Dudley v. Focused Recovery Solutions, Inc.

Filing 10

MEMORANDUM OPINION AND ORDER granting 5 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Arenda L. Wright Allen on 7/11/17 and filed on 7/12/17. (tbro)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA

Newport News Division

KIMBERLY DUDLEY,
Plaintiff,
Civil No. 4:17-cv-.10

V.

FOCUSED RECOVERY SOLUTIONS, INC.,
Defendant.

MEMORANDUM OPINION AND ORDER

This case arises from Plaintiff Kimberly Dudley's unpaid medical bill of $143.80 and the
attempts to collect that debt undertaken by Defendant Focused Recovery Solutions, Inc.
("Focused Recovery").

Plaintiff filed suit in state court, alleging that Focused Recovery's

collection efforts violated the Fair Debt Collection Practices Act ("FDCPA" or "the Act"), 15

U.S.C. § 1692 et seq. After removing the suit to federal court, Focused Recovery moved to
dismiss the Complaint for failure to state a claim upon which relief can be granted. Because
Plaintiff alleges no falsehood, misrepresentation, unfairness, or unconscionable means within the
ambit of the Act, Plaintiff fails to state a viable claim for relief.

Accordingly, Focused

Recovery's Motion to Dismiss (ECF No. 5) is granted.
1.

BACKGROUND

When ruling on a motion to dismiss for failure to state a claim, courts accept a
complaint's well-pled factual allegations as true, and draw any reasonable inferences in favor of

the plaintiff.

See Wag More Dogs, LLC v. Cozart^ 680 F.3d 359, 365 (4th Cir. 2012).

Accordingly, the Court recites the facts as alleged by Plaintiff. See Compl. (ECF No. 1-1).

On May 20, 2015, Plaintiff received medical services from the Surgery Center of

Chesapeake, incurring $7,554.56 in charges. See Itemization' (ECF Nos. 6-5, 1-1 Exh. E); see
also Compl. ^ 19, She was discharged that same day. See Itemization; see also Compl. ^ 19.
Prior to treatment. Plaintiff signed a document titled "Consent for Treatment, Release of

Information and Financial Responsibility" ("the Agreement"). See Agreement (ECF Nos. 6-1, 11 Exh. A); see also Compl.

19-21. The Agreement provided, inter alia, that "[a]ny unpaid

balance, whether covered by insurance or other benefit, will be subject to a finance charge of 1
[percent] per month, commencing sixty . . . days after the discharge date. This is an annual

percentage rate of 12 [percent]." Agreement at 1 (capitalization omitted). Plaintiff further
"agree[d] to pay all costs of collection including an attorney's fee o[r] collection fee of [30]
percent of the unpaid bill at the time of placement with such attorney or collection agency." Id.
(capitalization omitted).

Plaintiffs health insurer paid for $7,392.36 of the services' cost, in two payments made

on June 16, 2015. See Itemization. This apparently underpaid the insurer's share of the bill by
$18.40. See id. Plaintiffs portion of the surgery's expense, $143.80, also remained outstanding
throughout the summer of 2015. See id. These debts totaled $162.20. See id.
Seeking to collect this outstanding sum, the Surgery Center engaged the debt-collection

services of Focused Recovery. See Compl.

15, 18. Focused Recovery sent Plaintiff a letter

' The Court relies on an unredacted version of the Itemization, which Focused Recovery provided with its
Motion to Dismiss. See Zak v. Chelsea Therapeutics Int'l, Ltd., 780 F.3d 597, 607 (4th Cir. 2015) (holding that
courts can consider documents attached to a defendant's motion to dismiss when "integral to and explicitly relied on
in the complaint, and when the plaintiffs do not challenge [the document's] authenticity.") (internal quotation marks
omitted). Plaintiff also provided a copy of the Itemization, attached as Exhibit E to her Complaint. However,
Plaintiffs version is heavily redacted, rendering it useless.
Moreover, Plaintiffs redactions, paired with her description of the redacted information, render Exhibit E
misleading. Plaintiff explains that she redacted "personal, and otherwise irrelevant medical information . . . from
Exhibit E to protect [her] privacy." Compl. ^ 32 n.2. However, with two exceptions, Plaintiff redacted all payments
and charges to her account—their descriptions, their amounts, and their dates. Compare Itemization (ECF No. 6-5),
with Redacted Itemization (ECF No. 1-1, Exh. E).

dated October 8, 2015 (the "Dunning Letter"), informing her of the debt, seeking payment, and

providing several payment options.

See Dunning Letter (ECF Nos. 6-2, 1-1 Exh. E). The

Dunning Letter lists a balance of $207.61 and states: "Payment in full to this office will stop

further collection action on this account. Make your check or money order payable for $207.61."
Id. The Dunning Letter also provides statutorily required disclosures and advises Plaintiff of her
right to request verification of the debt. See id. Plaintiff responded to the Dunning Letter by

invoking this right. See Verification Request at 1-2 (ECF Nos. 6-3, 1-1 Exh. C).
Focused Recovery provided the requested verification by letter (the "Verification Letter")
dated December 15, 2015. See Verification Letter (ECF Nos. 6-4, 1-1 Exh. D). Enclosed was an

itemized bill printed on the Surgery Center's letterhead (the "Itemization"), which provides:
Figure 1: Itemization Suinmaiy
May 20

Medical Services

$7,554.56

June 16

Insurer Payment I

-$5,932.56

June 16

Insurer Payment 2

-$1,459.80

September 30

Collection Fee Assessed

October 13

Refund of Insurer Payment 2 (from June 16)

October 13

Insurer Payment 3

October 14

Interest Charge to Insurer

October 14

Interest Payment from Insurer

Total Outstanding Balance:

$45.41

$1,459.80
-$1,478.20
$0.31
-$0.31
$189.21

The Itemization reveals that the $189.21 outstanding balance is comprised of $143.80 overdue

for services and a $45.41 collection fee. See id. The $18.40 difference between the unpaid
amounts listed in the Dunning Letter ($207.61) and the Itemization ($189.21) results from an
interim insurer payment. See id. The record is silent regarding whether Focused Recovery

^All dates are in 2015. For clarity, the table re-organizes and streamlines some line items. The table also
omits two line items—an additional insurer payment of $5,932.56 on October 13, 2015, and a refund of that
payment, issued to Plaintiffs insurer that same day.

undertook additional efforts to collect the debt or whether Plaintiff ultimately paid the debt, and,
if so, the amount she paid.
A year later, Plaintiff filed suit in Hampton Circuit Court, alleging Focused Recovery's

methods violated provisions of the Fair Debt Collection Practices Act ("FDCPA"). See Compl.
Tin 50-67. Focused Recovery removed the suit to this Court and moved to dismiss the Complaint

under Federal Rule of Civil Procedure 12(b)(6). See Removal Notice (ECF No. 1); see also Mot.
Dismiss. The Motion is now ripe for resolution by the Court.
II.

LEGAL STANDARD

"To survive a Rule 12(b)(6) motion to dismiss, a complaint must 'state a claim to relief
that is plausible on its face.'" United States ex rel Nathan v. Takeda Pharm. N. Am., Inc., 707
F.3d 451, 455 (4th Cir. 2013) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "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. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more
than a sheer possibility that a defendant has acted unlawfully." Id. "Facts that are 'merely
consistent with' liability do not establish a plausible claim to relief." Takeda Pharm., 707 F.3d

at 455. Rather, the '"[f]actual allegations must be enough to raise a right to relief above the

speculative level,' thereby 'nudg[ing] [plaintiffs] claims across the line from conceivable to
plausible.'" Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 543 (4th Cir. 2013) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (first and second alteration in original).
At this stage, "(1) the complaint is construed in the light most favorable to the plaintiff,

(2) its allegations are taken as true, and (3) all reasonable inferences that can be drawn from the

pleading are drawn in favor of the pleader." 5B Charles A. Wright et al.. Federal Practice
& Procedure § 1357 & n.ll (3d ed.) (collecting cases); accord Wag More Dogs, LLC v.

Cozart, 680 F.3d 359, 365 (4th Cir. 2012). However, courts "will not accept 'legal conclusions

couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.'" Takeda

Pharm., 707 F.3d at 455 (quoting Wag More Dogs, 680 F.3d at 365).
"[A]s a general rule extrinsic evidence should not be considered at the 12(b)(6) stage."

Am. Chiropractic Ass'n v. Trigon Healthcare, Inc., 361 F.3d 212, 234 (4th Cir. 2004).
"Generally, . . . courts are limited to considering the sufficiency of allegations set forth in the
complaint and the 'documents attached or incorporated into the complaint.'" Zak v. Chelsea

Therapeutics Int'l, Ltd, 780 F.3d 597, 606 (4th Cir. 2015); see also Fed. R. Civ. P. 12(d).
However, "when a defendant attaches a document to its motion to dismiss, 'a court may consider

it in determining whether to dismiss the complaint [if] it was integral to and explicitly relied on
in the complaint and [if] the plaintiffs do not challenge its authenticity.'" Am. Chiropractic

Ass'n, 367 F.3d at 234 (quoting Phillips v. LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir. 1999)).
III.

ANALYSIS

Plaintiff alleges four violations of the FDCPA—two premised on allegedly false

representations under § 1692e, and two premised on allegedly unfair or unconscionable
collection efforts under § 1692f See Compl.

50-67. Focused Recovery's Motion argues that

all four claims fail to allege violations of the Act because its communications with Plaintiff were
lawful. Because Plaintiff fails to allege any falsehood, unfairness, or unconscionable means
within the ambit of the Act, she states no claim for relief Accordingly, Focused Recovery's
Motion to Dismiss is granted.

"Congress enacted the FDCPA in 1977 to eliminate abusive debt collection practices."
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010).

The Act

prohibits a variety of such practices, including "us[ing] any false, deceptive, or misleading

representation or means in connection with the collection of any debt," and "us[ing] unfair or

unconscionable means to collect or attempt to collect any debt." 15 U.S.C. §§ 1692e, 1692f.
"Whether a communication is false, misleading, or deceptive in violation of § 1692e is
determined from the vantage of the 'least sophisticated consumer.'"

Russell v. Absolute

Collection Servs., Inc., 162 F.3d 385, 394 (4th Cir. 2014) (quoting United States v. Nat'l Fin.
Servs., Inc., 98 F.3d 131, 136 (4th Cir. 1996)). The Fourth Circuit has "never directly addressed

whether application of the objective least-sophisticated-consumer test to the language of a
dunning letter is a question of law, [but has] assumed that to be the case." Id. at 395.
"A logical corollary of the least sophisticated consumer test is that false, deceptive, and
misleading statements must be material to be actionable." Powell v. Palisades Acquisition XVI,

LLC, 782 F.3d 119, 126 (4th Cir. 2014). "The materiality requirement limits liability under the

FDCPA to genuinely false or misleading statements that 'may frustrate a consumer's ability to
intelligently choose his or her response.'" Id. Therefore, "only misstatements that are important

in the sense that they could objectively affect the least sophisticated consumer's decisionmaking
are actionable." Id.

With these principles, the Court evaluates Plaintiffs four claims, which rely on two core

premises. First, that the Dunning Letter and Verification Letter failed to advise her that interest
was accruing or, alternatively, that interest was waived. Second, that Focused Recovery's

collection fee of $45.41 was unauthorized by law.^

' The Court notes that Plaintiffalleges that these instances violate both § 1692fand § 1692e. However,
"courts use § 1692f to punish conduct that FDCPA does not specifically cover." Lembach v. Bierman, 528 F, App'x
297, 304 (4th Cir. 2013). Therefore, "a § 1692f cause of action may not be based on the 'same alleged misconduct
that undergirds [a] § 1692e claim.'" Biber v. Pioneer Credit Recovery, Inc., No. l:16-cv-804, 2017 WL 118037, at
* 11 (E.D. Va. Jan. 11, 2017) (quoting Lembach, 528 F. App'x at 304).

A.

Plaintiffs Allegations Regarding Accrual or Waiver of Interest on the Debt

Plaintiffs first three claims are premised on her observation that interest charges were

provided for by contract, but went unmentioned in the course of Focused Recovery's collection
efforts. See CompL

50-64. Although the Agreement requires a 12-percent annual finance

charge after a grace period, neither the Dunning Letter nor the Verification Letter references

interest being assessed against Plaintiff.'^ See Agreement at 1; see also Dunning Letter;
Itemization. Because "the Act requires a statement of the debt," any interest due to settle the

account must be included: "[t]he unpaid principal balance is not the debt; it is only a part of the
debt." Miller v. McCalla, Rayner, Padrick, Cobb, Nichols, and Clark, LLC, 214 F.3d 872, 875
(7th Cir. 2000); see also Resp. at 6 (ECF No. 7).

Plaintiff argues that Focused Recovery

inaccurately reported her debt by either (a) failing to disclose interest accruing on her debt, or (b)
failing to disclose that interest charges were waived.

These claims, however, rest on

unwarranted inferences and unsupported legal conclusions.
1.

Plaintiff Fails to State Any Claim Based on the Failure to Disclose
Interest Accruing on Her Debt

The Complaint alleges that interest was accruing on Plaintiffs debt, the Dunning Letter
and Verification Letter omitted that accrued interest, and those communications failed to advise

her that interest would continue to accrue. See Compl. ^ 52-53, 58-59. Plaintiff contends that
by omitting the alleged interest, the communications falsely represented the amount of her debt,
and constituted a deceptive means of collecting her debt. See Compl.

51, 57.

This assertion lacks a factual basis. The Agreement provided that interest would accrue

on an unpaid balance at 12 percent annually, but nothing suggests that Focused Recovery sought
A 310 interest charge was assessed against Plaintiffs insurer on October 14, 2015, which the insurer paid
that same day. See Itemization. Even if this interest charge could be construed as having been assessed against
Plaintiff but paid by her insurer, a 310 misrepresentation is de minimis. Cf. Powell, 782 F.3d at 126 (observing that
"a de minimis misstatement of the total amount owed might not be actionable, although we need not determme the
threshold here"). In either case. Plaintiffs standing to pursue claims premised on this charge is questionable.

to charge Plaintiff any interest. Although her debt could have been accruing undisclosed interest,
this possibility does not satisfy the pleading standard, which requires "allegations plausibly

suggesting (not merely consistent with) [liability]." Bell Atl Corp. v. Twombly, 550 U.S. 544,

557 (2007).

In absence of plausible allegations suggesting that interest was accruing on

Plaintiffs debt, its omission cannot support her claims.^
2.

Plaintiff Fails to State Any Claim Based on Her Alternative Theory
That Focused Recovery Failed to Disclose That Interest Was Waived

In the alternative. Plaintiff alleges that if the Surgery Center had waived its right to

collect interest under their agreement, Focused Recovery had an affirmative obligation to inform
her of that waiver and failed to do so. See id. H54; see also Resp. at 12-13. This omission, she

contends, falsely represented the amount and character of her debt, was a false representation and

deceptive means of attempting to collect her debt, and was an unfair or unconscionable means of
attempting to collect her debt. See Compl.

54, 60, 63. This reasoning ignores the text of the

disputed communications.

Plaintiff asserts that the Act required Focused Recovery to expressly notify her that
interest was waived by stating that it would '"accept payment of the amount set forth in full
satisfaction of the debt.'" Resp. at 13 (quoting McNamee v. Debski & Assocs., No. 8:16-cv2272, 2016 WL 5391396, at *3 (M.D. Fla. Sept 27, 2016)). Focused Recovery did just that.
The Dunning Letter lists a balance of $207.61 and states: "Payment in full to this office will stop
^ Even if Plaintiff has plausibly alleged that interest was continuing to accrue on her debt, failing to
mention the interest was a de minimis misstatement. Plaintiffs debt would have accrued approximately $3.80 in
interest by October 8, 2015, meaning the Dunning Letter would have understated the debt owed by 1.8 percent. By
the December 15 Verification Letter, Plaintiffs account would have accrued approximately $7.00 in interest—an
understatement of 3.6 percent. If Plaintiff chose to continue forgoing payment, she would have incurred
approximately $17.25 in interest charges by July 29, 2016, one year after it began to accrue. This would represent
an 8.4 percent understatement. Such de minimis misstatements would not "frustrate a consumer's ability to
intelligently choose his or her response" and are, therefore, immaterial. Powell, 782 F.3d at 126. Cf. Conteh v.
Shamrock Cmty. Ass'n, Inc., 648 F. App'x 377, 379 (4th Cir. 2016) (holding that overstating debt by $165.02 (10.4
percent) is material). Interest figures were calculated based on the outstanding principal balances, accruing at a 12percent annual rate between July 29, 2015, and the relevant dates.

further collection action on this account. Make your check or money order payable for $207.61."
This fully informed Plaintiff of the amount required to settle her debt. Cf. Avila v. Riexinger &
Assocs.y 817 F.3d 72, 76 (2d Cir. 2016) (holding that a dunning letter must inform a debtor
whether the requested payment will satisfy her debt). If Plaintiff had paid the amount listed, and
Focused Recovery later attempted to collect additional fees and interest, a FDCPA violation

might have occurred.

However, the record is silent as to whether Plaintiff paid her debt.

Therefore, any allegation that paying the listed balance would not have "stop[ped] further
collection action on this account" is speculative.

Focused Recovery's Verification Letter does not discuss the amount due on Plaintiffs

account—so it could not have misrepresented the debt by omitting the language discussed above.
See Verification Letter.

The enclosed Itemization consists of a bill from the Surgery Center

listing charges, credits, and the balance due for Plaintiffs account. See Itemization; see also

Firgue 1, supra.

The bill itself, generated by the Surgery Center, contains no misleading

statements attributable to Focused Recovery.

Moreover, "[v]erification of a debt involves nothing more than the debt collector
confirming in writing that the amount being demanded is what the creditor is claiming is owed."
Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir. 1999). "Consistent with the legislative

history of the FDCPA, verification is only intended to eliminate the problem of debt collectors
dunning the wrong person or attempting to collect debts which the consumer has already paid."
Id. The Verification Letter fulfilled this purpose and fully complied with the law.
Under either of her theories regarding interest. Plaintiff has alleged—^at most—^a failure

to charge her interest. See Compl.

39-42. This is not a cognizable claim under the FDCPA.

See Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871, 875 (7th Cir. 2015).

Moreover, "[i]f [Plaintiff] has a complaint with the manner in which [the Surgery Center]

changed (i.e. reduced) the interest rate, [she] can raise that issue" with the Surgery Center. Id. at
877. But in an FDCPA case, "[t]he district court's inquiry . . . concerns the representations and
collection efforts of. . . the party alleged ... to have committed the FDCPA violations," rather
than third parties' conduct. Id.

Although the insurer was assessed 310 in interest upon paying its untimely share.

Plaintiff incurred no interest charges and nothing in the debt collector's communications
indicated that she would. See Dunning Letter; see also Itemization; Verification Letter. Instead,
the debt collector advised that payment of the outstanding balance would stop collection efforts.
See Dunning Letter. That sum included no interest. See Itemization; see also Figure 1, supra.

Because Plaintiff fails to allege that she was being charged undisclosed interest on the account,

and because she was advised of exactly how much was required to settle her debt, Claims One,

Two, and Three fail to state a claim for rehef.^
B.

Plaintiffs Allegations Regarding the Collection Fee

Focused Recovery also argues that the Complaint fails to allege that it sought an unlawful
collection fee.

The Agreement states that Plaintiff "agrees to pay all costs of collection,

including [a].. . collection fee of [30] percent of the unpaid bill at the time of placement with [a]

collection agency." Agreement at 1. At the time of placement. Plaintiffs account was $162.20
in arrears and 30 percent of that figure is $48.66. See Itemization. Focused Recovery charged
her a collection fee of $45.41, which amounts to a 28-percent fee. See id. Rather than viewing
this $3.25 discount as a windfall. Plaintiff claims that it constitutes an unauthorized collection
fee. See Compl.

54, 61, 65-67.

^ Plaintiff also alleges that including a collection fee that is not allowed by law constitutes an actionable
falsehood. See Compl.
55, 61. Because the Court concludes in Section III.B, iitfra, that Focused Recovery did
not charge an unlawful collection fee, its inclusion in the communications does not constitute a false representation.

10

To the extent Plaintiff argues that the $3.25 discrepancy constituted an unfair or

unconscionable means of collecting a debt, she is mistaken. As a matter of law, a 2-percent
discount on collection fees is not an "unfair" or "unconscionable" debt-collection practice
prohibited by the Act.
Even if this claim were cognizable, Plaintiff fails to allege facts supporting a plausible
inference that the fee was unlawful. She alleges that "[u]pon information and belief, the actual

cost of collection to [Focused Recovery] is neither $45.41 nor [30] percent of the debt at the time
of placement," and argues that the fee "appears to be made up whole cloth." Compl. ^ 48; see
also Resp. at 16. Plaintiff offers no facts regarding the actual cost of collection, rendering the
allegation speculative.

Furthermore, the factual allegations undercut her claims, because the

collection fee charged was less than the contract provided. Nothing unfair was afoot, and any
contrary inference is unwarranted.

See Iqbal, 556 U.S. at 679 ("Determining whether a

complaint states a plausible claim for relief [is] ... a context-specific task that requires the

reviewing court to draw on its judicial experience and common sense."). Therefore, Plaintiff
fails to raise a plausible inference (or even an implausible inference) that the 28-percent fee is
unlawful.
IV.

CONCLUSION

For the foregoing reasons, Focused Recovery's Motion to Dismiss (EOF No. 5) is
GRANTED.
IT IS SO ORDERED.

Arenda^fcr-Wfight Allen

j^
July

t'

United States District Judge
, 2017

Norfolk, Virginia

11