Guerrero v. Rjm Acquisitions LLC, 05-15121.

Citation499 F.3d 926
Decision Date23 August 2007
Docket NumberNo. 05-15121.,05-15121.
PartiesKenneth Jon GUERRERO, Plaintiff-Appellee, v. RJM ACQUISITIONS LLC, Defendant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

John Harris Paer, Honolulu, HI, for the plaintiff-appellee.

David J. Minkin, McCorriston, Miller, Mukai, & MacKinnon, LLP, Honolulu, HI, for the defendant-appellant.

Daniel P. Shapiro, Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., Chicago, IL, Amicus Curiae for the National Association of Retail Collection Attorneys and the Debt Buyers' Association, Inc.

Appeal from the United States District Court for the District of Hawaii; Helen Gillmor, District Judge, Presiding. D.C. No. CV-03-00038-HG.

Before: STEPHEN S. TROTT, KIM McLANE WARDLAW, and W. FLETCHER, Circuit Judges.

Per Curiam Opinion; Partial Concurrence and Partial Dissent by Judge WILLIAM A. FLETCHER.

PER CURIAM.

Kenneth Jon Guerrero, a consumer, sued RJM Acquisitions, LLC, a purchaser of consumer debt, in the United States District Court for the District of Hawaii alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. After extensive pretrial litigation, the district court issued two orders. The first denied RJM's motion to dismiss Guerrero's first amended complaint and ruled on the parties' cross summary judgment motions, concluding that RJM violated the Act and therefore Guerrero was entitled to actual and statutory damages and reasonable attorneys' fees. The second order adopted a special master's report recommending an award to Guerrero of over $45,000 in attorneys' fees. RJM appeals from these orders, claiming the district court incorrectly interpreted the Act. We have jurisdiction pursuant to 28 U.S.C. § 1291, and after carefully reviewing the district court's rulings, we reverse and remand.

I

RJM claims the district court erroneously denied RJM's motion to dismiss, in which RJM asserted that Guerrero's first amended complaint did not relate back to the date he filed his original complaint, and therefore his action was barred by the Act's one-year statute of limitations. As for the rulings on the parties' summary judgment motions, RJM claims the district court incorrectly interpreted the Act's provisions and what they require of debt collectors. Specifically, RJM challenges the district court's conclusions that RJM violated the Act when it (1) sent Guerrero two collection letters containing slightly different account and file numbers, in an attempt to collect one debt, in violation of § 1692g(a); (2) continued collection efforts, in violation of § 1692g(b), after receiving notice that Guerrero disputed the debt and before providing verification of the debt; and (3) misrepresented to Guerrero's counsel, in violation of § 1692e, that it was not a debt collection agency and not subject to the Act. In light of these allegedly erroneous conclusions, RJM argues, the district court's conclusion that RJM violated Hawaii consumer protection statutes is likewise incorrect. RJM claims also that Guerrero's complaint was brought in bad faith and to harass, and therefore the district court should have awarded RJM attorneys' fees. Finally, RJM challenges the district court's award of over $45,000 in attorneys' fees to Guerrero.

RJM and amici the National Association of Retail Collection Attorneys and the Debt Buyers' Association urge us to consider also whether communications that violate the Act when directed at a consumer do not violate the Act when directed at a consumer's legal counsel. RJM and amici argue for an affirmative answer to this question. RJM argued before the court, and amici argued in its brief, that the Act's purpose is to protect unsophisticated debtors from abusive debt collectors, and once a consumer obtains this protection by procuring legal counsel, the Act's protections become superfluous and therefore its provisions no longer apply. We agree. The Act's language and underlying purposes recognize a distinction between a consumer and a consumer's legal counsel. They are distinct legal entities. We therefore hold that the letter directed to the consumer's attorney after receiving notice that the consumer disputed an alleged debt does not violate the Act.

RJM and amici urge us also to correct the district court's conclusion that "even if [RJM] had ceased with its efforts to collect the alleged debt, [RJM] still would have been obligated to verify" it. We respectfully disagree with the district court, and hold that the Act requires a debt collector who receives notice that a consumer disputes an alleged debt to cease collection efforts until it provides the consumer with verification of the debt. The Act does not impose an independent obligation to verify a debt where the collector ceases all collection efforts directed at the consumer.

II

In May of 2002, RJM sent Guerrero two "WE ARE YOUR NEW CREDITOR" collection letters, one to his home address and one to his post office box. Each letter informed Guerrero that RJM had purchased a debt Guerrero originally owed to Shell Oil Corp., each contained the same partially redacted social security number, and each indicated a balance of $1291.86. The letters were identical except that Guerrero's mailing address on each letter was different, and the last letter in both the "account" and "RJM file" identifiers, which appeared at the top and the bottom of each letter, were slightly different. The account and file numbers in the letter sent to Guerrero's post office box each consisted of a series of numbers followed by the letter "A". The account and file numbers in the letter sent to his street address were identical to those in the other letter in all respects but one — they ended with a "B".

In small print below the account information in each letter, the words "Please see reverse side for important information" appeared. On the reverse side of each letter appeared language the Act requires debt collectors to include in initial communications with consumers regarding collection of debts, informing Guerrero that if he disputed the debt in writing within thirty days of receiving the letter, RJM would obtain and provide Guerrero with verification of the debt or a copy of a judgment against him. As mandated by the Act, each letter concluded with the statement that "[t]his is an attempt to collect a debt."

Between May 20 and June 10, Guerrero contacted his lawyer, Mr. Paer, regarding RJM's debt collection effort. Electing to turn the tables on RJM, attorney Paer wrote RJM on June 10, asserting violations of the Act and related Hawaii state laws by RJM, and offering to settle Guerrero's claims arising from these alleged violations within ten days for a payment from RJM of $3,000.00. He threatened also to sue RJM in federal court. The subject line of attorney Paer's letter went so far as to read: "Re: Guerrero v. RJM Acquisitions LLC." At this point in time, RJM had sent to Guerrero only the two letters dated May 20.

Attorney Paer, threatening to transform a simple debt collection matter into a federal case, wrote:

Please be advised that this office represents Mr. Kenneth Jon Guerrero.

It is his position that your letters of May 20, 2002, and its [sic] other collection attempts do not comply with the Fair Debt Collection Practices Act. . . . Mr. Guerrero will accept payment of $3000.00 covering both actual and statutory damages as well as attorneys fees in full settlement of his claims.

This offer will remain open for ten days from today, after which, Mr. Guerrero expects to file his action in Federal District Court to obtain the sums due him. Please respond within that time if you are interested in resolving this matter without litigation.

In addition, Mr. Guerrero hereby indicates formally that he disputes this alleged debt and requests that you send him verification of the debt. . . . Send verification and other communication to this office and not to Mr. Guerrero.

(emphasis added).

Attorney Paer's letter can only be described as a hardball tactic aimed either at resolving his client's debt at less than the amount RJM believed Guerrero owed, or at generating a lawsuit against RJM, or both. The letter had as one of its objectives the collection from RJM of alleged damages and attorneys' fees for violations of the Act for which attorney Paer claimed RJM was clearly liable. In point of fact, all RJM had done was send a letter to the two addresses, provided by the debtor, seeking to collect a relatively small debt. As we shall explain, the letters did not violate the Act, and attorney Paer's claims to the contrary were baseless. In return, RJM received a short ten-day turnaround demand for more than double the amount of the debt, including attorneys' fees, and a threat of immediate federal litigation.

Upon receipt of attorney Paer's letter, RJM ceased all direct collection activity from Guerrero. As instructed by Guerrero's attorney, and in compliance with the Act,1 RJM wrote attorney Paer on June 14, 2002, stating that it had acquired the Shell Oil account opened in the name of Kenneth Guerrero from Citibank, and providing Guerrero's complete social security number and the date of last payment. Enclosed with this letter was a copy of a June 11, 2002 letter from Citibank to Kenneth J. Guerrero. The letter reads,

Dear Mr. Guerrero,

The inquiry we received in reference to Associates/ Shell Oil account number 146240502 should be directed to:

                  RJM Acquisitions, LLC
                  575 Underhill Blvd
                  Suite 224
                  Syosset, N.Y. 11791
                  800-541-0824
                

Citibank no longer owns this account. This account was sold to RJM in March, 2002. All communication concerning this account should be addressed to the new owner.

                  Sincerely
                  [signed]
                  Portfolio Analyst
                

This letter responding to an inquiry presumably by Guerrero was sent to him by Citibank at his address approximately one month after he received from RJM the May, 2002 letters...

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