STEPHEN HOLZMAN v. MALCOLM S. GERALD & ASSOCIATES, INC., LVNV FUNDING, LLC,
No. 16-16511
United States Court of Appeals, Eleventh Circuit
April 5, 2019
[PUBLISH] D.C. Docket No. 9:16-cv-80643-RLR
Appeal from the United States District Court for the Southern District of Florida
(April 5, 2019)
Before TJOFLAT, JULIE CARNES, Circuit Judges, and KAPLAN,* District Judge.
Plaintiff asserts claims under the federal Fair Debt Collection Practices Act (“FDCPA“),
Defendants filed a motion to dismiss Plaintiff‘s FDCPA claims pursuant to Federal Rule 12(b)(6). The district court granted the motion, agreeing with Defendants that their collection efforts did not violate either
BACKGROUND
Defendant LVNV Funding, LLC (“LVNV“) is a debt collector that purchases and attempts to collect on time-barred debts. In 2015, LVNV purchased such a debt, which had been incurred by Plaintiff on a personal credit card years prior and had subsequently been charged off by the original creditor in 2007. LVNV retained Defendant Malcolm Gerald & Associates (“Malcolm“) to collect the debt on LVNV‘s behalf. Like LVNV, Malcolm is a debt collector for purposes of the federal and state statutes at issue in this litigation.
In connection with its collection efforts, Malcolm sent Plaintiff a collection letter that reads, in relevant part:
Original Creditor: HSBC BANK NEVADA, N.A.
BALANCE DUE: $869.51
Charge Off Date: 07/31/2007
Balance Itemization
Principal Balance: $615.41
Interest Balance: $254.10
Please be advised that LVNV FUNDING LLC, the Current Creditor-Debt Purchaser has purchased the account referenced above. LVNV FUNDING LLC has placed your account with us for collection.
Malcolm S. Gerald and Associates wants to help you resolve your delinquent account with LVNV FUNDING LLC. We would like to offer you a balance reduction to 30% of the balance due listed above. We will be able to accept $260.85 as a reduced payment in full on your account. To take advantage of this offer, the reduced amount listed must be received in our office no later than 05/31/2015. We are not obligated to renew this offer.
This communication is from a debt collector. This is an attempt to collect a debt. Any information obtained will be used for this purpose.
Make check payable to: Malcolm S. Gerald and Associates, Inc. If you would like to pay online, you may do so at https://msgpayments.com
After receiving this collection letter, Plaintiff filed a putative class action complaint against Defendants asserting federal claims under the FDCPA,
Defendants moved to dismiss Plaintiff‘s complaint pursuant to Federal Rule 12(b)(6). In an oral ruling and following a hearing on the motion, the district court dismissed Plaintiff‘s FDCPA claims with prejudice. In support of its ruling, the court cited Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767 (8th Cir. 2001), Huertas v. Galaxy Asset Management, 641 F.3d 28 (3d Cir. 2011), and Ehrich v. Convergent Outsourcing, Inc., 2015 WL 6470453 (S.D. Fla. Oct. 28, 2015) for the legal principle that: “the FDCPA permits debt collector[s] to see[k] voluntary repayment of . . . time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts.” The court determined that the letter Plaintiff received did not contain any language that could be interpreted as initiating or threatening legal action. Thus, accepting the legal principle announced in Freyermuth, Huertas, and Ehrich, the court concluded that Plaintiff‘s allegations did not assert a plausible violation of the FDCPA.
In so ruling, the district court distinguished Daugherty v. Convergent Outsourcing, Inc., 836 F.3d 507 (5th Cir. 2016), Buchanan v. Northland Group., Inc., 776 F.3d 393 (6th Cir. 2015), and McMahon v. LVNV Funding, LLC, 744 F.3d 1010 (7th Cir. 2014), in which the Fifth, Sixth, and Seventh Circuits, respectively, held that a collection letter offering to “settle” a time-barred debt, but not threatening litigation, could nonetheless serve as the basis for an FDCPA claim. The district court noted that the collection letter Plaintiff received offered to “resolve” his time-barred debt, not “settle” it. According to the court, the “settle” language used in the letters at issue in Daugherty, Buchanan, and McMahon was more akin to a threat of legal action than the “resolve” language used in the letter Plaintiff received. Consequently, the court determined that Plaintiff could not state a viable FDCPA claim under the rationale of Daugherty, Buchanan, or McMahon.
Having dismissed Plaintiff‘s FDCPA claims, the district court declined to exercise pendant jurisdiction over Plaintiff‘s Florida Act claim. The court thus dismissed this claim without prejudice.
Plaintiff appeals the dismissal of his FDCPA and Florida Act claims. As noted, Plaintiff argues that he has presented a plausible claim that the collection letter he received from Defendants was “false, deceptive, or misleading” in violation of
DISCUSSION
I. Standard of Review
We review the decision to dismiss Plaintiff‘s complaint pursuant to Rule 12(b)(6) de novo, applying the same standard as the district court. See West v. Warden, Comm‘r, Ala. Dep‘t of Corr., 869 F.3d 1289, 1296 (11th Cir. 2017). In conducting our review, we accept the allegations in Plaintiff‘s complaint as true and we construe the facts in the light most favorable to his claims. See id. Viewing the complaint in that manner, the relevant inquiry is whether Plaintiff has stated a “plausible claim for relief” under the FDCPA. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). If he has, then the district court‘s order dismissing Plaintiff‘s FDCPA claims must be reversed and the Florida Act claim must be reinstated. See id.;
The FDCPA protects consumers from abusive debt collection practices by regulating the conduct of debt collectors. See Crawford v. LVNV Funding LLC, 758 F.3d 1254, 1257 (11th Cir. 2014) (noting that “Congress passed the FDCPA in 1977 to stop the use of abusive, deceptive, and unfair debt collection practices by many debt collectors” (internal quotation marks omitted)). To enforce its provisions, the FDCPA provides consumers with a private right of action against debt collectors who violate the Act. See id. at 1258. Assuming Plaintiff‘s allegations are true, Defendants qualify as debt collectors for purposes of the FDCPA and are thus subject to the Act‘s regulations. See
As noted, Plaintiff alleges (1) that the collection letter he received from Defendants was “false, deceptive, or misleading” in violation of
The least-sophisticated consumer standard is intended to protect “all consumers, the gullible as well as the shrewd.” Id. at 1194 (internal quotation marks omitted). As such, the “least-sophisticated consumer” is presumed to have only a “rudimentary amount of information about the world.” Id. Nevertheless, it is assumed that the least-sophisticated consumer will be “willing[] to read a collection notice with some care.” LeBlanc, 601 F.3d at 1194 (internal quotation marks omitted). Moreover, the least-sophisticated consumer standard “has an objective component in that while protecting naive consumers, the standard also prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness.” Id. (internal quotation marks omitted). Finally, whether a representation made in a collection letter would be deceptive or misleading to the least-sophisticated consumer, or a collection practice would be unfair or unconscionable when applied to the least-sophisticated consumer, generally is a question of fact to be decided by a jury. See id. at 1195, 1201.
A. The collection letter Plaintiff received plausibly could be misleading or deceptive to the “least sophisticated consumer” in violation of § 1692e .
Section
This Court has not ruled on the above issue, and the appellate courts that have done so have taken different approaches. In a case factually similar to this one, the Third Circuit suggested that a threat of litigation is necessary to state a claim under
In contrast to Huertas and Freyermuth, the Fifth, Sixth, and Seventh Circuits disagree that a collection letter referencing a time-barred debt cannot violate the FDCPA absent an express threat of litigation. See Daugherty, 836 F.3d at 509; Buchanan, 776 F.3d at 399-400; McMahon, 744 F.3d at 1020. In each of these cases, a debt collector sent a letter offering to “settle” the debtor‘s account for a percentage of the total balance. Although technically accurate in every other respect, each of these collection letters failed to disclose that the referenced debt was, in fact, time-barred and thus legally unenforceable. Contrary to the result reached in Huertas and Freyermuth, the appellate courts in Daugherty, Buchanan, and McMahon held that the debtors had stated a claim under
In reaching this conclusion, the courts in Daugherty, Buchanan, and McMahon recognized that, as a general matter, a creditor can seek voluntary payment of a time-barred debt. See Daugherty, 836 F.3d at 509 (observing that “it is not automatically unlawful for a debt collector to seek payment of a time-barred debt“); Buchanan, 776 F.3d at 397 (“There . . . is nothing wrong with informing debtors that a debt remains unpaid or . . . allowing them to satisfy the debt at a discount.“); McMahon, 744 F.3d at 1020 (“[S]ome people
While it is not automatically unlawful for a debt collector to seek payment of a time-barred debt, a collection letter violates the FDCPA when its statements could mislead an unsophisticated consumer to believe that her time-barred debt is legally enforceable, regardless of whether litigation is threatened.
Further, notwithstanding its prior decision in Huertas, the Third Circuit recently has adopted the rationale of Daugherty, Buchanan, and McMahon. See Tatis v. Allied Interstate, LLC, 882 F.3d 422, 428-30 (3d Cir. 2018). The plaintiff in Tatis asserted a claim under
Huertas stands for the proposition that debt collectors do not violate [the specific prohibition found in]
15 U.S.C. § 1692e(2)(A) when they seek voluntary repayment of stale debts, so long as they do not threaten or take legal action. But the FDCPA sweeps far more broadly than the specific provision found in§ 1692e(2)(A) . It prohibits ”any false, deceptive, or misleading representation” associated with debt-collection practices.
Id. (emphasis in original). As to the FDCPA‘s general prohibition of any false, deceptive, or misleading representation, Tatis held that the plaintiff had established a plausible violation by pleading that she had received a collection letter offering to settle her debt but failing to disclose that this time-barred debt was legally unenforceable. Tatis, 882 F.3d at 430.
We are persuaded by the reasoning of Daugherty, Buchanan, and McMahon — and, most recently, Tatis. We likewise conclude that with regard to a collection letter seeking payment on a time-barred debt, an express threat of litigation is not required to state a claim for relief under
legally be taken” (i.e., threatening litigation
In their motion to dismiss under Rule 12(b)(6), Defendants argue that, as a matter of law, the particular representation at issue in the collection letter would not mislead or deceive an unsophisticated consumer as to the legal status of, or the legal ramifications of non-payment on, a time-barred debt. In examining this argument in a motion to dismiss context, the question is whether it is plausible that a reasonable jury could find that this representation would so mislead an unsophisticated consumer. See Iqbal, 556 U.S. at 678 (“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” (internal quotation marks omitted)); LeBlanc, 601 F.3d at 1195-97 (a court may decide this question as a matter of law only if there is no basis for a reasonable jury to conclude that a consumer would be deceived or misled). The language of the present collection letter contains an offer to “resolve” a time-barred debt, combined with a deadline to accept the reduced-payment offer and a warning that the offer might not be renewed if payment is not timely made. We conclude that this language, taken in
its entirety, could plausibly deceive or mislead an unsophisticated consumer as to the legal status of the debt, even in the absence of an express threat of litigation.
Further, we are not persuaded that this case is materially distinguishable from Daugherty, Buchanan, and McMahon merely because the letter Plaintiff received offers to “resolve” the referenced time-barred debt rather than “settle” it. Despite the slight semantic difference, it still is plausible that the letter Plaintiff received would leave an unsophisticated consumer with the same general — and inaccurate — impression as did the letters at issue in Daugherty, McMahon, and Buchanan. That is, by urging the debtor to “take advantage” of the offer, the letter might have caused an unsophisticated consumer to mistakenly believe that the debt was legally enforceable and that he had something to gain by accepting the offer, or to lose by declining it. In fact, the letter reinforces this impression by announcing a deadline, thus creating some urgency for the debtor to accept the offered terms by making payment. In this regard, the letter states that payment “must be received in our office no later than 5/31/2015” and that Defendants are “not obligated to renew” the offer. As Plaintiff points out, an unsophisticated reader might conclude from this language that he is being presented with an ultimatum, and that failure to make payment within the required time frame would result in negative consequences, such as legal action.
Finally, we disagree that our holding in this case will require debt collectors to give legal advice to debtors, as Defendants argue. Essentially, Defendants argue that by permitting Plaintiff‘s case to go beyond the pleading stage, we put debt collectors in the untenable position of having to analyze and advise debtors as to the merits of any potential statute of limitations defense. Whether or not that concern might be valid in some situations, the suggestion that Defendants would have had to conduct any legal analysis to determine whether the debt in this case was time-barred seems a bit disingenuous. After all, Defendants were aware of the status of Plaintiff‘s debt when they purchased it, presumably at a heavily discounted price that accounted for the fact that its legal
[I]f a debt collector is unsure about the applicable statute of limitations, it would be easy to include general language about that possibility, correcting any possible misimpression by unsophisticated consumers without venturing into the realm of legal advice.
Buchanan, 776 F.3d at 400 (internal quotation marks and citation omitted). And in fact, Defendant LVNV has, subsequent to the letter it sent to Plaintiff in this case, incorporated such language into its collection letters. See Shields v. J.C. Christensen & Assoc., Inc., 2017 WL 1106085, at *1 (S.D. Ind. Mar. 24, 2017) (quoting the following language from a recent LVNV collection letter: “The law limits how long you can be sued on a debt. Because of the age of your debt,
LVNV Funding LLC will not sue you for it, and LVNV Funding LLC will not report it to any credit reporting agency.” (internal quotation marks omitted)).
In short, it is at least plausible that the collection letter Defendants sent to Plaintiff would have been “false, deceptive, or misleading” to the “least sophisticated” recipient of the letter, in violation of
B. Attempting to collect on time-barred debt is not a per se unfair or unconscionable practice that automatically violates § 1692f of the FDCPA.
Although we find that Plaintiff has stated a plausible claim that Defendants’ collection letter was misleading under
[T]he opportunities for mischief and deception, particularly when sophisticated parties aim carefully crafted messages at unsophisticated consumers, may well be so great that the better approach is simply to find that any such efforts violate the FDCPA‘s prohibitions on deceptive or misleading means to collect debts,
§ 1692e , and on “unfair or unconscionable means” to attempt to collect debts,§ 1692f .
Id. Ultimately, however, the Pantoja Court never articulated such a general prohibition, noting that: (1) the plaintiff had not argued for it and (2) the case could be decided on narrower grounds. Id.
The Seventh Circuit‘s observations in Pantoja notwithstanding, courts generally have recognized that the FDCPA does not impose a bright-line rule prohibiting debt collectors from attempting to collect on time-barred debt. See Daugherty, 836 F.3d at 509 (noting that “it is not automatically unlawful for a debt collector to seek payment of a time-barred debt“); Buchanan, 776 F.3d at 397 (“Legal defenses are not moral defenses, however. And a creditor remains free, in the absence of a bankruptcy order or something comparable preventing
III. Plaintiff‘s Florida Act Claim
The district court did not dismiss Plaintiff‘s Florida claim on substantive grounds, but rather declined to exercise pendent jurisdiction over it after dismissing Plaintiff‘s federal FDCPA claims. In light of the Court‘s reversal of the ruling as to Plaintiff‘s claim under
CONCLUSION
For the foregoing reasons, we AFFIRM in part and REVERSE in part the district court‘s ruling dismissing Plaintiff‘s FDCPA claims pursuant to Rule 12(b)(6) and declining to exercise jurisdiction over Plaintiff‘s Florida Act claim. The case is REMANDED to the district court for further proceedings consistent with this opinion.