By: Shane Biffar
A recent Second Circuit Court of Appeals decision ruled that mandatory water and sewer charges are not subject to the Fair Debt Collection Practices Act (“FDCPA”). In Boyd v. J.E. Robert Co., Inc., 2014 U.S. App. LEXIS 16620 (2d Cir. Aug. 27, 2014), the Second Circuit affirmed a New York district court’s holding that liens for mandatory water and sewer charges, which are imposed as an incident to property ownership, do not involve a “debt” as that term is defined in the FDCPA and therefore are not subject to the statute.
In Boyd, the defendants purchased water and sewer lien certificates from the City of New York before commencing foreclosure actions on the plaintiffs’ properties. The putative class action plaintiffs were property owners who alleged that the defendants violated the FDCPA by obtaining unauthorized attorneys’ fees and costs in connection with the foreclosure actions. The district court granted summary judgment for defendants and dismissed the FDCPA claims on the basis that, inter alia, the liens did not involve a “debt” as defined by the FDCPA.
On appeal, the plaintiffs argued that the district court erred in dismissing their FDCPA claims. The Second Circuit rejected plaintiffs’ argument and denied FDCPA recovery, noting that any violation of the FDCPA must occur in connection with the collection of a “debt,” which is defined as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which [] the subject of the transaction [is] primarily for personal, family, or household purposes . . . .” (emphasis added).
In its analysis, the Second Circuit cited its prior decision in Beggs v. Rossi, 145 F.3d 511 (2d Cir. 1998), which held that “municipal taxes levied automatically in connection with ownership of personal property do not involve a ‘transaction’ as that term is understood under the FDCPA and, accordingly, are not “debt” for purposes of the FDCPA.” Applying this reasoning, the Court similarly concluded that water and sewer charges, like property taxes, “are levied, in some amount, as an incident to property ownership in New York” and therefore “do not involve ‘debt’ under the FDCPA.”
Further, the Second Circuit distinguished the Third Circuit’s holding in Piper v. Portnoff Law Assoc., Ltd., 396 F.3d 227 (3d Cir. 2005), which held that certain water and municipal charges are subject to the FDCPA. Specifically, the Second Circuit highlighted that the water and sewer services in Piper were first requested by the property owner before they could be charged by the City. Accordingly, the payment obligation in Piper arguably arose out of the “transaction” of requesting water services and therefore constituted “debt” within the meaning of the FDCPA.