Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing as moot debtor’s appeal of Bankruptcy Ct. order that directed debtor to amend his Chapter 13 reorganization plan by requiring that debtor make $15,000 additional payment to unsecured creditors to reflect fact that debtor had failed to include his pending workers’ compensation lawsuit in his Schedule B asset list. Debtor ultimately received $92,000 workers compensation award, and while his appeal before Dist. Ct was still pending, debtor voluntarily amended his reorganization plan by adding $15,000 payment requirement. Moreover, debtor’s Chapter 13 plan was subsequently dismissed where debtor had failed to make $15,000 payment as required by amended plan. Ct. of Appeals rejected debtor’s argument that his appeal was not moot because he had no choice but to file amended reorganization plan, since debtor could have pursued other avenues to preserve his challenge to underlying order that required amendment of reorganization plan. Also, where debtor’s bankruptcy petition had been dismissed, there was no remaining reorganization plan to enforce, and thus Dist. Ct. was free to rely on general rule that bankruptcy petition dismissal results in dismissal of other related proceedings.

Dist. Ct. did not err in dismissing for lack of Article III standing plaintiff’s Fair Debt Collection Practices Act (FDCPA) claim, alleging that defendant violated 15 USC section 1692g(a)(3) by sendig debt-collection letter that told plaintiff that if she not dispute debt in writing within 30 days, defendant would assume that debt was valid. While plaintiff asserted that she was confused by letter, she failed to allege any concrete injury such as contending that letter’s alleged lack of clarity led her to take any additional step such as paying money she did not owe. Moreover, plaintiff’s contention that debt collector violated FDCPA by telling her to communicate in writing was insufficient to establish any actual injury, where plaintiff failed to explain how writing requirement deterred her from disputing debt, or how disputing her debt would have done her any good. As such, plaintiff was no worse off than if instant letter had told her that she could dispute debt orally.

Dist. Ct. did not err in dismissing for failure to state cause of action, cross-plaintiffs' RICO action, alleging that cross-defendants-two law firms, which performed real-estate-related services on behalf of bank, committed financial institution fraud under 18 USC section 1962(c) and collected on unlawful debt. To state cause of action under section 1962(c), cross-plaintiffs were required to allege that instant law firms engaged in conduct of an enterprise through pattern of racketeering activity or collection of unlawful debt, and instant action failed to state viable action under section 1962(c) where allegations regarding law firms’ mere provision of legal services to alleged racketeering enterprise did not meet operation or management element of said offense. In this regard, cross-complaint alleged that seller of hotel properties colluded with bank and others to inflate appraised values of hotels that caused purchaser of hotels to eventually default on loans generated by said bank. However, cross-complaint failed to adequately plead that law firms either played role in operating or managing bank, or conspired to commit RICO violation or invested income from pattern of racketeering. Furthermore, even if law firms knew or should have known that instant appraisals were inflated, alleging such knowledge, by itself, was insufficient to state RICO claim against law firms.

Dist. Ct. erred in granting defendants’ motion for summary judgment in action by plaintiff-buyer of business owned by defendants seeking $2 million held in escrow fund created by instant sale of business to resolve disputes relating to purchase of business. Record showed that plaintiff spent over $1 million to compensate each of its current customers of business for alleged improper billing practices of defendants, as well as several hundred thousand dollars spent in investigating said practices. Dist. Ct. held that plaintiffs had failed to meet strict 10-day deadline for claiming indemnification from escrow account. However, Ct. of Appeals, in reversing Dist. Ct., found that issue of whether plaintiff’s demand for indemnification came within 10-day limitations period could not be resolved via summary judgment motion. Moreover, record otherwise demonstrated that, even if plaintiff was late in making instant demand, defendants could not use said fact to defeat instant indemnification claim, since undisputed facts showed that defendants did not irrevocably forfeit any rights or defenses to underlying disputes at issue in indemnification claim by reason of timing of plaintiff’s demand, as required by language in purchase agreement.

Magistrate Judge erred in granting plaintiffs-debtors’ motion for summary judgment in their action alleging that defendant-debt collector violated Fair Debt Collection Practices Act (FDCPA) by sending dunning letter that lacked statement indicating that interest was accruing on their debts. Dismissal of plaintiffs’ claims was required, where plaintiff failed to present facts in their affidavits supporting their summary judgment motion indicating that they had suffered concrete and particularized injury that was fairly traceable to challenged conduct and likely redressable by judicial decision. Ct. rejected plaintiffs’ contention that instant alleged violation was enough, by itself, to establish concrete injury necessary for standing, since failure to provide required information under FDCPA inflicts concrete injury only if it impairs plaintiffs’ ability to use withheld information for substantive purpose that statute envisioned. Here, record contained no evidence that absence of statement about interest had any effect on how plaintiffs responded to dunning letter or managed their debts.

Plaintiffs-debtors lacked standing to bring action under Fair Debt Collection Practices Act (FDCPA), where defendant-debt collector sent dunning letter stating that creditor might seek foreclosure of mechanics lien, covenant, mortgage or security agreement as it pertained to plaintiffs’ $2,000 debt. While statement in dunning letter was legally and factually correct, plaintiffs asserted that it was false and misleading because debt collector would have found it too costly to pursue foreclosure to collect instant $2,000 debt. Although Dist. Ct. dismissed case on its merits, Ct. of Appeals found that case should have been dismissed for lack of Article III standing, since plaintiffs failed to alleged how said statement injured them when plaintiffs did not pay anything in response to said statement and did not allege that said statement reduced their credit rating. Fact that plaintiffs were annoyed or intimidated by said statement, or that plaintiff’s claim concerned alleged substantive right under FDCPA did not require different result.

Plaintiff-debtor lacked standing to bring action under Fair Debt Collection Practices Act (FDCPA), alleging that defendant-debt collector sent false dunning letter that offered to settle debt at 50% of what was owed, but informed plaintiff that if creditor ended up forgiving more than $600, it would be required to report said forgiveness as taxable income to IRS on Schedule 1099C. Record showed that plaintiff essentially asked defendant to forgive entire $1,012 debt, and thus plaintiff would be subject to such reporting. While Dist. Ct. dismissed case on merits, plaintiff lacked Article III standing to bring instant action because she could not establish any concrete injury arising out of said alleged violation, where: (1) plaintiff conceded that dunning letter had not injured her; (2) plaintiff did not pay something that she did not owe; and (3) statement regarding obligation to report forgiveness of debt to IRS did not affect her credit rating or discourage anyone from doing business with her. Fact that complaint purported to allege violation of substantive as opposed to procedural right under FDCPA or that plaintiff claimed that she was confused by dunning letter did not require different result.

Plaintiff-debtor brought action under Fair Debt Collection Practices Act (FDCPA), alleging that defendant-debt collector violated FDCPA by sending dunning letter that provided total balance of debt, but failed to indicate whether said debt might increase with accrual of interest. In its motion to dismiss, defendant asserted among other things that plaintiff lacked Article III standing because no interest actually accrued on plaintiff’s debt, and thus plaintiff lacked any actual injury arising out of alleged violation. While Dist. Ct. dismissed case on other grounds, remand was required to resolve standing issue, where plaintiff asserted her injury arose out of accrual of interest, and where defendant disputed truthfulness of plaintiff’s claim that she incurred injury due to defendant’s withholding of required information about interest on debt. As such, Dist. Ct. must hold evidentiary hearing to resolve factual dispute concerning plaintiff’s standing to proceed on claim.