Opinion
Civil Action No. 90-369-SLR.
June 17, 1992
Erik C. Grandell, Esquire, of UAW Legal Services Plan, Newark, Delaware, attorney for plaintiff.
Jeoffrey L. Burtch, Esquire, of Cooch and Taylor, Wilmington, Delaware, attorney for defendants.
MEMORANDUM OPINION
INTRODUCTION
Plaintiff Rudolph Sutton has filed this action alleging various violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (hereinafter "the Act"). Specifically, plaintiff alleges that defendants, The Law Offices of Alexander L. Lawrence and Alexander L. Lawrence, Esquire, violated § 1692e subsections (2)(A), (5), (10), (11), § 1692f and § 1692g of the Act.
Plaintiff had a credit card charge account with Mellon Bank, and incurred $1,187.73 in outstanding charges. The account was referred to TCA Collections ("TCA") in San Fernando, California. In a notice/letter dated December 29, 1989, TCA informed plaintiff that Mellon Bank submitted the claim for collection. On January 15, 1990, defendant Alexander Lawrence sent a letter to plaintiff explaining that the account was referred to his client TCA for immediate collection in full, and stated "that if suit is commenced against you for collection of this account, you may be subject to a civil judgment . . . ". (Docket Item, "D.I." 18 at A-1) Plaintiff's attorney responded on January 29, 1990 to defendant Lawrence's letter directing him to cease all communication with Sutton, provide verification of the debt, and provide the name and address of the original creditor. (D.I. 18 at A-18) In further correspondence, plaintiff's attorney advised Lawrence that the letter violated the Fair Debt Collection Practices Act in various ways and that Sutton had filed for Chapter 13 Bankruptcy in November 1986. (D.I. 18 at A-15)
Before this Court is plaintiff's motion for partial summary judgment. (D.I. 16) Defendants have responded and raise as an affirmative defense 15 U.S.C. § 1692k(c). (D.I. 21) Defendants request, to the extent possible, that their answering brief in opposition to plaintiff's motion also be treated as a cross-motion for summary judgment. (D.I. 21 at 2)
STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(c) provides that a party is entitled to a summary judgment where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." A party seeking summary judgment always bears the initial responsibility of informing the Court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Where the nonmoving party opposing summary judgment has the burden of proof at trial on the issue for which summary judgment is sought, he must then make a showing sufficient to establish the existence of an element essential to his case. If the nonmoving party fails to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof, the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Moreover, the mere existence of some evidence in support of the nonmoving party will not be sufficient to support a denial of a motion for summary judgment; there must be enough evidence to enable a jury to reasonably find for the nonmoving party on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
DISCUSSION
Plaintiff claims that defendants violated the Act by sending a letter that failed to conform to the necessary requirements set forth in 15 U.S.C. §§ 1692e(2)(A), 1692e(5), 1692e(10), 1692e(11), 1692g, and 1692f.
The January 15, 1990 letter provides the following:
Your account has been referred to our client, TCA Collections, for immediate collection in full.
As a courtesy to you, I have requested TCA Collections to allow me time to make one demand upon you to give you SEVENTY-TWO (72) HOURS to respond to this request for payment of the above referenced account.
We are required to advise you, pursuant to Section 1031 of the Code of Civil Procedure, that if suit is commenced against you for collection of this account, you may become subject to a civil judgment which will include the costs of filing suit and service of process on you, in addition to whatever principal and interest the court awards, and attorney fees where there is a contract calling for such fees.
If you wish to arrange for payment of this account or have any questions concerning it, please contact this office directly.
If you reach an agreement with our office concerning payment, further action against you will be discontinued if you honor your agreement. If you are served with a summons and complaint, this letter does not constitute an extension of time for you to respond to the suit.
If you dispute the claim or have any questions concerning your legal rights, I urge you to contact any attorney of your choice at once. I would be pleased to discuss this claim with your attorney.
Please do not make the mistake of assuming that this is merely one in a series of continuing letters requesting payment of this account. (D.I. 18 at A-1)
§ 1692e(11) Violation
Plaintiff first contends that defendants' letter dated January 15, 1990 violated § 1692e(11) of the Act which provides:
Except as otherwise provided for communications to acquire location and information under 1692b of this title, the failure to disclose clearly in all communications made to collect a debt or to obtain information about a consumer, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.15 U.S.C. § 1692e(11).
Defendants argue that the requirements are inapplicable because the letter is simply a follow-up notice to a letter dated December 29, 1989 from TCA. See, Pressley v. Capital Credit and Collection, Inc., 760 F.2d 922 (9th Cir. 1985). Although the December letter contains the necessary notice requirements, "[t]he courts are divided on the issue of whether subsection 1692e(11) requires disclosure on follow-up contacts made by the debt collector". Beattie v. D.M. Collections, Inc., 754 F.Supp. 383, 388 (D.Del. 1991). Defendants' argument, however, is based upon the assumption that TCA and defendant Alexander Lawrence are one and the same, an assumption which this Court declines to embrace. Thus, the Pressley decision and the jurisdictions which follow its rationale are distinguishable from the present case in that the December 1989 and January 1990 letters are clearly from two separate entities; the January letter was the initial contact between defendants' office and plaintiff regarding the unpaid debt.
The requirements of § 1692e(11) are twofold. First, debt collectors must disclose that they are attempting to collect a debt; second, debt collectors must disclose that any information obtained from the debtor will be used for the purpose of collecting the debt. See Robinson v. Credit Service Company, 1991 U.S. Dist. LEXIS 13204 (D.N.J. 1991); Seabrook v. Onondaga Bureau of Medical Economics, 705 F.Supp 81, 86 (N.D.N.Y. 1989).
The January 15, 1990 letter specifically provides that "[y]our account has been referred to [defendants'] client for immediate collection in full", and that "[defendants have] requested TCA Collections to allow me time to make one demand upon you . . . to respond to this request for payment . . . ". Although one may argue that this language meets the first prong of the 1692e(11) requirements, defendants' letter fails to indicate, in any way, that the information received will be used to collect the debt. Consequently, I find that defendants' letter dated January 15, 1990 violates § 1692e(11) of the Act. 1692g Violation
Plaintiff further contends that defendants' letter violated § 1692g of the Act, which provides:
(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing —
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.15 U.S.C. § 1692g.
Similar to their argument under § 1692e(11), defendants argue that their "initial communication" with the plaintiff is only a follow-up letter to their client's communication, permitting defendants to avoid the § 1692g requirements because they were previously provided in TCA's December 1989 letter. As indicated above, although defendants argue that the two letters are interrelated, it is obvious from the face of both letters that they are from two separate parties. Furthermore, the Federal Trade Commission's Staff Commentary on the Fair Debt Collection Practices Act, 53 F.R. 50,097 (Dec. 13, 1988) provides the following:
An attorney who regularly attempts to collect debts by means other than litigation, such as writing the consumer demand letters (dunning notices) or calling the consumer on the phone about the obligation (except in response to a consumer's call to him after the suit has been commenced), must provide the required notice, even if a previous debt collector (or creditor) has given such notice.Id. at 50,108 (emphasis added).
In light of this finding, I cannot conclude other than that defendants are required to provide the necessary validation. Consequently, I find defendants' letter violated § 1692g of the Act.
§§ 1692e(2)(A), 1692e(5), and 1692e(10) Violations
Plaintiff further argues that defendants have violated 15 U.S.C. §§ 1692e(2)(A), 1692e(5), and 1692e(10). These sections prevent the following conduct:
(2)(A) the false representation of the character, amount, or legal status of any debt;
(5) the threat to take any action that cannot legally be taken or that is not intended to be taken.
(10) the use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain any information concerning a consumer.
The basis of these violations stems from defendants' failure to determine plaintiff's bankruptcy status. This Court in Hubbard v. National Bond Collection Associates, 126 B.R. 422, 427 (D.Del. 1991), affirmed 947 F.2d 935 (3rd Cir. 1991), concluded "that § 1692e of the FDCPA was not intended to penalize debt collectors for their failure to discover a debtor's prior bankruptcy". The language of § 1692e was intended to prohibit only knowing or intentional misrepresentations by debt collectors. Id. at 427. "The statutory scheme of the FDCPA thus allows debt collectors to avoid the costs of investigating a debtor's background and ensures a cost effective means by which a debtor and debt collector can exchange information." Id. at 428.
Plaintiff first argues that defendants' letter violated § 1692e(2)(A) "by falsely representing the legal status of the debt". (D.I. 17 at 18) Plaintiff alleges that a false representation occurred because defendants falsely represented that the debt was owed immediately or plaintiff would be subject to legal proceedings when, in fact, debtor's bankruptcy prevented the debt from being collected. Plaintiff, however, has failed to demonstrate that defendants' actions were knowing or intentional. He has only argued that defendants should have had knowledge of the bankruptcy. Requiring defendants to "bear the entire burden of collecting information concerning the debt" is contrary to the intent of the Act. Id. at 428. Consequently, I find that plaintiff has failed to demonstrate any violation of § 1692e(2)(A).
Plaintiff further alleges that defendants' letter violates § 1692e(5) by threatening "to take action that cannot legally be taken or that is not intended to be taken". (D.I. 17 at 19) Plaintiff separates his 1692e(5) argument into two parts. First, he alleges that similar to his 1692e(2)(A) argument, action could not be taken because of the bankruptcy stay; second, he alleges that defendants lacked the authority to bring action against plaintiff and, therefore, never intended to do so. (D.I. 17 at 19)
For the reasons provided above, I find that plaintiff's first argument fails because he has not demonstrated that defendants' actions were knowing or intentional. He has only alleged that defendants should have known of plaintiff's bankruptcy status. With respect to his second argument, plaintiff alleges that parties other than defendants "authorize or approve" the decision to file suit against a debtor. In support of this latter argument, plaintiff refers to defendants' answers to interrogatories which identify Steve Lawrence, Glenn Daniels, Craig Bolt, and David Siebert as "defendants' employees who make or approve the decision to file suit or request an attorney to file suit". (D.I. 18 at A-32, #27a) This evidence, however, fails to support plaintiff's proposition, primarily because answer to interrogatory #27 fails to indicate in any way that defendants lacked the authority or the intent to file a legal action against plaintiff. It only indicates employees of defendants who make or approve a decision to sue, not that defendants lacked any intent to file suit. Consequently, plaintiff has failed to demonstrate that defendants violated § 1692e(5) of the Act.
Plaintiff also alleges that defendants' letter of January 15, 1990 violated 15 U.S.C. § 1692e(10) "by using false representations or deceptive means to collect or attempt to collect any debt". (D.I. 17 at 21) To determine whether defendants' letter was deceptive, a "least sophisticated debtor" standard is objectively applied. Hubbard, 126 B.R. at 430. Plaintiff contends that the deception occurred because the language of the letter could mislead a consumer into believing that a suit could be instituted in a California state court. Plaintiff's argument is once again premised upon defendants' inability to collect a debt that was stayed by plaintiff's bankruptcy status. As before, this claim fails because plaintiff has not demonstrated that defendants' actions were knowing or intentional.
§ 1692f Violation
Plaintiff argues that the "cumulative effect" of defendants' actions amount to a violation of 15 U.S.C. § 1692f. This section provides that "[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt". 15 U.S.C. § 1692f. The section, thereafter, lists a variety of conduct that rises to unconscionable or unfair practices. Although the section does not limit the "general application" of the conduct, plaintiff fails to argue that defendants violated any particular section of 1692f. Instead, he contends that the overall effect of defendants' conduct violated § 1692f. After reviewing all of plaintiff's claims, this Court has found that defendants' "cumulative" conduct amounted to a violation of §§ 1692e(11) and 1692g of the Act. Although plaintiff attempted to demonstrate further violations than that found sub judice, I am unwilling to conclude that the "cumulative effect" of defendants' conduct also amounts to a violation of 15 U.S.C. § 1692f.
Defendants' Affirmative Defense
Defendants assert that any violation of the Act should be subject to the affirmative defense provided in 15 U.S.C. § 1692k(c), which provides:
A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.15 U.S.C. § 1692k(c).
Section 1692k(c) applies to situations where a debt collector's violation of the Act arises from "an unintentional clerical error that occurred despite the maintenance of reasonable preventative measures". Hubbard, 126 B.R. at 429. Defendants argue that the defense is applicable in the present situation because "fairly elaborate procedures [are maintained] to ensure compliance with the Act and to avoid errors". (D.I. 21 at 14) Any resulting errors, defendants argue, were caused by unintentional clerical oversights. Defendants' employees are provided three hours of video instruction of the Act, one week of training as to procedure, and are required to pass a test on the Act.
In support of their argument and classification of the violations as clerical, defendants attempt to follow the same analysis as presented in Beattie v. D.M. Collections, Inc., 754 F.Supp. 383 (D.Del. 1991). In Beattie the defendant offered evidence indicating that they "maintained procedures intended to ensure compliance with the FDCPA". Id. at 389. The employees attended seminars; were provided with various editions of the Fair Debt Collection Practices Act manual; were given a three page memorandum entitled "Statement of Collection Policy for Fair Debt Collection Practices Act"; and in particular were required to recite from a card while making telephone calls to indicate that the call was an attempt to collect a debt and that information obtained would be used for that purpose. Id. at 389. The Court concluded that defendant's procedures were specifically designed to overcome violations of 1692e(11) and, as a result, any failure of defendant's employees to provide the necessary disclosure requirements of 1692e(11) resulted from clerical error. The 1692k(c) defense, therefore, applied and summary judgment was granted in favor of the defendant. Id. at 390.
In contrast to the defendant in Beattie, the defendants sub judice have failed to provide any evidence that the §§ 1692e(11) or 1692g requirements are normally a part of correspondence directed to a debtor. Consequently, I find that the § 1692k(c) defense fails to apply in the present case.
CONCLUSION
For the foregoing reasons, plaintiff's motion for partial summary judgment is granted as to 15 U.S.C. § 1692e(11) and 15 U.S.C. § 1692g. Plaintiff's motion for partial summary judgment is denied and defendants' motion for summary judgment is granted as to 15 U.S.C. § 1692e(2)(A), 15 U.S.C. § 1692e(5), 15 U.S.C. § 1692e(10), and 15 U.S.C. § 1692f. An Order consistent with this Memorandum Opinion shall issue.