Court Opinion

ID: 1040351
Source: CourtListenerOpinion
Date Created: 2013-09-10 18:59:42.236604+00
Date Added: 2024-06-11T12:49:44.112216
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 13-1170

NARENDRA MAVILLA; PADMAVATHI MAVILLA,

                Plaintiffs - Appellants,

          v.

ABSOLUTE COLLECTION SERVICE, INC.,

                Defendant – Appellee,

          and

WAKEMED FACULTY PHYSICIANS,

                Defendant.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. James C. Fox, Senior
District Judge. (5:10-cv-00412-F)

Submitted:   August 30, 2013           Decided:   September 10, 2013

Before GREGORY, DAVIS, and WYNN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Christopher W. Livingston, White Oak, North Carolina, for
Appellants. Sean T. Partrick, Jennifer D. Maldonado, Allison J.
Becker, YATES, MCLAMB & WEYHER, LLP, Raleigh, North Carolina,
for Appellee.
Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:

     Appellants       Narendra    Mavilla      and    Padmavathi      Mavilla

(“Appellants”    or   “the   Mavillas”)    appeal    the   district   court’s

orders setting aside entry of default against Appellee Absolute

Collection    Service,   Inc.    (“ACS”   or   “Appellee”),    and    granting

summary judgment in favor of ACS on all claims. The district

court found good cause to set aside entry of default, and that

Appellants failed to present any evidence of actionable conduct

by ACS under either the Fair Credit Reporting Act (FCRA), 15

U.S.C. § 1681 et seq., or the Fair Debt Collection Practices Act

(FDCPA), 15 U.S.C. § 1692 et seq. We affirm.

                                     I.

     Appellants commenced this action against ACS, a consumer

debt collection agency, on October 4, 2010 in the District Court

for the Eastern District of North Carolina. Appellants claimed

ACS violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. §

1681 et seq., the Fair Debt Collection Practices Act (FDCPA), 15

U.S.C. § 1692 et seq., and sections of the North Carolina Debt

Collection Act, N.C. GEN. STAT. § 75-54 and the North Carolina

Collection Agency Act, N.C. GEN. STAT. § 58-70-95(3),- 110(4), and

-115(1). The complaint alleged that ACS violated these laws when

it mailed written letters and placed phone calls to the Mavilla

residence attempting to collect debts for prenatal and obstetric

care services purportedly received by Mrs. Mavilla.

                                     3
     ACS mailed three letters to Mrs. Mavilla on April 14, 2009,

demanding    payment    of     $126   for       services     rendered    on    June    13,

2005, $54 for services rendered on June 30, 2005, and $312 for

services     rendered   on     July   26,       2006.   On   April    16,     2009,    ACS

mailed Mrs. Mavilla a copy of the itemized medical bills from

WakeMed Faculty Practice Plan (“WakeMed”), the medical service

providers, as proof of the debts. On June 3, 2009, ACS mailed

three more letters to Mrs. Mavilla, one for each debt, which

warned her that “since [she] did not respond to [ACS’s] initial

request[s]     for    payment,    [ACS]         ha[s]   initiated       further,      more

serious collection activity.” J.A. 34-36. The letters advised

Mrs. Mavilla to contact ACS’s office immediately to either pay

the debts in full or arrange a payment plan in order to “prevent

this from appearing on [her] credit report.” Id.

     In addition to the letters, ACS placed at least 21 phone

calls   to    the    Mavilla    residence         between     April     15,   2009     and

December 9, 2009, in efforts to collect the WakeMed debts. In

several      of      these     calls,           Mrs.    Mavilla       informed        ACS

representatives that she had not incurred the debts and that,

indeed, it was impossible that she received the alleged services

because she had been incapable of bearing children since 2001.

     On July 21, 2009, the Mavillas mailed a dispute letter to

WakeMed denying that Mrs. Mavilla received any services from

WakeMed.     ACS continued to call the Mavilla residence, and on

                                            4
August 24, 2009, Mrs. Mavilla mailed a letter to ACS demanding

that “all types of communications” cease immediately “until the

dispute has been resolved with Wakemed.” J.A. 39. Mrs. Mavilla

mailed an additional dispute letter to WakeMed on August 24,

2009, as well. Although ACS made several attempts to collect the

debt from the Mavillas, Mrs. Mavilla testified that ACS never

threatened to file a lawsuit to collect the debts.

       ACS reported a total of $492 of unpaid medical debt to

credit reporting bureaus to be placed on Mrs. Mavilla’s credit

reports. On December 28, 2009, the Mavillas paid $180 to ACS to

satisfy part of the WakeMed debt.

       In    September    2010,     the    Mavillas    were   twice    negatively

affected by ACS’s reporting the unpaid WakeMed debts to consumer

credit      reporting    bureaus.    First,     Mrs.   Mavilla   applied      for   a

Kohl’s retail store credit card and was denied based on the

negative report submitted by ACS. Then, the Mavillas were denied

refinancing on their home mortgage because of the ACS report on

Mrs.   Mavilla’s    credit.       According     to   the   Mavillas,   had    their

refinancing     application       been    approved,    they   would    have   saved

$268.03 per month, and a total of $80,409.00 over the course of

their 300-month mortgage.

       On    September   26,   2010,      the   Mavillas    disputed   the    debts

through the credit bureaus, which then communicated the dispute

to ACS on September 27, 2010. The Mavillas contend that ACS

                                           5
should have further investigated the debt even though WakeMed

continued to affirm the validity of the debts in the face of

Mrs. Mavilla’s dispute. However, Mrs. Mavilla conceded that if

ACS   had   further    investigated        the     debts,     it    is     likely      that

“WakeMed would have also told ACS that they believed that the[]

charges     belonged    to     [Mrs.      Mavilla].”       J.A.     458.     She       also

testified that she knew of no information that would suggest

that ACS knew that the debts were not her obligations.

      On October 4, 2010, the Mavillas initiated this lawsuit for

violations of various federal and state debt collection laws.

Sometime after the suit was filed, ACS was notified by WakeMed

that the debt in fact did not belong to Mrs. Mavilla, and in

response,    ACS    “close[d]     the     [Mavilla]       account    at     the    credit

bureaus and remove[d] the information from [its] system.” J.A.

212. It is unclear from the record what new evidence WakeMed

relied      on    to   change       its        position      on     Mrs.     Mavilla’s

responsibility for the debt.

      On October 12, 2010, ACS’s general counsel, Ken Perkins

(“Perkins”)       learned    of    the     Mavillas’s        suit        against       ACS.

According to an affidavit submitted by Perkins, he spoke with

Appellants’ counsel by phone at the end of October 2010 and

requested    an    unlimited      extension      of   time    to    respond       to    the

Summons and Complaint. Perkins contends that Appellants’ counsel

                                           6
agreed     to    the    requested   extension        and       did    not    condition     the

agreement on the parties engaging in settlement discussions.

      On    December      21,    2010,      Appellants     moved       for    an   Entry    of

Default against ACS; the Clerk of the Court entered the default.

Appellants then moved for Default Judgment, and the district

court directed Appellants’ counsel to file documents in support

of the default judgment motion. While the district court was

considering       the    motion,    ACS     filed    a    Notice       of    Appearance     of

Counsel and Motion to Set Aside Entry of Default.

      In    support        of    its      motion,        ACS     submitted         Perkins’s

affidavit, in which he explained that he had not filed a notice

of appearance nor a response to the complaint in reliance on the

parties’ agreement to an unlimited extension of time to respond.

He averred that ACS’s “failure to file an Answer was a mistake”

of counsel that was not the fault of ACS and was thus “not

fairly imputable to ACS having been occasioned solely by the

neglect of counsel.” J.A. 98. Perkins also stated that he only

learned that Appellants had received an Entry of Default against

ACS   because      he    happened      to    have    reviewed         computerized       case

filings on April 20, 2011. ACS filed its Notice of Appearance of

Counsel     on     the    same     day      that    the    Entry        of    Default      was

discovered. In response to ACS’s Motion to Set Aside Entry of

Default,    Appellants’         counsel      submitted     an        affidavit     declaring

                                              7
that he had agreed to an extension of 30 days, not an unlimited

extension.

      On July 25, 2011, the district court granted ACS’s Motion

to Set Aside Entry of Default. The parties engaged in discovery

and both sides moved for summary judgment. The district court

granted      summary    judgment      for    ACS      on    all    federal   claims    and

declined to exercise supplemental jurisdiction over the state

law claims. Appellants filed a timely notice of appeal.

                                            II.

      The Mavillas argue that the district court erred in setting

aside the entry of default they had obtained against ACS. They

maintain      that     ACS   showed    no     good         cause   supporting   such    a

decision.

      This Court reviews a district court’s decision to set aside

an   entry    of   default     for    abuse      of   discretion.      Colleton     Prep.

Acad., Inc. v. Hoover Universal, 616 F.3d 413, 417 (4th Cir.

2010). A district court has abused its discretion when it “acts

in an arbitrary manner or relies on an erroneous principle of

law.” Ga. Pac. Consumer Prods., L.P. v. Von Drehle Corp., 710

F.3d 527, 533 (4th Cir. 2013) (internal quotation omitted).

      Under Federal Rule of Civil Procedure 55(c), a district

court   can    set     aside   an    entry       of   default      “[f]or    good   cause

shown.” Fed. R. Civ. P. 55(c). In deciding whether to set aside

an entry of default, a district court should consider

                                             8
       whether the moving party has a meritorious defense,
       whether it acts with reasonable promptness, the
       personal responsibility of the defaulting party, the
       prejudice to the party, whether there is a history of
       dilatory action, and the availability of sanctions
       less drastic.

Id. quoting Payne ex rel. Estate of Calzada v. Brake, 439 F.3d

198, 204-05 (4th Cir. 2006).               This         Court        has       “repeatedly

expressed      a    strong        preference       that,   as    a    general       matter,

defaults be avoided and that claims and defenses be disposed of

on their merits.” Colleton, 616 F.3d at 417.

       The district court conducted the applicable “good cause”

analysis.      It    concluded        that     ACS      adequately      demonstrated      a

meritorious defense: that it relied on information its client,

WakeMed, provided as the basis for attempting to collect the

debts from Mrs. Mavilla, and that it had no knowledge of the

fact that WakeMed had made an error in attributing the debt to

her.    With    regards      to    the    promptness       of   ACS’s      actions   after

learning of the default, the district court noted that ACS filed

a Notice of Appearance the very same day its counsel learned of

the Entry of Default on the docket. The court found that ACS’s

counsel misunderstood the length of the extension of time agreed

to by Appellants’ counsel and that that misunderstanding was not

attributable to his client. Appellants’ counsel himself admitted

that    the    Mavillas      would    “suffer      no    prejudice      from    having   to

prove    their      case,”    which      the   district     court     took     as   another

                                               9
factor weighing in favor of setting aside the default. J.A. 128.

Lastly, the district court found that ACS has been a party to

other actions in that court, but none had been defaulted. The

court concluded that, even if no lesser sanction was available,

all other relevant factors demonstrated good cause to set aside

the entry of default.

     The     district     court’s       decision        was     not    arbitrary,        and

Appellants      provide   no    basis    on       which    to   conclude       the   court

relied on erroneous principles of law. All factors considered,

ACS demonstrated good cause to set aside the entry of default,

an   outcome     consistent      with       this    Court’s       strong       preference

against disposing of cases in that manner.

                                         III.

     Appellants        next   argue     that      the   district       court     erred   in

granting summary judgment to ACS on all claims under the FDCPA.

We review a grant of summary judgment de novo, and apply the

same standard as the district court. Crockett v. Mission Hosp.,

Inc. 717 F.3d 348, 354 (4th Cir. 2013). Summary judgment is

appropriate      “if    the    movant    shows      that      there    is   no    genuine

dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a).

     Count IV alleged violations of the FDCPA arising from ACS’s

attempt    to     collect       on    the        WakeMed      debts.     Specifically,

Appellants maintain that ACS violated 15 U.S.C. § 1692e(2)(A),

                                            10
(5), and (10), and § 1692f of the FDCPA by attempting to collect

debts that the Mavillas did not owe by “misrepresenting to them

that   they      owed    these     debts    and      then         misrepresenting          to   the

credit bureaus that they owed these debts.” Appellant’s Br. 33.

Appellants       devote      a   large   portion          of      their   argument      on      this

issue to asserting that ACS has failed to establish its defense

of bona fide error. We find, however, that the undisputed facts

demonstrate that Appellants failed to make a prima facie case

under the FDCPA.

       Section 1692e(2)(A) prohibits a debt collector from making

a   false    representation         of     “the      character,           amount,     or     legal

status of any debt” in connection with the collection of a debt.

15 U.S.C. § 1692e(2)(A). Under Section 1692e(10), it is unlawful

for    a    debt      collector     to   use        any      “false       representation         or

deceptive means to collect or attempt to collect any debt or to

obtain      information          concerning         a     consumer.”         15     U.S.C.        §

1692e(10).       It    is    unclear     how    Appellants           contend      ACS   falsely

represented        the      character,     amount,           or    legal     status     of      the

WakeMed debt, or how ACS used false representations or deceptive

means to attempt to collect the debt. Appellants have failed to

identify the exact conduct that violated these provisions of the

FDCPA,     and     similarly     have    failed         to     present     any    evidence       in

support     of     the   claims.     The    district           court      correctly     granted

summary judgment for ACS on these allegations.

                                               11
       Section        1692e(5)           prohibits        a     debt     collector      from

threatening to “take any action that cannot legally be taken or

that is not intended to be taken.” 15 U.S.C. § 1692e(5). The

Complaint seems to allege that although these debts were beyond

the statute of limitations, ACS was threatening the Mavillas

with a lawsuit if they failed to pay the debt. J.A. 15-16.

However, in her deposition testimony, Mrs. Mavilla admitted that

ACS never threatened to file a lawsuit to collect the WakeMed

debts. Appellants have not provided any evidence supporting this

claim, thus summary judgment was appropriate.

       Section 1692f prohibits debt collectors from using “unfair

or unconscionable means to collect or attempt to collect any

debt.” 15 U.S.C. § 1692f. The section provides a list of acts

exemplifying           unconscionable            debt         collection       activities.

Appellants       do    not      specify        which      prohibited      activities     ACS

engaged in, but appear to contend that ACS’s conduct generally

violated     the       provision.         We    disagree.        Appellants      have   not

presented any evidence that ACS’s debt collection methods were

illegal, and they do not argue that ACS’s collection activities

were    harassing.          While   there      was   an     error   in    attributing   the

debts to Mrs. Mavilla, this was an error ACS was unaware of, and

the    methods     ACS      used    to    attempt      to     collect    the   debt—placing

phone    calls        and     mailing      letters—are          completely     legal    debt

                                               12
collection     practices.      The      district    court      properly       granted

summary judgment to ACS on this claim.

                                         IV.

     We next turn to Appellants’ claim that the district court

erred in granting summary judgment to ACS on the FCRA claim.

Count    I   alleged    that   ACS      either     willfully     or       negligently

violated     the   FCRA *   when   it    failed    to   conduct       a    reasonable

     *
       Appellants assert ACS violated 15 U.S.C. § 1681s-2(b) by
failing to fulfill the statutorily imposed duties of furnishers
of information to consumer reporting agencies. That section
provides:

(b) Duties of furnishers of information upon notice of dispute

     (1) In general

     After receiving notice pursuant to section 1681i(a)(2) of
     this title of a dispute with regard to the completeness or
     accuracy of any information provided by a person to a
     consumer reporting agency, the person shall—

          (A) conduct an             investigation      with    respect       to   the
     disputed information;

          (B) review all relevant information provided by the
     consumer reporting agency pursuant to section 1681i(a)(2)
     of this title;

          (C) report the results of the investigation to the
     consumer reporting agency;

     . . .

     (2) Deadline

     A person shall complete all investigations, reviews,                           and
     reports required under paragraph (1) . . . before                              the
     expiration of the period under section 1681i(a)(1) of                         this
     title [30-day[s] [] beginning on the date on which                             the
(Continued)
                                         13
investigation of the WakeMed debts after the Mavillas disputed

the debts.

        The district court provided a thorough and clear overview

of the duties imposed on furnishers of information under the

FCRA. As the court explained, under the FCRA, when a furnisher

of information to consumer reporting agencies is notified of a

credit dispute, it must “conduct an investigation with respect

to the disputed information,” “review all relevant information

provided by the consumer reporting agency . . . ,” and “report

the   results    of    the   investigation    to    the    consumer   reporting

agency” within thirty days of being notified of the dispute. 15

U.S.C. § 1681s-2(b)(1), (2), 15 U.S.C. § 1681i(a). However, a

furnisher’s     duty    to   investigate     is    not    triggered   until   it

receives notification of a dispute from a consumer reporting

agency. See 15 U.S.C. § 1681s-2(b)(1); Stafford v. Cross Country

Bank, 262 F. Supp. 2d 776, 784 (W. D. K.Y. 2003) (“This means

that a furnisher of credit information, such as the Bank, has no

responsibility to investigate a credit dispute until after it

receives notice from a consumer reporting agency.”) (emphasis in

original).      Once   the    duty   to    investigate      is   triggered,    a

      agency receives the notice of the dispute from the consumer
      or reseller] . . .

15 U.S.C. § 1681s-2(b)(1),(2).

                                      14
furnisher breaches that duty if it fails to comply within thirty

days.

         Here, the undisputed facts demonstrate that ACS received

notification of the disputed debt on September 27, 2010. This

was the date that ACS’s duties as a furnisher under the FCRA

were triggered. As the district court pointed out, “[b]y law,

ACS had thirty (30) days after receiving notice of the dispute

from    a   CRA    within      which    to        investigate     and     correct    any

incomplete or inaccurate information ACS had provided to the

CRA(s).” Mavilla v. Absolute Collection Serv., Inc., 2013 WL

140046 *8 (E.D.N.C. Jan. 10, 2013)(emphasis in original). It is

also uncontested that this action was commenced on October 4,

2010, only five days after ACS’s duties arose. Thus, at the time

of this suit, ACS had not breached any duty under the FCRA.

       Appellants    concede     that       the    FCRA   “allows    30   days   for    a

furnisher of information to conduct a reasonable investigation,”

but argue that it “does not establish a safe harbor against suit

once a furnisher has done all the investigation it intends to

do.”    Appellants’      Br.   16.     In   sum,     Appellants      argue   that    ACS

completed    all    of   the    investigation         that   it     had   intended     to

undertake at the time this action was commenced and “[g]iving it

another 25 days would have been futile and is not what the

statute requires.” Appellants’ Br. 49.

                                            15
     Contrary to this assertion, the statute precisely requires

that the 30 day period for investigation have expired for ACS to

have breached any duty which would give rise to the Mavillas’s

private right of action under this section of the law. It is

inapposite     whether        ACS      would     or    would       not     have     further

investigated because Appellants chose to initiate this lawsuit

at a time when ACS by the terms of the law could not have yet

breached   its      duty    to    investigate.         Thus,    the      district     court

properly granted summary judgment to ACS on the FCRA claim.

                                            V.

     For   the      reasons      set   forth,     we    affirm       the   judgment.     We

dispense     with    oral        argument      because       the     facts    and     legal

contentions    are    adequately         presented      in     the    materials      before

this court and argument would not aid the decisional process.

                                                                                  AFFIRMED

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