Applies to Foreclosure Clp12_08

Chapter 8

Complaint and Briefs Arguing that the Fair Debt Collection Practices Act Applies to the Foreclosure of a Deed of Trust

Robert Erwin founded the Erwin Law Firm, P.A., in Baltimore, MD, to help individuals with consumer litigation. The firm accepts referrals of cases involving automobile sales/leasing fraud, auto lemon laws, odometer roll backs, breach of warranty, Fair Debt Collection, Fair Credit Reporting, Truth-in-Lending, defective products, bankruptcies, and class actions. Prior to private practice he worked with the Maryland Office of the Attorney General and the Legal Aid Bureau. This chapter contains the complaint (§ 8.1), brief (§ 8.2), and reply brief (§ 8.3) in a case under the Fair Debt Collection Practices Act arguing that the attorneys foreclosing on a deed of trust violated the FDCPA by continuing the foreclosure without responding to a request to verify the debt and by continuing to contact the consumer directly when they knew he was represented by counsel.1 The Fourth Circuit sided with the consumer’s interpretation of the FDCPA that the foreclosure attorneys were covered by the FDCPA as they were seeking payment and debt collection was central, and not “incidental,” to their fiduciary duties as trustees.2

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See generally NCLC's Fair Debt Collection § 4.2.5 (5th Ed. 2004) Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006).

8.1

Complaint
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND (NORTHERN DIVISION)

[PLAINTIFF] [Address] [Address] Plaintiff v. DRAPER & GOLDBERG, PLLC SUITE 301 803 SYCOLIN ROAD LEESBURG VA 20175 Serve On: AMANDA SMITH, RESIDENT AGENT [Address] FREDERICK, MD 21701 And L. DARREN GOLDBERG SUITE 301 803 SYCOLIN ROAD LEESBURG VA 20175

* * * * * * * * * * * * * * Civil Action No.

Defendants ************ COMPLAINT Plaintiff, [Plaintiff], by her attorneys The Erwin Law Firm, P.A., sues Draper & Goldberg, PLLC and L. Darren Goldberg and says: Parties 1. Plaintiff, [Plaintiff] is an adult citizen of the State of Maryland residing at [Address], in Columbia Maryland.

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2. Defendant Draper & Goldberg, PLLC is a Virginia professional limited liability corporation with its principal place of business in Leesburg, Virginia. At all times relevant hereto, defendant Draper & Goldberg, was engaged in the business of collecting debts in the state of Maryland and made use of the United States mail in regularly collecting or attempting to collect debts owed or due or asserted to be owed or due to other entities. Defendant Draper & Goldberg regularly attempts to collect debts from Maryland citizens allegedly to be due to others. 3. Defendant Draper & Goldberg is a “debt collector” as defined by the Fair Debt Collection Practices Act, 15 U.S.C. § 1692(a)(6). 4. Defendant L. Darren Goldberg is an adult citizen engaged in the practice of law in Leesburg, Virginia. Defendant L. Darren Goldberg manages defendant Draper & Goldberg’s litigation practice as well as all contested foreclosures, and is a principal of defendant Draper & Goldberg, PLLC. At all times relevant hereto, defendant L. Darren Goldberg was engaged in the business of collecting debts in the state of Maryland and made use of the United States mail in regularly collecting or attempting to collect debts owed or due or asserted to be owed or due to other entities. Defendant Goldberg regularly attempts to collect debts from Maryland citizens allegedly to be due to others. 5. Defendant L. Darren Goldberg is a “debt collector” as defined by the Fair Debt Collection Practices Act, 15 U.S.C. § 1692(a)(6). Jurisdiction 6. Jurisdiction of this Court arises under 15 U.S.C. § 1692(k)(d) and 28 U.S.C. §1337. At all times relevant hereto, defendant Draper & Goldberg transacted substantial business in collecting debts from Maryland citizens, regularly made telephone calls to Maryland citizens and used the U.S. mail to contact Maryland citizens, and made use of the Courts of the state of

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Maryland in attempting to collect debts from Maryland citizens, out of which activities plaintiff’s cause of action arose. At all times relevant hereto, Defendant L. Darren Goldberg was a member of the Maryland State Bar and transacted substantial business in collecting debts in the state of Maryland and made use of the United States mail in regularly collecting or attempting to collect debts owed or due or asserted to be owed or due to other entities. Defendant Goldberg regularly attempts to collect debts from Maryland citizens allegedly to be due to others. Actual Allegations 8. On or about September 2, 2003, defendants Draper & Goldberg, PLLC and L. Darren Goldberg mailed to plaintiff a collection letter demanding payment for an alleged debt in the original principal amount of $43,191.90 allegedly due to Chase Manhattan Mortgage Corporation and advising plaintiff of her right to dispute the validity of the debt within thirty (30) days. 9. The alleged debt of plaintiff, [Plaintiff], to Chase Manhattan Mortgage Corporation was incurred for personal, family, or household services, i.e. a purchase money mortgage for her principle residence. 10. Defendants’ letter dated September 2, 2003, was received by plaintiff at her residence in Columbia, Maryland. 11. On or about September 6, 2003, plaintiff wrote defendants that she did dispute the validity of the debt and requested that defendants verify the debt with Chase Manhattan as required by the Fair Debt Collection Practices Act. 12. Plaintiff’s letter was received by defendants on or about September 8, 2003. 13. In spite of plaintiff’s letter dated September 6, 2003, defendants instituted a foreclosure action on behalf of Chase Manhattan Mortgage Corporation in the Circuit Court for Howard

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County on September 11, 2003, Case No. [No.]. Defendant L. Darren Goldberg was an attorney filing the foreclosure action in Circuit Court. 14. On September 18, 2003, plaintiff’s attorney wrote defendants advising defendants that it represented plaintiff and requested all further communications be with counsel and not with [Plaintiff]. 15. On October 6, 2003, defendant Draper & Goldberg wrote plaintiff directly at her home advising her that her home would be sold at a foreclosure sale on October 17, 2003. Defendant L. Darren Goldberg authorized the sending of this letter. 16. Defendants caused notice of the foreclosure of plaintiff’s residence to be published in the Howard County Times on multiple occasions creating ridicule among plaintiff’s neighbors and acquaintances, and causing plaintiff extreme embarrassment. 17. As a result of the defendants’ actions causing publication of the foreclosure, plaintiff received numerous annoying phone calls from various companies offering debt counseling and management services, resulting in plaintiff not wanting to answer her own home phone 18. Defendants caused plaintiff’s residence to be posted with a sign advertising the foreclosure sale, causing plaintiff further embarrassment before her minor children, and her friends and neighbors became aware of the alleged foreclosure sale. 19. As a result of the acts alleged above, plaintiff incurred attorney’s fees in the amount of $1,780 to defend and resolve the foreclosure action in the Circuit Court for Howard County. 20. As a result of the acts alleged above, plaintiff suffered headache, nausea, embarrassment, and lost weight and incurred additional expenses in contesting the alleged debt. Count I 17. Plaintiff repeats and re-alleges and incorporates by reference paragraphs 1-20 as though they were set forth in full herein and further alleges:

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18. Defendants failed to obtain verification of plaintiff’s alleged debt from Chase Manhattan Mortgage Corporation. 19. Defendants failed to mail plaintiff written verification of the alleged debt. 20. Defendants did not cease its efforts to collect the alleged debt from plaintiff following defendants’ receipt of her letter dated September 6, 2003. 21. Defendants violated the Fair Debt Collection Practices Act. Defendantss violations include but are not limited to the following: (a) Defendants violated 15 U.S.C. §1692(g)(b), in failing to verify the debt with Chase Manhattan Mortgage Corporation and mail such verification to the plaintiff; (b) Defendants violated 15 U.S.C. §1692(g)(b) in failing to cease collection of the debt and instead filed a foreclosure proceeding in the Circuit Court for Howard County; (c) Defendants violated 15 U.S.C. §1692(c)(a)(2) by communicating directly to the plaintiff when theyknew that plaintiff was represented by an attorney with respect to the alleged debt. 22. As a result of the foregoing violations of the Fair Debt Collection Practices Act, defendants are liable to the plaintiff for her actual damages as are determined by the jury, statutory damages in the amount of $1,000, and costs and reasonable attorney’s fees. WHEREFORE, plaintiff [Plaintiff] demands judgment against defendants Draper & Goldberg, PLLC and L. Darren Goldberg, jointly and severally, for her actual damages, statutory damages, plus costs and reasonable attorney’s fees.

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___________________ H. Robert Erwin, Jr. The Erwin Law Firm, P.A. 111 West Monument Street Baltimore, MD 21201 (410) 385-6000

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND (NORTHERN DIVISION)

[PLAINTIFF] [Address] COLUMBIA MD 21045 Plaintiff v. DRAPER & GOLDBERG, PLLC SUITE 301 803 SYCOLIN ROAD LEESBURG VA 20175 Serve On: AMANDA SMITH, RESIDENT AGENT [Address] FREDERICK, MD 21701 And L. DARREN GOLDBERG SUITE 301 803 SYCOLIN ROAD LEESBURG VA 20175 Defendants

* * * * * * * * * * * * * ************ DEMAND FOR JURY TRIAL Civil Action No.

Plaintiff [Plaintiff] hereby demands trial by jury on all issues in the above captioned case. ___________________ H. Robert Erwin, Jr. The Erwin Law Firm, P.A. 10 West Madison Street Baltimore, MD 21201 (410) 385-6000

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8.2

Brief
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

[PLAINTIFF] Appellant v. DRAPER & GOLDBERG, PLLC, et al Appellees

* * * * * ************ ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION BRIEF OF APPELLANT I. STATEMENT OF JURISDICTION Case No.: [No.]

Plaintiff [Plaintiff] filed this case in the United States District Court for the District of Maryland (Northern Division) alleging violations of the Fair Debt Collection Practices Act (FDCPA) and asserting jurisdiction pursuant to 15 U.S.C. §1692(k)(d) and 28 U.S.C. § 1337. Defendants Draper & Goldberg, PLLC, and one of its attorneys, L. Darrin Goldberg, filed a Motion to Dismiss supported by an Affidavit on October 18, 2004. Treating this as a Motion for Summary Judgment, the trial Court entered a final Order granting summary judgment in favor of defendants on March 3, 2005. On March 29, 2005, plaintiff filed this appeal pursuant to 28 U.S.C. §1291.

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II. STATEMENT OF ISSUES A. Whether the trial Court erred in holding, under the facts of this case, that defendants were not debt collectors under the Fair Debt Collection Practices Act. B. Whether the trial Court erred in determining that there were no disputes of material fact preventing the entry of summary judgment. III. STANDARD OF REVIEW The standard of review to be applied by this Court in reviewing a grant of summary judgment by a lower Court is de novo. Motor Club of America Insurance Co. v. Hanifi, 145 F. 3rd 170 (4th Cir. 1998), cert. den. 525 U.S. 101; Sempione v. Provident Bank of Maryland, 75 F. 3rd 951 (4th Cir. 1996). IV. STATEMENT OF CASE On September 9, 2004, plaintiff [Plaintiff] filed her Complaint alleging that Draper & Goldberg, PLLC and L. Darrin Goldberg had violated the Fair Debt Collection Practices Act in the course of instituting foreclosure proceedings in the Circuit Court for Howard County pursuant to the Deed of Trust in favor of Chase Manhattan Mortgage Corporation. (A. 4-9) Specifically, plaintiff alleged that defendants had failed to verify the debt as required by Section 1692g(b) of the Act; that defendants had failed to cease collection of the debt after receiving plaintiff’s written dispute of its validity as required by Section 1692g(b) of the Act; and finally that defendants communicated directly with the plaintiff when they knew that plaintiff was represented by counsel in violation of Section 1692c(a)(2) of the Act. (A. 8)

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In lieu of an Answer, on October 18, 2004, defendants filed a Motion to Dismiss the Complaint for failure to state a claim upon which relief can be granted. (A. 10-11) Defendants’ Motion argued that they were not “debt collectors” because their activities were “incidental to a bona fide fiduciary obligation” and thereby excluded by Section 1692a(6)(F)(i) of the Act; that they were “enforcers of a security interest” and thereby subject only to the substantive provisions of Section 1692f(6) of the Act; and finally that foreclosing on a Deed of Trust is not “collecting a debt” within the meaning of Section 1692a(5) of the Act. (A. 14-18) Defendants’ supported their Motion with the Affidavit of L. Darrin Goldberg and certain other exhibits (A. 20-27), thereby requiring that the Motion to Dismiss be treated as a Motion for Summary Judgment. FRCP 56. Plaintiff opposed defendants’ Motion to Dismiss arguing that defendants were not merely foreclosing on a Deed of Trust, but in fact, were attempting to collect a debt. In support of her Opposition, plaintiff included letters from defendants inviting her to contact them and demanding payment of $7,392.36 to bring her account current. (A. 47) Plaintiff also demonstrated that defendants’ activities were regular, having filed over 2300 foreclosure actions throughout Maryland in 2003, and used similar collection letters in all of them. (A. 41-42) Most importantly, plaintiff demonstrated that defendants’ “foreclosure actions” rarely resulted in the sale of the property and transfer of title. Indeed, in the four month period of June through September 2003, defendants filed twenty-three foreclosure actions in the Circuit Court for Howard County but only one resulted in the sale of the property and ratification of the sale by the Circuit Court, and in one other action, the sale was conducted but not ratified. In twenty actions, including plaintiff’s foreclosure proceeding, the home owner took steps to avoid having their house sold by paying arrearages, making future payment arrangements, or in paying off the

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delinquent mortgage. (A. 41-42; 49-123) In her Opposition, plaintiff argued that these facts demonstrated that defendants’ activities were in fact collecting arrearages on delinquent Deeds of Trust by using the threat of foreclosure and sale. (A. 35-36) On March 3, 2005, the District Court entered a five page Memorandum Opinion and Order granting defendants’ Motion for Summary Judgment pointing only to the factual assertions in defendants’ Affidavit (A. 153) and holding that “any actions taken by a Trustee in foreclosing on a property pursuant to a Deed of Trust may not be challenged as FDCPA violations.” (A. 154) Nowhere in the lower Court’s decision was there any reference to any of the facts raised by the plaintiff in her Opposition to the Motion. Plaintiff filed her timely Notice of Appeal of the District Court’s Opinion and Order on March 29, 2005. (A. 156) IV. ARGUMENT A. THE TRIAL COURT ERRED IN HOLDING, UNDER THE FACTS OF THIS CASE, THAT DEFENDANTS WERE NOT “DEBT COLLECTORS” UNDER THE FAIR DEBT COLLECTION PRACTICES ACT. The trial Court’s Memorandum Opinion in this case makes no findings concerning whether defendants’ activities were exempt from the FDCPA because their activities were “incidental to a bona fide fiduciary obligation” or because, although debt collectors, they were subject to only one section of the Act because they were “enforcers of a security interest.” Nor did the Court cite to those sections of the FDCPA. Instead, without any factual analysis, the lower Court reached the tautological conclusion, “Trustees foreclosing on a property pursuant to a Deed of Trust are not ‘debt collectors’ under the FDCPA.” (A. 153) citing Heinemann v. Jim Walter Homes, Inc., 47 F. Supp. 2nd 716, 722 (N.D.W. Va. 1998). Quoting Hulse v. Ocwen

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Federal Bank FSB, 195 F. Supp. 2nd 1188, 1204 (D. Ore. 2002) the lower Court determined, “Foreclosing on a Deed of Trust is distinct from the collection of the obligation to pay money... payment of funds is not the object of the foreclosure action. Rather, the lender is foreclosing its interest in the property.” (A. 154) The lower Court then provides carte blanche to all firms foreclosing Deeds of Trust to engage in any and all manner of collection activity in its ultimate holding, “Any actions taken by a Trustee in foreclosing on a property pursuant to a Deed of Trust may not be challenged as FDCPA violations.” (A. 154) The Fair Debt Collection Practices Act defines “debt collector” as, Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another. 15 U.S.C. 1692a(6) It is undisputed that plaintiff owed no monies to defendants, rather the underlying obligation was to Chase Manhattan Mortgage Corp, defendants’ client. The Act defines “debt” as, Any obligation or alleged obligations of a consumer to pay money arising out of a transaction in which the money, property, insurance, where services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. 15 U.S.C. 1692a(5) It is equally undisputed that defendants’ foreclosure action in the Circuit Court for Howard County involved plaintiff’s home, an alleged obligation primarily for personal, family, or household purposes. The lower Court went astray in its uncritical reliance on the Hulse assertion that the object of foreclosure actions is not the collection of funds. The facts in this case demonstrate precisely the opposite. Defendants’ initiated their contacts with the plaintiff through the mail by advising her they were in the process of preparing foreclosure papers and advised “if you have

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any questions, do not hesitate to contact me.” (A. 43) Surely one such question would have been, “How can I avoid having my house sold?” leading to a discussion of bringing her mortgage current. This conclusion is reinforced by defendants’ subsequent communication to plaintiff again by mail in which it demanded $7,392.36 by cashier’s check payable to “Chase Manhattan Mortgage Corporation” in order to “reinstate the above account.” (A. 47) This was clearly the use of United States mails to collect a debt asserted to be owed or due to another. The real purpose of defendants’ foreclosure activity is amply demonstrated by the analysis of the docket entries of defendants’ foreclosure suits in the Circuit Court for Howard County. In the four month period of June – September 2003, defendants’ filed twenty-three such foreclosure actions in the Circuit Court for Howard County, including the action underlying this case. (A. 49-123) Of these twenty-three foreclosure actions, only one resulted in the sale of the property and ratification of the sale by the Circuit Court. (A. 113-117) Two other foreclosure actions from this period remain open, and in one of those two a sale was conducted but not yet ratified. (A. 55-58) In the other twenty actions, including plaintiff’s, the homeowner took sufficient steps to avoid having their house sold at foreclosure by paying arrearages, making future payment arrangements, or even paying off the delinquent mortgage. (A. 41-42, Stipulation ¶4) Thus, it is clear under the facts of this case, defendants’ activities in foreclosing Deeds of Trust was not for purposes of sale of the property and transfer of title (as assumed by the lower Court and the Court in Hulse) but rather was the collection of funds due to Chase Manhattan Mortgage Corporation. The District Court’s Memorandum Opinion failed to address any of these underlying facts in this case. The necessity of careful factual analysis has been demonstrated by several Courts in distinguishing form from substance in FDCPA cases. In Piper v. Portnoff Law Associates Ltd.,

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396 F. 3rd 272 (3rd Cir. 2005) defendant law firm argued that it was not subject to the FDCPA because it initiated Court actions to enforce a lien on real property in an effort to collect water and sewer charges due to the City of Bethlehem, Pennsylvania. After a careful analysis of the defendant’s activities, the Third Circuit noted: We are unpersuaded by PLA’s argument that its practices cannot be found to be covered by the FDCPA because all it ever tried to do was enforce a lien in a manner dictated by the [Municipal Claims and Tax Liens Act]. PLA’s letters and calls prior to filing suit, as we have demonstrated, come within the same meaning and text of the FDCPA. The same can be said about any of the papers that PLA sent to the Pipers in the course of litigation. This settles the matter. As PLA acknowledges, the Piper’s consumption of water created a personal debt that could be collected in an action in assumption. The fact that the MCTLA provided a lien to secure the Piper’s debt does not change its character as a debt or turn PLA’s communications to the Pipers into something other than an effort to collect that debt. We have already noted that, if a communication meets the Act’s definitions of an effort by a “debt collector” to collect a “debt” from a “consumer,” it is not relevant that it comes the context of litigation. Heintz v. Jenkins, 514 U.S.C. 291, 115 S. Ct. 1489, 131 L. Ed. 2nd 395 (1995). The same is true where the communication comes in the context of in rem litigation. * * * *

More directly on point, we held in Crossley v. Leiberman, 868 F. 2nd 566 (3rd Cir. 1989), that defendant was a “debt collector” based on the volume of in rem mortgage foreclosure actions he had filed in the Court of Common Pleas. The letters found in Crossley constitute efforts to collect a “debt” that are not materially distinguishable from those sent by PLA. 396 F. 3rd at 234. The United States Court of Appeals for the Second Circuit also recognized the need to carefully evaluate litigation efforts in order to determine what constitutes “debt collection.” In Romea v. Heiberger & Associates, 163 F. 3rd 111 (2nd Cir 1998) the attorney-defendants argued they were not subject to the provisions of the Fair Debt Collection Practices Act because they

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were merely providing the notice of eviction required by the New York statute regarding summary eviction proceedings. In analyzing the attorneys’ claim, the Second Circuit noted: Although Heiberger is correct that the notice required by § 711 is a statutory condition precedent to commencing a summary eviction proceeding that is possessory in nature, this does not mean that the notice is mutually exclusive with debt collection. The facts surrounding an Article 7 summary proceeding prove nothing about whether the notice that Romea received from Heiberger was or was not a “communication” sent “in connection with the collection of any debt,” 15 U.S.C. § 1692e (1994). Whatever else it was, the 711 letter that Heiberger sent to Romea was undeniably a “communication” as defined by the FDCPA in that it conveyed “information regarding a debt” to another person, Id. § 1692a(2). And Heiberger makes no attempt to deny that his aim in sending the letter was at least in part to induce Romea to pay the back rent she allegedly owed. As a result, the fact that the letter also served as a pre-requisite to commencement of the Article 7 process is wholly irrelevant to the requirements and applicability of the FDCPA. We therefore hold that the § 711 notice that Heiberger sent to Romea was a “communication” under 15 U.S.C. § 1692g(a) and as such, must comply with the FDCPA’s requirements. 163 F. 3rd at 116. In addition to the Second and Third Circuits, the Supreme Court of Colorado likewise recognized the need for careful factual analysis when examining attorney’s claims of exemptions from the FDCPA when asserting liens in litigation. In a decision which presaged the United States Supreme Court’s holding in Heintz v. Jenkins, 514 U.S.C. 291, (1995), the Colorado Supreme Court closely examined defendant attorney’s claims of exemption from the FDCPA when filing foreclosure proceedings pursuant to a Deed of Trust in counties other than that in which the properties were located. The Colorado Supreme Court held: If the definition of debt collectors is construed liberally, with the remedial purpose of the statute in mind, the attorneys are not exempt merely because their collection activities are primarily limited to foreclosures. The section 1692a(6) definition of the term debt collector includes one who ‘directly or indirectly’

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engages in debt collection activities on behalf of others. Since a foreclosure is a method of collecting a debt by acquiring and selling secured property to satisfy a debt, those who engage in such foreclosures are included within the definition of debt collectors if they otherwise fit the statutory definition. Our interpretation of section 1692a(6) is consistent with Crossley v. Lieberman, 868 F.2d 566 (3rd Cir. 1989). In Crossley the Court held that an attorney who regularly engaged in debt collection activities was a debt collector under Section 1692a(6), even though twenty two of the thirty two cases the attorney filed in the Court of Common Pleas were mortgage foreclosures. Id. at 569-70. Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Co. 1992). See also Galuska v. Blumenthal, 1994 WL 323121 (N.D. IL. June 26, 1994) (Attorneys engaged in debt collection activities by pursuing foreclosure and negotiating settlements are debt collectors within Section 1692a(6) and are covered by the FDCPA.); Sandlin v. Shapiro & Fishman, 919 F. Supp. 1564 (N.D. Fl. 1996) (Law firm was acting as a debt collector by requesting the consumer to pay a mortgage debt.) The cases relied upon by the lower Court completely fail to engage in this critical factual distinction. In Henneman v. Jim Walters’ Homes, Inc., 47 F. Supp 2nd 716 (N.D. W. Va. 1998), the plaintiffs, proceeding Pro Se, did not even assert an FDCPA count. However, in dicta, the Court noted in passing that the plaintiffs may be attempting to assert such a claim and asserted without analysis or discussion “the trustees were not collecting on the debt at that time, but merely foreclosing on the property pursuant to a Deed of Trust”. 47 F. Supp at 722 . Unlike the present case, in Hennemann there was absolutely no analysis of whether defendants’ activities in that case or other cases resulted in the sale of property, or as here, resulted in the collection of a debt.

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The decision Hulse v. Ocwen Federal Bank, FSB, 195 F. Supp 2nd 1188 (D. Or. 2002) is likewise void of factual analysis. Relying heavily on the decision in Heinemann, the District Court in Hulse focused solely on the foreclosure proceeding and concluded the purpose of such litigation is the sale of the property rather than the collection of money. 195 F. Supp 2nd at 1204. Setting aside for the moment that the collection of a debt owed to another by means of the sale of property as a result of executing a lien is little different from a debtor writing a check, in neither Hulse nor Hennemann was there any showing the foreclosure proceedings were actually a club being used by defendants as the ultimate threat to motivate consumers in arrears to bring their mortgages current. If affirmed by this Court, the lower Court’s holding in this case that, “any actions taken by a Trustee in foreclosing on a property pursuant to a Deed of Trust may not be challenged as FDCPA violations,” would eviscerate the Fair Debt Collection Practices Act by carving out a section of activity where anything is fair game. Few things are as important to consumers as the ownership of their home. Exempting attorney/trustees completely from the requirements of the FDCPA would open the door for the very abuses Congress sought to eliminate by passing the FDCPA. Even the Court in Hulse stopped short of the Court’s sweeping ruling in this case, “...plaintiff’s may maintain any FDCPA claims based on alleged actions by OFD in collecting a debt, but not maintain any FDCPA claims based on the alleged actions made in pursuant of the actual foreclosure.” 195 F. Supp. 2nd at 1204. Applying this distinction to the facts of the present case, it would appear that under this reasoning in Hulse only the October 6, 2003, communication from defendants to plaintiff would be sheltered by actual foreclosure activity and the September 5 and October 15th communications from defendants to plaintiff would not be. Such distinctions highlight the necessity of a careful factual analysis, omitted by the lower

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Court herein, required to distinguish form from substance and accomplish the purpose of the FDCPA. B. THE TRIAL COURT ERRED IN DETERMINING THERE WERE NO DISPUTES OF MATERIAL FACT PREVENTING THE ENTRY OF SUMMARY JUDGMENT. Summary Judgment should be granted only where there is no dispute of material fact and the moving party is entitled to judgment as a matter of law. Randall v. Prince

George’s County, 303 F. 3rd 188 (4th Cir. 2002). In deciding a Motion for Summary Judgement the facts must be viewed in a light most favorable to the non-moving party. Hooven-Lewis v. Caldera, 249 F. 3rd 259 (4th Cir. 2001). Inferences drawn from the underlying facts are also to be viewed in the light most favorable to the non-moving party. Summerville v. Microcom Corp., 42 F. 3rd 891 (4th Cir. 1994). On a summary judgment motion, the court’s function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue of fact for trial. American Metal Forming Corp. v. Pittman, 52 F. 3rd 504 (4th Cir. 1995). The District Court’s Memorandum Opinion and Order relies entirely for its factual findings on the self-serving, conclusory Affidavit of defendant L. Darrin Goldberg that defendants’ principal business is the foreclosure of mortgages and Deeds of Trust and that is what it was doing in the present case. (A. 153) Nowhere in the memorandum Opinion and Order does the Court acknowledge the existence of the factual matters raised in the Exhibits 1 and 2 to Plaintiff’s Opposition to Defendant’s Motion to Dismiss. (A. 41-123) Thus, the District Court overlooked the fact that defendants had invited the plaintiff to contact them about the outstanding balance due on her mortgage in their letter of September 2, 2003 (A. 43), and had made a specific demand for payment of $7,392.36 on October 15, 2003. (A. 47) Most significantly, the District Court failed to undertake any analysis

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of the docket sheets of the twenty-three foreclosure cases filed by defendants in the Circuit Court for Howard County in June – September 2003. (A. 49-123) As discussed infra at P. 6-7, it is difficult to understand how the District Court could conclude that defendants were merely enforcing Deeds of Trust when in fact only one of the twenty-three foreclosure actions resulted in sale and ratification of the sale by the Circuit Court for Howard County. In the

overwhelming majority of the cases, twenty of the twenty-three, the foreclosure proceeding never resulted in a sale at all. As stipulated by defendants themselves, the foreclosure actions were rendered moot by the home owner’s payment of arrearages, forbearance agreements, bankruptcy, title issues and/or refinancing or sale of the house resulting in the payment of the arrearages or outstanding balance. (A. 41-42 ¶ 4) When the evidence attached to plaintiff’s Opposition to the Motion to Dismiss is viewed in the light most favorable to the plaintiff and when all reasonable inferences are likewise made to benefit the plaintiff, there is clearly an issue of material fact in dispute concerning whether defendants’ activities in filing foreclosures were merely the enforcement of the Deeds of Trust to execute the lien or, to the contrary, were in fact legal proceedings which usually resulted in the successful collection of outstanding balances on the home owner’s accounts with Chase Manhattan Mortgage Corporation. Because this evidence could lead reasonable minds to

conclude that defendants’ activities are in fact the collection of debts, there is a genuine dispute of material fact to be resolved at trial and which prevented the appropriate entry of summary judgement. Because the lower Court erroneously concluded there were no disputes of material fact when in fact there were, its decision granting summary judgment in this case must be reversed. IV

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CONCLUSION Because the lower Court erred in holding, under the facts of this case, that defendants were not debt collectors within the meaning of the Fair Debt Collection Practices Act or, in the alternative, because the lower Court in this case erred in determining there were no disputes of material fact concerning defendants activities when there was evidence in the record from which reasonable minds could infer that defendants were, in fact, engaging in activities as debt collectors, thus making summary judgment inappropriate, this Court should reverse the District Court’s Order granting Summary Judgment dated March 3, 2005, and should remand this case to the United States District Court for the District of Maryland (Northern Division) for further proceedings.

_______________________ H. Robert Erwin, Jr. The Erwin Law Firm, P.A. 1o West Madison Street Baltimore, MD 21201 (410) 385-6000

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8.3

Reply Brief
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

[PLAINTIFF] Appellant v. DRAPER & GOLDBERG, PLLC, et al Appellees

* * * * * ************ REPLY BRIEF OF APPELLANT Docket number [No.]

Contrary to Appellees' assertion, the issue in this case is not whether a law firm foreclosing a Deed of Trust is a “debt collector” within the meaning of the Fair Debt Collection Practices Act (FDCPA). Rather, the issue posed is whether a law firm demanding money from a consumer on behalf of its client is a “debt collector” within the meaning of the FDCPA. I. BECAUSE DEFENDANTS DEMANDED MONEY FROM THE PLAINTIFF, THEY ARE “DEBT COLLECTORS” WITHIN THE MEANING OF THE FDCPA AND NOT MERELY “ENFORCERS OF SECURITY INTERESTS.” An analysis of this issue must start with the plain language of the Fair Debt Collection Practices Act itself. The FDCPA defines “debt collector” as: Any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another.

15 U.S.C. § 1692a(6) The Act also defines “debt” as: ...any obligation or alleged obligations of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services

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which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. 15 U.S.C. § 1692a(5). Thus, under the plain language of the Act itself, when a person uses the mail to demand money due to a third party from a consumer they are clearly acting as a “debt collector” within the meaning of the Act. It is the direct or indirect demand for money from a consumer that distinguishes the “debt collector” from the mere “enforcer of security interests.” As the definition of “debt collector” explains, “For the purposes of Section 1692f(6) of this Title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.” Although the term “enforcement of security interests” is not further defined, it is apparent that such activity would not be included as a “debt collector” because, for example, the repossession of a car is not a demand for money. Hence, there was the need to make clear that such activity is subject to Section 1692f(6) of the Act even where there was no demand for money from a consumer. The Sixth Circuit has made clear that in the FDCPA Congress made a distinction between “debt collector” and an “enforcer of security interest” because a debt collector is seeking money the consumer lacks whereas an enforcer of security interest is seeking only the recovery of property still in possession of the consumer. The Court further indicated that when §1692f(6) is read in conjunction with its legislative history the two provide ‘the key to understanding the reason Congress drew a distinction between a debt collector and an enforcer of a security interest.’ Id. It went on to find that the FDCPA was enacted in order to ‘prevent the “suffering and anguish” which occur when a debt collector attempts to collect money which the debtor, through no fault of his own, does not have.’ Id. At 658 (citation omitted). In contrast, the Court found that the evil sought to be prevented by proscribing the conduct of debt collectors, namely, ‘harassing attempts to collect money which the debtor does not have due to misfortune,’ is not implicated in the situation of a repossession

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agency that enforces a “present right” to a security interest because in the latter context, ‘an enforcer of a security interest with a “present right” to a piece of secured property attempts to retrieve something which another person possess but which the holder of the security interest still owns. Id. Montgomery v. Huntington Bank & Silver Shadow Recovery, Inc. , 346 F. 3rd 693, 700 (6th Cir 2003) citing Jordon v. Kent Recovery Services, Inc. 731 F. Supp 652 (D.Del. 1990). This distinction, the demand for money, is precisely the distinction made by the Third Circuit in Piper v. Portnoff Law Associates Ltd., 396 F. 3rd 272 (3rd Cir. 2005) and by the Second Circuit in Romea v. Heiberger & Associates, 163 F. 3rd 111 (2nd Cir 1998). Significantly, even though these two cases were cited and relied on in Appellant’s opening Brief, Appellees' Brief neither distinguishes them on the facts nor discusses why the holding of these two Circuits should not be followed in this case. (See discussion pp. 10-12 of Appellant’s Brief) It is also this key distinction that explains the Court’s holding in Bergs v. Hoover, Bax & Slovacek, LLP, 2003 U.S. Dist. Lexis 16827, 16 (N.D. Tex. 2003). Under the facts of that case, the defendant law firm never made a demand for the payment of money directly from the plaintiff. Thus, the District Court’s holding in Bergs is perfectly consistent with the holdings in Piper and Romea. It is beyond dispute that the defendants in this case used the United States mail to demand payment of money, $7,392.36, directly from the plaintiff in its October 15, 2003 letter. (A. 47) Contrary to the assertion at pages 2 and 14 of Appellees’ Brief, the October 15th letter was not “in response” to counsel’s letter of October 9th. It was not “in response” to counsel’s letter because the October 15th letter was addressed and mailed to the plaintiff, not to counsel. It was also not “in response” to counsel’s letter of October 9th because it did not provide the

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information counsel had requested. In the October 9th letter, counsel requested, “a complete statement of [Plaintiff]’s account indicating all interest, late charges, and other charges, the interest rate and all payments since the inception of the mortgage.” (A. 147) None of that information was provided in defendants’ letter to plaintiff dated October 15th which was purely a demand for a specific balance allegedly due at that time. (A. 47) Consequently, the assertions at p. 15 of Appellees’ Brief that the October 15th letter provided, “monthly payment records and a loan transaction history” and that the information provided in the October 15th letter “was sent to the Appellant at the Appellant’s request” are quite simply inaccurate. These are key distinctions from the facts in Bergs v. Hoover, Bax & Slovacek, LLP, Supra, where plaintiff’s counsel did request a “reinstatement quote” and the quote was supplied to counsel, and not directly to the consumer. The October 15th letter demanding the payment of money from the plaintiff brings defendants squarely within the plain language definition of “debt collector” in the FDCPA and prevents them from being a mere “enforcer of security interests.” In its Brief, Appellee notes that the September 2, 2003, letter to the plaintiff does not contain an explicit demand for the payment of a specific amount of money. (Appellees' Brief at 13-14) This argument likewise ignores the plain language of the definition of “debt collector” in the FDCPA. The Act includes under the definition of “debt collector” anyone who “attempts to collect, directly or indirectly,” money from a consumer. As was pointed out at page 8 of Appellant’s Brief, the September 2nd letter was an “indirect” demand for the payment of money. (A 43) II. DEFENDANTS’ ACTIVITIES IN THIS CASE ARE NOT EXEMPT FROM THE FDCPA BECAUSE THEY ARE “INCIDENTAL TO A BONA FIDE FIDUCIARY OBLIGATION.”

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In an attempt to bolster the District Court’s Order granting Summary Judgment of March 3, 2005, Appellees’ Brief argues that it is not a “debt collector” because their foreclosure activities were incidental to a bona fide fiduciary obligation. (Appellees’ Brief, pp. 7-10) The trial Court made no such finding in its Memorandum and Order granting Summary Judgment, and this Court should likewise not find that defendants’ activities exclude them from the definition of “debt collector” in the FDCPA. Section 1692a(6) provides in part: The term [debt collector] does not include... (F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due to another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow agreement.... This section was created to exclude the activities of bank trust departments, escrow companies and other bona fide fiduciaries. Senate Report No. 95-382, p. 572 (A 127). The exemption provided by this section does not apply to trustees in foreclosure: The exemption (i) for bona fide fiduciary obligations or escrow arrangements applies to entities such as trust departments of banks and escrow companies. It does not include a party who is named as a debtor’s trustee solely for the purpose of conducting a foreclosure sale (i.e. exercising a power of sale in the event of default on a loan). FTC Official Staff Commentary §803(6)(4)(f). (A 134) Defendants’ Memorandum cites no cases in support of its position that lawyers foreclosing Deeds of Trust are exempt pursuant to the fiduciary exclusion. To the contrary, in Reed v. Smith, 1994 U.S. Dist. LEXIS 21463 (M.D. AL. July 25, 1994) the Court held that where attorneys were engaged primarily to collect a debt, their activities were not exempted from the FDCPA by reason of their acting in a fiduciary capacity.

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Defendants argue that Section 15-101(g) of the Maryland Estates and Trusts Article defines the term “fiduciary” to include a trustee acting under a deed of trust. However, under Maryland law, every attorney has a fiduciary relationship with his or her clients. Buxton v. Buxton, 363 Md. 634, 770 A.2d 152, 164 (2001); Homa v. Friendly Mobile Manor, Inc., 93 Md. App. 337, 612 A.2d 322, cert. granted 329 Md. 168, 617 A.2d 1085 (Md. App. 1992.) Under defendants’ reading, every attorney attempting to collect a debt on behalf of his client could argue that their activity was “incidental to a bona fide fiduciary obligation” and they are therefore not a “debt collector” as defined in the FDCPA. But it is now beyond question that the FDCPA applies to attorneys collecting consumer debts even in their litigation activities. Heintz v. Jenkins, 514 U.S.C. 291 (1995) ; Scott v. Jones, 964 F.2d 314 (4th Cir. 1992). Appellees cite no cases which have adopted the position they espouse, and this court should not be the first to do so. III. WHETHER DEFENDANTS WERE ACTING AS A “DEBT COLLECTOR” UNDER THE FACTS OF THIS CASE WAS A DISPUTED FACT MAKING SUMMARY JUDGMENT INAPPROPRIATE.

Attempting to elevate form over substance, Appellees’ Brief argues “the only facts that are material to the outcome of this matter are whether the Appellees were acting as trustee in foreclosing on the Appellant’s property pursuant to a deed of trust.” (Appellees Brief at p. 16) This argument ignores the plain language of the definition of “debt collector” in Section 1692a(6) of the FDCPA and the plain language of the definition of “debt” in Section 1692a(5) of the Act. This argument also conveniently requests that the Court overlook the fact that defendant used the U.S. mail to demand the payment of money by the plaintiff to its client, Chase Manhattan Mortgage Corporation, thereby bringing it squarely within the meaning of “debt collector” within the meaning of the Act. Defendants’ argument also ignores the

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language of the definition of “debt collector” in the FDCPA that requires a showing that the person “regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another.” Section 1692a(6) (emphasis added). In this case, the defendants stipulated that the October 15th letter to the plaintiff demanding the payment of money was a “regular” part of the handling of their cases. (A 42, ¶7) Thus, contrary to Appellees’ assertion, there are far more facts to be considered than merely defendants’ self-serving characterization in its Affidavit that the “principal business” of the defendant law firm is “enforcement of security interest.” (A 20) Rather, a finder of fact in determining whether defendants’ activities meet the definition of “debt collector” must consider (A) that defendants made a demand of money from the plaintiff to its client; (B) that defendants regularly make such demands to other individuals in the course of their collection activities; and (C) in the vast majority of instances such demands result in the security interest not being “enforced” by the sale of the property at auction. All of these facts are material and must be considered in determining whether defendants’ activities meet the definition of “debt collector” under the FDCPA. Because of this dispute of material fact, the lower Court’s Order granting Summary Judgement in favor of defendant must be reversed. IV. CONCLUSION Because the defendants made a demand for the payment of money allegedly due to its client from plaintiff, its activities meet the plain language of the definition of “debt collector” in the Fair Debt Collection Practices Act. By seeking the payment of money instead of merely possession of property, the defendants are not merely an enforcer of security interests. Nor were defendants acting incidental to a bona fide fiduciary obligation. The lower Court’s Order finding that defendants are not a debt collector must be reversed.

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In the alternative, whether defendants’ activities qualify it as a “debt collector” under the FDCPA is clearly a question of fact. Because their were material facts in dispute on this issue, the lower Court should not have granted Summary Judgment and its Order dated March 3, 2005, should be reversed and the case should be remanded to the District Court of Maryland (Northern Division) for further proceedings.

____________________ H. Robert Erwin, Jr. The Erwin Law Firm, P.A. 1o West Madison Street Baltimore, MD 21201 (410) 385-6000

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