McGlinchey's Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation. We're pleased to expand our Commercial Law Bulletin from its previous coverage of Ohio case law to include additional areas in McGlinchey's footprint.
Fair Debt Collection Practices Act
Snyder v. Finley & Co., L.P.A., 6th Cir. No. 21-3997, 2022 U.S. App. LEXIS 16512 (June 15, 2022)
In this appeal, the Court of Appeals for the Sixth Circuit reversed and remanded the District Court for the Northern District of Ohio's decision, finding the debt collector violated the Fair Debt Collection Practices Act (FDCPA) by suing plaintiff to recover her husband's criminal-defense legal fees under Ohio's Necessaries Statute because the lawsuit was contingent on the debt collector's claim against the husband, and when they sued plaintiff, the debt collector had not satisfied the prerequisite to collect from her.
The Bullet Point: At issue in this dispute was whether the debt collector violated the FDCPA, 15 U.S.C.S. § 1692e, when it sued plaintiff to recover her husband's criminal-defense legal fees under Ohio's Necessaries Statute. Specifically, the debt collector filed a debt-collection lawsuit jointly against plaintiff and her husband, asserting a spousal-obligation-to-support claim under Ohio's Necessaries Statute. R.C. § 3103.03. The trial court granted judgment in favor of plaintiff, and plaintiff subsequently filed this federal FDCPA lawsuit, claiming that by filing a debt-collection claim under the spousal-obligation-to-support theory without an arguable legal basis, the debt collector engaged in debt-collection practices prohibited by the FDCPA. The district court resolved the parties' cross-motions for summary judgment in favor of the debt collector. Plaintiff appealed, arguing the debt collector's lawsuit against her and her husband was "objectively baseless" and thus violated the FDCPA. The FDCPA provides that a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. 15 U.S.C.S. § 1692e. An FDCPA violation occurs when a debt collector's representation or action is materially false or misleading, and had the purpose of inducing payment by the debtor. This is an extraordinarily broad, strict-liability statute, and courts view any alleged violation through the lens of the least sophisticated consumer.
On appeal, the Court analyzed the debt collector's lawsuit against plaintiff and her husband as Section 1692e applies to debt-collection efforts utilizing the legal process. As the Court explained, merely advancing an ultimately unsuccessful claim for relief does not, in and of itself, rise to an FDCPA violation. Rather, an FDCPA violation occurs when a material misstatement about state law in a court filing is "false, deceptive, or misleading" at the time it is made. When evaluating an alleged FDCPA violation in a legal action, "a lawyer does not 'misrepresent' the law by advancing a reasonable legal position later proved wrong." Instead, courts must determine "whether the legal contention was objectively baseless at the time it was made, making it legally indefensible or groundless in law." That would include, for example, "misquoting a case, relying on a statute no longer in existence, . . . invoking an overruled decision," "claim[ing] that a one-year statute of limitations runs for two years," "say[ing] today that the [FDCPA] does not apply to attorneys collecting debts," "suing on a time-barred debt," and "filing a writ of garnishment against a debtor current on his payments."
In this matter, the debt collector sought to hold plaintiff liable for her husband's outstanding legal bills via Ohio's Necessaries Statute, as it permits creditors to collect certain debts from one spouse incurred by the other. R.C. § 3103.03. However, there are conditions precedent to collecting from a spouse. Specifically, the Ohio Supreme Court has held that the Necessaries Statute "does not impose joint liability on a married person for the debts of his or her spouse." Rather, "[a] creditor must . . . first seek satisfaction of its claim from the assets of the spouse who incurred the debt" and must show that the debtor-spouse is "unable to pay" for a nondebtor-spouse to be liable under the Necessaries Statute. Here, the debt collector's claim against plaintiff was contingent on its claims against her husband. But when the debt collector filed its lawsuit against plaintiff, it had not satisfied the prerequisites to collect from her. There was no finding that its claims against the husband were meritorious or that he lacked the assets to pay for those claims. The debt collector was required to "first seek satisfaction of its claim from" the husband and was prohibited from filing a joint-liability suit against plaintiff and her husband without clearly stating that its claim against plaintiff was contingent. If "misquoting a case, relying on a statute no longer in existence, . . . invoking an overruled decision, [or] . . . suing on a time-barred debt" runs afoul of the FDCPA, asserting a claim against a party under circumstances in which a state supreme court has explicitly held that the party cannot be held liable certainly does as well. Consequently, the debt collector's lawsuit violated the FDCPA.
Communications Decency Act
Holmok v. Burke, 8th Dist. Cuyahoga No. 110900, 2022-Ohio-2135
In this appeal, the Eighth Appellate District affirmed the trial court's decision, agreeing that defendant's retweeting of a tweet did not make her the publisher or speaker of the tweet and defendant was immune from liability under the Communications Decency Act (CDA).
The Bullet Point: In this matter, plaintiff filed a complaint for defamation against defendant following her retweeting of a tweet purportedly about plaintiff. Specifically, plaintiff alleged in his defamation claim that by retweeting an allegedly false tweet, defendant published a false statement about plaintiff to her 938 Twitter followers. In doing so, plaintiff contended that defendant acted with malice and that he suffered embarrassment, anxiety, and emotional distress and incurred costs for counseling. Defendant filed an answer raising several defenses, including immunity under 47 U.S.C. 230, the federal CDA. The trial court subsequently granted judgment in favor of defendant, and plaintiff appealed.
The CDA establishes immunity "'against causes of action of all kinds'" for interactive service providers and users. Section 230(c)(1) of the CDA states, "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." 47 U.S.C. 230(c)(1). Unlike interactive computer service providers or users, however, Section 230(c)(1) does not extend immunity to information content providers. Furthermore, the CDA expressly preempts civil claims under state law. 47 U.S.C. 230(e)(3). The CDA defines an "interactive computer service" as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions." 47 U.S.C. 230(f)(2). An "information content provider" is "any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service." 47 U.S.C. 230(f)(3).
Plaintiff argued on appeal that defendant was not immune under the CDA because she was 'an information content provider' because she created and sent her own content and further developed information that others created. The Court rejected this contention, finding that defendant's alleged retweeting of a tweet does not convert her from a "user" into an "information content provider." It was further noted that courts across the country have routinely found that Twitter falls within the CDA's definition of an interactive computer service. Consequently, the allegations in the complaint related to defendant's claim that she used Twitter to retweet, making her a user of an interactive computer service. As the Court explained, the act of retweeting can fall outside the immunity provided by the CDA when a user couples the retweet with his or her own added speech. The D.C. District Court recently noted that "[w]hile section 230 may provide immunity for someone who merely shares a link on Twitter,* * * it does not immunize someone for making additional remarks that are allegedly defamatory." Likewise, other courts have explained that CDA immunity can be lost by "substantively alter[ing] third-party content or becom[ing] directly involved in the alleged illegality".
Here, defendant retweeted a tweet and added a handle tag to another account. The Court found that defendant did not substantively alter or add to the tweet's content when she added the handle tag to another account. Consequently, defendant could not be "treated as the publisher or speaker," under the CDA, of the tweet and "no liability may be imposed under any state * * * law that is inconsistent with [Section 230]." 47 U.S.C. 230(e)(3). Plaintiff further argued defendant was liable to defamation because she "published false accusations against" him. The elements of a defamation claim are: "(1) that a false statement of fact was made; (2) that the statement was defamatory; (3) that the statement was published; (4) that the plaintiff suffered injury as a proximate result of the publication; and (5) that the defendant acted with the requisite degree of fault in publishing the statement." However, under the CDA defendant could not be "treated as the publisher or speaker" of the original tweet; accordingly, plaintiff failed to allege an actionable statement published by defendant. Therefore, the trial court did not err when it granted defendant judgment on the pleadings dismissing the defamation claim.
Waiver of conditions precedent
Wsb Rehab. Servs. v. Cent. Accounting Sys., 1st Dist. Hamilton Nos. C-210454, C-210467, 2022-Ohio-2160
In this appeal, the First Appellate District affirmed in part, reversed in part, and remanded the trial court's decision, agreeing that as defendants waived plaintiff's failure to perform the condition precedent, which was not a breach and did not trigger the anti-waiver clause in the parties' agreement, defendants were obligated to continue paying plaintiff for services it provided.
The Bullet Point: A condition precedent is an act or event that must occur before performance obligations arise. An unsatisfied condition precedent can excuse performance under a contract and is a defense to a breach-of-contract claim. But a party may waive a condition precedent by performing under the contract despite the nonfulfillment of the condition. As the appellate court explained, a condition precedent "may be waived by the party to whom the benefit of the condition runs * * * expressly or by implication, and the key to its application in a particular case is a showing of some performance pursuant to the terms of the contract." To establish a waiver, the party alleging it "must prove a clear, unequivocal, decisive act of the party against whom the waiver is asserted which amounts to an estoppel on his part."
Here, defendants paid plaintiff's invoices for seven years despite the invoices not containing the name of the therapist and the time spent providing therapy. As such, the trial and appellate courts determined defendants waived the invoice requirement. Moreover, it was noted that plaintiff provided the information that defendants claimed was missing from the invoices via a direct data link between the parties' medical record systems. Defendants also argued that despite not enforcing the invoice requirement for seven years, the anti-waiver clause in the agreements allowed them to begin enforcing said requirement and relieved them of the duty to pay plaintiff for non-performance of said requirement.
Generally, anti-waiver provisions allow a party to waive a right in one instance without relinquishing rights to enforce other contract provisions. Here, the anti-waiver clause provided "the waiver by either party of a breach or violation of any provision of this Agreement shall not operate as, or be construed to be a waiver of any subsequent breach of the same or other provision hereof." The appellate court explained that if a contractual provision is a promise, a party's failure to perform constitutes a breach of contract. On the other hand, "a party's failure to fulfill a condition precedent * * * is merely a fact or event – it is not a promise that can be breached." Simply stated, nonperformance of a condition precedent is not a breach of contract. Rather, it excuses performance under a contract or renders the contract unenforceable, but it does not affect the validity of the contract. In this matter, plaintiff's failure to perform the invoice requirement – a condition precedent – did not constitute a breach or violation of the agreements. The anti-waiver clause between the parties was limited to breaches or violations of the agreements. Because plaintiff did not breach or violate the agreements, the anti-waiver clause was never triggered and defendants were obligated to continue paying plaintiff for services it provided.
Premature Summary Judgment Ruling
Sacramento v. Citizens Prop. Ins. Co., No. 3D20-1790 (Fla. 3d DCA June 22, 2022)
The Third District concluded that a trial court's order granting summary judgment was premature because it was entered while the noticed deposition of a key witness was pending.
The Bullet Point: Under Florida law, if there is a pending deposition that would most likely raise a genuine issue of material fact, discovery is considered ongoing and summary judgment is premature.
At issue in this appeal was whether a trial court's summary judgment ruling was premature. The appellant argued summary judgment was premature because the noticed deposition of a key witness was still pending. The appellee maintained summary judgment was proper because no formal motion for continuance was filed. The Third District disagreed with the appellee, reasoning that while it would have been better practice to file a written motion for continuance, a trial court cannot ignore a pending deposition of a witness whose testimony would most likely raise a genuine issue of material fact. Key to the court's analysis was the fact that the appellant's attorney's practice had been delayed by the COVID-19 pandemic and subsequent office closures, the appellant's attorney had contacted the appellee's attorney requesting that the summary judgment hearing be rescheduled, and the appellee had cross-noticed the outstanding deposition, thereby "defeating" its own summary judgment motion. Therefore, because the trial court was "fully aware of the pending and noticed deposition that would potentially shed light on the causation issue central to the outcome of the case," the summary judgment was premature. Accordingly, the Third District reversed the trial court's order granting summary judgment.
Financial Disclosure from a Nonparty
Tallo v. Illes, et al., No. 3D21-1206 (Fla. 3d DCA June 22, 2022)
The Third District reviewed the considerations that must be examined by a trial court prior to compelling financial disclosure from a nonparty in a postjudgment context.
The Bullet Point: Before a trial court can compel financial disclosure from a nonparty in a postjudgment context, a proper predicate must be laid. When a judgment creditor seeks to discover the personal financial information of a nonparty, the creditor bears the burden of proving the information sought is relevant or reasonably calculated to lead to the discovery of admissible evidence. The matters relevant for postjudgment discovery are those that enable the judgment creditor to collect a debt or those that encompass information identifying or leading to the discovery of assets available for execution.
This appeal stemmed from the trial court compelling postjudgment financial disclosure from the petitioner, the spouse of a judgment debtor and nonparty to the underlying proceedings. The Third District reviewed the considerations and determined the trial court compelled financial disclosure in the absence of any proper predicate. Because the order involved financial discovery, it was irremediable on appeal. Accordingly, the Third District ruled that the trial court departed from the essential requirements of the law.
Vacate a Foreclosure Sale
GGG Found. and Trust LLC v. HMC Assets, LLC, No. 1D21-2879 (Fla. 1st DCA June 15, 2022)
The First District affirmed a trial court's decision to overrule a borrower's objection to a foreclosure sale.
The Bullet Point: In this appeal, the First District reviewed a trial court's court decision to overrule a borrower's objection to a foreclosure sale. Generally, a trial court has large discretion in deciding whether there are equitable grounds to vacate a foreclosure sale. The party seeking to set aside a foreclosure sale based on the inadequacy of the sale price must show that the inadequacy resulted from a "mistake, accident, surprise, fraud, misconduct, or irregularity upon the part of either the purchaser or the person connected with the sale." The First District concluded the trial court reasonably found the appellant did not prove the grounds for relief and failed to show that the sale price was inadequate. Accordingly, the First District held that the trial court did not abuse its discretion in overruling the objection to the sale.
The Apex Doctrine
DecisionHR USA, Inc. v. Mills, No. 2D21-3468 (Fla. 2d DCA June 17, 2022)
The Second District quashed a trial court's order denying a motion for a protective order because the trial court did not follow the requirements of the apex doctrine, codified in Florida Rule of Civil Procedure 1.280(h), in ruling on the motion.
The Bullet Point: A trial court must follow the requirements of the apex doctrine in ruling on a motion for protective order that seeks to preclude the deposition of a corporate officer. Under the apex doctrine, the party resisting the deposition carries the burden of both persuading the court that the would-be deponent is high-level and must produce an affidavit or declaration explaining the officer's lack of unique, personal knowledge of the issues being litigated. If those showings are made, the trial court must issue an order preventing the deposition, unless the party seeking the deposition demonstrates three factors: (1) that it has exhausted other discovery, (2) that such discovery is inadequate, and (3) that the officer has unique, personal knowledge of discoverable information.
In this petition, the petitioners sought review of the trial court's order denying their motion for protective order, which sought to preclude the respondents from deposing an undisputedly high-level corporate officer. The Second District granted the petition and quashed the trial court's order, concluding the trial court did not follow the requirements of the apex doctrine. The Second District reasoned that the trial court neither addressed the sufficiency of the officer's affidavit nor evaluated whether the respondents demonstrated the requisite three factors. Further, the Second District found that the petitioners met their burden under the apex doctrine, but the respondents failed to demonstrate that they exhausted other discovery and that it was inadequate, and they fell short of demonstrating that the officer had unique, personal knowledge of discoverable information. Therefore, the Second District ruled that the trial court should have issued an order preventing the deposition, and it concluded that the trial court departed from the essential requirements of law by denying the motion for protective order.
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