| Bank of N.Y. Mellon v Luria |
| 2022 NY Slip Op 22218 [76 Misc 3d 724] |
| July 18, 2022 |
| Grossman, J. |
| Supreme Court, Putnam County |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| As corrected through Wednesday, October 26, 2022 |
| The Bank of New York Mellon, Plaintiff, v Ann Luria et al., Defendants. |
Supreme Court, Putnam County, July 18, 2022
Clair Gjertsen & Weathers PLLC (Mary Aufrecht of counsel) for Ann Luria, defendant.
Friedman Vartolo LLP (Zachary Gold of counsel) for plaintiff.
It is ordered that the motion is disposed of as follows:
Factual and Procedural Background
This is a mortgage foreclosure action. The plaintiff bank has been awarded summary judgment on its foreclosure claim, but a judgment of foreclosure and sale remains to be entered. Defendant borrower Ann Luria now moves for renewal on the basis of the Second Department's recent decision in Bank of Am., N.A. v Kessler (202 AD3d 10 [2d Dept 2021]). She contends that plaintiff's 90-day notice did not comply with the requirements of RPAPL 1304, as interpreted by Kessler, because in addition to the language prescribed in section 1304 (1) it contained the following language:
"Nationstar is a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose. However, if you are currently{**76 Misc 3d at 726} in bankruptcy or have received a discharge in bankruptcy, this communication is not an attempt to collect a debt from you personally to the extent that it is included in your bankruptcy or has been discharged, but is provided for informational purposes only." [*2]
Relying on Kessler and its progeny—especially Ocwen Loan Servicing, LLC v Sirianni (202 AD3d 702 [2d Dept 2022])—defendant argues that by including this language in the 90-day notice plaintiff violated RPAPL 1304 (2), which provides that "[t]he notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice."
In an interim decision dated May 11, 2022, this court wrote:
"The additional 'material' included in the November 29, 2016 90-day notice was a brief advisory dictated by the Federal [Fair] Debt Collection Practices Act ('FDCPA'), 15 USC § 1692 et seq. There were two components. First:
"Nationstar is a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.
"The 'debt collector' advisory is what is colloquially known as the 'mini-Miranda' warning required in certain communications with a debtor by the FDCPA. See, 15 USC § 1692e(11). Second:
"However, if you are currently in bankruptcy or have received a discharge in bankruptcy, this communication is not an attempt to collect a debt from you personally to the extent that it is included in your bankruptcy or has been discharged, but is provided for informational purposes only.
"The 'bankruptcy' advisory was patently designed to avoid any imputation that the § 1304 notice implicitly conveyed a 'false representation of the character, amount, or legal status of any debt; or [t]he threat to take any action that cannot legally be taken or that is not intended to be taken' in violation of the FDCPA. See, 15 USC § 1692e, subd. (2)(A), (5).
"The RPAPL § 1304 notice at issue here was sent by Nationstar Mortgage on or about November 29, 2016. At that time, there was case authority to the effect that noteholders or mortgage servicers whose{**76 Misc 3d at 727} interests were acquired after the mortgage was in default may be considered 'debt collectors' subject to the strictures of the FDCPA. See, e.g., JPMorgan Chase Bank, N.A. v Mantle, 134 AD3d 903 (2d Dept. 2015); Roth v Citimortgage Inc., 756 F.3d 178, 183 (2d Cir. 2014). It appears from the record here that the Defendant borrower defaulted on her mortgage obligations as of January 1, 2012; that post-default Nationstar acquired an interest in the mortgage by an assignment executed on October 8, 2012 and recorded December 3, 2012; and, again post-default, that plaintiff Bank of New York Mellon acquired an interest in the mortgage by an assignment executed on December 5, 2016 and recorded January 10, 2017. In November 2016, then, Nationstar had good reason to believe that the language it appended to the RPAPL § 1304 notice was required to assure its compliance with the FDCPA. If it was so required, then there arises a serious question whether Kessler's 'bright-line' rule is preempted by the FDCPA. See, 15 USC § 1692n." (Bank of N.Y. Mellon v Luria, 75 Misc 3d 1205[A], 2022 NY Slip Op 50384[U], *4-5 [Sup Ct, Putnam County 2022].)
Based inter alia on the foregoing, the court invited the parties to make supplemental submissions addressed among other things to the relevance of the Federal Fair Debt Collection Practices Act to the case at bar.
The plaintiff proffered evidence that (1) Nationstar Mortgage never possessed an ownership interest in the defendant's loan, (2) Nationstar was at all times acting solely as a [*3]mortgage servicer on behalf of the beneficial owner, and (3) Nationstar first undertook to act as a mortgage servicer for defendant's loan approximately six months after the loan was in default. Plaintiff accordingly argues that Nationstar was a "debt collector" within the meaning of the FDCPA, and that the language cited by defendant as a violation of Kessler was inserted in compliance with the requirements of the FDCPA.
Defendant asserts that this court is bound by Second Department holdings, particularly Sirianni, that inclusion of such language as that at issue here in an RPAPL 1304 notice violates Kessler's "bright-line" rule.[FN1] Defendant further argues that the language at issue was not required by federal law to{**76 Misc 3d at 728} be included in the section 1304 90-day notice because Nationstar was not a "debt collector" nor was that notice issued "in connection with the collection of any debt" within the meaning of the FDCPA.
Kessler and its progeny do not resolve the FDCPA preemption issue presented in this case.
As a threshold matter, the court must address the defendant's contention that Kessler and Sirianni are dispositive of the issues presented here and require the relief defendant requests irrespective of any issues arising under the FDCPA.
The FDCPA per 15 USC § 1692n may preempt RPAPL 1304 as interpreted by Kessler and Sirianni. Section 1692n provides:
"This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter" (emphasis added).
In the wake of this court's interim decision, one federal district court, faced with an RPAPL 1304 notice containing essentially the same FDCPA-related language as that presented here, observed that "Kessler . . . did not grapple with how the separate envelope rule conflicts with a debt collector's obligations under the FDCPA," expressly found that the Kessler rule conflicts with the requirements of 15 USC § 1692e (11) and declined to follow Kessler. (See CIT Bank, N.A. v Neris, 2022 WL 1799497, *5-6, 2022 US Dist LEXIS 99040, *12-14 [SD NY, June 2, 2022, 18 Civ. 1511 (VM)].) Indeed, the Second Department has never addressed the FDCPA preemption issue presented by the case at bar, perhaps because the issue has never previously arisen.[FN2] [*4]
Article VI, clause 2 of the United States Constitution provides in pertinent part that "[t]his Constitution, and the {**76 Misc 3d at 729}Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." State law is preempted under the Supremacy Clause by a federal statute if and to the extent that Congress has so directed through explicit statutory language. (See English v General Elec. Co., 496 US 72, 78-79 [1990].) If and to the extent that the FDCPA by virtue of 15 USC § 1692n preempts section 1304 as interpreted by Kessler, the FDCPA is supreme and precludes application of the Kessler "bright-line" rule to the motion before this court. Since the Second Department has yet to grapple with FDCPA preemption issues, one lower court—in U.S. Bank N.A. v Sackaris (74 Misc 3d 923 [Sup Ct, Suffolk County 2022])—properly declined to apply Kessler without first conducting an analysis to determine whether RPAPL 1304 as interpreted by Kessler and its progeny was inconsistent with the requirements of the FDCPA. (See id. at 925-926.) This court not only may but must do likewise.
RPAPL 1304 and Bank of Am., N.A. v Kessler
RPAPL 1304 (1) provides that,
"[n]otwithstanding any other provision of law, with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower . . . including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower . . . which shall include the following."
Compliance with the requirements of RPAPL 1304 is a condition precedent to an action to foreclose a mortgage. (See e.g. Everhome Mtge. Co. v Aber, 195 AD3d 682 [2d Dept 2021].)
Section 1304 (1) requires inter alia that borrowers be given information about housing counseling agencies, and specifies language which must be contained in the 90-day notice, including the following:
• "YOU MAY BE AT RISK OF FORECLOSURE."
• "As of ___, your home loan is ___ days and ___ dollars in default. Under New York State Law, we are required to send you this notice to inform{**76 Misc 3d at 730} you that you are at risk of losing your home."[FN3]
• "While we cannot assure that a mutually agreeable resolution is possible, we encourage you to take immediate steps to try to achieve a resolution. The longer you wait, the fewer options you may have."
• "If you have not taken any actions to resolve this matter within 90 days from the date this notice was mailed, we may commence legal action against you."
RPAPL 1304 (2) further provides that "[t]he notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing [*5]or notice."
In Bank of Am., N.A. v Kessler, the Second Department established a "bright-line" rule with respect to the contents of section 1304 90-day notices, holding that "inclusion of any material in the separate envelope sent to the borrower under RPAPL 1304 that is not expressly delineated in [section 1304] constitutes a violation of the separate envelope requirement of RPAPL 1304 (2)." (202 AD3d at 14.) Thereafter, in Ocwen Loan Servicing, LLC v Sirianni, the Second Department held that the inclusion in a section 1304 notice of language akin to that at issue here—i.e., the FDCPA debt collector advisory and notice concerning the rights of borrowers in bankruptcy—runs afoul of the Kessler "bright-line" rule and violates RPAPL 1304 (2). (202 AD3d at 705; see also US Bank N.A. v Lanzetta, 207 AD3d at 502; Citimortgage, Inc. v Dente.) Since compliance with RPAPL 1304 is a condition precedent to a foreclosure action, the section 1304 violations found in Kessler, Sirianni, Lanzetta and Dente resulted in the dismissal of those actions. (See id.)
The Federal Fair Debt Collection Practices Act
The Federal Fair Debt Collection Practices Act (FDCPA) is codified at 15 USC § 1692 et seq. Its stated purpose is "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who 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 USC § 1692 [e].) A claim {**76 Misc 3d at 731}under the FDCPA arises where (1) the plaintiff is a "consumer" who has been the object of collection activity arising from consumer "debt," (2) the defendant is a "debt collector" as defined by the FDCPA, and (3) the defendant has engaged in any act or omission in violation of FDCPA requirements. (See Kurzdorfer v Constar Fin. Servs., LLC, 490 F Supp 3d 663, 666 [WD NY 2020]; Ossipova v Pioneer Credit Recovery, Inc., 2019 WL 6792318, *3, 2019 US Dist LEXIS 214455, *8 [ED NY, Dec. 11, 2019, 1:18-ev-11015-GHW].)
FDCPA Definitions
The FDCPA defines critical statutory terms including "consumer," "debt," "debt collector," and "creditor."
Consumer
"[A]ny natural person obligated or allegedly obligated to pay any debt." (15 USC § 1692a [3].)
Defendant Ann Luria is a natural person alleged by plaintiff herein to be obligated to pay the mortgage debt on the premises which are the subject of this action. She qualifies as a "consumer" provided that the subject note and mortgage fall within the FDCPA definition of "debt." (See Jones v New Penn Fin., LLC, 2020 WL 8771252, *3, 2020 US Dist LEXIS 216988, *9 [ED NY, Nov. 13, 2020, 9-CV-1493 (ENV)(PK)].)
Debt
"[A]ny 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 USC § 1692a [[*6]5].)
Consistent with the plain language of the FDCPA, payment obligations incurred for "personal, family, or household purposes" are "debts," and hence a promissory note, like that at issue here, financing the purchase of a personal residence constitutes "debt" for purposes of the FDCPA. (See Cohen v Rosicki, Rosicki & Assoc., P.C., 897 F3d 75, 82-83 [2d Cir 2018]; Jones v New Penn Fin., LLC, 2020 WL 8771252, *4, 2020 US Dist LEXIS 216988, *10.)
Debt Collector
"[A]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted{**76 Misc 3d at 732} to be owed or due another. . . . The term does not include—
"(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor; . . .
"(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . (iii) concerns a debt which was not in default at the time it was obtained by such person." (15 USC § 1692a [6] [A], [F].)
Creditor
"[A]ny person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another." (15 USC § 1692a [4].)
Judicial mortgage foreclosure proceedings fall within the FDCPA's broad definition of debt collection. (See Cohen v Rosicki, Rosicki & Assoc., P.C., 897 F3d 75, 83 [2d Cir 2018], supra; cf. Obduskey v McCarthy & Holthus LLP, 586 US —, 139 S Ct 1029 [2019] [business engaged solely in non-judicial mortgage foreclosure, wherein borrower may not be held liable for balance due on note, is not a "debt collector" under the FDCPA].) A mortgage servicer is deemed to be a "debt collector" under the FDCPA if the mortgage was in default at the time the servicer began servicing the mortgage debt. (See Roth v CitiMortgage Inc., 756 F3d 178, 183 [2d Cir 2014], supra; Jones v New Penn Fin., LLC, 2020 WL 8771252, *4-5, 2020 US Dist LEXIS 216988, *12-13; Zirogiannis v Seterus, Inc., 221 F Supp 3d 292, 302 [ED NY 2016], affd 707 Fed Appx 724 [2d Cir 2017], supra; JPMorgan Chase Bank, N.A. v Mantle, 134 AD3d 903 [2d Dept 2015], supra; 15 USC § 1692a [4], [6] [F].)
Defendant has not controverted plaintiff's evidence that Nationstar Mortgage (1) never possessed an ownership interest in the defendant's loan, (2) was at all times acting solely as a mortgage servicer on behalf of the beneficial owner, and (3) first undertook to act as a mortgage servicer for defendant's loan approximately six months after the loan was in default. On the record before the court, it must be concluded that Nationstar was a "debt collector" subject to the requirements of the FDCPA.{**76 Misc 3d at 733}
Protection Afforded Debtors by the FDCPA [*7]
15 USC § 1692e provides: "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." The statute proceeds "[w]ithout limiting the general application of" that proscription to delineate specific conduct deemed violative of section 1692e, including the following:
• "The failure to disclose in the initial written communication with the consumer . . . that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action." (15 USC § 1692e [11].)
• "The false representation of . . . the character, amount, or legal status of any debt." (15 USC § 1692e [2] [A].)
• "The threat to take any action that cannot legally be taken or that is not intended to be taken." (15 USC § 1692e [5].)
• "The use of any false representation or deceptive means to collect or attempt to collect any debt." (15 USC § 1692e [10].)
Action Taken "in Connection with the Collection of [a] Debt"
Section 1692e by its terms applies only to conduct undertaken "in connection with the collection of [a] debt." In that regard, the Second Circuit in Hart v FCI Lender Servs., Inc. (797 F3d 219 [2d Cir 2015]) held:
"[W]hether a communication is 'in connection with the collection of [a] debt' is a question of fact to be determined by reference to an objective standard. . . . [W]e must view the communication objectively, asking whether [the plaintiff] has plausibly alleged that a consumer receiving the communication could reasonably interpret it as being sent 'in connection with the collection of [a] debt,' rather than inquiring into the sender's subjective purpose. Such an inquiry is consistent with the FDCPA's goal of protecting consumers: if a consumer receiving a letter could reasonably understand it to be a communication in connection with the collection of a debt, then the consumer is entitled to the protections Congress has mandated{**76 Misc 3d at 734} for such communications." (Hart, 797 F3d at 225 [citations omitted].)
The Second Circuit observed that whereas two other circuit courts[FN4] had held that such communications "must attempt to induce the borrower to pay, not just convey information about the debt," a local district court had "recently construed the phrase far more flexibly when it rejected the information/inducement dichotomy and reasoned that 'in connection with' is 'synonymous with the phrases "related to," "associated with," and "with respect to," ' and does not necessitate any inducement element." (Hart, 797 F3d at 225-226, quoting Tocco v Real Time Resolutions, Inc., 48 F Supp 3d 535, 540 [SD NY 2014].) The Second Circuit did not resolve that discrepancy, holding on the facts of the case before it only that "an attempt to collect a debt . . . qualifies as a communication 'in connection with the collection of any debt.' " (Hart at 226; see also Schwebel v Resurgent Capital [*8]Servs., L.P., 2020 WL 5663382, *5, 2020 US Dist LEXIS 174738, *10 [SD NY, Sept. 23, 2020, No. 19-CV-8821 (KMK)]; Solis v Commonwealth Fin. Sys., Inc., 2020 WL 2523047, *3, 2020 US Dist LEXIS 86792, *8 [ED NY, May 15, 2020, 18-cv-6130 (SJF) (AKT)].)
[1] A consumer receiving an RPAPL 1304 90-day notice containing the language which the statute requires could reasonably interpret such a notice as having been sent in an attempt to collect the mortgage debt. As noted above, section 1304 required Nationstar to tell Ms. Luria:
• that she may be at risk of foreclosure;
• that her mortgage was $xxx in default;
• that she was at risk of losing her home;
• that she could cure the default by paying a specified amount by a specified date;
• that Nationstar encouraged her to take immediate steps to try to achieve a resolution;
• that the longer she waited, the fewer options she might have; and
• that if she did not take action to resolve the matter within 90 days, legal action may be commenced against her.
A defaulting borrower like Ms. Luria would be hard put to construe such a notice, objectively considered, as anything{**76 Misc 3d at 735} other than a lender's attempt to induce payment of a portion of the outstanding mortgage debt on pain of the foreclosure of her mortgage and the loss of her home. Hence, section 1304 90-day notices qualify as measures undertaken "in connection with the collection of [a] debt" within the meaning of 15 USC § 1692e.
The FDCPA "Mini-Miranda" Warning
The FDCPA is a "strict liability statute" (Vangorden v Second Round, Ltd. Partnership, 897 F3d 433, 438 [2d Cir 2018]), and a debt collector's failure to give the FDCPA "mini-Miranda" warning in a communication made in connection with the collection of a debt is a per se violation of the statute unless the document in question constitutes "a formal pleading made in connection with a legal action." (See 15 USC § 1692e [11].) The reasons for the warning and the "formal pleading" exception were explained in Bohannon v LVNV Funding, LLC (2015 WL 893362, 2015 US Dist LEXIS 24976 [ED Va, Mar. 2, 2015, Civil No. 3:14-CV-354]):
"The FDCPA requires debt collectors to make certain disclosures on all communications 'in connection with the collection of any debt.' 15 U.S.C. § 1692e (11). Known as the 'mini-Miranda,' the warning tells the debtor that the creditor is trying to collect a debt and that the creditor can use information given by the debtor in the collection effort. This warning allows the unwary debtor to exercise caution in his communication with the creditor.
"The mini-Miranda disclosure requirement carves out a special exception, however, for 'a formal pleading made in connection with a legal action.' Id. Here, Congress attributes to the debtor the common sense to know that when a creditor sues him, the creditor wants to collect the debt, and that what the debtor tells the creditor can be used in the collection case." (Bohannon, 2015 WL 893362, *4, 2015 US Dist LEXIS 24976, *10-11; see also Rivas v Pollack & Rosen, P.A., 2019 WL 6468709, *4, 2019 US Dist LEXIS 207460, *11 [SD Fla, Dec. 2, 2019, Case No. 19-cv-61815-BLOOM/Valle] [citing Bohannon, and observing that the "formal pleading" exception applies to a variety of litigation-related documents once a lawsuit to collect the debt has been initiated].)
The court in U.S. Bank N.A. v Sackaris (74 Misc 3d 923 [Sup Ct, Suffolk County 2022], supra), having cited Bohannon, Rivas{**76 Misc 3d at 736} and similar cases, incongruously found that pre-litigation section 1304 90-day notices qualify as "formal pleadings," and accordingly held that there was no inconsistency between the FDCPA and RPAPL 1304 as construed by Kessler.[*9](See id. at 925-926.) The case law on which the Sackaris court founded its decision is simply inapropos: those cases dealt not with pre-litigation notices but exclusively with documents tantamount to complaints in civil actions (or, as noted, post-commencement filings in civil actions).
In Townsend v Quantum3 Group, LLC (535 BR 415 [Bankr MD Fla 2015]), for example, the court held that a proof of claim filed by a creditor in a bankruptcy proceeding constitutes a "formal pleading" within the meaning of 15 USC § 1692e (11). In support of that holding the Townsend court canvassed authority demonstrating that the bankruptcy proof of claim is a pleading because it is tantamount to the complaint in a civil action:
" '[C]ourts routinely recognize that the filing of a proof of claim is analogous to the filing of a complaint and that, by doing so, a creditor submits itself to the jurisdiction of the court, at least with regard to the adjudication of its claim.' In re Franchi, 451 B.R. 604, 607 (Bankr.S.D.Fla.2011); see O'Neill v. Cont'l Airlines, Inc., . . . 928 F.2d 127, 129 (5th Cir.1991) ('[T]he filing of a proof of claim is analogous to the filing of a complaint in a civil action, with the bankrupt's objection the same as the answer.') . . . ; see also Nortex Trading Corp. v. Newfield, 311 F.2d 163, 164 (2d Cir.1962) ('The filing by Nortex of its proof of claim is analogous to the commencement of an action within the bankruptcy proceeding'.) . . . ; In re Cerrato, 504 B.R. 23, 38 (Bankr. E.D.N.Y.2014) ('The filing of a proof of claim is equivalent to the filing of a complaint in a civil action, and an objection to a claim is analogous to an answer.'). . . .
"Black's Law Dictionary—which the Eleventh Circuit recently cited for the definition of 'pleading' as that term appears in § 1962e(11), Miljkovic [v Shafritz & Dinkin, P.A.], 791 F.3d [1291,] 1298-99 n.5—defines 'pleading' as '[a] formal document in which a party to a legal proceeding (esp. a civil lawsuit) sets forth or responds to allegations, claims, denials, or defenses,' such as 'the plaintiff[']s {**76 Misc 3d at 737}complaint and the defendant's answer.' Black's Law Dictionary 1339 (10th ed. 2014). Without question, Defendant's proofs of claim 'set[ ] forth . . . claims,' and are 'pleadings.' Id." (Townsend v Quantum3 Group, LLC, 535 BR at 422.)
Similarly, the court in Lilly v RAB Performance Recoveries, LLC (2013 WL 4010257, 2013 US Dist LEXIS 109369 [ED Tenn, Aug. 5, 2013, No. 2:12-CV-364]) held that a sworn affidavit attached to a civil warrant was exempt from FDCPA requirements as a "formal pleading" because under Tennessee law it was a necessary part of the complaint. The court wrote:
"[T]he sworn affidavit falls within the formal pleading exception. The civil warrant in this case serves the same purpose in a general sessions court case as the complaint does in other courts, as it is the manner in which an action is commenced in a general sessions court. Tenn.Code Ann. § 16-15-716. In addition, the sworn affidavit attached to the civil warrant serves as the means to conclusively establish the amount owed, such that it becomes a necessary part of the complaint. See Tenn.Code Ann. § 24-5-107." (2013 WL 4010257, *4, 2013 US Dist LEXIS 109369, *13 ; see also Bohannon v LVNV Funding, LLC, 2015 WL 893362, *4, 2015 US Dist LEXIS 24976, *10.)
However, the Second Circuit's decision in Romea v Heiberger & Assoc. (163 F3d 111 [2d Cir 1998]) demonstrates precisely why section 1304 90-day notices are not "formal [*10]pleadings" in a foreclosure action. The question therein presented was whether the three-day notice required by RPAPL 711 as a statutory predicate for an article 7 summary eviction proceeding[FN5] is exempt from FDCPA requirements on the grounds that it constitutes "legal process" within the meaning of 15 USC § 1692a (6) (D). The Romea court answered "no," and its analysis bears directly on the resolution of the issue presented here. The court held:
"Under New York law . . . a § 711 notice is a prerequisite to, rather than a part of, an Article 7 proceeding. 'The three-day notice is not a pleading; rather, it is a notice to the tenant of what must be{**76 Misc 3d at 738} done to forestall a summary proceeding.' J.D. Realty Assoc. v. Jorrin, 166 Misc.2d 175, 179 . . . aff'd sub nom. J.D. Realty Assoc. v. Scoullar, 169 Misc.2d 292, 293 . . . (N.Y.Sup.App.Term 1996) . . . Article 7 expressly provides that a summary proceeding is 'commenced by petition and a notice of petition.' N.Y. Real Prop. Acts. Law § 731(1) . . . [Defendant] offers us no basis for interpreting the definition of 'legal process' under 15 U.S.C. § 1692a(6)(D) to include notices that are a prerequisite to, rather than part of, a legal proceeding." (Romea, 163 F3d at 117 [emphasis added].)
The parallels between RPAPL articles 7 and 13 are striking. The RPAPL 1304 90-day notice is a statutory prerequisite for, or condition precedent to, a mortgage foreclosure action. (See Everhome Mtge. Co. v Aber, 195 AD3d 682 [2d Dept 2021], supra.) It is not a pleading nor any part of the foreclosure action, but rather notice to the borrower of what can or must be done to avoid foreclosure. By its express terms section 1304 requires service of the notice "at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower." (See RPAPL 1304 [1] [emphasis added].) The mortgage foreclosure action itself is "commenced by filing a summons and complaint" (see CPLR 304 [a]), and New York law does not contemplate much less require that the 90-day notice be filed, either with the summons and complaint or with the superintendent of financial services. (See RPAPL 1304, 1306 [2].) Like the RPAPL 711 three-day notice, the RPAPL 1304 90-day notice is simply not a pleading.
This court accordingly concludes that (1) the RPAPL 1304 90-day notice does not fall within the "formal pleading" exception set forth in 15 USC § 1692e (11); (2) since the section 1304 notice was a communication made in connection with the collection of a debt, Nationstar as a debt collector was required by the FDCPA to give defendant Luria the section 1692e (11) "mini-Miranda" warning in that notice; and (3) to the extent that Kessler and its progeny prohibit the inclusion of the "mini-Miranda" warning in a section 1304 90-day notice, the rule promulgated by those cases is inconsistent with the provisions of the FDCPA.
The FDCPA Bankruptcy Advisory
15 USC § 1692e provides in general terms that "[a] debt collector may not use any false, deceptive, or misleading representation{**76 Misc 3d at 739} or means in connection with the collection of any debt." Whether a debt collector's communication is "false, deceptive, or misleading" under the [*11]FDCPA is determined from the perspective of the "least sophisticated consumer." (See e.g. Huebner v Midland Credit Mgt., Inc., 897 F3d 42, 51 [2d Cir 2018]; Avila v Riexinger & Assoc., LLC, 817 F3d 72, 75 [2d Cir 2016]; Easterling v Collecto, Inc., 692 F3d 229, 233 [2d Cir 2012].) This is an "objective standard, designed to protect all consumers, 'the gullible as well as the shrewd.' " (Huebner v Midland Credit Mgt., Inc. at 51; Easterling v Collecto, Inc., 692 F3d at 234.) "Under this standard, a collection notice can be misleading if it is 'open to more than one reasonable interpretation, at least one of which is inaccurate.' " (Avila v Riexinger & Assoc., LLC at 75; Easterling v Collecto, Inc., 692 F3d at 233.)
Specific conduct deemed by Congress to be violative of section 1692e includes "[t]he false representation of . . . the character, amount, or legal status of any debt" (15 USC § 1692e [2] [A]) and "[t]he threat to take any action that cannot legally be taken or that is not intended to be taken" (15 USC § 1692e [5]). Accordingly, "communications and practices that could mislead a putative-debtor as to the nature and legal status of the underlying debt, or that could impede a consumer's ability to respond to or dispute collection, violate the FDCPA." (Gabriele v American Home Mtge. Servicing, Inc., 503 Fed Appx 89, 94 [2d Cir 2012]; see Sutton v Financial Recovery Servs., Inc., 121 F Supp 3d 309, 313 [ED NY 2015].)
Since the nature and legal status of a debt may be materially affected by bankruptcy proceedings, debt collectors must beware. Liability under the FDCPA may result from a false statement that a borrower's debt is ineligible for bankruptcy. (See Easterling v Collecto, Inc., 692 F3d at 233-235; Gabriele v American Home Mtge. Servicing, Inc.) FDCPA liability may also result from a demand for payment of a debt while the borrower is in bankruptcy or after the debt's discharge in bankruptcy. (See Randolph v IMBS, Inc., 368 F3d 726, 728 [7th Cir 2004]; Turner v J.V.D.B. & Assoc., Inc., 330 F3d 991, 995 [7th Cir 2003].) As Judge Easterbrook explained in Randolph: "A demand for immediate payment while a debtor is in bankruptcy (or after the debt's discharge) is 'false' in the sense that it asserts that money is due, although, because of the automatic stay (11 U.S.C. § 362) or the discharge injunction (11 U.S.C. § 524), it is not." (Randolph v IMBS, Inc., 368 F3d at 728.){**76 Misc 3d at 740} Critically, such misrepresentations are "presumptively wrongful under the [FDCPA]" even if the debt collector is unaware of the borrower's bankruptcy, for ignorance is no excuse. (See Randolph v IMBS, Inc. at 728; Turner v J.V.D.B. & Assoc., Inc., citing Russell v Equifax A.R.S., 74 F3d 30, 33 [2d Cir 1996].) Since the FDCPA is a strict liability statute, "there is no need for a plaintiff to plead or prove that a debt collector's misrepresentation of a debt obligation was intentional." (Vangorden v Second Round, Ltd. Partnership, 897 F3d 433, 438 [2d Cir 2018], supra; see Russell v Equifax A.R.S. [same].)
In other words, the FDCPA affords debtors protection even from inadvertent misrepresentations (1) that money is due when in fact on account of bankruptcy it is not, and (2) that recovery is sought from the debtor personally when in fact on account of bankruptcy it is not. To extend this protection to defendant Luria as well as to protect itself from liability under the FDCPA, Nationstar properly qualified its section 1304 90-day notice with a bankruptcy advisory, to wit: "However, if you are currently in bankruptcy or have received a discharge in bankruptcy, [*12]this communication is not an attempt to collect a debt from you personally to the extent that it is included in your bankruptcy or has been discharged, but is provided for informational purposes only." Once again, this court concludes that to the extent that Kessler and its progeny prohibit the inclusion of an FDCPA bankruptcy advisory in a section 1304 90-day notice, the rule promulgated by those cases is inconsistent with the provisions of the FDCPA.
Federal Preemption of Kessler and its Progeny by the FDCPA
15 USC § 1692n provides:
"This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter" (emphasis added).
In Arellano v Clark County Collection Serv., LLC (875 F3d 1213 [9th Cir 2017]), the Ninth Circuit elucidated "conflict" preemption principles in the context of the FDCPA. The court wrote:{**76 Misc 3d at 741}
" '[S]tate law is pre-empted to the extent that it actually conflicts with federal law.' [English v General Elec. Co., 496 US 72] at 79 . . . This conflict occurs when 'the operation of state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," ' In re Cybernetic Servs., Inc., 252 F.3d 1039, 1045-46 (9th Cir. 2001) (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 479 . . . (1974)), or when it 'interferes with the methods by which the federal statute was designed to reach [its] goal,' Int'l Paper Co. v. Ouellette, 479 U.S. 481, 494 . . . (1987). In other words, state law is preempted when 'under the circumstances of the particular case,' it stands as an obstacle to Congressional purpose '—whether that "obstacle" goes by the name of "conflicting; contrary to; repugnance; difference; irreconcilability; inconsistency; violation; curtailment; interference," or the like.' Geier v. Am. Honda Motor Co., 529 U.S. 861, 873 . . . (2000) . . . (quoting Hines v. Davidowitz, 312 U.S. 52, 67 . . . (1941)).
"Federalism requires that we assume federal law was not intended to supersede the states' historic police powers 'unless that was the clear and manifest purpose of Congress.' CTS Corp. v. Waldburger, [573 US 1] . . . (2014). Although we read even express preemption provisions narrowly, a state cannot avoid compliance with a federal regime 'merely by relying upon a connection to an area of traditional state regulation.' Wos v. E. M. A., 568 U.S. 627, 640 . . . (2013).
" '[T]he purpose of Congress is the ultimate touchstone in every pre-emption case.' Altria Grp., Inc. v. Good, 555 U.S. 70, 76 . . . (2008) (citing Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 . . .(1996)). 'The FDCPA was enacted as a broad remedial statute designed to "eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." ' Gonzales v. Arrow Fin. Services, LLC, 660 F.3d 1055, 1060 (9th Cir. 2011) (quoting 15 U.S.C. § 1692(e)). The Act's purpose is 'to protect vulnerable and [*13]unsophisticated debtors from abuse, {**76 Misc 3d at 742}harassment, and deceptive debt collection practices.' Guerrero v. RJM Acquisitions LLC, 499 F.3d 926, 938 (9th Cir. 2007) . . . And the 'FDCPA protects all consumers, the gullible as well as the shrewd . . . the ignorant, the unthinking and the credulous.' Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1171 (9th Cir. 2006) (quoting Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir. 1993)).
"In order to achieve these goals, the Act regulates communication between debt collectors and debtors, 15 U.S.C. §§ 1692b, c, g, and creates a federal cause of action for debtors under 15 U.S.C. § 1692k. Debt collectors may be subject to civil liability for engaging in harassment or abuse, 15 U.S.C. § 1692d, making false or misleading representations of various sorts, 15 U.S.C. §§ 1692e, j, or engaging in unfair practices while attempting to collect debt, 15 U.S.C. § 1692f." (Arellano v Clark County Collection Serv., LLC, 875 F3d at 1216-1217 [emphasis added].)
[2] In light of Arellano, one may appreciate the gravity of the conflict between the FDCPA and RPAPL 1304 as construed by the Second Department in Kessler and its progeny. While the FDCPA regulates communications between debt collectors and debtors to protect even gullible, ignorant, unthinking or credulous consumers, section 1304 requires just such a communication as a prerequisite to a foreclosure action while concomitantly (per Kessler) prohibiting language that is either explicitly required by the FDCPA (e.g., the "mini-Miranda" warning), or otherwise needful (e.g., the bankruptcy advisory) to avoid potentially false, misleading or deceptive representations and thereby afford debtors the protection Congress intended in enacting the FDCPA. Hence, for purposes of 15 USC § 1692n, the "bright-line" rule promulgated by Kessler and its progeny is "inconsistent" with the provisions of the FDCPA.
Per the explicit direction of Congress, then, unless Kessler by prohibiting FDCPA warnings in RPAPL 1304 notices affords consumers greater protection than that afforded by the FDCPA, the FDCPA is controlling and Kessler may not here be applied. (See 15 USC § 1692n.) In this court's estimate, Kessler affords consumers less protection, not more. Kessler deprives the recipients of section 1304 90-day notices of warnings and/or information{**76 Misc 3d at 743} which Congress and courts interpreting the FDCPA deem meaningful and important. Conversely, as this court pointed out in its prior interim order, the Kessler majority was unable to articulate how its "bright-line" rule advances the purposes of the New York State Legislature in enacting section 1304's "separate envelope" requirement: "[T]he Kessler majority was unable to discern the Legislature's intent: the purpose of the 'separate envelope' is nowhere stated in its decision, and the majority is forced at one point to guess that it may have been 'to obviate a borrower becoming confused or distracted by extraneous information.' " (Bank of N.Y. Mellon v Luria, 75 Misc 3d 1205[A], 2022 NY Slip Op 50384[U], *6; see Kessler, 202 AD3d at 18.) The notion that New York can avoid the FDCPA by asserting that it affords consumers only "extraneous information" that distracts them from the state-dictated contents of a section 1304 90-day notice may not be countenanced.
As noted above (at 737-738), the pre-eviction notices required by RPAPL 711 are akin in [*14]significant respects to the pre-foreclosure notices required by RPAPL 1304. It has long been settled—by federal and New York state courts—that a debt collector who issues a section 711 pre-eviction notice must comply with the FDCPA, and that RPAPL 711 is preempted to the extent of any inconsistency with the provisions of the FDCPA. (See Romea v Heiberger & Assoc., 163 F3d 111, 118 [2d Cir 1998], supra; Garmus v Borah, Goldstein, Altschuler & Schwartz, P.C., 1999 WL 46682, *3 [SD NY, Feb. 1, 1999, No. 98 CIV. 856 CSH]; Hairston v Whitehorn & Delman, 1998 WL 35112, *3, 1998 US Dist LEXIS 819, *7 [SD NY, Jan. 30, 1998, No. 97 Civ. 3015(JSM)]; Eina Realty v Calixte, 178 Misc 2d 80, 86 [Civ Ct, Kings County 1998]; Finlayson v Yager, 21 Misc 3d 1112[A], 2008 NY Slip Op 52052[U], *1 [Poughkeepsie City Ct 2008].) Recently, a federal district court has concluded that RPAPL 1304 as construed by the Second Department in Kessler conflicts with FDCPA requirements and accordingly declined to follow the Kessler "bright-line" rule. (See CIT Bank, N.A. v Neris, 2022 WL 1799497, *5-6, 2022 US Dist LEXIS 99040, *12-14 [SD NY, June 2, 2022], supra.) For the reasons shown above, this court now holds that insofar as Kessler and its progeny prohibit inclusion of the FDCPA "mini-Miranda" warning and bankruptcy advisory in a section 1304 90-day notice, the rule promulgated by those cases is inconsistent with the provisions of the FDCPA and is preempted by virtue of 15 USC § 1692n. {**76 Misc 3d at 744}
Conclusion
In closing, the court is constrained to reiterate its view that the inconsistency giving rise to federal preemption herein arises not from the text of RPAPL 1304 but solely from the Second Department's construction of that statute in Kessler and its progeny. (See Bank of N.Y. Mellon v Luria, 75 Misc 3d 1205[A], 2022 NY Slip Op 50384[U].) Sparing the reader the entirety of its opinion in that regard, the court recounts only the following passages from its prior interim order:
"[T]he Kessler majority asserts that the language of the statutory requirement that Section 1304 90-day notices be sent 'in a separate envelope from any other mailing or notice' is 'clear, precise, and unambiguous,' and purports to 'give effect to its plain meaning' in holding that:
"[I]nclusion of any material in the separate envelope sent to the borrower under RPAPL 1304 that is not expressly delineated in these provisions constitutes a violation of the separate envelope requirement of RPAPL 1304(2).
"See, id., 202 AD3d at 12-14 (emphasis added). In so holding, however, the Kessler Court nowhere construes the statutory terms 'other mailing' or 'other notice.' By sleight-of-hand, the Court instead speaks in its holding of the inclusion of other 'material'—which is by no stretch of the imagination the same thing as an 'other' 'mailing' or 'notice.' . . .
"Applying § 1304 as written, the question posed would be whether the FDCPA advisory constituted an 'other mailing' or 'other notice' within the meaning of the statute. To this Court the answer is quite evidently 'No': by its very nature an FDCPA advisory is not an 'other notice'; it is, rather, wholly ancillary to the notice to which it is appended, functioning as a qualifier or disclaimer, which would never be independently given or 'mail[ed]' in a 'separate envelope.' " (Bank of N.Y. Mellon v Luria, 75 Misc 3d 1205[A], 2022 NY Slip Op 50384[U], *2, *5.)
Regardless, since RPAPL 1304 as construed by the Second Department in Kessler and [*15]its progeny is preempted by the FDCPA, defendant may not rely on that authority as grounds for asserting that plaintiff failed to satisfy the section 1304{**76 Misc 3d at 745} condition precedent to its prosecution of this mortgage foreclosure action. Consequently, defendant's motion for renewal is denied.
It is therefore ordered that defendant's motion for renewal of this court's prior decision and order awarding plaintiff summary judgment of foreclosure is denied.