Opinion
No. TTD CV 10 6002096 S
December 14, 2010
MEMORANDUM OF DECISION
The plaintiff, Citibank (South Dakota) N.A., moves to strike the counterclaim of the defendant, Ralph Mazzarella, and certain special defenses.
A motion to strike "admits all the facts well pleaded; it does not admit conclusions or the truth or accuracy of opinions stated in the pleadings." Mingachos v. CBS, Inc., 196 Conn. 91, 108 (1985).
On July 15, 2010, the plaintiff filed the underlying collection claim to recover on a credit card debt allegedly owed to it by the defendant. The first count of the complaint asserts breach of contract, and the second count is based on account stated. Citibank makes the following allegations in its complaint. Citibank and the defendant entered into a credit installment agreement whereby Citibank extended credit to the defendant. Citibank sent to the defendant monthly statements which indicated true accounts of the indebtedness owed by the defendant as a result of the credit extended. The defendant has failed to make payments on the debt.
Although the defendant has failed to comply with Practice Book § 10-51, which required that each special defense be alleged separately rather than as paragraphs within the generic term "special defenses," the court will do its best to tease the special defenses apart and treat each as if separately pleaded.
In his answer, the defendant alleged six special defenses to Citibank's complaint, as well as a counterclaim. In his first special defense, the defendant alleges that Citibank acted recklessly in allowing him to charge the sums claimed in the complaint. In his second special defense, the defendant claims that Citibank improperly stated its annual percentage rate (APR) of the sums advanced. In his third special defense, the defendant claims that Citibank, through neglect and/or by decision, failed to curtail, reduce or rescind his usage of credit. In his fourth special defense, the defendant claims that Citibank's collection agent, Solomon and Solomon, used deceptive practices in attempting to collect the debt by failing to declare clearly and explicitly to him the dual role of its involvement with Citibank, that as collector of debt and that of plaintiff's attorney, as well as by failing to advise him to seek independent legal counsel in this matter. In his fifth special defense, the defendant claims that Citibank's collection agent failed properly to document the progression of his loan activities and therefore cannot establish a claim for the account stated. In his sixth special defense, the defendant claims that his failure to dispute the validity of the debt cannot be construed as an admission of liability. The defendant also asserts a counterclaim against Citibank, paralleling that of the deceptive practices claim of special defense four and incorporating the allegations of special defenses one through four.
Citibank moves to strike special defenses one, three, and four as to the first count, and one and two as to the second count, as well the defendant's counterclaim.
First and Third Special Defenses as to the First Count
Citibank argues that the defendant's first special defense that Citibank acted recklessly by allowing the defendant to utilize his credit line, as well as the defendant's third special defense that Citibank, through neglect and/or by decision, failed to curtail, reduce, or rescind the defendant's usage of credit are both legally insufficient. The defendant counters that Citibank's recklessness and negligence is a result of its violation of 15 U.S.C. § 1665e.
The Truth in Lending Act, 15 U.S.C. § 1661(a), et seq. was passed to "assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. 1601(a). In May 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Card Act), which amended the Truth in Lending Act, in response to concerns that consumers were being taken advantage of by credit and gift card issuers. Among the provisions of the Card Act was Pub.L. No. 111-24, sec. 109, 123 Stat. 1743 (now codified at 15 U.S.C. § 1665e) entitled "Consideration of Ability to Repay." It provides: "A card issuer may not open any credit card account for any consumer under an open end consumer credit plan, or increase any credit limit applicable to such account, unless the card issuer considers the ability of the consumer to make the required payments under the terms of such account." However, Pub.L. No. 111-24, sec. 3, 123 Stat. 1734 (now codified at 15 U.S.C. 1602 note) provides that: "This Act [enacting sections . . . 1665c to 1665e] . . . shall become effective [nine] months after the date of enactment of this Act [on May 22, 2009]. . ."
The statute that the defendant relies upon as a special defense, then, did not become effective until February 2010. These special defenses lack any allegation that the plaintiff failed to comply with the provisions of this federal law after that law became effective. Given the recent enactment of 15 U.S.C. § 1665e, an essential allegation necessary to the defendant's pleading is that the plaintiff opened or increased the defendant's credit line after February 2010. The mere existence of this statute, as currently pleaded, fails to state a legally sufficient special defense to the underlying action.
The motion to strike the defendant's first and third special defenses to the first count is granted.
Fourth Special Defense to the First Count
Citibank argues that the defendant's claim that Citibank's attorney acted deceptively by failing to state that it was acting as both a collector of debt and an attorney is not a legally sufficient special defense because it had no duty to make such a disclosure, and furthermore, its failure to do so is not a defense to its account stated claim. The defendant counters that Citibank's attorney acted deceptively, in violation of Connecticut's Unfair Trade Practices Act (CUTPA), by violating numerous federal credit law statutes.
Because the defendant has reiterated the same allegations in its counterclaim, seeking damages under CUTPA, the court holds that the defendant cannot assert those alleged CUTPA violations as a special defense with respect to liability. Windsor Federal Savings v. AQB Properties, LLC, Superior Court, Hartford J.D., d.n. CV 06-5002705 (December 1, 2006), Freed, J.T.R.); U.S. Bank National Association v. Ascenia, Superior Court, New Haven, J.D., d.n. CV08-5022527 (July 30, 2009, Abrams, J.) [ 48 Conn. L. Rptr. 345]. See however, Connecticut National Bank v. Voog, 233 Conn. 352, 368 (1995).
First and Second Special Defenses to Second Count
Citibank argues that these special defenses should be stricken on the ground that neither is a legally sufficient special defense to the underlying claim. Specifically, it argues that the alleged failure of its collection agent to document the progression of the debt is not a special defense as to the account stated claim. The defendant counters that (1) he disputes the validity of the debt; (2) his failure to have disputed the debt cannot be construed as an admission of liability.
Practice Book § 10-50 provides in relevant part: "No facts may be proved under either a general or special denial except such as show that the plaintiff's statements of fact are untrue. Facts which are consistent with such statements but show, notwithstanding, that the plaintiff has no cause of action, must be specially alleged." "The fundamental purpose of a special defense, like other pleadings, is to apprise the court and opposing counsel of the issues to be tried, so that basic issues are not concealed until the trial is [underway]." (Internal quotation marks omitted.) Almada v. Wausau Business Ins. Co., 274 Conn. 449, 456, (2005). The requirements for a cause of action sounding in account stated were recently laid out by our Appellate Court. "[T]he delivery by the [creditor] to the [debtor] of each statement of the latter's account, with the [documentation] upon which the charges against [the debtor's account] were based, [is] a rendition of the account so that retention thereof for an unreasonable time constituted an account stated which is prima facie evidence of the correctness of the account." (Internal quotation marks omitted.) Credit One, LLC v. Head, 117 Conn.App. 92, 98, cert. denied, 294 Conn. 907, (2009), quoting General Petroleum Products, Inc. v. Merchants Trust Co., 115 Conn. 50, 56, (1932).
Citibank's second count undoubtedly pleads sufficient facts to state a cause of action as to the account stated under the Credit One requirements. The defendant argues that he disputes the validity of the debt, but he makes no factually supported allegation in support of such a contention. The defendant's special defense merely states: "The plaintiff's collection agent failed to properly document the progression of the defendant's loan activities and therefore does not comply with the adjudicated standards established for claiming recourse to [account stated]." This statement, however, is not a special defense to the underlying action. The fact that the creditor's collection agent supposedly failed properly to document the progression of debt is irrelevant to Citibank's claim. Even if the answer was construed to read, " The plaintiff failed to properly document the progression of the defendant's loan activities," as opposed to its collection agent, it still would not be a legally sufficient special defense, pursuant to Practice Book § 10-52, because it would be essentially a mere denial of Citibank's allegations.
Finally, the defendant relies upon 15 U.S.C. § 1692g(c) of the Federal Debt Collections Practice Act (FDCPA) for the proposition that his failure to dispute the debt cannot be used as an admission of liability. Congress passed the FDCPA in order "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. § 1692(e). The FDCPA provides civil remedies for consumers who can prove that a debt collector violated the provisions of the statute. See 15 U.S.C. § 1692k.
The FDCPA generally applies only to debt collectors, however, and a creditor such as Citibank is not a debt collector within the definition of 15 U.S.C. § 1692a(6) of the FDCPA. See Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985) (holding "legislative history [of the FDCPA] . . . indicates conclusively that a debt collector does not include the consumer's creditors . . . as long as the debt was not in default at the time it was assigned").
15 U.S.C. 1692a(6) provides: "The term "debt collector" means any person 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. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests."
Moreover, 15 U.S.C. § 1692g(c) of the FDCPA, which the defendant cites in his memorandum of law as the ground for his special defense, simply provides that if a consumer fails to dispute a debt that a debt collector is seeking to collect, it cannot be held by a court to have been an admission of the validity of the debt. The FDCPA is not, however, a special defense to a properly pleaded claim of account stated.
These special defenses are, therefore, stricken.
Counterclaim
Citibank contends that the defendant's counterclaim for deceptive practices under CUTPA fails to state a claim upon which relief can be granted because it had no duty to disclose to the defendant that its attorney was also its collection agent, and it also had no duty to advise the defendant to seek independent legal representation, and thus, it committed no deceptive action. The defendant argues Citibank, through its attorney, acted deceptively, in violation of CUTPA, by violating numerous federal credit law statutes, presumably the Fair Debt Collections Practice Act (FDCPA), 15 U.S.C. § 1692, et seq., 15 U.S.C. § 1665e of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Card Act), and Connecticut Creditor's Collection Practices Act (CCPA) pursuant to General Statutes §§ 36a-646.
CUTPA forbids engaging in either deceptive or unfair practices, General Statutes § 42-110b(a). Although there is overlap, a "deceptive" practice is a narrowed category of prohibited conduct that is embraced by the term "unfair" practice. "Deception is a subject of special attention as a subclass of unfairness. All deceptive acts and practices are unfair, but not all unfair acts and practices are deceptive. As a special subclass deception has more particularized elements that are easier to apply than the unfairness criteria" Langer, Morgan, and Bett, The Connecticut Unfair Trade Practices Act, 2003, and 2009-2010 supplement § 2.3, p. 33. In this case the defendant has specifically alleged a deceptive trade practice.
Consequently, the court will limit its focus to whether the defendant has demonstrated that the nondisclosures about which he complains comprise a deceptive, rather than unfair, trade practices under CUTPA. To reiterate, a practice may be unfair without being deceptive unless those unfair acts are also deceptive under CUTPA.
Our legislature has expressly stated that, in construing CUTPA, Connecticut courts "shall be guided by interpretations given by the Federal Trade Commission and the federal courts . . ." § 42-110b(b). The FTC has identified three components required to establish a particular practice as "deceptive:"
"First, there must be a representation, omission, or other practice likely to mislead consumers. Second, the consumers must interpret the message reasonably under the circumstances. Third, the misleading representation, omission, or practice must be material — that is, likely to affect consumer decisions or conduct." Figgia International, Inc., 107 F.T.C. 313, 374 (1986). These components have been incorporated into our CUTPA jurisprudence with respect to delineating what comprises a deceptive practice. Caldor, Inc. v. Heslin, 215 Conn. 590, 597 (1990); Southington Savings Bank v. Rodgers, 40 Conn.App. 23, 28 (1995).
These three components impose no obligation to prove that the allegedly deceptive practice was accompanied by an intent to deceive, actual or constructive knowledge of the misleading character of the representation, or any illicit motive. Jacobs v. Healey Ford-Subaru, Inc., 231 Conn. 707, 726 (1995); Associated Investment Co. v. Williams Associates IV, 230 Conn. 148, 156 (1994); Calandro v. Allstate Insurance Co., 63 Conn.App. 602, 616 (2001). Also, the test as to whether a representation is misleading to consumers is an objective one based on reasonable interpretation, Longer, Morgan, and Bett, The Connecticut Unfair Trade Practices Act, 2003 ed., § 2.3, p. 30; and the second element requires that the representation be "likely" to mislead rather than merely having a tendency or capacity to do so. Id., p. 27.
There is an additional requirement when the misleading nature of the practice is generated by omission or nondisclosure rather than by an untrue statement. The defendant makes no claim that he was affirmatively given false information.
Our appellate level caselaw has held that a failure to disclose information is a deceptive practice under CUTPA only when the nondisclosing party had a preexisting duty to disclose that information independent of CUTPA. This extrinsic duty may be imposed by statute, regulation, or the common law. Glazer v. Dress Barn, Inc., 274 Conn. 33, 85 (2005); Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 523-24 (1994); Hinchliffe v. American Motors Corporation, 184 Conn. 607, 612 (1981); Southington Savings Bank v. Rodgers, supra, 28-29.
In Hinchliffe, supra, the plaintiff sued a car manufacturer under CUTPA for failing to inform the plaintiff at the time of purchase that components of the vehicle were not manufactured by that car company. Because the manufacturer had never stated affirmatively that it had made the parts in question and because no statute nor regulations otherwise mandated disclosure, no CUTPA violation, as a deceptive practice, occurred. Id., 612.
Whether a statutory, regulatory, or common-law duty, such as one created by contract or a fiduciary relationship, exists is a question of law. Glazer v. Dress Barn, Inc., supra, 84. In that case, the plaintiff alleged that the defendant purposefully withheld from the plaintiff that it had no intention of providing the plaintiff with financing while knowing that the plaintiff was expending considerable sums for advertising its new venture based on securing that financing. Id. A party that affirmatively speaks on a topic must do so fully and fairly, but mere silence "cannot give rise to an action" for a deceptive practice under CUTPA unless some statute or regulation or independent common-law duty compels disclosure. Id., 84-86. In the present case, the defendant identifies no such statute, regulation, nor common-law obligation.
Also the defendant alleges no facts that support an obligation that Citibank acted deceptively in violation of CUTPA by failing to rescind, reduce, or curtail his line of credit or by Citibank's failure to disclose that its attorney was also acting as its debt collection agent. The party alleging a CUTPA violation must show that the opposing party's actions were "within at least the penumbra of some common law, statutory, or other established concept of unfairness." Harley v. Indian Spring Land Co., supra, 123 Conn.App. 834. As previously discussed, the Card Act, specifically 15 U.S.C. § 1665e, cannot provide a statutory basis because there are no factually supported allegations in the defendant's counterclaim that Citibank's actions occurred after that portion of the statute went into effect in February 2010. Likewise, neither the FDCPA nor the CCPA can provide a basis for a CUTPA violation by Citibank because nothing in either statute imposes such duties of disclosure on Citibank. Without a common-law or statutory duty, or some "other established concept of unfairness," there simply is no deceptive practice by Citibank. Without any deceptive practice by Citibank, there can be no legally sufficient claim under CUTPA.
Therefore the counterclaim is also stricken.