Scott v. Fedchoice Fed. Credit Union

• Decision Date: 12 May 2022
• Docket Number: 20-CV-322
• Citation: 274 A.3d 318
• Parties: Reginald SCOTT, Appellant, v. FEDCHOICE FEDERAL CREDIT UNION and Alexandria Kelly, Appellees.
• Court: D.C. Court of Appeals

274 A.3d 318

Reginald SCOTT, Appellant,

v.FEDCHOICE FEDERAL CREDIT UNIONandAlexandria Kelly, Appellees.

No. 20-CV-322

District of Columbia Court of Appeals.

Submitted January 19, 2021

Decided May 12, 2022

Dean Gregory for appellant.

John M. Bredehoft, Norfolk, for appellee.

Before Glickman and Deahl, Associate Judges, and Ferren, Senior Judge.

Glickman, Associate Judge:

Reginald Scott appeals the Superior Court's dismissal of his Third Amended Complaint against FedChoice Federal Credit Union (FedChoice) and its former employee Alexandria Kelly for violations of the Maryland Consumer Debt Collection Act (MCDCA).¹ The trial court concluded that the complaint failed to state a claim under the MCDCA on which relief could be granted, and that any actions Ms. Kelly took as FedChoice's agent did not expose her to liability even if those actions did violate the MCDCA. For the reasons that follow, we reverse both rulings and remand for further proceedings.

I.

A. The Allegations of Scott's Third Amended Complaint

As alleged in his Third Amended Complaint, Mr. Scott is a retiree who resides in the District of Columbia. FedChoice, a federally chartered and federally insured credit union, has its principal place of business in Maryland. At all times relevant to this case, Ms. Kelly was a FedChoice employee handling debt collection on its behalf.

In 2012, Scott opened a consumer credit card account at FedChoice. His credit card agreement with FedChoice states that it is governed by the law of Maryland. In 2018, after suffering health problems, Scott defaulted on his accumulated FedChoice credit card debt. Between February and June 2019, FedChoice and Kelly communicated with Scott in attempting to collect the debt. In doing so, the complaint alleges, they violated the prohibition in Section 14-202(6) of the MCDCA against communicating with a debtor in a "manner as reasonably can be expected to abuse or harass the debtor."² The complaint alleges the following four violations, each of which involved actions by Kelly on behalf of FedChoice:

(1) sending Scott four letters warning that FedChoice might sue him to collect his debt, the last of which said that "unless settlement is made within FIVE DAYS ... legal proceedings may be instituted against you to recover this claim," even though (the complaint alleges) "the decision to sue had not been made" at that time;

(2) requiring Scott to make a partial payment of his credit card debt before allowing him to withdraw "exempt retirement funds" from an account he maintained at FedChoice;³

(3) repeatedly contacting Scott directly, by letter, telephone, and in person (when he withdrew funds from his account) to demand payment of the credit card debt, despite FedChoice having been informed he was represented by counsel; and

(4) calling Scott and "repeatedly demanding payment and threatening Scott with legal action knowing he was in the hospital, on medication, and on a dialysis machine."

We provide additional details of the alleged violations in our discussion below of the legal sufficiency of the complaint.

B. Dismissal of the Complaint for Failure to State a Claim

Appellees moved to dismiss the Third Amended Complaint pursuant to Superior Court Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief may be granted. The motion was based, in part, on the terms of Scott's credit card agreement, which was referenced in the complaint though not appended to it. Scott opposed the motion to dismiss but it does not appear that he objected to its reliance on the credit card agreement or disputed the authenticity of that agreement.

In April 2020, the Superior Court granted appellees’ motion and dismissed the Third Amended Complaint for failure to state a claim under § 14-202(6) of the MCDCA for the following reasons:

(1) the notices of a potential lawsuit to collect the credit card debt were neither abusive nor harassing, given that the credit card agreement put Scott on notice that his default could trigger such legal action;

(2) preventing Scott from withdrawing funds from his account at FedChoice was not abusive or harassing, inasmuch as he had contractually agreed (in his credit card agreement) to allow FedChoice to freeze his account and apply any account balance to the credit card debt in the event of a default;

(3) direct contact with a debtor after being informed that the debtor had retained legal representation is not prohibited by § 14-202(6); and

(4) contacting Scott when he was in the hospital was not actionable because "[Scott] makes no assertion of continued phone calls after Kelly was made aware of [Scott's] hospitalization."

Additionally, the court ruled that Scott failed to state a claim against Kelly in her individual capacity because she "was working within the scope of her employment" and appellant "ha[d] not alleged that Kelly committed any sort of intentional tort."

II.

A. Standard of Review

"The only issue on review of a dismissal made pursuant to Rule 12(b)(6) is the legal sufficiency of the complaint."⁴ As a motion to dismiss a complaint "presents questions of law, our standard of review ... is de novo."⁵

All that is required for a complaint to be sufficient is "a short and plain statement of the claim showing that the pleader is entitled to relief."⁶ We "construe the complaint in the light most favorable to the plaintiff by taking the facts alleged in the complaint as true."⁷ The complaint need only "contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ "⁸

Generally speaking, "a defendant raising a 12(b)(6) defense cannot assert any facts which do not appear on the face of the complaint itself."⁹ If the trial court decides a Rule 12(b)(6) motion by considering factual material outside the complaint, the motion normally should be treated as a motion for summary judgment.¹⁰ We have held, however, that the trial court is permitted to consider documents that a defendant attaches to a motion to dismiss when the plaintiff referenced those documents in the complaint and they are central to the claim; this does not convert the motion to dismiss into one for summary judgment because such documents may be considered part of the pleadings.¹¹

B. The Maryland Consumer Debt Collection Act

The Maryland Court of Appeals has described the MCDCA as a "remedial consumer protection and licensing statute[ ]," enacted with "the overarching purpose and intent ... to protect the public from unfair or deceptive trade practices by creditors engaged in debt collection activities."¹² To that end, Section 14-202 lists acts that a "collector" cannot take when "collecting or attempting to collect an alleged debt."¹³ Two provisions of this statute are pertinent to this appeal.

First, § 14-202(6) prohibits a collector from "[c]ommunicat[ing] with the debtor or a person related to him with the frequency, at the unusual hours, or in any other manner as reasonably can be expected to abuse or harass the debtor ." Scott argued in the trial court and maintains on appeal that appellees violated the italicized portion of this provision.¹⁴ The MCDCA does not define the terms "abuse" or "harass." The Maryland state courts have not undertaken to give a definitive construction of those terms either. However, the Maryland Court of Appeals has said that a remedial statute like the MCDCA "must be liberally construed, in order to effectuate its broad remedial purpose."¹⁵

For further guidance as to the use of terms like abuse and harassment in this legal context, we may look to the legal dictionary. Black's Law Dictionary defines "abuse" as "[a] departure from legal or reasonable use; misuse," or "[c]ruel or violent treatment of someone; specif[ically], physical or mental maltreatment, often resulting in mental, emotional, sexual, or physical injury."¹⁶ The same dictionary defines "harassment" as "[w]ords, conduct, or action (usu[ally] repeated or persistent) that, being directed at a specific person, annoys, alarms, or causes substantial emotional distress to that person and serves no legitimate purpose; purposeful vexation."¹⁷ Federal courts construing § 14-202(6) also have looked to the "substantively very similar" prohibitions in § 806 of the federal Fair Debt Collection Practices Act (FDCPA).¹⁸ That section provides that "[a] debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt."¹⁹ Section 806 further states that, "[w]ithout limiting the general application of" that prohibition, it encompasses such conduct as "[t]he use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person"; "[t]he use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader"; publication or advertisement of the debt or the debtor's identity; and "[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number."²⁰

The second provision of the MCDCA pertinent to this appeal is § 14-202(11). This provision prohibits Maryland collectors from engaging "in any conduct that violates §§ 804 through 812 of the federal Fair Debt Collection Practices Act." This prohibition is relevant here because § 805(a)(2) of the FDCPA provides that "a debt collector may not communicate with a consumer in connection with the collection of any debt ... if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address," unless the attorney fails to respond within a reasonable period of time or consents to direct communication with the consumer.²¹ Although the Third Amended Complaint alleges that appellees violated the MCDCA by continuing to communicate directly...