The opinion of the court was delivered by: Kahn, District Judge.
Presently before the Court is Defendant's motion to dismiss
and for fees, costs, and sanctions. For the reasons set forth
below, Defendant's motion is granted in part and denied in part.
Plaintiff alleges that, on or about February 23, 1999, the Law
Office of Andrew F. Capoccia, L.L.C. (now Daly, Cilingiryan,
Murphy, Sinnott & Cappocia Law Centers, L.L.C.) notified
Defendant's client, First Select Corporation ("FSC"), that it
had been retained to represent Plaintiff with respect to
Plaintiffs debt with FSC. According to Plaintiff, this
notification advised FSC to close the account and to forward all
future communications to the Law Office of Andrew F. Capoccia
and not to contact Plaintiff directly.
On August 16, 1999, FSC forwarded Plaintiffs file to Defendant
via electronic mail for collection purposes. Defendant contends
that, despite an established procedure for doing so, the file
did not indicate that Plaintiff was represented by an attorney.
Defendant subsequently sent a demand letter directly to
Plaintiff that same day. Moreover, on October 19, 2000,
Defendant received a facsimile from FSC indicating that a
settlement with Plaintiff as pending and that, as a result of
the pending settlement, Plaintiff was required to make a reduced
payment in satisfaction of his debt by November 13, 1999. This
communication also did not indicate that Plaintiff was
represented by an attorney.
On October 21, 1999, Plaintiff payed off his account with FSC
pursuant to a settlement agreement. On December 14, 1999, having
failed in efforts to receive confirmation of the results of the
settlement effort, Defendant mailed another demand letter to
Plaintiff. On December 28, 1999, Defendant received confirmation
that FSC was paid in full and closed Plaintiffs file.
Plaintiff commenced the present action on January 14, 2000
alleging violations of the Fair Debt Collection Practice Act
("FDCPA"), 15 U.S.C. § 1692, which prohibits debt collectors
from engaging in abusive, deceptive, and unfair collection
practices. Specifically, Plaintiff alleges three causes of
action pursuant to §§ 1692c(a)(2), 1692c(c), and 1692e of the
A. Motion to Dismiss
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6), for "failure to state a claim upon which
relief can be granted," must be denied "unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of
his claim [that] would entitle him to relief." Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
In assessing the sufficiency of a pleading, "all factual
allegations in the complaint must be taken as true," LaBounty
v. Adler, 933 F.2d 121, 123 (2d Cir. 1991), and all reasonable
inferences must be construed in favor of the plaintiff, Scheuer
v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90
(1974); see also Bankers Trust Co. v. Rhoades, 859 F.2d 1096,
1099 (2d Cir. 1988) (applying the principle of construing
inferences in favor of plaintiff).
Brass v. American Film Technologies, Inc.,
(2d Cir. 1993).
The Rules do not require the plaintiff to set out in detail
the facts upon which the claim is based, but only that a
defendant be given "fair notice of what the . . . claim is and
the grounds upon which it rests." Conley, 355 U.S. at 45-46,
78 S.Ct. 99. Individual allegations, however, that are so baldly
conclusory that they fail to give notice of the basic events and
circumstances of which the plaintiff complains are meaningless
as a practical matter and, as a matter of law, insufficient to
state a claim. See Barr v. Abrams, 810 F.2d 358, 363 (2d Cir.
Plaintiffs first claim for relief relies on § 1692c(a)(2),
which provides in relevant part:
(a) Without the prior consent of the consumer given
directly to the debt collector or the express
permission of a court of competent jurisdiction, a
debt collector may not communicate with a consumer in
connection with the collection of any debt . . . (2)
if the debt collector knows the consumer is
represented by an attorney with respect to such debt
and has knowledge of, or can readily ascertain, such
attorney's name and address. . . .
15 U.S.C. § 1692c(a)(2). Courts have construed the "knowledge"
component of 1692c(a)(2) to require that a debt collector
possess "actual knowledge" that the debtor was represented by an
attorney. See, e.g., Burger v. Risk Mgmt. Alternatives, Inc.,
94 F. Supp.2d 291, 293 (N.D.N.Y. 2000); Countryman v. Solomon
and Solomon, No. 99-CV-1548, 2000 WL 156837, at *2 (N.D.N.Y.
Feb. 8, 2000); Filsinger v. Upton, Cohen & Slamowitz, No.
99-CV-1393, 2000 WL 198223, at *2 (N.D.N.Y. Feb. 18, 2000);
Hubbard v. National Bond and Collection Assocs., Inc.,
126 B.R. 422, 426 (Del. 1991) (citing cases). Moreover, "a
`creditor's knowledge that the consumer has an attorney is not
automatically imputed to the debt collector.'" Burger,
94 F. Supp.2d at 293 (quoting Hubbard, 126 B.R. at 427) (quoting
FTC Statements of General Policy or Interpretation Staff
Commentary on the Fair Debt Collection Practices Act, 53
Fed. Reg. 50,097, 50,104 (Dec. 13, 1988) ("FTC Commentary"));
Degonzague v. Weiss, Neuren, & Neuren, 89 F. Supp.2d 282, 284
Notwithstanding this general principle, this Court has
recognized that a strict reading of these requirements would
allow creditors and debt collectors to maintain practices which
would "blatantly circumvent the intent of the FDCPA." Powers v.
Professional Credit Servs., Inc., 107 F. Supp.2d 166, 168
(N.D.N.Y. 2000). In Powers, this Court imputed knowledge to
the debt collector when, at the time the debtor's file was
transferred, the creditor knew that he was represented by an
attorney. See id. The Court reasoned that permitting creditors
and debt collectors to engage in such limited disclosure as
existed in that case "would utterly eviscerate the protections
afforded debtors by the FDCPA." Id.
For example, a debt collector wishing to defeat the purposes
of the act could establish a practice of not seeking out
information regarding the debtor's representation by counsel.
Whenever a creditor discovered that a debtor was represented by
counsel, it could transfer the file to a debt collector with
such a practice and allow them to contact the debtors directly
without fear of liability under the FDCPA. Therefore, under
those circumstances, knowledge will be imputed to the debt
collector. However, where the debt collector has a procedure in
place by which it asks creditors whether the debtor is
represented by counsel and the creditor withholds the
information, either mistakenly or intentionally, the court
cannot fairly impute the creditor's knowledge to the innocent
Although the FTC Commentary states that knowledge will not
"automatically" be imputed to the debt collector, it does not
state that such knowledge cannot be imputed. Thus, imputing
knowledge to the
debt collector when it does not inquire whether the debtor is
represented by counsel gives full meaning both to the FTC
Commentary and to the protections afforded by the FDCPA.
In this case, Defendant claims that it had a long-standing
procedure in place for creditors to indicate at the time of the
file transfer whether the debtor was represented by counsel.
Indeed, it claims that the procedure had been followed on
countless other occasions by the creditor in this case, FSC, and
with Plaintiffs attorneys in this case, the Law Office of Andrew
F. Capoccia. However, Defendant's argument is one more properly
brought pursuant to Rule 56 in the event that discovery
establishes that there is no material factual dispute as to the
procedure established and followed by Defendants.*fn1
At this time, the Court holds that Plaintiff's complaint
states a claim for which relief may be granted, in that it
alleges that Defendant knew that the plaintiff was represented
by counsel. See Burger, 94 F. Supp.2d at 294. It cannot be said
that Plaintiff can prove no set of facts which would entitle him
to relief. Accordingly, the Court denies Defendant's motion to
dismiss as to Plaintiffs first claim for relief.
Section 1692c(c) of the FDCPA states, in pertinent part:
If a consumer notifies a debt collector in writing
that the consumer refuses to pay a debt or that the
consumer wishes the debt collector to cease further
communication with the consumer, the debt collector
shall not communicate further with the consumer with
respect to such debt. . . .
15 U.S.C. § 1692c(c). The plain language of the statute requires
a written communication directly to the debt collector.
Accordingly, in order to prevail on a claim pursuant to §
1692c(c), a plaintiff must establish that he notified the
defendant debt collector in writing that he refused to pay the
debt or that communications should cease. See O'Connor v. Check
Rite, 973 F. Supp. 1010, 1017 (Colo. 1997).
Here, Plaintiffs complaint alleges that Defendant violated §
1692c(c) because it contacted Plaintiff by mail after FSC,
Defendant's client, had been notified in writing that Plaintiff
wished FSC to cease further communication with Plaintiff.
Plaintiff does not allege that he ever communicated with
Defendant regarding the debt or that he ever requested that
Defendant not communicate with him. To the contrary, the only
alleged communication was with FSC. Therefore, Plaintiffs
complaint fails to state a claim upon which relief may be
granted under § 1692c(c) and the Court grants Defendant's motion
to dismiss as to Plaintiffs second claim for relief.
Plaintiffs third claim for relief relies on § 1692e of the
FDCPA. Section 1692e generally forbids the use of "any false,
deceptive, or misleading representation or means in connection
with the collection of a debt." 15 U.S.C. § 1692e.
Plaintiff alleges that the second demand letter sent to
Plaintiff by Defendant, seeking payment of a debt which had
already been paid in full pursuant to a settlement agreement,
was false and misleading in violation of § 1692e. Defendant
contends, however, that it made an unintentional error and
argues that § 1692e requires that a defendant make a knowing
misrepresentation before a violation occurs.
The Court, however, cannot agree with Defendant's reading of
the statute. The Second Circuit has held that the FDCPA is a
strict liability statute. See Russell v. Equifax A.R.S.,
74 F.3d 30, 33 (2d Cir. 1996); Bentley v. Great Lakes Collection
Bureau, 6 F.3d 60, 63 (2d Cir. 1993). "[T]he degree of a
defendant's culpability may only be considered in computing
damages." Bentley, 6 F.3d at 63.
Defendant's rely on a decision by the Sixth Circuit applying §
1692k(c)'s "bona fide error" defense to protect a defendant from
liability where the defendant made what was "at most a clerical
error" when it had procedures in place "reasonably adopted to
avoid any such error." Smith v. Transworld Systems, Inc.,
953 F.2d 1025, 1031 (6th Cir. 1992). However, because § 1692e
"imposes strict liability on any debt collector that fails to
comply with the [FDCPA's] provisions, knowledge or intent is
only a factor in the liability stage of the proceedings and need
not be pled to state a prima facie case." Kaplan v. Assetcare,
Inc., 88 F. Supp.2d 1355, 1362 (S.D.Fla. 2000). Accordingly, as
discussed above in Part II.A., Defendant's "bona fide error"
defense is more appropriately brought on summary judgment.
Therefore, the Court denies Defendant's motion to dismiss as to
Plaintiffs third claim for relief.
Defendant moves for sanctions pursuant to section 1692k(a)(3)
of the FDCPA, which provides in relevant part:
On a finding by the court that an action under this
section was brought in bad faith and for the purpose
of harassment, the court may award to the defendant
attorney's fees reasonable in relation to the work
expended and costs.
15 U.S.C. § 1692k(a)(3). However, "[g]iven the necessity of
determining that an action was brought in bad faith and for the
purpose of harassment, such a finding cannot be made until the
merits of the case are determined." Boyce v. Computer Credit,
Inc., No. C-3-96-148, 1997 WL 661856, at *1 (S.D.Ohio Sept. 3,
1997) (citing Villarreal v. Snow, No. 95-C-2484, 1997 WL
116801, at *3 (N.D.Ill. 1997)). Accordingly, Defendant's motion
is denied as premature. However, in the event further discovery
reveals that Plaintiffs claim is brought in bad faith, Defendant
will be entitled to the relief sought.
Accordingly, it is
ORDERED that Defendant's motion to dismiss is GRANTED as to
Plaintiffs second cause of action and DENIED in all other
ORDERED that Plaintiffs second claim for relief be DISMISSED;
ORDERED that Defendant's motion for sanctions is DENIED
without prejudice to refile; and it is further
ORDERED that the clerk serve a copy of this order on all
parties by regular mail.
IT IS SO ORDERED.