Smothers v. Midland Credit Mgmt., Inc.

• Decision Date: 29 December 2016
• Docket Number: Case No. 16-2202-CM
• Parties: BETTY JO SMOTHERS, Plaintiff, v. MIDLAND CREDIT MANAGEMENT, INC., Defendant.
• Court: U.S. District Court — District of Kansas

BETTY JO SMOTHERS, Plaintiff,
v.
MIDLAND CREDIT MANAGEMENT, INC., Defendant.

Case No. 16-2202-CM

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS

December 29, 2016

MEMORANDUM AND ORDER

Plaintiff Betty Jo Smothers filed this action under the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. § 1692 et seq., alleging that defendant Midland Credit Management, Inc. violated the FDCPA by sending a single debt collection letter to plaintiff that included false, deceptive, and misleading representations. This matter is before the court on two motions that will effectively resolve the case: defendant's motion for summary judgment (Doc. 23) and plaintiff's motion for summary judgment (Doc. 25). For the reasons stated below, the court denies defendant's motion and grants plaintiff's motion.

I. Factual Background

The parties stipulated to nearly all of the relevant facts in this case. Highly summarized, those facts are as follows:

Plaintiff owed credit card debt to Citibank (South Dakota), N.A. ("Citibank"). Due to non-payment, Citibank charged off the debt, and defendant eventually purchased the debt. The statute of limitations for filing a lawsuit to collect on the debt has since passed.

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After the statute of limitations expired, defendant sent a letter to plaintiff that states, "The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it." The letter also includes the following:

Image materials not available for display.

. . . .

*If you pay your full balance, we will report your account as Paid in Full. If you pay less than your full balance, we will report your account as Paid in Full for less than the full balance.

The letter does not threaten litigation. Moreover, defendant at all relevant times had a written policy specifying that, after a debt was out of statute, defendant would not recalculate the statute of limitations if it received a payment toward the debt—even if the law allowed revival.

II. Legal Standard

Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In applying this standard, the court views the evidence and all reasonable inferences therefrom

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in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

III. Discussion

Congress enacted the FDCPA in response to reports of "abusive, deceptive, and unfair debt collection practices by many debt collectors." 15 U.S.C. § 1692(a). One of the purposes of the FDCPA is "to eliminate [these] abusive debt collection practices." Id. § 1692(e). To further this purpose, the FDCPA prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." Id. § 1692e. To establish a violation of § 1692e, the plaintiff must show that (1) the plaintiff is a "consumer" and the defendant is a "debt collector" within the meaning of the FDCPA; (2) the debt arises out of a transaction "primarily for personal, family, or household purposes"; and (3) the defendant used a "false, deceptive, or misleading representation or means" when trying to collect the debt. Id. §§ 1692a, 1692e; see also Yang v. Midland Credit Mgmt., Inc., No. 15-2686-JAR, 2016 WL 393726, at *1 (D. Kan. Feb. 2, 2016). The parties agree that the first and second elements are not at issue; only the third element is disputed.

Plaintiff argues that she is entitled to summary judgment for two reasons: (1) defendant misrepresented the character and nature of the debt when it failed to disclose the revivable nature of a time-barred debt in Kansas; and (2) defendant engaged in a deceptive practice when it described the benefits of a partial payment without disclosing the legal consequences of such a payment in Kansas. These two arguments are based on Sections 1692e(2)(A) and 1692e(10) of the FDCPA. Defendant counters that summary judgment in its favor is justified because (1) the statute of limitations disclosure was true at the time defendant mailed the letter; (2) the disclosure would be true even if plaintiff made payments on the debt because defendant's policies prohibited suing on time-barred debt—regardless of

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whether partial payment revived the statute of limitations; and (3) numerous courts have approved letters like the one issued here.

A. FDCPA Standards

When analyzing a claim under the FDCPA, the "overwhelming majority of Courts of Appeals" apply the "least sophisticated consumer" or the "least sophisticated debtor" standard, which is also referred to as the "unsophisticated consumer" or the "unsophisticated debtor" standard. Jensen v. Pressler & Pressler, 791 F.3d 413, 419 n.3 (3d Cir. 2015). Although the Tenth Circuit has not expressly adopted this standard, it has recognized that other circuits apply an objective standard when analyzing FDCPA claims, "measured by how the 'least sophisticated consumer' would interpret the notice received from the debt collector." Ferree v. Marianos, No. 97-6061, 1997 WL 687693, at *1 (10th Cir. Nov. 3, 1997) (citation omitted). In Ferree, the Tenth Circuit explained that "the test is how the least sophisticated consumer—one not having the astuteness of a [lawyer] or even the sophistication of the average, everyday, common consumer—understands the notice he or she receives." Id. (citation omitted). The Tenth Circuit, however, also noted that the hypothetical consumer "can be presumed to possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care." Id. (citation omitted). Based on this guidance from the Tenth Circuit and consistent with recent case law in this district, the court predicts that the Tenth Circuit would hold that the "least sophisticated consumer" standard applies to FDCPA claims. See e.g., Kalebaugh v. Berman & Rabin, P.A., 43 F. Supp. 3d 1215, 1222 (D. Kan. 2014); Yang, 2016 WL 393726, at *3.

There is a circuit split over whether the application of the "least sophisticated consumer" test in § 1692e claims is a question of law or fact. Kalebaugh, 43 F. Supp. 3d at 1222. Although not definitively resolving the issue, in Sheriff v. Gille, the Supreme Court recently noted in dicta that "the

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application of the FDCPA to [undisputed] facts is a question of law," and the lower court "therefore properly granted summary judgment" on the issue of whether a practice was "false, deceptive, and misleading." 136 S. Ct. 1594, 1603 n.7 (2016). This is consistent with the Second, Fourth, and Ninth Circuits, which "have determined that the question [of] whether a communication is false and deceptive in violation of [§] 1692e is a question of law for the [c]ourt." Kalebaugh, 43 F. Supp. 3d at 1222 (citations omitted). Further, although the Fifth, Sixth, Seventh, and Eleventh Circuits held this determination is a question of fact, these courts have "explained that not all cases require a jury trial if material facts are not disputed and the court is able to decide the case as a matter of law based on the language in the collection...