Gonzalez v. Kay

• Decision Date: 03 August 2009
• Docket Number: No. 08-20544.,08-20544.
• Citation: 577 F.3d 600
• Parties: Jose GONZALEZ, Plaintiff-Appellant, v. Mitchell N. KAY; Law Offices of Mitchell N. Kay, P.C., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

577 F.3d 600

Jose GONZALEZ, Plaintiff-Appellant, v. Mitchell N. KAY; Law Offices of Mitchell N. Kay, P.C., Defendants-Appellees.

No. 08-20544.

United States Court of Appeals, Fifth Circuit.

August 3, 2009.

Matthew Brian Probus (argued), Wauson Probus, Sugar Land, TX, for Gonzalez.

David Craig Brinker (argued), Henslee Schwartz, LLP, Dallas, TX, Erik V. Larson, Henslee Schwartz, LLP, Houston, TX, for Defendants-Appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, PRADO and SOUTHWICK, Circuit Judges.

PRADO, Circuit Judge:

Plaintiff-Appellant Jose Gonzalez ("Gonzalez") allegedly failed to pay his Sprint PCS Wireless cell phone bills, totaling $448.97. Sprint turned the consumer debt over to U.S. Asset Management Services, Inc. ("US Asset"), which in turn used the services of Defendants-Appellees Mitchell N. Kay ("Kay") and the Law Offices of Mitchell N. Kay, P.C. ("the Kay Law Firm") to collect the debt. The Kay Law Firm sent a collection letter to Gonzalez, which Gonzalez asserts violated the Fair Debt Collection Practices Act ("FDCPA" or the "Act"), 15 U.S.C. § 1692e. The district court dismissed Gonzalez's case for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). We reverse.

I. FACTUAL BACKGROUND

Gonzalez owed U.S. Assets $448.97 based on a consumer debt he initially owed to Sprint PCS Wireless.¹ US Assets turned to the Kay Law Firm to collect the debt. On November 21, 2007, the Kay Law Firm sent a collection letter to Gonzalez.² The letter was printed on the Kay Law Firm's letterhead, but it was not signed. The letterhead states, "admitted in New York & Washington, D.C.," which the parties agree is a representation that Kay was admitted to practice law in these jurisdictions. The front of the letter states,

Please be advised that your account, as referenced above, is being handled by this office.

We have been authorized to offer you the opportunity to settle this account with a lump sum payment, equal to 65% of the balance due—which is $291.83!

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.

If you notify this office in writing within 30 days from receiving this notice, this office will: Obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification.

If you request this office in writing within 30 days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.

After a large white blank space, the bottom of the letter directs the recipient to "PLEASE ADDRESS ALL PAYMENTS TO" the "Law Offices of Mitchell N. Kay, P.C." Immediately below the payment information, the letter states, "Notice: Please see reverse side for important information." A box surrounds this notice. Below the notice box is a detachable payment stub.

On the back, the letter states, in the same font and typeface as the text on the front,

This communication is from a debt collector and is an attempt to collect a debt. Any information obtained will be used for that purpose.

Notice about Electronic Check Conversion: Sending an eligible check with this payment coupon authorizes us to complete the payment by electronic debit. If we do, the checking account will be debited in the amount shown on the check—as soon as the same day we receive the check—and the check will be destroyed.

At this point in time, no attorney with this firm has personally reviewed the particular circumstances of your account.

Kay and the Kay Law Firm assert that this "disclaimer" language is sufficient to notify Gonzalez that lawyers were not involved in the debt collection. The parties agree that neither Kay nor any lawyers in his firm reviewed Gonzalez's file or were actively involved in sending the letter. Instead, Gonzalez asserted in his complaint that the letter was deceptive in that the Kay Law Firm "pretended to be a law firm with a lawyer handling collection of the Account when in fact no lawyer was handling the Account or actively handling the file." Gonzalez essentially contends that the Kay Law Firm is not actually a law firm at all but instead is a debt collection agency that uses the imprimatur of a law firm to intimidate debtors into paying their debts.

II. JURISDICTION AND STANDARD OF REVIEW

Gonzalez brought suit, alleging that the Kay Law Firm's debt collection letter violated the FDCPA. Relying upon the disclaimer, the district court entered a final judgment dismissing the case pursuant to Rule 12(b)(6), meaning that this court has jurisdiction under 28 U.S.C. § 1291.

"This court reviews a district court's dismissal under Rule 12(b)(6) de novo, accepting all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiffs." Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir.2008) (internal quotation marks omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court recently expounded upon the Twombly standard, explaining that "[t]o 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, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. 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." Id. It follows that "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged— but it has not `show[n]'—`that the pleader is entitled to relief.'" Id. at 1950 (quoting FED.R.CIV.P. 8(a)(2)).

When deciding whether a debt collection letter violates the FDCPA, this court "must evaluate any potential deception in the letter under an unsophisticated or least sophisticated consumer standard." Goswami v. Am. Collections Enter., Inc., 377 F.3d 488, 495 (5th Cir.2004); Taylor v. Perrin, Landry, deLaunay & Durand, 103 F.3d 1232, 1236 (5th Cir.1997). We must "assume that the plaintiff-debtor is neither shrewd nor experienced in dealing with creditors." Goswami, 377 F.3d at 495. "At the same time we do not consider the debtor as tied to the very last rung on the [intelligence or] sophistication ladder." Id. (internal quotation marks omitted) (alteration in original). "This standard serves the dual purpose of protecting all consumers, including the inexperienced, the untrained and the credulous, from deceptive debt collection practices and protecting debt collectors against liability for bizarre or idiosyncratic consumer interpretations of collection materials." Taylor, 103 F.3d at 1236.

III. DISCUSSION

Congress enacted the FDCPA "to eliminate abusive debt collection practices by debt collectors, to ensure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). The FDCPA provides, "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." Id. § 1692e. The statute then lists several activities that violate the FDCPA. See id. § 1692e(1)-(16). Gonzalez claims that Kay and the Kay Law Firm violated subsections (3) and (10). Subsection (3) prohibits "[t]he false representation or implication that any individual is an attorney or that any communication is from an attorney." Id. § 1692e(3). Subsection (10) prohibits "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Id. § 1692e(10). There is no dispute that Gonzalez is a "consumer" under the FDCPA and that Kay and the Kay Law Firm are "debt collectors" under the Act. See id. § 1692a(3), (6). A debt collector who violates the FDCPA is liable for actual damages, additional damages of up to $1,000, and attorneys' fees. See id. § 1692k.

There are sound policy reasons for the FDCPA's prohibition on a debt collector sending a collection letter that is seemingly from an attorney. Judge Evans of the Seventh Circuit adroitly explained the intimidation inherent in this type of communication:

An unsophisticated consumer, getting a letter from an "attorney," knows the price of poker has just gone up. And that clearly is the reason why the dunning campaign escalates from the collection agency, which might not strike fear in the heart of the consumer, to the attorney, who is better positioned to get the debtor's knees knocking.

Avila v. Rubin, 84 F.3d 222, 229 (7th Cir.1996). A letter from a lawyer implies that the lawyer has become involved in the debt collection process, and the fear of a lawsuit is likely to intimidate most consumers. "Thus, if a debt collector (attorney or otherwise) wants to take advantage of the special connotation of the word `attorney' in the minds of delinquent consumer debtors to better effect collection of the debt, the debt collector should at least ensure that an attorney has become professionally involved in the debtor's file." Id. In the alternative, a lawyer acting as a debt collector must notify the consumer, through a clear and prominent disclaimer in the letter, that the lawyer is wearing a "debt collector" hat and not a "lawyer" hat when sending out the letter. See Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 361-62 (2d Cir.2005).

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