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Munoz v. Pipestone Financial

September 12, 2005

DOUGLAS MUNOZ, PLAINTIFF,
v.
PIPESTONE FINANCIAL, LLC AND MESSERLI & KRAMER, P.A., DEFENDANTS.



The opinion of the court was delivered by: Joan N. Ericksen United States District Judge

MEMORANDUM

Douglas Munoz brought this action against Defendants Pipestone Financial, LLC and Messerli & Kramer, P.A. (collectively Defendants), asserting claims under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692o (2000). The case is before the Court on Defendants' motion for summary judgment. For the reasons set forth below, the Court denies Defendants' motion.

I. BACKGROUND

In 1995, Munoz opened a credit-card account (Account) with First USA Bank, N.A. (First USA). The Cardmember Agreement governing the Account establishe d an interest rate of 11.99 percent per year*fn1 on outstanding purchase balances. The Cardmember Agreement also provided for the payment by Munoz of reasonable attorney fees in the event that First USA referred the account in default to an attorney who is not a "regularly salaried employee" of First USA. Moreover, the Cardmember Agreement provided: "[First USA] may at any time assign [the] Account, any sums due on [the] Account, this Agreement or [First USA's] rights or obligations under this Agreement. The person(s) to whom [First USA] makes any such assignment shall be entitled to all of [First USA's] rights under this Agreement, to the extent assigned."

Munoz used the Account for approximately seven years. He ultimately defaulted and the Account was closed in September 2002. The Account balance was $7,519.13. In the summer of 2003, rights in and to a portfolio of debt, including Munoz's debt with First USA, were assigned to Unifund CCR Partners (Bank One-Unifund Assignment). The transaction was memorialized in a bill of sale, which provided for the assignment of "all rights, title and interest of Seller in and to those certain receivables, judgments or evidences of debt described in Exhibit 1" to Unifund.*fn2

On December 29, 2003, Unifund sold to Pipestone "all of its good and marketable title . . . in and to" certain accounts, including Munoz's Account. Pipestone is a purchaser of defaulted debt portfolios.

Pipestone retained Messerli & Kramer to collect Munoz's debt. Messerli & Kramer sent a demand letter in the amount of $8,660.26 to Munoz on January 5, 2004. This letter was sent in an envelope with a transparent window. On April 7, 2004, Messerli & Kramer filed suit on behalf of Pipestone in Minnesota District Court for the First Judicial District. In the state complaint, Pipestone sought the principal sum; attorney fees in the amount of $2,105.35, which represented 28% of the principal; and accrued interest totaling $1,341.20. Munoz filed this action on September 17, 2004. Munoz claims that Defendants violated the FDCPA by attempting to collect an impermissible amount of interest, misrepresenting the attorney fees that may lawfully be received, and by sending a letter in an envelope through which personal and confidential information was visible. Munoz has since stipulated to entry of judgment in the state action for the full principal amount of $7,519.13.

II. DISCUSSION

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party "bears the initial responsibility of informing the district court of the basis for its motion," and must identify "those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party satisfies its burden, Rule 56(e) requires the nonmoving party to respond by submitting evidentiary materials that designate "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

A. Interest Rate and Attorney Fees

In Count One of his Complaint, Munoz alleges that Defendants attempted to collect interest at an impermissible rate under Minnesota law and the FDCPA. In Count Two of his Complaint, Munoz alleges that Defendants violated the FDCPA by misrepresenting the entitlement to attorney fees in connection with the collection of Munoz's debt. Munoz asserts that Pipestone was not assigned First USA's rights to either collect interest or to collect attorney fees because those rights were not part of the Ba nk One-Unifund Assignment. Munoz further asserts that Unifund, therefore, could not assign those rights to Pipestone. Alternatively, Munoz argues that even if Pipestone were entitled to collect interest or attorney fees pursuant to the assignment, it is not permitted to collect interest at the rate of 11.99 percent under Minnesota law or attorney fees based on a percentage of the principal irrespective of the legal services actually provided. Defendants contend that Pipestone is authorized to collect 11.99 percent interest and attorney fees because it is a successor in interest to First USA's rights in the Cardmember Agreement, including both the interest rate and attorney fees provisions.

The Court first considers whether Defendants have demonstrated, as a matter of law, that Pipestone was assigned the rights to collect interest and attorney fees under the Cardmember Agreement. Unifund could only assign to Pipestone the rights it acquired. Therefore, the Court must first determine what rights passed with the Bank One-Unifund Assignment. The bill of sale memorializing that transaction provided that only the "rights, title and interest of Seller in and to those certain receivables, judgments or evidences of debt described in Exhibit 1" were assigned. The parties acknowledge that this dispute turns on whether the term "receivables" includes the right to collect interest and attorney fees.

Under Minnesota law, absent an ambiguity, contract terms are given their plain and ordinary meaning. See Knudsen v. Transp. Leasing/Contract, Inc., 672 N.W.2d 221, 223 (Minn. Ct. App. 2004). The plain meaning of "receivable" is "[a]n amount owed." Black's Law Dictionary 1296(8th ed. 2004).*fn3 Because the term "receivable" refers to an amount owed, it does not refer to interest not yet accrued or future attorney fees. Using the plain meaning of "receivable," the amount owed at the time of the Bank One-Unifund Assignment was the $7,519.13 balance, plus interestaccrued up to that time.Thus, Defendants have failed to demonstrate that, as a matter of law, ...


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