Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—1st Cir.: Condo owner’s claims over collection of assessments revived, (Dec 30, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by a condominium owner against the law firm hired by the condominium association to collect the owner’s unpaid assessments and late payment fees, the trial court erred in finding that the law firm was not liable under the Massachusetts unfair trade practices law, the U.S. Court of Appeals in Boston has decided. Thus, the trial court order vacating a judgment in favor of the owner was reversed and remanded with instructions to reinstate the original judgment (McDermott v. Marcus, Errico, Emmer & Brooks, P.C., December 29, 2014, Thompson, O.).

William McDermott owned two units at the Pondview Condominiums in Lynn, Massachusetts. Under the condominium rules, owners were required to pay monthly assessments. Failure to pay on time required the payment of a late fee. In 2004, McDermott fell behind in his assessment payments for both units and began to incur late payment fees. After McDermott disputed the late payment fees and ceased making the monthly assessments, Pondview hired the law firm Marcus, Errico, Emmer & Brooks (MEEB) to collect McDermott’s debt.

From April 2005 to September 2008, MEEB filed nine collection actions in state court against McDermott—two of which MEEB won after a trial. During the pendency of these actions, MEEB repeatedly contacted the mortgagees of each of McDermott’s units without his knowledge or consent, informed them of McDermott’s delinquencies, and demanded payment from the mortgagees. The mortgagees accommodated MEEB, paying the amounts requested and passing the costs on to McDermott by tacking the amounts onto the outstanding mortgages. MEEB also occasionally contacted McDermott directly, despite knowing that he was represented by counsel.

In response to MEEB’s collection activities, McDermott filed suit against MEEB in the federal district court in Boston, alleging violations of the Massachusetts Consumer Protection Act (MCPA) and the Fair Debt Collection Practices Act (FDCPA). McDermott took issue with the wording of several collection letters, alleged that MEEB was deliberately misleading and conflated legal fees, and complained about MEEB’s direct contact with him and his mortgagees. Following trial, a magistrate judge found in favor of McDermott on both claims. Upon reconsideration, the judgment was reversed in part, finding MEEB not liable under the MCPA. McDermott appealed.

Per se liability. The magistrate judge committed an error in vacating the judgment in favor of McDermott on his MCPA claim, according to the appellate court. The MCPA broadly prohibits unfair and deceptive conduct in trade or commerce. Under a state regulation promulgated by the Attorney General, violations of federal consumer protection law were violations of the MCPA. In rejecting McDermott’s argument that the regulation rendered MEEB’s violations of the FDCPA a per se violation of the MCPA, the court noted that the Attorney General was not authorized to “regulate away” the two requirements of the MCPA and McDermott was required to show unfair and deceptive conduct occurring in trade or commerce.

However, the appellate court found that MEEB’s violations of the FDCPA constituted per se violations of the MCPA by virtue of the unambiguous statutory language in the FDCPA and FTC Act. The FDCPA expressly provided that a violation of its provisions shall be deemed unfair or deceptive acts or practices under the FTC Act, and the MCPA incorporated the administrative and decisional law under the FTC Act in relation to the definitions of “unfair” and “deceptive.” In this case, the magistrate judge determined that MEEB violated the FDCPA when it contacted McDermott directly to collect the debt despite its awareness that he was represented by counsel. Although McDermott did not advance any claims under the state debt collection law, it was clear that MEEB’s FDCPA violation would have violated the state debt collection law as well. Therefore, MEEB’s FDCPA violations resulted in per se liability under the MCPA, the court concluded.

The case is No. 13-2181.

Attorneys: Philip H. Cahalin (Law Office of Philip H. Cahalin) for William M. McDermott. Stephen Joseph Duggan (Lynch & Lynch), and Edmund A. Allcock for Marcus, Errico, Emmer & Brooks, PC.

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