Daugherty v. Convergent Outsourcing, Inc.

• Decision Date: 18 June 2015
• Docket Number: CIVIL ACTION NO. H-14-3306
• Parties: ROXANNE DAUGHERTY, Plaintiff, v. CONVERGENT OUTSOURCING, INC. and LVNV FUNDING, LLC, Defendants.
• Court: U.S. District Court — Southern District of Texas

ROXANNE DAUGHERTY, Plaintiff, v. CONVERGENT OUTSOURCING, INC. and LVNV FUNDING, LLC, Defendants.

CIVIL ACTION NO. H-14-3306

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

June 18, 2015

MEMORANDUM AND ORDER

Pending are Defendant LVNV Funding, LLC's Motion to Dismiss (Document No. 7) and Defendant Convergent Outsourcing, Inc.'s Motion to Dismiss (Document No. 12). After having carefully considered the motions, responses, replies, supplemental brief, and applicable law, the Court concludes that the motions should be granted.

I. Background

Plaintiff Roxanne Daugherty ("Plaintiff") brings this suit against Defendants LVNV Funding, LLC ("LVNV") and Convergent Outsourcing, Inc. ("Convergent" and collectively with LVNV, "Defendants"), alleging that she received a January 23, 2014 letter from Convergent that violated the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. § 1692, et seq.¹ Plaintiff allegesthat she is obligated "to pay a debt owed or due, or asserted to be owed or due to a creditor other than Convergent," arising from transactions she incurred on a personal credit card.² She alleges that LVNV is "an entity who acquires debt in default merely for collection purposes," and that it acquired her debt after her default and retained Convergent to collect the debt.³ Convergent's January 23, 2014 letter about which Plaintiff complains (the "Offer Letter") was titled "Settlement Offer," and represented that Plaintiff owed LVNV on her account a total balance of $32,405.91, consisting of $12,824.24 in principal and $19,581.67 in interest, and that LVNV was willing to settle the account in full for $3,240.59. The Offer Letter stated:

This notice is being sent to you by a collection agency. The records of LVNV Funding LLC show that your account has a past due balance of $32,405.91.

Our client has advised us that they are willing to settle your account for 10% of your total balance due to settle your past balance. The full settlement must be received in our office by an agreed upon date. If you are interested in taking advantage of this offer, call our office within 60 days of this letter. Your settlement amount would be $3,240.59 to clear this account in full. Even if you are unable to take advantage of this offer, please contact our office to see what terms can be worked out on your account. We are not required to make this offer to you in the future.

Sincerely,

Convergent Outsourcing, Inc.

THIS IS AN ATTEMPT TO COLLECT A DEBT AND ANY

INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

THIS COMMUNICATION IS FROM A DEBT COLLECTOR.

NOTICE: PLEASE SEE REVERSE SIDE

FOR IMPORTANT CONSUMER INFORMATION⁴

At the close of the Offer Letter there was a detachable form available to be included with payment, which invited the debtor to "Select Your Plan" from three proposals: (1) a "Lump Sum Settlement Offer of 10%," which reiterated the above offer to pay $3,240.59 to settle Plaintiff's account in full; (2) a "Settlement Offer of 25% & Pay Over 3 Months," which allowed Plaintiff to pay $2,700.49 for three months for a settlement of $8,101.48; and (3) an offer for Plaintiff to "Spread Your Payments Over 12 Months," which allowed Plaintiff to pay off the entire balance of the account by making $2,700.49 payments for 12 months.⁵ The Offer Letter contained no mention, express or implied, of a lawsuit or threat of a lawsuit.

Plaintiff does not allege that she was "interested in taking advantage of this offer," or that she called Convergent's office "within 60 days of this letter" as she was invited to do if she were interested in the settlement offer, or that she had any interaction with Convergent or with LVNV during those 60 days orthereafter. Nor does she allege that she made any payment or partial payment of her debt. Nearly 10 months later, however, on November 18, 2014, Plaintiff filed this suit to recover statutory damages of $1,000, non-specified "actual damages," and attorneys' fees.

Plaintiff alleges--without citation to any subsection either of 15 U.S.C. 1692e or of 1692f--that the Offer Letter violated those sections because (1) it did not disclose that Plaintiff may incur tax liability for the forgiven debt and (2) it failed "to advise that the Debt was outside the applicable statute of limitations," or that "partial payment would have revived the statute of limitations," which Plaintiff alleges is "uncon-scionable."⁶ LVNV and Convergent move to dismiss Plaintiff's suit for failure to state a claim.⁷

II. Legal Standard

Rule 12(b)(6) provides for dismissal of an action for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). When a district court reviews the sufficiency of a complaint before it receives any evidence either by affidavit or admission, its task is inevitably a limited one. See Scheuer v.Rhodes, 94 S. Ct. 1683, 1686 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 102 S. Ct. 2727 (1982). The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support the claims. Id.

In considering a motion to dismiss under Rule 12(b)(6), the district court must construe the allegations in the complaint favorably to the pleader and must accept as true all well-pleaded facts in the complaint. See Lowrey v. Tex. A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). To survive dismissal, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1974 (2007). "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." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). While a complaint "does not need detailed factual allegations . . . [the] 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)." Twombly, 127 S. Ct. at 1964-65 (citations and internal footnote omitted).

III. Analysis

It is undisputed that Plaintiff was a "consumer," that she owed a "debt," and that Defendants were "debt collectors" within the meaning of the FDCPA and properly identified themselves as such as required by the FDCPA.⁸ Plaintiff argues that the Offer Letter was a "false, deceptive, or misleading representation or means in connection with the collection of any debt" in violation of section 1692e, and constituted an "unfair or unconscionable means to collect or attempt to collect any debt, in violation of section 1692f."⁹ 15 U.S.C. §§ 1692e, 1692f. Each of these two sections includes long lists of specific conduct that such section identifies, respectively, as "false, deceptive, or misleading representation or means," or "unfair or unconscionable means," in collecting a debt. None of these subsections is cited by Plaintiff and, indeed, none of them states that in connection with thecollection of a debt legal advice must be given on a debtor's potential income tax obligations or on state statutes of limitations for lawsuits where no lawsuit is mentioned or threatened, either expressly or impliedly.

A. Not Providing Advice on Possible Tax Consequences of Debt Forgiveness

Plaintiff alleges that the Offer Letter "did not disclose that [if Plaintiff accepted the offer to settle the debt for 10% of the balance due] Convergent or LVNV would be required by the IRS to report the forgiven $29,165.32 as Plaintiff's income, and issue a form 1099-C," and that accordingly, "Defendant's representation that Plaintiff's payment obligations would be satisfied in full is misleading, where Plaintiff would also have to pay an additional amount due to the proposed settlement."¹⁰

Courts confronted with this argument have uniformly held that non-lawyer debt collectors have no obligation under the FDCPA to disclose in dunning letters possible tax consequences of debt forgiveness. Most recently, the Second Circuit last month held that a similar letter offering settlement of the debtor's account for a lump-sum payment equal to a "savings of 48% on your outstanding account balance" did not violate the FDCPA for omitting advice on the possible tax consequences of the forgiven portion ofthe debt. See Altman v. J.C. Christensen & Associates, Inc., No. 14-2240-CV, 2015 WL 2242398, at *1 (2d Cir. May 14, 2015) ("We . . . hold that a debt collector need not warn of possible tax consequences when making a settlement offer for less than the full amount owed to comply with FDCPA."). See also Rigerman v. Forster & Garbus LLP, No. 14-CV-1805 MKB, 2015 WL 1223760, at *4 (E.D.N.Y. Mar. 16, 2015) ("There is no language in the FDCPA that requires a debt collector to notify a debtor of the potential tax consequences of any debt forgiveness.") (finding dunning letter not misleading); Schaefer v. ARM Receivable Mgmt., Inc., No. CIV.A. 09-11666-DJC, 2011 WL 2847768, at *5 (D. Mass. July 19, 2011) ("The language of the FDCPA does not require a debt collector to make any affirmative disclosures of potential tax consequences when collecting a debt. . . . [R]equiring, as a matter of law, debt collectors to inform a debtor of such a potential collateral consequence of settling a pre-existing debt seems far afield from even the broad mandate of FDCPA to protect debtors from abusive debt collection practices."); Landes v. Cavalry Portfolio Servs., LLC, 774 F. Supp. 2d 800, 802-03 (E.D. Va. 2011) ("Boiled down to its essence, the Complaint essentially amounts to a claim that [defendant] violated the FDCPA by failing to advise [plaintiff] and other consumers of the tax consequences of accepting a discount of their debt. However, there is no language anywhere in the FDCPA that mandates such affirmativedisclosures by a debt collector.").¹¹ Accordingly, Plaintiff's FDCPA claim based on Defendants' not having given to her advice on possible...