Pettaway v. National Recovery Solutions
955 F.3d 299
2d Cir.2020Background
- Pettaway co-signed a student loan that defaulted and was later charged-off; US Asset purchased the debt and referred it to National Recovery Solutions (NRS) for collection.
- NRS sent a form collection letter stating the balance and that the amount "may" increase because of interest, late charges, and other charges; it also included a time‑sensitive settlement offer for a reduced lump sum.
- Pettaway filed a putative class action under the FDCPA, alleging the letter was materially false and misleading because it suggested charges could increase even where some charges were not contractually or legally available.
- Defendants moved to dismiss under Rule 12(b)(6). Pettaway filed an amended complaint as of right within 21 days after defendants served their 12(b)(6) motion; the clerk flagged the filing as deficient under local ECF instructions.
- The district court dismissed the complaint and denied leave to amend; the Second Circuit held the amended complaint was timely notwithstanding the clerk’s notice but affirmed dismissal on the merits, finding the letter not misleading under the least‑sophisticated‑consumer standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of amended complaint | Pettaway: amended complaint was filed within 21 days as of right under FRCP 15(a)(1)(B) following court ECF instructions | Clerk's deficiency meant it was not properly filed and required re‑filing with consent or leave | Amended complaint was timely; a clerk cannot refuse to file solely for form errors (FRCP 5(d)(4); Contino) |
| Effect on pending 12(b)(6) motion (mootness) | Pettaway: amended complaint moots the pending motion to dismiss | Defs: pending motion remains; district court may treat filing as deficient | Court may either deny the pending motion as moot or evaluate it on the amended complaint; both approaches permissible |
| Whether letter's 'may vary' language violated the FDCPA by implying impermissible charges | Pettaway: letter misleads least‑sophisticated consumer into thinking late charges/other fees could be added even if unavailable | Defs: 'may' merely signals a possibility; not inaccurate or misleading | Not misleading; 'may' is consistent with the possibility interest could accrue and does not state charges will be imposed; no plausible FDCPA claim |
| Whether settlement‑offer language misled consumers into thinking deadline was the only settlement opportunity | Pettaway: suggests deadline implies no future chance to settle for less | Defs: letter permits online negotiation and does not foreclose future offers | Not misleading; settlement language did not reasonably preclude other negotiations and plaintiff's allegations were conclusory and inadequate under Iqbal |
Key Cases Cited
- Contino v. United States, 535 F.3d 124 (2d Cir. 2008) (clerk's refusal to file for form defects cannot cause loss of a party's right)
- In re Crysen/Montenay Energy Co., 226 F.3d 160 (2d Cir. 2000) (amended pleading ordinarily supersedes original)
- Brown Media Corp. v. K&L Gates, LLP, 854 F.3d 150 (2d Cir. 2017) (de novo review of Rule 12(b)(6) dismissal standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must state a plausible claim; conclusory allegations insufficient)
- Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360 (2d Cir. 2005) (least‑sophisticated‑consumer standard for FDCPA claims)
- Taylor v. Financial Recovery Servs., 886 F.3d 212 (2d Cir. 2018) (a notice can be misleading if open to more than one reasonable interpretation)
- Clomon v. Jackson, 988 F.2d 1314 (2d Cir. 1993) (rejection of bizarre or idiosyncratic interpretations of collection notices)
- Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83 (2d Cir. 2002) (amendment is futile if proposed claims could not survive Rule 12(b)(6))