Morisco v. Allied Interstate Llc et al

BRIEF in Opposition

D.N.J.December 27, 2016

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY MICHAEL MORISCO, on behalf of himself and those similarly situated, Plaintiff, vs. ALLIED INTERSTATE LLC, LVNV FUNDING LLC, RESURGENT CAPITAL SERVICES, L.P.; ALEGIS GROUP, LLC, and JOHN DOES 1 to 10, Defendants. Case No. 2:16-cv-1507-MCA-MAH PLAINTIFF’S BRIEF IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS Yongmoon Kim KIM LAW FIRM LLC 411 Hackensack Avenue, 2nd Floor Hackensack, NJ 07601 (201) 273-7117 Attorneys for Plaintiff Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 1 of 35 PageID: 157 i TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................ II PRELIMINARY STATEMENT ............................................................................ 1 STATEMENT OF THE CASE ................................................................................. 2 STANDARD OF REVIEW: “PLAUSIBILITY” ..................................................... 4 LEGAL ARGUMENT ............................................................................................... 6 POINT I. THE FAIR DEBT COLLECTION PRACTICES ACT ......................... 6 A. Basic Elements of a Cause of Action under the FDCPA ............................. 6 B. The FDCPA Protects the Least Sophisticated Consumer ............................ 7 POINT II. IN VIOLATION OF THE FDCPA, THE LETTER WOULD DECEIVE AND MISLEAD THE LEAST SOPHISTICATED CONSUMER TO BELIEVE THAT DEFENDANTS WERE COLLECTING AN ENFORCEABLE DEBT 10 A. The Cases ...................................................................................................11 B. The Regulatory Position .............................................................................15 C. Academic Support ......................................................................................23 D. Defendants LVNV, Resurgent and Alegis Cannot Skirt Liability for the Unlawful Conduct of its Debt Collector Agent. ................................................25 E. Tatis has no Preclusive Effect on this Case. ..............................................27 CONCLUSION .......................................................................................................28 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 2 of 35 PageID: 158 ii TABLE OF AUTHORITIES CASES Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364 (3d Cir. 2011) ------------ 8 Ashcroft v. Iqbal, 556 U.S. 662 (2009) --------------------------------------------------- 4 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ---------------------------------- 4 Bentley v. Great Lakes Collection Bureau, 6 F.3d 60 (2d Cir. 1993) ------------ 6, 28 Blaha v. First Nat'l Collection Bureau, Inc., No. 2:16-cv-2791-WHW-CLW, 2016 U.S. Dist. LEXIS 157575 (D.N.J. Nov. 10, 2016) ----------------------------- 11, 14 Brown v. Card Serv. Ctr, 464 F.3d 450 (3d Cir. 2006 ---------------------------------- 8 Buchanan v. Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015) -------------- passim Burrell v. DFS Servs., LLC, 753 F. Supp. 2d 438 (D.N.J. 2010) ---------------------- 5 Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294 (3d Cir. 2008) - 8, 10 Caprio v. Healthcare Revenue Recovery Grp., LLC, 709 F.3d 142 (3d Cir. 2013) - 4 Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) ----------------------------------------------------------------------------- 21, 22, 23 Clifford Steers & Shenfield Inc. v. FTC, 392 F.2d 921 (6th Cir. 1968) ------------- 20 Commonwealth v. Fremont Investment & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008) -------------------------------------------------------------------------------------- 22 County of Los Angeles v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) ----------------- 22 Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014) ----------------- 25 Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507 (5th Cir. 2016) -------- 13 Douglass, v. Convergent Outsourcing, 765 F.3d 299 (3d Cir. 2014) ----------------- 6 Ellis v. Solomon & Solomon, P.C., 591 F.3d 130 (2d Cir. 2010) --------------------- 9 F.T.C. v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007) ------------------------ 27 Fackina v. RJM Acquisitions, LLC, No. 3:14-cv-6532-PGS-TJB (D.N.J. May 4, 2015) ---------------------------------------------------------------------------------- 11, 14 Filgueiras v. Portfolio Recovery Assocs., LLC, No. 2:15-cv-8144-JLL-SCM, 2016 U.S. Dist. LEXIS 54672 (D.N.J. Apr. 25, 2016) ------------------------------- 11, 14 FTC v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007) ---------------------------- 7 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 3 of 35 PageID: 159 iii FTC v. Colgate-Palmolive, 380 U.S. 374 (1965) -------------------------------------- 20 FTC v. Mandel Bros., 359 U.S. 385 (1959) --------------------------------------------- 21 Funderburk v. AFNI, Inc., Case 2:14-cv-06361-PD, 2015 U.S. Dist. LEXIS 177745 (E.D.Pa. Mar. 19, 2015) -------------------------------------------------- 11, 12 Glassman v. Computervision Corp., 90 F.3d 617 (1st Cir. 1996) --------------------- 5 Godson v. Eltman, 11-CV-0764S(Sr), 2016 U.S. Dist. LEXIS 51010 (W.D.N.Y. April 15, 2016) --------------------------------------------------------------------------- 25 Gonzales v. Arrow Fin. Services, LLC, 660 F.3d 1055 (9th Cir. 2011) -------------- 9 Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991) ------------------------------------ 8 Heathman v. Portfolio Recovery Assocs., LLC, No. 12-CV-201-IEG (RBB), 2013 U.S. Dist. LEXIS 27057 (S.D. Cal. Feb. 27, 2013) --------------------------------- 25 Hernandez v. Midland Credit Mgmt., Inc., 2007 WL 2874059 (N.D. Ill. Sept. 25, 2007) --------------------------------------------------------------------------------------- 26 Huertas v. Galaxy Asset Management, 641 F.3d 28 (3rd Cir. 2011) ------- 10, 11, 12 In re Burlington Coat Factory Litig., 114 F.3d 1410 (3d Cir. 1997) ----------------- 5 Jacobson v. Healthcare Fin. Services, Inc., 516 F.3d 85 (2d Cir. 2008) ------------- 9 Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244 (3d Cir. 2006) ---------------------------------------------------------------------------------------------- 27 Jensen v. Pressler and Pressler, LLP, 791 F.3d 413 (3rd Cir. 2015) ------------- 9, 10 Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010) - 7 Johns v. Northland Group, Inc., 76 F. Supp. 3d 590 (2014) -------------------------- 10 Johnson v. Riddle, 305 F.3d 1107 (10th Cir. 2002) ------------------------------------- 8 Keeton v. Tate & Kirlin Associates et al., 1:14-cv-00130 (S.D. Tex. May 26, 2015) ---------------------------------------------------------------------------------------------- 14 Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D. Ala. 1987) -------------------- 26 Kline v. Mortgage Electronic Security Systems, 3:08cv408, 2012 WL 1376995 (S.D. Ohio April 19, 2012) ------------------------------------------------------------- 23 Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993 (3d Cir. 2011) ----- 8, 9 Lopera v. Midland Credit Mgmt., No. 8:16-cv-1448-T-33JSS, 2016 U.S. Dist. LEXIS 155960 (M.D. Fla. Nov. 10, 2016) ------------------------------------------- 14 Lopez v. Law Offices of Faloni & Assocs., LLC, No. 16-cv-01117-SDW-SCM, 2016 U.S. Dist. LEXIS 124730 (D.N.J. Sep. 14, 2016) ---------------------------- 25 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 4 of 35 PageID: 160 iv Luther v. Convergent Outsourcing, Inc., No. 15-10902, 2016 U.S. Dist. LEXIS 56456 (E.D. Mich. Apr. 28, 2016) ----------------------------------------------------- 14 McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014) ------------ passim McRill v. Nationwide Credit Inc., No. 12-2175, 2012 WL 6727974, 2012 U.S. Dist. LEXIS 183009 (C.D. Ill. Dec. 6, 2012) ----------------------------------------------- 15 Medical Ctr. Pharm. v. Mukasey, 536 F.3d 383 (5th Cir. 2008) --------------------- 23 Midtec Paper Corp. v. United States, 857 F.2d 1487 (D.C.Cir.1988) --------------- 22 Miller v. Midland Credit Mgmt., Inc., 621 F. Supp. 2d 621 (N.D. Ill. 2009) ------- 26 N.J. Carpenters v. Tishman Constr. Corp., 760 F.3d 297 (3d Cir. 2014) ------------ 4 National Fuel Gas Supply Corp. v. FERC, 811 F.2d 1563 (D.C. Cir. 1987) ------- 22 Piper v. Portnoff Law Assocs., 396 F.3d 227 (3d Cir. 2005) -------------------------- 6 Pollice v. National Tax Funding. L.P., 225 F.3d 379 (3d Cir. 2000) ---------------- 26 Rawson v. Source Receivables Management LLC, No. 11 C 8972, 2012 WL 3835096, 2012 U.S. Dist. LEXIS 125205 (N.D. Ill. Sept. 4, 2012) --------------- 15 Rosenau v. Unifund Corp., 539 F.3d 218 (3d Cir. 2008) ------------------------------ 4 SEC v. Chenery Corp., 332 U.S. 194 (1947) ------------------------------------------- 21 State of Alaska v. O’Neill Investigations, 609 P.2d 520 (1980) ---------------------- 22 Tatis v. Allied Interstate, LLC, No. 2:16-cv-0109-JMV, 2016 U.S. Dist. LEXIS 134338 (D.N.J. Sep. 29, 2016) --------------------------------------------------------- 12 Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232 (5th Cir. 1997) 6, 28 Tex. Coalition of Cities for Utility Issues v. F.C.C., 324 F.3d 802 (5th Cir. 2003) 23 Trans Union Corp. v. FTC, 81 F.3d 228 (D.C.Cir.1995) ----------------------------- 22 Trans Union LLC v. FTC, 295 F.3d 42 (D.C. Cir. 2002) ----------------------------- 22 W. Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010) -------- 5 Weiss v. Regal Collections, 385 F.3d 337 (3d Cir. 2004) ------------------------------ 9 Williams Co. v. Federal Trade Commission, 381 F.2d 884 (6th Cir. 1967) -------- 20 Wilson v. Quadramed Corp., 225 F.3d 350 (3d Cir. 2000) ------------------------ 9, 10 Woerthwein v. Midland Credit Mgmt., No. 1:16-cv-4058, 2016 WL 6194908, 2016 U.S. Dist. LEXIS 146624 (N.D. Ill. Oct. 24, 2016) --------------------------------- 14 Zuniga v. Jefferson Capital Sys., LLC, No. 4:16-CV-526, 2016 U.S. Dist. LEXIS 173195 (E.D. Tex. Dec. 15, 2016) ----------------------------------------------------- 14 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 5 of 35 PageID: 161 v STATUTES 15 U.S.C. § 1692(a) ------------------------------------------------------------------------- 7 15 U.S.C. § 1692(b) ------------------------------------------------------------------------- 7 15 U.S.C. § 1692(e) ------------------------------------------------------------------------- 7 15 U.S.C. § 1692a(6) ------------------------------------------------------------------------ 6 15 U.S.C. § 1692L-------------------------------------------------------------------------- 22 15 U.S.C. § 1692m(a) ---------------------------------------------------------------------- 17 N.C. Gen. Stat. §75-55(1) ----------------------------------------------------------------- 19 OTHER AUTHORITIES “CFPB Orders American Express to Pay $85 Million Refund to Consumers Harmed by Illegal Credit Card Practices” (Oct. 1, 2012), http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-american- express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card- practices/ ---------------------------------------------------------------------------------- 19 “Collecting Consumer Debts: The Challenges of Change – A Workshop Report” (February 2009), https://www.ftc.gov/sites/default/files/documents/reports/collecting consumer debts challenges change federal trade commission workshop report/dcwr.pdf -- 17 “Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration” (July 2010), https://www.ftc.gov/sites/default/files/documents/reports/federal trade commission bureau consumer protection staff report repairing broken system protecting/debtcollectionreport.pdf ---------------------------------------------------- 17 “The Structure and Practices of the Debt Buying Industry” (January 2013), https://www.ftc.gov/sites/default/files/documents/reports/structure and practices debt buying industry/debtbuyingreport.pdf ------------------------------------------- 17 American Express Joint Consent Order, http://files.consumerfinance.gov/f/2012- CFPB-0002-American-Express-Centurion-Consent-Order.pdf -------------------- 19 Complaint for Civil Penalties, Injunctive and Other Relief, https://www.ftc.gov/sites/default/files/documents/cases/2012/01/120130assetcm pt.pdf--------------------------------------------------------------------------------------- 18 Goldsmith , Timothy E. and Natalie Martin, ”Testing Materiality under the Unfair Practices Acts: What Information Matters When Collecting Time-Barred Debts?” 64 Consumer Fin. L.Q. Rep. 372 (2010) ----------------------------------- 24 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 6 of 35 PageID: 162 vi Minnesota v. Midland Funding LLC, No. 27-cv-11-11510 (Hennepin Co. (Minn.) Dist. Ct.------------------------------------------------------------------------------------ 19 S. Rep. No. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1698 ----- 8 RULES Fed. R. Civ. P. 12(b)(6) -------------------------------------------------------- 4, 11, 13, 28 REGULATIONS 6 N.Y. City R. §2-191 --------------------------------------------------------------------- 19 940 Code Mass. Reg. §7.07(24) ---------------------------------------------------------- 19 N.M. Admin. Code §12.2.12.8-9 (App. N) --------------------------------------------- 19 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 7 of 35 PageID: 163 1 PRELIMINARY STATEMENT Plaintiff respectfully submits this opposition to Defendants’ Motion to Dismiss. Contrary to Defendant’s arguments, the Third Circuit has not addressed the issue presented: whether collection letters violate the FDCPA when they mislead or deceive a consumer into believing the debt was legally enforceable when, in fact, it was time barred and without regard to whether the letter threatened suit. The weight of authorities—including decisions from the Fifth, Sixth and Seventh Circuit Courts of Appeals, District Courts within this Circuit, the findings of the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”), and the research of Professors Goldsmith and Martin—all conclude that letters like the ones Plaintiff received could mislead or deceive the least sophisticated consumer to believe the debt was legally enforceable.. For the reasons stated herein, Defendants’ motion to dismiss should be denied. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 8 of 35 PageID: 164 2 STATEMENT OF THE CASE LVNV Funding LLC, Resurgent Capital Services, L.P, and Alegis Group, LLC (hereinafter “LVNV Defendants”) are highly litigious debt-buyers who purchases defaulted consumer debts for pennies on the dollar and then seeks to collect the full value of those unpaid debts through the use of its in-house and outside attorneys. (Compl. ¶¶ 6-8, 11-14, 16-23; ECF No. 1). All Defendants regularly collect or attempt to collect debts allegedly owed to others which were incurred primarily for personal, family or household purposes using mails, telephone, the internet and other instruments of interstate commerce. Id. at ¶¶ 11- 23. Defendants asserted that Plaintiff incurred or owed a certain financial obligation arising from an account originating from MCI Communications Services, Inc. (“Debt” or “Account”). Id. at ¶ 24. The Debt arose from one or more transactions which were primarily for Plaintiff’s personal, family, or household purposes. Id. at ¶ 25. In connection with their attempt to collect the Debt and on behalf of the LVNV Defendants, Allied Interstate LLC mailed Plaintiff a letter in an attempt to collect the Debt. Id. at ¶¶ 32, 34. The letter dated March 18, 2015 (the “Letter”) offered to “settle” the Debt. Id. at ¶ 32; Ex. A. At the time Allied mailed the Letter, the statute of limitations on the Debt had already expired. Id. at ¶ 36. The Letter Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 9 of 35 PageID: 165 3 did not disclose that the Debt was barred by the statute of limitations and, therefore, Defendants would never sue Plaintiff to collect the Debt. Id. at ¶¶ 38-43; Ex. A. The Letter falsely implies the Debt is legally enforceable and least sophisticated consumers would understand that the LVNV Defendants might later sue to collect it. Id. at ¶¶ 38-50; Ex. A. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 10 of 35 PageID: 166 4 STANDARD OF REVIEW: “PLAUSIBILITY” Defendant moves to dismiss under Fed. R. Civ. P. 12(b)(6). “In order to survive a motion to dismiss, the complaint must contain sufficient factual matter, which if accepted as true, states a facially plausible claim for relief.” Caprio v. Healthcare Revenue Recovery Grp., LLC, 709 F.3d 142, 147 (3d Cir. 2013) (citation omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (to survive dismissal, complaint must state a “plausible claim for relief”); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (need only to provide factual allegations that are sufficient “to raise a right to relief above the speculative level” (citations omitted)). The Court must view the facts presented and the inferences to be drawn therefrom in the light most favorable to the non-moving party. Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008). Thus, “[a] complaint has facial plausibility when there is enough factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” N.J. Carpenters v. Tishman Constr. Corp., 760 F.3d 297, 302 (3d Cir. 2014) (quoting Iqbal) (internal quotation marks omitted). The Court of Appeals has cautioned–as did Iqbal–that the standard “does not impose a probability requirement at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of’ the necessary element.” W. Penn Allegheny Health Sys., Inc. v. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 11 of 35 PageID: 167 5 UPMC, 627 F.3d 85, 98 (3d Cir. 2010) (internal quotation marks omitted and emphasis added). Applying that standard, the well-pleaded facts, together with the reasonable inferences favorable to Plaintiff drawn from those facts, will establish the elements of Defendants’ violation of the FDCPA. Therefore, Defendants’ Motion should be denied. If, however, this Court were to conclude that some deficiency exists, Plaintiff should be permitted to amend. As has been explained: When a claim is dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6), leave to amend and reassert that claim is ordinarily granted. In re Burlington Coat Factory Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). A claim may be dismissed with prejudice, however, if amending the complaint would be futile. Id. “Futile,” as used in this context, means that the complaint could not be amended to state a legally-cognizable claim. Id. (citing Glassman v. Computervision Corp., 90 F.3d 617, 623 (1st Cir. 1996)). Burrell v. DFS Servs., LLC, 753 F. Supp. 2d 438, 444 (D.N.J. 2010). Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 12 of 35 PageID: 168 6 LEGAL ARGUMENT The well-pled facts in the Class Action Complaint (the “Complaint”), along with reasonable inferences from those facts, establish that Defendants violated the FDCPA. Liability under the FDCPA arises upon the showing of a single violation. Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1238 (5th Cir. 1997); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 62-3 (2d Cir. 1993). Although Plaintiffs pled multiple violations, Plaintiff need only demonstrate the sufficient allegation of a single violation to defeat the Motion. POINT I. THE FAIR DEBT COLLECTION PRACTICES ACT A. Basic Elements of a Cause of Action under the FDCPA "To prevail on an FDCPA claim, a plaintiff must prove that (1) she is a consumer, (2) the defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect a "debt" as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in attempting to collect the debt.” Douglass, v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir. 2014) (citing Piper v. Portnoff Law Assocs., 396 F.3d 227, 232 (3d Cir. 2005)). Defendants’ Motion is focused on the fourth element. The LVNV Defendants also dispute that they are “debt collections” under the FDCPA. Thus, Allied is a “debt collector” who attempted to collect a “debt,” and Plaintiff is a “consumer” all within the meaning of 15 U.S.C. § 1692a. Plaintiff Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 13 of 35 PageID: 169 7 addresses the fourth element and that the LVNV Defendants are “debt collectors” below. B. The FDCPA Protects the Least Sophisticated Consumer The FDCPA was enacted because existing consumer protection laws were found to be inadequate to protect the honest but unfortunate debtor based on abundant evidence of abusive, deceptive, and unfair debt collection practices by many debt collectors which contributed to the number of personal bankruptcies, marital instability, loss of jobs, and invasions of individual privacy. 15 U.S.C. §§ 1692(a) and 1692(b); FTC v. Check Investors, Inc., 502 F.3d 159, 165 (3d Cir. 2007) (“Congress recognized that ‘the vast majority of consumers who obtain credit fully intend to repay their debts. When default occurs, it is nearly always due to an unforeseen event such as unemployment, overextension, serious illness or marital difficulties or divorce.’”). Moreover, abusive tactics by some collectors gave the unscrupulous ones a competitive advantage over the ethical ones. Thus, Congress adopted the FDCPA with the “express purpose to eliminate abusive debt collection practices by debt collectors, and to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged.” Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573 (2010) (emphasis added) (internal quotation marks omitted); 15 U.S.C. § 1692(e); see also S. Rep. No. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 14 of 35 PageID: 170 8 1695, 1698 (the Act was meant to suppress unfair and deceptive debt-collection practices). The Act’s provisions should be liberally construed in favor of the consumer to effectuate its remedial purpose. Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 997 (3d Cir. 2011); Johnson v. Riddle, 305 F.3d 1107, 1117 (10th Cir. 2002). Consequently, a debt collector’s conduct is judged from the standpoint of the “least sophisticated consumer.” Brown v. Card Serv. Ctr, 464 F.3d 450, 453n1 (3d Cir. 2006); Graziano v. Harrison, 950 F.2d 107, 114 (3d Cir. 1991) (the FDCPA is construed from the viewpoint of the “least sophisticated consumer”). In this way, “the FDCPA protects all consumers, the gullible as well as the shrewd.” Lesher, 650 F.3d at 997. For example, a “debt collection letter is deceptive where it can be reasonably read to have two or more different meanings, one of which is inaccurate.” Brown, 464 F.3d at 455; Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294, 298 (3d Cir. 2008). Furthermore, except where the Act expressly makes knowledge or intent an element of the violation, the “FDCPA is a strict liability statute.” Allen ex rel. Martin v. LaSalle Bank, N.A., 629 F.3d 364, 368 (3d Cir. 2011); See also Kaff v. Nationwide Credit, Inc., No. 13-cv- 5413(SLT)(VVP), 2015 U.S. Dist. LEXIS 182048, at *15 (E.D.N.Y. Mar. 31, 2015) (“A plaintiff need not plead ‘intentional conduct on the part of the debt collector’ because the FDCPA ‘is a strict liability statute, and [thus,] the degree of Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 15 of 35 PageID: 171 9 a defendant's culpability may only be considered in computing damages.’) (quoting Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 135 (2d Cir. 2010)). “Congress also intended the FDCPA to be self-enforcing by private attorney generals [sic].” Weiss v. Regal Collections, 385 F.3d 337, 345 (3d Cir. 2004). “In order to prevail, it is not necessary for a plaintiff to show that she herself was confused by the communication she received; it is sufficient for a plaintiff to demonstrate that the least sophisticated consumer would be confused.” Jacobson v. Healthcare Fin. Services, Inc., 516 F.3d 85, 91 (2d Cir. 2008); see also Gonzales v. Arrow Fin. Services, LLC, 660 F.3d 1055 (9th Cir. 2011). “Thus, the FDCPA enlists the efforts of sophisticated consumers … as private attorneys general to aid their less sophisticated counterparts, who are unlikely themselves to bring suit under the Act, but who are assumed by the Act to benefit from the deterrent effect of civil actions brought by others.” Jensen v. Pressler and Pressler, LLP, 791 F.3d 413, 419 (3rd Cir. 2015) (internal quotation marks omitted). “The [least sophisticated consumer] standard is an objective one, meaning that the specific plaintiff need not prove that she was actually confused or misled, only that the objective least sophisticated debtor would be.” Id. The least sophisticated consumer is a “low standard” which “protects naïve consumers.” Lesher, 650 F.3d at 997; Wilson v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000). At the same time, “it also prevents liability for bizarre or Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 16 of 35 PageID: 172 10 idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.” Id. at 354-355 (internal quotation marks omitted). When applying the standard to a letter, words are not viewed in isolation but in the context of the entire document. See, Campuzano-Burgos, 550 F.3d at 299. The application of the least sophisticated consumer standard is a question of law decided by a judge. Wilson, 225 F.3d at 353 n.2. When determining the legality of Defendants’ letter from the standpoint of the least sophisticated consumer, the allegedly unlawful language must be “capable of influencing the decision of the least sophisticated consumer.” Jensen, 791 F.3d at 421. Applying the least sophisticated consumer standard to Defendants’ letter leads to the conclusion that Defendants violated the FDCPA. POINT II. IN VIOLATION OF THE FDCPA, THE LETTER WOULD DECEIVE AND MISLEAD THE LEAST SOPHISTICATED CONSUMER TO BELIEVE THAT DEFENDANTS WERE COLLECTING AN ENFORCEABLE DEBT Defendants miss the point of Plaintiff’s claims. Plaintiff does not assert that the Letter expressly threatened litigation—which were issues raised and decided in Huertas v. Galaxy Asset Management, 641 F.3d 28 (3rd Cir. 2011) and Johns v. Northland Group, Inc., 76 F. Supp. 3d 590 (2014). Instead, he claims that the Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 17 of 35 PageID: 173 11 letters would mislead the least sophisticated consumer to believe that the debt was legally enforceable. A. The Cases Defendants do not dispute that three Courts of Appeal decisions—from the Fifth, Sixth and Seventh Circuits—conclude that these types of letters could violate the FDCPA. As found by this Court in Blaha v. First Nat'l Collection Bureau, Inc., No. 2:16-cv-2791-WHW-CLW, 2016 U.S. Dist. LEXIS 157575 (D.N.J. Nov. 10, 2016); Filgueiras v. Portfolio Recovery Assocs., LLC, No. 2:15-cv-8144-JLL- SCM, 2016 U.S. Dist. LEXIS 54672 (D.N.J. Apr. 25, 2016); Fackina v. RJM Acquisitions, LLC, No. 3:14-cv-6532-PGS-TJB (D.N.J. May 4, 2015) (see May 4, 2015 transcript and Order denying motion for judgment on the pleadings attached as Exhibit A); and this Court’s sister district in Funderburk v. AFNI, Inc., No. 2:14-cv-06361-PD, 2015 U.S. Dist. LEXIS 177745 (E.D. Pa. Mar. 19, 2015) these decisions are persuasive and Huertas is distinguishable. The first, McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014), was a consolidated appeal from two cases. One, Delgado v. Capital Mgmt. Services, LP et al., No. 13-8009 (7th Cir.), was an interlocutory appeal of a denial of a motion to dismiss under Fed. R. Civ. P. 12(b)(6). There, as here, the plaintiff received a collection letter that offered to “settle” a debt without revealing that the debt was time-barred. The Seventh Circuit affirmed: Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 18 of 35 PageID: 174 12 [I]f the debt collector uses language in its dunning letter that would mislead an unsophisticated consumer into believing that the debt is legally enforceable, regardless of whether the letter actually threatens litigation (the requirement the Third and Eighth Circuits added to the mix), the collector has violated the FDCPA. Because it is plausible that an unsophisticated consumer would believe a letter that offers to “settle” a debt implies that the debt is legally enforceable, it was correct in Delgado to decline to dismiss the action at this stage …. The proposition that a debt collector violates the FDCPA when it misleads an unsophisticated consumer to believe a time-barred debt is legally enforceable, regardless of whether litigation is threatened, is straightforward under the statute. Section 1692e(2)(A) specifically prohibits the false representation of the character or legal status of any debt, whether a debt is legally enforceable is a central fact about the character and legal status of that debt. McMahon, 744 F.3d at 1020. As did the Court in Tatis v. Allied Interstate, LLC, No. 2:16-cv-0109-JMV, 2016 U.S. Dist. LEXIS 134338 (D.N.J. Sep. 29, 2016), Defendants incorrectly rely on Huertas. As Funderburk noted, the issue here—the letter’s ability to mislead as to a debt’s legal enforceability—was not presented by the pro se plaintiff in Huertas. The Sixth Circuit reached the same conclusion as McMahon. Buchanan v. Northland Grp., Inc., 776 F.3d 393 (6th Cir. 2015). There, as here, the plaintiff received a collection letter which offered to “settle” one of LVNV’s time-barred debts. Id., at 395. The letter failed to disclose that the debt was time-barred or that a payment would re-start the clock. Id. at 395-396. The district court had granted Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 19 of 35 PageID: 175 13 the defendant’s Rule 12(b)(6) motion but the Court of Appeals1 reversed. It wrote: Was this letter misleading? One reason to say yes is that a “settlement offer” with respect to a time-barred debt may falsely imply that payment could be compelled through litigation. Formal and informal dictionaries alike contain a definition of “settle” that refers to concluding a lawsuit…. The other problem with the letter is that an unsophisticated debtor who cannot afford the settlement offer might nevertheless assume from the letter that some payment is better than no payment. Not true: Some payment is worse than no payment. The general rule in Michigan is that partial payment restarts the statute-of– limitations clock, giving the creditor a new opportunity to sue for the full debt. As a result, paying anything less than the settlement offer exposes a debtor to a substantial new risk. This point is almost assuredly not within the ken of most people, whether sophisticated, whether reasonably unsophisticated, or whether unreasonably unsophisticated. Id. at 399 (emphasis in original) (citations omitted). Thereafter, finding McMahon and Buchanan persuasive, the Fifth Circuit held “that a collection letter that is silent as to litigation, but which offers to ‘settle’ a time-barred debt without acknowledging that such debt is judicially unenforceable, can be sufficiently deceptive or misleading to violate the FDCPA.” Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507, 511 (5th Cir. 2016). Just as in McMahon, Buchanan and Daugherty, the letter here (i) offered to settle a debt, (ii) did not disclose the debt was time-barred, and (iii) did not disclose 1The panel majority in Buchanan included the Honorable Lee Rosenthal, District Judge, Southern District of Texas. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 20 of 35 PageID: 176 14 a settlement might re-start the statute of limitations clock for Defendants to sue the consumer (and report it on their credit). This Court and other courts have also been persuaded by the McMahon- Buchanan analysis. See Zuniga v. Jefferson Capital Sys., LLC, No. 4:16-CV-526, 2016 U.S. Dist. LEXIS 173195 (E.D. Tex. Dec. 15, 2016) (denying motion to dismiss); Luther v. Convergent Outsourcing, Inc., No. 15-10902, 2016 U.S. Dist. LEXIS 56456 (E.D. Mich. Apr. 28, 2016) (certifying class); Blaha v. First Nat'l Collection Bureau, Inc., No. 2:16-cv-2791-WHW-CLW, 2016 U.S. Dist. LEXIS 157575, at *19 (D.N.J. Nov. 10, 2016) (“offering a ‘settlement’ on a time-barred debt without proper notification that the debt is timebarred could plausibly mislead or deceive the least sophisticated consumer into believing that the debt was legally enforceable.”); Lopera v. Midland Credit Mgmt., No. 8:16-cv-1448-T-33JSS, 2016 U.S. Dist. LEXIS 155960 (M.D. Fla. Nov. 10, 2016) (denying motion to dismiss); Woerthwein v. Midland Credit Mgmt., No. 1:16-cv-4058, 2016 WL 6194908, 2016 U.S. Dist. LEXIS 146624 (N.D. Ill. Oct. 24, 2016) (same); Filgueiras v. Portfolio Recovery Assocs., LLC, No. 2:15-cv-8144-JLL-SCM, 2016 U.S. Dist. LEXIS 54672 (D.N.J. Apr. 25, 2016) (distinguishing Huertas and denying motion to dismiss); Keeton v. Tate & Kirlin Associates et al., 1:14-cv-00130 (S.D. Tex. May 26, 2015) (denying LVNV’s summary judgment motion) (see Exhibit B); Fackina v. RJM Acquisitions, LLC, No. 3:14-cv-6532-PGS-TJB (D.N.J. May 4, 2015) Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 21 of 35 PageID: 177 15 (denying defendant’s motion for judgment on the pleadings) (see Exhibit A); McRill v. Nationwide Credit Inc., No. 12-2175, 2012 WL 6727974, 2012 U.S. Dist. LEXIS 183009 (C.D. Ill. Dec. 6, 2012); Rawson v. Source Receivables Management LLC, No. 11 C 8972, 2012 WL 3835096, 2012 U.S. Dist. LEXIS 125205 (N.D. Ill. Sept. 4, 2012). B. The Regulatory Position The amici curiae briefs filed by the FTC and CFPB in the McMahon/Delgado appeals and in Buchanan support denial of the Defendants’ Motion. Those federal agencies argued that least sophisticated consumers could be deceived and misled by a letter offering a settlement of a time-barred debt, even absent any explicit threat of litigation: Although an implicit threat is a sufficient condition of a statutory violation in this context, it is not also a necessary condition. That point is the subject of some confusion in the case law. Though there is wide agreement that actual or threatened lawsuits on stale debts violate the FDCPA, a number of courts have inartfully described this principle as if it sets the outer limit on FDCPA liability in time-barred debt cases… [T]he Commission has concluded that consumers can be misled or deceived when debt collectors seek partial payments on stale debt. In most states, a partial payment restarts the statute of limitations for the entire amount of the debt. The Commission observed that “consumers do not expect” that a partial payment “will have the serious, adverse consequence of starting a new statute of limitations.” Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 22 of 35 PageID: 178 16 Accordingly, the Commission concluded that a debt collector’s solicitation of a partial payment on a time barred debt—implying, incorrectly, that the payment will reduce the consumer’s legal obligation—can “create a misleading impression as to the consequences of making a payment,” thereby violating the FDCPA, 15 U.S.C. §1692e. The Commission stated that “to avoid creating a misleading impression, collectors would need to disclose clearly and prominently to consumers prior to requesting or accepting such payments that (1) the collector cannot sue to collect the debt and (2) providing a partial payment would revive the collector’s ability to sue to collect the balance.” In sum, the debt collector need not make an overt threat or a false or misleading representation about the debt to violate the FDCPA. Rather, the court must consider a practice’s effect on unsophisticated consumers from their perspective – for example, in light of circumstances such as their prior collections experience and any preexisting misconceptions. In particular, it will often be relevant that most consumers do not know or understand their legal rights with respect to time-barred debt. In some circumstances, a debt collector may be required to make affirmative disclosures in order to avoid misleading consumers. (Emphasis in original; citations omitted.) Brief of Amici Curiae Federal Trade Commission and Consumer Financial Protection Bureau in McMahon and in Buchanan. McMahon called the FTC/CFPB views “well-reasoned.” McMahon, 744 F.3d at 1020. The Sixth Circuit in Buchanan observed that the CFPB had requested comment for potential rulemaking on the issue of time-barred debts and also intended to do further research on time-barred debt issues. The Sixth Circuit held that the plaintiff had stated a plausible claim, as follows: Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 23 of 35 PageID: 179 17 At this preliminary stage of the case, it seems fair to infer that, if the agency deems these same questions worthy of further study, Buchanan deserves a shot too. A contrary conclusion—that consumer confusion is not even plausible here—would amount to our own declaration that the CFPB’s efforts on this score as a waste of time. We are not prepared to say that at this stage of the case. Buchanan, 776 F.3d at 398. The positions taken by the FTC and CFPB in the amici briefs filed in Delgado and Buchanan were based, in part, on research both agencies conducted in the last few years on the debt collection industry. After extensive research, the FTC issued a number of reports summarizing its studies of the debt collection industry: “Collecting Consumer Debts: The Challenges of Change – A Workshop Report” (February 2009);2 “Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration” (July 2010);3 and “The Structure and Practices of the Debt Buying Industry” (January 2013).4 See also 15 U.S.C. § 1692m(a) (2009) (reports to Congress). In the FTC’s attempt to regulate debt buyers’ efforts to collect on time- barred debts, it brought an enforcement action in 2012 against a large debt buyer, 2 https://www.ftc.gov/sites/default/files/documents/reports/collecting-consumer- debts-challenges-change-federal-trade-commission-workshop-report/dcwr.pdf 3 https://www.ftc.gov/sites/default/files/documents/reports/federal-trade- commission-bureau-consumer-protection-staff-report-repairing-broken-system-pro tecting/debtcollectionreport.pdf 4 https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices -debt-buying-industry/debtbuyingreport.pdf Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 24 of 35 PageID: 180 18 Asset Acceptance LLC claiming it tried to collect time-barred debts without disclosure of that fact. (See Complaint for Civil Penalties, Injunctive and Other Relief.).5 The FTC alleged that “a large percentage of the individual accounts it collects are past the statute of limitations,” that out-of-statute debts “can be revived in many states if the consumer either makes a payment on the debt or states, in writing, an intention to pay it,” and that this basically tricks consumers into waiving a defense: Many consumers do not know if the accounts that Asset is attempting to collect are beyond the statute of limitations. Consumers also do not realize that making a partial payment on a debt, or making a written promise to pay will, in many instances, revive the debt. When Asset contacts consumers to collect on a debt, many consumers believe they could experience serious negative consequences, including being sued, if they fail to pay the debt. Similarly, many consumers believe that making a partial payment on a debt in response to Asset’s collection efforts is a positive action that can avert the negative consequences of nonpayment. If consumers knew, in connection with a past-statute debt, that Asset had no legal means to enforce collection of the debt, or understood that making a partial payment or a written to promise to pay would revive it, some consumers would likely choose not to make a payment or a written promise to pay. Id. at ¶¶ 30-35 (emphasis added). Similarly, the CFPB has taken action along with other federal agencies—the 5 https://www.ftc.gov/sites/default/files/documents/cases/2012/01/ 120130assetcmpt.pdf Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 25 of 35 PageID: 181 19 FDIC, the Federal Reserve, and the Office of the Comptroller of the Currency—to require that creditors disclose whether debts are time barred. These agencies entered into three consent orders with various American Express entities on October 1, 2012, which require AmEx to “provide disclosures concerning the expiration of… litigation rights when collecting debt that is barred by applicable state statutes of limitations,” and to advise those to whom AmEx sells or assigns the debts of this requirement. Under the order, the CFPB and FDIC have authority to enforce compliance. (Joint Consent Order).6 Such actions have been supplemented by state enforcement of debt collection statutes—whether by statute in North Carolina (N.C. Gen. Stat. §75-55(1)), by regulation in Massachusetts, New Mexico and New York City (940 Code Mass. Reg. §7.07(24), N.M. Admin. Code §12.2.12.8-9 (App. N) and 6 N.Y. City R. §2-191, or by litigation in Minnesota (Minnesota v. Midland Funding LLC, No. 27-cv-11-11510 (Hennepin Co. (Minn.) Dist. Ct.). (Consent Judgment, ¶ 13g., p. 6; ¶ 16h, pp. 7-8.). These actions refute any contention Defendants could make regarding Plaintiff’s claims with respect to time-barred debts. Plaintiff’s claims are not based on an irrational 6 http://files.consumerfinance.gov/f/2012-CFPB-0002-American-Express- Centurion-Consent-Order.pdf See also “CFPB Orders American Express to Pay $85 Million Refund to Consumers Harmed by Illegal Credit Card Practices” (Oct. 1, 2012), http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-american- express-to-pay-85-million-refund-to-consumers-harmed-by-illegal-credit-card- practices/. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 26 of 35 PageID: 182 20 view of the law. As the Buchanan and McMahon courts were persuaded by the view of the FTC and CFPB, Plaintiff asks this Court to be similarly persuaded. In FTC v. Colgate-Palmolive, 380 U.S. 374, 384-385 (1965), the Supreme Court held that the FTC “is often in a better position than are courts to determine when a practice is ‘deceptive’ within the meaning of the Act. This Court has frequently stated that the Commission’s judgment is to be given great weight by reviewing courts.” Accord, Clifford Steers & Shenfield Inc. v. FTC, 392 F.2d 921, 925 (6th Cir. 1968) (“reviewing courts are admonished that in cases involving allegedly deceptive advertising the Commission’s judgment is to be accorded especial deference”) and Williams Co. v. Federal Trade Commission, 381 F.2d 884, 889 (6th Cir. 1967) (“it is the [FTC’s] function to find... facts [and consider ability of advertising to mislead] and a court should not disturb its determination unless the finding is arbitrary or clearly wrong”). Moreover, as the FTC and CFPB noted in their amici brief in McMahon, at p. 5: [C]ourts have found the Commission’s “accumulated expertise” persuasive regarding “the expectations and beliefs of the public, especially where the alleged deception results from an omission of information instead of a statement.” Simeon Mgmt. Corp. v. FTC, 579 F.2d 1137, 1145 (9th Cir. 1978); see also, e.g., Bridge v. Ocwen Fed. Bank, 681 F.3d 355, 361 (6th Cir. 2012) (finding FTC Staff Commentary on the FDCPA “instructive”); Dunham v. Portfolio Recovery Assocs., Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 27 of 35 PageID: 183 21 663 F.3d 997, 1002 (8th Cir. 2011) (“[W]e have found [the FTC’s] Staff Commentary [on the FDCPA] persuasive in the past.”). Administrative agencies make law through adjudication as well as by rulemaking. SEC v. Chenery Corp., 332 U.S. 194, 203 (1947). “And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.” Id. The decision of an agency to file a complaint represents its construction of the relevant statutes, in this case both the FTC Act and the FDCPA, even if the proceeding is resolved by a consent decree. Thus, in FTC v. Mandel Bros., 359 U.S. 385, 391 (1959), the FTC determined that receipts issued by retailers to consumers purchasing fur were “invoices” within the meaning of the Fur Products Labeling Act. The Supreme Court held “The inclusion of retail sales slips in invoices has been the consistent administrative construction of the Act. This contemporaneous construction is entitled to great weight even though it was applied in cases settled by consent rather than in litigation.” Id. The FTC’s interpretation of what is “deceptive” in the area of debt collection is entitled to deference by the courts. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The FTC has been given authority to enforce both the FTC Act and the FDCPA, both of which condemn “unfair and deceptive practices”. “Where…Congress enacts an ambiguous provision within a Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 28 of 35 PageID: 184 22 statute entrusted to the agency’s expertise, it has ‘implicitly delegated to the agency the power to fill those gaps.’” Trans Union LLC v. FTC, 295 F.3d 42, 50 (D.C. Cir. 2002) citing County of Los Angeles v. Shalala, 192 F.3d 1005 (D.C. Cir. 1999) (quoting National Fuel Gas Supply Corp. v. FERC, 811 F.2d 1563, 1569 (D.C. Cir. 1987). Thus, the FTC is empowered to determine, based upon its expertise, what practices are unfair or deceptive. Here, the FTC’s interpretation of unfairness was subjected to a deliberative process, including notice and an opportunity for comment, through the public workshops and 2010 Report described above, making its determination equivalent to a regulation issued in the context of Congressional delegation of regulatory authority. The FTC and CFPB have the authority to issue regulations with respect to the collection of debts by debt collectors. 15 U.S.C. § 1692L(a), (d). Chevron deference extends to interpretations reached in adjudications, Trans Union Corp. v. FTC, 81 F.3d 228, 230 (D.C.Cir.1995) citing Midtec Paper Corp. v. United States, 857 F.2d 1487, 1497 (D.C.Cir.1988). Deference is appropriate as to interpretations arising pursuant to consent decrees and even positions in amicus briefs. Commonwealth v. Fremont Investment & Loan, 452 Mass. 733, 897 N.E.2d 548 (2008) (accorded deference to concepts of unfairness indicated by an FDIC consent decree governing mortgage lending standards); State of Alaska v. O’Neill Investigations, 609 P.2d 520 (1980) (gave deference to FTC administrative Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 29 of 35 PageID: 185 23 interpretations of state unfair and deceptive practices act derived from consent decrees); Kline v. Mortgage Electronic Security Systems, 3:08cv408, 2012 WL 1376995 (S.D. Ohio April 19, 2012)(court accorded deference to FTC position in amicus brief, reversing prior contrary ruling). An agency’s interpretation of its governing statutes—here, the FTC Act and FDCPA—is followed by the courts as long as it is reasonable, even if a different view would also be reasonable. If a statute is ambiguous or silent, the court must defer to any “permissible construction of the statute” by the agency. Chevron, 467 U.S. at 843. The court may reverse the agency’s decision only if it is “arbitrary, capricious, or manifestly contrary to the statute.” Medical Ctr. Pharm. v. Mukasey, 536 F.3d 383, 393 (5th Cir. 2008). “If the decision is based on a reasonable interpretation of the statute, we defer to the agency’s construction.” Tex. Coalition of Cities for Utility Issues v. F.C.C., 324 F.3d 802, 807 (5th Cir. 2003) (citing Chevron, 467 U.S. at 844) (“[A] court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency.”) Thus, when an agency with such expertise studies the matter and expresses its considered view—like the FTC and CFPB has here—courts should follow it. C. Academic Support The Complaint, at ¶ 49, references the report of Professors Timothy E. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 30 of 35 PageID: 186 24 Goldsmith and Natalie Martin entitled, “Testing Materiality under the Unfair Practices Acts: What Information Matters When Collecting Time-Barred Debts?” 64 Consumer Fin. L.Q. Rep. 372 (2010) (the “Study”). The Study suggests that the fact that a debt is time-barred is material to the least sophisticated consumer. The purpose of the Study was to determine how a debtor’s desire and willingness to pay a debt is affected by whether or not it is time-barred. In the Study, some participants were told that a debt was no longer legally enforceable while other participants were not told that fact. When queried as to their willingness to pay the debt, “consumer debtors who were told that a debt was time- barred were less likely to want to pay the debt in question, making clear that the fact that a debt is time barred is material and thus may be a required disclosure under unfair trade practice laws.” Id. at § III, p. 373. The study found that 34% of the participants would not pay the debt when given notice in a collection letter that the debt was time-barred, while only 6% would not pay when no notice was given. Id. § VIC., p. 378. Assuming that the notice made no difference to either the 66% who would still pay even after notice or to the 6% who would not pay despite not getting notice, a significant 28% of consumers demonstrated that whether a debt is time-barred is a material fact. Therefore, Defendants’ failure to disclose that the debts being collected were time barred was an omission of a material fact in violation of the FDCPA. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 31 of 35 PageID: 187 25 D. Defendants LVNV, Resurgent and Alegis Cannot Skirt Liability for the Unlawful Conduct of its Debt Collector Agent. The LVNV Defendants argue they are not “debt collectors” as defined under the FDCPA.7 The only argument raised to support that assertion is that there are no allegations of any direct communications between Plaintiff and the LVNV Defendants. The LVNV Defendants have raised this very argument in this Court— which has been rejected. Lopez v. Law Offices of Faloni & Assocs., LLC, No. 16- cv-01117-SDW-SCM, 2016 U.S. Dist. LEXIS 124730, at *7 (D.N.J. Sep. 14, 2016) (“a defendant need not communicate directly with a consumer in order to be considered a debt collector for purposes of the FDCPA”); see also Heathman v. Portfolio Recovery Assocs., LLC, No. 12-CV-201-IEG (RBB), 2013 U.S. Dist. LEXIS 27057, at *16 (S.D. Cal. Feb. 27, 2013) (“PRA argues that it cannot be held vicariously liable for its attorneys filing an erroneous lawsuit against Heathman. This argument is frivolous[.]”) The plain language of the FDCPA—the statutory definition—does not include any requirement of a direct communication with a consumer. The statutory definition prescribed in 15 U.S.C. § 1692a(6) simply states that a debt collector is 7 But see Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1258 (11th Cir. 2014) (“Undisputedly, LVNV and its surrogates are debt collectors and thus subject to the FDCPA.”); Godson v. Eltman, 11-CV-0764S(Sr), 2016 U.S. Dist. LEXIS 51010, at *14-15 (W.D.N.Y. April 15, 2016) (“In light of LVNV's refusal to comply with this Court's Decision and Order . . . the Court determines that, for purposes of this action, LVNV is a debt collector as defined by 15 U.S.C. § 1692a(6) and LVNV's net worth is $50 million.”). Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 32 of 35 PageID: 188 26 any person who: (1) uses interstate commerce or the mails; (2) in any business whose principal purpose is debt collection; (3) who regularly collects or attempts to collect either directly or indirectly; (4) debts owed or asserted to be owed to another. In fact, the definition does not even require any communication with an alleged debtor. The statutory definition of a “debt collector” does not require any connection or nexus between the criteria required to fit said definition and the actual activities of a debt collector. The Third Circuit has held that a company which purchases defaulted accounts and attempts to collection them directly or indirectly is a debt collector subject to the FDCPA. Pollice v. National Tax Funding. L.P., 225 F.3d 379, 403 (3d Cir. 2000). Several courts have held that the debt buyer’s parent company is also a debt collector since the facts showed that the parent was “thoroughly enmeshed in the debt collection business” and “a significant participant in the debt collection process” Hernandez v. Midland Credit Mgmt., Inc., 2007 WL 2874059 (N.D. Ill. Sept. 25, 2007); see also Miller v. Midland Credit Mgmt., Inc., 621 F. Supp. 2d 621 (N.D. Ill. 2009); Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D. Ala. 1987). Thus, farming out debts to a third party to collect does not negate the business’s “principal purpose” as the “collection of any debt.” Pollice, 225 F.3d at 404; 15 U.S.C. § 1692a(6); see also, F.T.C. v. Check Investors, Inc., 502 F.3d 159 Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 33 of 35 PageID: 189 27 (3d Cir. 2007) (affirming Pollice’s holding that company that purchases defaulted obligations and attempts to collect them is a debt collector). Consequently, the LVNV Defendants are “debt collectors” and are liable for Allied’s unlawful collection activities conducted on their behalf. E. Tatis has no Preclusive Effect on this Case. Defendants’ argument that Plaintiff is precluded from certifying a class action due to the Tatis dismissal is without merit. First, the application of the doctrine of collateral estoppel requires, inter alia, notice and a full and fair opportunity to be heard afforded to the party sought to be precluded. Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 249 (3d Cir. 2006) (“the party being precluded from relitigating the issue was fully represented in the prior action.”). Plaintiff was not a party in the Tatis case and Tatis was not certified as a class action. Cases cited by Defendants are inapplicable to this case since Plaintiff is not a member of a certified class. Thus, collateral estoppel clearly does not apply. Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 34 of 35 PageID: 190 28 CONCLUSION Liability under the FDCPA arises upon the showing of a single violation. Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1238 (5th Cir. 1997); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 62-3 (2d Cir. 1993). To succeed, then, Plaintiff needs to prove one violation and, for purposes of defeating a motion under Fed. R. Civ. P. 12(b)(6), need to plausibly allege facts for one violation. The Motion must be denied if the Court concludes that the facts give rise to one violation because Plaintiff will have sufficiently pled the single cause of action for violation of the FDCPA. For the reasons stated, Plaintiff respectfully requests that the Court deny Defendant’s Motion to Dismiss. DATED: December 27, 2016 Respectfully submitted, s/ Yongmoon Kim Yongmoon Kim, Esq. Kim Law Firm LLC Case 2:16-cv-01507-MCA-MAH Document 23 Filed 12/27/16 Page 35 of 35 PageID: 191 EXHIBIT A Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 1 of 17 PageID: 192 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY ARLEEN FACKINA. on behalf of Civil Action No. 14-cv-06532 (PGS)(TJB) herself and all others similarly situated Plaini i/f. V. ORDER RJM ACQUISITIONS LLC and JOHN DOES 1-25 Defendants. This matter has been brought before Court on Defendant, RJM Acquisition LLC’s (hereinafter “Defendant”), Motion for Judgment on the Pleadings (ECF 11). A conference was convened before the Court on May 4, 2015, at which time oral argument was taken with respect to the pending motion. Having carefully considered the parties’ submissions, as well as the arguments presented to the Court during oral argument on May 4, 2015, and for the reasons set forth on the record at the May 4, 2015, conference, and for other good cause shown, IT IS on this 4th day of May, 2015, ORDERED that Defendant’s Motion for Judgment on the Pleadings (ECF 11) be, and hereby is, DENIEI) WITH PREJUDICE. I)ated: May 4, 2015 PETER G. SlIER 1I)AN, U.S.D.J. Case 3:14-cv-06532-PGS-TJB Document 18 Filed 05/05/15 Page 1 of 1 PageID: 233Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 2 of 17 PageID: 193 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court Trenton, New Jersey 1 UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY ______________________________ ARLEEN FACKINA, PLAINTIFF Vs. CIVIL NO. 14-6532 (PGS) RJM ACQUISITIONS, LLC, DEFENDANT ______________________________ MAY 4, 2015 CLARKSON S. FISHER COURTHOUSE 402 EAST STATE STREET TRENTON, NEW JERSEY 08608 B E F O R E: THE HONORABLE PETER G. SHERIDAN U.S. DISTRICT COURT JUDGE DISTRICT OF NEW JERSEY A P P E A R A N C E S: JOSEPH K. JONES, LLC BY: BENJAMIN J. WOLF, ESQUIRE FOR THE PLAINTIFF LEWIS, BRISBOIS, BISGAARD & SMITH, LLP BY: PETER T. SHAPIRO, ESQUIRE FOR THE DEFENDANT HEARING ON MOTION TO DISMISS Certified as true and correct as required by Title 28, U.S.C. Section 753 /S/ Francis J. Gable FRANCIS J. GABLE, C.S.R., R.M.R. OFFICIAL U.S. REPORTER (856) 889-4761 Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 3 of 17 PageID: 194 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:00 00:00 00:00 00:01 00:01 United States District Court Trenton, New Jersey 2 THE COURT: So, this is Fackina versus RJM. Could we enter appearances? We'll start with the plaintiff. MR. WOLF: Sure, Judge, for plaintiff and the putative class, Benjamin Wolf, of the law offices of Joseph K. Jones, 555 5th Avenue, New York, New York, good afternoon. THE COURT: Good afternoon, Mr. Wolf. MR. SHAPIRO: Good afternoon, Peter Shapiro from Lewis, Brisbois, Bisgaard and Smith for defendant RJM Acquisitions. THE COURT: Good afternoon. So, Mr. Shapiro, it's your motion; right? MR. SHAPIRO: Yes, it is, your Honor. THE COURT: Do you wish to be heard? MR. SHAPIRO: Thank you, your Honor. I think this is a fairly straight forward motion and matter. RJM is a debt collector, the plaintiff Fackina had a debt that was acquired by RJM; RJM sent a collection letter and it offered repayment options, didn't threaten suit, just offered repayment options. The allegation that's challenged by this motion is not the entirety of the complaint, but rather specific allegations that the collection letter violated certain provisions of the FDCPA, insofar as it misled the consumer; I guess would be fair to characterize everything under that catchall, because the letter failed to disclose that if any part payment was made pursuant to the repayment options that Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 4 of 17 PageID: 195 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:01 00:02 00:02 00:03 00:03 United States District Court Trenton, New Jersey 3 were offered, that would reset the running of the statute of limitations. And it's our position that the Third Circuit's 2011 decision in Huertas case precludes that claim. In that decision the Third Circuit said that it's okay to collect on a time-barred debt, because time-barred debts are still valid, they just can't be something that's sued upon, provided that the collection letter does not threaten litigation. This collection letter from RJM does not threaten litigation, and therefore it's acceptable and not misleading within the ruling of Huertas. And we do not believe that it's possible for this Court to revisit the Huertas decision and hold as plaintiff would like, that offering repayment options is deceptive, misleading, and otherwise violative of the FDCPA, because we submit Huertas has said debt collectors are allowed to try to collect on these time-barred debts. A typical collection letter would say, we'd like you to pay this debt -- that's pretty much all that RJM's letter said; we'd like you to repay the debt, here are some options on how to repay it. Under those circumstances the letter doesn't violate the FDCPA and we submit that that count should be dismissed. THE COURT: So, your motion only goes to 1692e(10); is that right? MR. SHAPIRO: Well, no, it's the claims under e(2), Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 5 of 17 PageID: 196 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:03 00:03 00:04 00:04 00:04 United States District Court Trenton, New Jersey 4 (5) and (10), and also f. There's a separate claim that is asserted under 1692c that we haven't challenged here, because that's really a factual issue that would have to be litigated. THE COURT: But they all revolve around that one issue; right? MR. SHAPIRO: The ones that we moved against all revolve around the same issue, yes. THE COURT: Okay, thank you. Mr. Wolf? MR. WOLF: Good afternoon, your Honor. What I'd like to do is initially tell you what this case is really about, and then distinguish and show why the Huertas decision is not relevant to this case at all. So, number one, this case is about whether or not this letter's deceptive, because it tries to collect on a time-barred debt while it's offering a payment plan. And that's key because by the least sophisticated consumer making just a minimum payment, which is repayment option 2 in the defendant's letter, by making this mere $10 payment, what it does as you know is that restarts the clock by which RJM can now sue on the entire debt. And that now leads us to why Huertas is completely irrelevant to this case. First of all, it's based on a pro se plaintiff's complaint. And if you look at the complaint in Huertas and also the appellant's brief and brief reply, you'll realize Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 6 of 17 PageID: 197 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:04 00:05 00:05 00:05 00:05 United States District Court Trenton, New Jersey 5 number one that the pro se plaintiff had an axe to grind against the court in general, and it's just not pled well. And that what it pleads is that there was a "false debt" in Huertas. So Huertas plaintiff was saying this debt isn't even valid. So, in the case I'm not saying that. I'm not saying that on behalf of the plaintiff and I'm not saying that on behalf of the putative class. I'm saying that that's valid and RJM may or may not be able to collect on it. What I'm saying is that by giving the plaintiff these two options, either pay the entire thing or pay this minimum $10 payment, without telling the plaintiff that the entire clock is going to restart and they can now sue on the entire debt by making this mere $10 payment, that's deceptive and that's misleading. And that's something that Huertas does not talk about. And not only does it not talk about it by just reading the Third Circuit's opinion in Huertas, but if you look at two other circuits and how they criticize Huertas on this particular issue, the Sixth and Seventh Circuit in McMahon and Buchanan which is cited in our brief, both of them both say that Huertas never answered the question about whether or not these types of letters are deceptive or misleading. And in fact, in Huertas -- and Judge, you had brought up the e(10) violation, that wasn't even alleged by Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 7 of 17 PageID: 198 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:05 00:06 00:06 00:06 00:07 United States District Court Trenton, New Jersey 6 the pro se plaintiff in Huertas, either because he knew better, or maybe he didn't, he should have hired better counsel, but at the end of the day the Third Circuit never decided the issue about whether or not these types of letters are misleading or deceptive. And again it's by Huertas itself, and also as cited by the Sixth Circuit and the Seventh Circuit. And what I'd also like to add -- and again, we conceded this that it's not binding, but as the Seventh Circuit wrote in McMahon it's actually instructive, is that if you look where the FTC and CFTD have come on these issues -- and they've cited amicus briefs in McMahon and they relied on by Buchanan, and they say look, this can be instructive, we should listen to what they have to say and they say that this is deceptive or this can be misleading by not telling the least sophisticated consumer that the debt is beyond the statute of limitations, and by the way if you make this even nominal payment on the entire debt, we can sue you on the entire amount. So, this case is not about just merely just the ability to sue on a time-barred debt, that's not what this case is about. This case about whether or not these types of letters are misleading or deceptive and by not telling the sophisticated consumer that you can be sued on the entire amount, that's misleading and deceptive to the consumer. Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 8 of 17 PageID: 199 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:07 00:07 00:08 00:08 00:08 United States District Court Trenton, New Jersey 7 THE COURT: Thank you. Do you wish to reply briefly? MR. SHAPIRO: Just very briefly, just to say that two other circuit court decisions do disagree with Huertas, but they're not binding on this Court and Huertas is, and we submit that based on that authority the Court should grant our motion. THE COURT: Okay, thank you. So, this action arises out of the defendant's attempt to collect on a time-barred debt, via a collection letter dated May 21, 2014, purportedly owed scholastic. It is undisputed by the parties that the defendant attempted to collect the debt after the expiration of the applicable statute of limitations, which was six years. NJSA2A:14-1. Plaintiff filed the complaint seeking statutory damages and injunctive relief. Specifically plaintiff avers that the defendant's collection letter was false and misleading on the grounds that, in attempting to collect a time-barred debt on which the statute of limitations expired, defendant failed to explicitly advise plaintiff: (1) that the defendant was without legal recourse in attempting to resolve the outstanding balance due to the expiration of the statute of limitations; and (2) partial payment of the debt would revive the statute of limitations, and thereby afford defendant the opportunity it otherwise would not have had to institute Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 9 of 17 PageID: 200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:09 00:09 00:10 00:11 00:11 United States District Court Trenton, New Jersey 8 litigation in order to recover the entirety of the remaining balance. The allegedly offending letter clearly stated that the last payment received on the account was December 6, 2007. And the letter also provides in relevant part in two main paragraphs, and one is in bold, and it says: Repayment option 1, pay the balance due, $67.31. And underneath it it says: You can satisfy this account by your payment of $67.31. Then in another bold printed option it says: Repayment option number 2, pay $10 per month. And then underneath that bold sentence it says: If you cannot send $67.31 all at once, RJM is pleased to accept $10 per month until the balance due of $67.31 is paid. Please respond by July 10, 2014. When you finish paying, your account will be satisfied in full. Defendant's argument in support of their motion hinges on the assertion that, under existing Third Circuit precedent -- that's the Huertas case which both parties have discussed -- is controlling. Huertas, 641 F.3d, 28 (3d. Cir. 2011), stands for the proposition that a statute of limitations is a bar to a remedy, but it does not extinguish the obligation of a debtor. That's at page 32. "A statute of limitations does not invalidate a debt, but renders it unenforceable." That's at page 32 as well. In the absence of a threat of litigation, no violation of the FDCPA occurs. Id. at 33. As in Huertas, if the debt collector is only Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 10 of 17 PageID: 201 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:12 00:12 00:13 00:13 00:14 United States District Court Trenton, New Jersey 9 attempting to collect a debt; that is, if the debt can't be sued upon because the statute of limitations expired, then as long as the debt collector does not threaten litigation to the debtor, or the unsophisticated consumer, then there's no breach of the FDCPA. It seems to me, however, Huertas is distinguishable, because there's a partial payment option. In this case defendant offers repayment option number 2, to pay $10 a month; that is, "RJM is pleased to accept $10 per month until the balance due of $67.31 is paid." The partial payment clause may be misleading, because upon a partial payment it revives the amount that's owed by the debtor, because the statute of limitations starts anew. See, Burlington County Country Club v. Midlantic National Bank South, 223 N.J. Super 227, at 235, and it's a Chancery Division 1987 case. And the status of this precedent is prevalent throughout the country. What's different about Huertas is that I don't believe the Third Circuit, when it rendered its decision in Huertas, was concerned about these partial payments. And secondly, the Huertas court it didn't consider the position of the Federal Trade Commission on these partial payments. The McMahon case cites to the Federal Trade Commission report of 2013, which was a couple years after the Third Circuit decided Huertas. But the Federal Trade Commission report states in part: "Similar concerns arise when collectors request or Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 11 of 17 PageID: 202 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:14 00:15 00:15 00:16 00:16 United States District Court Trenton, New Jersey 10 accept partial payments on time-barred debts. When a collector makes such a request or accepts such a partial payment, in many circumstances such efforts may convey or imply to consumers that they have only obligated themselves in the amount of the partial payment. For example, if a collector offers to accept a $50 payment on a $500 time-barred credit card debt, a consumer may believe that the $50 payment itself is the only consequence to him or her for making the payment. Nevertheless, under the laws of most states --" and I've quoted from New Jersey -- "a partial payment on a time-barred debt revives the entire balance of the debt for a new statute of limitation period. This consequence likely would be important to consumers in deciding whether to make the payment." That's the Federal Trade Commission Structure & Practice of Debt Buying Industry, 472013. In a case in another circuit, McMahon v. LVNV Funding, 744 F.3d 1010, the Seventh Circuit focuses on the revival of the statute of limitation based upon a partial payment. In McMahon the court stated, "The court in Huertas and Freyermuth, did not explain why such a representation about the legal status of the debt, wholly apart from the threat of litigation, does not violate the Act. The fact that both Delgado and McMahon letters contained an offer of settlement makes things worse, not better, since a gullible consumer who made a partial payment would inadvertently have Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 12 of 17 PageID: 203 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:17 00:17 00:17 00:18 00:18 United States District Court Trenton, New Jersey 11 reset the limitations period, and made him or herself vulnerable to a suit on the full amount. That is why those offers only reinforce the misleading impression that the debt was legally enforceable." And that's from the McMahon case at page 1021. As I noted before, the Huertas case does not concern a partial payment and its effects on the statute of limitations. In addition, the Third Circuit in 2011 as I noted, did not have the benefits of the FTC report, which I believe was issued in 2013. It seems to me that the distinction between Huertas and this case, and the policy of the FTC are important here. So, I find that Huertas is distinguishable from the case before me, with regard to the payment option number 2, where partial payment is involved. So, I find that the language of the letter under prepayment option number 2, is misleading to an unsophisticated consumer based upon McMahon. See also, Buchanan v. Northland, 776 F.3d 393 (6th Cir. 2015). So, the defendant's motion to dismiss on that ground is denied. MR. SHAPIRO: Can I ask one question, your Honor, for clarification? THE COURT: You may. MR. SHAPIRO: You just stated that defendant's letter is misleading; I think perhaps that's an overstatement. Perhaps it should be potentially misleading and that's an Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 13 of 17 PageID: 204 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 00:18 00:18 United States District Court Trenton, New Jersey 12 issued to be determined in the case? THE COURT: Potentially misleading? I'm not certain what the importance of that is, but -- MR. SHAPIRO: Well, if it's misleading then the case is over. THE COURT: I see what you're saying. But I meant it could be found to be misleading to an unsophisticated consumer. MR. SHAPIRO: Thank you. (Matter concluded.) Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 14 of 17 PageID: 205 $ $10 [7] - 4:19, 5:11, 5:14, 8:10, 8:12, 9:8, 9:9 $50 [2] - 10:6, 10:7 $500 [1] - 10:6 $67.31 [5] - 8:7, 8:8, 8:11, 8:13, 9:10 / /S [1] - 1:24 0 08608 [1] - 1:10 1 1 [2] - 7:20, 8:7 10 [2] - 4:1, 8:13 1010 [1] - 10:17 1021 [1] - 11:5 14-6532 [1] - 1:5 1692c [1] - 4:2 1692e(10 [1] - 3:23 1987 [1] - 9:15 2 2 [6] - 4:18, 7:23, 8:10, 9:8, 11:14, 11:16 2007 [1] - 8:4 2011 [3] - 3:3, 8:19, 11:8 2013 [2] - 9:23, 11:10 2014 [2] - 7:11, 8:13 2015 [1] - 1:8 2015) [1] - 11:18 21 [1] - 7:11 223 [1] - 9:14 227 [1] - 9:15 235 [1] - 9:15 28 [2] - 1:23, 8:18 3 32 [2] - 8:21, 8:23 33 [1] - 8:25 393 [1] - 11:18 3d [1] - 8:18 4 4 [1] - 1:8 402 [1] - 1:9 472013 [1] - 10:15 5 5 [1] - 4:1 555 [1] - 2:5 5th [1] - 2:5 6 6 [1] - 8:4 641 [1] - 8:18 6th [1] - 11:18 7 744 [1] - 10:17 753 [1] - 1:23 776 [1] - 11:17 8 856 [1] - 1:25 889-4761 [1] - 1:25 A ability [1] - 6:21 able [1] - 5:9 absence [1] - 8:23 accept [4] - 8:12, 9:9, 10:1, 10:6 acceptable [1] - 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2:4 OFFICIAL [1] - 1:25 ON [1] - 1:21 once [1] - 8:11 one [5] - 4:4, 4:14, 5:1, 8:6, 11:20 ones [1] - 4:6 Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 16 of 17 PageID: 207 opinion [1] - 5:17 opportunity [1] - 7:25 option [8] - 4:18, 8:6, 8:9, 9:7, 9:8, 11:14, 11:16 options [6] - 2:18, 2:25, 3:14, 3:20, 5:10 order [1] - 8:1 otherwise [2] - 3:15, 7:25 outstanding [1] - 7:22 overstatement [1] - 11:24 owed [2] - 7:11, 9:12 P page [3] - 8:21, 8:23, 11:5 paid [2] - 8:13, 9:10 paragraphs [1] - 8:6 part [3] - 2:25, 8:5, 9:25 partial [14] - 7:23, 9:7, 9:10, 9:11, 9:19, 9:21, 10:1, 10:2, 10:5, 10:10, 10:18, 10:25, 11:7, 11:14 particular [1] - 5:19 parties [2] - 7:12, 8:17 pay [6] - 3:18, 5:11, 8:7, 8:10, 9:8 paying [1] - 8:14 payment [25] - 2:25, 4:16, 4:18, 4:19, 5:11, 5:14, 6:18, 7:23, 8:4, 8:8, 9:7, 9:10, 9:11, 10:3, 10:5, 10:6, 10:7, 10:9, 10:10, 10:14, 10:19, 10:25, 11:7, 11:14 payments [3] - 9:19, 9:21, 10:1 per [3] - 8:10, 8:12, 9:9 perhaps [1] - 11:24 Perhaps [1] - 11:25 period [2] - 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9:16 time-barred [10] - 3:6, 3:17, 4:16, 6:21, 7:10, 7:18, 10:1, 10:6, 10:11 Title [1] - 1:23 TO [1] - 1:21 Trade [4] - 9:21, 9:22, 9:24, 10:14 TRENTON [1] - 1:10 United States District Court Trenton, New Jersey 15 tries [1] - 4:15 true [1] - 1:23 try [1] - 3:16 two [4] - 5:10, 5:18, 7:4, 8:5 types [3] - 5:22, 6:4, 6:22 typical [1] - 3:17 U U.S [2] - 1:13, 1:25 U.S.C [1] - 1:23 Under [1] - 3:20 under [6] - 2:23, 3:25, 4:2, 8:16, 10:9, 11:15 underneath [2] - 8:7, 8:10 undisputed [1] - 7:12 unenforceable [1] - 8:23 UNITED [1] - 1:1 unsophisticated [3] - 9:4, 11:16, 12:7 up [1] - 5:25 V valid [3] - 3:6, 5:5, 5:8 versus [1] - 2:1 via [1] - 7:10 violate [2] - 3:21, 10:22 violated [1] - 2:21 violation [2] - 5:25, 8:24 violative [1] - 3:15 Vs [1] - 1:5 vulnerable [1] - 11:2 W wholly [1] - 10:21 wish [2] - 2:13, 7:1 WOLF [3] - 1:16, 2:3, 4:10 Wolf [3] - 2:4, 2:6, 4:9 worse [1] - 10:24 wrote [1] - 6:10 Y years [2] - 7:14, 9:23 York [2] - 2:5 Case 2:16-cv-01507-MCA-MAH Document 23-1 Filed 12/27/16 Page 17 of 17 PageID: 208 EXHIBIT B Case 2:16-cv-01507-MCA-MAH Document 23-2 Filed 12/27/16 Page 1 of 17 PageID: 209 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS BROWNSVILLE DIVISION MICHAEL A. KEETON, an individual; § on behalf of himself and all others § similarly situated, § Plaintiffs, § § VS. § CIVIL ACTION NO. B-14-130 § TATE & KIRLIN ASSOCIATES, et al., § Defendants. § ORDER On April 24, 2015, the United States Magistrate Judge filed a Report and Recommendation [Doc. No. 50]. Defendant LVNV Funding, LLC has objected to the Report and Recommendation [Doc. No. 53] and Plaintiff has filed his Opposition to Defendant LVNV Funding, LLC’s Objections [Doc. No. 56]. Having considered de novo the Magistrate Judge’s Report and Recommendation and the issues raised by Defendant LVNV Funding, LLC’s Objections to the Report and Recommendation and Plaintiff’s Opposition to Defendant LVNV Funding, LLC’s Objections, the Court hereby adopts the Report and Recommendation. Therefore, the motion for summary judgment filed by Defendant LVNV Funding, LLC [Doc. No. 38] is granted in part and denied in part. The motion is denied as to any claims made by Keeton pursuant to the FDCPA. The motion is granted as to any claims made by Keeton pursuant to the TDCA. Signed this 26th day of May, 2015. _________________________________ Andrew S. Hanen United States District Judge Case 1:14-cv-00130 Document 57 Filed in TXSD on 05/26/15 Page 1 of 1Case 2:16-cv-0 507-MCA-MAH Document 23-2 Filed 12/27/16 Page 2 of 17 PageID: 210 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS BROWNSVILLE DIVISION MICHAEL A. KEETON, an individual; § on behalf of himself and all others § similarly situated, § Plaintiffs, § § v. § Civil Action No. B-14-130 § TATE & KIRLIN ASSOCIATES, et al., § Defendants. § REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE On July 23, 2014, Plaintiff Michael A. Keeton (“Keeton”) filed a complaint against Defendants Tate & Kirlin Associates (“Tate & Kirlin”), LVNV Funding, LLC (“LVNV”) and John & Jane Does Numbers 1 Through 25. Dkt. No. 1. Keeton alleged that the Defendants violated the Fair Debt Collection Practices Act (“FDCPA”) and the Texas Debt Collection Act (“TDCA”). On December 19, 2014, LVNV filed a motion for summary judgment, which is currently pending before the Court.1 Dkt. No. 38. Keeton filed a response to the summary judgment motion; LVNV has filed a reply. Dkt. Nos. 47, 48. After reviewing the record and the relevant case law, the Court recommends that the motion for summary judgment be denied in part and granted in part. It is recommended that summary judgment be denied as to the FDCPA claims, because there is a genuine dispute of material fact as to whether the letter was misleading. It is also recommended that the motion for summary judgment be granted as to the TDCA claims, because Keeton has not shown that LVNV made an affirmative statement that constituted a misrepresentation. 1 This Report and Recommendation does not address the claims made against Tate & Kirlin or the Doe defendants. No motions have been filed concerning those defendants. 1 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 1 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 3 of 17 PageID: 211 I. Background A. Factual Background The facts of this case are largely undisputed; the question before the Court is whether, under these facts, LVNV’s actions violated the FDCPA and TDCA. Approximately “10 years ago,” Keeton obtained a credit card from Citibank, which he used for household purchases, “such as buying food, clothing and gas.” Dkt. No. 47-1. Keeton “believe[s]” that his last payment on the credit card debt was made prior to May 20, 2007. Id. LVNV does not dispute that “more than 7 years had elapsed” between Keeton’s last payment and the issuance of the dunning letters in this case. Dkt. No. 38, p. 2. Under Texas law, there is a four year statute of limitations on causes of action to collect debts. TEX. CIV. PRAC. & REM. CODE § 16.004(a)(3). The date of the last payment determines the accrual date for purposes of this statute. Dodeka, L.L.C. v. Campos, 377 S.W.3d 726, 731 (Tex. Ct. App.–San Antonio 2012). In a letter dated May 20, 2014, Tate & Kirlin – acting on behalf of LVNV – contacted Keeton regarding his Citibank debt. Dkt. No. 1, p. 19.2 The letter alleged that the total balance of the debt was $1,287.22 and gave Keeton three alternatives regarding the debt. Id. The letter also requested Keeton to “[p]lease respond by 6/10/14 to take advantage of this offer. We are not obligated to renew this offer.” Id. The first offer was to “Take a 95% discount! Settle your account for $64.36 in one payment,” which the letter noted would save Keeton $1,222.86. Dkt. No. 1, p. 19. The second offer was to “Take a 90% discount! Settle your account for $128.72 in three monthly 2 While the Fifth Circuit has not directly addressed the question, the Third and Ninth Circuits have concluded that “an entity which itself meets the definition of ‘debt collector’ may be held vicariously liable for unlawful collection activities carried out by another on its behalf.” Pollice v. National Tax Funding, L.P., 225 F.3d 379, 404 (3d Cir. 2000); Fox v. Citicorp Credit Services, Inc., 15 F.3d 1507, 1516 (9th Cir. 1994). This appears to be little more than the normal liability that arises in an agent-principal relationship, where the agent acts on behalf of the principal. As such, the Court finds the reasoning of these cases to be persuasive. Accordingly, LVNV could be liable for any unlawful actions taken by Tate & Kirlin in attempting to collect the debt. 2 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 2 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 4 of 17 PageID: 212 payments of $42.91,” which would save Keeton $1,158.50. Id. The third offer was for Keeton to pay $50.00 each month until the entire balance of $1,287.22 was paid off. Id. At the bottom of the letter, on the section that would be detached and mailed back to Tate & Kirlin, the three options were represented with check boxes. In responding to the letter, Keeton would mark the box for one of the following alternatives: (1) “Enclosed is a payment of $64.36 to settle my account;” (2) “Enclosed is my first payment of $42.91 towards the settlement balance of $128.72;” or, (3) “Enclosed is a payment of $50.00 towards the balance due of $1,287.22.” Dkt. No. 1, p. 19. In a letter dated June 24, 2014, Tate & Kirlin again contacted Keeton regarding his Citibank debt. Dkt. No. 47-1, p. 9. While the total amount of the debt increased by $7.43 – to $1,294.65 – the language used in the letter was identical to the language used in the previous letter. Id. The only change was the payment amount that would be required to settle the account. The central issue in this case is whether the use of the words “settle” and “settlement” implied that legal action could follow if no payment was made. B. Procedural History On July 23, 2014, Keeton filed a class action complaint, on behalf of himself and all others similarly situated, against Tate & Kirlin, LVNV and “John and Jane Does numbers 1 through 25.”3 Dkt. No. 1. Keeton asserted that the letter from Tate & Kirlin, sent on behalf of LVNV, violated the FDCPA and TDCA.4 Id. 3 Keeton’s complaint seeks to have this case certified as a class action, but he has not filed a motion seeking such certification pursuant to FED. R. CIV. P. 23. The Court takes no position as to the propriety of such a classification at this time. 4 Keeton has filed two additional complaints, all of which list LVNV as a defendant. Keeton v. Convergent Outsourcing, et al., Civil No. 14-131; Keeton v. Convergent Outsourcing, et al., Civil No. 14-132. These complaints are part of a nationwide series of complaints against LVNV and other debt-collectors based upon letters sent to people who owed money on time- barred debts. The Judicial Panel on Multidistrict Litigation (“MDL”) rejected an effort to have these cases centralized as MDL cases. In re: LVNV Funding, LLC, Fair Debt Collection Practices Act Litigation, MDL No. 2610, dated April 2, 2015. 3 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 3 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 5 of 17 PageID: 213 As to the FDCPA claims, Keeton asserts that the letter – and its use of the terms settle and settlement – violated the FDCPA’s prohibitions against using or making “false, deceptive or misleading representations,” in connection with collecting a debt, which would violate 15 U.S.C. §1692e(2)(A). Dkt. No. 1, p. 15. Keeton has further pled that the Defendants made “false threats to take action that cannot legally be taken,” in violation of § 1692e(5). Id, p. 16. Keeton also alleges that the Defendants used “false representation or deceptive means to collect or attempt to collect [a] debt,” in violation of § 1692e(10). Id. Finally, Keeton has pled that the Defendants used “unfair or unconscionable means” to collect on the debt in violation of 15 U.S.C. § 1692f. Id. In the TDCA claims, Keeton asserts that the Defendants misrepresented “the character, extent, or amount of a consumer debt and whether a legal obligation exists for the consumer to pay it,” in violation of TEX. FIN. CODE § 392.304(a)(8). Dkt. No. 1, p. 16. On December 19, 2014, LVNV filed a motion for summary judgment, pursuant to FED. R. CIV. P. 56. Dkt. No. 38. LVNV asserted that there is no genuine dispute of material fact in this case, because LVNV’s conduct was permissible as a matter of law. Id. LVNV asserts that while it used the word settle in its letter, LVNV “never makes any threat of litigation or that the account will be reported on [Keeton’s] credit [report].” Id, p. 4. On March 4, 2015, Keeton timely filed a response to the motion for summary judgment.5 Dkt. No. 47. Keeton asserts that the issue of whether the word settle implies possible future legal action is a question of fact for the jury to decide. Id. Keeton has introduced into evidence a study conducted by a proposed expert witness, Timothy Goldsmith, as to people’s reactions – and subsequent actions – when they are informed that 5 In the interim, a motion to consolidate this case with several similar cases from around the country was filed with the Judicial Panel on Multidistrict Litigation. Dkt. No. 40. The response to the summary judgment motion in this case was initially delayed pending resolution of a request to stay proceedings pending action by the MDL. Dkt. Nos. 42, 43, 44. That motion was denied and Plaintiff was ordered to respond to the summary judgment no later than March 5, 2015. Dkt. No. 45. As noted earlier, supra n.4, the MDL panel denied the motion to transfer on April 2, 2015. 4 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 4 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 6 of 17 PageID: 214 their debt is no longer legally enforceable. Dkt. No. 47-1, p. 75. On March 13, 2015, LVNV filed a reply. Dkt. No. 48. LVNV notes that all of the Circuit Court cases which have addressed this issue did so at the motion to dismiss stage, rather than at summary judgment. Id. LVNV also objected to the introduction of Goldsmith’s study as an expert report. Id. II. Applicable Law A. Summary Judgment Under Rule 56, summary judgment is appropriate when the moving party has established that the pleadings, depositions, answers to interrogatories, admissions, and affidavits – if any – demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). A material fact is one that might influence the outcome of the suit. Bazan v. Hidalgo Cnty., 246 F.3d 481, 489 (5th Cir. 2001). A genuine issue is “real and substantial, as opposed to merely formal, pretended, or a sham.” Id. Accordingly, a “genuine issue of material fact exists where evidence is such that a reasonable jury could return a verdict for the non-movant.” Piazza’s Seafood World, L.L.C. v. Odom, 448 F.3d 744, 752 (5th Cir. 2006). If “the nonmoving party will bear the burden of proof at trial on a dispositive issue,” then “a summary judgment motion may properly be made in reliance solely on the pleadings, depositions, answers to interrogatories, and admissions on file.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). “If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party’s claim.” Norwegian Bulk Transport A/S v. International Marine Terminals Partnership, 520 F.3d 409, 412 (5th Cir. 2008). The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. Id. “[O]n a motion for summary judgment, the evidence proffered by 5 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 5 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 7 of 17 PageID: 215 the plaintiff to satisfy his burden of proof must be competent and admissible at trial.” Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012). Additionally, the Court must review all evidence in the light most favorable to the non-moving party. Piazza’s Seafood World, 448 F.3d at 752. Factual controversies must be resolved in favor of the non-moving party, “but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts.” Murungi v. Xavier Univ. of La., 313 Fed. App’x. 686, 688 (5th Cir. 2008) (unpubl.) (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)). Thus, “in the absence of proof,” the court cannot “assume that the nonmoving party could or would prove the necessary facts.” Little, 37 F. 3d at 1075. Finally, “a court should not make credibility determinations or weigh the evidence in ruling on a motion for summary judgment.” Chacon v. Copeland, 577 Fed. App’x. 355, 360 (5th Cir. 2014) (unpubl.) (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)) (internal quotations omitted). B. Fair Debt Collection Practices Act The Fair Debt Collection Practices Act (“FDCPA”) is a federal statute that was enacted to “eliminate abusive debt collection practices by debt collectors.” 15 U.S.C. § 1692(e). The FDCPA sets out which types of entities qualify as debt collectors and regulates their collection activities to prevent “abusive” practices. 15 U.S.C. § 1692, et seq. The FDCPA permits individual consumers to seek damages in federal court. 15 U.S.C. § 1692k. If a defendant is found liable in a FDCPA action, the Plaintiff can recover actual damages suffered as well as statutory damages. 15 U.S.C. § 1692k(a). However, the statutory damages are assessed “per [civil] action, not per violation.” Peter v. GC Services L.P., 310 F.3d 344, 352 n. 5 (5th Cir. 2002) (emphasis original). Each plaintiff in a civil action can recover – with some exceptions – up to $1,000 in statutory damages, no matter how many violations of the FDCPA are proven at trial. 15 U.S.C. § 1692k(a)(2)(A)-(B). C. Texas Debt Collection Act The Texas Debt Collection Act (“TDCA”) is a state law provision that permits a 6 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 6 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 8 of 17 PageID: 216 consumer to sue for threats, coercion, harassment, abuse, unconscionable collection methods, or misrepresentations made in connection with the collection of a debt. TEX. FIN. CODE ANN. § 392.001, et seq. A prevailing plaintiff may recover actual damages, attorneys’ fees, and at least $100 for each violation. Id. at § 392.403. III. Analysis As previously noted, this case turns on the use of the words settle and settlement and what those words imply to a hypothetical unsophisticated consumer. Keeton has raised claims under the FDCPA and TDCA. As to the claims made under the FDCPA, the Court concludes that there is a genuine dispute of material fact whether LVNV’s actions violated the law. As to the TDCA, no genuine dispute of material fact exists over whether LVNV made an affirmative statement that constituted a misrepresentation. Accordingly, and for the reasons set forth more fully below, the motion for summary judgment should be denied as to the FDCPA claims, but granted as to the TDCA claims. A. FDCPA In determining whether LVNV’s actions potentially violated the FDCPA, the Court must determine what a hypothetical unsophisticated consumer would understand the words settle and settlement to mean in the context of the letter that was sent. The Court is mindful that it must not interpret the letter “in isolation but must analyze whether the letter is misleading as a whole.” Gonzalez v. Kay, 577 F.3d 600, 607 (5th Cir. 2009). Moreover, the Court must analyze the letter under a “least sophisticated consumer standard,” and “assume that the plaintiff-debtor is neither shrewd nor experienced in dealing with creditors.” McMurray v. ProCollect, Inc., 687 F.3d 665, 669 (5th Cir. 2012) (quoting Goswami v. Am. Collections Enter., Inc., 377 F.3d 488, 495 (5th Cir. 2004)). Such a consumer may be naive and uninformed, but he or she is not “a dimwit.” Wahl v. Midland Credit Management, Inc., 556 F.3d 643, 645-46 (7th Cir. 2009). As an initial matter, the fact that the debt is time-barred does not affect LVNV’s ability to collect on the debt. The FDCPA does not supercede state law, except to the extent 7 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 7 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 9 of 1 PageID: 217 state law is inconsistent with federal law. 15 U.S.C. § 1692n. The FDCPA contains no provision setting a limit as to when a debt becomes judicially unenforceable. 15 U.S.C. § 1692, et. seq. Accordingly, the parties have agreed that the question – of whether the debt is time-barred – is defined by Texas law. Dkt. No. 1, ¶ 54; Dkt. No. 38, p. 2. As pointed out earlier, that limit is four years. TEX. CIV. PRAC. & REM. CODE § 16.004(a)(3). Under Texas law, a time-barred debt is still a valid debt, even if it is not judicially enforceable. “Texas has consistently followed the legal principle that the statute of limitations may bar an action to recover on a debt, but the debt still exists . . . .” Miller, Hiersche, Martens & Hayward, P.C. v. Bent Tree Nat. Bank, 894 S.W.2d 828, 830 (Tex. App.–Dallas 1995). Rather than extinguishing the debt, “[t]he statute of limitations provides a personal defense that protects the debtor from an action to collect on the debt after the designated passage of time.” Holman Street Baptist Church v. Jefferson, 317 S.W.3d 540, 546-47 (Tex. Ct. App.–Houston [14 Dist.] 2010). While the Fifth Circuit has not directly decided the issue, other Circuit Courts have concluded that attempting to collect a time-barred debt is not a per se violation of the FDCPA. Buchanan v. Northland Group, Inc., 776 F.3d 393, 397 (6th Cir. 2015) (“There thus is nothing wrong with informing debtors that a debt remains unpaid or for that matter allowing them to satisfy the debt at a discount”); McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1021 (7th Cir. 2014) (“We do not hold that it is automatically improper for a debt collector to seek re-payment of time-barred debts”); Huertas v. Galaxy Asset Management, 641 F.3d 28, 32-33 (3d Cir. 2011) (“the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt”); Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir. 2001) (“no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid”). On the other hand, these same courts have concluded that the threat of litigation – whether direct or implied – on a time-barred debt does violate the FDCPA. Buchanan, 776 F.3d at 399-400; McMahon, 744 F.3d at 1021; Huertas, 641 F.3d at 32-33; Freyermuth, 248 8 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 8 of 15Case 2:16-cv-0 507-MCA-MAH Document 23-2 Filed 12/27/16 Page 10 of 17 PageID: 218 F.3d at 771. The Fifth Circuit has similarly indicated, albeit in dicta, that “threatening to sue on time-barred debt may well constitute a violation of the FDCPA.” Castro v. Collecto, Inc., 634 F.3d 779, 783 (5th Cir. 2011) (holding that because the debts were not time-barred, there could be no violation of the FDCPA); see also Crawford v. LVNV Funding, LLC, 758 F.3d 1254, 1259-1260 n. 6 (11th Cir. 2014) (collecting cases). These views appear consistent with the statute, which prohibits debt collectors from using a “threat to take any action that cannot legally be taken.” 15 U.S.C. § 1692e(5); Larsen v. JBC Legal Grp., P.C., 533 F.Supp.2d 290, 303 (E.D.N.Y. 2008) (“Although it is permissible [under the FDCPA] for a debt collector to seek to collect on a time-barred debt voluntarily, it is prohibited from threatening litigation with respect to such a debt.”). Thus, while nothing prohibits attempts to collect time-barred debts, there is a strong consensus that the express or implied threat of litigation on a time-barred debt violates the FDCPA. The question then becomes whether such a threat was made in the instant case. The Sixth and Seventh Circuits have held, under factual scenarios remarkably similar to the letter at issue in this case, that use of the word settle in a time-barred letter could violate the FDCPA by making it appear that the debt could be enforceable in court. Buchanan, 776 F.3d at 399-400; McMahon, 744 F.3d at 1021. Both cases were decided at the motion to dismiss stage. At that point the Court was required to accept all of the plaintiff’s well-pled facts as true and the question was merely whether the complaint had plausibly stated a claim upon which relief could be granted Admittedly, this case is at a different stage – summary judgment – with a different standard to be employed by the Court. In the instant case, the Court must consider all of the competent evidence to determine whether there is a genuine dispute of material fact. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). In judging a motion to dismiss, the Court is concerned with whether the claim is “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In analyzing a motion for summary judgment, the Court is tasked with determining whether a reasonable 9 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 9 of 15Case 2:16-cv-0 507-MCA-MAH Document 23-2 Filed 12/27/16 Page 11 of 17 PageID: 219 finder of fact could find for the plaintiff. Piazza’s Seafood World, 448 F.3d at 752. Thus, the question before the Court at the two stages is different. See Rader v. Cowart, 543 Fed. App’x. 358, 361 (5th Cir. 2013) (unpubl.) (“The standard applied to a motion to dismiss under Rule 12(b)(6) differs significantly from that applied to a motion for summary judgment.”). The Court notes these differences as it considers LVNV’s motion. In deciding the motions to dismiss, the Sixth and Seventh Circuits turned to dictionaries and Wikipedia to consider the definition of “settle.” Buchanan, 776 F.3d at 399- 400 (turning to Webster’s, Oxford, American Heritage, and Black’s Law dictionaries); McMahon, 744 F.3d at 1021 (turning to Wikipedia). Both courts found that the definition of the term settle encompassed the resolution of a lawsuit. Id. Based upon those definitions and the letters in those cases, the Sixth and Seventh Circuits concluded that the plaintiffs had stated a claim upon which relief could be granted. At this point in the instant case, the question is whether there is a genuine dispute of material fact as to what a hypothetical unsophisticated consumer would understand the words settle and settlement to mean in the context of a specific letter. In this case the terms may or may not imply that litigation was the next step if the debtor did not settle the outstanding debt. Generally speaking, the words settle and settlement are not so obscure that an unsophisticated consumer – one that is naive, but not a dimwit – would not have some sense of what the word means. But as noted by the Sixth Circuit, there are “various ways that an everyman individual might read,” the words settle and settlement. Buchanan, 776 F.3d at 399. Moreover, if the consumer turned to the dictionary to sort out what is meant by settle and settlement, the meaning would apparently depend upon which dictionary was consulted and which definition was adopted. As noted by the Sixth Circuit, Black’s Law Dictionary “acknowledges” that the word settle has an “equivocal meaning” and that “the particular sense in which it is used may be explained by the context or surrounding circumstances.” Buchanan, 776 F.3d at 399 (citing Black's Law Dictionary 1372 (6th ed.1990)). Thus, there 10 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 10 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 12 of 7 PageID: 220 appears to be multiple definitions of the terms, at least one of which would lead the typical unsophisticated consumer to believe that settle and settlement imply the possibility of litigation if the debt is not satisfied. At the same time, Keeton’s declaration, that he personally considered the use of the word settle to raise the specter of litigation, is of little help in analyzing this claim. The use of the “unsophisticated consumer” test is an objective one; Keeton’s personal belief is of no consequence. See Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1062 (7th Cir. 2000) (“under the FDCPA, confusion is not in the eyes of the beholder.”). This approach protects the legal rights of an unsophisticated consumer as well as protecting debt collectors from “bizarre and idiosyncratic interpretation of collection letters.” Gonzalez, 577 F.3d at 609 (internal quotations omitted). Accordingly – irrespective of Keeton’s personal understanding of the letter – the Court must determine if there is a genuine dispute that the terms were objectively misleading and implied that the debt was legally enforceable. In this case, the letter is ambiguous when considered as a whole. The letter was dated May 20, 2014 and gave Keeton 21 days (until June 10, 2014) to “take advantage of this offer.” The offer presented three different options. Dkt. No. 1, p. 19. The letter added that the Defendants were “not obligated to renew this offer,” but did not specifically state what would happen if the offer was rejected or the letter was ignored.6 Id. 6 The Sixth Circuit, in Buchanan, observed that correspondence on a time-barred debt could induce the debtor to send a partial payment and unwittingly re-start the statute of limitations on a debt. That result is less likely in the instant case. Buchanan arose under Michigan law, which provides that partial payment on a time-barred debt would restart the statute limitations clock, “unless it is accompanied by a declaration or circumstance that rebuts the implication that the debtor by partial payment admits the full obligation.” Yeiter v. Knights of St. Casimir Aid Society, 461 Mich. 493, 497 (Mich. 2000). Under the Michigan law, there was a rebuttable presumption that partial payment revived the entire debt. Id. Texas law is different. Under Texas law, partial payment does not automatically re-start the statute of limitations unless such a written agreement is made. Stine v. Stewart, 80 S.W.3d 586, 591 (Tex. 2002); TEX. CIV. PRAC. & REM. CODE § 16.065. Texas law requires a new agreement that must “1) be in writing and signed by the party to be charged; 2) contain an unequivocal acknowledgment of the justness or the existence of the particular obligation; and 3) refer to the obligation and express a willingness to honor that obligation.” Stine, 80 S.W.3d at 591. Even 11 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 11 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 13 of 7 PageID: 221 Under these circumstances, an unsophisticated consumer may well conclude that if they do not accept the offer – given the “take it or leave it” terms – that the debt is legally enforceable and litigation may follow. In sum, the terms settle and settlement – in this context – may carry the connotation of avoiding litigation. If this is the meaning taken from the letter by a hypothetical unsophisticated consumer, then such a letter would violate the FDCPA. Such enforcement – threatening litigation on a time-barred debt – is “[an] ... action that cannot legally be taken.” 15 U.S.C. § 1692e(5). If that were the case, LVNV would also be misrepresenting “the character, amount, or legal status of [a] ... debt,” by misrepresenting whether legal action could be taken to enforce the debt. 15 U.S.C. § 1692e(2)(A). Furthermore, such a misrepresentation would amount to using a “false representation or deceptive means to collect or attempt to collect [a] ... debt,” by falsely representing that legal action could follow any failure to settle the account. 15 U.S.C. § 1692e(10).7 There is language in the letter that contradicts Keeton’s argument as to its meaning and that might lead the unsophisticated consumer to conclude that legal action would not then, a party may only sue for breach based on the new written agreement and not the expired debt. Id. Furthermore, the Court notes that no party has interpreted the letter in this case as a contractual offer or as a novation of the original agreement with Citibank. 7 The Court notes that Keeton has also alleged that the letter constituted “unfair or unconscionable means” of collection, in violation of 15 U.S.C. § 1692f. Section 1692f sets forth what amounts to “unfair or unconscionable means” of collection. The prohibited activities include actions such as soliciting post-dated checks for the purpose of threatening criminal prosecution, or utilizing collect calls, or post cards to communicate with debtors. See, e.g., 15 U.S.C. § 1692f(3), (5), (7). That clearly is not the conduct in the instant case. Moreover, despite the “catchall provision” in the statute, the activities in the instant case are not of a similar type. Permitting the plaintiff to recover on allegations of conduct that are not of the same kind as the conduct enumerated in the statute would appear to violate the principle of ejusdem generis. See, e.g., U.S. v. Christensen, 559 F.3d 1092, 1094 (9th Cir. 2009) (holding that ejusdem generis requires that crimes covered by a catch-all statute must involve conduct similar to the conduct specifically enumerated in the statute). In any event, given the present posture of this case, it is unnecessary to decide whether LVNV used “unfair or unconscionable means” to collect the debt. 12 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 12 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 14 of 7 PageID: 222 result. For example, the bottom portion of the letter expressly states that the Defendants were offering to “settle [the] account,” rather than settling any potential litigation. Dkt. No. 1, p. 19. Admittedly, this statement does not foreclose the possibility of litigation, but nor does it threaten it.8 Nevertheless, employing a general understanding of the words settle and settlement, a naive, unsophisticated consumer could easily conclude that the debt is legally enforceable and that legal consequences could follow a decision not to settle the account.9 The Fifth Circuit has stated that there are some communications which clearly, on their face, violate the FDCPA and other communications which are clearly permissible under the FDCPA. Gonzalez, 577 F.3d at 606. “In the middle, there are letters that include contradictory messages and therefore present closer calls.” Id. The letter in this case fits that description. These cases in the middle present questions of fact as to what the unsophisticated consumer would understand the letter to mean. Id. 8 In McMahon, the Seventh Circuit noted that in a district court case, the Federal Trade Commission entered into a consent decree with a debt collector concerning time-barred debts. McMahon, 744 F.3d at 1015-1016 (citing U.S. v. Asset Acceptance, LLC, No. 8:12–cv–182– T–27EAJ (M.D.Fla. 2012). As part of the consent decree, the debt collector was required to add the following language to any dunning letters that involved a time barred debt: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.” Id. Had that language been included in the instant letter, the Court’s analysis would be much different. Moreover, the inclusion of such language “is not a herculean task.” Buchanan, 776 F.3d at 400. In Buchanan – a 2015 decision – the Sixth Circuit noted that Northland – one of the named defendants in that case – was utilizing new letters that included the following language: “The law limits how long you can be sued on a debt. Because of the age of your debt, LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency.” Id. 9 To the extent that LVNV has objected to the introduction of Goldsmith’s expert report, that objection should be granted at this stage of the proceedings. Keeton has proffered no evidence concerning Goldsmith’s qualifications or methodology. Indeed, Keeton has made no showing of the requirements for the introduction of expert testimony. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993). At this point, the Court, makes no recommendation as to the admissibility of this evidence at trial. That is clearly a matter for another day. See Tewari De-Ox Systems, Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604, 609 (5th Cir. 2011) (noting that contested evidence at the summary judgment stage may prove to be “admissible if properly presented during trial”). 13 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 13 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 15 of 7 PageID: 223 Thus, there are two plausible and mutually contradictory interpretations of the letter in this case: (1) that the letter misleadingly implies that the debt is legally enforceable and Keeton should settle the debt, lest possible legal consequences follow; or (2) that the letter gives Keeton an opportunity to settle the debt, but did not expressly or implicitly state that the debt was legally valid and thus, no threat of legal consequences is made or implied. In such circumstances, the question of whether, objectively speaking, the letter would deceive an unsophisticated consumer is a question of fact for the jury to decide. Langley v. Weinstein & Riley, P.S., 2013 WL 2951057, *3 (S.D. Tex. 2013) (unpubl.) (citing Gonzalez, 577 F.3d at 605-607). There is clearly a genuine dispute of material fact at this stage and summary judgment is inappropriate as to the FDCPA claims. For that reason, LVNV’s motion for summary judgment as to the FDCPA claim should be denied. B. TDCA Keeton has pled that LVNV violated the Texas Debt Collection Act by “misrepresenting the character, extent, or amount of a consumer debt,” in violation of TEX. FIN. CODE § 392.304(a)(8). “To violate the TDCA using a misrepresentation, the debt collector must have made an affirmative statement that was false or misleading.” Thompson v. Bank of America Nat. Ass’n., — F.3d —, — 2015 WL 1810738, *2 (5th Cir. April 21, 2015) (quoting Verdin v. Federal Nat. Mortg. Ass’n, 540 Fed. App’x. 253, 257 (5th Cir. 2013) (unpubl.) (internal quotations omitted) (emphasis original).10 In Verdin, the Defendant’s representatives told the Plaintiff “not to worry about the foreclosure,” but later foreclosed. Id. The Fifth Circuit found that the Defendants never “made an affirmative statement that it would forgo foreclosure,” and thus did not make a misrepresentation under the TDCA. Id. Similarly in this case, there is no evidence of any “affirmative statements that 10 The Court notes that the FDCPA does not appear to have a similar requirement that misrepresentations must be based on affirmative statements. Furthermore, the Court has been pointed to no case law imposing such a requirement on claims made under the FDCPA. 14 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 14 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 16 of 7 PageID: 224 misrepresent the character, extent, or amount of the debt.” Massey v. EMC Mortg. Corp., 546 Fed. App’x. 477, 481 (5th Cir. 2013) (unpubl.). The letter made no explicit statements concerning whether the debt was time-barred or whether litigation would be initiated if no payments were made. While the letter may have given that impression to an unsophisticated consumer, the fact remains that no affirmative statements were made. As such, there is no genuine dispute of material fact on this point; no reasonable juror could find that such statements were made. Accordingly, summary judgment is appropriate as to this claim. IV. Recommendation It is recommended that the motion for summary judgment filed by Defendant LVNV Funding, LLC, be granted in part and denied in part. Dkt. No. 38. It is recommended that the motion be denied as to any claims made by Keeton pursuant to the FDCPA. It is recommended that the motion be granted as to any claims made by Keeton pursuant to the TDCA. A. Notice to the Parties The parties have fourteen (14) days from the date of being served with a copy of this Report and Recommendation within which to file written objections, if any, with the Honorable Andrew S. Hanen, United States District Judge. 28 U.S.C. § 636(b)(1) (eff. Dec. 1, 2009). Failure to timely file objections shall bar the parties from a de novo determination by the District Judge of an issue covered in the report and shall bar the parties from attacking on appeal factual findings accepted or adopted by the district court except upon grounds of plain error or manifest injustice. See § 636(b)(1); Thomas v Arn, 474 U.S. 140, 149 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996). DONE at Brownsville, Texas, on April 24, 2015. ______________________________ Ronald G. Morgan United States Magistrate Judge 15 Case 1:14-cv-00130 Document 50 Filed in TXSD on 04/24/15 Page 15 of 15Case 2:16-cv-0 507 MCA-MAH Document 23-2 Filed 12/27/16 Page 17 of 7 PageID: 225 Page 1 of 1 UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY MICHAEL MORISCO, on behalf of himself and those similarly situated, Plaintiff, vs. ALLIED INTERSTATE LLC, LVNV FUNDING LLC, RESURGENT CAPITAL SERVICES, L.P.; ALEGIS GROUP, LLC and JOHN DOES 1 TO 10, Defendants. Civil Action No. 2:16-cv-01507-MCA-MAH CERTIFICATE OF SERVICE I hereby certify that on this 27th day of December 2016, I caused a true and correct copy of Plaintiff's Brief in Opposition to Defendant's Motion to Dismiss to be served on this date via the Court's CM/ECF system upon: Kellie A. Lavery, Esq. Reed Smith LLP 36 Main Street, Suite 250 Princeton, NJ 08540 Attorneys for Defendants Allied Interstate LLC, LVNV Funding LLC, Resurgent Capital Services, L.P. and Alegis Group, LLC /s/ Yongmoon Kim Yongmoon Kim Case 2:16-cv-01507-MCA-MAH Document 23-3 Filed 12/27/16 Page 1 of 1 PageID: 226