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Dormant No Longer. Ohio Revises Dormant Judgment Statutes

December 15, 2016 in Ohio Courts, Post Judgment Execution

On December 8, 2016 the Ohio Senate unanimously passed revisions to Ohio Revised Code section 2329 regarding dormant judgments and the bill now awaits the expected signature of Governor Kasich.  In Ohio, a judgment would become dormant if execution was not issued upon the judgment for a 5 year period.  Revised Code Section 2327.01 defined “execution” specifically as a writ of execution or a certificate of judgment lien.  Garnishments and other proceedings in aid of execution were not considered “execution” for purposes of keeping a judgment active and out of dormancy.  However, with the new revisions to Section 2329, an order of garnishment will now also keep an Ohio judgment from becoming dormant.  The revisions to 2329.07(B)(1)(c) provide that “An order of garnishment is issued or is continuing, or until the last garnishment payment is received by the clerk of courts or the final report is filed by the garnishee, whichever is later.” 

This is great news for all of our client’s who have obtained judgments in the State of Ohio.  The revisions allow for the creditor to seek the most successful and expeditious forms of collection upon the judgment without fear of dormancy.  A creditor is no longer pigeon-holed into issuing execution that may be unfruitful, costly, or unnecessary for the sole purpose of keeping a judgment active and may now continue with the proceedings that have proven the most successful in the case at hand. 

The text and analysis of the bill may be found at the Ohio Legislatures Website:  https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA131-SB-227

Insurers Are Exempt From Ohio Consumer Statute

February 26, 2016 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

The Consumer Sales Practices Act (CSPA) is an Ohio statute governing consumer transactions that limits a number of specific business practices as well as more general prohibitions against unfair and deceptive acts by businesses against consumers. As the Ohio Supreme Court recently held however, a number of transactions and businesses are specifically exempted from the statute and its prohibitions. In this case, cost estimates provided by insurers are not required to follow the CSPA’s requirements.

In Dillon, et. al., v. Farmers Insurance of Columbus, Inc., Farmers provided insurance coverage for Dillon’s automobile. After crashing his vehicle, Dillon reported the accident to Farmers to have his vehicle repaired. Dillon chose Mission Auto Connection, Inc. to repair his vehicle and Farmers, after an inspection, provided an estimate for the amount it would pay to repair the vehicle. The estimate was based on using non-original equipment manufacturer (OEM) parts as provided in the insurance agreement. Dillon however instructed Mission Auto to repair the vehicle using OEM parts and was aware that he would be responsible for the difference in cost. He then sued Farmers for a CSPA violation for providing an estimate based on non-OEM parts and not getting Dillon to sign an acknowledgement of such.

The CSPA and the requirements and prohibitions it contains apply only to consumer transactions. Consumer transactions are defined by the statute to include transactions primarily for personal, family or household purposes but it also specifically excludes transactions between consumers and specific types of business entities, including insurers. A specific provision of the CSPA, ORC 1345.81, requires that any insurer providing a repair estimate based on the use of non-OEM parts must include a disclaimer on the estimate and have the consumer acknowledge the disclaimer by signing the estimate. This creates a potential statutory conflict as the CSPA specifically excludes transactions with insurers from the statute but the provision regarding repair quotes specifically names insurers as having to comply with the provision.

The trial and appellate courts upheld Dillon’s argument that statutory interpretation requires the more specific provision to apply when two statutes are in contradiction with one another and cannot be reconciled to give effect to both. As the provision regarding repair quotes is more specific than the general definition provision excluding insurers from the CSPA as a whole, the repair quote provision should apply and Farmers should have complied with its requirements. The courts further held that as the repair quote statute was enacted subsequent to the CSPA definitions, the later enacted provision should take precedence indicating the legislature’s wish for insurers to be covered by that provision.

The Ohio Supreme Court however sided with Farmers and reversed the lower courts’ decision, finding that both statutes can be construed so as to give effect to both. The Supreme Court held that while insurers are clearly covered by the provision’s requirements, the statute provides a remedy only if the violation is in connection with a consumer transaction. As the remedy provided by the CSPA provision is limited to consumer transactions and insurers are excluded from the definition of consumer transactions, the CSPA provision prevents insurers from issuing repair estimates without the non-OEM disclosure but provides no remedy for breach of the provision. Dillon is therefore limited to receiving a declaratory judgment or injunction regarding Farmers’ failure to comply with the provision.

The Ohio Supreme Court in this case provides a reminder that, if possible, apparently contradictory statutes must be read in such a way that each is given effect before rules of statutory construction determining priority may be applied. It also points out that the exclusions written into the CSPA are effective and entities such as insurers and banks may not be sued for damages under CSPA.

The Full Text of the Opinion May Be Found HERE

6th Circuit Upholds TCPA Dismissal in Healthcare Admissions Case

February 17, 2016 in Medical and Healthcare, Ohio Courts, TCPA

In June of 2015 we posted on the positive decision of the US District Court for the Southern District of Ohio in the matter of Baisden v. Credit Adjustments, Inc. whereby the District Court found “prior express consent” was given to Credit Adjustments to call the Plaintiff’s cellphone when the number was presented to a hospital at the time of admission and thereby negated the Plaintiffs’ Telephone Consumer Protection Act (TCPA) claims.  (original post and discussion of the facts of the case may be found HERE).  On February 12, 2016, the 6th Circuit Court of Appeals upheld the ruling of the District Court and found that the Plaintiffs had given express consent for their cellphone to be called.  This decision is of importance because Credit Adjustments was not hired by the hospital directly, but by the anesthesiologists who also provided services to the Plaintiffs.  The court found that the express consent was not only given to the hospital, but also applied to the “other health care providers” including the anesthesiologists and its collection agency.  It is important to note that the consent did not “automatically” transfer and was carefully analyzed by the court in relation to the admission documents and the language they contained.  Since the process of a single admission point is utilized by many healthcare providers and is a common practice in the industry, it is comforting to see the process upheld with regard to TCPA claims.  

The complete 6th Circuit Opinion may be found HERE.

Limitation of Liability Does Not Violate Consumer Sales Practices Act

January 20, 2016 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

In the matter of Barto v. Boardman Home Inspection, Inc. the Ohio Eleventh District Court of Appeals determined that the limitation of liability provision in a home inspection contract was not unconscionable and thereby did not violation the Ohio Consumer Sales Practices Act.

Barto hired Boardman Home Inspection, which is solely owned and operated by David Shevel to perform a home inspection on a home they were purchasing.  The parties entered into a written agreement prior to the inspection that included the areas for inspection as well as a limitation of liability clause.  The clause limited Boardman’s liability to the amount paid for the inspection and inspection report.  After agreeing to the terms, Shevel performed the inspection including a visual inspection on the roof and determined that asphalt shingles were proper for the pitch of the roof.   After Barto took possession of the home, the roof leaked because asphalt shingles were not proper for the actual pitch of the roof causing damage to the home.

Barto sued Boardman Home Inspection and David Shevel for negligence and for violations of the Consumer Sales Practices Act.   The trial court determined that the limitation of liability clause was not unconscionable and therefore did not violate the Consumer Sales Practices Act.  As such, it limited Boardman’s liability to $350.00.  The court also determined that Shevel could not be held personally responsible for any negligence as he was clearly identified as an agent for Boardman.

The Court of Appeals affirmed the decision finding that the limitation of liability clause did not violate the Consumer Sales Practice Act.  The court looked favorably upon the 9th District’s decision in Green v. Full Service Property Inspections, LLC, 2013-Ohio-4266, which also found that a limitation of liability provision in a home inspection contract did not violate the Consumer Sales Practices Act.  In finding that the clause was not unconscionable, the court noted some important factual findings including:  that the clause was set off in the agreement in a separate paragraph, that the consumer was not rushed into signing the agreement or prevented from asking questions about it, that the consumer was not prevented from negotiating terms, and that the consumer was not prevented from hiring another inspection company.

A limitation of liability clause can be a powerful tool in any contract.  It is a way for the parties to agree upon the amount of damages should any problems arise, allowing the parties to quantify their risk and exposure.  Using a rational amount that is logically connected to the underlying transaction along with the factual findings above regarding negotiation and execution of the agreement should allow a party to limit their liability without running afoul of the Consumer Sales Practices Act.

The Full Text of the Opinion May Be Found HERE.

OCSPA Class Actions Require Actual Damage

October 5, 2015 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

OCSPA Class Actions Require Actual Damage

In Felix v. Ganley Chevrolet, the Ohio Supreme Court recently held that ALL members of a plaintiff’s class action alleging violations of the Ohio Consumer Sales Practices Act (“OCSPA”) must have suffered actual injury as a result of the alleged conduct to maintain an action. 

In Felix, the Plaintiffs filed suit against a car dealership for deceptive practices under the OSCPA.  They included a claim that the arbitration provision contained in the dealer’s contracts was unconscionable and that the dealer’s practices pertaining to the clause violated the OSCPA.  The Felixes sought to certify a class that included any consumer who signed a contract with any of Ganley’s 25 companies that included the same arbitration clause.  The trial court held that the inclusion of the arbitration provision violated the OSCPA and awarded the statutory damage of $200 per transaction to each class member.  The court of appeals upheld this decision and the Ohio Supreme Court granted review for the purpose of determining if all members of a plaintiff’s class alleging violations of the OCSPA must have suffered actual damage. 

The OCSPA allows the recovery of “damages” in a class action (See R.C. § 1345.09(B)) but the code limits those damages to “actual damages” and does not allow for the recovery of the statutory damages laid out by the OCSPA for individual actions.  The Court found this reasoning consistent with the purpose of the individual damage provisions in the OCSPA to encourage consumers with smaller amounts of damage to bring their claims.  The court found this purpose unnecessary in class action claims because the aggregation of claims constitutes the necessary deterrent to noncompliance with the statute.

The Court stated that the suffering of some injury is one of the most basic requirements to bringing a lawsuit and is an indispensable part of civil actions.   In the case of a class action, common evidence must be shown that all members of the class suffered some injury.  The “fact of damage” (the existence of injury) goes directly to the predominance inquiry required under Civil Rule 23(b)(3) for class actions.   A claim that requires individual inquiry into the fact of damage does not meet this predominance requirement.  Damage must result for the common action alleged to cause actual injury to all of the class members.  Without a showing that all class members were damaged, the predominance requirement is not met and the class must fail. 

In Felix, the Court found that the Plaintiffs did not show that all consumers who signed a contract with the offending provision were damaged and therefore the class claims must be denied.  While the language used in all of the contracts may have violated the OCSPA, the Plaintiffs were still required to show that this caused actual injury to all members of the class.  The violation, in and of itself, was not enough to award damages to the class without a showing of actual injury to each and every class member. 

The Full Text of the Opinion May Be Found HERE

TCPA and Health Care Admissions

June 29, 2015 in Ohio Courts, TCPA

In the case of Baisden v. Credit Adjustments, Inc. the US District Court for the Southern District of Ohio reviewed the issue of the application of the Telephone Consumer Protection Act (“TCPA”) to “other health care providers” in the context of hospital admission and subsequent collection. 

In the case, Baisden sought medical care from a local hospital.   As part of his admission, Baisden signed a “Patient Consent and Authorization” form that contained a standard Release of Information provision.  The provision entitled the hospital to release the patient’s “health information” for various reasons including insurance, billing, other health care providers, and other various reasons.  In conjunction with his hospital stay, Baisden also received services from the hospital’s anesthesia provider.  The anesthesiologists subsequently billed Baisden for the services provided and Baisden failed to pay as required.  The anesthesiologists then transferred Baisden’s account to Credit Adjustments to collect upon the unpaid balance.  Credit Adjustments made numerous phone calls to Baisden in an attempt to collect the anesthesiologist’s bill.  Baisden then sued Credit Adjustments claiming violations of the TCPA for contacting him on his cellphone using an automated dialing system.  Credit Adjustments claimed that it received prior consent from Baisden due to the completed consent and authorization forms that Baisden signed upon admission to the hospital.

The court addressed two issues, 1) whether the hospital forms signed by Baisden also applied to the anesthesiologist and the anesthesiologist’s third party debt collector and 2) whether the signed form actually provided express consent under the TCPA.

The patient consent form signed by Baisden included language regarding the release of information and stated, “I authorize Mount Carmel to receive or release my health information… to such employees, agents, or third parties as are necessary for these purposes…”  The list of purposes included “billing and collecting moneys due from me.”  Baisden argued that this transfer of “health information” did not include his cellular telephone number or any permission derived to call it.  Citing favorably to the Eleventh Circuit opinion in Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110 (11th Cir. 2014), the Court determined that the cellphone number provided on the hospital admission form was part of the record from the visit and was the contact information given by Baisden related to billing.  The Court further examined the HIPPA definition of “health information” which includes, “any information … created or received by a health care provider” that “relates to … the past, present or future payment for the provision of health care to an individual.”  Finding that “health information” included the cellular telephone and the consent to contact it, the Court further noted that the anesthesiologist was easily one of the “other health care providers” that served the hospital and the consent was transferred to them and their attempts to collect the outstanding bill.

The Court also addressed the issue regarding the signed form providing express consent as required under the TCPA.  Again citing favorably to the Mais decision the Court took the same approach and also performed a similar analysis under the 2008 FCC Declaratory Ruling which provides that prior express consent exists when a cell phone subscriber makes the number available to the creditor regarding the debt.  The court also looked to a 2014 FCC Order in In re GroupMe, Inc./Skype Commc’ns S.A.R.L. Petition, 29 FCC Rcd. 3442, 3447 (March 27, 2014) which provided that “the TCPA does not prohibit a caller from obtaining consent through an intermediary.”  Using these two rulings along with the Mais decision, the court found that a cellular phone subscriber can provide their number to a creditor, like the anesthesiologists in this case, by affirmatively giving an intermediary (the hospital) permission to transfer the number to the anesthesiologist for use in billing.  By providing the number at the time of service, Baisden agreed to be contacted at that number.   The court thereby found that prior express consent had been given to call Baisden’s cellphone.   

Accordingly the Court granted summary judgment in favor of Credit Adjustments and denied Baisden’s TCPA claims.  Baisden has recently appealed this decision to the 6th Circuit. 

The Full Text of the Opinion May Be Found HERE

WE’VE MOVED!

May 18, 2015 in News

Slovin & Associates Co., LPA is pleased to announce that our firm has moved office locations.  Nestled between the iconic Cincinnati Museum Center and the downtown central business district, our office is now conveniently located at 644 Linn Street in the historic Queensgate neighborhood of Cincinnati. 

Oral Guarantees and the Leading Object Rule

April 17, 2015 in Creditors Rights, Ohio Courts

In the matter of Willoughby Supply Company v. Robert Inghram, the Ohio Eleventh District Court of Appeals affirmed a decision upholding an owner’s oral guaranty of a corporate debt through the application of the leading object rule.

In the case Robert Inghram was the owner and sole shareholder of a business.  In his dealings with Willoughby Supply the business filled out a credit application and a personal guaranty.  Mr. Inghram denied signing the guaranty and through the course of the trial it was discovered that the guarantee was likely signed by one of his employees.  However, evidence also showed that, in a phone call with Willoughby Supply, Mr. Inghram orally acknowledged the personal guarantee.  The trial court found this acknowledgment to be a ratification of the guarantee and applied the leading object rule as an exception to the Statute of Frauds and enforced the guarantee.

Ohio follows the leading object rule as an exception to the Statute of Frauds.  The leading object rule provides that oral contracts by third parties guaranteeing another’s debt are not within the Statute of Frauds, if the guarantor’s principal purpose is to benefit his or her own business or pecuniary interest.

In this case Inghram argued that the promise of a stockholder to pay the debts of a corporation remains within the Statute of Frauds.  However, the Court found that where the promisor owns all, or substantially all, of the stock in the corporation, and is transacting his business in its name for personal convenience, there is sufficient consideration running to him personally to take it out of the statute.    The Court found that as the sole owner, Inghram clearly benefited from the agreement.

Concurring in the judgment, Judge Timothy Cannon notes that the doctrine of equitable estoppel would also apply to the case at hand.  Equitable estoppel provides relief where one party induces another to believe certain facts are true and the other party changes his position in reasonable reliance to his detriment on those facts.  By orally confirming that he signed the guarantee, inducing Willoughby Supply to extend credit, Inghram was estopped from later arguing that the signature was not valid.

The Full Text of the Opinion May Be Found HERE

Enforceability of Arbitration Agreements

October 21, 2014 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

Ohio has a public policy favoring the enforcement of arbitration provisions in contracts and ORC 2711.01(A) provides that such provisions will be enforced unless grounds exist in law or equity for revocation of the contract. The Ohio Court of Appeals recently addressed the issue and looked at whether an arbitration provision in a consumer contract should be upheld in a suit alleging violations of the Consumer Sales Practices Act.

In Tamara Hedeen v. Autos Direct Online, Inc., the plaintiff alleged violations of the Ohio Consumer Sales Practices Act, fraud, and deceit arising from a contract to purchase a vehicle. 8th Dist. Cuyahoga No. 100582, 2014-Ohio-4200. Tamara Hedeen (“Hedeen”) purchased the vehicle online from Autos Direct Online (“ADO”) and discovered after delivery that the vehicle had been in an accident and had unrepaired damage. The contract signed by Hedeen included an arbitration agreement and ADO moved to stay proceedings pending arbitration. The trial court granted the motion and Hedeen appealed the decision. The Court of Appeals addressed five potential grounds for not enforcing the arbitration provision.

The Court of Appeals first addressed whether ADO waived its right to arbitrate by waiting five months to file its motion and by participating in discovery and pretrial hearings. A party may waive its right to arbitration if it acts inconsistently with that right. Such an inconsistency may be found in a delay requesting arbitration, the extent of participation in the litigation prior to requesting arbitration, the filing of a counterclaim without  a motion for a stay, or if the plaintiff would be prejudiced by the inconsistent acts. The Appeals Court determined that ADO did not waive its right to arbitrate as it participated in the litigation only as required by the court and moved to stay the proceedings before the litigation within 75 days of answering the complaint.

The Appeals Court then addressed whether ADO was required to attach authenticated evidence to its Motion to Stay Pending Arbitration. Hedeen cited case law indicating that a copy of the arbitration agreement must be included with the motion along with an affidavit stating that the arbitration agreement is the agreement that was signed. The Appeals Court found that case inapplicable as it was unclear if the parties agreed to arbitrate and an oral contract was involved. In this case, Hadeen inadvertently admitted that she signed the agreement and did not dispute the authenticity of the arbitration agreement or her signature on it. As such, the trial court had the discretion to admit the arbitration agreement into evidence.

Hedeen also argues that the arbitration agreement was procedurally and substantively unconscionable, both of which are required for an agreement to be found unconscionable. Procedural unconscionability occurs when no voluntary meeting of the minds was possible due to the circumstances of the execution and substantive unconscionability is found when the terms are found to not be commercially reasonable. Hadeen alleged that there was procedural unconscionability because ADO failed to notify her of or explain the arbitration agreement and the arbitration agreement was included in a stack of papers emailed to her. The Appeals Court found no procedural unconscionability since Hedeen had an adequate opportunity to read the arbitration agreement, the agreement was set out on its own page with a bold notice directly above Hadeen’s signature, Hadeen had no impairment or disability that prevented her from understanding the agreement, and she made no effort to renegotiate its terms.  As there was no procedural unconscionability, the court did not address substantive unconscionability.

The arbitration agreement also contained a provision requiring the losing party to pay the attorney fees of the prevailing party in arbitration. The Ohio Consumer Sales Practices Act however provides for the shifting of attorney fees only if the action was both groundless and filed or maintained in bad faith. While courts have found that statutory remedies may be heard in arbitration, they have also found a violation of public policy if they prevent the remedial purpose of the statute from being achieved. Hadeen argues that enforcement of an arbitration agreement with such a provision is contrary to public policy as it would directly contradict Ohio law protecting consumers who bring claims in good faith. The Appeals Court agreed and found that the arbitration agreement could not be enforced due to the “loser-pays” attorney fee shifting provision.

Hedeen also alleges that a provision in the arbitration agreement that states the arbitration is “final and binding” is against public policy as Ohio law sets out circumstances when a court may vacate an arbitral award. The Appeals Court rejected this argument as Ohio law requires such a statement before an arbitration award may be enforced in court.

While the Appeals Court ultimately found the arbitration agreement could not be enforced due to the loser-pays attorney fee shifting provision, it also detailed a number of other arguments that are insufficient to prevent the enforcement of such agreements. Without the loser-pays provision, the arbitration would have been upheld, showing the strong preference for enforcing arbitration agreements by Ohio courts.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

The Full Text of the Court Opinion May Be Found Here: http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2014/2014-ohio-4200.pdf

OCC Issues Guidance for Debt Sales

August 6, 2014 in Creditors Rights

On August 4, 2014 the Office of the Comptroller of the Currency (“OCC”) issued new Risk Management Guidance to all National Banks and Federal Savings Associations regarding the sale of consumer debt.  The OCC bulletin issues guidance on best practices and procedures for the sale and resale of debt from banks to debt buyers. 

In addition to describing the internal policies and procedures that a bank must develop and implement regarding debt-sale arrangements the bulletin also describes the due diligence that a bank must go through when selecting a debt buyer.  Banks are expected to “fully understand the debt buyers’ collection practices, including the resources that debt buyers or their agents use to manage and pursue collection.”   This includes the requirement that the bank review the debt buyers audited financial statements and confirm all required licenses and insurance policies are in place.  The bank must also assess the debt buyers’ reputation and confirm that the debt buyers’ staff is “appropriately trained to ensure that it follows applicable consumer protection laws and treats customers fairly throughout the collection process.”  Banks are required to perform all due diligence before entering into a sale agreement with the debt buyer. 

Further, the bulletin also lays out the documentation that a bank must provide to a debt buyer “at the time of sale.”  This is required to ensure that the debt buyer has “accurate and complete information necessary to enable them to pursue collections in compliance with applicable laws and consumer protections” at the time of sale.  The bulletin requires the bank to provide the debt buyer with:

–          A copy of the signed contract or other documents that provide evidence of the relevant consumer’s liability for the debt in question

–          Copies of all, or the last 12 (whichever is fewer) account statements

–          All account numbers used by the bank (and if appropriate its predecessors) to identify the debt at issue

–          An itemized account of all amounts claimed to be owed in connection with the debt to be sold, including the loan principal, interest and all fees.

–          The name of the issuing bank, and if appropriate, the store or brand name.

–          The date, source, and amount of the debtor’s last payment and the dates of default and amount owed.

–          Information about all unresolved disputes and fraud claims made by the debtor.  Information about collection efforts (both internal and third-party efforts, such as by law firms) made through the date of sale.

–          The debtor’s name, address, and Social Security number.

The bulletin concludes by listing certain types of debt and certain situations under which debt should not be sold by the bank and also a requirement that policies and procedures be in place to ensure all parties involved in the debt-sale arrangement comply fully with all applicable consumer protection laws.

 

The Full Text of the OCC’s August 4, 2014 Bulletin may be found: HERE

Update: Suesz v. Med 1 Solutions, Reversed

July 18, 2014 in FDCPA, Indiana Courts

On May 14, 2013 we reported on the Indiana District Court case of Suesz v. Med 1 Solutions, which determined that the Marion County Small Claims Courts were not “judicial districts” as defined by  15 U.S.C.§ 1692i for purposes of the Fair Debt Collection Practices Act (“FDCPA”).   In reaching this decision, the district court relied on the 7th Circuit case of Newsom v. Friedman.  The district court’s decision was originally upheld by a panel of the 7th Circuit on October 31, 2013 with a 2-1 decision.  However, upon rehearing en banc, on July 2, 2014 the 7th Circuit both reversed the district court in Suesz and overruled Newsom.  

The circuit court held that the “venue approach” should be used when determining if a court is a “judicial district” for purposes of the FDCPA.  Under this approach, a “judicial district” will be the “smallest geographic area relevant to venue in the court system in which the case is filed.”  In the plain terms, the 7th Circuit determined that if venue is not proper in the court in which the initial complaint was filed, the complaint was not filed in the correct “judicial district” and a possible FDCPA violation has occurred.   The circuit court stated that the “venue approach” would be more practical and would stop debt collectors from purposefully choosing inconvenient forums and forum-shopping for the most advantageous court.

The July 2, 2014 Suesz opinion may be found HERE

Attorney Chris Arlinghaus Now Licensed in Indiana

June 11, 2014 in News

Slovin & Associates is pleased to announce attorney Christopher Arlinghaus is now admitted to practice law in the state courts of Indiana.  Chris is looking forward to assisting individuals and companies in the area of creditor’s rights and civil litigation in Indiana, as well as continuing to practice in Ohio and Kentucky.

FDCPA Not Applicable to Proof of Claim Filings

May 16, 2014 in Creditors Rights, FDCPA, Kentucky Courts, Medical and Healthcare

In March of 2014 the US District Court of for the Eastern District of Kentucky discussed the application of the Fair Debt Collection Practices Act (“FDCPA”) to bankruptcy proof of claim filings. Plaintiff, Mallard, filed an adversarial proceeding with the bankruptcy court alleging that Defendant’s failure to redact numerical medical billing codes in a proof of claim filing violated the FDCPA and constituted harassment because the codes disclosed private medical information. In granting summary judgment in favor of Defendants, the US District Court for the Eastern District of Kentucky found that the FDCPA does not apply to proof of claim filings.

On October 1, 2012, the Plaintiff filed for bankruptcy protection under Chapter 13. On October 22, 2012, Wynn-Singer filed a proof of claim on behalf of Infectious Disease Consultants (“IDC”), a Kentucky healthcare provider. In their claim, Wynn-Singer attached unredacted billing records which included codes for the Plaintiff’s medical condition. On April 1, 2013, the Plaintiff filed an adversary proceeding. Mallard alleged that the disclosure of the private health information constituted harassment in violation of the FDCPA. When Wynn-Singer filed its Motion for Summary Judgment they asserted that filing a proof of claim cannot be the basis for an action under the FDCPA. The Plaintiff claims that by disclosing his medical information, Wynn-Singer violated 15 U.S.C. §1692d, which prohibits harassment or abuse in connection with the collection of a debt and 15 U.S.C §1692f, which prohibits unfair or unconscionable means of debt collection.

Although the Sixth Circuit has not specifically addressed the applicability of the FDCPA to proofs of claims, it has found that the FDCPA is broadly construed. Hartman v. Great Seneca Fin. Corp., 569 F.3d 606 (6th Cir. 2009). However, the Kentucky District Court reasoned that “for a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor.” citing Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011). The court determined that the filing a proof of claim does not constitute a demand for payment from a debtor. Rather, at best, it is a request to participate in the claims allowance process of a debtor’s estate. 11 U.S.C. §§ 502, 1306, 1326.

In reaching this decision, the court cited favorably to the Bankruptcy Court of the Northern District of Georgia which explained:

[F]iling a proof of claim in bankruptcy cannot be the basis for an FDCPA claim because it is not an activity against a consumer debtor. The FDCPA is designed to regulate debt collection activities against unsophisticated consumers. To constitute a debt collection activity under the FDCPA, the activity must asserted against a consumer. The filing of a proof of claim is a request to participate in the distribution of the bankruptcy state under court control. In re McMillen, 440 B.R. 907, 912 (Bankr. N.D. Ga. 2010)

The court further reasoned that the purpose of the FDCPA is to eliminate abusive debt collection practices to protect consumers. The FDCPA defines “consumer” as “any natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. §1692a(3). Under this definition, the court found that the debtor’s estate is not a natural person and as such, filing a proof of claim is not a form of debt-collection activity.

While the court dismissed the FDCPA claims, care should always be taken when filing claims of a medical nature. In this case, the codes disclosed Plaintiff’s HIV diagnosis. It was argued, that this disclosure violates Kentucky Revised Statute 214.181 which prohibits the disclosure of HIV test results. The court allowed these claims to proceed. The court also noted that such disclosures could cause issues with medical licensing boards and federal regulations under HIPPA.

The Full Text of the Opinion May be Found Here.

Many thanks to Kim Goldwasser for her contributions to this article. Kim is a paralegal with Slovin & Associates Co., L.P.A.

Out-of-State Debt Collectors Do Not Need a License in Indiana

April 17, 2014 in Creditors Rights, FDCPA, Indiana Courts

The Indiana Court of Appeals has held that an out-of-state debt collector with no physical place of business in Indiana is not required to obtain a license from the Indiana Department of Financial Institutions (“DFI”) to collect debts within the state. In Wertz v. Asset Acceptance, LLC, Nathan Wertz (“Wertz”) filed a counterclaim against Asset Acceptance, LLC (“Asset”) alleging violations of the Indiana Deceptive Consumer Sales Act and the Fair Debt Collection Practices Act for failing to obtain a license from DFI to collect on consumer loans. Ind.App. No. 71A03-1305-CC-175 (Mar. 21, 2014). The Court accepted DFI’s opinion on the statute in interpreting the Indiana Uniform Consumer Credit Code (“IUCCC”) and held that a license is required only if a creditor has a physical location within Indiana.

On August 9, 2012, Asset filed suit against Wertz to recover a balance due on a Chase credit card on which Wertz had allegedly defaulted. Wertz filed a counterclaim and putative class action against Asset alleging that Asset engaged in the practice of taking assignment of and collecting on Indiana consumer debts without a license as required by the IUCCC. Wertz further claimed that by collecting consumer debts without a license, Asset violated the FDCPA and Indiana Deceptive Consumer Sales Act. Arguing that it was not required to seek a license to collect consumer debts under the Act, Asset filed a motion to dismiss the counterclaim. The motion to dismiss Wertz’s counterclaim and class action was granted and Wertz appealed.

The IUCCC requires that a license be obtained “to regularly engage in Indiana in … taking assignment of consumer loans [or] undertaking direct collection of payments from or enforcement of rights against debtors arising from consumer loans” unless they are a depositary institution or a registered collection agency. Asset admitted it is not classified as a depository institution and is not registered as a collection agency. It also admitted to taking assignment of and collecting on consumer loans without having a license to do so. Asset argued however, that the phrase “regularly engage in Indiana” does not include companies, such as itself, with no physical presence in the state and therefore the licensing requirement does not apply. Wertz alleges that the statute does apply and Asset has violated the statute by not obtaining a license.

The Court of Appeals found the language “regularly engage in Indiana” to be ambiguous and looked to both the purpose of the statute and the interpretation of the statute by the relevant administrative agency. The Court determined the purpose of the IUCCC is to protect consumers from unfair collection practices by requiring creditors with sufficient minimum contacts with Indiana that “regularly engage in Indiana” in the collection of consumer debts to obtain a license. DFI, the agency tasked with enforcement of the statute, has issued guidance indicating that “regular” refers to at least twenty-five times per year and “engaged in Indiana” requires a physical presence within the state.

Wertz argued that the DFI opinion should not be used, as the interpretation is based on the official comments to the statute rather than the statutory language itself, and the interpretation was not issued through a formal rule making process and therefore deference to the agency is not required. The Court rejected Wertz’s first argument, relying on Basileh v. Alghusain, finding that the commentary to a uniform code enacted by the legislature is indicative of the legislature’s intent and the commentary is to be used when interpreting the statute. 912 N.E.2d 814 (Ind.2009). The Court then noted that a formal rulemaking process is not required before Indiana agencies are granted deference in statutory interpretation and the broad nature of DFI’s guidance authority would make such a process difficult.

The court held that the statutory guidance of DFI was valid and deserved great deference from the court. As such, an out-of-state business without a physical location within Indiana is not covered by the IUCCC and its licensing requirements. Asset did not meet the criteria to be covered by the statute and therefore did not need a license to pursue its case against Wertz. The dismissal of Wertz’s claims against Asset was affirmed.

The Full Text of the Wertz v. Asset Acceptance Opinion May Be Found HERE:

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Debt Buyer May Have Personal Knowledge of Records

April 1, 2014 in FDCPA, Ohio Courts

In an environment where successfully obtaining judgment against debtors who have defaulted on their obligations requires a sworn affidavit attesting to the amount and nature of the debt, the language that the affidavit contains can be critical.  The U.S. District Court for the Eastern District of Tennessee recently broadened language the 6th Circuit found acceptable for a debt buyer to use in testifying about account records created by the original creditor. 

In Sells v. LVNV Funding, LLC, the plaintiff, Carl T. Sells brought an action against LVNV Funding (“LVNV”) under the Federal Debt Collection Practices Act alleging violation of several provisions of the Act. Sells argued that the debt buyer, who merely purchased the account after default, did not have actual personal knowledge of the account creation and terms and therefore the affidavit filed with the collection case was false and misleading.   

The debt at issue in the original action was a credit card debt that Sells incurred and then defaulted on. It was assigned to LVNV who ultimately brought suit in November of 2010, with a copy of an affidavit attached. The affidavit stated a principal amount due of $6,321.47 and asked for pre and post judgment interest, as well as reasonable attorneys’ fees. With respect to the amount of the debt the affidavit stated: “on the Date of Assignment [5/28/2009], all ownership rights were assigned to, transferred to, and became vested in Plaintiff [LVNV], including the right to collect the purchased balance owing of $6,321.47 plus any additional accrued interest.

The District Court likened this case to the recent opinion by the 6th Circuit in Clark v. Main Street Acquisition Corp 2014 WL 274469 (6th Cir. January 17, 2014) regarding the use of an affidavit were the debt buyer claims personal knowledge of the debt.  In, Clark, the 6th Circuit stated that claims of personal knowledge refer to business records, which include the original lender’s records. 

The language LVNV used included,

–          “I have personal knowledge regarding Plaintiff’s creation and maintenance of its normal business books and records, including computer records of its account receivables.”

–          “In the ordinary courts of business, Plaintiff regularly acquires revolving credit accounts, installment accounts, service accounts and/or other credit lines.  The records provided to Plaintiff have been represented to include information provided by the original creditor or it successor in interest.”

–          “Based upon the business records maintained on account XXXXXX (hereinafter “Account”) which are a compilation of the information provided upon acquisition and information obtained since acquisition…”

Quoting from the Clark decision, the District Court stated, “Such an affidavit is not ‘inaccurate or misleading’ and even if it was ‘the representation was still not material’ because ‘the least sophisticated consumer understands that lenders and debt collectors will by necessity have to rely on business records they may not personally have created, especially in an age of automated, computerized transactions.’” (citing 2014 WL 274469 at *4).

           

The full text of the Sells opinion can be found here.

The full text of the Clark opinion can be found here

 

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.

Carmack Amendment Preempts State Law Claims Against Common Carriers

March 13, 2014 in Creditors Rights, Ohio Courts, UCC

The Federal Carmack Amendment preempts all state law claims against common carriers for damaged interstate shipments according to the Ohio Court of Appeals in the Fourth Appellate District. Originally enacted in 1906 as an amendment to the Interstate Commerce Act of 1887, the Carmack Amendment is designed to provide a uniform nationwide method of recovery for damage to shipments on common carriers. The appeals court found that only federal law claims could be brought against UPS for a damaged shipment in state court and any state statutory and common law claims are preempted. Dean v. UPS Legal Dept., 4th Dist. No. 13CA21, 2014-Ohio-619.

In Dean, Jared Dean purchased a tankless water heater from a local retailer for $500 and sold it through eBay for $1,600 to a buyer in California. He took the water heater to Staples where he purchased shipping and surrendered the package for shipment. UPS then shipped the package to California where it was refused due to damage. Dean’s claims with UPS and Staples were denied due to improper packaging.

Dean then filed a small claims petition in the Athens County Municipal Court against UPS for $1,740 representing the resale value of the water heater and the shipping cost. The complaint did not specify the legal theory or cause of action for which he was seeking damages. The trial court interpreted his claims under the Ohio common law rather than federal law, despite UPS briefing on the preemption of state law by the Carmack Amendment. Dean was awarded $1,600 by the trial court and UPS appealed asserting a number of errors including preemption of state law by the Carmack Amendment.

Citing significant case law, the appeals court found that Congress intended to completely preempt all state statutory and common law when it enacted the Carmack Amendment in order to provide a single method of recovery for shippers to recover damages to delivered property. The appeals court quoted the Supreme Court noting “Almost every detail of the subject is covered so completely that there can be no rational doubt that Congress intended to take possession of the subject, and supersede all state regulation with reference to it.” Adams Express Co. v. Croninger, 226 U.S. 491 (1913).

The court also noted that state courts still have jurisdiction over claims against common carriers if the claims are brought under federal rather than state law. Dean did not specify federal law or the Carmack Amendment in his complaint and the trial court interpreted his claims under state law. As such, the Carmack Amendment served as a complete defense to Dean’s state law claims and the appeals court reversed the judgment against UPS. By UPS’s request, on remand the trial court was instructed to interpret Dean’s claims under the Carmack Amendment.

The Full Text of the Court’s Opinion May Be Found Here: http://www.sconet.state.oh.us/rod/docs/pdf/4/2014/2014-ohio-619.pdf

The Text of the Carmack Amendment May Be Found Here: http://www.law.cornell.edu/uscode/text/49/14706?qt-us_code_tabs=3

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

No Private Right of Action Under FCRA for Erroneous Reporting

February 7, 2014 in Credit Reporting, Ohio Courts

The Eight District Court of Appeals in Ohio has dismissed the claims of a consumer filed under the Fair Credit Reporting Act (FCRA) for erroneous reporting stating that no private right of action exists. In the summer of 2011, Stephen Johnson discovered an item on his credit report relating to an overdue amount to KeyBank and promptly notified KeyBank. Within two weeks, KeyBank rectified the error and all notations of the alleged debt were removed from the reporting agency ChexSystems. However, despite the correction, Johnson demanded monetary compensation from KeyBank and eventually sued KeyBank for conducting an “unauthorized inquiry” and “illegally” reporting him to a consumer reporting agency. Johnson also raised several state law causes of action.

 KeyBank filed a motion for judgment on the pleadings which was granted and Johnson’s claims were dismissed. Johnson promptly filed an appeal.

The Court of Appeals dealt first with Johnson’s FCRA claim.  The court noted that KeyBank is a furnisher as defined by the FCRA.  A furnisher has two responsibilities under the Act.  A furnisher is required to report accurate information and correct any inaccurate information as well as being responsible to undertake certain investigations when information is disputed by the consumer.  The court dismissed Johnson’s claims holding that no private cause of action is available to a consumer under the FCRA for erroneous reporting.  The court further noted that enforcement in this case resides exclusively with federal and state agencies. 

Section 1681s-2(c) specifically exempts violations of 1681s-2(a) from private civil liability.  Section 1681s-2(a) prohibits a person from furnishing information to a consumer reporting agency that is known or has reasonable cause to be known to be false or if the person has been notified by the consumer that the information is false and it in fact false.  Violations of this type are explicitly reserved for enforcement by the Federal Trade Commission.  As such, Johnson’s claim failed to state a claim upon which relief could be granted as no private right of action existed concerning the erroneous reporting.   

With respect to Johnson’s state law claims of identity theft, libel, and conspiracy to defraud, the Court found that the sole fact underlying his allegations related to KeyBank’s erroneous reporting to ChexSystems. Therefore, all Johnson’s state law claims were preempted under Section 1861(b)(1)(F) of the FCRA.

Based on its findings, the Court of Appeals affirmed the trial court’s judgment dismissing the complaint.

The Full Text of the Opinion May Be Found At:  http://www.sconet.state.oh.us/rod/docs/pdf/8/2014/2014-ohio-120.pdf

 

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.

Verification Letters are Key in Factoring Agreements

February 3, 2014 in Construction, Creditors Rights, Indiana Courts

The Indiana Court of Appeals overturned a superior court ruling finding that the doctrine of promissory estoppel is applicable to verification letters in factoring contracts and should control in the case of Sterling Commercial Credit – Michigan, LLC v. Hammert’s Iron Works, Inc. 998 N.E.2d 752 (Ind. Ct. App. 2013). The case was brought to the court on Sterling’s appeal following a superior court ruling in favor of Hammert’s on both cross-motions for summary judgment.

The conflict addressed in this case arose from a contract for construction of a clinic in Evansville, Indiana. Hammert’s, which was responsible for the structural steel framing & decking, entered into a $490,000 subcontract with National Steel Erectors, Inc. (“NSE”) with terms calling for payment only after Hammert’s was paid by the general contractor. To provide liquidity, NSE entered into a Factoring and Security Agreement with Sterling. Sterling agreed to pay NSE 85% of the amount due when invoiced and would later receive the full payment directly from Hammert’s. Before making the payment, Sterling required a verification letter from Hammert’s asserting that the invoiced amount was earned, due, owing, and final except for payment.

Sterling purchased three invoices from NSE and received verification letters from Hammert’s for all three. Hammert’s paid the first invoice received without issue. Before paying the second invoice, Hammert’s inquired about the status of NSE’s payments to subcontractors who were currently owed $50,116.49. With the second invoice payment, Hammert’s included a letter indicating that NSE’s subcontractors must be paid and requested that the letter be signed and returned. Sterling disregarded the letter and kept the payment for the second invoice. NSE failed to pay its subcontractors and subsequently filed for bankruptcy. Hammert’s paid the subcontractors on NSE’s behalf and finished the construction itself but did not pay Sterling for the third invoice it had purchased from NSE.

Sterling filed suit against Hammert’s asserting breach of contract and that they detrimentally relied on Hammert’s verification letter in providing funding to NSE. Sterling argued that the doctrine of promissory estoppel should obligate Hammert’s to pay the third invoice. Hammert’s counter-claimed alleging breach of the agreement to pay NSE’s subcontractors, misappropriation of funds, and argued that the doctrine of promissory estoppel was inapplicable.

 Rather than rule on the breach of contract issues, the Indiana Court of Appeals decided the controversy solely using promissory estoppel. The doctrine is based on equitable principles and has been found to be applicable to commercial transactions under the Uniform Commercial Code. Promissory estoppel requires “(1) a promise by the promisor (2) made with the expectation that the promisee will rely thereon (3) which induces reliance by the promisee (4) of a definite and substantial nature and (5) injustice can be avoided only by enforcement of the promise.” The Appeals court found that the verification letter sent by Hammert’s satisfied the requirements of promissory estoppel as they were promises to pay the invoices with the expectation that Sterling would lend money to NSE based on the letter. As such, Hammert’s was estopped from refusing to pay the invoices and was not permitted to attach the additional terms to the payment requiring payments to NSE’s subcontractors.

The appeals court reversed and remanded the trial courts decision with instructions to enter judgment in favor of Sterling on the claim and counter-claim. The court also indicated that the decision was a continuation of doctrine from other courts finding that the issuance of a verification letter to a factor will prevent the debtor from refusing to pay the debt at a later date, regardless of intervening circumstances. Care should therefore be taken in submitting and securing verification letters in factoring agreements as the letter will prevent the later reduction or offset of the payment for other obligations that arise.

The Full Text of the Opinion May Be Found Here:  http://www.in.gov/judiciary/opinions/pdf/11271303ebb.pdf

 

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Waiver of Contractual Interest Does Not Necessarily Waive Right to Statutory Interest

January 6, 2014 in FDCPA, Kentucky Courts

In late November 2013, the US District Court for the Eastern District of Kentucky found that the waiver of prejudgment contractual interest by the original creditor did not necessarily, by itself, waive the right of a debt buyer to collect prejudgment statutory interest and therefore a request for prejudgment statutory interest did not violate the Fair Debt Collection Practices Act (“FDCPA”)

Portfolio Recovery Associates, LLC (“PRA”) filed a complaint attempting to collect a debt and requested the principal balance in addition to pre-judgment interest at the statutory rate of 8%.  In response, the defendant, Dede Stratton filed a class action suit.  Stratton alleged that PRA’s attempt to collect the pre-judgment statutory interest violated three provisions of the FDCPA. According to Stratton, PRA: (1) falsely represented the character, amount, and/ or legal status of the debt , (2) took an action that cannot legally be taken by filing the state court complaint, and (3) attempted to collect interest on a debt that was neither authorized by agreement nor permitted by law.  The debt arose when Stratton stopped making payments on her GE, F.S.B/ Lowe’s credit card (“GE”). GE eventually sold the debt to PRA, who filed the complaint against the debtor, seeking to collect the debt. After Stratton filed the putative class action in response, PRA filed a motion to dismiss.

In deciding PRA’s motion, the Court broke the analysis down into two parts. In the first part, the judge examined whether GE’s waiver of its right to collect contractual interest of 21.99% automatically operates as a waiver of its right to collect statutory interest from the date of the charge-off. By not charging the contractual rate of interest between the charge-off date and the date that GE sold it to PRA, it was argued that GE waived its right to assess interest at that rate. Because by assignment, PRA only inherits the rights in the debt that GE had at the time of purchase, anything GE had waived PRA could not collect.

However, PRA did not seek the contractual interest rate.  Instead, PRA sought statutory interest. Kentucky’s statutory interest rate is intended to operate in the absence of a contractually agreed upon rate.  The parties agreed and the court concurred that a party may not seek both contractual interest and statutory interest for the same period of time, however, the court found that the waiver of one did not necessarily waive the other.  The court therefore concluded that the mere fact that GE waived contractual interest did not, by itself, lead to the conclusion that it waived statutory interest. 

The court next addressed, and dispensed with, all three of the alleged FDCPA violations, the first of which was that by requesting an 8% prejudgment interest rate, PRA falsely represented the character, amount, and/ or legal status of the debt (1692e(2)(A)). The court held that because PRA reasonably believed it was entitled to the requested interest rate and the request was just that: a request to the court for consideration and not a demand on the debtor, it did not amount to a false representation of the debt.  Stratton’s second alleged FDCPA violation was that by filing the state court complaint PRA threatened to take an action that cannot legally be taken, violating 1692e(5). For a debtor to prove this violation he or she must establish two elements: (1) a threat to take an action; (2) showing that (a) the action can’t legally be taken and (b) the debt collector never intended to take the action. Distinguishing between “threats to take action” and the actions actually taken, the court held that this provision applies only to threats to take action and not the actions actually taken by PRA.   

The third alleged violation was that PRA’s attempt to collect interest on a debt that was neither authorized by agreement nor permitted by law violated 1692f(1) because it is an unfair and unconscionable means by which to collect or attempt to collect a debt. As established previously in the opinion, PRA’s “mere request in its valid state court debt collection action was not improper, much less unfair or unconscionable.”

Having determined that Stratton’s allegations had no merit, the Court granted PRA’s motion to dismiss.

The Full Text of the Opinion May Be Found At: http://scholar.google.com/scholar_case?case=13820757548343320467&hl=en&as_sdt=6,36

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Prevailing Wage Law – State v. Federal

December 12, 2013 in Construction, Ohio Courts

The Court of Appeals of Ohio recently upheld a Defiance County Common Pleas decision and found that the lower court had correctly interpreted the relevant state statute and applied the facts of the case accordingly. The International Brotherhood of Electrical Workers Local Union No. 8 (the “Union”) had sued the Board of Defiance County Commissioners (the “County”) for violating the Ohio Prevailing Wage Law on a jail building project. As the federal government partially funded the project, the County argued the Ohio statute did not apply. The Common Pleas Court granted summary judgment to the County and the Court of Appeals upheld the decision finding the Union’s interpretation of the applicable statutes to be fundamentally flawed and its remaining arguments to be baseless.

 The case resulted from a dispute over wages on a Defiance County construction project at a local jail. The County financed the project by issuing bonds and the federal government provided funding equal to forty five percent of the interest payable on the bonds. The County solicited bids for the project and stated that the Ohio Prevailing Wage Law would not apply to the project and that the federal Davis-Bacon Act would apply instead. The Union then filed suit to force the County to apply the state law to the project.

The statutes at issue are a state and federal statute governing wages for employees working on public projects. The federal Davis-Bacon Act requires that qualified employees be paid “the prevailing wage rate for their job classification as determined by the Secretary of Labor.” The Act applies to any federally funded construction project. The similar Ohio Prevailing Wage Law requires laborers and mechanics to be paid the “so-called prevailing wage in the locality where the project is to be performed.” The Ohio law would have resulted in a higher wage for the workers on the project. The Ohio law does not apply however, to projects that are wholly or partly funded by the federal government, if there is a federal law that prescribes predetermined minimum wages.

The Union first argued that the Ohio exemption did not apply because the federal government did not fund the project. They posited that the County funded the project through the bond issue and the federal government simply provided funding to help pay the interest on the bonds rather than the project itself. The Court quickly dispensed with this argument finding it was a distinction without a difference. The federal funds were deposited into an account used to pay the bond principal and interest, the federal funds were not restrict or intended to be used solely for interest payments, and financing interest is clearly part of the cost of a project. As such, the federal government funded part of the project and the Davis-Bacon Act applied.

The Union’s second argument is that the federal act should not preempt state law and the County should apply the Ohio Prevailing Wage Law as well. The Union’s position results from a clearly erroneous reading of the Ohio statute and its exception. The Court first pointed out that the federal law was not preempting state law, but rather the state law contained an exemption for projects with federal funding. The exception to the Ohio statute applies when “all or any part” of a project is federally funded and the Union’s argument that the project was not federally funded due to the timing and amount of the federal funding was clearly at odds with the statutory language.

The Court of Appeals found the Union’s arguments to be clear misinterpretations of the Ohio Prevailing Wage Law. Further, the Court found the argument that the project was not federally funded to be clearly illogical and designed to avoid the apparent result of the straightforward reading of the statutes. The case serves as an illustration that a mischaracterization of the facts and creative readings of statutes shouldn’t be used as a basis for a statutory claim.

 

The Full Text of the Opinion May Be Found at: 

http://www.sconet.state.oh.us/rod/docs/pdf/3/2013/2013-ohio-5198.pdf

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Randy Slovin and Brad Council 2014 Super Lawyers

December 4, 2013 in News

Slovin & Associates is pleased to announce that once again Randy Slovin and Brad Council have been included in the Thomson Reuters 2014 Ohio Super Lawyers list.  Randy was named a 2014 Ohio Super Lawyer and Brad was named a 2014 Rising Star.

Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.  A Rising Star includes those who are 40 years old or younger, or who have been practicing for 10 years or less.  No more than 5% of attorney’s in a state are named as Super Lawyers and no more than 2.5% are named Rising Stars.

Courts Have Broad Powers to Rectify Fraudulent Transfers

November 18, 2013 in Creditors Rights, Ohio Courts

Ohio has adopted the Uniform Fraudulent Transfer Act, which prevents debtors from transferring assets to defraud creditors. ORC § 1336. The Ohio Court of Appeals recently detailed the broad equitable powers that the courts possess to rectify fraudulent transfers of property used to hide assets from creditors in their decision Individual Bus. Servs. v. Carmack. 2013-Ohio-4819 (Ohio Ct. App., Montgomery County Nov. 1, 2013). In Cormack, the Defendant Danies Carmack transferred two pieces of real property to her husband and a related LLC shortly after being found liable for $192,055.61, in order to prevent the property from being used to satisfy the judgment. The trial court found Danies Carmack, her husband, and the LLC jointly and severally liable for the full judgment and the Ohio Court of Appeals affirmed the decision.

Danies Carmack owned and operated Individual Business Systems, Inc. (IBS) for fifteen years and was employed by the company for twelve years prior to assuming full ownership. Over the course of her ownership, she took $192,055.61 in loans from the company which were not repaid. In 2000, Danies retired and donated the company to Citizens Motorcar Company, including the outstanding loans. In 2002, during a suit against IBS for breach of a commercial lease, IBS filed a cross-claim against Danies alleging she had improperly removed money from the company on multiple occasions and classified the transactions improperly as loans to shareholders. IBS was granted summary judgment against Danies for the account receivable worth $192,055.61.

Immediately following the judgment against her, Danies transferred a piece of real property to her husband, Robert Carmack, and a Key West condominium to Sunset Cottages, LLC, an entity controlled by Robert. Danies was left without assets to pay the judgment against her and later filed for bankruptcy. IBS sued Danies, Robert, and Sunset alleging the transfers were fraudulent under ORC § 1336.04 and 1336.05 and the trial court found all three defendants jointly and severally liable for the entire $192,055.61 judgment against Danies. The defendants then appealed the judgment citing several assignments of error.

The defendants first allege that the Florida condominium could not be fraudulently transferred as it qualified for the Florida homestead exemption as Danies’ primary residence. The trial court determined that Danies’ primary residence was in fact Ohio and not Florida preventing the exemption from applying. The Court of Appeals found that the trial court’s finding was not against the manifest weight of the evidence and therefore upheld its decision.

The Defendants then alleged that the transfer of property from Danies to Sunset was not fraudulent under ORC § 1336.04(A)(1). To be fraudulent under the statute, the transfer must have been made “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Due to the difficulty in determining actual fraudulent intent, ORC § 1336.04(B) provides eleven “badges of fraud” which may be used to presume fraudulent intent as they are circumstances frequently attending fraudulent transfers. If a creditor can show the presence of a sufficient number of badges of fraud, some courts have required as few as three, then the defendant must prove the transfer was in good faith and for a reasonably equivalent value to prevent the finding of a fraudulent transfer. The trial court found six badges of fraud were present in the transfer, (1) the transfer was to an insider, (2) Danies continues to use the property, (3) the transfer was concealed, (4) a lawsuit was filed against Danies prior to the transfer, (5) Danies was insolvent at the time of the transfer, and (6) the transfer occurred shortly after a substantial debt was incurred. The defendants argue that they have proved the transfer was not fraudulent as the plaintiffs were denied punitive damages, the LLC was created for the purposes of limiting premises liability, and Robert had agreed to hold Danies harmless for any debt on the property and pay her living expenses. The Court of Appeals agreed with the trial court and found such evidence insufficient to overcome the numerous badges of fraud.

The Defendants also alleged that the transfer of the property to Robert was not fraudulent under ORC § 1336.04(A)(1). The trial court again found six badges of fraud present in the transfer: (1) the transfer was to an insider, (2) Danies retained possession of the property and continued to live there, (3) the transfer was made shortly after a judgment was obtained against Danies, (4) the transfer consisted of substantially all of Danies’ assets, (5) there was no consideration for the transfer, and (6) Danies was insolvent at the time of the transfer. The defendants argued that the transfer was routine due to Robert’s real estate investment business and his continued payment for her living expenses constituted adequate consideration. The Court of Appeals found the transfer to be unique in the business and lacking any consideration and therefore fraudulent due to the numerous badges of fraud.

The defendants’ final arguments allege that they should not be jointly and severally liable for the full judgment amount and the exact values of the property were not determined at the time of transfer. While the statute generally only imposes liability for the value of the transferred property, the Court of Appeals found that the trial court has broad equitable powers to grant “any relief that the circumstances may require.” ORC § 1336.07(A)(2)(c). The court stated that the primary purpose of the statute is to provide compensation to a creditor who has been damaged by a fraudulent debtor. As the parties were closely related and used that relationship to commit the fraudulent transfers, were each involved with at least one fraudulent transfer, and IBS had been attempting to collect the debt for almost a decade, the Court of Appeals found that joint and several liability for all defendants was an appropriate equitable remedy. The appeals court also found that it was not necessary to determine the value of the property on the exact date of transfer as the trial court had considered the available evidence to estimate the value and the purpose of the statute is equitable compensation for damaged creditors.

The Carmack case illustrates the broad equitable power of the court to compensate creditors for fraudulent transfers. In Carmack, the court found Danies’ husband and his company liable for her judgment without any direct proof of fraudulent intent. The presence of sufficient badges of fraud allowed the intent to be presumed absent compelling evidence to the contrary. As such, creditors have a powerful tool to use in situations where debtors have attempted to hide or protect assets from creditors.

The Full Text of the Opinion May Be Found at: 

http://www.supremecourt.ohio.gov/rod/docs/pdf/3/2013/2013-ohio-4109.pdf

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

6th Circuit Reviews Tyler v. DH Capital and Finds Error in Res Judicata Analysis But Affirms on Standing Grounds

November 8, 2013 in FDCPA, Kentucky Courts

As we discussed in February of this year, a District Court in Kentucky granted defendant, DH Capital Management’s (“DHC”), motion to dismiss a FDCPA action filed by Dionte Tyler in which the court found that the case failed on the grounds of res judicata and lack of standing due to Tyler’s bankruptcy filing.  (A full accounting of the lower court’s decision may be found here: FDCPA Claim Barred by res judicata and Lack of Standing).

Tyler believed the District Court had erred by holding that his claims were barred because he failed to present them as counterclaims in the original state-court action and that he had no standing because the cause of action belonged to his bankruptcy estate. Tyler appealed to the U.S. 6th Circuit Court of Appeals, which in turn found that the District Court erred in the application of res judicata but affirmed on the issue of standing.

The Court of Appeals addressed the two issues in turn.  Beginning with the procedural bar, the court held that while there will be instances where compulsory counterclaims that are not raised should be barred in a suit that was voluntarily dismissed without prejudice, in this instance the case was not sufficiently advanced to warrant application of the bar. Tyler filed his answer two days after DHC filed its notice of dismissal. Under Kentucky Rule 41.01, a notice of dismissal is effective immediately; the case was closed before Tyler filed his answer and so the content thereof does not matter. In addition, the principles of res judicata only apply to adjudications on the merits. Obviously, no such finality exists here. After a voluntary dismissal, the rules of res judicata do not prevent a party from asserting an unraised counterclaim, anymore than it prevents a party from re-filing suit.

While successful on his first assignment of error, Tyler was less so on his second: the Court held that the suit was the property of Tyler’s bankruptcy estate and as such, only the bankruptcy trustee had standing to bring it. The law surrounding this question is fairly straightforward: all legal or equitable interests of the debtor in property as of the commencement of the case are considered property of the bankruptcy estate. However, the inquiry required to determine at what point it becomes bankruptcy property, followed by when the actionable violation occurred, is far less straightforward.

A cause of action becomes the property of the bankruptcy estate, when the asset is “sufficiently rooted in the pre-bankruptcy past” of the debtor. Pre-petition conduct or facts alone will not root a claim in the past; there must be a pre-petition violation. All causes of action that hypothetically could have been brought pre-petition are property of the estate. Therefore, in Tyler’s case, if DHC’s alleged violation occurred prior to the filing of the bankruptcy petition, the cause of action may only be properly initiated by the bankruptcy trustee.

Tyler argued that the cause of action accrued when he was served with notice. The Court disagreed: violation occurred at filing, and thus Tyler’s FDCPA claim is pre-petition property of the estate. The Court stated several reasons for their conclusion. First, filing a complaint may cause harm to the debtor even before service is perfected. Second, the alternative to dating violations from the filing of the complaint can become factually complicated. Third, there is no viable logic for protecting debt collectors who have filed complaints but not yet served process. And finally, the relevant bankruptcy-law question is when the claim is minimally actionable, not when it is fully matured.

The final issue the court had to resolve in determining standing was whether Tyler’s failure to schedule the asset in his bankruptcy filings deprives him of the right to bring the claim. Failure to schedule an asset does have an affect on whether the trustee abandoned it. If the trustee abandons it, Tyler can pursue it. But he must schedule it first.  After that, it is only when the trustee declines to pursue it that Tyler will possess the requisite standing to bring his claim.

The full text of the opinion may be found here: http://scholar.google.com/scholar_case?case=8332826360302085246&hl=en&lr=lang_en&as_sdt=4,111,126,275,276,280,281,293,294,301,302,303,338,339,343,344,356,357,364,365,366,381&as_vis=1&oi=scholaralrt

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

 

Corporations Cannot Bring CSPA Claims

October 9, 2013 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

The Third Court of Appeals in Ohio recently found, in Semco, Inc. v. Sims Bros., Inc., that a corporation is prevented from bringing claims under Ohio’s Consumer Sales Practices Act (CSPA) and affirmed an award of $26,130 in attorney’s fees against Semco for bringing such a claim in bad faith. 2013-Ohio-4109. CSPA governs consumer transactions between a supplier and a consumer and prevents a number of unfair, deceptive or unconscionable acts or practices. In particular, the court rejected Semco’s argument that they could bring a CSPA claim against another corporation for a transaction involving their employees.

In the case, two employees of Semco, a foundry, stole metal from the foundry and sold it to Sims Bros., a metal recycler. Semco sued Sims Bros. under a number of different theories for the value of the metal stolen from Semco. Among the claims brought by Semco, Semco alleged that Sims Bros. violated CSPA by purchasing metal from the employees even though they suspected it was stolen.

 To prevail on a CSPA claim, there must be a consumer transaction that violates the statute. CSPA defines a consumer transaction as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” ORC 1345.01(A). The Ohio Supreme Court has ruled that “an individual” refers only to a natural person and does not include a business entity, such as a corporation. Culbreath v. Golding Ents., L.L.C., 114 Ohio St.3d 357.

 Semco asserted that a consumer transaction occurred between Sims Bros. and its employees when it purchased the stolen metal from them. As the metal belonged to Semco, it argued that it was entitled to stand in the employee’s place to file suit against Sims Bros. Without addressing other problems with characterizing the transaction as a consumer transaction, the Court found that the Plaintiff in a CSPA suit must be a natural person. The court found the “stand in the shoes” argument proposed by Semco to be erroneous and that as a corporation Semco is expressly prevented from filing a CSPA suit.

 CSPA may only be used by individual consumers and all forms of business entities are forbidden from filing suit under the Act. In addition, the Act does not allow businesses to file suit on behalf of an individual who has engaged in a consumer transaction. In Semco, the trial court found that alleging such a claim as a corporation amounts to bad faith and awarded attorney fees to the defendant for Semco’s claim under CSPA. The court also ruled against Semco on all other claims. The Appellate Court affirmed the trial court’s decision including the imposition of attorney’s fees against Semco for filing a claim under CSPA in bad faith.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Randy Is Again Teaching Debtor-Creditor Law at UC Law School

September 24, 2013 in News

It’s back to school time again and Randy Slovin is preparing for his 3rd year as an adjunct professor at the University of Cincinnati College of Law.  He is again teaching the course for the fall 2013 semester titled “Debtor-Creditor Law”.  Some of the topics included in the course are fraudulent conveyances, common law claims of debtors against creditors such as invasion of privacy, the federal Fair Debt Collection Practices Act and the Fair Credit Reporting Act, and post-judgment remedies of creditors.

Medical Services to Spouse Presumed Reasonable and Necessary

September 13, 2013 in Medical and Healthcare, Ohio Courts

The matter of Orchard Villa v. Irene Suchomma came before the Court of Appeals, Sixth Appellant District, in Lucas County Ohio on July 19, 2013.  The trial court found Ms. Suchomma to be liable for her deceased husband’s medical expenses.

In June, 2009, Joseph Suchomma signed a contract with appellee Orchard Villa to recuperate from a recent leg amputation. The contract contained a private pay provision.    His stay at Orchard Villa lasted until January, 2010.  Shortly after his release, Mr. Suchomma was diagnosed with leukemia and died on April 20, 2010. Prior to his death, Mr. Suchomma utilized Medicare Parts A and B and private insurance but had an outstanding balance of $20,692.80.  Orchard Villa then sued Mrs. Suchomma for the balance when she refused to pay.  The trial court agreed that Mrs. Suchomma was responsible for the outstanding balance.

The appellant asserts that the trial court erred by citing Rev. Code §3103.03 which provides that …  “(A) Each married person must support the person’s self and spouse out of the person’s property or by the person’s labor. If a married person is unable to do so, the spouse of the married person must assist in the support so far as the spouse is able. …”  The appellate court found that there was not sufficient evidence to indicate that Mrs. Suchomma was unable to pay the debt to Orchard Villa thereby upholding the trial court’s ruling.  The appellate court cites Kincaid, 48 Ohio St.3d at 80, 549 N.E. 2d 517 stating that the determination of a spouse’s ability to provide financially for one’s spouse “is a matter to be decided with the sound discretion of the trial court.”  Upon review, the appellate court did not find any abuse of that discretion. While the court admits that Mrs. Suchomma’s resources are limited, they believe that her sole ownership of the marital home as well as survivor benefit and her own income that she has is more than capable of aiding in her husband’s support as outlined in Rev. Code §3103.03. 

In her appeal, Mrs. Suchomma also contends that the service(s) provided by Orchard Villa were not in good faith as required the Rev. Code §3103.03 (C) which states:

 If a married person neglects to support the person’s spouse in accordance with this section, any other person, in good faith, may supply the spouse with necessaries for the support of the spouse and recover the reasonable value of the necessaries supplied from the married person who neglected to support the spouse unless the spouse abandons that person without cause.

The trial court record contains documentation that supports the fact that despite accumulating past-due balances, Orchard Villa continued to provide the same level of care throughout his stay there.  As such, the appellate court agreed with the trial court.

Mrs. Suchomma further contended that the balance due is not equivalent to the reasonable value of the services rendered.  Wagner v. McDaniels, 9 Ohio St.3d 184, 459 N.E.2d 561 (1984) states, “proof of the amount paid or the amount of the bill rendered and of the nature of the services performed constitutes prima facie evidence of the necessity and reasonableness of the charges.”  Orchard Villa provided all the bills and documentation to support the reasonableness of the services while Mrs. Suchomma provide only an assertion of the contract rate being unequal to reasonable value.  Further, Mr. Suchomma extended his stay by ten days without arguing the reasonableness of the contract rate.  The appellate court upheld the ruling of the trial court on this issue as well.

The Full Text of the Opinion May Be Found At:  http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2013/2013-ohio-3186.pdf

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Court Finds FDCPA Does Not Require Updating Credit Report With Dispute

September 6, 2013 in Credit Reporting, FDCPA, Indiana Courts

The Fair Debt Collections Practices Act requires that when a debt collector reports a debt to a consumer reporting agency, they must also report whether the debt is disputed. This requirement leaves open the question of what happens if a debt becomes disputed after the debt collector has already reported it. Does the collector have an obligation to update the reporting agency’s information?  In February of 2013, the District Court in the Southern District of Indiana in the case of Joshua Rogers v. Virtuoso Sourcing Group, LLC, decided that they did not, holding that once a debt collector has reported that the consumer owes the debt, they do not have a continuing, affirmative obligation to report if it becomes disputed at a later date.

In January 2012, Virtuoso reported to a consumer reporting agency that the plaintiff, Joshua Rogers, had defaulted on a debt. Four months later, Virtuoso received notice that Rogers was disputing the debt. When Rogers checked his credit report several months later, it still reflected the debt, but not that it was disputed.  Rogers brought an action against Virtuoso for violations of the FDCPA. He argued that the language of section 1692e(8), which states that it is a violation of the FDCPA to “communicate or threaten to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed” supported a finding that Virtuoso had an affirmative duty to update the credit reporting agency’s information once they knew the debt was disputed.

The District Court disagreed. Relying on an 8th Circuit Court of Appeals decision and a 1988 Federal Trade Commission Staff Commentary, the Court stated that, “if a debt collector elects to communicate ‘credit information’ about a consumer, it must not omit a piece of information that is always material – whether the debt was disputed.” In addition, the Court emphasized language from the 1988 Staff Commentary: “When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported.” When combined, this language clearly states that unless a debt collection agency chooses to report again after a debt becomes disputed, it is under no obligation to update a credit reporting agency’s information.

The Court also wasted little time responding to Rogers’ reliance on a 1997 FTC Staff Letter: “[it] is ambiguous at best…[and] does not stand for the proposition that the debt collector has an obligation to report the debt after the dispute.” This finding in spite of explicit language in the Letter which states that “if a dispute is received after a debt has been reported to a consumer reporting agency, the debt collector is obligated by Section 1692e(8) to inform the consumer reporting agency of the dispute.” The Court qualified this by stating that it only applies if a debt collector chooses to continue to report; it did not require them to report multiple times.

Finding such, the Court held that the plaintiff’s claim failed as a matter of law and granted defendant’s motion to dismiss.

The Full Text of the Opinion May Be Found At: http://scholar.google.com/scholar_case?case=155166204411155402&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Ohio’s New Law – Potential Benefits of Cure Offers in CSPA Claims

August 27, 2013 in Ohio Consumer Sales Practices Act (OCSPA)

The Ohio Consumer Sales Practices Act (CSPA) provides consumers with remedies against suppliers who engage in deceptive or unconscionable acts or practices. The CSPA allows consumers to recover economic and non-economic damages as well as treble damages, attorney’s fees and court costs in some situations. The prospect of large payouts by pursuing CSPA claims in court however, causes many plaintiffs, and their attorneys, to reject reasonable settlement offers in the hopes of getting much larger payouts through litigation. The result is a statute that is far more punitive to businesses and a windfall for plaintiff’s attorneys than it is a remedy for damaged consumers.

In an effort to balance the effects of the CSPA and encourage settlement instead of litigation, on April 2, 2012 Governor Kasich signed Ohio House Bill 275 into law enacting ORC 1345.092. Effective since July 3, 2012, ORC 1345.092 provides suppliers with an opportunity to avoid the most significant penalties of the CSPA by offering settlement to the consumer early in the litigation process.

ORC 1345.092 allows suppliers to make a cure offer to the consumer within 30 days of being served with a CSPA suit. The cure offer must include a settlement for damages known as a “supplier’s remedy” and in addition must offer to pay attorney’s fees up to $2,500 and court costs. The consumer then has 30 days to accept or reject the offer by filing notice with the court. If the consumer rejects the offer, they cannot collect treble damages, court costs or attorney fees incurred after the offer date unless the court awards damages in an amount greater than the supplier’s remedy.

The supplier’s cure offer must follow a number of requirements to provide the defendant with protection from increased damages. The supplier must deliver the cure offer via certified mail, return receipt requested, in addition to filing a copy with the court. A prominent notice must also be included in the offer with specific statutory language. If the consumer accepts the offer, they must submit documentation of attorney’s fees and court costs to the supplier. The supplier then has the opportunity to contest any unreasonable attorney fees before paying the settlement.

If the consumer declines the settlement offer and proceeds with litigation, the supplier will have some protection against excessive damage awards. If the consumer wins the case but is granted a damage award less than or equal to the amount offered by the defendant as a supplier’s remedy, the consumer will be barred from receiving treble damages as well as all attorney’s fees and court costs incurred after the cure offer was made. If the consumer receives a damage award greater than the supplier’s remedy however, the consumer will retain all rights to collect treble damages, attorney’s fees and court costs.

The result of ORC 1345.092’s enactment is a strong incentive for both consumer and supplier to settle CSPA disputes early in the litigation. If a supplier can reasonably estimate the potential damages that may be awarded to a consumer plaintiff in a dispute, they can offer an appropriate settlement and protect themselves from the most severe penalties of the CSPA. Consumers likewise are encouraged to accept reasonable settlement offers as rejecting them will result in a similar damage award offset against their own attorney’s fees. In addition to avoiding practices that violate the CSPA, suppliers should consider the potential benefits of using the new cure provision to reduce their liability under the statute.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Can the FDCPA Be Used as an Enforcement Mechanism for Other Statutes?

August 8, 2013 in FDCPA, Kentucky Courts

Several of the actions prohibited by the Fair Dept Collection Practices Act (FDCPA) use vague language that is not defined by the Act. Recently, debtors have attempted to use the language as an enforcement mechanism for procedural violations of unrelated statutes to collect statutory damages and attorney’s fees otherwise not permitted. The United States District Court for the Eastern District of Kentucky recently dismissed such an attempt.

In Currier v. First Resolution Inv. Corp., First Resolution obtained a default judgment against Currier on October 1, 2012, which Currier moved to vacate on October 5. First Resolution sought a judgment lien on Currier’s real property two days later. The request for a judgment lien was improper as KRS § 426.030 requires judgment creditors to wait ten days after a judgment before seeking a judgment lien and KRS § 426.720 only permits judgment liens on final judgments. Subsequently, Currier’s motion to vacate the default judgment was granted and she filed an action against First Resolution alleging that the improper seeking of the judgment lien under Kentucky law violated three sections of the FDCPA.

Currier first alleged that First Resolutions seeking of a judgment lien was an unfair and unconscionable act prohibited by 15 USC 1692f of the FDCPA. There is no definition in the statute of what is unfair and unconscionable, though the statute does provide a non-exclusive list of examples. Currier posited that as the act was not permitted by law it should be considered unfair and unconscionable. The court sided with similar rulings in other circuits finding that while ambiguous, the statute gives no hint that it may be used as an enforcement mechanism for other state or federal laws and therefore an act prohibited by a separate statute is not unfair and unconscionable per se. The court did indicate that conduct prohibited by other statutes may be actionable under § 1692f if it is unfair and unconscionable independent of the statute.

Currier’s second argument alleged a violation of § 1692f(1) which forbids “the collection of any amount … unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Currier argued that the filing of a judgment lien not permitted by law violated the wording of the statute. The court disagreed, finding that the section prohibits the collection of unauthorized amounts rather than unauthorized methods. As the amount First Resolution attempted to collect in placing the lien was authorized by the FDCPA, the improper placing of the lien did not violate the statute.

Currier’s final argument alleges that First Resolution violated § 1692e(5) which prohibits the “threat of any action that cannot be legally taken or that is not intended to be taken.” Currier argued that as the judgment lien could not legally be placed against her at the time First Resolution filed for it, First Resolution made a threat of an action that could not legally be taken upon sending her notice. The FDCPA does not define “threat” and the courts have had varying interpretations on its application. Some courts have found that there can be no threat if the action is actually taken. This court followed a line of cases indicating that a threat and action are not necessarily mutually exclusive. A threat under the FDCPA however, was found to be a threat to take an action to induce payment of a debt. Merely providing notice as required when actually taking the action however, does not qualify as a threat for FDCPA purposes.

The court in Currier, found that while First Resolution’s filing of a judgment lien prior to the time permitted by statute was likely improper, it was not a violation of the FDCPA. The FDCPA was not available for enforcement of other statutes and did not apply to First Resolution’s actions. While a collector’s actions could violate the FDCPA and a separate statute, it would need to be found to violate both individually.

 

The Full Text of the Opinion May Be Found at:

http://scholar.google.com/scholar_case?case=3641462025453617942&hl=en&lr=lang_en&as_sdt=4,111,126,275,276,280,281,293,294,301,302,303,338,339,343,344,356,357,364,365,366,381&as_vis=1&oi=scholaralrt

 

Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law. 

Hospital May Seek Full Payment from Third Party Insurer

August 5, 2013 in Medical and Healthcare, Ohio Courts

In response to the increasing influence of health insurance corporations and medical providers, the Ohio legislature attempted to set forth circumstances under which a hospital or other provider could collect on medical debt, and from whom. On July 8, 2013, in Annette Hayberg v. Robinson Memorial Hospital Foundation, the Ohio Court of Appeals interpreted one such attempt: RC 1751.60(A). That section states “every provider or health care facility” as therein defined “that contracts with a health insuring corporation to provide health care services to the health insuring corporation’s enrollees or subscribers shall seek compensation for covered services solely from the health insuring corporation and not, under any circumstances, from the enrollees or subscribers.”

The case began with a car accident in October 2003, resulting in Annette Hayberg being injured. The driver at fault was Hayberg’s husband, who was employed by General Motors Corporation, with whom he (and she) had health insurance (“GM plan”). That plan was administered by Anthem Blue Cross and Blue Shield (“Anthem”). The car was insured by Nationwide Insurance Company (“Nationwide”). Beginning with Hayberg’s stay in defendant’s hospital following the accident: Anthem paid the hospital 89% of the total invoice, per the contract between Anthem and General Motors. When it became clear that Nationwide was liable for the medical expenses, Nationwide paid the full invoice, at which point the hospital reimbursed Anthem.

The initial litigation centered on the $2,566.06 difference between what Anthem paid the hospital and what Nationwide paid. After the trial court granted summary judgment in the hospital’s favor and denied her cross motion for summary judgment, Hayberg appealed.

On appeal, Hayberg alleged two assignments of error, (1) since the hospital was under contract with Anthem, it was prohibited from seeking compensation from appellant in excess of the contracted rates plus approved co-payments and deductibles; and (2) appellee violated R.C. 1751.60 by seeking and retaining compensation in excess of the contracted rates plus approved co-payments and deductibles under the contract with Anthem. Hayberg v. Physicians Emergency Serv., Inc., 2008-Ohio-6180 (Ohio Ct. App. Nov. 28, 2008).

On appeal, the Court held that the statute did not permit the hospital to collect a greater amount than it was entitled to under its contract with General Motors, reversed the trial court’s decision and remanded it for further consideration. While the case was on remand, a new decision came out of the Supreme Court of Ohio, King v. ProMedica Health System, Inc., 129 Ohio St.3d 596, 2011-Ohio-4200. King held that per the express terms of 1751.60(A), the statute is applicable only when there is a contract between a provider and a health insuring corporation, and provider seeks compensation for services rendered and it is violated when the provider seeks compensation directly from the insured, rather than from third parties, such as auto insurers. Defendants filed a motion requesting summary judgment in light of the express holding of King, maintaining that King had the effect of nullifying the appellate court’s prior holding with regards to the claim’s viability under the statute; the trial court agreed and summary judgment was granted.

Hayberg, in her second appearance before the Court of Appeals, alleged the trial court committed prejudicial error by granting the appellee’s motion for summary judgment based on the “law-of-the case doctrine.”  The doctrine holds that a prior decision of a reviewing court (here the appellate court’s first decision) is to remain binding upon both the trial and appellate court in all ensuing proceedings. It does not allow trial courts to alter appellate mandates, except when there are intervening decisions from the Supreme Court, and therefore the Court of Appeals first interpretation of the statute should have been applied to the trial court’s decision and summary judgment should not have been granted. However, the Court ruled that King qualified as an intervening event, supplanting their earlier decision. Under King, the statute does not apply to the hospital’s separate request for payment from Nationwide, since it only applies when there is a contract between the hospital and insurer. Therefore, summary judgment in the hospital’s favor was appropriate.

The Full Text of the Opinion May Be Found Here:

http://www.sconet.state.oh.us/rod/docs/pdf/11/2013/2013-ohio-2828.pdf

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Ohio Super Lawyers

December 8, 2017 in News

Slovin & Associates is pleased to announce that for a 5th consecutive year Randy Slovin and Brad Council have been included in the Thomson Reuters Ohio Super Lawyers list.  Randy was named a 2018 Ohio Super Lawyer and Brad was named a 2018 Rising Star.

Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.  A Rising Star includes those who are 40 years old or younger, or who have been practicing for 10 years or less.  No more than 5% of attorney’s in a state are named as Super Lawyers and no more than 2.5% are named Rising Stars.

FDCPA May Not Apply to Debt Buyers

June 13, 2017 in FDCPA

A unanimous United States Supreme Court ruled today that purchasers of defaulted debt are not considered debt collectors by at least one definition found in the Fair Debt Collection Practices Act (“FDCPA”) and therefore are not necessarily subject to its restrictions, even though they are not the originator of the debt and intend to collect on it.

The case arose in the Fourth Circuit Court of Appeals and concerned the alleged improper debt collection practices of Santander Consumer USA Inc. against Ricky Henson. Henson purchased an automobile through a loan originated by CitiFinancial Auto. Henson subsequently defaulted on the terms of the loan and the defaulted loan was purchased by Santander. Santander subsequently engaged in collection activity giving rise to the present litigation.

The FDCPA outlines a number of restrictions on the practices debt collectors may use in the collection of debt and backs them up with stiff penalties. The Act includes as one definition of debt collector, a person “who regularly collects or attempts to collect … debts owed or due or asserted to be owed or due another.” 15 USC 1692a(6). It was this definition of debt collector that was alleged to cover Santander in this litigation and it is frequently the basis of similar litigation. Lower courts had previously held that a business who purchased a debt that was in default at the time of purchase were included under this definition of debt collector, however the Fourth Circuit Court of Appeals sided with Santander in the appealed decision.

Henson’s primary argument was that the word “owed” implied that the definition of debt collector included subsequent purchasers because the past tense form of the word implied there was a prior owner of the debt. Henson further argued that the debt purchasing market was not developed at the time of the passage of the FDCPA and therefore Congress would have more explicitly included subsequent purchasers of debt in the statute had they known how the debt market would evolve. Santander successfully argued that if the business owned the debt, it could not be “owed or due another” and therefore the business is not a debt collector under this definition.

The Supreme Court unanimously agreed with Santander and the Fourth Circuit and held that as the statutory language was clear, there was no need to use arcane grammatical analysis to interpret its words or to rewrite the plain language of the statute to better fulfill its stated purpose. Therefore, the purchase of defaulted debt by a business does not trigger the “regularly collects or attempts to collect … debts owed or due another” definition of a debt collector.

The Supreme Court did not however address the other definition of debt collector in its ruling, that of a business “the principal purpose of which is the collection of any debts.” 15 USC 1692a(6). Therefore, entities whose sole or primary purpose is the purchase and collection of debts may still potentially fall under the definition of debt collector and this will likely be a source of litigation in the future.

The text of the ruling may be found here: https://www.supremecourt.gov/opinions/16pdf/16-349_c07d.pdf

No FDCPA Standing for Procedural Violation

March 30, 2017 in Credit Reporting, FDCPA, Ohio Courts

In Johnston v. Midland Credit Management, the U.S. District Court for the Western District of Michigan, Southern Division, held that a mere “procedural violation” did not satisfy the concrete-harm requirement of standing, and that a complaint alleging an FDCPA violation did not automatically establish a claim upon which relief may be granted.  Johnston v. Midland Credit Management, W.D. Mich. No. 1:16-cv-437, 2017 WL 370929 (Jan. 26, 2017).

In Johnston, Plaintiff defaulted on credit card debt.  Defendant, Midland Credit Management (“MCM”), sent a letter to Plaintiff, which stated that Plaintiff had been pre-approved for a discount program to pay off his debt, and the letter provided Plaintiff with three repayment options.  The second option for repayment—the option under contention in the case—listed a blank discount rate percentage and a monthly payment of $0.000 due about one month from the date of the letter. After receiving the letter, Plaintiff retained counsel, who advised Plaintiff to call MCM and proceed with the second option.  During a phone call between Plaintiff and MCM, an MCM customer-service representative explained that there was an error in the letter Plaintiff had received; the second option—the option with $0.00 due—was a mistake. 

Plaintiff brought an action under the Fair Debt Collection Practices Act (FDCPA) alleging false, deceptive, and misleading statements in violation of 15 U.S.C. § 1692e.  Specifically, Plaintiff alleged that the second option in the letter was false, misleading, or deceptive, in violation of §§ 1692e(10) and 1692e.  Defendants subsequently filed a motion to dismiss for lack of subject matter jurisdiction under rule Fed. R. Civ. P. 12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6).  The District court found in favor of Defendants, and dismissed the case.

The Johnston court held that the plaintiff did not have standing to bring his claim in federal court.  To establish standing in an Article III court, a party must demonstrate an injury-in-fact that is fairly traceable to the challenged conduct of the defendant, and the injury is likely to be redressed by a favorable judicial decision.  Lujan v Defenders of Wildlife, 504 U.S. 555, 560-561 (1992).   The Johnston court followed the rationale in Spokeo, Inc. v Robins, 136 S. Ct. 1540 (2016), a recent case in which the Supreme Court held that a plaintiff must, at the pleading stage, plausibly allege facts supporting an inference of a concrete injury in order to have standing under the Fair Credit Reporting Act.  Spokeo at 1548.  The Spokeo court also held that the violation must constitute a “real risk of harm” to the plaintiff.  Id.  The court in Johnston found the plaintiff’s claim, which alleged a statutory violation, was not enough to establish standing, as the violation alone did not articulate a “real risk of harm” to the plaintiff.  Just as in Spokeo, the Johnston court held a party must allege more than just a “bare procedural violation” to satisfy Article III’s injury-in-face requirement.

Johnston is one of many post-Spokeo cases, in which courts have held that standing requires a plaintiff to allege an injury that is both concrete and particularizedId. at 1545. District courts in the Sixth Circuit have similarly held that while Congress may create new legal rights by statute, a plaintiff must be able to show that she suffered “a concrete, particularized, and personal injury . . . as a result of the violation of the newly created legal rights in order to have Article III standing.”  See Macy v GC Servs. L.P., 2016 U.S. Dist. LEXIS 13421 at *6 (W.D. Ky. Sept. 29, 2016), (quoting Imhoff Inv., LLC v Alfoccino, Inc., 792 F.3d 627, 633 (6th Cir. 2015).

For example, in Smith v. Ohio State Univ., 191 F.Supp. 3d 750 (S.D. Ohio 2016), the court found a plaintiff’s concession that she did not suffer “concrete consequential damage” as a result of an alleged procedural violation of the FCRA was fatal to standing.  Id. at 757.  In Smith, plaintiff argued they had standing based only on an alleged FCRA violation.  Id. at 756.  However, the court, relying on the Spokeo analysis, found that plaintiff must allege more than the violation itself to establish standing; plaintiffs must also allege that the violation resulted in a concrete and particularized injury-in-fact.  Id. at 757.  Without an injury, plaintiffs did not have standing, and thus the court lacked subject-matter jurisdiction to hear the case.  Id.

As Johnston illustrates, the post-Spokeo analysis places a higher burden on a plaintiff to clearly state how an alleged statutory violation has resulted in a concrete injury-in-fact. If a court follows the Spokeo analysis, that court is likely to reject and dismiss a party’s claims for lack of standing, unless a plaintiff is able to allege a concrete and particularized injury-in-fact.

The Full Text of the Johnston Opinion May Be Found HERE

Dormant No Longer. Ohio Revises Dormant Judgment Statutes

December 15, 2016 in Ohio Courts, Post Judgment Execution

On December 8, 2016 the Ohio Senate unanimously passed revisions to Ohio Revised Code section 2329 regarding dormant judgments and the bill now awaits the expected signature of Governor Kasich.  In Ohio, a judgment would become dormant if execution was not issued upon the judgment for a 5 year period.  Revised Code Section 2327.01 defined “execution” specifically as a writ of execution or a certificate of judgment lien.  Garnishments and other proceedings in aid of execution were not considered “execution” for purposes of keeping a judgment active and out of dormancy.  However, with the new revisions to Section 2329, an order of garnishment will now also keep an Ohio judgment from becoming dormant.  The revisions to 2329.07(B)(1)(c) provide that “An order of garnishment is issued or is continuing, or until the last garnishment payment is received by the clerk of courts or the final report is filed by the garnishee, whichever is later.” 

This is great news for all of our client’s who have obtained judgments in the State of Ohio.  The revisions allow for the creditor to seek the most successful and expeditious forms of collection upon the judgment without fear of dormancy.  A creditor is no longer pigeon-holed into issuing execution that may be unfruitful, costly, or unnecessary for the sole purpose of keeping a judgment active and may now continue with the proceedings that have proven the most successful in the case at hand. 

The text and analysis of the bill may be found at the Ohio Legislatures Website:  https://www.legislature.ohio.gov/legislation/legislation-summary?id=GA131-SB-227

Insurers Are Exempt From Ohio Consumer Statute

February 26, 2016 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

The Consumer Sales Practices Act (CSPA) is an Ohio statute governing consumer transactions that limits a number of specific business practices as well as more general prohibitions against unfair and deceptive acts by businesses against consumers. As the Ohio Supreme Court recently held however, a number of transactions and businesses are specifically exempted from the statute and its prohibitions. In this case, cost estimates provided by insurers are not required to follow the CSPA’s requirements.

In Dillon, et. al., v. Farmers Insurance of Columbus, Inc., Farmers provided insurance coverage for Dillon’s automobile. After crashing his vehicle, Dillon reported the accident to Farmers to have his vehicle repaired. Dillon chose Mission Auto Connection, Inc. to repair his vehicle and Farmers, after an inspection, provided an estimate for the amount it would pay to repair the vehicle. The estimate was based on using non-original equipment manufacturer (OEM) parts as provided in the insurance agreement. Dillon however instructed Mission Auto to repair the vehicle using OEM parts and was aware that he would be responsible for the difference in cost. He then sued Farmers for a CSPA violation for providing an estimate based on non-OEM parts and not getting Dillon to sign an acknowledgement of such.

The CSPA and the requirements and prohibitions it contains apply only to consumer transactions. Consumer transactions are defined by the statute to include transactions primarily for personal, family or household purposes but it also specifically excludes transactions between consumers and specific types of business entities, including insurers. A specific provision of the CSPA, ORC 1345.81, requires that any insurer providing a repair estimate based on the use of non-OEM parts must include a disclaimer on the estimate and have the consumer acknowledge the disclaimer by signing the estimate. This creates a potential statutory conflict as the CSPA specifically excludes transactions with insurers from the statute but the provision regarding repair quotes specifically names insurers as having to comply with the provision.

The trial and appellate courts upheld Dillon’s argument that statutory interpretation requires the more specific provision to apply when two statutes are in contradiction with one another and cannot be reconciled to give effect to both. As the provision regarding repair quotes is more specific than the general definition provision excluding insurers from the CSPA as a whole, the repair quote provision should apply and Farmers should have complied with its requirements. The courts further held that as the repair quote statute was enacted subsequent to the CSPA definitions, the later enacted provision should take precedence indicating the legislature’s wish for insurers to be covered by that provision.

The Ohio Supreme Court however sided with Farmers and reversed the lower courts’ decision, finding that both statutes can be construed so as to give effect to both. The Supreme Court held that while insurers are clearly covered by the provision’s requirements, the statute provides a remedy only if the violation is in connection with a consumer transaction. As the remedy provided by the CSPA provision is limited to consumer transactions and insurers are excluded from the definition of consumer transactions, the CSPA provision prevents insurers from issuing repair estimates without the non-OEM disclosure but provides no remedy for breach of the provision. Dillon is therefore limited to receiving a declaratory judgment or injunction regarding Farmers’ failure to comply with the provision.

The Ohio Supreme Court in this case provides a reminder that, if possible, apparently contradictory statutes must be read in such a way that each is given effect before rules of statutory construction determining priority may be applied. It also points out that the exclusions written into the CSPA are effective and entities such as insurers and banks may not be sued for damages under CSPA.

The Full Text of the Opinion May Be Found HERE

6th Circuit Upholds TCPA Dismissal in Healthcare Admissions Case

February 17, 2016 in Medical and Healthcare, Ohio Courts, TCPA

In June of 2015 we posted on the positive decision of the US District Court for the Southern District of Ohio in the matter of Baisden v. Credit Adjustments, Inc. whereby the District Court found “prior express consent” was given to Credit Adjustments to call the Plaintiff’s cellphone when the number was presented to a hospital at the time of admission and thereby negated the Plaintiffs’ Telephone Consumer Protection Act (TCPA) claims.  (original post and discussion of the facts of the case may be found HERE).  On February 12, 2016, the 6th Circuit Court of Appeals upheld the ruling of the District Court and found that the Plaintiffs had given express consent for their cellphone to be called.  This decision is of importance because Credit Adjustments was not hired by the hospital directly, but by the anesthesiologists who also provided services to the Plaintiffs.  The court found that the express consent was not only given to the hospital, but also applied to the “other health care providers” including the anesthesiologists and its collection agency.  It is important to note that the consent did not “automatically” transfer and was carefully analyzed by the court in relation to the admission documents and the language they contained.  Since the process of a single admission point is utilized by many healthcare providers and is a common practice in the industry, it is comforting to see the process upheld with regard to TCPA claims.  

The complete 6th Circuit Opinion may be found HERE.

Limitation of Liability Does Not Violate Consumer Sales Practices Act

January 20, 2016 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

In the matter of Barto v. Boardman Home Inspection, Inc. the Ohio Eleventh District Court of Appeals determined that the limitation of liability provision in a home inspection contract was not unconscionable and thereby did not violation the Ohio Consumer Sales Practices Act.

Barto hired Boardman Home Inspection, which is solely owned and operated by David Shevel to perform a home inspection on a home they were purchasing.  The parties entered into a written agreement prior to the inspection that included the areas for inspection as well as a limitation of liability clause.  The clause limited Boardman’s liability to the amount paid for the inspection and inspection report.  After agreeing to the terms, Shevel performed the inspection including a visual inspection on the roof and determined that asphalt shingles were proper for the pitch of the roof.   After Barto took possession of the home, the roof leaked because asphalt shingles were not proper for the actual pitch of the roof causing damage to the home.

Barto sued Boardman Home Inspection and David Shevel for negligence and for violations of the Consumer Sales Practices Act.   The trial court determined that the limitation of liability clause was not unconscionable and therefore did not violate the Consumer Sales Practices Act.  As such, it limited Boardman’s liability to $350.00.  The court also determined that Shevel could not be held personally responsible for any negligence as he was clearly identified as an agent for Boardman.

The Court of Appeals affirmed the decision finding that the limitation of liability clause did not violate the Consumer Sales Practice Act.  The court looked favorably upon the 9th District’s decision in Green v. Full Service Property Inspections, LLC, 2013-Ohio-4266, which also found that a limitation of liability provision in a home inspection contract did not violate the Consumer Sales Practices Act.  In finding that the clause was not unconscionable, the court noted some important factual findings including:  that the clause was set off in the agreement in a separate paragraph, that the consumer was not rushed into signing the agreement or prevented from asking questions about it, that the consumer was not prevented from negotiating terms, and that the consumer was not prevented from hiring another inspection company.

A limitation of liability clause can be a powerful tool in any contract.  It is a way for the parties to agree upon the amount of damages should any problems arise, allowing the parties to quantify their risk and exposure.  Using a rational amount that is logically connected to the underlying transaction along with the factual findings above regarding negotiation and execution of the agreement should allow a party to limit their liability without running afoul of the Consumer Sales Practices Act.

The Full Text of the Opinion May Be Found HERE.

OCSPA Class Actions Require Actual Damage

October 5, 2015 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

OCSPA Class Actions Require Actual Damage

In Felix v. Ganley Chevrolet, the Ohio Supreme Court recently held that ALL members of a plaintiff’s class action alleging violations of the Ohio Consumer Sales Practices Act (“OCSPA”) must have suffered actual injury as a result of the alleged conduct to maintain an action. 

In Felix, the Plaintiffs filed suit against a car dealership for deceptive practices under the OSCPA.  They included a claim that the arbitration provision contained in the dealer’s contracts was unconscionable and that the dealer’s practices pertaining to the clause violated the OSCPA.  The Felixes sought to certify a class that included any consumer who signed a contract with any of Ganley’s 25 companies that included the same arbitration clause.  The trial court held that the inclusion of the arbitration provision violated the OSCPA and awarded the statutory damage of $200 per transaction to each class member.  The court of appeals upheld this decision and the Ohio Supreme Court granted review for the purpose of determining if all members of a plaintiff’s class alleging violations of the OCSPA must have suffered actual damage. 

The OCSPA allows the recovery of “damages” in a class action (See R.C. § 1345.09(B)) but the code limits those damages to “actual damages” and does not allow for the recovery of the statutory damages laid out by the OCSPA for individual actions.  The Court found this reasoning consistent with the purpose of the individual damage provisions in the OCSPA to encourage consumers with smaller amounts of damage to bring their claims.  The court found this purpose unnecessary in class action claims because the aggregation of claims constitutes the necessary deterrent to noncompliance with the statute.

The Court stated that the suffering of some injury is one of the most basic requirements to bringing a lawsuit and is an indispensable part of civil actions.   In the case of a class action, common evidence must be shown that all members of the class suffered some injury.  The “fact of damage” (the existence of injury) goes directly to the predominance inquiry required under Civil Rule 23(b)(3) for class actions.   A claim that requires individual inquiry into the fact of damage does not meet this predominance requirement.  Damage must result for the common action alleged to cause actual injury to all of the class members.  Without a showing that all class members were damaged, the predominance requirement is not met and the class must fail. 

In Felix, the Court found that the Plaintiffs did not show that all consumers who signed a contract with the offending provision were damaged and therefore the class claims must be denied.  While the language used in all of the contracts may have violated the OCSPA, the Plaintiffs were still required to show that this caused actual injury to all members of the class.  The violation, in and of itself, was not enough to award damages to the class without a showing of actual injury to each and every class member. 

The Full Text of the Opinion May Be Found HERE

TCPA and Health Care Admissions

June 29, 2015 in Ohio Courts, TCPA

In the case of Baisden v. Credit Adjustments, Inc. the US District Court for the Southern District of Ohio reviewed the issue of the application of the Telephone Consumer Protection Act (“TCPA”) to “other health care providers” in the context of hospital admission and subsequent collection. 

In the case, Baisden sought medical care from a local hospital.   As part of his admission, Baisden signed a “Patient Consent and Authorization” form that contained a standard Release of Information provision.  The provision entitled the hospital to release the patient’s “health information” for various reasons including insurance, billing, other health care providers, and other various reasons.  In conjunction with his hospital stay, Baisden also received services from the hospital’s anesthesia provider.  The anesthesiologists subsequently billed Baisden for the services provided and Baisden failed to pay as required.  The anesthesiologists then transferred Baisden’s account to Credit Adjustments to collect upon the unpaid balance.  Credit Adjustments made numerous phone calls to Baisden in an attempt to collect the anesthesiologist’s bill.  Baisden then sued Credit Adjustments claiming violations of the TCPA for contacting him on his cellphone using an automated dialing system.  Credit Adjustments claimed that it received prior consent from Baisden due to the completed consent and authorization forms that Baisden signed upon admission to the hospital.

The court addressed two issues, 1) whether the hospital forms signed by Baisden also applied to the anesthesiologist and the anesthesiologist’s third party debt collector and 2) whether the signed form actually provided express consent under the TCPA.

The patient consent form signed by Baisden included language regarding the release of information and stated, “I authorize Mount Carmel to receive or release my health information… to such employees, agents, or third parties as are necessary for these purposes…”  The list of purposes included “billing and collecting moneys due from me.”  Baisden argued that this transfer of “health information” did not include his cellular telephone number or any permission derived to call it.  Citing favorably to the Eleventh Circuit opinion in Mais v. Gulf Coast Collection Bureau, Inc., 768 F.3d 1110 (11th Cir. 2014), the Court determined that the cellphone number provided on the hospital admission form was part of the record from the visit and was the contact information given by Baisden related to billing.  The Court further examined the HIPPA definition of “health information” which includes, “any information … created or received by a health care provider” that “relates to … the past, present or future payment for the provision of health care to an individual.”  Finding that “health information” included the cellular telephone and the consent to contact it, the Court further noted that the anesthesiologist was easily one of the “other health care providers” that served the hospital and the consent was transferred to them and their attempts to collect the outstanding bill.

The Court also addressed the issue regarding the signed form providing express consent as required under the TCPA.  Again citing favorably to the Mais decision the Court took the same approach and also performed a similar analysis under the 2008 FCC Declaratory Ruling which provides that prior express consent exists when a cell phone subscriber makes the number available to the creditor regarding the debt.  The court also looked to a 2014 FCC Order in In re GroupMe, Inc./Skype Commc’ns S.A.R.L. Petition, 29 FCC Rcd. 3442, 3447 (March 27, 2014) which provided that “the TCPA does not prohibit a caller from obtaining consent through an intermediary.”  Using these two rulings along with the Mais decision, the court found that a cellular phone subscriber can provide their number to a creditor, like the anesthesiologists in this case, by affirmatively giving an intermediary (the hospital) permission to transfer the number to the anesthesiologist for use in billing.  By providing the number at the time of service, Baisden agreed to be contacted at that number.   The court thereby found that prior express consent had been given to call Baisden’s cellphone.   

Accordingly the Court granted summary judgment in favor of Credit Adjustments and denied Baisden’s TCPA claims.  Baisden has recently appealed this decision to the 6th Circuit. 

The Full Text of the Opinion May Be Found HERE

WE’VE MOVED!

May 18, 2015 in News

Slovin & Associates Co., LPA is pleased to announce that our firm has moved office locations.  Nestled between the iconic Cincinnati Museum Center and the downtown central business district, our office is now conveniently located at 644 Linn Street in the historic Queensgate neighborhood of Cincinnati. 

Oral Guarantees and the Leading Object Rule

April 17, 2015 in Creditors Rights, Ohio Courts

In the matter of Willoughby Supply Company v. Robert Inghram, the Ohio Eleventh District Court of Appeals affirmed a decision upholding an owner’s oral guaranty of a corporate debt through the application of the leading object rule.

In the case Robert Inghram was the owner and sole shareholder of a business.  In his dealings with Willoughby Supply the business filled out a credit application and a personal guaranty.  Mr. Inghram denied signing the guaranty and through the course of the trial it was discovered that the guarantee was likely signed by one of his employees.  However, evidence also showed that, in a phone call with Willoughby Supply, Mr. Inghram orally acknowledged the personal guarantee.  The trial court found this acknowledgment to be a ratification of the guarantee and applied the leading object rule as an exception to the Statute of Frauds and enforced the guarantee.

Ohio follows the leading object rule as an exception to the Statute of Frauds.  The leading object rule provides that oral contracts by third parties guaranteeing another’s debt are not within the Statute of Frauds, if the guarantor’s principal purpose is to benefit his or her own business or pecuniary interest.

In this case Inghram argued that the promise of a stockholder to pay the debts of a corporation remains within the Statute of Frauds.  However, the Court found that where the promisor owns all, or substantially all, of the stock in the corporation, and is transacting his business in its name for personal convenience, there is sufficient consideration running to him personally to take it out of the statute.    The Court found that as the sole owner, Inghram clearly benefited from the agreement.

Concurring in the judgment, Judge Timothy Cannon notes that the doctrine of equitable estoppel would also apply to the case at hand.  Equitable estoppel provides relief where one party induces another to believe certain facts are true and the other party changes his position in reasonable reliance to his detriment on those facts.  By orally confirming that he signed the guarantee, inducing Willoughby Supply to extend credit, Inghram was estopped from later arguing that the signature was not valid.

The Full Text of the Opinion May Be Found HERE

Enforceability of Arbitration Agreements

October 21, 2014 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

Ohio has a public policy favoring the enforcement of arbitration provisions in contracts and ORC 2711.01(A) provides that such provisions will be enforced unless grounds exist in law or equity for revocation of the contract. The Ohio Court of Appeals recently addressed the issue and looked at whether an arbitration provision in a consumer contract should be upheld in a suit alleging violations of the Consumer Sales Practices Act.

In Tamara Hedeen v. Autos Direct Online, Inc., the plaintiff alleged violations of the Ohio Consumer Sales Practices Act, fraud, and deceit arising from a contract to purchase a vehicle. 8th Dist. Cuyahoga No. 100582, 2014-Ohio-4200. Tamara Hedeen (“Hedeen”) purchased the vehicle online from Autos Direct Online (“ADO”) and discovered after delivery that the vehicle had been in an accident and had unrepaired damage. The contract signed by Hedeen included an arbitration agreement and ADO moved to stay proceedings pending arbitration. The trial court granted the motion and Hedeen appealed the decision. The Court of Appeals addressed five potential grounds for not enforcing the arbitration provision.

The Court of Appeals first addressed whether ADO waived its right to arbitrate by waiting five months to file its motion and by participating in discovery and pretrial hearings. A party may waive its right to arbitration if it acts inconsistently with that right. Such an inconsistency may be found in a delay requesting arbitration, the extent of participation in the litigation prior to requesting arbitration, the filing of a counterclaim without  a motion for a stay, or if the plaintiff would be prejudiced by the inconsistent acts. The Appeals Court determined that ADO did not waive its right to arbitrate as it participated in the litigation only as required by the court and moved to stay the proceedings before the litigation within 75 days of answering the complaint.

The Appeals Court then addressed whether ADO was required to attach authenticated evidence to its Motion to Stay Pending Arbitration. Hedeen cited case law indicating that a copy of the arbitration agreement must be included with the motion along with an affidavit stating that the arbitration agreement is the agreement that was signed. The Appeals Court found that case inapplicable as it was unclear if the parties agreed to arbitrate and an oral contract was involved. In this case, Hadeen inadvertently admitted that she signed the agreement and did not dispute the authenticity of the arbitration agreement or her signature on it. As such, the trial court had the discretion to admit the arbitration agreement into evidence.

Hedeen also argues that the arbitration agreement was procedurally and substantively unconscionable, both of which are required for an agreement to be found unconscionable. Procedural unconscionability occurs when no voluntary meeting of the minds was possible due to the circumstances of the execution and substantive unconscionability is found when the terms are found to not be commercially reasonable. Hadeen alleged that there was procedural unconscionability because ADO failed to notify her of or explain the arbitration agreement and the arbitration agreement was included in a stack of papers emailed to her. The Appeals Court found no procedural unconscionability since Hedeen had an adequate opportunity to read the arbitration agreement, the agreement was set out on its own page with a bold notice directly above Hadeen’s signature, Hadeen had no impairment or disability that prevented her from understanding the agreement, and she made no effort to renegotiate its terms.  As there was no procedural unconscionability, the court did not address substantive unconscionability.

The arbitration agreement also contained a provision requiring the losing party to pay the attorney fees of the prevailing party in arbitration. The Ohio Consumer Sales Practices Act however provides for the shifting of attorney fees only if the action was both groundless and filed or maintained in bad faith. While courts have found that statutory remedies may be heard in arbitration, they have also found a violation of public policy if they prevent the remedial purpose of the statute from being achieved. Hadeen argues that enforcement of an arbitration agreement with such a provision is contrary to public policy as it would directly contradict Ohio law protecting consumers who bring claims in good faith. The Appeals Court agreed and found that the arbitration agreement could not be enforced due to the “loser-pays” attorney fee shifting provision.

Hedeen also alleges that a provision in the arbitration agreement that states the arbitration is “final and binding” is against public policy as Ohio law sets out circumstances when a court may vacate an arbitral award. The Appeals Court rejected this argument as Ohio law requires such a statement before an arbitration award may be enforced in court.

While the Appeals Court ultimately found the arbitration agreement could not be enforced due to the loser-pays attorney fee shifting provision, it also detailed a number of other arguments that are insufficient to prevent the enforcement of such agreements. Without the loser-pays provision, the arbitration would have been upheld, showing the strong preference for enforcing arbitration agreements by Ohio courts.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

The Full Text of the Court Opinion May Be Found Here: http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2014/2014-ohio-4200.pdf

OCC Issues Guidance for Debt Sales

August 6, 2014 in Creditors Rights

On August 4, 2014 the Office of the Comptroller of the Currency (“OCC”) issued new Risk Management Guidance to all National Banks and Federal Savings Associations regarding the sale of consumer debt.  The OCC bulletin issues guidance on best practices and procedures for the sale and resale of debt from banks to debt buyers. 

In addition to describing the internal policies and procedures that a bank must develop and implement regarding debt-sale arrangements the bulletin also describes the due diligence that a bank must go through when selecting a debt buyer.  Banks are expected to “fully understand the debt buyers’ collection practices, including the resources that debt buyers or their agents use to manage and pursue collection.”   This includes the requirement that the bank review the debt buyers audited financial statements and confirm all required licenses and insurance policies are in place.  The bank must also assess the debt buyers’ reputation and confirm that the debt buyers’ staff is “appropriately trained to ensure that it follows applicable consumer protection laws and treats customers fairly throughout the collection process.”  Banks are required to perform all due diligence before entering into a sale agreement with the debt buyer. 

Further, the bulletin also lays out the documentation that a bank must provide to a debt buyer “at the time of sale.”  This is required to ensure that the debt buyer has “accurate and complete information necessary to enable them to pursue collections in compliance with applicable laws and consumer protections” at the time of sale.  The bulletin requires the bank to provide the debt buyer with:

–          A copy of the signed contract or other documents that provide evidence of the relevant consumer’s liability for the debt in question

–          Copies of all, or the last 12 (whichever is fewer) account statements

–          All account numbers used by the bank (and if appropriate its predecessors) to identify the debt at issue

–          An itemized account of all amounts claimed to be owed in connection with the debt to be sold, including the loan principal, interest and all fees.

–          The name of the issuing bank, and if appropriate, the store or brand name.

–          The date, source, and amount of the debtor’s last payment and the dates of default and amount owed.

–          Information about all unresolved disputes and fraud claims made by the debtor.  Information about collection efforts (both internal and third-party efforts, such as by law firms) made through the date of sale.

–          The debtor’s name, address, and Social Security number.

The bulletin concludes by listing certain types of debt and certain situations under which debt should not be sold by the bank and also a requirement that policies and procedures be in place to ensure all parties involved in the debt-sale arrangement comply fully with all applicable consumer protection laws.

 

The Full Text of the OCC’s August 4, 2014 Bulletin may be found: HERE

Update: Suesz v. Med 1 Solutions, Reversed

July 18, 2014 in FDCPA, Indiana Courts

On May 14, 2013 we reported on the Indiana District Court case of Suesz v. Med 1 Solutions, which determined that the Marion County Small Claims Courts were not “judicial districts” as defined by  15 U.S.C.§ 1692i for purposes of the Fair Debt Collection Practices Act (“FDCPA”).   In reaching this decision, the district court relied on the 7th Circuit case of Newsom v. Friedman.  The district court’s decision was originally upheld by a panel of the 7th Circuit on October 31, 2013 with a 2-1 decision.  However, upon rehearing en banc, on July 2, 2014 the 7th Circuit both reversed the district court in Suesz and overruled Newsom.  

The circuit court held that the “venue approach” should be used when determining if a court is a “judicial district” for purposes of the FDCPA.  Under this approach, a “judicial district” will be the “smallest geographic area relevant to venue in the court system in which the case is filed.”  In the plain terms, the 7th Circuit determined that if venue is not proper in the court in which the initial complaint was filed, the complaint was not filed in the correct “judicial district” and a possible FDCPA violation has occurred.   The circuit court stated that the “venue approach” would be more practical and would stop debt collectors from purposefully choosing inconvenient forums and forum-shopping for the most advantageous court.

The July 2, 2014 Suesz opinion may be found HERE

Attorney Chris Arlinghaus Now Licensed in Indiana

June 11, 2014 in News

Slovin & Associates is pleased to announce attorney Christopher Arlinghaus is now admitted to practice law in the state courts of Indiana.  Chris is looking forward to assisting individuals and companies in the area of creditor’s rights and civil litigation in Indiana, as well as continuing to practice in Ohio and Kentucky.

FDCPA Not Applicable to Proof of Claim Filings

May 16, 2014 in Creditors Rights, FDCPA, Kentucky Courts, Medical and Healthcare

In March of 2014 the US District Court of for the Eastern District of Kentucky discussed the application of the Fair Debt Collection Practices Act (“FDCPA”) to bankruptcy proof of claim filings. Plaintiff, Mallard, filed an adversarial proceeding with the bankruptcy court alleging that Defendant’s failure to redact numerical medical billing codes in a proof of claim filing violated the FDCPA and constituted harassment because the codes disclosed private medical information. In granting summary judgment in favor of Defendants, the US District Court for the Eastern District of Kentucky found that the FDCPA does not apply to proof of claim filings.

On October 1, 2012, the Plaintiff filed for bankruptcy protection under Chapter 13. On October 22, 2012, Wynn-Singer filed a proof of claim on behalf of Infectious Disease Consultants (“IDC”), a Kentucky healthcare provider. In their claim, Wynn-Singer attached unredacted billing records which included codes for the Plaintiff’s medical condition. On April 1, 2013, the Plaintiff filed an adversary proceeding. Mallard alleged that the disclosure of the private health information constituted harassment in violation of the FDCPA. When Wynn-Singer filed its Motion for Summary Judgment they asserted that filing a proof of claim cannot be the basis for an action under the FDCPA. The Plaintiff claims that by disclosing his medical information, Wynn-Singer violated 15 U.S.C. §1692d, which prohibits harassment or abuse in connection with the collection of a debt and 15 U.S.C §1692f, which prohibits unfair or unconscionable means of debt collection.

Although the Sixth Circuit has not specifically addressed the applicability of the FDCPA to proofs of claims, it has found that the FDCPA is broadly construed. Hartman v. Great Seneca Fin. Corp., 569 F.3d 606 (6th Cir. 2009). However, the Kentucky District Court reasoned that “for a communication to be in connection with the collection of a debt, an animating purpose of the communication must be to induce payment by the debtor.” citing Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011). The court determined that the filing a proof of claim does not constitute a demand for payment from a debtor. Rather, at best, it is a request to participate in the claims allowance process of a debtor’s estate. 11 U.S.C. §§ 502, 1306, 1326.

In reaching this decision, the court cited favorably to the Bankruptcy Court of the Northern District of Georgia which explained:

[F]iling a proof of claim in bankruptcy cannot be the basis for an FDCPA claim because it is not an activity against a consumer debtor. The FDCPA is designed to regulate debt collection activities against unsophisticated consumers. To constitute a debt collection activity under the FDCPA, the activity must asserted against a consumer. The filing of a proof of claim is a request to participate in the distribution of the bankruptcy state under court control. In re McMillen, 440 B.R. 907, 912 (Bankr. N.D. Ga. 2010)

The court further reasoned that the purpose of the FDCPA is to eliminate abusive debt collection practices to protect consumers. The FDCPA defines “consumer” as “any natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. §1692a(3). Under this definition, the court found that the debtor’s estate is not a natural person and as such, filing a proof of claim is not a form of debt-collection activity.

While the court dismissed the FDCPA claims, care should always be taken when filing claims of a medical nature. In this case, the codes disclosed Plaintiff’s HIV diagnosis. It was argued, that this disclosure violates Kentucky Revised Statute 214.181 which prohibits the disclosure of HIV test results. The court allowed these claims to proceed. The court also noted that such disclosures could cause issues with medical licensing boards and federal regulations under HIPPA.

The Full Text of the Opinion May be Found Here.

Many thanks to Kim Goldwasser for her contributions to this article. Kim is a paralegal with Slovin & Associates Co., L.P.A.

Out-of-State Debt Collectors Do Not Need a License in Indiana

April 17, 2014 in Creditors Rights, FDCPA, Indiana Courts

The Indiana Court of Appeals has held that an out-of-state debt collector with no physical place of business in Indiana is not required to obtain a license from the Indiana Department of Financial Institutions (“DFI”) to collect debts within the state. In Wertz v. Asset Acceptance, LLC, Nathan Wertz (“Wertz”) filed a counterclaim against Asset Acceptance, LLC (“Asset”) alleging violations of the Indiana Deceptive Consumer Sales Act and the Fair Debt Collection Practices Act for failing to obtain a license from DFI to collect on consumer loans. Ind.App. No. 71A03-1305-CC-175 (Mar. 21, 2014). The Court accepted DFI’s opinion on the statute in interpreting the Indiana Uniform Consumer Credit Code (“IUCCC”) and held that a license is required only if a creditor has a physical location within Indiana.

On August 9, 2012, Asset filed suit against Wertz to recover a balance due on a Chase credit card on which Wertz had allegedly defaulted. Wertz filed a counterclaim and putative class action against Asset alleging that Asset engaged in the practice of taking assignment of and collecting on Indiana consumer debts without a license as required by the IUCCC. Wertz further claimed that by collecting consumer debts without a license, Asset violated the FDCPA and Indiana Deceptive Consumer Sales Act. Arguing that it was not required to seek a license to collect consumer debts under the Act, Asset filed a motion to dismiss the counterclaim. The motion to dismiss Wertz’s counterclaim and class action was granted and Wertz appealed.

The IUCCC requires that a license be obtained “to regularly engage in Indiana in … taking assignment of consumer loans [or] undertaking direct collection of payments from or enforcement of rights against debtors arising from consumer loans” unless they are a depositary institution or a registered collection agency. Asset admitted it is not classified as a depository institution and is not registered as a collection agency. It also admitted to taking assignment of and collecting on consumer loans without having a license to do so. Asset argued however, that the phrase “regularly engage in Indiana” does not include companies, such as itself, with no physical presence in the state and therefore the licensing requirement does not apply. Wertz alleges that the statute does apply and Asset has violated the statute by not obtaining a license.

The Court of Appeals found the language “regularly engage in Indiana” to be ambiguous and looked to both the purpose of the statute and the interpretation of the statute by the relevant administrative agency. The Court determined the purpose of the IUCCC is to protect consumers from unfair collection practices by requiring creditors with sufficient minimum contacts with Indiana that “regularly engage in Indiana” in the collection of consumer debts to obtain a license. DFI, the agency tasked with enforcement of the statute, has issued guidance indicating that “regular” refers to at least twenty-five times per year and “engaged in Indiana” requires a physical presence within the state.

Wertz argued that the DFI opinion should not be used, as the interpretation is based on the official comments to the statute rather than the statutory language itself, and the interpretation was not issued through a formal rule making process and therefore deference to the agency is not required. The Court rejected Wertz’s first argument, relying on Basileh v. Alghusain, finding that the commentary to a uniform code enacted by the legislature is indicative of the legislature’s intent and the commentary is to be used when interpreting the statute. 912 N.E.2d 814 (Ind.2009). The Court then noted that a formal rulemaking process is not required before Indiana agencies are granted deference in statutory interpretation and the broad nature of DFI’s guidance authority would make such a process difficult.

The court held that the statutory guidance of DFI was valid and deserved great deference from the court. As such, an out-of-state business without a physical location within Indiana is not covered by the IUCCC and its licensing requirements. Asset did not meet the criteria to be covered by the statute and therefore did not need a license to pursue its case against Wertz. The dismissal of Wertz’s claims against Asset was affirmed.

The Full Text of the Wertz v. Asset Acceptance Opinion May Be Found HERE:

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Debt Buyer May Have Personal Knowledge of Records

April 1, 2014 in FDCPA, Ohio Courts

In an environment where successfully obtaining judgment against debtors who have defaulted on their obligations requires a sworn affidavit attesting to the amount and nature of the debt, the language that the affidavit contains can be critical.  The U.S. District Court for the Eastern District of Tennessee recently broadened language the 6th Circuit found acceptable for a debt buyer to use in testifying about account records created by the original creditor. 

In Sells v. LVNV Funding, LLC, the plaintiff, Carl T. Sells brought an action against LVNV Funding (“LVNV”) under the Federal Debt Collection Practices Act alleging violation of several provisions of the Act. Sells argued that the debt buyer, who merely purchased the account after default, did not have actual personal knowledge of the account creation and terms and therefore the affidavit filed with the collection case was false and misleading.   

The debt at issue in the original action was a credit card debt that Sells incurred and then defaulted on. It was assigned to LVNV who ultimately brought suit in November of 2010, with a copy of an affidavit attached. The affidavit stated a principal amount due of $6,321.47 and asked for pre and post judgment interest, as well as reasonable attorneys’ fees. With respect to the amount of the debt the affidavit stated: “on the Date of Assignment [5/28/2009], all ownership rights were assigned to, transferred to, and became vested in Plaintiff [LVNV], including the right to collect the purchased balance owing of $6,321.47 plus any additional accrued interest.

The District Court likened this case to the recent opinion by the 6th Circuit in Clark v. Main Street Acquisition Corp 2014 WL 274469 (6th Cir. January 17, 2014) regarding the use of an affidavit were the debt buyer claims personal knowledge of the debt.  In, Clark, the 6th Circuit stated that claims of personal knowledge refer to business records, which include the original lender’s records. 

The language LVNV used included,

–          “I have personal knowledge regarding Plaintiff’s creation and maintenance of its normal business books and records, including computer records of its account receivables.”

–          “In the ordinary courts of business, Plaintiff regularly acquires revolving credit accounts, installment accounts, service accounts and/or other credit lines.  The records provided to Plaintiff have been represented to include information provided by the original creditor or it successor in interest.”

–          “Based upon the business records maintained on account XXXXXX (hereinafter “Account”) which are a compilation of the information provided upon acquisition and information obtained since acquisition…”

Quoting from the Clark decision, the District Court stated, “Such an affidavit is not ‘inaccurate or misleading’ and even if it was ‘the representation was still not material’ because ‘the least sophisticated consumer understands that lenders and debt collectors will by necessity have to rely on business records they may not personally have created, especially in an age of automated, computerized transactions.’” (citing 2014 WL 274469 at *4).

           

The full text of the Sells opinion can be found here.

The full text of the Clark opinion can be found here

 

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.

Carmack Amendment Preempts State Law Claims Against Common Carriers

March 13, 2014 in Creditors Rights, Ohio Courts, UCC

The Federal Carmack Amendment preempts all state law claims against common carriers for damaged interstate shipments according to the Ohio Court of Appeals in the Fourth Appellate District. Originally enacted in 1906 as an amendment to the Interstate Commerce Act of 1887, the Carmack Amendment is designed to provide a uniform nationwide method of recovery for damage to shipments on common carriers. The appeals court found that only federal law claims could be brought against UPS for a damaged shipment in state court and any state statutory and common law claims are preempted. Dean v. UPS Legal Dept., 4th Dist. No. 13CA21, 2014-Ohio-619.

In Dean, Jared Dean purchased a tankless water heater from a local retailer for $500 and sold it through eBay for $1,600 to a buyer in California. He took the water heater to Staples where he purchased shipping and surrendered the package for shipment. UPS then shipped the package to California where it was refused due to damage. Dean’s claims with UPS and Staples were denied due to improper packaging.

Dean then filed a small claims petition in the Athens County Municipal Court against UPS for $1,740 representing the resale value of the water heater and the shipping cost. The complaint did not specify the legal theory or cause of action for which he was seeking damages. The trial court interpreted his claims under the Ohio common law rather than federal law, despite UPS briefing on the preemption of state law by the Carmack Amendment. Dean was awarded $1,600 by the trial court and UPS appealed asserting a number of errors including preemption of state law by the Carmack Amendment.

Citing significant case law, the appeals court found that Congress intended to completely preempt all state statutory and common law when it enacted the Carmack Amendment in order to provide a single method of recovery for shippers to recover damages to delivered property. The appeals court quoted the Supreme Court noting “Almost every detail of the subject is covered so completely that there can be no rational doubt that Congress intended to take possession of the subject, and supersede all state regulation with reference to it.” Adams Express Co. v. Croninger, 226 U.S. 491 (1913).

The court also noted that state courts still have jurisdiction over claims against common carriers if the claims are brought under federal rather than state law. Dean did not specify federal law or the Carmack Amendment in his complaint and the trial court interpreted his claims under state law. As such, the Carmack Amendment served as a complete defense to Dean’s state law claims and the appeals court reversed the judgment against UPS. By UPS’s request, on remand the trial court was instructed to interpret Dean’s claims under the Carmack Amendment.

The Full Text of the Court’s Opinion May Be Found Here: http://www.sconet.state.oh.us/rod/docs/pdf/4/2014/2014-ohio-619.pdf

The Text of the Carmack Amendment May Be Found Here: http://www.law.cornell.edu/uscode/text/49/14706?qt-us_code_tabs=3

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

No Private Right of Action Under FCRA for Erroneous Reporting

February 7, 2014 in Credit Reporting, Ohio Courts

The Eight District Court of Appeals in Ohio has dismissed the claims of a consumer filed under the Fair Credit Reporting Act (FCRA) for erroneous reporting stating that no private right of action exists. In the summer of 2011, Stephen Johnson discovered an item on his credit report relating to an overdue amount to KeyBank and promptly notified KeyBank. Within two weeks, KeyBank rectified the error and all notations of the alleged debt were removed from the reporting agency ChexSystems. However, despite the correction, Johnson demanded monetary compensation from KeyBank and eventually sued KeyBank for conducting an “unauthorized inquiry” and “illegally” reporting him to a consumer reporting agency. Johnson also raised several state law causes of action.

 KeyBank filed a motion for judgment on the pleadings which was granted and Johnson’s claims were dismissed. Johnson promptly filed an appeal.

The Court of Appeals dealt first with Johnson’s FCRA claim.  The court noted that KeyBank is a furnisher as defined by the FCRA.  A furnisher has two responsibilities under the Act.  A furnisher is required to report accurate information and correct any inaccurate information as well as being responsible to undertake certain investigations when information is disputed by the consumer.  The court dismissed Johnson’s claims holding that no private cause of action is available to a consumer under the FCRA for erroneous reporting.  The court further noted that enforcement in this case resides exclusively with federal and state agencies. 

Section 1681s-2(c) specifically exempts violations of 1681s-2(a) from private civil liability.  Section 1681s-2(a) prohibits a person from furnishing information to a consumer reporting agency that is known or has reasonable cause to be known to be false or if the person has been notified by the consumer that the information is false and it in fact false.  Violations of this type are explicitly reserved for enforcement by the Federal Trade Commission.  As such, Johnson’s claim failed to state a claim upon which relief could be granted as no private right of action existed concerning the erroneous reporting.   

With respect to Johnson’s state law claims of identity theft, libel, and conspiracy to defraud, the Court found that the sole fact underlying his allegations related to KeyBank’s erroneous reporting to ChexSystems. Therefore, all Johnson’s state law claims were preempted under Section 1861(b)(1)(F) of the FCRA.

Based on its findings, the Court of Appeals affirmed the trial court’s judgment dismissing the complaint.

The Full Text of the Opinion May Be Found At:  http://www.sconet.state.oh.us/rod/docs/pdf/8/2014/2014-ohio-120.pdf

 

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.

Verification Letters are Key in Factoring Agreements

February 3, 2014 in Construction, Creditors Rights, Indiana Courts

The Indiana Court of Appeals overturned a superior court ruling finding that the doctrine of promissory estoppel is applicable to verification letters in factoring contracts and should control in the case of Sterling Commercial Credit – Michigan, LLC v. Hammert’s Iron Works, Inc. 998 N.E.2d 752 (Ind. Ct. App. 2013). The case was brought to the court on Sterling’s appeal following a superior court ruling in favor of Hammert’s on both cross-motions for summary judgment.

The conflict addressed in this case arose from a contract for construction of a clinic in Evansville, Indiana. Hammert’s, which was responsible for the structural steel framing & decking, entered into a $490,000 subcontract with National Steel Erectors, Inc. (“NSE”) with terms calling for payment only after Hammert’s was paid by the general contractor. To provide liquidity, NSE entered into a Factoring and Security Agreement with Sterling. Sterling agreed to pay NSE 85% of the amount due when invoiced and would later receive the full payment directly from Hammert’s. Before making the payment, Sterling required a verification letter from Hammert’s asserting that the invoiced amount was earned, due, owing, and final except for payment.

Sterling purchased three invoices from NSE and received verification letters from Hammert’s for all three. Hammert’s paid the first invoice received without issue. Before paying the second invoice, Hammert’s inquired about the status of NSE’s payments to subcontractors who were currently owed $50,116.49. With the second invoice payment, Hammert’s included a letter indicating that NSE’s subcontractors must be paid and requested that the letter be signed and returned. Sterling disregarded the letter and kept the payment for the second invoice. NSE failed to pay its subcontractors and subsequently filed for bankruptcy. Hammert’s paid the subcontractors on NSE’s behalf and finished the construction itself but did not pay Sterling for the third invoice it had purchased from NSE.

Sterling filed suit against Hammert’s asserting breach of contract and that they detrimentally relied on Hammert’s verification letter in providing funding to NSE. Sterling argued that the doctrine of promissory estoppel should obligate Hammert’s to pay the third invoice. Hammert’s counter-claimed alleging breach of the agreement to pay NSE’s subcontractors, misappropriation of funds, and argued that the doctrine of promissory estoppel was inapplicable.

 Rather than rule on the breach of contract issues, the Indiana Court of Appeals decided the controversy solely using promissory estoppel. The doctrine is based on equitable principles and has been found to be applicable to commercial transactions under the Uniform Commercial Code. Promissory estoppel requires “(1) a promise by the promisor (2) made with the expectation that the promisee will rely thereon (3) which induces reliance by the promisee (4) of a definite and substantial nature and (5) injustice can be avoided only by enforcement of the promise.” The Appeals court found that the verification letter sent by Hammert’s satisfied the requirements of promissory estoppel as they were promises to pay the invoices with the expectation that Sterling would lend money to NSE based on the letter. As such, Hammert’s was estopped from refusing to pay the invoices and was not permitted to attach the additional terms to the payment requiring payments to NSE’s subcontractors.

The appeals court reversed and remanded the trial courts decision with instructions to enter judgment in favor of Sterling on the claim and counter-claim. The court also indicated that the decision was a continuation of doctrine from other courts finding that the issuance of a verification letter to a factor will prevent the debtor from refusing to pay the debt at a later date, regardless of intervening circumstances. Care should therefore be taken in submitting and securing verification letters in factoring agreements as the letter will prevent the later reduction or offset of the payment for other obligations that arise.

The Full Text of the Opinion May Be Found Here:  http://www.in.gov/judiciary/opinions/pdf/11271303ebb.pdf

 

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Waiver of Contractual Interest Does Not Necessarily Waive Right to Statutory Interest

January 6, 2014 in FDCPA, Kentucky Courts

In late November 2013, the US District Court for the Eastern District of Kentucky found that the waiver of prejudgment contractual interest by the original creditor did not necessarily, by itself, waive the right of a debt buyer to collect prejudgment statutory interest and therefore a request for prejudgment statutory interest did not violate the Fair Debt Collection Practices Act (“FDCPA”)

Portfolio Recovery Associates, LLC (“PRA”) filed a complaint attempting to collect a debt and requested the principal balance in addition to pre-judgment interest at the statutory rate of 8%.  In response, the defendant, Dede Stratton filed a class action suit.  Stratton alleged that PRA’s attempt to collect the pre-judgment statutory interest violated three provisions of the FDCPA. According to Stratton, PRA: (1) falsely represented the character, amount, and/ or legal status of the debt , (2) took an action that cannot legally be taken by filing the state court complaint, and (3) attempted to collect interest on a debt that was neither authorized by agreement nor permitted by law.  The debt arose when Stratton stopped making payments on her GE, F.S.B/ Lowe’s credit card (“GE”). GE eventually sold the debt to PRA, who filed the complaint against the debtor, seeking to collect the debt. After Stratton filed the putative class action in response, PRA filed a motion to dismiss.

In deciding PRA’s motion, the Court broke the analysis down into two parts. In the first part, the judge examined whether GE’s waiver of its right to collect contractual interest of 21.99% automatically operates as a waiver of its right to collect statutory interest from the date of the charge-off. By not charging the contractual rate of interest between the charge-off date and the date that GE sold it to PRA, it was argued that GE waived its right to assess interest at that rate. Because by assignment, PRA only inherits the rights in the debt that GE had at the time of purchase, anything GE had waived PRA could not collect.

However, PRA did not seek the contractual interest rate.  Instead, PRA sought statutory interest. Kentucky’s statutory interest rate is intended to operate in the absence of a contractually agreed upon rate.  The parties agreed and the court concurred that a party may not seek both contractual interest and statutory interest for the same period of time, however, the court found that the waiver of one did not necessarily waive the other.  The court therefore concluded that the mere fact that GE waived contractual interest did not, by itself, lead to the conclusion that it waived statutory interest. 

The court next addressed, and dispensed with, all three of the alleged FDCPA violations, the first of which was that by requesting an 8% prejudgment interest rate, PRA falsely represented the character, amount, and/ or legal status of the debt (1692e(2)(A)). The court held that because PRA reasonably believed it was entitled to the requested interest rate and the request was just that: a request to the court for consideration and not a demand on the debtor, it did not amount to a false representation of the debt.  Stratton’s second alleged FDCPA violation was that by filing the state court complaint PRA threatened to take an action that cannot legally be taken, violating 1692e(5). For a debtor to prove this violation he or she must establish two elements: (1) a threat to take an action; (2) showing that (a) the action can’t legally be taken and (b) the debt collector never intended to take the action. Distinguishing between “threats to take action” and the actions actually taken, the court held that this provision applies only to threats to take action and not the actions actually taken by PRA.   

The third alleged violation was that PRA’s attempt to collect interest on a debt that was neither authorized by agreement nor permitted by law violated 1692f(1) because it is an unfair and unconscionable means by which to collect or attempt to collect a debt. As established previously in the opinion, PRA’s “mere request in its valid state court debt collection action was not improper, much less unfair or unconscionable.”

Having determined that Stratton’s allegations had no merit, the Court granted PRA’s motion to dismiss.

The Full Text of the Opinion May Be Found At: http://scholar.google.com/scholar_case?case=13820757548343320467&hl=en&as_sdt=6,36

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Prevailing Wage Law – State v. Federal

December 12, 2013 in Construction, Ohio Courts

The Court of Appeals of Ohio recently upheld a Defiance County Common Pleas decision and found that the lower court had correctly interpreted the relevant state statute and applied the facts of the case accordingly. The International Brotherhood of Electrical Workers Local Union No. 8 (the “Union”) had sued the Board of Defiance County Commissioners (the “County”) for violating the Ohio Prevailing Wage Law on a jail building project. As the federal government partially funded the project, the County argued the Ohio statute did not apply. The Common Pleas Court granted summary judgment to the County and the Court of Appeals upheld the decision finding the Union’s interpretation of the applicable statutes to be fundamentally flawed and its remaining arguments to be baseless.

 The case resulted from a dispute over wages on a Defiance County construction project at a local jail. The County financed the project by issuing bonds and the federal government provided funding equal to forty five percent of the interest payable on the bonds. The County solicited bids for the project and stated that the Ohio Prevailing Wage Law would not apply to the project and that the federal Davis-Bacon Act would apply instead. The Union then filed suit to force the County to apply the state law to the project.

The statutes at issue are a state and federal statute governing wages for employees working on public projects. The federal Davis-Bacon Act requires that qualified employees be paid “the prevailing wage rate for their job classification as determined by the Secretary of Labor.” The Act applies to any federally funded construction project. The similar Ohio Prevailing Wage Law requires laborers and mechanics to be paid the “so-called prevailing wage in the locality where the project is to be performed.” The Ohio law would have resulted in a higher wage for the workers on the project. The Ohio law does not apply however, to projects that are wholly or partly funded by the federal government, if there is a federal law that prescribes predetermined minimum wages.

The Union first argued that the Ohio exemption did not apply because the federal government did not fund the project. They posited that the County funded the project through the bond issue and the federal government simply provided funding to help pay the interest on the bonds rather than the project itself. The Court quickly dispensed with this argument finding it was a distinction without a difference. The federal funds were deposited into an account used to pay the bond principal and interest, the federal funds were not restrict or intended to be used solely for interest payments, and financing interest is clearly part of the cost of a project. As such, the federal government funded part of the project and the Davis-Bacon Act applied.

The Union’s second argument is that the federal act should not preempt state law and the County should apply the Ohio Prevailing Wage Law as well. The Union’s position results from a clearly erroneous reading of the Ohio statute and its exception. The Court first pointed out that the federal law was not preempting state law, but rather the state law contained an exemption for projects with federal funding. The exception to the Ohio statute applies when “all or any part” of a project is federally funded and the Union’s argument that the project was not federally funded due to the timing and amount of the federal funding was clearly at odds with the statutory language.

The Court of Appeals found the Union’s arguments to be clear misinterpretations of the Ohio Prevailing Wage Law. Further, the Court found the argument that the project was not federally funded to be clearly illogical and designed to avoid the apparent result of the straightforward reading of the statutes. The case serves as an illustration that a mischaracterization of the facts and creative readings of statutes shouldn’t be used as a basis for a statutory claim.

 

The Full Text of the Opinion May Be Found at: 

http://www.sconet.state.oh.us/rod/docs/pdf/3/2013/2013-ohio-5198.pdf

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Randy Slovin and Brad Council 2014 Super Lawyers

December 4, 2013 in News

Slovin & Associates is pleased to announce that once again Randy Slovin and Brad Council have been included in the Thomson Reuters 2014 Ohio Super Lawyers list.  Randy was named a 2014 Ohio Super Lawyer and Brad was named a 2014 Rising Star.

Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.  A Rising Star includes those who are 40 years old or younger, or who have been practicing for 10 years or less.  No more than 5% of attorney’s in a state are named as Super Lawyers and no more than 2.5% are named Rising Stars.

Courts Have Broad Powers to Rectify Fraudulent Transfers

November 18, 2013 in Creditors Rights, Ohio Courts

Ohio has adopted the Uniform Fraudulent Transfer Act, which prevents debtors from transferring assets to defraud creditors. ORC § 1336. The Ohio Court of Appeals recently detailed the broad equitable powers that the courts possess to rectify fraudulent transfers of property used to hide assets from creditors in their decision Individual Bus. Servs. v. Carmack. 2013-Ohio-4819 (Ohio Ct. App., Montgomery County Nov. 1, 2013). In Cormack, the Defendant Danies Carmack transferred two pieces of real property to her husband and a related LLC shortly after being found liable for $192,055.61, in order to prevent the property from being used to satisfy the judgment. The trial court found Danies Carmack, her husband, and the LLC jointly and severally liable for the full judgment and the Ohio Court of Appeals affirmed the decision.

Danies Carmack owned and operated Individual Business Systems, Inc. (IBS) for fifteen years and was employed by the company for twelve years prior to assuming full ownership. Over the course of her ownership, she took $192,055.61 in loans from the company which were not repaid. In 2000, Danies retired and donated the company to Citizens Motorcar Company, including the outstanding loans. In 2002, during a suit against IBS for breach of a commercial lease, IBS filed a cross-claim against Danies alleging she had improperly removed money from the company on multiple occasions and classified the transactions improperly as loans to shareholders. IBS was granted summary judgment against Danies for the account receivable worth $192,055.61.

Immediately following the judgment against her, Danies transferred a piece of real property to her husband, Robert Carmack, and a Key West condominium to Sunset Cottages, LLC, an entity controlled by Robert. Danies was left without assets to pay the judgment against her and later filed for bankruptcy. IBS sued Danies, Robert, and Sunset alleging the transfers were fraudulent under ORC § 1336.04 and 1336.05 and the trial court found all three defendants jointly and severally liable for the entire $192,055.61 judgment against Danies. The defendants then appealed the judgment citing several assignments of error.

The defendants first allege that the Florida condominium could not be fraudulently transferred as it qualified for the Florida homestead exemption as Danies’ primary residence. The trial court determined that Danies’ primary residence was in fact Ohio and not Florida preventing the exemption from applying. The Court of Appeals found that the trial court’s finding was not against the manifest weight of the evidence and therefore upheld its decision.

The Defendants then alleged that the transfer of property from Danies to Sunset was not fraudulent under ORC § 1336.04(A)(1). To be fraudulent under the statute, the transfer must have been made “with actual intent to hinder, delay, or defraud any creditor of the debtor.” Due to the difficulty in determining actual fraudulent intent, ORC § 1336.04(B) provides eleven “badges of fraud” which may be used to presume fraudulent intent as they are circumstances frequently attending fraudulent transfers. If a creditor can show the presence of a sufficient number of badges of fraud, some courts have required as few as three, then the defendant must prove the transfer was in good faith and for a reasonably equivalent value to prevent the finding of a fraudulent transfer. The trial court found six badges of fraud were present in the transfer, (1) the transfer was to an insider, (2) Danies continues to use the property, (3) the transfer was concealed, (4) a lawsuit was filed against Danies prior to the transfer, (5) Danies was insolvent at the time of the transfer, and (6) the transfer occurred shortly after a substantial debt was incurred. The defendants argue that they have proved the transfer was not fraudulent as the plaintiffs were denied punitive damages, the LLC was created for the purposes of limiting premises liability, and Robert had agreed to hold Danies harmless for any debt on the property and pay her living expenses. The Court of Appeals agreed with the trial court and found such evidence insufficient to overcome the numerous badges of fraud.

The Defendants also alleged that the transfer of the property to Robert was not fraudulent under ORC § 1336.04(A)(1). The trial court again found six badges of fraud present in the transfer: (1) the transfer was to an insider, (2) Danies retained possession of the property and continued to live there, (3) the transfer was made shortly after a judgment was obtained against Danies, (4) the transfer consisted of substantially all of Danies’ assets, (5) there was no consideration for the transfer, and (6) Danies was insolvent at the time of the transfer. The defendants argued that the transfer was routine due to Robert’s real estate investment business and his continued payment for her living expenses constituted adequate consideration. The Court of Appeals found the transfer to be unique in the business and lacking any consideration and therefore fraudulent due to the numerous badges of fraud.

The defendants’ final arguments allege that they should not be jointly and severally liable for the full judgment amount and the exact values of the property were not determined at the time of transfer. While the statute generally only imposes liability for the value of the transferred property, the Court of Appeals found that the trial court has broad equitable powers to grant “any relief that the circumstances may require.” ORC § 1336.07(A)(2)(c). The court stated that the primary purpose of the statute is to provide compensation to a creditor who has been damaged by a fraudulent debtor. As the parties were closely related and used that relationship to commit the fraudulent transfers, were each involved with at least one fraudulent transfer, and IBS had been attempting to collect the debt for almost a decade, the Court of Appeals found that joint and several liability for all defendants was an appropriate equitable remedy. The appeals court also found that it was not necessary to determine the value of the property on the exact date of transfer as the trial court had considered the available evidence to estimate the value and the purpose of the statute is equitable compensation for damaged creditors.

The Carmack case illustrates the broad equitable power of the court to compensate creditors for fraudulent transfers. In Carmack, the court found Danies’ husband and his company liable for her judgment without any direct proof of fraudulent intent. The presence of sufficient badges of fraud allowed the intent to be presumed absent compelling evidence to the contrary. As such, creditors have a powerful tool to use in situations where debtors have attempted to hide or protect assets from creditors.

The Full Text of the Opinion May Be Found at: 

http://www.supremecourt.ohio.gov/rod/docs/pdf/3/2013/2013-ohio-4109.pdf

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

6th Circuit Reviews Tyler v. DH Capital and Finds Error in Res Judicata Analysis But Affirms on Standing Grounds

November 8, 2013 in FDCPA, Kentucky Courts

As we discussed in February of this year, a District Court in Kentucky granted defendant, DH Capital Management’s (“DHC”), motion to dismiss a FDCPA action filed by Dionte Tyler in which the court found that the case failed on the grounds of res judicata and lack of standing due to Tyler’s bankruptcy filing.  (A full accounting of the lower court’s decision may be found here: FDCPA Claim Barred by res judicata and Lack of Standing).

Tyler believed the District Court had erred by holding that his claims were barred because he failed to present them as counterclaims in the original state-court action and that he had no standing because the cause of action belonged to his bankruptcy estate. Tyler appealed to the U.S. 6th Circuit Court of Appeals, which in turn found that the District Court erred in the application of res judicata but affirmed on the issue of standing.

The Court of Appeals addressed the two issues in turn.  Beginning with the procedural bar, the court held that while there will be instances where compulsory counterclaims that are not raised should be barred in a suit that was voluntarily dismissed without prejudice, in this instance the case was not sufficiently advanced to warrant application of the bar. Tyler filed his answer two days after DHC filed its notice of dismissal. Under Kentucky Rule 41.01, a notice of dismissal is effective immediately; the case was closed before Tyler filed his answer and so the content thereof does not matter. In addition, the principles of res judicata only apply to adjudications on the merits. Obviously, no such finality exists here. After a voluntary dismissal, the rules of res judicata do not prevent a party from asserting an unraised counterclaim, anymore than it prevents a party from re-filing suit.

While successful on his first assignment of error, Tyler was less so on his second: the Court held that the suit was the property of Tyler’s bankruptcy estate and as such, only the bankruptcy trustee had standing to bring it. The law surrounding this question is fairly straightforward: all legal or equitable interests of the debtor in property as of the commencement of the case are considered property of the bankruptcy estate. However, the inquiry required to determine at what point it becomes bankruptcy property, followed by when the actionable violation occurred, is far less straightforward.

A cause of action becomes the property of the bankruptcy estate, when the asset is “sufficiently rooted in the pre-bankruptcy past” of the debtor. Pre-petition conduct or facts alone will not root a claim in the past; there must be a pre-petition violation. All causes of action that hypothetically could have been brought pre-petition are property of the estate. Therefore, in Tyler’s case, if DHC’s alleged violation occurred prior to the filing of the bankruptcy petition, the cause of action may only be properly initiated by the bankruptcy trustee.

Tyler argued that the cause of action accrued when he was served with notice. The Court disagreed: violation occurred at filing, and thus Tyler’s FDCPA claim is pre-petition property of the estate. The Court stated several reasons for their conclusion. First, filing a complaint may cause harm to the debtor even before service is perfected. Second, the alternative to dating violations from the filing of the complaint can become factually complicated. Third, there is no viable logic for protecting debt collectors who have filed complaints but not yet served process. And finally, the relevant bankruptcy-law question is when the claim is minimally actionable, not when it is fully matured.

The final issue the court had to resolve in determining standing was whether Tyler’s failure to schedule the asset in his bankruptcy filings deprives him of the right to bring the claim. Failure to schedule an asset does have an affect on whether the trustee abandoned it. If the trustee abandons it, Tyler can pursue it. But he must schedule it first.  After that, it is only when the trustee declines to pursue it that Tyler will possess the requisite standing to bring his claim.

The full text of the opinion may be found here: http://scholar.google.com/scholar_case?case=8332826360302085246&hl=en&lr=lang_en&as_sdt=4,111,126,275,276,280,281,293,294,301,302,303,338,339,343,344,356,357,364,365,366,381&as_vis=1&oi=scholaralrt

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

 

Corporations Cannot Bring CSPA Claims

October 9, 2013 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

The Third Court of Appeals in Ohio recently found, in Semco, Inc. v. Sims Bros., Inc., that a corporation is prevented from bringing claims under Ohio’s Consumer Sales Practices Act (CSPA) and affirmed an award of $26,130 in attorney’s fees against Semco for bringing such a claim in bad faith. 2013-Ohio-4109. CSPA governs consumer transactions between a supplier and a consumer and prevents a number of unfair, deceptive or unconscionable acts or practices. In particular, the court rejected Semco’s argument that they could bring a CSPA claim against another corporation for a transaction involving their employees.

In the case, two employees of Semco, a foundry, stole metal from the foundry and sold it to Sims Bros., a metal recycler. Semco sued Sims Bros. under a number of different theories for the value of the metal stolen from Semco. Among the claims brought by Semco, Semco alleged that Sims Bros. violated CSPA by purchasing metal from the employees even though they suspected it was stolen.

 To prevail on a CSPA claim, there must be a consumer transaction that violates the statute. CSPA defines a consumer transaction as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” ORC 1345.01(A). The Ohio Supreme Court has ruled that “an individual” refers only to a natural person and does not include a business entity, such as a corporation. Culbreath v. Golding Ents., L.L.C., 114 Ohio St.3d 357.

 Semco asserted that a consumer transaction occurred between Sims Bros. and its employees when it purchased the stolen metal from them. As the metal belonged to Semco, it argued that it was entitled to stand in the employee’s place to file suit against Sims Bros. Without addressing other problems with characterizing the transaction as a consumer transaction, the Court found that the Plaintiff in a CSPA suit must be a natural person. The court found the “stand in the shoes” argument proposed by Semco to be erroneous and that as a corporation Semco is expressly prevented from filing a CSPA suit.

 CSPA may only be used by individual consumers and all forms of business entities are forbidden from filing suit under the Act. In addition, the Act does not allow businesses to file suit on behalf of an individual who has engaged in a consumer transaction. In Semco, the trial court found that alleging such a claim as a corporation amounts to bad faith and awarded attorney fees to the defendant for Semco’s claim under CSPA. The court also ruled against Semco on all other claims. The Appellate Court affirmed the trial court’s decision including the imposition of attorney’s fees against Semco for filing a claim under CSPA in bad faith.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Randy Is Again Teaching Debtor-Creditor Law at UC Law School

September 24, 2013 in News

It’s back to school time again and Randy Slovin is preparing for his 3rd year as an adjunct professor at the University of Cincinnati College of Law.  He is again teaching the course for the fall 2013 semester titled “Debtor-Creditor Law”.  Some of the topics included in the course are fraudulent conveyances, common law claims of debtors against creditors such as invasion of privacy, the federal Fair Debt Collection Practices Act and the Fair Credit Reporting Act, and post-judgment remedies of creditors.

Medical Services to Spouse Presumed Reasonable and Necessary

September 13, 2013 in Medical and Healthcare, Ohio Courts

The matter of Orchard Villa v. Irene Suchomma came before the Court of Appeals, Sixth Appellant District, in Lucas County Ohio on July 19, 2013.  The trial court found Ms. Suchomma to be liable for her deceased husband’s medical expenses.

In June, 2009, Joseph Suchomma signed a contract with appellee Orchard Villa to recuperate from a recent leg amputation. The contract contained a private pay provision.    His stay at Orchard Villa lasted until January, 2010.  Shortly after his release, Mr. Suchomma was diagnosed with leukemia and died on April 20, 2010. Prior to his death, Mr. Suchomma utilized Medicare Parts A and B and private insurance but had an outstanding balance of $20,692.80.  Orchard Villa then sued Mrs. Suchomma for the balance when she refused to pay.  The trial court agreed that Mrs. Suchomma was responsible for the outstanding balance.

The appellant asserts that the trial court erred by citing Rev. Code §3103.03 which provides that …  “(A) Each married person must support the person’s self and spouse out of the person’s property or by the person’s labor. If a married person is unable to do so, the spouse of the married person must assist in the support so far as the spouse is able. …”  The appellate court found that there was not sufficient evidence to indicate that Mrs. Suchomma was unable to pay the debt to Orchard Villa thereby upholding the trial court’s ruling.  The appellate court cites Kincaid, 48 Ohio St.3d at 80, 549 N.E. 2d 517 stating that the determination of a spouse’s ability to provide financially for one’s spouse “is a matter to be decided with the sound discretion of the trial court.”  Upon review, the appellate court did not find any abuse of that discretion. While the court admits that Mrs. Suchomma’s resources are limited, they believe that her sole ownership of the marital home as well as survivor benefit and her own income that she has is more than capable of aiding in her husband’s support as outlined in Rev. Code §3103.03. 

In her appeal, Mrs. Suchomma also contends that the service(s) provided by Orchard Villa were not in good faith as required the Rev. Code §3103.03 (C) which states:

 If a married person neglects to support the person’s spouse in accordance with this section, any other person, in good faith, may supply the spouse with necessaries for the support of the spouse and recover the reasonable value of the necessaries supplied from the married person who neglected to support the spouse unless the spouse abandons that person without cause.

The trial court record contains documentation that supports the fact that despite accumulating past-due balances, Orchard Villa continued to provide the same level of care throughout his stay there.  As such, the appellate court agreed with the trial court.

Mrs. Suchomma further contended that the balance due is not equivalent to the reasonable value of the services rendered.  Wagner v. McDaniels, 9 Ohio St.3d 184, 459 N.E.2d 561 (1984) states, “proof of the amount paid or the amount of the bill rendered and of the nature of the services performed constitutes prima facie evidence of the necessity and reasonableness of the charges.”  Orchard Villa provided all the bills and documentation to support the reasonableness of the services while Mrs. Suchomma provide only an assertion of the contract rate being unequal to reasonable value.  Further, Mr. Suchomma extended his stay by ten days without arguing the reasonableness of the contract rate.  The appellate court upheld the ruling of the trial court on this issue as well.

The Full Text of the Opinion May Be Found At:  http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2013/2013-ohio-3186.pdf

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Court Finds FDCPA Does Not Require Updating Credit Report With Dispute

September 6, 2013 in Credit Reporting, FDCPA, Indiana Courts

The Fair Debt Collections Practices Act requires that when a debt collector reports a debt to a consumer reporting agency, they must also report whether the debt is disputed. This requirement leaves open the question of what happens if a debt becomes disputed after the debt collector has already reported it. Does the collector have an obligation to update the reporting agency’s information?  In February of 2013, the District Court in the Southern District of Indiana in the case of Joshua Rogers v. Virtuoso Sourcing Group, LLC, decided that they did not, holding that once a debt collector has reported that the consumer owes the debt, they do not have a continuing, affirmative obligation to report if it becomes disputed at a later date.

In January 2012, Virtuoso reported to a consumer reporting agency that the plaintiff, Joshua Rogers, had defaulted on a debt. Four months later, Virtuoso received notice that Rogers was disputing the debt. When Rogers checked his credit report several months later, it still reflected the debt, but not that it was disputed.  Rogers brought an action against Virtuoso for violations of the FDCPA. He argued that the language of section 1692e(8), which states that it is a violation of the FDCPA to “communicate or threaten to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed” supported a finding that Virtuoso had an affirmative duty to update the credit reporting agency’s information once they knew the debt was disputed.

The District Court disagreed. Relying on an 8th Circuit Court of Appeals decision and a 1988 Federal Trade Commission Staff Commentary, the Court stated that, “if a debt collector elects to communicate ‘credit information’ about a consumer, it must not omit a piece of information that is always material – whether the debt was disputed.” In addition, the Court emphasized language from the 1988 Staff Commentary: “When a debt collector learns of a dispute after reporting the debt to a credit bureau, the dispute need not also be reported.” When combined, this language clearly states that unless a debt collection agency chooses to report again after a debt becomes disputed, it is under no obligation to update a credit reporting agency’s information.

The Court also wasted little time responding to Rogers’ reliance on a 1997 FTC Staff Letter: “[it] is ambiguous at best…[and] does not stand for the proposition that the debt collector has an obligation to report the debt after the dispute.” This finding in spite of explicit language in the Letter which states that “if a dispute is received after a debt has been reported to a consumer reporting agency, the debt collector is obligated by Section 1692e(8) to inform the consumer reporting agency of the dispute.” The Court qualified this by stating that it only applies if a debt collector chooses to continue to report; it did not require them to report multiple times.

Finding such, the Court held that the plaintiff’s claim failed as a matter of law and granted defendant’s motion to dismiss.

The Full Text of the Opinion May Be Found At: http://scholar.google.com/scholar_case?case=155166204411155402&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Ohio’s New Law – Potential Benefits of Cure Offers in CSPA Claims

August 27, 2013 in Ohio Consumer Sales Practices Act (OCSPA)

The Ohio Consumer Sales Practices Act (CSPA) provides consumers with remedies against suppliers who engage in deceptive or unconscionable acts or practices. The CSPA allows consumers to recover economic and non-economic damages as well as treble damages, attorney’s fees and court costs in some situations. The prospect of large payouts by pursuing CSPA claims in court however, causes many plaintiffs, and their attorneys, to reject reasonable settlement offers in the hopes of getting much larger payouts through litigation. The result is a statute that is far more punitive to businesses and a windfall for plaintiff’s attorneys than it is a remedy for damaged consumers.

In an effort to balance the effects of the CSPA and encourage settlement instead of litigation, on April 2, 2012 Governor Kasich signed Ohio House Bill 275 into law enacting ORC 1345.092. Effective since July 3, 2012, ORC 1345.092 provides suppliers with an opportunity to avoid the most significant penalties of the CSPA by offering settlement to the consumer early in the litigation process.

ORC 1345.092 allows suppliers to make a cure offer to the consumer within 30 days of being served with a CSPA suit. The cure offer must include a settlement for damages known as a “supplier’s remedy” and in addition must offer to pay attorney’s fees up to $2,500 and court costs. The consumer then has 30 days to accept or reject the offer by filing notice with the court. If the consumer rejects the offer, they cannot collect treble damages, court costs or attorney fees incurred after the offer date unless the court awards damages in an amount greater than the supplier’s remedy.

The supplier’s cure offer must follow a number of requirements to provide the defendant with protection from increased damages. The supplier must deliver the cure offer via certified mail, return receipt requested, in addition to filing a copy with the court. A prominent notice must also be included in the offer with specific statutory language. If the consumer accepts the offer, they must submit documentation of attorney’s fees and court costs to the supplier. The supplier then has the opportunity to contest any unreasonable attorney fees before paying the settlement.

If the consumer declines the settlement offer and proceeds with litigation, the supplier will have some protection against excessive damage awards. If the consumer wins the case but is granted a damage award less than or equal to the amount offered by the defendant as a supplier’s remedy, the consumer will be barred from receiving treble damages as well as all attorney’s fees and court costs incurred after the cure offer was made. If the consumer receives a damage award greater than the supplier’s remedy however, the consumer will retain all rights to collect treble damages, attorney’s fees and court costs.

The result of ORC 1345.092’s enactment is a strong incentive for both consumer and supplier to settle CSPA disputes early in the litigation. If a supplier can reasonably estimate the potential damages that may be awarded to a consumer plaintiff in a dispute, they can offer an appropriate settlement and protect themselves from the most severe penalties of the CSPA. Consumers likewise are encouraged to accept reasonable settlement offers as rejecting them will result in a similar damage award offset against their own attorney’s fees. In addition to avoiding practices that violate the CSPA, suppliers should consider the potential benefits of using the new cure provision to reduce their liability under the statute.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **

Can the FDCPA Be Used as an Enforcement Mechanism for Other Statutes?

August 8, 2013 in FDCPA, Kentucky Courts

Several of the actions prohibited by the Fair Dept Collection Practices Act (FDCPA) use vague language that is not defined by the Act. Recently, debtors have attempted to use the language as an enforcement mechanism for procedural violations of unrelated statutes to collect statutory damages and attorney’s fees otherwise not permitted. The United States District Court for the Eastern District of Kentucky recently dismissed such an attempt.

In Currier v. First Resolution Inv. Corp., First Resolution obtained a default judgment against Currier on October 1, 2012, which Currier moved to vacate on October 5. First Resolution sought a judgment lien on Currier’s real property two days later. The request for a judgment lien was improper as KRS § 426.030 requires judgment creditors to wait ten days after a judgment before seeking a judgment lien and KRS § 426.720 only permits judgment liens on final judgments. Subsequently, Currier’s motion to vacate the default judgment was granted and she filed an action against First Resolution alleging that the improper seeking of the judgment lien under Kentucky law violated three sections of the FDCPA.

Currier first alleged that First Resolutions seeking of a judgment lien was an unfair and unconscionable act prohibited by 15 USC 1692f of the FDCPA. There is no definition in the statute of what is unfair and unconscionable, though the statute does provide a non-exclusive list of examples. Currier posited that as the act was not permitted by law it should be considered unfair and unconscionable. The court sided with similar rulings in other circuits finding that while ambiguous, the statute gives no hint that it may be used as an enforcement mechanism for other state or federal laws and therefore an act prohibited by a separate statute is not unfair and unconscionable per se. The court did indicate that conduct prohibited by other statutes may be actionable under § 1692f if it is unfair and unconscionable independent of the statute.

Currier’s second argument alleged a violation of § 1692f(1) which forbids “the collection of any amount … unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” Currier argued that the filing of a judgment lien not permitted by law violated the wording of the statute. The court disagreed, finding that the section prohibits the collection of unauthorized amounts rather than unauthorized methods. As the amount First Resolution attempted to collect in placing the lien was authorized by the FDCPA, the improper placing of the lien did not violate the statute.

Currier’s final argument alleges that First Resolution violated § 1692e(5) which prohibits the “threat of any action that cannot be legally taken or that is not intended to be taken.” Currier argued that as the judgment lien could not legally be placed against her at the time First Resolution filed for it, First Resolution made a threat of an action that could not legally be taken upon sending her notice. The FDCPA does not define “threat” and the courts have had varying interpretations on its application. Some courts have found that there can be no threat if the action is actually taken. This court followed a line of cases indicating that a threat and action are not necessarily mutually exclusive. A threat under the FDCPA however, was found to be a threat to take an action to induce payment of a debt. Merely providing notice as required when actually taking the action however, does not qualify as a threat for FDCPA purposes.

The court in Currier, found that while First Resolution’s filing of a judgment lien prior to the time permitted by statute was likely improper, it was not a violation of the FDCPA. The FDCPA was not available for enforcement of other statutes and did not apply to First Resolution’s actions. While a collector’s actions could violate the FDCPA and a separate statute, it would need to be found to violate both individually.

 

The Full Text of the Opinion May Be Found at:

http://scholar.google.com/scholar_case?case=3641462025453617942&hl=en&lr=lang_en&as_sdt=4,111,126,275,276,280,281,293,294,301,302,303,338,339,343,344,356,357,364,365,366,381&as_vis=1&oi=scholaralrt

 

Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law. 

Hospital May Seek Full Payment from Third Party Insurer

August 5, 2013 in Medical and Healthcare, Ohio Courts

In response to the increasing influence of health insurance corporations and medical providers, the Ohio legislature attempted to set forth circumstances under which a hospital or other provider could collect on medical debt, and from whom. On July 8, 2013, in Annette Hayberg v. Robinson Memorial Hospital Foundation, the Ohio Court of Appeals interpreted one such attempt: RC 1751.60(A). That section states “every provider or health care facility” as therein defined “that contracts with a health insuring corporation to provide health care services to the health insuring corporation’s enrollees or subscribers shall seek compensation for covered services solely from the health insuring corporation and not, under any circumstances, from the enrollees or subscribers.”

The case began with a car accident in October 2003, resulting in Annette Hayberg being injured. The driver at fault was Hayberg’s husband, who was employed by General Motors Corporation, with whom he (and she) had health insurance (“GM plan”). That plan was administered by Anthem Blue Cross and Blue Shield (“Anthem”). The car was insured by Nationwide Insurance Company (“Nationwide”). Beginning with Hayberg’s stay in defendant’s hospital following the accident: Anthem paid the hospital 89% of the total invoice, per the contract between Anthem and General Motors. When it became clear that Nationwide was liable for the medical expenses, Nationwide paid the full invoice, at which point the hospital reimbursed Anthem.

The initial litigation centered on the $2,566.06 difference between what Anthem paid the hospital and what Nationwide paid. After the trial court granted summary judgment in the hospital’s favor and denied her cross motion for summary judgment, Hayberg appealed.

On appeal, Hayberg alleged two assignments of error, (1) since the hospital was under contract with Anthem, it was prohibited from seeking compensation from appellant in excess of the contracted rates plus approved co-payments and deductibles; and (2) appellee violated R.C. 1751.60 by seeking and retaining compensation in excess of the contracted rates plus approved co-payments and deductibles under the contract with Anthem. Hayberg v. Physicians Emergency Serv., Inc., 2008-Ohio-6180 (Ohio Ct. App. Nov. 28, 2008).

On appeal, the Court held that the statute did not permit the hospital to collect a greater amount than it was entitled to under its contract with General Motors, reversed the trial court’s decision and remanded it for further consideration. While the case was on remand, a new decision came out of the Supreme Court of Ohio, King v. ProMedica Health System, Inc., 129 Ohio St.3d 596, 2011-Ohio-4200. King held that per the express terms of 1751.60(A), the statute is applicable only when there is a contract between a provider and a health insuring corporation, and provider seeks compensation for services rendered and it is violated when the provider seeks compensation directly from the insured, rather than from third parties, such as auto insurers. Defendants filed a motion requesting summary judgment in light of the express holding of King, maintaining that King had the effect of nullifying the appellate court’s prior holding with regards to the claim’s viability under the statute; the trial court agreed and summary judgment was granted.

Hayberg, in her second appearance before the Court of Appeals, alleged the trial court committed prejudicial error by granting the appellee’s motion for summary judgment based on the “law-of-the case doctrine.”  The doctrine holds that a prior decision of a reviewing court (here the appellate court’s first decision) is to remain binding upon both the trial and appellate court in all ensuing proceedings. It does not allow trial courts to alter appellate mandates, except when there are intervening decisions from the Supreme Court, and therefore the Court of Appeals first interpretation of the statute should have been applied to the trial court’s decision and summary judgment should not have been granted. However, the Court ruled that King qualified as an intervening event, supplanting their earlier decision. Under King, the statute does not apply to the hospital’s separate request for payment from Nationwide, since it only applies when there is a contract between the hospital and insurer. Therefore, summary judgment in the hospital’s favor was appropriate.

The Full Text of the Opinion May Be Found Here:

http://www.sconet.state.oh.us/rod/docs/pdf/11/2013/2013-ohio-2828.pdf

Special thanks to Meredith Hughes for her contributions to this article.  Meredith is a Litigation Clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  

Brad Council attends annual Consumer Law Conference

August 1, 2013 in News

Slovin & Associates attorney, Brad Council attended the annual Consumer Law conference sponsored by the Ohio State Bar Association on July 31, 2013.  The conference included presentations by the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Ohio Attorney General’s Consumer Protection Section, as well as distinguished members of the local bar and judiciary.  The conference provides information on current cases and trends in consumer law that affect credit grantors and consumers alike.

Calls Not Harassing But May Be Third Party Communication Under FDCPA

July 26, 2013 in FDCPA, Ohio Courts

Last month, the United States District Court for the Northern District of Ohio made a ruling on a complaint brought forth by Karen Miller against Prompt Recovery Services, Inc under the Fair Debt Collection Practices Act (FDCPA) for alleged violations including harassing phone calls, making false threats, and communication with a third party.  Miller (Plaintiff) was seeking actual and statutory damages, attorney’s fees, and costs.  Prompt Recovery Services, Inc. (Defendant) filed a motion for summary judgment on all claims brought forth by Miller.

 

After Plaintiff fell behind on her credit card payments, she began receiving phone calls from Defendant.  Plaintiff stated that she received 27-32 phone calls from Defendant over the period of four months and that she would receive multiple calls in a single day on some occasions.  On three occasions, Plaintiff spoke with Defendant about this debt.  On one occasion, Plaintiff’s son answered the phone and was questioned about his father’s employment.  During the conversation between Plaintiff’s son and Defendant, the son was never informed that the person he was speaking with was attempting to collect a debt.  After the phone was handed over to Plaintiff, she went over settlement options and payment options with Defendant.  At this time, Plaintiff was informed that the small monthly payment she was willing to pay would not cover the interest and would not decrease the balance due at all.  Also at this time, Defendant informed Plaintiff that if payments were not made on the account, then it would be recommend that suit be filed against Plaintiff, so a wage garnishment could be filed against her husband and a lien would be placed on her house.

 

In allegations against Defendant, Plaintiff brought forth the following provisions of the FDCPA:  15 U.S.C §1692d (anti-harassment), 15 U.S.C. §1692e (threatening behavior), and 15 U.S.C. §1692c(b) (communications with third parties).  The anti-harassment provision of the FDCPA states that “[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.”  15 U.S.C. §1692d.  The statute goes on to give an example by stating specifically that a debt collector is prohibited from “using the telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”   Plaintiff alleges that the frequency in which Defendant contacted her coupled with the rudeness in which Defendant informed her that her payments were not large enough to satisfy the debt constitutes harassment under 15 U.S.C. §1692d.  However, the court reasoned that 33 phone calls over a four month period was not a high enough volume of calls to violate the statute and that, even if Defendant was rude in his statement that her payments were not large enough to satisfy the debt, his statement was true and accurate.  The court therefore, granted Defendant’s motion for summary judgment on the issue of harassment.

 

The FDCPA section involving threatening behavior states that a “debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt” and prohibits a debt collector from “”threat[ening] to take action that cannot legally be taken or that is not intended to be taken.” 15 U.S.C. §1692e.  Plaintiff alleges that Defendant violated this statute by threatening to take legal action in the form of filing a lien on her property and garnishing her husband’s wages if payments were not made.  Defendant argues that the agent was not threatening Plaintiff, but merely informing her of the recommendation that would be taken to Defendant’s client if the debt was not satisfied.  The court recognizes that the law is unclear on whether or not threatening to take legal action constitutes a thread under the FDCPA. However, the court reasons that the statement was not false or misleading.  By looking at Defendant’s history, the court established that the “threat” to take legal action was not made without the intent to follow through; therefore, the court ruled in favor of the defendant’s motion for summary judgment on this issue as well.

 

The FDCPA also prohibits a debt collector from discussing the debt owed with anyone other than the consumer under 15 U.S.C. §1692c(b).  Plaintiff alleges that Defendant violated this statute when the agent spoke with her son about her husband’s employment information.  Defendant argues that the collector was not in violation of §1692c(b) because he was inquiring about the husband’s employment information and not the Plaintiff’s.  However, the court reasons that “[f]or the purposes of § 1692c, the definition of consumer is expanded to also include “the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.” § 1692c(d). As George Miller’s spouse, plaintiff has standing to sue.”  Defendant also argues that the conversation with the minor child does not qualify as a “communication” by definition in the statute because the collector did not inform the child that he was calling in connection with Plaintiff’s debt.  The court disagrees, arguing that “it seems unlikely that Congress intended to define the term ‘communication’ so narrowly that it would essentially sanction the use of third-parties to coerce payment.”  Lastly, Defendant argues that if the conversation with the child is considered a communication under the FDCPA, then it falls under the safe harbor provision.  The safe harbor provision allows collectors to interact with third-parties for the purpose of obtaining location information about the debtor, but the statute states that the collector must identify himself and his reason for calling.  In this case, the collector did not meet either of these requirements nor did he ask any questions relating to location information.  The court denied Defendant’s motion for summary judgment on this issue.

 

Plaintiff was seeking actual damages in addition to statutory damages, attorney’s fees and court costs in this case.  However, the court reasoned that Plaintiff did not offer any evidence to prove actual damages and is not entitled to them.  The court concludes the opinion by granting Defendant’s motion for summary judgment in part, while dismissing Plaintiff’s request for actual damages, as well as her claims alleging harassment and threatening behavior with prejudice.  However, “Plaintiff’s claim under §1692c(b) and her prayer for statutory damages survive summary judgment.”

The Full Text of the Opinion May Be Found Here:  http://goo.gl/WGpLuW

 

Special thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Home Solicitation Sales Act Violation Can Lead to Rescission or Damages, Not Both

July 18, 2013 in Creditors Rights, Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

On June 27, 2013, the Ohio Court of Appeals decided the matter of Patrick Garber  v. STS Concrete Co., LLC.  The appellants claim the trial court erred in awarding the Appellee treble damages and attorney fees when he was also allowed to rescind the contract.  They also claimed that holding Mr. Suglio individually liable was an error.

In the original case, the trial court awarded damages to Patrick Garber in the amount of $18,600 (three times the amount of the damages of $6,200) as well as granted a partial summary judgment for violations of the Ohio Home Solicitation Sales Act (“HSSA”) and the Ohio Consumer Sales Practices Act (“CSPA”) holding Frank Suglio, owner of STS Concrete, individually liable for those violations.

Under the HSSA, a home solicitation sale must include a written agreement that indicates the buyer’s right to cancel the contract until midnight of the third business day after the contract is signed.[1]  The HSSA was designed to offset the high-pressure sales tactics sometimes applied during in-house solicitations.  It allows for a cooling-off period for the consumer to re-evaluate their decision to enter into the transaction.  If, however, that provision is not present in the contract, the buyer’s right to cancel does not expire.[2] The appellate court found that HSSA applied and because the contract failed to contain the required language, even after a ten month period, Garber’s notification rescinding the contract was valid.

With regard to damages, the Court of Appeals found that the trial court erred in awarding the treble damages to the Appellee. The HSSA, pursuant to division (A)(3) of section 1345.05 of the Revised Code, the buyer may rescind the transaction or recover damages, but not both.  Clearly, Garber’s notice of cancellation that was received by the Appellants on May 6, 2009, qualifies as a rescission of the contract.  Therefore, Garber was allowed to rescind, but could not also receive damages. With regard to attorney fees, the court found that since Garber canceled the contract pursuant to R.C. 1345.23, attorney fees are not available under RC 1345.09.  He could only receive one or the other.

The Court of Appeals affirmed the lower court’s ruling that Suglio should be held individually liable for violations of the HSSA and CSPA.  Typically, employees are not held accountable for the debts or responsibilities of their companies.  However, the CSPA allows that where officers or shareholders of a company participate in or direct others in actions that constitute a violation of the CSPA, that person may be held individually liable.

The court held that Suglio was correctly notified of the statutory provisions he was accused of by the cancellation letter which cited relevant sections of the Ohio Revised Code.  The letter provided specific references to the HSSA which put Suglio on notice that he should investigate its applicability.  This along with providing a contract without a cancellation notice are violations of the HSSA and therefore subject Suglio to individual liability.

In conclusion, the Court of Appeals found that granting of summary judgment was appropriate, and that since Garber cancelled the contract, he is entitled to only $6,200 as opposed to the $18,600 originally awarded by the lower court.

The Full Text of the Opinion May Be Found At:
http://www.sconet.state.oh.us/rod/docs/pdf/8/2013/2013-ohio-2700.pdf

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 



[1] R.C. 1345.22 and R.C. 1345.23.

[2] RC 1345.23(C).

Does the FDCPA Require a Dispute to be in Writing? – A look at Hooks v. Forman

July 8, 2013 in FDCPA

The rise in litigation over technical violations of the Fair Debt Collection Practices Act (FDCPA) has created a need for those covered by the statute to carefully construct all communications with debtors to avoid statutory penalties. Of particular concern are areas where the FDCPA is unclear and the courts have not come to a consistent interpretation as the statute creates strict liability for all violations. One such ambiguity is the wording of the notice of debt, required with the initial written communication, regarding the debtor’s right to dispute the debt. The widening split between the circuits is evident in the recent Second Circuit case Hooks v. Forman, Holt, Eliades & Ravin, LLC[1], which is the latest circuit decision interpreting the notice of debt’s wording.

 

Section 1692g of the FDCPA requires debt collectors to send a written “notice of debt” with the amount of the debt, the name of the creditor, and three statements listing rights the consumer has and the action the consumer must take to invoke them. At issue in Hooks, is the required statement that “unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” The FDCPA requirement does not indicate what format the dispute should take, but the next two statements require the consumer to notify the debt collector in writing that the debt is disputed or that they request information on the original creditor. Further, under the heading “disputed debts”, the statute lists requirements for debt collectors receiving written disputes from the notice section at issue but makes no mention of any other format of dispute. Courts and practitioners have been split on whether the statute indicates all disputes must be in writing or if the format the dispute may take depends on the right the debtor wishes to invoke.

 

The Ninth Circuit and now the Second have found that Congress intended to leave out the writing requirement to dispute the validity of debts while requiring a writing to receive verification and invoke other rights. Such a two-tiered system of dispute would allow consumers to activate one set of rights by orally disputing a debt, and a second larger set by disputing in writing. In Hooks, the Second Circuit admits that such an outcome is more complex but not unreasonable. The Court claims that the two-tiered system of disputes is favorable for the least sophisticated debtors, who  may find it more difficult for various reasons to dispute in writing than orally, and indicates that the rights conferred without a written dispute are more beneficial to them. The Court left out that the suspension of debt collection efforts until the debt is verified, one of the most beneficial rights for such debtors, requires that the dispute be in writing and failed to address that many of the rights available are not included in the notice and are found only in the statute text, of which such a debtor is likely unfamiliar. This system makes it more difficult for the least sophisticated debtor to properly exercise their rights as the decision of how to dispute a debt has effects on their rights of which they are likely unaware.

 

The Third Circuit, however, found the only reasonable reading of the statute is to require all disputes of the debt to be in writing. The Court ruled in Graziano v. Harrison[2] that any other reading of the statute would be “incoherent” and “create a situation in which, upon the debtor’s non-written dispute, the debt collector would be without any statutory ground for assuming the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts.” The Court indicated it is more beneficial for the least sophisticated consumer to always dispute the debt in writing to ensure that all available protections are activated within the time requirements and to provide documentation for the dispute. The Circuit’s interpretation of the statute requires that the notice and all communication with the debtor clearly indicate that the debtor cannot dispute the debt orally.  Debt collectors’ letters in that circuit have been found to violate the FDCPA by simply including a contact phone number in the body of a collection letter even though the notice on the letter indicated that all disputes must be in writing.[3] Such a letter was found to be potentially confusing to the least sophisticated debtor as they might assume they could call the number to dispute the debt even when the notice indicated they could not.

 

The ambiguity in the wording of the FDCPA has created numerous issues for those covered by the statute. While three circuits have now established the proper format of disputes in their jurisdictions, with differing outcomes, all other circuits have yet to decide such a case leaving the proper interpretation uncertain. The required notice wording in the Second Circuit now results in a FDCPA violation in the Third due to the strict liability imposed by the statute. Most practitioners have tracked the official language of the statute in their notices, but this runs the risk of the circuit siding with the Third Circuit and requiring written notice for all disputes. While notices must be worded so that a less than reasonable debtor would not be “left uncertain as to her rights,” practitioners and the courts are obviously uncertain as to the proper interpretation of those rights in the FDCPA.

Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law. 


[1] Hooks v. Forman, Holt, Eliades & Ravin, LLC, 2013 U.S. App. LEXIS 10754 (2d Cir.N.Y. May 29, 2013)

[2] Graziano v. Harrison, 950 F.2d 107 (3d Cir.N.J. 1991)

[3] Caprio v. Healthcare Revenue Recovery Group, LLC, 709 F.3d 142 (3d Cir.N.J. 2013)

Receiving A Notice Of Disposition Of Collateral

June 27, 2013 in Ohio Courts, UCC

Last month, the Ohio Court of Appeals handed down a decision involving the disposition of collateral in SAC Fin., Inc. v. Deaton, 2013-Ohio-2126. SAC Finance brought a claim against Tamara and Melvin Deaton in Darke County Municipal Court for money owed on a retail installment contract and security agreement for the purchase of a 2000 Pontiac Sunfire.  The trial court overruled SAC’s motion for summary judgment and ruled in favor of the Deatons at trial.  The trial court’s ruling was based on the Deatons testimony that they did not receive a notice of disposition of collateral before the repossessed car was sold.  An employee of SAC Finance testified that the notice was sent to each of the Deatons by certified mail, as required by law, but did not have the return receipt in hand to prove that it was sent.

 

Chapter 1317.16(B) of the Ohio Revised Code states that the secured party must notify the debtor of intent to sell collateral at least ten days prior to the sale by certified mail, return receipt requested, to the debtor’s last known address.  The Supreme Court of Ohio has also ruled on this subject, stating that “…the statutes [R.C. 1309.47 and R.C. 1317.16] nowhere require the secured party to delay its sale until return of the certified mail receipt… In fact, no statute or controlling case law specifies that the debtor must actually sign the notice, indicating actual receipt.”  Ford Motor Credit Co. v. Potts, 47 Ohio St.3d 97, 548 N.E.2d 223 (1989).  Using the above mentioned law for support, the Ohio Court of Appeals reversed the trial court’s decision in SAC Financial v. Deaton and remanded the case back to the trial court for further proceedings.

 

The Court of Appeals was not able to determine whether or not proper notice was sent as requested by SAC Finance because the trial court’s judgment entry is vague as to the reasoning behind the decision entered.  The Court of Appeals specifically stated that “[the court] can safely determine, from the judgment entry, that the trial court erred, as a matter of law, by concluding that proof of receipt of the notice was required. We cannot determine that this error was harmless, because it is not clear that the trial court discredited Holder’s testimony and found that the notice was not sent. Therefore, the only course open to us is to reverse the judgment and remand this cause for further proceedings.”

 

The Full Text of the Opinion May Be Found at:

http://www.sconet.state.oh.us/rod/docs/pdf/2/2013/2013-ohio-2126.pdf

 

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Mortgage Servicing Not A Consumer Transaction

June 14, 2013 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

The matter Anderson v. Barclay’s Capital Real Estate, Inc., Slip Opinion No. 2013-Ohio-1933, came before the Supreme Court of Ohio with the queries:  Is the servicing of a residential mortgage considered a “consumer transaction” as defined by the Ohio Consumer Sales Practice Act (“CSPA”) as codified in R.C.1345.01(A) and is the servicing entity a “supplier” as defined in R.C. 1345.01(C)?

By way of background, Barclays Capital Real Estate, which does business as HomeEq Servicing (“HomeEq”) engages in the servicing of residential mortgages.  In other words, it “accepts, applies and distributes mortgage loan payments and other fees, penalties and assessments, and in connection with doing so exercises discretion regarding the fees charged or applied to a particular mortgage loan account.”  It is neither a bank nor a financial institution as defined in RC 1345.01(A).

Sondra Anderson, plaintiff in the underlying cause, contended that mortgage servicing constituted a “consumer transaction” because it provided a service to the mortgage holder.  However, HomeEq countered that mortgage servicers provide services to the financial institution, not the borrower per se, thereby making the transactions commercial and not covered under the CSPA.

The CSPA defines a consumer transaction as “a sale, lease, assignment, award by chance or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes  that are primarily personal, family, or household, or solicitation to supply any of those things.”   In Anderson, there is not sale, lease, assignment, award by chance or other transfer to a consumer.  The mortgage servicing is done between the mortgage servicer and the financial institution only. There is no contract between the borrower and the mortgage servicer.  There have been instances where the mortgage servicer will negotiate a modification of the mortgage but does so on behalf of the financial institution, not the borrower.

The court found that mortgage servicing is a “collateral service” much like appraisal services or title services and therefore, except where specified in the statute, “are solely associated with the sale of real estate and are necessary to effectuate a ‘pure’ real estate transaction” and therefore not covered under CSPA.  See also Hanlin v. Ohio Builders & Remodelers, Inc., 212 F.Supp.2d 752,757 (S.D.Ohio 2002) (closing services were “part and parcel of the real estate transaction” and thus outside the CSPA).  The Court supports it’s position by invoking commentary to the Uniform Consumer Sales Practices Act which states, “On the assumption that land transaction frequently are, and should be, regulated by specialized legislation, they are excluded altogether.” 7A, Part I, National Conference of Commissioners on Uniform State Laws, Uniform Laws Annotated, Business and Financial Law, Uniform Consumer Sales Practices Act, Official Comment to Section 2(1), at 73 (Master Ed.2002). Even though the General Assembly has amended RC Chapter 1345 on many occasions, it has chosen not to include mortgage services in the definition of transactions subject to the CSPA.

The second query pertains to whether or not mortgage servicers can be classified as suppliers as defined in the CSPA.  The court held that they are not suppliers as, under the CSPA, a supplier “means a seller, lessor, assignor, franchisor or other person engaged in the business of effecting or soliciting consumer transactions, whether or not the person deals directly with the consumer.” RC 1345.01(C).  The court found that HomEq only serviced the mortgage and did cause and/or request the transaction between the financial institution and the borrower to occur.

In one of the two dissenting opinions, it is alleged that HomEq was remiss in its servicing duties in that it failed to apply Anderson’s (the plaintiff in the underlying cause) payments as required by her note and mortgage, failed to adequately answer her repeated inquiries and failed to acknowledge her payments and forward them to the lender.  She was subject to the negligence of HomEq but had no measure of remedy as she did not have a contractual relationship with HomEq. Judge O’Neill continues that because the CSPA is remedial in nature, it must be construed in favor of the consumer.  Further, that because mortgage servicers are not specifically exempt from the statute that they must be included.

In conclusion, despite two dissenting opinions, the court found that mortgage servicing is not a consumer transaction under the CSPA and the mortgage servicer is not a supplier therefore the CSPA does not apply.

 

The Full Text of the Court Opinion May Be Found Here:

http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2013/2013-ohio-1933.pdf

 

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

What a Difference a State Makes: Variations in Spousal Liability for Medical Debts in Ohio, Kentucky, & Indiana

June 3, 2013 in Indiana Courts, Kentucky Courts, Medical and Healthcare, Ohio Courts

The liability that individuals have for their spouse’s medical expenses is a common question for creditors with accounts consisting of medical debt. In the course of our practice in Ohio, Kentucky, and Indiana we have found that liability varies by state and depends upon the courts’ interpretation of common law doctrines and state statutes.

 

The theory for spousal liability for medical debts is based on the Necessaries Doctrine found in most states’ statutes or common law. Through the last century, the common law theory of coverture prevented women from having independent legal rights to contract or procure food, shelter, or medical services on credit separate from their husbands. O’Daily v. Morris, 31 Ind. 111. To counterbalance these legal disabilities, the Necessaries Doctrine was established to create a duty on the husband to provide all necessities for his wife. Should he fail to do so, the wife was authorized to procure necessities on credit and the husband would be liable to the supplier for their costs. Watkins v. DeArmond, 89 Ind. 553.

 

With the elimination of coverture and the equalization of women’s economic potential and legal rights, states have taken a mixed approach to the Necessaries Doctrine. Some states, including Alabama and Virginia, have eliminated the doctrine entirely and thus spousal liability for medical debts no longer exists. See Emanuel v. McGriff, 596 So.2d 578; Schilling v. Bedford County Memorial Hosp., Inc., 303 S.E.2d 905. Other states’ courts, including Kansas and New Jersey, have extended the doctrine to both spouses. Regional Medical Ctr., Inc. v. Bowles, 836 P.2d 1123; Jersey Shore Medical Ctr.-Fitkin Hosp. v. Estate of Baum, 417 A.2d 1003. State legislatures have taken similarly varied approaches. North Dakota notably extended the doctrine to both spouses but narrowed the definition of necessaries, leaving out medical care. N.D. Cent. Code § 14-07-08. The states in our practice area of Ohio, Kentucky, and Indiana have mirrored the national trend, each taking a different approach to spousal debt liability.

 

Ohio codified its common law Necessaries Doctrine in R.C. 3103.03 by requiring husbands to support their wives and establishing liability towards third parties that provide their wives necessaries. The statute limited required support to wives who were unable to support themselves and only to the extent the husband was able. The Ohio Supreme Court in Ohio State Univ. Hosp. v. Kinkaid, relying on R.C. 3103.01 which establishes that the marriage contract creates mutual obligations of support, found the duty extended to both spouses. 549 N.E.2d 517. The Court also found that medical expenses are necessaries as defined by the statute, thus establishing that where a married person is unable to provide for their own support, the spouse must aid in the support to the extent that they are able. Ohio subsequently amended their statute by removing all references to husband and wife and used the term “married person” to explicitly extend liability to both spouses. Ohio has established clear liability for the medical debts of a debtor spouse when the debtor spouse is unable to pay the debt, to the extent that the other spouse is able.

 

Kentucky enacted KRS § 404.040 which established a husband’s liability for necessaries provided to his wife after marriage. The Kentucky Supreme Court has not taken up the issue, but several courts of appeals have found that husbands are liable for their wives’ medical expenses without creating a limit based on their ability to pay. See Rhodus v. Proctor, 433 S.W.2d 625; Carpenter v. Hazelrigg, 45 S.W. 666, Atkins v. Atkins’ Adm’r, 262 S.W. 268. Kentucky courts have found that the statute does not extend liability to a wife for her husband’s necessary expenses and have also taken steps to avoid striking the statute as unconstitutional, though lower courts have found it to violate the equal protection clause. See Somerset Manor, LLC v. Rees, 2011 Ky. App. Unpub. LEXIS 532; Adams v. Riddle, 2010 Ky. App. Unpub. LEXIS 151. An amendment extending the statute to both spouses was introduced in 2011 but has not yet been passed by the Kentucky legislature. Currently in Kentucky, a husband is fully liable for his wife’s medical expenses regardless of their respective financial situations but the wife is not similarly liable for her husband’s.

 

Indiana never codified the Necessaries Doctrine into its state statutes. The common law doctrine survived the elimination of coverture however and Indiana courts became split on its subsequent application. The Indiana Supreme Court in Barstrom v. Adjustment Bureau, Inc. established the current complicated implementation of the doctrine by extending “secondary liability” to both spouses and found medical expenses to be a necessary expense. 618 N.E.2d 1. The debtor spouse retains primary liability for necessary expenses and is responsible for the entire medical debt they incur. If the cost of medical care exceeds the debtor spouse’s separate funds and the debtor spouse is dependant on a financially superior spouse, then secondary liability is imposed on the non-debtor spouse. This secondary liability imposes liability only for the portion of the medical debt that exceeds the debtor spouse’s available funds. However, the secondary liability imposed cannot exceed the non-debtor spouse’s ability to pay at the time the debt was incurred. Indiana courts current implementation of the doctrine now requires a fact-intensive investigation into both spouses’ financial positions to determine secondary liability for a spouse’s medical debt. Porter Mem. Hosp. v. Wozniak, 680 N.E.2d 13.

 

Creditors with claims for medical expenses face a patchwork of regimes in determining spousal liability. Ohio imposes clear spousal liability for medical debts to the extent that the non-debtor spouse is able to pay. Kentucky currently gives full liability for a wife’s medical expenses to the husband but not the reciprocal. Indiana imposes secondary liability on non-debtor spouses for medical debts but requires a fact-intensive evaluation of both spouses’ financial situation to determine its extent. The status of spousal liability in the area continues to evolve and the states have not yet established a majority rule on the issue.

 

Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law. 

Careful Wording Of Release Agreements

May 24, 2013 in Creditors Rights, FDCPA

Last month, the United States District Court for the Eastern District of Michigan handed down a decision regarding release agreements.  The case involved a personal debt owed by Jamie Hines to A&A American Financial, LLC (A&A), who was represented by G. Reynolds Sims & Associates (GRSA).  GRSA obtained a default judgment against Hines in state court; however, Hines and A&A entered in to a settlement agreement which allowed Hines to pay back the debt in monthly installments afterward.  The settlement agreement contained a release clause that states “Defendant [Hines] hereby forever releases the Plaintiff [A&A], their assigns, legal counsel, agents and successors from any and all further claims of whatever nature and all liability, known or unknown, foreseen and unforeseen, that could or may arise from this action or facts.”

Following the settlement agreements, Hines filed a complaint against GRSA based on the Fair Debt Collection Practices Act (FDCPA).  GRSA argues that the release agreement protects the defendant from Hines’ claims, and uses the ruling in Stolaruk v. Cent. Nat’l Ins. Co. of Omaha 522 N.W.2d 670 (Mich. Ct. App. 1994) to support his defense.  In Stolaruk, the release agreement referred to “all claims, past, present or future, known or unknown, accrued or not accrued, contingent or otherwise, relating to these parties arising out of or relating to the transactions between the Plaintiffs and the Defendants which are the subject matter of the instant litigation.” Id. at 672.  The Michigan Court of Appeals held that the release in this case dismisses any future claims Stolaruk may have.

Hines argued that the release agreement was ambiguous.  Hines stated that the wording “this action” could be interpreted to include only the state court collection case and not her FDCPA claims. Hines further argued that there was no language in the release to protect GRSA from future claims and that she could not have foretold the future actions that were currently before the court.

The court interpreted the agreement and reasoned that a contract is considered ambiguous when the language within may be reasonably interpreted in more than one way.  The court further stated that “[g]enerally, a release will ordinarily release all present, but not future, claims.”  Michigan courts have routinely found that future claims from future conduct will not be released unless the agreement specifically covers that scope.  In looking at Stolaruk v. Cent Nat’l Ins. Co. of Omaha, the court stated that the case does not support GSRA’s theory because neither release, GSRA’s or Stolaruk’s, expressly released future liability arising from conduct that had yet to occur.  Therefore, the court held that the release agreement is ambiguous.  Specifically, the court pointed out that the terms “this action”, “facts”, and “further” could have multiple interpretations.  The court thereby remanded the matter for further proceedings to determine the intent of the parties since the language of the agreement was ambiguous.

The Full Text of the Opinion May Be Found at:

http://scholar.google.com/scholar_case?case=13887224133987335086&hl=en&as_sdt=2,18

 

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Small Claims Courts are Not Judicial Districts Subject to 1692i

May 14, 2013 in FDCPA, Indiana Courts

The matter of Mark Suesz v. Med-1 Solutions, LLC, came before the United States District Court, S.D. Indiana, Indianapolis Division on March 21, 2013 whereby the court concluded that the Indiana judicial structure provides that the Circuit Courts are considered “judicial districts” for purposes of the required venue provisions in the Fair Debt Collection Practices Act, 15 U.S.C. § 1692i, but township small claims courts are not.

Plaintiff Suesz brought a putative class action suit against Med-1 claiming that Med-1 filed in the wrong judicial district in violation of the Federal Debt Collection Practices Act (FDCPA).  The FDCPA in 15 U.S.C.§ 1692i states that the action to collect a debt must be brought “only in the judicial district or similar legal entity in which such consumer signed the contract sued upon; or in which such consumer resides at the commencement of the action.”  The key issue in this matter is that of judicial district.  While Med-1 contends bringing the action in Marion County albeit not in the small claims court where the debtor lives, is the correct venue, Suesz believes that the district scope should be narrowed to a township small claims court.

In Indiana,  Article 7 of the State’s constitution provides that the state is divided into judicial circuits.  The Circuit Court Judge may transfer a small claims case from one township to another. This ability somewhat blurs the lines of jurisdiction as it relies on the discretion of the judge and suggests that the rules of jurisdiction are rules of administrative convenience.   Ind. Code §33-34-5-3 allows the small claims judges to sit in place of one another and perform each other’s duties at the direction or approval of the Circuit Court Judge.

The same issue was addressed by the 7th Circuit in Newsom v. Friedman, 76 F. 3d 813 (7th Cir. 1996 813 (7th Cir. 1996), with respect to Illinois courts.  According to Newsom, the district court found that the FDCPA required the debt collector to file in the appropriate Circuit Court, but did not further require him to file in any particular sub-district within the Circuit Court.  Of particular importance in Newsom was the local rule which provided for the trial of a proceeding in any Circuit Court regardless of department or division.  The court also found it persuasive that actions filed in the wrong department or division were not subject to dismissal. Thus the court in Newsom determined that the divisions were for “administrative” purposes and therefore not judicial districts.

Like in Illinois and Newsom, the township small claims courts of Indiana were determined by the court to be set up for “administrative purposes.”  The venue provisions of Ind. Code § 33-34-3-1(a) allow small claims cases to be venued and decided in any township in the county.  Small claims courts are also not the court of record (Ind. Code § 33-34-1-3) and may not hold jury trials (Ind. Code § 33-34-2-10).  Therefore, the court determined that for the purposes of the FDCPA and 15 U.S.C. § 1692i, township small claims courts are not considered “judicial districts”.

As Med-1 filed in Pike Township which is located in Marion County, the same county in which the debtor resides, there was no violation of the FDCPA.

 

The Full Text of the Opinion May Be Found at:

http://scholar.google.com/scholar_case?case=13361200775488162425&hl=en&as_sdt=2&as_vis=1&oi=scholarr

 

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Denial of Class Certification for “Gerrymandering” of Class Representatives

May 6, 2013 in Civil Procedure, FDCPA

On March 21, 2013, the United States District Court for Minnesota issued an order denying class certification in the case of Wenig v. Messerli & Kramer, PA because the class was too narrow and apparently defined as such to circumvent the limits on damage awards in class actions under the Fair Debt Collection Practices Act (“FDCPA”).

Plaintiff, Sandra L. Wenig filed suit against defendants, Messerli & Kramer P.A., claiming that the defendant’s form letters violated various provisions of the FDCPA.  Ms. Wenig sought to certify a class under Rule 23(b)(3), which provides that a class action may be maintained if the court finds that the questions of law or fact common to class members predominate over any questions affection only individual members, and that class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

The Defendant’s first collection letter was dated September 28, 2011.  Defendant thereafter sent out additional letters including a third collection letter which was dated October 24, 2011 and entitled FINAL NOTICE.  Ms. Wenig alleged that the defendants sent out first and third collection letters within a 30 day verification period and that the third letter overshadowed the disclosure of her rights in the first collection letter. Ms. Wenig alleged that the third letter communicated that her validation rights had expired.

The Plaintiff proposed a class which only included those Minnesota individuals who were also sent a first and third letter within the same 30 day period, but further limited the class to only include those who lived in HennepinCounty where the original creditor was Capital One.

To certify a class under Rule 23(b)(3), the Court must find that “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” The court found the class proposed by Plaintiff to be preposterous and without justification. The court analogized that a class of residence whose last name began with the letter “R” or persons who owned cats, would be as compelling as the class proposed by the Plaintiff.

The court stated that there were at least 30,000 Minnesotans who may have received Messerli’s third letter within 30 days of receiving the first letter, but found no justification for limiting the class to those who lived in a specific county or owed a specific creditor.  The court stated that essentially the same letter was sent to each individual regardless of the creditor or county of residence.  Therefore, the court called the limitations of the class “gerrymandering” and presumed that it was done for the sole purpose of avoiding the damages limits placed up on class actions by the FDCPA.

The court determined that the class should include all of the residence who received the letters regardless of the creditor or the county in which they live.  The court denied the Plaintiff’s motion for class certification finding that a class action that resolves only a fraction of the possible claims is neither a fair nor efficient way to adjudicate the controversy.

The Full Text of the Opinion May be Found at: http://scholar.google.com/scholar_case?case=8169208652499160766&q

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

Ohio’s Retail Installment Sales Act versus the Uniform Commercial Code

April 26, 2013 in Creditors Rights, UCC

Chapter 1317 of the Ohio Revised Code deals specifically with retail installment sales.  This statute defines retail installment sales as a contract to sell goods where the cash price may be paid in installments over time.  The statute further states that lease-purchase agreements and layaway arrangements do not qualify as retail installment sales.

Section 1317.16 of the Ohio Revised Code is part of the retail installment sales statute and discusses the disposition of collateral.  Section A of this statute gives the secured party permission to dispose of any collateral after default, and Section B goes into detail about how collateral should be disposed.  Section B specifically states that “[d]isposition of collateral shall be by public sale only.”  This chapter further states that notice of the sale should be published in a newspaper of common circulation in the county where the collateral will be sold at least ten days prior to the sale.

The Uniform Commercial Code, which can be found in the Ohio Revised Code starting at Chapter 1301 and continuing through Chapter 1353, also has requirements for the disposition of collateral. Section 1309.610 describes how a secured party may dispose of collateral by public or private sale as a whole, or in pieces, at any time and place, and on any terms as long as everything about the sale is commercially reasonable.  This section continues to detail how the secured party may purchase the collateral at a public sale, or even a private sale if the collateral is something that is normally sold on a recognized market, and how the secured party may change the terms of the warranties on the collateral being sold.

Part of the statute dealing with retail installment sales, specifically Section 1317.16 of the ORC, conflicts with part of the UCC requirements, specifically Section 1309.610 of the ORC.  The UCC statute allows secured parties to dispose of collateral by public or private sale, as long as the sale is under commercially reasonable circumstances.  However, the retail installment sales statute says that collateral must be disposed of by the secured party through public sale only and states specific requirements of how that sale should be advertised.

So, which law is the ruling law when dealing with retail installment sales?  The answer can be found in the retail installment sales statute.  Part C of Section 1317.16 of the ORC states that “[e]xcept as modified by this section, sections 1309.610, 1309.611, 1309.615, 1309.617, and 1309.624 of the Revised Code govern disposition of collateral by the secured party.”  This basically means that this section of the retail installment sales statute is the prevailing law; however, in the areas of law that this section doesn’t cover, one should look to the UCC statutes.

In the Tri-State area, these special requirements involving retail installment sales are unique to Ohio.  Kentucky and Indiana do not have anything comparable to the retail installment sales statutes with regard to the disposition of collateral, but instead look to the Uniform Commercial Code.  The codified UCC provisions can be found in the Indiana Code starting at IC 26-1-9.1-610 through IC 26-1-9.1-619 and in the Kentucky Revised Statutes starting at Section 355.9-610 through 355.9-619.

A Very Special thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Noneconomic Damages and Attorney Fees under the OCSPA

April 4, 2013 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

On March 7, 2013, the Ohio Court of Appeals for the Eighth Appellate District in the case of Delores Favors v. William Burke, et al., reversed the decision of the trial court and found it proper to award noneconomic damages and attorney fees under the Ohio Consumer Sales Practices Act.

This matter came on for hearing before Administrative Judge Melody Stewart regarding the issue that noneconomic and punitive damages in addition to attorney fees.

The trial court awarded damages to Favors in the amount of $6,050 which, in accordance with The Ohio Consumer Sales Practices Act, R.C. 1345.09(B), it tripled to the amount of $18,150.  The court also awarded interest for Burke’s failure to complete a remodeling contract.  Favors argued that she should have also received noneconomic and punitive damages for her inconvenience, frustration, embarrassment and mental distress as a result of the incompletion of the remodeling contract.

 

            “Noneconomic loss” has been defined in R.C. 2315.18(A)(4) as:

[N]onpecuniary harm that results from an injury or loss to person or

property that is a subject of a tort action, including, but not limited to, pain

and suffering, loss of society, consortium, companionship, care, assistance,

attention, protection, advice, guidance, counsel, instruction, training, or

education, disfigurement, mental anguish, and any other intangible loss.

 

In her testimony, Favors states that her unsuccessful attempts to resolve the issue with Burke resulted in her feeling “let down” and that she felt “a lot of anxiety and I was really depressed.”  She stated that the unfinished work that Burke had started made her feel “ashamed of her property.”  These feelings were so overwhelming to her that she made three office visits to a psychologist.

In Decapua v. Rychlik, 8th Dist. No. 91189, 2009-Ohio-2029 the court stated that, “The trier of facts always has the duty, in the first instance, to weigh the evidence presented, and has the right to accept or reject it.”  Depacua, citing Ace Steel Baling v. Porterfield (1969), 19 Ohio St. 2d 137, 138, 249 N.E.2d 892; see also Rogers v. Hill (1998), 124 Ohio App.3d 468, 470, 706 N.E.2d 438.

Even with the testimony given by Favors, the trial court, in its judgment entry did not specify that it found the evidence wanting at all; in fact, it simply did not address the noneconomic damages claim but unilaterally rejected it.  According to Whitaker v. M.T. Automotive, Inc., 111 Ohio St.3d 177, 2006-Ohio-5481, 855 N.E.2d 825, ¶ 22-22, “aggravation, frustration and humiliation are compensable noneconomic damages under R.C. 1345.09(A).

The Appellate court sustained the error and remanded with instructions for the court to determine the amount of noneconomic damages entitled to Favors.

Favors also stated that she should have been awarded punitive damages with regard to her claim of fraud and civil theft for Burke intentionally not completing the work on her home. R.C. 2315.21(C)(1) states that punitive damages cannot be recovered unless “[t]he actions or omissions of [the] defendant demonstrate malice or aggravated or egregious fraud * * *.” “Actual malice, necessary for an award of punitive damages, is (1) that state of mind under which a person’s conduct is characterized by hatred, ill will or a spirit of revenge, or (2) a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm.”  According to the trial court, the simple fact that he did not finish the work he intended does not necessarily constitute malice.  The trial court found that Favors did not present enough evidence to obtain the punitive damages and the Appellate court upheld that decision.

Finally, with regard to attorney fees, under R.C. 1345.09(F)(2) an award of attorney fees to a prevailing party is not mandatory, but within the discretion of the trial court, subject to review only for an abuse of that discretion. The Appellate court found that because Burke did not answer the complaint nor respond to requests for admissions, the evidence with regard to damages, the reasonableness of the hours worked, and the hourly rate was uncontroverted.  Therefore, it was unreasonable for the trial court to deny attorney fees.  However, given the fact that law students, under the supervision of an attorney-professor, handled the case, the claim was governed by Gov.Bar.R.II, Section 6 which states:

 

A legal intern shall not ask for or receive any compensation or remuneration

of any kind from a financially needy client on whose behalf services are

rendered. However, the law school clinic, legal aid bureau, public

defender’s office, or other legal services organization may be awarded

 attorney fees for services rendered by the legal intern consistent with the

Ohio Rules of Professional Conduct and as provided by law. A law school

clinic, legal aid bureau, public defender’s office, or other legal services

organization, the state, or any municipal corporation may pay compensation

to the legal intern.

 

The attorney-professor submitted an affidavit that the interns logged 156.19 hours on the case.  He requested $10,000 in attorney fees even though he stated that the prevailing rate for this type of work would be approximately $100 per hour.  The Appellate court found that the trial court’s denial of attorney fees was unreasonable, arbitrary and capricious and sustained the assignment of error and remanded with instructions for the court to award $10,000 in attorney fees.

 

The Full Text of This Opinion May Be Found At:

http://www.sconet.state.oh.us/rod/docs/pdf/8/2013/2013-ohio-823.pdf

 

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Request For Validation Under FDCPA Must Be Within 30 Days

March 28, 2013 in FDCPA

On March 7, 2013, the United States District Court for the Middle District of Tennessee, in the case of Boyd v. General Revenue Corporation, et al, found that the Defendants did not violate the FDCPA when they placed phone calls and sent letters after receiving a validation request from Plaintiff because Plaintiff sent the request outside of the statutorily required 30 day period.

Plaintiff, William A. Boyd filed suit against defendants, General Revenue Corporation (GRC), United Student Aid Fund, Inc. (USA Fund) and Sallie Mae claiming that the defendants violated the Telephone Consumer Protection Act (TCPA) and The Fair Debt Collections Practices Act (FDCPA) by making numerous, repeated calls to his place of employment and home as well as his cellular phone to collect on what he believed to be a nonexistent debt.

On August 18, 2004 William Boyd executed a Federal PLUS Loan application and master promissory note with Sallie Mae with USA Fund being the guarantor of the loan.  The plaintiff defaulted on the loan on October 24, 2006 at which time Sally Mae filed a default claim with USA Fund.  USA Fund paid the default claim on February 23, 2007.  USA Fund placed the plaintiff’s loan for collection with GRC.  On October 4, 2010, GRC mailed an initial collection letter, including a notice of validation rights under the FDCPA to the plaintiff’s address advising the plaintiff that his loan was in default and the terms of the loan pertaining to United Student Aid Funds purchase of the loan and placing it with GRC for collection.   The plaintiff was advised that unless he submitted a request in writing within 30 days after receiving this notice the he disputed the debt then they would assume that the debt is valid.

The plaintiff did not respond in writing but did make two telephone calls to a GRC collector stating that he was unable to make arrangements for the debt that day.  After December 3, 2010, plaintiff did not answer or return any calls from GRC.  However, on July 8, 2011, Boyd did send a written letter requesting validation of the debt.  A second letter was sent by Boyd on August 30, 2011 stating that GRC failed to respond to his prior request.

In reviewing Motions for Summary Judgment filed by the Defendants, the court determined that GRC did not violate the FDCPA by placing phone calls to Plaintiff after receiving his request for validation.  Since the written request from the Plaintiff came outside of the statutorily mandated 30 day period, the court found that GRC was not obligated to cease all collection efforts.

The court further found that GRC did not violate the TCPA because the calls made to his cellular telephone were manually dialed.  GRC did us an auto-dialer for calls made to Boyd’s residence; however the court determined that calls made to an individual’s residence are outside of the TCPA.  Therefore, because an auto-dialer was not used for calls to Boyd’s cellphone, but was used for calls to his residence, the court found that the TCPA did not apply and dismissed all claims.

The court further granted the summary judgment motions of Sallie Mae and USA Fund finding that the Plaintiff made no allegations against them, but rather all of the allegations were directed to GRC.

 

The Full Text of the Opinion May Be Found At:

http://scholar.google.com/scholar?scidkt=6151917493723069422&as_sdt=2&hl=en

 

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

CAUTIOUS COLLECTION LETTER WORDING

March 22, 2013 in FDCPA

On March 1, 2013, in the case of Caprio v. Healthcare Revenue Recovery Group, LLC, the Third Circuit of the United States Court of Appeals reversed a judgment in a collections case and remanded the case for further proceedings because the use of the words “please call” overshadowed the need for the consumer to dispute the debt in writing.

 

Healthcare Revenue Recovery Group, LLC (HRRG) was granted a judgment against Ray V. Caprio for debts owed for physician services, but Caprio appealed the judgment on the grounds that the demand letter he received was misleading and violated sections 1692g and 1692e(10) of the Fair Debt Collection Practices Act (FDCPA).  Section 1692g of the FDCPA requires that a debt collector provide the following information to the debtor when attempting to collect a debt:  the amount of the debt, the name of the creditor to whom the debt is owed, a statement to inform the debtor that if the debt is not disputed within 30 days then the debt is considered valid, a statement to inform the debtor that if the debt is disputed then the office will provide validation of the debt from the original creditor to the debtor, and a statement to inform the debtor that upon written request within thirty days the collector will provide the name of the original creditor if different from the current creditor.  Section 1692e (10) requires that “a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”

 

HRRG’s collection letter contained a validation statement, which was located in the last paragraph of the letter on the backside, that complied with the statutory regulations set forth in section 1692g of the FDCPA, but the body of the letter placed emphasis on instructions for the debtor to contact the office by telephone in order to dispute the debt.  For dispute of a debt to be legally valid, it must be submitted in writing.  While the validation statement informs the debtor that any dispute must be in writing in order to be legally valid, the body of the letter above the validation statement instructs the debtor to call or write to the office in order to dispute the debt.  The words “please call” and the office’s telephone number were both printed in bold.  The office’s telephone number was also placed at the top of the letter in bold print and in a larger font than the rest of the letter.  Unlike the instruction to call into the office, the instructions to write to the office in order to dispute the debt were not emphasized in any way.  Caprio’s claim alleged that “the least sophisticated consumer would believe that he should choose either of the instructions as set forth in the [body] of the notice and either call the toll free number or write to HRRG at the address on the letter, to dispute the alleged debt.”

 

The main question this case brought to the court was whether or not the body of this collection letter overshadowed or contradicted the validation notice and whether that constitutes false, deceptive, or misleading representation.  In their analysis, the court looked primarily at two cases, Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991) and Wilson v. Quadramed Corp., 225 F3d 350 (3d Cir. 2000).  The Graziano case included a collection letter that “threatened legal action within ten days unless the debt was resolved in that time” in the body of the letter, but still had a validation notice on the back side of the letter that explained that the debtor legally had 30 days to dispute the debt in writing.  The court held that there was “a reasonable probability that the least sophisticated debtor, faced with a demand for payment within ten days and a threat of immediate legal action if payment is not made in that time, would be induced to overlook his statutory right to dispute the debt within thirty days.”  In the Wilson case, the demand letter included language like “immediate collection” and “we shall afford you the opportunity to pay this bill immediately and avoid further action against you”, but also included the required validation notice in the last paragraph.  In Wilson, the court found that this language in the body of the letter did not contradict the validation statement.

 

In Wilson the court stated that “a validation notice ‘is overshadowing or contradictory if it would make the least sophisticated consumer uncertain as to her rights’” and that “a collection letter ‘is deceptive when it can be reasonably read to have two or more different meanings, one of which is inaccurate.’”  Wilson, 225 F3d at 354 (quoting Russell v. Equifax A.R.S., 74 F.3d 30, 35 (2d Cir. 1996)).  In Graziano the court stated that “the juxtaposition of two inconsistent statements…rendered the statutory notice invalid under section 1692g [of the FDCPA].”  Considering the above mentioned case law coupled with the fact that the words “please call” and the office’s phone number were printed in bold, and in some places in a larger font, while the instructions to write to office were not, the court came to its conclusion that the letter could be misleading to the least sophisticated debtor.  Specifically, the court ruled that “the Collection Letter was deceptive because ‘it can reasonably read to have two or more different meanings, one of which is inaccurate,’” as well as that “the Validation Notice was overshadowed and contradicted because the ‘least sophisticated debtor’ would be ‘uncertain as to her rights’” and that “it appears more likely that the ‘least sophisticated debtor’ would take the easier—but legally ineffective—alternative of making a toll-free telephone call to dispute the debt instead of going to the trouble of drafting and then mailing a written dispute.”

 

The Full Text of the Court Opinion May Be Found At:

http://www.ca3.uscourts.gov/opinarch/121846p.pdf

 

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Indiana Courts Given Discretion in Garnishment Orders

March 18, 2013 in Indiana Courts, Post Judgment Execution

On February 14, 2013, the Indiana Court of Appeals in American Acceptance Co., LLC v. Melissa Willis found that an order of garnishment was within the trial court’s discretion and the court had the ability to order or deny the garnishment based upon that discretion.

In 2008 American Acceptance received a default Judgment against Melissa Willis.  Later, in 2010 American Acceptance filed for a wage garnishment against the personal earnings of Willis.  Ms. Willis’s employer responded to the interrogatories produced and stated that Willis was employed and that she made a weekly salary of $724.38.

Ms. Willis appeared at the proceeding supplemental hearing and testified that she worked on commission, and the most she had received since being switched to an all commission income was $1,200.00 for a two week period.  Ms. Willis also testified that she was the only provider to her children as her husband is not working and is awaiting trial on felony charges.  She also stated that she had posted a $25,000.00 bond for her husband’s release and that American Acceptance could be paid out of the bond once his trial was complete.

After hearing her testimony, the trial court denied the order of garnishment finding that Ms. Willis did “not have substantial income to allow for a wage garnishment order.”  The trial court also ordered that the bond be held and not released in Mr. Willis’s criminal trial until a further hearing could be held in this matter.

On Appeal, American Acceptance argued that since Willis had income which was subject to garnishment, the trial court was required to issue the order of garnishment.  However, the Court of Appeals found that the trial court has broad discretion in conducting proceedings supplemental and that the Indiana Code does not mandate the order of garnishment.  The Court cited I.C. § 34-55-8-7(a) which provides that a trial court “may order” garnishment of the debtor’s income to be applied to satisfy the judgment.  The statute provides that a trial court “may order” a garnishment and thus is not a mandate and provides discretion to the trial court as to whether or not to enter the order.

Allowing a trial court to have discretion to enter the order of garnishment in Indiana is very different than the garnishment proceedings in Ohio and Kentucky which provide that the court “shall” enter the order and do not allow the trial court to use its discretion in the matter  (See Ohio Revised Code § 2716.041 and Kentucky Revised Statutes § 425.501).  This allows for equal application of the law to all debtors under the formulas enacted in the statutes.

 

The Full Text of the Indiana Court of Appeals Opinion May Be Found At:

http://www.in.gov/judiciary/opinions/pdf/02141301mpb.pdf

 

Many thanks to Erin Richmond for her contributions to this article.  Erin is a paralegal with Slovin & Associates Co., L.P.A. 

Medical Charges Presumed Reasonable and Challenges Must Be Substantiated

March 7, 2013 in Medical and Healthcare

On February 11, 2013, in the Court of Appeals of Ohio, Third Appellate District, Hardin County, judgment was affirmed in Riverside Methodist Hospital, Plaintiff-Appellee, (“Riverside”) v. Stephanie S. Phillips, Defendant-Appellant, (“Phillips”) Case No. 6-12-14 finding that summary judgment for Riverside was appropriate even without the medical bill being introduced into evidence and the Defendant’s claims of unreasonable charges were unsupported.

On September 2, 2011, Riverside filed a collection action against Phillips.  For privacy reasons, Riverside did not attach an itemization of the charges to the complaint but stated to the court that it would provide at the court’s request.  In response, Phillips filed an answer disputing that the medical and hospital charges were reasonable or necessary.  Riverside subsequently filed a motion for summary judgment contending that there was no issue of fact that Riverside rendered the medical and hospital services to Phillips and that her account was due and owing. In her memorandum contra to Riverside’s motion, Phillips stated that there was an issue of fact as to whether her insurance provider was responsible for the charges and whether the charges were reasonable and necessary.  The only evidence she submitted addressed the issue of liability for payment (Phillips or Aetna), not reasonableness of the charges. Despite the memorandum, the court granted Riverside’s motion for summary judgment.

Phillips then filed an appeal stating that the trial court erred in granting the judgment because there was an issue of fact as to the reasonableness and necessity of Riverside’s charges.  She claims that Riverside failed to provide an itemization when in fact, in its complaint, Riverside offered to provide an itemization. Riverside contended that simply because the trial court did not request a copy of the itemization does not mitigate the fact that the bill itself is sufficient evidence for reasonableness. In addition, in discovery, Phillips admitted she received a copy of the bill.

Even though the reasonable value of medical services is a question of fact, “[a] medical provider may be entitled to a presumption that its customary fees are reasonable.” St. Vincent Med. Ctr. v. Sader, 100 Ohio App.3d 379, 383 (6th

Dist.1995). In personal-injury actions, the Supreme Court of Ohio has said that“[b]oth the original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of charges rendered for medical and hospital care.” Robinson v. Bates, 112 Ohio St.3d 17, 2006-Ohio Case No. 6-12-14, 6263, ¶ 17

While Riverside did not submit the medical bill into evidence, Riverside presented other evidence by way of its employees’ affidavits to corroborate the amount of the charges contained in the bill sent to Phillips.  The court further found that despite her arguments on appeal, Phillips admitted that she did not compare the charges contained in Riverside’s bill to those of other hospitals nor did she demonstrate that Riverside customarily engaged in a practice of accepting an amount less than the one originally billed. Phillips’ general assertions without evidence tying that practice to the facts and circumstances of the case were insufficient to create a genuine issue of material fact to avoid summary judgment.

Therefore, the Court of Appeals affirmed the judgment of the trial court.

 

The full text of the opinion may be found at:

http://www.sconet.state.oh.us/rod/docs/pdf/3/2013/2013-ohio-423.pdf

 

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Ohio Legacy Trust Act

March 1, 2013 in Ohio Courts, Post Judgment Execution

On December 12, 2012, Ohio Governor Kasich, signed into law House Bill 479, the Ohio Asset Management Modernization Act, which enacts the Ohio Legacy Trust Act and will take effect on March 27, 2013.   The Act will increase the residential real property exemption to $125,000.00.  This same exemption was only recently increased just a few short short years ago.  In 2008, Senate Bill 281 increased the exemption from $5,000 to $20,200.  The bill also provided for automatic annual adjustments based upon the Consumer Price Index.  However, the legislature, has now increased the exemption to $125,000.00.

Revised Code Section 2329.66 will be amended to state that every person who is domiciled in this state may hold property exempt from execution, garnishment, attachment, or sale to satisfy judgment or order as follows:  (b)   In the case of all other judgments and orders, the person’s interest, not to exceed one hundred twenty-five thousand dollars (revised from $20,200), in one parcel or item of real or personal property that the person or a dependent of the person uses as a residence.

This increase will make it very difficult for judgment creditor’s to recover funds through judgment liens or other encumbrances upon real estate.   Creditor’s in Ohio will have to look to other means to obtain payment of their lawfully entered judgments.

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

Credit Relief From Settled Medical Debt

February 21, 2013 in Credit Reporting, Medical and Healthcare

Democratic Oregon Senator Jeff Merkley reintroduced the Medical Debt Responsibilities Act as Senate Bill 160 in January of this year.  This bill was previously introduced last year, but died in the Senate Banking Committee. Senator Merkley is joined by Senators Dick Durbin (D-IL), Chuck Schumer (D-NY), Tom Harkin (D-IA), Sherrod Brown (D-OH), Robert Menendez (D-NJ), and Richard Blumenthal (D-CN) in his introduction of the bill.  So far the bill has been read twice and referred to the Committee on Banking, Housing and Urban Affairs.

The Medical Debt Responsibilities Act basically requires any medical debt that has been paid in full, collected or settled to be expunged from the consumer’s credit report within 45 days of settling the account.  The Senators have reasoned that medical debt is unplanned debt that has debatable significance in calculating a debtor’s reliability for repaying deliberate debts.  The bill states that “Americans do not choose when accidents happen or when illness strikes.”  The Senators are making the argument that due to the involvement of insurance companies and the complex process of medical billing the consumer’s credit rating is often damaged before the consumer even becomes aware that they have a delinquent medical debt.  In Senator Merkley’s statement about the bill he declared that “Oregonians shouldn’t have to pay more on their mortgage or their credit card simply because they had the bad luck to need medical care. Unforeseen accident or illness can happen to any one of us.  We can’t change that fact, but we can change the law so that responsible working families aren’t hit with unfair credit reports for years after medical debt has been paid off.”

This piece of proposed legislation should not be misconstrued as a law that lets Americans off the hook for their medical debts.  If passed, the Medical Debt Responsibilities Act will not remove all medical debt from a person’s credit history and it does not excuse non payment of medical bills.  This bill simply provides relief to those who have taken responsibility for their debt and have fully settled their accounts.

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

FDCPA Claim Barred by res judicata and Lack of Standing

February 7, 2013 in Civil Procedure, Credit Cards, FDCPA, Kentucky Courts

On December 20, 2012, in the case of Dionte Tyler, v. DH Capital Management, Inc., Case No. 3:12-CV-00129-CRS the United States District Court, for the Western District of Kentucky, dismissed the Plaintiff’s complaint for damages under the Fair Debt Collection Practices Act (“FDCPA”) finding that the claims were barred by res judicata under Civil Rule 13 and that the Plaintiff did not have standing to sue due to his bankruptcy filing.

In his complaint, the Plaintiff (“Tyler”) alleged that DH Capital Management (“DHC”) violated the FDCPA and also alleged usury under KRS 360.020.  Tyler owed a credit card debt to DHC.   DHC filed a complaint for collection of that debt on March 23, 2011.  On June 28, 2011, Tyler filed for bankruptcy and received discharge from his debts.  However, in his original bankruptcy filing he neglected to list DHC as a creditor.  On October 12, 2011, Tyler was served with process regarding the debt owed.  Shortly thereafter, DHC became aware of Tyler’s bankruptcy status and immediately filed a notice to dismiss which was granted. In the interim, Tyler filed an answer to the collection action, but did not dispute the debt in that answer.  The answer also did not mention the filing of the bankruptcy action nor did it assert a counterclaim.

In March, 2012, Tyler filed a complaint against DHC alleging that (1) the interest rate charged in DHC’s action was usurious at 21% violating Kentucky’s usury laws which cap interest at 19% KRS §§ 360.010, 360.020; and (2) and that DHC violated FDCPA §§ 1692(f)(1), 1692(e)(5), 1962(e)(2)(A), by attempting to collect an usurious interest amount and by attempting to collect interest on a debt prior to purchasing the debt.  In response, DHC filed a motion to dismiss claiming that Tyler’s claims were barred by res judicata and that Tyler lacked standing to bring the claims.

The Court granted DHC’s motion and dismissed Tyler’s complaint finding that it was barred both by Civil Rule 13 and a lack of standing.  The Court found that Tyler’s claims were procedurally barred by res judicata in that they were not asserted as compulsory counterclaims in his answer to DHC’s collection action.  The Sixth Circuit had previously held that the failure to plead a compulsory counterclaim under Federal Rule of Civil Procedure 13 bars the claim under res judicata.  Sanders v. First Nat. Bank & Trust Co., 936 F.2d 273, 277 (6th Cir. 1991).  The Court found the claims Tyler raised in his FDCPA action met the “logical relationship test” employed by the 6th Circuit to determine if a compulsory counterclaim was required.  The Court noted that, if a debtor alleges that a creditor “wrongfully took action” to collect a debt in a prior legal preceding, then the elements of the “logical relationship test” are satisfied for the purposes of res judicata claim preclusion.

The Court further found that Tyler lacked standing because the bankruptcy trustee would have been the proper plaintiff in this case.  DHC filed its complaint March 23, 2011, BEFORE Tyler filed his bankruptcy petition.  Therefore, Tyler’s claims are directly derived from DHC’s debt collection action and as such are property of the bankruptcy estate.  Under 11 U.S.C § 521 and the Federal Rules of Bankruptcy Procedure,  Tyler had a duty to amend his financial statement to include “all suits and administrative proceedings” which the debtor is or was a part within one year preceding the filing of the bankruptcy case.  Fed. R. Bankr. P. §§ 1007(b), 9009; Official Bankruptcy Form 7.  The Court also noted that the 6th Circuit has, “concluded that judicial estoppel may apply in bankruptcy to bar a debtor from pursuing a cause of action for his own benefit after the debtor intentionally failed to disclose the cause of action, which was properly part of the bankruptcy estate.”  In re Simmerman, 463 B.R. 47, 56 (Bankr. S.D. Ohio 2011).

Finding Tyler’s claims both barred by res judicata and a lack of standing, the Court dismissed his FDCPA complaint.

The Full Text of The Opinion May Be Found At:

http://scholar.google.com/scholar_case?case=10505498705118593915&hl=en&as_sdt=2,36

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

 

 

Court Lacks Jurisdiction if Service is Not Perfected Within One Year

February 1, 2013 in Civil Procedure, Ohio Courts

Court Lacks Jurisdiction if Service is Not Perfected Within One Year

On December 14, 2012, the Ohio Seventh District Court of Appeals found that a judgment entered by the trial court was void because service was not perfected within one year of the filing of the complaint and the trial court lacked jurisdiction to take any action after that point.

Appellee Joseph Didomenico filed a breach of contract complaint against both Appellants John Valentino and J&V Roofing and Home Improvements, Inc.  What began as a breach of contract complaint was later appealed because the appellants claimed that Mr. Didomenico failed to perfect service of process on the appellants within one year as required by Civ. R. 3(A).  The Mahoning County Area Court No. 4 initially dismissed the complaint due to the plaintiff’s failure to appear and prosecute the case, but reopened the case in 2009 so as to allow Mr. DiDomenico an additional 30 days to effect service.  Mr. DiDomenico missed the deadline but did serve the complaint on the defendants two months later and thereafter a trial ensued.  Judgment was granted by the trial court if favor of Mr. DiDomenico.

Revised Code 2305.17 and Civ. R. 3(A) govern the commencement of a civil action.  R.C. 2305.17 states :  “An action is commenced… by filing a petition in the office of the clerk of the proper court together with a praecipe demanding that summons issue or an affidavit for service by publication, if service is obtained within one year.”  Civ. R. 3(A) states:  “A civil action is commenced by filing a complaint with the court, if service is obtained within one year from such filing upon a named defendant.”  Because the appellee did not perfect service of process, the appellants claimed the court had no jurisdiction to enter a judgment against them.

Absent proper service of process on a defendant, a trial court lacks jurisdiction to enter a judgment against that defendant, and if the court nevertheless renders a judgment, the judgment is a nullity and is void ab initio.  The Court stated that if service is not perfected in a year, the trial court lacks jurisdiction to continue to prosecute the case, unless service of process is waived.   Further, the court upheld the defense even after the commencement of trial, with the defendant’s participation, finding that once the defense is raised a party’s active participation in the litigation does not waive the defense.

The Court of Appeals therefore vacated the final judgment of the trial court and dismissed the complaint on the grounds that service of process was not perfected within one year as required by R.C. 2305.17  and Civ. R. 3(A).

The Full Text of the Opinion May be Found at:

http://supremecourt.ohio.gov/rod/docs/pdf/7/2012/2012-ohio-5992.pdf

 

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

 

Customer Service or Settlement Agreement?

January 25, 2013 in Construction, Creditors Rights, Indiana Courts, Uncategorized

Customer Service or Settlement Agreement?

In December of 2012, the Indiana Court of Appeals made an important decision regarding settlement agreements.  The appeals court reversed the decision made by the small claims division of the Allen Superior Court in the case of Vance v. Francisco Lozano, et al., finding that a compromise on a dispute can be considered an enforceable settlement agreement even if the claim is meritless.

The events that led up to the dispute began in May of 2009 when David Vance hired Rock Solid Concrete Inc. to remove and replace his driveway, sidewalks and drive approach at his home in Fort Wayne, Indiana.  The work was completed in July of 2009 and Rock Solid informed Vance of the proper ways to care for his new drive and that fresh concrete could be damaged by road salt.  In December of 2010, Vance noticed some pitting and scaling in his drive.  Both parties agreed to have an inspection done on the drive in order to determine the cause of the damage.  The third party inspection was done by Erie Haven, who came to the conclusion that the damage was cause by road salt that made its way onto the drive via the snow melting away from vehicles in the drive.

Erie Haven reached his conclusion in March of 2011 and recommended that Vance’s driveway be power washed and resealed.  As a solution, Rock Solid offered to complete this service for Vance, but Vance was not satisfied.  On June 7, 2011, Rock Solid offered to replace Vance’s drive way for no additional cost and gave a hopeful time frame for the end of August 2011.  When the work was not completed by this time frame, Vance unsuccessfully attempted to contact Rock Solid multiple times.  With no response regarding a tentative date for completion of his new drive, Vance filed suit against Rock Solid for breach of contract.

A trial was held for Vance’s claim in the small-claims division of Allen Superior Court.  This court found that Rock Solid made a goodwill gesture by agreeing to replace Vance’s drive, but did not breach a contractual agreement by not performing the task.  However, the Indiana Court of Appeals disagreed with this ruling and reversed this decision.  The appeals court reasoned that any attempt to compromise on a dispute can be considered an enforceable settlement agreement, regardless of whether or not a merited claim existed, as long as the claim was made fairly and in good faith. The Appeals Court found that Vance acted fairly and in good faith when making his claim and that Rock Solid offered to replace Vance’s drive in order to avoid litigation; therefore, the court found that an enforceable settlement agreement existed between the parties and reversed the findings of the small claims court.

The Full Text of the Court Opinion May Be Found Here:

http://www.in.gov/judiciary/opinions/pdf/12101202nhv.pdf

Many thanks to Brittany Page for her contributions to this article.  Brittany is a paralegal with Slovin & Associates Co., L.P.A. 

Banks Must Determine if Funds are Exempt From Garnishment

January 18, 2013 in Financial Institutions, Ohio Courts, Post Judgment Execution

On December 7, 2012, the Ohio Sixth District Court of Appeals sustained the judgment of the trial court in the case of Tillimon v. Wheeler, et al., finding that a bank was not in contempt of court for withholding funds which it deemed to be exempt from garnishment.

Duane Tillmon, the Appellant, obtained a judgment against Anthony Wheeler and subsequently filed for a garnishment of any funds Mr. Wheeler held with Fifth Third Bank.   Mr. Wheeler had an account with his wife at Fifth Third Bank. In responding to the garnishment Fifth Third Bank deposited $14.79 with the court, despite the fact that over $900.00 was being held in the account.  Fifth Third refused to secure the remaining funds stating that it had determined the remaining money put into the account was Mrs. Wheelers Social Security, and was not subject to garnishment. The trial court upheld this decision and found that Fifth Third Bank acted properly.

Mr. Tillmon appealed the decision stating “The trial court committed reversible error in not enforcing the nonwage garnishment of the judgment debtor’s joint bank account because the judgment debtor had unrestricted access to the account and therefore the money in the account was not exempt from garnishment.”

Federal law states that certain federal benefit payments, including Social Security benefits, are protected from garnishment. 42 U.S.C. 407(a), Daugherty v.Central Trust Co., 28 Ohio St.3d 441, 443, 504 N.E.2d 1100 (1986). Federal law requires financial institutions that are served with a garnishment order to first examine the order to ascertain whether a notice of right to garnish federal benefits is attached. 31 C.F.R. 212.4.   If a notice is not attached, the financial institution is required to review the prior two months of the account to determine if federal benefit payments were deposited during that time.  31 C.F.R. 212.5(b).  If federal benefit payments have been deposited during that period, the financial institution is directed to calculate the protected amount and ensure that the account holder has full and customary access to those funds.  31 C.F.R. 212.6.  These funds are to be “conclusively considered to be exempt from garnishment under law.” 31 C.F.R. 212.6(c). Any remaining funds are then handled by the standard garnishment procedures.  31 C.F.R. 212.6(d).

The Court of Appeals therefore, upheld the ruling of the District Court and agreed that Fifth Third Bank properly withheld the funds and that the bank account was exempt from garnishment.

 

The Full Text of the Opinion May be Found at:

http://www.supremecourt.ohio.gov/rod/docs/pdf/6/2012/2012-ohio-5804.pdf

 

Many thanks to Erin Richmond for her contributions to this article.  Erin is a paralegal with Slovin & Associates Co., L.P.A. 

When a Patient is Incapacitated, Who Signs the Admission and Financial Forms?

January 11, 2013 in Medical and Healthcare, Ohio Courts

In December 2012, the Ninth District Court of Appeals reversed and remanded the judgment of the Lorain County Court of Common Pleas in the case of Koch v. Keystone Point Health and Rehabilitation, et al., finding that an arbitration agreement signed by an unauthorized person is not binding.

In May, 2009, Richard Kissinger appointed his son James Kissinger as his attorney in fact and his health care power of attorney.  In May, 2010, Richard was taken by ambulance to appellee Keystone Pointe Health and Rehabilitation nursing facility. His son’s wife, Carla Kissinger, met him there.  Upon his arrival, Richard was confused and unable to sign the admission documents.  Carla signed the admission agreement as well as a separate arbitration agreement.  The arbitration agreement stated that any disputes arising from nonpayment may be settled in court or, if mutually agreed upon by the parties, by binding arbitration.  All other disputes including “breach of contract …, negligence, medical malpractice, tort, breach of statutory duty, resident’s rights and any departures from accepted standards of care” must by settled by binding arbitration.

During his stay at Keystone, Richard also received treatment at a local hospital but after treatment was always returned to Keystone.  Upon return from one of these treatments, James, his power of attorney, signed a re-admission agreement on behalf of Richard.

In July, 2010, Richard suffered a fall at Keystone and died November 14, 2012.  The administrator of the estate filed a complaint for wrongful death and violation of the nursing home patient’s bill of rights.  Instead of filing an answer, Keystone moved to stay the proceedings and compel arbitration.  The trial court granted the motion.

Appellant argued that the trial court erred in granting the motion based on the fact that the contract, which required the arbitration, was not executed by Richard Kissinger or any of his appointees.  Keystone argued that Carla Kissinger, Richard’s daughter-in-law, acted with authority when she signed the initial admission and arbitration agreement.  Further, they argue that James ratified this authority when he signed a re-admission agreement thereby renewing any prior agreement.

In Master Consolidated Corp. v. BankOhio Natl. Bank, The Ohio Supreme Court found that “in order for a principal to be bound by the acts of his agent under the theory of apparent agency, evidence must affirmatively show: (1) that the principal held the agent out to the public as possessing sufficient authority to embrace the particular act in question …” Master Consolidated Corp. v. BankOhio Natl. Bank, 61 Ohio St.3d 570 (1991), syllabus.

In this particular case, Richard had not appointed Carla to any such fiduciary role.    In addition, he was confused and unable to indicate to the workers at Keystone that Carla was not his agent nor was he able to hold her “out to the public” as having authority to act on his behalf.

Keystone argued that because James signed a re-admission agreement he had agreed to the arbitration agreement.  The Court, however, found that the language of the re-admission agreement stated that a copy of the original agreement was attached to the re-admission agreement which was not the case.  Further, the re-admission agreement was undated.

The Court of Appeals found that no contract existed which bound the parties to arbitration.   In addition, they found that there was no evidence that James was even aware of a prior agreement or its contents.  The Court therefore reversed the judgment of the Lorain County Court of Common Pleas.

The entire opinion of the Court is available and may be found here:

http://www.supremecourt.ohio.gov/rod/docs/pdf/9/2012/2012-ohio-5817.pdf

Many thanks to Kim Goldwasser for her contributions to this article.  Kim is a paralegal with Slovin & Associates Co., L.P.A. 

Ohio Super Lawyers

December 17, 2012 in News

Slovin & Associates is pleased to announce that Randy Slovin and Brad Council have been included in the Thomson Reuters 2013 Ohio Super Lawyers list.  Randy was named a 2013 Ohio Super Lawyer and Brad was named a 2013 Rising Star.

Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.  A Rising Star includes those who are 40 years old or younger, or who have been practicing for 10 years or less.  No more than 5% of attorney’s in a state are named as Super Lawyers and no more than 2.5% are named Rising Stars.

 

CFBP Issues “Snapshot” of Consumer Complaints Recieved

October 12, 2012 in Consumer Financial Protection Bureau (CFPB)

The CFPB issued a “snapshot” of the consumer complaints that it has received from July 2011 to September 2012.  The snapshot includes complaints received regarding credit cards, mortgages, bank accounts, and private student loans.  Of the almost 20,000 credit card complaints received, the median relief given to the consumer to resolve the compliant was $126.  The most common amount needed for resolution was $25.

A copy of the CFPB can be found here:

http://files.consumerfinance.gov/f/201210_cfpb_consumer_response_september-30-snapshot.pdf

 

Pay Me When? – A look at “pay-when-paid” and “pay-if-paid” construction contracts in Ohio

September 14, 2012 in Construction, Ohio Courts

Pay Me When?

A look at “pay-when-paid” and “pay-if-paid” construction contracts in Ohio through

EMH&T v. Triad Architects, 196Ohio App.3d 784, 2011-Ohio-4979

 

The Tenth Appellate District for the State of Ohio recently entered a decision in the case of Evans, Mechwart, Hambleton & Tilton, Inc., v. Triad Architects, Ltd., which reviews Ohio’s interpretation of “pay-when-paid” and “pay-if-paid” provisions found in most agreements between a general contractor and subcontractor.  The court also reviewed the AIA Document C141-1997 Standard Form of Agreement Between Architect and Consultant to determine if the document created a “pay-when-paid” or “pay-if-paid” situation.

In the case, the owner of a development hired Triad Architects, Ltd. (“Triad”) to provide architectural and engineering plans.  Triad then hired Evans, Mechwart, Hambleton & Tilton, Inc. (“EMH&T”) to supply civil-engineering services on the project.  Triad and EMH&T also entered into a similar agreement on another development project being handled by Triad for the same owner.  The parties used the standard AIA agreements which provided:

§12.5 Payments to the Consultant shall be made promptly after the Architect is paid by the Owner under the Prime Agreement.  The Architect shall exert reasonable and diligent efforts to collect prompt payment from the Owner.  The Architect shall pay the Consultant in proportion to amounts received from the Owner which are attributable to the Consultant’s services rendered.

and

§13.4.3*** The Consultant shall be paid for their services under this Agreement within ten (10) working days after receipt by the Architect from the Owner of payment for services performed by the Consultant on behalf of their Part of the Project.

 

Ultimately the owner canceled the project and did not pay Triad who in turn, did not pay EMH&T.  The parties argue whether the provisions above require Triad to pay EMH&T only if paid by the owner or if Triad’s duty to pay remains regardless of its receipt of payment from the owner.  This argument embodies the difference between the “pay-when-paid” and “pay-if-paid” provisions.

A typical “pay-when-paid” clause might read: “Contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.”  The majority of courts, includingOhio, hold that this type of provision means the contactor’s duty to pay is suspended for a reasonable time to allow the contractor to receive payment from the owner.  The duty to pay is only suspended and the risk of an owner’s nonpayment remains with the general contractor and is not passed along to the subcontractor.  In a “pay-when-paid” agreement, the owner’s nonpayment does not excuse the contractor from performing its duties under its agreement with the subcontractor.

A “pay-if-paid” clause shifts the risk of the owner’s nonpayment to the subcontractor.  A typical “pay-if-paid” provision might read, “Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor, the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes this risk”

For a provision to qualify as a “pay-if-paid” provision it must expressly state: (1) payment to the contractor is a condition precedent to payment to the subcontractor (2) the subcontractor is to bear the risk of the owner’s nonpayment, or (3) the subcontract is to be paid exclusively out of a fund the sole source of which is the owner’s payment to the subcontractor.   The courts require the payment provision to be unambiguous and unequivocally show intent to create a “pay-if-paid” clause.  A condition precedent is disfavored in the law, and if there is any ambiguity in the provision the courts will interpret the provision as a “pay-when-paid” clause not a “pay-if-paid” clause.

Further, AIA commentary, while not binding upon the courts, also favors this interpretation.  The Guide for Amendments cautions that “a pay-if-paid clause must clearly establish the intent of the parties to shift the credit risk of the Owner’s insolvency and should include the words ‘condition precedent.’”

In the case at hand the court determined that the language was not specific enough to create a condition precedent and therefore the language created a “pay-when-paid” provision and Triad’s duty to pay EMH&T was not extinguished by the owner’s nonpayment.

 

The full text of the opinion may be found at:  https://www.sconet.state.oh.us/rod/docs/pdf/10/2011/2011-ohio-4979.pdf

Back to School – Randy Teaching Again at UC Law

August 16, 2012 in News

Randy Slovin is preparing for his 2nd year as an adjunct professor at the University of Cincinnati College of Law.  He is again teaching the course for the fall 2012 semester titled “Debtor-Creditor Law”.  Some of the topics included in the course are fraudulent conveyances, common law claims of debtors against creditors such as invasion of privacy, the federal Fair Debt Collection Practices Act and the Fair Credit Reporting Act, and post-judgment remedies of creditors.

Amendments to the Ohio Rules of Civil Procedure

August 13, 2012 in Ohio Courts

Amendments to the Ohio Rules of Civil Procedure

The Supreme Court has recently adopted changes to the Ohio Rules of Civil Procedure which went into effect on July 1, 2012.  This includes changes to the rules governing methods of service of process, methods of services to litigants during litigation, and where a person may be subpoenaed for deposition.

Rule 4.1 now permit clerks of courts to issue service of process by commercial carrier services such as UPS or FedEx utilizing any form of delivery requiring a signed receipt as an alternative to US certified or express mail.  The remaining sections of Rule 4 were also updated to allow for commercial carrier service on parties outside of the state and in foreign counties.  However, if service is made in a foreign county who is a signatory to the Hague Convention, the provisions of the Convention supersede the other methods of service listed in Civil Rule 4.

Rule 5 was amended to permit service of documents, other than the original complaint, by electronic means including facsimile and email.  Rule 11 was amended to require all parties to provide a facsimile number and email address if available.  Rule 5 now allows for service of motions and other documents (other than the original complaint) by these two additional means. The rule also indicates that service by email or facsimile is complete upon transmission unless the transmitting party learns that it did not reach the person served.

Rule 45 was amended to state that a person may no longer be required by subpoena to give a deposition anywhere in the state.  The rule was amended to require the deposition to occur in the county where the deponent resides, is employed, or transacts business in person.  An alternate “convenient” location may be used by court order.  A person may still be compelled by subpoena to appear at a trial or hearing anywhere in the State.

 

To view the amendments in their entirety, go to:  http://www.sconet.state.oh.us/LegalResources/Rules/civil/CivilProcedure.pdf

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

No Private Right of Action for Medical Information Disclosure, OhioHealth Corp. v. Ryan, 2012-Ohio-60.

August 6, 2012 in Medical and Healthcare, Ohio Courts

No Private Right of Action for Medical Information Disclosure, OhioHealth Corp. v. Ryan, 2012-Ohio-60.

On January 10, 2012,  the Tenth District Court of Appeals for the State of Ohio upheld the decision of the trial court granting summary judgment for OhioHealth (plaintiff-appellee) on the claim upon account, and a OhioHealth’s motion to dismiss the appellants counterclaim that OhioHealth created false identifiable health information and disclosed it to a third party, damaging the appellant.

OhioHealth filed an action to recover unpaid medical services from James M. Ryan, Jr. for an amount of $1,337.07.  Ryan filed a counterclaim alleging that OhioHealth created false health information by stating that Ryan was uninsured and then disclosed this information to a third party, seemingly damaging Ryan.  OhioHealth filed a motion to dismiss the counterclaim arguing that Ryan can’t bring a private cause of action under the Health Insurance  Portability and Accountability Act of 1996 (HIPAA).  Even if there were a private right of action the “privacy rule” permits OhioHealth to use and disclose protected health information for purposes of treatment, payment and health care operation activities, as it did here.

In response, Ryan cited Biddle v. Warren Gen. Hosp., 86 Ohio St. 3d 395, 1999-Ohio-115, arguing that an independent tort exists for unauthorized disclosure of information to a 3rd party where that information was learned in a confidential relationship.  OhioHealth argues that HIPAA governs “covered entities” like itself and preempts any state law.

The counterclaim failed because HIPAA allows for the release of medical information for payment.  HIPAA governs the confidentiality of medical records and regulates how “covered entities” can use or disclose “individually identifiable health (medical) information (in whatever form) concerning and individual.”  HIPAA has set rules governing the disclosure of individually identifiable health information.

The relevant provision of the “privacy rule” prohibits ‘covered entities’ (generally, health care providers who transmit health information in electronic form, see 45 C.F.R. § 160.103) from using or disclosing an individual’s ‘protected health information’ except where there is a patient consent or the use or disclosure is used for “treatment, payment, or health care operations[.]”

If Biddle allows a claim for an independent tort against a health care provider for the unauthorized, unprivileged disclosure to a third party of nonpublic medical information learned via a physician-patient relationship involving account information (rather than medical records, as with the case in Biddle), appellant’s claim still fails.  First the disclosure here was authorized.  HIPAA permits the disclosure of individually identifiable health information when it is used to recover payment.  Second, state laws contrary to HIPAA are trumped by Federal requirements, unless they meet an exception, which are non-existent in this case.  Most significantly, HIPAA doesn’t allow a private cause of action inOhio law.  Even if a cause of action did exist under HIPAA, the appellant himself lacks the authority to bring it to court.

To view this case in its entirety visit: http://www.supremecourt.ohio.gov/rod/docs/pdf/10/2012/2012-ohio-60.pdf

 

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Stacey Zeschin for her contributions to this article.  Stacey is a paralegal with Slovin & Associates Co., L.P.A. 


Franken introduces “End Debt Collection Abuse Act” (S. 3350)

July 27, 2012 in Creditors Rights, FDCPA

On June 27, 2012 Senator Al Franken (D-Minn.) re-introduced the “End Debt Collection Abuse Act” (S. 3350) in hopes of creating a piece of legislation that will ultimately help consumers avoid the distasteful tactics of some debt collection companies and to provide more information to consumers regarding how to get help for their debts. The Senator first introduced this bill in September 2010 during a previous session of Congress; however, it was not enacted at the time. The End Debt Collector Abuse Act of 2012 has been referred to the Committee on Banking, Housing, and Urban Development.

The End Debt Collector Abuse Act hopes to amend the Fair Debt Collection Practices Act (FDCPA). The primary purpose of the FDCPA is to eliminate abusive practices in the collection of consumer debts, promote fair debt collection, and provide a way for consumers to not only dispute their debts, but to also receive validation information in hopes of keeping the information most accurate. This new Senate bill will not only create new provisions for attempting to collect debts, primarily medical debts, but it would also create a new structure to help consumers find relief from their debts.

The End Debt Collector Abuse Act of 2012 creates:

  • Enhanced validation notices:
    • An amendment to the FDCPA would provide for an itemization of the principle, fees, interest, and any other charges that make up the debt, including any other charges added after the date of the last payment made by or on behalf of the consumer on the subject debt.
    • It would also require the name and contact information of the person responsible for handling complaints on behalf of the debt collector to be disclosed.
  • Medical debt provisions:
    • All Medical Providers would automatically become “debt collectors” under the act and subject to the same restrictions as third party collectors.  This strips medical facilities of the normal “original creditor” exemptions from the FDCPA.
    • There would also be a prohibition on medical facility contact. No longer could a debt collector speak to a consumer regarding the debt in a hospital emergency department, labor and delivery, or any department where critical medical services are provided.
    • Tactics that were previously engaged in like the withholding of medical services, threatening to withhold medical services until the debt is paid would not be permissible.
  • Availability of information:
    • Collection companies would be required to disclose the availability of any charity care coverage, financial assistance, discounts based on income eligibility, or public or private insurance coverage that may assist in the payment of all or part of the debt. They would further be required to provide the consumer with information regarding how to apply for the available programs.
  • Dispute investigations and verification:
    • Upon receipt of a disputed debt the debt collector would be required to undertake a thorough investigation and provide the consumer specific responsive information and verification of the debt in a timely manner.
  • Awards and damages:
    • There would be an initial adjustment to account for inflation and then subsequent annual adjustments according to the Consumer Price Index.
  • Warrant for arrest as unfair debt collection practice:
    • A request by a debt collector to a court for the issuance of a warrant for the arrest of the debtor would be seen as unfair debt collection.

 

A complete copy of S. 3350 can be found at:

http://www.govtrack.us/congress/bills/112/s3350/text

 

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Amy Holston for her contributions to this article.  Amy is a paralegal with Slovin & Associates Co., L.P.A. 

Read The Fine Print! – SST Bearing Corp. v. Twin City Fan Co., Ltd., 2012-Ohio-2490

July 13, 2012 in Creditors Rights, Ohio Courts, UCC

On June 8, 2012, The Ohio First District Court of Appeals affirmed the trial court’s decision that Twin City had breached the contract between the parties and agreed with the court’s awarded attorney fees.  The awarding of late fees, however, was reversed since it was not part of the contract and was later “added-on” in the terms and conditions.

TwinCityand SST entered into a contract for the production of bearings. TwinCitysent SST a contract proposal outlining the details of each bearing to be ordered.  The contract was considered a blanket purchase order where the parts would be shipped in installments with separate purchase orders.

The contract language read, “Please formally accept this order subject to Twin City Fan’s terms and conditions per Form No. 1-1113 Rev 6-2007”.  The parties argue whether these terms and conditions were actually sent along with the contract.  The contract included an appendix that stated similar language stating all sales by SST were subject toTwinCity’s terms and conditions on order form 1-1113.  SST salesman, David Lindberg signed the contract.  When he sent the signed contract to Twin city, he included a form with SST’s terms and conditions.  This form stated “seller hereby accepts, with thanks, your offer to purchase the goods described on the reverse side hereof on the terms and condition specified thereon and on the additional terms and conditions specified below”. SST’s terms and conditions specified that any other terms and conditions would have no force or effect.  After a dispute over the product SST commenced legal action.

TwinCityargued that it had a right to cancel the contract at any time, and SST’s recovery was limited to actual costs incurred at the time of termination.  SST’s terms and conditions entitled them to late payment charges and attorney fees.  The court held that since TwinCityacted in bad faith, they were liable for the full contract price for all bearings, late fees, attorney fees, and legal costs. TwinCity appealed, stating the trial court erred in judgment in favor of SST by awarding SST late fees and attorney fees.

Both parties argue that its own respective terms and conditions were a part of the contract and that the other parties’ terms had no effect.  R.C. 1302.10(C) states that “the terms of the particular contract consist of those terms on which the writings of the parties agree”.

The appeal court found that SST’s terms and conditions had not become part of the contract and thus had no legal force or effect, and as a result, the terms and conditions could not be used to support an award of late fees or attorney fees.  However, becauseTwinCityacted in bad faith, the court was justified in awarding attorney fees to SST.  But the court erred in the granting of late fees to SST since such an award was not authorized by the contract.  As a result the appeals court overturned the award of $69,323.46 in late fees to SST.

 

To view the case in its entirety go to:

http://www.supremecourt.ohio.gov/rod/docs/pdf/1/2012/2012-ohio-2490.pdf

 

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Stacey Zeschin for her contributions to this article.  Stacey is a paralegal with Slovin & Associates Co., L.P.A. 

Treble Damages Under The Ohio Consumer Sales Practices Act

July 10, 2012 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts

On June 11, 2012, Ohio’s 12th District Appellate Court affirmed a decision by the Clermont County Court of Common Pleas to not award treble damages in an action brought under the Ohio Consumer Sales Practices Act (CSPA).   In the case of Nelson v. Pieratt, 2012-Ohio-2568, the Nelson’s entered into a contract with Pieratt for construction of a new house.  After moving into the home, the plaintiff’s filed a complaint claiming breach of contract, negligence and violations under the CSPA.  After proceeding to trial the jury found that Pieratt “materially breached the contract” and the Nelsons were awarded $60,000 for the breach of contract. The jury also found in favor of the plaintiffs for violations of the CSPA and awarded monetary damages in the amount of $20,100 for three out of seven of the claims.  Damages for the other four CSPA violations were not awarded.

In upholding the ruling, the 12th District reiterated that not all breaches of consumer sales agreements are violations of the CSPA.  The court required some indicia of an unfair or deceptive practice to be included with the breach for there to be a violation.  Further, the court also concluded that, while the CSPA does not allow judicial discretion in the awarding of treble damages, the awarding of actual economic damages for a violation of the CSPA does not, in and of itself, meet the burden of R.C. 1345.09(B) for an award of treble damages.

The Nelson’s filed a request for treble damages pursuant to R.C. 1345.09(B) which was denied by the trial court.  The trial court denied treble damages for the first four CSPA violations because the Nelson’s were not awarded actual economic damages by the jury for these violations.  The Court also refused to award treble damages for the last three violations because of the Nelson’s failure to meet the requirements of R.C. 1345.09(B) even though they were awarded $20,100 in damages.

Under the Ohio Consumer Sales Practices Act, a claimant may be entitled to treble damages as permitted under R.C. 1345.09(B) if the violation was declared to be deceptive or unconscionable by a regulation promulgated by the Attorney General or anOhiocourt must have previously determined that the action or practice was deceptive or unconscionable.  Therefore the Nelson’s were not entitled to treble damages for the CSPA violations because they failed to show that the actions committed were previously declared deceptive or unconscionable by Attorney General or an Ohio court.

For the full court opinion on this case, go to: http://www.supremecourt.ohio.gov/rod/docs/pdf/12/2012/2012-ohio-2568.pdf

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Sonya Gaines for her contributions to this article.  Sonya is a paralegal with Slovin & Associates Co., L.P.A. 

Garnishment of an Attorney IOLTA Account, Hadassah v. Schwartz, 2011-Ohio-5247

June 29, 2012 in Ohio Courts, Post Judgment Execution

A recent opinion out of the Ohio First District Court of Appeals affirms a trial court’s order determining funds held in an attorney’s IOLTA account may be garnished by a creditor. In Hadassah v. Schwartz, 2011-Ohio-5247, appellant Robert L. Schwartz argued that Hadassah, in bad faith, demanded that he place $150,000 in the custody of his attorney to help further settlement negotiations, but Hadassah instead garnished the funds. Schwartz also argued that the garnishment would deprive him of his right to representation as the funds represented a retainer for ongoing legal services.

The Ohio First District Court of Appeals found that, while his arguments were practical, funds generally are not exempt simply because they are placed with an attorney. Further, Schwartz could not produce a retainer agreement or any other records indicating that his attorney had acquired an ownership interest in the retainer, or that the retainer was non-refundable.

According to the Ohio Rules of Professional Conduct property belonging to a client or a third party is to be kept separate from the attorney’s property.  The placement of Schwartz’s $150,000 into an IOLTA account, instead of an operating account, indicated that Schwartz retained ownership rights over the funds, consequently making it subject to garnishment.

The Court also made clear that attorney retainers do not fall under the list of property exempt from garnishment, found under R.C. 2329.66.  Since garnishments are a statutory procedure, the Court is not in a position to create additional exemptions not fully delineated by the statute.

Additionally, the Court suggested that “[a] client in Schwartz’s position could avoid this result by reaching a representation agreement with the attorney that gives the attorney an ownership interest in some or all of the legal fee upon receipt…”  In the absence of such an agreement, the money placed with his attorney was subject to garnishment.

A full text copy of the opinion is available at: http://www.supremecourt.ohio.gov/rod/docs/pdf/1/2011/2011-ohio-5247.pdf

Slovin & Associates Co., LPA is a regional law firm serving clients in Ohio, Kentucky, and Indiana, which provides legal services to commercial and consumer credit grantors. Our client’s needs include commercial litigation, collection of past due accounts, landlord tenant matters, bankruptcy services, and compliance with and litigation involving federal and state consumer laws.

Many thanks to Amy Holston for her contributions to this article.  Amy is a paralegal with Slovin & Associates Co., L.P.A. 

Major Milestones for Two Exceptional Employees

June 18, 2012 in News

Major Milestones for Two Exceptional Employees

Slovin & Associates is pleased to announce that two employees, Amy and Becky, celebrated major milestones this month with our law firm. Amy, our collection manager, has worked with our firm and its predecessors for 25 years, and Becky, our post-judgment supervisor, for 20 years.

The firm hosted a surprise party for Amy and Becky on June 9 at the Precinct. A number of our firm’s vendors and clients offered their congratulations via emails and letters, many of which were read at the party.

Although our clients are aware of their dedication, excellence and experience throughout their careers, many did not realize that Amy and Becky are also sisters!

Our firm is proud to include their family in ours.

Garnishing Out of State Employer Not An FDCPA Violation says Eastern District of Kentucky

June 12, 2012 in FDCPA

The Eastern District of Kentucky has held that attempting to garnish an out of state employer or bank account is not a violation of the FDCPA as an attempt or threat to take action that cannot be taken.

Wilson v. Asset Acceptance, LLC, Action No. 5:12-cv-66-JMH

Temporary commercial dockets rules extended

May 30, 2012 in News, Ohio Courts

The Ohio Supreme Court has extended the rules governing the pilot program for the commercial docket. Hopefully this will lead to the establishment of a permanent program for courts operating specialized dockets to resolve business-to-business disputes.

Temporary commercial dockets rules extended

Randy returns from 2012 Spring Collection Conference

May 23, 2012 in News

Randy just returned from the 2012 Spring Collection Conference, hosted by the National Association of Retail Collection Attorneys, in San Diego.

The National Association of Retail Collection Attorneys is a trade association dedicated to serving law firms engaged in the business of consumer debt collection. NARCA’s mission is to preserve and protect the integrity and viability of legal collections with professionalism, ethical actions, and service oriented approach.

The NARCA Spring Collection Conference features three days of professional education. Sessions are geared especially for:

Attorneys whose practice includes the legal collection of consumer debt

Collection/Operations Manager Track

Member Clients

Buyers and sellers of consumer debt

In-house Counsel for Credit Grantors, and Debt Buyers.

 

NARCA’s Articles of Incorporation state the following purposes for which the corporation is organized:

  • To further promote the image and function of the legal profession engaged in the collection of consumer debt, creditor rights, creditor representation in bankruptcy and related areas of the laws pertaining to consumer credit.
  • To educate the public and members of the credit and collection industry as to all aspects of the consumer collection industry.
  • To provide an interchange of ideas for the members.
  • To provide meetings, seminars and publications to further the purposes of the Association.
  • To encourage and promote the adoption of legislation in the various states and in the United States favorable to the consumer collection industry, the attorney engaged in retail debt collection and the rights of the credit-granting public.
  • To gather and disseminate information and material relative to consumer credit which may be valuable to the members of the Association and the general public.
  • To elevate the standards and improve the practice and ethics of consumer collection law.
  • To foster among its members a feeling of fraternity and mutual confidence.
  • To encourage, foster and advance professional practices and ethical conduct among its members.

Landlord Tenant Law Presentation

March 8, 2012 in Landlord Tenant Law

Randy Slovin was proud to once again present material on Landlord Tenant Law and current legal trends effecting landlords at yesterday’s Towne University, a seminar conducted by Towne Properties for apartment managers and other residential landlords.

Towne Properties manages and owns part of a portfolio that consists of almost 12,000 apartments, 30,000 condominium and homeowners association units, over 1,500,000 sq. ft. of retail and office space and four recreational properties.   Towne’s mission is to provide the finest rental apartments, condominiums or landominiums to be found anywhere in the Greater Cincinnati, Columbus, Dayton and Lexington locations.  Over the years, Towne has earned the undisputed title of the Region’s Most Honored Developer. Looking to the future, Towne’s Mission is to continue to create, both for itself and its strategic partners, market driven products that make a difference – all well-designed, well-located, well-constructed and well-managed “Great Places to Live, Work, Shop and Play”.

Google Me

February 21, 2012 in News

The Article “Google Me” by Brad A. Council of Slovin & Associates was featured in the February edition of the Hamilton County Law Library Newsletter. The article gives practical advice to young attorneys on how to boost their online profile and internet presence.

“Google Me” – HCLL News, February 2012