Opinion
No. CV-04-4000577 S
December 22, 2004
MEMORANDUM OF DECISION
On July 20, 2004, the plaintiff, Arthur Machado, filed a two-count complaint against the defendants, Southern New England Telephone Company (SNET) and SBC Communications, Inc. (SBC). This action arises out of a dispute over a debt that Machado owed SNET for a business advertisement in the yellow pages. Machado and SNET stipulated to a judgment, which Machado paid, yet SNET subsequently attached Machado's checking account, causing him embarrassment and distress.
SBC is the parent company of, or is affiliated with, SNET.
In count one, Machado alleges a violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (FDCPA) due to SNET's execution on a paid debt and that it collected Machado's personal information in violation of 15 U.S.C. § 1601g. In count two Machado alleges that the actions of SNET and SBC to collect the paid debt violated the Connecticut Unfair Trade Practices Act, General Statute § 42-110b (CUTPA).
On August 3, 2004, SNET and SBC filed a motion to strike both counts of the complaint, accompanied by a memorandum in support. Machado filed a memorandum of law in opposition to the motion to strike on August 27, 2004.
DISCUSSION
"The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any complaint . . . to state a claim upon which relief can be granted." Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "[W]e must take as true the facts alleged in the plaintiff's complaint and must construe the complaint in the manner most favorable to sustaining its legal sufficiency." Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998). "In ruling on a motion to strike, the court is limited to the facts alleged in the complaint." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "Although grounds other than those specified should not be considered by the trial court in passing upon a motion to strike . . . where the trial court sustains a motion to strike on erroneous grounds, if another ground is appropriate, the granting of the motion will be upheld by this court . . . Of course, the alternative ground must have been alleged in the motion to strike in some form." (Internal quotation marks omitted.) Gazo v. Stamford, 255 Conn. 245, 259, 765 A.2d 505 (2001).
SNET and SBC move to strike count one on the grounds that it is legally insufficient because Machado fails to allege that the contract between him and SNET was incurred for personal, family or household purposes rather than business purposes as required to bring a claim under the FDCPA. In support of the motion, SNET and SBC argue that the FDCPA applies only to consumer debts and that the debt owed to SNET was a business debt for yellow page advertising. Machado counters that the language of the FDCPA pertains to him, since it defines a "consumer" as "any natural person obligated or allegedly obligated to pay any debt"; 15 U.S.C. § 1692a(5); which includes business debts by sole proprietors, such as himself.
To bring a claim under the FDCPA, the plaintiff must allege that the debt owed was a consumer obligation. Franklin Credit Management Corp. v. Nicholas, Superior Court, judicial district of New London, Docket No. CV 98 0546721 (April 27, 1999, Parker, J.). The FDCPA defines "consumer" as "any natural person obligated to pay any debt." 15 U.S.C. § 1692a(3). The word "debt" means "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. § 1692a(5).
"The FDCPA was passed to protect consumers from deceptive or harassing actions taken by debt collectors . . . [V]iolations [are evaluated] under the so-called least-sophisticated-consumer standard . . ." Kropelnicki v. Siegel, 290 F.3d 118, 127 (2d Cir. 2002). "This objective standard is designed to protect all consumers, the gullible as well as the shrewd . . ." (Internal quotation marks omitted.) Maguire v. Citicorp Retail Services, Inc., 147 F.3d 232, 236 (2d Cir. 1998).
"[T]he determination of whether a debt is incurred primarily for personal, family, or household purposes is a fact driven one, and should be decided on a case-by-case (not necessarily plaintiff-by-plaintiff) basis looking at all relevant factors . . . [T]he nearly dispositive factor to be the identity of the individual plaintiff and whether the debt was incurred and paid in their personal capacities or some other capacity." (Internal quotation marks omitted.) Hansen v. Ticket Track, Inc., 280 F.Sup.2d 1196, 1204 (W.D.Wash. 2003). "[T]he plain meaning of Section 1692a(5) indicates that a `debt' is created whenever a consumer is obligated to pay money as a result of a transaction whose subject is primarily for personal, family or household purposes." (Internal quotation marks omitted.) Albanese v. Portnoff Law Associates, Ltd., 301 F.Sup.2d 389, 402 (E.D.Pa. 2004). The federal court has held that, `The Act's definition of `debt' encompasses only transactions that are entered into primarily for personal, family, or household purposes." Beaton v. Reynolds, Ridings, Vogt, and Morgan, 986 F.Sup. 1360, 1362 (W.D.Okla. 1998).
In the present case, the plaintiff concedes in the complaint he "owed a business debt to the defendants for unpaid telephone advertising . . ." He asserts that the courts have interpreted the FDCPA to apply to business debts if incurred by a sole proprietor and he is a sole proprietor. Sluys v. Hand, 831 F.Sup. 321, 323 (S.D.N.Y. 1993). This holding however, has been rejected. "The opinion in Sluys [on which the plaintiff relies] has been sharply criticized — and rightly so — by courts and academic commentators due to its abandonment of the FDCPA's definition of a consumer debt . . . For this reason, . . . the case is not good law . . ." Slenk v. Transworld Systems, Inc., 236 F.3d 1072, 1076 (9th Cir. 2001).
The FDCPA only applies to consumer debts, which does not include sole proprietors' business debts, and, since the dispute between Machado and SNET was about a business debt, it is not within the purview of the statute. Therefore, count one is stricken.
SNET and SBC next move to strike count two, and argue that Machado's CUTPA claim is "derivative of the alleged FDCPA violation, and [is] devoid of any factual allegations to support a claim that such conduct offends public policy or could otherwise be considered `immoral, unethical, oppressive, or unscrupulous' . . ." In response Machado argues that SNET and SBC violated CUTPA by executing on a paid debt, which is a violation of the FDCPA, and further by collecting information about this prior debt when he subsequently activated his residential phone service with SBC without giving the proper notices. It is his position that all of these actions not only violate the FDCPA but also CUTPA.
Machado asserts that SBC and SNET also violated CUTPA by collecting information without giving the proper notices required by the FDCPA 15 U.S.C. § 1692g. Whether notice was provided, however, is not relevant because, as noted earlier, disputes over business debts are not within the scope of the FDCPA.
While a business debt is not within the purview of the FDCPA, it is not the determinative factor for a CUTPA claim. "[W]e previously have stated in no uncertain terms that CUTPA imposes no requirement of a consumer relationship." Macomber v. Travelers Property Casualty Corp., 261 Conn. 620, 643, 804 A.2d 180 (2002). "CUTPA is not limited to conduct involving consumer injury [and] . . . a competitor or other business person can maintain a CUTPA cause of action without showing consumer injury." McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 566-67, 473 A.2d 1185 (1984). "[I]n determining whether a practice violates CUTPA [the Connecticut Supreme Court has] adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; [or] (3) whether it causes substantial injury to consumers, [competitors or other businesspersons]. . . . All three criteria do not need to be satisfied to support a finding of [a violation of CUTPA]." (Internal quotation marks omitted.) Macomber v. Travelers Property Casualty Corp., supra, 261 Conn. 620, 643.
The judicial district of Ansonia/Milford heard a similar case in which the plaintiffs alleged a CUTPA violation where the defendant made unauthorized transfers from the plaintiff's bank account into another customer's accounts. There the court held that the plaintiffs had standing to assert a CUTPA claim and denied the defendant's motion to strike the CUTPA claim. Wachtel, Duklauer Fein, Inc. v. Sentinel, Superior Court, judicial district of Ansonia/Milford at Milford, Docket No. CV 94 0048307 (November 2, 1999, Arnold, J.).
"The policy behind CUTPA is to encourage litigants to act as private attorneys general and to bring actions for unfair or deceptive trade practices." (Internal quotation marks omitted.) Suarez v. Sordo, 43 Conn.App. 756, 772, 685 A.2d 1144 (1996). "Moreover, in 1980 the commission reviewed those factors and concluded that [u]njustified consumer injury is the primary focus of the FTC Act, and the most important of the three . . . criteria." (Internal quotation marks omitted.) Williams Ford, Inc. v. Hartford Courant Co., 232 Conn. 559, 592, 657 A.2d 212 (1995).
In the present case, Machado has alleged a violation of CUTPA in count two of the complaint for substantial injuries sustained, resulting from the attachment of his checking account after he had paid his debt in full to SBC and SNET. When a party inflicts substantial injury to consumers, competitors or other businesspersons, regarding claims for debts, that party may be in violation of CUTPA. The subject of Machado's claim is the conduct and actions of SNET and SBC in their attempt to satisfy a debt that had been paid. Machado has sufficiently alleged the elements of this cause of action. Therefore, the motion to strike count two is denied.
Martin, J.