FILGUEIRAS v. PORTFOLIO RECOVERY ASSOCIATES, LLC
Filing
25
OPINION. Signed by Judge Jose L. Linares on 4/25/16. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JOSEF A FILGUEIRAS, on behalf of herself and
those similarly situated,
Civil Action No.: 15-8144 (JLL) (SCM)
Plaintiff,
OPINION
V.
PORTFOLIO RECOVERY ASSOCIATES, LLC,
Defendant.
LINARES, District Judge.
This matter arises under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
("FDCP A") and comes before the Court by way of Defendant Portfolio Recovery Associates,
LLC's ("PRA") Motion to Dismiss Plaintiff's Amended Complaint. (ECF No. 16.) The Court
has considered the parties' submissions and decides this matter without oral argument pursuant to
Rule 78 of the Federal Rules of Civil Procedure. For the reasons set forth below, the Court grants
in part and denies in part the Motion to Dismiss.
FACTUAL BACKGROUND 1
Plaintiff Josefa Filgueiras resides in Bergen County, New Jersey. (ECF No. 10, Amended
Complaint ("Compl.") il 4.) Defendant PRA is a debt collector located in Virginia who purchases
defaulted consumer debts at a discount and then seeks to collect the full value of those unpaid
1
This background is derived from Plaintiffs Complaint, and other documents that are integral to and/or explicitly
relied upon in the Complaint, which the Court must accept as true at this stage of the proceedings. See Alston v.
Countrywide Fin. Corp., 585 F.3d 753, 758 (3d Cir. 2009).
accounts. (Id. iii! 5, 10.)
Plaintiff incurred or owed a certain financial obligation arising from an account originating
from
Money Bank- Walmart ("Debt" or "Account"). (Id. if 14; see id. Ex. A.) The Debt arose
from one or more transaction which were primarily for Plaintiffs personal, family, or household
purposes. (Id. if 15.) The parties dispute the nature of the Debt and the applicable statute of
limitations. (See Part B.1.a, infra.)
Plaintiff made her last payment on the Account on August 16, 2009, and defaulted on the
Account in September 2009.
(Id.~
25, 27.) The Account was charged off in March 2010, after
the Debt had been in default for a period of approximately 180 days. (Id. if 30.) PRA purchased
the Account, at which point it was past-due and in default. (Id. if 18.)
PRA mailed two collection letters to Plaintiff, the first on or about November 19, 2014
("20
Letter"), and the second on or about November 12, 2015 ("2015 Letter") (collectively
"PRA Letters.") (Id. if 32; see id. Ex. B.) The 2014 Letter includes three "Settlement Options"
which purport to offer discounted repayment options, and states that "the savings percentage will
be applied to the balance and your account will be considered 'settled in full' once your final
payment is successfully posted." (Id. if 36; id. Ex. B.) The 2015 Letter offers "Single Payment
Savings" and states that "your account will be considered 'settled in full' after your payment is
successfully posted." (Id. if 37; id. Ex. B.) The 2015 further states that "[b]ecause of the age of
your debt, we will not sue you for it." (Id. Ex. B.)
Plaintiff states that the PRA Letters failed to disclose: that the Debt was barred by the
statute of limitations; the date of the transactions giving rise to the Debt; the date of default; and
that the Debt is legally unenforceable in a court oflaw. (Id. ifif 45-48.) Plaintiff alleges that the
2
PRA Letters falsely imply that the Account is legally enforceable and that the least sophisticated
consumer would believe that PRA would later sue to collect on the debt. (Id.
ifif 49, 50.)
According
to Plaintiff: nothing in the PRA Letters disclosed the legal consequences of a settlement or a
payment, in particular that it would restart the statute of limitations. (Id.
ifif 51,
52.) Plaintiff
alleges that PRA' s reference to "savings" in the PRA Letters is false because there are no "savings"
when the statute oflimitations acts a complete defense to collection of the Debt. (Id.
if 55.)
Plaintiff alleges that PRA engaged in unfair and deceptive acts and practices by sending
letters, such as the PRA Letters, which attempt to settle time-barred debts without disclosing that
the debts are time-barred, without disclosing that payment of the debt would restart the statute of
limitations, and which falsely represent the benefits of the offers/options for payment. (Id.
if 57.)
In essence, Plaintiff alleges that PRA violated the FDCP A by referencing a "settlement" in
collection letters seeking repayment on time-barred debts. (See id.
if 79.)
PROCEDURAL HISTORY
Plaintiff commenced this action on November 18, 2015 with the filing of a proposed Class
Action Complaint. (ECF No. 1.) PRA filed a Motion to Dismiss on December 28, 2015 (ECF No.
7), which was denied as moot after Plaintiff filed an Amended Complaint on January 18, 2016.
(See ECF No. 11.)
In the one-count Amended Class Action Complaint, Plaintiff specifically alleges that the
she is a "consumer," that the Debt is consumer "debt," that PRA is a "debt collector," and that the
PRA Letters (and letters sent to other consumers which reference "settlement") are
"communications," as defined by the FDCPA. (Id.
3
ifif 72, 74, 76, 77, 78.)
Plaintiff alleges that by
sending numerous collection letters on time-barred debts that referenced a "settlement," PRA
violated sections 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), 1692e(10), and 1692f of the FDCPA.
(Id.
ii
Plaintiff seeks statutory and actual damages, attorneys fees, and certification of a Class. 2
On February 22, 2016, PRA filed the instant Motion to Dismiss the Amended Complaint.
(See
No. 22-1 ("Mov. Br.").) On March 24, 2016, Plaintiff filed opposition (ECF No. 21
("Opp. Br.")), and on April 8, 2016, PRA filed a reply (ECF No. 24 ("Reply Br.")). The matter is
now ripe for resolution.
2
The proposed Class is initially defined as follows:
All persons with an address within in the State of New Jersey to
whom Defendant Portfolio Recovery Associates, LLC, sent one or
more letter(s) in an attempt to collect a consumer debt which
allegedly arose from a Walmart account issued by either Walmart,
GE Money Bank or a related entity, which letter was dated from
November 18, 2014 through the final resolution of this case, which
letter contained one or more of the alleged violations of the Fair
Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., and:
Four-year Class: where the last payment on the Walmart account,
which use was limited to W almart stores, was more than four years
and 35 days before the date on which the letter was sent.
Six-year Class: where the last payment on the Walmart account,
which use was not limited to Walmart stores, was more than six
years and 35 days before the date on which the letter was sent.
(Id.
ii 59.)
4
LEGAL STANDARD
withstand a motion to dismiss for failure to state a claim, "a complaint must contain
sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"
Ashcroft
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). "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."
Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to
a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted
unlawfully." Id.
determine the sufficiency of a complaint under Twombly and Iqbal in the Third Circuit,
the court must take three steps: first, the court must take note of the elements a plaintiff must plead
to state a claim; second, the court should identify allegations that, because they are no more than
conclusions, are not entitled to the assumption of truth; finally, where there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they plausibly
give
to an entitlement for relief. See Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d
Cir. 2016) (citations omitted). "In deciding a Rule 12(b)( 6) motion, a court must consider only
the complaint, exhibits attached to the complaint, matters of the public record, as well as
undisputedly authentic documents if the complainant's claims are based upon these documents."
Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010).
Stated differently, the Court must "accept all factual allegations as true, construe the
complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable
reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cty. ofAllegheny, 515
5
F.3d
233 (3d Cir. 2008) (internal citation and quotation marks omitted). The Court's role is
not to determine whether the non-moving party "will ultimately prevail" but whether that party is
"entitled to offer evidence to support the claims." United States ex rel. Wilkins v. United Health
Grp.,
, 659 F.3d 295, 302 (3d Cir. 2011) (internal citation and quotation marks omitted). The
Court's analysis is a context-specific task requiring the court "to draw on its judicial experience
and common sense." Iqbal, 556 U.S. at 663-64.
ANALYSIS
The Court first discusses the relevant standard under the FDCP A before turning to the PRA
Letters at issue in this case. The Court ultimately concludes that Plaintiff's FDCPA claim shall
proceed to the extent it is premised on the 2014 Letter; on the other hand, allegations stemming
from the 2015 Letter fail to plausibly state a claim for relief.
A. Relevant Standard Under the FDCPA
In this section, the Court determines that the Third Circuit's decision in Huertas v. Galaxy
Asset Management, 641 F.3d 28 (3d Cir. 2011) does not entirely control in this case. Although
Huertas suggests that a "threat of litigation" is required to state a claim under the FDCPA relating
to collection of a time-barred debt, the Court finds Huertas distinguishable because it did not
address a "settlement offer" in connection with a time-barred debt. The Court agrees that use of
the term "settlement offer" in attempting to collect a time-barred debt could be deemed a
misrepresentation of the legal status of the debt in the eyes of the least-sophisticated debtor, in
violation of the FDCP A.
6
1. FDCP A Background
The purpose of the FDCP A 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). When Congress passed the
legislation in 1977, it found that "[a]busive debt collection practices contribute to the number of
personal bankruptcies, to marital instability, to the loss of jobs, and invasions of individual
privacy.
to
F.3d
Id. § 1692(a). "As remedial legislation, the FDCP A must be broadly construed in order
full effect to these purposes." Caprio v. Healthcare Revenue Recovery Grp., LLC, 709
148 (3d Cir. 2013). Accordingly, the Court must "analyze the communication giving
rise to the FDCP A claim 'from the perspective of the least sophisticated debtor."' Kaymark v.
Bank ofAmerica, NA., 783 F.3d 168, 174 (3d Cir. 2015) (quoting Rosenau v. Unifund Corp., 539
F.3d 2
221 (3d Cir. 2008). "[W]hile the least sophisticated debtor standard protects naive
consumers, 'it also prevents liability for bizarre or idiosyncratic interpretations of collection
notices
preserving a quotient of reasonableness and presuming a basic level of understanding
and willingness to read with care."' Brown v. Card Serv. Ctr., 464 F.3d 450, 454 (3d Cir. 2006)
(quoting Wilson v. Quadramed Corp., 225 F.3d 350, 354 (3d Cir. 2000)).
prevail on an FDCPA claim, a plaintiff must prove that (1) she is a consumer, (2) the
defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect
a 'debt' as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in
attempting to collect the debt." Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir.
2014) (citation omitted). Here, Plaintiff has alleged all four elements (see Compl. ifif 72, 74, 76,
7
77,
and PRA does not dispute the first three prongs. 3 At issue is the fourth prong: whether
PRA violated a provision of the FDCP A in attempting to collect the debt.
Plaintiff alleges that PRA violated 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), 1692e(10),
and l
by sending numerous collection letters on time-barred debts that referenced a
"settlement." (See Compl. if 79.) Section 1692f prohibits ''unfair practices" and states in part that
"[a] debt collector may not use unfair or unconscionable means to collect or attempt to collect any
debt." 15 U.S.C. § 1692f. Meanwhile, section 1692e prohibits a debt collector from "us[ing] any
false, deceptive, or misleading representation or means in connection with the collection of any
debt," 15 U.S.C. § 1692e, including: falsely representing "the character, amount, or legal status of
any debt," id. § 1692e(2)(A), "threat[ ening] to take any action that cannot legally be taken," id. §
1692e(5), or ''us[ing] any false representation or deceptive means to collect or attempt to collect
any debt or to obtain information concerning a consumer." Id. § 1692e(10).
Discussion of Relevant Case Law
The case law is not settled on whether offering a "settlement" on a time-barred debt can
give rise to liability under the FDCPA. PRA relies heavily on the Third Circuit's 2011 Huertas
decision in support of their motion to dismiss, while Plaintiff attempts to distinguish Huertas by
relying on more recent decisions from the Seventh and Sixth Circuits. 4
Huertas, the pro-se plaintiff's claims were "primarily based upon ... attempts to
collect[] a 'false' debt, i.e., a debt upon which the six-year statute oflimitations had run under New
3
Indeed, the PRA letters specifically disclose that the "communication[s] [are] from a debt collector and [are] an
attempt to collect a debt." (See Compl. Ex. B.)
4
It goes without saying that this Court must follow precedential decisions of the Third Circuit Court of Appeals,
whereas decisions from other circuits are not binding, even though they may be instructive. See Papaioannoiu v.
Hellenic
Ltd., 569 F. Supp. 724, 728-29 (E.D. Pa. 1983) ("While the decisions of Circuit Court panels outside
the Third Circuit are ordinarily highly persuasive to this Court, they are not binding precedent as are decisions rendered
by the Third Circuit.").
8
Jersey law." 641 F.3d at 31. Specifically, Huertas alleged that the debt collector violated the
FDCP A by sending a letter which
indicate[d] that Huertas's account ha[d] been reassigned,
request[ ed] that Huertas "call to resolve this issue," include[ d] a
privacy notice informing him that [the creditor] would be accessing
his private information, and, as required by 15 U.S.C. § 1692g(a),
indicate[ d] that, if Huertas [did] not dispute the debt within thirty
days of receiving the letter, [the debt collector] [would] assume the
debt [was] valid. At the bottom, the letter state[ d], in bold, capital
letters, "THIS IS AN ATTEMPT TO COLLECT A DEBT."
641
at 31, 33. The Court notes that the dunning letter did not provide for a "settlement offer."
In atlirming the district court's dismissal ofHuertas's FDCPA claim, the Third Circuit first held
that under New Jersey law, a debtor's "debt obligation is not extinguished by the expiration of the
statute
limitations, even though the debt is ultimately unenforceable in a court of law." Id. at
32. "In other words, [the debtor] still owes the debt-it is not extinguished as a matter of lawbut he has a complete legal defense against having to pay it." Id. Next, having determined that
Huertas
owed the debt, the Third Circuit framed his FDCPA claim as "turn[ing] on whether a
debt collector may attempt to collect upon a time-barred debt without violating the statute." Id.
The Third Circuit cited to 15 U.S.C. §§ 1692e(2)(A) and 1692f-the same statutes Plaintiff asserts
here--before addressing the issue. The Third Circuit "agreed" with the "majority of courts" that
when the expiration of the statute of limitations does not invalidate
a debt, but merely renders it unenforceable, the FDCPA permits a
debt collector to seek voluntary repayment of the time-barred debt
so long as the debt collector does not initiate or threaten legal action
in connection with its debt collection efforts.
641
28, 32-33 (3d Cir. 2011). 5 The Third Circuit held that "Huertas' s FDCP A claim hinges
5
In support of this statement, the Huertas panel cited numerous cases. See id. (comparing Freyermuth v. Credit
Bureau
Inc., 248 F.3d 767, 771 (8th Cir.2001) ("[I]n the absence of a threat oflitigation or actual litigation, no
violation of the FDCP A has occurred when a debt collector attempts to collect on a potentially time-barred debt that
9
on whether (the communication from the debt collector] threatened litigation," which in tum
"depends on the language of the letter, [and] which should be analyzed from the perspective of the
least sophisticated debtor." Id. at 33 (citations and internal quotation marks omitted). After
reviewing the contents of the letter received by Huertas (which, as noted, did not offer to "settle"
Huertas's time-barred debt), the Third Circuit held that "[e]ven the least sophisticated consumer
would not understand [the] letter to explicitly or implicitly threaten litigation" and affirmed the
district court's dismissal of the FDCPA claim. PRA argues in essence that Huertas stands for the
proposition that, in the Third Circuit, in order for a debt-collector to be liable under the FDCP A
for attempting to collect on a time-barred debt, the communication must implicitly or explicitly
threaten legal action, which the PRA Letters do not. (See Mov. Br. at 13-17; Reply Br. at 10-13.)
contrast, Plaintiff acknowledges Huertas, but argues that it did not address the gravamen
of Plaintiff's claims here: that by not disclosing that the Debt was time-barred, and by offering
"settlement," the PRA Letters could mislead or deceive the least sophisticated consumer into
believing that the debt was legally enforceable, regardless of whether the creditor threatened
litigation. (See Compl. if 79; Opp. Br. at 22-35.) In support, Plaintiff points to recent cases from
the Seventh and Sixth Circuits, which have taken a more expansive view than Huertas. Yet, while
is otherwise valid."), Wallace v. Capital One Bank, 168 F.Supp.2d 526, 527-29 (D. Md. 2001) (debt validation notices
that were silent as to whether debt was time barred and which did not threaten collection action did not violate
FDCPA), and Shorty v. Capital One Bank, 90 F.Supp.2d 1330, 1331-33 (D.N.M. 2000) (sending of debt validation
notice regarding time-barred debt did not violate the FDCPA), with Larsen v. JBC Legal Grp., P.C., 533 F.Supp.2d
290, 302-03 (E.D.N.Y.2008) (threatening legal action on time-barred debt violated FDCPA), Beattie v. D.M.
Collections, Inc., 754 F.Supp. 383, 393 (D. Del. 1991) ("[T]he threatening of a lawsuit which the debt collector knows
or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is the kind of
abusive practice the FDCPA was intended to eliminate."), and Kimber v. Fed. Fin. Corp., 668 F.Supp. 1480, 1487
(M.D. Ala. 1987) ("[A] debt collector's filing of a lawsuit on a debt that appears to be time-barred, without the debt
collector having first determined after a reasonable inquiry that that limitations period has been or should be tolled, is
an unfair and unconscionable means of collecting the debt.").)
10
both cases hold that a debt collector violates the FDCP A by misrepresenting the legal
enforceability of a debt-i.e., by offering to "settle" a time-barred debt-the Sixth and Seventh
Circuits disagree as to the precise contours of Huertas.
McMahon, the Seventh Circuit Court of Appeals addressed "the circumstances under
which a dunning letter for a time-barred debt could mislead an unsophisticated consumer to believe
that
debt is enforceable in court, and thereby violate the [FDCPA]." 744 F.3d at 1012. The
Seventh Circuit analyzed the same statues present in Huertas and in this case--namely 15 U.S.C.
§§ 1
and l 692f-and held that "if the debt collector uses language in its dunning letter that
would mislead an unsophisticated consumer into believing that the debt is legally enforceable,
regardless of whether the letter actually threatens litigation (the requirement the Third and Eighth
Circuits added to the mix), the collector has violated the FDCPA." McMahon, 744 F.3d at 1020.
Based on a "straightforward" application of 15 U.S.C. § 1692e, because the letters at issue in
McMahon offered to "settle" the time-barred debt, the Seventh Circuit found that "it is plausible
that an unsophisticated consumer would believe a letter that offers to 'settle' a debt implies that
the debt is legally enforceable" and permitted the claims to proceed to discovery. Id. at 1020; see
also
at 1021 (noting that the Wikipedia entry for "settlement offer" states that the term "offer
to settle" is "used in a civil lawsuit to describe a communication from one party to the other
suggesting a settlement-an agreement to end the lawsuit before a judgment is rendered.")
Significantly, the Seventh Circuit explicitly "recognize[d] that this interpretation"-that a threat
of litigation is not necessary to state a claim under the FDCPA when a debt collector offers to
settle a time-barred debt-"conflicts with that of the Eighth and Third Circuits." Id. (citing
Huertas, 641 F.3d at 33; Freyermuth, 248 F.3d at 771.)
11
Buchanan, the Sixth Circuit reached a result similar to that of Seventh Circuit, but found
that Huertas had not precisely addressed the issue. The debt collector in Buchanan similarly
"made a settlement offer to [plaintiff] to resolve an unpaid debt without disclosing that the statute
oflimitations had run on the debt." 776 F.3d at 395. Plaintiff filed suit under the FDCPA, claiming
that the letter falsely implied that the debt was legally enforceable. The Sixth Circuit, analyzing
15
§ l 692e, reversed the district court's dismissal of the claim. According to the panel,
"[t]he question is whether [the debt collector's] letter could plausibly mislead a 'reasonable
unsophisticated consumer' into thinking her debt is enforceable in court." Id. at 398 (citation
omitted).
Like the Seventh Circuit, the panel in Buchanan answered the question in the
affirmative: "When a dunning letter creates confusion about a creditor's right to sue, that is illegal
[under 5 U.S.C. § 1692e(2)(A)] .... [A] 'settlement offer' with respect to a time-barred debt may
falsely imply that payment could be compelled through litigation." Id. at 399 .6 In further mirroring
the Seventh Circuit, the Buchanan panel noted that "[ fjormal and informal dictionaries alike
contain a definition of 'settle' that refers to concluding a lawsuit" and cited to various sources in
support. Id. Unlike the Seventh Circuit, however, the Sixth Circuit distinguished Huertas and
Freyermuth, stating that they
held only that an attempt to collect a time-barred debt is not a thinly
veiled threat to sue.... [N]either case addressed the possibility that
consumers might still be confused about the enforceability of a debt
or the pitfalls of partial payment. And neither case, most pertinently,
featured a letter offering a "settlement."
Id. at 399-400.
6
The panel also reversed on grounds that "whether a letter is misleading raises a question of fact" that was not wellsuited for disposition at the motion to dismiss stage, especially considering that the plaintiff had alleged that evidence
supported her claim. Id. at 397.
12
Thus, the Sixth and Seventh Circuits agree that misrepresenting the legal enforceability of
a debt is sufficient to state a claim under the FDCPA, but they disagree as to whether the Third
Circuit addressed the issue in Huertas.
Nevertheless, case law from the Third Circuit lends further support to Plaintiffs positionthat offering to "settle" a time-barred debt is sufficient to state a claim under the FDCPA and that
Huertas did not foreclose such a result. See Johns v. Northland Grp., Inc., 76 F. Supp. 3d 590,
592 (E.D. Pa. 2014); Order, Funderburk, Jr. v. AFNL Inc. et al., No. 14-6361 (E.D. Pa. Mar. 18,
2015),
No. 21 (hereafter "Funderburk Order").
Johns, the plaintiff filed suit after receiving a letter from the defendant debt collector
which included a "settlement offer" on outstanding, time-barred debt. 76 F.Supp.3d at 592-93.
Plaintiffs complaint fell into two categories: first, that the collection on the debt was time-barred
under Pennsylvania law, and second, that the letters violated the FDCPA. Id. at 595. In dismissing
the statute oflimitations claim, the district court found that, under Huertas, the debt collector "was
permitted to seek voluntary repayment of the debt because [the debt collector] did not initiate
litigation against Plaintiff nor threaten litigation in the letters." Id. at 596. Tellingly, however, in
dismissing the FDCPA claims, the district court did not cite to Huertas. Instead, the district court
found that Plaintiff had failed to plausibly allege that the debt at issue was "debt" as defined within
the FDCP A, and that even if she had, the content of the letters did not violate the FDCP A. Id. at
597-600 (citing in part Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294 (3d Cir.
2008)). Most relevant to the instant action, the district court held that Plaintiff failed to plausibly
allege that the debt collector's use of the term "settlement offer'' misrepresented the legal status of
the debt, because the argument was ''unconvincing" in light of relevant case law. Id. at 599-600.
13
The district court reasoned as follows:
It is well established that "[t]here is nothing improper about making
a settlement offer'' in communications between a collector and a
debtor. Campuzano-Burgos, 550 F.3d at 299 (citing Evory v. RJM
Acquisitions Funding L.L.C., 505 F.3d 769, 775 (7th Cir. 2007)).
Forbidding them "would force honest debt collectors seeking a
peaceful resolution of the debt to file suit in order to advance efforts
to resolve the debt-something that is clearly at odds with the
language and purpose of the [FDCPA]." Id. (citing Lewis v. ACB
Bus. Servs., Inc., 135 F.3d 389, 399 (6th Cir. 1998)). Moreover,
"[p]ermitting the use of settlement letters may allow resolution of a
claim without the 'needless cost and delay of litigation ... [and] is
certainly less coercive and more protective of the interests of the
debtor."' Campuzano-Burgos, 550 F.3d at 299 (quoting Lewis, 135
F.3d at 399).
Id. at 600. However, the Court notes that Campuzano-Burgos is not entirely on point, because
there is no indication that the debt at issue in that case was time-barred. Accordingly, it appears
as though the district court in Johns did not specifically analyze the interplay between an offer of
"settlement" on a time-barred debt, and instead relied on case law which permits offers of
settlement more generally.
Furthermore, in Funderburk, the district court issued a three-page order denying the debtcollector's motion for judgment on the pleadings, where the defendant debt collector similarly
offered a "settlement" on a time-barred debt. The court cited McMahon and Buchanan in support
of its finding that the "collection letter could plausibly mislead or deceive the least sophisticated
consumer into believing that time-barred debt was legally enforceable." Funderburk Order at 2.
The court continued:
In the instant case, Plaintiffs allege that AFNI's collection letters
violate the FDCPA because, by not disclosing that a debt was timebarred, the letters could mislead or deceive the debtor into believing
the debt was legally enforceable, regardless of whether the creditor
was threatening a meritless lawsuit. (See, e.g., Compl. ir 69.) The
14
Huertas Court did not address the viability of such a claim under the
FDCPA. Accordingly, I conclude that Plaintiffs have pled a
plausible claim for relief and I will deny AFNI's Motion.
Funderburk Order at 2-3.
3. This Court's Position
After reviewing the relevant case law, the Court agrees with Plaintiff. Despite the Seventh
Circuit's indication to the contrary, the Court finds thatHuertas's "threat oflitigation" requirement
does not apply to situations where a debt collector offers to "settle" a time-barred debt, because
such
were not present in Huertas, and were not raised by the pro-se appellant. This Court
agrees with the Sixth Circuit that Huertas is limited to the proposition that a debt collector may
legally request voluntary repayment on a time-barred debt, because such a request is "not a thinly
veiled threat to sue." See Buchanan, 776 F.3d at 399. But Huertas did not purport to set the outer
boundaries for permissible conduct for debt collectors in seeking voluntary repayment of timebarred debts, and the facts before this Court are sufficiently distinguishable to those before the
Huertas panel.
Keeping in mind that the FDCP A is to be broadly construed, Caprio, LLC, 709 at 148, the
Court finds that because the plain language of 15 U.S.C. § 1692e(2)(A) specifically prohibits the
false representation of the character or legal status of any debt, a misrepresentation about that fact
violates the FDCPA, regardless of whether litigation is threatened. When a debt collector offers
to "settle" a time-barred debt, it is plausible that the legal status of the debt has been misrepresented
since
is plausible that an unsophisticated consumer would believe a letter that offers to 'settle'
a debt implies that the debt is legally enforceable[.]" McMahon, 744 F.3d at 1020; see also
Buchanan, 776 F.3d at 399 ("[A] 'settlement offer' with respect to a time-barred debt may falsely
15
imply that payment could be compelled through litigation."); Funderburk Order at 2 (a collection
letter offering to settle a time-barred debt "could plausibly mislead or deceive the least
sophisticated consumer into believing that time-barred debt was legally enforceable"). The Court
further agrees with the McMahon and Buchanan panels that the meaning of the word "settlement"
is sufficiently opaque to the least sophisticated debtor for this conclusion to make sense. See
McMahon, 744 F.3d at 1021 (noting that the Wikipedia entry for "settlement offer" states that the
term "offer to settle" is "used in a civil lawsuit to describe a communication from one party to the
other suggesting a settlement-an agreement to end the lawsuit before a judgment is rendered.");
Buchanan, 776 F.3d at 399 (noting that "[f]ormal and informal dictionaries alike contain a
definition of' settle' that refers to concluding a lawsuit" and citing thereto).
Having stated the relevant standard, the Court next addresses the allegations of Plaintiffs
Complaint.
B. Plaintiff Has Plausibly Stated a Claim Sufficient to Survive a Motion to Dismiss
With Respect to the 2014 Letter Only; Plaintiff Has Failed to State a Claim With
Respect to the 2015 Letter
this section, the Court addresses the PRA Letters which form the basis of Plaintiffs
Complaint. The Court concludes that Plaintiffs FDCPA claim shall proceed to the extent it is
premised on the 2014 Letter; on the other hand, allegations stemming from the 2015 Letter fail to
plausibly state a claim for relief.
1. The 2014 Letter could be deemed to misrepresent the legal status of the Debt
a. There is an issue offact with respect to the applicable statute of limitations.
The first issue the Court must address is whether the Debt is governed by a four-year or
six-year statute oflimitations. Because Plaintiff made her last payment on the Account on August
16
16, 2009 (Comp!.
ii 25), and defaulted sometime in September 2009
(id.
ii 27), determining the
applicable statute of limitations is key to whether the 2014 Letter potentially violated the FDCPA.
On the one hand, if the six-year limitations period applies, no violation of the FDCPA occurred
because the Debt was not time-barred when the 2014 Letter was sent. But, if the four-year
limitations period applies, the Debt was time-barred and the 2014 Letter potentially violated the
FDCPA. Stated differently, it is necessary but not sufficient for the four-year limitations period to
apply
order for the Court to then find that the 2014 Letter violated the FDCPA. Plaintiff
contends that the four-year limitations period applies (Opp. Br. at 13-21), while PRA argues that
the six-year period applies (Mov. Br. at 9-12; Reply Br. at 4-10).
NJ S.A. 12A:2-725( 1) provides a four-year statute of limitations for breach of any contract
for sale: "An action for breach of any contract for sale must be commenced within four years after
the cause of action has accrued." Id. Conversely, an action upon a written contract or an account
receivable is governed by a six-year statute oflimitations under NJ.SA. 2A:14-1:
Every action at law . . . for recovery upon a contractual claim or
liability, express or implied, not under seal, or upon an account other
than one which concerns the trade or merchandise between
merchant and merchant, their factors, agents and servants, shall be
commenced within 6 years next after the cause of any such action
shall have accrued. This section shall not apply to any action for
breach of any contract for sale governed by section 12A:2-725 of
the New Jersey Statutes.
Id. In essence, the distinction hinges on whether the Account is an installment contract for the sale
of goods versus a loan of money. See New Century Fin. Servs., Inc. v. McNamara, No. A-255612Tl,
4 WL 1057076, at *4 (N.J. Super. Ct. App. Div. Mar. 20, 2014); Gray v. Suttell &
Associates, 123 F. Supp. 3d 1283, 1289-91 (E.D. Wash. 2015).
17
first question to be answered in determining the applicable statute oflimitations is with
whom Plaintiff entered into a credit card agreement when she opened the Account: Walmart or
GE Bank? See Gray, 123 F. Supp. 3d at 1292. If she entered into an agreement with Walmart, as
Plaintiff contends, then it is likely that the four-year limitations period applies. Id. at 1291. In
contrast, if she entered into an agreement GE Bank, as PRA contends, then it is necessary to
determine the relationship between GE Bank and Walmart, and whether the credit card can only
be used to buy goods from Walmart. Id. Such a determination is clearly fact-intensive.
The front of the card is branded as Walmart, yet the back of the card states as follows:
"Your credit card has been issued, and credit will be extended by GE Money Bank." (See Compl.
Ex.
The back of the card also has a logo for Sam's Club. Taken together, this seems to suggest
that a tripartite relationship exists, such that the six-year limitations period applies, but the Court
must next determine the relationship between GE Bank and Walmart, and whether the credit card
can
be used to buy goods from Walmart. See Gray, 12 F. Supp. 3d at 1291. The Court is
hesitant to make such a fact-determinative decision prior to discovery, especially because Plaintiff
has alleged facts in the Complaint to suggest that the four-year limitations period applies. (See
Compl. iii! 14, 19-24, 34, 35 (specifically alleging in part that the Account could only be used to
purchase various retail merchandise items and goods from Walmart, could not be used outside of
Walmart stores, and could not be used to purchase services).)
Again, at the motion to dismiss stage, the Court must "accept all factual allegations as true,
construe the complaint in the light most favorable to the plaintiff, and determine whether, under
any reasonable reading of the complaint, the plaintiff maybe entitled to relief." Phillips, 515 F.3d
at 233 (internal citation and quotation marks omitted). Whether or not the Court thinks the non-
18
movant will ultimately prevail is irrelevant. See US. ex rel. Wilkins, 659 F.3d at 302. Accordingly,
given
early state of the litigation, the Court will reserve on this issue and will revisit in due
course.
b. Assuming at this stage that a four-year limitations period applies, Plaintiff has
plausibly stated a claim for relief based on an alleged misrepresentation of the
status of the Debt in the 2014 Letter.
2014 Letter includes three "Settlement Options" which purport to offer discounted
repayment options, and states that "the savings percentage will be applied to the balance and your
account will be considered 'settled in full' once your final payment is successfully posted." (Id. 4'!
As an initial matter, the Court finds that the 2014 Letter does not state a claim for relief
under Huertas because the settlement offer contained therein does not amount to a threat of
litigation. See Buchanan, 776 F.3d at 397 ("Nor does a 'settlement offer' with respect to a timebarred debt by itself amount to a threat of litigation. Even an unsophisticated consumer could not
reasonably draw such an inference.").
However, because the 2014 Letter presents "Settlement Options" for Debt that was
arguably time-barred, it is plausible that the legal status of the debt has been misrepresented in
violation of the FDCPA since "it is plausible that an unsophisticated consumer would believe a
letter that offers to 'settle' a debt implies that the debt is legally enforceable[.]" McMahon, 744
F.3d at 1020; see also Buchanan, 776 F.3d at 399 ("[A] 'settlement offer' with respect to a timebarred debt may falsely imply that payment could be compelled through litigation."); Funderburk
Order at 2 (a collection letter offering to settle a time-barred debt "could plausibly mislead or
deceive the least sophisticated consumer into believing that time-barred debt was legally
19
enforceable"). In addition, Plaintiff specifically alleges in the Complaint that nothing in the PRA
Letters disclosed the legal consequences of a settlement or a payment-in particular that it would
restart the statute of limitations, giving he creditor a new opportunity to sue for the full debt. (Id.
ii,-r
51, 52.) "Without disclosure [of the legal status of the debt], a well-meaning debtor could
inadvertently dig herself into an even deeper hole." Buchanan, 776 F.3d at 399; see also
McMahon, 744 F.3d at 1021 (a collection letter that offers settlement on a time-barred debt "makes
things worse, not better, since a gullible consumer who made a partial payment would
inadvertently have reset the limitations period and made herself vulnerable to a suit on the full
amount. That is why those offers [of settlement] only reinforced the misleading impression that
the debt was legally enforceable.").
Viewing the allegations in a light most favorable to Plaintiff, and broadly construing the
FDCP A, Caprio, LLC, 709 at 148, the Court finds that the meaning of the word "settlement" is
sufficiently opaque to the least sophisticated debtor for Plaintiff to have plausibly stated a claim.
This is especially true when addressing this issue at the motion to dismiss stage and where the
Plaintiff points to evidence in the Complaint in support of the claim. 7 As aptly stated by the Sixth
Circuit in Buchanan,
whether a [dunning] letter is misleading raises a question of fact.
... Courts do not lightly reject fact-based claims at the pleading
stage. They may do so only after drawing all reasonable inferences
form the allegations in the complaint in the plaintiffs favor and only
after concluding that, even then, the complaint still fails to allege a
plausible theory of relief.... [T]he hurdle to proceed from pleading
to discovery remains a low one, requiring only that the plaintiff
plead a plausible theory of relief.
7
Like the plaintiff in Buchanan, Plaintiff here points to a potential expert in the area who could support her claims, in
addition to citing to actions undertaken by relevant federal agencies. (See Comp I. ii 43 (citing report of Timothy E.
Goldsmith and Natalie Martin); id. ili! 39-42 (citing relevant work of the Federal Trade Commission and the Consumer
Financial Protection Bureau).)
20
at 397 (citing Fed. R. Civ. P. 12(b)(6); Iqbal, 556 U.S. at 677-79); see also Phillips, 515
776
F.3d at
(noting that at the motion to dismiss stage the Court must "construe the complaint in
the light most favorable to the plaintiff, and determine whether, under any reasonable reading of
the complaint, the plaintiff may be entitled to relief.").
Accordingly, to the extent Plaintiff's claim is premised on the "Settlement Options" in the
2014 Letter, such allegations plausibly state a claim for relief because the legal status of the Debt
has arguably been misrepresented. 8
The 2015 Letter is not in violation of the FDCPA because even the least
sophisticated debtor would not understand the 2015 Letter to threaten litigation, or
to misrepresent the legal status of the Debt.
PRA concedes that the Debt was time-barred when the 2015 Letter was sent. (See Mov.
Br. at 1
However, as explained, this is not in and of itself a violation of the FDCPA. See
Huertas, 641 F.3d at 33 ("[I]t is appropriate for a debt collector to request voluntary repayment of
a time-barred debt[.]") (citation omitted).
the 2015 Letter does not violate the FDCP A because it does not threaten litigation.
See Huertas, 641 F.3d at 32-33. Although the 2015 Letter offers "Single Payment Savings" and
states that "your account will be considered 'settled in full' after your payment is successfully
posted," crucially, it further states that "[b]ecause of the age of your debt, we will not sue you for
8
The Court notes that Plaintiff alleges violation of 15 U.S.C. §§ 1692e, 1692e(2), 1692e(5), 1692e(10), and 1692f
stemming from the PRA Letters, but it is not clear to the Court how§§ 1692e(5), 1692e(l0) or 1692f apply to the
facts of this case. As noted, Section 1692fprohibits "unfair practices" and states in part that "[a] debt collector may
not use unfair or unconscionable means to collect or attempt to collect any debt." 15 U.S.C. § 1692f. Meanwhile,
section l 692e prohibits a debt collector from ''us[ing] any false, deceptive, or misleading representation or means in
connection with the collection of any debt," 15 U.S.C. § l 692e, including: falsely representing "the character, amount,
or legal status of any debt," id. § 1692e(2)(A), "threat[ening] to take any action that cannot legally be taken," id. §
1692e(5), or "us[ing] any false representation or deceptive means to collect or attempt to collect any debt or to obtain
information concerning a consumer." Id. § 1692e(10). To be sure, without discovery, the Court is not currently in a
position to rule on the applicability of the various subsections, but simply flags the issue for resolution in due course.
21
it." (Compl. Ex. B (emphasis added).) Accordingly, the 2015 Letter does not violate the FDCPA
because it does not threaten litigation, and, in fact, specifically disclaims litigation. Huertas, 641
F.3d at 32-33 ("[T]he FDCPA permits a debt collector to seek voluntary repayment of the timebarred debt so long as the debt collector does not initiate or threaten legal action in connection
with
debt collection efforts.").
the same reasons, the 2015 Letter does not violate the FDCPA because the least
sophisticated debtor would not interpret it misrepresent the legal status of the Debt. Again, the
2015 Letter offers "Single Payment Savings" as opposed to "settlement options." Furthermore,
even though the 2015 Letter states that "your account will be considered 'settled in full' after your
payment is successfully posted," it then states that "[b ]ecause of the age of your debt, we will not
sue
" (Compl. Ex. B (emphasis added).) Thus, in light of this explicit disclaimer
acknowledging that the debt is time-barred, even the least-sophisticated debtor would not believe
that the Debt was legally enforceable. See Campuzano-Burgos, 550 F.3d at 299 ("Even the least
sophisticated debtor is bound to read collection notices in their entirety."); Buchanan, 776 F.3d at
400
a debt collector is unsure about the applicable statute oflimitations, 'it would be easy to
include general language about that possibility,' McMahon, 744 F.3d at 1022, correcting any
possible misimpression by unsophisticated consumers without venturing into the realm of legal
advice.
Accordingly, the Court finds that to the extent Plaintiff's FDCPA claim is premised on the
2015 Letter, Plaintiff has failed to state a claim upon which relief can be granted. 9
9
Plaintiff appears to concede this point, as Plaintiff's opposition does not reference the 2015 Letter at all.
22
CONCLUSION
the reasons above, the Court grants in part and denies in part the Motion to Dismiss.
An appropriate Order accompanies this Opinion.
DATED: April
6
. LINARES
ED STATES DISTRICT JUDGE
23
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