The Court of Special Appeals turned back attempts by several judgment debtors to hold a Baltimore County law firm liable for actions taken on behalf of a client to collect outstanding judgments that resulted from a series of breach of lease cases. In Chavis v. Blibaum Associates, P.A. (No. 334, Sept. Term 2019) (July 2, 2020), the court determined that the law firm violated neither the Maryland Consumer Debt Collection Act (MCDCA), nor the Maryland Consumer Protection Act (MCPA) when it attempted to collect post-judgment interest at a higher rate than allowed by law. The court did so despite the fact that a federal court has expressed a contrary view in related litigation. Slip Op. at 10, n. 4.
Chavis involved consolidated appeals from circuit court decisions in Baltimore City and Baltimore County, both of which found in favor of the law firm. In each case, the firm had pursued collection efforts following the entry of money judgments against residential tenants who had breached their leases. Also in each case, the law firm had erroneously calculated post-judgment interest at the rate of 10%, when the applicable rate of interest was only 6%. The deliberate attempt to collect the higher rate of interest, the former tenants argued, violated the MCDCA, which provides that “[i]n collecting or attempting to collect an alleged debt a collector may not … [c]laim, attempt, or threaten to enforce a right with knowledge that the right does not exist[.]” Md. Comm. Law Ann. §14-202(8). The tenants also alleged that by claiming the higher rate of interest, the law firm ran afoul of MCPA, which prohibits “any … deceptive trade practice … in … [t]he collection of consumer debts.” Id., § 13-303. The collection efforts were deceptive, the debtors maintained, because they led them to believe that their debt was greater than it actually was. Slip Op. at 13.
At the time the collection efforts were initiated, however, the law was unclear as to the appropriate interest rate to be applied to a judgment entered for a breach of a lease that did not distinguish amounts attributable to rent from amounts derived from other breaches. The law firm and its client took the position that it was the 10% rate applicable to Maryland judgments generally, as provided by Md. Courts Art. §11-107(a), while the tenants believed §11-107(b) imposed a 6% ceiling on “money judgments for rent of residential premises,” regardless of origin.
The legal ambiguity was not resolved until the U.S. District Court certified precisely this question to the Maryland Court of Appeals in three Chavis-related cases. Slip Op. at 5. Ultimately, the Court of Appeals sided with the tenants and held that the 6% rate applied to judgments for unpaid rent and any other debts arising from a breach of contract based on a residential lease. Ben-Davis v. Blibaum & Assocs., P.A., 457 Md. 228 (2018). This decision was not rendered until after the law firm’s collection activities had begun.
In deciding the case, the Court of Special Appeals first observed that the MCDCA, which prohibits an attempt to enforce a right to collection with the knowledge that the right does not exist, proscribes “certain methods of debt collection and is not a mechanism for attacking the validity of the debt itself.” Slip Op. at 7-8 (citations omitted). Here, the court found, “there is no dispute that [the law firm] had a right to collect … post-judgment interest [and] the only dispute pertains to the amount of … post-judgment interest.” Id. at 10. As a result, “the parties’ legal disagreement — that was ultimately resolved by the Court of Appeals — does not result in a cognizable claim under the MCDCA.” Id. at 10, n.4.
The tenants’ MCPA claim, that using an illegal rate of interest was a deceptive trade practice, failed for essentially the same reason. The law firm “charged the incorrect amount of post-judgment interest based on their interpretation of a novel legal issue … [and] we hold that the [law firm] cannot be liable under the MCPA for asserting a legal position on a novel issue of law, which turned out to be incorrect.” Id. at 15.
The Court decided several other issues in the case, most notably holding that the law firm could recover fees paid to the state court for filing garnishments, and that neither circuit court abused its discretion when denying the tenants’ requests for class certification. Id. at 12. Given the pendency of the related federal actions against the law firm, and the apparent difference of opinion between the state and federal court on the MCDCA claim, the final chapter in this ongoing saga probably has not yet been written.