Opinion
CIVIL ACTION NO. 02-2149
December 30, 2003
MEMORANDUM
Plaintiff Atuahene Oppong ("Mr. Oppong") brings this action against defendants First Union Mortgage Corporation ("First Union"), Wells Fargo Home Mortgage, Inc. ("Wells Fargo"), and Francis S. Hallinan ("Mr. Hallinan") (collectively "defendants") under the Fair Debt Collection Practices Act ("FDCPA" or "the Act"), 15 U.S.C. § 1692 et seq., based on defendants efforts to foreclose on a defaulted mortgage secured by Mr. Oppong's residence, located at 7200 Sprague Street, Philadelphia. Mr. Oppong also brings common law claims of assault and intentional infliction of emotional distress in connection with defendants' activities.
Presently before the court are First Union's motion for summary judgment and Wells Fargo's and Mr. Hallinan's motion for summary judgment. For the reasons that follow, the court finds that summary judgment is appropriate in favor of the defendants and against Mr. Oppong on the FDCPA claims. Mr. Oppong has failed to establish that defendants are "debt collectors" as defined by the Act. As the remaining state law claims are brought under this court's supplemental jurisdiction, the court will exercise its discretion and dismiss the claims without prejudice.
The following facts are either undisputed or, if disputed, viewed in the light most favorable to the non-moving party.
On March 6, 1995, CoreStates Mortgage Corporation ("CoreStates") loaned to Mr. Oppong the sum of $75,000, repayment of which was secured by a mortgage against Mr. Oppong's residence located at 7200 Sprague Street in Philadelphia, Pennsylvania. Shortly after closing, CoreStates sold the loan to Federal Home Loan Mortgage Corporation ("FHLMC"), but CoreStates retained the right to service the loan and mortgage for FHLMC.
On or about May 1, 1998, CoreStates was merged into First Union and First Union thereafter became the servicer of Mr. Oppong's loan and mortgage by operation of law. After its merger with CoreStates, First Union continued to service Mr. Oppong's loan and mortgage for FHLMC through March 15, 2001.
On March 16, 2001, the servicing rights of First Union were transferred to Wells Fargo pursuant to a Servicing Rights Purchase and Sale Agreement entered into between First Union and Wells Fargo on August 31, 2000. Under the agreement, First Union agreed to sell and transfer to Wells Fargo the right to service approximately $36 billion in residential mortgage loans, including Mr. Oppong's loan, that First Union was servicing for, or under pooled programs of, FHLMC and others.
Pursuant to the agreement, First Union, as successor by merger to CoreStates, caused Mr. Oppong's mortgage to be nominally assigned to Wells Fargo by assignment dated April 13, 2001, but made effective March 15, 2001, to facilitate Wells Fargo's servicing of the loan for FHLMC on and after March 16, 2001. By letter dated February 26, 2001, Mr. Oppong was informed by First Union that the servicing of the loan was being transferred from First Union to Wells Fargo effective on March 16, 2001.
Prior to the transfer of Mr. Oppong's loan and mortgage to Wells Fargo, in December 1997, First Union initiated a foreclosure action against Mr. Oppong in the Court of Common Pleas of Philadelphia County. This action was voluntarily withdrawn by First Union and in January 2000, a second foreclosure action was initiated by First Union against Mr. Oppong's residence. Thus, Mr. Oppong's loan and mortgage were in default prior to First Union's assignment of the loan and mortgage to Wells Fargo.
Mr. Oppong's last payment on the mortgage was in July or August of 1997. The exact date of Mr. Oppong's default on his loan and mortgage is not evident from the record before the court. For the purposes of this court's decision, however, it is important only that the default occurred at some point prior to First Union's assignment of Mr. Oppong's loan and mortgage to Wells Fargo, as evidenced by First Union's initiation of a foreclosure action in December 1997.
At some point prior to March 16, 2001, First Union retained Federman Phelan, a law firm, to prosecute the foreclosure action commenced in January 2000 against Mr. Oppong. Following March 16, 2001, Federman Phelan was utilized by Wells Fargo to prosecute the foreclosure action against Mr. Oppong. Mr. Hallinan is a partner at Federman Phelan.
A praecipe to substitute Wells Fargo as party plaintiff was entered in state court on July 24, 2001.
Mr. Oppong's FDCPA claim is based on allegations that Wells Fargo failed to provide him with a proper notice of validation of his debt, in violation of 15 U.S.C. § 1692g; that Wells Fargo furnished Mr. Oppong with deceptive and misleading forms, in violation of 15 U.S.C. § 1692j; that Wells Fargo, First Union and Mr. Hallinan used unfair and unconscionable means to collect Mr. Oppong's debt, in violation of 16 U.S.C. § 1692f; and that Mr. Hallinan verbally threatened and physically assaulted Mr. Oppong while attempting to collect Mr. Oppong's debt, in violation of 15 U.S.C. § 1692d. Along with the FDCPA claims, Mr. Oppong has brought common law claims of assault and intentional infliction of emotional distress against defendants.
II. DISCUSSION
A. The Standard for Summary Judgment.
A court may grant summary judgment only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" only if its existence or non-existence would affect the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). An issue of fact is "genuine" only when there is sufficient evidence from which a reasonable jury could find in favor of the non-moving party regarding the existence of that fact. Id. In determining whether there exist genuine issues of material fact, all inferences must be drawn, and all doubts must be resolved, in favor of the non-moving party. Coregis Ins. Co. v. Baratta Fenerty, Ltd., 264 F.3d 302, 305-06 (3d Cir. 2001) (citing Anderson, 477 U.S. at 248).
Although the moving party bears the burden of demonstrating the absence of a genuine issue of material fact, in a case such as this, where the non-moving party is the plaintiff, and therefore, bears the burden of proof at trial, that party must present affirmative evidence sufficient to establish the existence of each element of his case. Id. at 306 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Accordingly, a plaintiff cannot rely on unsupported assertions, speculation, or conclusory allegations to avoid the entry of summary judgment, see Celotex, 477 U.S. at 324, but rather, she "must go beyond the pleadings and provide some evidence that would show that there exists a genuine issue for trial." Jones v. United Parcel Service, 214 F.3d 402, 407 (3d Cir. 2000).
B. Defendants Are Not "Debt Collectors" As Defined By The FDCPA.
In order for Mr. Oppong to succeed on his FDCPA claim, he must demonstrate, as a threshold matter, that the defendants are "debt collectors" for the purposes of imposing liability under the Act. Under the FDCPA, the term "debt collector" generally refers to "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." 15 U.S.C. § 1692a(6).
Among the several statutory exceptions to the definition of "debt collector" is "any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person. . . ." 15 U.S.C. § 1692a (6)(F) (iii).
First Union, successor in interest of CoreStates through merger, was the original creditor of Mr. Oppong's loan and mortgage and remained the servicer of the mortgage until March 15, 2001. Although Mr. Oppong defaulted on his loan while it was being serviced by First Union, the debt "was not in default at the time it was obtained" by First Union. 15 U.S.C. § 1692a(6)(F)(iii). Thus, First Union is not a "debt collector" as defined by the FDCPA. See Dawson v. Dovenmuehle Mortgage, Inc., 2002 U.S. LEXIS 5688 *15 (E.D. Pa. Apr. 3, 2002) (finding that a "loan servicer . . . is not a `debt collector' if the servicer begins servicing of the loan before the default."); Oldroyd v. Associates Consumer Discount Co./PA, 863 F. Supp. 237, 241-42 (E.D. Pa. 1994) (finding that a loan servicer is not "debt collector" under the FDCPA). Accordingly, Mr. Oppong has failed to raise a genuine issue of material fact that First Union is a "debt collector" under the FDCPA. Summary judgment is, therefore, appropriate in favor of First Union and against Mr. Oppong.
Wells Fargo, by assignment from First Union, obtained its interest in Mr. Oppong's loan and mortgage after Mr. Oppong's default. As such, Wells Fargo stands in a different position vis-a-vis First Union. Because Wells Fargo obtained its interest in Mr. Oppong's loan and mortgage after Mr. Oppong had defaulted, Wells Fargo does not fall within the ambit of the statutory exception for those collecting debts "not in default at the time it was obtained by such person," as First Union did. 15 U.S.C. § 1692a(6)(F)(iii). However, the analysis does not end here.
According to the statute, the term "debt collector" does not include "any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor." 15 U.S.C. § 1692a(6)(A). "Creditors — as opposed to `debt collectors' — generally are not subject to the FDCPA." Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 403 (3d Cir. 2000).
A "creditor" is defined by the FDCPA as "any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of debt for another." 15 U.S.C. § 1692a(4). "Courts [have] interpret[ed] that language to mean that those who are assigned a defaulted debt are not exempt from the FDCPA if their principal purpose is the collection of debts or if they regularly engage in debt collection." Farber v. NP Funding II L.P., 1997 WL 913335 *3 (E.D.N.Y. Dec. 9, 1997); Cirkot v. Diversified Financial Systems, Inc., 839 F. Supp. 941, 944 (D. Conn. 1993); see also Pollice, 225 F.3d at 404 (noting both that defendant business was assigned claims after default and that debt collection was the "principal purpose" of the business in finding the business to be a "debt collector" under the FDCPA).
The evidence on record shows that Wells Fargo is a subsidiary of Wells Fargo Company, a "diversified" financial services company and that defendant Wells Fargo, a California corporation, is a home lender providing mortgage servicing to its customers. The record also shows that Wells Fargo purchased, pursuant to a Servicing Rights Purchase and Sale Agreement entered into between it and First Union on August 31, 2000, approximately $36 billion in residential mortgage loans from First Union, of which plaintiff's loan was an infinitesimal part of the transaction. Thus, it appears that Wells Fargo's principal purpose is the making and servicing of mortgages and loans.
On the other hand, Mr. Oppong has proffered no evidence, aside from Wells Fargo's involvement in the foreclosure action against Mr. Oppong, to support a finding that the collection of debts is the "principal purpose" of Wells Fargo's business or that Wells Fargo is "regularly" engaged in debt collection. Given that the statute places the burden on the plaintiff to show that a defendant's "principal purpose" is the collection of debts, the court finds that Mr. Oppong has failed to raise a genuine issue of material fact that Wells Fargo is a "debt collector" under the FDCPA. Summary judgment is, therefore, granted in favor of Wells Fargo and against Mr. Oppong on this claim.
Finally, Mr. Hallinan is an attorney associated with the law firm of Federman Phelan. Federman Phelan was retained by First Union and Wells Fargo to prosecute the foreclosure actions against Mr. Oppong.
Attorneys are not exempt from the definition of "debt collector" to the extent that they are "regularly" involved in debt collection activity.Crossley v. Lieberman, 868 F.2d 566, 569-70 (3d Cir. 1989). The burden is on the plaintiff to show that a defendant attorney is a "debt collector," i.e., regularly engaged in debt collection activity. Schroyer v. Frankel, 197 F.3d 1170, 1176 (6th Cir. 1999). Mr. Oppong, however, has provided no evidence as to the regularity of Mr. Hallinan's debt collection activity other than to point to Mr. Hallinan's involvement in this case. Given that the statute places the burden on the plaintiff to show that a defendant attorney is "regularly" involved in the collection of debts, the court concludes that Mr. Oppong has failed raise a genuine issue of material fact that Mr. Hallinan is a "debt collector" for the purposes of imposing liability under the FDCPA. The court finds that summary judgment is, therefore, proper in favor of Mr. Hallinan and against Mr. Oppong on Mr. Oppong's FDCPA claims. See Schroyer, 197 F.3d at 1176.
"In identifying such attorneys, other courts have relied upon a variety of factors, including the volume of the attorney's collection activities, the frequent use of a particular debt collection document or letter, and whether there exists a steady relationship between the attorney and the collection agency or creditor he represented. Courts have considered what portion of the overall caseload debt collection cases constitute, and what percentage of revenues derive from debt collection activities. Some have maintained that even where debt collection takes up a minor portion of a law practice, debt collector' liability may lie where the defendant has an `ongoing relationship' with a client whose activities substantially involve debt collection."Schrover, 197 F.3d at 1176(citations omitted); see also Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll Bertolotti, 155 F. Supp.2d 60, 64 (S.D.N.Y. 2001). Aside from Mr. Hallinan's involvement in the foreclosure action against Mr. Oppong, Mr. Oppong has provided no evidence of other debt collection activities by Mr. Hallinan for the court to consider.
C. The State Law Claims Are Dismissed Without Prejudice.
The remainder of Mr. Oppong's claims are brought pursuant to state law over which this court has only supplemental jurisdiction pursuant to 28 U.S.C. § 1367. The court needs to decide whether to exercise its discretion and retain the claims or dismiss the claims without prejudice. Borough of West Mifflin v. Lancaster, 45 F.3d 780, 788 (3d Cir. 1995) ("[W]here the claim over which the district court has original jurisdiction is dismissed before trial, the district court must decline to decide the pendant state claims unless considerations of judicial economy, convenience, and fairness to the parties provide an affirmative justification for doing so.") (citations omitted). Given that Mr. Oppong is presently litigating other claims relating to the foreclosure of the property located at 7200 Sprague Street — the property implicated in this case and the basis for dispute here — in state court against some of these very defendants, judicial economy will be best served by having the related issues fully aired out and adjudicated upon at the state level.
Mr. Oppong has indicated in his complaint that the state law claims are brought pursuant to the this court's supplemental jurisdiction under 28 U.S.C. § 1367.
For this same reason, the court has placed civil action no. 03-5456 in suspense pending the outcome of the state court proceedings.
III. CONCLUSION
Summary judgment is proper in favor of defendants and against Mr. Oppong on the FDCPA claims because Mr. Oppong has failed to establish that the defendants are "debt collectors" as defined by the Act. As this court has only supplemental jurisdiction over the remaining state law claims, these claims shall be dismissed without prejudice.
An appropriate order follows.
ORDER
AND NOW, this ___ day of December 2003, it is hereby ORDERED that defendants' motions for summary judgment (doc. nos. 30, 31) shall be GRANTED in accordance with the accompanying memorandum.It is FURTHER ORDERED that JUDGMENT shall be ENTERED in favor of defendants and against plaintiff as to count I of plaintiff's complaint.
It is FURTHER ORDERED that plaintiff's state law claims, counts II and III of the complaint, shall be DISMISSED without prejudice.
AND IT IS SO ORDERED.