Russey v. Rankin

• Decision Date: 17 July 1995
• Docket Number: CIV 92-776 MV/DJS.,No. CIV. 92-766 MV/DJS,CIV. 92-766 MV/DJS
• Citation: 911 F. Supp. 1449
• Parties: Cleo H. RUSSEY, Plaintiff, v. Jon P. RANKIN and TCA, Inc., d/b/a TCA Collections, Defendants.
• Court: U.S. District Court — District of New Mexico

911 F. Supp. 1449

Cleo H. RUSSEY, Plaintiff, v. Jon P. RANKIN and TCA, Inc., d/b/a TCA Collections, Defendants.

Nos. CIV. 92-766 MV/DJS, CIV 92-776 MV/DJS.

United States District Court, D. New Mexico.

July 17, 1995.

COPYRIGHT MATERIAL OMITTED

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Richard J. Rubin, Santa Fe, New Mexico, for plaintiff.

Martin E. Threet, Threet & King, Albuquerque, New Mexico, for TCA.

Jon P. Rankin, Tiburon, California, pro se.

MEMORANDUM OPINION

VAZQUEZ, District Judge.

THIS MATTER came on for consideration of the Plaintiff's Amended Motion for Partial Summary Judgment, filed March 2, 1993. The Court has reviewed the motion, the memoranda submitted by the parties and the relevant authority. The Court finds that the motion is well-taken in part and not well-taken in part as further explained below.

SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate only when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Federal Rule of Civil Procedure 56(c) provides that it is the movant's burden to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 321-23, 106 S.Ct. 2548, 2551-53, 91 L.Ed.2d 265 (1986). Upon such a showing,

an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or if otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.

Fed.R.Civ.P. 56(e). Viewing the evidence in the light most favorable to the non-movant, there is no issue for trial unless the Court finds sufficient evidence to support a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

FACTS

The undisputed facts are as follows. Plaintiff received a credit card from Bank One of Columbus, Ohio, and used the card to purchase several personal items qualifying as "consumer debts" under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, et seq. ("FDCPA"). Defendant TCA, Inc., ("TCA"), a California debt collection agency, was hired by Bank One to collect money owed on its outstanding overdue accounts.

Defendant Jon P. Rankin had a "Retainer Agreement" with Defendant TCA formalized in January 1991. The Agreement contained two addenda entitled "Rules of Engagement" and "Delegation of Authority." Rankin authorized certain TCA personnel to affix a facsimile stamp bearing his signature on form demand letters which he had revised and approved in advance. The agreement further provided Rankin with an office contiguous to that of TCA. Defendant Rankin was physically present for two days each month in this office and was available by telephone all other working days.

While residing in New Mexico, Plaintiff received two letters regarding his outstanding debt to Bank One. The first letter ("AZL1") was dated July 31, 1991, and bore a signature purporting to be that of Defendant Rankin, an attorney licensed in California. The letterhead indicated the correspondence was from the "Law Offices of Jon P. Rankin" and gave a phone number for which TCA was the subscriber. TCA employees answered all phone calls to the listed number.

The AZL1 letter stated in part: "I am the attorney for the above referenced creditor Bank One" and instructed the debtor to "please send your check for $1602.70 directly to me within five days." The letter informed Plaintiff Russey that, although he had thirty days in which to dispute the debt, "we have the legal right to file a lawsuit on the claim within the thirty day period."

The second letter ("NTC1") received by Plaintiff in Albuquerque was dated August 3, 1991, and bore a "TCA Collections" letterhead. The NTC1 collection letter states in part: "YOUR ACCOUNT AND COMPLETE FILE IS NOW IN THIS OFFICE" and "IT IS IMPERATIVE THAT YOUR PAYMENT IS RECEIVED IN THIS OFFICE AS SOON AS POSSIBLE." The letter goes on to describe the thirty-day period for disputing the debt.

THE FAIR DEBT COLLECTION PRACTICES ACT (FDCPA)

The FDCPA prohibits a debt collector from using "false, deceptive or misleading representations or means in connection with the collection of any debt." 15 U.S.C. § 1692e. Section 1692e contains sixteen subsections which set forth a non-exhaustive list of practices that fall within this ban. The FDCPA also prohibits harassment, abuse and unfair or unconscionable means to collect any debt. 15 U.S.C. §§ 1692d, 1692f. In order to establish a violation of the FDCPA, a plaintiff must demonstrate three elements: (1) he has been the object of collection activity arising from a consumer debt; (2) the defendant attempting to collect the debt qualifies as a "debt collector" under the Act; and (3) the defendant has engaged in a prohibited act or has failed to perform a requirement imposed by the FDCPA. Kolker v. Duke City Collection Agency, 750 F.Supp. 468, 469 (D.N.M.1990). The first two elements are conceded by both defendants. Only the third element is at issue on this motion for partial summary judgment to establish liability on the FDCPA claims.

In analyzing whether statements in either the NTC1 or AZL1 letters are "false, deceptive or misleading," the Court must use an objective standard. The "least sophisticated consumer" standard maintains an element of reasonableness and has been the most often applied by appellate courts considering FDCPA claims. Clomon v. Jackson, 988 F.2d 1314, 1318 (2nd Cir.1993). However, the Seventh Circuit recently rejected the "least sophisticated consumer" standard explaining that a reasonableness inquiry is at odds with the "least sophisticated consumer" who "is not merely below average he is the very last rung on the sophistication ladder" and would likely not be able to read a collection notice with care (or at all) let alone "interpret it in a reasonable fashion." Gammon v. GC Servs. Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir.1994).

The Seventh Circuit adopted the "unsophisticated consumer standard," which it explained as the "hypothetical consumer whose reasonable perceptions will be used to determine if collection messages are deceptive or misleading." Id.; see also Riveria v. MAB Collections, Inc., 682 F.Supp. 174, 178 (W.D.N.Y.1988) (using "unsophisticated consumer" standard).

The only apparent difference between the two standards is the terminology. Both are grounded in consumer protection law and their underlying purpose is the same: to protect the consumer who is uninformed, naive, or trusting, with consideration given to an objective element of reasonableness which shields complying debt collectors from liability for unrealistic or peculiar interpretations of collections letters. Id.; Clomon, 988 F.2d at 1320.

ANALYSIS

Plaintiff contends that Defendant TCA violated the FDCPA by sending him the AZL1 and NTC1 letters. He claims Defendant Rankin is also liable for any violations stemming from the AZL1 letter. Plaintiff contends that both letters (1) falsely threatened collection litigation; (2) failed to include a mandated disclosure provision; (3) represented a false sense of urgency; and (4) overshadowed the requisite thirty-day validation period, in violation of several provisions of the FDCPA.

In addition, Plaintiff maintains that the AZL1 letter (1) falsely represented that it came from an attorney and (2) falsely represented Defendant Rankin as the attorney for Bank One.

Finally, Plaintiff argues that in the NTC1 letter Defendant TCA (1) misrepresented that it could take action to collect the debt because New Mexico statutes require that collection agencies be licensed prior to engaging in collection efforts within the state and (2) falsely claimed it had Plaintiff's "complete file."

These multiple alleged violations will each be addressed separately below.

AZL1 & NTC1 Letters.

(1) Falsely threatening to sue.

Plaintiff contends Defendants TCA and Rankin both violated 15 U.S.C. § 1692e(5) by falsely threatening to file collection litigation in the AZL1 letter. Plaintiff further contends that Defendant TCA again violated Section 1692e(5) in its NTC1 letter. Section 1692e(5) of the FDCPA proscribes any "threat to take any action that cannot legally be taken or that is not intended to be taken."

a. AZL1 Letter.

The AZL1 Letter, purportedly from attorney Rankin, clearly threatens litigation by its express language: "We have the legal right to file a lawsuit on the claim within the 30 day period ..." and "you should know that the lawsuit could result in your paying our costs of filing and service of process ..."

It is undisputed in the record that under its agreement with Bank One, TCA had to obtain written permission from Bank One prior to filing litigation against its debtors. When TCA obtained Bank One's permission to sue, it did so on a 65 percent contingency assignment in TCA's own name. New Mexico law prohibits a collection agency from filing suit in its own name on a contingency assignment, as such conduct constitutes the unauthorized practice of law. See Kolker, 750 F.Supp. at 472.

Therefore, Defendants could not legally have filed litigation according to TCA's agreement with Bank One against Plaintiff within the thirty-day time period indicated in the demand letter. Plaintiff is thus entitled to Summary Judgment on his claim that Defendants violated 15 U.S.C. § 1692e(5) by falsely threatening to file collection litigation in the AZL1 letter.

b. NTC1 Letter.

Plaintiff claims the NTC1 letter also falsely threatens to file collection litigation and, therefore, summary judgment should be granted against Defendant TCA who sent that letter. Plaintiff contends that the NTC1 letter threatens litigation by referencing the matter as "RE: BANK ONE, COLUMBUS, OHIO VS: CLEO H. RUSSEY" and including the following "litigation language" in the body of the letter: "THE ABOVE REFERENCED CREDITOR HAS FILED CLAIM AGAINST YOU WITH...