11th Cir. Says Insurance Subrogation Claims Not Subject to FDCPA Because No “Transaction”

In Parham v. Seattle Service Bureau, Inc., 2016 WL 4039665, at *3 (11th Cir. 2016), the Court of Appeals found debt collection in connection with insurance subrogation claims was exempt from the FDCPA.

Our decision in Hawthorne squarely controls the outcome in this case. Like Andrew Parham’s sister, the plaintiff in Hawthorne was involved in an automobile accident, allegedly resulting from the plaintiff’s negligence. 140 F.3d at 1369. Like Seattle Service, a company in Hawthorne subsequently attempted to collect a claim from the plaintiff, which the company alleged arose from the automobile accident and was due to the plaintiff’s negligence. Id. And like Parham, the plaintiff in Hawthorne filed an action against the company seeking relief under the FDCPA. Id.    This Court determined that “the FDCPA may be triggered only when an obligation to pay arises out of a specified ‘transaction’ ” within the meaning of the statute. Id. at 1371. We noted that the word “ ‘transaction’ necessarily implies some type of business dealing between parties” and referred to “consensual or contractual arrangements, not damage obligations thrust upon one as a result of no more than her own negligence.” Id. We explained that “the fact that [the company] may have entered into a contract with the insurer for subrogation rights does not change the fact that no contract, business, or consensual arrangement between Hawthorne and the damaged party, its insurer, or [the company] exists.” Id. Since the claim the company sought to collect was not a “specified transaction,” we held that the FDCPA did not apply. Id. (quotation marks omitted). As further support for our holding, we explained that the statute’s “language further limits application of the FDCPA to debts arising from consumer transactions” and noted that the debt at issue “[did] not arise out of a consumer transaction; it ar[ose] from a tort.”    Here, it is undisputed that Seattle Service sought to collect an alleged debt from Andrew and Leahana Parham that purportedly arose as a result of Leahana’s negligence in the January 10, 2013 automobile accident, presumably the same accident in which Leahana bumped Garrison’s car. If anything, the alleged debt arose from a tort, not from a consensual, contractual, or consumer transaction within the meaning of the FDCPA. Thus, the district court properly dismissed Parham’s FDCPA claims.