Bunting v. Phillips Lytle LLP

• Decision Date: 23 June 2011
• Docket Number: Case No. 5:11-CV-123 (TJM)(DEP)
• Parties: BENJAMIN H. BUNTING, NICOLE M. DORCH, BRIAN KELLEY, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILLIPS LYTLE LLP; AMERICAN TAX FUNDING, LLC; CAPITAL MARKETS CORP. (f/k/a HARRIS NESBITT CORP.); WELLS FARGO FOOTHILL, INC., Defendants.
• Court: U.S. District Court — Northern District of New York

BENJAMIN H. BUNTING, NICOLE M. DORCH, BRIAN KELLEY, on behalf of themselves and all others similarly situated, Plaintiffs, v. PHILLIPS LYTLE LLP; AMERICAN TAX FUNDING, LLC;

CAPITAL MARKETS CORP. (f/k/a HARRIS NESBITT CORP.);

WELLS FARGO FOOTHILL, INC., Defendants.

Case No. 5:11-CV-123 (TJM)(DEP)

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK

DATED:June 23, 2011

THOMAS J. McAVOY,Senior United States District Judge

DECISION & ORDER

I. INTRODUCTION

Plaintiff commenced this class action asserting claims under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") and New York's General Business Law § 349. Defendants have moved pursuant to Fed. R. Civ. 12(b)(6) to dismiss the action. Plaintiffs have opposed the motion. For the reasons that follow, the motion is granted.

II. BACKGROUND

Plaintiffs assert that Defendants American Tax Funding, LLC, BMO Capital Markets Corp., and Wells Fargo Foothill, Inc., are in the business of purchasing Tax LienCertificates from municipalities, including from the City of Syracuse. Upon obtaining the Tax Lien Certificates, Defendants hire law firms for the purposes of foreclosing on the subject properties. One such law firm, and the subject of the instant action, is Phillips Lytle LLP.

The named-Plaintiffs in the action¹ received summonses and complaints from Phillips Lytle indicating that foreclosure lawsuits had been commenced relative to properties in which the named-plaintiffs held a right, title, or interest. The summonses notified the Plaintiffs that they had thirty (30) days from the date of service of the summons to "answer the Complaint in this action, and to serve a copy of your Answer . . . on plaintiff's attorney." The summonses further provided:

NOTICE

YOU ARE IN DANGER OF LOSING YOUR HOME

If you do not respond to this summons and complaint by serving a copy of the answer on the attorney for the company who filed this foreclosure proceeding against you and filing the answer with the court, a default judgment may be entered and you can lose your home.

Speak to an attorney or go to the court where your case is pending for further information on how to answer the summons and protect your property.

Sending a payment will not stop this foreclosure.

YOU MUST RESPOND BY SERVING A COPY OF THE ANSWER ON THE ATTORNEY FOR THE PLAINTIFF AND FILING THE ANSWER WITH THE COURT.

Also attached to the summonses and complaints were standard form "Help for Homeowners in Foreclosure" notices, advising the recipients that they were in danger oflosing their home; advising that they should contact an attorney or the local legal aid office; providing a telephone number (toll-free help-line) and internet website address maintained by the New York State Banking Department where the recipient could obtain sources of information and assistance; and warning of foreclosure rescue scams.

Further, attached to the summonses and complaints were Fair Debt Collection Practices Act ("FDCPA") Notices. These FDCPA Notices provided, inter alia, that

THE PLAINTIFF AS NAMED IN THE ATTACHED COMPLAINT IS THE CREDITOR TO WHOM THE DEBT IS OWED.

THE DEBT DESCRIBED IN THE COMPLAINT ATTACHED HERETO WILL BE ASSUMED TO BE VALID BY THE CREDITOR'S LAW FIRM, UNLESS THE DEBTOR, WITHIN THIRTY (30) DAYS AFTER THE RECEIPT OF THIS NOTICE, DISPUTES THE VALIDITY OF THE DEBT OR SOME PORTION THEREOF.

IF THE DEBTOR NOTIFIES THE CREDITOR'S LAW FIRM IN WRITING WITHIN THIRTY (30) DAYS OF THE RECEIPT OF THIS NOTICE THAT THE DEBT OR ANY PORTION THEREOF IS DISPUTED, THE CREDITOR'S LAW FIRM WILL OBTAIN A VERIFICATION OF THE DEBT AND A COPY OF THE VERIFICATION WILL BE MAILED TO THE DEBTOR BY THE CREDITOR'S LAW FIRM.

IF THE CREDITOR NAMED AS PLAINTIFF IN THE ATTACHED COMPLAINT IS NOT THE ORIGINAL CREDITOR, AND IF THE DEBTOR MAKES A WRITTEN REQUEST TO THE CREDITOR'S LAW FIRM WITHIN THE THIRTY (30) DAYS FROM THE RECEIPT OF THIS NOTICE, THE NAME AND ADDRESS OF THE ORIGINAL CREDITOR WILL BE MAILED TO THE DEBTOR BY THE CREDITOR'S LAW FIRM.

WE ARE ATTEMPTING TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

THIS ADVICE PERTAINS TO YOUR DEALINGS WITH US AS A DEBT COLLECTOR. IT DOES NOT AFFECT YOUR DEALINGS WITH THE COURT, AND IN PARTICULAR IT DOES NOT CHANGE THE TIME AT WHICH YOU MUST ANSWER THE COMPLAINT. THE SUMMONS IS A COMMAND FROM THE COURT, NOT FROM US, AND YOU MUST FOLLOW ITS INSTRUCTIONS EVEN IF YOU DISPUTE THE VALIDITY OR AMOUNT OF THE DEBT. THE ADVICE IN THIS NOTICE ALSO DOES

NOT AFFECT OUR RELATIONS WITH THE COURT. AS LAWYERS, WE MAY FILE PAPERS IN THE SUIT ACCORDING TO THE COURT'S RULES AND THE JUDGE'S INSTRUCTIONS.

Plaintiffs assert that "[c]ontrary to the summons[es], a defendant personally served would only have 20 days to answer the summons and complaint, not 30 days." Compl. ¶ 25 (citing New York Civil Practice Law & Rules ("CPLR") § 320(a)). The Complaint does not allege that any Plaintiff was aware of CPLR § 320(a)'s time limitation, or that any adverse action was taken against any Plaintiff before the thirty (30) day period stated in the summonses expired. Rather, the Complaint alleges that "[u]pon reading the summons[es] and complaint[s] and then the [FDCPA] Notice[s], class plaintiffs become confused as to what they should do, as well as anxious, upset, and embarrassed." Compl. ¶ 27; see also Compl. ¶¶ 31, 36, 40. The Complaint further alleges that, as a result of the confusion, anxiousness, upset and embarrassment caused by reading the summonses, complaints, and FDCPA Notices, "Mr. Bunting had to seek legal representation to defend himself from this foreclosure action," Compl. ¶ 32; Ms. Dorch unsuccessfully attempted to work out a payment plan (see Compl. ¶¶ 37-39²) thereby requiring Ms. Dorch "to seek legal representation to defend herself from this foreclosure action," Compl. ¶¶ 37-40; and "Mr. Kelley had to seek legal representation to defend himself from this foreclosure action." Compl. ¶ 45.

Plaintiffs assert that:

(1) Defendants' act of serving a summons and complaint together with a FDCPANotice violates the FDCPA because, when read together, they "mislead, unfairly and unconscionably confuse, and deceive the consumer as to his or her rights, and overshadows [sic] their rights to validation," in violation of the FDCPA. Compl. ¶¶ 47(c), 46-47 (Count 1);

(2) "Defendants' act of stating in the summons that plaintiffs had 30 days to answer the complaint, when the law in New York State only provides 20 days to answer a complaint where personal service is effected, is false, deceptive, misleading and unfair," in violation of the FDCPA. Compl. ¶ 49 (Count 2);

(3) That the purchase of a Tax Lien Certificate creates a claim against the subject res but which extinguishes personal liability on the part of the property owner, so the "Defendants' act of mischaracterizing the subject tax liens as consumer debts by virtue of the issuance of the FDCPA Notice together with the summons and complaint is false, deceptive, misleading and unfair" in violation of the FDCPA. Compl. ¶ 52 (Count 3);

and

(4) That, by the same conduct, Defendants' actions violated New York's Deceptive Practices Act contained at New York General Business Law §349. Compl. ¶¶ 53-59 (Count 4).

III. STANDARD OF REVIEW

"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1964 (2007)(quoting Conley v. Gibson, 355 U.S. 41, 47, 78S. Ct. 99 (1957)). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 1964-65. "Factual allegations must be enough to raise a right to relief above the speculative level. . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 1965. "'[T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.'" Id. at 1965 (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)(quoting Twombly, 550 U.S. at 570). A complaint does not suffice "if it tenders naked assertions devoid of further factual enhancement." Ashcroft, 129 S. Ct. at 1949. Legal conclusions must be supported by factual allegations. Iqbal, at 1950. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (quoting Twombly, 550 U.S. 557) (internal quotations omitted).

IV. DISCUSSION

a. FDCPA Claims

The Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA") addresses conduct related to debt collectors' actions in attempting to collect debts arising from consumer transactions. See 15 U.S.C. § 1692a(5);³ Beggs v. Rossi, 145 F.3d 511, 512 (2d Cir. 2010); Turner v. Cook, 362 F.3d 1219, 1226-27 (9th Cir. 2004); Staub v. Harris, 626 F.2d 275, 278 (3d Cir. 1980); Sun v. Rickenbacker Collection, 2011 WL 704437, at *2 (N.D.Cal. Feb. 18, 2011); see also Shmerkocvich v. RMC Consulting Group LLC, ...