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Lustig, Glaser & Wilson, P.C. v. Cotney

Superior Court of Massachusetts, Suffolk, Business Litigation Session

June 23, 2016

Lustig, Glaser & Wilson, P.C.
v.
David J. Cotney, in His Capacity as the Commissioner of Banks et al No. 134249

          Filed June 27, 2016

          MEMORANDUM OF DECISION AND ORDER ON THE DEFENDANTS' MOTION TO DISMISS

          Mitchell H. Kaplan, Justice

         Plaintiff Lustig, Glaser & Wilson, P.C. (LGW) is a law firm that represents clients in connection with the collection of consumer debts. The defendant Massachusetts Division of Banks (the Division), [1] among other things, is charged with the regulation of debt collection. See G.L.c. 93, § § 24-28. This case arose out of a dispute regarding the Division's interpretation of G.L.c. 93, § 24, and whether firms like LGW were debt collectors within the meaning of that statute. The case is before the court on the Division's motion to dismiss on the grounds of mootness.

         BACKGROUND

          G.L.c. 30A, § 8 provides that: " On request of any interest person, an agency may make an advisory ruling with respect to the applicability to any person, property or state of facts of any statute or regulation enforced or administered by that agency. In issuing the advisory ruling, the agency need not comply with the requirements of this chapter with respect to regulations." The Consumer Affairs and Business Regulation department of the Division has published Regulatory Bulletin 1.1-103, which describes how an affected person or entity may request an advisory opinion from the Division. The Bulletin explains that the Division publishes selected opinions on its website as a means to " offer[ ] its perspective on current issues and questions in the financial services industry."

         In correspondence dated September 19, 2013 and October 21, 2013, LGW requested an opinion concerning whether the firm was required to obtain a debt collector license. The letters provided an explanation of the manner in which LGW provides debt collection services to its clients. On November 2, 2015, the Division replied in a letter (the Letter) in which it reasoned that " the applicability of the exemption to Massachusetts law firms turns on the extent of the debt collection activity conducted by the firm." It then concluded that because LGW " as a firm [is] overwhelmingly engaged in the area of consumer debt collection on behalf of its clients . . . [it] is required to be a licensed debt collector."

         On December 7, 2015, LGW filed the complaint commencing this action. It was pled in three counts. Count I requested a declaratory judgment to the effect that LGW is not a debt collector subject to regulation by the Division. In Count II, LGW asserted that the advisory opinion set out in the Letter constituted a violation of its due process rights under the United States and Massachusetts constitutions and therefore a violation of 42 U.S.C. § 1983 and G.L.c. 12, § 11I. Count III requested an injunction enjoining the Division from enforcing chapter 93 against LGW. Although, the prayers in the complaint requested a temporary, preliminary, and permanent injunction, no motion for injunctive relief was filed. On January 25, 2016, LGW filed an amended complaint, which divided its request for declaratory relief into two counts: Count I was premised on improper statutory interpretation, and the new Count II asserted an alternative argument that, as interpreted by the Division, G.L.c. 93, § 24 violates the separation of powers provision of the Massachusetts Declaration of Rights.

         On February 1, 2016, the Division filed an answer to the amended complaint. On February 11, 2016, the Division issued a statement clarifying that law firms that are required to obtain debt collectors' licenses do not have to submit applications for a license until six months from the date of that February 11, 2016 statement. Also, on February 11, 2016, the court issued a notice to the parties to appear at a Rule 16 Conference on March 10, 2016. On February 24, 2016, LGW filed a motion for judgment on the pleadings directly with the court, in violation of the procedures required by Superior Court Rule 9A. The Rule 16 conference was continued at the parties' request. Then, on April 1, 2016, the Division delivered a letter to LGW notifying it that it had reconsidered its interpretation of G.L.c. 93, § 24 and withdrawn its November 2, 2015 letter. The April 1st letter went on to state: " Therefore, the Division will not require LGW, or other similarly situated law firms, to become licensed solely because LGW is primarily engaged in consumer debt collection or regularly collects consumer debt."

         Thereafter, the Division filed this motion to dismiss this action on the grounds of mootness.

         DISCUSSION

         The Division argues that because it has withdrawn its November 2, 2015 letter, and expressly stated that it will not require LGW to become a licensed debt collector, the case is moot: there is no actual controversy for the court to resolve and there is no relief that the court might grant that is of use to LGW. See, e.g., Boston Herald, Inc. v. Superior Court Dep't of the Trial Court, 421 Mass. 502, 504, 658 N.E.2d 152 (1995) (where the court held that to be justiciable a case must present a " real dispute where the circumstances indicate that unless a determination is had, subsequent litigation as to the identical subject matter will ensue"); Bronstein v. Board of Registration in Optometry, 403 Mass. 621, 627, 531 N.E.2d 593 (1988) (" Litigation is considered moot when the party who claimed to be aggrieved ceases to have a personal stake in its outcome . . . Speculative fear of future litigation, however, does not save a case from being moot").

         LGW contends that the case is not moot because the Division has not " made it absolutely clear that [it] (or a subsequent Commissioner) will not revert to an interpretation along the lines of the challenged interpretation that unconstitutionally subjects LGW to debt collector licensing requirements." In support of its position, LGW primarily relies on two cases Friends of Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) ( Laidlaw ) and Wolf v. Comm'r of Pub. Welfare, 367 Mass. 293, 299, 327 N.E.2d 885 (1975). The court finds the facts and circumstances of those cases, as well as their holdings, to be far removed from the issues presented in this case and therefore not instructive.

          Laidlaw involved a citizen suit under the Clean Water Act against a defendant for discharge of pollutants, particularly mercury, into the North Tyger River. The trial court found that the defendant had violated its permit and discharged pollutants, thereby gaining economic advantage. It ordered the defendant to pay a civil fine, but declined to enter injunctive relief because the defendant had been in substantial compliance with its permit for several years by the time judgment entered. The defendant appealed and the Fourth Circuit Court of Appeals reversed based on a lack of standing and mootness. Much of the Supreme Court's decision focused on the difference between the principles of standing and mootness. The Supreme Court did restate the well-established principle that: " a defendant's voluntary cessation of a challenged practice dose not deprive a federal court of its power to determine the legality of the practice . . . If it did the courts would be compelled to leave the defendant free to return to his old ways . . . The heavy burden of persuading the court that the challenged conduct cannot reasonably be expected to start up again lies with the party asserting mootness." Id. at 189 (Internal quotations and citations omitted). The Supreme Court's decision did not focus on the application of those principles to the defendant's conduct, and, in a concurring opinion, Justice Breyer noted that the case could not be moot, even if the defendant had gone out of business and posed no threat of future permit violations, because the money judgment was valid based on past violations of the Clean Water Act.

          Wolf involved an action brought by a recipient of AFDC benefits who alleged on behalf of herself~, and other similarly situated recipients of AFDC benefits, that she had not received her benefits check and the Department of Public Welfare had unlawfully delayed in providing her with a replacement check in violation of both its own regulation and provisions of the United States, Social Security Act. The Superior Court dismissed the case on the ground of mootness because the named plaintiff had received her check by the time the matter was before the court. On further appellate review, the Supreme Judicial Court noted that Federal courts had long held " that a class action is not mooted by the settlement or termination of the named plaintiff's individual claim." It applied that principle to the case before it and held that " the judge should have passed on the existence of a proper class before considering the question of mootness." 367 Mass. at 297. It ...


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