Opinion
99 C 5569
September 6, 2000
MEMORANDUM OPINION AND ORDER
Plaintiff Beatrice Young initiated this suit pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., alleging that she received a letter from Defendants which failed to comport with §§ 1692(d), (e), (f), (g) as well as § 1692(e)(5), (7), and (11). Defendants have moved for summary judgment on all counts, and for the reasons explained below, that motion will be granted.
I. BACKGROUND
On May 6, 1999, Plaintiff Beatrice Young filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Code. Young's creditors were notified of her bankruptcy and June 21, 1999 was set as the date for the 11 U.S.C. § 341 initial meeting of creditors. Discover Financial Services (Discover) was one of Young's 18 credit-card creditors. At the time that Young filed for bankruptcy, her total credit card debt amounted to $61,000. Her monthly income at that time was $1899 and her monthly expenses excluding debt service was $1849. In the 60 days prior to filing her bankruptcy petition, Young charged $1300 worth of goods and services on her Discover Card. At the time of her bankruptcy, Young's account reflected $6,031.50 in charges on her Discover Card.
Discover is a client of the defendant law firm, Wienstein, Chism, Manley, Riley Therriault Singer (the Firm). Discover referred Young's account information to the Firm for review. When a bankruptcy matter is referred to the Firm by a client, it is the Firm's practice to evaluate the debtor's account through a process the Firm dubs, "Fraud Finder." In the first step of the process, the Firm evaluates the debtor's account activity based on the following factors:
(A) the length of time between charges made and the filing of the bankruptcy;
(B) the number of charges made;
(C) the amount of the charges;
(D) whether the charges were above the credit limit for the account;
(E) whether the debtor made multiple charges on the same day; and
(F) whether there was a sudden change in the debtor's buying habits;
As a result of this evaluation, debtors are assigned a "score" from 1 to 10. A 10, based on the Firm's interpretation of its system, indicates the greatest indicia of fraud was discovered, a score of 1 indicates the opposite. Those debtors whose scores are 5 or higher advance to the second level of review by the Firm which involves a case-specific evaluation of the account by an attorney or paralegal.
Defendants claim to employ the following factors for evaluation at the second level:
(A) whether an attorney had been consulted concerning the filing of bankruptcy prior to the charges being made;
(B) the financial condition of the debtor at the time the charges were made;
(C) whether the debtor was employed;
(D) the debtor's prospects for employment;
(E) the financial sophistication of the debtor; and
(F) whether purchases were made for luxuries or necessities.
Plaintiffs contest that Defendants have access to information relevant to these factors. However, this dispute is not material to the resolution of this motion.
Defendant Theodore Manley, the director of the defendant law firm, reviewed Young's account and made the following determinations:
(A) Young charged over $1300 on her Discover Card within the 60 day presumption period set forth in 11 U.S.C. § 523(a)(2)(C);
(B) Young made several charges, largely to vendors;
(C) Young made multiple charges in a short period of time;
(D) Young's bankruptcy schedule indicated her income exceeded her expenses by $50.00, excluding her payment obligations on her $61,000 credit card debt;
(E) Young had not used her Discover Card for a significant period of time, and then suddenly charged over her credit limit;
Manley did not determine whether the charges Young made were for necessities or luxury items.
On July 5, 1999 Manley sent a letter to Young's bankruptcy attorney. The letter identified the Firm as representing Discover, listed Young's account balance, and stated that Young's account had been referred to the Firm for, "review of the issue of possible bankruptcy fraud pursuant to 11 U.S.C. § 523." The letter then stated that Young had accumulated $1300 in retail charges between March 11 and April 28, 1999, and asserted:
Based on this fact alone, we believe that there is sufficient basis to object to the discharge of our client's claim in this matter. As you probably know, if Discover Financial Services, Inc. brings a successful nondischargeability action against your client, a portion of your client's debt with Discover Financial Services may survive the bankruptcy. Before the parties incur the costs of fully pursuing a § 523 action, Discover Financial Services is willing to provide your client the option of settling the account pursuant to one of the following two alternatives: (1) Reaffirmation of the sum of $1300.00 at the contractual rate of interest; or (2) one time cash settlement in the sum of $900.00.
On August 25, 1999, Young initiated this suit alleging multiple violations of the Fair Debt Collection Practices Act (FDCPA). 15 U.S.C. § 1692 et seq. Young complains of violations of the notice requirements found in 15 U.S.C. § 1692(e)(11) and § 1692(g), as well as violations of the provisions found in § 1692(d), § 1692(e), § 1692(e)(5), and § 1692(f) which prohibit deceptive, unfair, and harassing debt collection practices.
II. DISCUSSION
Federal Rule of Civil Procedure 56(c) provides that summary judgment is to be granted when no dispute of material fact exists between the parties. The Court must view the evidence making all reasonable inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). The movant bears the initial burden of demonstrating that no material issue exists for trial. Celotex Corp. v. Catrett, 477 U.S. 317 (1986). Once the movant has properly supported his motion, the nonmoving party must offer specific facts demonstrating that a material dispute indeed exists. Id. "The non-moving party, however, may not rest upon mere denials or allegations in the pleadings, but must set forth specific facts sufficient to raise a genuine issue for trial."Weicherding v. Riegel, 160 F.3d 1139, 1142 (7th Cir. 1998). A mere scintilla of evidence is not sufficient to defeat a proper motion for summary judgement. Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
A. VALIDATION NOTICE CLAIMS
Plaintiff claims that the August 5, 1999 violated 15 U.S.C. § 1692(e)(11) and § 1692(g). plaintiff asserts that the letter constituted an initial communication with consumer Young, and that, therefore, Defendants were required to provide Young with the statutorily outlined validation notices.
However, Defendants contend that the letter in question is not a "communication with a consumer" within the meaning of the FDCPA. The Court agrees. 15 U.S.C. § 1692 defines "'consumer' as, any natural person obligated or allegedly obligated to pay any debt." The term consumer also includes, "the consumers's spouse, parent (if the consumer is a minor), guardian, executor, or administrator." 15 U.S.C. § 1692(c)(d).
Here, the letter in question was sent to Plaintiff's bankruptcy attorney. While Plaintiff argues that communication with her attorney constituted an indirect communication with Plaintiff, the Court finds this argument to be manifestly unconvincing. Not only is Plaintiff's attorney not a consumer under the plain language of the FDCPA, such a construction falls outside the clear purpose of the statute. Congress enacted the FDCPA to protect the unsophisticated consumer from harassing or abusive debt collection practices. 15 U.S.C. § 1692 et seq., Bass v. Stolper, Koritzinsky, Brewster Neider, 111 F.3d 1322, 1324 (7th Cir. 1997). This purpose is not furthered by "`a ban on communications with consumers' attorneys who presumably have a higher level of sophistication." Phillips v. North American Capital Corp., 199 WL 299872, *3 (N.D.Ill.). Dikeman v. National Educators Inc., 81 F.3d 949 (10th Cir. 1996) Indeed, the FDCPA requires debt collectors to communicate with debtors through their attorneys under certain circumstances as a mechanism of protection for the consumer. This Court finds that both the plain language and explicit purpose of FDCPA, § 1692(e)(11) and § 1692(g) notice requirements did not apply in the factual situation presented here. Therefore, summary judgment must be granted in favor of Defendants with respect to Plaintiff's claims under 15 U.S.C. § 1692(e)(11) and § 1692(g).
B. DECEPTIVE, UNFAIR, AND HARASSING PRACTICE
Plaintiff also contends that the August 5, 1999, letter constituted a deceptive, unfair, and harassing debt collection practice against Young, in violation of § 1692(e), § 1692(e)(5) and § 1692(f). Specifically, Plaintiff argues that the letter contained a false threat of future legal action which Defendants did not intend to take.
Plaintiff's amended complaint alleges a claim pursuant to § 1692(d) asserting that the letter was a form of harassment. Defendants moved for summary judgment on this claim. Plaintiff declined to address Defendants' arguments for summary judgment on this claim in her response to the motion. The Court finds that Plaintiff has provided neither argument nor evidence in support of her claim that the letter is a form of harassment under the Act. Further, the Court finds that the letter is not harassing on its face, and Defendants are entitled to summary judgment with respect to this claim as a matter of law.
Similarly, Plaintiff's amended complaint alleges a claim pursuant to § 1692(e)(7) asserting that the letter falsely represented that the consumer had committed a crime. Again, Defendants moved for summary judgment with respect to this claim and Plaintiff failed to support this allegation with evidence or argument. The Court finds that Defendants are entitled to summary judgment on this claim.
Section 1692e provides in pertinent part that a "debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt," including "[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).
In the case at bar it is clear that Defendants had a legal right to challenge the dischargeabillty of Plaintiff's debt. However, Plaintiff argues that Defendants did not intend to challenge the dischargeability at the time the letter was sent. Plaintiff relies on United States v. National Financial Services, Inc. in which the Court found that a computer-generated dunning letter in which creditors threatened legal action violated § 1692e(5) because the creditors did not intend to take a particular action against a particular debtor. 98 F.3d 131 (4th Cir. 1996). However, National Financial Services, is very much distinguishable. In National Financial Services, the defendants sent out "literally millions" of notices and only ever filed 13 suits. Further, the attorney whose name appeared on the threatening letter had no real involvement with the letters, did not know the identity of the debtors who received the letters, and never took any steps to initiate suits against them. The Court rejected the defendant's argument that he had entertained the notion of suing all the debtors (again, of which there were millions) first, because such a notion was obviously untenable, and because the Court concluded that in light of the facts mentioned above, defendant's "inchoate `intention' to someday sue `all debtors'," could not act as a "blanket justification for six years of sending millions of threatening letters." Id. at 138.
Here the facts are substantially different. In the case at bar, Defendants challenge the dischargeability of debts in approximately 20% of the cases in which a letter like the one Plaintiff received is sent. 20% is not so de minis a percentage of instances such as would make it unlikely that Defendants intended to undertake that action here.Compare, United States v. National Financial Services, Inc. 98 F.3d 131 (4th Cir. 1996) (where "literally millions of notices were sent" and only 15 suits were ever filed, the Court found that creditors did not intend to pursue the course of action threatened). Compare also, Davis v. Commercial Check Control, 199 WL 89556 (N.D.Ill.) (finding where 20,000 letters were sent and the threaten course of action was not once undertaken).
The FTC Official Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed.Reg. 50097 (Dec. 13, 1988), states, "A debt collector may state that certain action is possible, if it is true that such action is legal and is frequently taken by the collector or creditor with respect to certain debts. . . ." Here, the action which Defendants suggest they might pursue is legal, and Defendants do undertake this course of action with reasonable frequency.
In response, Plaintiff next argues that even if Defendants file suit in approximately 20% of the cases in which they initially sent letters, the complaints which Defendants file in those suits may not be proper. Plaintiff then accuses Defendants of filing complaints in those cases to frighten debtors into settlement. As proof of this otherwise unsubstantiated allegation, Plaintiffs note that out of a particular sampling of 19 letters sent, Defendants filed suit in nine cases (a significant 47% of the cases) but that of those nine suits filed, all nine settled. Plaintiff concludes, therefore, that Defendants used the filing of the suit as a mechanism for frightening debtors into settlement. This is specious reasoning at best. The fact that Defendants settle a majority of the cases they initiate against debtors is not evidence that those cases were lacking in merit or that the filing of those complaints were improper. Plaintiff has not offered sufficient evidence to substantiate this allegation. Further, even if Plaintiff had been able to prove that Defendants' complaints were often improper, it is still a separate question whether Defendants intended to do what they threatened to do here, and what they had a legal right to do, which is challenge the discharge of this debt. Plaintiff simply fail to provide the Court with sufficient evidence that Defendants did not intend to challenge the discharge such that a reasonable fact-finder could find in Plaintiff's favor.
The FDCPA prohibits debt-collectors from issuing threats of legal action that the debt-collector either could not take, or did not intend to take. Here, it is clear that Defendants have a legal right to challenge the dischargeability of the debt. It is also clear that Defendants do file suits in cases similar to Plaintiff's with reasonable frequency. Further, Plaintiff has failed to prove sufficient evidence to the contrary to sustain her burden at trial. Therefore, this Court must grant summary judgment to Defendants on this claim.
ORDERED: Defendants' motion for summary judgment is granted.