Wise v. Zwicker & Assocs., P.C.
| Decision Date | 12 March 2015 |
| Docket Number | No. 14–3278.,14–3278. |
| Citation | 780 F.3d 710 |
| Parties | Dawson W. WISE, Plaintiff–Appellant, v. ZWICKER & ASSOCIATES, P.C.; Anne Smith; Derek Scranton, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
OPINION TEXT STARTS HERE
ARGUED:Theodore E. Meckler, Spokane, Washington, for Appellant. Boyd W. Gentry, Law Office of Boyd W. Gentry, Beavercreek, Ohio, for Appellees. ON BRIEF:Theodore E. Meckler, Spokane, Washington, for Appellant. Boyd W. Gentry, LAW Office of Boyd W. Gentry, Beavercreek, Ohio, for Appellees.
Before: SILER, SUTTON, and STRANCH, Circuit Judges.
Plaintiff Dawson Wise appeals the district court's judgment on the pleadings dismissing his claims under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the Ohio Consumer Sales Practices Act (OCSPA), Ohio Rev.Code §§ 1345.02, 1345.03. The claims arise from an attempt by the defendants—two lawyers and their law firm—to collect attorney's fees pursuant to a consumer credit card agreement (Agreement). Ohio does not enforce provisions for the collection of attorney's fees in such consumer contracts, but Utah, the state designated in the Agreement's choice-of-law clause, does. Wise contends that Ohio law governs, barring the fees, and that the defendants' state court complaint was therefore a false or misleading representation or an unfair practice in violation of the FDCPA. The district court concluded on the basis of the pleadings and attached documents that Utah law applies to the issue and dismissed the case. Because the pleadings do not resolve the question of which law would govern the attorney's-fee question, we REVERSE and REMAND the case for further proceedings on the federal claim. On the state law claim, however, we AFFIRM.
Wise is a resident and citizen of Akron, Ohio. American Express Centurion Bank (American Express) extended an offer of credit to Wise by sending him a credit card and accompanying “Agreement Between American Express Credit Cardmember and American Express Centurion Bank.” See R. 1–2. Wise accepted the offer by keeping and using the credit card. Id. at PageID 13 (“When you keep, sign, or use the Card issued to you ... you agree to the terms of this Agreement.”). The Agreement provides:
This Agreement and your Account, and all questions about their legality, enforceability and interpretation, are governed by the laws of the State of Utah (without regard to internal principles of conflicts of law), and by applicable federal law. We are located in Utah, hold your Account in Utah, and entered into this Agreement with you in Utah.
Id. at PageID 16. It also provides, in the event of default: “You agree to pay all reasonable costs, including reasonable attorneys' fees, incurred by us [ ] in connection with the collection of any amount due on your Account.” Id. at PageID 15.
Wise defaulted on the credit card account, and American Express retained Zwicker & Associates, P.C., to collect the debt. Two attorneys at the firm, Derek Scranton and Anne Smith, contacted Wise and demanded payment on the debt, as well as attorney's fees for their collection activities. They also filed suit in the Ohio Court of Common Pleas in Summit County for breach of contract and unjust enrichment. The prayer for relief in the state court lawsuit recites, in relevant part, “WHEREFORE, the Plaintiff, AMERICAN EXPRESS CENTURION BANK demands judgment against Defendant(s), DAWSON WISE, on Counts One [Breach of Contract] and Two [Unjust Enrichment] of its Complaint, in sum of [the amount owed] ... plus attorney fees.” R. 1–1, PageID 12. Wise subsequently filed for bankruptcy, staying the state court lawsuit.
Wise filed this putative class action lawsuit in the Northern District of Ohio against the two attorneys and their firm, seeking to represent consumers from whom they demanded attorney's fees. Noting that Ohio law bars contracts that would require payment of attorney's fees on the collection of consumer debt, Wise contends that their demands for fees, both prior to and during litigation, violated the federal FDCPA and state OCSPA.
The defendants first filed an unsuccessful motion to compel arbitration, based on an arbitration clause in the Agreement. Noting that the Agreement contained a choice-of-law clause designating Utah and that the application of Utah law to the arbitration question would not violate a fundamental policy of Ohio, the district court applied Utah law and determined that the case fell outside the scope of the arbitration clause.
The defendants then filed a motion for judgment on the pleadings, which the district court granted. The court concluded that Utah law governed and allowed for the collection of attorney's fees, that there was therefore no violation of the FDCPA, and that the Agreement was not governed by the OCSPA. Wise appealed.
Congress passed the FDCPA to address “what it considered to be a widespread problem” of consumer abuse at the hands of debt collectors. Frey v. Gangwish, 970 F.2d 1516, 1521 (6th Cir.1992). It sought to “eliminate abusive debt collection practices by debt collectors [and] to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” 15 U.S.C. § 1692(e). In reaction to the size of the problem, it crafted “an extraordinarily broad” remedial statute. Frey, 970 F.2d at 1521. Among other restrictions, the Act bars debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” 15 U.S.C. § 1692e, or using “unfair or unconscionable means to collect or attempt to collect any debt,” id. § 1692f. In each section, Congress provided a non-exhaustive list of examples of banned practices.
Wise brought FDCPA claims under both the false-or-misleading-representations section, § 1692e, and the unfair-practices section, § 1692f, but both sets of claims reflect the same basic allegation. Wise contends that Ohio law barred American Express from obtaining attorney's fees on the collection of his debt; the actions of the defendants in representing American Express—demanding attorney's fees before the lawsuit and including the attorney's fees provision in the complaint's prayer for relief—were therefore misleading. 1
Under the FDCPA, a plaintiff does not need to prove knowledge or intent to establish liability, nor must he show actual damages, which “places the risk of penalties on the debt collector that engages in activities which are not entirely lawful, rather than exposing consumers to unlawful debt-collector behavior without a possibility for relief.” Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 449 (6th Cir.2014). In other words, if a debt collector seeks fees to which it is not entitled, it has committed a prima facie violation of the Act, even if there was no clear prior judicial statement that it was not entitled to collect the fees. See id. at 450–51. Notably, in Jerman v. Carlisle, McNellie, Rini, Kramer, & Ulrich L.P.A., 559 U.S. 573, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010), the Supreme Court held that mistakes of law regarding the FDCPA itself constitute violations of the Act for which a debt-collector attorney may not invoke the Act's bona fide error defense, 15 U.S.C. § 1692k(c). Id. at 604–05, 130 S.Ct. 1605. The Supreme Court declined to address whether the defense is available for mistakes of law other than the FDCPA itself, id. at 580 n. 4, 130 S.Ct. 1605, but the discussion of the affirmative defense makes clear that mistakes of state law can give rise to liability.
As the district court noted, the present case turns on the question of whether Utah or Ohio law governs the contract. This court has generally characterized Ohio law as “prohibit[ing] creditors from recovering attorney's fees in connection with the collection of a consumer debt,” Barany–Snyder v. Weiner, 539 F.3d 327, 332 (6th Cir.2008). It would be more precise to describe Ohio law as refusing to enforce such fee-shifting provisions. “Ohio has long adhered to the ‘American rule’ with respect to recovery of attorney fees: a prevailing party in a civil action may not recover attorney fees as part of the costs of litigation.” Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 906 N.E.2d 396, 400 (2009). The exceptions to the rule are “when a statute or an enforceable contract specifically provides for the losing party to pay the prevailing party's attorney fees or when the prevailing party demonstrates bad faith on the part of the unsuccessful litigant.” Id. (citation omitted). Ohio common law historically refused to enforce contracts for fee-shifting, particularly in the context of collection on a defaulted debt. See Miller v. Kyle, 85 Ohio St. 186, 97 N.E. 372, 372–73 (1911) (); see also Leavans v. Ohio Nat'l Bank, 50 Ohio St. 591, 34 N.E. 1089, syllabus 2 (1893). In more recent years, Ohio courts have enforced fee-shifting provisions in a number of contracts, while maintaining the law of Miller and Leavans.See Wilborn, 906 N.E.2d at 401 & n. 2. Finally, in 2000, the Ohio General Assembly passed a statute allowing for enforcement of fee-shifting provisions in certain commercial credit contracts. The statute limits the enforceability of such provisions to contracts for debt that is not “incurred for purposes that are primarily personal, family, or household,” and only if that debt is in an amount greater than $100,000. Ohio Rev.Code § 1319.02(A)(1).3 The General Assembly's exclusion of “personal, family, or household” debt reinforces Ohio's common-law rule that such provisions are not enforceable.
If Ohio law clearly applied to this...
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