MEMORANDUM AND ORDER
This is an action under the Fair Debt Collection Practices Act (FDCPA).
Based on the pleadings; the motions, responses, and replies; and the relevant law, the plaintiffs’ motion for leave to file the second amended complaint (Docket Entry No. 15) is granted as to the deletion of the state-law claims and the FDCPA claims under § 1692e(3) and (5); granted as to the claim under § 1692g(a)(4)-(a)(5); granted as to the class-action allegations with respect to this claim; and denied as to the other FDCPA claims. The defendant’s motion for judgment on the pleadings (Docket Entry No. 21) is granted in part and denied in part. The motion for judgment on the pleadings is denied as to the claim under § 1692g(a)(4)-(a)(5), and granted as to the other claims. A status conference is set for October 3, 2011, at 10:30 a.m. in Courtroom 11-B to set a schedule to resolve the remaining claims.
The reasons for these rulings are explained below.
I. Background
In April 2010, the plaintiffs, Russell and June Osborn, received a one-page letter from the defendant, Ekpsz, LLC d/b/a Texas Final Judgments, LLC. The letter sought to collect a $3,639.29 judgment entered against June Osborn in a justice of the peace court in September 2009. The letterhead identified the sender as “TEXAS FINAL JUDGMENTS, LLC,” with an address in Lakeway, Texas. (Docket Entry No. 15-1, at 4). Below this letterhead, aligned to the left, the letter listed the addressee, June Osborn, and gave her address. (Id). The subject line stated in bold font: “Cause No. CV31C0044160, Pharia L.L.C. v. JUNE OSBORN, in the Justice Court of HARRIS County, Texas.” (Id). The body of the letter stated:
Dear Mr or Ms OSBORN:
On 9/22/2009, a judgment was entered against you personally in the above referenced lawsuit. It is our understanding that you are not represented by an attorney at this time. If you are represented by an attorney, please forward this Notice to your attorney and direct them to contact us at their earliest convenience.
The judgment taken against you has resulted in an outstanding balance due of $3,639.29. Note this balance amount does not include post-judgment interest, which we are entitled to collect. We will exclude post-judgment interest if you contact us immediately to arrange payment.
Do not avoid dealing with this judgment debt as it may be abstracted in any county in which you own property and in the county in which you live. In addition, the judgment will continue to grow with interest and may remain on your financial reсord until resolved.
We are willing to work with you and would like to end this matter amicably. However, if we do not hear from you within the next thirty (30) days, we will direct our attorneys to send a Notice of Deposition with Subpoena Duces Tecum or Request for Production of Documents and Interrogatories. You will be required to appear at a deposition for the taking of your sworn testimony and bring certain documents disclosing your finances or you will be required to produce said documents and answer interrogatories at our attorney’s office. To avoid the sworn deposition and or production of documents, please contact our office at the following number:
(Id.). The defendant’s phone number followed, centered on the page and in larger font. (Id.). The letter was signed by “Texas Final Judgments, LLC.” Below the signature line, the letter included a notice — in bold letters and in the same font size as the body of the letter — that stated, in relevant part:
IMPORTANT NOTICE. Federal law gives you 30 days after you receive this letter to dispute the validity of the debt or any part of it. Unless you dispute this debt, or any portion of it, within 30 days from receipt of this notice, we will assume the debt to be valid. If you notify us within 30 days after receipt of this notice that you dispute the debt, or any portion of it, we will obtain verification of the debt or copy of the judgment against you and provide you a copy. If you make a request within 30 days of receipt of this notice, we will provide you with the name and address of the original creditor, if the original creditor is different from the current creditor.
(Id.). A bar code was beneath this paragraph. (Id.).
The plaintiffs filed a three-count complaint against Ekpsz, alleging that by sending the letter, the defendant violated the FDCPA, the Texas Debt Collection Practices Act,
Before the defendant responded to the first amended complaint, the plaintiffs filed a motion for leave to file a second amended complaint. (Docket Entry No. 15). The proposed second amended complaint drops the state-law causes of actions and the FDCPA causes of action under §§ 1692e(3) and (5), re-alleges the remaining FDCPA violations and adds new ones, and adds allegations seeking class certification for those violations under Rule 23(b)(3). The proposed second amended complaint alleges violations of the following FDCPA provisions:
(2) § 1692e(9), because the debt collection letter falsely implied that it was authorized or approved by a Texas court;
(3) § 1692e(10), because the use of the name “Texas Final Judgments, LLC” would mislead consumers intо believing the defendant was associated with a Texas court;
(4) § 1692f, because the defendant used fair and unconscionable means to collect the alleged debt by sending a letter that mimicked documents a Texas court would issue;
(5) § 1692g(b), because other language in the letter overshadowed or contradicted the debt validation notice; and
(6) § 1692e(10), because the letter misrepresented that a judgment has been entered against Russell Osborn, not just June Osborn. (Docket Entry No. 15-1).
II. The Legal Standards
A. Leave to Amend
When there is no need to adjust a scheduling order to allow a pleading amendment, a motion for leave to amend “is evaluated under [Rule 15], which provides that the court ‘should freely give leave when justice so requires.’ ” Cole v. Sandel Med. Indus., L.L.C.,
B. Rule 12(c)
“A motion brought pursuant to Fed.R.Civ.P. 12(c) is designed to dispose of cases where the material facts are not in dispute and a judgment on the merits can be rendered by looking to the substance of the pleadings and any judicially noticed facts.” Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In Bell Atlantic Corp. v. Twombly,
When a plaintiff’s complaint fails to state a claim, the court should generally give the plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice. See Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co.,
The court may consider documents attached to a motion to dismiss “if they are referred to in the plaintiffs complaint and are central to her claim.” Collins v. Morgan Stanley Dean Witter,
The FDCPA seeks to eliminate “abusive, deceptive, and unfair debt collection practices” by regulating the type and number of contacts a “debt collector” can have with a debtor. 15 U.S.C. § 1692. To achieve this goal, the Act regulates сommunications related to debt collection (§ 1692c), prohibits conduct that tends to harass, abuse, or oppress consumers (§ 1692d), forbids debt collectors from making false, deceptive, or misleading representations (§ 1692e), proscribes unfair or unconscionable debt collection practices (§ 1692f), and requires that debt collectors advise consumers whose debts they seek to collect of specified rights (§ 1692g). “Consumers may sue to enforce the Act’s provisions and, if successful, recover actual damages, statutory damages, and attorney’s fees and costs.” McKinney v. Cadleway Props., Inc.,
When deciding whether a debt collection letter violates the FDCPA, the court “must evaluate any potential deception in the letter under an unsophisticated or least sophisticated consumer standard.” Goswami v. Am. Collections Enter., Inc.,
III. Analysis
A. The § 1692g Claims
Under § 1692g, a debt collector who solicits payment must provide the consumer, within five days of the initial communication, a written validation notice that sets out:
(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 beassumed 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(a). A debt collector may violate § 1692g in two ways. First, a debt collector violates § 1692g by failing to provide the information the statute requires. DeSantis v. Computer Credit, Inc.,
The plaintiffs allege both types of § 1692g violations. First, the plaintiffs allege that the defendant’s letter violated subsections (a)(4) and (a)(5) by failing to state that requests under those subsections had to be in writing. The defendant admits that the section of the letter discussing how the plaintiffs could request verification of the debt and information about the original creditor did not mention that the request had to be in writing. The defendant argues that omitting this requirement did not violate the statute because it allowed a consumer to dispute the debt and request verification either orally or in writing, expanding rather than restricting statutory rights. The defendant contends that under the notice it provided in the collection letter, it had to verify the debt (as required by § 1692g(a)(4)), or disclose the name and address of the original creditor (as required by § 1692g(a)(5)), even if the plaintiffs made an oral request. Second, the plaintiffs allege that the body of the debt-collection letter overshаdowed and contradicted the validation notice by compelling the plaintiffs to respond to the letter before the 30-day statutory verification period ended. The defendant responds that its letter does not confuse unsophisticated consumers about their right to obtain verification of their debt within 30 days of receipt of the letter. For the reasons explained below, this court concludes that the plaintiffs have stated a claim that the required validation notice was incomplete, but have not stated a claim that the letter overshadowed or contradicted the validation notice.
Under the FDCPA, a debt collector’s validation notice must state that the debt collector will obtain and mail the consumer a verification of the debt or will provide the consumer with the name and address of the original creditor if the consumer disputes the debt or requests information about the original creditor in writing within 30 days of receiving the сollection letter. 15 U.S.C. § 1692g(a)(4)-(a)(5). The defendant’s letter informed June Osborn that she could request verification of the alleged debt or information about the original creditor, but did not state that the request had to be in writing. The letter did not fully comply with the statutory requirement.
The defendant argues that it did not violated subsections 1692g(a)(4) and (a)(5) by omitting the term “in writing” because its letter “afford[ed] Plaintiffs additional rights.” (Docket Entry No. 22, at 5). The defendant contends that, consistent with the FDCPA’s purpose, the validation notice section of its letter expanded rights by allowing consumers to obtain verification of their debts and information about original creditors through oral as well as written requests. (Id., at 6-7). The courts that have addressed this issue have rejected such an argument and found similar language in a debt-collection letter to violate the statute. These courts have emphasized the difference between a consumer’s written as opposed to oral notification that it disputes an alleged debt.
An oral notice of dispute of a debt’s validity has differеnt legal consequences than a written notice. Section 1692g(b) provides that if the consumer notifies the collector of a dispute in writing within the 30-day period, the collector must cease collection activities until he obtains the verification or information required by subsections 1692g(a)(4) and (a)(5). But if the consumer disputes the debt orally rather than in writing, the consumer loses the protections afforded by § 1692g(b); the debt collector is under no obligation to cease all collection efforts and obtain verification of the debt. Withers v. Eveland,
The defendant’s argument that its collection letter afforded the plaintiffs additional rights assumes that the defendant would have been legally obligated to provide the plaintiffs the information required by subsections 1692g(a)(4) and (a)(5) in response to orаl requests. This assumption is incorrect. “The plain meaning of § 1692g is that debtors can trigger the rights under subsection (a)(3) by either an oral or written ‘dispute,’ while debtors can trigger the rights under subsections (a)(4) and (a)(5) only through written dispute.” Camacho,
Every district court to consider the issue has held that a debt collector violates § 1692g(a) by failing to inform consumers that requests under subsections (a)(4) and (a)(5) must be made in writing. See, e.g., Bicking,
The reasoning of these courts is persuasive. “Any consumer, not simply the least sophisticated consumer, who read [the defendant’s] letter would not know that to secure her right to obtain verification of the debt and the identity of the original creditor, her dispute of the debt and request fоr the identity of the original creditor must be in writing.” Grief,
Contrary to the defendant’s argument, neither Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, — U.S. -,
The plaintiffs have stated a plausible claim based on the defendant’s failure to state in the letter that a request under subsections 1692g(a)(4) and (a)(5) had to be in writing. See Nero,
2. The Claim that the Letter Violated § 1692g(b)
A debt-collection letter sent “during the 30-day [statutory] period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.” 15 U.S.C. § 1692g(b). As the Fifth Circuit has explained, “[c]ourts have generally found contradiction or apparent contradiction of the printed § 1692g notice where payment is demanded in a concrete period shorter than the 30-day statutory contest period.” Peter,
In Swanson v. Southern Oregon Credit Service, Inc.,
By contrast, courts have held that letters that do not demand payment within the 30-day statutory period or that ask the debtor to contact the debt collector within that period do not contradict or overshadow the validation notice. In Peter, the collection letter stated in capital letters that “full collection activity will continue until this account is paid in full” and that “to avoid further collection activity, your student loan must be paid in full.”
Nothing in the defendant’s debt-collection letter overshadows or contradicts the validation notice section of that letter. The format of the letter does not have the effect of concealing the notice. The notice appears on the front, shortly after the four paragraphs that form the body of the letter, and in the same font size. The letter emphasizes the validation notice over the preceding four paragraphs by printing the notice in bold-face font. And the notice clearly outlines the procedure June Osborn must follow to dispute the debt (though, as discussed above, the notice does not mention that her request must be in writing).
Contrary to the plaintiffs’ allegations, the letter’s substantive content would not confuse a consumer, measured under the least sophisticated consumer standard, about the right to request verification of the debt or information about the original creditor. The first paragraph informs the debtor that if she is represented by an attorney, she should ask that attorney to contact the defendant at his or her “earliest convenience.” A request that the debtor’s attorney рromptly contact -the debt collector does not conflict with the validation notice. By directing the debtor to contact her attorney, the letter makes it more likely that the debtor will — by talking to the attorney — understand her statutory rights. The second paragraph lists the outstanding balance of the alleged debt and informs the debtor that the collector “will exclude post-judgment interest” if the debtor contacts the defendant “immediately to arrange payment.” Unlike the language in the collection letters in Bartlett and Swanson, this language does not demand immediate payment; rather, it encourages immediate contact with the debt collector to arrange payment by offering a financial incentive. Courts have held that offering a financial incentive to payment does not violate the FDCPA even if consumers must pay within the 30-day statutory period to benefit from the incentive. See, e.g., Day v. Allied Interstate, Inc., No. 09 Civ. 0495(BMC),
The third paragraph of the defendant’s letter urges the debtor not to avoid dealing with the debt and lists possible consequences of inaction, including that the debt “will cоntinue to grow with interest.” Letters that ask consumers not to avoid dealing with a debt do not violate the FDCPA. See Foti v. NCO Fin. Sys., Inc.,
The plaintiffs argue that read together, the second and third paragraphs would lead an unsophisticated consumer to believe “that only if she opted to disregard her statutorily-entitled rights, could she avoid an enlargement of the outstanding balance allegedly owed.” (Docket Entry No. 24, at 23). “Stated otherwise, Defendant, through its letter, presented Plaintiffs with mutually exclusive opportunities: (1) Plaintiffs were entitled to thirty (30) days from receipt of Defendant’s letter to dispute the validity of the subject debt, ... but (2) if Plaintiffs chose to exercise that right, Defendant would enlarge the outstanding balance by including an unspecified amount of post-judgment interest.” (Id.). The 30-day validation period “is not a grace period: a debt collector is ‘perfectly free’ to demand payment and pursue collection efforts, including an appropriate lawsuit against the debtor, -within the validation period,” unless the consumer disputes her debt. Durkin,
The fourth paragraph of the letter states that if the defendant “does not hear from [June Osborn] within the next thirty (30) days,” it will direct its attorneys “to send a Notice of Deposition with Subpoena Duces Tecum or Request for Production of Documents and Interrogatories” and June Osborn will “be required to appear at a deposition for the taking of [her] sworn testimony.” The letter instructs June Osborn to call the defendant if she wants to “avoid the sworn deposition and/or production of documents.” The defendant’s phone number is in the middle of the letter, in a font size three to four times larger than the body of the letter. The plaintiffs allege that the threat of having to be deposed or produce documents, together with the prominent telephone number, “overshadows and obfuscates the independently defective validation notice” because the plaintiffs “would ... feel compelled to respond before the expiration of the statutory verification period.” (Second Am. Compl. ¶¶ 68, 69). The plaintiffs also allege that “[t]he letter is confusing in that it fails to identify when the ‘next thirty days’ would be calculated from.” (Id. ¶ 68). Neither allegation states a claim under § 1692g(b). Even if the letter is confusing as to when the 30-day period to call the debt collector to avoid legal action begins, the validation notice is clear that June Osborn has “30 days after [she] reeeive[s] this notice” to dispute the alleged debt or request additional information. See Jacobson,
The plaintiffs’ argument that the letter would compel unsophisticated consumers to call the defendant is also unpersuasive. “It does not follow that simply because a collection letter instructs a consumer to contact a debt collector that the validation notice is necessarily overshadowed or contradicted.” Lerner v. Forster,
It is particularly significant that the challenged language in this matter does not require payment “immediately.” It merely requests a phone call. A demand for payment within less than the thirty-day timeframe necessarily requires the debtor to forego the statutory right to challenge the debt in writing within thirty days, or suffer the consequences. For this reason, requiring a payment that would eliminate the debt before the debtor can challenge the validity of that debt directly conflicts with the protections for debtors set forth in section 1692g. The request that the debtor telephone the collection agency does not contradict the admonition that the debtor has thirty days to contest the validity of the debt. This language simply encourages the debtor to communicate with the debt collection agency. It does not threaten or encourage the least sophisticated debtor to waive his statutory right to challenge the validity of the debt.
Terran,
The defendant’s motion to dismiss is granted as to the § 1692g(b) claim.
B. The § 1692e Claims
Section 1692e generally prohibits a debt collector from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” and lists, in 16 subsections, examples of conduct that violates the FDCPA. 15 U.S.C. § 1692e. The plaintiffs allege three violations of § 1692e: one violation of § 1692e(9) and two violations of § 1692e(10). Each alleged violation is addressed below.
First, the plaintiffs contend that the defendant’s letter violates § 1692e(9) by falsely implying that the letter was approved or authorized by a Texas court. The plaintiffs allege that the collection letter “uses an address block which is commonly associated with the Justice Courts and Civil District Courts of the State of Texas.” (Second Am. Compl. ¶ 42). The plaintiffs allege that a state-court judge— Judge Mike Parrott — also uses a letterhead in which his name and address are centered at the top of the page. (Id. ¶ 46). The plaintiffs also allege that the letter contains a bar code in the lower left corner and that a bar code also appears at a similar location on the bottom of the page of documents the defendant submits to the court, the judge signs, and the defendant mails with the collection letter. (Id. ¶ 44). According to the plaintiffs, the “use of the name ‘Texas Final Judgments, LLC’ compounds the deceptive design and layout of the ... letter and furthers the impression that the ... letter originated from, [was] authorized by, or [was] approved by a Texas [c]ourt.” (Id. ¶ 43).
Section 1692e(9) prohibits “[t]he use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court ..., or which creates a false impression as to its source, authorization, or approval.” 15 U.S.C. § 1692e(9). “Courts have generally limited the application of § 1692e(9) to egregious situations where the debt collector overtly impersonates a government agency or where it attempts to hide its identity by using a false alias.” Sullivan v. Credit Control Servs., Inc.,
Second, the plaintiffs allege that the defendant’s use of the name Texas Final Judgments, LLC, violates § 1692e(10) because it misleads consumers into believing that the collection letter was authorized or approved by a Texas court. (Second Am. Compl. ¶¶ 51, 52). Section 1692e(10) prohibits “[t]he use of any false representation or deceptive means to collect or attempt to collect any debt.” 15 U.S.C. § 1692e(10). For the reasons discussed above, the least sophisticated consumer would not conclude that the defendant’s letter was authorized or approved by a Texas court. Cf. Dorner v. Commercial Trade Bureau of Cal., No. CIV-F-08-0083 AWI SMS,
Third, the plаintiffs allege that the defendant’s letter violates § 1692e(10) because it “misrepresented that the judgment in question was entered against both Plaintiffs, whereas said judgment was entered only against June Osborn.” (Second Am. Compl. ¶ 76). The plaintiffs further allege that the letter “threatened to take an action against Plaintiffs that could not be legally taken, or that was not actually intended to be taken, including threatening post-judgment actions against Plaintiff Russell Osborn, despite the fact that no judgment had been entered against him.” (Id. ¶ 77). The least sophisticated consumer would not read the defendant’s letter to state that a judgment had been entered against Russell Osborn or that legal action was threatened against him. Russell Osborn’s name does not appear in the letter. Below the defendant’s letterhead, the letter lists June Osborn’s name and address. The subject line of the letter states, in part, “Cause No. CV31C0044160, Pharia L.L.C. v. June Osborn.” Contrary to the plaintiffs’ argument, the salutation line— “Dear Mr or Ms OSBORN” — does not suggest that the letter is addressed to Russell Osborn. The disjunctive “or” indicates that the letter has only one recipient, June Osborn, without identifying the recipient’s gender. This court grants the defendant’s motion to dismiss this claim.
C. The § 1692f Claim
Section 1692f generally prohibits a debt collector from using “unfair or unconscionable means to collect or attempt to collect any debt” and lists, “[w]ithout limiting the general application of the foregoing,” examples of conduct that violates the FDCPA. 15 U.S.C. § 1692f. The plaintiffs do not allege that the defendant’s letter violated one of the specific provisions. Instead, the plaintiffs allege that the letter violated § 1692fs general prohibition “by mailing, or causing to be mailed, a letter and forms to Plaintiffs which mimics a document issued by [a] Texas Court enclosed therewith.” (Second Am. Compl. ¶ 58).
D. The Class Allegations and the Defendant’s Request for Fees
The defendant argues that the motion for leave to amend should be denied because the plaintiffs “seek to redefine much of their case” by adding class allegations and because the defendant has already incurred substantial costs defending against the plaintiffs’ action. There is no substantial reason to deny the plaintiffs leave to amend to add class-action allegations as to the FDCPA claim that survives the pleading challenges. The plaintiffs filed their motion for leave to amend before the defendant filed an answer to the first amended complaint and more than a month before the defendant filed its motion to dismiss the first amended complaint. The plaintiffs have not moved for class-action certification and the defendant will not suffer any prejudice at this early stage of the litigation from the class allegations in the second amended complaint.
The defendant was not unfairly prejudiced by having to respond to multiple complaints because, as the defendant admits, many of the arguments made in its motion to dismiss the first amended complaint apply to the plaintiffs’ second amended complaint. The costs incurred defending against the plaintiffs’ action— which include costs related to preparing motions to dismiss the original complaint and the first amended complaint — are the type of costs defendants incur every day. The circumstances of this case do not warrant requiring the plaintiffs to pay the defendant the fees it incurred to date as a condition for granting leave to amend.
IV. Conclusion
The plaintiffs’ motion for leave to file the second amended complaint (Docket Entry No. 15) is granted as to the deletion of the state-law claims and the FDCPA claims under § 1692e(3) and (5); granted as to the claim under § 1692g(a)(4)-(a)(5); granted as to the class action allegations with respect to this claim; and denied as to the other FDCPA claims. The defendant’s motion for judgment on the plead
Notes
. 15U.S.C. § 1692 etseq.
. Tex. Fin.Code § 392.001 et seq.
. Tex. Bus. & Com.Code § 17.41 et seq.
. In response to the defendant's mоtion to dismiss, the plaintiffs assert that the defendant’s letter also violated § 1692g(a)(l) because it failed to accurately state the debt amount. (Docket Entry No. 24, at 23). The plaintiffs contend that by failing to specify the amount of accrued interest, the letter leaves unsophisticated consumers uncertain about the magnitude of the debt. But neither the
. The Fifth Circuit has described Wilson as a "difficult and close case as it falls between cases like Savino that confuse consumers by emphasizing immediate payment, and cases
. In response to the defendant’s motion to dismiss, the plaintiffs assert that the defendant’s letter also violated § 1692e(ll) because the letter failed to disclose that the communication was from a debt collector. (Docket Entry No. 24, at 24). But the complaint does not allege a violation of § 1692e(ll) and the plaintiffs do not seek leave to amend to add such an allegation.