Smith v. Transworld Systems, Inc.

• Decision Date: 14 January 1992
• Docket Number: No. 90-3727,90-3727
• Citation: 953 F.2d 1025
• Parties: Gary SMITH, Plaintiff-Appellant, v. TRANSWORLD SYSTEMS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1025

953 F.2d 1025

21 Fed.R.Serv.3d 1424

Gary SMITH, Plaintiff-Appellant, v. TRANSWORLD SYSTEMS, INC., Defendant-Appellee.

No. 90-3727.

United States Court of Appeals, Sixth Circuit.

Argued May 7, 1991.

Decided Jan. 14, 1992.

Edward A. Icove (argued and briefed), Cleveland, Ohio, for Gary M. Smith.

Patrick J. Perotti (argued and briefed), Dworken & Bernstein, Painesville, Ohio, Karin P. Beam, Anderson, Zeigler, Disharoon & Gary, Santa Rosa, Cal., for Transworld Systems, Inc.

Before KRUPANSKY and MILBURN, Circuit Judges, and CONTIE, Senior Circuit Judge.

CONTIE, Senior Circuit Judge.

Plaintiff-appellant Gary M. Smith appeals the district court's summary judgment dismissal of his action challenging the debt collection practices of defendant-appellee Transworld Systems, Inc. For the following reasons, we affirm the district court's determinations.

I.

Plaintiff-appellant Gary M. Smith ("appellant" or "Smith") owed Ryder Truck Rental, Inc. ("Ryder") $446.21 for charges incurred in February 1988. In April, 1988, Ryder sent a statement to the appellant requesting payment of the debt. Smith requested documentation of this claim which was provided to him in October, 1988, along with Ryder's renewed demand for payment. Smith mailed his $446.21 check to Ryder on November 20, 1988; the appellant's bank records reveal that this check was charged against his account on November 23, 1988. On January 8, 1989, however, Ryder inadvertently referred Smith's account to the defendant-appellee, Transworld Systems, Inc. ("Transworld" or "appellee"), for collection. The referral form issued by Ryder to Transworld incorrectly stated the balance due as $456.21--Smith's November payment was not reflected on the referral form.

On January 13, 1989, Transworld sent a collection letter (resembling a telegram) to the appellant requesting payment of the debt. Transworld used its Columbus, Ohio, office as its return address. ¹ Though Transworld's letter "strongly recommended" that Smith contact Ryder directly, Smith, an attorney, sent a letter to Transworld's Columbus office demanding that Transworld "cease and desist from all further collection activities." The appellant's letter also discussed what Smith considered to be violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Smith's letter, dated January 22, 1989, was mailed to Transworld's Columbus office on January 24, 1989, by certified mail, return receipt requested. Though there is a dispute as to the date Transworld's Columbus office received the letter (the return receipt was signed but not dated), the parties stipulated that Transworld received Smith's letter "on or about January 26, 1989."

On January 27, 1989 (approximately one day after Transworld's Columbus office received Smith's letter), Transworld's Rohnert Park, California, office mailed Smith a second computer-generated collection letter. Transworld engaged in no further collection activities after January 27, 1989.

On May 26, 1989, Smith initiated this action in federal court alleging that Transworld had violated various federal and state law provisions enacted to protect consumers from unfair debt collection practices. Though Smith's complaint enumerated only two "Claims for Relief" (the first claim alleged violations under federal law; the second claim alleged violations under Ohio law), the district court separated Smith's convoluted federal claim into six distinct federal claims:

Count I charged that Transworld twice misrepresented the amount Smith owed, in violation of 15 U.S.C. § 1692e(2)(A);

Count II charged that Transworld twice demanded an amount in excess of the amount actually due, in violation of 15 U.S.C. § 1692e(2)(A);

Count III charged that Transworld failed to give Smith notice of his right to dispute a portion of the debt, in violation of 15 U.S.C. § 1692g(a)(3);

Count IV charged that Transworld twice affiliated itself with the state of Ohio by representing itself as a "licensed agency," in violation of 15 U.S.C. § 1692e(1);

Count V charged that Transworld failed to cease and desist collection activities after being requested to do so, in violation of 15 U.S.C. § 1692g(b); and

Count VI charged that Transworld failed to respond to Smith's demand to verify the debt, in violation of 15 U.S.C. § 1692g(b).

See District Court's July 23, 1990 Memorandum Opinion at 5. Though Smith later moved to file an amended complaint to seek class certification pursuant to Fed.R.Civ.P. 23, the district court judge denied Smith's motion after finding "that plaintiff's proposed amended complaint is insufficient as a matter of law to satisfy the required prerequisites set out in Rule 23(a) necessary to maintain a class action." District Court's January 8, 1990 Order at 5.

On November 15, 1989, Smith filed a motion for partial summary judgment (the federal claims). On January 11, 1990, Transworld responded by filing its brief in opposition to Smith's summary judgment motion, and a cross-motion for partial summary judgment (the federal claims). In its response, Transworld raised (for the first time) a "bona fide error" defense: "A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c).

Smith filed a memorandum opposing Transworld's motion for partial summary judgment on February 23, 1990, arguing that Transworld was precluded from maintaining a 15 U.S.C. § 1692k(c) defense because it had not plead the bona fide error defense in its answer to Smith's complaint. Smith nevertheless addressed the merits of Transworld's bona fide error defense.

On July 23, 1990, the district court judge: denied Smith's motion for partial summary judgment; granted Transworld's motion for partial summary judgment (thereby dismissing Smith's federal claims brought under the FDCPA); and, declined to exercise jurisdiction over Smith's pendent state claims (brought under the Ohio Consumer Sales Practices Act, Ohio Rev.Code § 1345.01 et seq.) which the judge dismissed without prejudice to Smith's right to re-file the claims in state court.

Smith thereafter filed a timely notice of appeal.

II. Summary Judgment

Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A district court's grant of summary judgment is reviewed de novo. Pinney Dock & Transp. Co. v. Pennsylvania Cent. Corp., 838 F.2d 1445, 1472 (6th Cir.), cert. denied, 488 U.S. 880, 109 S.Ct. 196, 102 L.Ed.2d 166 (1988). In its review, this court must view all facts and inferences drawn therefrom in the light most favorable to the nonmoving party. 60 Ivy St. Corp. v. Alexander, 822 F.2d 1432, 1435 (6th Cir.1987).

Though the moving party has the burden of conclusively showing that no genuine issue of material fact exists, id., the nonmoving party, in the face of a summary judgment motion, may not rest on its pleadings but must instead come forward with some probative evidence to support its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); 60 Ivy St. Corp., 822 F.2d at 1435.

"By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986) (emphasis in original). The dispute must be genuine and the facts must be such that if they were proven at trial a reasonable jury could return a verdict for the nonmoving party. 60 Ivy St. Corp., 822 F.2d at 1435. If the disputed evidence "is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. at 2511 (citations omitted).

A.

Smith argues that Transworld's January 13, 1989 collection letter violated 15 U.S.C. § 1692g(a)(3) because it did not "clearly advise the unsophisticated consumer that he/she can dispute not just 'all portions' of the debt, but any portion of the debt." Appellant's Brief at 5-6 (emphasis in original). At issue is the following preprinted language found on the bottom of Transworld's January 13, 1989 letter to Smith:

Transworld Systems Inc. is a licensed collection agency and any information obtained from you will be used for the purpose of collecting this debt. All portions of this claim shall be assumed valid unless disputed within thirty days of receiving this notice. If disputed in writing, verification of the debt will be provided to you. If the original creditor is different from the above named creditor, the name and address of the original creditor will also be provided.

Joint Appendix at 49.

After correctly noting that a court "must determine whether the 'least sophisticated consumer' would be deceived by a collection agency's letters," District Court's July 23, 1990 Memorandum Opinion at 17; see also Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1172-75 (11th Cir.1985) (adopting "least sophisticated consumer" standard), the district court found that Transworld's statement satisfied 15 U.S.C. § 1692g(a)(3) by giving Smith notice that he could dispute the charges: "It is clear that defendant's statement complies with and fulfills the requirements of 15 U.S.C. § 1692g. The Court finds that even the least sophisticated consumer would be apprised by this language that the debt could be disputed." District Court's July 23, 1990 Memorandum Opinion at 15.

15 U.S.C. § 1692g(a)(3) provides:

Within five days after the initial communication with a consumer in connection with the...