Opinion
No. 02 CV 1061 (CBA)(ASC)
November 20, 2002
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE A. SIMON CHREIN
By Order dated June 18, 2002, the Honorable Carol Amon referred the above captioned matter to me to prepare a Report and Recommendation with respect to Defendants' motion to dismiss the complaint for failure to state a claim up n which relief can be granted. For the reasons set forth below, I would recommend that Defendants' motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6), be denied.
BACKGROUND
Raegina A. Healy ("Plaintiff"), is a citizen of the State of New York and resides in this district. (Compl. ¶ 2). On January 6, 2001, Plaintiff received medical services at Maimonides Medical Center ("Maimonides"). On or about June 4, 2001, Jzanus Entities ("Defendants"), debt collection agency, using the unregister business name of Medicaid Recovery Services, undertook to collect a debt incurred by Plaintiff on behalf of Maimonides for services rendered. (Compl. ¶ 3). Sometime after June 4, 2001, Plaintiff received a letter ("the Letter"), From Defendants under the letterhead of Medicaid Recovery Services, regarding the debt owed to Maimonides. (Compl. ¶ 3). The Letter included a notice that a balance of $12,000 exists for services rendered by Maimonides on January 6, 2001. The Letter additionally contained notice that Defendants represent Maimonides in pursuit of Medicaid coverage, and requested additional information from Plaintiff in order to complete the Medicaid application. Finally, Defendants inserted at the bottom of the Letter a statutorily required validation notice stating:
All references to "Compl." refer to the class action complaint in the above captioned matter dated February 12, 2002.
All references to "Letter" refer to the one-page letter sent from Defendants to Healy, dated June 4, 2001.
THIS IS AN ATTEMPT TO COLLECT A DEBT, AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE. THIS COMMUNICATION IS FROM A DEBT COLLECTOR.
The Letter also contained the following language:
UNLESS YOU NOTIFY THIS OFFICE WITHIN 30 DAYS AFTER RECEIVING THIS NOTICE THAT YOU DISPUTE THE VALIDITY OF THIS DEBT OR ANY PORTION THEREOF, THIS OFFICE WILL ASSUME THAT THIS DEBT IS VALID. IF YOU NOTIFY THIS OFFICE IN WRITING WITHIN 30 DAYS FROM RECEIVING THIS NOTICE, THIS OFFICE WILL OBTAIN VERIFICATION OF THE DEBT OR OBTAIN A COPY OF A JUDGMENT AND MAIL YOU A COPY OF SUCH JUDGMENT OR VERIFICATION. IF YOU REQUEST THIS OFFICE IN WRITING WITHIN 30 DAYS AFTER RECEIVING THIS NOTICE, THIS OFFICE WILL PROVIDE YOU WITH THE NAME AND ADDRESS OF THE ORIGINAL CREDITOR, IF DIFFERENT FROM THE CURRENT CREDITOR.
Plaintiff, Healy, filed the present class action complaint on February 12, 2002, alleging that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692. On May 10, 2002, Defendants moved to dismiss the complaint for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6). Judge Amon referred this case to me to issue a Report and Recommendation as to Defendants' 12(b)(6) motion to dismiss the complaint.
DISCUSSION
A. Standard for Failure to State a Claim
Granting a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6) is proper where, "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." ICOM Holding, Inc. v. MCI Worldcom, Inc., 238 F.3d 219, 221 (2d Cir. 2001). The issue in a Rule 12(b)(6) motion is not whether the plaintiff will ultimately prevail on the claim asserted, "but whether the claimant is entitled to offer evidence to support the claim." Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000). While it may appear on the face of the complaint that the plaintiffs claim is unlikely to succeed, this is not the proper test that a court should apply when deciding a Rule 12(b)(6) motion. Id. Instead, in a Rule 12(b)(6) motion the court is to, "assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Galloway v. Suffolk County Correctional Facility, 2002 WL 31453979 at *2 (E.D.N.Y. Nov. 5, 2002). In deciding a 12(b)(6) motion, the court must accept as true all material facts alleged by the plaintiff in the complaint and draw all reasonable inferences in the nonmoving party's favor. ICOM Holding, 238 F.3d at 221. For the plaintiff to survive a motion to dismiss, the claim(s) against the defendant must be supported by specific and factual allegations that are not stated in mere conclusory terms. Friedl v. City of New York, 210 F.3d 79, 85-86 (2d Cir. 2000). In ruling on the Rule 12(b)(6) motion, a court must confine its consideration to, "facts stated on the face of the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Leonard F. v. Israel Disc. Bank of N.Y., 199 F.3d 99, 107 (2d Cir. 1999).
B. Fair Debt Collection Practices Act
In order to establish a violation under the Fair Debt Collection Practices Act ("FDCPA"), three requirements must be met: (1) the plaintiff must be a "consumer" who allegedly owes the debt or a person who has been the object of efforts to collect a consumer debt, and (2) the defendant collecting the debt is considered a "debt collector," and (3) the defendant has engaged in any act or omission in violation of FDCPA requirements. 15 U.S.C. § 1692(a).
While Defendants concede that Plaintiff is a consumer under the FDCPA, and that Defendants was acting as a debt collector, Defendants nevertheless argues that since the debt is not in default, they are not subject to the requirements set forth in the FDCPA. (Def. Reply ¶ 3). Defendants buttress their argument based on 15 U.S. § 1692(a)(6)(F)(iii), which defines the term "debt collector" as to exclude a person collect g or attempting to collect a debt asserted to be owed to the extent such activity, "concerns a debt which was not in default at the time it was obtained by such person." Consequently, cowls in this circuit hold that where the debt at issue was not in default at the time is was obtained by the defendant collector, the defendant is not considered a debt collector and is not subject to regulation under the FDCPA. Franceschi v. Mautner-Glick Corp., 22 F. Supp.2d 250, 254 (S.D.N.Y. 1998) (finding that a landlord and management agent were not "debt collectors" under the meaning of the FDCPA, since they obtained the right to collect tentant's rent before it became overdue). The issue here can therefore be distilled into the question of whether the debt Plaintiff allegedly owed Defendants was in default.
All references to "Def. Reply" refer to the Reply Memorandum of Law in Further Support of Defendants's Motion to Dismiss dated June 14, 2002.
Assuming the facts stated by Plaintiff to be true, the practice employed by Defendants illustrate the legislative purpose behind the implementation of the FDCPA. Congress passed the FDCPA to, "eliminate abusive debt collection practices by debt collectors . . . and to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). The act seeks to protect consumers in general from abusive debt collection practices, "and the test is how the least sophisticated consumer understands the notice he or she receives." Russell v. Equifax A.R.S. and CBI Collections, 74 F.3d 30, 34 (2d Cir. 1996). Defendants refer to the letter as an "Information Request" and argues that the Letter sent to Plaintiff solely requested information pursuant to a Medicaid claim. Yet the language contained in the Letter unambiguously states, "this is an attempt to collect a debt aiu my information will be used for that purpose."
Defendants assert that their own language used in the Letter is irrelevant since the debt being sought is not in default, bringing them outside the scope of the FDCPA. Defendants attempt to draw a parallel between the Letter sent to Plaintiff here, and the letter sent in Buckley v. Bass, 2000 WL 1006568 (N.D.Ill. July 19, 2000). In Buckely, the court found that a letter was simply a request for information. The court in Buckly reasoned that since, "there is nothing that indicates that this letter is an attempt to collect a debt," it is not governed by the FDCPA. 2000 WL 1006568 at *2. In Wexler v. Banc of America Auto Finance Corp., 2000 WL 1230497 at *2 (N.D.Ill. Aug. 25, 2000), another case that Defendants cite in their motion papers, the court found that the defendant was not a debit collector since the letter, "is not a communication in connection with a collection of a debt . . . and . . . does not even discuss payment." By their own admission, Defendants here are a debt collector seeking to collect a debt. Defendants fails in their analogy since the Letter here clearly states that it "is an attempt to collect a debt." The distinctions between the letters are apparent.
Section 1692g of the FDCPA, states that when an independent debt collector solicits payment, it must provide the consumer with a detailed validation notice. The notice must include the amount of the debt, the name of the creditor, a statement that the debts validity will be assumed unless disputed by the consumer within 30 days, and an offer to verify the debt and provide the name and address of the original creditor if the consumer so requests. 15 U.S.C. § 1692g(a). This validation notice appears on the bottom of the Letter. It is suspicious that Defendants would place this statutorily mandated validation notice on the bottom of the Letter, when they argue that the Letter merely seeks information from Plaintiff. It seems odd that Defendants would go out of their way to comply with the FDCPA, only to argue that the FDCPA does not apply to them when faced with litigation. The Letter here states in plain language that this is a communication from a debt collector in an attempt to collect a debt. In the mind of the least sophisticated consumer, this language, coupled with the appearance of a $12,000 balance at the top of the letter, clearly seeks payment of a debt owed by Plaintiff.
Defendants go to great lengths analogizing this matter to a previous case in which they were also a party. In Guttman v. Jzanus, No. 01-CV-0572 (E.D.N.Y. July 3, 2001), Judge Garaufis dismissed a plaintiffs complaint that similarly alleged a violation of the FDCPA. In Guttman, the court ruled that Jzanus was not attempting to collect a debt in default, but was instead seeking information in order to obtain funds from workers compensation coverage. In Guttman, the court found it significant that the letter sent to the plaintiff contained no indication that the debt was past due, did not mention the need for collection practices, and was simply a letter requesting information so that the bill could be paid by a third party. Examination of the Guttman letter reveals a stark difference between that letter and the Letter in question here. To begin with, the letterhead appearing on the Guttman letter reveals that it was sent directly from Maimonides to the plaintiff, whereas here, the Letterhead reveals that Medicaid Recovery Services, the unregistered business name used by Defendants, were representing Maimonides in pursuit of the debt owed by Plaintiff. While there was no indication in Guttman that the letter was being sent by a debt collector, the Letter here clearly states that, "this is a communication from a debt collector." Further examination of the Guttman letter reveals that nowhere on that letter does a balance of any sort appear, and even more importantly, a validation notice does not appear anywhere on the Guttman letter. Not only does the Letter sent to Plaintiff contain a statement of balance of at the top of the Letter, but as aforementioned, a validation notice, in compliance with the FDCPA clearly appears on the bottom of the Letter. Defendants attempt to draw an analogy between the Letter sent here, to the letter sent in Guttman, therefore fails. While the letter in Guttman seeks information for purposes of billing a third party, the Letter here seeks information from Plaintiff in pursuit of a debt in default. If Maimonides simply sought information from Plaintiff in order to bill Medicaid, they would have sent a similar form to that used in Guttman, containing the same letterhead, without including a validation notice on the bottom of the correspondence. Looking at the facts in a light most favorable to the non-moving party, it can be inferred that since Maimonides is not in the business of debt collection and Defendants admittedly are, the debt owed by Plaintiff was in default when Plaintiff received the Letter. If Maimonides was only seeking information, they could have done so themselves, as they did in Guttman. Instead, Maimonides hired a third-party debt collector, Defendants, to collect a debt in default owed by Plaintiff.
This case, along with the letter in question, was attached to the Memorandum of Law in Support of Defendants's Motion to Dismiss dated May 10, 2002.
As previously noted, the legislative purpose behind the FDCPA is to protect the least sophisticated consumer from deceitful practices used by debt collectors. But for the voluminous and well documented practices of deceit directed towards society's weakest members, Congress likely would not have passed the FDCPA. Granting Defendants' 12(b)(6) motion at this time would seem to contradict the very purpose behind the FDCPA. Allowing debt collectors to send harassing letters to consumers before the debt has become due, only to cry "debt not in default" when the consumer seeks refuge in the FDCPA, would saw off the very branch on which the FDCPA sits. It borders a nonsensical argument for Defendants to assert that a letter sent by an admitted debt collector that contains a balance and validation notice would not appear, in the mind of the least sophisticated consumer, to be a debt collection letter. Plaintiff states a claim that, in the mind of the least sophisticated consumer, the Letter sent to Plaintiff indicates that the debt at issue was in default. Plaintiff is certainly entitled to present evidence to support their claim against Defendants. Accordingly, I respectfully recommend that Defendants' motion to dismiss for failure to state a claim be denied.
CONCLUSION
For the previous reasons, I recommend that Defendants' Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim be denied. Any objections to the recommendations made in this Report must be filed with the Clerk of the Court and the Chambers of Judge Amon on or before December 11, 2002. Failure to file timely objections, may preclude appellate review. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72; Small v. Secretary of Health and Human Services, 892 F.2d 15, 16(2d Cir. 1989).