Coyne v. Midland Funding LLC et al
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that: 1. The Motion to Dismiss 9 is GRANTED; and 2. The Complaint is DISMISSED with prejudice as to claims arising out of alleged misstatements regarding interest, and DISMISSED without prejudice as to claims arising out of the alleged misstatement regarding costs. LET JUDGMENT BE ENTERED ACCORDINGLY. (Written Opinion) Signed by The Hon. Paul A. Magnuson on 07/20/2017. (LLM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
David Coyne, on behalf of himself
and all others similarly situated,
Case No. 17-cv-500 (PAM/SER)
MEMORANDUM AND ORDER
Midland Funding, LLC, Midland
Credit Management, and
Messerli & Kramer, P.A.,
This matter is before the Court on Defendants’ Motion to Dismiss.
following reasons, the Motion is granted.
Plaintiff David Coyne is an attorney licensed in Minnesota. At some unspecified
point in the past, Coyne defaulted on a Citibank credit-card debt. Defendant Midland
Funding bought the debt and hired Defendant Messerli & Kramer to collect it. Midland
likely purchased Coyne’s debt for pennies on the dollar because it was an old debt. (Pl.’s
Opp’n Mem. (Docket No. 16) at 2-3.)
Midland hoped to convince Coyne to pay
something on the debt, although Coyne was no longer legally obligated to do so.
Messerli sent Coyne a letter about the debt on February 26, 2016. (Am. Compl.
(Docket No. 4) ¶¶ 35-42.) This letter does not ask Coyne to take any action, but rather
purports to “provide some additional information pertaining to [Coyne’s] account.” (Id.
Ex. A.) The letter lists the charge-off balance of the debt as $13,205.30, and the “current
balance” as $17,230.29. (Id.) The letter explains that the account balance “consists of
the principal balance of $13,205.30 and interest of $3,871.39 at the rate of 6.00% plus
incurred costs of $153.60.” (Id.)
According to Coyne, this letter violated the Fair Debt Collection Practices Act
(“FDCPA”) in several ways. 1 First, the letter “did not disclose what the additional
‘incurred costs’ related to.” (Id. ¶ 48.) Coyne contends that this failure to explain the
incurred costs and to collect them was both an unfair or unconscionable means to collect
a debt under § 1692f and a false representation concerning the character, amount, or legal
status of a debt under § 1692e(2)(A). Coyne also contends that he did not owe Messerli
costs of $153.60, and thus the letter violated several subsections of § 1692e and § 1692f.
(Am. Compl. ¶¶ 55-60.) Second, the charge-off balance in the letter allegedly included
principal, fees, and contractual interest and, according to Coyne, this violated the FDCPA
in multiple ways.
(Id. ¶¶ 69-71.)
Finally, the letter violated the FDCPA because
Messerli “did not disclose the time period from which the interest at 6.00% accrued” (id.
¶ 74), and the interest amount listed constituted compounded statutory interest in
violation of Minnesota law. (Id. ¶ 80.)
Coyne then received a letter from Defendant Midland Credit Management, dated
September 28, 2016. (Id. ¶ 102.) (The Amended Complaint does not specify what the
relationship is between Midland Funding and Midland Credit Management.) This letter
listed the “Charge-Off Balance” as $13,205.30, an interest rate of 6.00%, the “MCM
Coyne initially asserted that the letter misstated the name of the creditor and that this
misstatement violated the FDCPA. At the hearing, Coyne abandoned this claim.
Interest Balance” as $214.82, and the “Current Balance” as $13,420.13. (Id. Ex. B at 2.)
The letter offered Coyne “Available Payment Options” including paying 30% of the debt
to settle the account in full. (Id. at 1.) The letter also told Coyne that, “[b]ecause of the
age of your debt, we will not sue you for it. If you do not pay the debt, we may continue
to report it to the credit reporting agencies as unpaid.” (Id.)
Coyne contends that this
letter misrepresented the principal balance because the amount listed included principal,
fees, and interest. (Am. Compl. ¶ 111.) Coyne also contends that the amount listed as
“MCM interest” violated the FDCPA in multiple ways. (Id. ¶¶ 126-46.)
On November 10, 2016, Midland Credit Management sent Coyne another letter,
substantially the same as the September letter, again offering to settle the debt by paying
30% of the “current balance of $13,420.13,” or $4,026.03. (Id. Ex. C.) Coyne contends
that this letter also violated §§ 1692e and 1692f in similar ways to the other letters. (Am
Compl. ¶¶ 156-57, 161-62, 171-76, 184-88.)
Coyne does not allege that he took any
action in response to these letters, or that he was ever contacted by any of the Defendants
after these letters.
Coyne seeks to represent two subclasses of individuals with “addresses within the
state of Minnesota” who received a communication similar to those he received from
Messerli and the Midland entities. (Id. ¶ 199.)
The Amended Complaint raises a single claim for violation of the FDCPA against
all three Defendants. He alleges that the statutory violations invaded his privacy, caused
him emotional distress and embarrassment, and that Defendants intimidated and harassed
him. (Id. ¶¶ 195-97.) Coyne seeks both actual damages and statutory damages under
§ 1692k, and attorney’s fees and costs.
Standard of Review
When evaluating a motion to dismiss under Rule 12(b)(6), the Court assumes the
facts in the Complaint to be true and construes all reasonable inferences from those facts
in the light most favorable to the non-moving party. Morton v. Becker, 793 F.2d 185,
187 (8th Cir. 1986). However, the Court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999), or legal conclusions that the plaintiff draws from the facts pled. Westcott v. City
of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
545 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements,” will not pass muster under Twombly. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). This standard “calls for
enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of
[the claim].” Twombly, 550 U.S. at 556.
The FDCPA prohibits debt collectors from using a “false, deceptive or misleading
representation or means in connection with the collection of any debt,” 15 U.S.C.
§ 1692e, or “unfair or unconscionable means to collect or attempt to collect any debt.”
Id. § 1692f. Courts evaluate the statements at issue using the “unsophisticated consumer”
Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1055 (8th Cir. 2002).
Defendants first argue that the Court should not use the “unsophisticated consumer”
standard in this case, but rather should use the “competent lawyer” standard because
Coyne is an attorney. See Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567, 573-74
(8th Cir. 2015) (Courts should not use unsophisticated-consumer standard in
communications sent to a consumer’s attorney.) But as Coyne points out, all of the cases
discussing the “competent lawyer” standard are cases where the attorney was an
intermediary between the consumer and the debt collector, not where the consumer is
himself an attorney. E.g., Ferkingstad v. Accounts Receivable Servs., LLC, No. 16-3565,
2017 WL 1373261, at *3 (D. Minn. Apr. 13, 2017) (Ericksen, J.) (“When an attorney is
interposed as an intermediary between the debt collector and consumer, courts apply [the]
‘competent lawyer’ [standard].”).
There is no authority for Defendants’ position that communications to a consumer
who is also an attorney are judged by a different standard than communications sent to a
consumer who is not an attorney. The FDCPA prohibits misleading communications
even if the consumer was not actually misled. At this early stage of the litigation, the
Court will not judge those communications by a more exacting standard. In addition,
because the Court concludes below that nearly all of the alleged misrepresentations were
not material as a matter of law, whether the Court applies the unsophisticated consumer
standard or the competent lawyer standard is of no moment. The statements in the letters
are, in the main, not actionable as a matter of law, no matter to whom they were made.
Defendants assert that the Supreme Court’s 2016 decision in Spokeo v. Robins,
136 S. Ct. 1540 (2016), means that Coyne does not have standing to bring his claims. In
Spokeo, the Supreme Court discussed the injury requirement for bringing a claim for a
violation of the Fair Credit Reporting Act, which is similar in scope and purpose to the
FDCPA. The Court emphasized that a “bare procedural violation” would not suffice to
establish the requisite injury for standing purposes. Id. at 1549. But the Supreme Court
did not hold that intangible injuries are insufficient as a matter of law. Rather, to
determine whether intangible injuries, such as those Coyne alleges here, are sufficiently
concrete to satisfy the injury-in-fact requirement, “both history and the judgment of
Congress play important roles,” because “Congress may ‘elevat[e] to the status of legally
cognizable injuries concrete, de facto injuries that were previously inadequate in law.’”
Id. (alteration in original) (quoting Lujan v Defenders of Wildlife, 504 U.S. 555, 578
In the FDCPA, Congress created a scheme to protect consumers from abusive debt
collection practices. Jackson v. Abendroth & Russell, P.C., 207 F. Supp. 3d 945, 959
(S.D. Iowa 2016). Most courts considering the subsections of the statute at issue here,
§§ 1692e and 1692f, have found that these sections create the right on behalf of the
consumer to be free from false or misleading communications or representations about a
debt, and the right to be free from unfair or unconscionable means to collect a debt. See,
e.g., Hill v. Accounts Receivable Servs., LLC, No. 16-219, 2016 WL 6462119, at *4 (D.
Minn. Oct. 31, 2016) (Frank, J.); see also Bernal v. NRA Grp., LLC, 318 F.R.D. 64, 7273 (N.D. Ill. 2016) (finding that consumer alleging harm from debt collection letter
claiming to assess collection costs that were not lawfully assessed had standing). Indeed,
the Eleventh Circuit has held post-Spokeo that a plaintiff who received a debt-collection
letter that allegedly did not include FDCPA-required disclosures had Article III standing,
even though “the injury may not have resulted in tangible economic or physical harm.”
Church v. Accretive Health, Inc., 654 F. App’x 990, 994 (11th Cir. 2016).
In the FDCPA, Congress created a statutory scheme and the rights that go with it.
Coyne has sufficiently alleged injury here, both in the violation of the rights the FDCPA
creates and in his allegations of emotional distress and other injuries. He has standing to
A plaintiff raising a violation of § 1692e or § 1692f must allege that the
representation or communication was not only false but materially so. See Hill, 2016 WL
6462119, at *6 (citing cases). “A misrepresentation is material if it ‘undermined [the
plaintiff’s] ability to intelligently choose her action regarding the debt.’” Id. (quoting
Caulfield v. Am. Account & Advisors, Inc., No. 12cv2761, 2013 WL 1953314, at *2 (D.
Minn. May 10, 2013) (Doty, J.)). Coyne makes no allegations in this regard. He does
not contend that he did or refrained from doing anything in response to these letters. And
regardless of Coyne’s specific response, the question is whether any reasonable
unsophisticated consumer would have been unable to choose her response to the letters
because of the alleged misrepresentations therein.
The majority of the alleged
misrepresentations here are immaterial as a matter of law.
First, that the “principal” actually included interest and other fees incurred before
Midland bought the debt is not actionable. Consumers who have credit cards know that
those companies charge exorbitant interest, and given the age of the debt involved, any
consumer would have assumed that whoever bought the old debt bought it inclusive of
the interest and fees Citibank originally charged. Despite Coyne’s insistence that he did
not sign a contract with Citibank, getting and using a credit card constitutes sufficient
assent to that card’s terms and conditions, which always include interest and fees. And
Midland was certainly entitled to attempt to collect the entire amount of the debt it
bought from Citibank. This statement is not actionable.
Neither is the failure to disclose the time period on which the 6% interest accrued
material. No consumer, no matter how unsophisticated, would be unable to decide how
to respond to a debt-collection letter because that letter did not include the period of time
during which statutory interest accrued.
The only possibly material misstatement is the listing of “incurred costs” of
$153.60 in the letter Coyne received from Messerli. Coyne contends that these costs
include amounts that Midland was not legally allowed to collect. Defendants respond
that, even if they were not allowed to collect these costs, the amount is so small as to be
immaterial. But Defendants’ argument is not appropriate at this stage of the litigation.
Multiple courts have held that a representation that costs are due when the debt collector
has no legal right to collect those costs violates the statute and is material. See Gorman
v. Messerli & Kramer, P.A., No. 15cv1890, 2016 WL 755618, at *5 (D. Minn. Feb. 25,
2016) (Tunheim, C.J.) (finding that “a debt collector’s false statements . . . asserting that
a debtor owes an amount the debt collector is unauthorized to collect should almost
always be considered material”); but see Grunwald v. Midland Funding LLC, 172 F.
Supp. 3d 1050, 1054-55 (D. Minn. 2016) (Kyle, J.) (statement that debtor owed $30 that
debt collector was not yet authorized to collect was not material).
Defendants insist that they are entitled to collect the costs listed as “incurred
costs” in the Messerli letter. But Coyne plausibly alleges that they were not so entitled,
and given the letter’s failure—and Defendants’ failure here—to specify what those costs
entailed, the Court must assume that Defendants were not legally allowed to collect those
costs. Thus, the statement that costs were owed is, at least for purposes of a motion to
dismiss, a plausible violation of the FDCPA.
However, Coyne has not plausibly alleged that this statement somehow
“undermined [his] ability to intelligently choose [his] action regarding [his] debt.” 2
Caulfield, 2013 WL 1953314, at *2. In other words, he has not pled materiality with
respect to the only potentially actionable statement in the letters he received. The Court
And indeed, in light of the entire text of the Messerli letter, which does not demand any
payment from Coyne, as well as the small amount of money involved, it is doubtful that
Coyne will ultimately be able to prove materiality, even if he plausibly pleads such. See
Grunwald, 172 F. Supp. 3d at 1054-55 (misrepresentation as to costs not material in light
of the full text of letter and small amount of costs compared to the total debt).
will therefore dismiss this aspect of his claim without prejudice, and the rest of his claims
Coyne has failed to plausibly plead claims on which relief can be granted as to the
majority of his claims. Those claims are dismissed with prejudice. The statement
regarding costs, however, is potentially material but Coyne has not pled that it is. His
claims arising out of this statement are dismissed without prejudice.
Accordingly, IT IS HEREBY ORDERED that:
The Motion to Dismiss (Docket No. 9) is GRANTED; and
The Complaint is DISMISSED with prejudice as to claims arising out of
alleged misstatements regarding interest, and DISMISSED without
prejudice as to claims arising out of the alleged misstatement regarding
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: July 20, 2017
s/ Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge
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