Spurgeon v. Frederick J. Hanna & Associates, P.C.
MEMORANDUM AND ORDER - Defendants' motion to dismiss, (filing 19 ) is granted; Spurgeon's motion to certify (filing 9 ) is denied as moot; This case is dismissed with prejudice; and A separate judgment will be entered in accordance with this Memorandum and Order. Ordered by Judge John M. Gerrard. (MKR)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
KAREN S. SPURGEON, On behalf of
herself and all others similarly
MEMORANDUM AND ORDER
FREDERICK J. HANNA &
ASSOCIATES, P.C., et al.,
In her operative complaint (filing 8), the plaintiff, Karen S. Spurgeon,
alleges that the defendants, Frederick J. Hanna & Associates, P.C.; Frederick
J. Hanna; Joseph C. Cooling; and Robert A. Winter, sent her a letter which
violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692
et seq., and the Nebraska Consumer Protection Act ("NCPA"), Neb. Rev. Stat.
§ 59-1601 et seq. Specifically, Spurgeon alleges that defendants falsely
represented the communication was from an attorney, used false and
deceptive means to collect or attempt to collect a debt, and attempted to
charge fees and interest not allowed by law. Filing 8 at ¶¶ 30-31. Spurgeon
also asks the Court to certify her suit as a class action under Fed. R. Civ. P.
23. Filing 9. Defendants have moved to dismiss Spurgeon's complaint,
asserting that the letter complied with the FDCPA and NCPA. Filing 19. For
the reasons set forth below, the Court will grant defendants' motion to
dismiss, and will deny Spurgeon's motion to certify as moot.
Defendant Frederick J. Hanna & Associates, P.C. ("the Firm"), is a
professional corporation with its principal office in Georgia. It engages in
debt collection in Nebraska. Defendant Frederick J. Hanna is the Firm's
president, principle owner, and an attorney at law. Defendants Joseph C.
Cooling and Robert A. Winter, also attorneys, are managing partners and
minority shareholders of the Firm. Filing 8 at ¶¶ 4–7.
Spurgeon bought a car from a local Kia dealership through an
installment sales contract. The car was later damaged by a hail storm,
determined to be a total loss, and was subsequently repossessed. Filing 8 at
¶¶ 8–9. This is apparently the source of the debt allegedly at issue in this
Spurgeon alleges that she received a debt collection letter from the
Firm dated October 8, 2013. Filing 8 at ¶ 10. The letter, written on the Firm's
letterhead, referenced the creditor as Santander Consumer, USA; the account
and file numbers; and a balance of $4,607.79. Filing 8-1. The remainder of the
letter appears as follows:
Spurgeon claims that this letter violates her rights as a debtor under
the FDCPA and NCPA. Specifically, she alleges that defendants "falsely
represent[ed] or impl[ied] that a communication was from an attorney . . .
and (2) us[ed] [a] false representation or deceptive means to collect or
attempt to collect any debt" in violation of 15 U.S.C. § 1692e(3) and e(10).
Filing 8 at ¶ 30. Spurgeon further alleges defendants have wrongfully
"attempt[ed] to charge fees and interest not allowed by law." Filing 8 at ¶ 31.
In addition to seeking remedies on behalf of herself, Spurgeon seeks the
certification of two classes: (1) a class based on the alleged FDCPA violations
and (2) a class based on the alleged NCPA violations. However, she has
moved the Court to stay briefing on the issue until discovery is completed.
Filing 8 at ¶¶17-26.
Defendants have moved to dismiss Spurgeon's complaint under Fed. R.
Civ. P. 12(b)(6). Defendants argue that, as a matter of law, the letter is not
false, misleading, or deceptive. Defendants further contend that Spurgeon
has not pleaded sufficient facts to support her claim that they have
attempted to charge fees and interest not allowed by law.
II. STANDARD OF REVIEW
A complaint must set forth a short and plain statement of the claim
showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). This
standard does not require detailed factual allegations, but it demands more
than an unadorned accusation. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
The complaint need not contain detailed factual allegations, but must provide
more than labels and conclusions; and a formulaic recitation of the elements
of a cause of action will not suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007). For the purposes of a motion to dismiss a court must take all of
the factual allegations in the complaint as true, but is not bound to accept as
true a legal conclusion couched as a factual allegation. Id.
And to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a
complaint must also contain sufficient factual matter, accepted as true, to
state a claim for relief that is plausible on its face. Iqbal, 556 U.S. at 678. A
claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged. Id. Where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct, the complaint has
alleged—but it has not shown—that the pleader is entitled to relief. Id. at
Determining whether a complaint states a plausible claim for relief will
require the reviewing court to draw on its judicial experience and common
sense. Id. The facts alleged must raise a reasonable expectation that
discovery will reveal evidence to substantiate the necessary elements of the
plaintiff's claim. See Twombly, 550 U.S. at 545. The court must assume the
truth of the plaintiff's factual allegations, and a well-pleaded complaint may
proceed, even if it strikes a savvy judge that actual proof of those facts is
improbable, and that recovery is very remote and unlikely. Id. at 556.
The intent of the FDCPA is "to eliminate abusive debt collection
practices by debt collectors, to insure that those debt collectors who refrain
from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers
against debt collection abuses." 15 U.S.C. § 1692(e).
In this case, Spurgeon has alleged defendants violated the FDCPA in
two distinct ways: (1) by misrepresenting attorney involvement in the
collection of the alleged debt and (2) by charging impermissible interest and
A. Misrepresentation of Attorney Involvement
The FDCPA provides, in relevant part:
A debt collector1 may not use any false, deceptive, or misleading
representation or means in connection with the collection of any
debt. Without limiting the general application of the foregoing,
the following conduct is a violation of this section:
(3) The false representation or implication that any individual is
an attorney or that any communication is from an attorney.
(10) The use of any false representation or deceptive means to
collect or attempt to collect any debt or to obtain information
concerning a consumer.
15 U.S.C. § 1692e(3) and (10).
The Eighth Circuit applies the "unsophisticated consumer" test in
evaluating whether a debt collector's practices, including the use of debt
collection letters, is false, misleading, or deceptive.2 See Duffy v. Landberg,
Defendants do not dispute they were acting as a "debt collector" as defined by 15 U.S.C.
The "unsophisticated consumer" standard is a modification of the "least sophisticated
consumer" test adopted by several other courts. Gammon v. GC Servs. Ltd. P'ship, 27 F.3d
1254, 1257 (7th Cir. 1994). The Gammon Court explained the "unsophisticated consumer
test as follows:
In maintaining the principles behind the enactment of the FDCPA, we
believe a simpler and less confusing formulation of a standard designed to
protect those consumers of below-average sophistication or intelligence
should be adopted. Thus, we will use the term, "unsophisticated," instead of
the phrase, "least sophisticated," to describe the hypothetical consumer
whose reasonable perceptions will be used to determine if collection messages
are deceptive or misleading. We reiterate that an unsophisticated consumer
standard protects the consumer who is uninformed, naive, or trusting, yet it
admits an objective element of reasonableness. The reasonableness element
215 F.3d 871, 873 (8th Cir. 2000). The test is "designed to protect consumers
of below average sophistication or intelligence," but it also contains an
"'objective element of reasonableness.'" Peters v. Gen. Serv. Bureau, Inc., 277
F.3d 1051, 1055 (8th Cir. 2002) (quoting Gammon, 27 F.3d at 1257). This
Court may determine whether a collection letter is false, misleading, or
deceptive under the FDCPA as a matter of law. See Peters, 277 F.3d at 1056;
see also McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 913-14 (8th Cir.
Spurgeon asserts that defendants' debt collection letter was deceptive
and misleading because it misrepresented the involvement of an attorney in
the debt collection process, a violation of 15 U.S.C. § 1692e(3) and (10).
Defendants counter that Spurgeon's claim must fail as a matter of law
because the letter contains a clear and unambiguous disclaimer that
explained that no attorney had evaluated the case or reviewed the "particular
circumstances" of Spurgeon's account, and that although Hanna & Associates
is a law firm, it had not been engaged to file a lawsuit. Thus, defendants
argue, even an unsophisticated debtor could not have been misled. The Court
finds defendants' argument persuasive.
"There are sound policy reasons for the FDCPA's prohibition on a debt
collector sending a collection letter that is seemingly from an attorney."
Gonzalez v. Kay, 577 F.3d 600, 604 (5th Cir. 2009) "A letter from a lawyer
implies that the lawyer has become involved in the debt collection process,
and the fear of a lawsuit is likely to intimidate most consumers." Id.
However, there is no express prohibition against a lawyer fulfilling a role as a
debt-collector. See Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360,
364–65 (2d Cir. 2005). But the lawyer/debt-collector must make his or her
role clear to the consumer in order to dispel the likely implication of the
threat of litigation that comes with a letter from an attorney on firm
letterhead. See id. If a debt-collection letter contains a "clear disclaimer
explaining the limited extent of [the attorney's] involvement in the
collection," the letter will pass muster under the FDCPA. Id.
Letters that courts have found acceptable have contained, either in the
body of the letter or otherwise prominently displayed on the same page as the
body of the letter, disclaimers informing the consumer that no attorney has
reviewed the consumer's file and that the attorney or firm has not been
in turn shields complying debt collectors from liability for unrealistic or
peculiar interpretations of collection letters.
presently retained to file suit. See, e.g., Greco, 412 F.3d at 365; Jones v. Law
Office of David Sean Dufek, --- F. Supp. 3d ---, 2015 WL 73072 at *2-3 (D.D.C.
Jan. 6, 2015); Davis v. Lyons, Doughty & Veldhuis, P.A., 855 F. Supp. 2d 279,
283 (D. Del. 2012); Eddis v. Midland Funding, LLC, case no. 11-cv-3923,
2012 WL 664812 at *8-9 (D.N.J. Feb. 28, 2012); Peak v. Southern & Allen,
case no. 4:09-cv-753, 2010 WL 1729958 at *4 (E.D. Ark. April 27, 2010). When
an attorney/debt collector and his or her law firm are transparent about what
role they are playing in the collection of a debt and do not confuse the
message with contradicting or ambiguous statements, their collection letters
will not be deemed misleading or fraudulent for the purposes of the FDCPA
merely because those letters appear on attorney letterhead and are from an
attorney acting as a debt collector and not legal counsel. See Greco, 412 F.3d
Conversely, attorneys wearing their debt-collector hats run afoul of the
FDCPA when their collection letters either create ambiguity or do not dispel
the inherent ambiguity in debt collection letters appearing on attorney
letterhead. This may occur when a disclaimer is placed on the back of the
letter; when the letter contained inconsistent messages which fostered,
rather than quelled, ambiguity in the sender's role; or when the letter
omitted information about the true nature of the attorney's or law firm's role
in the collection process. See, e.g., Lesher v. Law Offices of Mitchell N. Kay,
PC, 650 F.3d 993, 1003 (3d Cir. 2011); Kistner v. Law Offices of Michael P.
Margelefsky, LLC, 518 F.3d 433, 438-41 (6th Cir. 2008); Robertson v. Richard
J. Boudreau & Assocs., case no. 09-cv-1681, 2009 WL 5108479, at *2 (N.D.
Cal. Dec. 18, 2009).
Although the letter in this case appears on the Firm's letterhead and
the Firm's name appears in the signature block, defendants took sufficient
steps to explain the Firm's role as a debt collector and to disclaim any
misapprehension of attorney involvement. Defendants' letter clearly and
unambiguously sets forth the Firm's role in attempting to collect a debt from
Spurgeon. The letter expressly states that no attorney has reviewed
Spurgeon's file and, while acknowledging that it is a law Firm, that no
attorney has "reviewed the particular circumstances of [Spurgeon's] account,"
and that the Firm had not been engaged to file a law suit. Filing 8-1. The
final paragraph of the letter states that the Firm is only licensed to practice
law in Georgia, Florida, Missouri, and South Carolina.3 Thus, albeit by
The individual members of a law firm, and not the Firm itself, may be licensed to practice
law. Presumably, the statement is the Firm's way of informing the consumers of the states
in which it has at least one member licensed to practice.
omission, the Firm informed Spurgeon that its attorneys cannot practice law
in Nebraska. Lastly, the letter plainly articulates that all information is
being used only for the purpose of collecting a debt. Filing 8-1.
Spurgeon has not pointed to any portion of the letter which
overshadows or contradicts the disclaimer. Defendants' letter did not contain
misleading representations or mixed messages regarding the level of attorney
involvement. Nor did it threaten legal action of any kind. Thus, even if
Spurgeon was initially concerned about the threat of litigation due to letter's
origin, the disclaimer was sufficiently clear and conspicuous to provide notice
to even an unsophisticated consumer of the actual level of attorney
involvement in the collection process. Spurgeon's first FDCPA claim fails as a
matter of law. Her NCPA claim fails for the same reasons. See Birge v.
Smeall, case no. 8:13cv136, 2013 WL 6631653 (D. Neb. Dec. 17, 2013).
B. Improper Interest and Fees
Defendants next seek dismissal of Spurgeon's claim that defendants
attempted to charge "fees and interest not allowed by law in violation of §
1692e(2)(A) and § 1692f(1)." Defendants argue that Spurgeon's claim cannot
survive scrutiny under Fed. R. Civ. P. 12(b)(6) because she has stated no facts
in her complaint to support this cause of action. Again, the Court finds
defendants' argument persuasive.
Section 1692f(1) states debt collectors may not collect any amount
"unless such amount is expressly authorized by the agreement creating the
debt or permitted by law." And § 1692e(2)(A) forbids debt collectors from
falsely representing "the character, amount, or legal status of any debt."
Spurgeon does not allege what law Defendants allegedly violated by allegedly
attempting to charge unspecified interest and fees. In fact, Spurgeon's
complaint is devoid of any facts to support this claim. When provided the
opportunity to explain through briefing, Spurgeon merely stated that
"Defendants know exactly what interest and fees are being collected from
their own records regarding the alleged debt." Filing 22 at 19. This falls short
of the low threshold of notice pleading. Spurgeon has provided mere legal
conclusions without even the faintest attempt to identify the interest or fees
at issue or the laws that were allegedly violated. As such, Spurgeon's second
claim for relief (under both the FDCPA and NCPA) will also be dismissed.
That disposes of Spurgeon's entire complaint. And with the dismissal of
Spurgeon's underlying action, her pending motion for class certification
(filing 9) will be denied as moot.
THEREFORE, IT IS ORDERED:
Defendants' motion to dismiss, (filing 19) is granted;
Spurgeon's motion to certify (filing 9) is denied as moot;
This case is dismissed with prejudice; and
A separate judgment will be entered in accordance with this
Memorandum and Order.
Dated this 17th day of March, 2015.
BY THE COURT:
John M. Gerrard
United States District Judge
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