Lawsuit Text
The U.S. Supreme Court denied this Certiorari.
In the Supreme Court of the United States
October Term, 1998
GERALD J. VAN GEMERT and
THE LAW OFFICES OF GERALD J.
VAN GEMERT, a Professional Corporation,
Petitioners,
-V-
ANDREW LADICK,
Respondent.
On Petition for Writ of Certiorari to the United
States Court of Appeals for the Tenth Circuit
PETITION FOR A WRIT OF CERTIORARI To The UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT
Gerald J. Van Gemert
James A. Judge
Counsel of Record
GERALD J. VAN GEMERT, P.C.
19900 MacArthur Blvd., Suite 1070
Irvine, California 92612
(714) 833-8633
Dennis P. Derrick
Counsel of Record
Seven Winthrop Street
Essex, Ma 01929
(978) 768-6610
Questions Presented.
1. Does a common area maintenance assessment qualify as a "debt' within the Fair Debt Collection Practices Act, 15 U.S.C. S.S. 1692 et seq ("FDCPA"), where the assessment is statutorily imposed, no extension of credit is involved and there is no contractual, business or consensual arrangement concerning this assessment between the common interest development association and the separate interest owner?
2. Can the FDCPA's definition of "debt" encompass the collection of such common area maintenance assessments consistent with the Tenth Amendment to the federal Constitution where the State of California already has promulgated a comprehensive statutory scheme which closely regulates common interest developments and the collection of common area maintenance assessments?
The petitioner Law Offices of Gerald J. Van Gernert is an independent professional corporation with no parent companies and no nonwholly owned subsidiaries.
Citations of Opinions and Orders.
The opinion of the United States Court of Appeals for the Tenth Circuit in Andrew Ladick v. Gerald J Van Gemert et al., _ F.3d _ (10th Cir. 1998), is set forth in the Appendix hereto (App. I a-6a). The unpublished order of the United States District Court for the District of Colorado granting the petitioners' motion for summary judgment in Andrew Ladick v. Gerald J Van Gemert et al., is set forth in the Appendix hereto (A.7a-9a).
Basis for Jurisdiction in this Court
The judgment of the United States Court of Appeals for the Tenth Circuit was entered on June 9, 1998.
There has been no motion for rehearing or reconsideration or any other order granting an extension of time to file the petition for a writ of certiorari. This petition for writ of certiorari has been filed within ninety (90) days of June 9, 1998. 28 U.S.C. &2101(c).
The jurisdiction of this Court is invoked pursuant to the provisions of 28 U.S.C. S.1254(l).
The Constitutional and Statutory Provisions
Implicated By This Petition.
United States Constitution, Amendment X:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
This petition also involves the provisions of the Fair Debt Collection Practices Act, 15 U. S.C. S.S.1692 et seq. The full text of this statutory scheme is set forth in the Appendix hereto (App. Ia-30a).
This petition also implicates the provisions of the Davis Stirling Common Interest Development Act, California Civil Code, S.S. 13 50 -1377 (1985). The relevant portions of that statutory scheme are set forth in the Appendix hereto (App. 31 a-42a).
Statement of the Case.
The respondent Andrew Ladick ("Ladick") is an individual who has resided in Monument, Colorado at all the times pertinent to this civil action. Before moving to Colorado, Ladick had owned a condominium in a so-called common interest development in Rancho Santa Margarita, California, known as the Rancho Santa Margarita Landscape and Recreation Corporation ("SAMLARC"). This entity is a California corporation and is a homeowners' association which is empowered by the Davis-Stirling Common Interest Development Act, California Civil Code, S.S.1350-1377 (1985), to budget, levy and collect sufficient funds from the separate interest owners such as Ladick to maintain upkeep of the common areas (e.g., landscaping, streets, recreational facilities, etc.).
If a separate interest owner like Ladick fails to pay the assessment which SAMLARC has duly levied, it is required by the state's statutory scheme to notify the owner of the delinquent fees by certified mail, providing him with an itemized statement of the charges owed, "including items on the statement which indicate the principal owed, any late charges and the method of calculation, any attorney's fees, and the collecting practices used by the association, including the right of the association to the reasonable costs ofcollection." Cal. Civ. Code, S.1367(b)(App. 40a).
If the owner still refuses to pay the common area maintenance assessments, the homeowners' association can then cause to be recorded with the county recorder of the county where the separate interest is located a so-called notice of delinquent assessment. Id. S. 13 67(b)(App. 40a). This recorded notice by statute constitutes a lien on the owner's interest in the common interest development. Id.
After the expiration of thirty (30) days following the recording of the lien, the association may enforce the lien in any manner provided by law, including sale by the court, sale by the trustee designated in the notice of delinquent assessment, or sale by a substituted trustee Id. S. 13 67(e)(App. 41 a). But each one of these steps toward obtaining a deficiency judgment against a separate interest owner such as Ladick is closely circumscribed by the statutory scheme and can only be accomplished in strict compliance therewith (App. 41 a 42a).
Importantly, the common area maintenance assessments are imposed upon separate interest owners like Ladick automatically under California's statutory scheme. That is, Section 1366(a) of the Davis Stirling enactment provides that the association "shall levy" such assessments; and section 1367 (a) provides that such assessments "shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied" (App. 36a;39a). Thus neither Ladick as a separate interest owner nor the homeowners' association may decide not to levy these assessments. Nor is it necessary that either or both to them assent to the imposition of such assessments. Instead, the assessments arise irrespective of agreement as a statutory incident of being a separate interest owner in a common interest development in California.
The petitioner Gerald J. Van Gernert ("Van Gernert") is an attorney engaged in the practice of law in California as the principal of the co-petitioner Gerald J. Van Gernert, a Professional Corporation. Van Gernert offers his legal services to common interest developments such as SAMLARC and part of his representation includes the collection of delinquent homeowners' association assessments through the courts of California.
Acting on behalf of SAMLARC, Van Gemert wrote Ladick on or about March 14, 1995, at his home in Colorado seeking to collect from him a common area maintenance assessment which was levied upon Ladick as a separate interest owner of SAMLARC. Van Gernert's letter did not contain the validation notice or the debt collection warning prescribed by Sections 1692g(a) and 1692e(11), respectively, of the Fair Debt Collection Practices Act ("FDCPA") (App. 18a-20a).
In the wake of this communication from Van Gernert, Ladick brought this civil action in the District Court for the District of Colorado against Van Gernert and his law firm alleging a violation of the FDCPA, seeking a declaratory judgment to that effect and requesting a statutory award of damages. He invoked the jurisdiction of the District Court because of the federal question involved (28 U.S.C. S.1331) and pursuant to the express terms of the FDCPA itself, 15 U.S.C. S.1692k(d)(App. 24a).
Following the filing of Van Gernert's answer and some discovery, both he and Ladick filed motions for summary judgment. After considering the written and oral arguments of counsel, the District Court, Daniel, J., allowed Van Gemert's summary j udgment motion (App 7a-9a). In his memorandum of decision filed March 20, 1997, the District Judge found that the common area assessment sought to be collected by Van Gernert was not a "debt" within the meaning of the FDCPA and he accordingly allowed summary judgment in Van Gernert's favor (App. 8a-9a).
Upon Ladick's appeal, the United States Court of Appeals for the Tenth Circuit reversed the District Judge's ruling and remanded for further proceedings, holding that the condominium assessment sought to be collected by Van Gernert was a "debt" within the FDCPA (App. 1a-6a). Guided by its recent decision in Snow v. Riddle, 143 F.3d 1350 (10th Cir. 1998), the court of appeals in an opinion authored by Anderson, J., first determined that even though a condominium assessment does not involve an extension of credit and may resemble a tax, it was nevertheless a "debt" under the FDCPA (App. 3a-4a).
The FDCPA's definition of "debt" is
any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family or household purpose, whether or not such obligation has been reduced to judgment.
(App. 11a). Relying upon its prior reasoning in Snow, the court ruled that the plain meaning of this statutory definition does not require that there be an offer or extension of credit in order for an obligation to qualify as a "debt" within the FDCPA (App. 4a).
The court of appeals then ruled that the obligation to pay a common area assessment arising out of the purchase of the condominium itself as a covenant running with the property amounted to a "transaction" for the purposes of the FDCPA's definition of debt (App. 5a). Even though the FDCPA's provisions did not define the term "transaction," the court ruled as a matter of law that Ladick's purchase of the condominium unit was an event which triggered his duty to pay the common area assessments pursuant to the governing documents of the association and was therefore a qualifying "transaction" within Section 1692a(5) of the FDCPA (App. 5a).
Finally, the court concluded that even though the assessment concerned the upkeep of common areas, it nevertheless had a primarily personal, family or household purpose as required by the FDCPA's definition of "debt" (App. 6a).
The decision of the court of appeals was filed on June 9, 1998 (App. 1a). Van Gemert has duly filed this petition for writ of certiorari to the Court of Appeals for the Tenth Circuit within ninety (90) days of the entry of this order.
Reasons For Granting The Writ.
1. The Decision Below Is In Direct Conflict With The Decisions Of Other Courts Of Appeals Which Have Addressed The Important Federal Question Of Identifying The Nature Of The "Debt" Contemplated By The FDCPA And The Kind Of "Transaction" It Was Reasonably Intended To Encompass.
The FDCPA allows consumers who have been subjected to abusive, deceptive and unfair debt collection practices to recover damages, attorney's fees and costs. 15 U.S.C. S.1692k (a). A threshold requirement for application of the FDCPA is that the prohibited practices be employed in an attempt to collect a "debt." See Mabe v. G. C Servs. Ltd Partnership, 3 2 F.3d 86,88 (4th Cir. 1994), Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1167 (3rd Cir. 1987). The salient circumstance giving rise to the existence of a "debt" for purposes of the FDCPA is that it be an obligation of a consumer to pay money arising from a transaction whose subject is primarily for personal, family or household purposes. 15 U. S.C. S. 1692a (5).
Van Gernert submits that there is a substantial conflict among the circuit courts of appeals concerning the reach of the FDCPA and that this conflict warrants the granting of his petition in order to resolve this important federal question. Specifically, the circuit courts are divided on the crucial questions of what kinds of "debt" the FDCPA contemplates and the nature of the "transaction" which should invoke its provisions.
The Meaning of "Debt" Within the FDCPA.
By the plain terms of the FDCPA, not all obligations by consumers to pay money are considered "debts" subject to this statutory scheme. Rather the FDCPA may be triggered only when an obligation to pay arises out of a specified "transaction." Hawthorne v. Mac Adjustment, Inc., 140. F.3d 1367,1371 (1 lth Cir. 1998). In Zimmerman v. HBO Affiliate Group, 834 F.2d at 1168-1169, the Third Circuit held that the type of transaction which gives rise to a "debt" within the FDCPA is "one involving the offer or extension of credit to a consumer [..., i.e.J a transaction in which a consumer is offered or extended the right to acquire 'money, property, insurance or services'...and to defer payment." Id. Thus a cable television company which sought monetary compensation from the plaintiff for unlawfully pirating microwave television signals was not collecting a "debt" within the meaning of the FDCPA because no offer or extension of credit was involved. Id. at 1169. See also Staub v. Harris, 626 F.2d 275,277-279 (3rd Cir. 1980)(per capita tax levied by taxing district is not a "debt" within FDCPA).
In Azar v. Hayter, 874 F. Supp. 1314, 1318-1319 (N.D. Fla.), aff 'd Azar v. Rayter, 66 F.3d 342 (1 Ith Cir. 1995), cert. denied, U.S. , 116 S.Ct. 712 (1996), the court relied upon the reasoning of Zimmerman and Staub to conclude that condominium fees imposed upon unit owners for the maintenance of the common areas did not constitute a debt within the FDCPA because the sums did not reflect deferred payments on a prior debt and because there was no evidence of a pLo tanto exchange. Id. Accord, Riter v. Moss & Bloomberg, Ltd., 932 F. Supp. 210, 211-212 (N.D. Ill. 1996)(condominiurn fees are not "debts" for purposes of FDCPA); Archer v. Beasley, 1991 WL 34889 (D.N.J. 199 1)(same).
The law of the Third and Eleventh Circuits thus requires an extension of credit and a pro tanto exchange in order for delinquent condominium fees to be characterized as a "debt" within the FDCPA; and it would therefore exclude from this statutory scheme the actions of Van Gernert in collecting delinquent condominium fees from Ladick on this record.
In contrast to this law, the Seventh Circuit in Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 13251326 (7th Cir. 1997) has concluded that there is "no language in the Act's definition of 'debt' (or any other section of the Act) that mentions, let alone requires, that the debt arise from an extension of credit." Id. at 1325; 1327. Instead, the Bass court determined that as long as a given transaction creates an obligation to pay, a debt is created regardless of whether credit is extended. Id. In reaching this result, it expressly rejected Zimmerman's reading of the FDCPA since "the conduct in Zimmerman falls outside the reach of FDCPA for the reason that pirating television signals did not amount to a "transaction' at all, arguably the true basis for decision in Zimmerman." Id. at 1326.
Bass involved a law firm's efforts to collect funds in the wake of the dishonor of a check by a co-holder of the plaintiff s bank account. Id. at 1323. In cases involving dishonored checks and whether such dishonor created the kind of debt which would invoke the protection of the FDCPA, Bass' reasoning has been followed by the courts of appeals for the Eighth and the Ninth Circuits. See Duffy v. Landberg, 133 F.3d 1120, 1123 (8th Cir. 1998)(abusive collection practices concerning a dishonored check are prohibited by the FDCPA); Charles v. Lundgren &Associates, P. C., 119 F.3d 73 9, 742 (9th Cir.), cert. denied, _ U.S. _, 118 S.Ct. 627 (I 997)(same).
In Snow v. Riddle, 143 F.3d 1350 (10th Cir. 1998), the Tenth Circuit has joined this collection of circuits which have followed Bass when the debt asserted to be within the FDCPA is created by a bad check. The lower court here expressly relied upon Snow in applying that decision concerning a bad check to this case involving the collection of common interest maintenance assessments.
Van Gernert thus submits that there is a substantial conflict among the circuits on the issues of (1) whether an extension of credit is required in order to constitute a debt under the FDCPA; and (2) whether a condominium maintenance fee is the kind of debt entitled to the protection of that statutory scheme. Those circuits following Zimmerman or Azar would not find that the common interests maintenance assessment here was a debt within the meaning of the FDCPA. Those circuits following Bass and its progeny would so find. This conflict among the circuits is serious and substantial and warrants resolution by this Court.
Van Gernert ftirther submits that the better reasoned decisions are those represented by Zimmerman and Azar. In the first place, this is not a bad check case and the court of appeals here was wrong to apply the logic of its prior decision in Snow, a bad check case, to this action involving an assessment of condominium common area fees. Such assessments do not represent deferred payment of a present or prior debt as with a dishonored check. In fact, a condominium fee works in reverse fashion by requiring payment prior to the time when the common area goods and services are provided. There is no extension of credit involved and no cognizable "debt" within the FDCPA.
In the second place, Bass' statutory analysis of the FDCPA is fundamentally flawed. That court could find absolutely no language in the Act requiring that a "debt" arise from an extension of credit. 111 F.3d at 1325; 1327. In fact, however, the Act's definition of "creditoe' means "any person who offers or extends credit creating a debt or to whom a debt is owed (App, 11 a). (emphasis supplied).
The plain language of the FDCPA itself is the touchstone of what the Act means in fact. Heintz v. Jenkins, 514 U.S. 291, 297(1995). Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 475(1992). The FDCPA's definition of "creditor" is the only portion of the statutory scheme which addressed the creation of a "debt." If Congress did not intend to limit the creation of a debt to extensions of credit, it could have defined "creditor" simply as "anyone to whom a debt is owed." Bass' analysis of the FDCPA ignores completely this crucial language concerning the creation of debt by extensions of credit and renders it meaningless surplusage, all in violation of established principles of this Court mandating that all language of an enactment be given effect. Hughey v.United States, 495 U.S. 411, 415(1990). Mallard v. UnitedStates District Court, 490 U.S. 296, 300-301(1989). Reiter v. Sonotone Corp., 442 U.S. 330, 337-339(1979)
B. The Nature Of The "Transaction"
Contemplated By The FDCPA.
As the federal district judge observed in Thies v. Law Office of William A. Wyman, 969 F. Supp. 604, 606 (S.D. Cal. 1997), "[t]here is considerable confusion and conflict in the federal courts as to what a 'transaction' is for the purposes of [the FDCPA]." Id. The word "transaction" is one of flexible meaning, Moore v. New York Cotton Exchange, 270 U.S. 593,610 (1926), and the FDCPA does not define the nature of a "transaction" which may give rise to a "debt." See Zimmerman, 834 F.2d at 1167. But the term is not necessarily ambiguous. Its ordinary meaning implies some type of business dealing between two parties which is consensual or contractual in nature. Hawthorne v. Mac Adjustment, Inc., 140 F.3d at 1371 quoting Webster's New Collegiate Dictionary 1230 (1979) (defining "transaction" as a "business deal"). Accord, Coretti v. Lefkowitz, 965 F. Supp. 3, 5(D.Conn. 1997).
Even the Seventh Circuit in Bass has acknowledged that the "transaction" contemplated by the FDCPA is one arising from consensual relations where the parties themselves negotiate or contract for consumer-related goods or services. I I I F.3d at 1326. It does not contemplate obligations which are thrust upon the parties as the result of forces outside of their relationship which have nothing to do with their agreement, such as with a tax. See Hawthorne v. Mac adjustment, Inc., 140 F-3d at 1371; Staub v. Harris, 626 F.2d at 278.
Van Gernert submits that the common area maintenance assessment at issue here is precisely the kind of obligation which was not the product of any consensual arrangement between Ladick and the common interest development association. Much like a superlocal tax, the assessment is thrust upon Ladick as a necessary incident to his separate interest ownership in SAMLARC. It arose by force of statutory mandate, not as the result of any agreement between Ladick and the association.
Indeed, the established law of California has recognized that such community association assessments amount to equitable servitudes running with the land and are imposed by law upon the unit owner irrespective of any agreement between him and the homeowners' association. Nahrsdedt v. Lakeside Village Condominium Association, Inc., 878 P.2d 1275,1281-83; 1286(Cal. 1994) and cases cited.
Moreover, because these equitable servitudes are recorded and imposed to benefit only the common property, these assessments could never be fairly described as transactions whose purpose is primarily related to personal, family or household ends so as to constitute a "debt" within the FDCPA. See Mabe v. G. C Services Limited Partnership, 32 F.3d at 88; Dance v. Petty, Livingston, Dawson & Devening, 8 81 F. Supp. 223,225 (W.D. Va. 1994). Contrast Newman v. Boehm, Pearlstein & Bright, Ltd., 119 F.3d 477, 481(7th Cir. 1997); Thies, 969 F. Supp. at 607.
2.The Decision Below Implicitly Preempts California's Davis-Stirling Enactment Regulating Common Interest Developments And Thereby Violates The Tenth Amendment To The Federal Constitution.
The Tenth Amendment provides that the "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Even though this amendment provides no substantive limitation on the United States, it reinforces the notion that the federal government possess only the powers that have been given to it by the federal Constitution and no more. New York v. United States, 505 U.S. 144, 154-158 1992). In this respect, the federal government has no granted or inherent power to direct the internal affairs of a State and where by legislation it crosses the line from encouragement to coercion, it violates the federalism principles embodied in the Tenth Amendment. Id. at 175-177. "It is often a perplexing question whether Congress has precluded state action or by the choice of selective regulatory measures has left the police power of the States undisturbed Rice v. Sante Fe Elevator Corp., 331 U.S. 218,230-231(1947).
There can be no question on this record that the ruling below by the Tenth Circuit not only undermines the State's Davis Stirling enactment governing common interest developments but also preempts that statutory scheme, one that embodies every protection offered Ladick by the FDCPA except for the consumer warning and the 30-day verification of debt. But even as to this latter requirement, the state enactment mandates that the basis of the debt be provided the homeowner in the initial communication. See Cal. Civ. Code, S. 1367(App. 39a-40a).
California's regulation of common interest developments and the collection of common area maintenance assessments is pervasive and the lower court's ruling implicitly preempts that regulation without reason in violation of Tenth Amendment principles. National League of Cities v. Usery, 426 U.S. 833, 842-843(1976) quoting Fry v. United States, 421 U.S. 542(1975).
Where a state law provides protection to the consumer equal to or greater than the FDCPA, it should not be preempted by the federal statute. The Davis-Stirling enactment does just that and deserves to have independent vitality beyond the reach of the FDCPA.
Congress' intent in enacting the FDCPA was to "eliminate abusive debt collection practices See 15 U.S.C. S.1692(a) (App. 10 a). While the Congressional findings refer in the generic to "existing laws" being "inadequate to protect cons umers," there is nothing in Congress' declaration of purpose which would justify the wholesale supplanting of California's statutory scheme involving the operation of common interest developments, as the Tenth Circuit has, in effect, accom plished in this case. Its implicit preemption of the California statutory scheme is therefore against the law and violates the Tenth Amendment to the United States Constitution.
Conclusion.
For all of these reasons, a writ of certiorari should issue to review the opinion of the United States Court of Appeals for the Tenth Circuit and, ultimately, to vacate the judgment and remand the cause to the District Court for the entry of a new judgment in Van Gernert's favor.
Respectfully submitted,
Gerald J. Van Gernert
James A. Judge
Counsel of Record
GERALD J. VAN GEMERT, P.C.
19900 MacArthur Blvd., Suite 1070
Irvine, California 92612
(714) 833-8633
Dennis P. Derrick
Counsel of Record
Seven Winthrop Street
Essex, Massachusetts 01929
(978) 768-6610
------------------------------------------------------------------------
|
