United States District Court, E.D. New York
May 10, 2005.
ANN READE-ALVAREZ and ANN R. STUDEN, on behalf of themselves and all others similarly situated, Plaintiffs,
ELTMAN, ELTMAN & COOPER, P.C., ERIN CAPITAL MANAGEMENT, LLC, JAMES BRIAN BOYLE, WILLIAM NOLAN, ROBERT A. RUSSON, PAUL RENAGHAN, CARL FON, MANUEL BRAD MOSES, WILLIAM CORTELLESSA, PETER COOPER and MILTON RAWLE, Defendants.
The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge
MEMORANDUM AND ORDER
Ann Reade-Alvarez ("Alvarez") and Ann R. Studen ("Studen")
(collectively, "plaintiffs") have filed a putative class action
lawsuit against defendants Eltman, Eltman & Cooper, P.C. ("EEC"),
Erin Capital Management, LLC ("ECM") and several of their
officers and directors (collectively, "defendants"), for their
alleged violations of the Fair Debt Collection Practices Act,
15 U.S.C. § 1692 et seq. ("FDCPA" or the "Act"). Pending before
the Court is defendants' motion to dismiss the amended complaint
(the "complaint") pursuant to Fed.R.Civ.P. 12(b)(6).*fn1 Defendants argue that the factual allegations in the complaint
do not state a claim upon which relief under the FDCPA can be
granted. In response, plaintiffs argue that pursuant to the
notice pleading standard of Fed.R.Civ.P. 8, they have set
forth valid causes of action under the Act.
For the reasons set forth below, defendants' motion to dismiss
the complaint is granted in part and denied in part.
The facts are set forth in the light most favorable to
plaintiffs. EEC is a law firm incorporated under the laws of the
State of New York with its principal place of business in
Manhattan. (Compl. ¶ 5). ECM is a debt collection agency with its
principal place of business in the same office as EEC. (Id. ¶
6). Plaintiffs allege that in correspondence they received from
EEC, the telephone number and office address for EEC is the same
as ECM. (Id. ¶¶ 47, 48). ECM is purportedly "sending letters
and alleged legal pleadings under the name of the defendant EEC"
and ECM's agents are therefore engaged in the unauthorized
practice of law. (Id. ¶ 49). 1. Ann Reade-Alvarez
Reade-Alvarez allegedly incurred a debt to Providian, a company
in the financial services industry, in the amount of $1,737.03.
(Comp. ¶ 16). Providian assigned the debt to ECM. EEC, on behalf
of its client, ECM, sent a letter dated November 26, 2003 to
Reade-Alvarez. (Compl. ¶ 18). That letter, in addition to
specifying the amount of the debt and the name of the creditor to
whom the debt is owed, states as follows in its entirety:
Please be advised that our firm has been retained by
[ECM], purchaser of the above account, for the
collection of this debt.
Please call us to discuss this matter.
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 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.
This is an attempt to collect a debt by a debt
collector and any information obtained will be used
for that purpose.
(Affidavit of Thomas A. Leghorn sworn to on January 20, 2005
("Leghorn Aff.") Exh. D).
EEC sent Reade-Alvarez a second letter dated December 31, 2003,
more than thirty days after the first, stating in relevant part,
"You have ignored our previous correspondence, and therefore, we
assume that this is a valid debt and that you have an obligation
to pay." (Compl. ¶ 20; Leghorn Aff. Exh. D). After Reade-Alvarez
failed to respond, EEC sent her a third letter dated January 14,
2004, stating in relevant part, "We have attempted on numerous
occasions to settle the above debt to no avail. It is imperative
that you contact this office as soon as possible to discuss this
matter. If we do not hear from you we will have no alternative
but to advise our client of your failure to cooperate and request
authority to commence legal action against you for the full
amount of the outstanding debt." (Compl. ¶ 22; Leghorn Aff. Exh.
D). Among other things, Reade-Alvarez asserts that this letter is
"deceptive and misleading in that" it "falsely implies that . . .
EEC would have no alternative but to request authority from their
client ECM to commence legal action against" her, when in "fact,
the letter was sent by ECM under the" letterhead of EEC. (Compl.
EEC sent Reade-Alvarez a fourth letter dated January 28, 2004,
stating in relevant part, "We want to help you clear your credit
with our client. To help you do this we take a friendly approach
to working out problems. We offer AFFORDABLE PAYMENT PLANS and
courteous professional service. No matter your experience in the
past we are here to resolve this debt now. THIS OFFER IS GOOD
FOR 10 DAYS ONLY! TEN days after the date of this letter our
client reserves the right to seek the full amount. BY ACTING NOW
YOU MAY SAVE HUNDREDS OF DOLLARS." (Compl. ¶ 25; Leghorn Aff.
Exh. D) (emphasis in original). Reade-Alvarez asserts that this
letter is, among other things, "false, deceptive and misleading
in that [EEC] claims to take a friendly approach to working out
problems. In fact, this letter was sent fourteen (14) days after
the letter defendant ECM had sent threatening to gain authority
to commence legal action against the plaintiff . . . and 14 days
before the letter defendant ECM sent notifying the plaintiff . . .
that EEC had been authorized to commence legal action." (Compl.
¶ 27; Leghorn Aff. Exh. D). Reade-Alvarez also asserts that this
letter is misleading because it "falsely impl[ies] that [she] may
not enter into a payment plan after the ten days have passed" and
thus also "create[s] the false sense of urgency." (Compl. ¶¶ 28,
EEC sent Reade-Alvarez a fifth letter, dated February 11, 2004,
stating in relevant part, "Our client has authorized us to
commence legal action against you to recover the above balance.
We would, of course, prefer to resolve the debt without recourse to litigation
which is costly and a burden on all concerned. Please contact our
office as soon as possible so that we may discuss this matter. If
we do not hear from you we can only assume that we have no choice
but to bring suit against you for the full balance due." (Compl.
¶ 30; Leghorn Aff. Exh. D). For among other reasons,
Reade-Alvarez contends that this letter is "false, deceptive and
misleading" because it "implies that . . . EEC has gained
authority from ECM to commence legal action" against her when, in
fact, "the letter has been sent from ECM and not EEC." (Compl. ¶
2. Ann R. Studen
Studen allegedly incurred a debt to Discover, a credit card
company, in the amount of $5,879.30. (Compl. ¶ 33). Thereafter,
Discover assigned the debt to ECM. (Id. ¶ 34). In an effort to
collect the debt, EEC forwarded a letter dated July 23, 2004 to
Studen, which is substantially the same as the first letter sent
to Reade-Alvarez. (Id. ¶ 35; Leghorn Aff. Exh. E). More than 30
days later, by letter dated August 27, 2004, EEC forwarded a
second letter to Studen, stating in relevant part as follows: "We
want to help you clear your credit with our client. To help you
do this we take a friendly approach to work out problems. We
offer AFFORDABLE PAYMENT PLANS and courteous professional
service. No matter your experience in the past we are here to
resolve this debt now. THIS OFFER IS GOOD FOR 10 DAYS ONLY! TEN
days after the date of this letter our client reserves the right
to seek the full amount. BY ACTING NOW YOU MAY SAVE HUNDREDS
OF DOLLARS." (Compl. ¶ 37; Leghorn Aff. Exh. E) (emphasis in
original). For among other reasons, Studen claims this letter is
"deceptive and misleading" because it "falsely implies that the
plaintiff may not enter into a payment plan after the ten days
have passed from" August 27, 2004 and therefore "create[s] [a]
false sense of urgency." (Compl. ¶¶ 39, 40).
Plaintiffs allege that all of the above-referenced letters sent
to them were "computer generated and w[ere] submitted . . . without any meaningful attorney review."
(Compl. ¶¶ 19, 21, 23, 26, 31, 36, 38). They therefore assert
that the letters are "false, deceptive and misleading because the
least sophisticated consumer would believe the letter[s], and all
documents concerning the alleged debt referenced therein, were
reviewed by an attorney prior to" the time when they were mailed.
ECM, by its attorneys EEC, filed a summons and verified
complaint dated August 27, 2004 against Studen in the Civil Court
of the City of New York, County of Queens, to recover the debt.
(Leghorn Aff. Exh. F). No attorney signed the complaint.
(Id.). Studen alleges that no attorney from EEC, including
the two individuals identified on the summons and complaint,
"generated" these documents. (Compl. ¶ 42). The complaint was
verified by Carl Fon, assistant secretary of ECM who signed under
oath that he read the summons and complaint, knows "the contents
thereof and the same are true to [his] knowledge, except those
matters therein which are stated to be alleged on information and
belief, and as to those matters I believe them to be true."
(Id.). Mr. Fon's personal knowledge is based on his review
of records maintained by ECM. (Id.). Studen asserts,
however, that a "false implication" exists that Mr. Fon executed
the verification. (Id.).
Three days after oral argument, the Court received, via
facsimile, a four-page letter from plaintiffs' counsel dated May
9, 2005, two pages of which cite cases intended to respond to
questions which I had put to counsel which he declared were
irrelevant and deemed unworthy of an answer.*fn2 His
assumption evidently was that the Court was unaware of the law which
informed it regarding relevance rather than its effort to explore
the broader societal implications of the FDCPA and the
relationship between the legislative history of the Act and the
judicial application of it. His post-oral-argument letter "brief"
was neither invited nor appropriate and was not considered.
I. The Standard For Dismissal Under Fed.R.Civ.P. 12(b)(6)
A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) should
be granted only if it appears beyond doubt that plaintiffs can
prove no set of facts in support of their claims which would
entitle them to relief. Conley v. Gibson, 355 U.S. 41, 45-46
(1957). Therefore, on a motion to dismiss, all factual
allegations of the complaint must be accepted as true, Hishon v.
King & Spalding, 467 U.S. 69, 73 (1984), and all reasonable
inferences must be made in plaintiffs' favor. Cosmas v.
Hassett, 886 F.2d 8, 11 (2d Cir. 1989). "The court's function on
a Rule 12(b)(6) motion is not to weigh the evidence that might be
presented at a trial but merely to determine whether the
complaint itself is legally sufficient." Goldman v. Belden,
754 F.2d 1059, 1067 (2d Cir. 1985) (citation omitted).
II. Are Plaintiffs' FDCPA Claims Conclusory?
Defendants argue that their motion should be granted because
the complaint lacks factual support for the FDCPA claims. It is
well-established that the Court is not required to credit
plaintiffs' legal conclusions that the letters at issue violated
the FDCPA. It must simply assume the facts, as alleged, to be true for the purposes of a motion to dismiss. See Scalisi v.
Fund Asset Mgmt., L.P., 380 F.3d 133, 137 (2d Cir. 2004) ("we
are not required to accept as true the legal conclusions or
unwarranted deductions of fact drawn by the non-moving party")
(citing Hirsch v. Arthur Andersen & Co., 72 F.3d 1085, 1092 (2d
Cir. 1995); First Nationwide Bank v. Gelt Funding Corp.,
27 F.3d 763, 771 (2d Cir. 1994), cert. denied, 513 U.S. 1079
(1995); 2 James Wm. Moore et al., Moore's Federal Practice ¶
12.34 [b] (3d ed. 2004)). In other words, "[c]onclusory
allegations or legal conclusions masquerading as factual
conclusions will not suffice to prevent a motion to dismiss."
Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d
Cir. 2002) (internal quotation marks omitted). While the
plaintiffs need not satisfy some "heightened" pleading standard,
and instead need only comply with Fed.R.Civ.P. 8(a)'s liberal
system of "notice pleading," see Leatherman v. Tarrant County
Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168
(1993), and Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514
(2002), it is nonetheless true that the facts that are pleaded
must provide a basis for a reasonable inference that defendants
violated the FDCPA, because the Court is not obligated to draw
unreasonable inferences in plaintiffs' favor. See generally
Old Republic Ins. Co. v. Hansa World Cargo Serv., Inc.,
170 F.R.D. 361, 376 (S.D.N.Y. 1997) (claim for successor liability
dismissed pursuant to Fed.R.Civ.P. 12(b)(6) where the
plaintiff "makes no attempt to demonstrate that any Duferco
defendant is, in fact, a successor corporation to a previously
existing Duferco entity. Simply pleading such a legal conclusion
is insufficient to stave off dismissal, even under Rule 8(a)")
(citations omitted). Therefore, the critical issue is whether the
complaint sets forth factual allegations to support the FDCPA
claims, or merely legal conclusions. Drawing all inferences in
favor of plaintiffs, the Court finds that they have met their
burden at this preliminary stage of the proceedings to proceed
with discovery on certain of their claims.
Congress enacted the FDCPA to "eliminate abusive debt
collection practices by debt collectors, [and] to insure that those debt collectors who refrain from using
abusive debt collection practices are not competitively
disadvantaged." 15 U.S.C. § 1692(e). The legislative history of
the Act demonstrates that the statute was passed in response to
"collection abuses such as the use of `obscene or profane
language, threats of violence, telephone calls at unreasonable
hours, misrepresentation of a consumer's legal rights, disclosing
a consumer's personal affairs to friends, neighbors, or an
employer, obtaining information about a consumer through false
pretense, impersonating public officials and attorneys, and
simulating legal process.'" Kropelnicki v. Siegel,
290 F.3d 118, 127 (2d Cir. 2002) (citing S. Rep. No. 95-382, at 2 (1977),
reprinted in, 1977 U.S.C.A.A.N. 1695, 1696).
Plaintiffs argue that they have properly alleged claims under
the FDCPA by asserting that all of the letters they received from
EEC were computer generated and thus caused the least
sophisticated consumer to believe that these letters were
reviewed by an attorney, when, in fact, they were not. (Compl. ¶¶
19, 21, 23, 26, 31, 36, 38). Section 1692e of the FDCPA provides
in relevant part:
A debt collector may not use false, deceptive, or
misleading representation or means in connection with
the collection of any debt. Without limiting the
general application of the foregoing, the following
conduct is a violation of this section:
. . . .
(9) The use or distribution of any written
communication . . . which creates a false impression
as to its source, authorization, or approval.
(10) The use of any false representation or deceptive
means to collect or attempt to collect any debt or to
obtain information concerning a consumer.
A letter sent by an attorney on behalf of a debt collector must
be a product of "some degree of attorney involvement," including
direct control or supervision of the process through which the
letter is sent. Miller v. Wolpoff & Abramson, L.L.P.,
321 F.3d 292
, 301 (2d Cir.), cert. denied, 540 U.S. 823 (2003). The leading case in this district on this issue is Clomon v.
Jackson, 988 F.2d 1314
(2d Cir. 1993), in which a debt
collection agency sent five mass-produced collection letters
(also known as "dunning" letters) on the letterhead and under the
signature of the agency's general counsel.*fn3
general counsel was an attorney working for the agency, he did
not sign the letters. Instead, the letters were sent with a
mechanically reproduced facsimile of his signature. While the
general counsel approved the "form" of the letters, e.g., the
general substance of the letter without reference to a specific
individual, he "never considered the particular circumstances of
[the plaintiff's] case prior to the mailing of the letters and he
never participated personally in the mailing." Clomon,
988 F.2d at 1317. The Second Circuit held that these letters violated the
FDCPA and were false and misleading because although the
attorney's name and signature were on them, they were not "from"
the attorney in any meaningful sense of the word. Id. at 1320.
Specifically, the attorney failed to review the plaintiff's file,
he did not approve the five letters that were sent to plaintiff,
he did not receive any recommendations from individuals in his
office that the letters should be sent, and he did not even know
the plaintiff's identity. Id.
The Second Circuit in Clomon concluded that in a "mass
mailing," it is almost always the case that an attorney has not
been involved in any meaningful way with the facts of particular
debtors. "For this reason, there will be few, if any, cases in
which a mass-produced collection letter bearing the facsimile of an attorney's signature will comply with the restrictions imposed
by § 1692e."*fn4 Clomon, 988 F.2d at 1321.
Here, plaintiffs have alleged that the letters they received
were computer generated and lacked meaningful attorney review.
(Compl. ¶¶ 19, 21, 23, 26, 31, 36, 38). A review of the letters
reveals that they were not signed by anyone, including attorneys
associated with EEC. Rather, the letters contained a typed
signature line stating "Very truly yours, Eltman, Eltman &
Cooper, P.C." Further, each of the letters had the identical font
and format, consistent with computer generation. Moreover,
Reade-Alvarez and Studen received two letters that are virtually
identical, suggesting that EEC utilized an automated process in
generating them. Consistent with the reasoning in Clomon,
therefore, the Court denies this portion of defendants' motion
because plaintiffs have alleged sufficient facts to support a
claim under the FDCPA. See Lang v. Winston & Winston, P.C.,
2001 WL 641122, at *6 (N.D. Ill. June 4, 2001) (denying motion to
dismiss FDCPA claims where plaintiffs alleged, among other
things, "the defendant sends out thousands of collection letters
like the one sent to [the plaintiff] without conducting `a
meaningful attorney review of the accounts'" and that "the
letters defendant sends out are produced by a computer program
that inserts information given to defendant by its creditor
clients into pre-defined fields in a from letter"). Plaintiffs also assert that certain of the letters which EEC
sent them created a false sense of urgency because they contained
either false statements or false deadlines. (Compl. ¶¶ 29, 39,
40). However, a plain reading of those letters reveal that they
were not false, deceptive or misleading. For example, the January
14, 2004 letter to Reade-Alvarez states in relevant part that if
she does not contact EEC, it will "have no alternative but to
advise [its] client of [her] failure to cooperate and request
authority to commence [a] legal action against [her]." Plaintiff
contends that this letter is false, deceptive and misleading
because it "was sent by ECM under the defendant EEC letterhead,"
and that ECM was, in effect, engaged in the unauthorized practice
of law. (Compl. ¶¶ 24, 45, 48). However, on its face, the letter
represents what plaintiffs contend it is a communication sent
by EEC, as counsel to ECM, to Reade-Alvarez. The least
sophisticated consumer would understand the letter's content that
the law firm would need authorization from its client before it
could proceed with litigation. Moreover, as one court noted,
allegations relating to the "unauthorized practice of law" are
"the province of state bar associations and state courts.
Plaintiffs' allegations in this matter certainly might interest
[New York State's] Attorney Registration and Disciplinary
Committee, but they do not appear to be cognizable under the
FDCPA."*fn5 Bass v. Arrow Fin. Servs., L.L.C., 2002 WL
1559635, at *3 (N.D. Ill. July 16, 2002). The Court finds this
reasoning persuasive. Therefore, to the extent that plaintiffs
allege that ECM, through EEC, was engaged in the "unauthorized
practice of law" because EEC is, in essence, an alter ego of ECM,
that claim is not recognized by the FDCPA and it is dismissed. The January 28, 2004 letter to Reade-Alvarez states that EEC's
client offers affordable payment plans pursuant to which she
could save hundreds of dollars, but that the offer would expire
after ten days. (Compl. ¶ 25). The letter further states that
following the expiration of the offer, ECM reserves the right to
seek the full amount of the debt. Studen received an almost
identical letter dated August 27, 2004. (Id. ¶ 40). The
complaint does not allege any facts which would suggest that
these letters were anything but truthful. EEC's client, ECM, is a
collection agency that employs certain procedures in an effort to
collect debts for its clients. Only it can determine what methods
at its disposal should be utilized, and at what time, to collect
unchallenged debts. See, e.g., Metz v. HCSC Credit and
Collections, 1985 WL 3368, at *1 (E.D. Pa. Oct. 29, 1985). The
fact that the January 28, 2004 letter may have "taken a friendly
approach to working out problems" see Compl. ¶ 27, and the
January 14, 2004 letter did not, does not render the letter
"false, misleading or deceptive." Therefore, this portion of
defendants' motion is granted.*fn6
For the foregoing reasons, defendants' motion to dismiss the
amended complaint is granted in part and denied in part. The
parties are directed to contact the magistrate judge assigned to
this case so that a discovery schedule can be issued. Following
discovery, the parties may file dispositive pre-trial motions
and/or plaintiffs may file a motion for class certification. The
Clerk of Court is directed to randomly reassign this case to