Opinion
Civil Action No. 20-411
07-23-2020
ERIC HAYES, individually and on behalf of all others similarly situated, Plaintiff, v. COLLECTO, INC., doing business as EOS, CCA, Defendant.
District Judge William S. Stickman
Re: ECF No. 5 REPORT AND RECOMMENDATION
I. RECOMMENDATION
Plaintiff Eric Hayes ("Hayes") brings this putative class action against Defendant Collecto, Inc. d/b/a EOS, CCA ("Collecto"), alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C §§ 1692 et seq. Hayes alleges that Collecto's form collection letter violated two provisions of the FDCPA—§ 1692e and § 1692g—because it located a required debt validation notice on the back of the one-page letter and because it failed to more prominently draw attention to the notice. Collecto has filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) contending that as a matter of law, Hayes fails to state a viable claim under the FDCPA. ECF No. 5. For the following reasons, it is respectfully recommended that the Motion to Dismiss be granted and the Complaint be dismissed with prejudice.
II. REPORT
A. FACTUAL AND PROCEDURAL BACKGROUND
Hayes is a Pennsylvania resident who accrued a personal consumer obligation to pay approximately $600 to Verizon. ECF No. 1-2 and ECF No.5-2. Verizon retained Collecto to recover the debt. On October 17, 2019, Collecto issued a form collection letter to Hayes using its trade name, EOS CCA. The letter consisted of one piece of paper, with information related to the debt printed on both sides. The front contained a "tear off" mailing invoice on the bottom, and a series of information blocks on the top:
Hayes' Complaint includes only the back side of the collection letter. ECF No. 1-2 at 13-14. Both parties have since filed a complete copy for review. ECF No. 5-2 and ECF No. 10-1. "[A] court may consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document." Pension Ben. Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
Image materials not available for display. EOS CCA
PO BOX 981002
BOSTON, MA 02298-1002
ACCOUNT INFORMATION
STATEMENT DATE 10/17/19 ACCOUNT # 8-14477319 CLIENT NAME VERIZON
| TOTAL AMOUNT DUE > | $599.67 |
|---|---|
| SETTLEMENT AMOUNT DUE > | $239.87 |
Please see reverse side for details of Total Due.
NOTICE OF COLLECTION PLACEMENT
*** SETTLEMENT OFFER ***
VERIZON has authorized us to accept $239.87 to resolve this debt in full. To take advantage of this offer, you may pay online, through the mail, or by phone. We are not obligated to renew this offer. Check must be made payable to Verizon. This communication is from a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.
**Please see reverse for important notices and account details.**
PAYMENT OPTIONS
Pay online at www.eos-cca.com. Log in with the following account number: 8-14477319
Pay by phone at 1-855-666-9210.
Pay by mail. Include the remittance slip below and send to the address shown on the slip.
Office Hours: Mon-Thur 8:00 AM - 9:00 PM CT, Fri 8:00 AM - 5:00 PM CT, Sat 8:00 AM - 12:00 PM CT
Above a grey box detailing "PAYMENT OPTIONS," the letter contains a line in bold font with two asterisks on either side directing the reader to: **Please see reverse for important notices and account details.** ECF No. 5-2 and ECF No. 10-1. This direction is the reader's second instruction to "see the reverse side" of the letter. The first appears just under a box titled "Account Information" in the upper right-hand corner and informs the reader that "details of Total Due" appear on the back of the letter. Id.
The reverse side of the letter sets forth detailed information regarding the debt, with the creditor's account number and total due. Above the debt information and beneath the underlined and capitalized words "FEDERAL LAW," the letter includes language required by Section 1692g, regarding a consumer's right to dispute the validity of the debt:
FEDERAL LAW
Unless you dispute the validity of this debt, or any portion thereof, within thirty days after receipt of this notice, we shall assume the debt to be valid. If you notify us in writing of your dispute within this thirty-day period, we will obtain verification of the debt, or a copy of a judgment against you, and a copy of such verification or judgment will be mailed to you. Upon your written request within the thirty-day period, we will provide you with the name and address of the original creditor, if different from the current creditor.
| EOS CCA ACCOUNT # | CLIENT ACCOUNT # | PRINCIPAL | INTEREST | FEE | COLL. COSTS | BALANCE |
| 14477319 | 8542388090001 | $599.67 | $0.00 | $0.00 | $0.00 | $599.67 |
| TOTAL DUE: | $599.67 |
For payments and general account inquiries, call 1-855-666-9210 or 1-781-681-4300.
For customer service issues, call our Consumer Relations Department at 1-877-395-5997.
Id. There is no dispute that Hayes owes the amount indicated. Rather, Hayes alleges that the placement, font size and coloring of various text boxes renders the reader "unlikely to notice the reference to information on the back side of the letter." ECF No. 1-2 ¶ 15. Hayes contends that the design intentionally "overshadows" the required validation notice and thereby "ineffectively conveys the rights to which consumers are entitled." Id. ¶ 22. Hayes alleges that the letter therefore violates the Section 1692e prohibition against misleading representations and the 1692g requirement that a debt collector provide effective notice of the procedures by which consumers can challenge and obtain verification of an alleged debt. Id. at 9-10.
Hayes first filed this class action in the Court of Common Pleas of Allegheny County, Pennsylvania seeking statutory damages and attorneys' fees. ECF No. 1-2. After service, Collecto timely removed Hayes' action to this Court pursuant to 28 U.S.C. §1446(a), citing federal question jurisdiction. ECF No. 1. Collecto filed the pending Motion to Dismiss for Failure to State a Claim and Memorandum of Law in Support. ECF Nos. 5, 6. Hayes has filed a Memorandum of Law in Opposition to the Motion. ECF No. 10. Collecto filed a Reply. ECF No. 11. The Motion to Dismiss is now ripe for consideration.
B. STANDARD OF REVIEW
In assessing the sufficiency of the complaint pursuant to a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the Court must accept as true all material allegations in the complaint and all reasonable factual inferences must be viewed in the light most favorable to the plaintiff. Odd v. Malone, 538 F.3d 202, 205 (3d Cir. 2008). While a complaint does not need detailed factual allegations to survive the motion to dismiss, a complaint must provide more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A "formulaic recitation of the elements of a cause of action will not do." Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Factual allegations must be enough to raise a right to relief above the speculative level" and sufficient "to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 555, 570.
"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.... Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of 'entitlement to relief.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).
In other words, at the motion to dismiss stage, a plaintiff is required to make "a showing' rather than a blanket assertion of an entitlement to relief." Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008). "This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.'" Id. at 234, quoting Twombly, 550 U.S. at 556 n. 3.
To determine the sufficiency of a complaint, "a court ... must take three steps," that include (1) taking note of the elements a plaintiff must plead to state a claim; (2) identifying allegations that are merely legal conclusions "because they ... are not entitled to the assumption of truth"; and (3) assuming the veracity of all well-pleaded factual allegations and determining "whether they plausibly give rise to an entitlement to relief." Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (quoting Iqbal, 556 U.S. at 675, 679). If the court finds, even after construing the complaint in the light most favorable to the plaintiff, that the plaintiff has no right to relief, the court can dismiss the claim. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009).
C. DISCUSSION
Congress enacted the FDCPA to "eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692 ("There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors."). The FDCPA therefore prohibits a range of abusive practices and imposes certain affirmative disclosure obligations on debt collectors. To aid enforcement, the FDCPA "provides consumers with a private cause of action against debt collectors who fail to comply with the Act." Brown v. Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir. 2006). As a remedial statute, the FDCPA is construed broadly to give full effect to its purpose. Id.; and see Douglass v. Convergent Outsourcing, 765 F.3d 299, 302 (3d Cir. 2014).
To state a claim under the FDCPA, a plaintiff must plausibly allege that (1) he or she is a consumer, (2) the Defendant is a debt collector, (3) Defendant's challenged practice, here the letter, involves an attempt to collect a debt covered by the FDCPA, and (4) Defendant has violated the FDCPA when seeking to collect the debt. In this lawsuit, the only dispute concerns the fourth element, whether Collecto's letter to Hayes failed to adequately convey required notices regarding the right to dispute the debt in violation of either Section 1692g or 1692e of the Act.
As relevant here, the Section 1692g requires that debt collectors provide the following information to consumers:
(1) The amount of the debt;15 U.S.C. § 1692g(a).
(2) The name of the creditor to whom the debt is owed;
(3) A statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) A statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) A statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
The protection afforded to consumers who dispute the validity of a debt renders is significant. When a consumer disputes a debt or requests the identity of the original creditor, Section 1692g(b) mandates that:
the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.In addition, debt collectors are prohibited from reporting disputed debts to credit agencies without noting the fact of a dispute. 15 U.S.C. § 1692e(8) (prohibiting collectors from "[c]ommunicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed"). Finally, as relevant here, Section 1692e prohibits a debt collector from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. 1692e.
"[W]hether language in a collection letter contradicts or overshadows the validation notice is a question of law." Wilson v. Quadramed Corp., 225 F.3d 350, 353 n.2 (3d Cir. 2000). The United States Court of Appeals for the Third Circuit has held that "statutory notice must not only explicate a debtor's rights; it must do so effectively." Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir. 1991), overruled on other grounds by Riccio v. Sentry Credit, Inc., 954 F.3d 582 (3d Cir. 2020).
Riccio v. Sentry Credit, Inc., 954 F.3d 582 (3d Cir. 2020) was decided shortly before Collecto filed the pending Motion to Dismiss. In Riccio, the Third Circuit overruled its holding in Graziano that "§ 1692g(a)(3) requires that 'any dispute, to be effective, must be in writing.'" Id., 954 F.3d at 587 (quoting Graziano, 950 F.2d at 112). In so ruling, the Third Circuit reversed a line of cases finding violations of the FDCPA because a consumer was directed or provided an option to call a debt collector for information about the debt or to submit a dispute. Riccio makes clear that letters offering an option to call to initiate a dispute do not violate the Act.
"In order to comply with the requirements of section 1692g, more is required than the mere inclusion of the statutory debt validation notice in the debt collection
letter—the required notice must also be conveyed effectively to the debtor." Wilson, 225 F.3d at 354 (citing Payco-General, 943 F.2d at 484). The validation notice accordingly "must be in print sufficiently large to be read, and must be sufficiently prominent." Graziano, 950 F.2d at 111 (citing Swanson v. Southern Oregon Credit Serv., 869 F.2d 1222, 1225 (9th Cir. 1988)). "More importantly for present purposes, the notice must not be overshadowed or contradicted by accompanying messages from the debt collector." Id.Caprio v. Healthcare Revenue Recovery Grp., LLC, 709 F.3d 142, 148 (3d Cir. 2013), abrogated on other grounds by Riccio v. Sentry Credit, Inc., 954 F.3d 582 (3d Cir. 2020).
Compliance with the FDCPA is measured from the perspective of the "least sophisticated debtor." Graziano, 950 F.2d at 111. This standard ensures that the statute "protects all consumers, the gullible as well as the shrewd." Caprio, 709 F.3d at 149. "The least sophisticated debtor standard is therefore 'less demanding than one that inquires whether a particular debt collection communication would mislead or deceive a reasonable debtor.' Nevertheless, 'the standard does not go so far as to provide solace to the willfully blind or non-observant,' and so 'the least sophisticated debtor is bound to read collection notices in their entirety.'" Jewsevsky v. Financial Recovery Services, Inc., 704 F. App'x 145, 148 (3d Cir. 2017) (quoting Campuzano-Burgos v. Midland Credit Mgmt., Inc., 550 F.3d 294, 298, 299 (3d Cir. 2008)). "The standard is an objective one, 'meaning that the specific plaintiff need not prove that she was actually confused or misled, only that the objective least sophisticated debtor would be.'" Norman v. Allied Interstate, 310 F. Supp. 3d 509, 517 (E.D. Pa. 2018) (quoting Tatis v. Allied Interstate, LLC., 882 F.3d 422, 427 (3d Cir. 2018)).
Under this standard, a collection communication violates the FDCPA when it misleads a plaintiff into thinking he or she has a legal obligation to pay a time-barred debt, Tatis, 882 F.3d at 428; or "when it can be reasonably read to have two more different meanings, one of which is inaccurate," Caprio, 709 F.3d at 149; or where it contains "screaming headlines, bright colors and huge lettering" that point "to a deliberate policy of evading the spirit of the FDCPA and misleading the debtor into disregarding the validation notice." Id. at 154.
Hayes does not dispute the content or accuracy of the letter or the validation notice. Instead, Hayes contends Collecto's use of bold 12-point font and asterisks directing the reader to read the reverse of the collection letter "for important notices and account details" violates Section 1962e and 1962g. Hayes argues that the collection letter is misleading because this direction appears just above "PAYMENT OPTIONS," which is printed in 16-point bold type, located "in an elongated dark grey box" that "draw[s] the reader's primary attention." ECF No. 10 at 10. The effect, he says, "is to functionally erase the sentence [directing the consumer to the validation notice] from the page." Id.
In support of his claims, Hayes cites Guzman v. HOVG, LLC, 340 F. Supp. 3d 526 (E.D. Pa. 2018), and Hishmeh v. Cabot Collection Systems, LLC, No. 13-4795, 2014 WL 460768 (E.D. Pa. Feb. 5, 2014). Neither decision is controlling nor reasonably supports liability in this instance.
In Guzman, the district court determined that placing of the validation notice on the back side of a letter with a "vague reference on the front side to 'important consumer information,' obscures any notice that the validation notice provides." Guzman. 340 F. Supp. 3d at 532. That said, placement alone was not the reason for liability under the FDCPA; rather, the letter contained the then-impermissible instruction that the consumer could call the collector to dispute the debt. The district court determined that "the letter encourages the reader both to overlook the validation notice and to call, rather than write, with questions, thus increasing the likelihood that the consumer will misunderstand her validation rights. Accordingly, the validation notice is not 'conveyed effectively to the debtor,' and violates the FDCPA." Id. (emphasis in original).
Similarly, in Hishmeh, the district court determined that a validation notice violated the FDCPA when it was printed "in approximately an eight-point typeface in standard text at the bottom of the letter .... dwarfed by two other statements that are in much larger type and bolded" telling the consumer "DO NOT IGNORE THIS NOTICE - CONTACT THIS OFFICE IMMEDIATELY." The district court found that this instruction in bold, capitalized letters above the validation notice "may mislead the debtor into believing that a phone call is a valid way of verifying or disputing her debt when, in the Third Circuit, a written communication on those issues is required." Hishmeh, 2014 WL 460768, at *5.
In contrast, in Caprio, the Third Circuit considered the placement of the required validation notice on the back of a collection letter and observed that a collection notice does not violate the FDCPA where it does not also contain conflicting information related to the exercise of rights, or "screaming headlines" demanding immediate payment coupled with misleading printing (such as a validation notice in 8-point font).
[A] validation notice ... "must be in print sufficiently large to be read, and must be sufficiently prominent." Graziano, 950 F.2d at 111.... In other words, "a collection letter will not meet the requirements of the Act where the validation notice is printed on the back and the front of the letter does not contain any reference to the notice" or, more generally, where "the validation notice is overshadowed or contradicted by accompanying messages or notices from the debt collector." Wilson, 225 F.3d at 355 (citing Graziano, 950 F.2d at 111; Payco-General, 943 F.2d at 484).Caprio, 709 F.3d at 148. And where the validation notice is on the second page of a two page letter, "[a] consumer who reads the front page, follows the direction to see the reverse side, and scans through that side all the way down ... is sophisticated enough to see and understand the validation notice toward the top of page two of two. Or as the district court put it, 'a consumer who reads the front and back of the first page of a short letter and then completely disregards the second page has not read the letter with care.'" O'Boyle v. Real Time Resolutions, Inc., 910 F.3d 338, 345 (7th Cir. 2018) (affirming dismissal with prejudice). See also, Zemeckis v. Glob. Credit & Collection Corp., 679 F.3d 632, 637 (7th Cir. 2012) (affirming dismissal where notice directed consumer in capital letters to "see [the] reverse side for important information," because "locating the validation notice on the back of the letter, while undesirable, does not engender confusion sufficient to state a claim under the FDCPA.").
In this case, the collection letter directs the reader to the reverse side of the letter twice: once for account details, and once, enhanced with asterisks and in bold 12-point type, to review "important notices." The letter contains no factually incorrect statements regarding the consumer's rights, does not threaten legal action, and does not require action before the expiration of the dispute period. The back of the letter sets forth the validation notice in 12-point type under an underlined and capitalized alert informing the consumer of applicable "FEDERAL LAW."
Hayes' arguments to the contrary, the law requires even the least sophisticated debtor "to read collection notices in their entirety." Campuzano-Burgos, 550 F.3d at 299. Simply, despite placing the validation notice on the back of the form, the text and form of the letter do not plausibly overshadow or contradict a consumer's rights so as to confuse or mislead the least sophisticated debtor as to his rights to dispute or seek validation of the debt. Cf. Graziano, 950 F.2d at 111 (where demand on front of letter contradicts validation notice on reverse side, it does not effectively communicate rights under Section 1692g). Even a cursory review of the one-page, two-sided letter would alert the recipient of his rights under the FDCPA in a clear and effective fashion. Under these circumstances, Hayes fails to state a plausible claim for the violation of Section 1692e or 1692g as a matter of law and it is recommended that the Motion to Dismiss be granted.
When a court grants a motion to dismiss, the court "must permit a curative amendment unless such an amendment would be inequitable or futile." Great Western Mining & Mineral Co. v. Fox Rothschild, LLP, 615 F.3d 159, 174 (3d Cir. 2010) (internal quotations omitted). Amendment is futile "where an amended complaint 'would fail to state a claim upon which relief could be granted.'" M.U. v. Downingtown High Sch. E., 103 F. Supp. 3d 612, 631 (E.D. Pa. 2015) (quoting Great Western Mining & Mineral Co., 615 F.3d at 175. In this case, because resolution is a legal question based on an objective reading of the letter and amendment would not alter the document on which Plaintiff's claim relies, an amended complaint therefore is futile. Accordingly, it is recommended that the complaint be dismissed with prejudice.
D. CONCLUSION
For the foregoing reasons, it is respectfully recommended that the Motion to Dismiss, ECF No. 5, be granted, and the Complaint be dismissed with prejudice.
In accordance with the Magistrate Judges Act, 28 U.S.C. § 636(b)(1), and Local Rule 72.D.2, the parties may file written objections in accordance with the schedule established in the docket entry reflecting the filing of this Report and Recommendation. Failure to timely file objections will waive the right to appeal. Brightwell v. Lehman, 637 F.3d 187, 193 n. 7 (3d Cir. 2011). Any party opposing objections may file their response to the objections within fourteen (14) days thereafter in accordance with Local Civil Rule 72.D.2.
Respectfully submitted,
/s/ Maureen P . Kelly
MAUREEN P. KELLY
UNITED STATES MAGISTRATE JUDGE Dated: July 23, 2020 cc: The Honorable William S. Stickman
United States District Judge
All counsel of record via CM/ECF