Schultz v. Midland Credit Mgmt.
| Decision Date | 29 July 2022 |
| Docket Number | Civil Action 16-4415 |
| Parties | ROBERT A. SCHULTZ, JR., et al., Plaintiffs, v. MIDLAND CREDIT MANAGEMENT, INC., Defendant. |
| Court | U.S. District Court — District of New Jersey |
THIS MATTER comes before the Court on Defendant Midland Credit Management, Inc.'s (“Defendant” or “MCM”) (1) Motion to Decertify the Class and (2) Motion for Summary Judgment. ECF Nos. 124, 125. Named Plaintiffs Robert A. Schultz, Jr. (“Robert”) and Donna L. Schultz (“Donna”) and the Class (collectively, “Plaintiffs”) oppose the Motions and cross-move for Summary Judgment. ECF Nos. 131, 132. For the reasons explained below, Defendant's Motion for Summary Judgment is GRANTED, Plaintiff's Cross-Motion for Summary Judgment is DENIED and the Motion to Decertify the Class is DENIED AS MOOT.
This class action arises from claims that Defendant violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692, et seq., by sending collection letters to Plaintiffs that were deceptive and misleading. See generally Am. Compl., ECF No. 10. This Court granted Plaintiff's Motion for Class Certification on June 5, 2020, ECF Nos. 98-99, and the Supreme Court issued its decision in TransUnion LLC v Ramirez, 141 S.Ct. 2190 (2021) the following year. In light of TransUnion, Defendants now challenge Plaintiffs' standing to assert their claims in federal court.
MCM is an agency that regularly collects or attempts to collect past-due consumer debts. Am. Compl. ¶¶ 5-19; Pl. RSOMF ¶ 1. On August 24, 2015, MCM mailed collection letters to Robert and Donna to collect on separate debts of under $600, where Capital One was the underlying creditor. Def. SOMF ¶¶ 2-3; Pl. RSOMF ¶¶ 2-3.[2]
The Collection Letters contained the following language: Id. ¶ 23 (the “IRS Reporting Language”). Def. SOMF ¶ 6; Pl. RSOMF ¶ 2. Under the Department of Treasury and Internal Revenue Service (“IRS”) regulations, only discharges of indebtedness greater than $600 are subject to reporting, with certain exceptions. Am. Compl. ¶ 25; see also 26 C.F.R. § 1.6050P-1(a) (). As Plaintiffs' debts were less than $600, see Collection Letters, “there c[ould] never be a discharge of indebtedness over $600” in principle and Defendant “never” would be “required to report” a discharge of Plaintiff's debts “to the IRS.” Am. Compl. ¶ 27. Accordingly, Plaintiffs allege that the IRS Reporting Language is false, deceptive, and misleading in violation of the FDCPA because it implies there could be “negative consequences with the [IRS]” and “deliberately fails to disclose that such reporting is required under only limited circumstances.” Id. ¶¶ 29-30, 34.
Robert and Donna have not made any payments on the debt owed to MCM. Def. SOMF ¶ 9. At their depositions, they testified that they could not afford to pay their debts and were struggling to pay their rent at that time. Id. Donna stated that upon reading the Collection Letters, she “panicked” based on her belief that the letters threatened IRS involvement and that she was “in some kind of trouble.” Pl. RSOMF ¶ 7. Robert similarly testified that he was worried MCM would involve the IRS in its collections, that he sent the letter to his lawyer, and that he felt scared and intimidated by the prospect of IRS involvement. Id. ¶¶ 12-14.
On July 20, 2016, Plaintiff filed this putative class action, ECF No. 1, and amended the Complaint on November 22, 2016, ECF No. 10. The Amended Complaint asserts a single count of a violation of 15 U.S.C. § 1692e (“Section 1692e”). Am. Compl. ¶¶ 48-57. On June 5, 2020, the Court granted Plaintiffs' Motion for Class Certification, appointing Robert and Donna as class representatives, and certifying the class as:
All natural persons with addresses within the state of New Jersey, to whom, beginning July 20, 2015 through and including April 25, 2016, Midland Credit Management, Inc., sent a Section 1692g initial communication or “LT1Y” letter in an attempt to collect a consumer debt with an original creditor of Capital One and a current balance of less than $600 at the time the letter was sent, which contained the [IRS Reporting Language].
ECF No. 124. The instant Motions followed.
Pursuant to Federal Rule of Civil Procedure 56(c), the Court will grant a motion for summary judgment if the pleadings, depositions, answers to interrogatories, and admissions on file, together with available affidavits, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “[S]ummary judgment may be granted only if there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party.” Miller v. Ind. Hosp., 843 F.2d 139, 143 (3d Cir. 1988).
The Court construes all facts and inferences in the light most favorable to the non-moving party. Peters v. Del. River Port Auth., 16 F.3d 1346, 1349 (3d Cir. 1994). “[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 248 (citing First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968)) (internal quotation marks omitted).
Defendant argues that this Court lacks subject matter jurisdiction because Plaintiffs cannot articulate a “concrete” injury caused by the Collection Letters under the standard set forth by the Supreme Court in TransUnion. The Court agrees.
Under Article III of the U.S. Constitution, a plaintiff must establish standing to sue in federal court. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). Standing consists of three elements: “[(1)] an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). “The Supreme Court has repeatedly described the question of Article III standing as a ‘threshold' issue,” and courts have a continuing obligation to assure themselves of jurisdiction. Schaller v. United States SSA, 844 Fed.Appx. 566, 570 (3d Cir. 2021) (quoting Wayne Land & Mineral Grp. LLC v. Del. River Basin Comm'n, 959 F.3d 569, 573-74 (3d Cir. 2020)). As the party invoking federal jurisdiction, the plaintiff bears the burden of establishing these elements. Lujan, 504 U.S. at 560.
An injury in fact must be both particularized and concrete, affecting the plaintiff in a “personal and individual way,” and the plaintiff must show that the injury “actually exists, though it need not be tangible.” Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1386 (2014); Thomas v. Youderian, 232 F.Supp.3d 656, 665 (D.N.J. 2017) (citing Spokeo, 578 U.S. at 340). Although Congress has the power to “identify[] and elevat[e] intangible harms” to injuries that provide standing, “Article III standing requires a concrete violation even in the context of a statutory violation.” Spokeo, 578 U.S. at 341.
The Supreme Court recently illustrated these principles in TransUnion, 141 S.Ct. at 2190. There, a class of individuals sued a credit reporting agency, TransUnion, in federal court for violating the Fair Credit Reporting Act. Id. at 2200. For one group of class members, TransUnion provided credit reports that incorrectly labeled individuals as potential terrorists to third-party businesses, but it did not disseminate the credit reports containing the same misleading information for the other group of class members. Id. The Court held that the latter class members lacked standing to sustain their claims, finding that they lacked a concrete injury and rejecting “the proposition that ‘a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.'” Id. at 2198 (quoting Spokeo, 578 U.S. at 341). As for the remaining class members whose credit reports were sent to third parties, the Court found that their injury bore a “close relationship” to the reputational harm akin to the tort of defamation sufficient to confer standing. Id. The Court explained that because the element of disclosure or publication was a key part of the interests protected by defamation, “[t]he mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” Id. at 2210.
Where as here, Plaintiffs concede that they have not suffered a tangible harm, in the wake of TransUnion they must demonstrate some other intangible harm that bears a “‘close relationship' to a harm ‘traditionally recognized as providing a basis for a lawsuit in American courts.'” Id. at 2204; Pl. Opp. to MSJ at 21-22, ECF No. 131. Plaintiffs argue that the FDCPA's prohibition on false or deceptive statements bears a resemblance to the traditional cause of action for fraud. Pl. Opp. to MSJ at 23. Under New Jersey law, the elements of fraud are: “(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by...
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