Alibrandi v. Financial Outsourcing Services

• Citation: 333 F.3d 82
• Decision Date: 18 June 2003
• Docket Number: Docket No. 02-7540.
• Parties: David ALIBRANDI, On behalf of himself and all others similarly situated, Plaintiff-Appellant, v. FINANCIAL OUTSOURCING SERVICES, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 82

333 F.3d 82

David ALIBRANDI, On behalf of himself and all others similarly situated, Plaintiff-Appellant, v. FINANCIAL OUTSOURCING SERVICES, INC., Defendant-Appellee.

Docket No. 02-7540.

United States Court of Appeals, Second Circuit.

Argued: February 20, 2003.

Decided: June 18, 2003.

Lawrence Katz (Lance A. Raphael, of counsel), Katz & Kleinman, Uniondale, NY, for Plaintiff-Appellant.

Ian Chesir-Teran, Ohrenstein & Brown, LLP, New York, NY, for Defendant-Appellee.

Before: OAKES, KEARSE, and B.D. PARKER, Jr., Circuit Judges.

PER CURIAM.

David Alibrandi appeals from a judgment of the United States District Court for the Eastern District of New York (Joanna Seybert, Judge), granting Financial Outsourcing Services, Inc. summary judgment and dismissing Alibrandi's claim under the Fair Debt Collection Practices Act (the "FDCPA" or the "Act"), 15 U.S.C. § 1692 et seq. Alibrandi alleged that in a January 27, 2000 letter seeking payment of a debt he owed to First Union National Bank, Financial Outsourcing did not include the warnings and declarations of debtor rights that the Act requires to be included in correspondence from debt collectors. See 15 U.S.C. §§ 1692e(11), 1692g(a) (1997).

The district court found that, because First Union and Financial Outsourcing deemed Alibrandi's debts not to be in default when Financial Outsourcing wrote to him, Financial Outsourcing was not a "debt collector" and the FDCPA did not require the January 27, 2000 letter to contain the statutory warnings. Accordingly, the court granted Financial Outsourcing's motion for summary judgment and dismissed the case. Alibrandi appealed. We hold that if First Union retained North Shore Agency, Inc., and, by reason of a letter that North Shore as its agent sent to Alibrandi, in effect declared Alibrandi's debt to be in default before First Union referred his account to Financial Outsourcing, the January 27, 2000 letter was required to include the warnings. Because it does not appear at this point that Alibrandi's contentions as to First Union's retention of North Shore and North Shore's communication with him are undisputed, we vacate the judgment and remand for further proceedings.

BACKGROUND

In October 1999 at the conclusion of an automobile lease, First Union, the lessor, concluded that Alibrandi owed it $543.98 due to excess wear and tear on the vehicle. Apparently, First Union retained North Shore to help collect the money and, on November 10, 1999, North Shore wrote to Alibrandi on behalf of First Union seeking payment. In this letter, North Shore stated that it was a debt collector and cautioned Alibrandi that "[s]erious collection of your account with our client, First Union National Bank, begins with this letter." The letter contained the warnings that the FDCPA requires to be included in debt-collector correspondence. See 15 U.S.C. §§ 1692e(11), 1692g. For example, it informed Alibrandi that he could challenge the debt's validity, that there would be consequences for his failure to do so, and that any information North Shore obtained would be used for collection purposes.

As of January 21, 2000, Alibrandi had neither disputed nor paid the debt, and First Union apparently shifted collection responsibility from North Shore to Financial Outsourcing. In structuring its relationship with Financial Outsourcing, First Union envisioned Financial Outsourcing not as a debt collector but as a debt "service provider" whose job was to remind account holders to pay debts that were outstanding but not in default. Significantly, if Financial Outsourcing were a debt service provider, its correspondence with debtors would not have to include the statutory warnings. Debt servicing can be conducted before a debt goes into default, and the FDCPA only requires the warnings to be included in correspondence by "debt collectors" who, by definition, attempt to collect debts in default. According to Financial Outsourcing's contract with First Union:

1. First Union National Bank does not consider these accounts delinquent. Financial [Outsourcing] shall act as a service provider and not a collection agency when handling these accounts. Financial shall not make numerous phone calls at early or late hours nor send numerous letters to such customers. All form letters must be preapproved by First Union.

2. Undisputed accounts that are not paid within 120 days will be recalled and assigned to a collection agency for resolution.

(Letter from Stein to Myers of Jan. 15, 1998 ("Jan. 15, 1998 Letter"), at 1).

On January 27, 2000, Financial Outsourcing wrote Alibrandi, seeking payment of the money he owed First Union. At this time, Financial Outsourcing was unaware of North Shore's letter to Alibrandi. The Financial Outsourcing letter stated:

We are servicing the above referenced account on behalf of First Union National Bank. Your account is not in default.

Your recently expired lease has a deficiency balance which is noted above. This is in accordance with the contract terms that you signed at the lease inception. The balance due is a result of either excess mileage[,] wear and tear[,] or other fees associated with the terms of your lease.

Please remit payment using the enclosed envelope.

Should you have any questions, please contact our office, toll-free, ... as our staff is prepared to assist you.

(Letter from Financial Outsourcing to Alibrandi of Jan. 27, 2000, at 1.)

Financial Outsourcing's key phrases were that it was "servicing" Alibrandi's account and that the account was "not in default." Had Financial Outsourcing been "collecting" rather than "servicing" the debt and had the debt been in "default" as opposed to simply carrying a "deficiency balance," Financial Outsourcing would have been required to provide Alibrandi the warnings required of debt collectors. See 15 U.S.C. §§ 1692e(11), 1692g.

Alibrandi sued Financial Outsourcing, alleging violations of the FDCPA and seeking damages on behalf of himself and a purported class. Specifically, Alibrandi alleged that he had defaulted on his obligation to First Union as of October 1999 and that Financial Outsourcing's January 27, 2000 letter did not contain the warnings the Act requires of debt collectors' correspondence. In response, Financial Outsourcing maintained that it was not a "debt collector" under the FDCPA because it had agreed in its contract with First Union that it was not one and had also agreed that debts such as Alibrandi's would not be considered "delinquent," much less in default.

In granting Financial Outsourcing summary judgment, the district court rejected Alibrandi's argument that a debt goes into default immediately after it becomes due. The court further concluded that, in January 2000, Financial Outsourcing was not a "debt collector" under the FDCPA and, consequently, its correspondence was not governed by the requirements of the FDCPA. The court accordingly dismissed the case pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(c), and 56.¹ Alibrandi appealed. We now vacate.

DISCUSSION

We review a grant of summary judgment de novo, construing the evidence in the light most favorable to the non-moving party and drawing all reasonable inferences in its favor. Int'l Bus. Machines Corp. v. Liberty Mut. Fire Ins. Co., 303 F.3d 419, 423 (2d Cir.2002). "Summary judgment is appropriate only if it can be established that `there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Id. (quoting Fed.R.Civ.P. 56(c)).

This case turns on the definition of "default" for the purposes of the FDCPA. If Alibrandi's debt was not in default when Financial Outsourcing wrote to him, Financial Outsourcing could not have been a debt collector under the Act, and the contents of its January 27, 2000 letter would not have to contain the statutory warnings. On appeal, Alibrandi advances two theories as to why Financial Outsourcing was a debt collector: (1) his debt was in default immediately after it became due; and (2) prior to Financial Outsourcing's letter, First Union, through North Shore, had already declared Alibrandi's debt to be in default by virtue of North Shore's self-identification as a "debt collector."

Congress designed the FDCPA "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e) (1997). Although creditors generally are not subject to the FDCPA, see Aubert v. Am. Gen. Fin., Inc., 137 F.3d 976, 978 (7th Cir.1998), the Act subjects third-party debt collectors to limitations on the content and nature of their correspondence with debtors, see 15 U.S.C. §§ 1692e(11),² 1692g(a).³

For the purposes of the FDCPA, a "debt collector" is one who

uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.

15 U.S.C. § 1692a(6) (1997).

The FDCPA, however, provides a number of exceptions to this definition. One such exception is "any person collecting or attempting to collect any debt owed or due or asserted to be owed or...