Ellis v. Slamowitz

• Decision Date: 26 March 2010
• Docket Number: No. 1:09-cv-0810 (GLS/RFT).,1:09-cv-0810 (GLS/RFT).
• Citation: 701 F.Supp.2d 215
• Parties: Dennis ELLIS, Plaintiff,v.COHEN & SLAMOWITZ, LLP, Defendant.
• Court: U.S. District Court — Northern District of New York

701 F.Supp.2d 215

Dennis ELLIS, Plaintiff,v.COHEN & SLAMOWITZ, LLP, Defendant.

No. 1:09-cv-0810 (GLS/RFT).

United States District Court,

N.D. New York.

March 26, 2010.

COPYRIGHT MATERIAL OMITTED

Office of Anthony J. Pietrafesa, Anthony J. Pietrafesa, Esq., of Counsel, Schenectady, NY, for the Plaintiff.

Smith, Sovik Law Firm, Daniel R. Ryan, Esq., of Counsel, Syracuse, NY, for the Defendant.

MEMORANDUM-DECISION AND ORDER

GARY L. SHARPE, District Judge.

I. Introduction

Plaintiff Dennis Ellis brings this action against defendant Cohen & Slamowitz, LLP (C & S) under the Fair Debt Collection Practices Act (FDCPA) ¹ and New York General Business Law § 349. (Compl., Dkt. No. 1.) Pending is C & S's motion to dismiss. (Dkt. No. 8.) For the reasons that follow, C & S's motion is denied.

II. Background

On January 12, 2009, defendant C & S sent a letter to plaintiff Dennis Ellis demanding that he pay $6,370.35 for an alleged debt owed to Target National Bank. ( See Compl. ¶ 6, Dkt. No. 1.) C & S advised Ellis that Target referred Ellis's account to its law office for collection. ( See Letter One, Dkt. No. 1:2.) In the letter, C & S also provided Ellis with a “Validation Notice,” which stated: (1) that unless Ellis disputed the validity of the debt within thirty days, the debt would be assumed valid; and (2) that if Ellis disputed any portion of the debt, S & C would obtain and mail a verification of the debt to him. ( See id.)

On January 29, 2009, C & S sent Ellis a second letter entitled “Tax Season Special Discount.” ( See Letter Two, Dkt. No. 1:3.) In this second letter, C & S stated that it was offering Ellis “a savings of 30% off on the outstanding balance owed on [his] account ... [and] will accept the reduced sum of $4,490.75 if [he] pay[s] this amount on or before February 25, 2009.” ( Id.) In a third letter, also dated January 29, 2009, C & S advised Ellis that “[o]ur client has authorized us to commence suit against you.” (Letter Three, Dkt. No. 1:4.) This third letter does not mention either of the previous two letters or Ellis's ability to seek validation of the debt or the tax season discount offer.

Following the receipt of these letters, Ellis filed suit against C & S on July 16, 2009, under the FDCPA and New York General Business Law based on allegations that the contents of the individual letters, the sequence of the letters, and the letters in the aggregate were deceptive and misleading and overshadowed and contradicted his validation rights. ( See Compl. ¶¶ 16-36, Dkt. No. 1.) As a result, Ellis seeks actual and statutory damages, attorneys' fees and costs, a declaration that C & S violated the FDCPA and New York General Business Law, and an injunction preventing C & S from sending letters offering a discount without a notice of the attendant tax ramifications. ( See id. at 10.) On September 3, 2009, C & S moved to dismiss each of Ellis's claims under Fed. R. Civ. P. 12(b)(6). ( See Dkt. No. 8.)

III. Standard of Review

Rule 12(b)(6) provides that a cause of action shall be dismissed if a complaint fails “to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In ruling on a Rule 12(b)(6) motion, the court's task is “merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.” AmBase Corp. v. City Investing Co. Liquidating Trust, 326 F.3d 63, 72 (2d Cir.2003) (internal quotation marks and citation omitted). Therefore, in reviewing a motion to dismiss, a court “must accept the facts alleged in the complaint as true and construe all reasonable inferences in [the plaintiff's] favor.” Fowlkes v. Adamec, 432 F.3d 90, 95 (2d Cir.2005) (citation omitted).

“To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.’ ” ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “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 entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal quotation marks and citations omitted). Rather, the claim must be “plausible on its face.” Id. at 570, 127 S.Ct. 1955. “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, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citation omitted). Thus, the plausibility standard “asks for more than a sheer possibility that a defendant has acted unlawfully,” id., but “does not impose a probability requirement,” Twombly, 550 U.S. at 556, 127 S.Ct. 1955.

IV. Discussion

A. The Fair Debt Collection Practices Act

The FDCPA establishes a general prohibition against the use of “false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. Section 1692e includes sixteen subsections that set forth a non-exhaustive list of practices that fall within this ban. See Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir.1993). The subsections relevant to the pending motion include:

(2) The false representation of-(A) the character, amount, or legal status of any debt; or any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.

....

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

....

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.

15 U.S.C. § 1692e. However, since the list provided by § 1692e is not exhaustive, a debt collection practice may still be “false, deceptive, or misleading” even if it does not fit within one of § 1692e's subsections. See

Clomon, 988 F.2d at 1318.

Furthermore, under 15 U.S.C. § 1692f, a debt collector is forbidden from using “unfair or unconscionable means to collect or attempt to collect any debt.” In addition, pursuant to the obligations imposed by 15 U.S.C. § 1692g, the debt collector is required to send the consumer a written “validation notice,” which affords the consumer thirty days to dispute or verify the debt. See Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 134 (2d Cir.2010). And while debt collectors may continue collection activities during the validation period if the debt is not disputed, such activities “must not ‘overshadow’ or ‘contradict’ the validation notice.” Id. at 135 (citations omitted).

To determine whether a debt collection practice is deceptive or misleading or overshadows or contradicts a validation notice, that practice must be viewed objectively from the perspective of the “least sophisticated consumer.” Clomon, 988 F.2d at 1318; see also Russell v. Equifax A.R.S., 74 F.3d 30, 35 (2d Cir.1996). The basic purpose of this standard is to “ensure that the FDCPA protects all consumers, the gullible as well as the shrewd.” Clomon, 988 F.2d at 1318. However, “in crafting a norm that protects the naive and the credulous ... courts have carefully preserved the concept of reasonableness” without extending FDCPA protection to “bizarre or idiosyncratic interpretations” of collection notices and other practices. Id. at 1319-20 (citation omitted). Thus, as the Second Circuit has explained, the least-sophisticated consumer standard functions to ensure the protection of all consumers, while also protecting debt collectors against liability for unreasonable interpretations of collection notices. See id.

The FDCPA is a strict liability statute. Bentley v. Great Lakes Collection Bureau, Inc., 6 F.3d 60, 63 (2d Cir.1993). Accordingly, the consumer need not show intentional conduct by the debt collector. See Ellis, 591 F.3d at 135.

1. Failure to Inform of Potential Tax Consequences

In his first cause of action, Ellis argues that C & S's second letter offering to discount or forgive $1,924.61, or 30% of the debt, failed to notify him of the requirement under the Internal Revenue Code that any amount forgiven in excess of $600 must be reported as income on his federal tax return. And by failing to notify Ellis of potential tax consequences, Ellis contends that C & S violated the FDCPA, 15 U.S.C. §§ 1692e(2), 1692e(10), and 1692f, by seeking to deceive and mislead him into accepting the discounted amount.² ( See Compl. ¶ 17, Dkt. No. 1.) C & S counters that in addition to there being no case law to support such a claim, to impose such a duty on debt collectors would stretch the FDCPA beyond its intended reach. ( See Def. Mem. of Law at 3-5, Dkt. No. 8:9.)

Although the cases Ellis relies on are not as “analogous” as he suggests,³ and while the court shares C & S's concerns about whether this specific practice was intended to be covered by the FDCPA, the court nonetheless concludes that Ellis has adequately alleged a cause of action under § 1692e. As outlined in Ellis's submissions, ( See Pl. Resp. Mem. of Law at 2-4, Dkt. No. 9:9; Pietrafesa Decl. ¶¶ 13-17, Dkt. No. 9), the amount of debt being forgiven may be taxable under 26 U.S.C. § 61(a)(12), whereby the taxes levied specific to that additional taxable income would in essence diminish the actual net value of the discount offered by the debt collector. Thus, the discount offered in C & S's second letter may constitute a deceptive or misleading collection practice by failing to warn the consumer that the amount forgiven could affect his tax status. Accordingly, S & C's motion to dismiss Ellis's first cause of action is denied at this juncture.

2. Threat to Sue

In...