Aleta Powell v. Palisades Acquisition XVI, LLC , 782 F.3d 119 ( 2014 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1171
ALETA POWELL,
Plaintiff - Appellant,
v.
PALISADES ACQUISITION XVI, LLC; FULTON FRIEDMAN & GULLACE,
LLP; JOHN DOES 1-10,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge.
(1:13-cv-00219-RDB)
Argued: October 30, 2014 Decided: December 18, 2014
Before NIEMEYER and GREGORY, Circuit Judges, and DAVIS, Senior
Circuit Judge.
Affirmed in part, vacated in part, and remanded by published
opinion. Judge Niemeyer wrote the opinion, in which Judge
Gregory and Senior Judge Davis joined.
ARGUED: Max F. Brauer, THE LAW OFFICES OF E. DAVID HOSKINS, LLC,
Baltimore, Maryland, for Appellant. Megan Elizabeth Gullace,
FULTON FRIEDMAN & GULLACE, LLP, Rochester, New York, for
Appellees. ON BRIEF: E. David Hoskins, THE LAW OFFICES OF E.
DAVID HOSKINS, LLC, Baltimore, Maryland, for Appellant. Cynthia
L. Fulton, FULTON FRIEDMAN & GULLACE, LLP, Rochester, New York,
for Appellees.
NIEMEYER, Circuit Judge:
Aleta Powell, a credit card debtor, commenced this action
against Palisades Acquisition XVI, LLC, and its attorneys,
Fulton Friedman & Gullace, LLP, as debt collectors, alleging
violations of two provisions of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692e and § 1692f, and
related state statutes. She claimed that after Palisades
purportedly purchased a judgment that had been entered against
her in state court, it filed an Assignment of Judgment in the
action that falsely represented its ownership of the judgment
and misrepresented the amount she owed.
The district court granted summary judgment to Palisades
and Fulton Friedman & Gullace, concluding that the filing of the
Assignment of Judgment did not qualify as debt collection
activity that implicated the protections of the FDCPA and that,
in any event, the misrepresentations made in the document were
not material. It also concluded that Powell failed to produce
sufficient evidence to support a claim under 15 U.S.C. § 1692f
and the related state statutes.
On Powell’s appeal, we vacate the judgment entered on
Powell’s FDCPA claim under 15 U.S.C. § 1692e and remand that
claim. We conclude (1) that the filing of an assignment of
judgment in a debt collection action qualifies as debt
collection activity that triggers the protections of the FDCPA;
2
(2) that the Assignment of Judgment that Palisades filed against
Powell did not falsely claim Palisades’ ownership of the
judgment; and (3) that the misrepresentations in the Assignment
of Judgment as to the amount of the judgment and the amount of
Powell’s payments on the judgment were material. We also vacate
the court’s conditional ruling that the errors made in the
Assignment of Judgment did not provide a basis for the “bona
fide error defense” found in 15 U.S.C. § 1692k(c). We affirm
the judgment entered on Powell’s § 1692f claim and her state-law
claims.
I
Powell, a resident of Baltimore, Maryland, incurred a
credit card debt of $8,205.24, payable to Direct Merchants Bank,
N.A., and defaulted on the debt after losing her job in 2000.
The Bank assigned the debt to Platinum Financial Services Corp.,
which filed an action in November 2001 in the District Court of
Maryland for Baltimore City (“Baltimore City District Court”) to
collect the debt. In response to the suit, Powell agreed to a
payment schedule, subject to the entry of a consent judgment in
the event of default. On June 24, 2003, after Powell defaulted
again, the Baltimore City District Court entered judgment in
favor of Platinum Financial in the amount of $10,497.21, which
included $9,216.43 for principal and pre-judgment interest,
3
$1,230.78 in attorney’s fees, and $50 in costs, and which
provided for post-judgment interest at the statutory rate of
10%. When Platinum Financial began garnishment proceedings to
collect on its judgment, Powell again agreed to make payments,
and she did so until May 2005, making monthly payments totaling
$2,700. She later stated that she stopped making payments
because she thought she had paid off the debt.
In March 2007, Platinum Financial sold its judgment against
Powell to Palisades Acquisition XV, LLC, which, on the same day,
sold it to Palisades Acquisition XVI, LLC (“Palisades”).
Palisades later retained the law firm of Fulton Friedman &
Gullace, LLP, to help it collect the debt. Pursuing its
collection effort, Fulton Friedman & Gullace entered an
appearance in the debt collection action pending in the
Baltimore City District Court, prepared an Assignment of
Judgment, served a copy of it on Powell, and, on June 29, 2012,
filed it in the pending action. The Assignment of Judgment,
which included the caption of the action, indicated that it was
prepared pursuant to Md. Rule 3-624, which authorizes an
assignee who files an assignment of judgment to enforce the
judgment in its own name. The Assignment of Judgment that
Fulton Friedman & Gullace filed provided in relevant part:
A Judgment in the above case was entered on June 24,
2003 in the amount of $10497.21 plus attorney’s fees
of $1230.78 and costs of $0.00. Payments totaling
4
$0.00. PLATINUM FINANCIAL SERVICES CORP was the
judgment creditor in this case. PLATINUM FINANCIAL
SERVICES CORP transferred and assigned all title,
rights, and interest in said judgment on or about
March 5, 2007 to:
Palisades Acquisition XVI, LLC
210 Sylvan Avenue
Englewood Cliffs, NJ 07632
The Bill of Sales for said assignment are attached
hereto reflecting Judgment Creditor’s assignment.
The Assignment was signed by an attorney with Fulton Friedman &
Gullace and included a certificate of service indicating that a
copy was mailed to Powell on May 29, 2012. The last line of the
paper stated, “This communication is from a debt collector.”
As it turned out, the Assignment of Judgment was erroneous
in two respects. First, it reported a judgment in the total
amount of $11,727.99, instead of the correct amount of
$10,497.21. Apparently, the preparer of the document double
counted the $1,230.78 award for attorney’s fees. Second, it
reported that Powell had made no payments on the judgment when,
in fact, she had made $2,700 in payments.
The Assignment of Judgment indicated that bills of sale
reflecting the assignment of the judgment to Palisades were
attached, but as the Baltimore City District Court later found,
the attached bills of sale simply referenced “accounts” and were
not sufficiently specific to demonstrate the assignment of
Powell’s judgment.
5
In response to the Assignment of Judgment, Powell filed a
motion in the Baltimore City District Court to vacate the
judgment on the ground of “fraud, mistake, or irregularity.” At
the hearing on the motion, an attorney from Fulton Friedman &
Gullace acknowledged that the Assignment of Judgment that had
been filed was erroneous, and he submitted an amended Assignment
of Judgment to correct the errors. Nonetheless, the court
vacated the judgment because the bills of sale attached to the
Assignment of Judgment were insufficient to indicate Palisades’
ownership and because Palisades lacked records documenting
Powell’s payments on the debt. The Circuit Court for Baltimore
City affirmed the ruling on appeal, and the Maryland Court of
Appeals denied discretionary review.
After her judgment had been vacated by the Maryland court,
Powell commenced this action against Palisades and Fulton
Friedman & Gullace, asserting claims under the FDCPA, 15 U.S.C.
§§ 1692-1692p; the Maryland Consumer Debt Collection Act
(“MCDCA”), Md. Code Ann., Com. Law §§ 14-201 to 14-204; and the
Maryland Consumer Protection Act (“MCPA”), id. §§ 13-101 to 13-
501. Specifically, she alleged that the defendants violated two
provisions of the FDCPA, 15 U.S.C. § 1692e and § 1692f, “by
filing an assignment of judgment that overstated the amount due
on her debt” and “by filing an assignment of judgment without
proof of a valid assignment.” She alleged further that this
6
conduct also violated the two Maryland statutes. She demanded
$1,000 in statutory damages under the FDCPA and $60,000 in
compensatory damages, as well as attorney’s fees and costs.
On cross-motions for summary judgment, the district court
entered judgment in favor of the defendants on January 29, 2014.
With respect to the FDCPA claims, the court concluded that the
representations that Palisades made in the Assignment of
Judgment did not implicate the FDCPA because the filing of an
assignment of judgment did not qualify as conduct taken “in
connection with the collection of any debt,” 15 U.S.C. § 1692e,
or conduct taken “to collect or attempt to collect any debt,”
id. § 1692f. The court explained that “[f]iling an Assignment
of Judgment is not an action against a consumer, but rather a
request to the court that it recognize a right of the filing
party.” It also found that even if the FDCPA applied to the
Assignment of Judgment, the misrepresentations made in it were
not material. The court explained that at the time Palisades
filed the Assignment of Judgment, Powell was under the mistaken
“impression that she had paid her debt in full,” and that “[a]ny
reasonable consumer in that circumstance would have contested
the Assignment regardless of whether the judgment amount was
technically correct and regardless of the identity of the debt
collector.” The court separately concluded that “there [was] no
evidence that the Defendants acted unfairly or unconscionably in
7
violation of [15 U.S.C. § 1692f].” Finally, as to her state-law
claims, the court concluded that Powell had not produced
evidence to show that the defendants had attempted to enforce a
right with knowledge that the right did not exist, as required
by the relevant state statutes.
From the final judgment, Powell took this appeal.
II
Powell contends first that the district court erred in
concluding that the filing of an assignment of judgment in a
debt collection action does not constitute debt collection
activity that implicates the FDCPA. In reaching its conclusion,
the district court considered three factors: “(1) whether the
communication included a demand for payment or had the
‘animating purpose’ to induce payment; (2) the relationship
between the parties; and (3) the purpose and context of the
communication.” While the court acknowledged that the
relationship between the parties was that of debtor and debt
collector, it found that the Assignment of Judgment did not
contain a demand for payment and was not filed to induce
payment. Moreover, although the court recognized that the
Assignment of Judgment “was a step to ultimately collecting the
debt,” it nonetheless emphasized that “the Defendants would
[still] have had to take separate action to collect any money
8
from Powell.” It thus concluded that “filing the Assignment was
not an action to collect a debt” and that it therefore was “not
subject to the [FDCPA].” Challenging the court’s conclusion,
Powell argues that the standard applied by the court is not
supported by the statutory language and, in any event, has been
employed by other courts only to evaluate informal
communications from debt collectors, such as letters or
telephone calls, but not debt collectors’ litigation activities.
The defendants, on the other hand, assert that the district
court correctly concluded that “the Assignment was not a
collection activity, because [it] contained no demand for
payment and was not an action against the consumer capable of
inducing payment but rather served to establish a right of the
filing party with the court.”
To determine whether the filing of an assignment of
judgment in a debt collection action triggers application of the
FDCPA, we look first to the text of the statute -- in this case,
15 U.S.C. § 1692e and § 1692f. Section 1692e prohibits debt
collectors from “us[ing] any false, deceptive, or misleading
representation or means in connection with the collection of any
debt,” 15 U.S.C. § 1692e (emphasis added), and § 1692f prohibits
debt collectors from “us[ing] unfair or unconscionable means to
collect or attempt to collect any debt,” id. § 1692f (emphasis
added). It is apparent that nothing in this language requires
9
that a debt collector’s misrepresentation be made as part of an
express demand for payment or even as part of an action designed
to induce the debtor to pay. Cf. Gburek v. Litton Loan
Servicing LP, 614 F.3d 380, 385 (7th Cir. 2010) (noting “that a
communication need not make an explicit demand for payment in
order to fall within the FDCPA’s scope” and that “a
communication made specifically to induce the debtor to settle
her debt will be sufficient to trigger the protections of the
FDCPA” (emphasis added)). But see Grden v. Leikin Ingber &
Winters PC, 643 F.3d 169, 173 (6th Cir. 2011) (“[F]or a
communication to be in connection with the collection of a debt,
an animating purpose of the communication must be to induce
payment by the debtor”). Rather, to be actionable under these
provisions of the FDCPA, a debt collector needs only to have
used a prohibited practice “in connection with the collection of
any debt” or in an “attempt to collect any debt,” a standard
significantly broader than that employed by the district court.
The defendants do not take issue with the fact that the
Assignment of Judgment filed in the Baltimore City District
Court misrepresented the amount of the judgment and the amount
of payments made toward its satisfaction; indeed, they pleaded
that the misrepresentation was an unintentional clerical error.
Rather, they argue that because of its purpose and function, an
assignment of judgment is not filed “in connection with the
10
collection of any debt,” nor as an “attempt to collect any
debt.” To address that argument, we turn to the nature and role
of the Assignment of Judgment filed in the Baltimore City
District Court.
After Powell defaulted on her credit card debt, Platinum
Financial filed an action in the Baltimore City District Court
to collect the debt. Following Powell’s agreement to make
payments and her subsequent default on that agreement, the
Baltimore City District Court entered a judgment in the action
against Powell, dated June 24, 2003. When Platinum Financial
sought to enforce the judgment through garnishment proceedings
under Md. Rule 3-645, Powell yet again agreed to make payments,
deferring further debt collection efforts. After she defaulted
yet again, however, Platinum Financial sold the judgment to
Palisades, which substituted itself as the party plaintiff in
the action by filing the Assignment of Judgment under Md. Rule
3-624. That Rule provides that “[w]hen an assignment [of
judgment] is filed, the judgment may thereafter be enforced in
the name of the assignee to the extent of the assigned
interest.” Md. Rule 3-624. Thus, in the debt collection action
filed against Powell in the Baltimore City District Court, a
consent judgment was entered, a writ of garnishment was entered,
and the Assignment of Judgment was filed. All were steps taken
to collect Powell’s debt. More particularly, once Palisades
11
filed the Assignment of Judgment, it was able to step into
Platinum Financial’s shoes and enforce the judgment in its own
name by pursuing various mechanisms authorized by the Maryland
Rules, such as obtaining a writ of execution under Md. Rule
3-641 or a writ of garnishment under Md. Rule 3-645. See
Maryland Rules Commentary Rule 2-624 (4th ed. 2014) (describing
the purpose and effect of Md. Rule 2-624, the analogous rule for
state Circuit Courts).
Thus, it can hardly be disputed that when a person files an
assignment of judgment in a debt collection action so as to be
able to execute on the judgment, the person has taken action in
connection with the collection of the judgment debt or as part
of an attempt to collect the judgment debt.
This inevitable conclusion is further reinforced by the
factual context of the actions taken by Palisades in this case.
First, Palisades was in the business of collecting debts, and it
purchased the judgment in this case pursuant to that business
purpose. Thus, when Palisades filed the Assignment of Judgment
and served a copy on Powell, it included on the document, “This
communication is from a debt collector.” Moreover, counsel for
Palisades stated in his deposition that the company thought it
had “found some recoverable asset” and so decided to pursue
“collection procedures [on the judgment] against Ms. Powell.”
To that end, Fulton Friedman & Gullace entered its appearance in
12
the Baltimore City District Court action, filed the Assignment
of Judgment, and served a copy on Powell.
In reaching its contrary conclusion, the district court
emphasized that the filing of an assignment of judgment “simply
preserves the rights of the assignee by establishing [that it
is] the rightful owner of a judgment.” This characterization,
however, was too cramped and overlooked the crucial role that
the filing of an assignment of judgment plays in giving the
assignee access to court-sanctioned enforcement procedures.
Indeed, while the district court recognized that “filing the
Assignment was a step to ultimately collecting the debt,” it
nonetheless concluded that such a filing was not itself done to
collect a debt because “the Defendants would have had to take
separate action to collect any money from Powell.” Such
reasoning, however, would exclude a large range of collection
activities from the FDCPA’s protections, including activity that
we have already recognized as falling within the purview of the
statute. For example, in Sayyed v. Wolpoff & Abramson, 485 F.3d
226, 234 (4th Cir. 2007), we held that a motion for summary
judgment filed in a debt collection action was “subject to the
provisions of [the] FDCPA.” It would be incongruous now to hold
that an assignment of judgment filed in a debt collection action
is not similarly subject to the FDCPA, given that a debt
collector who obtains a judgment through a successful summary
13
judgment motion stands in exactly the same position as a debt
collector who files an assignment of judgment. Both have the
right to collect on their judgments, and both must take
additional steps to do so.
Accordingly, we conclude that the district court erred in
dismissing Powell’s FDCPA claims based on its holding that the
filing of an assignment of judgment is not debt collection
activity.
III
Powell contends that the district court also erred in
concluding that the defendants’ misrepresentations in the
Assignment of Judgment were not material. She argues that the
defendants falsely represented (1) that Palisades was the owner
of the judgment, and (2) both the amount of the judgment and her
payments on it. She maintains that these misrepresentations
were material.
As to the first alleged misrepresentation, we conclude that
the record clearly shows that the judgment against Powell had
indeed been assigned by Platinum Financial to Palisades and that
the defendants’ representation of this fact was therefore not
false. To be sure, the Baltimore City District Court found that
Palisades failed adequately to document the assignment in the
proceeding before that court, since Palisades attached only
14
generic bills of sale that were not specific as to Powell’s
debt. But Palisades has rectified that problem in this
litigation, providing the relevant records that show that
Powell’s judgment was one of the many “accounts” that Platinum
Financial assigned to Palisades in March 2007.
Powell argues nonetheless that the doctrine of collateral
estoppel requires us to conclude that Palisades lacked a valid
assignment and was not the true owner of the judgment.
Collateral estoppel, however, “only bars relitigation of issues
actually resolved in a previous suit.” Bethel World Outreach
Ministries v. Montgomery Cnty. Council, 706 F.3d 548, 554 n.2
(4th Cir. 2013) (citing Colandrea v. Wilde Lake Community Ass’n,
761 A.2d 899, 907 (Md. 2000)). In the collection action, the
Baltimore City District Court held only that Palisades had
failed to produce records documenting the assignment, not that
there had been no assignment to Palisades at all. Therefore,
the district court in this case correctly ruled against Powell
on her claim that the defendants falsely represented Palisades’
ownership of the judgment.
On the second alleged misrepresentation, it is undisputed
that the original Assignment of Judgment inaccurately reported
both the amount of the judgment and the amount of Powell’s
payments toward satisfaction of it. The district court
nonetheless held that the false representation did not violate
15
15 U.S.C. § 1692e because it was not material, emphasizing both
that “it appears beyond doubt that on May 29, 2012, Powell owed
significantly more . . . than the amount of the judgment stated”
due to the accrual of post-judgment interest and that “the least
sophisticated consumer who [like Powell] thought no debt was
owed at all would not reasonably act differently based on
whether the judgment amount was stated with exact precision.”
“Whether a communication is false, misleading, or deceptive
in violation of § 1692e is determined from the vantage of the
‘least sophisticated consumer,’” evaluating how that consumer
“would interpret the allegedly offensive language.” Russell v.
Absolute Collection Servs., Inc., 763 F.3d 385, 394-95 (4th Cir.
2014). A logical corollary of the least sophisticated consumer
test is that false, deceptive, and misleading statements must be
material to be actionable. See Donohue v. Quick Collect, Inc.,
592 F.3d 1027, 1033 (9th Cir. 2010) (“[F]alse but non-material
representations are not likely to mislead the least
sophisticated consumer and therefore are not actionable under §§
1692e or 1692f”); Miller v. Javitch, Block & Rathbone, 561 F.3d
588, 596 (6th Cir. 2009); Hahn v. Triumph P’ships, 557 F.3d 755,
758 (7th Cir. 2009) (“A statement cannot mislead unless it is
material, so a false but non-material statement is not
actionable”); see also Warren v. Sessoms & Rogers, P.A., 676
F.3d 365, 374 (4th Cir. 2012) (“[C]ourts have generally held
16
that violations grounded in ‘false representations’ must rest on
material misrepresentations”); Lembach v. Bierman, 528 F. App’x
297, 303 (4th Cir. 2013) (per curiam) (“[T]o plead a claim of
false representation under the FDCPA, the party must show that
the representations are material”).
The materiality requirement limits liability under the
FDCPA to genuinely false or misleading statements that “may
frustrate a consumer’s ability to intelligently choose his or
her response.” Donohue, 592 F.3d at 1034; see also Hahn, 557
F.3d at 758 (“The statute is designed to provide information
that helps consumers to choose intelligently . . .”). Thus,
only misstatements that are important in the sense that they
could objectively affect the least sophisticated consumer’s
decisionmaking are actionable. See Black’s Law Dictionary 1124
(10th ed. 2014) (defining “material”); cf. TSC Indus., Inc. v.
Northway, Inc., 426 U.S. 438, 449 (1976) (“An omitted fact is
material if there is a substantial likelihood that a reasonable
shareholder would consider it important in deciding how to
vote,” even if “disclosure of the omitted fact would [not] have
caused the reasonable investor to change his vote” (emphasis
added)). In assessing materiality, “we are not concerned with
mere technical falsehoods that mislead no one.” Donohue, 592
F.3d at 1034. For example, where a demand letter misstates
interest as principal but accurately states the total amount
17
owed, such a technical error is not material. See Hahn, 557
F.3d at 757. Similarly, a de minimis misstatement of the total
amount owed might not be actionable, although we need not
determine the threshold here.
In this case, the Assignment of Judgment falsely stated
that the judgment against Powell was “in the amount of $10497.21
plus attorney’s fees of $1230.78 and costs of $0.00,” for a
total of $11,727.99. It also erroneously stated that Powell had
made no payments toward satisfaction of this judgment. The
amended Assignment of Judgment corrected these errors, stating
instead that the judgment was for “$9,216.43 plus attorney’s
fees of $1,230.78 and costs of $50.00.” It also stated that
Powell had made $2,700 in payments. The difference between the
erroneous judgment total of $11,727.99 and the correct judgment
total of $10,497.21 and the erroneous statement of no payments
and $2,700 in payments was $3,930.78. This overstatement --
more than 50 percent -- was material under any standard.
The fact that Powell mistakenly thought that she had paid
off the debt in full does not render the false representation
immaterial. The district court presumed that an unsophisticated
consumer in Powell’s position would not “act differently based
on whether the judgment amount was stated with exact precision.”
(Emphasis added). But the least sophisticated consumer who
previously believed that she had paid her debt in full could,
18
upon receiving a copy of an assignment of judgment, be led to
realize that she did indeed have a debt outstanding. And when
that assignment contained an overstatement in excess of 50
percent, the least sophisticated consumer could be led to decide
to pay far more than she otherwise would have paid. Moreover,
even were we to assume the contrary, the inquiry is not whether
the least sophisticated consumer would have acted differently
upon receiving Palisades’ Assignment of Judgment. Instead, it
is whether the information would have been important to the
consumer in deciding how to respond to efforts to collect the
debt. Given the importance of the figures that were
inaccurately reported in the Assignment of Judgment and the
degree to which they were misstated, the misrepresentations here
easily satisfy that test.
Accordingly, we conclude that the district court erred in
its materiality conclusion with respect to Powell’s § 1692e
claim.
IV
While Powell’s claim under § 1692f was based on the same
facts advanced to support her § 1692e claim, the district court
granted summary judgment to the defendants on the § 1692f claim
after concluding that “there [was] no evidence that the
Defendants acted unfairly or unconscionably in violation of
19
[§ 1692f].” Powell has not challenged this separate ruling on
appeal, and therefore it remains part of the judgment that we
affirm. See United States ex rel. Ubl v. IIF Data Solutions,
650 F.3d 445, 456 (4th Cir. 2011) (“‘[T]he failure of a party in
its opening brief to challenge an alternate ground for a
district court’s ruling given by the district court waives that
challenge’” (quoting Rodriguez v. Hayes, 591 F.3d 1105, 1118 n.6
(9th Cir. 2010))); Sapuppo v. Allstate Floridian Ins. Co., 739
F.3d 678, 680 (11th Cir. 2014) (“When an appellant fails to
challenge properly on appeal one of the grounds on which the
district court based its judgment, he is deemed to have
abandoned any challenge of that ground, and it follows that the
judgment is due to be affirmed”).
V
Finally, with respect to Powell’s claims under the MCDCA
and the MCPA, we affirm the judgment of the district court.
Powell alleged that the defendants violated a provision of the
MCDCA that specifies that “[i]n collecting or attempting to
collect an alleged debt a collector may not . . . [c]laim,
attempt, or threaten to enforce a right with knowledge that the
right does not exist.” Md. Code Ann., Com. Law § 14-202(8)
(emphasis added). And her MCPA claim relies on the fact that a
20
violation of the MCDCA is a per se violation of the MCPA. See
id. § 13-301(14)(iii).
Unlike the FDCPA, the MCDCA contains a “with knowledge”
element, which Powell did not establish. See Spencer v.
Hendersen-Webb, Inc., 81 F. Supp. 2d 582, 595 (D. Md. 1999)
(interpreting § 14-202(8) as requiring proof “that the
Defendants either had actual knowledge that their asserted
claims were invalid or [that they] acted with reckless disregard
as to the validity of the claims”). Thus, the district court
correctly concluded that, regardless of the errors in the
amounts listed in the Assignment of Judgment, the undisputed
evidence shows that “when the Defendants filed the Assignment, .
. . they legitimately believed they had the legal right to do
so.” Because we agree with the district court that “the
Defendants did not attempt to enforce a right with knowledge or
reckless disregard as to the non-existence of that right,” we
affirm its judgment on Powell’s state-law claims.
VI
In sum, while we affirm the summary judgment on the § 1692f
claim and the state-law claims, we vacate the summary judgment
granted to the defendants on the § 1692e claim, based on our
conclusions (1) that the Assignment of Judgment was debt
collection activity implicating the FDCPA and (2) that the
21
misrepresentations in the Assignment of Judgment were material.
We remand the § 1692e claim for consideration of the defendants’
“bona fide error defense” and any other remaining factual
questions. While the bona fide error defense was pleaded, it
was not a basis of the district court’s judgment and therefore
was not presented to us on appeal.
The bona fide error defense allows a defendant to avoid
liability by “show[ing] by a preponderance of evidence that the
violation was not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error.” 15 U.S.C. § 1692k(c). While
the district court acknowledged that the defendants’ error in
this case was a “clerical error,” it nonetheless indicated that
the defense was inapplicable because the “affirmative defense
does not apply to errors of law” and “the Defendants made an
error of Maryland law as to what amounts are included in a
judgment.” Yet, there is no evidence in the record to support
the district court’s characterization of the defendants’
overstatement of the judgment amount as an error of law. To the
contrary, the record suggests that Palisades made a
transcription error. Moreover, the lawyer for Palisades who
filed the Assignment of Judgment testified at his deposition
that the transcription error was not known to him and had been
made by a paralegal. The commission of such errors, if
22
factually established, is an issue of fact, not a question of
law. On remand, the court should give the defendants an
opportunity to develop the defense and the parties an
opportunity to establish any other matter necessary to resolve
the FDCPA claim.
Accordingly, we vacate the summary judgment entered in
favor of the defendants on Powell’s § 1692e claim and remand
that claim, and we affirm the summary judgment entered in favor
of the defendants on Powell’s § 1692f claim and her state-law
claims.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
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