DEFAZIO v. LEADING EDGE RECOVERY SOLUTIONS, LLC et al

Filing 14

LETTER OPINION. Signed by Judge William J. Martini on 12/13/10. (gh, )

-MF DEFAZIO v. LEADING EDGE RECOVERY SOLUTIONS, LLC et al

Doc. 14

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
MARTIN LUTHER KING JR. FEDERAL BLDG. & U.S. COURTHOUSE 50 WALNUT STREET, P.O. BOX 419 NEWARK, NJ 07101-0419 [phone]

WILLIAM J. MARTINI JUDGE

LETTER OPINION

D e c e m b e r 13, 2010

M r. Joseph K. Jones L a w Offices of Joseph K. Jones, LLC 3 7 5 Passaic Avenue, Suite 100 F a irf ie ld , NJ 07004 A tto r n e y for Plaintiff M r. Richard J. Perr F in e m a n , Krekstein & Harris, PC M e llo n Bank Center 1 7 3 5 Market Street, Suite 600 P h ila d e lp h ia , PA 19103-7513 A tto r n e y for Defendants M s . Kellie A. Lavery R e e d Smith, LLP 1 3 6 Main Street, Suite 250 P rin c e to n , NJ 08543 A tto r n e y for Defendant, LVNV Funding, LLC R e: D e F a z io , et al v. Leading Edge Recovery Solutions, LLC et al. C a s e No. 2:10-cv-02945-WJM-MF

D e a r Litigants: This matter comes before the Court on the motion to dismiss of Defendant LVNV F u n d in g , LLC ("LVNV" or "Defendant") for failure to state a claim upon which relief

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may be granted pursuant to Fed. R. Civ. P. 12(b)(6). There was no oral argument. Fed. R . Civ. P. 78. For the reasons stated below, the motion is GRANTED and Plaintiff's C o m p la in t is DISMISSED WITHOUT PREJUDICE as to LVNV Funding, LLC. BACKGROUND P la in tif f , Lori DeFazio, on behalf of herself and all others similarly situated, brings th is Complaint arising from Defendants', LVNV Funding, LLC (hereinafter "LVNV") a n d Leading Edge Recovery Solutions, LLC (hereinafter "LERS"), alleged violation of 1 5 U.S.C. §1692, et seq., the Fair Debt Collection Practices Act (hereinafter "FDCPA"), w h ic h prohibits debt collectors from engaging in abusive, deceptive and unfair practices. S e e DeFazio, et al v. Leading Edge Recovery Solutions, LLC, et al, No. 10-2945, D o c u m e n t No. 1 (Compl. at ¶12). The Complaint alleges that on or before November 27, 2 0 0 9 , LVNV acquired from GE Capital a debt allegedly owed by Plaintiff to GE Capital a n d assigned it to LERS for the purpose of collections. (Id. at ¶¶15-16.) At that time, P la in tif f received a collection letter from LERS demanding payment of $1,929.13 for the a lle g e d debt. (Id. at ¶17.) Later, on or before April 13, 2010, Plaintiff received another c o lle c tio n letter from LERS demanding payment of $2,039.00 for the same alleged debt a s set forth in the November 27 th letter. (Id. at ¶18.) N o w , Defendant LVNV brings this 12(b)(6) motion to dismiss Plaintiff's C o m p la in t for failure to state a claim. Id. at Document No. 7 (Mot. to Dismiss). LVNV b a s e s its motion on three arguments. First, Plaintiff's Complaint fails to meet the 12(b)(6) p le a d in g standard as controlled by Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2 0 0 7 ). Second, Plaintiff's Complaint lacks any legal basis because Defendant LVNV c o n te n d s that it is not a "debt collector" subject to potential liability under the FDCPA. T h ird , Plaintiff's Complaint lacks any factual basis since the collection letters were sent b y Defendant LERS, not LVNV. Id. Plaintiff has filed a memorandum opposing LVNV's m o tio n to dismiss. Id. at Document No. 12 (Br. in Opp'n). Plaintiff contends that the C o m p la in t is sufficient, that LVNV is in fact a "debt collector" subject to liability under th e FDCPA, and that LVNV is vicariously liable for the actions of LERS. Id. Thus, the is su e s are: 1) whether Plaintiff's Complaint meets the 12(b)(6) pleading standard d e s c rib e d in Twombly, 2) whether LVNV is a "debt collector" subject to liability under th e FDCPA and 3) whether LVNV can be held vicariously liable for letters sent by LERS. T h e s e issues are addressed in turn.

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ANALYSIS 1. L e g a l Standard

In evaluating a motion to dismiss under Fed. R. Civ. P. 12(b), all allegations in the c o m p la in t must be taken as true and viewed in the light most favorable to the plaintiff. S e e Warth v. Seldin, 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. M ira g e Resorts, Inc., 140 F. 3d 478, 483 (3d Cir. 1998). When deciding a Rule 12(b)(6) m o tio n to dismiss for failure to state a claim, a court may consider only the complaint, e x h ib its attached to the complaint, matters of public record, and undisputedly authentic d o c u m e n ts if the plaintiff's claims are based upon those documents. See Pension Benefit G u a r . Corp. v. White Consol. Indus., 998 f.2d 1192, 1196 (3d Cir. 1993). If after viewing th e allegations in the complaint in the light most favorable to the plaintiff, it appears that n o relief could be granted "under any set of facts that could be proved consistent with the a lle g a tio n s ," a court may dismiss a complaint for failure to state a claim. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). A lth o u g h a complaint does not need to contain detailed factual allegations, "the `g ro u n d s ' of [the plaintiff's] `entitlement to relief' requires more than labels and c o n c lu s io n s , and a formulaic recitation of the elements of a cause of action will not do." T w o m b ly , 127 S. Ct. at 1965. In other words, the United States Supreme Court has a d m o n is h e d that Federal Rule of Civil Procedure 8 "demands more than an unadorned, th e -d e f e n d a n t-u n la w f u lly-h a rm e d -m e accusation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1 9 4 9 (2009). In Iqbal, the Supreme Court outlined the analytical framework for e v a lu a tin g the sufficiency of a claim under the standards announced in Twombly, holding th a t "[a] pleading that offers `labels and conclusions' or a `formulaic recitation of the e le m e n ts of a cause of action will not do. Nor does a complaint suffice if it tenders `naked a s s e rtio n [ s ]' devoid of `further factual enhancement'." Id. (quoting Twombly, internal c ita tio n s omitted). Thus, the factual allegations must be sufficient to raise a plaintiff's rig h t to relief above a speculative level. Twombly, 127 S. Ct. at 1964-65. Furthermore, a lth o u g h a court must view the allegations as true in a motion to dismiss, it is "not c o m p e lle d to accept unwarranted inferences, unsupported conclusions or legal c o n c lu s io n s disguised as factual allegations." Baraka v. McGreevey, 481 F. 3d 187, 211 (3 d Cir. 2007). A . It is unclear whether Defendant LVNV is a "debt collector" under the F D C P A , thus the Complaint does not meet the Twombly standard T h e FDCPA applies only to "debt collectors," not "creditors." 15 U.S.C. § 1 6 9 2 a (6 ); Pollice v. Nat'l Tax Funding, L.P., 225 F. 3d 379, 403 (3d Cir. 2000); Staub v. H a r r is , 626 F.2d 275, 277 (3d Cir. 1980). The FDCPA defines a "debt collector" as: 3

Any person who uses any instrumentality of interstate commerce of the m a ils in any business the principal purpose of which is the collection of any d e b ts , or who regularly collects or attempts to collect, directly or indirectly, d e b ts owed or due or asserted to be owed or due another. 1 5 U.S.C. §1692a(6). "Creditor" is defined as: Any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he re c e iv e s an assignment or transfer of a debt in default solely for the purpose o f facilitating collection of such debt for another. 15 U.S.C. §1692a(4). (Emphasis added). Moreover, a "debt collector" does not include a n y person collecting or attempting to collect any debt owed or due or asserted to owed or d u e another to the extent such activity concerns a debt which was not in default at the tim e it was obtained by such person. 15 U.S.C. §1692a(6)(F)(iii); FTC v. Check Investors, In c ., 502 F. 3d 159, 171-175 (3d Cir. 2007). (Emphasis added). Although the Complaint c o n c lu s iv e ly states that LVNV is in the business of collecting debt and is a "debt c o lle c to r" as defined by 15 U.S.C. §1692a(6), it fails to state whether LVNV is in fact a d e b t collector as to Plaintiff's alleged individual debt specifically. See DeFazio, et al v. L e a d in g Edge Recovery Solutions, LLC, et al, No. 10-2945, Document No. 1 (Compl.). T h e re f o re , one of the questions that needs to be determined is whether Plaintiff's alleged d e b t owed to GE Capital was already in default at the time LVNV acquired the debt. Additionally, Plaintiff's Complaint alleges that "LVNV is primarily in the business o f acquiring and/or collecting debts that are allegedly due to another and is therefore a `D e b t Collector' as that term is defined by 15 U.S.C. 1692a(6)." Id. at ¶10. This statement is not sufficient to identify LVNV as a debt collector. This is a formulaic recitation of the f irs t sentence of the definition of "debt collector," which is precisely what Iqbal and T w o m b ly advise against. This Court is not finding that LVNV is a "debt collector" based s o le ly on Plaintiff's statement in her Complaint that LVNV is a "debt collector." This is a n unsupported conclusion disguised as a factual allegation. Whether LVNV is a "debt c o lle c to r" as defined by the FDCPA is a question of law. Pollice, 225 F. 3d at 379. H o w e v e r, this Court has not heard sufficient factual allegations that support whether L V N V is a "debt collector" or a "creditor" beyond a mere speculative level. For example, th e Complaint does not state the principal purpose of LVNV's business, how often L V N V collects debts due to third parties in its regular business practice, how long it has b e e n doing so, etc. Furthermore, there are no factual allegations in the Complaint as to w h e re the debt in question originated from or as to the status of the debt owed to GE C a p ita l at the time the debt was acquired by LVNV. The Plaintiff did not state in the C o m p la in t whether the alleged debt owed to GE Capital was already in default at the time L V N V acquired the debt or any other factual allegations to support Plaintiff's contention th a t LVNV is a debt collector for the purposes of this case. These are all questions of f a c t, not of law. Thus, this Court cannot determine whether LVNV is a debt collector 4

subject to liability under the FDCPA at this time; therefore, the Complaint is dismissed f o r failure to meet the pleading standard described in Twombly. B . It is unclear whether LVNV can be held vicariously liable based on letters s e n t by LERS T h e conduct Plaintiff complains of states the following: O n or about November 27, 2009, Plaintiff received a collection letter from L E R S . Upon receipt Plaintiff read said letter. Said letter demanded payment o f $1,929.13, for the alleged debt. A copy of said letter is annexed hereto as E x h ib it A. O n or before April 13, 2010, Plaintiff received a collection letter from L E R S . Upon receipt Plaintiff read said letter. Said letter demanded payment o f $2,039.00, for the same alleged debt as set forth in the letter of N o v e m b e r 27, 2010. A copy of said letter is annexed hereto as Exhibit B. Id. at ¶¶17 and 18. Even though LVNV was identified on these letters as a "creditor," this a lle g e d conduct was done by LERS, not LVNV. See Exhibits A and B attached to the C o m p la in t. Defendant LVNV asserts that it cannot be held liable for violating the F D C P A based on letters it did not send. Id. at Document No. 7 (Mot. to Dismiss). The P la in tif f contends that LVNV should be held vicariously liable for violating the FDCPA b a s e d on letters sent on its behalf by LERS. Id. at Document No. 12 (Br. in Opp'n). The T h ird Circuit has recognized that there are federal cases supporting a claim for vicarious lia b ility under the FDCPA in certain circumstances. Pollice, 225 F. 3d. When considering v ic a rio u s liability between debt collectors, the United States Court of Appeals in Pollice f o u n d , "[t]hat is a fair result because an entity that is itself a `debt collector'-and hence s u b je c t to the FDCPA-should bear the burden of monitoring the activities of those it e n lis ts to collect debts on its behalf." Id., at 405-406. "[A]n entity that itself falls within th e FDCPA's definition of `debt collector' may be found vicariously liable for unlawful c o lle c tio n activities carried out by another on its behalf." Sankowski v. Citibank (South D a k o ta ), N.A., No. 06-CV-02469, 2006 WL 2037463, at *2 (E.D. Pa. July 14, 2006). In S c h u tz v. Arrow Financial Services, LLC, 465 F.Supp.2d 876, 876 (N.D. Illinois 2006), th e court agreed with the Pollice court, "that a debt collector may be held vicariously lia b le for the actions of a second debt collector working as an agent for the first." As p re v io u s ly discussed, this Court does not find that LVNV is a "debt collector" based a lo n e on the fact that the Complaint contains a conclusory statement that named LVNV as a "debt collector." Moreover, for the same reasons, this Court does not find that LVNV is a "creditor" based alone on the fact that the letters identified LVNV as a "creditor." In the instant case, for reasons outlined above, it is unclear on the face of the C o m p la in t whether LVNV is a "debt collector" as defined by the FDCPA. As such, this

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Court cannot determine if both Defendants are debt collectors in order for vicarious lia b ility to apply. C O N C L U S IO N F o r the reasons stated above, Defendant LVNV's motion to dismiss pursuant Fed. R . Civ. P. 12(b)(6) is hereby GRANTED and Plaintiff's Complaint is DISMISSED W I T H O U T PREJUDICE as to LVNV Funding, LLC. An appropriate order follows.

/s/William J. Martini WILLIAM J. MARTINI, U.S.D.J.

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