Opinion
No. HHD X04 CV-09-4042680 S
June 2, 2010
MEMORANDUM OF DECISION
The court heard argument on March 29, 2010 concerning the defendant's motion to strike (#124) the plaintiffs' second revised amended class action complaint (#114) (complaint). After considering the parties' arguments, the court issues this memorandum of decision. For the reasons set forth below, the motion is granted in part and denied in part.
I BACKGROUND
In the first count of the complaint, the plaintiffs, six individuals, on behalf of themselves and other Connecticut residents, claim that the defendant, Navy Federal Credit Union (NFCU), violated the Connecticut Creditors' Collection Practices Act, General Statutes §§ 36a-645 et seq. (CCPA). The plaintiffs bring the action as a class action. The plaintiffs allege that they are members of NFCU and have become indebted to NFCU as consumer debtors. The plaintiffs each allege one or more of four categories of claimed violations: leaving messages on their home answering machine which were heard by others; calling others and leaving messages even though NFCU already had location information for the plaintiff; calling the plaintiff at his/her work location after being informed that it is not convenient for the plaintiff to take collection calls at work; and continuing to contact the plaintiff after having been informed that the plaintiff had retained a bankruptcy attorney.
General Statutes § 36a-648(a) provides, "[a] creditor, as defined in Section 36a-645, who uses any abusive, harassing, fraudulent, deceptive or misleading representation, device or practice to collect or attempt to collect a debt in violation of Section 36a-646 or the regulations adopted pursuant to Section 36a-647 shall be liable to a person who is harmed by such conduct in an amount equal to the sum of: (1) Any actual damages sustained by such person, (2) if such person is an individual, such additional damages as the court may award, not to exceed one thousand dollars, and (3) in the case of any successful action to enforce liability under the provisions of this subsection, the costs of the action and, in the discretion of the court, a reasonable attorneys fee."
The plaintiffs allege that the class is comprised of persons who reside in Connecticut and whom NFCU claims or has claimed are delinquent in paying a debt to NFCU. In addition, the plaintiffs allege that NFCU has, according to its records, done one or more of the following: "(1) contacted a third party other than a spouse for purposes of leaving a message; (2) continued to call them directly even though it had received notice that they had retained an attorney in connection with the debt and had not attempted to contact that attorney; (3) continued to call them at their work even though they had been requested not to call at work; or (4) left a detailed message on the class members' answering machines indicating the call was made in connection with a debt." See complaint, first count, ¶ 18.
In the second count, the plaintiffs incorporate allegations from the first count and claim that NFCU's violations of the CCPA constitute unfair trade practices in violation of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et seq. (CUTPA). The plaintiff's claim that they have suffered an ascertainable loss "because the collection activity complained of causes more work for their bankruptcy counsel and for other bankruptcy attorneys practicing within the state, who are faced with increased client complaints and inquiries as a consequence of such violations." See complaint, second count, ¶ 26. As a result, they allege that the frequencies of such violations are considered in determining rates for representation that are quoted or charged to prospective clients. They allege that "the Class Members have an ascertainable loss due to the potential that any bankruptcy filing would be more expensive due to the violations of the CCPA." See complaint, second count, ¶ 26. The plaintiffs seek class certification, damages, punitive damages, costs, statutory damages, attorneys fees, a declaratory judgment, and injunctive relief.
In its motion to strike, NFCU contends that the first count fails to allege conduct which violates the CCPA. Also, it asserts that the first count is legally insufficient since it lacks any allegation that the plaintiffs and proposed class members suffered actual damages.
NFCU also moves to strike the second count, claiming that, since it is based entirely on the allegations of the first count, it is also legally insufficient. In addition, NFCU argues that the plaintiffs have failed to allege facts which rise to the level of a CUTPA violation or that class members suffered an ascertainable loss and actual damages.
II STANDARD OF REVIEW
The standard of review on a motion to strike is well established. "We take the facts to be those alleged in the complaint . . . and we construe the complaint in the manner most favorable to sustaining its legal sufficiency . . . [I]f facts provable in the complaint would support a cause of action, the motion to strike must be denied . . . Thus, we assume the truth of both the specific factual allegations and any facts fairly provable thereunder." (Internal quotation marks omitted.) Sylvan R. Shemitz Designs, Inc. v. Newark Corp., 291 Conn. 224, 231, 967 A.2d 1188 (2009). "[W]hat is necessarily implied [in an allegation] need not be expressly alleged . . . It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted . . . Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.) Violano v. Fernandez, 280 Conn. 310, 318, 907 A.2d 1188 (2006). Legal conclusions in a complaint are not deemed to be admitted. See Murillo v. Seymour Ambulance Association, Inc., 264 Conn. 474, 476, 823 A.2d 1202 (2003).
A motion to strike may be utilized to "trigger the trial court's determination of a dispositive question of law." Vertex v. Waterbury, 278 Conn. 557, 564, 898 A.2d 178 (2006). Whether the plaintiff properly has alleged the elements of a claim is a question of law that should be resolved by a motion to strike. See Marr v. WMX Technologies, Inc., 244 Conn. 676, 681, 711 A.2d 700 (1998).
III DISCUSSION A First Count
Section 36a-646 of the CCPA provides: "No creditor shall use any abusive, harassing, fraudulent, deceptive or misleading representation, device or practice to collect or attempt to collect any debt." The Commissioner of Banking may adopt regulations to specify "those acts which are deemed to be in violation of Section 36a-646." See General Statutes § 36a-647(a). Regs., Conn. State Agencies § 36a-647-5 provides that "[a] creditor shall not engage in any conduct the natural consequence of which to a reasonable person would be to harass or abuse such person in connection with the collection of a debt. A creditor shall not intentionally engage in any conduct which the creditor knows would harass or abuse any person." "Without limiting the general application of the foregoing," the regulation sets forth conduct which violates this section. See Regs., Conn. State Agencies § 36a-647-5.
The court addresses below the issues pertaining to the first count in the order presented in the plaintiffs' memorandum in opposition to the motion. First, the plaintiffs assert that, by continuing to contact them even after they notified it of their retention of bankruptcy attorneys, NFCU engaged in abusive and harassing practices to collect debts in violation of General Statutes § 36a-646.
In their memorandum in opposition, page 4, the plaintiffs cite Regs., Conn. State Agencies § 36a-647-3(b)(5), which provides that a creditor shall not "[c]ommunicate with any person other than the attorney for the consumer debtor or consumer debtor agent after the creditor knows the consumer debtor or consumer debtor agent is represented by an attorney with regard to the subject debt and has knowledge of such attorney's name and address, unless the attorney fails to respond within a reasonable period of time not to exceed thirty days after such communication from the creditor, or unless the attorney cannot or will not provide location information to such creditor." (Emphasis added.)
Practice Book § 10-3 requires that "[w]hen any claim made in a complaint . . . is grounded on a statute, the statute shall be specifically identified by its number." While the complaint here refers to the CCPA in general, it does not do so specifically. Specific references should be made to regulations relied upon to avoid confusion. See Asylum Hill Problem Solving Revitalization Association v. King, Superior Court, Complex Litigation Docket at Waterbury, Docket No. X02 CV 03 0179515 (January 5, 2004, Schuman, J.) ( 36 Conn. L. Rptr. 422), affirmed on other grounds, 277 Conn. 238, 890 A.2d 522 (2006). However, since this procedural deficiency was not raised in the motion to strike, the court does not rely upon it in adjudicating the motion.
Here, none of the plaintiffs alleges that NFCU had knowledge of their attorney's name and address. See complaint, first count, ¶¶ 9d, 11b, 13, 15, and 17c. Rather, all they allege is that NFCU was informed that they had retained bankruptcy attorneys to represent them in connection with their NFCU credit card and personal loan accounts. The additional requirement, of knowledge of the attorney's name and the address, is not alleged, nor is it necessarily implied. These allegations are legally insufficient to state a CCPA claim.
Second, the plaintiffs assert that messages left with third parties constitute communications with third parties and violate the CCPA. Regs., Conn. State Agencies § 36a-647-4(3)(b) provides, in relevant part,: "(1) Except as provided in Section 36a-647-3 of the Regulations of Connecticut State Agencies and subdivision (2) of this subsection, without the prior consent of the consumer debtor or consumer debtor agent given directly to the creditor, the express permission of a court of competent jurisdiction, or as reasonably necessary to effectuate a prejudgment or post-judgment judicial remedy, a creditor shall not communicate in connection with the collection of any debt with any person other than: (A) The consumer debtor or consumer debtor agent . . ."
Concerning communications to third parties, the plaintiffs allege that NFCU left messages with plaintiffs Aaron Hill's and Edward Hubert's parents. As to Hill, the plaintiffs allege in paragraph 9b: "NFCU has done the following with respect to the Hill debt within one year prior to the commencement of this action: . . . NFCU has also called Hill's parents and left messages with them, even though it already had location information for Hill." As to Hubert, the plaintiffs allege in Paragraph 11a: "NFCU has also called Hubert's father and has left messages with him, even though it already had location information for Hubert." These paragraphs are devoid of any information which was allegedly communicated.
The plaintiffs assert that debt collectors violate the CCPA when leaving messages with third parties. In support of this contention, they cite two United States District Court decisions which interpret the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (FDCPA). As the United States Court of Appeals for the Seventh Circuit has noted, there is a split of authority as to whether "a violation of § 1692c(b) requires the debt collector to convey some information about the debt to a third party." Horkey v. J.V.D.B. Associates, Inc., 333 F.3d 769, 774 n. 2 (7th Cir.), cert. denied, 540 U.S. 985, 124 S.Ct. 489, 157 L.E.2d 377 (2003).
However, even those cases cited by the plaintiffs here do not support their theory. In West v. Nationwide Credit, Inc., 998 F.Sup. 642, 644 (W.D.N.C. 1998), the allegations included the content of the communication which allegedly had occurred. There, the creditor "called [p]laintiff's neighbor and informed him that he was calling about a `very important' matter." He also gave the neighbor his name and telephone number and asked the neighbor to have the plaintiff call him. See id., 643. That court identified the issue as "whether Congress intended the phrase `information regarding a debt' to include the conveying of any information relating to a debt or whether Congress intended to limit the definition of this phrase to only those conversations where a debt collector actually discloses some information about a specific debt to a third party." Id., 644. The West court concluded that the plaintiff had alleged that the creditor communicated with a third party in relation to the plaintiff's debt, which was sufficient to state a claim under the FDCPA. See id., 645.
Here, as discussed above, Regs., Conn. State Agencies § 36a-647-4(3)(b) uses the language "shall not communicate in connection with the collection of any debt . . .
Likewise, the other case cited by the plaintiffs, Foti v. NCO Financial Systems, Inc., 424 F.Sup.2d 643, 656-59 (S.D.N.Y. 2006), also turned on the specific allegations of communications which occurred. There, the court stated, "[t]he term `communication,' of course, is limited to those situations involving the `conveying of information regarding a debt directly or indirectly.' 15 U.S.C. § 1692(a)(2). A phone call by a debt collector that in no way regards, or relates to, an outstanding debt would not violate the Act . . . [H]owever, there appears to be no question that the call related to the collection of a debt — when Foti returned the call he was explicitly told that it was in connection with the collection of a debt." (Citation omitted.) Id., 658.
Here, in the absence of any alleged facts about what was communicated, the court is unable to consider whether the alleged communications violated the CCPA. The plaintiffs have not alleged sufficient facts to state claims under CCPA based on leaving messages with third parties.
Third, the plaintiffs argue that messages left on answering machines that were heard by non-authorized third parties also violate CCPA, for which NFCU is strictly liable. In paragraph 9a, Hill alleges that "[i]n its attempts to collect on this account, NFCU has left messages on Hill's home answering machine, some of which have been heard by his girlfriend and his girlfriend's minor child." Plaintiffs David and Margaret Galczynski allege that "[i]n its attempts to collect on these accounts, NFCU has left messages on Galczynski's home answering machine, some of which have been heard by David Galczynski's daughter." See paragraph 17a.
In support of these parts of the first count, the plaintiffs cite Berg v. Merchants Association Collection Division, Inc., 586 F.Sup.2d 1336 (S.D.Fla. 2008), wherein overhearing a message by third parties was found to violate the FDCPA. The court is unpersuaded, since there, in contrast to the allegations here, the plaintiff alleged that "the Defendant knew or had reason to know that other persons besides the Plaintiff might hear the messages, and that Defendants never had authority to communicate with third parties regarding the debt." See id., 1339.
"The FDCPA was intended to protect against deliberate disclosures to third parties as a method of embarrassing the consumer, not to protect against the risk of inadvertent disclosure that could occur if another person unintentionally overheard the messages left on [plaintiff's] answering machine." (Internal quotation marks omitted.) Mostiller v. Chase Asset Recovery Corp., United States District Court, Western District of New York, Docket No. 09-CV-218A (January 22, 2010).
Here, as there, no allegation is made that NFCU knew or reasonably could anticipate that overhearing would occur or that it left a message with any intent to embarrass the plaintiffs. See id. The plaintiffs' allegations that messages left on answering machines were heard by non-authorized third parties are legally insufficient to state claims under CCPA.
Fourth, the plaintiffs argue that, since plaintiffs Hill and David Galzynski have alleged that NFCU continued to contact them at their place of work after being informed that it was not convenient for them to receive calls at work, they have stated legally sufficient claims that NFCU violated Regs., Conn. State Agencies § 36a-647-4(a)(1). In paragraph 9c, the plaintiffs allege that, with respect to the Hill debt, "NFCU has called Hill at his work even though he has told NFCU collectors that it is not convenient for him to take collection calls at work." Similar allegations are presented concerning David Galzynski in paragraph 17b.
Regs., Conn. State Agencies § 36a-647-4(a)(1) provides, in relevant part,: "Without the prior consent of the consumer debtor . . . a creditor shall not communicate with a consumer debtor . . . in connection with the collection of any debt: . . . at any . . . place known or that should be known to be inconvenient or embarrassing to the consumer debtor . . ." Calling a debtor at his place of employment after being told to cease the activity has been found to amount to harassment under the CCPA. See Tillquist v. Ford Motor Credit Co., 714 F.Sup. 607, 615, 616 (D.Conn. 1989) (debtor alleged that creditor called at place of employment when creditor knew it was inconvenient and embarrassing).
While § 36a-647-4(a)(3) specifically proscribes calling at the place of employment "if the creditor knows or has reason to know that the employer . . . prohibits such debtor . . . from receiving such communication," that subparagraph of the regulation is not inconsistent with § 36a-647-4(a)(1). A debtor may inform a creditor that such communications at work are inconvenient or embarrassing even if they are not prohibited by his/her employer.
In addition, NFCU argues that the plaintiffs have failed to allege facts showing that they suffered the requisite harm that precipitates recovery under General Statutes § 36a-648, which imposes liability "to a person who is harmed by" the creditor's conduct. Proof of actual damages is not required. See Woolfolk v. Van Ru Credit Corp., 783 F.Sup. 724, 727 n. 3 (D.Conn. 1990).
Accordingly, the court concludes that as to only one of the four bases for alleged violations of the CCPA alleged in the first count do the plaintiffs state legally sufficient claims. As discussed, these pertain to plaintiffs Hill and David and Margaret Galczynski and paragraphs 9c and 17b only, which concern contacting a debtor at work after being told that it was inconvenient. While, in general, where a viable cause of action is stated in a count, deficient parts thereof may not be stricken, here the deficient paragraphs discussed above purport to state separate causes of action for disparate alleged violations of CCPA. Under such circumstances, they may be stricken. See Cain v. DeStefano, Superior Court, judicial district of New Haven at New Haven, Docket No. CV 98 0420347 (December 17, 1999, Zoarski, J.), n. 1 (single paragraph or paragraphs may be attacked for insufficiency when a cause of action is therein attempted to be stated, citing Zamstein v. Marvasti, 240 Conn. 549, 553, 692 A.2d 781 (1997)).
This is especially appropriate for clarification where the stricken portions pertain to all of the claims of particular plaintiffs, as it does here concerning plaintiffs Edward Hubert, Dominic Sanderlin, and Lori Curry. Accordingly, paragraphs 9a, 9b, 9d (pertaining to plaintiff Hill), and paragraphs 17a and 17c (pertaining to David and Margaret Galczynski) are stricken. The claims of plaintiffs Hubert, Sanderlin, and Riley are stricken in their entirety. The corresponding class allegations in paragraph 18c(1), (2), and (4) are stricken as well.
B Second Count
As noted above, in the second count, the plaintiffs incorporate allegations from the first count in the second count and allege that NFCU's collection practices violate CUTPA. It is undisputed that a violation of the public policy set forth in CCPA may constitute a violation of CUTPA. "[General Statutes § ] 42-110b(a) provides that [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise — in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons] . . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . Thus a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy." (Citation omitted; internal quotation marks omitted.) Ramirez v. Health Net Of The Northeast, Inc., 285 Conn. 1, 18-19, 938 A.2d 576 (2008). Violation of CCPA has been found to violate CUTPA. See Tillquist v. Ford Motor Credit Co., supra, 714 F.Sup. 616.
"General Statutes § 42-110g(a) . . . allows [a]ny person who suffers any ascertainable loss of money or property . . ., as a result of the use or employment of a method, act or practice prohibited by Section 42-110b, [to] bring an action . . . to recover actual damages . . . [T]he words `any ascertainable loss' as used in this section do not require a plaintiff to prove a specific amount of actual damages to make out a prima facie case." (Emphasis omitted; internal quotation marks omitted.) Hinchliffe v. American Motors Corp., 184 Conn. 607, 612-13, 440 A.2d 810 (1981).
"The ascertainable loss requirement is a threshold barrier which limits the class of persons who may bring a CUTPA action seeking either actual damages or equitable relief . . . Thus, to be entitled to any relief under CUTPA, a plaintiff must first prove that he has suffered an ascertainable loss due to a CUTPA violation . . . An `ascertainable loss' is a loss that is capable of being discovered, observed or established . . . The term `loss' necessarily encompasses a broader meaning than the term `damage' and has been held synonymous with deprivation, detriment and injury . . . To establish an ascertainable loss, a plaintiff is not required to prove actual damages of a specific dollar amount . . . [A] loss is ascertainable if it is measurable even though the precise amount of the loss is not known . . . A plaintiff must also prove that the ascertainable loss was caused by or `as a result' of the prohibited act." (Citations omitted; internal quotation marks omitted.) Artie's Auto Body, Inc. v. Hartford Fire Insurance Co., 287 Conn. 208, 217-18, 947 A.2d 320 (2008).
Thus, there must be an allegation that an ascertainable loss of money or property has been suffered. See Hinchliffe v. American Motors Corp., supra, 184 Conn. 614-15. As discussed above, as to the individual plaintiffs, they allege that they have suffered an ascertainable loss "because the collection activity complained of causes more work for their bankruptcy counsel and for other bankruptcy attorneys practicing within the state, who are faced with increased client complaints and inquiries as a consequence of such violations." See complaint, second count, ¶ 26. As a result, they allege that the frequencies of such violations are considered in determining rates for representation that are quoted or charged to prospective clients. See complaint, second count, ¶ 26.
In their memorandum, page 13, the plaintiffs argue that "they plead that they already `have suffered an ascertainable loss' due to the higher cost of bankruptcy." The plaintiffs have not pleaded that they have suffered a loss due to the higher cost of bankruptcy. As discussed, all they have pleaded is that they have retained bankruptcy counsel and that violations are considered when rates for representation are quoted or charged. That higher costs of representation have been suffered is neither alleged nor necessarily implied. There is no allegation that the plaintiffs' bankruptcy attorneys charged higher rates as a result of the alleged conduct by NFCU.
Similarly unavailing is the "potential" that class members' bankruptcy filings would be more expensive, as alleged in paragraph 26. See Neighborhood Builders, Inc. v. Town of Madison, 294 Conn. 651, 668, 986 A.2d 278 (2010) (putative class members who paid allegedly excessive building permit fees suffered ascertainable loss); Criscuolo v. Shaheen, 46 Conn.Sup. 53, 63, 736 A.2d 947 (1999) (no ascertainable loss where plaintiff may "potentially" suffer increased tax liabilities).
Since the plaintiffs have not alleged an ascertainable loss suffered as a result of NFCU's alleged conduct, the second count is legally insufficient to state a claim under CUTPA. Accordingly, it is stricken.
CONCLUSION
For the reasons stated above, NFCU's motion to strike is granted in part and denied in part. As to the first count, paragraphs 9a, 9b, 9d (pertaining to plaintiff Hill), and paragraphs 17a and 17c (pertaining to David and Margaret Galczynski) are stricken. The motion to strike is denied as to paragraphs 9c and 17b.
The claims of plaintiffs Hubert, Sanderlin, and Riley in the first count are stricken in their entirety. The motion to strike is also granted as to paragraph 18c (1), (2), and (4) of the first count. The motion to strike the second count is granted.
It is so ordered.