Kistner v. Law Offices of Michael P. Margelefsky

• Decision Date: 26 February 2008
• Docket Number: No. 07-3134.,07-3134.
• Parties: Amanda KISTNER, Plaintiff-Appellant, v. The LAW OFFICES OF MICHAEL P. MARGELEFSKY, LLC and Michael P. Margelefsky, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

518 F.3d 433

Amanda KISTNER, Plaintiff-Appellant, v. The LAW OFFICES OF MICHAEL P. MARGELEFSKY, LLC and Michael P. Margelefsky, Defendants-Appellees.

No. 07-3134.

United States Court of Appeals, Sixth Circuit.

Argued: January 31, 2008.

Decided and Filed: February 26, 2008.

ARGUED:

Stephen R. Felson, Cincinnati, Ohio, for Appellant. David P. Strup, Cooper & Walinski, Toledo, Ohio, for Appellees.

ON BRIEF:

Stephen R. Felson, Cincinnati, Ohio, Edward A. Icove, Icove Legal Group, Cleveland, Ohio, Steven C. Shane, Bellevue, Kentucky, for Appellant. David P. Strup, Brandi L. Doniere, Cooper & Walinski, Toledo, Ohio, for Appellees.

Before: MERRITT, GILMAN, and COOK, Circuit Judges.

OPINION

RONALD LEE GILMAN, Circuit Judge.

In January of 2005, Amanda Kistner received a collection letter from The Law Offices of Michael P. Margelefsky, LLC related to her Cincinnati Bell account. The letter, printed on The Law Offices of Michael P. Margelefsky letterhead, contains a block signature declaring that the letter was sent by an "Account Representative." Kistner subsequently filed the present lawsuit as a putative class action against The Law Offices of Michael P. Margelefsky (the Law Offices) and Michael Margelefsky individually, alleging numerous violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, and the Ohio Consumer Sales Practices Act (OCSPA), Ohio Rev.Code Ann. § 1345.01.

The district court granted summary judgment both to the Law Offices and to Margelefsky after concluding that the collection letter did not make any misrepresentations and was not deceptive. For the reasons set forth below, we REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion. Specifically, we conclude that Margelefsky can be held individually liable as a "debt collector" under the FDCPA and that a genuine issue of material fact exists as to whether the collection letter was deceptive.

I. BACKGROUND

A. Factual background

Margelefsky individually is the sole member of the Law Offices. Under that name, Margelefsky operates both a law practice and a debt collection agency. These two businesses maintain separate addresses, telephone numbers, and bank accounts, even though they are physically adjacent to each other.

The form collection letter that Kistner received was initially drafted by Margelefsky. According to Margelefsky, the letter contains all of the language and notices required by the FDCPA. Thousands of these form letters were mailed by the Law Offices during the two-week period in which Kistner received her letter.

Printed on letterhead for the "Law offices of Michael P. Margelefsky, LLC," the letter contains the address and telephone number for the debt collection agency that operates under that name. (Formatting in original.) In its entirety, the text of the letter reads as follows:

This letter is to advise you that your account has been referred to this office.

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

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 that you dispute the debt or any portion thereof, 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 of 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.

The letter does not contain an individual's signature, but contains the following signature block:

ACCOUNT REPRESENTATIVE

The law offices of

MICHAEL P. MARGELEFSKY, LLC

(Formatting in original.) Finally, attached at the bottom of the letter is a remittance form that instructs the debtor to make a check or money order payable to "MICHAEL P. MARGELEFSKY," and to mail the payment to "THE LAW OFFICES OF MICHAEL P. MARGELEFSKY, LLC." (Formatting in original.)

Margelefsky acknowledged that he did not review the specific letter that was sent to Kistner before it was mailed. In fact, Margelefsky testified in his deposition that the letter was not even reviewed by an "Account Representative" before it was mailed.

B. Procedural background

Kistner filed her complaint in June of 2005. In September of 2005, she filed an amended complaint, alleging that Margelefsky violated six provisions of the FDCPA. Following discovery, both sides moved for summary judgment. The district court granted the joint motion of the Law Offices and Margelefsky and denied Kistner's. This timely appeal followed, with the only issues being Margelefsky's individual liability and Kistner's allegation that the collection letter was deceptive under 15 U.S.C. § 1692e(3).

II. ANALYSIS

A. Standard of review

We review de novo a district court's grant of summary judgment. Int'l Union v. Cummins, 434 F.3d 478, 483 (6th Cir. 2006). Summary judgment is proper where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). In considering a motion for summary judgment, the district court must construe all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

B. Margelefsky's individual liability

We will first address Margelefsky's argument that he should not be held individually liable because either (1) he did not have any involvement with the collection notice that was sent to Kistner, or (2) he is not individually liable for the actions of his law firm, which is established as a limited liability company (LLC). Margelefsky argues that, notwithstanding any liability that his debt-collection business might face, he is entitled to be dismissed from the case as an individually named defendant.

The question of whether an individual member of an LLC that is engaged in debt collection may be held liable under the FDCPA without piercing the corporate veil is an issue of first impression in this circuit. Liability under the FDCPA attaches only to a "debt collector," a term defined by the Act as

any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.

15 U.S.C. § 1692a(6). Ohio law precludes personal liability for members of an LLC on the basis of the LLC's liability. Ohio Rev.Code Ann. § 1705.48.

Margelefsky cites only one case in support of his argument that his lack of involvement with the specific notice at issue precludes his individual liability under the FDCPA. In that case, United States v. ACB Sales & Service, Inc., 590 F.Supp. 561 (D.Ariz.1984), the district court concluded that the director of a corporate entity "may be held liable only for [FDCPA] violations in which he materially participates." Id. at 575. In more recent years, however, the law surrounding this issue has been developed more fully and a split of authority has emerged.

On one side of the split, the Seventh Circuit and a few district courts have ruled that a shareholder, officer, or employee of a corporate debt collector may not be held personally liable without meeting the requirements necessary to pierce the corporate veil. The leading case for this proposition is White v. Goodman, 200 F.3d 1016 (7th Cir.2000), where the Seventh Circuit concluded that "[t]he Fair Debt Collection Practices Act is not aimed at the shareholders of debt collectors operating in the corporate form unless some basis is shown for piercing the corporate veil." Id. at 1019. Later, in Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057 (7th Cir.2000), the Seventh Circuit clarified that "under our holding in White v. Goodman, the extent of control exercised by an officer or shareholder is irrelevant to determining his liability under the FDCPA." Id. at 1059. According to the court in Pettit, officers and shareholders "do not become `debt collectors' simply by working for or owning stock in debt collection companies." Id. The Seventh Circuit explained that "the FDCPA has utilized the principle of vicarious liability" and, "[j]ust as in the Title VII context, the debt collection company answers for its employees' violations of the statute." Id.

On the other side of the split are a series of district court decisions concluding that "where a shareholder, officer, or employee of a corporation is personally involved in the debt collection at issue, he may be held personally liable as a debt collector without piercing the corporate veil." Brumbelow v. Law Offices of Bennett and Deloney, P.C., 372 F.Supp.2d 615, 618 (D.Utah 2005). For example, the Eastern District of California has concluded that

[b]y being directly involved in the day-to-day operation of Lundgren & Associates, including training and managing employees, and reviewing or supervising the review of all accounts, Lundgren was both directly and indirectly involved in Lundgren & Associates' collection of debts. Given the plain language of the FDCPA, defendant Lundgren is a debt collector within the meaning of the FDCPA and can be held liable for any acts in which he directly or indirectly attempted to collect debts in violation of the FDCPA.

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