Cortez v. Forster & Garbus, LLP

Filing 28

MEMORANDUM and ORDER: The Court denies the defendants motion 21 for summary judgment. Further, because there are no genuine issues of material fact and the defendant has had adequate opportunity to develop and present its case, Bridgeway Corp. v. Citibank, 201 F.3d 134, 139 (2d Cir. 2000), the Court sua sponte enters summary judgment on the issue of liability in favor of the plaintiff. Defendant's motion 25 to strike is denied as moot. Judgement will be entered shortly. Ordered by Judge Frederic Block on 6/12/2019. (Innelli, Michael)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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Cristian D. Cortez,
MEMORANDUM AND ORDER

Plaintiff,

Case No. 1: 17-cv-06501 (FB)(RLM) 

-againstFoster & Garbus, LLP,
Defendant.
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Appearances:
For the Plaintiff:
DAVID M. BARSHAY, ESQ.
100 Garden City Plaza
Suite 500
Garden City, New York 11530

For the Defendant:
ROBERT L. ARLEO, ESQ.
380 Lexington Avenue, 17th Floor
New York, New York 10168

BLOCK, Senior District Judge:
Cristian D. Cortez brings this action against Foster & Garbus, LLP, a debt
collector, seeking damages for violations of the Fair Debt Collection Practices Act
(“the FDCPA”). The defendant moves for summary judgment. For the following
reasons, the defendant’s motion is denied, and the Court enters summary judgment
in favor of the plaintiff on the issue of liability.
I.
Plaintiff incurred a debt to Discover Bank, which retained the defendant to
collect the debt. The defendant mailed the plaintiff several debt collection notices
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setting forth reduced-rate settlement offers. The specific notice challenged in the
complaint is dated February 2, 2017. That notice set forth three options for how the
plaintiff could pay off his debt, which at the time totaled $13,457.65. The notice
stated, in part:
This office has been authorized to advise you that a settlement of the
above account can be arranged. You are being offered a substantial
discount off the current balance due. You may choose one of the three
payment options as follows:
A. One payment of $5,383.06, which we shall expect by February 24,
2017.
B. Two payments of $3,364.42 each, totaling $6,728.84[,] which we
shall expect by February 24, 2017, and March 24, 2017.
C. Three payments of $2,691.53 each, totaling $8,074.59, which we
shall expect by February 24, 2017, March 24, 2017, and April 24,
2017.
Dkt No. 1, Ex. 1. Though the notice did not explicitly say so, if the plaintiff had
paid those amounts by the specified dates, the debt would not accrue interest or fees.
The notice also did not mention that if the plaintiff did not make a payment by
February 24, 2017, the debt would start accruing interest and/or fees. Subsequent
similar notices reflected higher “balance due” amounts and offering settlements for
higher amounts. The plaintiff filed his complaint on November 8, 2017, claiming
that the February 2, 2017, notice violated the FDCPA because it failed to inform
consumers about the potential interest and/or fees.
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II.
Under the FDCPA, “[a] debt collector may not use any false, deceptive, or
misleading representation or means in connection with the collection of any debt.”
15 U.S.C. § 1692e. That includes “the false representation of the character, amount,
or legal status of any debt.” Id. § 1692e(2)(A). The FDCPA is a consumer protection
statute and, therefore, courts must construe it broadly.

Avila v. Riexinger &

Associates, LLC, 817 F.3d 72, 75 (2d Cir. 2016).
“[I]n considering whether a collection notice violates Section 1692e, [courts]
apply the ‘least sophisticated consumer’ standard,” meaning that they “ask how the
least sophisticated consumer would understand the collection notice.” Id. (quoting
Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993). That means that a collection
notice is misleading if it is “open to more than one reasonable interpretation, at least
one of which is inaccurate.” Avila, 817 F.3d at 75 (quoting Clomon, 988 F.2d at
1319).
In Avila, the Second Circuit held that “the FDCPA requires debt collectors,
when they notify consumers of their account balance, to disclose that the balance
may increase due to interest and fees,” where applicable. 817 F.3d at 76. There, the
debt collection notice failed to inform consumers that the “current balance” was still
accruing interest daily and incurring late fees. Id. Therefore, when consumers paid
the “current balance,” they likely unknowingly failed to pay the debt in full. Id. The
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court also noted that a debt collection notice does not violate the FDCPA if it “clearly
states that the holder of the debt will accept payment of the amount set forth in full
satisfaction of the debt if payment is made by a specific date.” Id. at 77. It then
stated:
a debt collector who is willing to accept a specified amount in full
satisfaction of the debt if payment is made by a specific date could
considerably simplify the consumer’s understanding by so stating,
while advising that the amount due would increase by the accrual of
additional interest or fees if payment is not received by that date.
Id.
Shortly after deciding Avila, the Second Circuit stated in Taylor that a debt
collection notice need not inform consumers that their debt is not accruing interest.
Taylor v. Financial Recovery Services, Inc., 886 F.3d 212, 215 (2d Cir. 2018). The
court explained that, while the lack of a warning about interest “was prejudicially
misleading on the facts of Avila, on the facts [in Taylor] it was accurate: prompt
payment of the amounts stated in [the plaintiffs’] notices would have satisfied their
debts.” Id. at 214. Because “the only harm that [the plaintiffs] might suffer by
mistakenly believing that interest or fees are accruing on a debt is being led to think
that there is a financial benefit to making repayment sooner rather than later,” the
failure to notify consumers that their debts were not accruing interest or fees did not
violate the FDCPA. Id.

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Here, the defendant’s debt collection notice violated Section 1692e because it
failed to advise consumers that their debt was still accruing interest and/or fees. Like
the debt collection notice in Avila, the notice here fails to warn consumers that they
may fail to pay their debt in full, even if they pay the amount provided in the notice,
if they do not make the payment by the specified date. Though the additional interest
and/or fees do not start accruing again until after a specific date that is several weeks
after the notice is sent and by which the defendant states that it “expect[s]” payment,
the lack of a warning of additional interest still puts the consumer at risk of owing
additional money without clear warning.
True, consumers would fully satisfy their debt if they pay the amount set forth
in the notice by the date specified therein, which seems to fulfill Avila’s statement
that “a debt collector will not be subject to liability . . . [if the notice] states that the
holder of the debt will accept payment of the amount set forth in full satisfaction of
the debt if payment is made by a specified date.” 817 F.3d at 77. But read in its
entirety, Avila requires more than that. First, Avila explicitly states multiple times
that the defendants’ liability flowed from their failure to disclose that additional fees
and interest would accrue. See 817 F.3d at 74, 76. Second, shortly after Avila states
that debt collectors can avoid liability by informing consumers that payment by a
specific date will satisfy the debt in full, it then undercuts that idea by noting that
such a debt collector could improve consumers’ understanding by also advising that
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the amount would increase due to fees or interest. See id. at 77. That steps could be
taken to simplify consumers’ understanding demonstrates that the least sophisticated
consumer could be confused without such an explanation. Third, reading Avila to
mean that a debt collector could avoid liability simply by saying that a consumer
could satisfy their debt by paying an amount by a specific date, without needing to
advise the consumers that interest will accrue after the specified date, would violate
the least sophisticated consumer standard—it is possible to interpret that statement
as implying either that interest and/or fees would accrue after that date or that the
balance will stay the same after that date. Accordingly, the defendant violated Avila
by not also advising consumers that interest could continue to accrue.
In addition, it is debatable whether the collection notice “clearly state[d] that
[the defendant would] accept payment of the amount set forth in full satisfaction of
the debt if payment is made by a specific date.” Avila, 817 F.3d at 77. Though the
notice stated that the consumer may select one of three settlement options, including
one lump sum payment “which [the defendant] shall expect by” the relevant date—
and in fact that one payment would have satisfied the debt in full—the notice does
not state explicitly that the debt will be discharged fully upon receipt of that
payment.1

1

The Court, however, is hesitant to require debt collectors to state explicitly that
payment will satisfy consumers’ debt in full, as such a requirement would run afoul
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The defendant argues that the least sophisticated consumer would be able to
glean that interest and/or fees were still accruing because—looking at the successive
notices together—the total amount owed increased with each monthly notice. That
argument fails because the defendant has cited no case, and the Court has found
none, supporting the proposition that the least sophisticated consumer should be
expected to consider the notices as a group. Further, that reasoning could not apply
to the initial notice that the plaintiff received, as a consumer reading that first notice
would have no way of knowing that subsequent notices would have higher balances.
III.
For the above reasons, the Court denies the defendant’s motion for summary
judgment. Further, because there are no genuine issues of material fact and the
defendant has had “adequate opportunity to develop and present its case,” Bridgeway
Corp. v. Citibank, 201 F.3d 134, 139 (2d Cir. 2000), the Court sua sponte enters
summary judgment on the issue of liability in favor of the plaintiff.
IT IS SO ORDERED.
/S/ Frederic Block__________
FREDERIC BLOCK
Senior United States District Judge
June 12, 2019
Brooklyn, New York

of Taylor by requiring them to state that there would be no additional payments
required.
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