Daily Development for
Monday, January 4, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

LANDLORD/TENANT; RESIDENTIAL; EVICTION; NOTICE: Second Circuit holds that state statutory notice to quit, if filed by landlord's attorney, is a violation of the Federal Fair Debt Collection Practices Act, which provides for a thirty day period in which to dispute the bill and requires other disclosures.

Romea v. Heiberger & Assoc., 988 F.2d. 715 (2nd Cir. 1998).

This was a class action brought on behalf of tenants against lawyers representing landlords in summary eviction proceedings alleging violations of the Fair Debt Collection Practices Act. This Act is a thorny and vicious challenge to those who do not daily toil to keep up with the various judicial and regulatory pronouncements that detail procedures for parties collecting debts on behalf of third party creditors. The Act provides for attorneys' fees and minimum damages penalties per violation. For parties engaged in broad scale collection activities, it can lead to very expensive adverse judgments. The Act has had been held to apply to attorneys in a variety of circumstances, including mortgage foreclosures. The instant action challenged the validity under the Act of the New York statutes providing for a three day notice to quit following a default in rent.

The notice read as follows: "PLEASE TAKE NOTICE that you are hereby required to pay to 442 3RD AVE. REALTY LLC landlord of [442 Third Avenue], the sum of $2,800.00 for rent of the premises] ...You are required to pay within three days from the day of service of this notice, or to give up possession of the premises to the landlord. If you fail to pay or to give up the premises, the landlord will commence summary proceedings against you to recover possession of the premises."

The court noted that this three day notice is a prerequisite under New York Law to the landlord's proceeding for a summary possession action. The summary possession action actually terminates the tenancy. In the summary action, moreover, the landlord can obtain a judgment for the back rent.

The tenant argued that the notice to quit, which was in accordance with standard New York procedure, (1) "violated 15 U.S.C. § 1692(g) by failing to adequately advise the Plaintiff of her rights, because the thirty (30) day validation notice required by 15 U.S.C. § 1692(g) was not placed anywhere in the demand for payment of the alleged debt"; (2) "violated 15 U.S.C. § 1692(g) because it contradicts the requirement that the Plaintiff be advised of and be given a thirty (30) day period in which to dispute the bill"; (3) "failed to disclose clearly that the Defendant was attempting to collect a debt, and that any information obtained would be used for that purpose, as required by 15 U.S.C. § 1692(e)(11)"; and (4) "contained threats to take actions that could not legally be taken, or that were not intended to be taken, in violation of 15 U.S.C. § 1692(e)(5)."

Following a certification of an interlocutory appeal from the District Court, the Second Circuit Panel agreed with the tenant that the notice did fall under the provisions of the Act and remanded the case to the trial court to nail the rest of the lid on the defendant's coffin.

The Second Circuit panel, in an opinion written by Judge Calabrezzi, had no difficulty dismissing the landlord's technical arguments that back rent is not a debt or that the notice was not a "communication to collect a debt" covered by the Act. The landlord argued that the Act should not apply to statutorily required notices that are in the nature of service of process. Service of legal notices is an exempt activity under the Act. But the Second Circuit again gave short shrift to the argument, concluding that although the notice letter is a prerequisite to a legal proceeding, it is not itself a formal pleading. The summary possession action is commenced by petition following the running of the three day period described in the letter. Further, the court held that in any event the Act would apply to lawyers who provide notices through pleadings, as the exemption in the Act for service of process applies only the process servers who perform the sole function of delivery, and do not prepare the materials sent.

In response to the defendants' argument that the application of the Act here would lead to an "absurd" bundling together of two procedures, both of which were intended to address the same kind of consumer protection, the court cites examples of abuse of the New York procedure which Congress may have intended the Act to cure and further indicates that the Federal Trade Commission would have regulatory authority to exempt the New York procedure from the Act if the Commission concluded that this would be consistent with federal policy.

Comment 1: Note that the notice in question is a prerequisite to a formal legal proceeding, and the trial court addressed only this issue. But the appeals court goes further and suggests that the terms of the Act would apply to parties preparing formal legal documents - such as petitions for summary eviction. The case does not involve such documents, but if indeed the Act applies, it would appear that additional notices and in many cases additional time for response will become a part of summary eviction proceedings nationwide.

Comment 2: To appreciate the impact of the case in New York, it is useful to review the comments of the Federal District Court Judge (988 F.Supp. 715) who certified the case to the Second Circuit:

[I]t is safe to say that the decision in this case probably affects substantially over 100,000 cases annually in New York City alone. . . In each of those cases, a notice complying with RPAPL § 711 must be served. In many, quite likely most, of those cases, the notice is prepared and served by the landlord's attorney as part of the services rendered in handling the proceeding. The effect of this Court's ruling is to require a sea change in the practice as well as to open the door to a flood of federal court suits against lawyers under the FDCPA with respect to three day notices served by them within the period that remains open under the statute of limitations. Both of these consequences will have untoward effects.

The requisite change in landlord-tenant practice will be substantial. Lawyers who regularly serve three day notices, and who therefore may be treated as debt collectors under the FDCPA, could continue to do so free of liability only if they afford 30 days notice rather than the three required by state law and otherwise comply with the federal statute. The alternative would be for their landlord clients either to use lawyers who do not serve many three day notices or to serve the notices themselves. Either of these options would permit service of three day notices because neither the lawyers occasionally serving such notices nor the landlords themselves are "debt collectors" subject to the statute. [Note from editor - the cases are very stingy about defining the minimum amount of activity that triggers coverage under the Act - any active attorney should be cautious about relying on the exemption].

. . . Given the level of contention that frequently characterizes landlord-tenant relationships in New York City, it is not surprising that attorneys representing tenants in non-payment proceedings evidently are seeking to use alleged violations of FDCPA based on this Court's decision to seek dismissal of otherwise meritorious petitions on the ground that the three-day notices did not comply with the federal statute. Indeed, counsel for the plaintiff in this case has issued such a call to arms in a Web site posting that concludes with the peroration:

'Housing is a human right, not a commodity to bargain over. Tenants, tenant advocates and tenant attorneys must fight back against this feudal era inherited system called rent by any legal means necessary. The Romea decision gives us a big rock to throw in Goliath's face. Let the monkeywrenchers storm the barricades!'

Comment 3: Note that neither the District Court nor the Second Circuit has determined that a violation of the FDCPA is a defense to an eviction action. The Act in general applies only against the third party debt collectors who give the notices, and in most cases does not implicate the substantive rights addressed in these notices. As the District Court judge notes, the issue of whether a violation of the Act is a defense to a state court eviction action is an issue for the New York State courts.

Further, the class has not yet been certified, nor any other aspect of the case resolved in the trial court. Stay tuned on this one!!!

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