Rosenau v. Unifund Corp.

• Decision Date: 20 August 2008
• Docket Number: No. 07-3019.,07-3019.
• Citation: 539 F.3d 218
• Parties: Richard ROSENAU, Individually and on Behalf of All Others Similarly Situated v. UNIFUND CORP. a/k/a Unifund Group Corp.; Unifund CCR Partners. Richard Rosenau, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

539 F.3d 218

Richard ROSENAU, Individually and on Behalf of All Others Similarly Situated v. UNIFUND CORP. a/k/a Unifund Group Corp.; Unifund CCR Partners Richard Rosenau, Appellant.

No. 07-3019.

United States Court of Appeals, Third Circuit.

Argued June 30, 2008.

Filed: August 20, 2008.

Cary L. Flitter (Argued), Lundy, Flitter, Beldecos & Berger, Narberth, PA, for Appellant.

Richard J. Perr (Argued), Fineman, Krekstein & Harris, Philadelphia, PA, for Appellees.

Before: RENDELL, SMITH and FISHER, Circuit Judges.

OPINION OF THE COURT

FISHER, Circuit Judge.

Richard Rosenau claims that a debt-collection letter he received from Unifund Corporation and/or Unifund CCR Partners ("Unifund") was deceptive under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e. The District Court granted Unifund's motion for judgment on the pleadings. Rosenau appeals, arguing that the letter was deceptive because (1) it implied that it came from an attorney and (2) it stated that it came from the "Legal Department." For the reasons that follow, we will reverse the District Court's order and remand.

I.

Unifund purchases old consumer debt. It buys the debt from credit card companies in the form of data files that contain information on thousands of consumer accounts. Unifund's proprietary software then runs queries to determine which accounts Unifund will pursue for collection and which it will resell. Once the system has flagged the accounts that will be collected, another automated process generates letters that are mailed to consumers to begin the collection efforts. Unifund mails about 2,000 of these collection letters each day.

On January 9, 2006, Unifund sent a collection letter to Richard Rosenau. The letter demanded payment on a Citibank credit card account that had a balance of over $12,000. It stated:

"If we are unable to resolve this issue within 35 days we may refer this matter to an attorney in your area for legal consideration. If suit is filed and if judgment is rendered against you, we will collect payment utilizing all methods legally available to us, subject to your rights below.... This communication is from a debt collector. This is an attempt to collect a debt...."

In place of a signature, the bottom of the letter read:

"Unifund

Legal Department"

Unifund's Vice President of Legal Operations supervises the Legal Department's six employees. Neither the Vice President nor the Legal Department employees are lawyers. The Legal Department maintains a network of contract attorneys throughout the United States to whom it forwards claims for litigation. Four of the six Legal Department employees are Legal Liaisons who (1) place accounts with attorneys in the network, (2) handle daily disputes, (3) provide documents for litigation, and (4) act as witnesses when necessary. The remaining two Legal Department employees are a project coordinator and an administrative assistant.

The Vice President of Legal Operations manages the flow of letters out of the office. According to his deposition testimony, his function is akin to controlling a "spigot." No one reviews the consumers' files before the letters are mailed.

Unifund employs a small number of attorneys. Three attorney-employees handle "internal litigation," that is, litigation against consumers in certain states where Unifund does not use contract attorneys. In addition, Unifund employs an attorney as General Counsel. None of these attorneys work in the Legal Department.

Rosenau filed a class complaint against Unifund in the United States District Court for the Eastern District of Pennsylvania. He alleged that Unifund violated the FDCPA by sending him a letter that falsely created the impression that it was reviewed or sent by a Legal Department, as he defines that term, or by a lawyer. The parties engaged in discovery. Unifund then filed a motion for judgment on the pleadings, or in the alternative, for summary judgment. At the same time, Rosenau filed a motion for class certification.

The District Court granted Unifund's motion for judgment on the pleadings and dismissed Rosenau's complaint. Rosenau v. Unifund Corp., No. 06-01355, 2007 WL 1892888, at * 1 (E.D.Pa.2007).¹ The Court stated that it "need not treat Unifund's Motion as one for summary judgment" because "judgment on the pleadings [was] appropriate." Id. at *2. The Court concluded that the letter was not deceptive and that it would be "bizarre or idiosyncratic" to infer that it came from an attorney. Id. at *3.

For the sake of completeness, the Court also ruled on Rosenau's motion for class certification. Id. at *3-5. The Court concluded that Rosenau satisfied the requirements for class certification, but dismissed the motion nonetheless because of its dismissal of the complaint. Id. at *5. Rosenau filed this timely appeal.

II.

The District Court had jurisdiction under 28 U.S.C. §§ 1331, 1337 and 15 U.S.C. § 1692k(d). We have jurisdiction under 29 U.S.C. § 1291. We have explained our standard of review as follows:

"Our standard of review of a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is plenary. Under Rule 12(c), judgment will not be granted unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law. In reviewing the grant of a Rule 12(c) motion, we must view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party."

Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir.1988) (internal quotation marks and citations omitted).

A.

In 1977, Congress enacted the FDCPA, 15 U.S.C. §§ 1692-1692p, to address abusive debt collection practices. Brown v. Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir.2006). It is a remedial statute that we "construe ... broadly, so as to effect its purpose." Id. The FDCPA prohibits the use of deception in the debt-collection process:

"A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: ... (3) The false representation or implication that any individual is an attorney or that any communication is from an attorney.... (10) The 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.

"[L]ender-debtor communications potentially giving rise to claims under the FDCPA ... should be analyzed from the perspective of the least sophisticated debtor." Brown, 464 F.3d at 454. This standard is lower than the standard of a reasonable debtor. Wilson v. Quadramed, 225 F.3d 350, 354 (3d Cir.2000). "[A] communication that would not deceive or mislead a reasonable debtor might still deceive or mislead the least sophisticated debtor." Brown, 464 F.3d at 454. We use the "least sophisticated debtor" standard in order to effectuate "the basic purpose of the FDCPA: ... to protect `all consumers, the gullible as well as the shrewd' ...." Id. (quoting Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir.1993)).

Although the "least sophisticated debtor" standard is a low standard, it "`prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.'" Quadramed, 225 F.3d at 354-55 (quoting Clomon, 988 F.2d at 1319).

B.

Rosenau argues that Unifund's debt collection letter violates 15 U.S.C. § 1692e(3) because it is likely to lead the least sophisticated debtor to believe that it came from an attorney. Unifund responds that the letter is not deceptive because it is not from a law firm and is not signed by an attorney. The District Court agreed with Unifund's position. However, the District Court's reading of the letter is unconvincing in light of the procedural posture of this case and the least sophisticated debtor standard.

There are no precedential Third Circuit opinions that discuss the legality of a debt-collection letter under § 1692e(3). The narrower question in this case, whether a letter from a Legal Department that employs no lawyers is misleading under § 1692e(3), appears to be an issue of first impression in the federal courts of appeals. To determine whether the District Court properly granted judgment on the pleadings in Unifund's favor, we look to our opinions that discuss collection letters that were alleged to violate other subsections of the FDCPA.

"A debt collection letter is deceptive where it can be reasonably read to have two or more different meanings, one of which is inaccurate." Brown, 464 F.3d at 455 (internal quotation marks and citation omitted). In Quadramed, we concluded that a collection letter was not deceptive under 15 U.S.C. § 1692g.² 225 F.3d at 351-52. The letter began: "Our client has placed your account with us for immediate collection. We shall afford you the opportunity to pay this bill immediately and avoid further action against you." Id. at 352. A few paragraphs later, the letter provided the debt-validation notice required by § 1692g: "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." Id.

We determined that the opening paragraphs of the letter did not "overshadow[] or contradict[] the validation notice such that the `least sophisticated debtor' would be confused ... [about] his rights." Id. at 353. The letter presented the debtor with the option to "(1) ... pay the debt immediately and avoid further action, or (2) notify [the collection agency] within thirty days ... that he disputes the validity of the debt." Id. at 356. The letter did not "emphasize...