McNair vs. Maxwell & Morgan PC, 893 F.3d 680 (9th Cir. 2018)
McNair vs. Maxwell & Morgan PC, 893 F.3d 680 (9th Cir. 2018): 9th Circuit Court of Appeals holds that an attorney who does a judicial foreclosure on a piece of real property owned by an individual homeowner, is a “debt collector”, who is subject to the Fair Debt Collection Practices Act (“FDCPA”) and that a Court can order that attorney to pay damages, to the consumer homeowner, per the FDCPA, if the attorney did not comply with what the FDCPA requires. An attorney doing a judicial foreclosure would almost certainly NOT have done the things the FDCPA requires doing.
More specifically McNair decision holds that SUMMARY:
The Ninth Circuit has held that attorneys seeking a judicial foreclosure against a homeowner may be held liable under the FDCPA as “debt collectors” because the applicable state statute permitted deficiency liability, even though the attorneys did not seek a deficiency judgment against the homeowner. [McNair vs. Maxwell & Morgan PC, 893 F.3d 680 (9th Cir. 2018).]
FACTS: A homeowner defaulted on her HOA dues. A law firm, acting on behalf of the HOA, eventually obtained a writ of special execution for foreclosure on the home. The foreclosure sale completely satisfied the debt owed by the homeowner to the HOA. The homeowner later sued the firm under the Fair Debt Collection Practices Act (“FDCPA”), claiming that the firm had violated the FDCPA by misrepresenting the amount of the debt that she owed and by seeking attorney’s fees to which the firm was not entitled. The district court granted summary judgment against the homeowner on the ground that the firm was not engaged in “debt collection” for purposes of the statute and that the filing of the writ did not violate the statute because the state court approved the attorney’s fees claimed in the writ.
REASONING: The Ninth Circuit first held that the FDCPA did apply to the firm’s collection efforts. The firm argued that under Ho vs. ReconTrust Co., NA, 858 F.3d 568 (9th Cir.), cert. denied, 138 S. Ct. 504 (2017), the firm could not be held liable because it was merely pursuing foreclosure, rather than seeking to collect a debt. But the court reasoned that Ho involved a nonjudicial foreclosure, which (under California law) precluded deficiency liability. By contrast, in the present case, the relevant Arizona statute theoretically permitted the recovery of a deficiency following the judicial foreclosure. Therefore, Ho was distinguishable, and the firm’s conduct fell within the scope of the FDCPA.
The court then went on to hold that even though the state court eventually approved the attorney’s fees claimed by firm acting on behalf of the HOA, the application filed by the firm falsely implied that its fees had already been approved. That false statement provided an independent ground for FDCPA liability.