The Fair Debt Collection Practices Act (FDCPA); 15 USC §§ 1692e(2), 1692e(5), & 1692e(10); Wallace v. Washington Mut. Bank, F.A.; Whittiker v. Deutsche Bank Nat’l Trust Co. (ND OH); Whether a debt collection (foreclosure) action was a “compulsory” or a “permissive” counterclaim to the plaintiffs’ FDCPA lawsuit; Fed.R.Civ.P. 13(a)(1); Kane v. Magna Mixer Co.; Whigham v. Beneficial Fin. Co. of Fayetteville, Inc. (4th Cir.); Sanders v. First Nat’l Bank & Trust Co. in Great Bend; Whether the claims arose out of “the same transaction or occurrence”; Maddox v. Kentucky Fin. Co.; Truth in Lending Act (TILA) case precedent

The court held that the defendant-bank’s failure to bring a debt collection action as a counterclaim to the plaintiffs-Baumans’ prior FDCPA lawsuit did not waive its ability to sue for foreclosure in the future. The defendants prevailed in the FDCPA case, and the plaintiffs brought the current case, seeking to bar the defendants from bringing a future foreclosure action, and to quiet title. Even though the court had not “squarely addressed whether a counterclaim to collect the underlying debt is compulsory in a FDCPA action,” it looked to cases holding that “a counterclaim on the underlying debt” in a TILA action “is permissive rather than compulsory.” A “counterclaim on the underlying debt is not logically related to a TILA claim.” The plaintiffs could not establish that the foreclosure action was a compulsory counterclaim to the FDCPA action because they could not “show that the two claims ‘arise’ out of the same transaction or occurrence.” Their FDCPA claim involved different issues of law from a foreclosure action, and the fact issues of their FDCPA claims and a foreclosure action were not “‘largely the same.’” The court concluded that “the same policy reasons that compelled” it to “find that a counterclaim on the underlying debt in a TILA action is permissive support a similar holding here.” Finally, while the plaintiffs argued that the district court analyzed their complaint under an impermissible legal standard, the documents they provided to the district court created “an adequate basis to determine that the issues of fact and law presented in the FDCPA action are not ‘largely the same’ as those required to support a foreclosure claim.” The court affirmed the district court’s decision granting the defendants’ motion to dismiss.