Romea v. Heiberger & Associates

• Decision Date: 09 December 1998
• Docket Number: Docket No. 98-7259
• Citation: 163 F.3d 111
• Parties: Jennifer Lynn ROMEA, Plaintiff-Appellee, v. HEIBERGER & ASSOCIATES, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 111

163 F.3d 111

Jennifer Lynn ROMEA, Plaintiff-Appellee, v. HEIBERGER & ASSOCIATES, Defendant-Appellant.

Docket No. 98-7259

United States Court of Appeals, Second Circuit.

Argued Nov. 17, 1998.

Decided Dec. 9, 1998.

Robert E. Sokolski, Robert E. Sokolski, Esq., P.C., New York, N.Y. (Colleen F. McGuire, McGuire & Zekaria, P.C., New York, N.Y., on the brief), for Plaintiff-Appellee Jennifer Lynn Romea.

Evan H. Krinick, Rivkin, Radler & Kremer, Uniondale, N.Y., for Defendant-Appellant Heiberger & Associates.

James B. Fishman, Fishman & Neil, New York, N.Y., and Joanne S. Faulkner, New Haven, Conn., for Amicus Curiae National Association of Consumer Advocates.

Stephen L. Gordon and Thomas Richichi, of counsel, Beveridge & Diamond, P.C., New York, N.Y., for Amicus Curiae National Multi Housing Council, National Apartment Association, Community Housing Improvement Program, Inc., National Association of Home Builders, National Leased Housing Association, and American Seniors Housing Association.

Mark E. Housman and Stuart M. Riback, of counsel, Siller Wilk LLP, New York, N.Y., for Amicus Curiae Borah, Goldstein, Altschuler & Schwartz, P.C.

Scott A. Rosenberg, Director of Litigation, Civil Appeals and Law Reform Unit, Hwan-Hui Helen Lee, of counsel, Civil Appeals and Law Reform Unit, and Helaine Barnett, Attorney-in-Charge, Civil Division, The Legal Aid Society, New York, N.Y., for Amicus Curiae City-Wide Task Force on Housing Court.

Before: CALABRESI, SACK, and SOTOMAYOR, Circuit Judges.

CALABRESI, Circuit Judge:

This case raises the issue of whether the requirements of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692o, apply to an attorney's execution and delivery of the three-day rent demand notice that is required by New York law as a condition precedent to a summary eviction proceeding. Finding that the FDCPA does apply, we affirm the district court's denial of the defendant's motion to dismiss the plaintiff's complaint.

I. BACKGROUND

On December 26, 1996, Defendant-Appellant Heiberger & Associates ("Heiberger") sent a letter to Plaintiff-Appellee Jennifer Lynn Romea demanding back rent allegedly owed by Romea. The text of the letter read:

PLEASE TAKE NOTICE that you are hereby required to pay to 442 3RD AVE. REALTY LLC landlord of [442 Third Avenue], the sum of $2,800.00 for rent of the premises[.] ...

You are required to pay within three days from the day of service of this notice, or to give up possession of the premises to the landlord. If you fail to pay or to give up the premises, the landlord will commence summary proceedings against you to recover possession of the premises.

The letter appears to indicate that the $2,800 stemmed from Romea's failure to pay her $700 rent for the months of September, October, November, and December of 1996.

On June 25, 1997, Romea filed a class action complaint in the Southern District of New York alleging that the letter violated provisions of the FDCPA. Specifically, the complaint asserted that the letter (1) "violated 15 U.S.C. § 1692(g) by failing to adequately advise the Plaintiff of her rights, because the thirty (30) day validation notice required by 15 U.S.C. § 1692(g) was not placed anywhere in the demand for payment of the alleged debt"; ¹ (2) "violates 15 U.S.C. § 1692(g) because it contradicts the requirement that the Plaintiff be advised of and be given a thirty (30) day period in which to dispute the bill"; (3) "failed to disclose clearly that the Defendant was attempting to collect a debt, and that any information obtained would be used for that purpose, as required by 15 U.S.C. § 1692(e)(11)"; ² and (4) "contained threats to take actions that could not legally be taken, or that were not intended to be taken, in violation of 15 U.S.C. § 1692(e)(5)." ³

Heiberger moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. It argued that the FDCPA does not apply to the letter because rent due is not a "debt" and its letter was not a debt collection "communication" as the FDCPA defines those terms. The district court denied the motion, holding that both the plain language and the legislative history of the FDCPA dictate the conclusion that the requirements of the FDCPA apply to Heiberger's letter. See Romea v. Heiberger & Assocs., 988 F.Supp. 712 (S.D.N.Y.1997).

Heiberger thereupon moved for certification of an interlocutory appeal, which the district court granted. In so doing, it noted (1) that "there is a conflict among the circuits as to whether an obligation must involve the deferral of payment in order to constitute a 'debt' within the meaning of the [FDCPA]"; and (2) that "[t]he effect of this Court's ruling is to require a sea change in the practice as well as to open the door to a flood of federal court suits against lawyers under the FDCPA." Romea v. Heiberger & Assocs., 988 F.Supp. 715, 716-17 (S.D.N.Y.1998). We accepted the appeal on March 10, 1998.

II. DISCUSSION

A. Standard of Review

We review the district court's decision de novo, both because it involves a motion to dismiss under Rule 12(b)(6), see Scotto v. Almenas, 143 F.3d 105, 109 (2d Cir.1998), and because it requires us to answer an issue of statutory interpretation, see Perry v. Dowling, 95 F.3d 231, 235 (2d Cir.1996). In evaluating a motion to dismiss for failure to state a claim, we are "required to accept as true all factual allegations in the complaint and to consider documents attached to or incorporated by reference in the complaint." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998) (citations omitted).

B. Back Rent Is a Debt

Heiberger contends that the FDCPA does not apply to its letter to Romea because back rent does not fall under the FDCPA's definition of debt. The FDCPA defines debt as:

any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

15 U.S.C. § 1692a(5) (1994).

Heiberger invokes two bases for its argument that back rent is not debt. First, it asserts that rent is not a debt because leases customarily require a tenant to prepay rent for a specified period, generally on a monthly basis, for the use of the premises for that period. Relying on the logic of dicta in a Third Circuit opinion, Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir.1987), ⁴ Heiberger maintains that rent is not an extension of credit and that hence the obligation to pay it does not constitute a debt. Second, Heiberger claims that back rent is not a debt under the FDCPA because by definition a tenant who owes back rent has breached her lease and thereby terminated it. In the absence of a lease, the argument continues, no transaction between the landlord and tenant exists. Because the landlord is not consenting to the tenant's occupancy under such conditions and is prevented by New York Real Property and Proceedings Law § 711 from immediately evicting the tenant, the result is what Heiberger characterizes as "a nonconsensual relationship no different than the unauthorized use of cable television services or the nonpayment of taxes." And, as Heiberger notes, courts have held that such unauthorized uses are not debt. Cf. Staub v. Harris, 626 F.2d 275 (3d Cir.1980) (nonpayment of taxes); Coretti v. Lefkowitz, 965 F.Supp. 3 (D.Conn.1997) (unauthorized use of cable television).

Heiberger's first ground misconstrues the issue, which is not whether all rent is an extension of credit, but whether back rent is a debt. Under the FDCPA, "debt" is an "obligation ... to pay money arising out of a transaction" that involves "personal, family, or household purposes." 15 U.S.C. § 1692a(5). Back rent by its nature is an obligation that arises only from the tenant's failure to pay the amounts due under the contractual lease transaction. In this respect, back rent is much like the obligation arising out of a dishonored check where a service has been rendered or goods sold on the premise of immediate payment. The obligation to pay the bounced check, like the duty to pay back rent, does not derive from an extension of credit but rather because the payor breached its payment obligations in the contract between the parties. Virtually all circuits that have addressed the issue of dishonored checks have held such checks to fall under the plain language of the FDCPA's definition of "debt." ⁵ For the same reasons that those courts deemed dishonored checks to be debts under the FDCPA, we conclude that back rent is a debt.

Heiberger must therefore rely on its second ground: that no transaction exists for tenants who owe back rent. But Heiberger asserts no basis for its claim that the existence of a transaction on which the debt must be grounded means an extant contractual arrangement. The FDCPA includes no such requirement.

Moreover, even if a current transaction were necessary, such a transaction is, in fact, present in the case of a landlord who sends a warning letter to a tenant. This is so because, in New York, the tenant's failure to make a rental payment does not automatically end the lease agreement. Instead, under New York law, the landlord-tenant relationship terminates and the lease is canceled only after a housing court finds the tenant in default of its obligations under the lease. See N.Y. Real Prop. Acts. Law § 749(3) (McKinney 1979). The lease expressly does not end either at the time the tenant defaults on her obligation to pay rent or when the landlord sends the tenant a warning letter. Thus, Heiberger's reference to "the unauthorized use of cable television services or the nonpayment of taxes" is inapposite; in those cases, no contractual relationship exists or indeed ever existed.

Heiberger raises other similar (and equally unavailing)...