Judge rules against official

Ruppersberger's firm broke federal debt collection laws

January 05, 2000|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

A federal judge has ruled that the bill collection agency owned by Baltimore County Executive C. A. Dutch Ruppersberger broke federal debt collection laws, leaving the firm liable for thousands of dollars in damage claims.

In a 28-page opinion, Senior Judge Joseph H. Young concluded that Rupp and Associates violated the federal Fair Debt Collection Practices Act when it attempted to collect past-due rent for one of the largest apartment management companies in the region.

The court case centers on the efforts of Rupp to secure payment of rent from Kerry L. Spencer, a former tenant of Lakecrest Apartments in Cockeysville, one of several complexes managed by Hendersen-Webb, a Baltimore County-based apartment company. The company, a long-time client of Ruppersberger's, also participates in a federally funded rental assistance program administered by Baltimore County.

Ruppersberger's firm, a spinoff from a law firm he was formerly associated with, provides bill collection services to several other apartment management firms. Ruppersberger owns 100 percent of the stock, and state records show that his wife, Kay, his sister Carol Norton, and his brother Reese, are officers of the company.

In an interview last night, Ruppersberger said he had little knowledge of the case because he is not involved in the collections company's operations. He said most decisions are handled by a two-person board of directors and an employee who runs the company.

"I've chosen not to get involved in the everyday business to avoid appearances of conflict," Ruppersberger said. "If there's mismanagement, the board of directors will deal with it."

Ruppersberger said he believes the case stems from a technical error made by a part-time employee, apparently referring to Frances Flores, an employee of Rupp and Associates.

Young's ruling issued Dec. 16 occurred after a series of motions filed before trial, which was set to begin next week. Now, the trial will determine the amount of actual damages to be assessed against Rupp and co-defendants Hendersen-Webb, the law firm of Zimlin and Kilberg and Flores. Zimlin and Kilberg was the firm that Rupp hired to pursue Spencer's debt. The trial also will decide whether Hendersen-Webb is liable for alleged violations of state credit reporting laws by Rupp.

Based on his finding of "considerable violations" of federal law, the judge also decided to impose a penalty of $1,000 on all the defendants except for Hendersen-Webb.

Mary DiMaio, the attorney representing Ruppersberger's firm, Flores and the law firm in the case, said yesterday that the decision was not a surprise.

"We had acknowledged months ago that there was a technical, clerical error," said DiMaio.

She said the original Jan. 10 trial date had been postponed and a new date has not been set.

In his ruling, Young granted some of the pretrial motions the defendants sought, noting that no one disputed the fact that Spencer owed rent to Hendersen-Webb when she left the apartment in February 1994.

"The undisputed fact shows that Spencer failed to pay five months rent at $504 per month, for a total of $2,520," the judge wrote in dismissing defamation claims made by Spencer against the defendants. Spencer claimed that she was denied a mortgage because of an adverse credit reporttriggered by Rupp. She seeks $250,000 in compensatory damages and $500,000 in punitive damages.

In his ruling, the judge cited a fax sent by Rupp that claimed Spencer owed not only past due rent but attorney's fees of 15 percent, even though no attorney's fees had been incurred at the time.

"When Flores attempted to collect non-existent attorney's fees on behalf of Hendersen, she violated the Fair Debt Collection Practices Act," Young wrote.

The judge also found that Flores misstated the statute of limitations that applied to the debt, telling Spencer she was liable for the debt for 12 years. In fact, the judge said, the debt had a three-year statute of limitations.

Overall, Young concluded that Ruppersberger's company had failed to take basic steps to ensure that its debt collection efforts complied with federal law.

"To the contrary, the record clearly shows that Rupp's procedures were woefully inadequate in preventing collection of unjustified fees. Indeed, the company's computer program added a 15 percent fee to every account without regard to the agreement or document underlying the debt," he wrote.

Ruppersberger defended adding the attorney's fees to a collection bill as a common industry practice.

"The attorney's fee is not an issue," he said. "It's standard in every contract."

Attorneys for Rupp contended that the problems have subsequently been corrected.

Young, however, wrote that "no reasonable jury could conclude that Rupp employed suitable procedures to prevent its employers from misreporting overdue debts to consumers. Professional debt collectors and their attorneys must be held to be aware of laws affecting the validity of their collection efforts."

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