Minnesota Court Rules Attorney Serving Notice of Lien Not Immune from FDCPA Requirements

On Monday the Minnesota Court of Appeals reversed a lower court decision granting summary judgment in favor of a debt collector attorney on whether the Fair Debt Collection Practices Act (FDCPA) applied to an attorney who, in the course of complying with the Minnesota Mechanic’s Lien statute, served two mechanic’s lien statements on a consumer and his spouse. The case is Randall v. Pall, (Case No. A16-1745, MN Court of Appeals).

A copy of the court’s opinion can be found here. 

Background

Bruce and Kathy Randall hired Northstar Design and Build, Inc. (Northstar) to complete a home improvement project during the summer of 2014. On September 26, 2014, respondent William Paul, counsel for Northstar, served the Randalls via certified mail with a copy of a mechanic’s lien statement and a letter, which said, “please find [enclosed] a copy of the Mechanic's Lien Statement which is going to be recorded in the immediate future.” Among other things, the lien statement provided that Northstar intended “to claim and hold a lien upon” the Randalls’ land for the home improvement work in the amount of $9,901.75, which was “due and owing.” On October 2, 2014, Paul recorded the lien statement.

On October 6, 2014, Paul served the Randalls via certified mail with a second copy of the mechanic’s lien statement. For purposes of summary judgment, the parties appear to agree that the second copy of the lien statement was the same as the first copy, except it included an attachment providing a legal description of the Randalls’ property. Paul explained in an accompanying letter to the Randalls that he realized after serving the first copy that he had failed to include the attachment, he was serving “a conformed copy” of the lien statement, and he had recorded the lien statement. 

Over one year later, on October 15, 2015, the Randalls sued Paul for damages under the FDCPA, claiming that Paul failed to provide what the parties call a “mini-Miranda” warning advising them that he was a debt collector and that anything they said could be used in a debt collection action. The complaint also alleged that Paul failed to send the Randalls a validation notice verifying the amount owed and providing the procedures they could follow if they disputed the debt.

Paul moved for summary judgment, arguing that the letters and service of the mechanic’s lien statements were not subject to the FDCPA because they were not “communications” regarding a debt collection action, and he was complying with the requirements under Minn. Stat. § 514.08 to perfect the lien.

The district court granted Paul’s summary judgment motion and dismissed the complaint, concluding that the Randalls were not entitled to relief as a matter of law because Paul’s communications with them did “not trigger the protections afforded by the FDCPA.” 

The Randalls appealed the district court decision. 

Issue Presented 

The appellate court determined that the case presented the following issue:  Did the district court err in granting Paul summary judgment based on its determination that Paul’s service of two mechanic’s lien statements was not, as a matter of law, a “communication” under the FDCPA? 

The Court’s Opinion 

For purposes of the summary judgment motion, it was undisputed that the mechanic’s lien involved a disputed debt between the Randalls and Northstar, and Paul did not include mini-Miranda warnings in the service letters or lien statements or send the Randalls a validation notice. 

Also, Paul did not contest that, when he served the mechanic’s lien statements, he was acting as a “debt collector,” as that term is defined under the FDCPA.

Thus, the sole issue on appeal was whether there are genuine issues of material fact that Paul’s service of two mechanic’s lien statements in September and October 2014 were “communications” “made in connection with the collection” of a debt under the FDCPA.

The court wrote: 

“The Randalls contend that Paul’s two communications triggered FDCPA protections because they were “associated with the collection of a debt,” and fact questions exist that preclude summary judgment. Paul responds that his service of the lien statements was not an attempt to collect the debt, but rather was a necessary step under Minnesota law to perfect the lien. 

In granting Paul’s summary judgment motion, the district court determined that Paul’s communications with the Randalls were not subject to the FDCPA as a matter of law because Paul merely notified the Randalls “of the legal status of the case,” the service letters “included no demand for payment or a threat if payment was not received, and were not an attempt to get immediate payment,” and Paul was “not actively seeking to collect a debt on behalf of his client.” 

All that is required to trigger FDCPA initial notice requirements is a debt collector’s oral or written communication with a debtor made in connection with a debt collection. 15 U.S.C. §§ 1692e(11), 1692g(a). The fact that such a communication is also mandated by state law does not affect the FDCPA’s applicability. In other words, the FDCPA and the Minnesota mechanic’s lien statute are not mutually exclusive, and a debt collector may be required to comply with both laws. 

Keeping in mind the FDCPA’s broad remedial purpose, we conclude that a debt collector is not immune from FDCPA liability by virtue of complying with a state statute. Therefore, Paul was not immune from the FDCPA solely by reason of complying with Minn. Stat. § 514.08.” 

Once the court found that the FDCPA did apply to the defendant, the court moved to a discussion of whether a genuine issue of material fact exists regarding whether Paul’s service of the mechanic’s lien statements was a communication made in connection with a debt collection. 

The opinion states:

“We begin our analysis with the FDCPA’s definition of a “communication,” “the conveying of information regarding a debt directly or indirectly to any person through any medium,” and conclude that Paul’s service of the mechanic’s lien statements meets this “broad” definition because the lien statements and accompanying service letters conveyed information “regarding” the debt that the Randalls allegedly owed Northstar. 

But a debt collector’s communication to a debtor triggers FDCPA initial notice requirements only if it is made “in connection with the collection” of a debt. 

Whether a communication has the requisite connection with a debt collection activity is an objective, “commonsense inquiry” and is generally a fact question reserved for a fact finder. 

In granting Paul’s summary judgment motion, the district court noted that Paul did not explicitly demand payment or threaten consequences for non-payment in either his service letters or the mechanic’s lien statements. We also note that Paul did not provide a deadline for payment in his communications. But the district court erred by failing to view the evidence in the light most favorable to the Randalls. 

For instance, a reasonable fact-finder could conclude that Paul’s animating purpose in sending the lien statements was to induce payment because the statements expressly provided that “[t]he amount for the lien claimed is $9,901.75, and is due and owing to the lien claimant for labor performed and material furnished to the land.” (Emphasis added.) The statements also identified Northstar as the lienholder and provided Northstar’s mailing address. 

Viewing the evidence in the light most favorable to the Randalls, we conclude that there is a genuine issue of material fact on whether the “animating purpose” of Paul’s communications was to induce payment. Accordingly, the district court erred in granting summary judgment to Paul.” 

insideARM Perspective 

This case highlights the argument for attorneys to consider the absolute most conservative position in regard to FDCPA applicability in any instance.  The lesson: When in doubt, the FDCPA applies. 

However, one wonders if the result in this case would have been different if the attorney had argued that he was not a “debt collector” as that term is defined under the FDCPA.  Under the FDCPA , the term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another (emphasis added by insideARM). If the attorney does not “regularly collect” or his “principal practice” is not “the collection of debts” would the same result have occurred?