Guevara v. Constar Financial Services, LLC
Filing
27
MEMORANDUM (Order to follow as separate docket entry)For the reasons discussed above, Defendants Motion for Judgment on the Pleadings (Doc. 12) is DENIED. An appropriate Order is filed simultaneously with this Memorandum. Signed by Honorable Richard P. Conaboy on 6/14/18. (cc)
UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
LEONIDES GUEVARA,
:
:CIVIL ACTION NO. 3:17-CV-2282
Plaintiff,
:
:(JUDGE CONABOY)
v.
:
:
CONSTAR FINANCIAL SERVICES, LLC,
:
:
Defendant.
:
:
_________________________________________________________________
MEMORANDUM
Defendant’s Motion for Judgment on the Pleadings (Doc. 12) is
pending before the Court.
In its supporting brief, Defendant
contends it is entitled to judgment in its favor on Plaintiff’s
Fair Debt Collection Practices Act (“FDCPA”) action because
Plaintiff’s theory of the case is not tenable.
(Doc. 12-1 at 1.)
Specifically, Defendant maintains that it correctly stated the
amount due on the account as of the date of its letter to Plaintiff
and Plaintiff’s theory that the actual amount claimed on the debt
should have been less because a partial refund would eventually be
received by the creditor at a later date is without merit.
(Id.)
For the reasons discussed below, the Court concludes Defendant’s
motion is properly denied.
I.Background
1
In January 2015, Plaintiff purchased a vehicle on credit and
1
Given that the relevant legal standard requires the Court
to accept allegations in Plaintiff’s Complaint (Doc. 1) as true,
see, e.g., Zimmerman v. Corbett, 873 F.3d 414, 417-18 (3d Cir.
2017), background facts are derived from Plaintiff’s Complaint
(Doc. 1).
the purchase money loan (“the Account”) is a “debt” as the term is
defined in the FDCPA, 15 U.S.C. § 1925a(5).
(Doc. 1 ¶ 10.)
The
original lender sold the Account to Hyundai Motor Finance
(“Hyundai”), and Hyundai identified the Account by a number ending
in 4849.
(Id. ¶ 11.)
Eventually Plaintiff stopped making payments and Hyundai
declared a default and repossessed the vehicle.
(Id. ¶ 12.)
balance of the Account at the time was $22,878.56.
The
(Id. § 13.)
After Hyundai sold the vehicle, the deficiency balance was
$13,377.23.
(Id. ¶ 14.)
On November 1, 2016, Hyundai referred the Account to Defendant
Constar for collection.
(Id. ¶ 15.)
Eight days later, Hyundai
reviewed the Account and determined that the balance reported to
Defendant had been overstated by $1,820.67 because the deficiency
calculated did not address three refunds Hyndai was entitled to
receive: $1,123.50 for an extended warranty; $519.55 for gap
insurance; and $177.62 for a product related to the vehicle’s
tires.
(Id. ¶¶ 16, 17.)
In a letter which was an attempt to collect a debt from
Defendant Constar to Plaintiff dated December 11, 2016, the “Total
Due” was stated to be $13,377.23.
(Id. ¶¶ 21, 23, 24; Doc. 1-2 at
2.)
Hyundai received the credit by January 23, 2017.
(Id. ¶ 26.)
Defendant Constar held the Account for collection until March 17,
2
2017, and did not take action to change the information it had
provided to Plaintiff.
(Id. ¶ 27.)
In the Complaint filed on December 11, 2017, Plaintiff avers
that Defendant violated the FDCPA, 15 U.S.C. § 1692e(2)(A) and
(10), and § 1692g(a)(1).
(Id. ¶ 28.)
II. Discussion
A.
Legal Standard
“A motion for judgment on the pleadings based on a defense
that Plaintiff has failed to state a claim is analyzed under the
same standards that apply to a Rule 12(b)(6) motion.”
Hafeez, 226 F.3d 247, 249 (3d Cir. 2000).
Allah v. Al-
“A motion for judgment
on the pleadings should be granted if the movant establishes that
‘there are no material issues of fact, and he is entitled to
judgment as a matter of law.’”
Zimmerman v. Corbett, 873 F.3d 414,
417 (3d Cir. 2017) (quoting Sikirica v. Nationwide Ins. Co., 416
F.3d 214, 220 (3d Cir. 2005)).
“In considering a motion for
judgment on the pleadings, a court must accept all of the
allegations in the pleadings of the party against whom the motion
is addressed as true and draw all reasonable inferences in favor of
the non-moving party.”
B.
Zimmerman, 873 F.3d at 417-18.
Defendant’s Motion
Defendant contends it is entitled to judgment on the pleadings
because it correctly stated the amount due ($13,377.23) in the
December 11, 2016, letter to Plaintiff.
3
(Doc. 12-1 at 3.)
Noting
that each purported violation of the FDCPA is premised on the
alleged false amount claimed (id.),
Defendant elaborates that
Plaintiff’s own timeline shows that Defendant correctly stated the
amount due on the Account at the time the letter was sent in that
Hyundai did not receive a partial refund of the amount due on the
Account until January 23, 2017.
(Doc. 12-1 at 4.)
Alternatively,
Defendant argues that even if the amount stated on the letter was
incorrect, it is entitled to judgment on the pleadings because it
properly relied on the information provided by the creditor and it
did not need to conduct an independent investigation of the amount
due.
1.
(Id. at 5.)
Relevant FDCPA Provisions
As set out above, Plaintiff claims that Defendant specifically
violated three sections of the FDCPA: 15 U.S.C. § 1692e(2)(A) and
(10), and § 1692g(a)(1).
(Doc. 1 ¶ 28.)
In general, the Court of
Appeals for the Third Circuit has explained that
Congress made its purpose in enacting the
FDCPA explicit: “to eliminate abusive debt
collection practices by debt collectors, to
insure that those debt collectors who refrain
from using abusive debt collection practices
are not competitively disadvantaged, and to
promote consistent State action to protect
consumers against debt collection abuses.”
15 U.S.C. § 1620(e).
Allen ex rel. Martin v. LsSalle Bank, N.A., 629 F.3d 364, 367 (3d
Cir. 2011).
The FDCPA is a remedial statute and its language is to
be construed broadly to effect its purpose.
4
Brown v. Card Serv.
Ctr., 464 F.3d 450, 453 (3d Cir. 2006) (citing Hamilton v. United
Healthcare of La., 310 F.3d 385, 392 (5th Cir. 2002); Stroh v.
Director, OWCP, 810 F.2d 61, 63 (3d Cir. 1987)).
Noting a general
consensus on the issue, Allen stated “[t]he FDCPA is a strict
liability statute to the extent it imposes liability without proof
of intentional violation.
See § 1692k.”
629 F.3d at 368 & n.7
(citations omitted).
The three subsections at issue here relate to debt collectors’
representation to debtors.
Subsection 1692e(2) prohibits a debt
collector’s “false representation of” either “the character,
amount, or legal status of any debt.”
Subsection 1692e(10)
prohibits “[t]he use of any false representation or deceptive means
to collect or attempt to collect any debt or to obtain information
concerning a consumer.”
Subsection 1692(g)(1) addresses the debt
collector’s obligation to apprise the consumer in writing of “the
amount of the debt.”
2.
Accurate Statement of Amount of Debt
Defendant asserts it is entitled to judgment in its favor
because it stated the correct amount due at the time it sent the
letter to Plaintiff, adding that “Plaintiff’s apparent claim that a
debt collector is required to give credit of anticipated, nonguaranteed payments on an Account is meritless.”
(Doc. 12-1 at 4.)
Plaintiff responds that “Defendant’s argument would allow it to
demand payments of inflated balances, and runs contrary to the
5
remedial purposes of the FDCPA.”
omitted).)
(Doc. 20 at 11 (citation
The Court concludes that Defendant has not shown there
are no material issues of fact regarding the correctness of its
statement concerning the amount due on the Account balance.
See
Zimmerman, 873 F.3d at 417.
Addressing the amount due stated in a letter from a debt
collector to a debtor, the Third Circuit Court stated in McLaughlin
v. Phelan, Hallinan & Schmieg, LLP, 756 F.3d 240, 246 (3d Cir.
2014), “[i]f the amount actually owed as of that date was less than
the amount listed, then, construing the facts in the light most
favorable to [the plaintiff] as we must when reviewing the
dismissal under Rule 12(b)(6), . . . [the plaintiff] has stated a
claim that the letter misrepresents the amount of the debt in
violation of § 1692e(2) and (10).”
Here Defendant does not dispute that the creditor knew of the
refunds due before Defendant sent the December 11, 2016, letter.
The parties agree that the $1,820.67 refund would reduce the amount
Plaintiff owed from $13,377.23 to $11,566.56.
Significantly, the
parties characterize the situation differently: Defendant stresses
that the creditor’s altered calculation based on refunds not
factored into the
$13,377.23 amount were “anticipated, not
guaranteed payments” (Doc. 12-1 at 4); Plaintiff says the creditor
“knew that a credit would be forthcoming” for the refunds as
determined on November 9, 2016 (Doc. 20 at 11), refunds which the
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Complaint states the creditor determined it “was entitled to
receive” (Doc. 1 ¶ 16).
From the pleadings, the Court does not know what Defendant
knew as of the date it sent the letter, but that is beside the
point in this strict liability statute.
See Allen, 629 F.3d at368.
The central question here is what was “the amount actually owed” as
of the date of the letter.
See McLauglin, 756 F.3d at 246.
Given
the fact of Hyundai’s knowledge of refunds owed at the time
Defendant sent the letter to Plaintiff, the question becomes what
would Hyundai have identified as the amount owed by Plaintiff on
December 11, 2016.
In other words, as of December 11, 2016, when
identifying Plaintiff’s deficiency balance, would Hyundai factor in
the amount it had determined it was owed in refunds when it
reviewed Plaintiff’s account in early November 2016?
Construing
the facts in the light most favorable to Plaintiff as we must, see
Zimmerman, 873 F.3d at 417-18, and considering the remedial nature
of the statute, Brown, 464 F.3d at 453, the Court concludes the
question cannot be answered based on the pleadings.2
2
In his responsive brief, Plaintiff first asserts that
Defendant did not properly state the balance due because it did not
state the amount was subject to change. (Doc. 20 at 1.) Defendant
asserts that the Court should not consider this argument because it
was not raised in the Complaint (Doc. 21 at 1 (citing Commonwealth
of Pa. ex rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 181 (3d
Cir. 1988) (“[I]t is axiomatic that the complaint may not be
amended by the briefs in opposition to a motion to dismiss”)).)
The Court agrees that Plaintiff’s Complaint alleges error on the
basis that a false amount due was stated in the December 11, 2016,
letter. (See Doc. 1 ¶¶ 25, 27.) Based on the determination
7
3.
Defendant’s Reliance on Creditor’s Information
Defendant maintains that even if the amount stated in the
letter was incorrect it was entitled to rely on the information
provided by the creditor and did not need to conduct an independent
investigation of the amount due.
(Doc. 12-1 at 6.)
Plaintiff
agrees that the FDCPA does not require a debt collector to perform
its own investigation into the validity of a debt but “it
nevertheless imposes liability on a debt collector that falsely
represents the amount of the debt.”
(Doc. 20 at 13.)
The Court
concludes Defendant’s argument that it is entitled to judgment on
the pleadings even if the amount stated in the letter was incorrect
is not appropriately decided at this stage of the proceedings.
In support of its assertion that it is entitled to judgment on
the pleadings because it properly relied on information provided by
Hyundai, Defendant cites several district court cases within the
Third Circuit, relying principally on Slanina v. United Recovery
Sys., LP, Civ. A. No. 3:11-CV-1391, 2011 WL 5008367. (Doc. 12-1 at
5; Doc. 21 at 3-6).)
In Slanina, the plaintiff alleged numerous
violations of the FDCPA because the defendant debt collector
demanded payment of $8,052.18 and the plaintiff alleged this was an
regarding the correctness of the stated amount due explained in the
text, further discussion of the merits of Plaintiff’s argument is
not warranted. However, the Court notes that, given the remedial
nature of the statute, it would be troubling if Hyundai would not
have acknowledged refunds it knew it would receive which would
decrease the deficiency balance owed by Plaintiff.
8
attempt to collect a non-existent debt.
2011 WL 5008367, at *1.
There was no dispute that the defendant acted on the basis of
information provided by the creditor and the information was not
accurate.
Id.
The court concluded that defendant’s motion to
dismiss was properly granted because the defendant had no duty to
investigate and verify the debt before it contacted the plaintiff.
Id. at *3.
Slanina supports Defendant’s argument that, even if the amount
owed in the December 2016 letter was incorrect, Defendant did not
violate the FDCPA because it relied on the amount due indicated by
Hyundai when Hyundai referred the Account to Defendant.
at 5; Doc. 21 at 3-6.)
(Doc. 12-1
Plaintiff does not dispute the facts upon
which Defendant’s argument is based (see Doc. 1 ¶¶ 14-15) and does
not aver that Defendant was provided with any additional or
different information from the creditor before Defendant sent the
December 2016 letter.
However, Plaintiff asserts Defendant raises
a bona fide error defense which is a matter for summary judgment.
(Doc. 20 at 17-19 & n.6.)
Slanina determined that the matter could be decided on a
motion to dismiss because the bona fide error defense was not at
issue.
2011 WL 5008367 at *1, 3.
Slanina did not analyze the
broader question framed by the Ninth Circuit Court of Appeals as
“[w]hether a violation of §1692e may be predicated upon conduct
that is neither knowing nor intentional.”
9
Clark v. Capital Credit&
Collection Services, Inc., 460 F.3d 1162, 1174 (9th Cir. 2006).
While Defendant maintains that it cannot be liable under § 1692e(2)
and (10) if the amount in the letter was incorrect because the
inaccuracy was based on information provided by the creditor,
several circuit courts have determined that § 1692e applies even
when a false representation was unintentional.
See, e.g., Clark,
400 F.3d at 1175-76 (citing Turner v. J.V.D.B. & Associates, Inc.,
330 F.3d 991, 995 (7th Cir. 2003); Gearing v. Check Brokerage Corp.,
233 F.3d 469, 472 (7th Cir. 2000); Russell v. Equifax A.R.S., 74
F.3d 30, 33 (2d Cir. 1996)).
After setting out general rules of
statutory construction, Clark explained the rationale supporting
its determination.
Parsing the FDCPA with the aim of
placing § 1692e in its proper context, we
encounter § 1692k(c) which provides:
A debt collector may not be held
liable in any action brought under
the subchapter if the debt
collector shows 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 such
error.
As our colleagues in other circuits have
concluded, this broad language seems to make
the FDCPA a strict liability statute.
. . . .
We agree with the Second and Seventh
Circuits. Requiring a violation of § 1692e
to be knowing or intentional needlessly
10
renders superfluous § 1692k(c). . . . We are
convinced that this reading of the FDCPA is
more in harmony with the remedial nature of
the statute, which requires us to interpret
it liberally.
Clark, 460 F.3d at 1175-76 (internal citations omitted).
As noted above, the Third Circuit has concluded generally that
“[t]he FDCPA is a strict liability statute to the extent it imposes
liability without proof of an intentional violation,” Allen, 629
F.3d at 368, and regularly recognizes the statute’s remedial nature
and a reviewing court’s need to construe it broadly, id. at 367,
McLaughlin, 756 F.3d at 246.
In fact, Allen specifically
emphasized § 1692e’s proscription against “any false, deceptive or
misleading represntation.”
Allen).
629 F.3d at 367 (emphasis added in
Although neither party has cited a Third Circuit case that
squarely addresses a debt collector’s unintentional/unknowing
violation of § 1692e and this Court has not found a case directly
on point, the Court concludes that the approach outlined by the
circuits to have considered the issue is appropriate here.
Further, although McLaughlin addressed the issue of whether a
consumer is “required to seek validation of a debt he or she
believes is inaccurately described in a debt communication as a
prerequisite to filing suit under § 1692e,” 756 F.3d at 248, the
statement “[i]f the amount actually owed as of that date was less
than the amount listed, then . . . [the plaintiff] has stated a
claim that the letter misrepresents the amount of the debt in
11
violation of § 1692e(2) and (10),”
756 F.3d at 246, is indicative
of § 1692e liability arising from an unintentional false statement.
Pursuant to this reading of the FDCPA, “a debt collector’s
false statement is presumptively wrongful under the [FDCPA], see §
1692e(2)(A), even if the speaker is ignorant of the truth; but a
debt collector that exercises care to avoid making false statements
has a defense under § 1692k(c).”
726, 728 (7th Cir. 2004).
Randolph v. IMBS, Inc., 368 F.3d
Pursuant to § 1692k(c), the bona fide
error defense, Clark explained that
[l]ogically, if a debt collector reasonably
relies on the debt reported by the creditor,
the debt collector will not be liable for any
errors. On the other hand, the bona fide
error defense will not shield a debt
collector whose reliance on the creditor’s
representation is unreasonable . . . .
Accord Smith v. Transworld Systems, Inc., 953
F.2d 1025, 1032, (6th Cir. 1992) (finding no
violation because the creditor listed
incorrectly the amount owed when it referred
the debt to the debt collector)[.] . . . This
narrow exception to strict liability is an
affirmative defense, so [the defendant bears]
the burden of proof at summary judgment. Fox
[v. Citicorp Credit Services, Inc., 15 F.3d
1507, 1514 (9th Cir. 1994)].
Clark, 460 F.3d at 1177.
In this scheme, Defendant’s liability is based on wether it
can satisfy the requirements of the bona fide error defense, i.e.,
if the Account balance stated in the December 2016 letter was
incorrect, Defendant has the burden of showing that it reasonably
relied on the creditor’s report of the amount due on the Account.
12
See 15 U.S.C. §1692k(c).
necessary showing.
Defendant has not attempted to make the
Therefore, Defendant’s Motion for Judgment on
the Pleadings (Doc. 12) is properly denied.
III. Conclusion
For the reasons discussed above, Defendant’s Motion for
Judgment on the Pleadings (Doc. 12) is DENIED.
An appropriate
Order is filed simultaneously with this Memorandum.
S/Richard P. Conaboy
RICHARD P. CONABOY
United States District Judge
DATED: June 14, 2018
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