Barbato v. Greystone Alliance, LLC
MEMORANDUM (Order to follow as separate docket entry).Signed by Honorable Malachy E Mannion on 11/16/17. (bs)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
GREYSTONE ALLIANCE, LLC,
Civil Action No. 3:13-2748
Before the court is remaining defendant Crown Asset Management,
LLC’s (“Crown”) motion for reconsideration, (Doc. 107), of Judge Nealon’s
decision, (Doc. 100), finding that Crown is a “debt collector” as defined in
§1692a(6) of the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et seq.
(“FDCPA”), and denying its motion for summary judgment. Crown’s motion is
based on the recent decision by the Supreme Court in Henson v. Santander
USA, Inc., — U.S.—, 137 S.Ct. 1718 (June 12, 2017), issued after Judge
Nealon’s decision. After a thorough review of the record, the court will DENY
defendant Crown’s motion for reconsideration.1
On July 20, 2017, this case was reassigned to the undersigned judge
from Judge Nealon who issued the March 30, 2017 Memorandum. (Doc. 100).
This court will not repeat the full procedural and factual background of
this case since they are detailed extensively in the March 30, 2017
Memorandum. (Doc. 100, pp. 1-14). See also 2017 WL 1193731 (M.D.Pa.
March 30, 3017). Rather, the court incorporates by reference the background
as stated in the March 30, 2017 Memorandum.
Suffice it to say that on June 23, 2017, Crown filed a motion for
reconsideration of the court’s March 30, 2017 Order denying the crosssummary judgment motions of plaintiff and Crown. (Doc. 107). Crown
simultaneously filed its brief in support. (Doc. 108). After being granted an
extension of time, plaintiff filed a motion under seal on July 12, 2017, (Doc.
110), seeking the court’s permission to file, either under seal or not, her
attached brief in opposition to Crown’s motion for reconsideration, (Doc. 1102), and exhibit, namely, two excerpts (three sentences in total) from Crown’s
Consolidated Financial Statement for years 2012-2014 which Crown provided
to plaintiff in discovery under a protective order.
On August 4, 2017, Crown filed its reply brief in support of its
reconsideration motion. (Doc. 113). Also, on August 4, 2017, Crown filed a
brief in opposition to plaintiff’s Doc. 110 motion and requests the court to
strike the protected information from plaintiff’s brief under Fed.R.Civ.P. 12(f).
(Doc. 114). On August 18, 2017, plaintiff filed a motion to file her reply brief
in support of her (Doc. 110) motion, either under seal or not, (Doc. 116), as
well as a brief in support with an attached exhibit, (Doc. 117).
As discussed below, the court will not consider Crown’s Financial
Statement which plaintiff has submitted with her opposition brief and will strike
the portions of her brief regarding this document. As such, the court will grant
plaintiff’s motion to file her opposition brief, (Doc. 110-2), as well as her reply
brief, (Doc. 117-1), under seal and it will grant Crown’s motion to strike, (Doc.
114), the attached exhibit, (Doc. 110-3), to plaintiff’s opposition brief and any
reference to the exhibit in both of her briefs, (Doc. 110-2) and (Doc. 117-1).
II. STANDARD OF REVIEW
“The purpose of a motion for reconsideration is to correct manifest
errors of law or fact or to present newly discovered evidence.” Harsco v.
Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). “Accordingly, a judgment may be
altered or amended if the party seeking reconsideration shows at least one of
the following grounds: (1) an intervening change in the controlling law; (2) the
availability of new evidence that was not available when the court granted the
motion for summary judgment; or (3) the need to correct a clear error of law
or fact or to prevent manifest injustice.” Howard Hess Dental Labs. Inc. v.
Dentsply Intern., Inc., 602 F.3d 237, 251 (3d Cir. 2010) (quoting Max’s
Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 677 (3d Cir.
1999)); Chesapeake Appalachia, L.L.C. v. Scott Petroleum, LLC, 73 F. Supp.
3d 488, 491 (M.D. Pa. 2014) (Generally, reconsideration motions should be
granted sparingly.); Cont’l Cas. Co. v. Diversified Indus., Inc., 884 F. Supp.
937, 943 (E.D. Pa. 1995). “The standard for granting a motion for
reconsideration is a stringent one . . . . [A] mere disagreement with the court
does not translate into a clear error of law.” Chesapeake Appalachia, L.L.C.,
73 F. Supp. 3d at 491 (quoting Mpala v. Smith, Civ. No. 3:CV-06-841, 2007
WL 136750, at *2 (M.D. Pa. Jan. 16, 2007), aff’d, 241 F. App’x 3 (3d Cir.
2007)) (alteration in original). Additionally, “‘new evidence,’ for reconsideration
purposes, does not refer to evidence that a party obtains or submits to the
court after an adverse ruling. Rather, new evidence in this context means
evidence that a party could not earlier submit to the court because that
evidence was not previously available.” Howard Hess Dental Labs., 602 F.3d
at 251 (citation omitted). “Evidence that is not newly discovered, as so
defined, cannot provide the basis for a successful motion for reconsideration.”
Blystone v. Horn, 664 F.3d 397, 416 (3d Cir. 2011) (citing Harsco, 779 F.2d
906, 909 (3d Cir.1985)).
Initially, the court will address plaintiff’s (Doc. 110) motion and request
to submit a portion of Crown’s Financial Statement.2 Plaintiff states that the
exhibit to her opposition brief contains information which Crown designated
as “Confidential” and “Attorney Eyes Only” and, thus is protected under the
protective order entered by the court, (Doc. 47). However, plaintiff requests
that the court allow her to file her brief not under seal and that the court
consider this “very limited unredacted information” since it is directly relevant
to the issue presented in Crown’s motion for reconsideration, i.e., whether
Crown is a “debt collector” subject to the FDCPA. Plaintiff states that under
the factors of Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994),
her need for the information outweighs any injury to Crown that may result if
the court allows its disclosure because the information shows that the
principal purpose of Crown’s business is the collection of debts. Alternatively,
plaintiff requests the court to allow her to file her opposition brief with the
attached information as well as her reply brief under seal if it determines that
Crown can establish good cause by showing disclosure would cause it harm.
Crown opposes plaintiff’s motion to file the exhibit either under seal or
not and requests the court to strike this information under Fed.R.Civ.P. 12(f).
(Doc. 114). In Tennis v. Ford Motor Co., 730 F.Supp.2d 437, 443 (W.D.Pa.
Because the relevant portions of Crown’s Financial Statement are
protected from disclosure and contained in plaintiff’s (Doc. 110-3) filing at
page 3, which is under seal, the court will not state the provisions herein.
2010), the court explained as follows regarding a Rule 12(f) motion:
Under Fed.R.Civ.P. 12(f) “[t]he court may strike from a pleading
an insufficient defense or any redundant, immaterial, impertinent,
or scandalous matter.” Rule 12(f) “permits the court, on its own
motion, or on the timely motion of a party, to order stricken from
any pleading any insufficient defense or any redundant,
immaterial, impertinent, or scandalous matter.” Adams v. Cnty. of
Erie, Pa., 2009 WL 4016636 at *1 (W.D.Pa. Nov. 19, 2009)
(quoting Fed.R.Civ.P. 12(f)). “The purpose of a motion to strike is
to clean up the pleadings, streamline litigation, and avoid
unnecessary forays into immaterial matters.” Natale v. Winthrop
Resources Corp., 2008 WL 2758238 at *14 (E.D.Pa. July 9, 2008)
(quoting McInerney v. Moyer Lumber & Hardware, Inc., 244
F.Supp.2d 393, 402 (E.D.Pa. 2002)).
Crown contends that plaintiff’s motion should be denied for the following
First, the [Financial Statement] Document is immaterial since it
was prepared by Crown’s auditor and contains non-binding,
non-sworn, non-legal statements. Second, the Document should
not be considered because the Plaintiff failed to follow the specific
procedure set forth in the Confidentiality and Discovery Protective
Order. Third, the Document is irrelevant for the principal business
purpose that the Plaintiff seeks to use it because, post- Henson,
Crown is a creditor, not a debt collector, under the [FDCPA].
Crown states that on September 8, 2015, its counsel emailed plaintiff’s
counsel several pages of bates-stamped information, including the subject
Financial Statement, i.e., “CAM 303 through CAM 320”, which was designated
The court finds that the information plaintiff now seeks to introduce was
not part of the record before Judge Nealon when he rendered his March 30,
2017 decision. Nor did the court rely on this information when it issued its prior
decision. Rather, the court based its decision on the record before it, including
the statement of material facts of Crown, portions of which it found
undisputed. As in Howard Hess Dental Labs., 602 F.3d at 252, “[n]othing in
the record suggests that the evidence the Plaintiff [seeks] to present
post-summary judgment was unavailable to [it] when [it] filed [its] summary
judgment motion.” In fact, Crown sent plaintiff the information in September
2015. The Third Circuit has held that “[t]he scope of a motion for
reconsideration, ..., is extremely limited” and that “[s]uch motions are not to be
used as an opportunity to relitigate the case.” Blystone, 664 F.3d at 416.
Further, Crown’s motion for reconsideration is based only on Henson,
a change in controlling law, and the legal issue of whether Henson effects this
court’s decision finding that Crown was a “debt collector” based on the Check
Investors case. As mentioned, Crown argues that “post-Henson, Crown is a
creditor, not a debt collector, under the [FDCPA].” The issues considered by
the court in its March 30, 2017 decision, (Doc. 100, p. 15), were whether
Crown was a “debt collector” under the FDCPA at the time of the violations
alleged by plaintiff, Turning Point’s status as a “debt collector” under the
FDCPA, and whether Crown is liable for the alleged FDCPA violations
committed by Turning Point. The court found that Crown acquired plaintiff’s
account while in default and that Crown was a “debt collector” under the
principal purpose definition of the FDCPA. As such, the court found that
Crown could be vicariously liable for the alleged violations committed by
Turning Point based on the Pollice case.
Thus, the court in its discretion will not consider Crown’s Consolidated
Financial Statement for years 2012-2014, which plaintiff is attempting to
submit after the summary judgment motions were ruled upon, since this
information was available to her prior to the filing of the summary judgment
motions. See Howard Hess Dental Labs., 602 F.3d at 252 (citing Harsco, 779
F.2d at 909 (“district court correctly did not consider affidavit filed after
summary judgment was granted because it ‘was available prior to the
summary judgment’”)). As such, the court will strike Crown’s Consolidated
Financial Statement under Rule 12(f), (Doc. 110-3), as well as plaintiff’s
references to it in her opposition brief and her reply brief, and will not consider
this information in deciding Crown’s motion for reconsideration.
The court will now address the heart of the matter, namely, whether the
court’s prior decision that Crown qualifies as a “debt collector” under FDCPA,
still holds water in light of Henson.
In its motion for reconsideration, Crown requests this court to enter an
Order “(a) reconsidering this court’s March 30, 2017 Order that found Crown
to be a debt collector, (b) concluding Crown to be a creditor, [and] (c) entering
summary judgment in favor of Crown and against the Plaintiff upon Counts I
and II of the First Amended Complaint.” Crown’s instant motion for
reconsideration is based on a change in controlling law, namely, Henson.
However, the parties dispute as to whether Henson is controlling with respect
to this case. “In Henson, the Court held that individuals and entities who
regularly purchase debts originated by someone else and then seek to collect
on those debts do not qualify as debt collectors under the second prong of 15
U.S.C. §1692a(6) because they are not attempting to collect the debt of
another.” Deal v. Trinity Hope Associates, LLC, 2017 WL 3026401, *3 n. 2
(W.D.N.C. July 17, 2017) (citing Henson, 137 S.Ct. at 1721-25); Schweer v.
HOVG, LLC, 2017 WL 2906504, *2 (M.D.Pa. July 7, 2017) (In Henson, “[t]he
Court ruled that Congress did not intend for debt buyers to be considered debt
collectors for the purposes of the [FDCPA], where the debt buyers attempted
to collect debts for which the debt buyer now owned.”) (citing Henson,137 S.
Ct. at 1724).
Crown states that “Henson involves an identical issue of substantial
importance before this Honorable Court, namely, whether Crown qualifies as
a debt collector under the [FDCPA] where it does not regularly collect or
attempt to collect on debts owed or due another even when the debts were in
default when acquired.” (Doc. 102, p. 2). In the March 30, 2017 Memorandum,
Judge Nealon found that Crown qualified as a “debt collector” under the first
definition of “debt collector” contained in the FDCPA which was not at issue
in Henson. His decision was based upon, inter alia, an interpretation of the
Third Circuit case of Fed. Trade Commission v. Check Investors, Inc., 502
F.3d 159 (3d Cir. 2007), finding that Crown was acting as a “debt collector”
and subject to the FDCPA. (Doc. 100, pp. 24-26.); Check Investors, 502 F.3d
at 173 (“[o]ne attempting to collect a debt is a ‘debt collector’ under the
FDCPA if the debt in question was in default when acquired.”). Other circuits,
namely, the Fourth (i.e., Henson v. Santander Consumer USA, Inc., 817 F.3d
131, 135 (4th Cir. 2016)) and Eleventh Circuits, held that under the FDCPA,
a purchaser of charged-off receivables is not a debt collector simply because
it acquired the defaulted debts.
In opposition to Crown’s motion, plaintiff essentially argues that Henson
has no bearing on the present case since it dealt with the distinction between
a “debt collector” and a “creditor” with respect to the second definition of debt
collector under §1692a(6), as opposed to the first definition, namely, a
“principal purpose” debt collector, which is the issue herein. In fact, as plaintiff
points out, the Henson Court specifically stated that the “principal purpose”
definition of debt collector was not at issue in that case. Henson, 137 S.Ct. at
1721-25. As such, plaintiff basically asserts that while Henson may be
persuasive authority, it is not a change in controlling law.
In order to discuss whether Henson has any effect on the present case
and the court’s finding that Crown does not fit the definition of a “debt
collector” in light of Henson, the facts will be briefly repeated.
In 2007, plaintiff obtained a credit card from GE3 for personal use. She
was unable to pay off her outstanding balance. Between 2011 and 2013,
plaintiff’s delinquent account with GE in the amount of $2,483.83, was
basically transferred as a charged-off receivable to Atlantic, then to Security
Credit, then to Brightwater, and finally to Crown.
As the court stated in the March 30, 2017 memorandum, (Doc. 100, p.
Crown is a purchaser of charged-off receivables. (Doc. 80, p. 2);
(Doc. 84, p. 2). However, Crown does not directly collect on its
charged-off receivables. (Id.). Rather, Crown refers all of its
charged-off receivables to third-parties for collection. (Id.). For
example, on December 18, 2012, Crown entered into a service
agreement (the “Service Agreement”) with Turning Point. (Doc.
80, p. 5); (Doc. 84, p. 3). According to the Service Agreement,
Crown was seeking “to procure certain collection services from”
Turning Point. (Doc. 80-8, p. 2).
Based on the Service Agreement , Crown referred plaintiff's account to
Turning Point on February 4, 2013. On February 6, 2013, Turning Point,
identifying itself as a “National Debt Collection Agency,” issued a letter to
The court uses the same abbreviations that the court referenced in the
March 30, 2017 memorandum, (Doc. 100), since the parties are well familiar
plaintiff, in part, stating:
Our client, [Crown] has purchased your account and all rights to
the debt from [GE]. There is an outstanding balance due of
$2,483.83. Our client's records indicate that payment has not
been received or processed as of the date of this
correspondence, and has therefore been listed for collection.
The letter also notified plaintiff that: This communication from a debt
collector is an attempt to collect a debt and any information obtained will
be used for that purpose. (Doc. 100, pp. 11-12) (emphasis original).
Turning Point also left two voicemail messages for plaintiff on her
cellular telephone regarding her account between February 4, 2013 and May
6, 2013. (See Doc. 100, p. 13).
Crown did not review or approve the February 6, 2013 letter. Nor did
Crown make any calls to plaintiff about her account.
Subsequently, in May 2013, plaintiff filed a Chapter 7 bankruptcy petition
and Crown then recalled her account from Turning Point. Finally, on June 6,
2013, Crown closed plaintiff’s account.
Plaintiff is proceeding on her amended complaint, (Doc. 21), and only
Crown remains as a defendant. Plaintiff alleges that Crown violated
§1692e(11) and §1692g of the FDCPA. (Id. at pp. 4-6). She also asserts class
allegations with respect to her §1692g claim. (Id. at pp. 5-6). Plaintiff
essentially “claims that Turning Point failed to identify itself as a debt collector
when it called her to attempt collection of a debt, contrary to 15 U.S.C.
§1692e(11)” and that “Turning Point sent a letter [on February 6, 2013] which
contained a statement that ‘overshadowed’ disclosures required by 15 U.S.C.
§1692g.” The claim under §1692g “is being pursued for a putative class of
In Douglass v. Convergent Outsourcing, 765 F.3d 299, 303 (3d Cir.
2014), the Third Circuit delineated the following elements that a plaintiff must
prove to prevail on an FDCPA claim: “(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.”
At issue in this case regarding the reconsideration motion, is whether
plaintiff can prove that Crown was a “debt collector” under the FDCPA in light
of Henson, 137 S.Ct. at 1723-24, which held that “an entity collecting a debt
for its own account is not a ‘debt collector’ under the FDCPA even if it
purchased the debt when it was in default.” Bank of New York Mellon Trust
Co. N.A. v. Henderson, 862 F.3d 29, 34 (D.C. Cir. 2017); Henson, 137 S.Ct.
at 1724 (“So a company collecting purchased defaulted debt for its own
account … would hardly seem to be barred from qualifying as a creditor under
the statute’s plain terms.”). Crown argues that it merely accepted an
assignment of plaintiff’s account after her debt was in default and that based
on Henson, it is not a debt collector.
Specifically, Crown contends as follows:
Crown is a creditor under the FDCPA. If Crown is a creditor, it
cannot be a debt collector, pursuant to Third Circuit jurisprudence.
Which means that because Crown is a creditor, one does not
review Crown’s principal business purpose. If this Court were to
ignore the mutual exclusivity issue, then Crown
would be both a creditor and a debt collector, resulting in an
outcome contrary to the law of this Circuit.
(Doc. 113, p. 2).
Crown states that it is not a third party collection agency which the Court
in Henson found to be the focus of the FDCPA. Rather, Crown maintains that
it is a debt owner which was seeking to collect debts for itself. Crown states
it was not trying to collect on any debts “owed ... another”, language part of
the second definition of debt collector which was at issue in Henson. Crown
states that “as the current owner of the [plaintiff’s] Account, it would be the
entity to whom the account is ‘owed’ and not ‘another.’” As such, Crown
maintains that under Henson, it is not a debt collector. (Id. at pp. 3-4).
Plaintiff contends that notwithstanding Henson, Crown is a debt collector
since Judge Nealon determined in his March 30, 2017 Memorandum it met
the “principal purpose” definition of debt collector that was neither at issue nor
addressed in Henson.
The question in this case is whether Judge Nealon’s holding in his
March 30, 2017 decision that Crown qualified as a “debt collector” under the
first definition of “debt collector,” i.e., “any business the principal purpose of
which is the collection of any debts”, §1692a(6), is contrary to the Henson
decision despite the fact that Henson explicitly did not address this definition
of debt collector. Crown contends that “[a]pplying the ruling in Henson to this
case, Crown is not, and cannot be considered, a debt collector under the
FDCPA” since it is a person to whom a debt is owed, fitting neatly into the
FDCPA’s definition of “creditor.” (Id.). Crown states that since it fits the
definition of creditor, it cannot also be a debt collector with respect to plaintiff’s
account. Thus, Crown contends that it acted on its own behalf, as a creditor,
in its collection efforts after it bought plaintiff’s account already in default.
Crown encourages the court to broadly interpret the definition of a debt
collector and it cites to four cases in which courts have done so after Henson.
(Id. at pp. 4-5). Crown also submitted a notice of supplemental authorities on
August 29, 2017, (Doc. 118), listing three additional cases, which were
decided after Henson and after it filed its reply brief, and which support its
position that it is a “creditor.” The court does not find the cases cited by Crown
in its brief and in its supplement to be persuasive, including the recent case
of Chernyakhovskaya v. Resurgent Capital Services L.P., 2017 WL 3593115
(D.N.J. Aug. 18, 2017). In Chernyakhovskaya, the court dismissed plaintiff’s
FDCPA claim against defendant LVNV which had purchased plaintiff’s
account while it was already in default and then referred the debt for collection
to defendant Resurgent, without prejudice to file a second amended complaint
to “cure any deficiencies as to the allegations against LVNV”, seemingly to
see if plaintiff could show that the principal purpose of LVNV’s business was
the collection of any debts.
Importantly, “[t]he FDCPA creates two ‘mutually exclusive’ categories,
debt collectors and creditors, but only debt collectors are regulated by the
statute.” Bank of New York Mellon Trust Co. N.A., 862 F.3d at 34 (citation
omitted). A “debt collector” is defined in the FDCPA as “‘one who uses any
instrumentality of interstate commerce or the mails in any business  the
principal purpose of which is the collection of any debts, or  who regularly
collects or attempts to collect, directly or indirectly, debts owed or due or
asserted to be owed or due another.’” 15 U.S.C. §1692a(6)). The FDCPA
defines a “creditor” as “any person who offers or extends credit creating a
debt or to whom a debt is owed.” 15 U.S.C. §1692a(4).
No doubt that the Third Circuit has held that “[a]s to a specific debt, one
cannot be both a ‘creditor’ and a ‘debt collector,’ as defined in the FDCPA,
because those terms are mutually exclusive.” Check Investors, 502 F.3d at
173. However, the court in its March 30, 2017 Memorandum, (Doc. 100, p.
While a defendant in an FDCPA action cannot be both a “creditor”
and a “debt collector,” the United States Court of Appeals for the
Seventh Circuit has noted that “for debts that do not originate with
the one attempting collection, but are acquired from another, the
collection activity related to that debt could logically fall into either
Schlosser v. Fairbanks Capital Com., 323 F.3d 534, 536 (7th Cir. 2003).
The court then stated that “at least nominally, Crown could be
considered a ‘creditor’ under the FDCPA” since it acquired plaintiff’s account,
and since it was actually owed the debt which it acquired by assignment. (Id.,
pp.18-20). The court stated that based on the Check Investors case, when
this situation occurs, you look to “the status of the debt when it was acquired
to determine whether the defendant was acting as a ‘creditor’ or ‘debt
collector’ under the FDCPA” and, that “[o]ne attempting to collect a debt is a
‘debt collector’ under the FDCPA if the debt in question was in default when
acquired.” Check Investors, 502 F.3d at 173. Now, based on Henson, “[t]hat
the debt was already in default when the [entity] purchased it did not make the
[entity] a debt collector.” Bank of New York Mellon Trust Co. N.A., 862 F.3d
at 34 (citing Henson 137 S.Ct. at 1723-24); Niborg v. CitiMortgage, Inc., 2017
WL 3017633, *2 (W.D. Wa. July 17, 2017) (“An entity that seeks to collect a
debt for its own account is not a ‘debt collector’ under the FDCPA, even if it
obtained the debt from the loan originator after it went into default.”
“Accordingly, a holder on a note and deed of trust does not constitute a ‘debt
collector’ under the FDCPA.”) (citing Bank of New York Mellon Trust Co. N.A.
v. Henderson, supra); Chernyakhovskaya, 2017 WL 3593115, *8 (“The
holding in Henson overturned in part [Check Investors], which held that the
FDCPA applied to entities who were in the practice of purchasing debts and
then seeking to collect said debts.”) (citing Henson, 137 S. Ct. at 1721)).
Plaintiff cites to the Schweer case to support her contention that Henson
should be narrowly applied. In a nutshell, the facts in Schweer, 2017 WL
2906504, *1, are as follows:
Defendant HOVG, LLC, a collection agency acting on behalf of
Defendant Pendrick Capital Partners, LLC, mailed a letter to the
Plaintiff, Lori Schweer. HOVG, identified in the letter as Bay Area
Credit Service, advised Schweer that it was attempting to collect
a debt owed to [Pendrick] after Pendrick purchased Schweer’s
debt owed to “Broad Mountain Emerg Phys PLLC.”
Additionally, Pendrick did “not undertake or participate in independent
collection actions.” Id.
In the Schweer case, 2017 WL 2906504, *5, the court stated that:
In [Henson], the Supreme Court specifically addressed only
whether or not the defendant could be found a debt collector
when attempting to collect debts owed to itself as opposed to
“another.” Henson, 137 S.Ct. at 1721. In holding that they could
not, the Henson Court appears to address circumstances similar
to this one, where Pendrick, as owner of the debt, and regardless
of the origins of the debt, cannot be considered a debt collector
under the [FDCPA] for attempting to collect a debt that they own.
But the Henson Court also made clear that its holding in that
matter was narrow, and did not address the applicability of “in any
business the principal purpose of which is the collection of any
debts[.]” Henson, 137 S.Ct. at 1721.
The Schweer Court, id., then stated that “[i]t is that unaddressed
language that Schweer asks the Court to apply to Pendrick now. As stipulated
in the joint case management plan, Pendrick’s principal purpose of business
‘is to buy defaulted debts and thereafter attempt to collect those debts.’ The
Defendants stipulated specifically that Pendrick is indeed a debt collector for
the purposes of the Act.” The Schweer Court then concluded that “Henson
does not shield Pendrick from liability, as Pendrick fits in the remainder of the
definition of a debt collector unaddressed by Henson” and that “[u]nder this
definition of debt collector, the unresolved question on the status of the debt
at the time of obtaining ownership is irrelevant.” Id.
Crown states that plaintiff’s reliance on the Schweer case is misplaced
and that Schweer is distinguishable from this case since here there is no
stipulation as to the application of the FDCPA and since it has continued to
argue that it is a creditor, not a debt collector. Crown also states that
“Schweer ignored this Court’s creditor analysis in [the March 30, 2017
Memorandum, Doc. 100, pp. 24-25]”, and its holding that “the Third Circuit has
held that an entity is a debt collector if (1) it is assigned a defaulted debt, and
(2) its principal business purpose is the collection of debts, or it regularly
engages in debt collection.” (citing Beard v. Ocwen Loan Serv., LLC, 2015
U.S. Dist. LEXIS 128401, at *8 n.1 (M.D. Pa. Sept. 24, 2015) (emphasis
added) (citing Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379, 403 (3d Cir.
2000); Oppong v. First Union Mort. Corp., 215 F.App’x 114 (3d Cir. 2007)).
Thus, Crown concludes that:
Under Henson, a debt purchaser of defaulted debt does not
trigger the statutory definition of a debt collector. So,
post-Henson, the first part of the Pollice analysis must be
answered in the negative. As such, it is not necessary to consider
the second portion under the Pollice analysis, which is the
principal business purpose query, and Crown cannot be a debt
collector under the FDCPA.
(Doc. 113, p. 8).
Plaintiff states that “the ‘principal purpose’ definition covers all consumer
debts, even if they are not owing to another and are instead owned by the
debt collector defendant.” (Doc. 110-2, p. 13). She states that the Henson
decision was very narrow and did not address the definition of debt collector
at issue in this case. She points out that as the Schweer Court recognized, the
status of her debt at the time Crown bought it is not relevant and that this
court can still find Crown was a debt collector under the principal purpose
Crown argues that based on Henson, its summary judgment motion
should now be granted because it cannot be considered a “debt collector” and
the FDCPA does not apply. Therefore, Crown contends that it cannot be held
liable under the FDCPA. The Supreme Court in Henson, 137 S.Ct. at 1720,
“face[d] a question about who exactly qualifies as a debt collector subject to
the [FDCPA’s] rigors.” Chernyakhovskaya, 2017 WL 3593115, *8. In framing
the issue in Henson, the Supreme Court stated “what if you purchase a debt
and then try to collect it for yourself—does that make you a ‘debt collector’
too?” Henson, 137 S.Ct. at 1720.
The court in Chernyakhovskaya, 2017 WL 3593115, *8, summarized the
facts in Henson as follows:
CitiFinancial Auto loaned money to petitioners seeking to buy
cars, petitioners then defaulted on those loans, Santander
subsequently purchased the defaulted loans from CitiFinancial,
and Santander sought to collect in a manner petitioners believed
to be troublesome under the FDCPA. Id. at 1721-22. Both parties
agreed that in deciding whether Santander’s conduct falls within
the meaning of the Act, it is necessary to look to the statutory
language defining the term “ ‘debt collector’ to embrace anyone
who ‘regularly collects or attempts to collect... debts owed or
due...another’.” Id. at 1721-22 (citing 15 U.S.C. §1692a(6)).
“All that remain[ed] in dispute is how to classify individuals and
entities who regularly purchase debts originated by someone else
and then seek to collect those debts for their own account. Does
the Act treat the debt purchaser in that scenario more like the
repo man or the loan originator?” The Supreme Court held that a
company may collect debts that it purchased for its own account
without triggering the statutory definition of a debt collector as
defined by the FDCPA. The FDCPA's definition of debt collector
includes those who regularly seek to collect debts “owed ...
another” and the statute’s plain language focuses on third party
collection agents regularly collecting for a debt owner, not a debt
owner seeking to collect debts for itself. See ––– U.S. ––––, 137
S.Ct. 1718, 198 L.Ed.2d 177 (2017).
Based on Henson, Crown argues that it can no longer be considered a
“debt collector” in this case since it was assigned plaintiff’s defaulted debt and
then referred the debt, which it now owned, for collection to Turning Point.
See Chernyakhovskaya, 2017 WL 3593115, *9 (“Per Henson, an entity that
purchases a debt for its own account does not constitute a debt collector
under the FDCPA ....”). Crown also states that plaintiff must show, in part, that
it is a “debt collector” as defined by the Act. See Douglass, 765 F.3d at 303.
Thus, Crown maintains that it was a subsequent purchaser of plaintiff’s
defaulted Account, that it retained Turning Point to collect the debt for its own
account, thus rendering it a creditor under Henson.
Contrary to Crown’s position, the court does not read Henson as
impacting FDCPA cases beyond those which include a dispute concerning the
second of the definition of “debt collector” in §1692a(6). See Tepper v. Amos
Financial, LLC, 2017 WL 3446886, *8 (E.D.Pa. Aug. 11, 2017), appeal
pending, (“In Henson, the Court held that an entity that regularly purchases
debts originated by a third party and then seeks to collect those debts for its
own account is not a ‘debt collector’ under the second statutory definition.”).
The court in Tepper also stated that the first definition of “debt collector”
provided in §1692a, i.e., the defendant will be a debt collector if its “principal
purpose ... is the collection of any debts,” was “explicitly noted” by the
Supreme Court to be “outside the scope of its review.” Id. (citing Henson, 137
S.Ct. at 1721). Also, as discussed above, the court concurs with Deal, LLC,
2017 WL 3026401, *3 n. 2, which noted that “[i]n Henson, the Court held that
individuals and entities who regularly purchase debts originated by someone
else and then seek to collect on those debts do not qualify as debt collectors
under the second prong of 15 U.S.C. §1692a(6) because they are not
attempting to collect the debt of another.”) (emphasis added). Therefore, this
court declines to expand Henson and hold that Crown can no longer be
considered a “debt collector” since it was assigned plaintiff’s defaulted debt,
and thus is a creditor even if it fits the principal purpose definition which was
not addressed in Henson. See Tepper 2017 WL 3446886, *8 (“T]he [FDCPA]
provides two possible paths for a plaintiff to prove that a particular defendant
is a ‘debt collector.’”). As such, while the court agrees with Crown that
plaintiff’s FDCPA claims fail insofar as she is relying on the second statutory
definition of “debt collector”, which was at issue in Henson, since it applies to
“debts owed ... another,” and the debt here was owed to Crown, it does not
agree with Crown that it can no longer be considered a “debt collector” under
the first statutory definition, not at issue in Henson, since it “applies to ‘any
debts’, provided only that the entity’s principal purpose is the collection of
such debt.” Tepper, 2017 WL 3446886, *8 (emphasis original).
In the instant case, as Judge Nealon found in his March 30, 2017
Memorandum, (Doc. 100, p. 23), Crown is a purchaser of charged-off
receivables, i.e., consumer accounts or commercial accounts, such as credit
card accounts, where the consumer stopped paying on them,4 and plaintiff’s
account was in default for over two years when it was acquired by Crown by
agreement dated January 30, 2013. Approximately 90%-95% of the accounts
bought by Crown are consumer accounts. After Crown buys consumer
accounts, it validates the account, checks them for bankruptcy and deceased
consumers, and then forwards them out to a collection agency to collect on
the accounts. According to Foster, Crown does not ever collect on accounts
directly. (Doc. 86, p. 6). As indicated, this court is adhering to the record and
the undisputed facts which Judge Nealon found in his March 30, 2017
Memorandum for purposes of deciding Crown’s motion for reconsideration.
In his March 30, 2017 Memorandum, (Doc. 100, pp. 25-26), Judge
Nealon concluded as follows:
In addition to arguing that Crown acquired the Account when it
was in “default,” Plaintiff also argues that Crown’s “‘principal
purpose” is the collection of “any debts.” (Doc. 79, pp. 14-15). The
summary judgment record supports Plaintiff’s position.
Specifically, it is undisputed that Crown purchases “charged-off
receivables,” (Doc. 84, p. 2); (Doc. 94, p. 2), which, as noted
See also deposition transcript of Jessica Foster, Vice President of
operations for Crown and Crown’s Rule 30(b)(6) corporate designee, (Doc.
86, p. 5).
above, are defaulted accounts where the consumer has stopped
paying on the debt. See (Doc. 80-3, p. 3). According to Jessica
Foster, ..., Crown is “a debt purchaser.” (Doc. 83, p. 10); (Doc. 86,
p. 5). While Crown claims that it “does not collect on charged-off
receivables,” it does not dispute that it “refers all charged-off
receivables to third-party, independent servicers” for collection.
(Doc. 84, p. 2); see also (Doc. 80, p. 2); (Doc. 91, p. 2); (Doc. 94,
pp. 2-3). As a result, there is no dispute that Crown’s principal
purpose is to acquire accounts in “default” for the purpose of
collection. See (Doc. 80, p. 2); (Doc. 84, p. 2); also (Docs. 94-1 94-3). Further, approximately ninety (90) to ninety-five (95)
percent of Crown’s receivables concern consumers. (Doc. 86, p.
12). Therefore, it is determined that Crown’s “principal purpose”
is the collection of “debts” and, thus, meets the definition of a”debt
collector” under section 1692a(6) the FDCPA. See Pollice, 225
F.3d at 404, 405 n.28; see also Oppong, 215 F.App’x at 118-20;
Martsolf v. JBC Legal Gm., P.C., 2008 U.S. Dist. LEXIS 6876, at
*42-45 (M.D. Pa. Jan. 30, 2008) (Conner, J.).
As plaintiff explains, in Pollice, 225 F.3d at 404, “the Third Circuit
observed that ‘there is no question that the ‘principal purpose’ of [the
defendant debt buyer’s] business is the ‘collection of any debts,’ namely,
defaulted obligations which it purchases from municipalities.” Plaintiff then
concludes that this “standard remains unaffected by Henson, and is the law
of [the Third] Circuit.” (Doc. 110-2, p. 17). Plaintiff also notes, (Id., n. 1), that:
Pollice separately held that the debt collector was a debt buyer
based on the fact that it purchased debts after they had gone into
default. That particular language is no longer good law after
Henson. But, the court’s unrelated statement that purchasing
obligations constitutes the collection of debt was not reliant on
that discredited language.
As such, plaintiff maintains that Crown can still be a “debt collector”
under the first definition not addressed in Henson.
Simply put, this court declines to expand Henson and hold that Crown
is not a “debt collector” even though it bought plaintiff’s account after it was
defaulted and Crown fits the principal purpose definition in §1692a(6). As
mentioned, Judge Nealon in his March 30, 2017 Memorandum, (Doc. 100, pp.
25-26), held that “Crown’s ‘principal purpose’ is the collection of ‘debts’” and
that it met the principal purpose definition of “debt collector.”
The formula utilized by the court in its March 30, 2017 Memorandum to
determine whether Crown was acting as a “creditor” or “debt collector” has
been followed subsequent to Henson. In particular, in Martin v. Fein Such
Kahn & Shepard, P.C., 2017 WL 2958501, *5 (D.N.J. July 11, 2017), the court
stated that “[u]nder the FDCPA creditors are treated as debt collectors if they
are third-party buyers of debt, and if the debt was in default at the time the
third-party purchased it.” (citing Pollice, 225 F.3d at 403).
This court does not find any of the requisite grounds necessary to grant
Crown’s motion for reconsideration. Based on the existing record and based
on current Third Circuit precedent, this court will adhere to Judge Nealon’s
finding in his March 30, 2017 Memorandum that Crown meets the definition
of a “debt collector” under §1692a(6) of the FDCPA. Thus, it will not address
Crown’s penultimate argument, namely, that since it is a “creditor”, it cannot
be vicariously liable for the actions of Turning Point.
Accordingly, the court will deny Crown’s motion for reconsideration, Doc.
107. The court will give the parties 60 days to file renewed summary judgment
motions pursuant to Judge Nealon’s March 30, 2017 Memorandum, (Doc.
100, p. 45), regarding the issue of whether Turning Point was a “debt
collector” under the FDCPA.
The court will continue to hold the Doc. 64 motion of plaintiff to certify
class in abeyance until it decides the renewed dispositive motions.
V. CERTIFICATION UNDER 28 U.S.C. §1292(b)
In order to certify a non-final order for interlocutory appeal, the court
must find that: (1) the order involves a controlling question of law; (2) there is
substantial ground for difference of opinion as to the controlling question of
law; and (3) an immediate appeal has the potential to materially advance the
ultimate termination of the litigation. See Katz v. Carte Blanche Corp., 496
F.2d 747, 753-54 (3d Cir. 1974), cert. denied, 419 U.S. 885, 95 S.Ct. 152
(1974); Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., 2011
WL 1044864, *2 (E.D.Pa. March 23, 2011). For the reasons set forth in the
instant Memorandum as well as the Order that will issue simultaneously with
this Memorandum, the court finds that each of the three elements is satisfied.
As such, the court finds that certification pursuant to §1292(b) is appropriate
in this case.
An appropriate order will issue.
s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge
DATE: November 16, 2017
O:\Mannion\shared\MEMORANDA - DJ\CIVIL MEMORANDA\2013 MEMORANDA\13-2748-01 new date.wpd
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