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Zuniga v. Jacobs

United States District Court, S.D. Florida

January 13, 2020

NOEL ZUNIGA and C. CARLIN CASTILLO Plaintiffs,
v.
RUSSELL S. JACOBS, et al., Defendants.

          OMNIBUS ORDER

          KATHLEEN M. WILLIAMS, UNITED STATES DISTRICT JUDGE

         This matter .is before the Court on Plaintiffs' motion to strike (DE 78), Plaintiffs' motion for summary judgment (DE 57), and Defendants' motion for summary judgment (DE 60). For the reasons below, Plaintiffs' motion to strike is GRANTED IN PART, Plaintiffs' motion for summary judgment is DENIED, and Defendants' motion for summary judgment is GRANTED IN PART.

         I. BACKGROUND

         This action arises out of the Defendants'-the Jacobs Law Group ("Jacobs Law" or "Firm") and its attorneys Russell Jacobs and Scott Shapiro-attempts to collect association fees and related costs for the Beach Club at Fontaine Bleau Park Condominium ("Beach Club") from Plaintiffs who are unit owners. In 2006, Zuniga purchased unit F-107 independently and unit F-105 with Castillo. (DE 58 at ¶¶ 6, 8.) As unit owners, Plaintiffs were bound by the Beach Club's Declaration of Condominium ("Declaration"), which required owners to pay assessment fees for routine maintenance of the common elements, as well as for damage to the common areas caused by the "negligence, misuse or neglect of specific Unit Owners." (Id. at ¶ 1, 2; DE 59-43 at 14.)

         The first collection activity at issue is Defendants' mailing of a letter to Zuniga on July 31, 2017 seeking to collect a balance of $2, 902.94 on F-107's account. (DE 59-16.) It informed Zuniga that the Beach Club intended to "file a lien against your property on or after the date which is thirty days after the date on which this letter has been delivered to you." Id. The letter explained that unless Zuniga requested verification of the balance within thirty days, the debt would be assumed valid. Id. On August 30, 2017, Zuniga sent Jacobs Law a letter disputing the debt and requesting verification. (DE 58 at ¶ 22.) When the Firm and the Beach Club did not respond, Zuniga filed a complaint with Florida's Division of Business and Professional Regulation ("DBPR"). (Id. at ¶ 27.)

         During the course of the DBPR investigation, the Beach Club provided Zuniga ledgers for F-105 and F-107 dated September 26, 2017. (Id. at ¶ 28.) Unit F-107's ledger indicated that on July 31, 2017, the amount due was $1, 369.87. (DE 59-20.) Zuniga also discovered that the association had not posted a payment on April 22, 2016 which the Beach Club had cashed, causing Zuniga to incur late fees that should not have been charged. (DE 58 at ¶¶ 33-35.) Zuniga further discovered that eleven payments posted to the Beach Club's F-107 ledger did not appear on a separate ledger kept by the Firm. (Id. at 35.) Defendants relied on the balance in the Firm's separate ledger in preparing the July 31, 2017 communication. Id. In February 2018, in a letter addressed to Shapiro, DBPR informed Shapiro that the Beach Club was required to post the missed April 22, 2016 payment, remove the late fee, and provide Plaintiffs with accurate ledgers by March 2, 2018. (DE 20-13.)

         The second collection activity at issue is a lawsuit that Scott Shapiro filed against Castillo in Miami-Dade County Court in January 2018 to collect $1, 200 for property damage that she had allegedly caused to parts of the Beach Club's roof near unit F-105. (Id. at ¶ 46.) Defendants initiated the action at the request of the Beach Club, who provided Jacobs Law a copy of an invoice for repair services for $1, 200. (DE 61 at ¶¶ 13-15.) The September 26, 2017 F-105 ledger indicated that on June 6, 2017, the Beach Club posted $1, 200 on the account for "damage to Bldg F roof and repair costs." (DE 59-19 at 4.) Prior to the posting of this charge, there was a positive balance of $222.83 on the account. Id. The balance was automatically applied towards the $1, 200 charge when it posted, leaving a balance of $977.17. Id.

         Plaintiffs filed the instant action on June 8, 2018. (DE 1.) In count 1 of the amended complaint, Zuniga asserts that by sending the July 31, 2017 letter, Jacobs and the Firm violated various sections of the Fair Debt Collection Practices Act ("FDCPA"). (DE 20-1.) Zuniga alleges that Jacobs and the Firm violated sections 1692(e) and 1692(e)(2)(A) by seeking to collect a debt for an incorrect amount; section 1692(d) by "wrongfully and without basis" sending communication threatening to record a claim of lien against the property; and section 1692(e)(5) by "threatening to file a Claim of Lien where they had no legal right to do so, or never intended to do so at all." (Id. at ¶¶ 86-89.) Zuniga further alleges that they violated section 1692(f)(1) by attempting to collect interests on amounts other than overdue assessments, which is not permitted under the Beach Club's governing documents or Florida law.[1] (Id. at ¶ 92.)

         Zuniga also asserts claims against Shapiro and the Firm in count 1. He alleges that they violated section 1692(f) by "using an unfair or unconscionable means to collect or attempt to collect a debt," when they refused to comply with DBPR's directive to correct F-107's account record and issue an accurate ledger. (Id. at ¶ 90.) Moreover, he alleges that Shapiro and the Firm violated section 1692(f) by initiating the state court lawsuit to collect "amounts owed on Unit F105 which had already been deducted from Zuniga and Castillo's account." (Id. at ¶ 91.)

         In Count 2, Castillo alleges that Shapiro and the Firm violated section 1692(e)(2)(A) by "falsely representing the character, amount, or legal status of debt in the State Court lawsuit" by seeking to recover $1, 200 when the Beach Club had already applied a balance of $222.83. (Id. at ¶ 96.) Castillo further alleges that they violated section 1692(f) by using an "unfair or unconscionable means" to collect debt by "attempting] to collect amounts owed on Unit F105 which had already been deducted from Zuniga and Castillo's account." (Id. at ¶ 97.)

         II. DISCUSSION

         A. Plaintiffs' Motion to Strike

         Plaintiffs move to strike Russell Jacob's declaration which is attached as an exhibit to Defendants' response to Plaintiffs' statement of material facts.[2] The declaration enumerates facts in support of the defense that Defendants cannot be held liable under the FDCPA because they are not "debt collectors" under the statute. (DE 70-1.) The facts set forth in the affidavit are based on Jacob's personal knowledge from his employment at the Firm, as well as his "review of documents" and the Firm's "business records." (Id. at ¶ 4.) Plaintiffs move to strike the declaration under Rule 37 for noncompliance with Rule 26. They contend that Defendants failed to disclose the witnesses and documents they intend to use in support of this defense prior to summary judgment. Instead, Defendants proffered Jacobs' affidavit, which identifies Jacobs as a witness and the existence of certain business records, two months after the close of discovery.

         "The Federal Rules of Civil Procedure provide for required disclosure of materials that a party will use to support its claims or defenses." Slater v. Energy Servs. Grp. Int'l Inc., 441 Fed.Appx. 637, 642 (11th Cir. 2011). Pursuant to Rule 26(a)(1)(A), parties must provide in their initial disclosures "the name ... of each individual likely to have discoverable information-along with the subjects of that information-that the disclosing party may use to support its claims or defenses" as well as "all documents, electronically stored information, and tangible things that the disclosing party has in its possession . . . and may use to support its claims or defenses." Under Rule 26(e)(1)(A), parties have an ongoing duty to supplement their initial disclosures in a "timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect." Rule 37(c)(1) provides for sanctions if a party fails to make required disclosures:

If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or trial, unless that failure was substantially justified or is harmless.

         Defendants have asserted the "debt collector" defense for the first time in their response to Plaintiff's motion for summary judgment. Moreover, in violation of Rule 26, Defendants have failed to disclose the witnesses and documents they intend to rely upon to support their "debt collector" defense in their initial disclosures or in any supplemental disclosures under Rule 26(e). Defendants have identified the Firm's corporate representative, Jacobs, and Shapiro in their Rule 26(a)(1)(A)(i) disclosures, but did not indicate that these three individuals would have information regarding the "debt collector" defense. (DE 78-2.) In their Rule 26(a)(1)(A)(ii) disclosures, Defendants have failed to identify the documents and business records that Jacobs relied upon in preparing the declaration. Id.

         In Martinez v. Russell Jacobs, et. al., Case No. 15-23281-CV-KMW (S.D. Fla. Aug. 19, 2016) ("Martinez"), a FDCPA case where Jacob's Law and Russell Jacobs were also the defendants, this Court granted the plaintiff's motion to strike under nearly identical circumstances. In Martinez, the plaintiff moved to strike the defendants' affidavit that was signed by Russell Jacobs and filed as an exhibit to their motion for summary judgment. That affidavit is almost identical to the one in this case and also purported to support the "debt collector" defense. Martinez at 6-8. And like this instant case, the defendants did not assert the "debt collector" or disclose the existence of documents or information underlying it until summary judgment. Id. The Court granted the plaintiff's motion to strike, explaining:

[P]ursuant to Rule 26, Jacobs Law had a continuing obligation to produce to Martinez any documents or information it would use in support of its "debt collector" defense. Jacobs Law failed to meet this obligation and pursuant to Rule 37 may not now use undisclosed information to support a motion. Moreover, litigants in federal court have long known that "[m]odern instruments of discovery . . . [and] pretrial procedures make a trial less a game of blind man's bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent." United States v. Procter & Gamble Co. 356 U.S. 677, 682 (1958). Consequently, the Court strikes the portion of the affidavit regarding Jacob's Law's 'debt collector' defense and will not consider any statements of fact or arguments which rely on this portion in deciding the cross-motions for summary judgment.

Id. at 7-8 (record citations omitted).

         The reasoning in Martinez applies with equal force here. Defendants have provided no reason for why their disregard of Rule 26 is substantially justified. Nor have they provided an adequate explanation for why their neglect is harmless. Plaintiffs requested all documents referenced in Defendants' Rule 26(a)(1)(A)(ii) disclosures in their first request for production. (DE 59-49 at ¶ 29.) Had Defendants disclosed the existence of the business records, these documents would have been produced to Plaintiffs, who would have had the opportunity to conduct discovery with regard to them. Accordingly, the Court strikes Jacob's declaration (DE 70-1) from the record and will not consider it in deciding the cross motions for summary judgment.

         B. Cross Motions for Summary Judgment

         1. The Legal Standard

         Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Under this standard, "[o]nly disputes over facts that might affect the outcome of the suit under the governing [substantive] law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And any such dispute is "genuine" only "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id.

         In evaluating a motion for summary judgment, the Court considers the evidence in the record, "including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials ... ." Fed.R.Civ.P. 56(c)(1)(A). The Court "must view all the evidence and all factual inferences reasonably drawn from the evidence in the light most favorable to the nonmoving party, and must resolve all reasonable doubts about the facts in favor of the non-movant." Rioux v. City of Atlanta, 520 F.3d 1269, 1274 (11th Cir. 2008) (quotation marks and citations omitted). At the summary judgment stage, the Court's task is not to "weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

         For issues for which the movant would bear the burden of proof at trial, the party seeking summary judgment "must show affirmatively \he absence of a genuine issue of material fact: it must support its motion with credible evidence...that would entitle it to a directed verdict if not controverted at trial. In other words, the moving party must show that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the non-moving party. If the moving party makes such an affirmative showing, it is entitled to summary judgment unless the non-moving party, in response, come[s] forward with significant, probative evidence demonstrating the existence of a triable issue of fact." Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115-16 (11th Cir. 1993) (emphasis in original).

         2. Plaintiffs' Motion for Summary Judgment

         Plaintiffs move for summary judgment on all of their claims. Because there is a genuine issue of material fact as to whether Defendants are "debt collectors" under the FDCPA-an essential element of Plaintiffs' FDCPA claims-Plaintiffs' motion for summary judgment is denied.

         "The elements of an FDCPA claim include: (1) the plaintiff has been the object of collection activity arising from consumer debt, (2) the defendant is a debtor collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA." Pescatrice v. Orovitz, 539 F.Supp.2d 1375, 1378 (S.D. Fla. 2008) (citation omitted). The FDCPA defines a debt collector as "[a]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly attempt to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692(a)(6).

         To establish that an attorney or law firm is a "debt collector" under the FDCPA, "a plaintiff must show that the attorney or law firm collects debts as a matter of course for its clients or for some clients, or collects debts as a substantial, but not principal, part of his or its general law practice." Schroyer v. Frankel, 197 F.3d 1170, 1176 (6th Cir. 1999). Courts have considered several factors in making this determination, including, "the volume of the attorney's collection activities, the frequent use of a particular debt collection document or letter, and whether there exists a steady relationship between the attorney and the collection agency or creditor he represented." Id. Courts have also "maintained that even where debt collection takes up a minor portion of a law practice, 'debt collector' liability may lie where the defendant has an 'ongoing relationship' with a client whose activities substantially involve debt collection." Id. (citation omitted).

         Plaintiffs have proffered evidence for their claim that the Defendants are "debt collectors" under the FDCPA. For instance, they have provided a print out of Jacobs Law's website showing that the Firm advertises its debt collection services. (DE 20-3.) They have also provided copies of the claims of liens that Defendants have filed on behalf of clients, including those on nearly two dozen units in the Beach Club and on several other units in other condominiums. (DE 20-4, 20-5.) Plaintiffs also point to the July 31, 2017 collections letter, which states "[t]his firm is deemed a debt collector" and that Jacobs Law "is ...


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