Narendra Mavilla v. Absolute Collection Service

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.
2
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
16