225 F.3d 379 (3rd Cir. 2000), 99-3856, Tito Pollice v. Nat'l Tax Funding

Docket Nº:TITO POLLICE; VIOLET POLLICE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; LINDA MANSFIELD, APPELLANTS IN NO. 99-3856
Citation:225 F.3d 379
Case Date:August 29, 2000
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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225 F.3d 379 (3rd Cir. 2000)

TITO POLLICE; VIOLET POLLICE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; LINDA MANSFIELD, APPELLANTS IN NO. 99-3856

V.

NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET RESEARCH CORPORATION, LTD.

TITO POLLICE; VIOLET POLLICE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; LINDA MANSFIELD,

V.

NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET RESEARCH CORPORATION, LTD.

APPELLANTS IN NO. 99-3857

TITO POLLICE; VIOLET POLLICE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; LINDA MANSFIELD, APPELLANTS IN NO. 99-4049

V.

NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET RESEARCH CORPORATION, LTD.

GLADYS HOUCK; MARIE DEMITRAS; BRAGETTE PARKER; MARY WALSH, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; MARY TABB, APPELLANTS IN NO. 99-3858

V.

CAPITAL ASSET RESEARCH CORP., LTD.; NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET HOLDINGS GP INC.

GLADYS HOUCK; MARIE DEMITRAS; BRAGETTE PARKER; MARY WALSH, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; MARY TABB,

V.

CAPITAL ASSET RESEARCH CORP., LTD.; NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET HOLDINGS GP INC. APPELLANTS IN NO. 99-3859

GLADYS HOUCK; MARIE DEMITRAS; BRAGETTE PARKER; MARY WALSH, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED; MARY TABB, APPELLANTS IN NO. 99-3898

V.

CAPITAL ASSET RESEARCH CORP., LTD.; NATIONAL TAX FUNDING, L.P.; CAPITAL ASSET HOLDINGS GP INC.

Nos. 99-3856, 99-3857, 99-4049, 99-3858, 99-3859 and 99-3998

United States Court of Appeals, Third Circuit

August 29, 2000

Argued June 22, 2000

As amended September 7, 2000.

On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. Civ. Nos. 98-00813 and 98-00850) District Judge: Honorable Donald E. Ziegler

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Michael P. Malakoff Rudy A. Fabian (argued) Malakoff Doyle & Finberg, P.C. Suite 200--The Frick Building Pittsburgh, PA 15219 Bernard S. Rubb 434 Oliver Road Sewickley, PA 15143 Attorneys for Appellants and Cross-Appellees Tito Pollice, Violet Pollice and Linda Mansfield, individually and on behalf of all others similarly situated

Donald Driscoll (argued) Laurence Norton Community Justice Project 1705 Allegheny Building 429 Forbes Avenue Pittsburgh, PA 15222 Attorneys for Appellants and Cross-Appellees Gladys Houck, Marie Demitras, Bragette Parker, Mary Walsh and Mary Tabb, on their own behalf and on behalf of all others similarly situated

Robert L. Byer (argued) Terry Budd David M. Aceto Joseph R. Gette Kirkpatrick & Lockhart Llp Henry W. Oliver Building 535 Smithfield Street Pittsburgh, PA 15222 Attorneys for Appellees and Cross-Appellants Capital Asset Research Corp., Ltd., National Tax Funding, L.P. and Capital Asset Holdings GP Inc.

Before: Barry and Greenberg, Circuit Judges, and Oberdorfer,[*] District Judge

OPINION OF THE COURT

Greenberg, Circuit Judge.

These appeals present certified questions arising from two actions, Pollice v. National Tax Funding, L.P. et al. and Houck v. Capital Asset Research Corp., Ltd. et al. , which have been consolidated before the district court for pretrial purposes. The subject matter of both actions concerns the assignment of delinquent municipal tax and utility claims to defendant National Tax Funding, L.P. ("NTF "). We set forth the relevant factual and procedural background below.

I. BACKGROUND

For years, the City of Pittsburgh ("City"), the School District of Pittsburgh ("School District"), and the Pittsburgh Water and Sewer Authority ("PWSA") (collectively, the "government entities") accumulated a backlog of thousands of claims against homeowners who did not fully pay their property taxes or water or sewer bills. In order to eliminate this backlog, the government entities decided to sell the claims and the liens arising therefrom to NTF, which is in the business of purchasing such delinquent claims from municipalities in several states. App. at 135, 514. 1 In September 1996, the City and the School District entered into a Purchase Agreement whereby existing claims and liens for unpaid taxes and sewer charges were assigned to NTF.2 App. at 517. The Purchase Agreement also called for the City and the School District to sell NTF subsequent claims for the years 1996, 1997 and 1998. Under the agreement, the City and the School District retained the right

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to service the claims, and accordingly they entered into a Servicing Agreement with Capital Asset Research Corp., Ltd. ("CARC")3 pursuant to which CARC was to collect the claims for the benefit of NTF. App. at 859. The Servicing Agreement allowed the City and the School District to retain some measure of control over CARC's collection activities; for example, the agreement required CARC to make monthly reports to the City and the School District and it required CARC to offer homeowners "payment plans" having particular terms.

In April 1997, NTF entered into a similar Purchase Agreement with PWSA involving the assignment of unpaid water claims. App. at 886. Like the agreement with the City and the School District, the PWSA Purchase Agreement called for the assignment of not only existing claims but also future claims. Under the agreement, PWSA retained the right to service the claims, and it entered into a Servicing Agreement with CARC similar to the agreement between CARC and the City and School District. App. at 1099.

CARC then set about contacting homeowners in order to collect on the delinquent claims. According to defendants, NTF, through CARC, has endeavored to collect from the homeowners the same interest and penalties on the claims which the government entities collect under applicable local law. See app. at 139, 1141, 1146, 1151, 1196, 1198, 1221-23. Specifically, a City ordinance provides for a twelve percent annual rate of interest on unpaid property taxes, along with a one-half percent per month penalty. App. at 1385. Another ordinance provides for a twelve percent annual rate of interest on claims for unpaid sewer charges assigned by the Allegheny County Sanitary Authority ("ALCOSAN") to the City, along with a one-time five percent penalty. App. at 1128. In addition, a PWSA resolution calls for interest at the rate of one-half percent per month and penalty at the rate of one percent per month on unpaid water and sewer charges. App. at 1119. At approximately the same time as the 1996 assignment, the City amended the ordinance regarding unpaid property taxes so as to permit interest and penalties to be compounded on a monthly basis. See app. at 444, 471-72, 487, 492-93, 502, 506-07.4

In response to CARC's collection efforts, some homeowners entered into payment plans permitting them to pay their debts--together with interest and penalty--over a period of time ranging from six to twenty-four months. Others paid the claims in full immediately.

On April 17, 1998, Gladys Houck and others (the "Houck plaintiffs") filed suit against NTF, CARC and Capital Asset Holdings GP Inc. ("CAH"), the general partner in NFT and CARC, in the Court of Common Pleas of Allegheny County. The action was removed to the district court on May 14, 1998. App. at 49. The complaint, as amended, asserted claims on behalf of homeowners under the United States and Pennsylvania Constitutions, the Pennsylvania Second Class City Treasurer's Sale and Tax Collection Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTP/CPL"), the Pennsylvania Loan Interest Protection Law ("LIPL"), the federal Fair Debt Collection Practices Act ("FDCPA"), and the Pennsylvania Municipal Claims and Tax Liens Law. App. at 107-20. On May 8,

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1998, Tito Pollice and others (the "Pollice plaintiffs") filed an action on behalf of property owners against NTF and CARC in the district court asserting claims under the FDCPA and the federal Truth-in-Lending Act ("TILA"), along with claims for unjust enrichment and fraud. App. at 79-96. The central allegation in both cases, as relevant to these appeals, is that NTF, through CARC, has collected unlawfully high interest and penalties on the assigned claims.5 We will at times refer to the Houck plaintiffs and the Pollice plaintiffs as "homeowners" or "plaintiffs," collectively, even though the Pollice class includes property owners who are not homeowners, and we will at times refer to NTF, CARC and CAH as "defendants," collectively.

On July 20, 1998, the district court consolidated the Pollice and Houck matters for pretrial purposes. Defendants then moved for summary judgment on all claims in both actions, app. at 134-44, while the Houck plaintiffs moved for summary judgment on their FDCPA, UTP/CPL and LIPL claims.6 The district court ruled on the motions in an opinion and order dated July 29, 1999 and entered August 2, 1999. See Pollice v. National Tax Funding, L.P., 59 F. Supp.2d 474 (W.D. Pa. 1999). Relying on the recent decision of the Commonwealth Court in Maierhoffer v. GLS Capital, Inc., 730 A.2d 547 (Pa. Commw. Ct. 1999), appeal denied, 749 A.2d 473 (Pa. 2000), the district court indicated that the claims and liens in fact could be assigned to NTF under Pennsylvania law. See Pollice, 59 F. Supp.2d at 477 n.3. The court further indicated that NTF, as assignee of the government entities, is subject to a statutory provision permitting the collection of interest on municipal tax and utility claims at a rate not to exceed ten percent per year. See Pa. Stat. Ann. tit. 53, S 7143. The court rejected the argument that the City's status as a home rule municipality conferred...

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