ensure that all pertinent information would be expeditiously transmitted during a transfer of accounts from one office to another. Nor did it demonstrate any policy to ensure that pertinent information is readily imparted to agents newly-assigned to existing accounts. In the absence of any evidence supporting the existence of reasonable preventive procedures, an essential element of the bona fide error exception, Citicorp is not entitled to summary judgment on the basis of the affirmative defense.
28 Citicorp argues that, as an in-house collector, it is not a debt collector under the FDCPA. Under 15 U.S.C. Sec. 1692a(6)(B), the term debt collector does not include those collecting debts for corporate affiliates if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts. 29 Citicorp did not raise the in-house collector exemption issue in moving for summary judgment, and the district court did not consider it. Moreover, determining whether section 1692a(6)(B) applies to Citicorp requires several factual determinations. Because Citicorp did not raise the issue before the district court, the Foxes have not had a chance to demonstrate the existence of a material factual dispute as to whether Citicorp is affiliated with the actual creditor, as to whether Citicorp collects debts for non-affiliated entities, or as to whether debt collection is Citicorp's principal business. 7 We are unable to conclude that Citicorp necessarily falls under the in-house exemption and decline to affirm summary judgment on that basis. 30
31 Citicorp and Kaplan make three additional arguments in support of the entry of summary judgment on claim one. The defendants raise each of these arguments for the first time on appeal. Nonetheless, because each contention raises a pure issue of law, we consider them in deciding whether to affirm summary judgment. See Jovanovich v. United States, 813 F.2d 1035, 1037 (9th Cir.1987) (exceptions to general rule against considering issues for first time on appeal). 32
33 First, Citicorp contends that the application for a writ of garnishment, as an action in enforcement of a previously-obtained judgment, does not fall within the venue provision. By its terms, section 1692i reaches any legal action on a debt. The FDCPA defines debt as any obligation or alleged obligation of a consumer to pay money arising out of a transaction ... primarily for personal, family, or household purposes. 15 U.S.C. Sec. 1692a(5). Thus, the June 1989 stipulated judgment was entered in a legal action based upon a debt as defined in the FDCPA. Furthermore, the definition of debt specifically states that it applies whether or not such obligation has been reduced to judgment. Id. Nonetheless, Citicorp contends that the application for a writ of garnishment is not a legal action on a debt for purposes of section 1692i. 34 The plain meaning of the term legal action encompasses all judicial proceedings, including those in enforcement of a previously-adjudicated right. Cf. S & M Investment Co. v. Tahoe Regional Planning Authority, 911 F.2d 324, 326-27 (9th Cir.1990) (construing term legal action as used in interstate compact), cert. denied, 498 U.S. 1087, 111 S.Ct. 963, 112 L.Ed.2d 1050 (1991). Because debt includes obligations reduced to judgment, any judicial proceeding relating to such a judgment constitutes a legal action on a debt. 35 Moreover, the purpose of the venue provision supports our rejection of an enforcement-action exception. In enacting the provision, Congress was concerned about consumers having to defend against suits in distant or inconvenient courts. S.Rep. No. 382, 95th Cong., 1st Sess. 5 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1699. Consumers face similar burdens in defending against enforcement actions. Here, for example, had the writ not been quashed, the Foxes would have had to move for its quashing or defend against the amount of garnishment in a distant court. We find no indication that Congress intended to exclude enforcement actions, entailing the same concerns as initial adjudications, from the venue provision. Accordingly, we conclude that such actions are subject to section 1692i. 8
36 Second, the defendants argue that Maricopa County and Pima County are not separate judicial districts; therefore, filing the application in the former rather than in the latter establishes no venue violation. Section 1692i specifies judicial district or similar legal entity. We have no difficulty in concluding that the two counties are different venues under the FDCPA where the state has provided a formal transfer mechanism (as utilized in Citicorp's two 1986 actions against the Foxes) between courts in the two counties. The fact that, as the defendants argue, the state of Arizona constitutes a single federal judicial district and has a unitary state superior court has no effect on our conclusion. See Dutton v. Wolhar, 809 F.Supp. 1130, 1139 (D.Del.1992) (rejecting similar contention).
37 Third, Citicorp contends that it may not be held vicariously liable under section 1692i for a venue decision made solely by Kaplan. We reject this contention as inconsistent with the structure of the FDCPA. As noted above, the FDCPA initially contained an all-purpose attorney exemption. If we were to conclude, as Citicorp urges, that debt collectors are shielded from liability for venue violations whenever a legal action is filed by an attorney, we would have to decide that section 1692i was superfluous as originally enacted. Under Citicorp's theory, for the first nine years after the FDCPA became law, no attorney could ever have been liable and no collector could have been vicariously liable for the actions of his attorney; therefore, liability could rarely if ever have rested on a venue violation. 9 In order to give reasonable effect to section 1692i, we must conclude that Congress intended the actions of an attorney to be imputed to the client on whose behalf they are taken. 38 Having concluded that none of the defendants' general or specific arguments in favor of affirming summary judgment are valid, we reverse the entry of summary judgment on claim one and direct the district court to reinstate the Foxes' claim that Citicorp and Kaplan violated the FDCPA venue provision.