Jacobson v. Healthcare Financial Services, Inc.

Citation434 F.Supp.2d 133
Decision Date06 June 2006
Docket NumberNo. 04-CV-3268 (ILG).,04-CV-3268 (ILG).
PartiesGershon JACOBSON, on behalf himself and other similarly situated, Plaintiff, v. HEALTHCARE FINANCIAL SERVICES, INC., Defendant.
CourtU.S. District Court — Eastern District of New York

Lawrence Katz, Katz & Kleinman, for the Plaintiff.

David J. Gold, Esq., for the Defendant.

MEMORANDUM AND ORDER

GLASSER, Senior District Judge.

INTRODUCTION

In this putative class action Gershon Jacobson ("Plaintiff') alleges that Healthcare Financial Services ("Defendant") sent a debt collection letter that violated 15 U.S.C. § 1692g(a)(3) of the Fair Debt Collection Practices Act ("FDCPA"). Before the Court is Defendant's motion to dismiss under Rule 12(b)(6) for failure to state a claim, as well as a request for costs, disbursements, attorney's fees and sanctions against Plaintiff and/or Plaintiff's counsel for instituting a frivolous lawsuit.

FACTS

On or about July 13, Defendant mailed a letter to Plaintiff demanding payment of a $492.00 debt. The letter, in its entirety, reads as follows:

This account has been assigned to our office for collection.

If your payment or notice of dispute is not received in this office within 30 days, we shall recommend further action be taken against you to collect this outstanding balance.

Note: that we have the right to report this debt to the appropriate credit bureau which might have a negative impact on your credit rating. Make your check or money order payable to Healthcare Financial Services.

Please read below. This communication is an attempt to collect a debt and any information obtained will be used for that purpose.

In compliance with the provisions of paragraph 809 of the Consumer Credit Protection Act, Amendments, you are hereby notified of the following:

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume the debt is valid.

If you notify this office in writing within 30 days from receiving this notice, this office will obtain verification of the debt or obtain a copy of a judgement and mail you a copy of such judgement or verification

If you request from this office in writing, within 30 days after receiving this notice, this office will provide you with the name and address of original creditor, if different from the current creditor.

DISCUSSION
I. Standards of Review

Defendant seeks dismissal under Fed. R. Civ. Proc. 12(b)(6) or, in the alternative, summary judgment. See, e.g., Aetna Cas. and Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 573 (2d Cir.2005). Although Defendant's motion is properly construed as a motion for judgment on the pleadings under Rule 12(c) rather than a motion for failure to state a claim under Rule 12(b)(6), the standard for conversion to Rule 56 is the same under either rule. Compare Aetna Cas. and Sur. Co., 404 F.3d at 573 (holding that it is within the Court's discretion to convert a 12(b)(6) motion to summary judgment "when matters outside the pleadings have been presented and accepted by the Court, and where all parties have been given a `reasonable opportunity' to present materials pertinent to the motion's disposition.") with Sheppard v. Beerman, 94 F.3d 823, 828 (2d Cir.1996) (holding that a Rule 12(c) motion may be converted to a motion for summary judgment "if the court chooses to consider evidence extrinsic to the complaint and answer ... [E]ach party shall be given a reasonable opportunity to present all material pertinent to a summary judgment determination".). See also In re G. & A. Books, 770 F.2d 288 (2d Cir.1985), cert. denied, 475 U.S. 1015, 106 S.Ct. 1195, 89 L.Ed.2d 310 (1986) (essential inquiry in converting Rule 12 motion to dismiss into a Rule 56 motion for summary judgment is whether parties reasonably recognize the possibility of conversion or were deprived of a reasonable opportunity to meet facts outside the pleadings.). The parties acknowledge that the pertinent facts in this case are found in the letter Defendant sent to Plaintiff and reasonably anticipate that the Court might grant judgment based upon the parties' submissions.

Federal Rule of Civil Procedure 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See also Celotex Corp. v. Catrett, 477 U.S. 317, 324-325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when there is sufficient evidence favoring the nonmoving party such that a jury could return a verdict in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To defeat a supported motion for summary judgment, the adverse party "must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party." Fed.R.Civ.Proc. 56(e).

II. The Fair Debt Collection Practices Act

The enacted purpose of the Fair Debt Collection Practices Act is equally to "eliminate abusive debt collection practices," "to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged," and "to promote consistent State action." 15 U.S.C. § 1692(e). In separate subsections, the statute regulates the acquisition of information about a debtor and communications in connection with debt collection, see §§ 1692b, 1692c; prohibits harassment or abuse, the use of false or misleading representations and unfair practices by debt collectors, see §§ 1692d, 1692e, 1692f; grants a debtor subject to third-party collection efforts the right to have the debt validated, see § 1692g; and provides for a private right of action and civil liability as well as authorizes enforcement and reporting by the Federal Trade Commission. See §§ 1692k, 1692i, 1692m.

In analyzing claims brought pursuant to the Fair Debt Collection Practices Act, it is well-settled that this Court must employ a "least sophisticated consumer" standard. See, e.g., Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 363 (2d Cir.2005) (citing Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir.1993) (canvassing other Circuits)). See also Russell v. Equifax A.R.S., 74 F.3d 30, 34 (2d Cir. 1996). The least sophisticated consumer standard was imported from Federal Trade Commission Act jurisprudence and grounded in the conclusion that the FDCPA, like other consumer-protection laws, was "not made for the protection of experts, but for the public—that vast multitude which includes the ignorant, the unthinking and the credulous." Clomon, 988 F.2d at 1318 (citing Charles of the Ritz Distributors Corp. v. Federal Trade Commission, 143 F.2d 676, 679 (2d Cir.1944)) (quoting Florence Manufacturing Co. v. J.C. Dowd & Co., 178 F. 73, 75 (2d Cir. 1910)). Notwithstanding a certain logical incoherence to determining how the "least sophisticated consumer" would react to any conduct,1 the least sophisticated consumer standard is an objective standard which measures the questioned conduct "by how the `least sophisticated consumer' would interpret [it]," Russell, 74 F.3d at 34, but discards "unreasonable misinterpretations." Clomon, 988 F.2d at 1319.2 The norm is crafted mindful that the statute "(1) ensures the protection of all consumers, even the naive and the trusting, against deceptive debt collection practices, and (2) protects debt collectors against liability for bizarre or idiosyncratic interpretations of collection notices." Id. at 1320.

Though it has not directly held as much, the Second Circuit has characterized the FDCPA as a "strict liability" statute because any act that violates the regulations of the FDCPA as measured by the least sophisticated consumer standard gives rise to liability, regardless of whether the recipient of the letter suffered any actual damage as a result. See Russell, 74 F.3d at 33 (observing that the act "imposes strict liability."); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 63 (2d Cir. 1993) (same); Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 307 (2d Cir.2003) ("The FDCPA ... permits the recovery of statutory damages up to $1,000 in the absence of actual damages."); Savino v. Computer Credit, Inc., 164 F.3d 81, 86 (2d Cir.1998) ("All that is required for an award of statutory damages is proof that the statute was violated, although a court must then exercise its discretion to determine how much to award, up to the $1,000.00 ceiling."). It may be helpful in the main to conceive of the statute as imposing strict liability against debt collectors, even though such a standard is not to be found in the statute. But at the outer bounds of the statute's application, strict liability damages are inconsistent with both the statutorily authorized affirmative defense of § 1692k(c)3 and the statute's co-equal purpose of protecting scrupulous debt collectors. When a defendant has unintentionally made only a technical mistake, cognizable only under a standard that indulges the hypothetical, logically fallacious, least sophisticated consumer, see supra n. 1., the misapplication of statutory damages based on strict liability tort principles can give rise to questionable awards. This may have a punitive effect, despite the absence of the egregiousness typically associated with punitive damages. Cf. Parker v. Time Warner Entertainment Co., L.P., 331 F.3d 13, 22 (2d Cir.2003) (discussing "the effects of combining a statutory scheme that imposes minimum statutory damages awards ... with the class action mechanism that aggregates many claims.").

The interaction of the least sophisticated consumer standard with the presumption that the FDCPA imposes strict liability has...

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