Carr v. Northland Group, Inc. et al (TV2)

Filing 9

MEMORANDUM AND OPINION as set forth in following order.Signed by District Judge Thomas A Varlan on 12/11/12. (ABF)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
CHERALEE A. CARR,

)
)
Plaintiff,
)
)
v.
)
)
NORTHLAND GROUP, INC.,
)
SHERMAN FINANCIAL GROUP, LLC,
)
LVNV FUNDING, LLC, and
)
RESURGENT CAPITAL SERVICES, L.P., )
)
Defendants.
)

No.: 3:12-CV-378
(VARLAN/SHIRLEY)

MEMORANDUM OPINION
This case alleging claims under the Fair Debt Collection Practices Act (“FDCPA”)
is before the Court on defendants’ Joint Motion to Dismiss [Doc. 3], to which plaintiff has
responded [Doc. 6] and defendants have replied [Doc. 7]. The Court has carefully considered
the relevant pleadings and the matter is now ripe for determination. For the reasons set forth
below, the defendants’ motion to dismiss will be GRANTED.
I.

Background1
This case arises from defendants’ alleged attempts to collect a credit card debt owed

by plaintiff Cheralee A. Carr to Citibank [Doc. 1 at ¶ 9]. Defendants Sherman Financial
Group, LVNV Funding, LLC, and Resurgent Capital Services, LLP (collectively referred to

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For the purposes of a motion to dismiss, the Court takes plaintiff’s factual allegations as
true. See Erickson v. Pardus, 551 U.S. 89, 94 (2007) (noting that, “when ruling on a defendant’s
motion to dismiss, a judge must accept as true all of the factual allegations contained in the
complaint” (citations omitted)).

as “the Sherman defendants”) are affiliated companies that operate as a debt buying
enterprise [Id. at ¶ 11]. The Sherman defendants are engaged in the business of purchasing
charged-off consumer debts and attempting to collect them from consumers [Id. at ¶ 15].
After plaintiff’s alleged debt was in default, it was consigned, sold, or otherwise transferred
to defendants for collection [Id. at ¶ 10]. Defendant Northland Group, Inc. (“Northland”) is
regularly engaged in the collection of consumer debts owed or due or asserted to be owed or
due another [Id. at ¶ 18].
On August 29, 2011, defendant Northland sent a collection letter to plaintiff, a copy
of which is attached to the Complaint as Exhibit 1, which was the “initial communication”
by Northland with plaintiff in connection with the collection of the debt [Id. at ¶¶ 19, 24, Ex.
1]. The August 29, 2011 letter states that defendant LVNV Funding, LLC, is the current
owner of plaintiff’s debt and the balance due is $4,903.89 [Id. at ¶ 21, Ex. 1]. The August
29, 2011 letter further states in part:
LVNV Funding, LLC, the current creditor of your account has assigned the
above referenced account to Northland Group, Inc. for collection. As of the
date of this letter, you owe $4,903.89. Because of interest that may vary from
day to day, the amount due on the day you pay may be greater. Hence, if you
pay the amount shown above, an adjustment may be necessary after we receive
your check, in which event we will inform you before depositing the check for
collection. For further information, write the undersigned or call (866) 6484513 ext. 3310.
[Id. at ¶ 22, Ex. 1]. The second page of the August 29, 2011 letter contains the following
privacy notice on behalf of the Sherman defendants:
Information We May Collect. The Sherman Companies may collect the
following personal information: (1) information that we receive from your
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account file at the time we purchase or begin to service your account, such as
your name, address, social security number, and assets; (2) information that
you may give us through discussion with you, or that we may obtain through
your transactions with us, such as your income and payment history; (3)
information that we receive from consumer reporting agencies, such as your
creditworthiness and credit history, and (4) information that we obtain from
other third party information providers, such as public records and databases
that contain publicly available data about you, such as bankruptcy and
mortgage filings. All of the personal information that we collect is referred to
in this notice as “collected information.”
***
Sharing Collected Information with Affiliates. From time to time, the
Sherman Companies may share collected information about customers and
former customers with each other in connection with administering and
collecting accounts to the extent permitted under the Fair Debt Collection
Practices Act.
Sharing Collected Information with Third Parties. The Sherman
Companies do not share collected information about customers or former
customers with third parties, except as permitted in connection with
administering and collecting accounts under the Fair Debt Collection Practices
Act.
[Id. at ¶ 34, Ex. 1]. The plaintiff did not pay the debt within 5 days of this initial
communication [Id. at ¶ 27].
On October 14, 2011, defendant Resurgent Capital Service, L.P. (“Resurgent”) sent
a collection letter to plaintiff which identifies the previous creditor as Citibank, the current
creditor as LVNV Funding LLC, and the balance as $4,975.90. The October 14, 2011 letter
also states in part:
This letter is in response to your questions regarding the status of the above
referenced account. The current balance reflected on this account is
$4,975.90. This account was acquired from Citibank on 4/5/2006.

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Should you desire to pay off the account in full, you should contact us at 1888-665-0374 to determine the payoff balance as interest, payments, credits,
fees, and/or other permissible charges can continue to cause your account
balance to vary from day to day.
[Id. at ¶¶ 25–26, Ex. 2]. The second page of the October 14, 2011 letter contains a nearly
identical privacy notice as that contained in the August 29, 2011 letter [Id., Ex. 2].
II.

Analysis
A.

Standard of Review

Federal Rule of Civil Procedure 8(a)(2) sets out a liberal pleading standard, Smith v.
City of Salem, 378 F.3d 566, 576 n.1 (6th Cir. 2004), requiring only “‘a short and plain
statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the
[opposing party] fair notice of what the . . . claim is and the grounds upon which it rests,’”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)). Detailed factual allegations are not required, but a party’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions.” Twombly, 550 U.S. at 555. “[A] formulaic recitation of the elements of a
cause of action will not do,” nor will “an unadorned, the-defendant-unlawfully-harmed-me
accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In deciding a Rule 12(b)(6) motion to dismiss, a court must construe the complaint in
the light most favorable to the plaintiff, accept all factual allegations as true, draw all
reasonable inferences in favor of the plaintiff, and determine whether the complaint contains
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at

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570; Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (citation omitted). “A claim
has facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. “Determining whether a complaint states a plausible claim for relief will
[ultimately] . . . be a context-specific task that requires th[is Court] to draw on its judicial
experience and common sense.” Id. at 679.
In reviewing a claim under the FDCPA, the Court must use the “least sophisticated
consumer” standard to determine whether a debt collector has used deceptive or misleading
language. Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 172 (6th Cir. 2011). This
is an objective test that asks whether there is a reasonable likelihood that an unsophisticated
consumer who is willing to consider carefully the contents of a communication might yet be
misled by them. Id.
B.

Written Notice Containing the Amount of the Debt

Plaintiff asserts that the August 29, 2011 letter violated the FDCPA in several ways.
First, plaintiff alleges that the August 29, 2011 letter, as the “initial communication”
regarding the debt, “failed to correctly inform Plaintiff of the applicable interest rate, and the
letter did not expressly state as of what date that amount is due or what impact payment of
the stated amount would have on the consumer’s obligation to pay later-accruing interest”
[Doc. 1 at ¶ 28].

Plaintiff further alleges that “[w]ithin five days after the initial

communication by Defendant Northland with Plaintiff in connection with collection of the
debt, Defendant Northland failed to send Plaintiff a written notice containing the amount of
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the debt that Defendant Northland was attempting to collect, in violation of 15 U.S.C. §
1692g(a)(1)” [Doc. 1 at ¶ 29]. Defendants argue that this claim is “specious” because the
August 29, 2011 letter clearly communicates the amount due on the date of the letter and the
letter contains the “safe harbor” language approved in Miller v. McCalla, Raymer, Padrick,
Cobb, Nichols & Clark, L.L.C., 214 F.3d 872, 876 (7th Cir. 2000)2 [Doc. 4 at pp. 6–7].
The FDCPA requires:
Within five days after the initial communication with a consumer in
connection with the collection of any debt, a debt collector shall, unless the
following information is contained in the initial communication or the
consumer has paid the debt, send the consumer a written notice containing (1)
the amount of the debt... .
15 U.S.C. § 1692g(a)(1). It is undisputed that defendants did not send plaintiff a subsequent
communication within 5 days of the August 29, 2011 letter. The question then is whether
the August 29, 2011 letter contained “the amount of the debt,” thus eliminating the need for
another communication within 5 days. The Court finds that the August 29, 2011 letter
clearly states the amount due as of the date of the letter: “As of the date of this letter, you

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In Miller, the Seventh Circuit created a “safe harbor” formula for compliance with the
“amount of the debt” provision of the FDCPA in cases where the amount varies from day to day.
214 F.3d at 876. According to Miller, the following statement satisfies the debt collector’s duty to
state the amount of the debt: “As of the date of this letter, you owe $___[the exact amount due].
Because of interest, late charges, and other charges that may vary from day to day, the amount due
on the day you pay may be greater. Hence, if you pay the amount shown above, an adjustment may
be necessary after we receive your check, in which event we will inform you before depositing the
check for collection. For further information, write the undersigned or call 1-800-[phone number].”
The Miller court concluded that a debt collector who uses the safe harbor language, which is very
close to the language used in the August 29, 2011 letter in this case, will have discharged his duty
to state clearly the amount due as a matter of law because “[n]o reasonable person could conclude
that the statement that we have drafted does not inform the debtor of the amount due.” Id.
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owe $4,903.89” [Doc. 1, Ex. 1]. However, the letter further states, “[b]ecause of interest that
may vary from day to day, the amount due on the day you pay may be greater” [Id.]. Plaintiff
argues that this language could be interpreted by the least sophisticated consumer as
attempting to collect additional amounts above the balance due. Because plaintiff received
no follow-up communication concerning the amount of the debt within 5 days of the August
29, 2011 letter, plaintiff contends that defendants violated section 1692g(a)(1) [Doc. 6 at p.
13]. The undersigned disagrees.
As noted by another member of this Court:
Some courts have held that a validation notice fails to satisfy the statute unless
it states the total amount due as of the date the letter is sent and also discloses
whether the amount of the debt will increase due to interest.... [O]ther courts
have held that a validation notice satisfies the statute if it states the total
amount of the debt (including interest and any other charges) as of the date the
letter is sent.
King v. AllianceOne Receivables Management, Inc., 2012 WL 4758220 at *2 (E.D. Tenn.
Oct. 5, 2012) (J. Jordan) (quoting Jones v. Midland Funding, LLC, 755 F. Supp. 2d 393, 397
(D. Conn. 2010)); Ivy v. Nations Recovery Center, Inc., 2012 WL 2049387 at **1–2 (E.D.
Tenn. June 6, 2012) (J. Jordan) (same). “Under either of these approaches, [Northland]
sufficiently disclosed the amount of the debt.” King, 2012 WL 4758220 at *2. The August
29, 2011 letter clearly states the total amount due as of the date of the letter and further states
that the total amount may increase “because of interest.” “The common sense reading of the
letter is that the balance is accurate as of the date the letter is written,” Williams v. OSI Educ.
Servs., Inc., 505 F.3d 675, 679 (7th Cir. 2007), but that the amount due may increase

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“because of interest that may vary from day to day” [Doc. 1, Ex. 1]. Even to an
unsophisticated consumer, the language conveys that the total amount due may be more than
the amount due as of the date of the letter and the consumer should contact Northland for
further information. The Court finds that defendants complied with the requirements of 15
U.S.C. § 1692g(a)(1) and plaintiff cannot plausibly state a claim for failure to state the
amount of the debt.
C.

False Representation of the Amount of the Debt

Plaintiff next claims that the August 29, 2011 letter was “a false, deceptive, and
misleading representation of the amount of the debt . . . in violation of 15 U.S.C. §
1692e(2)(A), which is the use of a false, deceptive, and misleading representation or means
in connection with collection of the debt to collect or attempt to collect the debt, in violation
of 15 U.S.C. §§ 1692e and 1692e(10), and an unfair means to collect or attempt to collect the
alleged debt, in violation of 15 U.S.C. § 1692f” [Doc. 1 at ¶ 30]. In response, defendants
argue that the August 29, 2011 letter clearly stated the amount due and provided the safe
harbor language from Miller, 214 F.3d at 876 [Doc. 4 at p. 8].
Section 1692e of the FDCPA provides:
A debt collector may not use any false, deceptive, or misleading representation
or means in connection with the collection of any debt. Without limiting the
general application of the foregoing, the following conduct is a violation of
this section: . . .(2) the false representation of (A) the character, amount, or
legal status of any debt; . . . (10) the failure to disclose in the initial written
communication with the consumer and, in addition, if the initial
communication with the consumer is oral, in that initial oral communication,
that the debt collector is attempting to collect a debt, and that any information

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obtained will be used for that purpose, and the failure to disclose in subsequent
communications that the communication is from a debt collector, . . . .
15 U.S.C. § 1692e. Section 1692f states in part, “A debt collector may not use unfair or
unconscionable means to collect or attempt to collect any debt.” 15 U.S.C. § 1692f.
Plaintiff argues that the same facts asserted as a violation of section 1692g(a)(1),
discussed supra, also state a claim under section 1692e(2)(A). “By failing to state the total
amount due, including additional interest, in the August 29, 2011 collection letter, Defendant
Northland made a false, deceptive, and misleading representation of the amount of the debt,
in violation of 15 U.S.C. § 1692e(2)(A)” [Doc. 6 at pp. 13-14]. In support of this argument,
plaintiff relies on another opinion from this district, Stonecypher v. Finkelstein Kern
Steinberg & Cunningham, 2011 WL 3489685 (E.D. Tenn. Aug. 9, 2011) (J. Mattice).
In Stonecypher, the plaintiff received two collection letters, approximately 6 months
apart, stating that he owed a debt of $1,622.42. Attached to the second collection letter were
two bank statements which stated two different amounts of debt – $1,707.18 and $1,749.77
– and showed that the balance was incurring interest at a rate of 29.99%. The plaintiff then
was served with a civil warrant stating that the amount of debt due was $1,622.42 plus
interest at a contract rate of 10%, applicable attorneys fees, and court costs. Id. at *1. Given
the multiple communications with varying amounts and interest rates, Judge Mattice
concluded that the plaintiff had plausibly alleged a claim that the language was false,
deceptive, or misleading as to the amount of the debt in violation of 15 U.S.C. § 1692e(2)(A).
Id. at *6.

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In contrast to the facts presented in Stonecypher, the August 29, 2011 letter did not
falsely represent the amount of the debt. As discussed above, the letter plainly stated the
amount due as of the date of the letter and that the amount may increase “[b]ecause of
interest that may vary from day to day” [Doc. 1, Ex. 1]. The August 29, 2011 letter was not
false, deceptive, or misleading. Thus, plaintiff has failed to state a plausible claim for
violation of 15 U.S.C. § 1692e(2)(A) or § 1692e(10).
The Court also finds that the complaint contains no additional allegations of any acts
which constitute an “unfair or unconscionable means to collect or attempt to collect any
debt” in violation of 15 U.S.C. § 1692f. Instead, the complaint only summarily claims that
the previously complained-of conduct – that is, the alleged failure to state the amount due
and provide specifics about other charges, fees, or interest on the debt – is also an unfair
means to collect a debt [Doc. 1 at ¶ 30]. This allegation is a conclusion, not a plausible
allegation of fact. The plaintiff’s failure to support this conclusory allegation with any
additional factual allegations dooms her claim under section 1692f. See Chalik v. Westport
Recovery Corp., 677 F. Supp. 2d 1322, 1330 (S.D. Fla. 2009) (“a claim of a violation of
Section 1692f is deficient if it ‘does not identify any misconduct beyond that which Plaintiffs
assert violate other provisions of the FDCPA.’”) (quoting Foti v. NCO Fin. Sys. Inc., 424 F.
Supp. 2d 643, 667 (S.D.N.Y. 2006)); Taylor v. Heath W. Williams, L.L.C., 510 F. Supp. 2d
1206, 1217 (N.D. Ga. 2007) (“Her failure to specifically identify how this conduct was also
unfair or unconscionable under section 1692f warrants dismissal of this claim”).

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D.

Privacy Notice Allegations

Plaintiff alleges that the privacy notice included with the August 29, 2011 letter was
misleading and deceptive because the least sophisticated consumer would believe “that third
parties may be contacted and asked to provide information concerning the Plaintiff other than
‘location information’” and “that Defendants may provide ‘nonpublic personal information’,
including the fact that Plaintiff allegedly owes a debt to Defendant LVNV, to third parties
outside the list enumerated by the FDCPA” [Doc. 1 at ¶¶ 38–40]. Thus, plaintiff claims that
the privacy notice is misleading and deceptive in violation of 15 U.S.C. §§ 1692e, 1692e(5)
and 1692e(10), and is an unfair means to collect or attempt to collect the debt in violation of
15 U.S.C. § 1692f [Id. at ¶ 42].
As noted above, 15 U.S.C. § 1692e prohibits “any false, deceptive, or misleading
representation or means in connection with the collection of any debt.” Subsection (5)
prohibits “[t]he threat to take any action that cannot legally be taken or that is not intended
to be taken.” 15 U.S.C. § 1692e(5). Subsection (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.” 15 U.S.C. § 1692e(10). As also noted above, section
1692f prohibits the use of “unfair or unconscionable means to collect or attempt to collect
any debt.” 15 U.S.C. § 1692f.
The sections of the privacy notice of which plaintiff complains are entitled
“Information We May Collect,” “Sharing Collected Information with Affiliates,” and

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“Sharing Collected Information with Third Parties” [Doc. 1 at ¶ 34, Ex. 1].3 Under
“Information We May Collect,” the privacy notice describes the following types of personal
information that the Sherman Companies may collect:
(1) information that we receive from your account file at the time we purchase
or begin to service your account, such as your name, address, social security
number, and assets; (2) information that you may give us through discussion
with you, or that we may obtain through your transactions with us, such as
your income and payment history; (3) information that we receive from
consumer reporting agencies, such as your creditworthiness and credit history,
and (4) information that we obtain from other third party information
providers, such as public records and databases that contain publicly available
data about you, such as bankruptcy and mortgage filings.
[Doc. 1, Ex. 1]. Plaintiff appears to claim that this part of the privacy notice “misleads the
least sophisticated consumer into believing that third parties may be contacted and asked to
provide information concerning the Plaintiff other than ‘location information’” [Doc. 1 at ¶
39]. By the plain language of the notice, the only information the defendants may obtain
from third parties, as opposed to information from the account file or from the plaintiff, is
information from consumer reporting agencies and publicly available information. Thus, the
only third party from whom the defendants may obtain information is a consumer reporting
agency, a communication which is specifically permitted by the FDCPA. Section 1692c(b)
permits a debt collector to communicate with “a consumer reporting agency if otherwise
permitted by law.” 15 U.S.C. § 1692c(b). Further, as defendants point out, the Fair Credit

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As defendants have correctly noted in their briefs [Doc. 4 at p. 10, Doc. 7 at p. 3], plaintiff
has misquoted the sections of the privacy notice in her complaint and in her response to the motion
to dismiss. Therefore, the Court has relied on the actual language contained in the privacy notice
of the August 29, 2011 letter attached to the complaint throughout this opinion.
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Reporting Act, 15 U.S.C. § 1681b(a), permits a consumer reporting agency to provide a
consumer report to a party attempting to collect a consumer debt. Therefore, the notice to
plaintiff that defendants may collect information which they were legally permitted to obtain
is not false, deceptive, or misleading, or a threat to take any action that cannot legally be
taken in violation of 15 U.S.C. §§ 1692e, 1692e(5), or 1692e(10).
Under the section “Sharing Collected Information with Affiliates,” the privacy notice
states that “the Sherman Companies may share collected information about customers and
former customers with each other in connection with administering and collecting accounts
to the extent permitted under the Fair Debt Collection Practices Act” [Doc. 1, Ex. 1]. The
“Sharing Collected Information with Third Parties” section of the privacy notice advises that
the “Sherman Companies do not share collected information about customers or former
customers with third parties, except as permitted in connection with administering and
collecting accounts under the Fair Debt Collect Practices Act” [Id.]. Plaintiff alleges that this
“misleads the least sophisticated consumer into believing that Defendants may provide
‘nonpublic personal information,’ including the fact that Plaintiff allegedly owes a debt to
Defendant LVNV, to third parties outside the list enumerated by the FDCPA” [Doc. 1 at ¶
40]. However, this is not what the privacy notice says. As defendants argue, plaintiff’s
claims are based on a misstatement of the actual language of the privacy notice. The privacy
notice clearly states that, consumer information will be shared with affiliates and third parties
only “as permitted in connection with administering and collecting accounts under the Fair
Debt Collection Practices Act.” Thus, defendants have not threatened to communicate with
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third parties outside those permitted by the FDCPA as alleged; they have stated they will do
the opposite. See Veerhusen v. Capital Mgmt. Servs., LP, 2010 WL 8019878 at *5 (D. Neb.
Jan. 29, 2010) (“a statement that is not misleading or deceptive on its face . . . requires no
extrinsic evidence to determine whether it might mislead or deceive unsophisticated, but
reasonable, consumers”). The provisions on sharing collected information are not false,
deceptive, or misleading or a threat to take any action that cannot legally be taken in violation
of 15 U.S.C. §§ 1692e, 1692e(5), or 1692e(10).
Plaintiff also alleges that, if false, “the statement that Defendant LVNV
communicates, in connection with collection of the debt, with third parties outside of the
parties enumerated under the FDCPA . . . is misleading and deceptive in violation of the
FDCPA . . . and is an unfair means to collect or attempt to collect the alleged debt in
violation of 15 U.S.C. § 1692f” [Doc. 1 at ¶ 42]. As noted above, the privacy notice does not
state that defendant LVNV will communicate with third parties outside of those enumerated
under the FDCPA; it states that defendants will only communicate with third parties as
permitted by the FDCPA. Because the statement is not misleading or deceptive, it is also not
an unfair means to collect a debt in violation of 15 U.S.C. § 1692f. As with the previously
discussed allegations, the plaintiff’s failure to support this conclusory allegation with any
additional factual allegations dooms her privacy notice claim under section 1692f. See
Chalik, 677 F. Supp. 2d at 1330 (“a claim of a violation of Section 1692f is deficient if it
‘does not identify any misconduct beyond that which Plaintiffs assert violate other provisions
of the FDCPA.’”) (quoting Foti, 424 F. Supp.2d at 667); Taylor, 510 F. Supp. 2d at 1218
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(“Her failure to specifically identify how this conduct was also unfair or unconscionable
under section 1692f warrants dismissal of this claim”).
E.

Respondeat Superior Liability

Finally, plaintiff alleges that the Sherman defendants are liable via the doctrine of
respondeat superior for the FDCPA violations committed by defendant Northland [Doc. 1
at ¶ 47]. Defendants argue that because plaintiff has not stated an FDCPA claim, there can
be no respondeat superior liability of the Sherman defendants. Plaintiff has not responded
to this argument or provided further support for this claim. Accordingly, because the Court
has found that plaintiff has failed to state a claim for violation of the FDCPA, the Court
further finds that plaintiff cannot plausibly state a claim for respondeat superior liability.
III.

Conclusion
For all the reasons set forth above, the Court finds that plaintiff has failed to plausibly

state a claim for relief under the Fair Debt Collection Practices Act. Accordingly, the
defendants’ motion to dismiss [Doc. 3] will be GRANTED and this case will be dismissed.
An appropriate order will be entered.
ORDER ACCORDINGLY.

s/ Thomas A. Varlan
CHIEF UNITED STATES DISTRICT JUDGE

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