Tatis v. Allied Interstate, LLC

• Decision Date: 12 February 2018
• Docket Number: No. 16-4022,16-4022
• Citation: 882 F.3d 422
• Parties: Michelle TATIS, Individually and on behalf of all others similarly situated, Appellant v. ALLIED INTERSTATE, LLC; John Does 1–25
• Court: U.S. Court of Appeals — Third Circuit

882 F.3d 422

Michelle TATIS, Individually and on behalf of all others similarly situated, Appellant

v.ALLIED INTERSTATE, LLC; John Does 1–25

No. 16-4022

United States Court of Appeals, Third Circuit.

Argued September 5, 2017

Filed: February 12, 2018

Ari H. Marcus (Argued), Yitzchak Zelman, Marcus & Zelman, 1500 Allaire Avenue, Suite 101, Ocean, NJ 07712, Counsel for Appellant

James C. Martin (Argued), Kellie A. Lavery, Reed Smith, 136 Main Street, Suite 250, Princeton, NJ 08540, Counsel for Appellee

Before: CHAGARES, JORDAN, and HARDIMAN, Circuit Judges.

OPINION OF THE COURT

HARDIMAN, Circuit Judge.

This appeal arises under the Fair Debt Collection Practices Act (FDCPA or Act). The question presented is whether a collection letter sent to collect a time-barred debt that makes a "settlement offer" to accept payment "in settlement of" the debt could violate the Act's general prohibition against "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. We hold that it could.

I

Over ten years ago, Appellant Michelle Tatis incurred a debt of $1,289.86 to Bally Total Fitness Holding Corp. Appellee Allied Interstate, LLC—a debt collector—sent Tatis a letter dated May 18, 2015 that read as follows: "[The creditor] is willing to accept payment in the amount of $128.99 in settlement of this debt. You can take advantage of this settlement offer if we receive payment of this amount or if you make another mutually acceptable payment arrangement within 40 days ...." App. 37. At the time Allied sent its letter, the six-year New Jersey statute of limitations applicable to debt-collection actions had already run. Tatis v. Allied Interstate, LLC , 2016 WL 5660431, at *1, *3 (D.N.J. Sept. 29, 2016) ; see also N.J. STAT. ANN. § 2A:14-1.

Tatis filed a class action in the United States District Court for the District of New Jersey, alleging that Allied's letter violated the FDCPA. The complaint alleged that Tatis interpreted the word "settlement" in the letter to mean that she had a "legal obligation" to pay the debt, and the least-sophisticated debtor would hold a similar belief. Compl. ¶ 27, App. 32. She also claimed the letter was a "false, deceptive, or misleading representation or means in connection with" collecting the debt. Compl. ¶ 37, App. 34. Specifically, Tatis alleged that Allied "[f]alsely represent[ed] the legal status of the debt in violation of 15 U.S.C. § 1692e(2)(A)," made "false threats to take action that cannot legally be taken in violation of 15 U.S.C. § 1692e and 1692e(5)," and used "false representations and/or deceptive means to collect or attempt to collect [the] debt in violation of 15 U.S.C. § 1692e(10)." Compl. ¶ 38, App. 34.

Allied filed a motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim, and the District Court granted the motion.¹ See Tatis , 2016 WL 5660431, at *10. In doing so, the Court looked primarily to our decision in Huertas v. Galaxy Asset Management , 641 F.3d 28, 32–33 (3d Cir. 2011) (per curiam), which it read to hold that an attempt to collect a timebarred debt does not violate the FDCPA unless it is accompanied by the threat of legal action. See Tatis , 2016 WL 5660431, at *5. And because Allied's use of the word "settlement" did not constitute threatened legal action, the Court found dismissal of the complaint appropriate. Id. at *8–9. The Court also found it significant that, under New Jersey law, partial repayment of the debt would not revive the statute of limitations. Id. at *9. Thus, the letter could not deceive or mislead a consumer into inadvertently reviving a time-barred legal claim. Id.²

Tatis filed this appeal.

II³

A

We review de novo the District Court's order dismissing Tatis's complaint under Rule 12(b)(6). Wilson v. Quadramed Corp. , 225 F.3d 350, 353 (3d Cir. 2000). "[W]e accept as true all allegations in the plaintiff's complaint as well as all reasonable inferences that can be drawn from them, and we construe them in a light most favorable to the non-movant." Sheridan v. NGK Metals Corp. , 609 F.3d 239, 262 n.27 (3d Cir. 2010). To survive dismissal, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Plausibility means "more than a sheer possibility that a defendant has acted unlawfully." Id. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ).

B

Congress enacted the FDCPA to curb "abusive, deceptive, and unfair debt collection practices." 15 U.S.C. § 1692(a). Among other things, the Act seeks "to eliminate abusive debt collection practices by debt collectors [and] to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged." Id. § 1692(e). To effectuate these purposes, Congress proscribed the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt" and provided a list of sixteen examples of such prohibited conduct. Id. § 1692e. These include making "false representation[s]" about "the character, amount, or legal status of any debt," id. § 1692e(2)(A), and "threat[ening] to take any action that cannot legally be taken or that is not intended to be taken," id. § 1692e(5). As we have noted, "[b]ecause the list of the sixteen subsections is non-exhaustive, a debt collection practice can be a ‘false, deceptive, or misleading’ practice in violation of section 1692e even if it does not fall within any of the subsections."

Lesher v. Law Offices of Mitchell N. Kay, PC , 650 F.3d 993, 997 (3d Cir. 2011).

The FDCPA is remedial, so we "construe its language broadly, so as to effect its purpose." Brown v. Card Serv. Ctr. , 464 F.3d 450, 453 (3d Cir. 2006). In addition, we employ a "least sophisticated debtor" standard to evaluate whether a particular debt-collection practice violates the Act. Jensen v. Pressler & Pressler , 791 F.3d 413, 418 (3d Cir. 2015) (citing Rosenau v. Unifund Corp. , 539 F.3d 218, 221 (3d Cir. 2008) ). This standard aims to "protect[ ] the gullible as well as the shrewd," id. (alteration in original) (quoting Campuzano–Burgos v. Midland Credit Mgmt., Inc. , 550 F.3d 294, 298 (3d Cir. 2008) ), but it nevertheless "preserv[es] a quotient of reasonableness and presum[es] a basic level of understanding and willingness to read with care," id. (alterations in original) (quoting Rosenau , 539 F.3d at 221 ); see also Lesher , 650 F.3d at 997 (characterizing the least-sophisticated debtor standard as a "low standard"). The standard is objective, "meaning that the specific plaintiff need not prove that she was actually confused or misled, only that the objective least sophisticated debtor would be." Jensen , 791 F.3d at 419.

C

To prevail on her FDCPA claim, Tatis must demonstrate that "(1) she is a consumer, (2) the defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect a ‘debt’ as the Act defines it, and (4) the defendant has violated a provision of the FDCPA in attempting to collect the debt." Douglass v. Convergent Outsourcing , 765 F.3d 299, 303 (3d Cir. 2014). Only the fourth element is disputed in this appeal.

In arguing whether Allied violated the FDCPA, the parties offer competing interpretations of our opinion in Huertas . Allied contends that Huertas imposed a "threat of litigation" requirement that must be present for an attempt to collect a time-barred debt to violate the FDCPA. By contrast, Tatis attempts to distinguish Huertas , arguing that an "offer to settle may mislead the least sophisticated [debtor] into believing that a time-barred debt is legally enforceable, even when litigation is not threatened." Tatis , 2016 WL 5660431, at *2.

In Huertas , the plaintiff received a letter seeking to collect a time-barred debt. 641 F.3d at 31. Suit was brought under 15 U.S.C. § 1692e(2)(A), alleging that the collection letter Huertas received falsely represented the legal status of his debt which, like Tatis's, was time-barred under New Jersey law. Huertas v. Galaxy Asset Mgmt. , 2010 WL 936450, at *4 (D.N.J. Mar. 9, 2010) ; see also Huertas , 641 F.3d at 32. We disagreed for several reasons.

First, we explained that Huertas's debt remained valid under New Jersey law even after the statute of limitations had run. Huertas , 641 F.3d at 32. But even though the debt was still owed, Huertas "ha[d] a complete legal defense against having to pay it." Id. Next, we explained 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." See id. at 32–33. In reaching this conclusion, we cited with approval the Eighth Circuit's decision in Freyermuth v. Credit Bureau Services, Inc. , 248 F.3d 767, 771 (8th Cir. 2001). Consistent with Freyermuth , "Huertas's FDCPA claim hinge[d] on whether [the collection] letter threatened litigation," as "analyzed from the perspective of the ‘least sophisticated debtor.’ " Huertas , 641 F.3d at 33 (quoting Brown , 464 F.3d at 453 ). We concluded that the letter—which informed Huertas that his debt had been reassigned and requested that he contact the agency to "resolve this issue"—contained no such impermissible threat. Id.

Thus, Huertas stands for the proposition that debt collectors do not violate 15 U.S.C. § 1692e(2)(A) when they...