GREGORY v. HOME RETENTION SERVICES, INC. et al
OPINION. Signed by Judge Stanley R. Chesler on 11/24/14. (jd, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ALBERT GREGORY, on behalf of himself
and all others similarly situated,
HOME RETENTION SERVICES, INC.,
and JOHN DOES 1-25,
Civil Action No. 14-cv-5366 (SRC)
CHESLER, District Judge
This matter comes before the Court upon the motion filed by Defendant Home Retention
Services, Inc. (“Defendant” or “Home Retention Services”) to dismiss the Complaint filed by
Plaintiff Albert Gregory (“Plaintiff”). Plaintiff opposes the motion. The Court has considered
the parties’ submissions. For the reasons expressed in this opinion, the Court will grant the
motion in part and deny it in part.
A. Factual History
This is a putative class action lawsuit brought by a consumer against a corporation which
distributed notices regarding consumer debts and repayment. The Court takes the following facts
from the Complaint and assumes them to be true for purposes of this motion only.
Plaintiff is an individual who lives in New Jersey. Defendant is a corporation with its
principal place of business in Houston, Texas. Defendant uses various forms of communication,
including postal mail, to contact individuals regarding their financial obligations.
At some point before March 21, 2014, Plaintiff allegedly became indebted to Champion
Mortgage. On a date after March 21, 2014, Defendant sent Plaintiff a written letter (“the Letter”)
regarding the debt Plaintiff may have owed Champion Mortgage.
Various portions of the Letter are relevant. At the top of the page, it asserts:
Home Retention, Inc. is a debt collector. Therefore, the following
disclosures are required under various state and federal law.
However, we would like to reassure you that we have been retained
to assist Champion Mortgage with its efforts to reach customers who
may be eligible for a Home Affordable modification Program. The
true purpose of these letters is to obtain a more affordable payment
(Compl., Exhib. A).
Regarding Plaintiff’s specific debt, the Letter informs Plaintiff that “As of the date of this letter
the amount necessary to bring your mortgage current is $39,034.15.” (Compl. Exhib. A). The
Letter does not appear to be dated. Finally, the Letter asserts, “Unless within 30 days of your
receipt of this notice, you notify Home Retention Services, Inc. that you dispute the validity of
this debt, it will assumed to be correct.” (Compl. Exhib. A).
B. Procedural History and Defendant’s Motion to Dismiss
On August 27, 2014, Plaintiff filed a Class Action Complaint against Defendant. In it,
Plaintiff alleges that Defendant violated the Fair Debt Collection Practices Act (“the FDCPA”),
which prohibits debt collectors from engaging in abusive, deceptive, or unfair practices. Plaintiff
claims that Defendant violated the FDCPA by “(a) Using false representations or deceptive
means to collect or attempt to collect the debt; (b) Using unfair or unconscionable means to
collect or attempt to collect the debt; [and] (c) Failing to provide the proper notices in their initial
communication with the consumer.” (Compl. at ¶ 31). Plaintiff filed the Complaint on behalf of
all similarly situated individuals, which comprises at least thirty New Jersey consumers who
received debt-collection notices from Defendant. Federal subject matter jurisdiction is provided
for by 28 U.S.C. § 1331, as the Complaint arises under the FDCPA.
On October 10, 2014, Defendant moved to dismiss the Complaint pursuant to Federal
Rule of Civil Procedure 12(b)(6). Defendant makes three arguments in support of its motion.
First, it asserts that Plaintiff committed numerous procedural errors which should bar his
Complaint. Defendant next claims that it is not a “debt collector” and that its Letter was not part
of a debt-collection effort, rendering the FDCPA inapplicable. Last, on the merits, Defendant
claims that the Letter is not deceptive under the FDCPA, and that instead it complies with all of
the statute’s notice requirements.
Plaintiff opposes the motion for three corresponding reasons. He asserts that neither he
nor his lawyers violated any procedural rules by filing this suit. Plaintiff further submits that the
FDCPA does apply because Defendant is indeed a “debt collector” and its Letter falls under the
statute. On the merits, Plaintiff reasserts his contention that Defendant violated the FDCPA.
A. Motions to Dismiss
A court may dismiss a claim under Rule 12(b)(6) only if, accepting all of the well-
pleaded allegations in the complaint as true and viewing them in the light most favorable to the
non-movant, it finds the claims facial plausible. Bell Atlantic Corp. v. Twombly, 127 S.Ct.
1955, 1965 (2007). The complaint must contain sufficient factual allegations to raise a right to
relief above the speculative level. Id. at 1965; Phillips v. County of Allegheny, 515 F.3d 224,
234 (3d Cir. 2008). The Supreme Court has made clear that “a formulaic recitation of the
elements of a cause of action will not do.” Twombly, 127 S.Ct. at 1964-65; see also Ashcroft v.
Iqbal, 129 S.Ct. 1937, 1950 (2009) (“While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.”). Accordingly, the Court will identify
allegations that, “because they are no more than conclusions, are not entitled to the assumption
of truth.” Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 556
U.S. at 680). A complaint cannot survive where a court can only infer that a claim is merely
possible rather than plausible. Iqbal, 556 U.S. at 679.
In evaluating a Rule 12(b)(6) motion, the Court may consider only the complaint,
exhibits attached to it, matters of public record, and undisputedly authentic documents. See
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
The issue before the Court boils down to “not whether plaintiff will ultimately prevail[,] but
whether the claimant is entitled to offer evidence in support of the claims.” In re Burlington
Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997) (quoting Scheuer v. Rhodes, 416
U.S. 232, 236 (1974)). It is through this lens that the Court will assess Plaintiff’s Complaint.
B. Alleged Procedural Violations
To begin, the Court briefly notes that it does not find Plaintiff or his attorneys to have
committed any procedural violations. Defendant urges that Plaintiff failed to alert the Court that
similar matters were already pending in this district when Plaintiff filed his lawsuit. It is not
apparent to the Court, however, that the letters and entities involved in the other matters mirror
those involved here. Moreover, even if those other matters were sufficiently related to this one
such that they should have been joined together, that would not impact the instant motion. The
consolidation rules aim to serve the courts’ convenience, and a violation of those rules would not
necessarily entitle Defendant to relief. See Pagan v. United Recovery Sys., 2012 U.S. Dist.
LEXIS 2130, at *4 n.2 (D.N.J. Jan. 6, 2012) (noting that the requirement to indicate related cases
on cover sheet is meant to “to avoid a waste of judicial time”) (emphasis added).
Defendant further urges that Plaintiff failed to provide the Court with the full context of
Defendant’s Letter. Specifically, Defendant claims that the Letter was part of a larger mailing
distributed by Champion Mortgage, and not by Defendant. When assessing a Rule 12(b)(6)
motion, the Court may generally not look to materials outside of the Complaint and its exhibits.
Pension Ben., 998 F.2d at 1196. The Court notes that the Letter -- attached as Exhibit A to
Plaintiff’s Complaint -- contains letterhead belonging to Defendant, rather than to Champion
Mortgage. Defendant submitted additional documents for this Court to consider, but the parties
have not conceded the authenticity or relevance of those papers. Cf. id. (“[A] court may consider
an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss
if the plaintiff’s claims are based on the document.”) (emphases added). With the record before
the Court at this stage, therefore, the Court cannot determine if the Letter formed part of a larger
Champion Mortgage distribution.
Although the Court may be authorized to dismiss an action based on procedural
deficiencies, see generally Plasteras v. Kindercare Learning Ctrs., 2008 U.S. Dist. LEXIS 34850,
at *6 (D.N.J. Apr. 28, 2008), here the Court finds no procedural violations which impact the
C. The FDCPA’s Applicability
To state a claim for relief, Plaintiff must establish that the authority on which he relies -the FDCPA -- applies. That turns on whether (1) Defendant is a “debt collector” under the
statute and (2) whether the Letter was a communication made in connection with debt collection.
(1) Whether Defendant is a “Debt Collector” Under the FDCPA
The FDCPA defines a “debt collector” as “any person who uses . . . the mails in any
business the principal purpose of which is the collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due
another.” 15 U.S.C. § 1692a(6). One is not a debt collector if its activities concern “a debt
which was not in default at the time it was obtained[.]” 15 U.S.C. § 1692a(6)(F)(iii).
Here, the Court finds the Complaint to allege facts which, if true, render Defendant a debt
collector under the statute. The Complaint plausibly claims that Defendant sent written notices
to at least thirty New Jersey borrowers, and for reasons discussed more extensively below, such
notices can fairly be read to “serve the principal purpose” of collecting debts owed to another
party. 15 U.S.C. § 1692a(6). The Complaint expressly pleads that Defendant is a debt-collector
under the FDCPA, and that Plaintiff’s debt was allegedly in default. (Compl. ¶¶ 9, 24).
Defendant’s own admissions, moreover, indicate that it is a debt collector. The Letter expressly
states, “Home Retention Services, Inc. is a debt collector,” and goes on to provide that “This
communication is from a debt collector attempting to collect a debt. Any information you
provide Home Retention Services, Inc. will be used for that purpose.” (Compl. Exhib. A). The
Letter also highlights that various state and federal debt-collection laws applied.
Defendant seeks to undermine those admissions by pointing to cases in which entities
initially self-identified as debt collectors but were later found not to qualify as such by courts.
Defendant has not cited any authority from the Third Circuit or the U.S. Supreme Court which
prohibits the consideration of these admissions. Instead, the cases Defendant cites from within
this District appear to emphasize that an institution’s having self-identified as a debt collector is
not dispositive of whether it is one under the statute. See Slimm v. Bank of Am. Corp., 2013
U.S. Dist. LEXIS 62849, at *18 (D.N.J. May 2, 2013) (asserting that defendant’s self-reference
as debt collector did not “in and of itself” mean that it was one); Siwulec v. Chase Home Fin.,
2010 U.S. Dist. LEXIS 128942, *14 (D.N.J. Dec. 7, 2010) (finding that the “language used in the
written notice is not dispositive of” defendant’s status). Defendant also cites to Nwoke v.
Countrywide Home Loans, 251 Fed. Appx. 363, 365 (7th Cir. Ill. 2007), which held that an
entity’s self-reference as a debt collector had “nothing to do with whether” it qualified as one
under the FDCPA. The Third Circuit has not adopted that principle; and in any event, that case
appears distinguishable. There, defendant Countrywide had contacted a consumer about a debt
the consumer owed to Countrywide itself, rather than to a third party. Id. Collecting one’s own
debt falls outside the purview of the FDCPA, and therefore Countrywide’s boilerplate language
that it was a “debt collector” was irrelevant to conduct so clearly outside the statutory definition.
Id. Here, distinctly, Defendant sought to collect the debt of another entity, Champion Mortgage,
and it expressly stated that fact numerous times and in various ways.
All told, the Court finds that Plaintiff has adequately pleaded that Defendant sent mail to
consumers with a primary purpose of collecting another entity’s debt. Plaintiff has, accordingly,
“nudged [his] claims” regarding Defendant’s debt-collector status under Section 1692a(6)
“across the line from conceivable to plausible.” Twombly, 550 U.S. at 570.
(2) Whether Defendant’s Letter Falls under the FDCPA
The FDCPA similarly can only apply if the Letter was a communication made in
connection with debt collection. 15 U.S.C. § 1692(e). To assess a communication, courts look
to various factors, including: “whether the communication demands payment, the relationship
between the parties, and the purpose and context of the communication.” Gregory v. Nationstar
Mortg., 2014 U.S. Dist. LEXIS 64138, at *9 (D.N.J. May 9, 2014). A communication need not
“contain an explicit demand for payment to constitute a debt collection activity.” McLaughlin v.
Phelan Hallinan & Schmieg, 756 F.3d 240, 245 (3d Cir. 2014). Instead, courts focus on the
communication’s principal purpose. See id. (noting that “activity undertaken for the general
purpose of inducing payment constitutes debt collection”); Simon v. FIA Card Servs., 732 F.3d
259, 265-67 (3d Cir. 2013) (“[A]n animating purpose of the communication must be to induce
payment by the debtor.”) (internal citation and quotation marks omitted); Grubb v. Green Tree
Servicing, 2014 WL 3696126 at * 5-6 (D. N.J. July 24, 2014).
Defendant argues that the Letter is not a qualifying communication under the FDCPA,
and it emphasizes that the Letter did not explicitly demand that Plaintiff make a payment. Yet
the Letter does explicitly state, “This communication is from a debt collector attempting to
collect a debt. Any information you provide . . . will be used for that purpose.” Moreover, the
Letter states that it aims to “obtain a more affordable payment for you,” and it includes what
appears to be a payoff figure: “As of the date of this letter the amount necessary to bring your
mortgage current is $39,034.15.” (Compl. Exhib. A). The Court therefore finds that at this stage,
Plaintiff has plausibly pleaded that the Letter’s principal purpose was to collect the debt.
D. The FDCPA’s Substantive Provisions
Having determined that Defendant’s conduct triggered the FDCPA’s application, the
Court now assesses whether the Complaint states a claim for relief under that statute. The
substantive provisions of the FDCPA are analyzed “from the perspective of the least
sophisticated debtor.” See Campuzano-Burgos v. Midland Credit Mgmt., 550 F.3d 294, 298 (3d
Cir. 2008) (quoting Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008)). Courts must
construe the FDCPA’s rules broadly to effectuate its remedial purpose. Brown v. Card Service
Center, 464 F.3d 450, 453 (3rd Cir. 2006). Applying these principles, the Court finds Plaintiff to
have plausibly stated a violation of the FDPCA’s prohibition on deceptive practices; it also finds,
however, that some of Plaintiff’s contentions fail to state a basis for relief.
(1) The Letter’s Contradictory Purposes
Under Section 1692e of the FDCPA, debt collectors “may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.” Similarly, the
statute prohibits the “use of any false representation or deceptive means to collect or attempt to
collect any debt[.]” 15 U.S.C. § 1692e(10). Plaintiff alleges that Defendant violated these
provisions because the Letter states that “Home Retention, Inc. is a debt collector,” but then
confusingly provides that it aims “to obtain a more affordable payment” for the borrower.
The Court agrees. A communication is deceptive under the FDCPA if “it can be
reasonably read to have two or more different meanings, one of which is inaccurate.” Rosenau
v. Unifund Corp., 539 F.3d 218, 222 (3d Cir. 2008) (quoting Brown v. Card Serv. Ctr., 464 F.3d
450, 455 (3d Cir.2006)); Campuzano-Burgos v. Midland Credit Mgmt., 550 F.3d 294, 298 (3d
Cir. 2008). Here, the least-sophisticated consumer could have reasonably been confused as to
whether the Letter meant to either (1) collect the debt allegedly owed (“Home Retention
Services, Inc. is a debt collector . . . . This communication is from a debt collector attempting to
collect a debt. Any information you provide Home Retention Services, Inc. will be used for that
purpose . . . . [T]he amount necessary to bring your mortgage current is $39,034.15.”); or (2) to
negotiate a loan modification (“[W]e have been retained to assist Champion Mortgage with its
efforts to reach customers who may be eligible for a Home Affordable modification Program.
The true purpose of these letters is to obtain a more affordable payment for you.”). Defendant
further emphasizes in its filings that the Letter actually served a third, distinct purpose: (3) to
determine Plaintiff’s eligibility for a deed in lieu of foreclosure.
In light of these various potential purposes, the least-sophisticated consumer would be
confused as to whether Defendant was a friend or foe, and would accordingly be unsure as to
what action to take. The Court finds that the Letter “appears to have been talking out of both
sides of its proverbial mouth,” see generally Brooks v. Brookdale Senior Living Cmtys., 2012
U.S. Dist. LEXIS 179895, at *9 (D.N.J. Dec. 18, 2012). Because Plaintiff’s Complaint
highlights the Letter’s potentially contradictory purposes, he has stated a plausible violation of
the FDCPA’s prohibition on deceptive practices. The Court will thus deny Defendant’s motion
to dismiss those portions of the Complaint founded upon the Letter’s contradictory purposes.
(2) Plaintiff’s Other Claims
The Court finds that Plaintiff has not identified any other conduct which plausibly
violated the FDCPA. Section 1692e(2)(a) prohibits the “false representation of” the amount of
debt owed, and Section 1692g(a) requires the debt collector to inform the debtor as to the amount
owed. Plaintiff believes Defendant violated these provisions because the Letter tethered the
amount owed to the date of the communication -- “As of the date of this letter the amount
necessary to bring your mortgage current is $39,034.15” -- but then failed to actually date the
Letter. Defendant counters that the date referred to is the date of Champion Mortgage’s mailing,
of which Defendant’s Letter was allegedly part. For reasons discussed above, the Court at this
stage considers the Letter independently, but it nevertheless concludes that Plaintiff has failed to
plausibly allege that there was anything “false” about Defendant’s information on the debt.
Plaintiff further claims that Defendant violated Sections 1692e, 1692f, and 1692g(a) by
writing that if Plaintiff failed to dispute the debt, “it will be assumed to be correct.” Plaintiff
notes that the Letter is grammatically passive in terms of who exactly would assume the debt
correct, and that it uses the word “correct” rather than “valid” as is used in Section 1692g(a)(3).
The Court rejects both of these arguments because they demonstrate rhetorical nits, rather
than any deception by Defendant. It is important to recall that even the least-sophisticated
consumer is considered “rational” and to possess “common sense.” See Campuzano-Burgos,
550 F.3d at 299, 301. Here, a rational reader with common sense would not be thrown off by the
Letter’s use of “correct” rather than “valid,” nor by its failure to identify which of the two
entities involved would assume the debt to be such. See Stokes v. Transworld Sys., 2013 U.S.
Dist. LEXIS 19924, at *17 (D.N.J. Feb. 14, 2013) (granting motion to dismiss where notice
referred to “legitimate” debt rather than “valid” debt because the two are synonyms); Martin v.
Butler & Hosch, 2014 U.S. Dist. LEXIS 97965, at *10 (M.D. Fla. July 18, 2014) (finding
nothing misleading about substituting “owed” for “valid”); cf. Smith v. Hecker, 2005 WL
894812, at *4-5 (E.D. Pa. Apr. 18, 2005) (finding violation where debt collector wrote that debt
would be “assessed” valid rather than “assumed” valid because it implied that an official entity
such as a court or agency would take action on the debt). A difference in definitions does not
necessarily indicate deception. While “valid” and “correct” may convey distinct ideas in certain
contexts, Plaintiff has not articulated how they convey anything meaningfully different here.
Accordingly, the Court will grant Defendant’s motion to dismiss with respect to all
theories apart from the Letter’s potentially contradictory purposes.
For the reasons above, the Court will grant in part and deny in part Defendant’s motion.
An appropriate Order will be filed.
s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: November 24, 2014
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