Calogero v. Shows, Cali & Walsh, L.L.P.

• Decision Date: 17 August 2020
• Docket Number: No. 19-30558,19-30558
• Citation: 970 F.3d 576
• Parties: Iris CALOGERO, on her own behalf and on behalf of all others similarly situated, Plaintiff-Appellant v. SHOWS, CALI & WALSH, L.L.P., a Louisiana Limited Liability Partnership; Mary Catherine Cali; John C. Walsh, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

970 F.3d 576

Iris CALOGERO, on her own behalf and on behalf of all others similarly situated, Plaintiff-Appellant

v.SHOWS, CALI & WALSH, L.L.P., a Louisiana Limited Liability Partnership; Mary Catherine Cali; John C. Walsh, Defendants-Appellees

No. 19-30558

United States Court of Appeals, Fifth Circuit.

FILED August 17, 2020

Appeal from the United States District Court for the Eastern District of Louisiana, Barry W. Ashe, U.S. District Judge

Keren E. Gesund, Attorney, Gesund & Pailet, L.L.C., Metairie, LA, Jennifer C. Deasy, Margaret E. Woodward, New Orleans, LA, for Plaintiff-Appellant

David Scranton Daly, Esq., Senior Trial Attorney, Frilot, L.L.C., New Orleans, LA, for Defendants-Appellees

Before WIENER, GRAVES, and WILLETT, Circuit Judges.

JAMES E. GRAVES, JR., Circuit Judge:

Appellant-Plaintiff Iris Calogero appeals from the dismissal of her Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., claim against Shows, Cali & Walsh, L.L.P. and its partners Mary Catherine Cali and John C. Walsh (collectively "SCW"). For the following reasons, we REVERSE and REMAND.

I. BACKGROUND

In the aftermath of Hurricanes Katrina and Rita's devastation to displaced homeowners whose primary residences were either destroyed or severely damaged, Congress appropriated billions of dollars through the Community Development Block Grant program ("CDBG") of the Department of Housing and Urban Development ("HUD"). In 2006, Louisiana applied for CDBG funds for the Road Home Program ("Road Home") to provide grants for home repair and rebuilding, support affordable rental housing, and offer housing support services. Upon HUD's approval of the largest single housing recovery program in the United States, the Louisiana Office of Community Development ("OCD") and Louisiana Recovery Authority ("LRA") were tasked with implementing Road Home.

Calogero resides in Slidell, Louisiana, and her home was significantly damaged by Hurricanes Katrina and Rita. Calogero applied for a Road Home grant used as "compensation for damages suffered [by homeowners] from the Hurricanes." Once approved as a Road Home recipient, Calogero entered into an agreement¹ with the OCD and received $33,392.68 disbursed in one lump sum. The agreement consisted of four parts—the Road Home Declaration of Covenants Running with the Land; the Road Home Program Grant Agreement; the Road Home Limited Subrogation/Assignment Agreement; and the Road Home Grant Recipient Affidavit. As part of the Declaration of Covenants, Calogero agreed to several terms, including limitations on the transfer and sale of her property, occupancy of the Slidell property as her primary residence for three years after the execution of the agreement, maintenance of casualty and flood insurance, documentation demonstrating compliance with the agreement, and a waiver disclaiming Louisiana, the United States, or any other government branch or agency's liability for actions relating to the grant. Under the Limited Subrogation/Assignment Agreement and "in consideration for [her] receipt of funds under Road Home program," Calogero assigned to the State any recovery of funds she received from insurance or the Federal Emergency Management Agency ("FEMA"). Calogero also agreed to promptly pay the State any insurance or assistance payments that would have reduced the Road Home grant amount if Calogero received such payments prior to the receipt of the Road Home grant.

Over a decade after Calogero received the Road Home grant, Appellee SCW sent a letter to Calogero seeking $4,598.89 as repayment for an alleged grant overpayment per the Road Home Program Agreement. SCW identified itself as a "debt collector" representing Louisiana and Road Home in connection with the hurricane relief grant Calogero received. After Calogero disputed the overpayment, SCW sent another letter providing a breakdown of the amount, including $5,300 owed in duplicated FEMA benefits, $1,269.85 owed in overpaid homeowner insurance proceeds, and a $1,970.96 credit due to a recalculated insurance penalty.² Calogero then initiated this federal suit against SCW in the Eastern District of Louisiana. Calogero alleged on behalf of herself and a proposed class that SCW violated the FDCPA for its purported use of misrepresentation, false or deceptive means, and unfair or unconscionable means to collect a debt that cannot be legally taken. See 15 U.S.C. §§ 1692e(2)(A), 1692e(5), 1692e(10), 1692f. Calogero also brought claims individually against SCW for using deceptive means or unfair or unconscionable means to collect or attempt to collect $4,598.89 in violation of the FDCPA. See 15 U.S.C. §§ 1692e(10), 1692f.

SCW subsequently filed a Rule 12(b)(6) motion to dismiss for failure to state a claim, contending that the FDCPA is inapplicable to Calogero's claims because the Road Home money was a form of disaster compensation and Calogero failed to establish that the money being collected qualified as "debt" under 15 U.S.C. § 1692a(5). The district court granted SCW's motion and dismissed Calogero's FDCPA claims with prejudice after concluding that the money owed under the Road Home Program was not a "debt" within the meaning of the FDCPA. Calogero timely appealed.

II. STANDARD OF REVIEW

We review a district court's order granting a motion to dismiss for failure to state a claim de novo. Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013). We view the well-pleaded facts in the light most favorable to the nonmoving party. Turbomeca, S.A. v. Era Helicopters, LLC, 536 F.3d 351, 354 (5th Cir. 2008). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ).

III. DISCUSSION

The FDCPA was enacted in part "to eliminate abusive debt collection practices by collectors." 15 U.S.C. § 1692(e). Prohibited practices include conduct designed to "harass, oppress, or abuse any person in connection with the collection of a debt," 15 U.S.C. § 1692d, and the use of "false, deceptive, or misleading representation or means in connection with the collection of any debt," 15 U.S.C. § 1692e.

"To state an FDCPA claim, Plaintiffs must first allege that they have been the object of collection activity arising from ‘debt.’ " Hall v. Phenix Investigations, Inc. , 642 F. App'x 402, 405 (5th Cir. 2016) (citing Douglas v. Select Portfolio Servicing, Inc. , No. 4:14-1329, 2015 WL 1064623, at *4 (S.D. Tex. Mar. 11, 2015) (setting forth the elements of a FDCPA claim)). The FDCPA defines "debt" as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. § 1692a(5). In simpler terms, FDCPA debts are "payment obligations of (1) a consumer arising out of (2) a transaction in which the money, property, insurance or services at issue are (3) primarily for personal, family or household purposes." Agrelo v. Affinity Mgmt. Servs., LLC, 841 F.3d 944, 950 (11th Cir. 2016) (quoting Oppenheim v. I.C. Sys., Inc. , 627 F.3d 833, 837 (11th Cir. 2010) ). The parties do not dispute that Calogero is a consumer³ or that Road Home provided disaster relief money for personal, family, or household purposes. The crux of the appeal is whether Calogero's obligation to repay grant money "aris[es] out of a transaction" for purposes of a "debt" under the FDCPA. 15 U.S.C. § 1692a(5).

To assist in making this determination, the Third Circuit has helpfully "distill[ed] a three-part test to evaluate whether an obligation constitutes ‘debt’ under the FDCPA." St. Pierre v. Retrieval-Masters Creditors Bureau, Inc ., 898 F.3d 351, 360 (3d Cir. 2018). First, we determine if the "underlying obligation arises out of a transaction" meaning the "consensual exchange involv[es] an affirmative request and the rendition of a service or purchase of property or other item of value, such as a contract." Id. (internal citations and quotations omitted). Second, if we affirmatively answer the first question, we "next identify what money, property, insurance, or services ... are the subject of the transaction, i.e., what it is that is being rendered in exchange for the monetary payment." Id. at 361 (internal citation and quotation omitted). Third, "we consider the characteristics of that ‘money, property, insurance, or services’ to ascertain whether they are ‘primarily for personal, family, or household purposes.’ " Id. (quoting 15 U.S.C. § 1692a(5) ). Under the Third Circuit's test, a plaintiff must satisfy all three prongs of the St. Pierre test for the obligation of repayment to constitute an FDCPA debt.

A. Whether the obligation to repay Road Home money arises out of a "transaction"?

i. Statutory Interpretation of "Transaction"

"When interpreting a statute, we look first and foremost to its text."

United States v. Alvarez-Sanchez , 511 U.S. 350, 356, 114 S.Ct. 1599, 128 L.Ed.2d 319 (1994). The term "transaction" is not defined in the FDCPA or in any other relevant statutory provision. See Barlow v. Safety Nat. Cas. Corp., 856 F. Supp. 2d 828, 834 (M.D. La. 2012) (acknowledging that FDCPA cases can create close calls when the "facts hardly constitute the quintessential consumer debt").

Accordingly, we apply the "fundamental canon of statutory construction" which instructs that "words generally should be interpreted as taking their ordinary ... meaning ... at...