Consumer Finance Litigation

Andrew D. Dunavant, Jr., and Mary Dunavant (the Dunavants) appealed the district court's partial denial of their motion for summary judgment and its grant of the defendant's motion for summary judgment. Dunavant v. Sirote & Permutt, P.C., 2015 WL 525536, 1 (11th Cir. Feb. 9, 2015) (per curiam). The Dunavants allege that the defendant, Sirote & Permutt, P.C. (Sirote), unlawfully published two notices of foreclosure sale for the Dunavants' property after a state court enjoined the foreclosure action. Id. On appeal, the Dunavants first argue that the district court incorrectly dismissed their claim under Section 1692e(5) of the Fair Debt Collection Practices Act (FDCPA) for failure to show that Sirote's publication of the foreclosure notices amounted to the collection of a debt. Id. at 2. Second, the Dunavants argued the district court erred by dismissing their claim under Section 1692f(6) of the FDCPA as barred under the doctrine of res judicata. Id. Third, the Dunavants argued that the district court improperly dismissed their state-law claim Id. After careful consideration, the appellate court affirmed. Id. Relevant to the court's decision affirming the trial court is the analysis of whether publication of notices about a foreclosure sale falls within the purview of the FDCPA. That is, does every notice in a foreclosure action, the enforcement of a security interest, constitute debt collection? The Dunavant court said no. Reiterating its published opinion in Reese, the Eleventh Circuit stated that, "[I]n order to state a plausible FDCPA claim under § 1692e, a plaintiff must allege ... that the challenged conduct is related to debt collection." Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1216 (11th Cir. 2012); see also Warren v. Countrywide Home Loans, Inc., 342 F. App'x 458, 460 (11th Cir. 2009) (per curiam) (an enforcer of a security interest, such as a [mortgage company] foreclosing on mortgages of real property ... falls outside the ambit of the FDCPA except for the provisions of section 1692f(6)). Based on Reese and Warren, the Court explained the alleged violator must actually seek to collect the debt--an amount due and owing--in order to trigger the FDCPA. In support of this analysis, the court also relied on its decision in Birster in which it advised that if a defendant seeks to enforce a security instrument and collect a debt, then a defendant "may be liable under the FDCPA beyond § 1692f(6) even though it was also enforcing a security interest." Birster v. Am. Home Mortg. Serv., Inc., 481 F. App'x. 579, 582 (11th Cir. 2012) (per curiam). Because the mere activity of publishing notices did not also seek to collect an amount due and owing, the notifications were merely informational in nature as an ancillary activity to enforcement of a security instrument. In response to the Dunavant's argument that Birster overruled Warren, the Eleventh Circuit clarified that these decisions do not conflict. In Warren, a mortgagor argued that the mortgagee violated the FDCPA by failing to respond to a request for verification of his debt before conducting a foreclosure sale of his home, in a non-judicial foreclosure action. 342 F. App'x at 459. However, the court held that enforcement of a security instrument through a mortgage foreclosure action is not debt collection within the scope of the FDCPA. Id. at 460. In Birster, a loan servicer made harassing phone calls and home inspections, and sent the mortgagors a notice of default. 481 F. App'x at 580-81. The mortgagors alleged that these actions violated the FDCPA. Id. Following with Warren decision, the district court held that the conduct related to the enforcement of the mortgage, a security interest, and therefore, fell outside the purview of the FDCPA. Id. at 582. On appeal, however, the Eleventh Circuit relied on its Reese decision and reversed the district court, holding that an entity can both enforce a security interest and collect a debt. Id. at 583. The court emphasized that communications or conduct can have dual purposes. Id. Taking these decisions together, it is clear that in the foreclosure context, some conduct will constitute debt collection, other conduct will merely be enforcement of a security interest, particularly in non-judicial foreclosure states, and still other conduct could constitute both. But, how do these decisions apply in states like Florida, in which foreclosure can only occur through judicial proceeding? Does a judicial foreclosure proceeding constitute debt collection? What if the plaintiff seeks a deficiency judgment? It remains unclear how the Eleventh Circuit will answer these questions. To read the Court's full opinion, click here.