Opinion
3:05-CV-0579-RAM.
May 10, 2006
ORDER
Before the court is Defendant Victor G. Drakulich's Motion to Dismiss filed on January 10, 2006 (Doc. #7). Plaintiffs opposed the motion on January 24, 2006 (Doc. #8), and Defendant replied on February 7, 2006 (Doc. #9).
BACKGROUND
Plaintiffs Gary J. Wiley and Linda P. Wiley filed a class action pursuant to 15 U.S.C. § 1692 et seq., the Fair Debt Collection Practices Act (hereinafter "FDCPA"), on October 26, 2005. (Doc. #2.) Plaintiffs allege that Defendant, an attorney representing Business and Professional Collection Services, Inc. (hereinafter "B P"), sued them in state court but failed to provide a validation notice as required by the FDCPA. (Id.) Plaintiffs claim this conduct violated the FDCPA and constituted a deceptive trade practice under Nevada law. (Id.)
Defendant's Motion to Dismiss argues that Plaintiffs fail to state a claim upon which relief can be granted. (Docs. #7, 9.) Defendant argues that since Plaintiffs received a validation notice from B P, he was not required to send Plaintiffs another letter under the FDCPA. (Id.) Furthermore, Defendant argues that even if he was required to do so, his conduct should be excused because it was unintentional and/or resulted from a bona fide error. (Id.)
STATEMENT OF FACTS
The parties agree on all the legally relevant facts with one exception. This action began when Plaintiffs' various debts were assigned to B P in late 2003. (Doc. #7, Exh. A; Doc. #8.) Defendant was retained by B P to initiate judicial proceedings for the recovery of the amount owed. (Docs. #7, 8.) When Defendant filed suit against Plaintiffs in state court on November 5, 2004 (Doc. #8, Exh. A), he did not send out a section 1692(g) validation notice (Doc. #8).The parties disagree as to whether a section 1692(g) validation letter was ever sent to Plaintiffs by B P. According to Defendant, B P's third party contractor, Columbia Ultimate Business Services, sent Plaintiffs several validation notices before the suit was initiated. (Doc. #7, Exh A; Doc. #9, Exhs. 1-8.) Eight letters were supposedly sent between May 2003 and October 2004. (Doc. #9, Exhs. 1-8.) Plaintiffs' position is that neither B P nor Defendant ever sent any validation letters to them because non were received. (Doc. #8.)
The validation letters attached to Defendant's Reply are copies. (Doc. #9, Exhs. 1-8.) Original hard copies were not maintained. (Doc. #9; Doc. #9, Exh. 10.) Defendant asserts that the only discrepancies between the notices actually sent and these copies are the amounts listed as due. (Doc. #9; Doc. #9, Exh. 10.) This is because the letters reflect the current amount due when printed out. (Doc. #9; Doc. #9, Exh. 10.)
LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is a question of law that tests the legal sufficiency of the plaintiff's complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001); see Kruso v. Int'l Telephone Telegraph Corp., 872 F.2d 1416, 1421 (9th Cir. 1989); Fort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir. 1984) (stating a Rule 12(b)(6) motion, unlike a motion for summary judgment, only considers matters within the complaint). Dismissal is proper where there is no cognizable legal theory to proceed upon, or where there are insufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Where matters outside the pleadings are considered, however, a Rule 12(b)(6) motion may be converted into one for summary judgment. In re Rothery, 143 F.3d 546, 549 (9th Cir. 1998). In that event, the parties must have a reasonable opportunity to present evidence in support or in opposition thereof. Id. (citing Fed.R.Civ.P. 12(b)). The parties must be given ten days notice and the chance to present new evidence. Id. (citing Fed.R.Civ.P. 56(c)). No notice of the conversion is required, however, if the non-moving party is "fairly apprised" that the court will look beyond the pleadings, such as when the non-moving party submits extrinsic evidence itself. Id. (citing Grove v. Mead Sch. Dist. No. 354, 753 F.2d 1528, 1533 (9th Cir. 1985)).
A party may move for summary judgment under Rule 56(c) "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c)); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Material facts are those which would affect the outcome of the case under the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Whether there is no genuine issue on a material fact means that a rational fact-finder must not be able to find in favor of the nonmovant. Id.; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). In ruling on summary judgment, the court does not weigh the evidence to determine the truth of the matter, but "only determine[s] whether there is a genuine issue for trial." Crane v. Conoco, Inc., 41 F.3d 547, 549 (9th Cir. 1994).
Where the moving party bears the burden of proof at trial, the moving party must "establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor." Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). This must be shown through affidavits or some other form of admissible evidence. Id. Conversely, where the moving party does not bear the burden of proof at trial, he only has to show the court that there is no genuine issue of material fact, Celotex Corp., 477 U.S. at 323, on at least one of the essential elements of the other party's claim, Fontenot, 780 F.2d at 1195. This may be accomplished by either producing affirmative evidence to negate a material fact in the opposition's case, or by pointing out the absence of a genuine issue on a material fact in the opposition's case. Celotex Corp., 477 U.S. at 325. In either instance, if the moving party meets his initial burden of production, the nonmovant who bears the ultimate burden at trial "must set forth specific facts showing that there is a genuine issue for trial[,]" Fed.R.Civ.P. 56(e), and may not rely on mere allegations. Anderson, 477 U.S. at 248.
DISCUSSION
Defendant presents two separate arguments in his Motion to Dismiss. The court will deal with each in turn. As a preliminary issue, however, where matters outside the pleadings are presented to and considered by the court on a motion to dismiss for failure to state a claim, the motion may be treated as one for summary judgment. In re Rothery, 143 F.3d 546, 549 (9th Cir. 1998); Fort Vancouver Plywood Co. v. United States, 747 F.2d 547, 552 (9th Cir. 1984). Both sides have attached several forms of extrinsic evidence to their motions. (Docs. #7, 8, 9.) This "invitation" to consider matters outside the pleadings therefore waives any notice objections. In re Rothery, 143 F.3d at 549. Thus, the court will treat Defendant's Motion to Dismiss as one for summary judgment, and determine whether there is any genuine issue of material fact and whether Defendant is entitled to judgment as a matter of law. Fort Vancouver Plywood Co., 747 F.2d at 552 (citing Fed.R.Civ.P. 56(c)).A. Section 1692g: Validation Notice
The first main issue before the court is whether Defendant violated the FDCPA by failing to send Plaintiffs validation notices prior to the commencement of a suit for the recovery of debts owed to B P. The FDCPA was designed to "eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid." Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988) (quoting S. Rep. No. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1699). To ensure that debtors are aware of their legal rights, the Act requires they receive a validation notice. 15 U.S.C. § 1692g(a) (2006); Terran v. Kaplan, 109 F.3d 1428, 1431 (9th Cir. 1997). Debt collectors, including attorneys regularly engaged in consumer debt collection litigation, Heintz v. Jenkins, 514 U.S. 291, 299 (1995), must send written notice to the consumer within five days after the initial communication concerning collection, 15 U.S.C. § 1692g(a). That notice gives the debtor thirty days to ask the debt collector to verify the amount owed, during which time all collection efforts must cease. 15 U.S.C. § 1692g(b). Plaintiffs claim they never received notice of their validation rights from B P or Defendant. (Doc. #2.)
Defendant's first argument relies on his person or role in this suit. Defendant claims that as the attorney for B P he is not or should not be considered as a "debt collector" under the FDCPA. (Docs. #7, 9) In Heintz v. Jenkins, 514, U.S. at 293, a bank sued the plaintiff, Ms. Jenkins, for defaulting on a loan. The bank's attorney, Mr. Heintz, contacted Ms. Jenkins' attorney and listed the amount allegedly owed. Id. Ms. Jenkins then brought suit based on Mr. Heintz's failure to notify her of her validation rights. Id. Considering the common meaning of debt collector and a review of the Act's legislative history, id. at 294-95, led the Supreme Court to conclude that Mr. Heintz was in fact a "debt collector," id. at 299. A former section of the FDCPA provided an express exception for attorneys collecting debts on behalf of a client, but that section was entirely repealed by Congress. Id. at 294-95. In view of that holding, the court finds Defendant is clearly a "debt collector" under the FDCPA as was Mr. Heintz (Doc. #9 at p. 4 (admitting that Defendant is a "debt collector" under Heintz)). See also Senftle v. Landau, 390 F. Supp. 2d 463, 472 (D. Md. 2005) (finding a debt collector's retained attorney was a "debt collector" within the meaning of the FDCPA). Defendant has performed legal services for B P for nearly twenty-one years, and is paid with a monthly retainer fee. (Doc. #7, Exh. B.)
Defendant's second argument is that the filing of a state court lawsuit does not constitute an "initial communication" under the Act. (Doc. #7.) Although this issue has not been settled in the Ninth Circuit (Docs. #7-9), other courts have addressed it. Defendant relies on two cases from the same circuit, Vega v. McKay, 351 F.3d 1334, 1337 (11th Cir. 2003), and McKnight v. Benitez, 176 F. Supp. 2d 1301, 1308 (M.D. Fla. 2001). In Vega and McKnight, the courts reasoned that the term "communication" should not include legal actions or pleadings because the purpose of the FDCPA was to "curb abusive debt collection practices, not legal actions." Vega, 351 F.3d at 1336; McKnight, 176 F. Supp. 2d at 1306. The courts gave much weight to a December 1988 Federal Trade Commission (hereinafter "FTC") statement, Vega, 351 F.3d at 1337; McKnight, 176 F. Supp. 2d at 1305-06, which stated that "[a] debt collector's institution of formal legal action . . . is not a `communication . . .,' and thus does not confer . . . validation rights on the consumer." Statements of General Policy on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50,097, 50,108 (Dec. 13, 1988).
On the other side, however, lies Thomas v. Law Firm of Simpson Cybak, 392 F.3d 914, 917 (7th Cir. 2004) (en banc), which concluded that service of a summons and complaint were "initial communications" under the FDCPA, accord Goldman v. Cohen, No. 05-2645-CV, 2006 WL 947572, at *4 (2d Cir. Apr. 12, 2006) (publication pending in the Federal Reporter); Thweatt v. Law Firm of Koglmeier, Dobbins, Smith Delgado, P.L.C., No. CIV. 05-2005 PHX MHM, 2006 WL 880198, at *3-4 (D. Ariz. Mar. 21, 2006) (publication pending in the Federal Supplement); Senftle v. Landau, 390 F. Supp. 2d 463, 472 (D. Md. 2005); Sprouse v. City Credits Co., 126 F. Supp. 2d 1083, 1089 n. 8 (S.D. Ohio 2000). In Thomas, the Seventh Circuit first looked at the plain meaning of the FDCPA which defined a "communication" in broad and all-encompassing terms. Thomas, 392 F.3d at 917-18 (also relying on Heintz v. Jenkins, 514 U.S. at 297, for a plain reading of the FDCPA); see 15 U.S.C. § 1692a(2) (2006) (defining a "communication" as "the conveying of information regarding a debt directly or indirectly to any person through any medium"). The court parted ways from the Vega and McKnight courts by reasoning that to limit Congress' broad definition would undermine the function of consumers' validation rights. Thomas, 392 F.3d at 918. Debt collectors could avoid giving notice to consumers by simply filing lawsuits from the very start, which would run afoul of Congress' intent to safeguard them from "unfair, harassing, and deceptive" tactics. Id. Furthermore, the Thomas court pointed out that the FTC statement upon which Vega and McKnight relied upon was non-binding and pre- Heintz. Id. at 920. Indeed, the Seventh Circuit acknowledged a more recent FTC statement (Doc. #8, Exh. B at p. 2), wherein court documents were explicitly recognized as "communications." Id.
Absent any controlling authority from this circuit, the court finds the reasoning of the Thomas court is persuasive in the instant matter. Its reading of an initial "communication" is more true to the broad definition that was given by Congress. 15 U.S.C. § 1692a(2). Moreover, the court is unaware of any other case which adopted Vega's restricted interpretation, whereas courts from the Second, Goldman, 2006 WL 947572, at *4, Fourth, Senftle, 390 F. Supp. 2d at 472, Sixth, Sprouse, 126 F. Supp. 2d at 1089 n. 8, and Ninth Circuits, Thweatt, 2006 WL 880198, at *3-4, have relied upon the Seventh Circuit interpretation in Thomas. Thus, since the summons and complaint for the collection of Plaintiffs' debt conveyed information regarding their debt (Doc. #8, Exh. A), the court finds it was a communication within the meaning of the FDCPA.
Defendant's last argument is that Plaintiffs' case should be dismissed as a matter or law because B P already sent validation notices to Plaintiffs. (Docs. #7, 9; Doc. #9, Exhs. 1-8.) That is, Defendant argues that his communication with Plaintiffs was not the "initial" communication within the meaning of section 1692g(a). In support of this argument, Defendant cites one case, Mendus v. Morgan Assoc., P.C., 994 P.2d 83 (Okla.Civ.App. 1999), which he claims made an indirect but clear ruling that a prior validation notice sent by a collection agency would inure to the benefit of that agency's attorney (Doc. #9). Defendant reads too much into the case. In that case, the collection agency's attorney was sued by a debtor for an alleged violation of section 1692g. Mendus, 994 P.2d at 86. Although the attorney included a validation notice with the summons and complaint, its adequacy was questionable. Id. To avoid judicial scrutiny of that notice, the attorney claimed that the collection agency had sent a prior notice, and that it should inure to his benefit. Id. The court, however, did not consider that argument because there were no facts in the record to show whether a prior notice was ever sent. Id.
There is no law in this circuit that squarely addresses the issue before the court. However, several cases from other districts are instructive. First is Francis v. Snyder, 389 F. Supp. 2d 1034 (N.D. Ill. 2005). That case involved a debtor who sued a creditor's attorney for failing to provide him with section 1692g notice. Id. at 1036. The attorney had sent the debtor a collection letter containing a questionable validation notice. Id. at 1036-37. To avoid liability on those grounds, the attorney argued the court should look to previous validation notices sent by two different collection agencies. Id. at 1040 n. 2. The court found otherwise. Id. (citing Griswold v.J R Anderson Bus. Servs., No. 82-1474-PA, 1983 U.S. Dist. LEXIS 20365, at *3-4 (D. Or. Oct. 24, 1983) (stating that interpretation of the statute would better protect consumers and would be easier for courts to apply)); but see Weinstein v. Fink, No. 99 C 7222, 2001 WL 185194, at *7 (N.D. Ill. Feb. 26, 2001) (finding that there could only be one initial communication on any given debt).
In the second case, Ditty v. CheckRite, Ltd., 973 F. Supp. 1320, 1324-25 (D. Utah 1997), the plaintiff debtor sued a collection agency's attorney who also sent a collection letter to him. Again, the issue was whether the validation notice was adequate, and the attorney argued that the court should look at its client's previous letters. Id. at 1329. This time, however, the court agreed with the attorney. Id. Unlike the Francis court, the Ditty court placed greater weight in term initial communication, and reasoned that section 1692g should not require redundant efforts. Id. The third case is Senftle v. Landau, 390 F. Supp. 2d 463. There, the debtor sued the attorney based on his failure to provide him with a validation notice despite the fact that the collection agency client had already sent the debtor such notice. Id. at 466. The attorney argued that his first communication with the debtor was not the "initial communication," id. at 471, and the court agreed, id. at 473. The court relied on the statute's wording and reasoned there could be only one initial communication under the Act regardless of however many debt collectors existed. Id.
Given this trio of cases and the specific facts of this case, the court finds that B P made the initial communication which warranted a validation notice. To begin with, Defendant's case is more near to Ditty and Senftle than Francis. Like Ditty and Senftle, Defendant has a direct attorney-client relationship with the previous debt collector who sent validation notice. The attorney in Francis, however, worked directly for a creditor who had also retained the services of two collection agencies. See also Tipping-Lipshie v. Riddle, No CV 99-4646, 2000 U.S. Dist. LEXIS 2477, at *7 (E.D.N.Y. Mar. 1, 2000) (interpreting section 1692g the same was as Griswold where the defendant attorney for an assignee collection agency argued the court should find a validation notice sent by the prior collection agency fulfilled the obligation); Griswold, 1983 U.S. Dist. 20365, at *1-2 (where the defendant was an assignee collection agency).
Plaintiffs deny ever receiving those notices. However, section 1692g only requires that they be "sent." 15 U.S.C. § 1692g(a); Mahon v. Credit Bureau of Placer County Inc., 171 F.3d 1197, 1201 (9th Cir. 1999). To that extent, Defendant has provided the court with copies of each letter sent (Doc. #9, Exhs. 1-8; see also Doc. #7, Exh. A1-8), and an affidavit from an appropriate B P employee (Doc. #7, Exh. A). Since Plaintiffs have not challenged B P's business practices in sending those letters out, their denial is irrelevant. Van Westrienen v. Americontinental Collection Corp., 94 F. Supp. 2d at 1087, 1097 (D. Or. 2000).
Furthermore, Defendant's case is more like Ditty, and even more like Senftle when the court considers the nature of the initial communication with the debtor. Here, Defendant's first communication with Plaintiffs was the service of a summons and complaint in the name of B P. (Doc. #2.) Plaintiffs have not alleged or shown that they received any kind of communication which would suggest that Defendant is more than an instrument for B P. As with the attorney in Senftle, Defendant's contact with Plaintiffs was minimal. Senftle, 390 F. Supp. 2d at 466-67. Even in Ditty, where the attorney's first communication with the debtor was a collection letter, the language of the letter showed that he was only an instrument for the collection agency. Ditty, 973 F. Supp. at 1325 (stating that the matter was "referred by CheckRite to our law firm for litigation"). Under those circumstances, where it was evident that the attorney was not acting in any independent capacity, it seemed odd that the debtor could receive yet another thirty-day validation period. Id. at 1329. This case is not like Francis where the attorney sent the debtor a collection letter and never mentioned his client's name. Francis, 389 F. Supp. 2d at 1036-37; see also Tipping-Lipshie, 2000 U.S. Dist. LEXIS 2477, at *7; Griswold, 1983 U.S. Dist. 20365, at *1-2. In Francis, the letter also asked for payment to be made to the law firm, not its client. Id. at 1037.
Therefore, the court finds that the reasoning of Senftle should apply given the specific facts of this case. B P and Defendant are both debt collectors in a strict sense, but there was only one "initial communication" under section 1692g (Doc. #9, Exhs. 1-8), Senftle, 390 F. Supp. 2d at 473, between them. The nature of their relationship and the nature of Defendant's first communication with Plaintiffs supports this finding and the application of Senftle. Moreover, this finding does not upset the FDCPA policy recognized in Thomas v. Law Firm of Simpson Cybak, 392 F.3d 914, 918 (7th Cir. 2004). It would not allow collection agencies to simply avoid section 1692g by unfairly referring matters to their attorneys straightaway. Id.; see also Senftle, 390 F. Supp. 2d at 473 (citing Thomas). Accordingly, Defendant's Motion for Summary Judgment should be granted.
Defendant also raises the bona fide error defense under 15 U.S.C. § 1692k(c). (Doc. #7.) Since the court finds that Defendant has not violated section 1692g of the FDCPA under Thomas v. Law Firm of Simpson Cybak, 392 F.3d 914 (7th Cir. 2004) and Senftle v. Landau, 390 F. Supp. 2d 463 (D. Md. 2005), the court need not consider this issue.
CONCLUSION
IT IS HEREBY ORDERED that Defendant's Motion for Summary Judgment (Doc. #7) is GRANTED .LET JUDGMENT BE ENTERED ACCORDINGLY.