The order, arising from a dispute between Citibank and its former debt collection law firm partner, was filed June 29 in South Dakota’s U.S. District Court and contains helpful takeaways regarding contracts.
07/07/2023 1:30 P.M.
2 minute read
A South Dakota federal judge partially awarded summary judgment to Citibank against a debt collection law firm’s claims that it was owed for work the firm did for the bank.
Last month, U.S. District Judge Lawrence Piersol for the Southern District of South Dakota granted partial summary judgment to Citibank, which is the defendant in the case, on claims brought by Faloni & Associates LLC that it performed collection and legal work on certain second mortgage accounts that Citibank placed with Faloni but later recalled.
Background
Citibank retained the law firm to collect delinquent mortgage accounts for a contingent fee. The accounts were placed with the law firm pursuant to the signed agreement for collection work.
However, the law firm claimed that Citibank later changed the relationship between the parties by requiring the firm to litigate the files and provide information on the accounts to qualify them for credit against Citibank’s National Mortgage Settlement fine.
Faloni also contended that Citibank never revealed to Faloni that it would recall hundreds of accounts and forgive the debt on those accounts in order to obtain relief under the National Mortgage Settlement.
Faloni sought relief for work on the second mortgage accounts Citibank received credit for in the National Mortgage Settlement.
Faloni told the court that “Jere Taylor of Citibank told our office that we would be paid all commissions going forward including any work done for second mortgages.”
The Ruling
In rejecting the law firm’s claim that it should be paid for services provided that were outside the scope of the parties’ agreement, the court noted that a promise-to-pay statement allegedly made by Jere Taylor was “simply too vague and indefinite to constitute a ‘promise’ for purposes of promissory estoppel.”
The court granted Citibank’s motion for summary judgment as to the promissory estoppel claim but denied the quantum meruit and unjust enrichment claims.
“Questions of fact exist regarding whether Citibank requested additional services outside the scope of the parties’ [a]greement, and thus whether Faloni expected payment for the alleged extracontractual services provided by Faloni,” according to the court.
It denied Faloni’s motion for summary judgment.
The court noted that its function at the summary judgment stage is not “to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial.”
ACA’s Take
This order can serve as a reminder for debt collection agencies to have their contracts with creditors contemplate the scope of work and various types of cancellations as well as how the parties will get paid under each scenario.
Read Faloni & Associates LLC v. Citibank here.
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