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denying defendant summary judgment on defendant's bona fide error defense based on evidence of "numerous errors and violations of the FDCPA"
Summary of this case from Strom v. National Enterprise Systems, Inc.Opinion
00 Civ. 7836 (HB)
March 16, 2004
OPINION ORDER
On October 16, 2003, Magistrate Judge Ronald L. Ellis issued a report and recommendation ("RR") with respect to plaintiff's motion for partial summary judgment on his various claims under the Fair Debt Collection Practices Act and defendant's cross-motion for summary judgment. Magistrate Judge Ellis recommended that most of the claims asserted in defendant's cross-motion be denied and that most of the claims asserted in plaintiffs motion for partial summary judgment be granted. The parties subsequently filed objections to Magistrate Judge Ellis' RR. For the following reasons, plaintiffs motion is granted in part and denied in part and defendant's cross-motion is granted in part and denied in part.
The parties also attempted unsuccessfully to resolve the dispute through mediation.
I. BACKGROUND
A. Facts
The basic facts in this matter are generally not in dispute. On September 15, 1999, a check in the amount of $337.50 bearing the name and address of plaintiff Chris Johnson ("plaintiff' or "Johnson") was accepted by a Bloomingdale's store for the purchase of merchandise. (Deposition of Chris Johnson ("Johnson Dep.") Exhibit ("Ex.") 6.) The check was returned by the bank unpaid, and subsequently forwarded to defendant Equifax Risk Management Services ("defendant" or "Equifax"). On or about October 14, 1999, Equifax sent a letter to Johnson demanding payment of $357.50, including $337.50 for the unpaid check and a $20 service charge. (Johnson Dep. Ex. 1 at 1.) On October 22, 1999, Johnson, who is an attorney, mailed a letter to Equifax in which he asserted that he had not written the check to Bloomingdale's, and that Bloomingdale's had been defrauded. (Johnson Dep. Ex. 2.) On October 29, 1999, Equifax sent two letters to Johnson, one that requested full payment for the dishonored check, (Johnson Dep. Ex. 3 at 1), and another that acknowledged Johnson's claim of forgery and required that he complete, sign, and notarize an enclosed "Affidavit of Forgery" to confirm that he had not written nor authorized anyone else to write the check, (Johnson Dep. Ex. 4 at 1.) Johnson did not complete and return this "Affidavit of Forgery." (Johnson Dep. Ex. 3; Gordon Aff. Ex. B.)
The correct spelling of this department store is "Bloomingdale's," although all correspondence in this case that mentions the store refers to it as "Bloomingdales."
This letter did not indicate the location of the Bloomingdale's store.
The Equifax letter in its entirety is as follows:
Creditor: Bloomingdales
Balance Due: $357.50
This letter is to inform you that your check #009254 written to Bloomingdales on 09-15-99 has been returned unpaid due to OTHER (CHK NOT PRESENTED). Equifax Risk Management Services (Equifax) has been assigned to collect the balance and a $20.00 Service Charge our client imposes for all returned checks. All further communication regarding this check should be with Equifax.
Information regarding the check has been recorded in Equifax Check Services['] negative file, whose check authorization services are used by tens of thousands of retail establishments across the United States and Canada as a basis for check acceptance. Payment of your balance will restore your check writing privileges.
You will need to make full payment, including the applicable Service Charge, to Equifax. We suggest payment by Western Union or Moneygram for same day wire service or U.S. Postal Express Mail for next day mail service.
Federal law gives you thirty (30) days after you receive this letter to dispute the validity of the debt or any part of it. If you don't dispute it within that period, we will assume that it is valid. If you do dispute it and you notify us in writing to that effect, we will, as required by law, obtain and mail to you proof of the debt. And if within the same period, you request in writing the name and address of the merchant to whom your check was written, we will provide that information, too. Write to us at P.O. Box 30586, Tampa, F1 [sic] 33630-3586 for any of the above reasons. The law does not require us to wait until the end of the 30-day period before taking action to collect the debt If, however, you request proof of the debt or the name and address of the merchant to whom you wrote your check within the 30-day period that begins with your receipt of this letter, the law requires us to suspend our efforts to collect the debt until we mail the requested information to you.
This communication is from a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.
To discuss this account, please call:
Customer Service 1-800-543-5076 (Johnson Dep. Ex. 1 at 1.)
This letter was accompanied by a second page that provided notice of legal rights under certain state laws. (Id. at 2.)
The text of the Johnson letter (without salutations or enclosures) is as follows:
I write in response to your letter to me, dated October 14, 1999, addressed to "Christopher Johnson" at "118 West 83rd St.", New York, New York, a copy of which I enclose herewith for your reference.
I did not write the check to Bloomingdales that you refer to, nor have I or anyone else ever written any check on my checking account to Bloomingdales. Bloomingdales has obviously been defrauded by the same person who passed phony checks to numerous other retailers in different cities in New Jersey and Pennsylvania during the latter half of September.
My understanding is that all of the half-dozen or so checks were drawn on a fictitious Chase Manhattan account. The person who perpetrated this fraud apparently knows no more about me than can be gleaned by looking up my name in the 1999 Manhattan Yellow Pages under "Lawyers", which would explain why the checks list only me street address, without my apartment number.
Please provide me with the name and address of this and any other merchants who have been similarly victimized, as well as photocopies of the check or checks and any identification documents and information presented by this miscreant at the time and point of sale.
(Johnson Dep. Ex. 2.)
This letter from Equifax in its entirety is as follows:
Creditor Bloomingdales
Balance Due: $357.50
Despite a previous written notice, you have failed to make full payment on your $337.50 dishonored check written to Bloomingdales nearly 6 weeks ago. Your check was returned as a dishonored item and has been assigned to our Collection personnel to determine appropriate actions by Equifax Risk Management Services that will result in payment of this check.
Information regarding the check has already been recorded in Equifax Check Services['] negative file, whose check authorization services are used by tens of thousands of retail establishments across the United States and Canada as a basis for check acceptance. Payment of your balance will restore your check writing privileges.
You can stop this process by sending your payment in full, including the Service Charge referenced below, to Equifax along with the bottom portion of this letter.
This communication is from a debt collector, this is an attempt to collect a debt and any information obtained will be used for that purpose.
(Johnson Dep. Ex. 4 at 1.)
This letter was accompanied by a second page that provided notice of legal rights under certain state laws. (Id. at 2.)
On November 2, 1999, Johnson wrote to Equifax and asked it to respond to the requests he made in his prior letter, including the identity of the bank on which the contested check was drawn. (Johnson Dep. Ex. 5.) Further, Johnson asked Equifax to respond to these requests in writing, to "not communicate with [him] again for any other purpose," and that Equifax "honor [its] legal obligations under the Fair Debt Collection Practices Act" (Johnson Dep. Ex. 5.) On November 11, 1999, Johnson received a fax with a cover page from "FACS Fax Financial and Credit Services, Return Check Department," Bloomingdale's in-house credit and collection unit. (Johnson Dep. Ex. 6.) Attached to the fax was a copy of the returned check used in the transaction with Bloomingdale's; the check was drawn on an account at Chase in the name of Christopher Johnson, and includes his address. This fax also contained an "Affidavit of Forged Signature," which plaintiff again did not sign and return.
On November 15, 1999, Equifax again sent two letters to Johnson, (Johnson Dep. Ex. 7 at 1; Ex. 8 at 1.) In one, it requested payment for the "dishonored check" in question, referred to "repeated requests and notifications," and asserted that Johnson "seemingly elected to ignore [his] original obligation." Further, this letter again informed Johnson of the suspension of his check writing privileges at tens of thousands of merchants nationwide. The second letter was an affidavit of forgery, identical to the one sent on October 29. On December 10, 1999, and December 24, 1999, Equifax mailed additional affidavits of forgery to Johnson; Johnson responded to neither one. (Johnson Dep. Ex. 9; Ex. 10.)
On October 13, 2000, Johnson filed this lawsuit. In his motion for partial summary judgment, Johnson claimed that: (1) the October 14 and 29 letters "overshadow" and contradict the validation notice required by Title 15 U.S.C. § 1692g; (2) the October 14 and 29 letters were false, deceptive, and misleading, in violation of Title 15 U.S.C. § 1692e in that they contradicted the validation notice, led him to believe that his October 22 letter was ineffective, failed to inform Johnson that his dispute would be shared with users of Equifax's "negative file," and this was a more onerous requirement to dispute the debt than required by statute; (3) the two collection letters and four affidavits of forgery that Equifax mailed after it received Johnson's October 22 letter violated Title 15 U.S.C. § 1692g(b); (4) that each of the collection letters and three affidavits of forgery sent after it received Johnson's November 2 letter violated Title 15 U.S.C. § 1692c(c). Johnson further argued that he was entitled to the maximum amount of statutory damages. In its cross-motion, Equifax made the opposite contention with respect to each of Johnson's four contentions regarding statutory violations and claimed in addition that any violations Equifax may have committed were unintentional and the result of bona fide error, thereby precluding liability. In addition, Equifax contended that Johnson was hot entitled to any actual and statutory damages.
Defendant notes that it promptly made an offer of judgment, pursuant to Federal Rule of Civil Procedure 68, of $1,000 based on the "[recognition] that it might have some technical liability for having sent the October 29 collection letter." (Defendant's Objections to Magistrate's Report and Recommendation ("Def. Obj.")at 5 n. 5.)
B. Magistrate Judge Ellis' RR
Magistrate Judge Ellis concluded that Equifax violated several provisions of the Fair Debt Collection Practices Act and he therefore recommended that plaintiff's motion for partial summary judgment be granted in part and denied in part and that defendant's motion for summary judgment be granted in part and denied in part. Specifically, Magistrate Judge Ellis concluded that: (1) the October 14 and October 29 collection letters overshadowed or contradicted the validation notice and as such, violated Title 15 U.S.C. § 1962g; (2) the October 14 and October 29 collection letters were false, deceptive, or misleading and as such, violated Title 15 U.S.C. § 1692e; (3) the October 29 affidavit of forgery was false, deceptive, or misleading and violated Title 15 U.S.C. § 1692e because, in conjunction with the October 29 collection letter, it created confusion; (4) because the October 29 and November 15 collection letters were sent at a time when Equifax was obligated to cease debt collection, they were in violation of Title 15 U.S.C. § 1692g(b); (5) the collection letters and affidavits of forgery sent after November 2 were sent at a time when Equifax was obligated to have ceased communication with Johnson and as such, violated of Title 15 U.S.C. § 1692c(c); and (6) that these violations were not the result of bona fide error, such that Equifax would be shielded from liability pursuant to Title 15 U.S.C. § 1692k(c). Johnson v. Equifax Credit Info. Svcs., Inc., No. 00 Civ. 7836 (HB)(RLE), 2003 U.S. Dist. LEXIS 18705, at *23-*24 (S.D.N.Y. Oct. 16, 2003). Magistrate Judge Ellis recommended that Johnson be awarded the maximum amount of statutory damages — $1,000 for all violations — and that the amount of actual damages be presented at a trial. Id. at *24.
The relevant provision is:
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
Title 15 U.S.C. § 1692g(b).
Title 15 U.S.C. § 1692e provides: "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." It that sets out a non-exclusive list of 16 examples of conduct that violates this provision.
Magistrate Judge Ellis rejected plaintiff's contention that this affidavit of forgery violated Title 15 U.S.C. § 1692e to the extent it imposed a more onerous requirement for disputing a debt than required in the statute. Johnson objects to this aspect of Magistrate, Judge Ell is' RR.
Magistrate Judge Ellis concluded that the affidavits of forgery sent after Johnson disputed the debt were not in violation of Title 15 U.S.C. § 1692g(b). Johnson does not object to this recommendation.
Each side filed objections to the RR. Johnson objected to Magistrate Judge Ellis' conclusion that the affidavit of forgery that Equifax sent on October 29 violated Title 15 U.S.C. § 1692e only to the extent that, in conjunction with the October 29 collection letter, it created confusion. Specifically, Johnson contends that this letter violated § 1692e in a second respect, namely that it communicated a more onerous requirement for disputing a debt — i.e., submitting an affidavit — than is required by the statute and thus was deceptive or misleading.
The substantive part of the standardized affidavit of forgery that Equifax sent Johnson on four occasions is as follows:
Affiant after being duly sworn by me to tell the, truth, states that he/she did not sign, nor did he/she authorize anyone to sign check number ___ drawn on ___ (Financial Institution), ___ (Address) in the amount 0f ___ payable to ___. Affiant further deposes and says that he/she received rib `benefit or value from the proceeds of said check, and no part thereof was applied to any use or purpose in the Affiant's behalf.' Affiant further deposes and says that to the best of his/her knowledge the following check(s) have been stolen #___ through #___ and #___ through #___.
Equifax asserted eight objections to the RR. Equifax contended that summary judgment should not have been granted to plaintiff, but instead summary judgment should have been granted to Equifax on the following grounds: (1) the October 14 and October 29 collection letters did not violate Title 15 U.S.C. § 1692g; (2) the October 14 and October 29 collection letters did not violate Title 15 U.S.C. § 1692e; (3) the October 29 affidavit of forgery did not violate Title 15 U.S.C. § 1692e; (4) the collection letters and affidavits of forgery did not violate Title 15 U.S.C. § 1692g(b); (5) the post-November collection letters and affidavits of forgery did not violate Title 15 U.S.C. § 1692c(c); (6) Equifax's bona fide error defense precluded any finding of liability; (7) Johnson was not entitled to actual damages; and (8) Johnson was not entitled to statutory damages.
After Equifax received Johnson's letter of October 22 in which he disputed the debt, Equifax mailed six more letters, two of which were collection letters (dated October 29 and November 15) and four of which were affidavits of forgery (dated October 29, November 15, December 10, and December 24).
II. DISCUSSION
Those recommendations by Magistrate Judge Ellis to which the parties interpose objections are reviewed de novo. Fed.R.Civ.P. 72(b); 28 U.S.C. § 636(b)(1); United States v. Raddatz, 447 U.S. 667, 673 (1980).
A. Plaintiffs Objections
Magistrate Judge Ellis found that the October 29 affidavit of forgery violated Title 15 U.S.C. § 1692e because, in combination with the October 29 collection letter, it created confusion and therefore was false, deceptive, or misleading. In his objections, Johnson argued that the October 29 affidavit of forgery violated Title 15 U.S.C. § 1693e in a second respect, in that it communicated a more onerous requirement for disputing debt than required by statute. I agree with Magistrate Judge Ellis' conclusion that this affidavit of forgery would have actually aided Johnson in furtherance of his goal and therefore did not impose a more onerous requirement than required by statute. As Equifax argued, the affidavits of forgery were simply a tool to investigate a disputed check, and, in fact, the preliminary sentence in Equifax's affidavit of forgery correspondence reads, "We acknowledge your claim of forgery.'" (Defendant's Response to Plaintiffs Objections to Magistrate's Report and Recommendation ("Def. Obj.") at 2.) Therefore, even though I may not need to address plaintiffs contention, Mauro v. Southern New England Telecomm., Inc., 208 F.3d 384, 386 n. 1 (2d Cir. 2000) (affirming district court's refusal to consider claims raised for the first time in summary judgment), I find that it is without merit and Magistrate Judge Ellis properly rejected plaintiffs second ground for finding that the October 29 affidavit of forgery violated Title 15 U.S.C. § 1693e.
It is unclear as to why Johnson advanced this argument solely with respect to the October 29 affidavit of forgery and not the November 15 affidavit of forgery, which was also sent in conjunction with a collection letter from Equifax. The two other affidavits of forgery sent by Equifax were not accompanied by a collection letter.
Equifax also contended that this claim was not raised in Johnson's Amended Complaint and therefore could not be raised in his summary judgment motion. (Def. Obj. at 2.)
B. Defendant's Objections
Equifax raised eight objections to the RR, which I will addressseriatim. 1. The October 14 and October 29 Collection Letters Violated Title 15 U.S.C. § 1692g
As noted, Magistrate Judge Ellis concluded that the October 14 and 29 letters "overshadowed" and contradicted the validation notice required by Title 15 U.S.C. § 1692g. Specifically, with respect to the October 14 collection letter, he found that "[s]imultaneously, Equifax gave Johnson a thirty-day notice to dispute the validity of the debt, yet told him that he would have to pay the full amount in order to restore his good standing and creditworthiness." Johnson, 2003 U.S. Dist. LEXIS 18705, at *12-*13. He further explained:
Equifax violated the statute when it suggested to Johnson that it would not cooperate, that is, it would not restore his check cashing privileges until he paid the disputed amount. Notifying him of the opportunity to dispute the validity of the debt in question, while exacting penalties against him for failure to pay the disputed debt, Equifax sent confusing and conflicting messages to Johnson. This would lead the least sophisticated consumer to believe that he had no choice but to pay the debt.Id. at *13-*14 (citing Desantis v. Roz-Ber, Inc., 51 F. Supp.2d 244 (E.D.N.Y. 1999)). With respect to the October 29 letter, Magistrate Judge Ellis found it violated Title 15 U.S.C. § 1692g because it failed to inform Johnson of the validation process and gave the impression that only immediate payment could avoid adverse action by Equifax because it did not address the letter Johnson sent on October 22. Id. at *14-*15. Defendant contends that the validation notice in the October 14 letter closely tracked language approved by the Seventh Circuit in Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997) and thus does not "overshadow" or contradict the validation notice required by the statute. Equifax further contends that it is entitled to summary judgment because the October 14 collection letter lacked any of the common features that cause overshadowing, such as a reference to a deadline that appears to conflict with the thirty days a consumer has to dispute a debt or the use of different typefaces or font sizes to obscure the validation notice.Lerner v. Forster, 240 F. Supp.2d 233, 240 (E.D.N.Y. 2003) (collecting cases).
Title 15 U.S.C. § 1692g requires that the initial collection letter inform the consumer of certain information, including the amount of the debt, the name of the creditor, "a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector," and "a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer." Title 15 U.S.C. § 1692g(a). In short, Title 15 U.S.C. § 1692g requires the debt collector to inform the consumer of his right to dispute and demand verification of the debt. Even where a collection letter contains the requisite validation notice, it nevertheless violates the FDCPA if it contains language that overshadows or contradicts other language that informs the consumer of his or her rights. Savino v. Computer Credit, Inc., 164 F.3d 81, 85 (2d Cir. 1998). The Second Circuit evaluates whether a dunning letter violates Title 15 U.S.C. § 1692g from the perspective of the least sophisticated consumer. Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993) (adopting the least sophisticated consumer standard for all cases under Title 15 U.S.C. § 1692e). However, it also applies this standard "in a manner that protects debt collectors against liability for unreasonable misinterpretations of collection notices." Miller v. Wolpoff Abramson, L.L.P., 321 F.3d 292, 310 (2d Cir. 2003) (quoting Clomon, 988 F.2d at 1319).
The fact that plaintiff is an attorney does not alter the application of the objective "least sophisticated consumer" standard in this case. As the Second Circuit observed in Clomon v. Jackson, "the basic purpose of the least-sophisticated-consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd," and that this standard "carefully preserves the concept of reasonableness." 988 F.2d 1314, 1318, 1319 (2d Cir. 1993).
As an initial matter, defendant's heavy reliance on Bartlett is misplaced. Defendant contends that "[i]n the instant case, Equifax's validation notice followsBartlett to the letter[, and t]his alone entitles Equifax to summary judgment on plaintiffs overshadowing claim." (Def. Obj. at 7-8 (citingLerner, 240 F. Supp.2d 233).) However, the case that Equifax cites for the proposition that its use of language endorsed in Bartlett entitles it to summary judgment on this issue in fact stands for a contrary proposition. Lerner instructs that the proper analysis is not how well a debt collector copied two paragraphs from Judge Posner's suggested dunning letter, but rather whether the debt collector included other language that overshadowed this paragraph. Lerner, 240 F. Supp.2d at 237 ("The main question this Court must consider is whether the language in the second paragraph of the Letter `overshadowed' or `contradicted' the language in the third paragraph."); see also id. at 239 ("The language contained in the second paragraph of the Bartlett letter is notably similar to that in the second paragraph of the Letter in this case."). That Equifax included a portion of Judge Posner's suggested language is irrelevant to whether other language it wrote in its collection letter overshadowed this proper validation notice. Magistrate Judge Ellis therefore correctly focused on whether other language in the October 14 collection letter would confuse the reasonable least sophisticated consumer, notwithstanding a proper validation notice.
As defendant notes, Chief Judge Posner in Bartlett sought to provide guidance on how to comply with the statute without forcing the debt collector to conceal his intent to exploit his right to resort to legal action — i.e., to eliminate the confusion often engendered by the failure to explain how the debt collector's right to demand payment within 30 days and the consumer's right to demand verification fit together. Bartlett, 128 F.3d at 500-02.
In Lerner, Judge Spatt rejected plaintiff's contention that the collection letter at issue there contained language that overshadowed a proper validation notice and granted defendants' motion for summary judgment. Plaintiff there claimed that the letter misled her because it appeared to restrict her options to two — i.e., either to pay the debt or directly contact the creditor (rather than the debt collector, in which case the protections of the FDCPA would not be triggered). Lerner, 240 F. Supp.2d at 236.
For this same reason, Equifax's contention that any violation of § 1692g was a bona fide error because of its reliance on Bartlett's "safe harbor" language is without merit.
As defendant notes, the October 14 letter lacked the features that have caused courts to find overshadowing violations. For example, the validation notice is in the same typeface and size as the rest of the letter (with minor exceptions); it does not contain any deadlines that might appear to conflict with the thirty-day period for the consumer to dispute the debt, nor any other ominous language such as "immediate payment" of "immediate attention." What concerned Magistrate Judge Ellis, however, was the letter's assertion that the check had been reported to Equifax's negative file and that Johnson's check cashing privileges would be restored when the debt was paid. I share Magistrate Judge Ellis' concern that the least sophisticated consumer might reasonably believe that repayment, and repayment only, would restore the debtor's check-writing privileges, which had already been revoked as a penalty for the unpaid check. Although communicated without any visual legerdemain, the threat here is quite palpable, and Magistrate Judge Ellis was correct to conclude that the failure to clarify whether the consumer could restore his check writing privileges by any other means than payment would confuse the reasonable least sophisticated consumer.
Although the letter did not say "immediate payment," it clearly implied that a timely response was important by suggesting that the consumer wire the money or send it by overnight mail.
This portion of the letter reads: "Information regarding the check has been recorded in Equifax's Check Services['] file, whose check authorization services are used by tens of thousands of retail establishments across the United States and Canada as a basis for check acceptance. Payment of your balance will restore your check writing privileges." (Johnson Dep. Ex. 1 at 1.)
Finally, I am unpersuaded by defendant's attempt to distinguishDesantis, upon which Magistrate Judge Ellis relied. In Desantis, the court found that although the letter contained the requisite validation notice (in the same font size, on the same page, and preceded with the words, "IMPORTANT NOTIFICATION"), the letter also contained language that overshadowed this validation notice. 51 F. Supp.2d at 250. Significant was the fact that the phrase "IMMEDIATE ATTENTION" above the paragraph which demanded payment was "threatening in nature" and "obvious[ly] inten[ded] to evoke immediate payment from the debtor." Id. Moreover, the letter there suggested to the consumer that the debt collector would not cooperate with the consumer if he or she did not remit payment or make arrangements for payment. Id. Although Equifax here did not threaten to withhold cooperation absent payment, its letter, as discussed above, appears to have threatened plainitff. Id. Accordingly, I agree with Magistrate Judge Ellis that the October 14 letter overshadowed or contradicted the validation notice, in violation of Title 15 U.S.C. § 1692g.
With respect to Magistrate Judge Ellis' recommendation that the October 29 letter also violated Title 15 U.S.C. § 1692g because it "failed to inform Johnson of the validation process and gave him the impression that only immediate payment could avoid adverse action by Equifax," Johnson, 2003 U.S. Dist. LEXIS 18705, at *15-*16, defendant objects on the basis that the law does not require debt collectors to provide a second validation notice and that this letter does not use the words "immediate payment" or contain any deadlines. Defendant correctly notes that Title 15 U.S.C. § 1692g requires the debt collector to include the validation notice in the initial communication or within five days thereof, Title 15 U.S.C. § 1692g(a), and there is no dispute that Equifax complied with this provision. Thus, Equifax's failure to include the validation notice in the October 29 letter did not violate Title 15 U.S.C. § 1692g. However, I agree with Magistrate Judge Ellis that the failure to include this notice, in conjunction with the fact that this letter did not address Johnson's October 22 letter which disputed the debt and which therefore should have caused Equifax to cease debt collection, overshadowed and contradicted the validation notice in that it gave the impression that only immediate payment could avoid adverse action by Equifax. Equifax contends that the case that Magistrate Judge Ellis relied on, Barrientos v. Law Offices of Mark L. Nichter, 76 F. Supp.2d 510 (S.D.N.Y. 1999), is distinguishable on the basis that its October 29 collection letter did not include any deadlines or dates by which payment was required. This argument misses the point, as it was the mere sending of this letter — which Equifax concedes was in error — that would appear to the least sophisticated consumer to be in conflict with the rights required by the FDCPA. 2. The October 14 and October 29 Collection Letters Violated Title 15 U.S.C. § 1692e
The case that Equifax relies on, Orenbuch v. Computer Credit Inc., 2002 WL 1918222 (S.D.N.Y. Aug. 19, 2002), is distinguishable. There the debt collector'sent a second notice after the consumer failed to respond to its first collection letter. Unlike in that case, Johnson received this second collection letter even though he had sent a letter disputing the debt.
Title 15 U.S.C. § 1692e prohibits a debt collector from "us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt." The statute provides a non-exhaustive list of sixteen examples of conduct that violates this provision, including that it is illegal to use "any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Title 15 U.S.C. § 1692e(10). Johnson proposed four reasons that these two letters were "false, deceptive, or misleading," two of which Magistrate Judge Ellis accepted and two of which he rejected. The two that Magistrate Judge Ellis accepted and which Equifax challenges here are that: (1) the October 14 and October 29 collection letters contradict the validation notice; and (2) the October 29 collection letter led Johnson to believe that his October 22 letter was ineffective. Johnson, 2003 U.S. Dist. LEXIS 18705, at * 15.
Magistrate Judge Ellis rejected Johnson's contention that the October 29 letter violated Title 15 U.S.C. § 1692e in that: (1) it did not inform Johnson that Equifax was obligated to advise users of Equifax's negative file that Johnson disputed the debt; and (2) that the October 29 affidavit of forgery — which was sent separately from the October 29 collection letter — was an attempt to impose a more onerous requirement for disputing a debt than is statutorily required.Johnson, 2003 U.S. Dist. LEXIS 18705, at *16-*17.
Magistrate Judge Ellis' concluded that the October 14 and October 29 collection letters violated Title 15 U.S.C. § 1692e(10) for substantially the same reasons that they were found to violate Title 15 U.S.C. § 1692g, namely that they were ambiguous. Id. at *15-*16 (quoting Barrientos, 76 F. Supp.2d at 513, and Russell 74 F.3d at 35). Because I conclude that Equifax's October 14 letter contained language that created an ambiguity that overshadowed or contradicted the statutorily required validation notice, it follows that the October 14 letter was false, misleading or deceptive, in violation of Title 15 U.S.C. § 1692e.
Magistrate Judge Ellis also found that Equifax's October 29 letter violated Title 15 U.S.C. § 1692e because it imparted the impression that Johnson's letter of October 22 disputing the debt was ineffective — i.e., for the same reason he found that it violated Title 15 U.S.C. § 1692g. Johnson, 2003 U.S. Dist. LEXIS 18705, at *16. Equifax objects on the basis that because it sent the affidavit of forgery on the same day that it sent a letter that acknowledged his dispute, it is not clear how Johnson would be misled. I disagree with Equifax that the fact that it sent the affidavit of forgery which acknowledged its receipt of Johnson's October 22 letter on the same day that it sent the second collection letter eliminates any confusion about the October 29 collection letter. To the contrary, this affidavit of forgery, if anything, increases the chance that a least sophisticated consumer would believe that his or her dispute of the debt was ineffective, as Equifax on the same day sent one letter which indicated it had received the dispute and a second letter which continued to attempt to collect the debt, in blatant violation of the law and the representation made in the first collection letter. I adopt Magistrate Judge Ellis' conclusion that the October 29 letter violated Title 15 U.S.C. § 1692e because it created the impression that Johnson's dispute of the debt was ineffective.
Equifax also argues that Johnson complained bitterly about the October 29 affidavit of forgery in his correspondence with Equifax, but said nothing about the October 29 collection letter. This argument is beside the point, as the FDCPA strictly imposes liability for violations of the statute, without regard to whether the consumer was actually confused. Russell v. Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996) ("Because the Act imposes strict liability, a consumer need not show intentional conduct by the debt collector to be entitled to damages.").
3. The October 29 Affidavit of Forgery Violated Title 15 U.S.C. § 1692e
Magistrate Judge Ellis rejected Equifax's claim in its cross-motion for summary judgment that the October 29 affidavit of forgery did not violate Title 15 U.S.C. § 1692e. Johnson, 2003 U.S. Dist. LEXIS 18705, at *22-*23. Magistrate Judge Ellis concluded that although the affidavit of forgery was not a more onerous requirement than provided by statute, Id. at * 17, this affidavit "was false, misleading, and deceptive within the meaning of Section 1692e, particularly in combination with the October 29 collection letter demanding full payment as a condition for restoring Johnson's good standing." Id. at *22-*23. Equifax objects to this conclusion on the basis that the October 29 collection letter cannot be taken into consideration in any determination of whether the October 29 affidavit of forgery violated Title 15 U.S.C. § 1692e because the collection letter was a mistake and thus Equifax is protected from liability by the bona-fide error defense of Title 15 U.S.C. § 1692k(c). (Def. Obj. at 15.) Equifax also contends that each letter stands on its own and that there is nothing inherently false, deceptive, or misleading on the face of the October 29 affidavit of forgery.
Magistrate Judge Ellis concluded that although Equifax was required to inform any person to whom it communicated about this debt that the debt was disputed, Title 15 U.S.C. § 1692e(8) ("Communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed.")* Equifax was not required to inform Johnson of this obligation. Johnson, 2003 U.S. Dist LEXIS 18705, at *17 (quoting Miller, 321 F.3d at 311).
As discussed above, I agree with Magistrate Judge Ellis and adopt his recommendation that although the October 29 affidavit of forgery may not on its face have contained any false, deceptive, or misleading representation, that in the sequence of events it was deceptive or misleading means in connection with the collection of a debt. Title 15 U.S.C. § 1692e (prohibiting the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt"). As discussed below, defendant is not entitled to summary judgment on its contention that the October 29 letter was a bona fide error for which liability is precluded.
4. The Collection Letters and Affidavits of Forgery Violated Title 15 U.S.C. § 1692g(b)
Magistrate Judge Ellis agreed with Johnson's claim that the two collection letters, dated October 29 and November 15, sent after Johnson sent his October 22 letter violated Title 15 U.S.C. § 1692g(b), which requires a debt collector to cease collection of the debt if the consumer notifies the debt collector that the debt is disputed or requests information about the original creditor until the debt collector provides verification of the debt or the requested information. Magistrate Judge Ellis rejected Johnson's claim that the four affidavits of forgery also violated Title 15 U.S.C. § 1692g(b), as he found that these were not attempts to collect a debt, but rather, were Equifax's attempts to facilitate disputation of the debt. Johnson, 2003 U.S. Dist. LEXIS 18705, at * 19. Equifax concedes that the October 29 letter violated Title 15 U.S.C. § 1692g(b), but asserts that it was sent as a result of a bona fide error for which Equifax cannot be held liable. Equifax contends that the November 15 collection letter did not violate Title 15 U.S.C. § 1692g(b) because it was sent after Equifax transmitted verification of the debt (in the form of a copy of the check) on November 11. While Equifax is correct that it transmitted verification of the debt, the record here indicates that Equifax never provided the payee's address, which Johnson requested in his October 22 letter and which Equifax was thereafter obligated to provide before it resumed debt collection. Title 15 U.S.C. § 1692g(b). Although Equifax informed Johnson of the name of the original creditor — i.e., Bloomingdale's — in its three collection letters, it never provided an address of the Bloomingdale's store where this check was tendered or any other address for Bloomingdale's. Thus, as Magistrate Judge Ellis found, Equifax resumed its debt collection before it provided the information that it was obligated to provide Johnson, in response to his request, in violation of Title 15 U.S.C. § 1692g(b).
5. The Post-November Collection Letters and Affidavits of Forgery Violated Title 15 U.S.C. § 1692c(c)
On November 2, Johnson sent Equifax a letter in which he stated: "Please respond in writing to the requests that I made in my earlier letter, and do not communicate with me again for any other purpose." Magistrate Judge Ellis concluded that at that point Equifax was required to cease communications with Johnson with respect to the debt, pursuant to Title 15 U.S.C. § 1692c(c), which prevents a debt collector from further communicating with a consumer who indicates in writing his or her refusal to pay the debt or who requests the cessation of further communications. Magistrate Judge Ellis therefore recommended that the two collection letters and the three affidavits of forgery that Equifax sent after it received Johnson's October 22 letter violated Title 15 U.S.C. § 1692c(c). Equifax contends that plaintiff improperly seeks to have it both ways — i.e., that these letters were both refusals to pay pursuant to Title 15 U.S.C. § 1692c(c), which prevented any further communication, and demands for verification pursuant to Title 15 U.S.C. § 1692g(b), which required further communication. Equifax argues that the copy of the disputed check that it mailed to Johnson on November 11 illustrates the absurdity of plaintiffs position because this verification was simultaneously in fulfillment of its obligation under Title 15 U.S.C. § 1692g(b) and in violation of Title 15 U.S.C. § 1692c(c). (Def. Obj. at 17.) Equifax also argues that these letters were not requests to cease all communications-especially since they specifically requested that Equifax provide the information about the original creditor and verification of the debt — and that in fact they served to dictate the terms of the communications.
Magistrate Judge Ellis incorrectly ascribed this sentence to Johnson's October 22 letter. Although arguably Johnson's October 22 letter triggered Title 15 U.S.C. § 1692c(c) to the extent that it notified Equifax of Johnson's refusal to pay, see infra note 25, Magistrate Judge Ellis clearly intended that Equifax's obligation to cease communication originated in Johnson's November 2 letter, which unequivocally requested an end to further communication and thus plainly implicated Title 15 U.S.C. § 1692c(c).
This provision is as follows:
If a consumer notifies a debt collector in writing that the consumer refuses to pay a debt or that the consumer wishes the debt collector to cease further communication with the consumer, the debt collector shall not communicate further with the consumer with respect to such debt, except —
(1) to advise the consumer that the debt collector's further efforts are being terminated;
(2) to notify the consumer that the debt collector or creditor may invoke specified remedies which are ordinarily invoked by such debt collector or creditor, or
(3) where applicable, to notify the consumer that the debt collector or creditor intends to invoke a specified remedy.
Equifax's argument that Johnson seeks to have it both ways is unpersuasive. Johnson's November 2 letter is unequivocally a cease-and-desist letter, which triggered Title 15 U.S.C. § 1692c(c) and for which Equifax was liable for all subsequent communications that did not fit within the exceptions enumerated in the statute. In his November 2 letter, he clearly states his desire that Equifax not communicate for any purpose other than to provide the information he previously requested but had not yet been provided. There is nothing "absurd" about this request that would relieve Equifax of its statutory obligation to cease communication. Indeed, Johnson's request that Equifax send only the information that he previously requested is entirely sensible. Accordingly, as Magistrate Judge Ellis found, the collection letter Equifax sent on November 15 and the three affidavits of forgery it sent after November 2 (on November 15, December 10, and December 24) violated Title 15 U.S.C. § 1692c(c).
6. Summary Judgment Is Denied to Equifax on Its Bona Fide Error Defense
A debt collector may not be held liable if it can demonstrate by a preponderance of the evidence that its "Violation [of the Fair Debt Collection Practices Act] was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid any such errors." Title 15 U.S.C. § 1692k(c). Equifax reasserts its contention that it is entitled to summary judgment on its bona fide error defense on two grounds: First, with respect to its initial collection letter of October 14, Equifax contends that because it relied on the "safe harbor" language approved in Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997), any "overshadowing" violation was unintentional. As discussed above, see supra II.B. 1, Equifax's contention that its reliance on the language endorsed by Chief Judge Posner in Bartlett entitles Equifax to summary judgment on the basis that any violation was a bona fide error for which it cannot be liable is without merit.
Second, Equifax contends that it is entitled to summary judgment with respect to its claim that the October 29 letter was a bona fide error for which it cannot be held liable for violating Title 15 U.S.C. § 1692g(b). Magistrate Judge Ellis rejected Equifax's bona fide error defense on the basis that its procedures were clearly inadequate given the numerous errors and violations of the FDCPA. Johnson, 2003 U.S. Dist. LEXIS 18705, at *12-*13. Equifax contends here that it submitted uncontested evidence that it maintained reasonable procedures to avoid such errors and that, in this case the October 29 letter, was inadvertently generated and sent to Johnson due to an undetermined processing error. Equifax argues that it met the burden of showing by a preponderance of the evidence that its procedures were reasonable and that Johnson offered no evidence to the contrary and that accordingly it should have been granted summary judgment pursuant to Federal Rule of Civil Procedure 56(e). I disagree. Although Johnson did not submit any affidavits to contradict the affidavit of Cathy Reed, who was responsible for Equifax's collections operation during the time in question, it cannot be said on the basis of Ms. Reed's testimony that there is no genuine issue of material fact and that being so, summary judgment must be denied.
Equifax submitted an affidavit which stated that when it was notified that a check was a forgery, it changed the check's status from "active" to "pending forgery," which generated a standardized affidavit of forgery that was sent to the consumer. Equifax also changed the status of the account on its system to block the automated generation of further collection letters while verification was pending.
7. Summary Judgment Is Denied to Equifax on Johnson's Claim for Actual Damages and the Issue Is Reserved for Trial
Magistrate Judge Ellis rejected Equifax's contention in its cross-motion for summary judgment that Johnson is not entitled to actual damages, and concluded instead that the determination of "actual damages, including out-of-pocket expenses, mental distress and pain and suffering" be reserved for trial. Equifax contends that Johnson has no compensable out-of-pocket expenses or mental distress and pain and suffering. With respect to out-of-pocket expenses, Equifax contends that the $150 in time that Johnson spent responding to Equifax rather than working for paying clients is wholly speculative and furthermore, that the time spent responding to or disputing a collection letter has never been found to be the basis for actual damages.
Equifax cites Padilla v. Payco. Gen. Am. Credits. Inc., 161 F. Supp.2d 264, 277 n. 20 (S.D.N.Y. 2001), and Casella v. Equifax Credit Info. Svcs., 56 F.3d 469, 474 (2d Cir. 1995), for the proposition that "even if plaintiff was acting as his own attorney, he would not be entitled to damages for the time spent responding to Equifax's collections efforts." (Def. Obj. at 20.) However, neither case is on point, as both pertain to a plaintiff's right to recover attorneys' fees. Equifax's reliance on Casella to dispute Johnson's entitlement to pain and suffering is also unpersuasive. In Casella, the court stated that, "[i]n granting appellees' motion for summary judgment, the District Court properly recognized that `actual damages' may include humiliation and mental distress, even in the absence of out-of-pocket expenses." 56 F.3d at 474. Unlike in Casella, where there was no evidence that the credit-reporting agencies provided the consumer's credit report to any third party, here Equifax repeatedly reminded Johnson in the various collection letters that the check had already been forwarded to the negative file, which was used by tens of thousands of retails establishments. Thus, Equifax's argument that Johnson "has failed to show that the bad check ever appeared on his credit report, much less that he knew (as in Casella) it was on his credit report," (Def. Obj. at 22), rings hollows. Therefore, I adopt, Magistrate Judge Ellis' recommendation that the issue of actual damages be reserved for trial.
In Padilla the court in a footnote noted that because the plaintiff there proceeded pro se, she did not incur any attorneys' fees and thus could not recover them. Casella pertained to the ability of a person who challenged the inclusion of erroneous information in his credit report under the Fair Credit Reporting Act and claimed he was entitled to attorneys' fees incurred prior to the litigation of his FCRA claims.Casella, 56 F.3d at 474. The court there held that plaintiff was not entitled to these attorneys' fees incurred to prepare letters to two credit reporting agencies for the purpose of notifying them that plaintiff disputed the accuracy of certain information contained in his credit reports and to request the inclusion of statements in his credit report that he disputed the debt. Id. The court stated that "prelitigation expenses to retain a lawyer should not be compensable where, as in this case, the lawyer's services were not employed to remedy any violation of the law." Id.
8. Summary Judgment Is Denied to Equifax on Johnson's Claim for Statutory Damages and the Issue Is Reserved for Trial
Equifax also objects to Magistrate Judge Ellis' finding that the statutory maximum of $1,000 was appropriate on the facts here. Title 15 U.S.C. § 1692k(b)(1) provides that a determination of the amount of statutory damages should be based on "the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional." Equifax contends that under this standard, the nature of its violations were "so benign as not to cause any actual damages whatsoever." (Def. Obj. at 22.) I agree that Magistrate Judge Ellis' recommendation that the maximum amount of statutory damages pursuant to Title 15 U.S.C. § 1692k(a)(2)(A) finds support in the record given the frequency and persistence of Equifax's noncompliance. Nonetheless, I believe that the better course is to reserve a determination of statutory damages until the issues of actual damages and Equifax's bona fide error defense are fully aired at trial next month.