Fritz v. Resurgent Capital Services, LP et al
MEMORANDUM and ORDER: Defendants motion 38 to dismiss is granted as it pertains to the FDCPA claim based on the May 27, 2010 letter from the Harris Firm to Fritz. In all other respects, it is denied. See attached memorandum and order for details. Ordered by Judge Frederic Block on 7/24/2013. (Innelli, Michael)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
GISELLE FRITZ f/k/a GISELLE
CARTER, EVAN DAVIS, JASON
SPIEGEL-GROTE, and PATRICIA
CASERTANO, on behalf of themselves
and all others similarly situated,
MEMORANDUM AND ORDER
Case No. 11-CV-3300 (FB) (VVP)
RESURGENT CAPITAL SERVICES, LP;
LVNV FUNDING, LLC; ALEGIS
GROUP, LLC; MEL S. HARRIS AND
ASSOCIATES, LLC; DAVID
WALDMAN; and RESURGENT
CAPITAL SERVICES, LLC,
AHMAD KESHAVARZ, ESQ.
The Law Office of Ahmad Keshavarz
16 Court Street, 26th Floor
Brooklyn, NY 11241
BRETT A. SCHER , ESQ.
Kaufman Dolowich Voluck & Gonzo LLP
135 Crossways Park Drive, Suite 201
Woodbury, NY 11797
BLOCK, Senior District Judge:
Plaintiffs assert claims under the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. §§ 1692-1692p, and New York General Business Law (“GBL”) § 349.
Defendants move to dismiss the Second Amended Complaint (“SAC”) pursuant to Federal
Rule of Civil Procedure 12(b)(6).
Because defendants urge numerous grounds for dismissal, it is necessary to
structure the Court’s analysis. Part I presents the allegations of the SAC. Part II addresses
plaintiffs’ claims under the FDCPA, including any defenses particular to those claims. Part
III addresses plaintiffs’ claims under GBL § 349. Part IV addresses defenses common to all
of plaintiffs’ claims. Part V addresses the liability of defendants LVNV Funding, LLC
(“LVNV”), and Alegis Group, LLC (“Alegis”).1 For the reasons that follow, defendants’
motion to dismiss is granted in part and denied in part.
The following facts are taken from the SAC. For present purposes, they are
taken as true, with all inferences drawn in plaintiffs’ favor. See Cohen v. S.A.C. Trading
Corp., 711 F.3d 353, 358 (2d Cir. 2013).
LVNV purchases hundreds of thousands of dollars in consumer debt from
creditors who have written off the accounts. It outsources efforts to collect those debts to
defendant Resurgent Capital Services, LP (“Resurgent LP”). Alegis is the general partner
of Resurgent LP. Defendant Resurgent Capital Services, LLC (“Resurgent LLC”) is an
“entity related to” Resurgent LP. SAC ¶ 24.
The SAC alleges that LVNV, Resurgent LP and Resurgent LLC are “engaged
in a joint venture to collect debts owned by LVNV.” Id. In furtherance of that venture,
Resurgent LP retains various law firms to handle the legal aspects of collection. Defendant
Mel Harris and Associates, LLC (“the Harris Firm”), is one such firm. Defendant David
Waldman is an attorney with the Harris Firm.
Plaintiffs seek to represent a class. Since, however, they have not yet moved for
certification, this memorandum and order addresses only the claims of the named
In 2010, the named plaintiffs were separately sued in state court by Resurgent
LLC. In each suit, Resurgent LLC sought to collect a consumer debt; it alleged that it was
the “purchaser and assignee” of the debt at issue, and that it “own[ed] and retain[ed] all
beneficial rights and interests therein.” SAC, Exs. D, G, P, Q. Resurgent LLC further
alleged that it was a licensed debt-collection agency and held license number 1326179 from
the New York City Department of Consumer Affairs. The collection complaints were
signed by Waldman on behalf of the Harris Firm.
In fact, the debts were held by LVNV. In addition, the license number listed
in the complaints belonged to LVNV, and not to Resurgent LLC. The complaints made no
mention of LVNV.
The SAC also contains allegations unique to plaintiff Giselle Fritz. On May
27, 2010, the Harris Firm sent Fritz a letter demanding payment on behalf of its client,
which it identified as Resurgent LLC. The letter made no mention of LVNV. In addition,
Resurgent LP reported to various credit agencies, on behalf of LVNV, that Fritz owed
$2,838, which sum included $160 in court costs. At the time, the collection action against
Fritz was pending; it was discontinued without prejudice on July 6, 2011.
II. FDCPA CLAIMS
Plaintiffs assert that defendants’ actions violated the FDCPA in three ways:
by misrepresenting Resurgent LLC as the owner of the debts and as a
licensed debt collector in the collection complaints;
by including court costs in the amount of Fritz’s debt reported to credit
reporting agencies; and
by failing to name LVNV as the creditor in the May 27, 2010 collection letter
A. Misrepresentations in Collection Complaints
The FDCPA prohibits the use of “any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.
The statute then lists a series of specific prohibited acts. See id. § 1692e(1-16). The list is not
exhaustive, however, and “a debt collection practice can be a ‘false, deceptive, or
misleading’ practice in violation of § 1692e even if it does not fall within any of the
subsections of § 1692e.” Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993).
The collection complaints represented that Resurgent LLC owned the debts,
and that it held a debt-collection license from the New York City Department of Consumer
Affairs. Defendants do not dispute that those representations were false. Instead, they
argue (1) that § 1692e does not apply to litigation activity, and (2) that the
misrepresentations were not material.
1. Litigation Activity
In Heintz v. Jenkins, 514 U.S. 291 (1995), the Supreme Court held that the
FDCPA “applies to attorneys who regularly engage in consumer-debt-collection activity,
even when that activity consists of litigation.” Id. at 299 (internal quotation marks omitted).
Several circuit courts have concluded that the broader implication of Heintz is that the
FDCPA applies to all litigation activities. See Sayyed v. Wolpoff & Abramson, 485 F.3d 226,
232 (4th Cir. 2007) (collecting cases). And in Goldman v. Cohen, 445 F.3d 152 (2d Cir.2006),
the Second Circuit cited Heintz in support of its holding that a pleading was an “initial
communication” which, under the FDCPA, must include certain disclosures. See id. at 156.
Congress legislatively overruled Cohen by amending the FDCPA section
dealing with initial communications to exclude “a formal pleading in a civil action.” See
Pub. L. 109-351, § 809, 120 Stat. 2006 (2006) (amending 15 U.S.C. § 1692g). That amendment
demonstrates that Congress knows how to create an exemption for litigation activity. Yet
it created no analogous exception for § 1692e’s general prohibition on false statements. The
Supreme Court recently repeated the longstanding rule that “[w]here Congress includes
particular language in one section of a statute but omits it in another section of the same
Act, it is generally presumed that Congress acts intentionally and purposely in the
disparate inclusion or exclusion.” Sebellius v. Cloer, 133 S. Ct. 1886, 1894 (2013) (quoting
Bates v. United States, 522 U.S. 23, 29–30 (1997)).
Defendants cite Simmons v. Roundup Funding, LLC, 622 F.3d 93 (2d Cir. 2010),
and McAfee v. Law Firm of Forster & Garbus, 2008 WL 3876079 (E.D.N.Y. Aug. 18, 2008), in
support of the contrary proposition that the FDCPA does not apply to litigation activities.
The import of those cases, however, is not as broad as defendants make it out to be.
Simmons held that a proof of claim in a bankruptcy proceeding was not subject to § 1692e
because “[t]here is no need to protect debtors who are already under the protection of the
bankruptcy court.” 622 F.3d at 96. In McAfee, the claims related “solely to Defendants’
alleged improprieties in prosecuting a court action against him in state court and his
criticisms of the state-court system,” 2008 WL 3876079, at *5; Judge Garaufis dismissed
them because the plaintiff had offered neither allegations nor evidence “tending to
establish misrepresentation.” Id.
Many courts have read a materiality requirement into § 1692e. See Warren v.
Sessoms & Rogers, P.A., 676 F.3d 365, 374 (4th Cir. 2012) (collecting cases). The Second
Circuit has not made an analogous pronouncement, but it did cite Warren and similar cases
with apparent approval in a recent summary order. See Gabriele v. Am. Home Mortg.
Servicing, Inc., 503 F. App’x 89, 94 (2d Cir. Nov. 27, 2012) (“Although Congress did not
expressly require that any violation of § 1692e be material, courts have generally held that
violations grounded in ‘false representations’ must rest on material misrepresentations.”).
While Gabriele is not binding precedent, the Court agrees that only material
misrepresentations are actionable under the FDCPA.
Gabriele also persuasively explains what makes a misrepresentation material:
“Our case law demonstrates that communications and practices that could mislead a
putative-debtor as to the nature and legal status of the underlying debt, or that could
impede a consumer’s ability to respond to or dispute collection, violate the FDCPA.” Id.
That case law also establishes that compliance with the FDCPA is assessed “from the
perspective of the ‘least sophisticated consumer.’” Jacobsen v. Healthcare Fin. Servs., Inc., 516
F.3d 85, 90 (2d Cir. 2008) (quoting Clomon, 988 F.2d at 1318).
Applying those standards, the Court concludes that a false representation of
the owner of a debt could easily mislead the least sophisticated consumer as to the nature
and legal status of the debt. It could, moreover, impede the consumer’s ability to respond.
As Judge Irizarry reasoned, “[t]he entity to which a debtor owes money potentially affects
the debtor in the most basic ways, such as what the debtor should write after ‘pay to the
order of’ on the payment check to ensure that the debt is satisfied.” Eun Joo Lee v. Forster
& Garbus LLP, ___ F. Supp. 2d ___, 2013 WL 776740, at *3 (E.D.N.Y. Mar. 1, 2013). In other
words, one possible response to a collection action would be to voluntarily pay the debt.
A consumer—even a sophisticated one—might reasonably believe that paying the entity
bringing suit would extinguish the debt. Yet because of the misrepresentation as to the
ownership of the debt, paying Resurgent LLC would have left the debtor vulnerable to a
suit by the true owner, LVNV. Indeed, plaintiff Patricia Casertano alleges that she was
sued by LVNV while the suit by Resurgent LLC was pending.2
Defendants point out that the collection complaints clearly and correctly
listed the account numbers and original creditors for the debts. While such information
would certainly prevent even an unsophisticated consumer from being confused as to
what debt was at issue, it would have shed no light on whom to pay to discharge it.
The Court likewise concludes that the misrepresentations that Resurgent LLC
was a licensed debt collector were material. Defendants do not dispute that Resurgent LLC
was required to be licensed before taking any action to collect debts in New York City. See
N.Y.C. Admin. Code §§ 20-490 (“It shall be unlawful for any person to act as a debt
collection agency without first having obtained a license in accordance with the provisions
of this subchapter[.]”), 20-489 (defining “debt collection agency”). Lack of such a license
precludes recovery on collection actions. See N.Y.C.P.L.R. § 3015(e) (“Where the plaintiff’s
It is immaterial that not all of the named plaintiffs were subjected to competing
lawsuits: “[I]t is not necessary for a plaintiff to show that she herself was confused by
the communication she received; it is sufficient for a plaintiff to demonstrate that the
least sophisticated consumer would be confused.” Jacobsen, 516 F.3d at 91.
cause of action against a consumer arises from the plaintiff’s conduct of a business which
is required by state or local law to be licensed by the department of consumer affairs of the
city of New York . . . the complaint shall allege, as part of the cause of action, that plaintiff
was duly licensed at the time of services rendered and shall contain the name and number,
if any, of such license and the governmental agency which issued such license.”). The false
representation that Resurgent LLC held a debt-collection license could easily have led an
unsophisticated consumer to forgo a valid defense.
The Court is aware that some courts in this and other circuits have reached
a different conclusion as to the materiality of the creditor’s identity. See, e.g., Lane v. Fein,
767 F. Supp. 2d 382, 389 (E.D.N.Y. 2011); Klein v. Solomon & Solomon, P.C., 2011 WL 5354250,
at *2 (D. Conn. Oct. 28, 2011); McLain v. Gordon, 2010 WL 3340528, at *7 (W.D. Wash. Aug.
24, 2010). In addition, many courts have concluded that lack of a debt-collection license is
not a per se violation of the FDCPA. See Nero v. Law Office of Sam Streeter, P.L.L.C., 655 F.
Supp. 2d 200, 207 (E.D.N.Y. 2009). Perhaps the Second Circuit will eventually resolve these
debates. Until then, the Court is persuaded that misrepresentations that a plaintiff in a
collection action owns the debt and is licensed to collect it are both material.
B. Misrepresentation of Fritz’s Debt to Credit Reporting Agencies
Under New York law, a party is not liable for court costs unless and until
there is a judgment in favor of the opposing party. See N.Y.C.P.L.R. § 8101 (“The party in
whose favor a judgment is entered is entitled to costs in the action . . . .”). Since the
collection action against Fritz never resulted in a judgment, she was not liable for court
costs. By including court costs in the debt it reported to credit reporting agencies,
Resurgent LP misrepresented the amount of the debt. The FDCPA specifically prohibits
such misrepresentations. See 15 U.S.C. § 1692e(2)(A) (prohibiting the false representation
of “the character, amount, or legal status of any debt”). It also specifically prohibits the
reporting of “credit information which is known or which should be known to be false.”
Id. § 1692e(8).
Defendants’ only response to this claim is that it should have been made
under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681-1681x. It is true that the
FCRA makes it unlawful for any person to “furnish any information relating to a consumer
to any consumer reporting agency if the person knows or has reasonable cause to believe
that the information is inaccurate,” id. § 1681s-2(a)(1)(A), but nothing in the statute or the
case law suggests that the FCRA provides the exclusive remedy for misrepresentations to
a credit reporting agency.3 As explained above, such misrepresentations fall comfortably
within the plain language of the FDCPA. Accord Davis v. Trans Union, LLC, 526 F. Supp.
2d 577, 586-87 (W.D.N.C. 2007); Akalwadi v. Risk Mgmt. Alternatives, Inc., 336 F. Supp. 2d
492, 503 (D. Md. 2004); Finnegan v. Univ. of Rochester Med. Ctr., 21 F. Supp. 2d 223, 229
C. Misrepresentation in May 27, 2010 Letter to Fritz
The May 27, 2010 letter from the Harris Firm to Fritz misidentified Resurgent
LLC as the holder of her debt. As noted, the FDCPA addresses initial communications to
Indeed, the consensus is that § 1681s-2(a)(1)(A) does not even give rise to a
private cause of action. See, e.g., Trikas v. Universal Card Servs. Corp., 351 F. Supp. 2d 37,
44 (E.D.N.Y. 2005).
debtors; it specifically requires that such communications contain “the name of the creditor
to whom the debt is owed.” 15 U.S.C. §1692g(a)(2). However, FDCPA claims must be
brought within one year of the violation. See 15 U.S.C. § 1692k(d). Since the original
complaint was not filed until July 8, 2011, any claim based on the May 27, 2010 letter is
Fritz urges the Court to apply the discovery rule to FDCPA claims. See
Magnum v. Action Collection Serv., Inc., 575 F.3d 935, 940 (9th Cir. 2009) (“[T]he general
federal rule is that a limitations period begins to run when the plaintiff knows or has reason
to know of the injury which is the basis of the action.” (internal quotation marks omitted)).
Alternatively, she argues that the statute of limitations should be equitably tolled because
the misidentification of Fritz’s creditor effectively prevented her from recognizing that she
had an FDCPA claim. See Somin v. Total Cmty. Mgmt. Corp., 494 F. Supp. 2d 153, 158
(E.D.N.Y. 2007) (“As with any a statute of limitations, the FDCPA is subject to equitable
tolling in appropriate circumstances.”).
Both doctrines require the exercise of due diligence. See Guilbert v. Gardner,
480 F.3d 140, 149 (2d Cir. 2007) (“[Under the discovery rule,] a plaintiff’s cause of action
accrues when he discovers, or with due diligence should have discovered, the injury that
is the basis of the litigation.” (internal quotation marks omitted)); Johnson v. Nyack Hosp.,
86 F.3d 8, 12 (2d Cir. 1996) (“Equitable tolling requires a party to pass with reasonable
Defendants do not dispute that the other FDCPA claims are timely. Nor do they
argue that any of the GBL § 349 claims—including the claim based on the May 27, 2010
letter—are barred by the applicable three-year statute of limitations.
diligence through the period it seeks to have tolled.”). The Court agrees with defendants
that Fritz cannot demonstrate that she exercised due diligence in discovering the facts
concerning her claim. She does not dispute that she received the letter, which expressly
advised her of her right to seek verification of the debt and to dispute its validity. Yet she
does not allege that she sought clarification or took any action to satisfy the due diligence
requirement. This deficiency is fatal. See Derisme v. Hunt Leibert Jacobson P.C., 880 F. Supp.
2d 339, 356-57 (D. Conn. 2012) (“The fact that the Plaintiff was unaware that she had a
potential cause of action . . . is not the type of extraordinary circumstances that would
warrant the application of equitable tolling.”); Wade v. Rosenthal, Stein & Assocs., LLC, 2012
WL 3764291, at *3 (E.D.N.Y. Aug. 29, 2012) (refusing to apply equitable tolling because
plaintiff had not pleaded “any facts that he conducted any efforts whatsoever to discover
whether the letters violated the FDCPA”).5
The allegations regarding the misrepresentations of Resurgent LLC’s
ownership of the debt, its status as a licensed debt collector, and the amount of Fritz’s debt
state plausible claims under the FDCPA. The allegation that the May 27, 2010 letter to Fritz
failed to identify the correct creditor also states a plausible claim, but is time-barred.
Fritz does not seek leave to amend. In any event, the Court takes her failure to
challenge defendants’ assertion that she took no action after receiving the letter to mean
that she could not, in good faith, allege the necessary due diligence.
III. SECTION 349 CLAIMS6
GBL § 349 prohibits all “[d]eceptive acts or practices in the conduct of any
business, trade or commerce or in the furnishing of any service in this state.” GBL § 349(a)
“To state a claim under § 349, a plaintiff must allege: (1) the act or practice was
consumer-oriented; (2) the act or practice was misleading in a material respect; and (3) the
plaintiff was injured as a result.” Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009).
Defendants argue that plaintiffs have not adequately alleged any of the three elements.
A. Consumer-Oriented Conduct
To satisfy the consumer-oriented conduct element, plaintiffs must establish
that defendants’ “acts or practices have a broader impact on consumers at large.” Oswego
Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25 (1995). “Private
contract disputes, unique to the parties, [do] not fall within the ambit of the statute.” Id.
While plaintiffs allege that they are particular victims of defendants’ debtcollection practices, their claim is not unique to them. Rather, the crux of their claim is that
those practices were a normal part of defendants’ business, which involved hundreds of
thousands of dollars in consumer debt. The Court concludes that the allegedly deceptive
practices have a broad impact on consumers at large. Cf. Rozier v. Fin. Recovery Sys., 2011
WL 2295116, at *5 (E.D.N.Y. June 7, 2011) (holding that use of form collection letter was
Since, with one exception, the FDCPA claims survive, the Court exercises
supplemental jurisdiction over the § 349 claims.
B. Materially Deceptive or Misleading Conduct
The second element requires plaintiffs to allege representations or omissions
that are “likely to mislead a reasonable consumer acting reasonably under the
circumstances.” Oswego Laborers, 85 N.Y.2d at 25. This is a more stringent standard than
the “least sophisticated consumer” standard applicable to FDCPA claims. See Rozier, 2011
WL 2295116, at *5. Like the FDCPA, however, GBL § 349 does not require a plaintiff to
show that he or she relied on the deception. See Stutman v. Chemical Bank, 95 N.Y.2d 24, 29
(2000). For the reasons set forth in Part II, the Court concludes that defendants’ conduct
would mislead a reasonable consumer as well as the least sophisticated consumer.
Although plaintiffs must allege an actual injury, it need not be “pecuniary
harm.” Stutman, 95 N.Y.2d at 29. Thus, it is of no consequence that plaintiffs have not
alleged that defendants’ deceptive conduct resulted in judgments against them.
Plaintiffs’ alleged damages include “time spent and costs incurred by
consumers to defend against meritless collection lawsuits that should never have been filed
and should never have been prosecuted.” SAC ¶ 13. Such injuries satisfy the third element
of a § 349 claim. See Willner v. Allstate Ins. Co., 893 N.Y.S.2d 208, 218 (2d Dep’t 2010) (“The
plaintiffs alleged that they were forced to pay for an attorney, and thus adequately pleaded
damages under General Business Law § 349.”).
Defendants argue that plaintiffs’ claims must be dismissed based on collateral
estoppel, abstention, and the Noerr-Pennington doctrine.7 The Court disagrees.
A. Collateral Estoppel
“[A] federal court must give to a state-court judgment the same preclusive
effect as would be given that judgment under the law of the State in which the judgment
was rendered.” Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984). In New
York, as elsewhere, only judgments have preclusive effect. See Peterson v. Forkey, 376
N.Y.S.2d 560, 561 (1st Dep’t 1975) (“Both the doctrines of [r]es judicata and collateral
estoppel have as their prerequisites the entry of a judgment.”). Since defendants have not
demonstrated that any of the collection actions resulted in a judgment, their invocation of
collateral estoppel is puzzling.
In any event, collateral estoppel also requires that “the issue in the second
action [be] identical to an issue which was raised, necessarily decided and material in the
first action.” Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 349 (1999). Plaintiffs—as
defendants in the collection actions—did not raise the FDCPA or § 349, either as defenses
to collection or as counterclaims. There is, moreover, no conceptual reason for them to
have done so. Such claims challenge the method of debt collection, not the underlying
debt. See Mace v. Van Ru Credit Corp., 109 F.3d 338, 341 (7th Cir. 1997) (“The statute is
designed to protect consumers from unscrupulous collectors, regardless of the validity of
Although defendants address these defenses in the context of the FDCPA
claims, they are equally applicable to the § 349 claims.
the debt.”). Thus, an adjudication that plaintiffs are indebted to defendants would not
preclude plaintiffs from claiming that defendants violated the FDCPA or GBL § 349. Accord
Balk v. Fererstein & Smith, LLP, 2011 WL 1557948, at *1 (W.D.N.Y. Apr. 25, 2011)
(“[C]ollateral estoppel does not apply here because FDCPA violations can be separated
from underlying state litigation.”).
Abstention is “an extraordinary and narrow exception to the duty of a District
Court to adjudicate a controversy properly before it.” County of Allegheny v. Frank Mashuda
Co., 360 U.S. 185, 188-89 (1959). Accordingly, it is properly invoked only in “exceptional
circumstances.” Id. at 189. That said, abstention may be appropriate when parallel statecourt litigation might result in “comprehensive disposition of litigation.” Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (internal quotation marks
“[A] finding that the concurrent proceedings are ‘parallel’ is a necessary
prerequisite to abstention under Colorado River.” Dittmer v. County of Suffolk, 146 F.3d 113,
118 (2d Cir. 1998). The Court concludes that this action is not “parallel” to the state-court
collection actions for the same reason that collateral estoppel does not apply: This action
concerns defendants’ debt-collection methods, while the collection actions involve the
validity of the underlying debts. Since the collection actions will not resolve plaintiffs’
claims, abstention would not be appropriate.
Defendants argue that holding them liable for pursuing collection actions
would violate their First Amendment right to “petition the Government for redress of
grievances.” U.S. Const. Amend. 1. That right is protected by the Noerr–Pennington
doctrine, which “generally immunizes from liability a party’s commencement of a prior
court proceeding.” T.F.T.F. Capital Corp. v. Marcus Dairy, Inc., 312 F.3d 90, 93 (2d Cir. 2002)
(internal quotation marks omitted)). “The doctrine originated in the antitrust area, but it
has been extended to provide immunity from liability for bringing other suits.” Hirschfeld
v. Spanakos, 104 F.3d 16, 19 (2d Cir. 1997).
As noted, many circuit courts have held that the FDCPA applies to litigation
activities. See supra Part II.A.1. Only two, however, have specifically addressed the
implications of the Noerr-Pennington doctrine. In Hartman v. Great Seneca Fin. Corp., 569
F.3d 606 (6th Cir. 2009), the Sixth Circuit held that the Noerr-Pennington doctrine did not
provide immunity from an FDCPA claim based on intentional misrepresentations. See id.
at 616. It reasoned that “there is no constitutional value in false statements of fact” because
“[n]either the intentional lie nor the careless error materially advances society’s interest in
uninhibited, robust, and wide-open debate on public issues.” Id. (quoting Gertz v. Robert
Welch, Inc., 418 U.S. 323, 340 (1974)). It recognized that Heintz did not address NoerrPennington, but noted that application of the doctrine would negate the Supreme Court’s
“detailed analysis and clear conclusion” in that case. Id.
The Ninth Circuit reached a superficially contrary conclusion in Satre v. Wells
Fargo Bank, NA, 507 F. App’x 655 (9th Cir. Jan. 2, 2013), holding that Noerr–Pennington
immunized an attorney from FDCPA liability. See id. at 655. The basis for that holding,
however, was that the complaint “failed to establish that [the attorney], who was defending
his client from litigation initiated by the Satres, was a ‘debt collector.’” Id. Though Satre did
not cite Heintz, it is entirely consistent with the Supreme Court’s holding that the FDCPA
consumer-debt-collection activity.” 514 U.S. at 299.
The Court agrees with and adopts the Sixth Circuit’s reasoning that NoerrPennington does not provide immunity for intentional misrepresentations made in
litigation. See also California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 513 (1972)
(“Misrepresentations, condoned in the political arena, are not immunized when used in the
adjudicatory process.”). Although the FDCPA is often described as a “strict liability
statute,” see, e.g., Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 63 (2d Cir. 1993), a
defendant may escape liability by proving “by a preponderance of evidence that the
violation was not intentional and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. §
1692k(c). Thus, the statute respects whatever constitutional protections unintentional
Plaintiffs argue that any claim by the Harris Firm and Waldman that the
misrepresentations in the pleadings and letters they signed were unintentional would
make them liable under § 1692e(3), which prohibits “[t]he false representation or
implication . . . that any communication is from an attorney.” The Second Circuit has
held that a communication that is from an actual attorney can nevertheless violate
§ 1692e(3) if the attorney fails to conduct a meaningful review of the communication.
See Clomon, 988 F.2d at 1321 (“[T]he use of an attorney’s signature implies—at least in
the absence of language to the contrary—that the attorney signing the letter formed an
opinion about how to manage the case of the debtor to whom the letter was sent.”).
None of the defendants has invoked § 1692k(c) as a ground for dismissal.
Accordingly, the Court declines to address the viability of plaintiffs’ alternative theory
of liability at this time.
By contrast, liability under GBL § 349 does not depend on the defendant’s
intent. See Oswego Laborers, 85 N.Y.2d at 26 (“[I]t is not necessary under the statute that a
plaintiff establish the defendant’s intent to defraud or mislead.”). Nevertheless, the Court
is not persuaded that Noerr-Pennington immunizes defendants from such liability because
the doctrine excepts “sham” litigation from its protection. See T.F.T.F. Capital, 312 F. 3d at
93. The exception applies where “the litigation in question is: (i) ‘objectively baseless,’ and
(ii) ‘an attempt to interfere directly with the business relationships of a competitor through
the use of the governmental process—as opposed to the outcome of that process—as an
anticompetitive weapon.’” Primetime 24 Joint Venture v. National Broad. Co., 219 F.3d 92,
100-01 (2d Cir. 2000) (quoting Professional Real Estate Investors, Inc. v. Columbia Pictures
Indus., 508 U.S. 49, 51 (1993)). The phrasing of the second factor makes it irrelevant outside
the antitrust context. See DirecTV, Inc. v. Rowland, 2005 WL 189722, at *4 (W.D.N.Y. Jan. 22,
2005). A collection action by an entity that does not own the underlying debt is certainly
V. LIABILITY OF LVNV AND ALEGIS
Defendants LVNV and Alegis contend that the claims against them must be
dismissed because the SAC fails to allege that they took any wrongful actions. The Court
disagrees as to both defendants.
No Second Circuit case addresses whether and to what extent a defendant
may be held vicariously liable under the FDCPA. Out-of-circuit cases establish that “an
entity which itself meets the definition of ‘debt collector’ may be held vicariously liable for
unlawful collection activities carried out by another on its behalf,” Pollice v. National Tax
Funding, L.P., 225 F.3d 379, 405 (3d Cir. 2000), while an entity that is not a “debt collector”
may not be, see Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 108 (6th Cir. 1996). The
principle is a sensible one, and has been followed by district courts in this circuit. Compare
Okyere v. Palisades Collection, LLC, ___ F. Supp. 2d. ___, 2013 WL 1173992, at *6 (S.D.N.Y.
Mar. 22, 2013), with Doherty v. Citibank (S. Dak.) N.A., 375 F. Supp. 2d 158, 162 (E.D.N.Y.
Although LVNV is alleged to own the debts at issue as the result of
assignments by the original creditors, it does not dispute that it falls within the FDCPA’s
definition of “debt collector.” See Pollice, 225 F.3d at 403 (“[A]n assignee may be deemed
a ‘debt collector’ if the obligation is already in default when it is assigned.”). The SAC’s
allegation that LVNV engaged in a joint venture with Resurgent LP and Resurgent LLC to
collect its debts gives rise to a reasonable inference—at least at this stage of the
litigation—that LVNV directed the actions of those defendants.
LVNV argues that there would have been no FDCPA violation had it sued
in its own name. That argument misses the point. Plaintiffs’ theory is that LVNV used
Resurgent LLC and Resurgent LP to shield itself from FDCPA liability that might have
arisen had LVNV attempted to collect its debts in its own name.
Alegis does not dispute the allegations that it is a “debt collector” and the
general partner of Resurgent LP. “The basic premise of limited partnership law is that
general partners are personally liable for partnership obligations but limited partners are
not.” In re LJM Co-Inv., L.P., 866 A.2d 762, 772 (Del. Ch. 2004).9 That rule makes a general
partner liable for the FDCPA violations of the partnership. See Pollice, 225 F.3d at 405 n.9
(holding general partner liable “where the limited partnership meets the definition of ‘debt
Defendants’ motion to dismiss is granted as it pertains to the FDCPA claim
based on the May 27, 2010 letter from the Harris Firm to Fritz. In all other respects, it is
Senior United States District Judge
Brooklyn, New York
July 24, 2013
The Court cites Delaware law because both Resurgent LP and Alegis are
Delaware corporations, but the same rule obtains in New York. See United States v. 175
Inwood Assocs., LLP, 330 F. Supp. 2d 213, 224 (E.D.N.Y. 2004) (“[U]nder New York
[p]artnership law, general partners in a limited liability partnership are not protected as
individuals from liability incurred by the partnership if the assets of the partnership are
insufficient to satisfy the liability.”).
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