In re Cambron

• Citation: 379 B.R. 371
• Decision Date: 04 December 2007
• Docket Number: Adversary No. 06-1058.,Civ. No. 1:07-CV-00369-WHA.,Adversary No. 06-1057.,Bankruptcy No. 05-11879.
• Parties: In re James R. CAMBRON and Wendy L. Cambron, Debtors. William C. Cam, III, Bankruptcy Trustee, Plaintiff, v. Medical Data Systems, Inc., Defendant. William C. Cam, III, Bankruptcy Trustee, Plaintiff, v. Medical Data Systems, Inc., Defendant.
• Court: U.S. District Court — Middle District of Alabama

379 B.R. 371

In re James R. CAMBRON and Wendy L. Cambron, Debtors.

William C. Cam, III, Bankruptcy Trustee, Plaintiff, v. Medical Data Systems, Inc., Defendant.

William C. Cam, III, Bankruptcy Trustee, Plaintiff, v. Medical Data Systems, Inc., Defendant.

Civ. No. 1:07-CV-00369-WHA.

Bankruptcy No. 05-11879.

Adversary No. 06-1057.

Adversary No. 06-1058.

United States District Court, M.D. Alabama, Northern Division.

December 4, 2007.

David G. Poston, Brock & Stout, Enterprise, AL, David-CR G. Poston, Brock & Stout, Enterprise, AL, for Plaintiff.

Russel A. McGill, Brunson and Associates, Gadsden, AL, for Defendant.

MEMORANDUM OPINION AND ORDER

W. HAROLD ALBRITTON, III, Senior District Judge.

I. PROCEDURAL HISTORY

This case is before the court on a Report and Recommendation ("R & R") of the Chief United States Bankruptcy Judge pursuant to 28 U.S.C. 157(c)(1)(2006):

A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such Proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

The bankruptcy judge consolidated and heard two non-core adversary proceedings which were related to a case under Title 11 pending in his court. Following an evidentiary hearing, he entered his Report and Recommendation, with proposed findings of fact and conclusions of law. Objections were filed by the Defendant.

The court has considered the proposed findings and conclusions and has reviewed de novo those matters to which the Defendant has timely and specifically objected. The court finds no reason to take additional evidence, and has conducted the de novo review upon the record, including a review of a transcript of the hearing before the bankruptcy judge. FED. R. BANKR.P. 9033(d);

II. FACTS

On April 19, 2005, Medical Data Systems, Inc., d/b/a Medical Revenue Services (hereinafter "MDS"), wrote James R. Cambron a letter regarding his medical debt totaling $1,875.59. (Pl's. Ex. A). Two of the five debts listed were for services allegedly rendered at Flowers Hospital in March 1997, more than eight years prior to the date of the letter. The statute of limitations for collection of unsecured debt in Alabama is only six years. ALA. CODE § 6-2-34 (1975). Of the $1,875.59 allegedly owed, over 90% of the total debt was time-barred by the statute of limitations. On May 24, 2005, MDS sent an almost identical collection letter to Wendy L. Cambron regarding her medical debt of $175.00 for services allegedly rendered at Flowers Hospital on August 27, 2003. (Pl's Ex. B).

Both letters contained the same opening paragraph:

Medical Revenue Service is a collection agency, retained to represent the below named creditor. Since you have failed to pay this obligation in full, we now must determine your ability to repay this debt. The information we may be seeking, if available, to determine what further collection effort to take is:

1.) Real estate ownership/equity

2.) Personal property assets

3.) Saving, checking balances

4.) Your source of income

5.) Automobile ownership

6.) Verification of employment

(Pl.'s Exs. A, B).¹

The sole issue decided today is whether this language violates the Fair Debt Collection Practices Act ("FDCPA"), which prohibits, inter alia, the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. Section 1692e then enumerates an expressly nonexhaustive list of examples, including "[t]he threat to take any action that cannot be legally taken or that is not intended to be taken," § 1692e(5), and "[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." § 1692e(10). Plaintiff contends that the language violates subsections 1692e(5) and e(10), and therefore, as to each debtor, plaintiff seeks statutory damages in the amount of $1,000.00, plus attorney's fees and costs, for each violation. § 1692k.

The Report and Recommendation found that the letters deceptively implied to the "least sophisticated consumer" that "the debtors' assets and wages may be in jeopardy" and therefore they violated § 1692e(10). R & R at 384-85. It found as a fact the defendants intended to take no action other than telephone calls to the Cambrons. It further found that the same language suggested action which could not lawfully be taken, which constituted a threat violating § 1692e(5). Id. at 385-86 (citing Mailloux v. Arrow Fin. Servs., LLC, 204 F.R.D. 38, 41-42 (E.D.N.Y. 2001)).

The Defendant filed timely Objections to the Report and Recommendation, to which the Plaintiff timely responded. FED. R. BANKR.PRO. 9003(b). The Defendant then filed a Reply to the Plaintiffs Response to the Defendant's Objections (hereinafter "Defendant's Reply") at which time the Plaintiff asked for leave to respond to the Defendant's Reply. Rather than strike Defendant's Reply for exceeding the number of filings provided for under Rule 9003(b), the court accepted the Defendant's Reply and granted Plaintiff leave to file its second response (hereinafter "Plaintiffs Surreply"). Defendant's motion for leave to file an additional response to the Plaintiffs Surreply was denied.

For the reasons stated below, upon an independent evaluation and de novo review, the court finds that the bankruptcy judge's Recommendation is due to be adopted as modified herein.

III. STANDARD OF REVIEW

Pursuant to 28 U.S.C. § 157(c)(1), "any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1); see also Williford v. Funderburk (In re Williford), 222 Fed.Appx. 843, 844 (11th Cir.2007) (per curiam).

IV. DISCUSSION

A. Legal Background and Applicable Standards

Congress enacted the FDCPA to "eliminate abusive debt collection practices by debt collectors," 15 U.S.C. § 1692(e), noting that "[a]busive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy." § 1692(a); see also Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1173-74 (11th Cir.1985); Ferguson v. Credit Management Control, Inc., 140 F.Supp.2d 1293, 1297 (M.D.Fla.2001). The FDCPA is a strict liability statute. Ferguson, 140 F.Supp.2d at 1297; Kaplan v. Assetcare, Inc. 88 F.Supp.2d 1355, 1361-62 (S.D.Fla. 2000); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 63 (2d Cir.1993). Further, a single violation of § 1692e is sufficient to establish civil liability. See 15 U.S.C. § 1692k(a).

Plaintiff alleges that the identical language in defendant's debt collection letters violates both 15 U.S.C. § 1692e(5) ("e(5) violation") and 15 U.S.C. § 1692e(10) ("e(10) violation"). As noted earlier, subsection e(5) prohibits "[t]he threat to take any action that cannot legally be taken or that is not intended to be taken," whereas subsection e(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." 15 U.S.C. §§ 1692e(5) (emphasis added), 1692e(10) respectively.

In Jeter, the Eleventh Circuit adopted the "least sophisticated consumer" standard for determining "deception" under the FDCPA, including e(10) and one of two enumerated e(5) violations. 760 F.2d at 1175. In other words, courts should make FDCPA determinations in accordance with its purpose, "made [not] for the protection of experts, but for the public-that vast multitude which includes the ignorant, the unthinking and the credulous." Id. at 1172-73 (internal citations omitted). The lens of the "least sophisticated consumer" still "preserve[s] the concept of reasonableness" for an individual who can "possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care." Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993). Nevertheless, the fact that "a false statement may be obviously false to those who are trained and experienced does not change its character, nor take away its power to deceive others less experienced." Jeter at 1173 (internal citations and quotations omitted).

The Jeter court carved an exception from the "least sophisticated consumer" standard for the second "unintended action" prong of e(5):

The ... issue is simply whether or not [defendant] intended to take the action threatened ... requir[ing] proof of a fact which amounts to a per se violation of § 1692e. The sophistication, or lack thereof, of the consumer is [therefore] irrelevant to whether [defendant] threat[ened] to take any action ... that [was] not intended to be taken.'

Id. at 1175.

District courts within the Eleventh Circuit have confirmed the application of the "least sophisticated consumer standard" to the first ("illegal threats") but not second ("unintended threats") prong of § 1692e(5). Compare Ferguson, 140 F.Supp.2d at 1299 (applying standard to threats which "could not legally be taken") with Rivera v. Amalgamated Debt Collection Servs., 462 F.Supp.2d 1223, 1227 (S.D.Fla.2006) (noting application of standard for e(10) violations but citing Jeter for "unintended action" threats exception). In the Eleventh Circuit, therefore, the "least sophisticated consumer" standard shall be applied when determining violations of e(10) and threats of illegal action under e(5), but not threats of unintended action under e(5), because the existence of the intent to perform the action threatened is a...