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NATIONAL UNION FIRE INS. CO. v. HARTEL

August 6, 1990

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA. AND D'AMATO & LYNCH, PLAINTIFFS,
v.
STEPHEN HARTEL, DEFENDANT.



The opinion of the court was delivered by: Stanton, District Judge.

MEMORANDUM AND ORDER

Defendant Stephen Hartel invested $100,000 in a tax-shelter limited partnership which was formed to purchase and operate hotels and motels. He paid for his partnership interest with a cash payment of $6,670 and promissory notes for $93,330. Hartel signed the promissory notes in Louisiana, where he resides. The partnership negotiated the promissory notes to a bank, to secure a loan of working capital to the partnership. Plaintiff National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union") issued a bond which guaranteed, to the partnership and to the bank, that Hartel would make all of the capital contributions represented by his promissory notes to the partnership. In return for guaranteeing Hartel's notes, National Union required him to execute an indemnity agreement in which he agreed to reimburse National Union for any payments it made on the notes to the bank on his behalf.

Hartel stopped making his required contributions, and National Union made them on his behalf. National Union commenced an action (the "reimbursement action"), No. 88 Civ. 4768 (S.D.N.Y.) (LLS), seeking reimbursement under the indemnity agreement Hartel gave National Union when it guaranteed his payments, and as subrogee on the notes on which he had defaulted. Since an issue arose whether the filing of the reimbursement action violated the venue provision of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692-1692m, National Union and D'Amato & Lynch, the law firm representing National Union in the reimbursement action (and many others), commenced this action, seeking a declaratory judgment that they had not violated the FDCPA.

Both sides have moved for summary judgment.

The Issue

Section 1692i(a)(2) of the FDCPA provides that any debt collector who brings any legal action on a debt against any consumer shall

  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.

The question presented is whether that section applies, to require the filing of the reimbursement action in Louisiana, rather than New York.

Discussion

Defendant's motion is denied, and plaintiffs' motions are granted.

The promissory notes signed by Hartel are not a "debt" within the meaning of section 1692a(5) of the FDCPA, which defines a debt as

  any obligation or alleged obligation of a consumer
  to pay money arising out of a transaction in which
  the money, property, insurance, or services which
  are the subject of the transaction are primarily
  for personal, family, or household purposes,
 ...

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