MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This case arises out of a collection letter sent by Defendant Colltech, Inc. (“Coll-tech”) to Plaintiff Richard Eide after Eide had filed for bankruptcy. Eide failed to pay a $1,216.75 hospital bill that was the subject of Colltech’s collection efforts. Sometime after he incurred the hospital bill, but before Colltech sent the letter in question, the hospital bill was discharged in Eide’s bankruptcy proceedings. Eide brings claims for violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., arguing that the letter was false and misleading in representing that Eide owed a debt that had previously been discharged in bankruptcy. Colltech brings a motion for summary judgment. Because a material issue of fact remains regarding whether Colltech is entitled to the protection of the FDCPA’s bona fide error defense, 15 U.S.C. § 1692k(c), the Court will deny the motion.
1. THE UNDERLYING DEBT
On March 29, 2010, Eide received medical care at North County Regional Hospital (the “Hospital”)
After the Hospital was unsuccessful in attempting to collect Eide’s debt, it referred Eide’s account to Pinnacle Financial Group for collection on September 15, 2010. (Id ¶ 8, Ex. B at 7.) Pinnacle Financial Group was also unsuccessful in collecting the debt, and returned Eide’s account to the Hospital on September 30, 2011. (Id ¶ 8, Ex. B at 7.)
II.COLLTECH’S COLLECTION EFFORTS
In February 2012, the Hospital transferred Eide’s account to Colltech for collection. (Id. ¶ 9, Ex. B at 7; Aff. of Ray Costello ¶ 4, Ex. B, Apr. 25, 2013, Docket No. 12.) Colltech sent Eide an initial collection letter on February 15, 2012, regarding the $1,216.75 debt. (Costello Aff. ¶ 5, Ex. C.) The letter listed a “Balance Due” of $1,216.75 and explained that Eide’s account “has been referred to [Coll-tech] for collection and at this time [Coll-tech is] willing to work with you to resolve this outstanding balance.” (Id, Ex. C.) The letter also warned Eide “[u]nless you notify this office within 30 days after receiving this notice that you- dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.” (Id) If Eide notified Colltech within 30 days from receiving this notice of any dispute with the validity , of the debt, the letter explained that Colltech would “obtain verification of the debt or obtain a copy of a judgment and mail [Eide] a copy of such judgment or verification.” (Id)
When Eide did not dispute the validity of his debt within the thirty-day period, Colltech requested a credit bureau report on March 22, 2012. (Id ¶ 6.) Pursuant to this credit report, on April 3, 2012, Coll-tech “uncovered” the fact that Eide had filed for bankruptcy on November 7, 2011 — before his account was assigned to Colltech. (Id. ¶ 7.) Colltech ceased all collection activity on Eide’s account, and informed the Hospital that Eide had filed for bankruptcy. (Id. ¶ 7; Bergquist Aff. ¶ 10.)
III.EIDE’S BANKRUPTCY PROCEEDINGS
On November 7, 2011, Eide and his wife filed a Chapter 7 bankruptcy petition in United States Bankruptcy Court for the District of Minnesota. (Aff. of Richard O. Eide ¶4, May 16, 2013, Docket No. 15; Aff. of Michael J. Sheridan ¶ 2, Ex. A at 1, May 16, 2013, Docket No. 16.)
On his bankruptcy schedule for creditors holding unsecured, nonpriority claims, Eide listed a $1,217 debt owed to creditor North County Regional Hospital. (Costello Aff., Ex. D at 3.) The schedule also
Notice of Eide’s bankruptcy proceedings was never mailed directly to Colltech or the Hospital, but was instead mailed to Pinnacle Financial Group and AR Audit Services at the addresses provided on Eide’s bankruptcy schedules. (Bergquist Aff. ¶ 11; Costello Aff. ¶ 9.) Neither Pinnacle Financial Group nor AR Audit Services informed Colltech or the Hospital that they had received notices of Eide’s bankruptcy petition. (Bergquist Aff. ¶ 11; Costello Aff. ¶ 9.)
On December 7, 2011, the trustee of Eide’s bankruptcy filed a Report of No Distribution in the bankruptcy case, indicating that Eide’s bankruptcy was a no-asset case. (Sheridan Aff. ¶¶ 5-6, Ex. A at 3-4.) On February 1, 2012, the bankruptcy court issued an order discharging Eide from bankruptcy under 11 U.S.C. § 727. (Bankr. No. 11-47265, Feb. 1, 2012, Docket No. 26.)
IV. COLLTECH’S COLLECTION PROCEDURES
Colltech contends that it provides “detailed training and testing” to its new employees regarding compliance with state and federal debt collection statutes, including the FDCPA. (Costello Aff. ¶2.) In particular, Colltech requires two weeks of classroom training on these laws. (Id.) Colltech also periodically updates education for current employees, and conducts a random review of collectors and files to ensure compliance with debt collection laws. (Id.) Colltech maintains an electronic recording system which documents all of its collection activities, including the timing and content of collections communications made or attempted. (Id. ¶ 3.) In response to Eide’s discovery requests, Colltech refused to provide these training materials, citing the possibility that the materials may contain trade secrets. (Sheridan Aff. ¶¶ 11-14, Ex. B at 18-20.) In objecting to the discovery requests, Colltech indicated it would produce the documents only if a protective order was in place. (Id., Ex. B at 18.) To date, neither a protective order nor a motion to compel this discovery has been filed.
With respect to consumers that have filed for bankruptcy in particular, Colltech “relies upon Sanford Bemidji Medical Center not to forward accounts in bankruptcy, and assures that any accounts mistakenly referred for collection are promptly removed from actively collected accounts.” (Costello Aff. ¶ 10.) The collection agreement between Colltech and the Hospital provides that if the “hospital knows that the debtor disputes the account, is represented by an attorney, or has filed bankruptcy, hospital shall notify agent at the time of referral of the account or promptly upon receipt of that information if the account was previously referred.” (Id., Ex. E at 1.) The Hospital, in turn “main
V. COLLTECH’S COMPLAINT
Eide brought this action against Coll-tech, alleging numerous violations of the FDCPA. (Compl., Mar. 80, 2012, Docket No. 1.) The complaint alleges that Coll-tech’s February 15 letter was “an illegal communication in an attempt to collect a debt.” (Id. ¶ 13.) Specifically the complaint alleges that the letter violated provisions of the FDCPA that prohibit a debt collector from (1) engaging in conduct that harasses, oppresses, or abuses “any person in connection with the collection of a debt,” 15 U.S.C. § 1692d; (2) using “false, deceptive, or misleading representation or means in connection with the collection of any debt,” § 1692e, including false representations of “the character, amount, or legal status of any debt,” § 1692e(2)(A); and using “unfair or unconscionable means to collect or attempt to collect any debt,” § 1692f, including attempting to collect an amount not permitted by law, § 1692f(l). (CompLira 14,18.)
ANALYSIS ■
I. MOTION FOR SUMMARY JUDGMENT
A. Standard of Review
Summary judgment is appropriate where there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc.,
B. Standard for Liability Under the FDCPA
The FDCPA is a remedial, strict liability statute which was intended to be applied in a liberal manner. Cordes v. Frederick J. Hanna & Assocs., P.C.,
C. Discharge of Eide’s Debt in Bankruptcy
Colltech first argues that it did not violate the FDCPA in sending a letter to Eide because the hospital debt was not actually discharged in Eide’s bankruptcy. If the debt was not discharged and instead was due and payable on February 15, 2012, Colltech’s letter seeking to collect that debt would not have been misleading, would not have miseharacterized the legal nature of the debt, and would not have constituted harassment under the FDCPA.
The bankruptcy code generally exempts from discharge debts that were “neither listed nor scheduled” in time to permit the creditor to timely file proof of a claim or timely request a determination of dischargeability. In re Anderson,
The trustee of Eide’s bankruptcy certified to the bankruptcy court that Eide’s bankruptcy was a no-asset case, stating that “there is no property available for distribution from the estate over and above that exempted by law.” (Bankr. No. 11-47265, Chapter 7 Trustee’s Report of no Distribution, Dec. 7, 2011.) Because Eide’s bankruptcy was a no asset case, the hospital debt was discharged by the bankruptcy court’s discharge order, (Bankr. No. 11-47265, Order Discharging Debtor, Feb. 1, 2012, Docket No. 26), even though Eide failed to properly list the Hospital’s address in his bankruptcy schedules. Fur
D. Requirement that Eide Dispute the Debt
Colltech next argues that Eide’s FDCPA claims fail as a matter of law because he did not dispute the validity of the hospital debt within thirty days of receiving the first collection letter from Colltech.
The FDCPA requires a debt collector to send a consumer .written notice containing, among other information,
(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 the 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 ....
15 U.S.C. § 1692g(a). If a consumer notifies the debt collector of any dispute within thirty days “the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment,” and mails siich verification to the consumer. 15 U.S.C. § 1692g(b). Once the consumer notifies a debt collector and disputes the debt, “[a]t a minimum, the debt collector must contact the creditor and verify the nature, status, and balance of the debt and then convey that information to the consumer.” Erickson v. Johnson, Civ. No. 05-427,
To resolve Colltech’s motion for summary judgment, the Court must determine whether a consumer may bring an FDCPA claim solely on the basis that a debt collector sought to collect a debt that was not legally collectible if the consumer has not first challenged the validity of the debt through the statutory procedures set forth in § 1692g. Courts considering the question have split over whether the consumer dispute provision in § 1692g is a de facto prerequisite to bringing a federal lawsuit.
Some courts have prevented plaintiffs from maintaining lawsuits like the one brought by Eide, requiring plaintiffs first to use the statutory procedure for disputing the validity of the debt. See, e.g., Bleich v. Revenue Maximization Grp., Inc.,
Although the precise reasoning of courts barring claims like Eide’s has varied, all of these courts have relied in part on the rationale that FDCPA litigation premised solely on a disputed debt undermines the purpose of the statutory scheme providing for communication between consumers and debt collectors. For example, the Bleich court explained that if the plaintiff had exercised her rights under § 1692g to obtain verification of the debt “it is entirely likely that litigation would have been avoided.”
Other courts, however, have concluded that a plaintiff need not dispute the validity of a debt pursuant to § 1692g before filing a lawsuit alleging violations of the FDCPA for a debt collector’s use of false or misleading means — representing that an invalid debt is due and payable — to collect a debt. See, e.g., Burdett v. Harrah’s Kan. Casino Corp.,
The Court agrees with the approach taken by the latter group of courts, and concludes that disputing the validity of a debt using the procedures outlined in § 1692g is not a prerequisite to filing an FDCPA claim.
The validation provision in § 1692g does not alter the plain language of § 1692e. Nor does § 1692g alter § 1692k, which provides that “any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person.” 15 U.S.C. § 1692k (emphasis added). Section 1692k plainly provides a cause of action for a debt collector’s violation of any provision of the FDCPA, including § 1692e, and § 1692g does not state that disputing a debt within thirty days is a prerequisite to filing a lawsuit under § 1692k based on a debt collector’s false representation of the legal status of a debt. In a statute designed to “eliminate abusive debt collection practices by debt collectors” under which “debt collectors are liable for failure to comply with any provision of the Act,” Dunham v. Portfolio Recovery Assocs., LLC.,
Colltech argues that allowing a plaintiff to sue under the FDCPA without first disputing the debt conflicts with the portion of § 1692g which provides that “unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” 15 U.S.C. § 1692g(a)(3). Although this provision may shield a debt collector from certain kinds of liability for collection efforts .madd after the thirty day period has run, it does not provide that a debt collector is. entitled to assume the initial validity of all debts. If a debt collector was always allowed to assume that a debt is valid, in the absence of a consumer’s contention to the contrary, there would be no reason for the statute to specify that a debt collector is entitled to assume the validity of a debt only after the thirty day period for a consumer’s response has run. There is nothing contra
would encourage debt collectors to arbitrarily send a written notice to any person falsely claiming that person owed a debt. Provided the consumer fails to take action within thirty days, the debt collector may then institute a debt collection action repeating the same false representations without fear of FDCPA liability. Immunizing unscrupulous debt collectors, while depriving consumers of a remedy, would frustrate the FDCPA.
Gigli,
Furthermore, allowing plaintiffs to bring claims like Eide’s does not render § 1692g superfluous. The section still serves the purpose of guaranteeing that consumers “receive adequate notice of their rights under the law.” Wilson v. Quadramed Corp.,
E. Bona Fide Error Defense
Finally, Colltech argues that its failure to ascertain that Eide’s debt had been discharged in bankruptcy was due to a bona fide error, and therefore it is shielded from FDCPA liability.
1. Applicability of the Defense
The FDCPA provides that “[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). This “bona fide error defense offers debt collectors a narrow exception to the strict liability imposed by the FDCPA.” Cordes v. Frederick J. Hanna & Assocs., P.C.,
Rather than using the failure to use the procedures laid out in § 1692g as a means to bar lawsuits like Eide’s, other courts have analyzed the validity of such claims through the lens of the FDCPA’s bona fide error defense. See, e.g., Cross v. Risk Mgmt. Alternatives, Inc.,
2. Procedures Reasonably Adapted to Avoid Errors
The parties do not dispute that Coll-tech’s error — sending a letter regarding a debt that had previously been discharged in bankruptcy — was unintentional and constituted a bona fide error. The Court will therefore analyze only the third element of Colltech’s bona fide error defense — whether Colltech had in place procedures that were reasonably adapted to avoid such errors.
“[T]he procedures component of the bona fide error defense involves a two-step inquiry. The first step is whether the debt collector maintained — i.e., actually employed or implemented — procedures to avoid errors. The second step is whether the procedures were reasonably adapted to avoid the specific error at issue.” Owen,
Maintenance of reasonable procedures does not require a debt collector to conduct “an independent investiga
Although reliance on a creditor to report to the debt collector which accounts have been discharged in bankruptcy may constitute a reasonable procedure “the bona fide error defense ‘does not protect a debt collector whose reliance on a creditor’s representation is unreasonable.’ ” Bacelli,
Colltech alleges that it relies upon the Hospital to determine whether accounts are subject to bankruptcy proceedings, and this understanding is memorialized in the collection agreement between Colltech and the Hospital.
II. REQUEST FOR ATTORNEY FEES
In its reply brief, Colltech requests that the Court award attorney fees for costs Colltech has incurred in defending this matter under 15 U.S.C. § 1692k(a)(3) and 28 U.S.C. § 1927. (Def.’s Reply Mem. at 9-10, May 23, 2013, Docket No. 17.)
The FDCPA provides that “[o]n a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.” 15 U.S.C. § 1692k(a)(3). Title 28 U.S.C. § 1927 also allows for the award of attorney fees, providing that “[a]ny attorney ... who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” Sanctions under § 1927 are only proper “when attorney conduct, viewed objectively, manifests either intentional or reckless disregard of the attorney’s duties to the court.” Lee v. First Lenders Ins. Servs., Inc.,
In light of the Court’s denial of Colltech’s motion for summary judgment, the Court will decline to award attorney fees. This action clearly raises a variety of statutory issues that are subject to varying interpretations amongst the courts and therefore cannot fairly be character
This case will be placed on the Court’s next available trial calendar.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS HEREBY ORDERED that Defendant’s Motion for Summary Judgment [Docket No. 9] is DENIED.
Notes
. Eide also requested judgment independent of the motion pursuant to Federal Rule of Civil Procedure 56(f)(1). (Pl.'s Mem. in Opp. to Def.'s Mot. for Summ. J. at 2, May 13, 2013, Docket No. 14.) For the same factual reasons that the Court will deny Colltech's motion, the Court will deny Eide’s request.
. In March 2011, North County Regional Hospital merged with Sanford Health, and is now a distinct corporate entity known as Sanford Bemidji Medical Center. (Aff. of Jon Bergquist ¶¶ 1-2, Apr. 25, 2013, Docket No. 11.)
. Eide claims that he incurred the relevant hospital charge during a 2008 hospital visit. (Aff. of Richard O. Eide ¶ 2, May 16, 2013, Docket No. 15.) The hospital records indicate that the visit resulting in the hospital debt occurred in March 2010. (Bergquist Aff., Ex. B.)
. It is undisputed that the FDCPA is applicable in this case because Colltech is a "debt collector,” Eide is a "consumer,” and the "debt” that Colltech attempted to collect fits the statutory definition of "debt” under the FDCPA. See 15 U.S.C. § 1692a(3), (5), (6) (defining terms).
. In Velazquez, the court declined to directly rule on the issue of whether a plaintiff may bring an FDCPA claim based upon the allegation that the debt sought to be collected was
. Colltech argues that Richmond v. Higgins,
At least one court in this district has cited Richmond for the proposition that "[a] consumer cannot circumvent the statute’s procedural device to dispute the validity of a debt by filing an action pursuant to § 1692e on the sole basis that the debt is invalid.” Carpenter v. RJM Acquisitions, LLC,
. With respect to this defense, the training of Colltech's employees that is the subject of the discovery dispute seems irrelevant. Whether or not Colltech’s employees receive training regarding the legal requirements of the FDCPA does not shed light on whether Coll-tech employed procedures that were designed to ascertain whether á particular debt was previously discharged in bankruptcy.