E.D. Pa.: Proper Forum for Collection Lawsuit is Where Plaintiff Resides or Signs Contract Despite Contract's Language

In a recent case, the Eastern District of Pennsylvania looked into the issue where a collection lawsuit against a consumer should be filed. In Dixon v. J. Scott Watson, P.C., No. 17-cv-5236 (E.D. Pa. Aug. 28, 2018), the court denied reconsideration of its decision that filing a collection lawsuit in Pennsylvania when it is neither the location of plaintiff’s residence nor where plaintiff was located when he signed the agreement violates the Fair Debt Collection Practices Act (FDCPA).

Factual and Procedural Background

Drexel University accepted plaintiff as a student, sending the offer of admission to plaintiff’s residence in Virginia. To complete the admissions process, Plaintiff logged onto the university’s online system and electronically agreed to the school’s Tuition Repayment Agreement. The agreement states, "I understand that once I am registered for course(s) and/or participating in the Cooperative Education Program at Drexel University, I become solely responsible for payment of the resulting tuition, fees, and any other balances." The online system marked plaintiff’s location at the time of signature as Virginia. Plaintiff's future log ons into the online system were from Pennsylvania.

Plaintiff signed up for classes in Pennsylvania, but eventually withdrew from the university with an unpaid tuition bill. The university filed a breach of contract action against plaintiff in the Court of Common Pleas in Philadelphia, where plaintiff did not reside at the time of filing. Plaintiff filed a motion objecting to the forum in which the suit was filed (also known as “forum non conveniens”). The court denied this motion without providing reasoning for its decision.

The case proceeded to trial, where the court found that plaintiff was bound by the Tuition Repayment Agreement, However,the court made no reference as to where the agreement was signed.

After some other procedural steps in the state court action, plaintiff filed a FDCPA case against J. Scott Watson, P.C. (“JSW”), Drexel’s debt collector, in federal court for allegedly failing to comply with 1692i by filing the collection action in the wrong state. The court granted plaintiff’s motion for summary judgment. JSW moved for the court to reconsider its ruling.

The Decision

The court found that its decision granting of plaintiff’s motion for summary judgment should stand. In its decision, the court primarily focused on where the contract was signed rather the substance of the contract.

Among other things, JSW argued that the issue of forum non conveniens was previously litigated in the underlying state court action and thus was not allowed to be re-litigated. In reviewing this argument, the court looked at the evidence evaluated by the state court. Since the state court did not provide a reason for its denial of the forum non conveniens motion, it was of little help. However, the court noted that at trial, the only issue decided by the court was that plaintiff signed the agreement, not where plaintiff signed the agreement. Nor was there any indication that the state court took section 1692i of the FDCPA into consideration when making its decision. Due to this, the court found that this specific issue has not previously been litigated.

As to the proper forum for filing a collection suit, the court turned to the text of the FDCPA. Section 1692i states that a debt collector shall bring an action “only in a judicial district or similar legal entity… in which such customer signed the contract sued upon, or in which such consumer resides at the commencement of the action.” Since plaintiff neither resided in nor signed the contract while he was in Pennsylvania, the court found that its grant of summary judgment to plaintiff should stand.

insideARM Perspective

One interesting thing here is the language of the Tuition Repayment Agreement itself. The agreement states, "I understand that once I am registered for course(s) and/or participating in the Cooperative Education Program at Drexel University, I become solely responsible for payment of the resulting tuition, fees, and any other balances." (Emphasis added.). This language seems to indicate that the obligation to repay tuition does not occur until you sign up for classes, which plaintiff here did in Pennsylvalnia. The court did not take this into consideration even though it was the language that the plaintiff agreed to.