Dianne Roden Bradley v. Franklin Collection Service, Inc.

Case: 13-12276 Date Filed: 01/02/2014 Page: 1 of 9

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
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No. 13-12276
Non-Argument Calendar
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D.C. Docket No. 5:10-cv-01537-AKK

MELVIN BRADLEY,

Plaintiff,

DIANNE RODEN BRADLEY,
as executrix for the Estate of Melvin Bradley,
KEVIN A. CALMA,
individually and on behalf of all others similarly situated,

Plaintiffs - Appellants,

versus

FRANKLIN COLLECTION SERVICE, INC.,

Defendant - Appellee.

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Appeal from the United States District Court
for the Northern District of Alabama
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(January 2, 2014)
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Before HULL, MARCUS and WILSON, Circuit Judges.

PER CURIAM:

Appellants Melvin Bradley and Kevin Calma (collectively “Appellants”)

incurred medical debts at North Alabama Urology, P.C. (Urology) and University

of Alabama at Birmingham Health System West (UAB West), respectively.

Because Appellants failed to pay their debts, Urology and UAB West referred the

accounts to appellee Franklin Collection Service, Inc. (Franklin). As part of the

referral, Urology and UAB West added to Appellants’ accounts a charge for

collection fees. It is this charge that prompted Appellants to file suit against

Franklin, alleging violations of Alabama state law, the Fair Debt Collection

Practices Act (FDCPA), 15 U.S.C. §1692–1692p, and the Racketeer Influenced

and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961–1968. 1 Both parties

moved for summary judgment. The district court denied Appellants’ motion on all

claims except for Calma’s unjust enrichment claim and granted Franklin’s motion.

After the district court’s ruling, Appellants filed a motion to dismiss with prejudice

Calma’s unjust enrichment claim. Their motion was granted, and the case was

dismissed with prejudice. Appellants now appeal the district court’s decision to

1
Based on the district court’s order and the parties’ briefing on appeal, it appears that
only Bradley appeals his claims under the FDCPA and state law.
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grant Franklin’s motion for summary judgment. 2 For the reasons that follow, we

reverse the district court’s decision granting summary judgment in favor of

Franklin on Bradley’s claim under 15 U.S.C. § 1692f of the FDCPA. We affirm

the district court’s decision granting Franklin’s motion for summary judgment on

all remaining claims raised in this appeal.3

We review a district court’s summary judgment decision de novo, applying

the same legal standards as those that governed the district court. Capone v. Aetna

Life Ins. Co., 592 F.3d 1189, 1194 (11th Cir. 2010). Summary judgment is

appropriate where “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). We

construe the facts and draw all reasonable inferences in favor of the non-moving

party. Walters v. Am. Coach Lines of Miami, Inc., 575 F.3d 1221, 1226 (11th Cir.

2009) (per curiam). We therefore state the facts in the light most favorable to the

Appellants, the non-moving party.

2
In a footnote, Franklin notes that Appellants also appeal the district court’s order
denying their motion for class certification. However, class certification is never mentioned in
Appellants’ briefing. Because Appellants did not brief the issue, we consider it waived. See
Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004) (holding that “a legal
claim or argument that has not been briefed before the court is deemed abandoned and its merits
will not be addressed”).
3
Because we find Appellants’ remaining FDCPA claims, RICO claims, and claims under
state law unavailing, we affirm those claims based on the thorough and well-reasoned order of
the district court entered on March 28, 2013.
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I. BACKGROUND

A. UAB West

UAB West is a healthcare institution operating under the control of the

University of Alabama at Birmingham Health System (UAB). UAB manages

healthcare delivery and billing for its hospitals, including UAB West. UAB and

UAB West contracted with Franklin to collect unpaid medical bills. UAB West’s

agreement with Franklin involved adding a 30% collection fee to all accounts UAB

West referred for collection. The agreement also gave Franklin the right to pursue

collection lawsuits on UAB’s behalf.

In 2007, Appellant Calma incurred a $735 bill when he took his daughter to

UAB West for treatment. Calma failed to pay his bill. In response, UAB West

sent him three separate statements, warning that, pursuant to their agreement, if

Calma failed to pay, UAB West would send his account to a collection agency.

The agreement Calma signed with UAB West stated, in part, “I agree that if this

account is not paid when due, and the hospital should retain an attorney or

collection agency for collection, I agree to pay all costs of collection including

reasonable interest, reasonable attorney’s fees (even if suit is filed) and reasonable

collection agency fees.” 4 Calma never paid UAB West. According to its debt

4
Unlike Bradley, Calma did not appeal Franklin’s collection fee based on a violation of
15 U.S.C. § 1692f. And, unlike Bradley’s agreement, Calma’s agreement explicitly provided
that Calma agreed to pay “reasonable collection agency fees.”
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collection policy, UAB added a 30% collection fee to his account and referred his

account to Franklin for collection. With the 30% added collection fee, Calma

owed UAB West $922.25.

B. Urology

Urology is a healthcare provider that also uses Franklin to collect unpaid

medical bills. The collection contract between Urology and Franklin stated that

Urology would add 33-and-1/3% to a debt prior to transferring the account to

Franklin. The contract also stipulated that Franklin was entitled to 30% of the total

collected from each debt. Critically, Bradley was not a party to this agreement.

In 2009, Appellant Bradley received medical treatment from Urology and

incurred a bill for $861.96. Like Calma, Bradley also signed a patient agreement,

which stated: “In the event of non-payment . . . I agree to pay all costs of

collection, including a reasonable attorney’s fee . . . .” Also like Calma, Bradley

failed to pay his medical bill. As a result, Urology added a $293.06 collection fee

to Bradley’s balance. Urology then sent his account to Franklin for collection.

Bradley’s new balance due to Urology was $1,155.02. To avoid being sued,

Bradley paid the $1,155.02 and reserved his right to recover overcharges.

II. DISCUSSION

In enacting the FDCPA, Congress sought “to eliminate abusive debt

collection practices by debt collectors, to insure that those debt collectors who

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refrain from using abusive debt collection practices are not competitively

disadvantaged, and to promote consistent State action to protect consumers against

debt collection abuses.” 15 U.S.C. § 1692(e). The FDCPA prohibits debt

collectors from using “any false, deceptive, or misleading representation or means

in connection with the collection of any debt” as well as the use of “unfair or

unconscionable” means of collection. 15 U.S.C. §§ 1692e, 1692f. Here, the sole

issue is Bradley’s claim under § 1692f. We affirm the district court on all other

issues raised in this appeal.

Section 1692f prohibits unfair or unconscionable means of collection.

Subsection (1) of this section specifically prohibits “collection of any amount

(including any interest, fee, charge, or expense incidental to the principal

obligation) unless such amount is expressly authorized by the agreement creating

the debt or permitted by law.” 15 U.S.C. § 1692f(1). Bradley argues that the

collection fee he paid violates this section of the FDCPA because the fee was

really liquidated damages rather than the actual cost of collection. We agree.

While the Eleventh Circuit has not previously addressed this issue, we find

the Eighth Circuit’s reasoning in Kojetin v. CU Recovery, Inc., 212 F.3d 1318,

1318 (8th Cir. 2000) (per curiam), to be persuasive. There, the Eighth Circuit held

that the debt collector violated the FDCPA when it charged the debtor a collection

fee based on a percentage of the principal balance of the debt due rather than the

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actual cost of collection. Id. That is what happened here. When Bradley signed

Urology’s patient registration form, he only agreed to pay “all costs of collection.”

That is, Bradley agreed to pay the actual costs of collection; his contractual

agreement with Urology did not require him to pay a collection agency’s

percentage-based fee where that fee did not correlate to the costs of collection.

Before Urology handed over Bradley’s delinquent account to Franklin, it

added a 33-and-1/3% “collection fee.” Franklin failed to direct this Court to any

evidence that the 33-and-1/3% “collection fee”—which was assessed before

Franklin attempted to collect the balance due—bears any correlation to the actual

cost of Franklin’s collection effort. As such, the 33-and-1/3% fee breaches the

agreement between Bradley and Urology, since, contractually, Bradley was only

obligated to pay the “costs of collection.” See id. Urology and Franklin cannot

alter Bradley’s obligations by the terms of their subsequent agreement. Because

there was no express agreement between Urology and Bradley allowing for

collection of the 33-and-1/3% fee, that fee violates the FDCPA. See 15 U.S.C.

§ 1692(e); see also Kojetin, 212 F.3d at 1318.

This is not to say that Bradley and Urology could not have formed an

agreement allowing for the collection of the percentage-based fee. It is the nature

of the agreement between Bradly and Urology, not simply the amount of the fee

that is important here. For example, Plaintiff Calma agreed to pay, inter alia,

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“reasonable collection agency fees.” And, based on this contractual language,

Calma declined to argue on appeal that the agreement that he had with UAB West

did not cover Franklin’s percentage-based collection fee.

Courts examining other contractual language have also suggested that a

percentage-based fee can be appropriate if the contracting parties agreed to it. For

example, the Seventh Circuit suggested that the following contractual provision

may allow the imposition of a percentage-based collection fee when a delinquent

account was referred to a third-party collection agency: “You agree to reimburse

us the fees of any collection agency, which may be based on a percentage at a

maximum of 33% of the debt, and all costs and expenses, including reasonable

attorneys’ fees, we incur in such collection efforts.” See Seeger v. AFNI, Inc., 548

F.3d 1107, 1110, 1113 (7th Cir. 2008); see also Boatley v. Diem Corp., No. CIV.

03-0762-PHX-SMM, 2004 WL 5315892, *5-6 (D. Ariz. Mar. 24, 2004).

But, Bradley’s contract with Urology was not like Calma’s contract with

UAB West or the contracts from these other cases. Under the contract at issue

here, Bradley agreed to pay the actual costs of collection; he did not agree to pay a

percentage above the amount of his outstanding debt that was unrelated to the

actual costs to collect that debt.

Franklin argues that Kojetin is distinguishable because it holds that a

violation of the FDCPA only occurs where the debt collector charges a percentage-

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based fee not supported by the language of the underlying agreement. But that is

exactly what we have here. As explained above, the agreement creating the debt—

the patient agreement between Urology and Bradley—only allows a charge for

“costs of collection.” See id. Nowhere on the form does Bradley agree to a

collection fee that is not tied to the actual costs of collection, let alone the 33-and-

1/3% “collection fee” he was ultimately assessed.

We therefore hold that Franklin violated the FDCPA when it collected from

Bradley a debt that included a 33-and-1/3% “collection fee” when Bradley only

agreed to pay the actual costs of collection. Accordingly, we reverse the district

court’s decision granting summary judgment in favor of Franklin on Bradley’s

claim under § 1692f of the FDCPA. We affirm the district court’s decision

granting summary judgment on Appellants’ RICO claims, remaining FDCPA

claims, and state law claims.

AFFIRMED IN PART, REVERSED IN PART.

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