“What’s the Worst Thing I Can Do if I’m Sued?”

This is a question we hear all the time. And here’s the short answer: “Nothing.”

You get served with or receive a copy of a lawsuit. Maybe it’s a small amount. Or maybe you think they have the wrong party because you’ve read through the complaint and none of it sounds familiar. Or maybe you think, “well, they can’t get blood from a turnip so who cares if they get a judgment against me?!” Or here’s a classic line we hear all the time: “But I didn’t do anything wrong, so there’s no way a judge will let them get a judgment against me. Wrong, wrong, wrong, and (in case you didn’t know where I’m going with this)....wrong!

The worst thing you can possibly do is Nothing. Small judgments have a way of turning into big judgments through interest, attorneys’ fees, costs, or perhaps additional damages added later. Even that $500.00 judgment could come back to haunt you years later as a judgment for thousands of dollars. That complaint you chose to ignore also might have asked for injunctive relief, which can turn into contempt proceedings that include the possibility of fines or even jail time!

Oh, and if you’re banking on the judge acting as the gatekeeper to make sure the claims against you are valid, your money is better spent buying a Powerball ticket. Judges do not represent you. Without someone there to defend your interests, the odds are very good that you will lose. In a one-horse race, even a lame pony finishes first.

If you do nothing in response to a lawsuit, you generally lose the right to challenge the allegations against you. Yes, as with all things, there are exceptions. But if you have been served with the lawsuit and made the conscious decision not to respond, it will definitely be harder to try to reopen the case months or even years later. 

We get it. Lawyers cost money and lawsuits can be expensive. But the cost of doing nothing could cost you a lot more in the long run! At a minimum, go talk to a lawyer and get a better understanding of your rights, options, and responsibilities. 

 

 

 If you’re not sure on what to do, or if you have any questions regarding this, feel free to read more on our Civil Litigation and Appeals page or schedule a consultation today to speak with one of our attorneys.

Is a Debt Collector Suing You in a "Foreign" Court

The Fair Debt Collection Practices Act ("FDCPA") expressly prohibits a debt collector from bringing a legal action in a "foreign" venue. See 15 U.S.C. § 1692i. "Foreign" does not mean account on another country or even another state. For purposes of the FDCPA, a "foreign" court is any court that is not located in q judicial district in which you reside or in which you signed the contract that is at issue in the lawsuit.

This statute explicitly provides for just two proper forums:

  1. in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located; or

  2. in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity—

(A) in which such consumer signed the contract sued upon; or

(B) In which such consumer resides at the commencement of the action.

A legal action for purposes of this section is not limited to a lawsuit, but it can also include a garnishment action, other types of collection actions, and generally encompasses "all judicial proceedings."

Call us at 602-274-5400 If you have questions on whether you're being sued in the correct court. You are not being sued in the right court, you may be entitled to damages, attorneys' fees, and court costs (even if you owe the debt).

 

It pays to know your rights. If you want to learn more, you can check out or civil litigation and appeals and HOA defense and consumer rights page.

A Practical Guide to the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (“FDCPA”) was adopted to “eliminate abusive debt collection practices by debt collectors….” 15 U.S.C. § 1692(e). Debt collectors include lawyers and law firms regularly engaged in the collection of debts through litigation constitute debt collectors for purposes of the law. Heintz v. Jenkins, 514 U.S. 291, 299, 115 S.Ct. 1489, 1493, 131 L.Ed.2d 395 (1995).

A debt collector’s behavior is measured according to a “least sophisticated debtor” standard, which “ensure[s] that the FDCPA protects all consumers, the gullible as well as the shrewd… the ignorant, the unthinking, and the credulous.’” McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 952 (quoting Clark v. Capital Credit & Collection Serv., Inc., 460 F.3d 1162, 1171 (9th Cir. 2006)). The FDCPA is a strict liability statute that “makes debt collectors liable for violations that are not knowing or intentional.” Reichert v. National Credit Systems, Inc., 531 F.3d 1002, 1005 (9th Cir. 2008).

Absent evidence of a bona fide error, courts have held that a debt collector violates the Fair Debt Collection Practices Act as a matter of law where it misstates the balance owed, misrepresents the legal status of a debt, pursues a non-existent debt, or collects or garnishes more than the amount owed. 

Although a debt collector can violate the FDCPA in numerous ways, most violations fall into one of the following two categories. We will address additional FDCPA violations in subsequent blog posts.

False and Misleading Misrepresentations.

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. This includes, but is not limited to false representations as to:

(A) the character, amount, or legal status of any debt; or

(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.

(3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.

It also prohibits debt collectors from representing or implying: that nonpayment of a debt will result in arrest or imprisonment or the seizure, garnishment, attachment, or sale of any property or wages of any person (unless such action is lawful and the debt collector or creditor intends to take such action); threats to take actions that cannot legally be taken or that are not intended rot be taken; false representations or implications that the consumer committed any crime or other conduct in order to disgrace the consumer; and falsifying documents to make it appear they are authorized, issued, or approved by courts, officials, or the U.S. or state agencies.

This section of the FDCPA generally prohibits using false representations or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer. 

Unfair or Unconscionable Means.

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. This includes:

  1. Collecting amounts (including any interest, fee, charge, or expense incidental to the principal obligation) that are not expressly authorized by the agreement creating the debt or permitted by law.

  2. Accepting a check or other payment instrument postdated by more than five days (unless such person is notified in writing of the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit).

  3. Soliciting postdated checks or other postdated payment instruments for the purpose of threatening or instituting criminal prosecution.

  4. Depositing or threatening to deposit any postdated check or other postdated payment instrument prior to the date on such check or instrument.

  5. Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if (a) there is no present right to possession of the property claimed as collateral through an enforceable security interest; (b) there is n present intention to take possession of the property; or (c) the property is exempt by law from such dispossession or disablement.

  6. Communicating with a consumer regarding a debt by postcard.

Violations of the FDCPA carry penalties, including statutory and actual damages as well as attorneys' fees and court costs.

 

 If you like this article, you may also find these topics interesting: HOA Law, HOA Defense and Consumer Rights, Civil Litigation and Appeals, Bankruptcy.

A Big Victory for the Little Guy!

The Arizona Court of Appeals recently imposed significant restrictions on homeowners' associations' rights to impose fines and penalties against homeowners. In Turtle Rock III Homeowners Association v. Fisher, 243 Ariz. 294, 406 P.3d 824 (October 26, 2017), Division One of the Arizona Court of Appeals held that homeowners associations are prohibited from imposing and collecting fines or penalties if the HOA did not have a valid, published written fine penalty policy. The absence of such a policy was per se unreasonable and, as such, the fines were unenforceable.

Arizona law generally allows HOAs to charge reasonable monetary penalties. See, e.g., A.R.S. § 33-1803(B). However, the Court held in a previous case that it was unreasonable to impose late fees based on a retroactively adopted fee schedule. In Turtle Rock III, the Court of Appeals considered whether daily or weekly fines were reasonable or "akin to a punitive damages award." The Turtle Rock homeowner faced "escalating monetary penalties for her failure to cure" certain maintenance violations. 

The Turtle Rock III court rejected the fines on several grounds. First, it held that "[a]d hoc fines," that is fines that are imposed seemingly out of thin air, "are per se unreasonable." This is true "even where the HOA has the authority to levy fines." In addition, any fines must be promulgated pursuant to a prior published schedule of fines. In other words, secret fine policies are just as prohibited as no fine policies at all. The absence of a fine policy in the Turtle Rock case was a significant factor in the Court of Appeals' ruling for the homeowner. "The trial court did not make a finding that a promulgated fee schedule existed."

Finally, and perhaps most significantly, the Court of Appeals held that it was the Association's burden to prove that the fines imposed were reasonable. In Turtle Rock, the fees were $25.00 per day. The homeowner "was not required to present evidence controverting the existence of the fee schedule." That burden fell squarely on the Association suing to collect the fines. The Court of Appeals held that there was "no support in the record for a determination that a fine of $25 per day, for any violation, is reasonable. A stipulated damages provision made in advance of a breach is a penalty, and is generally unenforceable." 

The Court's central holding is worth repeating: 

Although the HOA had the authority under state statutes and the CC&Rs to promulgate a fine schedule for monetary penalties, there is no competent evidence in the record before us that it did so. Without competent evidence of a fee schedule timely promulgated demonstrating the fine amounts and the appropriateness of such amounts, monetary penalties are per se unreasonable. Even if a fee schedule existed, the HOA had the burden to prove its damages. Given our resolution of this matter, we need not address Fisher's due process claim related to the required thirty-day notice of a penalty. The trial court's award of monetary penalties is reversed and the attorneys' fees award below is reversed.

The last part of this ruling will continue to resonate: "Even if a fee schedule existed, the HOA had the burden to prove its damages." While an HOA may have the right to impose fees or penalties for CC&R violations, Turtle Rock suggests that any such fines, in addition to being set forth in a published fine policy, must relate to some damage that the HOA might suffer. 

Most HOAs that have fine policies charge a minimum of $25.00 for an initial violation. These fines often escalate quickly. $25.00 becomes $50.00, which becomes $100.00, and so on. But if these fines bear no relation to any actual damages that an HOA actually suffers, it raises serious questions whether the HOA can even enforce such fines in the first place.

Have you been fined? Did you pay the fines or are you contesting them? 

CALL US TODAY TO DISCUSS YOU LEGAL RIGHTS.

Can they really shut off my water?

Homeowner and condominium associations are increasingly adopting policies for shutting off water or other utilities where an owner has fallen behind in his or her assessments, owes fines or penalties for violating the governing documents, or is supposedly refusing to follow rules.  Although people who own in a homeowner association generally are obligated to pay assessments, associations commonly use these water shut-off policies in order to force members to pay assessments, fines, penalties or other charges that they may not owe.  These owners often face an unfair choice: Pay what we tell you to pay or live without water. 

What many homeowners do not know is that such policies in many cases may be unenforceable. There is no reported case in Arizona that authorizes a homeowners association to shut off water or other utilities. The determination of whether the policy is enforceable depends on several factors, including (a) an association’s governing documents, (b) Arizona’s planned community and condominium laws, (c) the history of the policy and its enforcement, and (d) whether the association is seeking to collect assessments or fines and penalties.  In many cases, the water shut off policy is not enforceable and can be successfully challenged in court.

In most cases, we find that the application of these factors provides fertile ground for challenging a shut-off policy.  While this is especially true where the association does not pay for the utility that is the subject of the shut-off policy, the association does not necessarily gain the right to shut off essential services even if it pays for the utilities.

Please understand that we are not advocating you to refuse to pay assessments.  Assessments have been called the “lifeblood” of a homeowners association and an association has every right to collect assessments…provided that the assessments are valid and it does so within the law.  If you believe that assessments are invalid, we strongly encourage you to seek legal representation to learn about your rights and obligations.  We recommend you seek legal counsel before taking any action.  Although many people believe that they can simply stop paying assessments, it is our experience that this is not the wisest course of action and many people who stop paying assessments quickly regret it.

Courts cannot, and should not, condone a homeowner who has refused to pay valid assessments.  But the courts also should not condone a homeowners association that has exceeded its lawful powers and seeks to use unlawful collection tactics.  And, in many cases, the association is using the threat of water shut off to force a homeowner to pay disputed fines or penalties. 

An Association’s Governing Documents Rarely Permit the Disconnection of Water of Other Utilities.

Although many associations will argue that their governing documents (CC&Rs and Bylaws) in general provide sufficient authority for shutting off utilities, this is rarely the case. Unless an association’s CC&Rs explicitly creates the right to shut off utilities as a collections tactic, then no such right exists.   Even if the CC&R’s provide such an explicit right, that provision may be found to be unlawful.

The CC&R’s constitute a contract between the Association and the homeowners. In most cases, the governing documents spell out the rights and remedies of the association.  Rarely do these enumerated rights include the ability to shut off water or other utilities for non-payment.  Rather, they generally permit an association to commence legal action for damages or foreclosure (if applicable) and on occasion may also allow the association to suspend certain rights and privileges, such as the right to vote.  If the right to shut off water is not expressly spelled out in the CC&Rs, then it is not part of your contract with the association.

Nor can the right be inferred or implied from a general right to collect assessments or charge fines. One court addressing this question has decried this “extra-legal means of enforcement,” holding that the association, in that case, lacked the legal right to shut off a homeowner’s water.  See Western v. Chardonnay Village Condominium Ass’n, 519 So.2d 243 (1988).  In general, the absence of express language authorizing utility shut off, and the inclusion of specific language spelling out the methods for collection of unpaid assessments, as if often the case, defeats any argument that such an implied right exists.

The association’s CC&R’s generally do not give it the right to employ collection tactics such as shutting off the water, disconnecting utilities, or prohibiting parking any more than the association could threaten to change the locks on your house or condominium.  And an association does not have the right to change the locks on your house or condominium.

Arizona Law Does Not Permit the Disconnection of Utilities.

Arizona law also does not authorize the disconnection of water or other utilities.  Arizona’s statutes governing condominiums and planned communities generally restrict exclusive an association’s remedy for non-payment of assessments to commencement of a civil action for damages and/or foreclosure of its lien (where applicable).  Nothing in Arizona’s Planned Communities Act or Condominium Act allows an association to disconnect these essential services any more than it could change the locks on your home.  Simply put, an association does not have the authority under Arizona law to deny water or other utilities as a means of collecting for past due assessments or penalties.

Arizona courts have analogized homeowners associations to landlords in many respects.  See Martinez v. Woodmar IV Condominiums Homeowners Ass’n, Inc., 189 Ariz. 206, 941 P.2d 218 (1997).  A homeowners association has no greater right to shut off water or other utilities than a landlord.  And a landlord generally cannot shut off essential utilities in Arizona—even where the landlord pays for those utilities—as a means of compelling payment of rent.  See A.R.S. § 33-1364.  Thus, the fact that the homeowners association might pay the utility bill as a common expense does not necessarily create the right to shut off that utility to a non-paying homeowner.

The disconnection of essential services also arguably raises serious due process concerns.  The Condominium Act and Planned Community Act both require commencement of legal process in order to collect past due assessments or fines.  Where an association has received a specific grant of power under the statute, a collection policy that circumvents the legal process provided, and avoids the judicial oversight inherent in the legal means set forth in the statute, offends basic concepts of due process.

The History and Application of the Policy Is a Crucial Question.

Even if state laws and an association’s governing documents permit shutting off utilities, one should examine the history of the policy and how it is being enforced.  Consider the following questions:  Was the policy adopted in a properly noticed, open meeting? Was the policy communicated to the homeowners?  Is the policy uniformly enforced? Unless you can answer, “yes,” to each of these questions, the homeowner may have valid grounds for challenging the policy.

Policies that are discussed and adopted in closed, private meetings by a select handful of homeowners subvert Arizona’s open meeting statutes (A.R.S. §§ 33-1248 and 33-1804), and are invalid and unenforceable. Although the open meeting statutes do not explicitly spell out the remedies for their violation, the statutes would be meaningless if actions taken during a closed or secret meeting are valid. Even if the policy was adopted in a properly noticed, open meeting, the failure of the association to disseminate the policy to homeowners could render the policy otherwise unenforceable.

Such policies, however, are almost never enforced uniformly or objectively.  The policy is often enforced only against those designated as troublemakers or outsiders, or delinquent board members may exempt themselves or their friends from the harsh application of the policy; or the policy may be enforced arbitrarily or capriciously.  Any evidence that the policy is not enforced on a uniform and non-preferential basis renders the policy enforceable.  It also violates an association’s duty to treat all homeowners equally and fairly.

Is the Association Shutting Off Water as a Fine or Penalty?

The non-payment of assessments, as discussed above, should not be condoned and Arizona law provides remedies for the non-payment of those assessments.  In many cases, an association has threatened to shut off water or other utilities as a means of forcing a homeowner to pay disputed fines, penalties, or fees.  The nature of the monetary amount that is the subject of the collection effort is a crucial factor that must be considered in challenging the water shut off policy.

Although it is our position that water shut-off policies are almost always unenforceable, the challenge to the policy is strengthened where the alleged delinquent balance includes disputed fines, penalties, and charges other than just assessments. The rationale common employed by an association defending a water shut-off policy is that assessments are used to pay the utilities.  This rationale is absent where the balance consists, in part or whole, of fines or penalties for alleged (and unproven) CC&R violations.

Arizona law distinguishes between assessments and fines.  For example, a homeowners association has the statutory right to foreclose where the unpaid assessments exceed $1,200.00 or have not been paid for more than one year, the association generally does not have the right to foreclose for violation fines or penalties.  If an association cannot foreclose if you paint your house the wrong color or leave your trashcan out overnight, why should they be allowed to shut off your water in order to force you to pay fines and penalties that you dispute and may not even be valid!

Conclusion.

In many cases, a policy that allows the association to deny essential utilities or access to your unit is subject to challenge.  Because every case is unique, you should not rely on this article as legal advice specific to your situation.  But if you are faced with threats of having your water shut off, you should immediately consult a lawyer.

Don’t be a victim or abusive practices. Seek legal assistance and learn more about your legal rights on consumer fraud.