Brown v. Card Service Center

• Citation: 464 F.3d 450
• Decision Date: 29 September 2006
• Docket Number: No. 05-4160.,05-4160.
• Parties: Elizabeth BROWN, On Behalf of Herself and All Others Similarly Situated, formerly known as Elizabeth Schenck, Appellant v. CARD SERVICE CENTER; Cardholder Management Services.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

464 F.3d 450

Elizabeth BROWN, On Behalf of Herself and All Others Similarly Situated, formerly known as Elizabeth Schenck, Appellant v. CARD SERVICE CENTER; Cardholder Management Services.

No. 05-4160.

United States Court of Appeals, Third Circuit.

Argued June 1, 2006.

Filed September 29, 2006.

Cary L. Flitter (Argued), Lundy, Flitter, Beldecos & Berger, P.C., Narberth, PA, David A. Searles, Donovan Searles, LLC, Philadelphia, PA, for Appellant.

Thomas W. Dymek, Stradley, Ronon, Stevens & Young, LLP, Philadelphia, PA, Thomas J. Cahill, Joshua M. Rubins (Argued), Daniel G. Gurfein, Satterlee Stephens Burke & Burke LLP, New York, NY, for Appellees.

Before AMBRO, FUENTES, and GREENBERG, Circuit Judges.

FUENTES, Circuit Judge.

Seeking to recover what it considered a bad debt, Card Service Center sent Elizabeth Brown a collection letter telling her that unless she made arrangements to pay within five days, the matter "could" result in referral of the account to an attorney and "could" result in "a legal suit being filed." Brown sued, claiming that because Card Service Center had no intention of referring her account to an attorney and no intention of filing a law suit, the letter violates the Fair Debt Collection Practices Act's ban on false, misleading or deceptive communications. The District Court dismissed Brown's suit, concluding that because "[t]he letter neither states nor implies that legal action is imminent, only that it is possible," Brown had failed to state a claim upon which relief could be granted. We disagree, and for the reasons that follow we vacate the District Court's judgment and remand for further proceedings.

I. Background

Card Service Center and Cardholder Management Services (collectively, "CSC") are debt-collection firms. In February of 2004, CSC sent Brown a collection letter (the "CSC Letter") demanding payment of a delinquent credit card balance of $1,874, which it stated was due. The letter threatened referral of Brown's account to CSC's attorney if payment was not made within five days. In relevant part, the letter reads:

You are requested to contact the Recovery Unit of the Card Service Center . . . to discuss your account.

Refusal to cooperate could result in a legal suit being filed for collection of the account.

You now have five (5) days to make arrangements for payment of this account. Failure on your part to cooperate could result in our forwarding this account to our attorney with directions to continue collection efforts.

(JA 1.) Though Brown did not make arrangements for payment on her delinquent account within five days, CSC did not institute a suit or otherwise enlist an attorney to assist with its collection efforts. Rather, Brown's decision not to comply with CSC's request resulted only in her receiving additional debt-collection letters from CSC.

In February of 2005, Brown filed suit against CSC in the United States District Court for the Eastern District of Pennsylvania on behalf of herself and all other similarly situated Pennsylvania consumers. In her complaint Brown alleged that the CSC Letter contained "false and misleading" statements "designed to coerce and intimidate the consumer . . . by false threat" and that the complaint suggested a deadline for debtor action that was "false and overstated." (Amend Compl. ¶¶ 11, 13, 15.) In support of this claim, Brown alleged that the 5-day deadline was illusory because CSC never intended to bring suit against her or to refer her debt — or that of the members of her putative class — to an attorney.

In response to the complaint, CSC filed a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the complaint for failure to state a claim under the Fair Debt Collection Practices Act (the "FDCPA" or the "Act"), 15 U.S.C. § 1692 et seq. The District Court granted the motion without prejudice in June of 2005. The District Court's order dismissing the complaint, which was amended by a second order in August of 2005, granted Brown through the end of September to conduct further investigation so that she might amend her complaint, with the caveat that if she failed to do so, the June dismissal would automatically become a dismissal with prejudice. Brown opted not to amend her complaint, and the dismissal became final. This appeal followed.

II. Jurisdiction and Standard of Review

The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1331 and 15 U.S.C. § 1692k(d). We have jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review over the grant of a motion to dismiss. Delaware Nation v. Pennsylvania, 446 F.3d 410, 415 (3d Cir.2006). When considering an appeal from a Rule 12(b)(6) dismissal, we must accept all well-pled allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. In re Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 215 (3d Cir.2002). In doing so, we must determine whether the plaintiff may be entitled to relief under any reasonable reading of the complaint. Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 374 n. 7 (3d Cir.2002).

III. Analysis

Brown maintains that the CSC Letter ran afoul of § 1692e of the FDCPA, which reads in relevant part:

§ 1692e. False or misleading representations

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:

. . .

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

Because CSC qualifies as a "debt collector" under the Act, see 15 U.S.C § 1692a(6), to the extent the CSC Letter is "false, deceptive, or misleading" or constitutes a "threat to take any action . . . not intended to be taken," it violates § 1692e.

A. FDCPA Background

Congress enacted the FDCPA in 1977 after noting the "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors." 15 U.S.C. § 1692(a). At the time the Act was being considered, Congress was concerned that "[a]busive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." Id. A significant purpose of the Act is not only to eliminate abusive practices by debt collectors, but "to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged." 15 U.S.C. § 1692(e).

In its findings Congress observed that "[e]xisting laws and procedures" enacted to remedy the injuries occasioned by abusive debt collectors "are inadequate to protect consumers." 15 U.S.C. § 1692(b). Accordingly, the Act provides consumers with a private cause of action against debt collectors who fail to comply with the Act. 15 U.S.C. § 1692k. A prevailing plaintiff under the Act is entitled to an award of damages, costs of suit and reasonable attorneys' fees. Id.

Because the FDCPA is a remedial statute, Hamilton v. United Healthcare of La., 310 F.3d 385, 392 (5th Cir.2002), we construe its language broadly, so as to effect its purpose, See Stroh v. Director, OWCP, 810 F.2d 61, 63 (3d Cir.1987). Accordingly, in considering claims under another provision of the FDCPA, we have held that certain communications from lenders to debtors should be analyzed from the perspective of the "least sophisticated debtor." See Wilson v. Quadramed Corp., 225 F.3d 350, 354 (applying the perspective of the least sophisticated debtor to the notice provision of the Act, § 1692g) (citation omitted); Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir.1991) ("Statutory notice under the Act is to be interpreted from the perspective of the `least sophisticated debtor.'").

Analyzing lender-debtor communications from this perspective is consistent with "basic consumer-protection principles." United States v. Nat'l Fin. Servs., 98 F.3d 131, 136 (4th Cir.1996). As the Second Circuit has observed, "[t]he basic purpose of the least-sophisticated consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd. This standard is consistent with the norms that courts have traditionally applied in consumer-protection law."¹ Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir.1993). That it may be obvious to specialists or the particularly sophisticated that a given statement is false or inaccurate does nothing to diminish that statement's "power to deceive others less experienced." Federal Trade Comm'n v. Standard Educ. Soc'y, 302 U.S. 112, 116, 58 S.Ct. 113, 82 L.Ed. 141 (1937). As Justice Black has observed, our laws "are made to protect the trusting as well as the suspicious," and this is particularly the case within the realm of consumer protection laws. Id. Bearing all of this in mind we conclude that any lender-debtor communications potentially giving rise to claims under the FDCPA, such as the CSC Letter, should be analyzed from the perspective of the least sophisticated debtor.

The least sophisticated debtor standard requires more than "simply examining whether particular language would deceive or mislead a reasonable debtor" because a communication that would not deceive or mislead a reasonable debtor might still deceive or mislead the least sophisticated debtor. Quadramed, 225 F.3d at 354 (internal quotation marks and citation omitted). This lower standard comports with a basic purpose of the FDCPA: as previously stated, to protect "all consumers, the gullible as well as the shrewd," "the trusting as well as the suspicious," from abusive debt collection practices. However, while the least sophisticated debtor standard protects naive consumers, "it also prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level...