Tavernaro v. Pioneer Credit Recovery, Inc.

• Decision Date: 08 August 2022
• Docket Number: 20-3219
• Citation: 43 F.4th 1062
• Parties: Jason E. TAVERNARO, Plaintiff - Appellant, v. PIONEER CREDIT RECOVERY, INC., Defendant - Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

43 F.4th 1062

Jason E. TAVERNARO, Plaintiff - Appellant,

v.PIONEER CREDIT RECOVERY, INC., Defendant - Appellee.

No. 20-3219

United States Court of Appeals, Tenth Circuit.

FILED August 8, 2022

Christopher E. Roberts, Butsch Roberts & Associates, LLC, Clayton, Missouri (Mark D. Molner, Molner Law Group, LLC, Kansas City, Missouri, with him on the briefs), for Plaintiff-Appellant.

Lisa M. Simonetti, Greenberg Traurig, LLP, Los Angeles, California (Lindsay N. Aherne, Greenberg Traurig, LLP, Denver, Colorado, with her on the brief), for Defendant-Appellee.

Before TYMKOVICH, Chief Judge, HARTZ and McHUGH, Circuit Judges.

TYMKOVICH, Chief Judge.

This case requires us to consider whether Pioneer Credit Recovery, Inc., violated the Fair Debt Collection Practices Act (FDCPA) when it sent Jason Tavernaro a letter attempting to collect a student loan debt. The district court dismissed Mr. Tavernaro's complaint for failure to state a claim because the alleged facts were insufficient to establish that Pioneer used materially misleading, unfair, or unconscionable means to collect the debt, as required by the FDCPA.

We affirm. We conclude that violations of 15 U.S.C. § 1692e for false or misleading communications must be material, and materiality is determined through the perspective of the reasonable consumer. Applying that standard, we find Pioneer's letter was not materially misleading. And because Mr. Tavernaro's other claim under § 1692f for unfair communications was similarly based on the § 1692e claim, we conclude his § 1692f claim also fails.

I. Background

A. Factual Background

Jason Tavernaro borrowed money through the Family Federal Education Loan program to pay for schooling, and then he defaulted on that debt. The defaulted debt was sold to Educational Credit Management Corporation (ECMC)—a federal student loan guaranty agency—which then contracted with Pioneer Credit Recovery, Inc., to help collect the debt.¹

In February 2020, in an attempt to collect the outstanding balance, Pioneer sent Mr. Tavernaro's employer a packet containing an Order of Withholding from Earnings. The Order required Mr. Tavernaro's employer to withhold a portion of his earnings and then remit the withheld wages to Pioneer.

The entire packet contained seven pages. The first two pages are a letter addressed to Mr. Tavernaro's employer that provided information about Mr. Tavernaro's alleged debt and ordered his employer to garnish his wages and send them to Pioneer.² The third page is an "Employer Acknowledgement of Wage Withholding," which—like its title suggests—was to be filled out by Mr. Tavernaro's employer and returned to Pioneer. Aplt. App. at 17. Pages four through six are the "Handbook for Employers," which provides some additional information to Mr. Tavernaro's employer. Id. at 18–20. And the last page is a worksheet to calculate the amount to be withheld per pay period. Id. at 21.

For clarity, we will describe the letter's key contents, beginning with the first page. At the top-right corner of the first page, ECMC's logo is prominently displayed. Centered near the middle of the same page is the letter's title, making clear the letter is an "Order of Withholding from Earnings." Id. at 15. The text clarifies ECMC "is the holder of a defaulted federally insured student loan debt" and that the letter "is an attempt, by a debt collector, to collect a debt." Id. Near the bottom of the first page, the reader is prompted to "PLEASE SEE [THE] NEXT PAGE FOR IMPORTANT INFORMATION." Id.

On the next page, the letter provides details about Mr. Tavernaro, his debt, and the withholding payments. Near the middle of this second page, Pioneer is named for the first time in the letter. Specifically, it states, "Pioneer Credit Recovery, Inc. is assisting ECMC with administrative activities associated with this administrative wage garnishment." Id. at 16. It then instructs the employer to remit payments to Pioneer and provides Pioneer's mailing address. And finally, the letter admonishes the reader to "please call ... or send correspondence to" Pioneer "[i]f [it has] questions regarding this matter" and again provides Pioneer's mailing address and phone number. Id.

After Mr. Tavernaro's employer received the letter, it withheld $652.97 of his wages and tendered the garnished funds to Pioneer. Mr. Tavernaro then filed suit against Pioneer on behalf of himself and a putative class, alleging Pioneer violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. He specifically alleged Pioneer violated the portions of the FDCPA that prohibit the use of "false, deceptive, or misleading representation[s]," id. § 1692e, or "unfair or unconscionable means," id. § 1692f, in attempting to collect a debt.

B. Procedural Background

In his complaint, Mr. Tavernaro accused Pioneer of employing deceptive and unfair practices in attempting to collect the debt he allegedly owed. Specifically, Mr. Tavernaro took issue with the contents of the letter. According to him, Pioneer deceptively sent the letter "to appear as though it were sent by ECMC." Aplt. App. at 9, ¶ 17. To achieve that deception, "Pioneer used ECMC's name and logo on the[ ] letter." Id. at 10, ¶ 30. And the allegedly deceptive use of ECMC's "name and logo on the first page of the[ ] letter" was also "an unfair or unconscionable means [used] to collect a debt." Aplt. App. at 10–11, ¶ 33.

Mr. Tavernaro alleged four violations of the FDCPA: (1) violation of the catch-all provision for § 1692f; (2) violation of the catch-all provision for § 1692e ; (3) violation of § 1692e(10), which prohibits the use of false representations or deceptive means to collect a debt or obtain information concerning a consumer, and; (4) violation of § 1692e(14), which requires debt collectors to use their "true name." Aplt. App. at 9–11, ¶¶ 29, 31, 32, 33.

In response, Pioneer filed a motion to dismiss for failure to state a claim, which the district court granted. See Fed. R. Civ. P. 12(b)(6). The district court granted Pioneer's motion because Mr. Tavernaro failed to plausibly allege Pioneer violated the FDCPA. For a violation of 15 U.S.C. § 1692e, the court required Mr. Tavernaro to plead facts sufficient to show "(1) [Pioneer] engaged in a practice that was false, deceptive, or misleading and (2) the false, deceptive, or misleading statement was material, in that it had the potential to frustrate the least sophisticated consumer's ability to choose his or her response." Aplt. App. at 26 (citation omitted). Applying the "least sophisticated consumer" test for materiality, the court concluded Mr. Tavernaro's "assertions [did] not even raise the possibility that the OWE was materially misleading" because he failed to "allege[ ] how knowledge of who mailed the OWE was material to his, his employer's[,] or the least sophisticated consumer's response." Id. at 29.

Because the court concluded the letter was not misleading, it necessarily concluded the letter was not unfair or unconscionable. See 15 U.S.C. § 1692f. Although whether a letter is misleading is a different question from whether it is unfair or unconscionable, the court resolved the issues jointly because Mr. Tavernaro's theory that the letter was unfair or unconscionable was premised on the idea that it was misleading. As all parties agreed, Mr. Tavernaro's claims "turn[ed] on the same issue: whether the OWE was materially misleading." Aplt. App. at 31. Consequently, the court granted Pioneer's motion to dismiss.

II. Discussion

We find the district court properly concluded Mr. Tavernaro failed to state a claim under the FDCPA. We first review and consider the FDCPA's text, structure, and purpose, as well as precedent from other circuits. Then, we conclude that statements violate § 1692e only if they are material, meaning that they frustrate the reasonable consumer's ability to intelligently respond. Applying this standard, we conclude Mr. Tavernaro's alleged facts are insufficient to find that the reasonable consumer would be materially misled by the letter.

We review dismissal under Rule 12(b)(6) for failure to state a claim de novo. Kansas Penn Gaming, LLC v. Collins , 656 F.3d 1210, 1214 (10th Cir. 2011). In doing so, we accept "all the well-pleaded allegations of the complaint as true and must construe them in the light most favorable to the plaintiff." Albers v. Bd. of Cty. Comm'rs, 771 F.3d 697, 700 (10th Cir. 2014) (internal quotation marks omitted). To survive a motion to dismiss, a complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). We "disregard conclusory statements and look only to whether the remaining[ ] factual allegations plausibly suggest the defendant is liable." Khalik v. United Air Lines , 671 F.3d 1188, 1191 (10th Cir. 2012).

A. FDCPA

Congress enacted the FDCPA "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." 15 U.S.C. § 1692(e). To achieve those purposes, the FDCPA places limits on debt collection practices, and it provides a private right of action that allows successful plaintiffs to recover damages for certain violations. Id. § 1692k.

Under the FDCPA, debt collectors cannot use false, deceptive, or misleading representations, or unfair or unconscionable means in attempting to collect a debt. See id. §§ 1692e, 1692f. The statutory text for both § 1692e and § 1692f provides examples of practices that violate these prohibitions, but the text makes clear the examples are non-exhaustive. Id. § 1692e ("Without limiting the general application of the foregoing, the following conduct is a violation of this section."); id. § 1692f (same). Among the example violations of § 1692e are the failure to use the debt...