Stimpson v. Midland Credit Mgmt., Inc.

• Citation: 944 F.3d 1190
• Decision Date: 18 December 2019
• Docket Number: No. 18-35833,18-35833
• Parties: Barry STIMPSON, Plaintiff-Appellant, v. MIDLAND CREDIT MANAGEMENT, INC., a Kansas corporation; Midland Funding, LLC, a Delaware limited liability company, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

944 F.3d 1190

Barry STIMPSON, Plaintiff-Appellant,

v.MIDLAND CREDIT MANAGEMENT, INC., a Kansas corporation; Midland Funding, LLC, a Delaware limited liability company, Defendants-Appellees.

No. 18-35833

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 24, 2019 Seattle, Washington

Filed December 18, 2019

Scott C. Borison (argued), Esq., Legg Law Firm, LLP, San Mateo, California; Ryan A. Ballard, Esq., Ballard Law, PLLC, Rexburg, Idaho; Peter A. Holland, Esq., Holland Law Firm PC, Annapolis, Maryland; for Plaintiff-Appellant.

Joshua C. Dickinson (argued), Spencer Fane LLP, Omaha, Nebraska; Lyle J. Fuller, Fuller & Fuller, PLLC, Preston, Idaho; for Defendants-Appellees.

B. Lynn Winmill, District Judge, Presiding

Before: Richard R. Clifton and Sandra S. Ikuta, Circuit Judges, and Jed S. Rakoff,^* District Judge.

IKUTA, Circuit Judge:

Barry Stimpson contends that a debt collector’s letter was deceptive or misleading because it attempted to persuade him to pay a time-barred debt. We reject this claim because a debt collector is entitled to collect a lawful, outstanding debt even if the statute of limitations has run, so long as the debt collector does not use means that are deceptive or misleading and otherwise complies with legal requirements.

I

In February 2006, Barry Stimpson obtained a credit card from HSBC Bank Nevada, N.A. (HSBC). HSBC’s credit agreement with Stimpson provided that Nevada law applied to the account.¹ Stimpson charged purchases to his card, but did not pay off the entire balance. He made his last payment on December 12, 2008. In September 2009, HSBC sold Stimpson’s account to a debt collector, Midland Funding, LLC.² Under Nevada law, the limitations period for bringing a legal action against Stimpson for recovery of the amount owed on the credit card expired on December 12, 2014, six years after Stimpson’s last payment. See NRS §§ 11.010, 11.190, 11.200.

Over two years later, in March 2017, Midland Credit sent a letter to Stimpson indicating that his account balance was $1,145.60.³ The upper right-hand corner of the letter states: "Offer Expiration Date: 04-27-2017." In the middle of the page, the letter states: "Available Payment Options. Option 1: 40% OFF. Option 2: 20% OFF Over 6 Months. Option 3: Monthly Payments As Low As: $50 per month. Call today to discuss your options and get more details." Immediately below the payment options, the letter states:

Benefits of Paying Your Debt

--Save $458.24 if you pay by 04-27-2017

--Put this debt behind you.

--No more communication on this account.

--Peace of mind.

The letter is signed by Tim Bolin, Division Manager. Under his signature, the letter states:

The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.

Near the bottom of the page, the letter provides: "We are not obliged to renew any offers provided. ... PLEASE SEE REVERSE SIDE FOR IMPORTANT DISCLOSURE INFORMATION."

The back of the letter states: "Please understand this is a communication from a debt collector. This is an attempt to collect a debt." Further down the page, the letter states: "We are required under state law to notify consumers of the following rights. This list does not contain a complete list of the rights consumers have under state and federal law." The letter then provides specific disclosures required by the laws of Massachusetts, Minnesota, New York City, North Carolina, and Tennessee.

After receiving the letter, Stimpson brought this action against Midland in Idaho state court on behalf of himself and a purported class of similarly situated individuals.⁴ The complaint alleged that Midland violated the FDCPA by attempting to collect "time-barred debts without disclosure of that fact." Midland removed the case to federal court and the district court granted summary judgment in favor of Midland. Stimpson v. Midland Credit Mgmt. , 347 F. Supp. 3d 538, 553 (D. Idaho 2018). Stimpson appealed.

We have jurisdiction under 28 U.S.C. § 1291. We review a district court’s grant of summary judgment de novo and "may affirm on any basis supported by the record." Gordon v. Virtumundo, Inc. , 575 F.3d 1040, 1047 (9th Cir. 2009). Summary judgment is appropriate if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

II

Congress enacted the FDCPA in 1977 due to finding "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors" and that "[e]xisting laws and procedures for redressing these injuries are inadequate to protect consumers." 15 U.S.C. § 1692(a), (b). Congress did not intend to ban debt collection but instead intended "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." § 1692(e). In other words, the FDCPA was designed to stop a relatively small number of "unscrupulous debt collectors" from using a "host of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors." S. Rep. No. 95-382, at 1–2, reprinted in 1977 U.S.C.C.A.N. 1695, 1696 (1977).

To prevail on a claim under the FDCPA, a plaintiff must establish that a debt collector, as defined in § 1692a(6), has failed to comply with a provision of the FDCPA. See § 1692k; Baker v. G. C. Servs. Corp. , 677 F.2d 775, 777 (9th Cir. 1982) ("Section 1692k, which governs a debt collector’s liability under the [FDCPA], provides in pertinent part that ‘any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person.’ "). On appeal, Stimpson contends that Midland’s letter violated § 1692e, which provides: "A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt." § 1692e. Section 1692e includes a nonexclusive list of 16 practices that are deemed to be "false, deceptive, or misleading." § 1692e. Those practices include misrepresenting the "character, amount, or legal status of any debt," § 1692e(2), and threatening to "take any action that cannot legally be taken," § 1692e(5). Section 1692e(10), which has been referred to as a "catchall" provision, Gonzales v. Arrow Fin. Servs., LLC , 660 F.3d 1055, 1062 (9th Cir. 2011), prohibits "[t]he use of any false representation or deceptive means to collect ... any debt," § 1692e(10).

In determining whether conduct violates § 1692e, we undertake an objective analysis of the question whether the "least sophisticated debtor would likely be misled by a communication." Gonzales , 660 F.3d at 1061 (quoting Donohue v. Quick Collect Inc. , 592 F.3d 1027, 1030 (9th Cir. 2010) ); accord Tourgeman v. Collins Fin. Servs., Inc. , 755 F.3d 1109, 1117–18 (9th Cir. 2014) ; Baker , 677 F.2d at 778. This is a legal, not a factual, determination. See Gonzales , 660 F.3d at 1061 (citing Terran v. Kaplan , 109 F.3d 1428, 1432 (9th Cir. 1997) (collecting cases)).⁵ The "least sophisticated debtor" is distinguished from the ordinary, reasonable person by being financially unsophisticated. See id. at 1062. Such a debtor is comparatively uninformed and naive about financial matters and functions as an "average consumer in the lowest quartile (or some other substantial bottom fraction) of consumer competence." Evory v. RJM Acquisitions Funding L.L.C. , 505 F.3d 769, 774 (7th Cir. 2007) (cited in Gonzales , 660 F.3d at 1062 ). Even so, the debtor has "rudimentary knowledge about the financial world." Wahl v. Midland Credit Mgmt., Inc. , 556 F.3d 643, 645 (7th Cir. 2009) (citation omitted). While financially unsophisticated, this debtor is not "the least intelligent consumer in this nation of 300 million people." Evory , 505 F.3d at 774. Rather, the debtor grasps the normal, everyday meaning of words, see Gonzales , 660 F.3d at 1062, and is "capable of making basic logical deductions and inferences," Wahl , 556 F.3d at 645 (quoting Pettit v. Retrieval Masters Creditors Bureau, Inc. , 211 F.3d 1057, 1060 (7th Cir. 2000) ). The least sophisticated debtor is not unreasonable, Turner v. J.V.D.B. & Assocs., Inc. , 330 F.3d 991, 995 (7th Cir. 2003), and has a "basic level of understanding and willingness to read with care," Gonzales , 660 F.3d at 1062 (cleaned up) (quoting Rosenau v. Unifund Corp. , 539 F.3d 218, 221 (3d Cir. 2008) ). In short, the least sophisticated debtor is reasonable and functional, but lacks experience and education regarding financial matters.

III

In light of this background, we begin by considering Stimpson’s claim that Midland’s letter used "false, deceptive, or misleading representation[s]" in violation of § 1692e.

A

Stimpson first identifies the letter’s statute-of-limitations disclosure as a primary example of misleading or deceptive representations. This disclosure states:

The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.

According to Stimpson, this language is deceptive or misleading because the letter does not clarify that his debt is time-barred as a matter of law; rather, it states Midland "will not" sue, which could mean that Midland has simply decided not to sue.

We disagree. A person who is unsophisticated regarding financial matters, but is still "capable of making basic logical deductions and inferences," Wahl , 556 F.3d at 645 (citation omitted), would not be deceived or misled by this language. The phrase "[d]ue to the age of this debt, we will not sue you," follows immediately...