Michelle Tatis v. Allied Interstate LLC
882 F.3d 422
3rd Cir.2018Background
- In 2015 Allied Interstate sent Michelle Tatis a letter offering to accept $128.99 “in settlement of” a $1,289.86 debt that was over ten years old and time-barred under New Jersey’s six-year statute of limitations.
- Tatis sued on behalf of a class, alleging the letter violated the FDCPA’s prohibition on "any false, deceptive, or misleading representation" (15 U.S.C. § 1692e) by implying a legal obligation to pay.
- The District Court dismissed under Rule 12(b)(6), relying on this Court’s Huertas decision to conclude collection of time-barred debts does not violate the FDCPA absent a threat of legal action.
- Tatis appealed, arguing a settlement offer can mislead the least-sophisticated debtor into believing the debt is legally enforceable even without a litigation threat.
- The Third Circuit considered precedent from other circuits addressing whether settlement offers for time-barred debts can be misleading and evaluated the letter under the FDCPA’s broad ban on deceptive practices and the “least-sophisticated debtor” standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an offer to "settle" a time-barred debt can violate § 1692e absent a threat of litigation | Tatis: "Settlement" could mislead the least-sophisticated debtor to believe the debt is legally enforceable and thus is deceptive | Allied: Huertas requires a threat of litigation for an FDCPA violation when collecting time-barred debt; no threat here | The court held it is plausible an offer to "settle" a time-barred debt may mislead and thus could violate § 1692e even without a litigation threat; remanded for further proceedings |
Key Cases Cited
- Huertas v. Galaxy Asset Mgmt., 641 F.3d 28 (3d Cir. 2011) (time‑barred debt may be pursued voluntarily so long as no litigation is threatened)
- McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014) (settlement offer for time‑barred debt may mislead unsophisticated consumer into believing debt is enforceable)
- Buchanan v. Northland Group, Inc., 776 F.3d 393 (6th Cir. 2015) (definitions of “settle” support plausibility that settlement language implies ability to sue)
- Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507 (5th Cir. 2016) (same conclusion endorsing that settlement offers can be misleading)
- Brown v. Card Serv. Ctr., 464 F.3d 450 (3d Cir. 2006) (FDCPA construed broadly to effectuate remedial purpose)
- Campuzano‑Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294 (3d Cir. 2008) (least‑sophisticated debtor standard protects the gullible yet presumes basic care in reading)