Lawrence Glazer v. Chase Home Finance, LLC

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit I.O.P. 32.1(b)

File Name: 13a0016p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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X

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LAWRENCE R. GLAZER,

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Plaintiff-Appellant,

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No. 10-3416

v.

,

>

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CHASE HOME FINANCE LLC; CINDY A.

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SMITH; REIMER, ARNOVITZ, CHERNEK &

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JEFFREY CO., L.P.A.; RONALD CHERNEK;

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Defendants-Appellees. N

and DARRYL E. GORMLEY,

Appeal from the United States District Court

for the Northern District of Ohio at Cleveland.

No. 09-01262—Christopher A. Boyko, District Judge.

Argued: March 8, 2012

Decided and Filed: January 14, 2013

Before: GRIFFIN and KETHLEDGE, Circuit Judges; and THAPAR, District Judge.*

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COUNSEL

ARGUED: Nicolette Glazer, LAW OFFICES OF LARRY R. GLAZER, Century City,

California, for Appellant. Thomas T. Brick, GALLAGHER SHARP, Cleveland, Ohio,

Danielle J. Szukala, BURKE, WARREN, MacKAY & SERRITELLA, P.C., Chicago,

Illinois, for Appellees. ON BRIEF: Nicolette Glazer, LAW OFFICES OF LARRY R.

GLAZER, Century City, California, for Appellant. Thomas T. Brick, Lori E. Brown,

Holly M. Olarczuk-Smith, GALLAGHER SHARP, Cleveland, Ohio, Danielle J.

Szukala, BURKE, WARREN, MacKAY & SERRITELLA, P.C., Chicago, Illinois,

Nelson M. Reid, Vladimir P. Belo, BRICKER & ECKLER LLP, Columbus, Ohio, for

Appellees.

*

The Honorable Amul R. Thapar, United States District Judge for the Eastern District of

Kentucky, sitting by designation.

1

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 2

_________________

OPINION

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GRIFFIN, Circuit Judge. This action involves claims under the Fair Debt

Collection Practices Act (“FDCPA” or the “Act”), 15 U.S.C. § 1692, and Ohio law that

plaintiff Lawrence Glazer asserts against a mortgage servicing company and the lawyers

it hired to foreclose on property Glazer inherited. The district court dismissed the

federal claims under Federal Rule of Civil Procedure 12(b)(6) and declined to exercise

jurisdiction over the state-law claims. For the reasons that follow, we affirm in part and

reverse in part. In doing so, we hold that mortgage foreclosure is debt collection under

the Act.

I.

In August 2003, non-party Charles Klie purchased property in Upper Arlington,

Ohio. He obtained financing for the purchase from non-party Coldwell Banker

Mortgage Corporation (“Coldwell Banker”) and gave Coldwell Banker a mortgage on

the property. Coldwell Banker promptly assigned its ownership rights in Klie’s note and

mortgage to the Federal National Mortgage Corporation (“Fannie Mae”) but continued

to service the loan. For reasons unknown, this assignment was never publicly recorded.

Four years later, in October 2007, Coldwell Banker transferred its servicing

rights to non-party JP Morgan Chase Bank (“JP Morgan”). This transaction did not

transfer any ownership rights in the note and mortgage (Coldwell Banker had none to

give). But in order to sell its servicing rights, Coldwell Banker had to assign whatever

rights it had in the note and mortgage (which were none) to JP Morgan, who then

reassigned the rights to Fannie Mae. On November 1, 2007, defendant Chase Home

Finance LLC (“Chase”), an arm of JP Morgan, obtained servicing rights to the Klie loan,

which was current at the time. Chase began to service the loan and accepted timely

payments for November and December of 2007 and January of 2008.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 3

Klie died on January 31, 2008. By the middle of May 2008, the loan was in

default. Chase hired defendant Reimer, Arnovitz, Chernek & Jeffrey Co., LPA, and two

of its attorneys (“RACJ”) to foreclose on the Klie property. On June 2, 2008, RACJ

prepared an assignment of the note and mortgage on behalf of JP Morgan that purported

to “sell, convey and transfer all rights and interests in the Klie promissory note and the

mortgage . . . to Chase” in order to establish Chase’s right to foreclose. According to

Glazer, the assignment transferred absolutely no rights because Fannie Mae still owned

the note and mortgage by virtue of Coldwell Banker’s assignment shortly after

origination.1

In June 2008, RACJ filed a foreclosure action on Chase’s behalf in state court,

alleging that Chase held and owned the Klie promissory note and that the original note

had been lost or destroyed. According to Glazer, Chase and RACJ fraudulently

concealed the fact that Fannie Mae owned the loan, and that the original note was not

lost or destroyed and was being held by a custodian for Fannie Mae’s benefit. The

complaint named plaintiff Lawrence Glazer as someone possibly having an interest in

the Klie property, and RACJ served Glazer with process. Glazer answered and asserted

defenses. He also notified RACJ that he disputed the debt and requested verification.

RACJ refused to verify the amount of the debt or its true owner.

In July 2008, the probate court handling Klie’s estate transferred all rights in the

property to Glazer as a beneficiary under Klie’s will. RACJ filed an amended

foreclosure complaint and again represented that Chase owned the note. Litigation

continued, and RACJ eventually moved for summary judgment, representing once again

that Chase owned the Klie note. The court granted the motion and entered a decree of

foreclosure. It later vacated that ruling and demanded that RACJ produce the original

note for inspection. Despite the vacatur of the foreclosure decree, RACJ scheduled a

sheriff’s sale but later cancelled it. Chase later dismissed the foreclosure action without

prejudice.

1

As the magistrate judge noted in his recommendation, “Chase has offered no explanation as to

how Coldwell Banker could assign its rights in the mortgage and note to another entity [when those rights]

had previously been assigned, nor has Chase disputed that an assignment to Fannie Mae occurred.”

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 4

In the midst of the foreclosure proceedings, Glazer filed the instant lawsuit,

alleging that Chase (and an employee) and RACJ violated the FDCPA and Ohio law

when they, among other things, falsely stated in the foreclosure complaint that Chase

owned the note and mortgage, improperly scheduled a foreclosure sale, and refused to

verify the debt upon request. Chase and RACJ moved to dismiss. A magistrate judge

recommended dismissing the federal claims and declining to exercise discretionary

jurisdiction over the state-law claims. Glazer filed objections and sought leave to amend

the complaint to add new allegations. The district judge adopted the recommendation,

granted defendants’ motions, and denied leave to amend.

Glazer timely appealed.

II.

We review de novo a district court’s order to dismiss a claim under Federal Rule

of Civil Procedure 12(b)(6). In doing so, we accept all well-pled allegations as true and

determine whether they plausibly state a claim for relief. Roberts v. Hamer, 655 F.3d

578, 581 (6th Cir. 2011).

III.

A.

Glazer alleges that Chase violated various provisions of the FDCPA, all of which

apply only to “debt collectors” as defined in the Act. See Kistner v. Law Offices of

Michael P. Margelefsky, LLC, 518 F.3d 433, 435–36 (6th Cir. 2008). The Act’s

definition of “debt collector” consists of a general definition followed by a number of

exceptions. See 15 U.S.C. § 1692a(6). One exception is relevant here: the term “debt

collector” does not include any person attempting to collect “any debt owed or due or

asserted to be owed or due another to the extent such activity . . . concerns a debt which

was not in default at the time it was obtained by such person.” Id. § 1692a(6)(F)(iii).

According to Glazer’s own allegations, Chase obtained the Klie loan for servicing before

default. Therefore, Chase is not a “debt collector.” See Perry v. Stewart Title Co.,

756 F.2d 1197, 1208 (5th Cir. 1985).

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 5

Glazer tries to avoid this result with two arguments, but neither is availing. He

contends first that this exception applies only to mortgage servicers who own the debt

obligation they service. Glazer is mistaken. The exception applies to a person collecting

a debt “asserted to be owed or due . . . another” when the efforts concern a debt that was

current when first obtained by the person. Requiring debt ownership would render the

exception nugatory. Cf. Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 107

(6th Cir. 1996) (concluding that even if the defendant did not own the auto loan it was

servicing, it was not a debt collector, because the loan was current when obtained for

servicing).

Second, Glazer asserts that the exception does not apply to subservicers, like

Chase, who service the underlying debt on behalf of the contractually obligated servicer.

He contends that JP Morgan, not Chase, obtained contractual servicing rights in

November 2007, so only JP Morgan meets the exception. Glazer is again mistaken.

Regardless of how he labels Chase—servicer or subservicer—the result is the same.

Chase started servicing the Klie debt when it was current. That it did so pursuant to an

agreement with JP Morgan rather than the debt’s owner makes no legal difference under

the Act. See Dawson v. Dovenmuehle Mortg., Inc., No. CIV.A.00-6171, 2002 WL

501499, at *5 n.4 (E.D. Pa. Apr. 3, 2002).

B.

Glazer sought leave to amend his complaint to “correct, supplement, and clarify

certain factual allegations based on facts disclosed by [Chase] for the first time during

a properly noticed deposition in the then pending state foreclosure action.” The

deposition he cited was that of Chase’s designated corporate representative, taken

October 19, 2009. As Glazer clarifies on appeal, the “new evidence” he sought to

include in his amended complaint is the fact that JP Morgan and Chase entered into a

“reciprocal collection agreement” on November 1, 2007, under which Chase agreed

to—and later did—service the Klie loan only after it fell into default. The allegation, if

permitted, would bring Chase out of the exception and make it a “debt collector.” The

district court denied Glazer leave to include the allegation in an amended complaint.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 6

Glazer argues that the district court erred by not granting his second motion for

leave to amend his complaint.2 As he sees it, leave was not required in the first place.

But even if he is correct on this point (we need not decide), he waived his right to press

the argument on appeal, having sought leave in the district court instead of simply filing

an amended complaint, and having cited in support of his request the portion of Civil

Rule 15 that says leave is required. See Pure Country, Inc. v. Sigma Chi Fraternity,

312 F.3d 952, 956 (8th Cir. 2002); see also Coventry First, LLC v. McCarty, 605 F.3d

865, 870 (11th Cir. 2010) (per curiam) (concluding that a party waived its right to amend

its pleading as a matter of course by instead seeking leave and inviting the district court

to review the amendment).

Accordingly, we review the district court’s ruling denying leave to amend for an

abuse of discretion. Leisure Caviar, LLC v. U.S. Fish & Wildlife Serv., 616 F.3d 612,

615 (6th Cir. 2010). Civil Rule 15 provides that “[t]he court should freely give leave

when justice so requires.” Fed. R. Civ. P. 15(a)(2). Nevertheless, denying leave is

appropriate in instances of “undue delay, bad faith or dilatory motive on the part of the

movant, repeated failure to cure deficiencies by amendments previously allowed, undue

prejudice to the opposing party by virtue of allowance of the amendment, futility of

amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).

The district court did not abuse its discretion in denying Glazer leave to amend.

Glazer filed his motion to amend on February 18, 2010, four months after discovery of

the “new” evidence, well after Chase’s motion to dismiss had been filed and fully

briefed, and one month after the magistrate recommended granting it. Permitting

amendment in this situation, the district court concluded, “would work against the intent

of the Federal Rules of Civil Procedure” by permitting a plaintiff to use the magistrate-

referral process to test out his pleading and discover defects before seeking to amend

them away in response to the magistrate’s recommendation. Furthermore, according to

2

The court also denied Glazer’s first motion to amend in which he requested permission to add

class allegations. The court found the proposed amendment futile only because Glazer could not maintain

claims of his own. See Fed. R. Civ. P. 23(a)(4); cf. Lewis v. Casey, 518 U.S. 343, 357 (1996). It otherwise

permitted the amendment. Because we are reinstating some of Glazer’s claims, the district court will need

to decide whether class treatment is warranted should Glazer request it on remand.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 7

the district court, allowing amendment under these circumstances would encourage delay

and bad faith on the part of plaintiffs and prejudice defendants who would have wasted

time and expense attacking a hypothetical complaint. We agree.

Glazer simply waited too long to seek leave to amend, and the delay unduly

prejudiced Chase. See United States v. Midwest Suspension & Brake, 49 F.3d 1197,

1202 (6th Cir. 1995) (noting that “a party must act with due diligence if it intends to take

advantage of the Rule’s liberality”). The evidence upon which the amendment was

predicated was discovered on October 19, 2009. By that time, Glazer was fully aware

of Chase’s argument that it was not a debt collector because it began servicing the Klie

loan prior to default. Chase’s motion was fully briefed by September 14, 2009. The

matter was referred to a magistrate on November 20, 2009. Apparently realizing that the

magistrate could only recommend a ruling on Chase’s motion, which Glazer could then

challenge before the district judge, Glazer took a wait-and-see approach. (He offers no

other plausible reason for waiting as long as he did.) Glazer should have sought leave

as soon as he learned of this new fact, as it is directly relevant to Chase’s argument, and

he certainly should not have waited until the magistrate’s report had issued. See

6 Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and

Procedure §1488, p. 764 (3d ed. 2010) (“A party who delays in seeking an amendment”

once the need to amend becomes apparent “is acting contrary to the spirit of the rule and

runs the risk of the court denying permission because of the passage of time.”). It was

not an abuse of discretion to deny leave in this instance.

We addressed a similar situation in Begala v. PNC Bank, Ohio, Nat’l Ass’n,

214 F.3d 776 (6th Cir. 2000). There, in the district court, the plaintiffs in a footnote in

their brief in response to the defendant’s motion to dismiss prospectively asked for leave

to amend in the event the court found the original complaint deficient. The district court

dismissed the complaint without granting leave to amend. On reconsideration, the

plaintiffs claimed error in dismissing the complaint without first granting leave to permit

them to correct the deficiencies with an amended complaint. The district court denied

the motion, noting that if the plaintiffs had sought to amend prior to the court’s

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 8

consideration of the defendant’s motion to dismiss, the court would have considered the

defendant’s motion in light of the proposed amendments. Id. at 784. Absent a request

for leave, however, the defendant was entitled to a review of the complaint as filed. The

district court reasoned: “Plaintiffs were not entitled to an advisory opinion from the

Court informing them of the deficiencies of the complaint and then an opportunity to

cure those deficiencies.” Id. We upheld the district court’s exercise of discretion. Id.

Similar reasoning supports the district court’s decision in the present case not to allow

Glazer to amend in response to the magistrate’s recommendation.

IV.

Next, Glazer challenges the dismissal of his FDCPA claims against RACJ arising

out of its conduct in relation to the attempted foreclosure on the Klie property. The

district court ruled that these claims failed because RACJ’s activities in bringing a

mortgage foreclosure action were not debt collection. The question is whether mortgage

foreclosure is debt collection under the Act. We hold that it is and therefore reverse.

A.

The FDCPA speaks in terms of debt collection. For example, to be liable under

the statute’s substantive provisions, a debt collector’s targeted conduct must have been

taken “in connection with the collection of any debt,” e.g., 15 U.S.C. §§ 1692c(a)–(b),

1692d, 1692e, 1692g, or in order “to collect any debt,” id. § 1692f. In addition, to be a

“debt collector” under the Act, one must either (1) have as his or her principal business

purpose “the collection of any debts” or (2) “regularly collects or attempts to collect,

directly or indirectly, debts owed or due . . . another.” Id. § 1692a(6). Despite the Act’s

pivotal use of the concept, however, it does not define debt collection. While the

concept may seem straightforward enough, confusion has arisen on the question whether

mortgage foreclosure is debt collection under the Act. We have not addressed the issue.3

3

In Wallace v. Washington Mutual Bank, 683 F.3d 323 (6th Cir. 2012), we held that a law firm

could suffer FDCPA liability for stating the wrong identity of the mortgage’s owner in a foreclosure

complaint. Id. at 326; see 15 U.S.C. § 1692e. Because the firm did not claim it was not engaged in debt

collection when it commenced foreclosure proceedings, we did not address the issue.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 9

Nor has the Consumer Financial Protection Bureau offered an authoritative interpretation

on the matter. See 15 U.S.C. § 1692l(d).4 Other courts have taken varying approaches

on the issue.

The view adopted by a majority of district courts, and the one followed below,

is that mortgage foreclosure is not debt collection. This view follows from the premise

that the enforcement of a security interest, which is precisely what mortgage foreclosure

is, is not debt collection. See, e.g., Rosado v. Taylor, 324 F. Supp. 2d 917, 924 (N.D.

Ind. 2004) (“Security enforcement activities fall outside the scope of the FDCPA

because they aren’t debt collection practices[,]” and “[n]o different rule applies in cases

involving real property[.]”); Hulse v. Ocwen Fed. Bank, 195 F. Supp. 2d 1188, 1204 (D.

Or. 2002). However, if a money judgment is sought against the debtor in connection

with the foreclosure, this view maintains, there has been debt collection, because there

was an attempt to collect money. See, e.g., McDaniel v. South & Assocs., P.C., 325 F.

Supp. 2d 1210, 1217–18 (D. Kan. 2004). Despite its pervasiveness in the district courts,

we find this approach unpersuasive and therefore decline to follow it.

B.

As with all matters requiring statutory interpretation, we begin with the text.

United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). “If the words are

plain, they give meaning to the act, and it is neither the duty nor the privilege of the

courts to enter speculative fields in search of a different meaning.” Caminetti v. United

States, 242 U.S. 470, 490 (1917).

Unfortunately, the FDCPA does not define “debt collection,” and its definition

of “debt collector” sheds little light, for it speaks in terms of debt collection. See

15 U.S.C. § 1692a(6); cf. In re Settlement Facility Dow Corning Trust, 628 F.3d 769,

773 (6th Cir. 2010) (noting that a definition containing the defined term is not likely to

be helpful). But the statute does offer guideposts. It defines the word “debt,” for

4

And contrary to Glazer’s contention, the Supreme Court’s recent decision in Jerman v. Carlisle,

McNellie, Rini, Kramer & Ulrich LPA, 130 S. Ct. 1605 (2010), did not resolve the issue.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 10

instance, which is “any obligation or alleged obligation of a consumer to pay money

arising out of a transaction in which the money, property, insurance, or services which

are the subject of the transaction are primarily for personal, family, or household

purposes[.]” 15 U.S.C. §1692a(5). The focus on the underlying transaction indicates that

whether an obligation is a “debt” depends not on whether the obligation is secured, but

rather upon the purpose for which it was incurred. Cf. Haddad v. Alexander, Zelmanski,

Danner & Fioritto, PLLC, 698 F.3d 290, 293 (6th Cir. 2012). Accordingly, a home loan

is a “debt” even if it is secured. See Reese v. Ellis, Painter, Ratterree & Adams, LLP,

678 F.3d 1211, 1216–17, 1218 (11th Cir. 2012); Maynard v. Cannon, 401 F. App’x 389,

394 (10th Cir. 2010); Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373, 376

(4th Cir. 2006).

In addition, the Act’s substantive provisions indicate that debt collection is

performed through either “communication,” id. § 1692c, “conduct,” id. § 1692d, or

“means,” id. §§ 1692e, 1692f. These broad words suggest a broad view of what the Act

considers collection. Nothing in these provisions cabins their applicability to collection

efforts not legal in nature. Cf. Heintz v. Jenkins, 514 U.S. 291, 292 (1995) (holding that

“a lawyer who ‘regularly,’ through litigation, tries to collect consumer debts” is a “debt

collector” under the Act). Foreclosure’s legal nature, therefore, does not prevent if from

being debt collection.

Furthermore, in the words of one law dictionary: “To collect a debt or claim is

to obtain payment or liquidation of it, either by personal solicitation or legal

proceedings.” Black’s Law Dictionary 263 (6th ed. 1990). The Supreme Court relied

on this passage when it declared the following in a case concerning the Act’s definition

of “debt collector”: “In ordinary English, a lawyer who regularly tries to obtain payment

of consumer debts through legal proceedings is a lawyer who regularly ‘attempts’ to

‘collect’ those consumer debts.” Heintz, 514 U.S. at 294 (emphasis added). Thus, if a

purpose of an activity taken in relation to a debt is to “obtain payment” of the debt, the

activity is properly considered debt collection. Nothing in this approach prevents

mortgage foreclosure activity from constituting debt collection under the Act. See

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Shapiro & Meinhold v. Zartman, 823 P.2d 120, 124 (Colo. 1992) (explaining that

“foreclosure is a method of collecting a debt by acquiring and selling secured property

to satisfy a debt”). In fact, every mortgage foreclosure, judicial or otherwise, is

undertaken for the very purpose of obtaining payment on the underlying debt, either by

persuasion (i.e, forcing a settlement) or compulsion (i.e., obtaining a judgment of

foreclosure, selling the home at auction, and applying the proceeds from the sale to pay

down the outstanding debt). As one commentator has observed, the existence of

redemption rights and the potential for deficiency judgments demonstrate that the

purpose of foreclosure is to obtain payment on the underlying home loan. Such remedies

would not exist if foreclosure were not undertaken for the purpose of obtaining payment.

See Eric M. Marshall, Note, The Protective Scope of the Fair Debt Collection Practices

Act: Providing Mortgagors the Protection They Deserve From Abusive Foreclosure

Practices, 94 Minn. L. Rev. 1269, 1297–98 (2010). Accordingly, mortgage foreclosure

is debt collection under the FDCPA.

Other provisions in the Act reinforce this view. The Act nowhere excludes from

its reach foreclosure or the enforcement of security interests generally. In fact, certain

provisions affirmatively suggest that such activity is debt collection. Section 1692f

prohibits “debt collectors” from using “unfair or unconscionable means” to “collect any

debt.” After stating this general prohibition, the section sets forth a non-exhaustive list

of specific activities prohibited thereunder, one of which is “[t]aking or threatening to

take any nonjudicial action to effect dispossession or disablement of property” if, e.g.,

“there is no present right to possession of the property claimed as collateral through an

enforceable security interest[.]” 15 U.S.C. § 1692f(6)(A). Foreclosure in some states

is carried out in just this way—through “nonjudicial action,” the result of which is to

“effect dispossession” of the secured property. See, e.g., Mich. Comp. Laws § 600.3204

(authorizing foreclosure by advertisement only if no lawsuit has been filed to recover the

underlying debt); Tenn. Code Ann. § 35-5-101 (permitting foreclosure by

advertisement). The example’s presence within a provision that prohibits unfair means

to “collect or attempt to collect any debt” suggests that mortgage foreclosure is a

“means” to collect a debt.

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 12

Consider also § 1692i. This section requires a debt collector bringing a legal

action against a consumer “to enforce an interest in real property securing the

consumer’s obligation”—e.g., a mortgage foreclosure action—to file in the judicial

district where the property is located. 15 U.S.C. § 1692i(a)(1). Although the provision

itself does not speak in terms of debt collection, it applies only to “debt collectors” as

defined in the first sentence of the definition, id. § 1692a(6), which does speak in terms

of debt collection.5 This suggests that filing any type of mortgage foreclosure action,

even one not seeking a money judgment on the unpaid debt, is debt collection under the

Act.

Our holding today is supported by decisions from our sister circuits. See Wilson

v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir. 2006); Piper v. Portnoff Law

Assocs., Ltd., 396 F.3d 227 (3d Cir. 2005). In Piper, the defendant lawyers telephoned

the plaintiff and mailed her multiple letters demanding payment of outstanding utility

bills. Failure to pay the bills resulted in a lien being placed on the plaintiff’s home. The

lawyers later obtained a judgment against the plaintiff by way of an in rem civil action,

and then sought to satisfy the judgment by foreclosing on the lien (selling the home).

The lawyers argued that their practices were not subject to the FDCPA because “all

[they] ever tried to do was enforce a lien in the manner dictated by” state law. Piper,

396 F.3d at 234. The Third Circuit disagreed. Pointing to pre-suit calls and demand

letters, as well as some communications sent during the litigation, the court concluded

that the fact that state law allowed for a lien to secure the debt did not “change its

character as a debt or turn [the] communications to the Pipers into something other than

an effort to collect that debt.” Id. It further noted that “if a collector were able to avoid

liability under the FDCPA simply by choosing to proceed in rem rather than in

personam, it would undermine the purpose of the FDCPA.” Id. (internal punctuation

omitted).

5

The venue provision applies only to those who satisfy the first sentence of the definition of “debt

collector,” not those who only meet the definition’s final sentence (concerning security-interest enforcers).

See Kaltenbach v. Richards, 464 F.3d 524, 528 (5th Cir. 2006); Montgomery v. Huntington Bank, 346 F.3d

693, 699–701 (6th Cir. 2003).

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 13

The Fourth Circuit echoed these sentiments in Wilson. There, a law firm retained

by a bank notified the plaintiff that the firm was preparing to foreclose on the plaintiff’s

house because her home loan was in default. A week later, the firm commenced

foreclosure proceedings and contacted the plaintiff to say that her home would soon be

sold at auction. In response to the plaintiff’s lawsuit claiming FDCPA violations, the

firm argued that the plaintiff’s debt ceased to be a “debt” under the Act once foreclosure

proceedings began, and that foreclosure is distinct from the enforcement of an obligation

to pay money. Disagreeing, the Fourth Circuit found that the debt remained a “debt” and

that the firm’s “actions surrounding the foreclosure proceeding were attempts to collect

that debt.” Wilson, 443 F.3d at 376. It noted that the law firm’s “argument, if accepted,

would create an enormous loophole in the Act immunizing any debt from coverage if

that debt happened to be secured by a real property interest and foreclosure proceedings

were used to collect the debt.” Id. Seeing “no reason to make an exception to the Act

when the debt collector uses foreclosure instead of other methods,” the court held that

the firm’s “foreclosure action was an attempt to collect a ‘debt.’” Id. at 376, 378. Piper

and (especially) Wilson fully support our holding that mortgage foreclosure is debt

collection under the Act.

C.

Courts that hold that mortgage foreclosure is not debt collection offer different

reasons for this view. Some reason that the FDCPA is concerned only with preventing

abuse in the process of collecting funds from a debtor, and that foreclosure is distinct

from this process because “payment of funds is not the object of the foreclosure action.”

Hulse, 195 F. Supp. 2d at 1204. We disagree. There can be no serious doubt that the

ultimate purpose of foreclosure is the payment of money.

Some courts that hold mortgage foreclosure to be outside the Act rely principally

on the definition of “debt collector.” After defining a “debt collector” as one whose

principal business purpose is the “collection of any debts” or who “regularly” collect

debts, the definition’s third sentence states: “For the purpose of section 1692f(6) of this

title, such term also includes any person who uses any instrumentality of interstate

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 14

commerce or the mails in any business the principal purpose of which is the enforcement

of security interests.” 15 U.S.C. § 1692a(6). One who satisfies the first sentence is a

debt collector for all sections of the Act, but one satisfying only the third sentence is a

“debt collector” limited to § 1692f(6) (concerning non-judicial repossession abuses).

See Kaltenbach, 464 F.3d at 528; Montgomery, 346 F.3d at 699–701. Therefore, these

courts reason, “if the enforcement of a security interest was synonymous with debt

collection, the third sentence would be surplusage because any business with a principal

purpose of enforcing security interests would also have the principal purpose of

collecting debts.” Gray v. Four Oak Court Ass’n, Inc., 580 F. Supp. 2d 883, 888 (D.

Minn. 2008). To avoid this result, these courts conclude that the enforcement of a

security interest, including mortgage foreclosure, cannot be debt collection. Id.

We reject this reading of the statute. The third sentence in the definition does not

except from debt collection the enforcement of security interests; it simply “make[s]

clear that some persons who would be without the scope of the general definition are to

be included where § 1692f(6) is concerned.” Piper, 396 F.3d at 236; see Shapiro &

Zartman, 823 P.2d at 124. It operates to include certain persons under the Act (though

for a limited purpose); it does not exclude from the Act’s coverage a method commonly

used to collect a debt. As the Third Circuit explained in Piper,

[e]ven though a person whose business does not primarily involve the

collection of debts would not be a debt collector for purposes of the Act

generally, if his principal business is the enforcement of security

interests, he must comply with the provisions of the Act dealing with

non-judicial repossession abuses. Section 1692a(6) thus recognizes that

there are people who engage in the business of repossessing property,

whose business does not primarily involve communicating with debtors

in an effort to secure payment of debts.

Piper, 396 F.3d at 236. And, in the words of the Fourth Circuit, “[t]his provision applies

to those whose only role in the debt collection process is the enforcement of a security

interest.” Wilson, 443 F.3d at 378.

Other than repossession agencies and their agents, we can think of no others

whose only role in the collection process is the enforcement of security interests. A

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 15

lawyer principally engaged in mortgage foreclosure does not meet this criteria, for he

must communicate with the debtor regarding the debt during the foreclosure

proceedings, regardless of whether the proceedings are judicial or non-judicial in nature.

See, e.g., Mich. Comp. Laws § 600.3205a(1) (requiring the foreclosing party to serve on

the borrower before commencing a foreclosure-by-advertisement a written notice

containing information about the underlying obligation and stating how to avoid

foreclosure); Tenn. Code Ann. § 35-5-101(e) (same); cf. Reese, 678 F.3d at 1217 (noting

that a foreclosure notice serves more than one purpose). See also Shapiro & Meinhold,

823 P.2d at 124 (noting that “attorneys are not exempt [from the Act] merely because

their collection activities are primarily limited to foreclosures”). Not so for repossessors,

who typically “enforce” a security interest—i.e., repossess or disable property—when

the debtor is not present, in order to keep the peace.6

Finally, the fact that the only provision of the Act applicable to those who satisfy

the third sentence in the definition (but not the first sentence) concerns non-judicial

repossessions—precisely the business of repossessors—also suggests that the sentence

applies only to repossessors. Indeed, all of the cases we found where §§ 1692f(6) and

1692a(6)’s third sentence were held applicable involved repossessors. See, e.g.,

Montgomery, 346 F.3d at 700 (agreeing that “those who enforce security interests, such

as repossession agencies, fall outside the ambit of the FDCPA,” except for the purposes

of § 1692f(6) (emphasis added)); Nadalin v. Auto. Recovery Bureau, Inc., 169 F.3d

1084, 1085 (7th Cir. 1999) (noting that “repossessors” must comply with § 1692f(6));

James v. Ford Motor Credit Co., 47 F.3d 961, 962 (8th Cir. 1995) (noting that “a few

provisions of the Act subject repossession companies to potential liability when they act

in the enforcement of others’ security interests”); Jordan v. Kent Recovery Servs., 731

F. Supp. 652, 657 (D. Del. 1990).

6

Nothing in our decision precludes the application of the entire FDCPA to a repossessor who

“regularly” collects debts for another and thus satisfies the general definition of “debt collector.”

15 U.S.C. § 1692a(6).

No. 10-3416 Glazer v. Chase Home Fin., et al. Page 16

D.

For these reasons, we hold that mortgage foreclosure is debt collection under the

Act. Lawyers who meet the general definition of a “debt collector” must comply with

the FDCPA when engaged in mortgage foreclosure. And a lawyer can satisfy that

definition if his principal business purpose is mortgage foreclosure or if he “regularly”

performs this function. In this case, the district court held that RACJ was not engaged

in debt collection when it sought to foreclose on the Klie property. That decision was

erroneous, and the judgment must be reversed.7

V.

The district court declined to exercise supplemental jurisdiction over Glazer’s

state-law claims after dismissing the federal ones. See 28 U.S.C. § 1367(c)(3); Musson

Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1254–55 (6th Cir. 1996). Because

we have revived some of Glazer’s federal claims, it is appropriate to reinstate his state-

law claims as well, including those against Chase. Cf. Briner v. City of Ontario, 370 F.

App’x 682, 707 (6th Cir. 2010).

VI.

For all these reasons, we affirm in part and reverse in part the judgment of the

district court. The portions of the judgment dismissing Glazer’s FDCPA claims against

Chase and denying Glazer leave to amend are affirmed. The portion dismissing Glazer’s

FDCPA claims against RACJ is reversed. The portion dismissing Glazer’s state-law

claims is vacated. The case is remanded for further proceedings consistent with this

opinion.

7

We decline to reach RACJ’s alternative grounds for affirmance because the issues are not clearly

presented in the briefs. See Carrier Corp. v. Outokumpu Oyj, 673 F.3d 430, 446 (6th Cir. 2012). The

district court can address the arguments if RACJ chooses to reassert them on remand.