Summary
holding that plaintiff's FDCPA claim was not precluded under New Jersey's Entire Controversy Doctrine even though plaintiff failed to raise this claim in a prior state court collection suit
Summary of this case from Etheresa Torsiello by Vincent Torsiello Ex'r v. Mcgovern Legal Servs., LLCOpinion
02-CV-3928 (JG)
December 31, 2002
LAWRENCE KATZ, Katz Kleinman, Uniondale, New York, Attorneys for Plaintiff.
NATHANIEL Z. MARMUR, Stillman Friedmam, P.C., New York, New York, Attorneys for Defendant.
MEMORANDUM AND ORDER
Plaintiff Ibrahim R. Ekinici claims that GNOC, Corporation ("GNOC") violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (the "FDCPA"), when it sent him a collection letter in 2001. GNOC moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) on the grounds that: (1) Ekinici failed to raise this claim when GNOC sued him in state court to collect his debt; and (2) GNOC was collecting its own debt and therefore is not a "debt collector" within the meaning of the FDCPA. For the reasons set forth below, the motion is denied. Ekinici is not precluded from suing GNOC for violations of the FDCPA due to the prior proceeding against him in state court, and it is not sufficiently clear that the letter, when viewed from the perspective of the least sophisticated consumer at this stage in the proceedings, came from GNOC as opposed to a debt collector.
BACKGROUND
Ekinici ran up a $5,000 debt at GNOC's Atlantic City Hilton Casino Resort (the "Hilton"). On August 24, 2001, GNOC sent a letter (the "letter") to Ekinici seeking payment of the debt. The letterhead identified the author in large bold type as:
N. Lynne Hughes Attorney At Law Boston and Pacific Avenues Atlantic City, New Jersey 08401 hughesnl@ballys.com
The letter stated that Hughes was "counsel to the Atlantic City Hilton in Atlantic City, New Jersey" and that Ekinici's account had been "forwarded to [Hughes's) office for resolution" of Ekinici's $5,000 debt. The letter stated that Ekinici should consider the letter "as a final request that [he] forward the full payment" of his debt "to Atlantic City Hilton or GNOC, Corporation, " but it also offered that Ekinici could arrange installment payments with "the Atlantic City Hilton's Collections Department." If Ekinici did not respond within 30 days, either by making payment or arranging for installments, Hughes would assume that Ekinici did not wish to resolve the matter "amicably" and would "take the appropriate legal action to collect the amount due and protect the rights of Atlantic City Hilton." The letter was signed by Hughes as "Assistant Vice President" and "Corporate Counsel." At the bottom of the letter, in italics and fine print, there appeared the standard FDCPA validation notice. See 15 U.S.C. § 1692g(a).
Ekinici did not respond to Hughes's letter. On November 9, 2001, GNOC sued Ekinici in New Jersey state court to recover the debt. Def.'s Mot., Ex. B. Ekinici was served on March 6, 2002 id., but he did not answer the complaint, and GNOC obtained a default judgment against him on June 27, 2002. Def.'s Mot., Ex. C. A few days later, Ekinici filed this action.
DISCUSSION
A. The Motion to Dismiss Standard
A federal court's task in determining the sufficiency of a complaint is "necessarily a limited one." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The appropriate inquiry is not whether the plaintiff might ultimately prevail on his claim, but whether he is even entitled to offer any evidence in support of the allegations in his complaint. Id. Federal Rule of Civil Procedure 12(b)(6) warrants dismissal of a complaint only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Conley v. Gibson, 355 U.S. 41, 45-46 (1957). I must accept as true all the factual allegations in the complaint and must draw all reasonable inferences in favor of the plaintiff. See Hamilton Chapter of Alpha Delta Phi. Inc. v. Hamilton Coll., 128 F.3d 59, 62-63 (2d Cir. 1997).
B. Ekinici's Claim and GNOC's Motion to Dismiss
Ekinici's complaint broadly alleges that GNOC violated the FDCPA by making threats and false representations in the letter and by employing a name other than its own. GNOC moves to dismiss because: (1) Ekinici failed to raise this claim when GNOC sued him in state court to collect his debt; and (2) GNOC was collecting its own debt and therefore is not a "debt collector" within the meaning of the FDCPA.
1. GNOC's Claim That Ekinici's FDCPA Claim Is Precluded By the State Court Judgment
GNOC claims that Ekinici's claim is barred because of New Jersey's "entire controversy" doctrine, a claim preclusion doctrine that applies in state and federal actions following New Jersey judgments. See Rycoline Prods., Inc., v. C W Unlimited, 109 F.3d 883, 886-87 (3d Cir. 1997). Under New Jersey law, "the entire controversy doctrine encompasses `virtually all causes, claims, and defenses relating to a controversy' and requires, "at a minimum," that all parties to a suit bring all affirmative claims, counterclaims, cross-claims, and defenses out of the underlying controversy. Oliver v. Ambrose, 705 A.2d 742, 747 (N.J. 1998) (quotations and citations omitted). New Jersey courts invoking the doctrine have made clear that it is the core set of facts that provides the link between distinct claims against the same parties and triggers the requirement that they be determined in one proceeding." Id. Nevertheless, application of the doctrine is "flexible" and "discretionary" and should be guided by the "polestar" of "judicial fairness." Rycoline Prods, Inc., 109 F.3d at 886 (citations and quotations omitted).
GNOC's contention that the state court proceeding and the FDCPA claim comprise the same controversy arising from the same set of facts goes too far. I do not believe that a New Jersey court would find that the prior default judgment would bar Ekinici's FDCPA claim because the two claims arise from different controversies and different sets of core facts. GNOC's default judgment was based on Ekinici's activities at the Hilton that culminated in his $5,000 debt. Ekinici's FDCPA claim is based solely on the wording of the dunning letter, an event later in time and different in kind. See Whitaker v. Ameritech Corporation, 129 F.3d 952, 957-58 (7th Cir. 1997) (applying Illinois's principles of res judicata and rejecting claim that prior default judgment on debt prevented debtor from bringing FDCPA claim because "debt attachment and debt collection are matters separated by time and purpose"); see also Alger v. Ganick, O'Brien Sarin, 35 F. Supp.2d 148, 160 n. 20 (D.Mass. 1999) (dismissing without comment argument that default judgment bars FDCPA action).
The Second Circuit's decision in Kropelnicki v. Siegel, 290 F.3d 118, 123-24 (2d Cir. 2002), does not require a different result. In that case, the debtor/plaintiff claimed that a lawyer acting on behalf of the creditor had violated the FDCPA when the lawyer told the debtor that the lawyer would not initiate legal proceedings against the debtor and then subsequently obtained a default judgment against the debtor in state court. After the default judgment, the debtor moved to reopen the state court judgment, and the Second Circuit was unaware of the outcome of that motion. Id. at 125. The court invoked, sua sponte, the Rooker-Feldman doctrine to bar plaintiffs FDCPA claim because it was "inextricably intertwined with the state court default judgment and the motion to vacate it" and "the plaintiff had ample opportunity to raise [it] before the state court." Id. at 129.
Unlike the plaintiffs claim in Kropelnicki, Ekinici's claim here is not "inextricably intertwined with the merits of the state court judgment" and does not call into question whether that "state court judgment was erroneously entered or was void." Id. Rather, Ekinici is bringing a separate claim based on a separate set of facts. There is no respect in which a judgment favorable to plaintiff in this case would, in effect, reverse or otherwise call into question defendant's default judgment in state court.
2. GNOC's Claim That It Is Not a "Debt Collector" Under the FDCPA
GNOC claims that Ekinici's complaint must be dismissed for the additional reason that the letter clearly identifies Hughes as an employee of GNOC, and GNOC cannot be considered a "debt collector" under the FDCPA. Generally, debt collectors, not creditors, are subject to the FDCPA, but a creditor seeking to collect its own debts can violate the FDCPA if it disguises its name and essentially leaves the impression that a third party is collecting its debt. See 15 U.S.C. § 1692a(6);Maguire v. Citicorp Retail Servs., Inc., 147 F.3d 232, 235 (2d Cir. 1998). In evaluating whether a creditor has violated the FDCPA, courts must review all communications with the debtor from the perspective of the "least sophisticated consumer," and determine whether such a consumer would be left with "the false impression that a third party was collecting the debt." Id. at 236.
GNOC claims that, although the letter's letterhead does not state that Hughes worked for GNOC or the Hilton, even the least sophisticated consumer could tell that Hughes worked for GNOC because: (1) her address in the letterhead is the same as the casino where Ekinici gambled; (2) her email address in the letterhead, which ends with "ballys.com," signifies that Hughes "is part of Hilton's family of casinos," Def.'s Mem. at 9; (3) the letter tells Ekinici to make her check out to GNOC or to the Hilton, or to make arrangements with the Hilton's Collections Department; and (5) the signature line identifies Hughes as "Assistant Vice President" and "Corporate Counsel," which are "obviously not titles that would be used by an outside collection attorney." Id. at 10. For support, GNOC relies on Karp v. Siegel, 1998 WL 314769 (S.D.N.Y. 1998).
I reject this claim as well. Given the early stage in the proceedings and general obfuscation in the letter, I cannot conclude as a matter of law that the least sophisticated consumer would not have been misled by the letter. At best, the letter, standing alone, is contradictory. The letterhead does not clearly identify Hughes as an employee of GNOC or the Hilton; instead, it says Hughes is just an "Attorney at Law." The first sentence states Hughes is "counsel to" the Hilton, and the second sentence states that Ekinici's "account ha[d] been forwarded to Hughes's office," leaving the impression that her office was somehow different from GNOC's or the Hilton's. Rather than referring to GNOC or the Hilton informally or using first-person pronouns to convey that Hughes was an employee there, the letter consistently refers to GNOC and the Hilton formally and as external, unrelated entities. Perhaps the signature's tag line might lead an attorney to believe that Hughes worked with, and not for, GNOC or the Hilton as an assistant vice president and corporate counsel, but an unsophisticated consumer could scarcely be expected to draw that inference. That Hughes shared the same mailing address as the casino is hardly dispositive; the argument based on the email address borders on the frivolous.
GNOC's reliance on Karp is misplaced. In Karp, a dispute over whether an in-house lawyer's letter subjected American Express to the FDCPA, the district court granted summary judgment to American Express because the contested letter's letterhead and stationery clearly identified the lawyer as an American Express employee and because the prior communication between the lawyer and the debtor confirmed this. Id. at *4. A better analogy, at least for now, is Maguire, where the Second Circuit reversed a district court judge's grant of summary judgment in favor of the creditor because it found that neither the contested letter, which contained a misleading letterhead, nor prior correspondence between the debtor and creditor, which was virtually nonexistent, could "establish, or even suggest" to the "least sophisticated consumer" that the letter originated with the creditor. 147 F.3d at 236. If the Second Circuit could not conclude as a matter of law that summary judgment in favor of the creditor was warranted in Maguire, I cannot grant GNOC's motion here under the even more demanding standard applicable on a motion to dismiss.
CONCLUSION
For the foregoing reasons, GNOC's motion is denied.