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E. STEVEN DUTTON, Appellee v. WOLPOFF AND ABRAMSON,
Appellant
No. 92-7533
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
5 F.3d 649; 1993 U.S. App. LEXIS 22526
April 27, 1993, Argued
September 7, 1993, Filed
PRIOR HISTORY: [**1] Appeal from the United States District Court for the
District of Delaware. (D.C. Civil Action No. 91-00577).
LexisNexis (TM) HEADNOTES - Core Concepts:
COUNSEL: Neal J. Levitsky, Esquire, Louis P. Agostini, Jr. Esquire, Agostini &
Levitsky, 623 King Street, P.O. Box 2323, Wilmington, DE 19899, Ronald S.
Canter, Esquire (Argued), Wolpoff & Abramson, 7272 Wisconsin Avenue, Fourth
floor, Bethesda, MD 20814-4838, Attorneys for Appellant.
O. Randolph Bragg, Esquire, Andrea G. Green, Esquire (Argued), UAW Legal
Services Plan, Suite 212, 200 Continental Drive, Newark, DE 19713, Attorneys for
Appellee ____________.
JUDGES: PRESENT: BECKER, HUTCHINSON and WEIS, Circuit Judges.
OPINIONBY: HUTCHINSON
OPINION: [*651] OPINION OF THE COURT
HUTCHINSON, Circuit Judge.
Appellant, the law firm of Wolpoff and Abramson (the "law firm"), appeals an
order of the United States District Court for the District of Delaware. By that
order, the district court entered judgment for statutory damages in favor of
appellee, E. Steven Dutton ("Dutton"), on two claims under the Fair Debt
Collection Practices Act ("FDCPA" or the "Act"), 15 U.S.C.A. § 1692 (West 1982 &
Supp. 1993).
The district court had subject matter jurisdiction over this case under 15
U.S.C.A. § 1692k [**2] (d) (West 1982). We have appellate jurisdiction over
this appeal from the final order of the district court under 28 U.S.C.A. § 1291
(West Supp. 1993).
After denying the law firm's renewed Federal Rule of Civil Procedure 50
motion for a verdict as a matter of law, the district court granted judgment for
Dutton as a matter of law on his claim that the law firm violated 15 U.S.C.A. §
1692e(11) (West 1982), a disclosure provision. On Dutton's claim that it
violated 15 U.S.C.A. § 1692e(10) (West 1982), which prohibits misleading
statements in debt collection communications, the court sent that question to
the jury which decided in favor of Dutton.
On the subsection (11) disclosure claim, the law firm contends that the entry
of judgment as a matter of law for Dutton was contrary to Congress's intent in
enacting that section of the statute. The law firm relies on an FTC opinion
letter and a judicial decision concerning the application of subsection (11)'s
disclosure provisions to a debt collector's follow-up letters. On the subsection
(11) non-disclosure claim, the plain language [**3] of the FDCPA ultimately
constrains us to affirm.
On Dutton's subsection (10) claim, the law firm asserts that the district
court erred in not entering a verdict for it as a matter of law because Dutton
had failed to show that the settlement letters were misleading. There is indeed
no evidence that Dutton, the actual plaintiff, was misled, but the decisive
issue on that claim is whether the settlement letters could have misled the
hypothetical consumer that Congress enacted the statute to protect. On that
issue, we think the potential effect of the law firm's letter was for the jury.
I.
Sometime before March 1989, Dutton became delinquent on debts evidenced by
two separate accounts he owed to Macy's Northeast, Inc. ("Macy's"). Macy's
retained the Wolpoff and Abramson law firm to collect these debts. On March 16,
1989, and March 27, 1989, the law firm sent Dutton separate collection letters
on each account. The letters were identical and, on the reverse side, contained
a full disclosure statement in accord with FDCPA requirements.
Dutton failed to pay and the law firm filed suit on Macy's behalf in the
Court of Common Pleas for New Castle County, Delaware on each delinquent
account. [**4] Dutton did not respond and the state court entered a default
judgment against him. On November 1, 1990, with the debts still unpaid, the law
firm sent Dutton two identical "settlement letters." They offered to settle the
debts the accounts evidenced for fifty percent of the balance claimed. After
reciting the account numbers and the balance due each letter stated:
Dear Sir/Madam:
Christmas comes early from Macys. Our records show a judgment was
entered against you for the above sum (which includes principle, [sic]
interest, court costs and attorney fees if applicaple [sic]).
Our client has allowed us to accept a one time settlement of 1/2 of
the above balance. This offer is good for 30 DAYS ONLY from the date
of this letter. When the payment is received, we will release all
liens and mark the judgment as Paid and Satisfied.
If you have any questions, please feel free to call our office. We
have enclosed an envelope with our new address for your convenience.
Very truly yours
WOLPOFF AND ABRAMSON
Appellant's Appendix ("App.") at A-11, A-16 (emphasis added). These two letters
are the basis for Dutton's claims under the FDCPA.
[*652] Through his counsel, U.A.W. Legal [**5] Services Plan (the "Plan"),
Dutton filed two separate district court actions against the law firm for
violation of the FDCPA. n1 The district court consolidated them. It did not rule
on the parties' cross-motions for summary judgment, n2 and the case went to
trial on September 8, 1992. During the trial, the law firm asked Dutton how he
was misled. He was unable to answer and referred the question to his attorney.
n3 After the record was closed, the district court held as a matter of law that
the firm had violated subsection (11)'s express requirements that a debt
collector disclose in "all communications" that the communication's purpose is
collection of a debt and that any information furnished in response will be used
for that purpose.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n1 Research indicates that Dutton's counsel favors strict construction and
vigorous enforcement of the provisions of the FDCPA at issue here. The Plan has
represented plaintiffs suing under the Act in over fifty other reported cases.
One of those other actions was also on behalf of the easily deceived but not
always injured Mr. Dutton. See Dutton v. Wolhar, 809 F. Supp. 1130, 1132 (D.
Del. 1992). The Plan's propensity for litigating cases where no actual damage is
present has prompted one judge to suggest that Rule 11 sanctions may be a proper
response to the filing of these actions. See Frey v. Gangwish, 970 F.2d 1516,
1522 (Suhrheinrich, J., dissenting).
Perhaps the opinion of America's most revered lawyer, Abraham Lincoln, may
also warrant the passing consideration of counsel. Lincoln once criticized
lawyers who "habitually overhaul[] the register of deeds in search of defects in
titles, whereon to stir up strife . . . ." Lincoln Talks--An Oral Biography
52-53 (Emanuel Hertz ed. 1939) (quoting John G. Nicolay & John Hay, Abraham
Lincoln). It is not necessary to repeat all of Lincoln's words, but he did offer
this positive advice to all lawyers:
Discourage litigation. Persuade your neighbors to compromise whenever
you can. Point out to them how the nominal winner is often the real
loser--in fees, expenses, and waste of time. As a peacemaker, the
lawyer has a superior opportunity of being a good man. There will
always be enough business. Never stir up litigation.
Id. at 52.
The record before us does not indicate any final disposition of the plaintiff
's right to counsel fees or their amount. Of course, that does not affect the
finality of the judgment against the law firm on the merits. See White v. New
Hampshire Dept. of Employment Sec., 455 U.S. 445, 452, n.14, 102 S. Ct. 1162, 71
L. Ed. 2d 325 (1982) (noting "the collateral character of the fee issue
establishes that an outstanding fee question does not bar recognition of a
merits judgment as 'final' and 'appealable.'") (citing Obin v. District No. 9,
Int'l Assoc. of Machinists & Aerospace Workers, 651 F.2d 574, 584 (8th Cir.
1981)); Halderman v. Pennhurst, 673 F.2d 628, 644 (3d Cir. 1982) (in banc)
(Opinion sur Petition for Rehearing), cert. denied, 465 U.S. 1038, 79 L. Ed. 2d
712, 104 S. Ct. 1315 (1984). If and when the district court is asked to approve
fees, we suggest it closely scrutinize that request as to both propriety and
amount. [**6]
n2 Dutton and the law firm acknowledge the absence of any ruling on the
cross-motions for summary judgment but do not contend the district court erred
in failing to grant either one.
n3
Q. In your complaint it states that you are alleging that Wolpoff and
Abramson used false and deceptive means in order to collect a debt.
What false and deceptive means do you believe Wolpoff and Abramson did
in attempting to collect this debt?
. . .
A. There was supposed to be a statute on the bottom of the
notification. My attorney could specify more about that. That is why
she spoke like she did.
Q. And it is your testimony that the only deceptive means that you
believe the defendant employed was not having this disclosure on the
bottom of the letter?
A. I can't answer that statement, sir. I am not--I can't answer that.
App. at A-52.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Later, after denying the law firm's motions for judgment as a matter of law
on the subsection (10) misrepresentation claim, the district court sent the
issue of whether the law firm had falsely implied it had liens on Dutton's
property to the [**7] jury and also asked the jury to decide what Dutton should
be awarded in statutory damages. n4 The jury found that the letters falsely
implied liens had already been obtained on Dutton's goods in violation of §
1692e(10) and awarded Dutton statutory damages of $ 500.00. The law firm filed a
timely notice of appeal.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n4 The parties had already agreed that Dutton had suffered no actual damage.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
II.
The meaning of a statute is a legal question subject to plenary review. Air
Courier Conference of Am. v. United States Postal Serv., 959 F.2d 1213, 1217 (3d
Cir. 1992). Whether a party is entitled to a verdict as a matter of law is also
a legal issue [*653] subject to plenary review, but jury verdicts can be
overturned only if the record fails to contain the "minimum quantum of evidence
from which the jury could have rationally reached a verdict." Black v. Stephens,
662 F.2d 181, 190 (3d Cir. 1981), cert. denied, 455 U.S. 1008, 71 L. Ed. 2d 876,
102 S. Ct. 1646 (1982); see Duke v. Uniroyal Inc., 928 F.2d 1413, 1417 [**8]
(4th Cir.), cert. denied, 116 L. Ed. 2d 449, 112 S. Ct. 429 (1991).
In 1977 Congress enacted the FDCPA "to eliminate abusive debt collection
practices by debt collectors, to insure that those debt collectors who refrain
from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers
against debt collection abuses." 15 U.S.C.A. § 1692(e) (West 1982).
The FDCPA provides in relevant part,
A debt collector may not use any 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:
. . . .
(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.
(11) . . . the failure to disclose clearly in all communications made
to collect a debt or to obtain information about a consumer, that the
debt collector is attempting to collect a debt and that any
information obtained will be used for that purpose.
[**9]
Id. §§ 1692e(10), (11) (emphasis added). We will separately consider Dutton's
claim under each subsection.
The § 1692e(11) Claim
The law firm argues the district court erred when it concluded that follow-up
communications violate subsection (11) if they do not say expressly that they
are an attempt to collect a debt and that any information obtained as a result
of them will be used for that purpose. Four United States Courts of Appeals have
addressed this question with differing results. See Carroll v. Wolpoff &
Abramson, 961 F.2d 459, 461 (4th Cir.) (debt collection warning must appear in
subsequent correspondence), cert. denied, 121 L. Ed. 2d 222, 113 S. Ct. 298
(1992); Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22, 26 (2d Cir.
1989) (same); accord Frey v. Gangwish, 970 F.2d 1516, 1519-20 (6th Cir. 1992)
(dicta); but see Pressley v. Capital Credit & Collection Serv., Inc., 760 F.2d
922, 925 (9th Cir. 1985) (follow-up letter need not include warning).
The law firm urges us to follow the approach of the United States Court of
[**10] Appeals for the Ninth Circuit in Pressley and interpret subsection (11)
to exclude follow-up communications.
In Pressley the court of appeals relied on United States v. American Trucking
Associations, 310 U.S. 534, 543-44, 84 L. Ed. 1345, 60 S. Ct. 1059 (1940).
There, the United States Supreme Court stated,
There is, of course, no more persuasive evidence of the purpose of a
statute than the words by which the legislature undertook to give
expression to its wishes. Often these words are sufficient in and of
themselves to determine the purpose of the legislation. In such cases
we have followed their plain meaning. When that meaning has led to
absurd or futile results, however, this Court has looked beyond the
words to the purpose of the act. Frequently, however, even when the
plain meaning did not produce absurd results but merely an
unreasonable one "plainly at variance with the policy of legislation
as a whole" this Court has followed that purpose, rather than the
literal words.
Id. (footnotes omitted). The court in Pressley then determined that a follow-up
letter repeating a demand for payment of a debt was not a "communication" to
which the disclosure provision [**11] of subsection (11) applied. Pressley,
760 F.2d at 925. The court did not adhere to the text of the statute stating
disclosure must be made in all communications. It departed from the text because
it believed repetitive disclosure in otherwise non-deceptive circumstances would
be unreasonably at variance with the statute's purpose "'to protect consumers
from a host of [*654] unfair, harassing, and deceptive debt collection
practices without imposing unnecessary restrictions on ethical debt collectors.'
" Id. (quoting 123 Cong. Rec. S27,386 (daily ed. Aug. 5, 1977) (statement of
Sen. Riegle)). Thus, the court of appeals concluded in Pressley that subsection
(11) is not violated when a follow-up communication that does not disguise its
purpose is clearly an attempt to collect a debt. Id. at 926.
Pressley also relied on an informal advisory opinion of the Federal Trade
Commission ("FTC"). See id. at 925. The FDCPA charges the FTC with enforcement
but prohibits it from issuing rules or regulations on debt collection practices.
See 15 U.S.C.A. § 16921 [**12] (a), (d) (West 1982). Accordingly, the FTC's
advisory opinions are not entitled to deference in FDCPA cases except perhaps to
the extent that their logic is persuasive. See Staub v. Harris, 626 F.2d 275,
279 (3d Cir. 1980). The Ninth Circuit relied on an advisory letter from the
Director of the FTC's Office of Congressional Relations to Representative Robert
L. Smith. The letter attempted to answer the question whether subsection (11)
always required inclusion of a warning in follow-up correspondence. n5 The
Director's reasoning persuaded the court that "no useful purpose would be served
by repetition of a formal warning in . . . a follow up notice to a debtor. Nor
was this intended by Congress." Pressley, 760 F.2d at 926.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n5 The Director's letter stated in part:
Where the debtor has already received proper notification of the debt
as required by Section 809 of the Act [ 15 U.S.C. § 1692g] or has been
negotiating with the debt collector over the terms of repayment, . . .
no purpose is served by requiring that every subsequent communication
with that debtor contain these disclosures. In fact, there are some
circumstances where the disclosures could become increasingly
intimidating, contrary to the overall intent of the Act.
Pressley, 760 F.2d at 925.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**13]
Pressley is premised on the notion that reading the statute literally would
contravene its express purpose. Absent that circumstance we do not think that a
court would be justified in looking beyond the plain language of the statute.
See, e.g., Demarest v. Manspeaker, 498 U.S. 184, 190, 112 L. Ed. 2d 608, 111 S.
Ct. 599 (1991) ("When we find the terms of a statute unambiguous, judicial
inquiry is complete except in rare and exceptional circumstances."), superseded
by statutory amendment on other grounds, 28 U.S.C.A. § 1821 (West Supp. 1993);
see also Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 73 L. Ed. 2d
973, 102 S. Ct. 3245 (1982) (further inquiry warranted only in rare cases where
literal application of statute would produce result "demonstrably at odds with
the intentions of its drafters"). Requiring a disclosure of purpose and use in
all communications is not always at odds with this statute's main purpose.
Sometimes it is only after numerous exchanges between a creditor and a debtor
that a debt collector's abusive conduct becomes apparent. The United States
Court of Appeals for the Fourth Circuit has observed, "Consumers [**14]
sometimes do not receive first notices, and thus, follow-up letters may often
provide them with their first notice of the debt collection process." Carroll,
961 F.2d at 461. Moreover, it is Congress, not a court, that decides what are
the best ways to protect the interests at stake. "Although over-reaching may
occur in only a few circumstances, 'Congress [may] exercise its legislative
judgment to adopt a reasonable margin of safety to insure its remedial goal.'"
Id. (quoting Pipiles, 886 F.2d at 27). As the court in Pipiles noted, the
Pressley court's interpretation of the FDCPA changes the clear and unambiguous
language "all communications" and substitutes for it the more limited phrase
"some communications." Pipiles, 886 F.2d at 27 (emphasis in original). Absent
the most compelling legislative history or the strongest practical indication
that the purpose of subsection (11) would be frustrated by requiring inclusion
of cautionary terms in follow-up written communications, we are unwilling to
make that substitution. It is beyond our power to deviate from the text of a
statute [**15] unless its literal application would lead either to an absurd or
futile result or one plainly at odds with the policy of the whole legislation.
See American Trucking, 310 U.S. at 543-44. On the facts of this case, we are
constrained to [*655] follow those courts that have recently rejected Pressley
's reasoning, see Carroll, 961 F.2d at 461; Pipiles, 886 F.2d at 26-27; cf.
Frey, 970 F.2d at 1520 (dicta).
The law firm next argues, however, that the FTC opinion and Pressley have
been incorporated into the FDCPA by "legislative reenactment." Generally
speaking, the doctrine of legislative reenactment assumes that when Congress
reenacts legislation, it incorporates existing administrative and judicial
interpretations of the statute into its reenactment. See, e.g., Lorillard v.
Pons, 434 U.S. 575, 580, 55 L. Ed. 2d 40, 98 S. Ct. 866 (1978); Bridges v.
United States, 346 U.S. 209, 221, 97 L. Ed. 1557, 73 S. Ct. 1055 (1953). The
reenactment doctrine does not apply where the statutory language is "unambiguous
and the regulation clearly inconsistent with it." Massachusetts Mut. Life Ins.
Co. v. United States, 288 U.S. 269, 273, 77 L. Ed. 739, 53 S. Ct. 337 (1933);
[**16] see Demarest, 498 U.S. at 190 ("Where the law is plain, subsequent
re-enactment does not constitute an adoption of previous administrative
construction.") (citing Leary v. United States, 395 U.S. 6, 24-25, 23 L. Ed. 2d
57, 89 S. Ct. 1532 (1969)).
Initially, the FDCPA exempted attorneys from the reach of the statute. See 15
U.S.C.A. § 1692a(6)(F) (West 1982) (exempting attorney-at-law collecting debt as
attorney on behalf of and in name of his client). In 1986, Congress repealed
subsection (6)(F). See Fair Debt Collection Practices Act, Amendment, Pub. L.
No. 99-361, 1986 U.S. Code Cong. & Admin. News (100 Stat.) 768. In doing so,
Congress intended to treat attorney and non-attorney debt collectors similarly
because the prior legislation could be construed to "imply that [attorneys
could] use tactics that collections agencies are prohibited from using[.]" H.R.
Rep. No. 405, 99th Cong., 2d Sess. 5, reprinted in 1986 U.S. Code Cong. & Admin.
News 1752, 1756.
The law firm argues that the repeal of the attorney exemption is a statutory
reenactment that incorporated the FTC commentary, see, e.g., Massachusetts
Mutual, 288 U.S. at 273 [**17] (holding reenactment adopted Treasury
interpretation of tax code), as well as Pressley, the only judicial authority on
the question in existence in 1986. See, e.g., Lorillard, 434 U.S. at 581-82
(incorporating federal court of appeals' decisions applying statutory language);
Albemarle Paper Co. v. Moody, 422 U.S. 405, 414, 45 L. Ed. 2d 280, 95 S. Ct.
2362 n.8 (1975) (acknowledging legislative incorporation of previous judicial
interpretation of backpay provision of Title VII).
The Fourth Circuit was presented with the reenactment argument in Carroll. It
stated, "While it is true that re-enactment of statutory provisions generally
incorporate [sic] administrative or judicial decisions, this Act was not
re-enacted rather, part of it was repealed." Carroll, 961 F.2d at 461. When
Congress reenacts a whole statute, it may be a useful fiction to assume it has
reviewed each provision in the context of the judicial and administrative gloss
that has been put on them and decided that the court and agency decisions
interpreting and implementing all the statute's provisions are consistent with
Congress's intent in reenacting [**18] it. See Lorillard, 434 U.S. at 580-81.
But when Congress merely repeals a single exception to the commands of an
otherwise comprehensive statute, there is no reason to suppose that it has taken
a fresh look at the meaning of the whole statute as affected by judicial and
administrative decisions interpreting each of its provisions and then decided
that all those decisions are in accord with the legislative intent.
Repeal of an exemption from statutory coverage is not equivalent to
reenactment of the whole statute. Congress made no mention of Pressley or any
other interpretive decisions when it repealed the attorney exemption from FDCPA.
Were it Congress's intent to reenact the FDCPA, we think the legislative history
would show some discussion of the Act as a whole. Cf. National Muffler Dealers
Ass'n, Inc. v. United States, 440 U.S. 472, 477, 59 L. Ed. 2d 519, 99 S. Ct.
1304 (1979) (legislative history showing consideration of prior decisions
material in applying reenactment doctrine to aid in statutory interpretation).
The absence of serious deliberation over subsection (11) leads us to conclude
that the 1986 repeal of [*656] the attorney exemption was nothing [**19] more
than an amendment of this statute and not a reenactment. n6 The law firm cites
no authority for its contention that repeal of an exemption is tantamount to a
reenactment of the statute, and we are unwilling to assume Congress was aware of
all the judicial and administrative gloss put on the original Act when it
amended it by repealing the exemption for attorneys it once provided.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n6 Even if the reenactment doctrine did apply to the repeal of an exemption,
it is doubtful that it would help the law firm here. The reenactment doctrine
does not apply where the interpretive decision contradicts the statute's plain
language. See, e.g., Demarest, 498 U.S. at 190. As discussed above, both
Pressley and the FTC interpretive memo do appear to contradict the plain
language of the parts of the statute in question.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
The law firm's third and final argument on the subsection (11) disclosure
provision is that a literal interpretation of the statute is contrary to public
policy because the [**20] inclusion of subsection (11) disclosures in all
communications to the debtor is so burdensome that it would be at odds with
Congress's intent to eliminate abusive debt collection practices without
hampering an ethical debt collector's efforts to secure payment. The law firm
contends literal interpretation would require the subsection's warning to appear
on all settlement letters, postponement of trial letters, letters regarding
depositions, interrogatories, etc., to say nothing of its articulation in phone
calls or other oral communications. A requirement so broad, it says, would be
contrary to Congress's intent to make the debt collection process less
frightening and abusive. The law firm's quarrel about the burden this part of
the statute places on it is with Congress, who chose to use the modifier "all."
We apply the language of the section of FDCPA codified at 15 U.S.C.A. § 1692e
(11) to the case before us. The application of subsection (11) to other types of
communications that may or may not be within 15 U.S.C.A. § 1692a(2)'s definition
of communications is not before us. There is no absurdity in applying [**21]
the express language of subsection (11) to the facts of this case. n7
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n7 Of course, we do not decide whether literal application of the phrase "all
communications" to every possible communication, including all oral
communications, would be at cross-purposes with Congress's intent. All possible
circumstances are not before us.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
Here, however, the law firm's purpose of collecting a debt is obvious on the
letters' face. Therefore, they do not violate the requirement of subsection (11)
that they disclose their purpose of collecting a debt. Dutton cannot reasonably
contend that the letters failed to disclose that purpose. Each refers to a
particular debt. Each offers to settle it in return for money. We do not think
subsection (11) is a magic incantation whose ritual observance is required to
avoid the sovereign's wrath. See Pipiles, 886 F.2d at 26.
Unfortunately for the law firm, disclosure of the purpose of collecting a
debt is not all subsection (11) asks. It also requires a warning to [**22] the
debtor and third parties that information received in response either to a
demand for payment or a request for information may be used in aid of
collection. It is easy to see how the statutory purpose is furthered by
requiring a statement of the purpose for which the information will be used in
letters to third parties who may not know the reason behind the collector's
request for information. It is less clear, however, why this potential use of
information obtained in response must be disclosed to the debtor. Once the
debtor is on notice that a given communication is meant to collect a debt, one
would believe that a rational consumer debtor would conclude that any material
information contained in his response would be used to advance the collector's
purpose of obtaining payment, not the debtor's purpose of avoiding it.
Nevertheless, the statute can be read to require both disclosures in
communications with debtors and third parties. See Emanuel v. American Credit
Exch., 870 F.2d 805, 807 (2d Cir. 1989) (holding that warning must appear even
where communication does not request or contemplate the return of information).
The settlement letters before [**23] us do not clearly [*657] contain the
required warning about the use of responsive information. Constrained in this
respect by the text of the statute, we believe that the law firm's letters
violated subsection (11) as a matter of law.
The § 1692e(10) Claim
In its two settlement letters to Dutton, the law firm stated, "When the payment
is received, we will release all liens and mark the judgment Paid and Satisfied.
" App. at 11, 16. It is undisputed that Macy's never had a lien on any of Dutton
's property. The district court sent the question whether the letters' reference
to liens was misleading in this respect and so violated subsection (10) to the
jury. n8 By its verdict the jury decided that the letters could be interpreted
by the hypothetical consumer debtor the statute is meant to protect as falsely
stating that Macy's had a lien on Dutton's property. See Graziano v. Harrison,
950 F.2d 107, 111 (3d Cir. 1991).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n8 The precise question the court asked the jury to answer was, "Did
Defendant debt collector violate the Fair Debt Collection Practices Act by the
use of any false representation or deceptive means to collect or attempt to
collect a debt or to obtain information concerning the consumer?" App. at 128.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**24]
The law firm argues that the letters, taken as a whole, cannot reasonably be
read to imply the presence of liens on Dutton's property and therefore the
district court should have granted it judgment as a matter of law on Dutton's
subsection (10) claim that its letters were misleading. The firm also contends
that the letters' reference to liens was not a misrepresentation because the
firm had the ability to obtain a lien on Dutton's property so long as the
default judgment it had secured against Dutton remained unsatisfied. It says
that even if the reference to liens was a threat, it was a true statement about
a legal tool legitimately available to debt collectors in pursuing their trade,
not a misrepresentation.
In support, the law firm points to Crossley v. Lieberman, 868 F.2d 566 (3d
Cir. 1989). There, we held a debt collector's threat against a 68 year old widow
to take action in a manner which was prohibited by applicable Pennsylvania law
violated the Act by implying the existence of a pending legal proceeding not yet
begun. The firm believes that egregious circumstances were present in Crossley
and that they were essential to our holding that [**25] the debt collector who
falsely implied both the existence and the availability of a particular legal
proceeding in aid of collection violated subsection (10).
The law firm also points to Higgins v. Capitol Credit Services, Inc., 762 F.
Supp. 1128 (D. Del. 1991). There, the court held that a collector who threatened
to attach a debtor's personal property and garnish his wages did not violate the
Act. Id. at 1138. Because the letter informed the debtor that the collector had
been given a power of attorney to collect the debt on the creditor's behalf, the
debtor argued that an unsophisticated consumer could read it to imply that an
attachment had already taken place. Id. The district court rejected the debtor's
argument, holding that a collector does not violate the FDCPA when it points out
legal procedures that can be used to collect a debt if payment is not made. Id.
(citing Riveria v. MAB Collections, Inc., 682 F. Supp. 174, 177-78 (W.D.N.Y.
1988)). Higgins is distinguishable from the present case and from Crossley. The
letter in Higgins did not say that attachment had [**26] occurred, merely that
it could occur absent debtor action. Id.
In Crossley, we did not have to rely on the egregious nature of the abusive
acts with respect to subsection (10). Our discussion of subsection (10) in
Crossley actually supports Dutton's position. In that context, we stated the
collector "falsely represented the legal status of the debt by implying that the
mortgage foreclosure case was already in litigation." Crossley, 868 F.2d at 571.
n9
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n9 In Crossley, we also held that a threat to commence a judicial proceeding
"within one week" when Pennsylvania law required a debtor be given thirty days
notice of intent to sue violated subsection (5) of the Act. Crossley also
involved subsection (5). Subsection (5) prohibits "the threat to take any action
that cannot legally be taken . . . ." 15 U.S.C.A. § 1692e(5). That particular
misrepresentation is not required by subsection (10).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
A communication which misrepresents the fact [**27] that property is already
the subject of a lien is no different. Here, a consumer debtor could interpret
the law firm's letters to Dutton [*658] to state that liens already existed
when the letters were written. That is all subsection (10) requires. The
district court did not err in permitting the jury to decide whether the letters
falsely represented that Macy's already had a lien, or instead merely pointed
out that Macy's had the right to obtain a lien on Dutton's property and use that
lien to force payment of the debts the store claimed he owed it.
The law firm says in its letters, "We will release all liens if you pay this.
" It creates a question for the jury as to the present existence of liens. When
the jury determined it did imply existing liens, it properly found a violation
of subsection (10).
For the foregoing reasons, we conclude that the firm's settlement letters
violated the FDCPA. Therefore, we will affirm the judgment of the district
court. Each side will bear its own costs. |
