By Rolf Garcia-Gallont

In an opinion published today, the Fourth Circuit affirmed the district court’s decision in the civil case of Elyazidi v. SunTrust Bank, dismissing all claims brought by the appellant and original plaintiff, Mounia Elyazidi.

Facts and Procedural Posture

Elyazidi overdrew her SunTrust checking account when, despite having only a few hundred dollars in the account, she cut herself a check for nearly $10,000 and cashed it at a SunTrust branch.

When Elyazidi had opened her account with SunTrust, she had signed an agreement that included a provision addressing the account holder’s overdraft liability as follows:

You are liable for all amounts charged to your Account, whether by offset, overdraft, lien or fees. If we take court action or commence an arbitration proceeding against you to collect such amounts, . . . you will also be liable for court or arbitration costs, other charges or fees, and attorney’s fees up to 25 percent, or an amount as permitted by law, of the amount owed to us.

After its own attempts to collect the money proved unsuccessful, SunTrust hired a Maryland law firm, Mitchell Rubenstein & Associates (“MR&A”), to bring a debt collection suit. Because Elyazidi is a Virginia resident, MR&A filed suit on SunTrust’s behalf in Virginia state court. MR&A used a “warrant in debt,” a standardized pleading form that the Virginia courts make available to creditors. The attorneys filled in the blanks to indicate that Elyazidi owed $9,490.82, plus 6 percent interest; $58 in costs; and $2,372.71 in attorneys’ fees. The $2,372.71 in attorneys’ fees represented exactly 25% of the amount Elyazidi owed. MR&A and SunTrust both submitted affidavits along with the pleading, estimating the legal work that would be required to justify this amount. The Virginia state court entered judgment for the full amount demanded by the plaintiff.

After losing her collection suit in Virginia, Elyazidi filed a complaint against SunTrust and MR&A in Maryland state court. Four of her claims — two under Maryland state law, and two under the federal Fair Debt Collection Practices Act (FDCPA) — challenged SunTrust’s and MR&A’s efforts to recover attorneys’s fees in the Virginia suit. Another claim was brought under the FDCPA to recover for MR&A’s disclosure of Elyazidi’s social security number in an unredacted exhibit produced during the Virginia proceedings.

SunTrust and MR&A removed the case to the United States District Court for the District of Maryland, where they were granted a motion to dismiss all claims for failure to state a claim. Elyazidi appealed.

FDCPA CLAIMS

Appellees’ Prayer for Attorneys’ Fees Cannot, as a Matter of Law, Be a False, Deceptive, or Misleading Representation Under the FDCPA

Pursuant to 15 U.S.C. § 1692e, a debt collector may not “use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” It is unlawful to make a “false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.” To violate the statute, a representation must be material, in the sense that it would affect a naive, unsophisticated consumer’s decisionmaking.

The Fourth Circuit found that MR&A’s representations in the Virginia pleading form were not misleading, because the attorneys sought no more than was allowed in the agreement between Elyazidi and SunTrust, indicated via affidavit that the figure was an estimate, and provided an explanation for the amount of work that would generate that amount of fees. Under these circumstances, not even the most unsophisticated consumer would have misunderstood the nature of MR&A’s request.

The Agreement between Elyazidi and SunTrust Expressly Authorized SunTrust to Seek Attorney’s Fees

Section 1692f(1) of the FDCPA condemns the use of “unfair or unconscionable means to collect or attempt to collect any debt,” and provides a non-exhaustive list of proscribed conduct, including “[t]he 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.”

Again, because SunTrust sought nothing more than to enforce their valid contractual rights, the Fourth Circuit affirmed dismissal of this claim for failure to state a claim for relief.

Accidental Disclosure of Elyazidi’s Social Security Number During Litigation Was Not an Unfair or Unconscionable Means of Debt Collection Under FDCPA

Section 1692f lists several examples of unfair or unconscionable debt collection practices. The common denominator of these prohibited practices is that they involve harassing or pressuring the debtor to pay her debt. Elyazidi argued that MR&A had intentionally disclosed her social security number as a means to “extort payment” from her.

The Fourth Circuit again affirmed dismissal of her claim, considering that there was no evidence of a scheme to extort payment, and the fact that the failure to redact the documents that contained the social security number had been quickly remedied.

MARYLAND STATE CLAIMS

The Maryland Consumer Debt Collection Act (“MCDCA”) and Maryland Consumer Protection Act (“MCPA”) Did Not Apply to Appelles’ Conduct, Which Took Place Outside of Maryland

The federal district court exercised supplemental jurisdiction over Elyazidi’s Maryland state claims, and dismissed them on the grounds that neither the MCDCA nor the MCPA applies to conduct occurring “entirely” in Virginia.

In Maryland, regulatory statutes are “generally construed as not having extra-territorial effect unless a contrary legislative intent is expressly stated.” Regardless of the fact that MR&A was a Maryland firm, the entirety of the conduct that gave rise to Elyazidi’s claims took place in Virginia. For this reason, the Fourth Circuit affirmed the district court’s dismissal of both Maryland state claims.

The District Court’s Decision to Dismiss All Counts for Failure to State a Claim is Affirmed

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