Dante Askew v. HRFC, LLC ( 2016 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1384
DANTE ASKEW, on his own behalf and on behalf of all others
similarly situated,
Plaintiff - Appellant,
v.
HRFC, LLC, d/b/a Hampton Roads Finance Company,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge.
(1:12−cv−03466−RDB)
Argued: September 15, 2015 Decided: January 11, 2016
Before WYNN and DIAZ, Circuit Judges, and DAVIS, Senior Circuit
Judge.
Affirmed in part, reversed in part, and remanded by published
opinion. Judge Diaz wrote the opinion, in which Judge Wynn and
Senior Judge Davis joined.
Cory Lev Zajdel, Z LAW, LLC, Reisterstown, Maryland, for
Appellant. Kelly Marie Lippincott, CARR MALONEY P.C.,
Washington, D.C., for Appellee.
DIAZ, Circuit Judge:
Dante Askew appeals the district court’s grant of summary
judgment to Hampton Roads Finance Company (“HRFC”). Askew
contends that the court erred in holding that HRFC was not
liable for (1) violating the Maryland Credit Grantor Closed End
Credit Provisions (“CLEC”), Md. Code Ann., Com. Law § 12-1001 et
seq., (2) breach of contract, and (3) violating the Maryland
Consumer Debt Collection Act (“MCDCA”), Md. Code. Ann., Com. Law
§ 14-201 et seq. For the reasons that follow, we affirm the
district court’s judgment with regard to Askew’s CLEC and breach
of contract claims. As for Askew’s MCDCA claim, however, we
reverse the district court’s order granting summary judgment to
HRFC and remand for further proceedings consistent with this
opinion.
I.
A.
This case arises out of a 2008 retail installment sales
contract between Dante Askew and a car dealership financing the
purchase of a used car. The dealership subsequently assigned
the contract to HRFC.
The contract, which is subject to CLEC, charged a 26.99%
interest rate, exceeding CLEC’s maximum allowable rate of 24%.
§ 12-1003(a). In August 2010, HRFC recognized this discrepancy.
2
The following month, it sent Askew a letter informing him that
“the interest rate applied to [his] contract was not correct”
and that HRFC had credited his account $845.40. J.A. 228. The
letter also said that HRFC “w[ould] continue to compute interest
at the new rate [of 23.99%] until [Askew] make[s] [his] final
payment.” 1 J.A. 228. Finally, HRFC told Askew that he would
repay his loan earlier if he continued to make the same monthly
payments, but that HRFC would “adjust [his] monthly payments so
that the contract will be repaid on the date originally
scheduled” if he so requested. J.A. 228. The parties do not
dispute that HRFC made all of the adjustments it claimed in its
letter.
After receiving the letter, Askew fell behind on his
payments, leading HRFC to take steps to collect on his account.
From July 2011 to December 2012, HRFC contacted Askew five times
seeking repayment—four times by letter and once by phone. Askew
alleges that HRFC made a number of false and threatening
statements to induce him to repay his debt, including that (1)
HRFC reported him to state authorities for fraud for failing to
insure his car and for concealing it from repossession agents;
(2) a replevin warrant had been prepared, which increased his
debt; and (3) his complaint in this case had been dismissed.
1
The letter did not specify the new rate, an omission that
we discuss later.
3
B.
Askew filed suit in state court alleging violations of CLEC
and the MCDCA as well as breach of contract based on HRFC’s
supposed failure to comply with CLEC. HRFC removed the case to
federal court.
After limited discovery related to Askew’s CLEC
allegations, HRFC moved for summary judgment, which the district
court granted. With regard to Askew’s CLEC claims, the court
held that (1) Askew did not present sufficient evidence that
HRFC knowingly violated CLEC under section 12-1018(b), and (2)
CLEC’s section 12-1020 safe-harbor provision shielded HRFC from
any other basis for liability under the statute. The court also
held that Askew’s breach of contract claim must rise and fall
with his CLEC claim. Accordingly, the court concluded that HRFC
was not liable for breach of contract. As to Askew’s MCDCA
claim, the court held that “[t]aken individually or as a whole,
HRFC’s course of conduct in attempting to collect the debt owed
on the [contract] by Askew did not reasonably rise to the level
of abuse or harassment” necessary to constitute a violation of
the statute. Askew v. HRFC, LLC, No. RDB-12-3466, 2014 WL
1235922, at *10 (D. Md. Mar. 25, 2014).
This appeal followed.
4
II.
Summary judgment is warranted if “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). We review
the district court’s grant of summary judgment de novo, viewing
the facts in the light most favorable to the nonmovant.
Defenders of Wildlife v. N.C. Dep’t of Transp., 762 F.3d 374,
392 (4th Cir. 2014). Because this case involves solely state-
law matters, “our role is to apply the governing state law, or,
if necessary, predict how the state’s highest court would rule
on an unsettled issue.” Horace Mann Ins. Co. v. Gen. Star Nat’l
Ins. Co., 514 F.3d 327, 329 (4th Cir. 2008).
A.
We turn first to Askew’s contention that the district court
erred in granting summary judgment to HRFC on his CLEC claims.
We begin by sketching out CLEC’s basic framework.
Credit grantors doing business in Maryland may opt to make
a loan governed by CLEC if they “make a written election to that
effect.” § 12-1013.1. If the statute applies, section 12-
1003(a) sets a maximum interest rate of 24% and mandates that
“[t]he rate of interest chargeable on a loan must be expressed
in the agreement as a simple interest rate or rates.”
Generally, if a credit grantor violates this provision, it may
collect only the principal of the loan rather than “any
5
interest, costs, fees, or other charges.” § 12-1018(a)(2). If
a credit grantor “knowingly violates [CLEC],” it “shall forfeit
to the borrower 3 times the amount of interest, fees, and
charges collected in excess of that authorized by [the
statute].” § 12-1018(b).
CLEC also includes two safe-harbor provisions, one of
which, section 12-1020, is central to this case. Section 12-
1020 affords credit grantors the opportunity to avoid liability
through self-correction. It provides:
A credit grantor is not liable for any failure to
comply with [CLEC] if, within 60 days after
discovering an error and prior to institution of an
action under [CLEC] or the receipt of written notice
from the borrower, the credit grantor notifies the
borrower of the error and makes whatever adjustments
are necessary to correct the error.
§ 12-1020. CLEC’s second safe harbor, section 12-1018(a)(3),
differs in a key respect relevant to this case: while section
12-1020 applies to “any failure to comply with [CLEC],” section
12-1018(a)(3) offers no protection from knowing violations.
Askew presents three principal arguments with respect to
CLEC. First, he says that HRFC violated CLEC by failing to
expressly disclose in the contract an interest rate below the
statutory maximum. If he were correct on this point, HRFC would
have committed an uncured violation of CLEC and therefore would
be liable. Second, Askew contends that the “discovery rule”
from the statute-of-limitations context should apply to the
6
section 12-1020 safe harbor, which would mean HRFC failed to
cure an error within sixty days of discovery as section 12-1020
requires. 2 Finally, Askew argues that section 12-1020 provides
HRFC no protection because (1) HRFC failed to properly notify
him of the interest-rate error, and (2) it failed to make the
necessary adjustments to correct the error. We discuss these
contentions in turn.
1.
Askew argues that it is a distinct violation of section 12-
1003(a) to fail to expressly disclose an interest rate below
CLEC’s maximum in the operative contract. Here, the parties do
2 Askew also argues that HRFC “knowingly” violated CLEC
within the meaning of section 12-1018(b), which he asserts
precludes application of section 12-1020’s safe harbor. He
reasons that section 12-1018(b) “requires only a showing that
the violator knows that he is engaging in the act that violates
the law - evidence of a specific express knowledge that the act
violates the law is not required to find a knowing
violation . . . - because ignorance of the law is no excuse[.]”
Appellant’s Br. at 44. According to Askew then, HRFC knew the
facts constituting the violation when it accepted assignment of
the contract because parties to a contract are presumed to have
read and understood its terms. That, says Askew, is enough to
make out a knowing violation of the statute, even if HRFC did
not immediately understand the legal significance of the
contract terms.
But whether Maryland courts would hold that knowledge of
the operative contract terms is alone sufficient to make out a
“knowing” violation of section 12-1018(b) is a question that we
do not decide. As we explain later, section 12-1020 allows a
credit grantor to cure any failure to comply with CLEC, knowing
or otherwise, provided it acts within 60 days of discovering
that it violated the statute and before the borrower files suit
or provides notice to the credit grantor.
7
not dispute that the contract specifies an interest rate above
the statutory maximum. Consequently, if Askew’s interpretation
of CLEC were correct, he would prevail because HRFC would have
committed an uncured violation of section 12-1003(a).
Askew’s argument turns on the text of section 12-1003(a),
which states:
A credit grantor may charge and collect interest on a
loan . . . as the agreement, the note, or other
evidence of the loan provides if the effective rate of
simple interest is not in excess of 24 percent per
year. The rate of interest chargeable on a loan must
be expressed in the agreement as a simple interest
rate or rates.
Askew urges that the word “provides” in the statute mandates
that “a credit grantor is authorized to charge and collect
interest . . . only after . . . the credit grantor discloses an
interest rate equal to or less than 24% in the [retail
installment sales contract].” Appellant’s Br. at 23.
Additionally, with regard to the second sentence of section 12-
1003(a), Askew says that (1) the term “rate of interest
chargeable” refers to a maximum of 24%, and (2) this rate must
be expressly disclosed in the contract.
The district court rejected Askew’s arguments, explaining
that the only disclosure requirement in section 12-1003(a) is
one mandating that the interest rate charged be expressed as a
simple interest rate. See Askew, 2014 WL 1235922, at *5. We
agree.
8
In our view, the first sentence of section 12-1003(a) bars
credit grantors from collecting or charging interest above 24%,
while the second sentence requires credit grantors to express
the rate as a simple interest rate. Interpreted this way, the
statute furthers two important purposes. First, it prevents
credit grantors from charging usurious rates. Second, it
protects consumers by eliminating confusion caused by difficult-
to-decipher interest rates (e.g., compound interest rates) that
might obscure the true cost of a loan.
Adopting Askew’s interpretation, in contrast, would subject
credit grantors to a rather meaningless technical requirement
while doing little to help consumers. We can think of no
sensible reason to interpret section 12-1003(a) so as to impose
strict liability, regardless of the circumstances, whenever the
paper upon which a contract is written erroneously expresses an
interest rate higher than “twenty-four.” Instead, read as a
whole and in context, the provision targets far more immediate
dangers to consumers: being charged excessive interest and being
duped into accepting a deceptively high rate. Askew’s concern—
that a credit grantor can “disclose[] an interest rate of one
thousand percent (1,000%) in the loan agreement” but then
“nonetheless charge and collect interest at 24%”—strikes us as
fanciful, at best. Appellant’s Br. at 25. Indeed, even taking
Askew’s contention at face value, we suspect most consumers
9
would be pleased to pay a rate 976 percentage points lower than
what they agreed to in a contract.
We hold that HRFC’s mere failure to disclose an interest
rate below CLEC’s statutory maximum is not a distinct violation
of section 12-1003(a) for which liability may be imposed.
2.
Next we consider Askew’s contention that HRFC is liable
under CLEC because the section 12-1020 safe harbor imports
Maryland’s “discovery rule” from the statute-of-limitations
context. Maryland’s discovery rule provides that a “cause of
action accrues when the claimant in fact knew or reasonably
should have known of the wrong” that provides the basis of his
claim. Poffenberger v. Risser, 431 A.2d 677, 680 (Md. 1981).
It is the default rule in Maryland for when the clock begins to
run on a plaintiff’s cause of action. Windesheim v. Larocca,
116 A.3d 954, 962 (Md. 2015).
There is no dispute that HRFC violated section 12-1003(a)
by charging Askew a 26.99% interest rate. Nevertheless, HRFC
argues (and the district court agreed) that section 12-1020
shields it from liability. Essential to HRFC’s contention is
that it “discovered” its error—charging Askew an interest rate
above CLEC’s statutory maximum—in August 2010, less than sixty
days before curing it. Because, says HRFC, it corrected the
10
error within section 12-1020’s cure period, it cannot be held
liable under CLEC.
If the discovery rule applied, however, it would move the
moment of “discovery” back more than two years to the day HRFC
accepted assignment of the contract. This is because HRFC
should have known at the time of assignment that the contract
violated section 12-1003(a), as the writing clearly (1) provides
that CLEC applies, and (2) expresses an interest rate above that
authorized by the statute. Thus, if we credit Askew’s argument,
HRFC would not have cured its error within sixty days of
discovery, as required by the safe-harbor provision.
In Maryland, “[t]he cardinal rule of statutory
interpretation is to ascertain and effectuate the intent of the
legislature . . . begin[ning] with the plain language of the
statute, and ordinary, popular understanding of the English
language.” Hammonds v. State, 80 A.3d 698, 709 (Md. 2013)
(quoting Briggs v. State, 992 A.2d 433, 439 (Md. 2010)). “When
the language of the statute is subject to more than one
interpretation, it is ambiguous and [courts] usually look beyond
the statutory language to the statute’s legislative history,
prior case law, the statutory purpose, and the statutory
structure as aids in ascertaining the Legislature’s intent.”
Id. (quoting Briggs, 992 A.2d at 439).
11
The meaning of the term “discovering” in section 12-1020 is
a question of first impression. Askew attempts to fill the void
in authority by citing to a number of statute-of-limitations
cases holding that a statute’s use of the word “discover”
imports the discovery rule. Appellant’s Br. at 28–32.
Importantly, however, none of these cases involves a safe-harbor
provision placing a deadline on a defendant.
Moreover, interpreting the term “discovering an error” in
section 12-1020 to mean actually uncovering a mistake
constituting a violation of the statute better comports with
CLEC’s text, public policy, and the statute’s purpose.
Analyzing the statutory language, the district court explained
that the term “error” in section 12-1020 means “an ‘assertion of
belief that does not conform to objective reality.’” Askew,
2014 WL 1235922, at *5 (quoting Error, Black’s Law Dictionary
(9th ed. 2009)). The court went on to define “discovery” as the
“act or process of finding or learning something that was
previously unknown.” Id. (quoting Discovery, Black’s Law
Dictionary (9th ed. 2009)). Combining these definitions, the
court concluded, and we agree, that “discovery of the error
means when the Defendant actually knew about” a mistake—in this
case, charging an interest rate above CLEC’s maximum. Id.Equally persuasive is the negative policy implication of
accepting Askew’s position. If the discovery rule governed
12
CLEC’s safe harbor, credit grantors would have little incentive
to correct their mistakes and make debtors whole. This is
particularly problematic because the borrower is unlikely to
discover on his own that the interest rate charged on a loan
exceeds CLEC’s maximum. The instant case proves this point.
Upon learning of its mistake, and but for the safe harbor, HRFC
would have had little reason to inform Askew of its error, lower
his interest rate, and provide a refund. Instead, HRFC might
well have chosen to do nothing, leaving it to Askew to discover
the error. 3 Consequently, applying the discovery rule in cases
like this one is likely to exacerbate one of the harms CLEC
seeks to avoid—the charging of usurious interest. On the other
hand, if we reject the discovery rule, credit grantors will be
encouraged to do exactly what the text of the statute encourages
and what HRFC did here in fact: cure any CLEC violation upon
learning of it and notify the debtor, who is otherwise unaware
of any problem with the loan.
CLEC’s purpose further bolsters our conclusion. The
Maryland legislature enacted CLEC as part of what has become
known as the “Credit Deregulation Act” in order to “entice
3We accept that the discovery rule might heighten a credit
grantor’s vigilance, at least for the first sixty days after
accepting assignment of a contract. But, honest mistakes like
the one in this case can slip through the cracks. We think the
Maryland legislature intended such mistakes to be corrected upon
discovery rather than swept under the rug.
13
creditors to do business in the State.” Ford Motor Credit Co.
v. Roberson, 25 A.3d 110, 117–18 (Md. 2011). The bill
containing CLEC was introduced after “four Maryland banks
transferred certain of their operations to Delaware where the
banking laws were more favorable.” Id. at 118 (quoting Biggus
v. Ford Motor Credit Co., 613 A.2d 986, 991 (Md. 1992)).
Concerned that the bill went too far in deregulating banks,
however, the Maryland Attorney General objected. Patton v.
Wells Fargo Fin. Md., Inc., 85 A.3d 167, 179 (Md. 2014). In a
legislative compromise, the bill was amended to include some
additional consumer-protection provisions. Id. at 179–80. In
light of this history, CLEC is best read to handle credit
grantors with a relatively light touch while still protecting
consumers. Our interpretation of section 12-1020 promotes this
purpose by ensuring that borrowers are made whole while allowing
credit grantors to avoid litigation and penalties through self-
correction.
In this case, HRFC discovered its error—the fact that it
charged interest above CLEC’s maximum rate—in August 2010,
within sixty days of its cure attempt. Consequently, assuming
HRFC properly notified Askew and “ma[de] whatever adjustments
[were] necessary to correct the error,” as section 12-1020
requires, the district court was correct that HRFC is not liable
under CLEC. We turn now to whether that assumption is correct.
14
3.
a.
Askew contends that HRFC’s September 2010 letter was so
vague that it failed to meet the notice requirement of section
12-1020, which mandates that “the credit grantor notif[y] the
borrower of the error.” We disagree.
HRFC’s cure letter provided Askew notice of the error,
albeit somewhat cryptically. It identified a “problem” with
Askew’s interest rate and then told him that he was due a credit
of $845.40. J.A. 228. Taken together, this information implies
that Askew’s interest rate was too high—the “error” that HRFC
cured under section 12-1020. We think this was enough to comply
with the statute’s notice requirement.
To support his argument that HRFC needed to do more, Askew
cites cases interpreting similarly worded safe-harbor provisions
in the federal Truth in Lending Act (“TILA”), 15 U.S.C. §
1640(b), and a Texas usury law, Tex. Fin. Code Ann. §
305.103(a)(2). But those cases are inapposite. Both Thomka v.
A. Z. Chevrolet, Inc., 619 F.2d 246, 248–52 (3d Cir. 1980), and
In re Weaver, 632 F.2d 461, 462, 465–66 (5th Cir. 1980), deal
with violations of disclosure provisions, unlike this case.
Disclosure errors are rooted in some defect in conveying
information. See, e.g., 15 U.S.C. § 1601(a) (explaining that
TILA’s disclosure requirements exist “so that the consumer will
15
be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit”). An
anti-usury provision, on the other hand, exists to stop the
collection of excessive interest. Requiring more specificity
strikes us as a far more useful remedy in the former case than
in the latter.
To the extent the cases dealing with the Texas statute
require more specific notice than HRFC provided, they are
inconsistent with CLEC’s purpose, especially where the harm to
the borrower—being overcharged—has been remedied. Furthermore,
the Texas statute requires the creditor to give “written
notice . . . of the violation,” § 305.103(a)(2) (emphasis
added), while CLEC requires notice of the “error,” § 12-1020.
The term “violation” is more technical, implying explicit
reference to a violation of a statute. See In re Kemper, 263
B.R. 773, 783 (Bankr. E.D. Tex. 2001) (focusing on the term
“violation” in section 305.103 in holding that “a correction of
a usury violation under § 305.103 must be just that—an
acknowledgment of the existence of a usury violation”). CLEC’s
use of the term “error,” in contrast, avoids inviting jargon in
the cure letter by simply requiring identification of the
substance of the mistake at issue—in this case, charging too
much interest.
16
We therefore conclude that HRFC complied with section 12-
1020’s notice requirement.
b.
Finally we address Askew’s argument that HRFC failed to
properly cure its error. See § 12-1020 (predicating application
of the safe harbor on the credit grantor “mak[ing] whatever
adjustments are necessary to correct the error”). We conclude
that HRFC’s cure was sufficient.
Askew first argues that HRFC never cured its failure to
disclose in the contract an interest rate less than or equal to
24%. As previously discussed, this does not give rise to
liability for a violation of CLEC.
Next, Askew argues that section 12-1003(a) makes charging
and collecting any interest on a loan conditional on charging a
rate of 24% or below. Therefore, Askew contends, HRFC should
have refunded far more than $845.40, which only accounts for the
amount HRFC collected in excess of CLEC’s maximum rate.
We disagree. As the district court noted, “it is
inconceivable that a borrower should receive such a windfall
upon the credit grantor’s cure of an error.” Askew, 2014 WL
1235922, at *7. Furthermore, the section 12-1020 safe harbor is
intended to encourage credit grantors to self-correct, which
they would have little incentive to do if forced to refund all
interest collected.
17
Askew also argues in his reply brief that HRFC should have
refunded all interest collected in excess of 6%. Askew roots
this argument in Maryland common law and the Maryland
Constitution. In short, he says that “any contract assessing
interest higher than the constitutional rate [of 6%] that was
not otherwise controlled by a statutory provision was unlawful
and the portion of interest greater than the constitutional rate
w[as] recoverable in an action for usury.” Reply Br. at 14; see
also Md. Const. art. 3, § 57 (“The Legal Rate of Interest shall
be Six per cent. per annum; unless otherwise provided by the
General Assembly.”).
Because Askew presents this argument too late, we need not
address it. See Hunt v. Nuth, 57 F.3d 1327, 1338 (4th Cir.
1995) (“[A]ppellate courts generally will not address new
arguments raised in a reply brief because it would be unfair to
the appellee and would risk an improvident or ill-advised
opinion on the legal issues raised.”). But we note that
Maryland law mandates a default rate of 6% only in the absence
of a statute providing otherwise. Here, CLEC is precisely such
a statute, and, for the reasons explained above, it merely
required HRFC to make a timely refund of the interest it
collected above CLEC’s statutory maximum.
18
B.
We turn now to the question of whether the district court
properly granted summary judgment to HRFC on Askew’s breach of
contract claim. Askew contends that because the contract
incorporates CLEC’s provisions, HRFC is liable for breach of
contract for any deviation from CLEC, “regardless of whether
HRFC properly cured the failure to comply” with the statute.
Appellant’s Br. at 51.
We reject this argument. Here, the contract incorporates
all of CLEC—including its safe harbors. It follows that just as
liability under CLEC begets a breach of the contract, a defense
under CLEC precludes contract liability. A contrary outcome
would nullify the effect of CLEC’s safe harbors because credit
grantors that properly cure mistakes—as CLEC encourages—would
still face contract liability. We decline to accept such an
anomalous result.
C.
We next consider whether the district court erred in
granting HRFC summary judgment on Askew’s MCDCA claim. Askew
attacks the district court’s decision on this issue on two
grounds. First, he argues that a reasonable jury could conclude
that he was entitled to relief. Second, he contends that the
court granted summary judgment prematurely because it did not
allow him discovery related to the MCDCA claim. Because a
19
reasonable jury could find that HRFC’s conduct violated the
MCDCA, we conclude that HRFC is not entitled to summary judgment
as to this claim.
The MCDCA “protects consumers against certain threatening
and underhanded methods used by debt collectors in attempting to
recover on delinquent accounts.” Shah v. Collecto, Inc., No.
Civ.A.2004-4059, 2005 WL 2216242, at *10 (D. Md. Sept. 12, 2005)
(quoting Spencer v. Hendersen-Webb, Inc., 81 F. Supp. 2d 582,
594 (D. Md. 1999)). The portion of the MCDCA at issue, section
14-202(6), provides that a debt collector may not “[c]ommunicate
with the debtor or a person related to him with the frequency,
at the unusual hours, or in any other manner as reasonably can
be expected to abuse or harass the debtor” (emphasis added).
Askew argues that HRFC violated the MCDCA by, among other
things, representing that it had taken certain legal actions
against him when it had not, in fact, taken such actions.
Specifically, Askew contends that HRFC (1) falsely suggested
that it had obtained a replevin warrant, (2) falsely represented
that “[n]otice of complaint has been forwarded to the MVA
[(presumably the Maryland Motor Vehicle Administration)] fraud
division for your refusal to insure the vehicle and for hiding
the car from the lien holder,” and (3) falsely represented that
the instant case had been dismissed when it was still pending.
J.A. 13–14, 280–81.
20
A jury could find that attempting to collect a debt by
falsely claiming that legal actions have been taken against a
debtor violates section 14-202(6). In Zervos v. Ocwen Loan
Servicing, LLC, for example, the court allowed a claim under 14-
202(6) to survive a motion to dismiss based on the “Defendant’s
alleged representations that Plaintiffs’ home had been
foreclosed upon and that a sale date had been scheduled, when in
fact there was no such foreclosure.” No. 1:11-cv-03757, 2012 WL
1107689, at *3, *6 (D. Md. Mar. 29, 2012). Similarly, in Baker
v. Allstate Financial Services, Inc.—a case arising under an
analogous provision in the federal Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692d 4—a plaintiff’s claim
that a debt collector falsely implied that a legal case was
pending against him survived a motion to dismiss. 554 F. Supp.
2d 945, 950-51 (D. Minn. 2008).
Other cases suggest that there is a line between truthful
or future threats of appropriate legal action, which would not
4 Section 1692d prohibits a debt collector from “engag[ing]
in any conduct the natural consequence of which is to harass,
oppress, or abuse any person in connection with the collection
of a debt.” As HRFC notes, section 1692d “is substantively very
similar to the prohibitions of [section] 14-202(6).” Appellee’s
Br. at 27; see also Zervos, 2012 WL 1107689, at *6 (explaining
that because the plaintiff’s “allegations made out a minimally
plausible claim that Defendant's communications with them
regarding their mortgage were abusive or harassing under the
FDCPA,” her MCDCA claim under section 14-202(6) “will stand for
the same reasons”).
21
give rise to liability, and false representations that legal
action has already been taken against a debtor, as HRFC
allegedly made here. In Dorsey v. Morgan, for instance, the
plaintiff argued that the defendant violated section 1692d by
threatening future legal action against him when, according to
the plaintiff, the defendant would not take such action. 760 F.
Supp. 509, 515 (D. Md. 1991). The court rejected this argument,
reasoning that the debt collector’s supposed threat “w[as] not
false” because the collector said merely that he “may request”
that legal action be taken against the debtor. Id. at 515–16
(emphasis added). Similarly, in Russell v. Standard Federal
Bank, the court concluded that a notice stating that a debt
collector was proceeding with a foreclosure action did not
violate section 1692d because it “was truthful.” No. 02-70054,
2002 WL 1480808, at *5 (E.D. Mich. June 19, 2002); see also
Pearce v. Rapid Check Collection, Inc., 738 F. Supp. 334, 338–39
(D.S.D. 1990) (“In this case, the only threats which defendants
made were ones which legally could be taken, and in fact were
taken. There has been no violation of section 1692d.”).
Here, HRFC told Askew on at least three occasions that it
had taken some legal action against him when (according to
Askew) it had not. Contrary to what the district court held, a
jury could find that this conduct, at least in the aggregate,
could reasonably be expected to abuse or harass Askew.
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Accordingly, we reverse the district court’s order granting
summary judgment to HRFC on Askew’s MCDCA claim.
III.
For the reasons given, we affirm the judgment of the
district court with respect to Askew’s CLEC and breach of
contract claims. With regard to Askew’s MCDCA claim, however,
we reverse the district court’s order granting summary judgment
to HRFC and remand for further proceedings consistent with this
opinion.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
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