Manuel v. Merchants & Prof'l Bureau, Inc.

• Decision Date: 29 April 2020
• Docket Number: No. 19-50814,19-50814
• Citation: 956 F.3d 822
• Parties: Silvia MANUEL, Plaintiff - Appellee v. MERCHANTS AND PROFESSIONAL BUREAU, INCORPORATED, Defendant - Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

956 F.3d 822

Silvia MANUEL, Plaintiff - Appellee

v.MERCHANTS AND PROFESSIONAL BUREAU, INCORPORATED, Defendant - Appellant

No. 19-50814

United States Court of Appeals, Fifth Circuit.

FILED April 29, 2020

Brent Allen Devere, Esq., Karen Elisabeth Oprea, Law Office of Oprea & Weber, Austin, TX, for Plaintiff-Appellee.

David C. Sander, Esq., Scanlan, Buckle & Young, P.C., Austin, TX, for Defendant-Appellant.

James Allen Moseley, Esq., Dylan Owen Drummond, Esq., Gray Reed & McGraw, L.L.P., Dallas, TX, for Amicus Curiae.

Before OWEN, Chief Judge, and HIGGINBOTHAM and WILLETT, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This Fair Debt Collection Practices Act ("FDCPA") appeal concerns the collection of debt too old to be legally enforced under the applicable statute of limitations. In 2016, we held in Daugherty v. Convergent Outsourcing, Inc. , that "a collection letter seeking payment on a time-barred debt (without disclosing its unenforceability) but offering a ‘settlement’ and inviting partial payment (without disclosing the possible pitfalls) could constitute a violation of the FDCPA."¹ Here, the collection letters did not expressly threaten litigation or offer a settlement. Still, the district court, leaning on Daugherty and the out-of-circuit cases it endorsed, held that letters seeking collection of time-barred debt that do not flag the existence and operation of statutes of limitations are misleading as a matter of law. On that basis, it granted Appellee Silvia Manuel partial summary judgment on one of her FDCPA claims. Appellant Merchants and Professional Bureau, Inc. ("Merchants") timely appealed this order. As the letters in question were misleading for more than their mere silence as to the age and time-barred nature of the debt, we leave for another day whether such silence on its own is misleading as a matter of law. We affirm summary judgment on alternate grounds.

I.

A.

Manuel owes Texas Orthopedics, Sports and Rehabilitation Associates ("Texas Orthopedics") a $250 debt for services from December 2010 and January 2011. No payments have been made on the debt, which was transferred to Merchants for collection. Merchants sent Manuel six collection letters in 2011 and, after six years with seemingly no collection effort, it sent four more in 2017. When Merchants sent the 2017 letters, it is undisputed that the four-year Texas statute of limitations barred any lawsuit to collect the debt. At issue here, these letters did not disclose (1) that a lawsuit seeking payment of the debt was time-barred or (2) that any partial payment might defeat a statute-of-limitations defense.

The first letter at issue, dated October 2, 2017, stated in relevant part:

YOU OWE: TX ORTHOPEDICS, SPORTS, & REHAB

AMOUNT DUE: $250.00

Urgent! Payment has not been received!

In reviewing your account today, we show you still have an unpaid balance due. Please remit your balance due immediately in order to prevent any additional collection efforts, such as personal phone calls.

Payment may be made over the phone, by mail or through our secure website shown above. We report unpaid collection accounts to the three national credit reporting repositories. Check by phone and major credit cards accepted by phone, with no service fees added.

The second, dated October 10, 2017, was written in Spanish and stated in relevant part:

YOU OWE: TX ORTHOPEDICS, SPORTS, & REHAB

AMOUNT DUE: $250.00

IMPORTANT NOTICE:

Your account is being reevaluated. We must notify you of additional collection efforts, such as phone calls, can be anticipated if you don’t pay your account immediately.

Pay this debt now to suspend these efforts. We report statements in collection to the national credit repositories.²

The third, dated October 17, 2017, was also written in Spanish and stated in relevant part:

YOU OWE: TX ORTHOPEDICS, SPORTS, & REHAB

AMOUNT DUE: $250.00

Important Warning

You have only one more opportunity to stop all collection efforts. Make payment arrangements immediately.

Please call our office today to make a complete payment or to make payment arrangements on the balance due. We report to the three national repositories.

Finally, the fourth, dated October 25, 2017, again written in Spanish, stated:

YOU OWE: TX ORTHOPEDICS, SPORTS, & REHAB

AMOUNT DUE: $250.00

Account eliminated when it is paid.

Our client has authorized the elimination of this element of your credit history, but we need to receive your complete payment immediately! In most cases this should improve your credit points since this will be eliminated completely from your credit history. As you know, a good credit score is more essential than ever. We will notify all the credit reporting agencies when the bill is paid.

This is a very special offer. Please take advantage of this now.

B.

In March 2018, Manuel sued Merchants and Merchants’s surety, Travelers Casualty and Surety Company of America ("Travelers"). Manuel brought claims under the FDCPA, alleging the 2017 letters were false or misleading ( 15 U.S.C. § 1692e ) and unfair or unconscionable ( 15 U.S.C. § 1692f ) for failing to disclose the time-barred nature of the debt. Manuel also brought a claim under the Texas Debt Collection Act based on the same conduct. Manuel argued that the 2017 letters violated the Texas and federal statutes by failing to inform her that the debt was time-barred and thus judicially unenforceable, and that any partial payment could reinstate the statute of limitations. Manuel also contended that the threat to use "additional collection efforts" could induce an unsophisticated consumer to anticipate litigation.

In December 2018, Manuel moved for partial summary judgment on her § 1692e claim. Merchants then filed its own summary judgment motion. With these motions pending, the parties filed a joint stipulation narrowing the case. They stipulated that Manuel dismissed all claims against Travelers, leaving Merchants as the only defendant, and that Manuel dismissed without prejudice her TDCA claim. Finally, they stipulated that Manuel did not seek actual damages, and if she won summary judgment she would receive the maximum $1,000 statutory damages rather than proceed to trial on that issue.

The district court granted summary judgment for Manuel on her § 1692e claim, concluding

that a debt collection letter that does not inform the consumer that judicial enforcement of the debt is time-barred or that any partial payment on the debt could defeat the otherwise absolute defense of the statute of limitations is a ‘false representation of the character, amount, or legal status of any debt’ under 15 U.S.C. § 1692e(2)(A) and the use of a ‘false representation or deceptive means to collect or attempt to collect any debt’ under 15 U.S.C. § 1692e(10).

Since the letters were misleading under § 1692e, and "there is a growing consensus" that a claim under § 1692f is a "backstop" to catch conduct outside that barred by § 1692e and other provisions, the court granted summary judgment to Merchants on Manuel’s § 1692f claim. Merchants timely appealed.

II.

This Court reviews a grant of summary judgment de novo, applying the same standard as the district court.³ Summary judgment is warranted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."⁴

"This court may affirm the district court’s grant of summary judgment on any ground supported by the record and presented to the district court."⁵

III.

A.

The FDCPA’s purpose is to "eliminate abusive debt collection practices by debt collectors[.]"⁶ Because "Congress ... clearly intended the FDCPA to have a broad remedial scope[,]" it should "be construed broadly and in favor of the consumer."⁷ The provisions of § 1692e relied on by Manuel are as follows:

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

....

(2) The false representation of—

(A) the character, amount, or legal status of any debt; ....

(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.

....

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.⁸

The parties do not dispute that Merchants is a debt collector as understood by the FDCPA or that Manuel was the object of debt-collection activity arising from a consumer debt. This leaves the sole issue of whether Merchants’s letters "use[d] any false, deceptive, or misleading representation or means in connection with the collection of any debt."⁹

"When evaluating whether a collection letter violates § 1692e or § 1692f, a court must view the letter from the perspective of an ‘unsophisticated or least sophisticated consumer.’ "¹⁰ The unsophisticated consumer is "neither shrewd nor experienced in dealing with creditors[,]" but neither is that consumer "tied to the very last rung on the intelligence or sophistication ladder."¹¹ While "[w]e have not formally picked sides" in the circuit debate over whether application of the unsophisticated-consumer standard is a question of law or fact, we "generally treat the issue as a question of law, as we do again here."¹²

B.

Our decision in Daugherty is central to this appeal. There, a debt collector offered to "settle" the plaintiff’s old credit card debt of roughly $32,000 for a payment of roughly $3,000.¹³ We held that "a collection letter that is silent as to litigation, but which offers to ‘settle’ a timebarred debt without acknowledging that such debt is judicially unenforceable, can be sufficiently deceptive or misleading to violate the FDCPA."¹⁴ In doing so we "agree[d] with the Seventh Circuit’s interpretation of the FDCPA in [ McMahon v. LVNV Funding, LLC ,¹⁵ ] and with the Sixth Circuit’s opinion in [ Buchanan v. Northland Group, Inc ,¹⁶ ] insofar as...