Fell v. ALCO Capital Grp. LLC

538 P.3d 1249

George Rollan FELL, Kelly Molyneux, and Becky Curtis, Appellants,

v.ALCO CAPITAL GROUP LLC, Appellee.

No. 20210394-CA

Court of Appeals of Utah.

Filed October 19, 2023

Daniel M. Baczynski, Draper, Attorney for Appellants

Brett B. Larsen, Phoenix, AZ, and Gregory M. Constantino, West Jordan, Attorneys for Appellee

Judge Gregory K. Orme authored this Opinion, in which Justice Jill M. Pohlman¹ and Senior Judge Russell W. Bench² concurred.

Opinion

ORME, Judge:

¶1 George Rollan Fell, Kelly Molyneux, and Becky Curtis (collectively, Appellants) challenge the district court's grant of summary judgment in favor of Alco Capital Group LLC (Alco). The court's summary judgment ruling resulted in dismissal of Appellants’ suit, which was premised on their pivotal contention that Alco engaged in "deceptive" and "unconscionable" acts and practices in violation of the Utah Consumer Sales Practices Act (the UCSPA), see generally Utah Code Ann. §§ 13-11-1 to -23 (LexisNexis 2013 & Supp. 2022),³ by pursuing debt collection while unlicensed under the Utah Collection Agency Act (the UCAA), see generally id. §§ 12-1-1 to -11.⁴ Appellants contend that the district court erred in concluding that "in the absence of some affirmative misrepresentation, ... simply being not registered under the UCAA is not a deceptive or unconscionable practice under the [UCSPA]." We affirm.

BACKGROUND⁵

¶2 Alco is a Wisconsin limited liability company with its principal office in Brookfield, Wisconsin. Alco engages in the acquisition of "portfolios of bad debts from debtors all over the country, including residents of Utah." Alco's collection method primarily involves "outsourc[ing] those collection activities to third-party debt collectors in some instances or in this case to counsel to try to recover those debts through filing lawsuits in the given jurisdiction."

¶3 Alco purchased a portfolio of outstanding debts that included debts owed by Appellants. Between June 2017 and January 2018, Alco engaged local legal counsel and filed actions in the appropriate Utah district courts to collect those debts. In its complaints against Appellants, Alco asserted that it had the "same right to collect" as the prior debt holder and that Alco was thus "entitled to a judgment." Alco ultimately obtained judgments against Appellants, and after the entry of those judgments, Alco "sought to enforce the judgments via garnishment proceedings." In those cases, Appellants did not argue that Alco's collection efforts were barred on the ground that Alco was not licensed under the UCAA.

¶4 In March 2020, Appellants filed their complaint in this case (the Complaint), challenging Alco's alleged deceptive and unconscionable collection efforts. In the Complaint, Appellants’ primary claim was that Alco's collection efforts violated the UCSPA. See Utah Code Ann. §§ 13-11-4, -5 (LexisNexis 2013 & Supp. 2022). The Complaint described Alco as a "collection agency, collection bureau, or collection office" that was required to register and file a bond pursuant to the UCAA prior to pursuing any collection effort action in Utah. See id. § 12-1-1 (2013).⁶

¶5 Appellants contended that when Alco initiated its collection actions against Appellants, it "did not disclose that it did not have the requisite license," which amounted to an active misrepresentation of "its ability to enforce its right to collect the debt." Appellants reasoned that "Alco's conduct in filing a debt collection lawsuit, affirmative representations in its filings regarding Alco's right to recovery, and material omissions regarding its unlicensed status, together constitute a misrepresentation of its licensure and bonding status" and constitute a "per se deceptive act for a supplier under the UCSPA."

See id. §§ 13-11-4, -5 (2013 & Supp. 2022). Appellants further alleged that "Alco purposefully engaged in these activities knowingly and intentionally to harm consumers and gain an advantage over its competitors" and that it "knew or should have known" about the UCAA licensure requirements.

¶6 Relying on their primary claim, Appellants sought a "declaration on behalf of [Appellants] that since Alco was acting unlawfully as an unlicensed collection agency," it "did not have legal standing to obtain any judgment in Utah Courts against [Appellants]" and that its existing judgments should be "declared (i) void and unenforceable and (ii) Alco should not be entitled to collect any sums on those judgments or debts related to [Appellants]." Appellants also asked that Alco "be ordered to disgorge all sums collected on [all] judgment amounts from [Appellants] that Alco obtained as a result" of the improper judgments and that Alco be "enjoined from attempting to collect any judgment amounts entered improperly against [Appellants] in its favor while it acted illegally as a collection agency without a license." Alternatively, Appellants sought "a declaration that ... Alco is not entitled to the assistance of any Utah court to enforce the principal amount due under any judgment Alco obtained improperly." In addition to these requests for relief, Appellants asserted their entitlement to "statutory damages of $2,000 under the [UCSPA] for the harm caused by Alco's unlawful attempts to collect on a debt."

¶7 In addition to seeking a declaratory judgment against Alco for the alleged violation of the UCSPA, Appellants further alleged that Alco had been unjustly enriched, asserting that "Alco had an appreciation that it was not entitled to receive the benefits it was collecting ... that flow[ed] from the void judgments it improperly obtained." On this claim, Appellants contended that Alco "engaged in deceptive and/or unconscionable acts in violation of the [UCSPA] and was thereby unjustly enriched under common law." In their final claim, Appellants alleged that Alco's pursuit of wage garnishments under the circumstances constituted intrusion upon seclusion.⁷

¶8 Following service of the Complaint, Alco removed the case to the United States District Court for the District of Utah. But within just a matter of weeks, the case was remanded back to Utah's Third District Court.⁸

¶9 In December 2020, Alco filed its motion for summary judgment pursuant to rule 56(a) of the Utah Rules of Civil Procedure seeking to dismiss the Complaint in its entirety. Alco sought summary judgment on the theory that "all of [Appellants’] claims are based entirely on Alco's alleged noncompliance with the UCAA's registration and bonding requirements" and because the UCAA "provides only for criminal penalties for noncompliance, ... a violation of the UCAA cannot support a private right of action in the circumstances of this case."

¶10 The district court held a hearing on Alco's motion for summary judgment, during which Alco conceded that at no time prior to initiating the collection actions or its pursuit of garnishment proceedings against Appellants was it licensed with the Division of Corporations and Commercial Code (the Division). See Utah Code Ann. § 12-1-1 (LexisNexis 2013) (requiring a "person" to be "registered with [the Division] and [have] on file a good and sufficient bond" when engaging in collection activity). Alco acknowledged that "in theory there could be circumstances somewhere where a violation of the UCAA or this registration requirement could support a [UCSPA] claim if it was coupled with some other kind of wrongful conduct other than just the sheer violation of the administrative requirements to register and post a bond." But, Alco argued,

there's no evidence in the record in this case ... that Alco made any misrepresentations about their registration or bonding status. You know there's not like a letter somewhere where [Alco] said they were registered or bonded and they really weren't. There's no evidence that they purposely concealed that fact from any of [Appellants] or any other debtors for that matter.

¶11 Alco further argued that "this violation in this case without something more cannot support those kind of claims, cannot support a private cause of action in and of itself without something more, without some other wrongful conduct beyond the violation itself." And Alco contended that if the court were to determine that a violation of the UCAA is sufficient to trigger liability under the UCSPA, the court would essentially be creating a private right of action under the UCAA where the Legislature had intentionally not provided for one, instead having prescribed only a criminal sanction for a violation. See id. § 12-1-6. Alco again insisted that "without some other showing, some other evidence of some other wrongful conduct, ... these allegations here just can't support the private causes of action that [Appellants] have asserted in the case either under the [UCSPA] or on the common law theories."

¶12 In response, Appellants argued that the court should take notice of the analysis offered in some federal cases relating to violations of the UCAA, the UCSPA, and the federal Fair Debt Collection Practices Act (the FDCPA), see 15 U.S.C. §§ 1692 to 1692p. Appellants argued that "[i]f threats to commit an unlawful act are deceptive or unconscionable," as proscribed by the FDCPA, see generally id. § 1692f, "it has to also be considered that the unlawful act itself would be deceptive." But Appellants concede on appeal that the Complaint does not include a claim under the FDCPA. Instead, the Complaint's pivotal contention is the alleged violations of the UCSPA by virtue of the lack of licensure under the UCAA.

¶13 In the Complaint, Appellants’ principal theory is anchored to the allegation of Alco's "deceptive" and "unconscionable" acts or practices, proscribed by the UCSPA, by reason of Alco's lack of licensure. At the summary judgment hearing, Appellants noted that in this context the terms "deceptive" and "unconscionable" "are not really well tailored to exact definitions." Attempting first to provide meaning to the term "deceptive" by relying on the...