Graziano v. Harrison

Decision Date29 November 1991
Docket NumberNo. 91-5082,91-5082
Citation950 F.2d 107
PartiesAnthony GRAZIANO, Appellant, v. Michael HARRISON, Appellee.
CourtU.S. Court of Appeals — Third Circuit

O. Randolph Bragg (argued), UAW Legal Services Plan, Newark, Del., Alberta T. Foster, UAW Legal Services Plan, Woodbridge, N.J., for appellant.

Michael Harrison (argued), Harlan L. Schlossberg, Harrison & Schlossberg, Cedar Knolls, N.J., for appellee.

Before MANSMANN and SCIRICA, Circuit Judges, and POLLAK, District Judge. *

OPINION OF THE COURT

LOUIS H. POLLAK, District Judge.

This is a case under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o ("the Act"). Appellant Anthony Graziano, plaintiff in the district court, claimed that the debt collection efforts of appellee Michael Harrison, defendant, violated the Act in several respects. The parties filed cross motions for summary judgment; the district court granted summary judgment for Graziano on one count, granted summary judgment for Harrison on the remaining counts, awarded nominal statutory damages of $50, and denied Graziano's application for attorney's fees. 763 F.Supp. 1269. Graziano claims that the district court erred in failing to find more than one violation of the Act, in determining damages, and in denying attorney's fees.

I. FACTUAL HISTORY

Harrison, an attorney who maintains a debt collection practice, sent notice of a delinquent debt to Graziano. That notice stated the name of the creditor and the amount of the unpaid debt ($80.00). It also threatened legal action within ten days unless the debt was resolved in that time. At the bottom of the page appeared the phrase "See reverse side for information regarding your legal rights!" The statement on the reverse purported to inform Graziano of his rights under the Act. The statement informed Graziano that unless he disputed the debt in writing within thirty days, the debt would be assumed valid. It also informed Graziano that, upon receiving written notice of a dispute, Harrison would provide verification of the debt. There is no dispute that the statement of rights was printed in a manner sufficient to bring it to Graziano's attention.

Upon receipt of the notice, Graziano retained an attorney, who, on Graziano's behalf, requested verification of the debt. The verification furnished by Harrison listed a date different from that on the original notice, and described the services provided as "E.R. Extended Service." At the same time, Harrison discovered that Graziano owed an additional debt of $35 for services provided on another date; a bill and computer printout for this debt were enclosed with the verification of the first debt. Graziano's attorney requested clarification but apparently none was forthcoming.

Harrison later sent two additional notices of two additional debts to Graziano (the debts amounted to $22.56 and $20). These notices were sent directly to Graziano, and not to the attorney whom Graziano had retained to handle the first debt.

II. PROCEDURAL HISTORY

Graziano filed a complaint alleging several violations of the Fair Debt Collection Practices Act, and seeking compensatory damages for costs incurred and for emotional distress, statutory damages of $1000 per violation, and attorney's fees. Graziano claimed that Harrison's conduct contravened the Act in the following ways: (1) the requirement that plaintiff dispute the debt in writing violated subsection (a)(3) of 15 U.S.C. § 1692g; 1 (2) the threat to sue within ten days, contained in the same communication that set forth the statutory notice mandated by section 1692g, allowing Graziano thirty days to dispute the debt, effectively eviscerated the statutory notice; (3) the threat to sue within ten days represented a threat to take action that legally could not be taken or that was not intended to be taken in violation of section 1692e(5); 2 (4) the materials Harrison sent to Graziano were not adequate to verify the debt under section 1692g; (5) Harrison, in contravention of section 1692c(a), communicated directly with Graziano at a time when Harrison knew that Graziano was represented by counsel. 3

Harrison moved for summary judgment, asserting that the record revealed no violations of the Act. Graziano filed a cross-motion for partial summary judgment asserting that the undisputed facts established several violations. The district court granted summary judgment for Harrison on all of Graziano's claims, with one exception. The court, finding that Harrison had made a threat that he could not legally or did not intend to carry out under section 1692e(5), granted summary judgment for Graziano on that one count. The court awarded fifty dollars in statutory damages, but declined to award attorney's fees.

On appeal, Graziano argues that the district court erred in failing to find more than one violation of the Act. He also contends that the court misinterpreted the proper measure of statutory damages, and that the court erred in refusing to award attorney's fees.

III. ISSUES
A. Demand for Payment Within Ten Days

Graziano argues that Harrison's demand for payment within ten days, when read in conjunction with the statutory notice that Graziano had thirty days within which to dispute the debt, constituted a breach of section 1692g. 4 The district court was of the view that Harrison's inclusion of these inconsistent recitals violated section 1692e(10), which states that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt," and, by way of illustration, specifies, inter alia, "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." The district court determined, however, that this violation was without consequence, because Graziano had not alleged a violation of section 1692e(10). The court went on to grant summary judgment to Harrison on the count alleging a violation of section 1692g, reasoning that, regardless of the inclusion of the demand for payment within ten days, the text of the statutory notice was adequate to advise Graziano of his rights under that section.

We agree with the district court that there was a violation of section 1692e(10). We feel, however, that the juxtaposition of two inconsistent statements also rendered the statutory notice invalid under section 1692g. Statutory notice under the Act is to be interpreted from the perspective of the "least sophisticated debtor." 5 Baker v. G. C. Servs., 677 F.2d 775, 778 (9th Cir.1982). To comply with the terms of the Act, statutory notice must not only explicate a debtor's rights; it must do so effectively. Thus, for example, the notice must be in print sufficiently large to be read, and must be sufficiently prominent to be noticed. See Swanson v. Southern Oregon Credit Serv., 869 F.2d 1222, 1225 (9th Cir.1988). More importantly for present purposes, the notice must not be overshadowed or contradicted by accompanying messages from the debt collector. There is a reasonable probability that the least sophisticated debtor, faced with a demand for payment within ten days and a threat of immediate legal action if payment is not made in that time, would be induced to overlook his statutory right to dispute the debt within thirty days. See id. at 1225-26. A notice of rights, when presented in conjunction with such a contradictory demand, is not effectively communicated to the debtor. We conclude that the statutory notice provided by Harrison failed to meet the terms of section 1692g.

B. The Writing Requirement

According to section 1692g(a)(3), a debt collection notice submitted under the Act must include "a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector." This statutory language does not expressly require that a debtor's dispute be in writing.

Graziano argues that, because the notice that Harrison sent to him required that any dispute of the debt be in writing, the notice failed to comply with the terms of section 1692g(a)(3). He notes that three courts that have addressed the issue have concluded that, under section 1692g(a)(3), a debtor may dispute a debt, with the consequence that the debt collector may not presume the debt to be valid, without submitting the dispute in writing. See Bailey v. TRW Receivables Mgmt. Servs., Inc., Civ. No. 90-192, Order at 5-6 (D.Haw. Aug. 16, 1990); Young v. Credit Bureau of Lockport, Civ. No. 86-1121, Memorandum and Order at 3-4, 1989 WL 79054 (W.D.N.Y. July 14, 1989); Harvey v. United Adjusters, 509 F.Supp. 1218, 1221 (D.Or.1981).

Harrison counters that, while section 1692g(a)(3) does not itself require that a dispute be in writing, the following two provisions of the Act--section 1692g(a)(4), which allows the debtor to obtain from the debt collector verification of the debt, 6 and section 1692g(a)(5), which allows the debtor to obtain the name and address of the original creditor 7--expressly provide that the debtor communicate with the debt collector in writing. He argues that the requirement of a writing in subsections (a)(4) and (a)(5) of section 1692g reveals a congressional intent that disputes be in writing.

The opinions relied on by Graziano have reasoned that the statutory scheme teaches a different lesson. Since subsections (a)(4) and (a)(5) expressly call for written communications, the absence of such a requirement in subsection (a)(3) is strong evidence--so the opinions argue--that Congress advertently omitted an analogous requirement in subsection (a)(3). See Bailey at 5; Young at 3. Nevertheless, we are of the view that, given the entire structure of section 1692g, subsection (a)(3) must be read to require that a dispute, to be effective, must be in writing.

Subsection (a)(3)...

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