Martinez v. Albuquerque Collection Serv.

• Decision Date: 14 October 1994
• Docket Number: Civ. No. 93-1468 JB.
• Citation: 867 F. Supp. 1495
• Parties: Yvonne MARTINEZ, Plaintiff, v. ALBUQUERQUE COLLECTION SERVICES, INC., Defendant.
• Court: U.S. District Court — District of New Mexico

867 F. Supp. 1495

Yvonne MARTINEZ, Plaintiff, v. ALBUQUERQUE COLLECTION SERVICES, INC., Defendant.

Civ. No. 93-1468 JB.

United States District Court, D. New Mexico.

October 14, 1994.

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Richard J. Rubin, Santa Fe, NM, for plaintiff Yvonne Martinez.

James M. Curry, IV, Albuquerque, NM, for defendant Albuquerque Collection Services, Inc.

MEMORANDUM OPINION AND ORDER

BURCIAGA, Chief Judge.

THIS MATTER came on for a hearing on September 30, 1994, on Plaintiff Yvonne Martinez's August 5, 1994 motion for partial summary judgment and Defendant Albuquerque Collection Services, Inc.'s September 9, 1994 cross motion for partial summary judgment. The Court, having heard the arguments of counsel and having reviewed the pleadings, the submissions of the parties, and the relevant law, and being otherwise fully advised of the premises, finds Plaintiff's motion for partial summary judgment is well taken in part and is granted in part. The Court also hereby grants in part and denies in part Defendant's cross motion for partial summary judgment.

FACTS

Unless otherwise stated, the facts recited herein are undisputed. Plaintiff Yvonne Martinez has at all times relevant resided in Santa Fe, New Mexico. Defendant collection agency is Albuquerque Collection Services, Inc. ("ACS"). Creditors hire ACS to collect payment on their outstanding debtor accounts. In exchange for ACS's successful collection efforts, creditors pay ACS a commission, calculated variously at rates ranging from twenty-eight to fifty percent of the balance collected. ACS engages in four types of collection activities. Throughout the collection process, ACS mails to debtors requests for payment printed on ACS stationery. Next, ACS collectors request payment from debtors by telephone. Then, in some cases, ACS prints form letters on the letterhead of an attorney, Michael Croom. These letters, which Croom signs, demand payment and instruct the debtor to call ACS. Finally, ACS initiates collection lawsuits in the New Mexico Metropolitan and District Courts. Prior to litigation, creditors assign their claims to ACS. In these lawsuits, ACS is named as Plaintiff and Croom is ACS's attorney of record.

Three creditors referred their contractual rights against Plaintiff to ACS. All of the debts in question arose out of medical services these creditors provided to Plaintiff in Santa Fe, New Mexico pursuant to oral contracts. In January 1990, Savino Professional Associates ("Savino") referred to ACS an outstanding balance of $55.00, which Plaintiff incurred in May 1989. (DeVine Dep. Ex. 1.) In April 1991, SED Medical Labs ("SED") referred to ACS an outstanding balance of $25.41, which Plaintiff incurred in November 1990. (Id.) This balance consisted of a $24.00 charge for diagnostic services, a $1.41 charge for gross receipts tax, and no charge for interest. (Croom Dep. Ex. IIb.) In July 1992, Lovelace Health Systems ("Lovelace") referred to ACS an outstanding balance of $1086.74, which Plaintiff incurred for medical services related to endometriosis surgery performed on four days in September, 1991. (DeVine Dep. Ex. 1; Lovelace Dep. Ex. 3.) The Lovelace balance consisted of assessments for interest and gross receipts tax as well as charges for medical services. (Allen Dep. at 27-30, 60.) Plaintiff disputes the Lovelace debt because of the alleged inferior quality of surgical services Lovelace provided. She underwent identical surgery under the care of another health care provider shortly after Lovelace performed the services underlying the Lovelace debt.

Defendant's efforts at collecting Plaintiff's debts are at the center of this controversy. First, Plaintiff asserts that she never received any mail notices or billings from ACS. (Martinez Dep. at 32-36.) However, Defendant's supervisory employee, Henry DeVine, testified that ACS mailed a "friendly reminder notice" to Plaintiff on February 2, 1993. (DeVine Dep. at 60-61.) Second, the parties agree that an ACS collector, Kirsten Eaton, telephoned Martinez at her place of employment on May 20, 1993. However, the parties dispute whether Ms. Eaton requested payment on all three accounts (Eaton Dep. at 17) or on just the Lovelace account (Martinez Dep. at 13-15, 32-34). Third, on March 3, 1993 ACS mailed to Plaintiff a form letter which Croom signed. (DeVine Dep. at 77.)¹ Plaintiff remembers receiving a letter on attorney Croom's letterhead. (Martinez Aff. ¶ 2.) Because the parties have not provided the Court with the actual letter, a factual dispute remains as to which debt payments the letter demanded from Plaintiff. Finally, on July 21, 1993, ACS filed a collection lawsuit against Plaintiff. Attorney Croom, acting on behalf of ACS, filed suit in Bernalillo County, pleading contractual rights on the SED and Lovelace accounts but not on the Savino account. (Pl.'s Jan. 13, 1994 Mem. in Supp. of Mot. to Dismiss Countercl. Ex. A.) In order to facilitate the filing of the lawsuit, ACS submitted to Croom a cover sheet which describes the Lovelace and SED accounts as "open." (DeVine Dep. Ex. 11.)

The state trial court awarded Defendant a default judgment in the collection lawsuit. As part of that judgment, Defendant sought and was awarded gross receipts tax, interest, and attorney fees. ACS served Plaintiff's employer with a writ of garnishment. In response, Plaintiff's prior attorney filed a motion to dismiss the suit for improper venue selection. Before the motion could be heard, ACS quashed the writ of garnishment and dismissed the entire collection lawsuit.

Plaintiff filed two lawsuits — one naming Croom as Defendant, and the present case naming ACS as Defendant. In May 1994, Plaintiff executed a general release of liability in favor of Croom. (Pl.'s Sept. 20, 1994 Resp. & Reply Mem. Ex. A.) The present lawsuit, filed on December 14, 1993, challenges ten separate debt collection practices of Defendant under state and federal law.

ANALYSIS

Because analysis of Plaintiff's allegations under the New Mexico Unfair Trade Practices Act is not necessary to resolve the issues herein, the Court only assesses Plaintiff's claims under the federal Fair Debt Collection Practices Act (FDCPA). The parties agree that Plaintiff is a "consumer" and Defendant is a "debt collector" by FDCPA definition.

I. ATTORNEY LETTER

Section 1692(e) of the FDCPA prohibits false, deceptive, and misleading collection practices, including "the false representation or implication that any individual is an attorney or that any communication is from an attorney." 15 U.S.C.A. § 1692e(3) (West 1982). In evaluating whether a defendant's collection practice is false, deceptive, or misleading under section 1692e of the Act, the Court must assess the impact such conduct would have on "the least sophisticated consumer." Masuda v. Thomas Richards & Co., 759 F.Supp. 1456, 1460 (C.D.Cal.1991); Swanson v. Southern Or. Credit Serv., Inc., 869 F.2d 1222, 1227 (9th Cir.1988); Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1172-75 (11th Cir.1985). Where debt collectors mass produce and mail form letters printed on an attorney's letterhead and cursorily signed by the attorney, courts find section 1692e(3) liability. Masuda, 759 F.Supp. at 1460-61; Clomon v. Jackson, 988 F.2d 1314, 1320 (2nd Cir.1993); cf. Anthes v. Transworld Sys., Inc., 765 F.Supp. 162, 166-67 (D.Del.1991) (no debt collector violation under section 1692e(3) where attorney mailed letter from his own office after independently reviewing debtor's file to decide whether he should mail letter). By mailing these attorney form letters, debt collectors create a false or deceptive impression to the unsophisticated consumer that the creditor retained an attorney for the collection of the debtor's particular debts. The letter implies that its source is the attorney, not the collection agency.

The facts in this case are indistinguishable from those in cases finding liability. Defendant ACS delivers between twenty and one hundred form letters to attorney Croom for signature on a weekly basis. ACS collectors, not Croom, decide to which debtors they will mail an attorney letter. Croom's typical review of the individual accounts consists of a mere check for conflicts of interest with his own existing clients. Once Croom has signed the letters, ACS mails them to debtors. ACS pays Croom one dollar per letter for this service. In light of these facts, ACS clearly violated section 1692e(3) when it mailed to Plaintiff one of its "attorney letters."

ACS's contention that Plaintiff lacks standing is without merit. Defendant correctly notes that Plaintiff testified that she never received any mailings from ACS. However, the essence of liability under section 1692e(3) is that unsophisticated consumers are likely to be misled into thinking that an attorney, rather than a debt collector, sent the letter. Plaintiff has offered uncontroverted evidence that ACS did mail an attorney letter to Plaintiff. (DeVine Dep. at 77.) Furthermore, Plaintiff testifies that she remembers receiving a letter on attorney Croom's letterhead. (Martinez Sept. 14, 1994 Aff. ¶ 2.) Also to no avail is Defendant's argument that it is not vicariously liable for Croom's conduct. The representations under scrutiny here are those of ACS, not Croom. Thus, ACS's liability arising out of the attorney letter is direct rather than vicarious.

Defendant further avers that Plaintiff cannot relitigate this issue because she has already settled her claim based on these facts in a separate suit against Croom. This argument, too, fails. Neither claim preclusion nor issue preclusion is applicable unless the court in a former adjudication rendered a final, valid judgment on the merits. Restatement (Second) of Judgments § 17 (1982). Although Croom signed a general release in the prior suit, Defendant has offered no evidence of a judgment on the merits. (Pl.'s Sept. 20, 1994 Reply & Resp. Mem. Ex. A.) Assuming...