Daniel N. Gordon, an Or. Prof'l Corp. v. Rosenblum

• Decision Date: 27 April 2017
• Docket Number: SC S063978,CC 161208399
• Citation: 393 P.3d 1122,361 Or. 352
• Parties: Daniel N. GORDON, an Oregon professional corporation; and Daniel N. Gordon, individually, Petitioners on Review, v. Ellen ROSENBLUM, Attorney General; and Oregon Department of Justice, Respondents on Review.
• Court: Oregon Supreme Court

361 Or. 352

393 P.3d 1122

Daniel N. GORDON, an Oregon professional corporation; and Daniel N. Gordon, individually, Petitioners on Review,

v.Ellen ROSENBLUM, Attorney General; and Oregon Department of Justice, Respondents on Review.

CC 161208399

SC S063978

Supreme Court of Oregon.

Argued and submitted November 10, 2016.

April 27, 2017

R. Daniel Lindahl, Bullivant Houser Bailey PC, Portland, argued the cause and filed the brief for petitioners on review. Daniel N. Gordon, Gordon Aylworth & Tami PC, Eugene, also argued the cause on behalf of himself.

Michael A. Casper, Assistant Attorney General, Salem, argued the cause and filed the brief for respondents on review. Also on the brief were Ellen F. Rosenblum, Attorney General, and Benjamin Gutman, Solicitor General.

Jonathan P. Strauhull, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association. Also on the brief was Phil Goldsmith, Portland.

Before Balmer, Chief Justice, and Kistler, Walters, Landau, Brewer, and Nakamoto, Justices, and Baldwin, Senior Justice, Justice pro tempore.^**

BALMER, C.J.

In this declaratory judgment action, we consider whether provisions of Oregon's Unlawful Trade Practices Act (UTPA) that prohibit using "unconscionable tactic[s]" to collect certain debts, ORS 646.607(1), and causing likely "confusion" or "misunderstanding" regarding loans and credit, ORS 646.608(1)(b), apply to the debt collection activities of plaintiffs, a lawyer and his law firm. The trial court held that those provisions apply only to certain consumer relationships and that plaintiffs' roles as a lawyer and law firm engaged in debt collection activities, and not as a lender or debt owner, removed their activities from the scope of the UTPA. The court granted plaintiffs' request for an injunction preventing the Oregon Department of Justice from enforcing the UTPA against plaintiffs. The Court of Appeals reversed the circuit court's declarations of law and the injunction, concluding that the UTPA does apply to plaintiffs' debt collection activities. Daniel N. Gordon, PC v. Rosenblum , 276 Or.App. 797, 370 P.3d 850 (2016). On review we affirm, although our interpretation of the statutes differs in some respects from that of the Court of Appeals.

I. FACTUAL AND PROCEDURAL BACKGROUND

Daniel N. Gordon, P.C. and Daniel N. Gordon ("law firm" or "plaintiffs") represent creditors and debt buyers in their attempts to collect debt, often defaulted consumer credit card debt. The law firm assists its clients with pre-litigation collection activity, civil litigation, and post-judgment collection efforts. The business is high-volume: In 2010, the law firm pursued collection of more than 16,000 accounts, obtained judgments with respect to approximately 9,000 of those accounts, and collected on approximately 4,000.

In 2011, acting on several years of complaints about the practices of the law firm, the Oregon Department of Justice ("DOJ" or "defendant") investigated the law firm. The investigation revealed a number of practices that DOJ determined might violate the UTPA. For example, in every collection complaint examined by DOJ, the law firm alleged a right to attorneys' fees and interest on the debt, despite in many cases not attaching a contract showing those rights.

Additionally, DOJ found evidence that the law firm failed to follow choice of law provisions in applicable contracts and, as a result, sometimes pursued debts that were barred by the relevant statute of limitations. In the many cases resolved by default judgment, the veracity of the contents of the complaint—and the debtor's obligation to pay—was never established in an adversarial process. As a result of those and other findings, DOJ concluded that the law firm

"had a pattern and practice of filing thousands of breach of contract actions against credit card debtors and obtaining default judgments for attorneys' fees and interest in a manner that apparently took advantage of the debtors' legal ignorance, lack of resources and general belief that they could not fight the claim."

DOJ determined that it had probable cause to sue to enjoin the law firm and its attorneys from engaging in trade practices prohibited under sections ORS 646.607(1) and ORS 646.608(1)(b) of the UTPA.

Based on that conclusion, DOJ served the law firm with a proposed Assurance of Voluntary Compliance (AVC) and demanded that the law firm execute the agreement. Under the AVC, the law firm would change its behavior as specified in the agreement and DOJ would release the law firm from any liability under the UTPA. The remedies contained in the AVC addressed both the law firm's non-litigation collection activities, such as its use of autodialers, and its litigation activities. The AVC required that any complaint in a breach of contract case involving credit card debt filed by the law firm in Oregon include certain documents, such as a copy of the contract between the creditor and debtor in effect at the time of the creditor's charge-off, and certain information, such as the date of the last payment. It also prohibited the law firm from seeking attorneys' fees as part of any default judgment and required the law firm to use independent contractors, rather than its own employees, to provide service of process.

Plaintiffs refused to execute the agreement and instead initiated this declaratory judgment action. Plaintiffs' complaint contended that the UTPA and the Unlawful Debt Collection Practices Act (UDCPA), ORS 646.639, did not apply to their actions while representing clients in debt collection activities and sought an injunction preventing DOJ from enforcing those statutes against plaintiffs. On cross motions for summary judgment, the trial court entered judgment for plaintiffs and issued an injunction.¹

DOJ appealed. The Court of Appeals affirmed the trial court's holding that the UDCPA did not apply to plaintiffs' debt collection activities. Daniel N. Gordon, PC , 276 Or.App. at 814-22, 370 P.3d 850. Neither party challenges that holding before this court, and we do not address it. The Court of Appeals, however, reversed the trial court's decision that the UTPA did not apply to plaintiffs' debt collection activities. In analyzing the UTPA, the court first construed ORS 646.607(1), which prohibits a person, in the course of the person's business, from employing "any unconscionable tactic in connection with * * * collecting or enforcing an obligation." ORS 646.607(1). The Court of Appeals disagreed with plaintiffs' contention that, because the debtors were never customers of the law firm, the law firm's actions were not "unconscionable tactics" as that term is used in the UTPA. The court concluded that "the statute does not require plaintiffs and a debtor to have a consumer relationship," interpreting the UTPA to encompass plaintiffs' alleged conduct.² Daniel N. Gordon, PC , 276 Or.App. at 809, 370 P.3d 850.

Next, the court construed ORS 646.608(1), making it unlawful for a "person," in the course of the person's business, to cause "likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of real estate, goods or services." "Real estate, goods or services" includes "loans and extensions of credit."

ORS 646.605(6)(a). Plaintiffs argued that the statute applied only to confusion or misunderstanding caused by a person regarding that person's own real estate, goods, or services , and not real estate, goods, or services that were provided by some other party. As plaintiffs represented creditors and third-party debt buyers and did not provide loans themselves, under that construction the statute would not apply to them. Again, the Court of Appeals disagreed. It explained that "the statute's text does not explicitly require that the unlawful practice in the course of the person's business must be with respect to that person's own real estate, goods, or services." Daniel N. Gordon, PC , 276 Or.App. at 811, 370 P.3d 850.

The Court of Appeals thus concluded that the trial court had erred in holding that ORS 646.607(1) and ORS 646.608(1) did not apply to the law firm's conduct. Id. at 822, 370 P.3d 850. It reversed those parts of the declaratory judgment and the injunction that the trial court had issued. Id.

Plaintiffs petitioned for review, and we allowed the petition.

II. ANALYSIS

On review, the parties reprise their arguments over whether two provisions of the UTPA should be interpreted to apply to plaintiffs' alleged conduct. We interpret the statutes by examining their text, context, and legislative history. State v. Gaines , 346 Or. 160, 206 P.3d 1042 (2009).

A. ORS 646.607(1)

ORS 646.607 provides, in part:

"A person engages in an unlawful trade practice if in the course of the person's business, vocation or occupation the person:

"(1) Employs any unconscionable tactic in connection with selling, renting or disposing of real estate, goods or services, or collecting or enforcing an obligation."

Plaintiffs argue that the statute does not apply to their debt collection activities because their relationship with the debtors is not a customer relationship—that is, it is not a relationship between plaintiffs as a business and debtors as direct customers of that business. Plaintiffs base that argument on the meaning of "unconscionable tactics." ORS 646.605(9) provides:

" ‘Unconscionable tactics' include, but are not limited to, actions by which a person:

"(a) Knowingly takes advantage of a customer's physical infirmity, ignorance, illiteracy or inability to understand the language of the agreement;

"(b) Knowingly permits a customer to enter into a transaction from which the customer will derive no material benefit;

"(c) Permits a customer to enter into a transaction with knowledge that there is no reasonable probability of payment of the attendant financial obligation in full by the customer when due; or

"(d) Knowingly takes advantage of a customer who is a disabled veteran, a disabled servicemember or a servicemember in

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