Sibley v. Firstcollect, Inc., 94-2710-A-M2.

• Decision Date: 06 December 1995
• Docket Number: No. 94-2710-A-M2.,94-2710-A-M2.
• Citation: 913 F. Supp. 469
• Parties: Anne B. SIBLEY v. FIRSTCOLLECT, INC.
• Court: U.S. District Court — Middle District of Louisiana

913 F. Supp. 469

Anne B. SIBLEY v. FIRSTCOLLECT, INC.

No. 94-2710-A-M2.

United States District Court, M.D. Louisiana.

December 6, 1995.

Garth J. Ridge, Bivens & Ridge, Baton Rouge, LA, for plaintiff, Anne B. Sibley.

Edward P. Gothard and Frederick M. Stoller, McCloskey, Langenstein, & Stoller, New Orleans, LA, for defendant, Firstcollect, Inc.

RULING

NOLAND, United States Magistrate Judge.

This matter is before the Court on plaintiff Anne B. Sibley's motion for partial summary judgment filed with the Court on September 12, 1995. Plaintiff has sued defendant Firstcollect, Inc., (hereinafter "Firstcollect"), pursuant to the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (hereinafter the "FDCPA"), alleging several violations under the FDCPA. Plaintiff brings this partial motion for summary judgment alleging that Firstcollect is liable to the plaintiff under the FDCPA because, when it engaged in collection activities against the plaintiff, Firstcollect was not a licensed "debt collector" as required by Louisiana Revised Statutes 9:3576.8.

Firstcollect contends that, even if the failure to be licensed as a "debt collector" under Louisiana law is a violation under the FDCPA, its conduct is protected by the bona fide error defense, which necessarily raises a disputed issue of material fact that prevents the Court from entering partial summary judgment in the plaintiff's favor. Firstcollect maintains it is entitled to raise the bona fide error defense because it relied upon the erroneous legal advice of counsel who, prior to the alleged violations involving the plaintiff, advised Firstcollect that there were no licensing requirements for debt collectors in Louisiana. Additionally, Firstcollect argues that a violation of state licensing statutes is not an ipso facto violation of the FDCPA because, to the extent that state law provisions conflict with the FDCPA, such provisions are pre-empted by the FDCPA.

Plaintiff counters Firstcollect's arguments and asserts that the bona fide error defense does not apply to the error of law made by Firstcollect. Furthermore, plaintiff argues that Firstcollect fails to present evidence that it employed a system that would have caught the error made by its legal counsel but, nonetheless, failed to catch the mistake. Finally, plaintiff maintains that Louisiana's requirement that all debt collectors register with the state is not inconsistent with the FDCPA and, therefore, a failure to be licensed can be a violation of the FDCPA.

As this matter is before the Court on the plaintiff's motion for summary judgment, the basic question before the Court is whether the evidentiary materials on file "show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c) (West 1992). When a summary judgment motion is properly made and supported under Rule 56(c), the nonmoving party may not rest on the mere allegations of its pleadings but, rather, must come forward with "specific facts" showing that there is a genuine issue for trial. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Fed.R.Civ.P. 56(e) (West 1992). Accordingly, summary judgment must be entered against a nonmoving party who has the burden of proof at trial (on a claim or defense) when that party fails to make an evidentiary showing in opposition to the motion sufficient to establish the existence of an element essential to the claim or defense, Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986), for a failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial. Id. There is no genuine issue for trial on a claim unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party on the claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If the evidence on a claim or defense is merely colorable or is not significantly probative, summary judgment may be entered against the nonmoving party on that claim. Id.

In order to prevail on her cause of action pursuant to 15 U.S.C. § 1692k, plaintiff must prove that: (1) the plaintiff has been the object of collection activity arising from consumer debt, (2) the defendant is a debt collector as defined by the FDCPA, and (3) the defendant has engaged in an act or omission prohibited by the FDCPA. See, e.g., Kolker v. Duke City Collection Agency, 750 F.Supp. 468, 469 (D.N.M.1990). The parties agree that the first two parts of this test have been met. It is the last item that must be decided by the Court. Plaintiff alleges only one overt act or omission in her complaint that she deems to be a violation of the FDCPA. Namely, that at the time of all its communications with the plaintiff, Firstcollect was an unlicensed debt collector in violation of Louisiana Revised Statutes 9:3576.8, which requires that all debt collectors be licensed with the state of Louisiana prior to engaging in any debt collecting activities within Louisiana. La.R.S. 9:3578.8 (West Supp.1995). Plaintiff alleges that Firstcollect's omission in this respect was a violation of sections 1692e(5), 1692e(10), and 1692f of the FDCPA.

Several district courts agree with the plaintiff's proposition that a failure to comply with a state's licensing provisions is a violation of the FDCPA. See Russey v. Rankin, 911 F.Supp. 1449, 1458-59 (D.N.M.1995); Kuhn v. Account Control Technology, Inc., 865 F.Supp. 1443, 1451-52 (D.Nev.1994); Gaetano v. Payco of Wisconsin, Inc., 774 F.Supp. 1404, 1413-14 (D.Conn.1990). After reviewing the cases cited by the plaintiff, this Court agrees that a debt collector who has not been properly licensed by the state in which it attempted to collect a debt has violated Section 1692e(5) of the FDCPA.

Louisiana Revised Statutes 9:3576.8 states that "no person shall act, assume to act, or advertise as a collection agency ... without first having applied for and obtained a license from the commissioner." La.R.S. 9:3576.8 (West Supp.1995). Under Louisiana law, a person can be fined up to $500.00, be imprisoned for up to six months, and be forced to forfeit any fees obtained collecting debts if he is found guilty of operating a collection agency without a valid license. La.R.S. 9:3576.22 (West Supp.1995). Clearly, then, it is unlawful to collect debts in Louisiana without a valid license.

According to Section 1692e(5) of the FDCPA, it is a violation of the FDCPA for a debt collector to threaten "to take any action that cannot be legally taken...." 15 U.S.C. § 1692e(5) (West 1982). At the time Firstcollect communicated with the plaintiff about her underlying debt, it did not hold the necessary Louisiana license. The two letters later received by plaintiff's counsel regarding the plaintiff's debt were designated as "an attempt to collect a debt." Thus, it is undisputed that the letters and other communications were an attempt to act as a debt collector in Louisiana without the required license. Consequently, when Firstcollect attempted to collect the debt from the plaintiff, it was threatening to take an action that it could not legally take, namely, act as a debt collector in the state of Louisiana. Hence, it violated Section 1692e(5) of the FDCPA. Now that the Court has decided that Firstcollect's failure to be licensed violated Section 1692e(5), the Court need not address whether this same omission violated Sections 1692e(10) and 1692f of the Act.¹See Johnson v. Eaton, 873 F.Supp. 1019, 1026 (M.D.La.1994).

Next, the Court must address Firstcollect's contention that it has a defense under Section 1692k(c) of the FDCPA which precludes the issuance of summary judgment. Section 1692k(c) provides that "a debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c) (West 1982) (emphasis supplied).

First, as pointed out by the plaintiff, there is considerable authority that an error of law, such as relying upon the...