Bautz v. ARS Nat'l Servs., Inc.

• Decision Date: 23 December 2016
• Docket Number: No. 16–CV–768 (JFB) (SIL),16–CV–768 (JFB) (SIL)
• Citation: 226 F.Supp.3d 131
• Parties: Virginia T. BAUTZ, on behalf of herself and all others similarly situated, Plaintiffs, v. ARS NATIONAL SERVICES, INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

226 F.Supp.3d 131

Virginia T. BAUTZ, on behalf of herself and all others similarly situated, Plaintiffs,

v.ARS NATIONAL SERVICES, INC., Defendant.

No. 16–CV–768 (JFB) (SIL)

United States District Court, E.D. New York.

Signed December 23, 2016

Plaintiff is represented by Gus Michael Farinella and Ryan L. Gentile of the Law Offices of Gus Michael Farinella P.C., 110 Jericho Turnpike, Suite 100, Floral Park, New York 11001.

Defendant is represented by Peter G. Siachos and Yevgeny Roymisher of Gordon & Rees LLP, 90 Broad Street, 23rd Floor, New York, New York 10004.

MEMORANDUM AND ORDER

Joseph F. Bianco, District Judge:

Plaintiff Virginia T. Bautz ("plaintiff" or "Bautz") brings this putative class action against ARS National Services, Inc. ("defendant" or "ARS") under the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. §§ 1692 et seq .

Defendant now moves to dismiss plaintiff's complaint, pursuant to Federal Rule of Civil Procedure 12(b)(1), for lack of standing. Because the Court concludes that plaintiff has sufficiently alleged (1) a substantive violation of the FDCPA that demonstrates a concrete and particularized injury-in-fact; or, alternatively, (2) a procedural violation of the FDCPA that poses a "risk of real harm" to plaintiff's statutory interests, Strubel v. Comenity Bank , 842 F.3d 181, 189 (2d Cir. 2016) (citing Spokeo Inc. v. Robins , –––U.S. ––––, 136 S.Ct. 1540, 1549, 194 L.Ed.2d 635 (2016) ), defendant's motion is denied.

Plaintiff alleges that defendant violated Section 1692e of the FDCPA by including a "false, deceptive, or misleading representation" in a letter to her concerning the collection of outstanding credit card debt, and the Court previously determined that plaintiff had plausibly stated a claim that the representation at issue was materially misleading to the least sophisticated consumer. The Court now holds, consistent with Supreme Court and Second Circuit precedent, that adequately alleging a "false, deceptive, or misleading representation" under Section 1692e that is materially misleading to the least sophisticated consumer satisfies the concrete injury component of Article III standing because such conduct violates an individual's substantive statutory right to be free of abusive debt practices. The Supreme Court's decision in Spokeo , as well as the Second Circuit's decision in Strubel , do not suggest otherwise; rather, both cases addressed alleged procedural violations of statutes, which do not automatically confer standing absent a concrete harm that satisfies the injury-in-fact requirement of Article III. In contrast, here, the claim involves an alleged materially false and misleading statement that is a substantive violation of Section 1692e, and confers standing upon the plaintiff without running afoul of the guidance in Spokeo and Strubel . In any event, even assuming arguendo that plaintiff's alleged Section 1692e claim could somehow be considered to be a procedural, rather than substantive, violation of the FDCPA, the Court holds that plaintiff still has standing, under Spokeo and Strubel , because, as to the particular alleged violation in this case, she has "demonstrate[d] a sufficient ‘risk of real harm’ to the underlying [statutory] interest to establish concrete injury without ‘need to allege any additional harm beyond the one Congress has identified.’ " Strubel , 842 F.3d at 189 (brackets omitted) (quoting Spokeo , 136 S.Ct. at 1549 ). The Court emphasizes that its analysis is limited to this claim under Section 1692e of the FDCPA, and it offers no view on whether other provisions of the FDCPA confer substantive rights.

I. BACKGROUND

A. The FDCPA

Because the instant motion and the Court's analysis address plaintiff's interests under the FDCPA, a brief discussion of the purpose and structure of the relevant statutory scheme is required.

Congress enacted the FDCPA because of "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors," which "contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." 15 U.S.C. § 1692(a). The statute's purpose is "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." Id . § 1692(e). To that end, the FDCPA prohibits, inter alia , "[t]he false representation of (A) the character, amount, or legal status of any debt; or (B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt," and, more generally, "[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." Id . §§ 1692e(2), (10). Such "conduct is a violation" of the FDCPA. Id . § 1692e.

As a remedy for statutory infractions, the FDCPA permits recovery in individual actions for damages equal to the plaintiff's actual loss and/or statutory damages of no more than $1,000, id . §§ 1692k(a)(1)–(2)(A); and in class actions for "(i) such amount for each named plaintiff as could be recovered" in an individual action, "and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector," id . § 1692k(a)(2)(B). In addition, a successful individual or class action may recover "the costs of the action, together with a reasonable attorney's fees as determined by the court." Id . § 1692k(a)(3).

B. Facts

The following facts are taken from the complaint. The Court assumes them to be true for the purpose of deciding this motion and construes them in the light most favorable to the plaintiff as the non-moving party.

Prior to December 2015, plaintiff incurred a credit card debt owed to Department Stores National Bank ("DSNB"). (Compl., ECF No. 1, ¶ 13.) On or about December 31, 2015, defendant, a debt collector, mailed or caused to be mailed to plaintiff a letter (the "Letter") that attempted to collect that debt. (Id . ¶¶ 10–12, 18; id . Ex. A.) The Letter stated that plaintiff had an outstanding debt of $849.35 and "offer[ed] to settle [her] account for the reduced amount of $467.15. That's a savings of $382.20." (Id . ¶¶ 22–23; id . Ex. A.) In addition, it said that "Department Stores National Bank will report forgiveness of debt as required by IRS [i.e., Internal Revenue Service] regulations." (Id . ¶ 24; id . Ex. A.)

Plaintiff alleges that the language in the Letter "is deceptive and misleading and violated the FDCPA," that defendant's "debt collection practice is largely automated and utilizes standardized form letters," and that defendant mailed or caused to be mailed similar correspondence "over the course of the past year to hundreds of New York consumers ...." (Id . ¶¶ 25, 27, 30.) Specifically, plaintiff asserts that the statement that " ‘Department Stores National Bank will report forgiveness of debt as required by IRS regulations' [the "IRS Language"] could reasonably be understood by the least sophisticated consumer to mean that IRS regulations require that Department Stores National bank report all forgiveness of debt." (Id . ¶ 38.) Plaintiff claims that the IRS Language "giv[es] erroneous and incomplete tax information because in actual fact and according to IRS regulations, Department Stores National Bank ‘will not ’ report to the IRS forgiveness of debt of less than $600." (Id . ¶ 39.) Because the Letter offered to settle plaintiff's debt for only $382.20, plaintiff alleges that the IRS Language was "an attempt by ARS to make consumers think that the IRS requires the reporting of all forgiveness of debt." (Id . ¶ 42.) Plaintiff further claims that "[s]uch a statement in a collection letter suggests to the least sophisticated consumer that failure to pay will get the consumer into trouble with the IRS," and that the "least sophisticated consumer would likely be deceived into [falsely] believing that there would be a tax consequence if she accepted Defendant's offer ...." (Id . ¶¶ 44–45.)

Accordingly, plaintiff asserts that defendant violated the FDCPA, 15 U.S.C. §§ 1692e, 1692e(2), and 1692e(10) ; and seeks statutory damages, attorney's fees, and costs on behalf of herself and a putative class pursuant to 15 U.S.C. § 1692k. (Id . at 9.)

C. Procedural History

Plaintiff commenced this action on February 15, 2016. (ECF No. 1.) On June 2, 2016, defendant filed its first motion to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 13.) That motion was fully briefed on July 14, 2016 (ECF No. 15), and the Court held oral argument on August 24, 2016 (ECF No. 17.)

The Court denied the first motion to dismiss in an oral ruling on August 31, 2016. (ECF No. 19.) It held that plaintiff had sufficiently pled that the Letter contained a "false, deceptive, or misleading representation" under an "an objective test based on the understanding of the least sophisticated consumer." (Tr. of Aug. 31, 2016 Oral Ruling, ECF No. 21, at 3:5–6, 18–22 (citing Bentley v. Great Lakes Collection Bureau , 6 F.3d 60, 62 (2d Cir. 1993), and Vu v. Diversified Collection Servs., Inc. , 293 F.R.D. 343, 359 (E.D.N.Y. 2013) ).) Specifically, the Court concluded that "the combination of the term ‘will report’, as well as the term ‘as required’ " in the IRS Language "reasonably communicates to the least sophisticated consumer that any forgiveness of debt without any qualifications or conditions will be reported to the IRS because it is required by the IRS regulations." (Id . at 4:25–5:5.) In addition, the Court determined that plaintiff had adequately alleged that the IRS Language was "material," and therefore...