Bella v. Bureaus Investment Group Portfolio No. 15 LLC et al

Filing 32

ORDER ADOPTING REPORT AND RECOMMENDATIONS, For the foregoing reasons, upon de novo review, the Court finds Magistrate Judge Scanlon's R&R to be correct, well-reasoned and free of reversible error. The Court, therefore, adopts the R&R in its ent irety, supplemented by this Memorandum & Order, as the opinion ofthe Court. BIG Ill's Rule 12(b)(2) motion and defendants' Rule 12(b)(6) motion are granted, and plaintiffs remaining claim in this action is dismissed with prejudice. The Clerk is directed to enter judgment accordingly and to close this case. (Ordered by Judge Eric N. Vitaliano on 5/28/19.) c/m Fwd. for Judgment. (Galeano, Sonia)

FILED
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

KPUSTINA BELLA,on behalf of herself and all
others similarly situated,
Plaintiff,

BROOKttYN OFFICE
MEMORANDUM & ORDER

17-cv-6115(ENV)(VMS)

-againstBUREAUS INVESTMENT GROUP PORTFOLIO

NO. 15 LLC,THE BUREAUS,INC., and
BUREAUS INVESTMENT GROUP III, LLC,
Defendants.

VITALIANO,D.J.

On January 4,2019, Magistrate Judge Vera M.Scanlon issued a Report and
Recommendation("R&R")in this action, in which she recommended that defendants Bureaus

Investment Group Portfolio No. 15 LLC("BIG 15"), The Bureaus, Inc.("Bureaus") and Bureaus
Investment Group III, LLC("BIG in")'s Rule 12(b)(6) motion to dismiss for failure to state a

claim and BIG IIFs Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction be granted,
and that the Court dismiss plaintiff Kristina Bella's one remaining claim. Bella filed objections
to the R&R on January 18,2019, drawing opposition from defendants on February 1,2019.
After a careful and de novo review ofthe record. Judge Scanlon's R&R is adopted in its entirety,

as supplemented by this Memorandum & Order, as the opinion ofthe Court. The reasons follow.
Background^

On October 20,2017, defendants removed the instant action, commenced in Kings

County Supreme Court with a summons and notice but without a complaint. Dkt. No. 1.

^ The facts are recounted in the light most favorable to plaintiff, with all reasonable inferences
drawn in her favor, as they must be on a motion to dismiss.

Making her claim more definite, on December 15, 2017, Bella filed her complaint in this Court.

Dkt. No. 12. It alleges that defendants violated the Fair Debt Collection Practices Act

("FDCPA"), 15 U.S.C. § 1692e, when they attempted to collect a credit card debt of $552.85 that
Bella was said to owe to Capital One N.A. R&R at 2. The letter, with a statement date of June
7, 2016, and on the billhead of Asset Recovery Solutions, LLC("Asset Recovery"), listed, in
relevant part, the following information at the top:
Original Creditor:

CAPITAL ONE N.A.

Current Creditor:

BUREAUS INVESTMENT GROUP
PORTFOLIO NO 15 LLC

Total Current Balance:

$552.85
$552.85
$.00
$.00
$.00

Amount Due at Charge Off:
Interest Accrued Since Charge Off:
Miscellaneous Fees Since Charge Off:
Total Payments Since Charge Off:

See Dkt. No. 12-1 (collection letter). The collection letter stated that Bella's "past due account(s)
have been referred to our agency for collection.... This communication is from a debt
collector. This is an attempt to collect a debt." Id.

The complaint goes on to allege that BIG 15 and Asset Recovery possess licenses from
the New York City Department of Consumer Affairs to operate as "debt collection agencies,"

Dkt. No. 12 m 10, 24; that BIG 111 "purchases defaulted debts and then assigns the defaulted
debts" to BIG 15 for BIG 15 to attempt to collect, id. H 16; that BIG 111 is the sole member of

BIG 15, M H 15; and that Bureaus acts as the "master servicer" for BIG 15 and BIG 111. Id.%2\.
Standard of Review

In reviewing a magistrate judge's R&R,a district judge "may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. §

636(b)(1). The district judge need only be satisfied "that there is no clear error on the face ofthe
record" to accept the reviewed R&R,provided no timely objection has been made in writing.

Urena v. New York, 160 F. Supp. 2d 606,609-10(S.D.N.Y. 2001)(quoting

v. Smith,618

F. Supp. 1186, 1189(S.D.N.Y. 1985)); see also Thomas v. Arn,414 U.S. 140,150, 106 S. Ct.
466, 88 L. Ed. 2d 435 (1985). The districtjudge, moreover, is required to "determine de novo

any part ofthe magistrate judge's disposition that has been properly objected to." Fed. R. Civ. P.
72(b)(3); see also Arista Records, LLC v. Doe 3,604 F.3d 110,116(2d Cir. 2010). Objections

that are general, conclusory, or "merely recite the same arguments presented to the magistrate

judge" do not constitute proper objections and are reviewed only for clear error. Sanders v. City
ofNew York, No. 12-CV-l 13(PKC)(LB),2015 WL 1469506, at *1 (E.D.N.Y. Mar. 30, 2015)

(citation omitted). Clear error exists "where, upon a review of the entire record,[the district

judge] is left with the definite and firm conviction that a mistake has been committed." Saveria
JFK, Inc. V. Flughafen Wien, AG,No. 15-CV-6195(RRM)
(RLM),2017 WL 1194656, at *2
(E.D.N.Y. Mar. 30, 2017).
Discussion

I.

Rule 12rby2^ Motion^

Judge Scanlon determined that plaintiff failed to plausibly allege "purposeful activities in
New York sufficient to establish jurisdiction" over BIG III under the state's long-arm

jurisdiction statute. R&R at 8;see also Metro. Life Ins. Co. v. Robertson-Ceco Corp.,84 F.3d
560,566(2d Cir. 1996)("On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction,
the plaintiff bears the burden of showing that the court has jurisdiction over the defendant.").

^ "As a general rule, when the court is confronted by a motion raising a combination of Rule
12(b) defenses, it will pass on the jurisdictional issues before considering whether a claim was
stated by the complaint." 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and
Procedure § 1351 (3d ed. Apr. 2019). Therefore, although unlike a challenge to subject-matter

jurisdiction, a challenge to personal jurisdiction is waivable, and thus the Court will still consider
BIG Ill's Rule 12(b)(2) motion before defendants' Rule 12(b)(6) motion.

The complaint here does not allege that "BIGIII purchased any debts in or from New York or

even that BIGIII purchased Bella's debt and assigned it to BIG15." R&R at 8. Nor does BIG

Ill's name appear on the collection letter. Id. Judge Scanlon concluded, consequently, that
Bella's mere allegation that BIG Ill's parent company is present in New York is "not a sufficiem:
basis for jurisdiction." Id. at 9(citing Grill v. Walt Disney Co.,683 F. Supp. 66,68(S.D.N.Y.
1988)("no basis" for asserting personal jurisdiction over defendant merely because its "parent
company is present in New York")).

Bella asserts that, because the collection letter identifies BIG 15 as the "current creditor'

collecting on a debt incurred in New York and the complaint alleges, on information and belief,
that BIG III purchases defaulted debts and assigns them to BIG 15 for attempted collection, she
should be permitted to "at least... conduct discovery on the issue" of whether BIG III was
involved in the subject collection. PI. Objs. to R&R,Dkt. No. 30, at 12-13. Bella's objections

add nothing to her original argument, however, which was properly rejected by Judge Scanlon.

The complaint alleges that BIG III is incorporated in Illinois and has its principal place of
business there. Dkt. No. 12 H 13. It does not allege a single in-state activity or transaction by

BIG III.^ And it is beyond dispute that a subsidiary corporation is not subject to "personal

jurisdiction simply because a state has jurisdiction over the parent, even if the parent is the sole
shareholder ofthe subsidiary." Saraceno v. S. C. Johnson & Son, Inc., 83 F.R.D. 65,67

(S.D.N.Y. 1979). As a result, BIG Ill's motion to dismiss for lack of personal jurisdiction is

properly granted. At the same time, the finding that in personam jurisdiction over BIG III is
^ BIG III submitted a declaration by its manager that it does not conduct or transact business in
New York and had no role in collecting the debt owed by Bella. See generally Dkt. No. 24-1

(Decl. of Michael Slotky). The Court's analysis does not rely on this declaration, however,
because it is plaintiffs burden to show that jurisdiction exists,see Metro. Life Ins. Co.,84 F.3d
560, and she plainly has failed to do so here.

lacking is somewhat academic because, as explained below, the complaint against it must be
dismissed, as it is against all other defendants, for failure to state a claim.
II.

Rule lirbyb") Motion

"In the Second Circuit, the question of whether a communication complies with the

FDCPA is determined from the perspective ofthe 'least sophisticated consumer.'" Kolbasyuk v.

Capital Mgmt. Servs., LP,918 F.3d 236,239(2d Cir. 2019). "While the least sophisticated
consumer may lack the astuteness ofa Philadelphia lawyer or even the sophistication ofthe

average, everyday, common consumer, he can nonetheless be presumed to possess a rudimentary
amount ofinformation about the world and a willingness to read a collection notice with some

care." Id. (internal quotations and citations omitted). "Under this standard, a collection notice

can be misleading if it is 'open to more than one reasonable interpretation, at least one of which
is inaccurate.'" Avila v. Riexinger &Assocs., LLC,817 F.3d 72,75(2d Cir. 2016)(internal
citation omitted).

The viability of Bella's claim, therefore, hinges on whether the plain language ofthe
collection letter is, or could be, misleading to the hypothetical least sophisticated consumer. The

complaint alleges that the collection letter listed a "Total Current Balance" but did not identify if
"interest, late charges, and/or other charges were not accruing," which, Bella contends,

constitutes a misleading notice under FDCPA. Dkt. No. 12 ^ 110;see also Mem.of Law in 0pp.
to Mot. to Dismiss, Dkt. No. 25, at 2(arguing that "if the debt is static but the collection letter
describes the balance due as the 'current' balance, the debt collector has violated the FDCPA ).

Bella's position is squarely at odds with controlling Second Circuit precedent. In Taylor
V. Financial Recovery Services, Inc., the Circuit held that"a collection notice that fails to
disclose that interest and fees are not currently accruing on a debt is not misleading within the

meaning of Section 1692e." Taylor v. Fin. Recovery Servs., Inc., 886 F.3d 212,215(2d Cir.
2018); see also R&R at 11 (citing Derosa v. CAC Fin. Corp., 740 F. App'x 742,743(2d Cir.
2018)(summary order)(no FDCPA violation occurred where collection letter failed to mention
interest and fees because interest and fees did not continue to accrue on account)).

Bella first objects that "two differentjudges in the Eastern District of New York have
found that the use of the word 'current' could be interpreted to mean that the balance is

dynamic," which, both sides agree, would be an incorrect interpretation because interest and fees
were not accruing on Bella's account."* Both are unpublished decisions and, more importantly,
do not alter the outcome here. In Thomas v. Midland Credit Management, Inc., Dkt. No. 22,No|

2:17-cv-00523-ADS-ARL(Nov. 27, 2017 E.D.N.Y.), the collection letter listed a "current

balance" and instructions that the plaintiff could "call" the defendant "to resolve this account."

Id. at 2. That, coupled with other allegations not present here -for instance, the plaintiff in
Thomas alleged that interest was accruing during the relevant period, id. at 7- led the court to

find that a potential FDCPA violation had occurred. Thomas is, therefore, easily distinguishable
from the instant case.

Bella's other case is even less helpful to her. In Carall v. CBE Group, Inc., Dkt. No. 18,

No. 2:17-cv-03678-SJF-ARL(June 18, 2018 E.D.N.Y.), the court held that the use ofthe phrase
"total amount due" was not misleading and that the collection letter made clear that prompt

payment would completely satisfy the plaintiffs debt. Id. at 10. The court in Carall granted the
motion to dismiss the complaint. Id. at 15.^

"* Neither party objected to Judge Scanlon's characterization ofthe debt as static. See R&R at 11.
^ Bella also cites an unpublished decision from the Northern District of New York, Dkt. No. 12,
Azzara v. Nat'I Credit Adjusters, LLC,No. l:16-cv-01213-TJM-TWD (June 19, 2017 N.D.N.Y.),
in which the court granted a defaultjudgment without adjudicating the merits of whether the use
ofthe word "current," rather than "total," is a per se violation of FDCPA where interest and fees

Reduced to its essence, Bella hangs her hat on the collection letter's use of the phrase
"total current balance," rather than "total balance," in support of an alleged FDCPA violation,

and, in doing so, relies on Taylor and a Seventh Circuit case, Chaway v. National Action
Financial Services, Inc.^ 362 F.3d 944,948(7th Cir. 2004). But "[njeither Chuway nor Taylor

holds that the use ofthe word 'current' is automatically misleading." R&R at 15. Bella latches

on to a footnote in Taylor, which cites language in Chuway that a collection letter listing the
balance due,"without talk ofthe 'current' balance," satisfies the requirements of FDCPA.
Taylor, 886 F.3d at 215 n.l.

Reading Chuway in context, however, it becomes clear that the Seventh Circuit did not

hold that use ofthe phrase "current balance" for a static debt is per se misleading. The collection
letter in Chuway directed the reader to call a 1-800 number "[t]o obtain your most current
balance information." 362 F.3d at 947(7th Cir. 2004). Chuway,therefore, did not turn on the
collection letter's use ofthe word "current" but rather, as defendants observe,"on the idea that

the letter at issue stated one balance, but ifthe consumer called per the letter's instruction, that

balance might be different." Reply Mem.,Dkt. No. 26, at 5. By contrast, the letter Bella

received "did not suggest that the amount owed was different than the amount stated or from the
'current balance.'" R&R at 14;see also Chuway,362 F.3d at 948("It is impossible to draft a

letter that is certain to be understood by every person who receives it; only if it would confuse a

significant fraction ofthe persons to whom it is directed will the defendant be liable.").

Once the fog ofthe parties' semantic back-and-forth lifts, the unavoidable conclusion is
that the "least sophisticated consumer" would not have been prejudicially misled by the language
of the collection letter that Bella received. The letter"makes it abundantly clear that interest has

are not accruing.

not and will not accrue ...[and] any other interpretation is farfetched and implausible." R&R at
16. Judge Scalon correctly held that the collection letter, consequently, did not violate FDCPA.
Defendants' motion to dismiss must, therefore, be granted.

Additionally, because the Court has determined, as a matter of law,that the collection
letter did not violate FDCPA,any attempted amendment of the complaint to remedy the

jurisdictional defects, even if successful, would not save the complaint from dismissal.
Accordingly, that exercise in futility being unwarranted, the Court denies leave to amend.
Conclusion

For the foregoing reasons, upon de novo review, the Court finds Magistrate Judge
Scanlon's R&R to be correct, well-reasoned and free of reversible error. The Court, therefore,

adopts the R&R in its entirety, supplemented by this Memorandum & Order, as the opinion of
the Court. BIG Ill's Rule 12(b)(2) motion and defendants' Rule 12(b)(6) motion are granted,
and plaintiffs remaining claim in this action is dismissed with prejudice.
The Clerk is directed to enter judgment accordingly and to close this case.
So Ordered.

Dated: Brooklyn, New York
May 28,2019

/s/ USDJ ERIC N. VITALIANO
ERICN. VITALIANO

United States District Judge