Michael Davis v. Hollins Law , 832 F.3d 962 ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MICHAEL DAVIS, No. 14-16437
Plaintiff-Appellee,
D.C. No.
v. 2:12-cv-03107-LKK-AC
HOLLINS LAW, a Professional
Corporation, OPINION
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of California
Lawrence K. Karlton, District Judge, Presiding
Argued and Submitted May 12, 2016
San Francisco, California
Filed August 8, 2016
Before: Stephen S. Trott, Sandra S. Ikuta,
and Paul J. Watford, Circuit Judges.
Opinion by Judge Ikuta
2 DAVIS V. HOLLINS LAW
SUMMARY*
Fair Debt Collection Practices Act
The panel reversed the district court’s judgment, after a
bench trial, in favor of the plaintiff on a claim under the Fair
Debt Collection Practices Act.
The panel held that the defendant’s communication was
sufficient in context to disclose to the least sophisticated
debtor that it was from a debt collector, and therefore did not
violate 15 U.S.C. § 1692e(11).
COUNSEL
Kathleen Mary Kushi Carter (argued) and Tamara M.
Heathcote, Hollins Law, Irvine, California, for Defendant-
Appellant.
Aaron D. Radbil (argued), Greenwald Davidson Radbil
PLLC, Austin, Texas; Ryan S. Lee, Krohn & Moss, LTD, Los
Angeles, California; Matthew A. Rosenthal, Westgate Law,
Los Angeles, California; for Plaintiff-Appellee.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
DAVIS V. HOLLINS LAW 3
OPINION
IKUTA, Circuit Judge:
Hollins Law, a law firm and debt collection agency, is
subject to the Fair Debt Collection Practices Act (FDCPA),
which among other things requires debt collectors “to
disclose in subsequent communications that the
communication is from a debt collector.” 15 U.S.C.
§ 1692e(11). Today we hold that if a subsequent
communication is sufficient to disclose to the least
sophisticated debtor that the communication was from a debt
collector, there is no violation of § 1692e(11) even if the debt
collector did not expressly state, “this communication is from
a debt collector.” Accordingly, Hollins Law did not violate
§ 1692e(11) here.
I
We begin by describing the legal background. The
FDCPA, 15 U.S.C. §§ 1692–1692p, comprehensively
regulates debt collectors. Tourgeman v. Collins Financial
Servs., Inc., 755 F.3d 1109, 1119 (9th Cir. 2014). Its
remedial purpose is to prevent debt collection actions that
frustrate consumers’ ability to chart a course of action in
response to a collection effort. See Donohue v. Quick
Collect, Inc., 592 F.3d 1027, 1034 (9th Cir. 2010). Section
1692e precludes a debt collector from using “any false,
deceptive, or misleading representation or means in
connection with the collection of any debt.” 15 U.S.C.
§ 1692e. “Debt” is defined as “any obligation or alleged
obligation of a consumer to pay money arising out of a
transaction in which the money, property, insurance, or
services which are the subject of the transaction are primarily
4 DAVIS V. HOLLINS LAW
for personal, family, or household purposes, whether or not
such obligation has been reduced to judgment.” Id.
§ 1692a(5). Section 1692e provides a nonexclusive list of 16
collection practices that violate the FDCPA. At issue here is
§ 1692e(11), which provides:
The failure to disclose in the initial written
communication with the consumer and, in
addition, if the initial communication with the
consumer is oral, in that initial oral
communication, that the debt collector is
attempting to collect a debt and that any
information obtained will be used for that
purpose, and the failure to disclose in
subsequent communications that the
communication is from a debt collector,
except that this paragraph shall not apply to a
formal pleading made in connection with a
legal action.
To determine whether a debt collector is liable for a
violation of § 1692e, we apply an objective standard that
“takes into account whether the least sophisticated debtor
would likely be misled by a communication.” Tourgeman,
755 F.3d at 1119 (internal quotation marks omitted). We
have defined the “least sophisticated debtor” standard as
“lower than simply examining whether particular language
would deceive or mislead a reasonable debtor.” Id. (internal
quotation marks omitted). Even though the “least
sophisticated debtor may be uninformed, naive, and gullible,”
the debtor’s “interpretation of a collection notice cannot be
bizarre or unreasonable.” Evon v. Law Offices of Sidney
Mickell, 688 F.3d 1015, 1027 (9th Cir. 2012). Courts “have
carefully preserved the concept of reasonableness” and have
DAVIS V. HOLLINS LAW 5
presumed that debtors have “a basic level of understanding
and willingness to read [the relevant documents] with care”
in order to safeguard bill collectors from liability for
consumers’ “bizarre or idiosyncratic interpretations of
collection notices.” Id. (quoting Clomon v. Jackson, 988 F.2d
1314, 1319 (2d Cir. 1993) and Campuzano-Burgos v.
Midland Credit Mgmt., Inc., 550 F.3d 294, 298 (3rd Cir.
2008)).
We have also held that any error in a debt collectors’
communications must be material in order to be actionable
under § 1692e. Donohue, 592 F.3d at 1033. Immaterial
errors, by definition, would not frustrate a debtor’s ability to
intelligently choose an appropriate response to a collection
effort. See Tourgeman, 755 F.3d at 1119. For instance, in
Donohue, a debt collector’s statement to a consumer
accurately stated the total amount owed, “but the label for at
least one of the two sums comprising the total debt was
technically incorrect” in that it labeled that amount “12%
interest” when it actually included both interest and pre-
assignment finance charges. Donohue, 592 F.3d at 1034. We
held that the misstatement was not a materially false
characterization of the debt “and hence not actionable” under
§ 1692e. Id. In sum, mere technical errors that deceive no
one do not give rise to liability under the FDCPA. See
Tourgeman, 755 F.3d at 1119.
II
We now turn to the facts of this case. In 2009, Michael
Davis obtained an American Express TrueEarnings Business
6 DAVIS V. HOLLINS LAW
Card at Costco.1 In order to qualify for a business card, Davis
filled in the credit card application with information about his
wife’s real estate practice, even though his wife had stopped
working in real estate the previous year. He subsequently
used the card to purchase a number of personal items at
Costco, including groceries, gas, and a 65-inch television.
Neither Davis nor his wife ever used the card for business
purposes.
Davis failed to pay the balance on the American Express
card and his debt was referred to Hollins Law, a law firm and
debt collection agency. Hollins Law used case management
software to track calendar entries, employee emails,
employee notes, and other records, as well as to generate
reports, including a report detailing Hollins Law’s
communications with Davis. The firm’s first contact with
Davis was on July 23, 2012, when Maggie Higgins, a Hollins
Law employee, called Davis and spoke to him by telephone.
According to the report, Davis told Higgins to communicate
with a debt settlement firm that he had retained to negotiate
on his behalf, and that he would call back the following day
with the settlement firm’s contact information. Hollins Law
required its debt collectors to identify both the nature of the
call and to identify the law firm as a debt collector, and Davis
does not allege Higgins failed to do so.
Davis did not call back with the information he had
promised, so on July 25, 2012, Higgins called Davis again
and reached Davis’s wife, who provided Higgins with the
name and contact information for their debt settlement firm.
1
Unless otherwise specified, the following facts were either found by
the district court or undisputed at trial.
DAVIS V. HOLLINS LAW 7
Over the next few weeks, Higgins communicated
exclusively with the debt settlement firm. The call records
demonstrate that Higgins made multiple attempts to reach
Davis’s representative at the firm during that time. On
August 29, 2012, Davis’s case was assigned to a different
Hollins Law employee, Gregory Daulton, who continued to
leave multiple voicemail messages for different
representatives at the debt settlement firm.
On September 10, 2012, Daulton emailed Davis to thank
him for a telephone inquiry about settling the credit card debt.
Daulton’s email asked Davis to detail the amount of the
settlement offer and the date it would be paid, as well as
information regarding Davis’s monthly income and expenses.
Davis responded by email that same day and offered to settle
the debt for roughly 30 percent of the total due. Davis’s
email explained: “I am in a similar situation with two
additional credit cards both with higher dollar amounts. . . .
[M]y goal is to settle the bad debt for all three credit cards
and this is where I get the 30% number.” Daulton emailed a
reply to Davis’s message, stating that he would forward the
information to the creditor.
The next day, September 11, Daulton emailed Davis with
a second request to specify the amount of his settlement offer.
Davis responded via email: “Actually I don’t even know the
total due on the AMEX account. Can you provide me the
number?” Daulton responded to the inquiry by attaching a
report to a reply email.
On September 17, Davis sent Daulton an email asking for
a status report on the creditor’s response to his settlement
offer. Daulton sent an email reply, stating: “No update. This
is a low offer. Possibly they are dealing with the larger
8 DAVIS V. HOLLINS LAW
percentage offers first, but I’m not sure.” The email also
stated that Daulton would advise Davis about any updates he
received.
Hollins Law’s records show that on September 25,
Daulton left the following voicemail message for Davis:
“Hello, this is a call for Michael Davis from Gregory at
Hollins Law. Please call sir, it is important, my number is
866-513-5033. Thank You.”2 In the voicemail message,
Daulton did not state that Hollins Law was a debt collector.
However, Davis later admitted in response to a discovery
request that: “Upon hearing the voice message, . . . Plaintiff
understood that it was from a debt collector by combining the
message itself with Plaintiff’s prior knowledge that
Defendant was a debt collector.”
After September 25, Davis and Daulton exchanged eleven
additional emails from October 4 to October 12. In those
emails, Daulton informed Davis that his initial settlement
offer had been declined and that Hollins Law would move
forward with legal action. At one point, Davis hired debt
consolidation attorneys to represent him, but then fired the
attorneys and told Daulton to “feel free to deal with [him]
directly.” By October 12 (the last email in the record), the
two parties had still not reached an agreement to settle the
debt.
2
The evidence in the record establishes that Daulton left the voicemail
message for Davis on September 25, 2012. Although Davis submitted an
affidavit in support of a summary judgment motion stating that he had
received Daulton’s voicemail message on August 29, 2012, Davis
admitted at trial that he did not actually recall when he had received the
voicemail, and did not know whether August 29th was the correct date.
On appeal, Davis concedes that he received Daulton’s call in September.
DAVIS V. HOLLINS LAW 9
On December 28, 2012, Davis filed suit against Hollins
Law, alleging a violation of the FDCPA.3 In his complaint,
Davis stated that Hollins Law was “attempting to collect a
debt” on behalf of American Express and that by leaving the
September 25th voicemail message, Hollins Law violated the
FDCPA by (among other things) “failing to disclose in
subsequent communications that the communication was
from a debt collector” in violation of § 1692e(11).
Davis and Hollins Law filed cross motions for summary
judgment, which the district court denied. The court held a
bench trial on April 15, 2014, and ruled in favor of Davis.
The court held that the debt at issue was consumer debt
because the credit card was “primarily used for household
purposes” even though Davis had applied for a business
credit card. Therefore the FDCPA (which applies only to
consumer debt) was applicable to communications from
Hollins Law to Davis. Further, the court held that because
Daulton’s voicemail message failed to disclose that “the
communication is from a debt collector,” it technically
violated § 1692(e)(11), which imposes liability for the
“failure to disclose in subsequent communications that the
communication is from a debt collector.” Although the court
recognized that the violation was “clearly de minimis,” it
proceeded to enter judgment in favor of Davis on June 24,
2014.
3
Davis also alleged that Hollins Law violated the Rosenthal Fair Debt
Collection Practices Act (RFDCPA), which is the California state
equivalent of the FDCPA. See Cal. Civ. Code § 1788 et. seq. The
applicable provision of the RFDCPA states that “every debt collector
collecting or attempting to collect a consumer debt shall comply with the
provisions of Sections 1692b to 1692j” of the FDCPA. Cal. Civ. Code
§ 1788.17. Because the state law claim is derivative of the federal claim,
we do not address it separately.
10 DAVIS V. HOLLINS LAW
Hollins Law timely appealed the district court’s judgment
and raises multiple arguments on appeal.4 The district court
had jurisdiction under 28 U.S.C. § 1331, and we have
jurisdiction under 28 U.S.C. § 1291. When reviewing a
district court’s ruling following a bench trial, we review
questions of law de novo and findings of fact for clear error.
Ambassador Hotel Co. v. Wei-Chuan Inv., 189 F.3d 1017,
1024 (9th Cir. 1999).
III
We begin by considering whether, assuming without
deciding that the amount due on the American Express card
was a “debt” for purposes of the FDCPA, Daulton’s
voicemail message on September 25, 2012, violated the
FDCPA’s prohibition on the “failure to disclose in subsequent
communications that the communication is from a debt
collector.” See 15 U.S.C. § 1692(e)(11).
We first apply an objective standard that takes into
account whether Daulton’s voicemail message would be
sufficient to disclose to the least sophisticated debtor that the
call was on behalf of a debt collector. See Tourgeman,
755 F.3d at 1119. In applying this standard, we presume that
the debtor has a basic level of understanding, which does not
4
Hollins Law argues the following: (1) Davis incurred his debt on a
business credit card, so the district court erred by concluding that the debt
was a consumer debt covered by the FDCPA; (2) even if Davis’s debt is
covered by the FDCPA, Hollins Law met its disclosure obligations under
15 U.S.C. § 1692e(11); (3) Daulton’s voicemail is not a “communication”
under the FDCPA because it did not reference the debt; (4) the district
court erred by misapplying the burden of proof on Davis’s FDCPA claim;
and (5) the district court abused its discretion by precluding the
presentation of Hollins Law’s “bona fide error” defense at trial.
DAVIS V. HOLLINS LAW 11
include “bizarre or idiosyncratic interpretations” of the
communication at issue. Evon, 688 F.3d at 1027. We also
must avoid taking a hypertechnical approach. See
Tourgeman, 755 F.3d at 1119.
Before Daulton’s September 25 voicemail message, Davis
and Daulton had been involved in settlement negotiations for
about a two week period. Davis had made a “telephone
inquiry” to Daulton and had exchanged eight emails with
him. At the time Daulton left the voicemail for Davis on
September 25, Davis had a pending settlement offer to settle
the debt for 30 percent of the total due and had asked Daulton
for a status report regarding the creditor’s response. In the
voicemail in question, Daulton identified himself as “Gregory
at Hollins Law.”
We conclude, given the extent of the prior
communications, that the voicemail message’s statement that
the call was from “Gregory at Hollins Law” was sufficient to
disclose to a debtor with a basic level of understanding that
the communication at issue was “from a debt collector,”5
15 U.S.C. § 1692e(11). Indeed, any other interpretation of
Daulton’s voicemail message would be “bizarre or
idiosyncratic.” Evon, 688 F.3d at 1027 (quoting Campuzano-
Burgos, 550 F.3d at 298). Given the context, the call was not
“false, deceptive, or misleading,” 15 U.S.C. § 1692e, and
would not frustrate consumers’ ability to intelligently chart a
course of action in response to a collection effort, see
Donohue, 592 F.3d at 1034. Although Daulton’s voicemail
message did not expressly state that Hollins Law is “a debt
collector,” § 1692e(11) does not require a subsequent
5
Indeed, Davis admits he did know this, by “combining the message
itself with [his] prior knowledge that [Hollins Law] was a debt collector.”
12 DAVIS V. HOLLINS LAW
communication from the debt collector to use any specific
language so long as it is sufficient to disclose that the
communication is from a debt collector, as it was here. See
Tourgeman, 755 F.3d at 1119.6
Because Daulton’s September 25th voicemail message
was sufficient to disclose to the least sophisticated debtor that
the communication at issue was “from a debt collector,”
Hollins Law did not violate § 1692e(11) in its
communications with Davis, and the district court erred in so
holding.7
REVERSED.
6
Davis cites a number of district court decisions establishing a per se
rule that a debt collector violates § 1692e(11) unless it expressly states
that it is a debt collector in every subsequent communication. See Forkum
v. Co-Operative Adjustment Bureau, Inc., 44 F. Supp. 3d 959, 963 (N.D.
Cal. 2014); Pasquale v. Law Offices of Nelson & Kennard, 940 F. Supp.
2d 1151, 1158 (N.D. Cal. 2013); Savage v. NIC, Inc., 2009 WL 2259726,
at *5–6 (D. Ariz. July 28, 2009). Because the FDCPA does not require
such a hypertechnical approach, we disapprove these decisions to the
extent they are contrary to our decision here.
7
Because we decide Hollins Law’s appeal on this ground, we do not
reach Hollins Law’s other arguments.