Summary
holding that a notice that provided that the plaintiff must notify the debt collector "within 30 days of receipt of this notice that [she] disputes the validity of the debt, or any portion thereof . . . tracks the statutory language"
Summary of this case from Homa v. GC Servs. Ltd. P’shipOpinion
01 CIV. 10127 (DLC)
September 12, 2002
Lawrence Katz, Katz Kleinman, Uniondale, NY, for Plaintiff.
Arthur Sanders, Esq., Spring Valley, for Defendant.
OPINION AND ORDER
This motion requires the Court to resolve two separate legal issues: first, whether an offer of judgment pursuant to Rule 68, Fed.R.Civ.P., at the initial stages of a litigation can moot a class action, and second, whether the Fair Debt Collection Practices Act ("FDCPA" or the "Act"), 15 U.S.C. § 1692, requires a debt collector to provide debtors with its telephone number in order to assist debtors to dispute their debts orally. Although the first issue is resolved in the plaintiff's favor, the second is not and requires dismissal of the action.
Background
On November 30, 2000, GC sent a debt collection letter (the "Letter") to Nasca at his home address on behalf of ATT Services requesting payment of the amount of $44.93. The front of the Letter, which is attached to the complaint, states, in pertinent part:
We have been informed that you presently have a long overdue balance . . . for ATT Services. They have asked us to help resolve this matter. You have been a valued customer to ATT, and they are anxious to have you resolve your account without further collection activity. Please mail your payment promptly along with the bottom portion of this letter — — to ATT in the enclosed envelope.
If you fail to resolve this account, further collection activity will be taken by us or another agency. Thank you for your prompt attention to this matter. If you have any questions concerning this account, please contact your ATT Business Office at 1-888-288-3680.
(Emphasis supplied). Appearing prominently along the bottom front of the Letter in bold capital letters is the sentence "NOTICE: SEE REVERSE SIDE FOR IMPORTANT CONSUMER INFORMATION."
The reverse of the Letter states in capital letters the following:
This is an attempt to collect a debt and any information obtained will be used for that purpose. Consumer Information:
Unless you, within thirty (30) days after your receipt of GC Services' initial written notice to you concerning this debt, dispute the validity of the debt, or any portion thereof, the debt will be assumed to be valid by GC Services. If you notify GC Services in writing within the above described thirty (30) day period that the debt, or any portion thereof, is disputed, GC Services will obtain verification of the debt or a copy of a judgment against you and a copy of such verification or judgment will be mailed to you by GC Services. Upon your written request within the above described thirty (30) day period, GC Services will provide you with the name and address of the original creditor, if different from the current creditor.
The demands for payment in this letter do not reduce your rights to dispute this debt, or any portion thereof, and/or to request verification within the thirty (30) day period as set forth above.
(Emphasis supplied).
On November 16, 2001, Nasca filed the instant action as a nationwide class action pursuant to Rule 23, Fed.R.Civ.P., on behalf of himself and all others who received similar debt collection letters from GC, alleging that the text of the Letter violates Sections 1629g and 1692e(10) of the FDCPA. On January 14, 2002, GC filed its answer. At an initial conference held on February 22, GC indicated its intention to file a motion to dismiss and for judgment on the pleadings. On March 12, 2002, GC served an offer of judgment pursuant to Rule 68, Fed.R.Civ.P., offering $1,000 as well as costs and attorney's fees in an amount to be determined by the Court, and pursuant to a schedule set at the conference, filed the motion to dismiss ten days later. GS alleges, and Nasca does not deny, that $1,000 is the maximum amount to which Nasca is entitled under Section 1692k of the Act, 15 U.S.C. § 1692k. Nasca has not yet filed a motion for class certification.
Discussion I. GS's Mootness Argument
GS argues that the instant action is moot because it submitted its Rule 68 offer to Nasca before class certification. "A case is moot, and accordingly the federal courts have no jurisdiction over the litigation, when the parties lack a legally cognizable interest in the outcome." Fox v. Board of Trustees of State University of New York, 42 F.3d 135, 140 (2d Cir. 1994) (citation omitted). See also Rand v. Monsanto Co., 926 F.2d 596, 598 (7th Cir. 1991) ("Once the defendant offers to satisfy the plaintiff's entire demand, there is no dispute over which to litigate, and a plaintiff who refuses to acknowledge this loses outright, under Fed.R.Civ.P. 12(b)(1), because he has no remaining stake." (citation omitted)). Where, as here, the plaintiff has filed a class action complaint, the Second Circuit has held that "in general, if the claims of the named plaintiffs become moot prior to class certification, the entire action becomes moot. In contrast class certification will preserve an otherwise moot claim." Comer v. Cisneros, 37 F.3d 775, 798 (2d Cir. 1994) (citations omitted). See also Swan v. Stoneman, 635 F.2d 97, 102 n. 6 (2d Cir. 1980) ("As a general rule, a class cannot be maintained unless there is a named plaintiff with a live controversy both at the time the complaint is filed and at the time the class is certified.").
Rule 68, Fed.R.Civ.P., provides, in pertinent part:
At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer.
Rule 68, Fed.R.Civ.P.
The Supreme Court has recognized, however, a relation back exception to the general rule regarding mootness. Specifically, the Court has expressed concern over cases in which the named plaintiff's claims may be transitory in nature:
There may be cases in which the controversy involving the named plaintiffs is such that it becomes moot as to them before the district court can reasonably be expected to rule on a certification motion. In such instances, whether the certification can be said to "relate back" to the filing of the complaint may depend upon the circumstances of the particular case and especially the reality of the claim that otherwise the issue would evade review.
Sosna v. Iowa, 419 U.S. 393, 402 n. 11 (1975). Similarly, in Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993), the Second Circuit applied the relation back exception to a class action in which it found the named plaintiff's claims to be inherently transitory because the Vermont Department of Social Welfare "will almost always be able to process a delayed application before a plaintiff can obtain relief through litigation." Id. at 939. The Robidoux court held that "[e]ven where the class is not certified until after the claims of the individual class representatives have become moot, certification may be deemed to relate back to the filing of the complaint in order to avoid mooting the entire controversy." Id.
The Supreme Court has also expressed concern over a class action defendant's ability to "pick off" named plaintiffs by mooting their private individual claims. In Deposit Guarantee Nat. Bank v. Roper, 445 U.S. 326 (1980), the Court considered whether putative class representatives retain a private interest in appealing the denial of class certification subsequent to the entry of judgment in their favor over their objections. Judgment was entered based on the defendant's offer to each named plaintiff of the maximum amount that each could have recovered in the action. The Deposit Guarantee Court held that such plaintiffs do retain an interest such that their appeal of the denial of class certification is not moot. In reaching this holding, the Court criticized precisely the strategy that GS has pursued in the instant action:
A district court's ruling on the certification issue is often the most significant decision rendered in these class-action proceedings. To deny the right to appeal simply because the defendant has sought to "buy off" the individual private claims of the named plaintiffs would be contrary to sound judicial administration. Requiring multiple plaintiffs to bring separate actions, which effectively could be "picked off" by a defendant's tender of judgment before an affirmative ruling on class certification could be obtained, obviously would frustrate the objectives of class actions; moreover it would invite waste of judicial resources by stimulating successive suits brought by others claiming aggrievement.
Id. at 339.
The Second Circuit has demonstrated similar concerns over a defendent's deliberate attempt to "buy off" a named plaintiff in a class action. In White v. Matthews, 559 F.2d 852 (2d Cir. 1977), plaintiff filed a class action challenging delays in administrative hearings for disability benefits at the Social Security Administration, which granted plaintiff his hearing while his motion for class certification was pending. The Second Circuit related the class certification back to at least the date of the filing of the motion to certify because "[r]efusing to do so would mean that the SSA could avoid judicial scrutiny of its procedures by the simple expedient of granting hearings to plaintiffs who seek, but have not yet obtained, class certification." Id. at 857.
The above cases are generally concerned with situations in which the named plaintiff has already filed a motion for class certification, which Nasca has not yet done. Yet Nasca has not yet had a reasonable opportunity to file a motion for certification. Less than two months after it filed its answer, and one month after the initial conference, GS submitted its Rule 68 offer. Ten days later, it submitted the instant motion. To allow a Rule 68 offer to moot a named plaintiff's claim in these circumstances would encourage defendants to pick off named plaintiffs in the earliest stage of the case. For this reason, several district courts in this circuit have applied the relation back exception to the attempted mooting of a class action by a Rule 68 offer in cases where no motion for class certification has yet been filed. See, e.g., White v. OSI Collection Services, Inc., 2001 WL 1590518, 01 Civ. 1343, at *5 (E.D.N.Y. Nov. 5, 2001); Schaake v. Risk Management Alternatives, Inc., 203 F.R.D. 108, 111 (S.D.N.Y. 1996).
GS relies on Ambalu v. Rosenblatt, 194 F.R.D. 451, 453 (E.D.N.Y. 2000), in which the Honorable Eugene H. Nickerson dismissed a named plaintiff's claim as moot following a pre-certification Rule 68 offer of judgment in an FDCPA case. In Ambalu, however, the named plaintiff had still failed to submit a motion for class certification a year and a half after filing his complaint and over a year after receiving the Rule 68 offer. It is not clear from the Ambalu opinion that Judge Nickerson would have found mootness had the plaintiff been a less dilatory litigant.
II. Defendant's Motion for Judgment on the Pleadings
The standard for evaluating a motion for judgment on the pleadings under Rule 12(c), Fed.R.Civ.P., is the same as that under Rule 12(b)(6), Fed.R.Civ.P. Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). A court may dismiss an action pursuant to Rule 12(b)(6), Fed.R.Civ.P., 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.'" Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In considering the motion, the court must "accept as true all allegations in the complaint," Hayden v. County of Nassau, 180 F.3d 42, 47 (2d Cir. 1999), and "draw all reasonable inferences in the plaintiff's favor." Jackson Nat'l Life Ins. v. Merrill Lynch Co., 32 F.3d 697, 699-700 (2d Cir. 1994). The court can dismiss the claim only if, assuming all facts alleged to be true, the plaintiff still fails to plead the basic elements of a cause of action.
GC moves to dismiss this complaint on the ground that the plaintiff has failed to identify any actionable deficiency in its notification to Nasca of his rights under the FDCPA. "The FDCPA establishes certain rights for consumers whose debts are placed in the hands of professional debt collectors for collection, and requires that such debt collectors advise the consumers whose debts they seek to collect of specified rights." Kropelnicki v. Siegel, 290 F.3d 118, 127 (2d Cir. 2002) (citation omitted). Specifically, Section 1692g of the Act provides that within five days of a debt collector's initial communication with the consumer, the debt collector must send the consumer a written notice containing
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) 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;
(4) 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 and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.15 U.S.C. § 1692g(a) (emphasis supplied).
"Even if a debt collector conveys the required information, the collector nonetheless violates the Act if it conveys that information in a confusing or contradictory fashion so as to cloud the required message with uncertainty." DeSantis v. Computer Credit, Inc., 269 F.3d 159, 161 (2d Cir. 2001). "When a notice contains language that overshadows or contradicts other language informing a consumer of her rights, it violates the Act." Savino v. Computer Credit, Inc., 164 F.3d 81, 85 (2d Cir. 1998) (citation omitted). "The juxtaposition of two inconsistent statements renders the notice invalid under § 1692g." Id. (citation and alteration omitted).
In determining whether Section 1962g has been violated, the Second Circuit applies "an objective standard measured by how the `least sophisticated consumer' would interpret the notice received from the debt collector." Russel v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996). "The critical question is therefore whether the notice fails to convey the required information clearly and effectively and thereby makes the least sophisticated consumer uncertain as to the meaning of the message." DeSantis, 269 F.3d at 161 (citation omitted). The least sophisticated consumer standard "(1) ensures the protection of all consumers, even the naive and the trusting, against deceptive debt collection practices, and (2) protects debt collectors against liability for bizarre or idiosyncratic interpretations of collection notices." Clomon v. Jackson, 988 F.2d 1314, 1320 (2d Cir. 1993).
Finally, Section 1692e(10) of the Act, 15 U.S.C. § 1692e(10), forbids "the use of any false presentation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." A debt collector's use of terminology that is "vague or uncertain will not prevent it from being held deceptive under § 1692e(10) of the Act." Russell, 74 F.3d at 35.
Nasca argues that the Letter violates Sections 1692e(10) and 1692g of the Act because the sentence on the front of the Letter that instructs the consumer to "contact your ATT Business Office" by telephone "[i]f you have any questions concerning this account" overshadows and contradicts the notice on the back of the Letter that instructs the consumer to contact GC Services if he wishes to dispute the debt. Nasca argues that the Letter thus encourages the least sophisticated consumer to dispute the debt with ATT, the creditor, rather than with GC, the debt collector, a course of action which will not invoke the protections of Section 1692g because that section requires that the dispute be raised with the "debt collector" for the section's protections to become available.
The instructions given on the back of the Letter regarding whom to contact to dispute the debt are not, however, overshadowed or contradicted by those given on the front. Even the least sophisticated consumer will understand from the clear and unambiguous language in bold capital letters along the bottom front of the Letter that there is also "IMPORTANT CONSUMER INFORMATION" on the "REVERSE SIDE" of the Letter. (Emphasis in original). It is undisputed that the validation notice on the back of the Letter unambiguously instructs the consumer to contact GC within thirty days or GC will assume that the debt is valid. The notice also clearly states that if the consumer disputes the debt in writing to GC, GC will verify the debt and send a copy of that verification to the consumer.
In support of his argument that the Letter's instruction about contacting the creditor overshadows the instructions regarding notice to the credit agency, Nasca points out that the Letter does not include the credit agency's telephone number. Nasca's argument implies that the Letter must include GC's telephone number or violate Section 1692g(a)(3) of the Act. The notification in the Letter says, in pertinent part, "[u]nless you, within thirty (30) days . . . dispute the validity of the debt . . . the debt will be assumed to be valid by GC Services." The Letter provides GC's address, but not its telephone number. It further advises the consumer, tracking the statutory language, that written notice of a dispute will cause GC to obtain and provide verification of the debt.
The Second Circuit has not decided whether debt collection companies must provide their telephone numbers to consumers or even whether consumers are entitled to dispute their debt orally under the terms of Section 1692g(a)(3), which includes no explicit writing requirement, in contrast to Sections 1692g(a)(4) and (a)(5), which do include a writing requirement. In Graziano v. Harrison, 950 F.2d 107, 112 (3d Cir. 1991), the Third Circuit held that consumers are not entitled to dispute their debts orally. The notification in Graziano, unlike the notice at issue here, instructed the consumer "that unless he disputed the debt in writing within thirty days, the debt would be assumed valid." Id. at 109 (emphasis supplied). The Graziano court reasoned that adopting a reading of Section 1692g(a)(3) that entitled the debtor to dispute his debt by telephone would
create a situation in which, upon the debtor's non-written dispute, the debt collector would be without any statutory ground for assuming that the debt was valid, but nevertheless would not be required to verify the debt or to advise the debtor of the identity of the original creditor and would be permitted to continue debt collection efforts. We see no reason to attribute to Congress an intent to create so incoherent a system. We also note that there are strong reasons to prefer that a dispute of a debt collection be in writing: a writing creates a lasting record of the fact that the debt has been disputed, and thus avoids a source of potential conflicts. We therefore conclude that subsection (a)(3), like subsections (a)(4) and (a)(5), contemplates that any dispute, to be effective, must be in writing.
Graziano, 950 F.2d at 112.
Notwithstanding this reasoning, district courts in the Second Circuit have concluded that Section 1629g(a)(3) entitles debtors to dispute their debt by telephone. Faced with a notice identical to that scrutinized by the Graziano court — a notice that told the consumer "[u]nless you notify this office in writing within 30 days from receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume the debt is valid," Ong v. American Collections Enterprise, Inc., 98 Civ. 5117, 1999 WL 51816, at *1 (E.D.N.Y. Jan. 15, 1999) (emphasis supplied) — the court in Ong held that such notification misled consumers by implying that "the only method of disputing a debt is their written communication." Id. at *4.
Similarly, the court in In re Risk Management Alternatives, Inc., 208 F.R.D. 493 (S.D.N.Y. 2002), found that the statute requires that a notice to consumers unambiguously indicate that a dispute may be orally communicated to the collection agency. Notably, the letter at issue was found to be inadequate even though it omitted any reference to a writing requirement in the critical passage and even included an "800" telephone number for the debt collector. Id. at 498. The court found that the letter's notification, which faithfully tracked the statutory language, violated the FCRA because the "juxtaposition of sentences" may lead the least sophisticated consumer to conclude that the debt must be disputed in writing. Id. at 502. Recognizing that this conclusion was a "silly result," id., the court nonetheless held that letters from debt collectors must communicate that a consumer "could raise a dispute in many ways" but get verification of the debt "only if she disputed it in writing." Id. See also Brady v. Credit Recovery Co., 160 F.3d 64, 67 (1st Cir. 1998) ( 15 U.S.C. § 1692e(8) does not impose a writing requirement on consumers who wish to dispute a debt.)
The letter at issue here tracks the statutory language. It does not include any explicit requirement of a writing to dispute a debt. On the other hand, it does not provide a telephone number to contact the collection agency. This letter is in compliance with the Act.
Strict adherence to the Act's notification provisions is sufficient under the law. This is an extremely detailed statutory directive and the faithful copying of the statute gives the consumer the notice Congress intended the consumer to receive. Indeed, any attempt to encourage oral notification in lieu of written notification runs the risk of doing the consumer a real disservice. Without written notice to the collection agency of the dispute, the consumer is not entitled to receive verification of the debt and the name and address of the original creditor if it is different from the current creditor. As significantly, the statute permits debt collection efforts to continue in the absence of a written notice of dispute. Oral notification also runs the risk of burdening the debtor with proving that she did dispute the debt and did so within thirty days. It is, therefore, very much in the interest of the consumer to dispute the debt in writing. In sum, even if consumers may be entitled to dispute the debt by telephone, the statute does not require the collection agency to give a telephone number to the consumer or otherwise encourage such an inefficient and problematic practice. If Congress wished to require disclosure of telephone numbers it could have easily added the requirement to its detailed instructions. It did not.
Conclusion
For the reasons stated, defendant's motion for judgment on the pleadings is granted. The Clerk of Court shall close the case.
SO ORDERED