Jerman v. Carlisle, McNellie, Rini, Kramer, Ulrich

• Decision Date: 18 August 2008
• Docket Number: No. 07-3964.,07-3964.
• Citation: 538 F.3d 469
• Parties: Karen L. JERMAN, Plaintiff-Appellant, v. CARLISLE, McNELLIE, RINI, KRAMER & ULRICH LPA; Adrienne S. Foster, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

538 F.3d 469

Karen L. JERMAN, Plaintiff-Appellant, v. CARLISLE, McNELLIE, RINI, KRAMER & ULRICH LPA; Adrienne S. Foster, Defendants-Appellees.

No. 07-3964.

United States Court of Appeals, Sixth Circuit.

Argued: June 11, 2008.

Decided and Filed: August 18, 2008.

ARGUED: Stephen R. Felson, LAW OFFICE, Cincinnati, Ohio, for Appellant. George Coakley, Reminger Co., Cleveland, Ohio, for Appellees. ON BRIEF: Stephen

R. Felson, Law Office, Cincinnati, Ohio, Edward A. Icove, Icove Legal Group, Cleveland, Ohio, for Appellant. George Coakley, James O'Connor, Reminger Co., Cleveland, Ohio, for Appellees.

Before: SILER and COLE, Circuit Judges; CLELAND, District Judge.^*

OPINION

COLE, Circuit Judge.

Plaintiff Karen L. Jerman filed an action challenging the debt-collection practices of the law firm Carlisle, McNellie, Rini, Kramer & Ulrich ("Carlisle"), and Adrienne S. Foster, an attorney employed by Carlisle, (collectively, "Defendants"). Jerman claims that Defendants violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692-92p, when they used allegedly deceptive forms to notify her of a foreclosure on her home. More specifically, Jerman claims that Defendants violated the FDCPA by representing to Jerman that her debt would be assumed valid unless she disputed the debt "in writing" even though the FDCPA does not require a written dispute. The district court granted Defendants' motion for summary judgment, concluding that, although Defendants violated the FDCPA by instructing Jerman that she must dispute the debt in writing, Defendants qualified for the FDCPA bona fide error defense, 15 U.S.C. § 1692k(c). On appeal, Jerman asserts that the defense is not available. For the following reasons, we affirm.

I. BACKGROUND

On April 17, 2006, Defendants filed a complaint in the Ashtabula County Court of Common Pleas on behalf of their client, Countrywide Home Loans, Inc., the holder of a mortgage interest in real property owned by Jerman. The complaint, handled by Foster, sought foreclosure on that property. Attached to the complaint was a "Notice Under the Fair Debt Collection Practices Act" (hereafter, "Validation Notice") which provided, among other things, that "the debt described herein will be assumed to be valid by the creditor's law firm [Carlisle] unless the debtor(s) . . . within thirty (30) days after receipt of this notice, dispute, in writing, the validity of the debt or some portion thereof." The Validation Notice was dated, included Defendants' contact information, and provided the amount of debt and interest at issue along with the relevant Note and Mortgage. On April 20, 2006, Jerman was served by certified mail with the summons and complaint, which included the Validation Notice attachment. Defendants had no further communication with Jerman.

On April 25, 2006, Defendants received a letter from Edward A. Icove, Jerman's attorney, indicating that Jerman disputed the debt alleged in the complaint. On April 26, 2006, Defendants requested verification of the debt from Countrywide. On May 4, 2006, Countrywide notified Defendants that the note had been paid in full. On May 5, 2006, Defendants sent a judgment entry dismissing the complaint to the court of common pleas for filing, and mailed a copy of the judgment entry to Icove. The judgment entry was filed with the court on May 11, 2006.

On June 7, 2006, Jerman filed a complaint seeking certification as a class action and statutory damages, on the ground that Defendants violated the FDCPA by representing erroneously that a debt will be assumed valid absent a written dispute. Defendants filed a motion to dismiss the complaint on September 22, 2006, arguing that the words "in writing" in the Validation Notice did not violate the FDCPA. The district court denied that motion on November 21, 2006, finding that the Validation Notice violated the FDCPA because it compelled debtors to dispute the debt in writing when the FDCPA imposes no such requirement. Jerman v. Carlisle, 464 F.Supp.2d 720, 725 (N.D.Ohio 2006). After discovery, Defendants moved for summary judgment, arguing that: (1) the foreclosure complaint was not an "initial communication," which is necessary before debtor "validation rights can be triggered" under the FDCPA; (2) Defendants' alleged mistake as to the written-dispute requirement was unintentional and resulted from a bona fide error; and (3) Defendants are absolutely immune from liability because their actions represented an "integral part of the judicial process." The district court granted Defendants' motion on June 20, 2007, concluding that, although the foreclosure complaint was an initial communication triggering rights under the FDCPA and that Defendants violated the FDCPA by instructing Jerman that she must dispute the debt in writing, Defendants were shielded from liability by the bona fide error defense. Jerman v. Carlisle, 502 F.Supp.2d 686, 696 (N.D.Ohio 2007).

Jerman timely filed a notice of appeal on July 19, 2007.

II. ANALYSIS

On appeal, Jerman argues that (1) the district court erred in concluding that the FDCPA's bona fide error defense may apply to mistakes of law,¹ and (2) even if the defense does apply to mistakes of law, the district court erred in concluding that Defendants were entitled to summary judgment on the defense, because a question of fact remains as to whether Defendants maintained procedures reasonably calculated to avoid the violation.² We review de novo a district court's grant of summary judgment. Miller v. Admin. Office of the Courts, 448 F.3d 887, 893 (6th Cir.2006). Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of proving that there are no genuine issues of material fact, Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), and the party opposing the motion must then "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

A. Applicability of the FDCPA's Bona Fide Error Defense to Mistakes of Law

A debt collector may avoid liability for an FDCPA violation under the Act's bona fide error defense, which provides:

A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

15 U.S.C. § 1692k(c). The issue of whether this defense applies to mistakes of law, in addition to procedural or clerical errors, is one of first impression for this Court.

Jerman argues that Smith v. Transworld Sys., Inc., 953 F.2d 1025 (6th Cir. 1992) is instructive. Smith recognized that the bona fide error defense protects a debt collector from liability resulting from a clerical error. Id. at 1034 (holding that although collection agency's second collection letter, mailed shortly after receiving consumer's cease-communication assist letter, violated the FDCPA, the agency was shielded under the bona fide error defense because its procedures were reasonably adapted to avoid any such error). Thus, Smith is not relevant to the instant matter because it indisputably involved a clerical error; moreover, the panel majority did not address whether the bona fide error defense also applies to mistakes of law. See id. Although Judge Krupansky, concurring in part and dissenting in part, opined that "the bona fide error defense applies only to clerical errors," id. at 1034, his statement is simply dicta and does not serve as precedent.

Further, the district courts in this circuit are split. Compare Dunaway v. JBC & Assoc., Inc., No. 03-73597, 2005 WL 1529574, at *6 (E.D.Mich. June 20, 2005) (citing Smith for the erroneous proposition that the Sixth Circuit "has explicitly held" that "the bona fide error defense applies only to clerical errors"), and Edwards v. McCormick, 136 F.Supp.2d 795, 800 (S.D.Ohio 2001) (explaining that "were the mistake an error in legal judgment, it could not be erased by [the bona fide error defense]" and citing Smith for the proposition that the defense applies only to clerical errors), with Miller v. Javitch, Block & Rathbone, 534 F.Supp.2d 772, 777 (S.D.Ohio 2008) (stating that the bona fide error defense "is applicable to mistakes of law as well as clerical errors" and finding defendant shielded by defense for an alleged mistake of law (citing Delawder v. Platinum Fin. Serv. Corp., 443 F.Supp.2d 942, 952 (S.D.Ohio 2005), which holds that the defense applies to debt-collection attorneys who unintentionally violate the FDCPA by asserting in good faith a legal claim that was later rejected by a court)); Lee v. Javitch, Block & Rathbone, LLP, No. 1:06-CV-585, 2007 WL 4591961, at * 1 (S.D.Ohio Dec.28, 2007) (noting Smith, and circuit split, but explaining that recent and more persuasive case authority has permitted the defense for mistakes of law as well as fact); Kelly v. Great Seneca, 443 F.Supp.2d 954, 960 (S.D.Ohio 2005) ("FDCPA liability is not imposed for good faith mistakes or errors of law or mathematics."); and Taylor v. Luper, Sheriff & Niedenthal Co., L.P.A., 74 F.Supp.2d 761, 765 (S.D.Ohio 1999) ("There is nothing in the language of [the defense] which limits its application to clerical mistakes or ministerial errors.").

Courts outside of this Circuit are also divided as to whether the bona fide error defense applies to mistakes of law or is limited, as Jerman contends, to procedural or clerical errors. See Johnson v. Riddle, 305 F.3d 1107, 1121 n. 14 (10th Cir.2002) (collecting cases). Although the "majority view is...