Sellers v. Rushmore Loan Management Services, LLC

          Appeal from the United States District Court for the Middle District of Florida D.C. Docket No. 3:15-cv-01106-TJC-PDB

          Before WILSON, JILL PRYOR, and THAPAR, ^[*] Circuit Judges.

          JILL PRYOR, CIRCUIT JUDGE.

         After Randolph and Tabetha Sellers filed for Chapter 7 bankruptcy, the bankruptcy court issued a discharge order, which relieved them from personal liability on their discharged debts and generally barred creditors from taking actions to collect those debts. Despite the discharge order, Rushmore Loan Management Services, LLC, the servicer for the Sellerses' home mortgage, sent them monthly statements for their mortgage.

         Because Rushmore sent statements after the discharge order was entered, the Sellerses sued Rushmore seeking class certification on claims arising under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and the Florida Consumer Collection Practices Act ("FCCPA"), Fla. Stat. § 559.55 et seq. The Sellerses alleged that Rushmore made false, deceptive, and misleading representations when it sent mortgage statements and attempted to collect on their mortgage debt after they received a Chapter 7 discharge. The district court denied class certification, concluding that for each claim individualized inquiries predominated over issues common to the proposed class. In reaching this conclusion, the district court relied, at least in part, on its determination that the question of "whether the Bankruptcy Code precluded and/or preempted the FDCPA and FCCPA" presented an individualized rather than a common issue. Doc. 62 at 9.^[1]

         The Sellerses appeal the district court's denial of class certification. After careful review and with the benefit of oral argument, we conclude that the district court abused its discretion when it determined that Rushmore's preclusion/ preemption defense raised an individualized issue. We vacate and remand so that the district court may consider again the Sellerses' class certification motion in light of our conclusion that this question is common to all class members.

         I. FACTUAL BACKGROUND

         The Sellerses obtained a loan secured by a mortgage lien on their home in Keystone Heights, Florida. When they defaulted on the loan, the holder of the mortgage filed a foreclosure action. While the foreclosure action was pending, the Sellerses moved out of the home.

         After moving out, the Sellerses filed for Chapter 7 bankruptcy, which triggered a stay of the foreclosure action. In the bankruptcy proceeding, the Sellers did not reaffirm the mortgage debt. The bankruptcy court entered a discharge order, which functioned as an injunction that generally prohibited the Sellerses' creditors from taking any steps to collect the discharged debts. See 11 U.S.C. § 524(a)(2) (stating that the discharge order "operates as an injunction against . . . an act[] to collect, recover or offset any such debt as a personal liability of the debtor"). With respect to the mortgage debt, the discharge order released the Sellerses from personal liability on the mortgage, but the mortgage holder continued to have a lien against the property. See Dewsnup v. Timm, 502 U.S. 410, 418 (1992). If the Sellerses had remained in their home, the Bankruptcy Code would have allowed the mortgage holder to try to collect on the mortgage so long as its actions were limited to "seeking or obtaining periodic payments" in lieu of foreclosing on the home. See 11 U.S.C. § 524(j).

         About two years after the discharge order was entered, Rushmore took over servicing the Sellerses' loan. Despite the discharge, Rushmore sent the Sellerses monthly mortgage statements that appeared to seek payment on the mortgage debt. For a period of eight months, Rushmore sent the Sellerses monthly statements in the form of "Mortgage Statement I."^[2] In the top right corner of these statements was a box listing the "Payment Due Date" and "Amount Due" along with a notice that if payment was received after a certain date, a late fee would be charged. Doc. 28-1 at 19. The "Amount Due" was listed as more than $70, 000, and it increased with each monthly statement. Directly below that box was a disclaimer:

This communication is from a debt collector and any information received will be used for that purpose. This does not imply that Rushmore Loan Management Services is attempting to collect money from anyone whose debt has been discharged pursuant to (or who is under the protection of) the bankruptcy laws of the United States; in such instances, it is intended solely for informational purposes.

Id. Below the disclaimer was an "Explanation of Amount Due," which itemized the principal, interest, escrow, monthly payment due, total fees and charges, and overdue payments on the loan. The first page also warned that "IF YOU ARE [sic] FORECLOSURE OR BANKRUPTCY, the amount listed here may not be the full amount necessary to bring your account current." Id. The bottom of the first page included a detachable payment coupon that listed a "Due Date," an "Amount Due," a "Late P[a]ym[en]t Amount," and instructions to make checks payable to Rushmore. Id. In addition, Rushmore included with Mortgage Statement I an envelope for the Sellerses to use to remit their payment.

         Eventually, Rushmore revised its form mortgage statement. For a period of seven months, Rushmore sent the Sellerses monthly statements in the form of "Mortgage Statement II."^[3] These statements were in many ways similar to the Mortgage Statement I form. First, the top of these statements remained the same with a box listing the "Payment Due Date" and "Amount Due" along with a notice that if payment was received after a certain date, a late fee would be charged. Doc. 33-9 at 2. Second, the statements continued to include the same disclaimer and "Explanation of Amount Due" information as the earlier statements. Id. Third, the statements included the same warning to borrowers "IN FORECLOSURE OR BANKRUPTCY" that "the amount listed here may not be the full amount necessary to bring your account current." Id.

         But Rushmore did make some changes to the format of Mortgage Statement II. The statements no longer included a payment coupon. In place of the payment coupon, Rushmore printed this disclaimer:

This is an Informational Statement for borrowers in bankruptcy or borrowers whose debt has been discharged in bankruptcy. It is not an attempt to collect a debt. Please note that even if your debt has been discharged in bankruptcy and you are no longer personally liable on the debt, the lender may, in accordance with applicable law, pursue its rights to foreclose on the property securing the debt. If you do not wish to receive informational statements in the future, please call Rushmore toll-free at (888) 504-6700.

Id. And Rushmore added an additional disclaimer to the end of the statement, at the bottom of the fifth page:

Rushmore Loan Management Services LLC is a Debt Collector, who is attempting to collect a debt. Any information obtained will be used for that purpose. However, if you are in Bankruptcy or received a Bankruptcy Discharge of this debt, this letter is being sent for informational purposes only, is not an attempt to collect a debt and does not constitute a notice of personal liability with respect to the debt.

Id. at 6.

         During the period when the Sellerses were receiving statements in the form of Mortgage Statement I, the state court entered a final judgment of foreclosure on the Keystone Heights home. The property then was sold at a foreclosure sale. After the final judgment of foreclosure was entered, for a period of ten months, Rushmore continued to send monthly mortgage statements in the form of Mortgage Statement I or Mortgage Statement II.

         II. PROCEDURAL HISTORY

         After receiving the mortgage statements, the Sellerses filed a putative class action against Rushmore in federal district court, bringing FDCPA and FCCPA claims. First, the Sellerses alleged that Rushmore violated the FDCPA by sending monthly mortgage statements that "attempted to collect a debt and represented that it had a legal right to collect upon discharged monetary amounts." Doc. 1 at ¶ 46. The Sellerses alleged that this conduct violated the FDCPA, which prohibits the use of "false, deceptive, or misleading representation[s]" including by making false representations about "the character, amount, or legal status of [a] debt." 15 U.S.C. § 1692e(2)(A). According to the Sellerses, when Rushmore took the action of sending the monthly statements, it falsely represented that it had a legal right to collect the mortgage debt from the Sellerses and also falsely represented the legal status of the debt.

         Second, the Sellerses alleged that Rushmore's conduct violated the FCCPA. By sending the mortgage statements, the Sellerses alleged, Rushmore had "claim[ed] and attempt[ed] to enforce a debt which was not legitimate and not due and owing." Doc. 1 at ¶ 66. As with the FDCPA claim, the Sellerses' contention that the debt could not be enforced was based on their allegation that any amounts they owed on the mortgage ...