Bryan v. Credit Control, LLC

• Decision Date: 03 April 2020
• Docket Number: Docket No. 19-244-cv,August Term 2019
• Citation: 954 F.3d 576
• Parties: Michael BRYAN, on behalf of himself and all others similarly situated, Plaintiff-Appellant, v. CREDIT CONTROL, LLC, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

954 F.3d 576

Michael BRYAN, on behalf of himself and all others similarly situated, Plaintiff-Appellant,

v.CREDIT CONTROL, LLC, Defendant-Appellee.^*

Docket No. 19-244-cv

August Term 2019

United States Court of Appeals, Second Circuit.

Argued: November 20, 2019

Decided: April 3, 2020

TIFFANY N. HARDY (Daniel A. Edelman, on the brief) Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Appellant.

PATRICK A. WATTS, Watts Law Group, LLC, St. Louis, MO (Donald S. Maurice, Jr., Thomas R. Dominczyk, Maurice Wutscher, LLP, Flemington, NJ, on the brief), for Appellee.

Before: Walker, Lynch, and Sullivan, Circuit Judges.

Richard J. Sullivan, Circuit Judge:

Section 1692g of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq ., mandates that a debt collector disclose to a consumer "the creditor to whom the debt is owed," id. § 1692g(a)(1). This appeal requires us to consider whether a debt collector violates Section 1692g when, in a collection letter concerning private label credit card debt, it discloses the name of the retailer that services the credit card but not the financial institution that owns the debt.

Plaintiff-Appellant Michael Bryan, individually and on behalf of a class, brought suit alleging that Defendant-Appellee Credit Control, LLC ("Credit Control"), a debt collector, violated Section 1692g when it sent him a collection letter related to his Kohl’s Department Stores, Inc. private label credit card debt. The letter listed Kohl’s Department Stores, Inc., which services the credit card, as Credit Control’s "client," but made no mention of Capital One, which owns the debt. Bryan also alleged that, because the letter failed to mention Capital One, it constituted a false or misleading communication in connection with a debt, in violation of 15 U.S.C. § 1692e. The district court (Sandra J. Feuerstein, J. ) granted Credit Control’s motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure.

On appeal, Bryan argues that the district court erred in holding that Credit Control did not violate Section 1692g – and therefore did not violate Section 1692e – because Kohl’s was the "creditor to whom the debt is owed." We agree.

BACKGROUND ¹

The Kohl’s private label credit card allows consumers to purchase goods at Kohl’s online and brick-and-mortar stores. Until 2011, Kohl’s issued its private label credit cards in partnership with Chase Bank; since then, it has issued the cards in partnership with Capital One. Various public documents make clear that Capital One, not Kohl’s, owns the debt on these cards. Kohl’s SEC Form 10-K states that "[t]he proprietary Kohl’s credit card accounts are owned by an unrelated third-party, but [Kohl’s] share[s] in the net risk-adjusted revenue of the portfolio." App’x 37. The Kohl’s Cardmember Agreement ("Cardmember Agreement"), which is posted online, expressly states that Capital One is the "creditor and issuer" of the accounts. Id. at 117. The Private Label Credit Card Program Agreement between Kohl’s and Capital One ("Program Agreement") further states that Capital One "offer[s] Private Label Credit Cards to qualified customers," id. at 63, "extend[s] credit on newly originated and existing Accounts," id. at 68, "own[s] ... all [a]ccounts," id. at 69, and has the exclusive right to "effect collection" of amounts owed, id. The Cardmember Agreement states that Kohl’s services the accounts, and the Program Agreement specifies that Kohl’s is responsible for, among other things, processing credit applications, establishing and monitoring accounts, handling collection and recovery efforts, and preparing and mailing billing statements.

After Bryan defaulted on his Kohl’s private label credit card account debt, Credit Control, a debt collector as defined by the FDCPA, see 15 U.S.C. § 1692a(6), sent Bryan a debt collection letter. See App’x 46. The letter listed "Kohl’s Department Stores Inc." as "Our Client" and "Chase Bank Usa N.A." as the "Original Credit Grantor." It further listed the "Client Account #" and the "Balance Due," but did not disclose that Capital One owned the debt.

Bryan filed this action on February 8, 2018, alleging that Credit Control violated the FDCPA because that letter did not list Capital One as "the creditor to whom the debt is owed." 15 U.S.C. § 1692g(a)(2). He further alleged that, because Credit Control did not disclose Capital One, the letter was misleading, in violation of 15 U.S.C. § 1692e. Credit Control filed its answer on March 23, 2018, and moved for judgment on the pleadings on July 18, 2018. In response, Bryan sought leave to amend his complaint to add an allegation that Kohl’s was not the current creditor, and attached a proposed amended complaint and a number of exhibits, including the Cardmember Agreement and the Program Agreement.

The district court referred the motions to Magistrate Judge Locke, who considered the substance of the amended complaint and recommended judgment on the pleadings in favor of Defendant. Magistrate Judge Locke opined that Kohl’s is the "creditor to whom the debt is owed," and the failure to disclose the owner of the debt was not misleading because it would not have materially affected a consumer’s decision-making process. He thus recommended that the motion to amend the complaint be denied as futile. The district court considered Bryan’s objections, but ultimately adopted the report and recommendation in its entirety. It therefore granted Credit Control’s motion for judgment on the pleadings, denied Bryan’s motion to amend the complaint, and dismissed the case.

STANDARD OF REVIEW

We review the district court’s decision to grant judgment on the pleadings de novo . See Hayden v. Paterson , 594 F.3d 150, 160 (2d Cir. 2010). We must "accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiff[’s] favor," and affirm the district court’s decision only if plaintiff’s complaint fails "to state a claim to relief that is plausible on its face." Id. (internal quotation marks omitted).

DISCUSSION

Bryan argues that the district court erred in holding that (1) by identifying Kohl’s as the "client," Credit Control identified the "name of the creditor to whom the debt is owed," and (2) because the letter identified the "creditor to whom the debt is owed," it made no material misstatement in violation of Section 1692e. Because we conclude that the district court erred in finding that Credit Control identified the "name of the creditor to whom the debt is owed," we do not reach the question of whether there was a material misstatement in violation of Section 1692e.

I. Section 1692g

The FDCPA requires that a debt collector attempting to collect a debt must, within five days after its initial communication, send the consumer a written notice containing, among other things, "the name of the creditor to whom the debt is owed," unless it provided that information in the initial communication. 15 U.S.C. § 1692g(a)(2). "A debt collector violates the [FDCPA] if it fails to convey the information required by the [FDCPA]." DeSantis v. Comput. Credit, Inc. , 269 F.3d 159, 161 (2d Cir. 2001). "Even if a debt collector conveys the required information, the collector nonetheless violates [ Section 1692g ] if it conveys that information in a confusing or contradictory fashion so as to cloud the required message with uncertainty." Id. A collection letter is misleading if the "least sophisticated consumer – one not having the astuteness of a Philadelphia lawyer or even the sophistication of the average, everyday, common consumer," Taylor v. Fin. Recovery Servs., Inc. , 886 F.3d 212, 214 (2d Cir. 2018) (internal quotation marks omitted) – is left "uncertain as to the meaning of the message," DeSantis , 269 F.3d at 161 (internal quotation marks and citation omitted).

In arguing that Credit Control violated Section 1692g, Bryan insists that "the creditor to whom the debt is owed" is synonymous with the "owner" of the debt, and that Credit Control was therefore required to list Capital One – not Kohl’s – as the creditor to whom Bryan’s credit card debt was owed. The FDCPA provides that a "creditor" is "any person who offers or extends credit creating a debt or to whom a debt is owed," except if that person "receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another." 15 U.S.C. § 1692a(4). Relying on the Program Agreement, the district court found that Kohl’s qualified as a creditor because "Kohl’s is the entity offering credit accounts to its customers ... and, in turn, facilitating the incurrence of monetary obligations through transactions by consumers exclusively at its stores." Bryan v. Credit Control, LLC , No. 18-CV-0865 (SJF)(SIL), 2018 WL 6520730, at *4 (E.D.N.Y. Dec. 11, 2018), report and recommendation adopted , 2019 WL 166100 (E.D.N.Y. Jan. 9, 2019).

But the mere fact...