Florida Court Holds Notice of Bankruptcy Sufficient for ‘Actual Knowledge’ of Representation by Counsel Under FCCPA

This article was originally published on the Maurice Wutscher blog and is republished here with permission.

The U.S. District Court for the Middle District of Florida, Orlando Division recently ruled that debtors’ FCCPA and TCPA claims did not arise out of and were not related to their mortgage to fall under the jury waiver provisions in the mortgage where the claims arose out of attempts to enforce a debt that was discharged in bankruptcy.

The Court also ruled the debtors sufficiently stated a claim under FCCPA by alleging the creditor received notice of the debtors’ bankruptcy case to constitute actual knowledge the debtors’ were represented by counsel.

A copy of the opinion in Bray et al v. PNC Bank, N.A. is available at: Link to Opinion.

The borrowers entered into a mortgage loan secured by their residential property.  Thereafter, the borrowers filed a voluntary Chapter 7 bankruptcy. The mortgage loan was listed in their bankruptcy filing.  The remaining debts, including the in personam debt held by the mortgagee, were discharged in bankruptcy. The mortgagee was sent notice of the discharge.

After the discharge, the mortgagee allegedly began sending mail and making calls to the borrowers supposedly attempting to collect on the debt.  The debtors filed a complaint alleging violations of the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. § 559.55 et seq., and the federal Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227.

The mortgagee moved to strike the plaintiffs’ jury demand pursuant to the jury waiver provision in the mortgage.  The debtors argued that this lawsuit is not “in any way related to” the note or mortgage. The Court agreed with the debtors.

The Court noted that several courts have ruled that FCCPA and TCPA claims are sufficiently related to mortgage documents to allow similar waivers to be enforced. See, e.g., Levinson v. Green Tree Servicing, LLC, No. 8:14-cv-2120-EAK-TGW, 2015 WL 1912276, at *2 (M.D. Fla. Apr. 27, 2015); Foley v. Wells Fargo Bank, N.A., 849 F. Supp. 2d 1345, 1352 (S.D. Fla. 2012) (collecting cases).

However, the Court here distinguished those cases.  In all of the cases, the Court explained, the disputes arose directly out of the defendants’ attempts to enforce the plaintiffs’ obligations under the note or mortgage agreement containing the waiver. See Levinson, 2015 WL 1912276, at *2 (“[The] [p]laintiffs acknowledge that [the defendant’s] alleged . . . violation of the FDCPA and FCCPA was due to [the plaintiffs’] failure to pay as contractually obligated under the same mortgage.

Here, however, the Court pointed out that the plaintiffs have alleged an intervening bankruptcy. The Court noted that the debtors’ claims here arise out of the mortgagee’s alleged attempts to enforce a debt that was discharged in bankruptcy and not for claims arising directly from the mortgage.

The Court ruled the debtors’ FCCPA and TCPA claims did not arise out of and are not sufficiently related to the mortgage to fall within the jury waiver provision in the mortgage, where the debtors’ claims arise out of the creditor’s attempts to enforce a debt that was discharged in bankruptcy, as opposed to arising directly from the mortgage.

The debtors also alleged that the mortgagee had actual knowledge that they were represented by counsel when the mortgagee received notice of the debtors’ bankruptcy case.

As you may recall, subsection 559.72(18) of the Florida Statutes prohibits direct communication with a debtor with respect to a debt “if the person knows that the debtor is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address.” “Actual knowledge is required to prove violations of Fla. Stat. § 559.72(18).” Nordwall v. PNC Mortg., No. 2:14-cv-747-FtM-CM, 2015 WL 4095350, at *3 (M.D. Fla. July 7, 2015).

The mortgagee argued that notice of the debtors being represented in a bankruptcy case is not sufficient to constitute actual knowledge that the debtors were represented with respect to this specific debt and relied on two recent decisions.  See Nordwall, 2015 WL 4095350, at *3 (holding that the plaintiff’s counsel’s “appearance in a separate [foreclosure] action does not constitute actual notice of representation for all-debt related activity”); Wright v. Select Portfolio Servicing, Inc., No. 8:14-cv-2298-T-30TGW, 2015 WL 419618, at *5 (M.D. Fla. Feb. 2, 2015) (“[T]he notice of appearance filed in the foreclosure action . . . was insufficient as a matter of law to place [the defendant] on notice that the [plaintiffs] were represented by counsel with respect to their debt.”).

However, the Court again agreed with the debtors.  The Court held that, when an attorney files a notice of appearance in a bankruptcy case, the scope of representation is readily ascertainable as being related to all collection efforts with respect to the debts listed in that bankruptcy action. Here, the Court noted, the debtors alleged that the debt was listed in the bankruptcy proceedings and the mortgagee received notice of those proceedings.

Accordingly, the Court held the debtors’ allegations were sufficient to state a claim under the FCCPA and denied the mortgagee’s motion to dismiss with respect to the FCCPA claim.

The debtors also asserted a claim pursuant to the TCPA alleging the mortgagee placed several calls to their cell phone using an automatic telephone dialing system, without their prior express consent.  The debtors also asserted that, if they did give consent, it was subsequently revoked.

The TCPA provides that “[i]t shall be unlawful for any person . . . to make any call (other than a call . . . made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227(b)(1)(A)(iii).  Prior express consent is an affirmative defense for which the defendant bears the burden of proof.  Lardner v. Diversified Consultants Inc., 17 F. Supp. 3d 1215, 1224 (S.D. Fla. 2014).

The Court held the debtors’ allegations were sufficient to state a claim under the TCPA and denied the defendant’s motion to dismiss with respect to the TCPA claim.  The Court avoided making any ruling as to revocation of consent as it was not clear from the pleadings if the plaintiffs ever provided consent.

Accordingly, the Court denied both the mortgagee’s motion to strike the debtors’ demand for jury trial and the mortgagee’s motion to dismiss.