Xilena M. Caceres v. McCalla Raymer, LLC

Case: 13-12450 Date Filed: 06/26/2014 Page: 1 of 10
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 13-12450
________________________
D.C. Docket No. 1:13-cv-20035-JLK
XILENA M. CACERES,
on behalf of herself and all others similarly situated,
Plaintiff-Appellant,
versus
MCCALLA RAYMER, LLC,
a Georgia limited liability company,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(June 26, 2014)
Before MARCUS and ANDERSON, Circuit Judges, and GOLDBERG,* Judge.
ANDERSON, Circuit Judge:
___________________
*Honorable Richard W. Goldberg, United States Court of International Trade Judge, sitting by
designation.
Case: 13-12450 Date Filed: 06/26/2014 Page: 2 of 10
Xilena Caceres appeals the district court’s dismissal of her putative class
action suit against law firm McCalla Raymer for violating the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA” or “the Act”). The district court
granted McCalla’s motion to dismiss, reasoning that its letter to Caceres was not an
initial communication, as defined by the Act, and that the alleged error in the letter
was not misleading. Caceres appeals, arguing that the district court got both
conclusions wrong.
I. FACTS AND PROCEDURAL HISTORY
Caceres received a letter from McCalla Raymer dated October 19, 2012,
which stated that Caceres was behind in her payments on her residential mortgage
and owed the lender, Reverse Mortgage Solutions, $269,786.81. Invoking the Act,
the letter stated that McCalla represented the interests of the lender and that
Caceres could dispute the validity of the debt within thirty days of the receipt of
the letter. The letter stated that failure to dispute within that period of time would
result in the debt being assumed valid by the creditor, whereas the Act requires a
statement that the debt collector—not the creditor—will assume the debt’s validity
in the case of a failure to dispute within thirty days. The letter provided her with
the law firm’s phone number to inquire about the amount to be paid, in certified
funds. It also gave the law firm’s address for written inquiries. Finally, it stated,
2
Case: 13-12450 Date Filed: 06/26/2014 Page: 3 of 10
“This communication is for the purpose of collecting a debt, and any information
obtained from the debtor will be used for that purpose.” This was the first
communication that Caceres received from McCalla.
Although the subject line was “Reverse Mortgage Solutions, INC. vs.
XILENA CACERES,” the letter was not accompanied by the service of any papers
initiating a lawsuit, nor did it provide any other information pertaining to a legal
matter. It did state, “Even though you are required to file a response to the lawsuit
prior to the thirty (30) days, your validation rights, as set forth in this notice, shall
not expire for thirty (30) days.” This statement, a stray reference to the creditor as
plaintiff, and the caption were the only indications that a lawsuit was forthcoming.
A foreclosure action was indeed filed three days later and the complaint was served
on Caceres two days after that.
Caceres brought suit pursuant to 15 U.S.C. § 1692e, which prohibits debt
collectors from using false or deceptive means to collect a debt. The FDCPA also
requires the debt collector to send the debtor a written notice containing certain
information in an initial communication (or provided within five days). This
written notice is sometimes referred to as a validation notice. The required
information includes the amount of the debt, the name of the creditor to whom the
debt is owed, and information about disputing the debt. 15 U.S.C. § 1692g(a).
Specifically, and of importance in this case, the Act requires a statement that a
3
Case: 13-12450 Date Filed: 06/26/2014 Page: 4 of 10
failure to dispute the amount within thirty days will result in the debt collector
assuming that the debt is valid. § 1692g(a)(3).
The district court dismissed Caceres’ class action suit. It held that the letter
was not an initial communication as defined in the Act because it was issued
regarding a foreclosure and thus fell under an exception to the definition of
communication. In the alternative, the court held that even if the letter were, the
technical violation of the statute would not mislead the least sophisticated
consumer regarding the nature of her rights. We first address the initial
communication issue, and then the issue of whether the letter was misleading.
II. DISCUSSION
A. Was the Letter an Initial Communication?
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. § 1692(e). As noted above, the FDCPA prohibits debt
collectors from using “any false, deceptive, or misleading representation or means
in connection with the collection of any debt.” 15 U.S.C. § 1692e. The Act
provides no definition of initial communication (i.e., the required validation notice)
4
Case: 13-12450 Date Filed: 06/26/2014 Page: 5 of 10
although it does define communication: “the conveying of information regarding a
debt directly or indirectly to any person through any medium.” 15 U.S.C. §
1692a(2). The Act’s validation notice provision only excludes two types of
communications from the category of initial communications that trigger the
requirements of § 1692g(a): formal legal pleadings and notices regarding privacy
rights and data security breaches that are required by law and not provided in
connection with debt collection efforts.1 15 U.S.C. § 1692g(d) & (e).
Several courts have stated that the Act defines communication expansively.
The Second Circuit held that if a communication conveys information about a debt
and its aim is at least in part to induce the debtor to pay, it falls within the scope of
the Act. Romea v. Heiberger & Assocs., 163 F.3d 111, 116 (2d Cir. 1998). This
Court adopted that reasoning in Reese v. Ellis, Painter, Ratterree & Adams, LLP,
678 F.3d 1211, 1218 (11th Cir. 2012), where we rejected a law firm’s argument
that a letter pertaining to a secured debt did not fall under the Act’s strictures. In
Reese, we looked at the language of the letter to determine that it was an attempt to
1
These exceptions read:
(d) Legal pleadings
A communication in the form of a formal pleading in a civil action shall not be treated as
an initial communication for purposes of subsection (a) of this section.
(e) Notice provisions
The sending or delivery of any form or notice which does not relate to the collection of a
debt and is expressly required by Title 26, title V of Gramm-Leach-Bliley Act [15 U.S.C.
§ 6801 et seq.], or any provision of Federal or State law relating to notice of data security
breach or privacy, or any regulation prescribed under any such provision of law, shall not
be treated as an initial communication in connection with debt collection for purposes of
this section.
15 U.S.C. § 1692g(d) & (e).
5
Case: 13-12450 Date Filed: 06/26/2014 Page: 6 of 10
collect a debt. Id. at 1217. We pointed specifically to the statements in the letter
that the lender demanded full and immediate payment, threatened that unless the
debtors paid, attorneys’ fees would be added, and stated that the law firm was
attempting to collect a debt and was acting as a debt collector; we held it was an
attempt to collect a debt. Id. We rejected the law firm’s argument that it was
simply to inform the debtors that the lender was seeking a nonjudicial foreclosure;
we stated we would not ignore the statements demanding payment and pointed out
that a communication can have more than one purpose. Id. We stated, “The fact
that the letter and documents relate to the enforcement of a security interest does
not prevent them from also relating to the collection of a debt within the meaning
of § 1692e.” Id.
Beginning, as we should, with the language of the statute, we agree that the
definition of communication is very broad. As noted above, it is defined as “the
conveying of information regarding a debt directly or indirectly to any person
through any medium.” Also, as noted above, the prohibition of “false, deceptive,
or misleading” representations applies “in connection with the collection of any
debt.” § 1692e. In turn, the exception to the definition of “initial communication”
clearly exempts “[a] communication in the form of a formal pleading.” § 1692g(d).
We conclude that the letter is a communication in connection with the
collection of a debt; it is an attempt to collect a debt. And we conclude that the
6
Case: 13-12450 Date Filed: 06/26/2014 Page: 7 of 10
exception does not apply. It is evident that this letter was not a formal pleading: it
is addressed “Dear Property Owner” and has the firm’s letterhead on it, not a
court’s; it states that it is “for the purpose of collecting a debt;” it refers in two
additional paragraphs to “collection efforts;” it states that collections efforts will
continue and that additional attorneys’ fees and costs will accrue; it states the
amount of the debt and indicates that it must be paid in certified funds; and it gives
the name of the creditor and supplies the law firm’s phone number in the paragraph
where it talks about payments.2 The only references to a lawsuit were fleeting: the
subject line contained what appeared to be a caption; there was one reference to
Caceres as “plaintiff;” and there was one reference to answering “the lawsuit.” No
reasonable person would consider this to be a pleading, let alone a formal one.
Thus we conclude that the district court erred when it found that the letter from
McCalla was not an initial communication under the Act.
B. Was the Letter “False, Deceptive, or Misleading”?
2
Although Reese, in holding that the letter from the law firm was an initial
communication, did focus, inter alia, on the fact that the letter there made an express demand for
payment, 678 F.3d at 1214, and although there may not have been such an express demand in
this case, it is clear in this case that there was an implicit demand for payment. The letter states
the amount of the debt, describes payment by the debtor in certified funds, gives the phone
number and address of the law firm to which payment is obviously contemplated, and expressly
states that the letter is for the purpose of collecting a debt. Under these circumstances, we have
no trouble concluding that the letter qualifies as an initial communication. See Gburek v. Litton
Loan Servicing LP, 614 F.3d 380, 384-87 (7th Cir. 2010) (rejecting the defendant’s argument
that an explicit demand for payment is a prerequisite for an initial communication).
7
Case: 13-12450 Date Filed: 06/26/2014 Page: 8 of 10
The absence of one or more of the statutory requirements for the validation
notice is actionable as a violation of 15 U.S.C. § 1692e3 under our precedent if the
variance is one that would tend to mislead the least sophisticated consumer. Jeter
v. Credit Bureau, Inc., 760 F.2d 1168, 1175 (11th Cir. 1985). The court in
LeBlanc v. Unifund CCR Partners, 601 F.3d 1185 (11th Cir. 2010) (per curiam),
discussed the standard:
The least sophisticated consumer can be presumed to possess a
rudimentary amount of information about the world and a willingness
to read a collection notice with some care. However, the test has an
objective component in that while protecting naive consumers, the
standard also prevents liability for bizarre or idiosyncratic
interpretations of collection notices by preserving a quotient of
reasonableness.
Id. at 1194 (internal quotations and citations omitted).
Here, the letter substituted “creditor” for “debt collector” when informing
the consumer of who would assume that the debt was valid if the debt was not
contested within thirty days. 4 We assume arguendo, without deciding, that the
3
In pertinent part, 15 U.S.C. § 1692e reads:
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.
...
15 U.S.C. § 1692e.
4
The statute requires in the initial communication or within five days: “a statement that
unless the consumer, within thirty days after receipt of the notice, disputes the validity of the
8
Case: 13-12450 Date Filed: 06/26/2014 Page: 9 of 10
least sophisticated consumer might be deterred from pursuing his or her rights to
dispute the debt—e.g. might believe that his or her right to dispute the debt would
be adversely affected—if he or she failed to dispute the debt within the thirty-day
period. See Iyamu v. Clarfield, Okon, Salomone, & Pincus, P.L., 950 F. Supp. 2d
1271, 1274 (S.D. Fla. 2013). However, because the debt collector is obviously the
agent of the creditor, the same implication arises from the notice required by §
1692g(a)(3) as from McCalla’s erroneous statement. In other words, the least
sophisticated consumer would think that if the debt collector was entitled to
assume that the debt is valid, the creditor would have the same right. Thus,
because the same implication arises whether or not the language of the notice is
“assumed valid by the debt collector,” as required by statute, or “assumed valid by
the creditor,” as stated in the letter, the letter did not mislead. 5
debt, or any portion thereof, the debt will be assumed to be valid by the debt collector.” 15
U.S.C. § 1692g(a)(3).
5
We note that the Second Circuit in Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d
360, 366 (2d Cir. 2005), reached the same result on similar facts, albeit by different reasoning.
We also note that courts have described the legal effect of the assumed validity of the provision
as follows. It conveys “to the consumer that failure to dispute the debt permits the debt collector
to proceed for collection purposes on the ‘temporary fiction’ that the debt is valid [, that f]ailure
to dispute a debt has no legal effect on a debtor’s rights . . . [and that i]n any subsequent
collection action, the burden would remain on the debt collector . . . to prove the validity of the
debt.” Orr v. Westport Recovery Corp., 941 F. Supp. 2d 1377, 1381-82 (N.D. Ga. 2013)
(alteration in original) (quoting Harlan v. NRA Group, LLC, 2011 WL 500024, at *4 (E.D. Pa.
Feb. 9, 2011)). However, we do not think that the least sophisticated consumer would
understand or be aware of that fiction. Thus, because the language actually required by the
statute creates the same implication, we cannot conclude that McCalla’s actual language was any
more misleading than the precise language required by the statute.
9
Case: 13-12450 Date Filed: 06/26/2014 Page: 10 of 10
Because we hold that the letter, which was an initial communication, would
not mislead the least sophisticated consumer, we affirm the decision of the district
court.
AFFIRMED.
Most of the cases relied upon by Caceres involved validation notices that omitted
altogether the phrase “by the debt collector,” § 1692g(a)(3), and did not advise the debtor what
entity would be entitled to assume the debt to be valid. See, e.g., Koch v. Atkinson, Diner,
Stone, Mankuta, & Ploucha, P.A., 2011 WL 4499100 (S.D. Fla. Sept. 27, 2011); Guerrero v.
Absolute Collection Serv., Inc., 2011 WL 8183860 (N.D. Ga. Oct. 6, 2011); Nelson v. Select
Fin. Servs., Inc., 430 F. Supp. 2d 455 (E.D. Pa. 2006). Those cases concluded that a validation
notice that did not identify the entity which could assume the validity of the debt meant that the
least sophisticated consumer might reasonably believe that the failure to dispute the debt within
thirty days would entitle a court or other authoritative entity to assume the validity of the debt—
i.e., that the debtor’s right to dispute the debt after the thirty days would be adversely affected.
Of course, such a perception would be inconsistent with the statute, which expressly provides
that the failure of the debtor to dispute the debt within thirty days “may not be construed by any
court as an admission of liability.” § 1692g(c). The risk that the least sophisticated consumer
would think that a court or other authoritative agency would be entitled to assume the validity of
the debt—the risk feared by those cases—is not present in the instant case. Thus, the cases relied
upon by Caceres are distinguishable. Only one case, Iyamu v. Clarfield, Okon, Salomone, &
Pincus, PL, 950 F. Supp. 2d 1271 (S.D. Fla. 2013), actually supports Caceres’ position. For the
reasons set forth in this opinion, we disagree with the result of Iyamu.
Finally, we note that debt collectors might consider including in their validation notices
the substance of § 1692g(c). Section 1692g(c) provides as follows: “The failure of a consumer
to dispute the validity of a debt under this section may not be construed by any court as an
admission of liability by the consumer.” 15 U.S.C. § 1692g(c).
10