JOAN N. ERICKSEN, District Judge.
Douglas Munoz claims that Pipestone Financial, LLC, and Messerli & Kramer, P.A., (collectively, Defendants) violated the Fair Debt Collection Practices Act (FDCPA) by attempting to collect interest at an impermissible rate, misrepresenting their entitlement to attorney fees, and using envelopes that reveal personal and confidential information about him in communications with him. The case is before the Court on Munoz's and Defendants' motions for partial summary judgment. For the reasons set forth below, the Court grants in part and denies in part the motions.
In 1995, Munoz opened a credit-card account (Account) with First USA Bank, N.A.
After using the Account for approximately seven years, Munoz defaulted. The Account was closed in September 2002 with a balance of $7,519.13. Later, First USA assigned the Account to Unifund CCR Partners. In turn, Unifund CCR Partners assigned the Account to Pipestone. Pipestone is a purchaser of defaulted debt portfolios.
Pipestone retained Messerli & Kramer to collect Munoz's debt. Messerli & Kramer sent a demand letter in the amount of $8,660.26 to Munoz on January 5, 2004. This letter was sent in an envelope with a transparent window. On April 7, 2004, Messerli & Kramer filed suit en behalf of Pipestone in the Minnesota District Court for the First Judicial District. In the state-court complaint, Pipestone sought a "total amount due and owing of $10,965.68." This amount comprised the Account's closing balance; attorney fees in the amount of $2,105.35; and accrued interest totaling $1,341.20. Munoz later stipulated to entry of judgment against him in the state-court action for $7,519.13.
During the pendency of the state-court action, Munoz brought this action under the FDCPA. The motions before the Court relate to Munoz's claims that are based on Defendants' attempt to collect interest and attorney fees.
Summary judgment is proper "if 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 a judgment as a matter of law." Fed. R.Civ.P. 56(c). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265
In Count I of his Complaint, Munoz claims that Defendants violated the FDCPA by attempting to collect interest at an impermissible rate. The FDCPA provides that "[a] debt collector may not use any false, deceptive, or misleading representation or, means in connection with the collection of any debt." 15 U.S.C. § 1692e (2000). A false representation of a debt's character, amount, or legal status violates section 1692e. Id. § 1692e(2). The FDCPA also states that "[a] debt collector any not use unfair or unconscionable means to collect or attempt to collect any debt." Id. § 1692f. Violations of section 1692f include "[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law." Id. § 1692f(1); see Duffy v. Landberg, 215 F.3d 871, 875 (8th Cir.2000) (holding letters seeking interest overstated by less than $2 violated section 1692f). "A violation of the FDCPA is reviewed utilizing the unsophisticated-consumer standard which is designed to protect consumers of below average sophistication or intelligence without having the standard tied to the very last rung on the sophistication ladder." Strand v. Diversified Collection Serv., Inc., 380 F.3d 316, 317 (8th Cir.2004) (quotations omitted).
According to Munoz, Minnesota law prohibits Defendants from collecting interest at a rate that exceeds eight percent. See Minn.Stat. § 334.01 (2006). Defendants contend that they properly attempted to collect interest at the rate specified in the Cardmember Agreement.
"The National Bank Act (NBA), 12 U.S.C. §§ 21-216d, authorizes a national bank `to charge interest at the rate allowed by the laws of the state in which the bank is located.'" Phipps v. FDIC, 417 F.3d 1006, 1011 (8th Cir.2005) (quoting Krispin v. May Dep't Stores Co., 218 F.3d 919, 922 (8th Cir.2000)). In this case, it is undisputed that First USA, a national bank chartered in Delaware, properly charged Munoz interest at an annual percentage rate of 11.99%. See 12 U.S.C. § 85 (2000); 5. Del. C. §§ 943-945. Through a series of assignments, Munoz's Account was assigned from First USA to Pipestone. Although, Pipestone is not a national bank, "[c]ourts must look at the originating entity (the bank), and not the ongoing assignee . . . in determining whether the NBA applies.'" Phipps, 417 F.3d at 1013 (quoting Krispin, 218 F.3d at 924). Thus, Defendants properly attempted to collect interest from Munoz at the rate specified in the Cardmember Agreement. As to Count I, the Court therefore grants Defendants' motion, denies Munoz's motion, and dismisses the claim.
In Count II of his Complaint, Munoz alleges that Defendants violated the FDCPA by misrepresenting their entitlement to attorney fees. He maintains that Defendants violated the FDCPA by claiming in the state-court complaint that attorney fees were due and owing before the fees were actually incurred.
Messerli & Kramer represented Pipestone in the state-court action on a contingencyfee basis. The amount of attorney fees sought reflects the contingency-fee agreement between Messerli & Kramer and Pipestone. Defendants contend that their request for attorney fees in the state-court action did not violate the FDCPA.
"Recovery of attorney fees must be based on either a statute or a contract." Schwickert, Inc. v. Winnebago Seniors, Ltd., 680 N.W.2d 79, 87 (Minn.2004); see Kallok v. Medtronic, Inc., 573 N.W.2d 356, 363 (Minn.1998). In the Cardmember Agreement, Munoz agreed to pay reasonable attorney fees:
In support of their motion, Defendants cite cases that hold that a debtor may not
Defendants contend that they did not violate the FDCPA by quantifying the amount of attorney fees in the demand for judgment. In support, they rely on Winn v. Unifund CCR Partners, Civ. No. 06-447, 2007 WL 974099 (D.Ariz. Feb. 13, 2007). In that case, the defendants brought an action against the plaintiff in state court to collect a debt. 2007 WL 974099, at *4. In the body of the state court-complaint, the defendants alleged that the plaintiff owed principal and interest in specified amounts and that the defendants were entitled to reasonable attorney fees. Id. The defendants did not specify the amount of attorney fees sought in the body of the complaint. Id. In the prayer for relief, however, the defendants specified the amount of attorney fees sought. Id. at *5. In contrast to the case at hand, the defendants in Winn did not allege that attorney fees were "due and owing" in the prayer for relief. Id. The district court, adopting a magistrate judge's Report and Recommendation, concluded that the defendants had not violated the FDCPA by quantifying the amount of attorney fees sought in the prayer for relief because the prayer for relief was simply "a request for a certain amount of attorney's fees":
Id. at *3. The district court relied on the complaint's structure to reinforce its reasoning:
Id. (citations omitted). The Court is not persuaded by Defendants' reliance on Winn. Unlike that case, Pipestone's demand for judgment asserted that a specific amount, including attorney fees, was due and owing. Thus, Pipestone's demand for judgment did not simply request that the state court find a certain amount of attorney fees reasonable. Instead, the demand for judgment represented that attorney fees in the amount of $2,105.35 were due and owing from Munoz when the statecourt action began.
Defendants maintain that they had no choice but to allege the relief sought in the state-court complaint. However, they cite no rule that required them to represent in a complaint that attorney fees based on a contingency-fee agreement between a debt collector and its "attorney were due and owing from a debtor. Cf. Wells Fargo Home Mortgage, Inc. v. Newton, 646 N.W.2d 888, 899 (Minn.Ct.App.2002) (holding complaint's request that included demand for attorney fees "as allowed by law in such an amount as the Court shall determine" satisfied Minn. R. Civ. P. 8.01).
74 F.Supp.2d at 767. The Taylor court cited Central Trust Co. v. Warburg, 104 Ohio App.3d 186, 661 N.E.2d 275, 277 (1995) ("We cannot say that the trial court abused its discretion when it awarded attorney fees consistent with the contingentfee agreement. . . .") to support its view of Ohio law, but failed to acknowledge a decision of the Ohio Supreme Court that undermines Warburg, see Landis v. Grange Mut. Ins.Co., 82 Ohio St.3d 339, 695 N.E.2d 1140, 1142-43 (1998) ("That the contingency fee agreement was normal and customary as to [plaintiff] and [his counsel] does not mean that it can be enforced against a party that did not agree to it.").
More than 100 years ago, the Minnesota Supreme Court noted that -many courts had held stipulations in instruments for the payment of money for attorney fees or costs of collection in excess of taxable costs absolutely void. Campbell v. Worman, 58 Minn. 561, 60 N.W. 668, 668-69 (1894). The court, however, held them "valid as agreements to indemnify the payees for such liabilities as they may be necessarily and reasonably compelled to incur for attorneys' fees in case they are compelled, on default of the makers, to collect by suit." Id. at 669. The court continued:
Id. (citations omitted).
Defendants" argue that Campbell need not be credited due to its antiquity. They say it is "simply outdated." In 2000, however, the United State Court of Appeals for the Eighth Circuit characterized Campbell as "relevant Minnesota law." Kojetin v. C U Recovery, Inc., 212 F.3d 1318, 1318 (8th Cir.2000) (per curiam). In Kojetin, a credit union referred a note to the defendant after the note, signed by the
In this case, Pipestone, represented by Messerli & Kramer, alleged that attorney fees were due and owing at the outset of the state-court action. Defendants' contingency-fee agreement determined the amount of attorney fees sought,. Munoz was not a party to that agreement, and he did not agree in the Cardmember Agreement to subject himself to whatever contingency fee a debt collector agreed to pay its attorney. Instead, he agreed to pay "all collection expenses actually incurred" and "reasonable fees" of an outside attorney. Having agreed to pay Messerli & Kramer a percentage of the amount collected, Pipestone had not incurred the attorney fees sought in the state-court action when Pipestone alleged that the fees were due and owing from Munoz. See Stall v. First Nat'l Bank of Buhl, 375 N.W.2d 841, 845 (Minn.Ct.App.1985) ("Because no amounts have yet been realized on the Roberts file, Stall is not entitled to a contingent fee at this time. He will be entitled to his contingent fee if and when the bank realizes an amount on this matter."). Therefore, the Court denies Defendants' motion, grants Munoz's motion, and concludes that Defendants are liable under Count II. See Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 404 (3d Cir.2000).
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT: