Gionis v. Javitch, Block & Rathbone, LLP

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 07a0377n.06
Filed: June 6, 2007
Nos. 06-3048 & 06-3171
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
SHERRY GIONIS, )
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
JAVITCH, BLOCK & RATHBONE, LLP, ) COURT FOR THE SOUTHERN
) DISTRICT OF OHIO
Defendant-Appellant. )
BEFORE: KEITH, COLE, Circuit Judges; and STEEH, District Judge.*
DAMON J. KEITH, Circuit Judge. Sherry Gionis entered into a credit card agreement
with Direct Merchants Credit Card Bank (“Direct Merchants”). When she became delinquent in her
payments, Direct Merchants hired the law firm of Javitch, Block & Rathbone, LLP (“Javitch” or
“law firm”) to collect the delinquent funds. Javitch’s attempts to collect the debt eventually led it
to file suit against Gionis in an Ohio state court on November 24, 2003.
No mention of attorney fees appeared in the state court complaint; but Javitch did attach an
“Affidavit of Indebtedness & Debt & Non-Military & Contract” (“Affidavit”) signed by Erica Vick
(a Direct Merchant agent), paragraph 4 of which reads, in part:
The [credit card] agreement specifically provides that Direct Merchant’s
Credit Card Bank is entitled to recover, to the extent permitted by applicable law, its
*
The Honorable George Caram Steeh, United States District Court Judge for the Eastern District of
Michigan, sitting by designation.
1
reasonable attorney’s fees and costs incurred in any action to enforce its rights under
the agreement.
(JA 20) (emphasis added). Though Ohio law does not permit recovery of attorney fees in connection
with any claim involving “personal, family, or household” debt, see Ohio Rev. Code Ann. § 1301.21,
(which the parties do not dispute), Gionis contends that this language in the Affidavit misleads “the
least sophisticated consumer” to think otherwise, and thereby violates the Fair Debt Collection
Practices Act (“FDCPA” or “Act”), 15 U.S.C. §§ 1692–1692o. In any event, the state court suit
against Gionis was settled between the parties.
Gionis then filed her own lawsuit (a class action) against Javitch in federal court. She
contended that the law firm violated various provisions of the FDCPA and the Ohio Consumer Sales
Practices Act (“OCSPA”), Ohio Rev. Code Ann. § 1345.01, et seq., by attaching the threatening and
misleading Affidavit to the state court complaint.
However, the matter never reached a jury. On cross motions for summary judgment, the
district court found Javitch (a “debt collector” under the Act, see Heintz v. Jenkins, 514 U.S. 291,
294 (1995)) was (1) not protected by witness immunity nor litigation immunity, and (2) liable under
two provisions of the Act—15 U.S.C. §§ 1692e(5) and 1692e(10)—for attaching the Affidavit to the
state court complaint. The district court dismissed Gionis’s remaining claims.
Unresolved issues of class certification, notice, and remedies remain pending in the district
court. Therefore, Javitch filed this interlocutory appeal (purportedly under the “collateral order
doctrine”) challenging the district court’s denial of its immunity claims. Javitch also petitioned for
an interlocutory appeal on the liability issues, see 28 U.S.C. § 1292(b), which another panel of this
Court granted. The two appeals were later consolidated.
I
2
Though neither party disputes our jurisdiction to hear these issues, we have “a duty to
consider sua sponte whether appellate jurisdiction is properly invoked[,]” Mattingly v. Farmers State
Bank, 153 F.3d 336, 336 (6th Cir. 1998), and a recent case, Kelly v. Great Seneca Fin. Corp., 447
F.3d 944 (6th Cir. 2006), makes clear that we have no independent jurisdiction over Javitch’s
immunity claims under the collateral order doctrine. See also Delawder v. Platinum Fin. Servs.
Corp., 189 F. App’x 369, 371 (6th Cir. 2006) (unpublished). But, fortunately for Javitch, the
liability issues (which we have already agreed to hear under 28 U.S.C. § 1292(b)) “cannot be
resolved without addressing” Javitch’s claims of immunity. See Chambers v. Ohio Dep’t of Human
Servs., 145 F.3d 793, 797 (6th Cir. 1998). That is to say, a favorable finding on the immunity issues
may forestall liability under the Act. See Gilda Marx, Inc. v. Wildwood Exercise, Inc., 85 F.3d 675,
679 (D.C. Cir. 1996). Hence, we may properly invoke pendent appellate jurisdiction over these
issues. See Chambers, 145 F.3d at 797; Gilda Marx, Inc., 85 F.3d at 679.
Unfortunately for Javitch, neither litigation immunity nor witness immunity shields it from
liability under the Act. With respect to litigation immunity, Javitch maintains that “[t]he Right to
Petition under the First Amendment has been construed by Courts to afford qualified immunity [to
lawyers engaged in litigation]” (JA 38) (emphasis added), and, at the same time, “[l]awyers possess
an absolute privilege [under common law] concerning statements they make which are reasonably
related to and made in the course of judicial proceedings, and are likewise absolutely immune from
suit for claims which are based on such statements.” (JA 54) (emphases added.) Accepting these
propositions as true as applied to Javitch would, of course, undercut Heintz v. Jenkins—where the
Supreme Court held that “the Act applies to attorneys who ‘regularly’ engage in consumer-debt-
collection activity, even when that activity consists of litigation.” 514 U.S. at 299 (emphasis added);
3
see also 15 U.S.C. § 1692a(6). Javitch does not dispute that it “‘regularly’ engage[s] in consumer-
debt-collection activity.” See Heintz, 514 U.S. at 299. So any discussion of litigation immunity as
applied to lawyers in general (those who do not regularly engage in consumer-debt-collection
activity) is of no help to Javitch. The Supreme Court has already said that lawyers, in their function
as debt collectors, are covered by the Act.
Javitch also contends that “statements contained in[,] and attached to, the state court
complaint cannot serve as the basis for a claim here under the [common law] doctrine of absolute
witness immunity.” (JA 45.) This assumes that Javitch is a “witness.” But it provided no testimony
in the Affidavit; only Erica Vick (the Direct Merchant agent) did. Javitch merely attached the
Affidavit to the state court complaint, and it points to no authority purporting to extend witness
immunity to those who merely attach affidavits.
Even so, we have held that while “testimony presented in the form of an affidavit may be
protected under absolute witness immunity,” Todd v. Weltman, 434 F.3d 432, 439 (6th Cir. 2006),
the immunity does not extend to “complaining witnesses”—those who help instigate the judicial
process by swearing to tell the truth, id. at 444. Vick’s Affidavit (as in Todd) was attached to a state
court complaint, and thus “set the wheels of government in motion by instigating a legal action.”
Id. (quoting Wyatt v. Cole, 504 U.S. 158, 164-65 (1992)) (internal quotation marks omitted). So
Vick and, especially, Javitch are not entitled to absolute witness immunity. (But Vick, of course,
cannot be sued under the Act, for she is not a “debt collector.” See § 1692a(6).)
II
We turn now to the issue of whether summary judgment in Gionis’s favor was proper. There
are no genuine issues of material fact—no dispute as to what was said, who said it, or where it was
4
said; and none about who attached it to the complaint. All that remains is to apply these “basic
facts” to the applicable legal standard. See, e.g., Williams v. Mehra, 186 F.3d 685, 690 (6th Cir.
1999) (en banc) (applying deliberate-indifference standard to facts); Weaver v. Shadoan, 340 F.3d
398, 406 (6th Cir. 2003) (applying the probable-cause standard to facts); Scott v. Clay County, 205
F.3d 867, 877 n.16 (6th Cir. 2000) (same). So review under summary judgment was appropriate,
see Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986), and we review de
novo, see Moore v. Philip Morris Cos., 8 F.3d 335, 339 (6th Cir. 1993). Hence, the issue: Did
Javitch violate § 1692e(5) or § 1692e(10) of the Act when it attached Erica Vick’s Affidavit, which
mentioned recovering attorney fees “to the extent permitted by applicable law,” to the state court
complaint?
The purpose of the Act is “to eliminate abusive debt collection practices by debt collectors[.]”
15 U.S.C. § 1692(e).1 Section 1692e of the Act states “[a] debt collector may not use any false,
deceptive, or misleading representation or means in connection with the collection of any debt.”
And, “without limiting the general application of the foregoing,” id., § 1692e(5) prohibits a “threat
to take any action that cannot legally be taken or that is not intended to be taken.” Section 1692e(10)
1
After oral arguments, Javitch submitted a letter under Rule 28(j), see Fed. R. App. P.
28(j), providing the Court with a citation to a recent Seventh Circuit case, Beler v. Blatt, 480 F.3d
470 (7th Cir. 2007). Beler questions (but does not decide) whether the Act regulates the content
of state court filings in particular. But see Veach v. Sheeks, 316 F.3d 690, 691-92, 693 (7th Cir.
2003) (applying the Act to the content of “a summons and complaint for Indiana small claims
court proceedings”). But the reason for the Beler court’s incertitude is not entirely clear from its
opinion, and thus Beler lends no particular support to Javitch’s position.
And though it postures the Beler case as a “supplemental” citation, Javitch’s appellate
briefs do not provide any reason to think that the Act does not cover the content of state court
filings in particular, see United States v. Nason, 9 F.3d 155, 163 (1st Cir. 1993) (“[A] letter
submitted pursuant to [R]ule 28(j) cannot raise a new issue.”) (internal quotation marks omitted)
(alterations in original); and the Court sees none.
5
similarly prohibits, in relevant part, “[t]he use of any false representation or deceptive means to
collect or attempt to collect any debt[.]”
In a strict sense, neither § 1692e(5) nor § 1692e(10) has been violated here. The Affidavit
only says Direct Merchant “is entitled to recover, to the extent permitted by applicable law, its
reasonable attorney’s fees and costs incurred in any action to enforce its rights under the agreement.”
(JA 20) (emphasis added). Because the credit card agreement (though not the Affidavit) defines
“applicable law” as “federal law, and laws of Arizona,” and because the case was filed in Ohio, there
was (technically speaking) no “threat to take any action that cannot legally be taken,” § 1692e(5)
(emphasis added), nor “use of any false representation or deceptive means to collect” Gionis’s debt,
§ 1692e(10) (emphases added).
But the Act does not require such a sophisticated interpretation. Quite the contrary, in fact:
Courts must view any alleged violation through the lens of the “least sophisticated consumer,” see
Smith v. Transworld Sys. Inc., 953 F.2d 1025, 1029 (6th Cir. 1992)—the usual objective legal
standard in consumer protection cases, see Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993).
“The basic purpose of the least-sophisticated-consumer standard is to ensure that the FDCPA
protects all consumers, the gullible as well as the shrewd.” Id. “This effort is grounded, quite
sensibly, in the assumption that consumers of below-average sophistication or intelligence are
especially vulnerable to fraudulent schemes.” Id. at 1319. The standard thus serves a dual purpose:
“it (1) ensures the protection of all consumers, even the naive and the trusting, against deceptive debt
collection practices, and (2) protects debt collectors against liability for bizarre or idiosyncratic
interpretations of collection notices.” Id. at 1320.
6
Since Javitch sued in Ohio and the Affidavit leaves the “applicable law” undefined, the least
sophisticated consumer (who is both “naive” and “below-average sophistication ,” see id. at 1319)
would, without question, conclude the “applicable law” to be Ohio law. (It does not matter that a
more sophisticated consumer would have discovered that the “applicable law” is actually “federal
law, and laws of Arizona” under the credit card agreement. (JA 167.)) And the phrase “to the extent
permitted” suggests (at least to the least sophisticated consumer) that some extent is in fact permitted
under Ohio law. “Why else,” the consumer would wonder, “would Javitch attach this language to
the complaint if Ohio law does not permit attorney fees here?”
Yet the threatening language appeared in a court filing—where one seeks remedies, not make
empty threats—and that arguably could be understood by the least sophisticated consumer as an
actual “attempt” to collect attorney fees (not a “threat” per se) and thus not actionable under
§1692e(5). See §1692e(5) (prohibiting the“threat to take any action that cannot legally be taken”
(emphasis added)). After all, “What other reason would the statement appear in a court proceeding
if Javitch were not attempting to collect attorney fees?,” the consumer may again ask. A few lower
courts, in fact, have refused to find a violation under § 1692e(5) where “[d]efendants did not
threaten to take [an unlawful] action, but actually took it by filing the complaint.” See, e.g.,
Delawder v. Platinum Fin. Servs. Corp., 443 F. Supp. 2d 942, 948 (S.D. Ohio 2005) (emphasis in
original) and cases cited therein.
But, in this context, “attempts” and “threats” are not necessarily mutually exclusive concepts,
for when we keep the Act’s overarching principles in mind—“to eliminate abusive debt collection
practices by debt collectors,” § 1692(e), and to prevent “false, deceptive, or misleading
representation[,]” § 1692e—whether the Affidavit’s metaphysical description is more an “attempt”
7
or more a “threat” is essentially wordplay. No semantical recasting alters the intimidating effect on
the least sophisticated consumer: that she “would be confused, and reasonably might feel pressured
to immediately pay the debt, even if she disputed its validity, in order to avoid the possibility of
having to also pay [the debt collector’s] attorney fees at some later date.” Gionis v. Javitch, 405 F.
Supp. 2d 856, 867 (S.D. Ohio 2005).
This is so because even if the least sophisticated consumer would view the Affidavit’s
attorney fees language as an actual “attempt” to collect attorney fees, the attempt would nonetheless
embody an ongoing threat that likely higher attorney fees would be assessed so long as the litigation
continues—an action that cannot legally be taken in Ohio. See § 1692e(5). Suppose, on the other
hand, the least sophisticated consumer would view the Affidavit’s attorney fees language as a simple
threat (not an actual attempt) to collect attorney fees at some later date (should Javitch choose to).
That threat is likewise one that cannot legally be taken in Ohio.
Javitch’s failure to assert the attorney fees language in the complaint’s “prayer of relief”
section does not cure the threat. See Veach v. Sheeks, 316 F.3d 690, 693 (7th Cir. 2003) (“When
there are two different accounts of what a debtor actually owes the creditor, that one version is the
correct description does not save the other . . . under the unsophisticated debtor standard . . . .”). The
least sophisticated consumer would not realize what a trained lawyer would—that a failure to assert
a request for attorney fees in a complaint’s “prayer of relief” generally bars recovery of such relief.
See Ohio Civ. P. R. 8(A). Hence, either way we slice it, an unlawful “threat” to collect attorney fees
was made in the Affidavit, violating § 1692e(5), which also amounted to a “false representation or
deceptive means to collect or attempt to collect a[] debt[,]” violating § 1692e(10).
8
Javitch believes that attaching the Affidavit to the complaint would be no different than
attaching the entire credit card agreement to the complaint, and that to hold it liable here would
“effectively prohibit creditors from including fee-shifting terms in their cardholder agreements, and
hamper their efforts to enforce [those] terms.” (Appellant’s Br. 22.) But this ignores two significant
distinctions. Foremost, had Javitch attached the credit card agreement to the complaint, there would
be less room to argue that the least sophisticated consumer would feel threatened in the same manner
as here since the agreement explicitly defines “applicable law” as “federal law, and laws of
Arizona[.]” (JA 167.) The Affidavit does not (conveniently) make this clarification, and such an
omission leaves room for the least sophisticated consumer to conclude the “applicable law” to be
Ohio law.
There is another distinction. The Affidavit chose to point out the fact that the “agreement
specifically provides” for recovery of attorney fees under the applicable law (and, again, does so
without mentioning what that “applicable law” is). (JA 20) (emphasis added.) Certainly, this is
more threatening than attaching the entire Agreement—where no terms or conditions are
“specifically” isolated for the consumer’s attention. See Barany-Snyder v. Weiner, No. 06-2111,
2007 WL 210411, at *8 (N.D. Ohio Jan. 24, 2007) (unpublished) (discussing this distinction).
Hence, contrary to Javitch’s thinking, our holding does not “prohibit creditors from including fee-
shifting terms in their cardholder agreements, [or] hamper their efforts to enforce terms.”
(Appellant’s Br. 22.)
One more hurdle remains in this matter: Javitch did not utter the statement in the Affidavit;
Erica Vick did. Javitch therefore contends that imputing Erica Vick’s words onto it would
essentially amount to impermissible “vicarious liability.” This is not so. Had Vick independently
9
made the threat to Gionis (with no assistance from Javitch), the imposition of liability on Javitch for
Vick’s threatening words could be classified as “vicarious liability.” See Restatement (Third) of
Torts § 13 (2000). But Javitch did not passively stand by as Vick made the threat. It instead chose
to communicate the threatening language to Gionis—in a lawsuit no less. And any consumer,
especially the least sophisticated one, could view the very act of doing so as an adoption of Vick’s
threat—and thus a “threat” within itself. Cf. United States v. Cox, 957 F.2d 264, 266 (6th Cir. 1992)
(“A threat is . . . an appearance to the victim.”) (internal quotation marks omitted). This is all the
more true in Ohio given that Ohio’s Civil Procedure Rule 10(c) provides that “[a] copy of any
written instrument attached to a pleading is part of the pleading for all purposes.” Ohio Civ. P. R.
10(c) (emphasis added). Hence, to hold Javitch liable for its own actions does not invoke vicarious
liability.
III
Accordingly, we conclude that Javitch made a “threat to take an[] action that cannot legally
be taken,” in violation of § 1692e(5), which also amounted to “false representation or deceptive
means to collect or attempt to collect a[] debt[,]” in violation of § 1692e(10). For these reasons, we
AFFIRM the district court’s grant of summary judgment.
10
GEORGE C. STEEH, District Judge, dissenting.
I respectfully dissent.
The underlying facts in this case are straightforward. Appellee Sherry Gionis was sued in
an Ohio state court for a credit card debt owing to Direct Merchant’s Credit Card Bank (DMCCB).
Gionis signed an agreement, at the time she took on the credit card, that the applicable law would
be that of Arizona.1 An affidavit filed by the appellant-attorneys to collect the unpaid debt included
language that DMCCB “is entitled to recover, to the extent permitted by applicable law, its
reasonable attorney’s fees and costs incurred in any action to enforce its rights under the agreement.”
As noted by the majority, the case was promptly settled, and DMCCB never sought any attorney’s
fees.
Given the particular facts of this case, it unreasonably stretches the statutory language to
conclude that the action complained of in this lawsuit violated the Fair Debt Collection Practices
Act.2 As my colleagues concede, “[i]n a strict sense, neither § 1692e(5) nor § 1692e(10) has been
violated here.” Nowhere did the complaint or affidavit affirmatively state that attorney’s fees would
1
Although it appears that appellant waived its argument that the case may be disposed of
on the basis that Arizona law––which allows the collection of attorney’s fees in connection with
consumer debt––governed Ms. Gionis’ contract with DMCCB, the fact remains that the
cardholder agreement is in the record and there is no dispute that it contains the Arizona choice
of law provision.
2
This action certainly does not fall within the scope of practices the FDCPA was
designed to curb, such as abusive phone calls, false and deceptive debt collection letters, and
other patently unfair antics described in the statute’s legislative history. See Lewis v. ACB
Business Services, Inc., 135 F.3d 389, 398 (6th Cir. 1998). In fact, the careful placement of the
reference to attorney fees in the affidavit, rather than the complaint, and the fact that plaintiff
made no affirmative representation that it was entitled to attorney fees, indicates an attempt on
the part of the plaintiff to comply with the FDCPA.
11
be sought. Furthermore, there is no record that appellee felt undue pressure resulting from the
statement in the affidavit, or that there was any prior contact between appellee and appellant which
might support an inference that the law firm threatened the collection of its fees from the perspective
of “the least sophisticated consumer.”
I cannot agree that any authority cited by appellee lends significant support to her position.
There is no precedent supporting appellee’s argument that a complaint which itself did not make
claim to attorney’s fees, appending an attachment which did not state an affirmative intention to
collect attorney fees, may nonetheless be found to have violated §§ 1692e(5) or (10). For instance,
in the case of Veach v. Sheeks, 316 F.3d 690 (7th Cir 2003), relied on in part by appellee, the
Seventh Circuit’s ruling actually reverses the lower court’s entry of summary judgment for the
defendant on the FDCPA claim because the defendant debt collector, in addition to claiming that the
debt owed included attorney fees, had represented the amount of the debt to be three times the actual
debt, i.e. applying treble damages, where such an award may only be made by court order.
Furthermore, the mention of attorney’s fees was an affirmative statement in the complaint itself that
such fees were owed,3 rather than a mere recitation of text from a cardholder agreement in an
affidavit. See id. at 693. Veach is so factually distinguishable from the instant case that the opinion
lends no assistance in this decision.
In the recent, unpublished case of Barany-Snyder v. Weiner, No. 06-2111, 2007 WL 210411
(N.D. Ohio Jan 24, 2007) (unpublished), in which attorneys for the Baldwin Wallace College were
sued for allegedly improper collection of unpaid school debt, the district court held that “[m]erely
3
“[T]he Defendant is indebted to the Plaintiff in the sum of $ 1,050 as treble damages
for a bad check in the sum of $ 350.00, plus reasonably [sic] attorney fees as permitted by law.”
Id. at 693.
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attaching an agreement which includes an attorneys’ fee provision to a complaint and a brief does
not constitute a threat to exercise that provision.”4 This holding followed its discussion of the
elements required for a claim under § 1692e(5): “(1) a threat to take legal action and (2) the inability
to take that action lawfully.” Id. at *7, citing Wright v. Asset Acceptance Corp., No. C-3-97, 375,
1999 U.S. Dist. LEXIS 20675, *5 n. 7 (S.D.Ohio Jan. 3, 2000). I agree with the decision rendered
by Judge Gaughan in that case, and I cannot find a meaningful distinction between attaching a two
page “revolving agreement” that was the subject of the lawsuit in the Barany-Snyder5 case and
quoting a provision of the cardholder agreement in the instant case.6 Here, even if appellant could
not lawfully seek attorney’s fees in Ohio, there is no threat to do so stated or implied in the complaint
or affidavit.
Although Judge Gaughan in Barany-Snyder distinguished the district court’s decision in
Gionis, pointing out that the language complained of in the Gionis case was contained in an affidavit,
rather than a copy of the cardholder agreement, I find her reasoning equally applicable to this matter,
and cannot find that under the facts of this case, even the “least sophisticated consumer” would
4
Discussing, in part, the holding of the court below in the instant case. See Gionis v.
Javitch, Block & Rathbone, 405 F. Supp. 2d 856, 866 (S.D. Ohio 2005).
5
Notably, the two page “revolving agreement” did not contain, as the cardholder
agreement in the instant case did, a choice of law provision indicating applicable law of any state
other than Ohio.
6
In fact, the two page “revolving agreement” contained language that was arguably more
“threatening”:
I/We understand that upon default of any, or all of the terms and conditions of this credit
agreement and upon proper service of a NOTICE OF DEFAULT by the College, all
signers immediately become, at the option of the college, liable for attorney fees and/or
actual or reasonable collection costs which may be added to the total amount due.
13
conclude that defendant threatened to take illegal or unintended action, or b) that defendant used a
false representation or deceptive means to collect or attempt to collect a debt. I would reverse the
district court’s grant of summary judgment.
14