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Thomas v. American Service Finance Corporation

United States District Court, E.D. New York

May 7, 2013

CHARLES THOMAS on behalf of himself and all others similarly situated, Plaintiff,
v.
AMERICAN SERVICE FINANCE CORPORATION d/b/a MERCHANTS INTERSTATE COLLECTION AGENCY, Defendant

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For the Plaintiff: Brian L. Bromberg, Esq., and Michael Noah Litrownik, Esq., Of Counsel, Bromberg Law Office., P.C., New York, NY.

For the Plaintiff: Joseph Mauro, Esq., of Counsel, The Law Office of Joseph Mauro, LLC, West Islip, NY.

For the Defendant: Howard R. Hawkins, Esq., and Michael Nicholas Abdo, Esq., of Counsel, Cadwalader Wickersham & Taft LLP, New York, NY.

OPINION

Page 84

MEMORANDUM OF DECISION AND ORDER

ARTHUR D. SPATT, United States District Judge.

On August 23, 2012, the Plaintiff Charles Thomas (" the Plaintiff" ), on behalf of himself

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and all others similarly situated, commenced this action against the Defendant American Service Finance Corporation d/b/a Merchants Interstate Collection Agency (" the Defendant" ) for alleged acts committed by the Defendant in violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (" FDCPA" ). Presently before the Court is the Defendant's motion to dismiss the Plaintiff's Second Amended Complaint. For the reasons set forth below, this Court grants the Defendant's motion.

I. BACKGROUND

Unless otherwise stated, the following facts are drawn from the Plaintiff's Second Amended Complaint and construed in a light most favorable to the Plaintiff.

A. Underlying Facts

On or about January 16, 2012 the Plaintiff entered into a contract with H. Shin Tae Kwon Do Center, Inc. d/b/a Martial Arts America (" Martial Arts America" ), a karate school located in Hicksville, New York. (2d Amend. Compl., ¶ 20; Abdo Decl., Exh. B.) The contract provided for the Plaintiff's son to receive karate lessons from Martial Arts America for a period of six months, starting in February 2012 and ending in August 2012. (2d Amend. Compl., ¶ 21; Abdo Decl., Exh. B.) Under the terms of the contract, the Plaintiff agreed to pay a total of $909 for the lessons and to make an initial down payment of $195. (Abdo Decl., Exh. B.) The Plaintiff further agreed to pay the remaining balance in six monthly installments of $119, with the first installment being payable on February 15, 2012 and all subsequent installments being payable on the same day of each consecutive month until the agreement was paid in full. (Abdo Decl. Exh. B.)

The monthly installment payments were to be paid by a method known as direct deposit, in which the payments were made from the Plaintiff's checking account to the Defendant, which was allegedly Martial Arts America's " billing company." (2d Amend. Compl., ¶ 22; Abdo Decl., Exh. B.) According to the Plaintiff, the Defendant " is a Colorado Corporation not licensed to do business in New York" and that " regularly engages in the collection of debts allegedly owed by consumers through correspondence and telephone calls." (2d Amend. Compl., ¶ ¶ 9-10.) The Defendant took an unspecified number of payments from the Plaintiff's checking account using the direct deposit method, but then the Plaintiff defaulted on his monthly payments. (2d Amend. Compl., ¶ 23.)

Following the Plaintiff's default, the Defendant allegedly began using the pseudonym " Merchants Interstate Collection Agency" to try to collect the defaulted debt from the Plaintiff. (2d Amend. Compl., ¶ 24.) In this regard, on or about June 18, 2012, the Defendant mailed the Plaintiff a letter on letterhead indicating that the letter was sent from " Merchants Interstate Collection Agency." (2d Amend. Compl., ¶ ¶ 25-27, Exh. A.) The Defendant had never previously used the name " Merchants Interstate Collection Agency" during its relationship with the Plaintiff. (2d Amend. Compl., ¶ 29.) Moreover, the June 18, 2012 letter did not mention that " Merchants Interstate Collection Agency" was the Defendant American Service Finance Corporation. (2d Amend. Compl., ¶ 28, Exh. A.) In fact, the June 18, 2012 letter did not mention the Defendant at all. (2d Amend Compl., ¶ 28, Exh. A.) Further, the June 18, 2012 letter indicated that " Merchants Interstate Collection Agency" was a debt collection agency and a member of the American Collector's Association. (2d Amend. Compl., ¶ 31, Exh. A.) The Plaintiff asserts that the Defendant

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used the pseudonym " Merchants Interstate Collection Agency" in order to " give the false impression that a third party was now involved in the process of collecting the defaulted debt." (2d Amend. Compl., ¶ 30.)

The June 18, 2012 letter noted that Martial Arts America was the creditor and the total debt owed by the Plaintiff was $769.00. (2d Amend. Compl., ¶ 32, Exh. A.) However, the Plaintiff had incurred no late charges. (2d Amend. Compl., Exh. A.) The letter advised the following:

The above-mentioned creditor [" Merchants Interstate Collection Agency" ] has asked us to bring this past due account to your attention. This is to put you on notice that the above mentioned creditor reserves the right to report unpaid accounts to the reporting division for the credit bureau.
It is imperative that you remit the full balance to this office by return mail or call our office today to make payment by phone at 303-986-6520.
. . . .
If you dispute the validity of this debt or any portion of it in writing within 30 days, we will mail verification of the debt to you. If you do not dispute the validity of this debt or any portion of it within 30 days, we will assume it is valid. At your request in writing within 30 days, we will provide you with the name and address of the original creditor if different from the current creditor. If you refuse to pay the debit or if you wish our agency to cease further communication and you so advise our agency in writing, we shall not communicate further with you except: A. To advise you that we intend to invoke specified remedies permitted by law or that we may invoke specified remedies, which we ordinarily invoke; or B. To advise you our efforts are being terminated. You, the consumer, have the right to request that Merchants Interstate Collection Agency cease all telephone communications to your place of employment.
For information about the Colorado Fair Debt Collection Practices Act, see www.coloradoattorneygeneral.gov/ca.
This is an attempt to collect a debt. Any information obtained will be used for that purpose.

(2d Amend. Compl., Exh. A.) According to the Plaintiff, this was a form letter and violated one or more provisions of the FDCPA. (2d Amend. Compl., ¶ ¶ 33, 35.)

About one month later, on or about July 23, 2012, the Defendant mailed the Plaintiff a second letter, again using the pseudonym " Merchants Interstate Collection Agency." (2d Amend. Compl., ¶ ¶ 36-40.) The July 23, 2012 letter also did not mention the Defendant in any way. (2d Amend. Compl., ¶ 39, Exh. B.) In large typeface, the letter stated " WE ARE PROFESSIONAL COLLECTORS." (2d Amend. Compl., Exh. B.) Like the June 18, 2013 letter, the July 23, 2012 letter indicated that Martial Arts America was the creditor and that the total debt owed by the Plaintiff was $769.00. (3d Amend. Compl., Exh. B.) However, the July 23, 2012 letter, unlike the June 18, 2012 letter, described the total debt as including (1) an amount due of $739.00 and (2) a late charge of $30.00. (2d Amend. Compl., ¶ 31, Exh. B.)

B. Procedural History

As mentioned above, on August 23, 2012, the Plaintiff commenced this action by filing the Original Complaint in the Eastern District of New York. He sought actual and statutory damages pursuant to 15 U.S.C. § 1692k, attorney's fees and costs and declaratory and injunctive relief. (Orig. Compl., " WHEREFORE" ¶ .) The Original Complaint raised class allegations and brought one cause of action for violations

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of the FDCPA, which was asserted by the Plaintiff individually and on behalf of the class pursuant to Fed.R.Civ.P. 23. (Orig. Compl., ¶ ¶ 26-43.)

Specifically, the Plaintiff alleged that by mailing the June 18, 2012 letter to the Plaintiff, and by sending similar form letters to other class members, the Defendant violated the FDCPA by (1) misrepresenting the source of the letter by not referencing the Defendant's actual name in any manner; (2) falsely indicating that " Merchants Interstate Collection Agency" was collecting the debt on behalf of Martial Arts America; (3) giving the false impression that there had been a change in the company that is collecting the alleged debt, in that the letter indicated that a company other than the Defendant was collecting the debt, when in reality the Defendant and Merchants Interstate Collection Agency were one in the same; (4) falsely indicating that the Defendant was permitted to charge the consumer $29.00 as a " service fee" for " returned items" ; (5) indicating that Martial Arts America was the creditor and failing to reference the Defendant; and (6) failing to inform the Plaintiff that the 30-day period to dispute the debt began to run from the date that the letter was received by the Plaintiff. (Orig. Compl., ¶ ¶ 38-43.)

On October 23, 2012, the Defendant made an Offer of Judgment pursuant to Fed.R.Civ.P. 68. (Abdo Decl;, Exh. H.) Without making any admissions as to its liability or the Plaintiff's damages, the Defendant offered to allow the following judgment to be entered against it in the action: (1) $1,000, which is the maximum statutory penalty prescribed under 15 U.S.C. ยง 1692k(a)(2)(A); (2) the greater of (a) $769, the total outstanding debt owed by the Plaintiff to Martial Arts America or (b) actual damages to be determined by the Court; and (3) costs of the action, together with reasonable ...


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