In an arena traditionally reserved for State law, two recent federal cases have had an interesting, and maybe, significant impact on landlord/tenant practice in New York; namely, Heintz v. Jenkins2 and Romea v. Heiberger & Assocs.3
The Heintz Case.
In Heintz v. Jenkins, a lawyer representing a bank sued the respondent to recover the balance due on her defaulted car loan. The lawyer had sent a letter to the respondent seeking to recover monies owed, including the cost of insurance bought by the bank when the respondent failed to insure her car. The respondent sued the lawyer claiming that the letter constituted a violation under the FDCPA by the lawyer and his lawfirm. The District Court had dismissed the lawsuit, holding that the FDCPA does not apply to lawyers. The Court of Appeals disagreed and reversed and the Supreme Court affirmatively held that attorneys regularly in the business of collecting debts — even when that activity consists of litigation — are “debt collectors” within the meaning of the federal Fair Debt Collection Practices Act (“FDCPA”)4 and are subject to its provisions.
A Brief Look at the FDCPA
The FDCPA provides that when a debt collector communicates with a debtor, the debt collector must advise the debtor that the debt collector is “attempting to collect a debt and that any information obtained will be used for that purpose.” 15 U.S.C.A. §1692e(11). The foregoing is sometimes referred to as the “mini-Miranda warning” by practitioners. In addition, the debt collector must advise in writing that the debtor must dispute the validity of the debt within thirty days or “the debt will be assumed to be valid by the debt collector.” 15 U.S.C.A. §1692g(a)(3) — often referred to as the “validation” notice. Failure of the debt collector to comply with the foregoing is a violation of the FDCPA and can result in up to $1,000 in damages as well as payment of a plaintiff’s reasonable attorneys’ fees.
The FDCPA was enacted to protect debtors from the abusive practices of debt collectors
— a category of persons “who regularly collects or attempts to collect, directly or indirectly, debts owed [to] ... another” §1692a(6). If the creditor himself directly attempts to collect the debt, the notice provisions of the FDCPA are not triggered. In addition, the FDCPA does not apply to commercial debt but to debts “arising out of ... transaction[s] that “are primarily for personal, family, or household purposes.” §1692a(5).
Until an amendment to the FDCPA in 1986, attorneys were expressly exempt from the definition of debt collector. Although following the amendment the Federal Trade Commission (“FTC”), the agency which enforces the provisions of the FDCPA, published a nonbinding commentary to the FDCPA which stated that lawyers whose practices were limited to debt collection were not covered by the FDCPA, the Supreme Court refused to give weight to the FTC statement and held otherwise in Heintz v. Jenkins.
Notwithstanding, the holding in Heintz, the Supreme Court recognized that §1692c(c) contains an exception that permits communications to notify the consumer that the debt collector or creditor may invoke or “intends to invoke” a “specified remedy” (of a kind “ordinarily invoked by [the] debt collector or creditor”). §§1692c(c)(2)(3). Specifically, the Supreme Court stated that “[c]ourts can read these exceptions, plausibly, to imply that they authorize the actual invocation of the remedy that the collector “intends to invoke.”5 Thus, allowing that an ordinary court-related document does, in fact, “notify” its recipient that the creditor may “invoke” a judicial remedy. This interpretation, the Supreme Court stated, is consistent with the statute’s objective of “preserving the creditors’ judicial remedies.”6
The Romea Case
Initially, the impact of the Heintz holding seemed to affect only attorneys who “regularly”
— a concept not defined in the FDCPA or in Heintz — engaged in the practice of debt collection. Romea, however, added an interesting, and assuredly unintended, twist to the Heintz holding and is a classic example of Federal law preempting conflicting State law.
In Romea, the landlord’s attorney signed and served a three-day notice on the tenant advising that if back rent was not paid she would be evicted — a common practice among landlord/tenant practitioners.
The tenant sued the landlord’s attorney in federal court claiming that the notice violated the FDCPA in that, among other things, the notice did not advise the tenant that (i) the notice was an attempt to collect a debt; and (ii) the tenant had thirty (30) days in which to dispute the claim. The defendant law firm responded that (i) since the three-day notice was statutorily required to be served upon a tenant, it was not a “communication” within the meaning of the FDCPA; and (ii) unpaid rent was not covered by the FDCPA since it did not involve a consumer credit transaction.
Judge Kaplan held that the FDCPA was meant to encompass consumer obligations to pay money for personal or household purposes “without regard to whether the underlying transactions involve the extension of credit or the deferral of payment.” Consequently, the court held, rent was a “debt” within the meaning of FDCPA §1692(1)(5). In addition, a three-day notice, the court held, is a “communication” under FDCPA §1692(a)(2) since it seeks the payment of a debt. Notwithstanding the provisions of New York State’s RPAPL, the court held, the FDCPA properly preempts the RPAPL to the extent the RPAPL conflicts with the FDCPA.
While, at Judge Kaplan’s request, Romea has been certified for appeal to the U.S. Court of Appeals for the Second Circuit7 to resolve some of the issues raised, the impact on attorneys who regularly represent landlord’s in non-payment proceedings is only significant to the extent counsel feel compelled to send notices on behalf of their clients.
Other Cases Follow the Romea Lead
On the heals of Romea, Judge Martin in Hairston v. Whitehorn & Delman8, agreed with Romea and held that rent is a debt since the definition of “debt” includes circumstances where there is no extension of credit. In addition, the court held, while the three-day notice letters served by the defendant law firm were pursuant to the Real Property Actions and Proceedings Law (“RPAPL”), the letters served a dual purpose by seeking to collect a debt and, as such, were required to comply with the FDCPA.
In Soho Tribeca Space Corp. v. Mills9, Judge Martino held that the FDCPA specifically preempts the requirements of the RPAPL. The court held that the rent demand notice signed by the landlord’s attorney which failed to give the validation notice violated the FDCPA and could not serve as a predicate notice for the commencement of the summary nonpayment proceeding.
In Dearie v. Hunter10, Judge Martino once again dismissed a summary non-payment proceeding where the three-day notice had been served by the landlord’s attorney. However, in Dearie, the tenant had appeared pro se throughout the proceeding and had signed a stipulation of settlement. After violating the stipulation, the petitioner had the matter restored to the calendar and obtained a judgment and warrant was issued to the marshal.
Subsequent to issuance of the warrant to the marshal, a legal services entity moved, on behalf of the respondent, by order to show cause to dismiss the petition on the grounds that, among other things, the rent demand had failed to comply with the FDCPA validation provision. The court granted the respondent’s motion to dismiss inasmuch as the rent demand, which violated the FDCPA, was an ineffective predicate for the commencement of the nonpayment proceeding.
Going even further, in Eina Realty v. Calixte11, another nonpayment summary proceeding, the tenant had been evicted and moved by order to show cause to (i) vacate the final judgment and warrant of eviction; (ii) dismiss the petition; and (iii) restore the respondent to possession on the grounds that the five-day rent demand violated the FDCPA by failing to include the mini-Miranda warning or the validation notice.
The petitioner did not deny that the rent demand failed to contain the FDCPA notices but instead argued that since, in addition to the signature of the attorney, the landlord-creditor’s name had been typed above the line “landlord”, the landlord had effectively “signed” the rent demand. Thus, claimed the petitioner, the rent demand was not a communication from a “debt collector” within the meaning of the FDCPA but was a communication directly from the creditor and not subject to the provisions of the FDCPA.
While the court agreed that the provisions of the FDCPA would not apply to a creditor collecting its own debt, the provisions do apply to a creditor who, “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.” 15 U.S.C.A. §1692a(6). Consequently, even though the typed name of the landlord could be construed as a signature, the landlord also used the name of a third party (namely, the attorneys) in its attempt to collect the debt. In addition, since the only handwritten signature was that of the landlord’s attorney, the “least sophisticated consumer”12 could only have believed that the notice was sent by the attorneys.
Relying on the holding in Soho Tribeca Space Corp. v. Mills, the court held that since the notice violated the FDCPA, it could not serve as an effective predicate to the commencement of the summary proceeding.
The respondent’s motion was granted and the respondent restored to possession. Interestingly, the petitioner had already entered into a lease with a third party for the premises. The court, however, denied that portion of the respondent’s motion for an order issuing a warrant of eviction against the third party because the third party was not in possession at the time and “the lease between her and the landlord is now unenforceable in light of the Court’s ruling herein.”
It would appear, then, that a weighing of the equities will not be addressed by the court in the event that a third party is involved because the FDCPA must be strictly construed and if the predicate notice fails, then the court never had the authority to proceed in the first place.
Finally, in 684 East 189th Street HDFC v. Cotrone13, related summary nonpayment proceedings involving five apartments in a cooperative apartment building, the respondent moved to dismiss on the grounds that the written rent demand violated the FDCPA. The petitioner argued that the respondents waived their right to challenge the adequacy of the demand on the foregoing ground because they failed to plead this claim specifically in their initial answers. The court was not persuaded and stated that the petitioner has the burden of both pleading and proving an adequate demand and, since the respondents served a general denial in their answers, that element of the petitioner’s case was put at issue along with the others.
The court held the rent demand inadequate and, since a predicate notice in not amendable, dismissed the proceeding without prejudice.
Armageddon? Hardly.
Inasmuch as the provisions of the FDCPA are only triggered if an attorney signs a notice, it would seem that a simple response to the foregoing line of cases (and one I have suggested in previous articles) is for the practitioner to have the client sign the rent demand. Between telefacsimile, email and overnight mail, very little time will be lost by the practitioner in making service of the demand and, given the foregoing line of cases, to do otherwise would be foolhardy, at best.
Further Impact? Unlikely.
While the question of whether the notice provisions of the FDCPA should, or do, apply to the notice of petition and petition has been raised and the tenant’s bar would clearly support such an interpretation, it seems unlikely that a court would agree inasmuch as these documents seem squarely to fall within the court documents exception outlined in Heintz — certainly as to those notices of petition and petition issued by the clerk of the court in the City of New York — and most probably to all litigation papers signed by counsel which represent the “actual invocation of the remedy that the collector ‘intends to invoke.’”14
Consequently, while it will be interesting to hear what the Court of Appeals has to say about Romea and the provisions of the FDCPA, the practical effect on landlord/tenant practitioners is, in reality, negligible.
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1 Real Property Actions and Proceedings Law 2 514 U.S. 291 (1995). 3 989 F. Supp. 712 (S.D.N.Y. 1997). 4 15 U.S.C. §1692, et seq. 5 Heintz v. Jenkins, 514 U.S. 291, 296, 116 S.Ct. 1489, 1492 (1995). 6 Heintz v. Jenkins, 514 U.S. 291, 296, 115 S.Ct. 1489, 1492 (1995).
7 There have been three federal district court cases that conflict with the Romea court by holding that the term “debt” is limited to extensions of credit. National Union Fire Ins. Co. v. Hartel, 741 F.Supp. 1139 (S.D.N.Y. 1990); National Union Fire Ins. Co. v. Pidala, 85 Civ. 487
(S.D.N.Y. 1986); Bank of Boston Int’l of Miami v. Arguello Tefel, 644 F.Supp. 1423 (E.D.N.Y. 1986).
| 8 | 1998 WL 35112, 97 Civ. 3014 (S.D.N.Y. 1998). |
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| 9 | N.Y.L.J., May 13, 1998 at 28, col. 6 (N.Y. Civ. Ct. May 13, 1998). |
| 10 | N.Y.L.J., Jul. 8, 1998 at 31, col. 3 (N.Y. Civ. Ct. Jul. 8, 1998). |
| 11 | N.Y.L.J., Aug. 19, 1998 at 24, col. 1 (Kings Civ. Ct. Aug. 19, 1998). |
| 12 | Eina Realty v. Calixte citing Russell v. Equifax A.R.S., 74 F. 3d 30, 34 (2d Cir. 1996) for the proposition |
that in attempting to assess the effect of a debt collection communication on a debtor, the court should assume that the debtor is a least sophisticated consumer. 13 N.Y.L.J., Sep. 16, 1998 at 2, col. 6 (Bronx Civ. Ct. Sep. 16, 1998). 14 Heintz v. Jenkins, 514 U.S. 291, 296, 115 S.Ct. 1489, 1492 (1995).