                  NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 17a0493n.06

                                         Case No. 16-5468

                           UNITED STATES COURT OF APPEALS
                                FOR THE SIXTH CIRCUIT
                                                                                       FILED
                                                                                 Aug 23, 2017
DEDE STRATTON,                                       )                       DEBORAH S. HUNT, Clerk
                                                     )
       Plaintiff-Appellant,                          )
                                                     )       ON APPEAL FROM THE UNITED
v.                                                   )       STATES DISTRICT COURT FOR
                                                     )       THE EASTERN DISTRICT OF
PORTFOLIO RECOVERY ASSOCIATES,                       )       KENTUCKY
LLC,                                                 )
                                                     )
       Defendant-Appellant.                          )
                                                     )
____________________________________/


Before: MERRITT, KETHLEDGE, and WHITE, Circuit Judges.

       MERRITT, Circuit Judge. This is a Fair Debt Collection Practices Act (“Act”) case,

now before us for the second time, brought by a plaintiff debtor, Dede Stratton, against a

defendant debt collection agency, Portfolio Recovery Associates, LLC (“Portfolio”). The only

question before this court is whether Portfolio violated federal law by attempting to collect

prejudgment interest of 8% per annum on a credit card debt in a Kentucky state-court collection

action. Portfolio has not changed its position in its subsequent pleadings or briefs that it was

entitled to collect the original card debt of “$2,630.95, with interest thereon at the rate of 8% per

annum from December 19, 2008 until date of judgment with 12% per annum thereafter until

paid, plus court costs.”
Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


       This case is here for the second time because both parties failed to allege or disclose the

existence of a credit card agreement applying Utah law – a fact disclosed only after we remanded

the case to the district court. Stratton asserts that Kentucky law rather than Utah law applies, and

that Portfolio violated the federal Act by filing a collection action in Kentucky state court for

interest on a credit card debt when it had no right to collect the interest under Kentucky law. To

prove that Portfolio violated the Fair Debt Collection Practices Act, Stratton must prove that

Portfolio was entitled to neither statutory nor contractual interest. Portfolio now argues that the

credit card agreement proves Portfolio’s right to collect statutory interest on the debt under Utah

law. The district court granted Portfolio’s motion for summary judgment on remand, finding that

Utah law applied and that Stratton failed to demonstrate that Portfolio had violated the Act when

it filed the collection action.   Stratton now appeals again, claiming that the district court

improperly relied on a Utah choice-of-law provision in the credit card agreement between

Stratton and her original creditor, GE Money Bank, and that the court should have applied

Kentucky law.

       We conclude that the application of the choice-of-law provision is dispositive in this case.

Utah law applies and Portfolio did not violate the Fair Debt Collection Practices Act. As the

assignee of the right to collect Stratton’s credit card debt, Portfolio received the rights and

obligations arising from Stratton’s original credit card contract, including the right to invoke the

Utah choice-of-law provision. The rights of Portfolio as assignee are subject to all terms of the

agreement between the account debtor and the assignor. Accordingly, the Utah choice-of-law

provision applies, and under Utah law Portfolio was entitled to file a collection action for

prejudgment interest in Kentucky state court without violating the Fair Debt Collection Practices

Act. Since the only question before this court is whether Portfolio violated the Act, we conclude



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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


that the district court properly granted summary judgement to Portfolio. The collection action is

a matter for Kentucky’s Scott County state court.

                              I. Factual and Procedural Background

        In September 2007, Dede Stratton opened a credit card account with GE Money Bank,

F.S.B./Lowes (“GE”). On December 19, 2008, GE “charged off” the account, declaring to the

credit bureaus that it had given up trying to collect Stratton’s unpaid debt. At the time, Stratton’s

debt was $2,630.95, and GE ceased charging interest on it. Before the debt was charged off, the

contractual rate of interest on the debt was set in the Credit Card Agreement at 21.99%.

        Portfolio, a company primarily engaged in the business of purchasing debt from creditors

and collecting those debts, purchased Stratton’s $2,630.95 credit card debt from GE on January

4, 2010. More than two years later on January 20, 2012, Portfolio filed a collection action in

Kentucky to collect the debt from Stratton. Importantly, Portfolio alleged in the collection action

complaint that Stratton owed $2,630.95 with interest “at the rate of 8% per annum from

December 19, 2008 until date of judgment with 12% per annum thereafter until paid, plus court

costs.” (emphasis added).1 Kentucky sets the legal statutory rate of interest on loans at 8%.

Ky. Rev. Stat. § 360.010(1). Stratton then sued Portfolio in federal court under the Fair Debt

Collections Practice Act. Stratton argued that since GE had previously “waived” its right to

collect interest, Portfolio, as GE’s assignee, did not inherit a right to collect any interest.

She asserted that Portfolio’s collection action violated the Fair Debt Collections Practice Act by:

(1) pursuing a collection action that was not “expressly authorized by the agreement creating the

debt or permitted by law” in violation of 15 U.S.C. § 1692(f)(1), (2) falsely representing the




1
 At the time of the collection action, Kentucky law allowed for 12% post-judgment interest. Ky. Rev. Stat. §
360.040.

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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


character of the debt under 15 U.S.C. § 1692(e)(2)(A), and (3) illegally “threat[ening]” Stratton

with the state court action under 15 U.S.C. § 1692(e)(5).

         Portfolio filed a 12(b)(6) motion to dismiss Stratton’s claim, and the district court granted

the dismissal. But this court reversed, holding that Stratton had alleged a plausible claim for

relief. See Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 451 (6th Cir. 2014). The

decision held that under Kentucky law, prejudgment statutory interest rates are waived where the

parties are bound to a contractual interest rate, and that GE and Stratton had a binding

contractual rate. See id. at 447. When GE allegedly waived the contractual interest rate, it could

not revive a right to collect statutory interest.2 See id. at 447–48. Consequently, under Kentucky

law GE’s assignee, Portfolio, also had no right to statutory interest. See id. at 448. Since under

Kentucky law Portfolio had illegally attempted to collect the interest, we found that Stratton had

plausibly alleged that Portfolio had violated the Fair Debt Collection Practices Act. See id. at

452.

         However, when the Sixth Circuit remanded the case to the district court we noted that,

“[i]t may be that the discovery process could reveal some contractual provision that entitles

[Portfolio] to collect some sort of interest.” Id. at 448. The case is before this court again

because Portfolio has found such a provision. During discovery on remand, Portfolio obtained

the original Credit Card Agreement between GE and Stratton and amended its Answer to

Stratton’s complaint to include the Agreement. Portfolio claimed that a Utah choice-of-law

provision in the Agreement changes the outcome of the case in its favor. Portfolio distinguished

2
  When we first heard this case in 2014, Portfolio conceded for the purposes of that appeal that GE Bank waived the
right to collect interest at the contractually agreed upon rate of 21.99%, leaving only the issue of statutory interest.
See Stratton, 770 F.3d at 447. Portfolio does not make that concession during this current appeal. However,
whether the right to contractual interest was waived does not impact the outcome of this appeal, since we hold that
under Utah law, unlike under Kentucky law, Portfolio’s right to collect prejudgment statutory interest was
preserved. Portfolio attempted to collect interest at 8% per annum – below the authorized Utah statutory rate and
the contractual rate. Accordingly, as long as Portfolio has either a statutory or a contractual right to interest, it did
not violate the Fair Debt Collection Practices Act.

                                                         -4-
Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


the Utah language from the language in the Kentucky code, claiming that the Utah language

allows a creditor (or debt collector) to collect statutory interest even if the right to collect

contractual interest is established and then waived. See U.C.A. § 15-1-1.

       After Portfolio produced the Credit Card Agreement, both parties moved for summary

judgment before the district court.     Stratton also filed a motion to strike the Credit Card

Agreement from the record. The district court again found for Portfolio, dismissing Stratton’s

claim. The court held that the original Credit Card Agreement between GE and Stratton was

admissible evidence and that the Agreement applies Utah law to GE’s assignee, Portfolio. The

court also found that Utah law permits Portfolio to pursue statutory interest in lieu of contractual

interest. Since Stratton must prove Portfolio was entitled to neither statutory nor contractual

interest to prove her federal Fair Debt Collection Practices Act claim, Stratton’s claim failed in

its entirety and was dismissed.

       Stratton again appeals, arguing that: (1) Portfolio is judicially estopped from arguing that

Utah law applies; (2) the Credit Card Agreement is hearsay that should not have been admitted;

(3) Portfolio did not acquire GE’s contractual rights under the Credit Card Agreement, only the

right to collect Stratton’s debt; (4) since the Credit Card Agreement’s choice-of-law provision

does not apply, Kentucky law, not Utah law, governs whether the right to collect statutory

interest was waived; (5) under Kentucky law, Portfolio had no right to collect the statutory or

contractual interest and therefore violated the Fair Debt Collection Practices Act; and (6) the

bona fide error defense does not protect Portfolio.




                                               -5-
Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


                                           II. Analysis

                        A. Admissibility of the Credit Card Agreement

       At the district court on remand, Portfolio entered the original Credit Card Agreement

between GE and Stratton into evidence through the Business Records Exception to the hearsay

rule. Stratton contests the admissibility of this Agreement. Federal Rule of Evidence 803(6)

states the following exception to the rule against hearsay:

       A record, of an act, event, condition, opinion, or diagnosis if: (A) the record was
       made at or near the time by – or from information transmitted by – someone with
       knowledge; (B) the record was kept in the course of a regularly conducted
       business, organization, occupation, or calling, whether or not for profit;
       (C) making the record was a regular practice of that activity; (D) all these
       conditions are shown by the testimony of the custodian or another qualified
       witness, or by a certification that complies with Rule 902(11) or (12) or with a
       statute permitting certification; and (E) the opponent does not show that the
       source of information or the method of circumstances of preparation indicate a
       lack of trustworthiness.

Fed. R. Evid. 803(6).

       The document at issue is a ten page credit card contract that does not contain Stratton’s

name, but does contain a branch designation number (C822) matching at least one of the other

documents in Stratton’s account-records. The document also states the undisputed contractual

interest rate of 21.99 %. Portfolio supplemented this Credit Card Agreement with an affidavit by

Portfolio’s Senior Vice President of Core Operations, Tara Privette.            Privette attested to

Portfolio’s debt purchasing process, whereby some documents associated with the accounts are

transmitted directly from banks to Portfolio, while others are held by the bank until Portfolio

requests them. After Stratton, who no longer had her copy of the Agreement, submitted a

discovery request to Portfolio, Portfolio sent a request to GE for a copy of Stratton’s Agreement

pursuant to Portfolio’s practice with GE. GE obliged, and Privette verified that the document

was consistent with the rest of the records applicable to Stratton’s account.

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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


       The district court did not abuse its discretion in admitting the Credit Card Agreement.

See United States v. McDaniel, 398 F.3d 540, 544 (6th Cir. 2005). Stratton fails to make

convincing arguments why this Credit Card Agreement is an unreliable record of her contract

with GE. The agreement is not a document “prepared specifically for use in litigation.” See

Melendez-Diaz v. Massachussets, 557 U.S. 305, 321 (2009). Nor is there any specific reason to

doubt that the document was properly integrated into Portfolio’s records.          See Air Land

Forwarders, Inc. v. United States, 172 F.3d 1338, 1343 (Fed. Cir. 1999).

       The affidavit by Privette is sufficient to establish her reliability as a custodian of the

Credit Card Agreement. See United States v. Jenkins, 345 F.3d 928, 935 (6th Cir. 2003) (“[The]

information must be presented through the ‘testimony of the custodian or other qualified

witness[.]’”) (quoting Fed. R. Evid. 803(6)). Privette attested to the routine procedures followed

in obtaining a document from an original creditor and the document transfer process specifically

between GE and Portfolio. The business records exception does not require that a custodian

have personal knowledge, but only that she “be familiar with the company’s recordkeeping

practices.” See Fambrough v. Wal-Mart Stores, Inc., 611 F. App’x 322, 328 (6th Cir. 2015).

While Privette did not create the document, she is familiar with Portfolio’s record-keeping

practices and qualifies as a custodian of the records in Stratton’s account. See id. Further, she

attested that she requested and received the contract from GE. Accordingly, the district court

properly admitted the Agreement.

                        B. Assignment of Stratton’s Debt to Portfolio

       While the Credit Card Agreement is admissible, there is also disagreement between the

parties whether GE’s contractual rights and obligations under the Agreement transferred to

Portfolio. As a preliminary matter neither party is estopped from making arguments concerning



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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


whether Portfolio has rights under the Credit Card Agreement. See New Hampshire v. Maine,

532 U.S. 742, 750 (2001) (“several factors typically inform the decision whether to apply the

[judicial estoppel] doctrine . . . a party’s later position must be clearly inconsistent with its earlier

position”) (internal quotation marks omitted). At prior litigation stages the Agreement had not

yet been found, and so no arguments concerning the rights under the Agreement and its choice-

of-law provision were “inconsistent.” See Engel v. Buchan, 791 F. Supp. 2d 604, 608 (N.D. Ill.

2011).    Since neither party had an opportunity to affirmatively litigate those issues until

discovery, permitting the parties to make the arguments now does not threaten the “integrity of

the judicial process” by allowing arguments in bad faith. See Edwards v. Aetna Life Ins. Co.,

690 F.2d 595, 598 (6th Cir. 1982).

         Stratton claims that Portfolio cannot rely on the original Credit Card Agreement because

Portfolio did not acquire GE’s contractual rights in the Credit Card Agreement when it bought

Stratton’s debt.     Specifically, Stratton argues that Portfolio purchased the “receivables,”

associated with Stratton’s account but not the “account” itself. In support of this position

Stratton references the “Bill of Sale” between GE and Portfolio and the corresponding “Forward

Flow Receivables Purchase Agreement.” The Bill of Sale between GE and Portfolio for the debt

reads in relevant part:

         For value received and in further consideration of the mutual covenants and
         conditions set forth in the Forward Flow Receivables Purchase Agreement (the
         “Agreement”), dated this 28th day of August, 2009 by and between General
         Electric . . . (collectively “Seller”) Portfolio Recovery Associates, LLC (“Buyer”),
         Seller hereby transfers, sells, conveys, grants, and delivers to Buyer, its successors
         and assigns, without recourse except as set forth in the Agreement, to the extent of
         its ownership, the Receivables as set forth in the Notification Files (as defined in
         the Agreement), delivered by Seller to Buyer . . . .

(emphasis added). The Bill of Sale also came with a “Forward Flow Receivables Purchase

Agreement” between GE and Portfolio that defines “receivable” and “account” separately,

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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


defining “receivables” in a circular manner as “any retail credit card receivable relating to an

unsecured credit card account owned by Seller that is being sold to Buyer pursuant to the terms

of this Agreement,” and “account” as “any retail credit card account owned by Seller with

respect to which there is a [r]eceivable.” Because the agreements refer only to the transfer of

“the [r]eceivables,” Stratton argues that we should interpret “receivable” according to its plain

meaning.    Stratton asserts that we should look to Black’s Law Dictionary, which defines

“receivable” as “an amount owed, esp. by a business’s customer.” BLACK’S LAW DICTIONARY

(10th ed. 2014).

       It is clear that Portfolio is an assignee of GE for the purpose of collecting the debt. The

rights of assignees are generally subject to all the terms of an agreement between the debtor and

the assignor unless explicitly limited in the agreement. See U.C.C. § 9-404 (“the rights of an

assignee are subject to all terms of the agreement between the account debtor and assignor and

any defense or claim in recoupment arising from the transaction that gave rise to the contract”);

KRS 355.9-404; see also Martin v. Cavalry SPV I, LLC, 2014 WL 1338702 at *6 (E.D. Ky.

March 31, 2014). Stratton’s original Credit Card Agreement with GE states, “[w]e may sell,

assign or transfer any of our rights or obligations under this Agreement or your Account.” The

Forward Flow Agreement between GE and Portfolio states that “Seller shall sell and Buyer shall

buy all right, title and interest in and to the Receivables. . . .” GE’s rights, title, and interest in

and to the Receivables included the Utah choice-of-law provision. That is, if GE was seeking to

collect the amount owed by Stratton, it would be entitled to the benefits of Utah law. We

therefore conclude that Portfolio now stands in GE’s shoes as an assignee of the right to collect

Stratton’s debt. See Restatement (Second) of Contracts § 325 cmt. a (1981) (“The creditor

typically delivers to the assignee a written instrument addressed to the debtor directing the debtor



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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


to pay all or part of the debt to the assignee. . . The writing is an assignment.”) (emphasis

added).

          Since Stratton’s signed contract with GE is the basis of her debt, and is therefore the basis

of her claim against Portfolio, the rights and obligations of that contract should continue with the

assignment. See Sears, Roebuck & Co. v. Lea, 198 F.2d 1012, 1015 (6th Cir. 1952). Stratton

cannot pick and choose which provisions of that contract are enforceable.              See id.   GE’s

contractual rights and obligations under the Credit Card Agreement transferred to Portfolio.

                                          C. Choice of Law

          Due to Portfolio’s status as GE Bank’s assignee, the choice-of-law provision in Stratton’s

Credit Card Agreement with GE was assigned to Portfolio. The Agreement’s Utah choice-of-

law provision states in relevant part:

          This Agreement and your Account and any claim, dispute or controversy arising
          from or relating to this Agreement or your Account, whether based on contract,
          tort, fraud and other intentional torts, statute, common law, and/or equity, are
          governed by and construed in accordance with federal law, and to the extent that
          state law applies, the laws of the State of Utah (without regard to internal
          principles of conflicts of law). The legality, enforceability and interpretation of
          this agreement and the amounts contracted for, charged and received under this
          Agreement will be governed by such laws. This Agreement is entered into
          between you and us in Utah. . . .

          Whether Portfolio was entitled to request prejudgment interest from Stratton is an issue

of substantive law, and therefore an issue to be decided under the laws of the state designated in

the contract’s choice-of-law provision. See Miller Truck Lines, LLC v. Central Refrigerated

Serv., Inc. 781 F. Supp 2d 488, 497 (W.D. Ky. 2011). Kentucky follows the Restatement

(Second) of Conflict of Laws, which says that the law of the state chosen by the parties to govern

their contractual rights and duties will be applied, unless “the chosen state has no substantial

relationship to the parties or the transaction” or “application of the law of the chosen state would



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Case No. 16-5468, Stratton v. Portfolio Recovery Assocs., LLC


be contrary to a fundamental public policy[.]” Restatement (Second) of Conflict of Laws §

187(2) (1971). The first exception does not apply because GE had Utah citizenship at the time of

contracting – a clear substantial relationship to the state. As for the public policy exception, the

Kentucky Supreme Court has held that absent a “clear and certain statement of strong public

policy in controlling laws or judicial precedent” the decision of the contracting parties must be

respected. See State Farm Mut. Auto. Ins. Co. v. Hodgkiss-Warrick, 413 S.W.3d 875, 880 (Ky.

2013). Here, Stratton advances no well-defined or dominant public policy that invalidates the

choice-of-law provision. Since neither exception is applicable, the Utah choice-of-law provision

applies to the dispute in this case.

                                   D. Fair Debt Collection Practices Act

         The Fair Debt Collection Practices Act provides, in effect, that there would be a violation

of federal law if Portfolio’s attempt to collect interest was unauthorized under Utah law.3 At oral

argument, Stratton’s counsel frankly admitted that “[their] brief does not articulate a path to

victory under Utah law,” and that they would be “in a world of hurt if Utah law applies.” As this

case effectively hinges on whether Utah law or Kentucky law applies, the contractual Utah

choice-of-law provision settles this matter. Since all of the alleged violations are contingent on

whether Portfolio was authorized to collect the claimed interest under Utah law, all of Stratton’s

claims necessarily fail. We AFFIRM.




3
  The Fair Debt Collection Practices Act states that a debt collector may not falsely represent “the character, amount,
or legal status of any debt,” may not threaten “to take any action that cannot legally be taken” (such as an illegal
state court collection action), or to collect interest “unless such amount is expressly authorized by the agreement
creating the debt or permitted by law.” See 15 USC §§ 1692(e)(2)(A), 1692(e)(5), 1692(f)(1).

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