Huertas v. Galaxy Asset Mgmt.

• Decision Date: 11 April 2011
• Docket Number: No. 10–2532.,10–2532.
• Citation: 641 F.3d 28
• Parties: Hector L. HUERTAS, Appellantv.GALAXY ASSET MANAGEMENT, f/k/a Galaxy Asset Purchasing; Capital Management Services, L.P.; Asset Management Professionals, LLC; Experian Information Solutions; TransUnion, LLC; Applied Card Bank, f/k/a Cross Country Bank.
• Court: U.S. Court of Appeals — Third Circuit

641 F.3d 28

Hector L. HUERTAS, Appellant

v.GALAXY ASSET MANAGEMENT, f/k/a Galaxy Asset Purchasing; Capital Management Services, L.P.; Asset Management Professionals, LLC; Experian Information Solutions; TransUnion, LLC; Applied Card Bank, f/k/a Cross Country Bank.

No. 10–2532.

United States Court of Appeals, Third Circuit.

Submitted Pursuant to Third CircuitLAR 34.1(a) April 1, 2011.Opinion filed April 11, 2011.

Hector L. Huertas, Camden, NJ, Appearing Pro Se.William J. Martin, Esq., Martin, Gunn & Martin, P.A., Westmont, NJ, for Appellee Asset Management Professionals, LLC.James W. Gicking, Esq., Marshall, Dennehey, Warner, Coleman & Goggin, PC, Philadelphia, PA, for Appellee Applied Card Bank.Before: BARRY, JORDAN and GARTH, Circuit Judges.

OPINION OF THE COURT

PER CURIAM.

Hector Huertas appeals pro se from the District Court's dismissal of his claims against Asset Management Professionals (“AMP”) and Applied Card Bank f/k/a Cross Country Bank (“ACB”).¹ For the following reasons, we will affirm.

I.

In addition to AMP and ACB, Huertas brought this lawsuit against four other defendants—Galaxy Asset Management f/k/a Galaxy Asset purchasing (“Galaxy”); Capital Management Services, L.P.; Experian Information Solutions; and TransUnion, LLC. Huertas incurred credit card debt owed to ACB, which sold the debt obligation to Galaxy, which ultimately retained AMP to collect on the debt. Huertas's claims are primarily based upon ACB's transfer of, and AMP's attempts to collect, a “false” debt, i.e., a debt upon which the six-year statute of limitations had run under New Jersey law.² Specifically, Huertas alleged that AMP violated the Fair Debt Collection Practices Act (“FDCPA”) by sending him a letter in February 2009 in an attempt to collect on the time-barred debt, and violated the Fair Credit Reporting Act (“FCRA”) by acquiring his credit information from TransUnion in connection with its improper debt collection efforts. Huertas also alleged that both ACB and AMP breached their duties of good faith and fair dealing, violated the New Jersey Consumer Fraud Act (“NJCFA”), N.J. Stat. Ann. §§ 56:8–1 to –20, and violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961– 1968.

AMP and ACB moved to dismiss the claims against them, pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim. Huertas responded with a “Motion for Judgment on the Pleadings and for Sanctions In Response to Defendant's Applied Bank and Asset Management Professionals Motions to Dismiss.” The District Court granted AMP's and ACB's motions and denied Huertas's motion. The District Court reasoned that expiration of the statute of limitations makes a debt unenforceable, but does not extinguish the debt itself, such that neither ACB's assignment of Huertas's debt nor AMP's attempt to collect on the debt violated the law or breached any duty.

Despite having rejected Huertas's claims to the extent that they were based on a time-barred debt, the District Court recognized that Huertas's filings indicated that he had previously filed for bankruptcy. Since it was unclear to the District Court whether Huertas was alleging that the defendants had attempted to collect a debt extinguished by bankruptcy proceedings, the District Court allowed Huertas to amend his complaint to assert such a theory.

Huertas did not file an amended complaint within the time period prescribed by the District Court. Instead, he dismissed his claims against the remaining defendants, and timely appealed to this Court. On appeal, Huertas explained that he did not amend his complaint because his debt had not, in fact, been discharged in bankruptcy.

II.

The District Court's jurisdiction arose under 28 U.S.C. §§ 1331 & 1367. Our jurisdiction is based on 28 U.S.C. § 1291. ³ Our review of the District Court's decision to grant AMP and ACB's motions to dismiss is plenary. Grier v. Klem, 591 F.3d 672, 676 (3d Cir.2010). “[W]e accept as true all well-pled factual allegations in the complaint and all reasonable inferences that can be drawn from them, and we affirm the order of dismissal only if the pleading does not plausibly suggest an entitlement to relief.” Fellner v. Tri–Union Seafoods, L.L.C., 539 F.3d 237, 242 (3d Cir.2008). We may also consider documents attached to the complaint. Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993). Furthermore, we must construe Huertas's complaint liberally because he is proceeding pro se. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). The same standard of review applies to a motion for judgment on the pleadings. Leamer v. Fauver, 288 F.3d 532, 535 (3d Cir.2002).

III.

A. Validity of the Debt

Huertas's primary contention on appeal is that the District Court erred in concluding that the expiration of the statute of limitations did not extinguish his debt. We agree with the District Court, however, that, under New Jersey law, Huertas's debt obligation is not extinguished by the expiration of the statute of limitations, even though the debt is ultimately unenforceable in a court of law.⁴ See R.A.C. v. P.J.S., Jr., 192 N.J. 81, 927 A.2d 97, 106 (2007) (“When a procedural statute of limitations runs its course, only the remedy is barred, not the common law right.”); Hollings v. Hollings, 8 N.J.Super. 552, 73 A.2d 755, 757 (Ch.Div.1950) (observing that a statute of limitations “is a bar to the remedy only, and does not extinguish, or even impair, the obligation of the debtor”), aff'd, 12 N.J.Super. 57, 78 A.2d 919 (App.Div.1951). In other words, Huertas still owes the debt—it is not extinguished as a matter of law—but he has a complete legal defense against having to pay it. Having reached that conclusion, we agree with the District Court that Huertas has failed to state claims against AMP and ACB for the reasons below.

B. FDCPA claim

Huertas's FDCPA claim against AMP turns on whether a debt collector may attempt to collect upon a time-barred debt without violating the statute. The FDCPA prohibits a debt collector from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt,” 15 U.S.C. § 1692e, including falsely representing “the character, amount, or legal status of any debt,” id. § 1692e(2)(A). The FDCPA also prohibits debt collectors from using unfair or unconscionable means of collecting a debt. Id. § 1692f.

Although our Court has not yet addressed the issue, the majority of courts have held that when the expiration of the statute of limitations does not invalidate a debt, but merely renders it unenforceable, the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its debt collection efforts. Compare Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir.2001) (“[I]n the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid.”), Wallace v. Capital One Bank, 168 F.Supp.2d 526, 527–29 (D.Md.2001) (debt validation notices that were silent as to whether debt was time barred and which did not threaten collection action did not violate FDCPA), and Shorty v. Capital One Bank, 90 F.Supp.2d 1330, 1331–33 (D.N.M.2000) (sending of debt validation notice regarding time-barred debt did not violate the FDCPA), with Larsen v. JBC Legal Grp., P.C., 533 F.Supp.2d 290, 302–03 (E.D.N.Y.2008) (threatening legal action on time-barred debt violated FDCPA), Beattie v. D.M. Collections, Inc., 754 F.Supp. 383, 393 (D.Del.1991) (“[T]he threatening of a lawsuit which the debt collector knows or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is the kind of abusive practice the FDCPA was intended to eliminate.”), and Kimber v. Fed. Fin. Corp., 668 F.Supp. 1480, 1487 (M.D.Ala.1987) (“[A] debt collector's filing of a lawsuit on a debt that appears to be time-barred, without the debt collector having first determined after a reasonable inquiry that that limitations period has been or should be tolled, is an unfair and unconscionable means of collecting the debt.”). We agree with the logic underlying those decisions and conclude that Huertas's FDCPA claim hinges on whether AMP's February 11, 2009, letter threatened litigation.

Whether a debt collector's communications threaten litigation in a manner that violates the FDCPA depends on the language of the letter, which “should be analyzed from the perspective of the ‘least sophisticated debtor.’ ” ⁵ Brown v. Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir.2006) (quoting Wilson, 225 F.3d at 354). AMP's letter indicates that Huertas's account has been reassigned, requests that Huertas call “to resolve this issue,” includes a privacy notice informing him that Galaxy would be accessing his private consumer information, and, as required by 15 U.S.C. § 1692g(a), indicates that, if Huertas does not dispute the debt within thirty days of receiving the letter, AMP will assume the debt is valid. (App. 33.) At the bottom, the letter states, in bold, capital letters, “THIS IS AN ATTEMPT TO COLLECT A DEBT.” ( Id.)

Even the least sophisticated consumer would not understand AMP's letter to explicitly or implicitly threaten litigation. Furthermore, the FDCPA requires debt collectors to inform a debtor “that the debt collector is attempting to collect a debt.” 15 U.S.C. § 1692e(11). Since it is appropriate for a debt collector to request voluntary repayment of a time-barred debt, see Freyermuth, 248 F.3d at 771, it would be unfair if debt collectors were found to violate the FDCPA both if they include the mandated language (because inclusion would threaten suit) and if they do not (because failure to include a mandatory notice...