Barbato v. Greystone Alliance, LLC

• Decision Date: 22 February 2019
• Docket Number: No. 18-1042,18-1042
• Citation: 916 F.3d 260
• Parties: Mary BARBATO v. GREYSTONE ALLIANCE, LLC ; Turning Point Capital Inc; Crown Asset Management LLC Crown Asset Management LLC, Appellant
• Court: U.S. Court of Appeals — Third Circuit

916 F.3d 260

Mary BARBATO

v.GREYSTONE ALLIANCE, LLC ; Turning Point Capital Inc; Crown Asset Management LLC Crown Asset Management LLC, Appellant

No. 18-1042

United States Court of Appeals, Third Circuit.

Argued: September 6, 2018

Opinion Filed: February 22, 2019

Anthony J. Gingo, Michael J. Palumbo, Gingo Palumbo Law Group, 4700 Rockside Road, Suite 440, Independence, OH 44131, Matthew R. Rosenkoff [ARGUED], Taylor English Duma, 1600 Parkwood Circle, Suite 200, Atlanta, GA 30339, Counsel for Defendant-Appellant Crown Asset Management LLC

Daniel A. Edelman [ARGUED], Edelman Combs Latturner & Goodwin, 20 South Clark Street, Suite 1500, Chicago, IL 60603, Brett M. Freeman, Carlo Sabatini, Sabatini Law Firm, 216 North Blakely Street, Dunmore, PA 18512, Counsel for Plaintiff-Appellee Mary Barbato

Before: HARDIMAN, KRAUSE, and BIBAS, Circuit Judges

OPINION OF THE COURT

KRAUSE, Circuit Judge.

The Fair Debt Collection Practices Act ("FDCPA") protects consumers from abusive, deceptive, or otherwise unfair debt collection practices. 15 U.S.C. § 1692(a). It applies to "debt collectors," defined alternatively as those engaged "in any business the principal purpose of which is the collection of any debts" and those "who regularly collect[ ]" debts "owed or due another." Id. § 1692a(6). This appeal concerns only the first definition and requires us to determine whether an entity that acquires debt for the "purpose of ... collection" but outsources the actual collection activity qualifies as a "debt collector." The District Court held that it does, and we agree: an entity that otherwise meets the "principal purpose" definition cannot avoid the dictates of the FDCPA merely by hiring a third party to do its collecting. We therefore will affirm.

I. Background

A. Factual Background

Appellant Crown Asset Management ("Crown") is a purchaser of charged-off receivables, that is, accounts on which a consumer has stopped paying the debt owed. When Crown purchases an account, it determines if the debtor has filed for bankruptcy or is deceased. If neither is the case, Crown does not collect on the account itself; rather, it refers the charged-off receivable to a third-party servicer for collection or it hires a debt collection law firm to file a collection lawsuit on its behalf. Although Crown does not contact consumers directly, it principally derives revenue from liquidating the consumer debt it has acquired.

In this case, Appellee Mary Barbato obtained a consumer credit card from GE Electric Capital Corporation and GE Money Bank (collectively "GE") in 2007. She made her last payment on the account in November 2010, leaving an outstanding balance. GE subsequently charged off that balance and, after a number of sales and assignments, Crown purchased Barbato’s debt. Pursuant to its standing service agreement with collection agency Turning Point Capital, Inc. ("Turning Point"), Crown then referred that debt to Turning Point for collection.

Crown’s service agreement with Turning Point explained that Crown was seeking "to procure certain collection services" from Turning Point, and Turning Point was agreeing to "undertake collection on each Account placed" with it by Crown. App. 376. In addition, the agreement said that Crown had the "sole and absolute discretion," App. 378, as to which accounts it would forward, that Crown’s obligation to pay Turning Point was contingent upon Turning Point’s success, and that Crown could establish settlement guidelines from which Turning Point would have to obtain permission in order to deviate.

Pursuant to this agreement, Turning Point sent Barbato a collection letter in February 2013, identifying itself as a "National Debt Collection Agency" and Crown as its client. Turning Point also called Barbato and left her two voicemail messages. For its part, Crown did not have any direct communication with Barbato regarding her account, nor did it review or approve the letter sent to her by Turning Point. When Barbato filed for bankruptcy, however, Crown recalled Barbato’s account from Turning Point and subsequently closed it.

B. Procedural Background

Several months later, after Turning Point was absorbed by Greystone Alliance, LLC ("Greystone"), Barbato filed a state court complaint against Greystone, alleging that it had violated the FDCPA. And after Greystone removed the action to federal court, Barbato filed an amended complaint in which she added Turning Point and Crown as defendants and alleged that each was a "debt collector" as defined by the FDCPA.¹ Turning Point was served but never answered. Barbato eventually dismissed both Turning Point and Greystone from the action, leaving only Crown as a defendant.

Barbato and Crown subsequently filed cross-motions for summary judgment on, among other issues, the question whether Crown was a debt collector. Barbato did not argue that Crown satisfied the "regularly collects" definition, i.e., that it "regularly collect[ed]" debts "owed or due another." 15 U.S.C. § 1692a(6). Rather, she argued that Crown was a "debt collector" because: (1) it purchased debts when they were in default, which, under then-controlling precedent, was a prerequisite to being considered a "debt collector" as opposed to a "creditor"² —statuses we had deemed mutually exclusive under § 1692a(6), see F.T.C. v. Check Inv’rs, Inc ., 502 F.3d 159, 171 (3d Cir. 2007) —and (2) it satisfied the statute’s "principal purpose" definition because the principal purpose of its business was the collection of those defaulted debts, even if it hired third-party debt collectors to do the collecting. 15 U.S.C. § 1692a(6) ; App. 209–10 (citing Pollice v. Nat’l Tax Funding, L.P. , 225 F.3d 379, 403–04 (3d Cir. 2000) ). Crown countered that, regardless of the default status of the debt, Barbato could not prove it fit the "principal purpose" definition because it took no collection action towards her and its principal purpose was not the collection of debt but, rather, its acquisition.

Siding with Barbato on these issues, the District Court held that Crown was "acting as [a] ‘debt collector’ " because: (1) it acquired debts like Barbato’s when they were in default and (2) the summary judgment record supported that Crown’s "principal purpose" was the "collection of ‘any debts.’ " Barbato v. Greystone All., LLC , No. 3:13-CV-2748, 2017 WL 1193731, at *10 (M.D. Pa. Mar. 30, 2017). As to the second ground, the Court found little difference between collecting on charged-off receivables and referring charged-off receivables to third-party independent servicers for collection. Instead, given that Crown purchased debt, that ninety to ninety-five percent of that debt came from consumers, and that Crown referred all of that debt out for collection, the District Court concluded that "Crown’s principal purpose is to acquire accounts in ‘default’ for the purpose of collection." Id. The District Court nevertheless denied Barbato’s motion for summary judgment, holding that she had not established that Crown was vicariously liable for Turning Point’s conduct because (1) in the District Court’s view, vicarious liability could be imputed to Crown in these circumstances only if the agent too was a "debt collector," and (2) the evidence in the record was insufficient to hold that Turning Point was a debt collector under the FDCPA. The Court granted the parties leave to file renewed motions for summary judgment to address Turning Point’s status as a debt collector.

While these proceedings continued in the District Court, however, the Supreme Court issued a decision that prompted Crown to seek reconsideration of the District Court’s ruling that it was a "debt collector." In Henson v. Santander, Consumer USA Inc. , in interpreting the "regularly collects" definition and deciding whether the entity there "regularly collect[ed] ... debts owed or due another," 15 U.S.C. § 1692a(6), the Supreme Court held that it was irrelevant whether the debt acquired and sought to be collected was in default; instead, it held "[a]ll that matters is whether the target of the lawsuit regularly seeks to collect debts for its own account or does so for ‘another,’ " ––– U.S. ––––, 137 S.Ct. 1718, 1721, 1724, 198 L.Ed.2d 177 (2017). Construing that language to apply to § 1692a(6) generally, Crown urged that it could no longer be considered a debt collector, even under the "principal purpose" definition, because it too was collecting debts on its own behalf and not for another. The District Court disagreed, holding that Henson pertained only to the "regularly collects" definition of "debt collector" and did not affect its holding that Crown was a debt collector under the "principal purpose" definition. See Barbato v. Greystone All., LLC , No. CV 3:13-2748, 2017 WL 5496047, at *1, *9–*10 (M.D. Pa. Nov. 16, 2017).

Nevertheless, the District Court certified its decision for interlocutory appeal and presented a controlling question of law to this Court: "whether Henson requires a finding that Crown is not a debt collector in this case when it was a third-party buyer of the debt, and the debt was in default at the time it purchased it." App. 34. Crown then filed a petition for permission to file the interlocutory appeal and to appeal the District Court’s denial of its motion for reconsideration, which we granted.

II. Jurisdiction and Applicable Standards

The District Court had jurisdiction under 28 U.S.C. § 1331, and we have jurisdiction over this interlocutory appeal under 28 U.S.C. § 1292(b). When reviewing an interlocutory appeal under 28 U.S.C. § 1292(b), we exercise plenary review over the question certified. Florence v. Bd. of Chosen Freeholders of Cty. of Burlington , 621 F.3d 296, 301 (3d Cir. 2010). The scope of our review, however, is not limited to the question set forth in the certification motion but, rather, includes any issue fairly included within the certified order. See Yamaha Motor Corp., U.S.A. v. Calhoun , 516 U.S. 199, 205, 116 S.Ct. 619, 133 L.Ed.2d 578 (...