The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge*fn1
Plaintiff Paul Kuhne ("Kuhne" or "Plaintiff") and Defendants Cohen & Slamowitz, LLP ("C&S") and Midland Funding NCC-2 Corp. ("NCC-2" and, together with C&S, "Defendants") each has moved this Court for summary judgment. The issue is whether NCC-2's failure to hold a New York City debt collection license, and C&S's knowledge of this fact, violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., (the "FDCPA") and New York General Business Law (the "GBL") § 349. For the reasons set forth below, Defendants' motion for summary judgment is GRANTED and Plaintiff's motion for summary judgment is DENIED.
The following facts are not disputed. At all times relevant to this dispute, NCC-2 was a wholly owned subsidiary of Encore Capital Group Inc. ("Encore"), a public company. Decl. of Brian L. Bromberg (Jan. 7, 2008) ("Bromberg Decl.") Exs. G, S. Encore is a Delaware holding company whose assets consist of investments in its subsidiaries. Through its subsidiaries, Encore purchases, manages and collects charged-off consumer receivable portfolios, which it acquires at deep discounts from face value and which consist largely of defaulted credit card debt. Bromberg Decl. Ex. G. For more than 16 years, Encore has purchased such defaulted debt for its own account. Id.
Defendant NCC-2, a subsidiary of Encore, is also a holding company. Its assets consist of portfolios of charged-off consumer debt, but it has no employees or operations. Aff. of Thomas A. Leghorn (Jan. 7, 2008) ("Leghorn Aff.") Ex. G. While NCC-2 itself has no direct contact with debtors, another Encore subsidiary, Midland Credit Management, Inc. ("MCM"), collects NCC-2's debts pursuant to a Servicing Agreement between NCC-2 and MCM. Bromberg Decl. Ex. K ("Servicing Agreement"). To that end, MCM sends debt collection letters and other communications to the debtor and, when unsuccessful, is authorized to hire counsel and commence litigation "in the name of" NCC-2. Servicing Agreement § 2.3. MCM is licensed as a debt collection agency by the New York City Department of Consumer Affairs (the "DCA"), but NCC-2 is not. Leghorn Aff. Ex. D. While the complicated corporate set-up might lead one to suggest thatsomething suspicious is behind all these machinations, they appear to be lawful.
After Plaintiff Kuhne failed to pay his consumer debt to Citibank/Associates, NCC-2 purchased Kuhne's defaulted debt from Citibank. Def.s' Mem. in Support of Mot. Summ. J. ("Def.'s Mem.") 2. NCC-2 did not have any communication with Kuhne. Leghorn Aff. Ex. S. Pursuant to the Servicing Agreement, MCM tried to collect the debt and when its communications proved unsuccessful it retained counsel, Defendant C&S, which holds a New York City debt collection license. Def.'s Mem. 4. C&S filed a lawsuit in the name of NCC-2 against Kuhne in New York City Civil Court to recover the debt, but ultimately discontinued the suit with prejudice. Bromberg Decl. Ex. H. A few days later Kuhne filed the instant case.
A court will not grant a motion for summary judgment unless it determines that there is no genuine issue of material fact and the undisputed facts are sufficient to warrant judgment as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). In determining whether there is a genuine issue of material fact, the Court must resolve all ambiguities, and draw all inferences, against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). Whether a fact is "material" is determined by the substantive law defining the claims. Liberty Lobby, 477 U.S. at 248. However, a disputed issue of material fact alone is insufficient to deny a motion for summary judgment; the disputed issue must be "material to the outcome of the litigation," Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), and must be backed by evidence that would allow "a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Kuhne's claim that Defendants violated the FDCPA and GBL § 349 rests entirely on his assertion that the New York City debt licensing statute required NCC-2 to be licensed before it could sue to collect a debt. The parties agree that NCC-2 did not hold such a license, while MCM and Defendant C&S did. This Court finds on the facts presented here, the weight of authority in this Circuit and the purpose behind the New York City licensing statute and the FDCPA, that NCC-2 was not required to hold a license.
A. Purpose of the New York City Debt Licensing Statute and the FDCPA
The New York City Administrative Code's subchapter on the licensing of Debt Collection Agencies includes the following "legislative declaration":
The [New York City] council hereby finds the presence of consumer related problems with respect to the practices of debt collection agencies . . . . [T]here is a minority of unscrupulous collection agencies in operation that practice abusive tactics such as threatening delinquent debtors, or calling such people at outrageous times of the night. These actions constitute tactics which would shock the conscience of ordinary people . . . . [I]t is incumbent upon this council to protect the interests, reputations and fiscal well-being of the citizens of this city against those agencies who would abuse their privilege of operation. It is herein declared that the city should license debt collection agencies.
New York City Admin. Code ("Admin. Code") § 20-488 (emphasis added). The FDCPA was designed to address the "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of personal privacy." FDCPA, 15 U.S.C. § 1692(a). Both ...