Cain v. Midland Funding, LLC

475 Md. 4

256 A.3d 765

Clifford CAIN, et al.

v.MIDLAND FUNDING, LLC

Tasha Gambrell

v.Midland Funding, LLC

No. 38, Sept. Term, 2020

No. 39, Sept. Term, 2020

Court of Appeals of Maryland.

August 4, 2021

Argued by Scott C. Borison (Borison Firm, LLC, Baltimore, MD; Phillip R. Robinson, Consumer Law Center LLC, Silver Spring, MD), on brief, for Petitioners.

Argued by James P. Ulwick and Amy E. Askew (Louis P. Malick, Kramon & Graham, P.A., Baltimore, MD), on brief, for Respondent.

Amici Curiae Maryland Volunteer Lawyers Service and Pro Bono Resource Center of Maryland, Inc.: E. David Hoskins, Esq., The Law Offices of E. David Hoskins, LLC, 16 E. Lombard Street, Suite 400, Baltimore, MD 21202, Sharon Goldsmith, Esq., Executive Director, Pro Bono Resource Center of Maryland, Inc., 520 W. Fayette Street, Suite 300, Baltimore, MD 20201, Amy P. Hennen, Esq., Director of Advocacy & Financial Stabilization, Maryland Volunteer Lawyers Service, 201 N. Charles Street, Suite 1400, Baltimore, MD 21201.

Amicus Curiae Maryland Defense Counsel, Inc.: Timothy M. Hurley, Esq., Peter W. Sheehan, Esq., Richard Ochran, Esq., Nelson Mullins Riley & Scarborough LLP, 100 S. Charles Street, Suite 1600, Baltimore, MD 21201.

Argued before: Barbera, C.J.; McDonald, Watts, Hotten, Getty, Booth and Biran, JJ.

Booth, J.

In the instant cases, we must decide the applicable statute of limitations for claims filed by consumer debtors against a consumer debt buyer, Midland Funding, LLC ("Midland"), alleging improper debt collection activities in connection with money judgments that Midland obtained against the plaintiffs at a time when Midland was not licensed as a collection agency under Maryland law.

These matters originated as two separate putative class action cases that were filed against Midland in Maryland circuit courts. Petitioner Clifford Cain, Jr. filed a putative class action against Midland in the Circuit Court for Baltimore City on July 30, 2013. Petitioner Tasha Gambrell filed a putative class action against Midland in the Circuit Court for Anne Arundel County on September 28, 2015. In both cases, Petitioners allege that Midland obtained judgments against the named plaintiffs and similarly situated members of the putative classes for consumer debts during a time period when Midland did not have a collection agency license under the Maryland Collection Agency Licensing Act ("MCALA").¹ Both putative class actions included counts for declaratory judgment (seeking a declaration that the judgments obtained by Midland were void), injunctive relief preventing Midland from collecting on the judgments in the future, and money damages arising from claims for unjust enrichment and violations of the Maryland Consumer Debt Collection Act ("MCDCA")² and the Maryland Consumer Protection Act ("MCPA").³ In both cases, the circuit courts resolved the cases by motion. In Mr. Cain's case, the circuit court entered an order granting summary judgment to each party in part, and a separate declaratory judgment declaring the rights of the parties. In Ms. Gambrell's case, the circuit court granted Midland's motion to dismiss.

Both cases were appealed to the Court of Special Appeals. That court issued an unreported opinion in each case. With respect to Mr. Cain's case, the Court of Special Appeals determined that it had jurisdiction to consider Mr. Cain's appeal, concluding that the circuit court's summary judgment order and declaratory judgment constituted a final judgment. Aside from that procedural issue, which was unique to Mr. Cain's case, the Court of Special Appeals resolved Mr. Cain's and Ms. Gambrell's claims in the same manner.

In each instance, the intermediate appellate court held that our decision in LVNV Funding LLC v. Finch , 463 Md. 586, 207 A.3d 202 (2019) (" Finch III ") resolved the Petitioners' declaratory judgment counts and that under Finch III , the judgments obtained when Midland was unlicensed were not void. The court also held that, since Petitioners' judgments had been satisfied, they were not entitled to injunctive relief because Midland was no longer collecting on them. With respect to the remaining claims seeking restitution under an unjust enrichment theory and money damages for the statutory claims, the Court of Special Appeals held that the claims were barred by the general three-year statute of limitations codified at Maryland Code, Courts and Judicial Proceedings Article ("CJ") § 5-101. The court rejected Petitioners' argument that the claims constituted "actions on a judgment" and were therefore subject to a 12-year statute of limitations applicable to specialties actions under CJ § 5-102(a)(3). The court similarly rejected Petitioners' assertion that the continuing harm doctrine applied to change the accrual date for their unjust enrichment claims. Finally, the court rejected Petitioners' argument that the statute of limitations was tolled under the class action tolling doctrine based upon Mr. Cain's earlier participation as a putative class member in a federal class action case, and in Ms. Gambrell's case, based upon two would-be class action cases pending against Midland in Maryland state courts. We granted Mr. Cain's and Ms. Gambrell's petitions for writ of certiorari .⁴ Because the cases involve the same questions of law, we issue one opinion to answer the following questions, which we have rephrased for clarity:

1. Whether Petitioners' claims for unjust enrichment and money damages under the MCPA and MCDCA are subject to the three-year general statute of limitations under CJ § 5-101 ?

2. Whether the continuing harm doctrine applies to change the accrual date for Petitioners' claims for unjust enrichment and statutory money damages because Midland garnished Petitioners' wages over a period of time after it obtained the judgment?

3. Whether the statute of limitations period on Mr. Cain's individual claims was tolled under Maryland's class action tolling doctrine?

4. Whether 28 U.S.C. § 1367(d) tolled the statute of limitations on Mr. Cain's claims asserted in his state court class action based upon his earlier participation as a putative class member of a federal class action?

5. Whether a final judgment was entered by the circuit court in Mr. Cain's action that was therefore reviewable by the Court of Special Appeals?

We answer yes to questions one, three and five, and no to question two. Given our holding that Maryland recognizes cross-jurisdictional class action tolling, we determine that it is unnecessary to answer question four. In Ms. Gambrell's case, we affirm the judgment entered by the Court of Special Appeals in both cases in its entirety. In Mr. Cain's case, pertaining to Mr. Cain's individual claims, we affirm the judgment of the Court of Special Appeals in part, and reverse it in part.

Before we get into the weeds of the instant cases, we start with some background and history for context. This is not the first time that we have addressed debt collection activities by consumer debt purchasers like Midland. It is useful to give an overview of the licensing laws that apply to the collection activities that spawned several class action cases in both the United States District Court for the District of Maryland and our state circuit courts.

I.Background

A. Debt-Buying Industry—Unlicensed Collection Activities and Legislative Amendments to Regulate Industry

In Finch III ,⁵ we described the emergence of the consumer debt-buying business model that was developed in the late 1980s, which has become commonplace in the debt collection industry. Under this new business format, creditors (such as credit card companies) sell consumer debt accounts that are in default to bulk purchasers for pennies on the dollar, thereby transferring the expense and risk of consumer debt collection efforts to the consumer debt purchaser.

In Maryland, a debt collection agency is required to be licensed. See the MCALA, Md. Code, Business Regulation Article ("BR") § 7-301(a) ("a person must have a license whenever the person does business as a collection agency in the State[ ]"). The MCALA was enacted by the General Assembly in 1977.⁶ From its enactment until some amendments in 2007, the license requirements focused on persons who were "directly or indirectly in the business of collecting for, or soliciting from another, a consumer claim." Finch III , 463 Md. at 603, 207 A.3d 202 (emphasis omitted).⁷

By 2007, it was apparent to the state regulators, and ultimately, the General Assembly, that the new business model did not fit within the existing definition of "collection agency," and debt bulk purchasers were engaging in debt collection activities—filing civil lawsuits, obtaining judgments, and engaging in post-judgment collection activities—in the State without a license. Id. at 603–04, 207 A.3d 202. It was estimated that, by 2007, there were approximately 40 debt purchasers that were engaging in debt collection activities in Maryland without a license.⁸ To close this loophole, at the urging of the Commissioner of Financial Regulation, the General Assembly expanded the definition of "collection agency" to include a person "who engages directly or indirectly in the business of ... collecting a consumer claim the person owns, if the claim was in default when the person acquired it[.]" BR § 7-101(d)(1)(ii) (the "2007 amendment"). The 2007 amendment took effect on October 1, 2007. From that date, bulk purchasers of consumer debts "who engaged directly or indirectly in the business of collecting consumer debt that they owned and that was in default when they acquired it" were required to be licensed. Finch III , 463 Md. at 604, 207 A.3d 202.

Despite the legislative change that brought bulk consumer debt purchasers within the statutory umbrella of the state licensing scheme, some debt purchasers professed confusion concerning whether they were required to be licensed in certain instances. This confusion purportedly arose from their reliance on a letter issued in ...