JOHN ROBERT BLAKEY, District Judge.
Plaintiff Joanna Sanchez ("Plaintiff") alleges that Defendants John Lee Jackson ("Jackson") and Universal Fidelity, LP ("Universal") (collectively, "Defendants") violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692, et seq., by failing to provide a proper debt validation notice to Plaintiff. First Am. Comp. [18]. On September 15, 2016, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Defs.' Mot. Dismiss [21]. For the reasons explained below, Defendants' motion is denied.
Plaintiff sets forth the following relevant facts, which the Court accepts as true for the purposes of Defendants' Motion to Dismiss. Sometime before the spring of 2016, Plaintiff, an Illinois resident, incurred a consumer debt from a Montgomery Ward credit account. First Am. Compl. [18] ¶ 10. Plaintiff did not pay the debt and it went into default. Id. ¶ 11.
Universal is a debt collection agency with its principal place of business in Houston, Texas.
In addition to its own collection efforts, Universal also retained Jackson, an independent Texas attorney, to assist in the collection of outstanding debts. First Am. Compl. [18] Ex. B. On or about May 9, 2016, Jackson sent a one-page, two-sided collection letter to Plaintiff. Id. The letter constituted Jackson's initial communication with Plaintiff. First Am. Compl. [18] ¶ 16. The letterhead provided Jackson's name and address and identified Jackson as an "ATTORNEY ON RETAINER FOR UNIVERSAL FIDELITY LP." First Am. Compl. [18] Ex. B. In the body of the letter, Jackson stated the following:
Id. (emphasis added) (other emphasis removed). The bottom of Jackson's letter stated, "
The reverse side of Jackson's letter stated, in relevant part (and in all caps), the following:
Id. (emphasis added). Plaintiff did not receive any further communication from Jackson aside from the May 9, 2016 correspondence. First Am. Compl. [18] ¶ 23.
On June 16, 2016, Plaintiff filed a class action suit in this Court. Compl. [1]. On August 25, 2016, Plaintiff filed her First Amended Complaint [18]. In her sole count, Plaintiff alleges that Defendants violated § 1692g(a) of the FDCPA. Generally, § 1692g(a) provides that "in either the initial communication with a consumer in connection with the collection of a debt or another written notice sent within five days of the first, a debt collector must provide specific information to the consumer." Janetos v. Fulton Friedman & Gullace, LLP, 825 F.3d 317, 320-31 (7th Cir. 2016). Specifically, § 1692g(a) states:
15 U.S.C. § 1692g(a). Plaintiff alleges that Jackson (and vicariously, Universal) violated this provision by failing to provide an adequate debt validation notice in conjunction with his May 9, 2016 letter. First Am. Compl. [18] ¶ 32. Although, as described above, Jackson's letter included a validation notice referencing Universal, Plaintiff maintains that Jackson cannot rely on another debt collector and instead must include his own disclosure referencing himself. Id. ¶¶ 20-24. In other words, Plaintiff asserts that § 1692g(a) required Jackson to notify Plaintiff of her right to contact Jackson directly to dispute or verify her debt. Id. Defendants' disagreement with this statutory interpretation forms the basis of their Motion to Dismiss. Defs.' Mot. Dismiss [21].
A motion to dismiss under Rule 12(b)(6) "challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted." Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). To survive a motion to dismiss, the claim must first comply with Rule 8 of the Federal Rules of Civil Procedure by providing "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), such that the defendant is given "fair notice" of what the claim is "and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Second, the complaint must contain "sufficient factual matter" to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). That is, the allegations must raise the possibility of relief above the "speculative level." E.E.O.C. v. Concentra Health Servs. Inc., 496 F.3d 773, 776 (7th Cir. 2007). A claim has facial plausibility "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). The plausibility standard "is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). The "amount of factual allegations required to state a plausible claim for relief depends on the complexity of the legal theory alleged," but "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Limestone Dev. Corp. v. Vill. of Lemont, 520 F.3d 797, 803 (7th Cir. 2008). In evaluating the complaint, the Court accepts all well-pleaded allegations as true and draws all reasonable inferences in favor of Plaintiff. Iqbal, 556 U.S. at 678.
The Court begins with the principle that "the FDCPA regulates only the conduct of `debt collectors.'" Ruth v. Triumph Partnerships, 577 F.3d 790, 796 (7th Cir. 2009) (emphasis added); see also Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003) ("Creditors, `who generally are restrained by the desire to protect their good will when collecting past due accounts,' are not covered by the Act. Instead, the Act is aimed at debt collectors, who may have `no future contact with the consumer and often are unconcerned with the consumer's opinion of them.'") (quoting S. Rep. 95-382, at 2 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1696). Therefore, Plaintiff's complaint must be dismissed "if it fails to raise a plausible inference that defendants were `debt collectors' within the meaning of the FDCPA." Stone v. Washington Mut. Bank, No. 10-cv-6410, 2011 WL 3678838, at *8 (N.D. Ill. Aug. 19, 2011). With certain exceptions not applicable here, the FDCPA defines "debt collector" as
15 U.S.C. § 1692a(6).
Here, Defendants concede that Universal falls under this definition, but contend that Jackson, Universal's attorney agent, does not. The first question, therefore, is whether, as a matter of law, attorneys may qualify as "debt collectors." In Heintz v. Jenkins, the Supreme Court held that the FDCPA "applies to attorneys who `regularly' engage in consumer-debt-collection activity." 514 U.S. 291, 299 (1995). In doing so, the Court noted that the original version of the statute enacted in 1977 contained an express exemption for lawyers "`collecting a debt as an attorney on behalf of and in the name of a client.'" Id. at 294 (quoting Pub. L. 95-109, § 803(6)(F), Sept. 20, 1977, 91 Stat. 874, 875). The Court further noted, however, that in 1986, Congress repealed this exemption in its entirety. Id. (citing Pub. L. 99-361, 100 Stat. 768). From this, the Court inferred, "Congress intended that lawyers be subject to the Act whenever they meet the general `debt collector' definition." Id. at 294-95.
Here, drawing all reasonable inferences in favor of Plaintiff, the pleadings sufficiently allege that Jackson "regularly engages" in consumer debt collection. Plaintiff alleges that, besides Jackson's May 9, 2016 letter to Plaintiff, Jackson sent similar letters to "multiple consumers in Illinois." First Am. Compl. [18] ¶ 34. Jackson's letter also acknowledged his role in the collection of "outstanding accounts"—plural—owed to Universal; that he received and reviewed multiple debt files; and that he approved the release of numerous collection letters. Id. Ex. B. Most importantly, the bottom of Jackson's letter included a bolded disclaimer that "
Defendants counter that, in this instance, Jackson merely acted as an agent "on behalf of" Universal, Mem. Supp. Defs.' Mot. Dismiss [22] 4, an assertion confirmed by Jackson's letter. See First Am. Compl. [18] Ex. B (stating that Jackson was "not an employee" of Universal but rather "on retainer" to help implement "the collection strategy of the outstanding accounts owed to them"). The next issue, therefore, is whether debt-collector attorneys are subject to the FDCPA even when serving as agents of debt-collector clients. The Court answers this question in the affirmative. See Hernandez v. Williams, Zinman & Parham PC, 829 F.3d 1068, 1071 n. 1 (9th Cir. 2016) (holding that FDCPA applies to attorneys who regularly engage in debt-collection activity "even if the attorney is acting on behalf of a debt-collector client.") (citing Fox v. Citicorp Credit Servs., Inc., 15 F.3d 1507, 1513 (9th Cir. 1994)).
This finding is consistent with Congress' repeal of the FDCPA's exemption for lawyers "collecting a debt as an attorney on behalf of and in the name of a client," Pub. L. 95-109, § 803(6)(F), Sept. 20, 1977, 91 Stat. 874, 875, and has been indirectly endorsed by the Seventh Circuit. In Marquez v. Weinstein, Pinson & Riley, P.S., several plaintiffs alleged FDCPA violations against multiple co-defendants: an attorney, his law firm, and its debt-collection agency client. No. 14-cv-00739, 2015 WL 4637952, at *1 (N.D. Ill. Aug. 4, 2015). The plaintiffs alleged that, in an attempt to collect outstanding student loan debts, the attorney and law firm filed misleading and deceptive civil complaints against the plaintiffs "on behalf of" the debt-collection agency. Id.; see 15 U.S.C. § 1692e (prohibiting a debt collector from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt"). The district court disagreed that the filings at issue violated the FDCPA and dismissed the complaint. Id. at 5. The Seventh Circuit reversed and found the complaints "misleading and deceptive as a matter of law," despite the fact that, as here, the attorney and law firm merely acted as agents of their debt collector client. 836 F.3d 808, 815 (7th Cir. 2016).
Having concluded that Jackson qualifies as an independent "debt collector" subject to FDCPA regulation—even in light of his representation of Universal—the Court turns to whether his May 9, 2016 letter constitutes an "initial communication." See 15 U.S.C. § 1692g(a) (only requiring debt validation notice within five days of "initial communication" with a consumer). This issue is clouded by Plaintiff's acknowledgment that, more than thirty days before Jackson's letter, Universal sent its own collection notice to Plaintiff. Courts in this district are split as to whether § 1692g applies only to the first debt collector to make contact with a debtor, or rather to each successive debt collector in line. The trend, however, has been towards the latter. Compare Thomas v. Law Firm of Simpson & Cybak, No. 00-cv-8211, 2001 WL 1516746, at *3-4 (N.D. Ill. Nov. 28, 2001), rev'd on other grounds, 392 F.3d 914 (7th Cir. 2004) (finding that because initial communication with the plaintiff was made by the debt collection agency and not its retained lawyer, lawyer's failure to provide debt notification did not violate FDCPA); Weinstein v. Fink, No. 99-cv-7222, 2001 WL 185194, at *7 (N.D. Ill. Feb. 26, 2001) (same) with Janetos v. Fulton Friedman & Gullace, LLP, No. 12-cv-1473, 2013 WL 791325, at *6 (N.D. Ill. Mar. 4, 2013) ("§ 1692g applies to the initial communication in connection with the collection of a debt by each successive debt collector"); Francis v. Snyder, 389 F.Supp.2d 1034, 1040 n. 2 (N.D. Ill. 2005) (same).
In Janetos, as in the present case, the plaintiffs filed a class action lawsuit against a debt collection agency and the law firm that managed the agency's collection litigation. 2013 WL 791325, at *1. The plaintiffs, like Plaintiff here, alleged that in an attempt to collect debts on behalf of the collection agency, the law firm mailed individual collection letters that violated the FDCPA's debt notice provision. Id. According to the Janetos plaintiffs, the law firm's collection letters failed to clearly identify which entity—the law firm or the collection agency— actually owned the purported debt. Id. at *4; see 15 U.S.C. § 1692g(a)(2) (requiring debt collector to provide "the name of the creditor to whom the debt is owed"). Moreover, one collection letter pertained to a debt previously extinguished in state court. Id. The defendants asserted that, because the collection agency initiated its own collection efforts several years before the law firm, § 1692g did not apply to the firm's letters. Id. That is, the defendants claimed that the firm's letters constituted the initial communication from the firm, not the initial communication with respect to the purported debts. Id.
The district court acknowledged that "§ 1692g is not clear on its face whether `the initial communication' requirements apply once to each debt or once to each debt collector who attempts to collect a debt." Id. at *5. Nevertheless, given "the FDCPA's purpose of curbing abusive debt collection practices," the court declined "to read a loophole into § 1692g that would exempt successive debt collectors from sending a validation notice." Id. The court reasoned that § 1692g "is not superfluous when a new debt collector enters the picture" because it "helps to ensure that any mistakes"—such as the attempted collection of a previously-extinguished debt—"are promptly resolved." Id. The court further found that requiring each debt collector to comply with § 1692g was "not a heavy burden" and consistent with the Federal Trade Commission's interpretation of the statute. Id.; see Federal Trade Commission Statements of General Policy or Interpretation, Staff Commentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50097-02, 50100 (December 13, 1998) (explaining that under § 1692g, an "attorney debt collector must provide the required validation notice, even if a previous debt collector (or the creditor) has given such notice").
Although the district court found § 1692g applicable to initial communications made by successive debt collectors, it held in a subsequent ruling that, on grounds not pertinent here, the plaintiffs failed to meet their burden of proof and granted summary judgment to the defendants. No. 12-cv-1473, 2015 WL 1744118, at *9 (N.D. Ill. Apr. 13, 2015). The Seventh Circuit reversed and held that the plaintiffs were "entitled to a finding of liability for violations of § 1692g(a)(2)." 825 F.3d 317, 326 (7th Cir. 2016). The Seventh Circuit did not specifically address the district court's predicate ruling that § 1692g applies to each debt collector who attempts to collect a debt. But it defies logic that the court would grant relief for violations of § 1692g if it doubted the applicability of the provision to the communications at issue. Consequently, this Court adopts the interpretation of § 1692g found in the Janetos line of cases and finds that § 1692g applies to the initial communication made in connection with the collection of a debt by each successive debt collector. Applied here, this includes Jackson's May 9, 2016 letter to Plaintiff.
The Court however, cannot rest there, because this case presents the added wrinkle that Jackson's letter to Plaintiff did include a debt notice—Universal's. The letter informed Plaintiff to notify Universal in order to dispute or verify her debt, but said nothing of notifying Jackson. Defendants argue that this satisfies § 1692g(a). The Court therefore, must also determine whether an attorney debt collector acting as an agent on behalf of another debt collector must provide his own debt notice in addition to, or in lieu of, that of his client.
Once again, the Court answers this question in the affirmative. In doing so, the Court begins, as it must, with an examination of the FDCPA's statutory text. See BedRoc Ltd., LLC v. United States, 541 U.S. 176, 183 (2004) ("The preeminent canon of statutory interpretation requires us to presume that the legislature says in a statute what it means and means in a statute what it says there. Thus, our inquiry begins with the statutory text[.]") (internal quotations and citations omitted). If the "statutory language is unambiguous, in the absence of `a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive.'" United States v. Turkette, 452 U.S. 576, 580 (1981) (quoting Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980)). When a statute is unambiguous, "our inquiry starts and stops with the text." United States v. Marcotte, 835 F.3d 652, 656 (7th Cir. 2016) (internal quotations omitted).
To repeat, § 1692g(a) provides that
15 U.S.C. § 1692g(a) (emphasis added). The statutory text identifies the subject of the provision—"debt collector"—five times. In the first instance, the term is preceded by an indefinite article: "
By arguing that the debt validation notice in Jackson's May 9, 2016 letter satisfies § 1692g(a), Defendants necessarily posit that "
A holistic reading of § 1692g(a), however, reveals that the term "
As discussed above, the Court interprets § 1692(g)(a)'s initial reference to "
This interpretation preserves the efficacy of the other sections of § 1692g. See Sturgeon v. Frost, 136 S.Ct. 1061, 1070 (2016) (Statutory language "cannot be construed in a vacuum. It is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme."). For example, subsection (b) of § 1692g—which continues the use of the definite article—provides that
15 U.S.C. § 1692g(b). The purpose of subsection (b) is to impose, upon a debtor's request, a cessation of collection activities "until the debt collector verifies the accuracy of the amount claimed." Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1031 (6th Cir. 1992) (internal quotations omitted).
Because subsection (b) continues the use of the definite article, "
One may argue that common law agency restrictions would mitigate this potential statutory enforcement gap. An agent, of course, owes a fiduciary duty to act within the scope of his principal's authority. See Credit Gen. Ins. Co. v. Midwest Indem. Corp., 916 F.Supp. 766, 775 (N.D. Ill. 1996). Congress, however, enacted the statutory rigors of the FDCPA because it determined that "[e]xisting laws and procedures" were "inadequate to protect consumers" from the continued "use of abusive, deceptive, and unfair debt collection practices by many debt collectors." 15 U.S.C. § 1692. Indeed, the Senate Report on the FDCPA viewed the statute as "comprehensive legislation" which "fully addresse[d] the problem of collection abuses" and was "primarily self-enforcing." S. Rep. 95-382, at 5-6 (1977), 1977 U.S.C.C.A.N. 1695, 1699-700. The Court declines Defendants' invitation to rely on a common law enforcement regime that Congress has already deemed inadequate.
Furthermore, Defendants' interpretation of § 1692g would introduce needless confusion to the debt verification process. Under the plain language of § 1692g(b), a debtor's dispute or verification notice sent to an independent attorney agent would not suffice to halt collection activities by the collection agency client. Faced, however, with correspondence from a debt-collector attorney containing a notification provision referencing only the debt-collector client, it would not be per se unreasonable for a debtor to mistakenly believe that sending a validation request to the attorney sufficiently invoked the FDCPA's statutory protections. This is particularly true in this case, where Jackson's May 9, 2016 letter: (1) stated that he was "on retainer" to "advise [Universal] of corporate law" and assist "in the collection strategy of the outstanding accounts owed to them"; (2) stated that Jackson received and reviewed Universal's debt files and approved the release of the collection letters; and (3) contained only two addresses, with one address— Jackson's—located in the letterhead below the words "ATTORNEY ON RETAINER FOR UNIVERSAL FIDELITY LP," and the other—Universal's P.O. Box—located within the payment slip.
Courts evaluate FDCPA communications through the eyes of the "unsophisticated consumer." Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 643, 645 (7th Cir. 2009); see also Bartlett v. Heibl, 128 F.3d 497, 500 (7th Cir. 1997). While this assumes that the debtor possesses "rudimentary knowledge about the financial world" and is "capable of making basic logical deductions and inferences," Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir. 2000), it also assumes that he or she is "uninformed, naive, [and] trusting." Veach v. Sheeks, 316 F.3d 690, 693 (7th Cir. 2003) (internal quotations omitted). Viewed through this lens, it would be unfair to require debtors to decipher the legal intricacies of a principal-agent relationship before qualifying for the FDCPA's safe harbor.
Finally, the Court's findings are consistent with the FDCPA's legislative intent. The Senate Report on the statute states that a "significant feature" of the legislation was its "provision requiring the validation of debts." S. Rep. 95-382, at 4 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1699. Congress believed the validation provision would "eliminate the recurring problem of debt collectors dunning the wrong person or attempting to collect debts which the consumer has already paid." Id. Because of this "broad remedial purpose," Blakemore v. Pekay, 895 F.Supp. 972, 984 (N.D. Ill. 1995), the statute "is liberally construed in favor of consumers." Ramirez v. Apex Fin. Mgmt., LLC, 567 F.Supp.2d 1035, 1040 (N.D. Ill. 2008); Ross v. Commercial Fin. Servs., Inc., 31 F.Supp.2d 1077, 1079 (N.D. Ill. 1999). This goal is furthered by applying all of § 1692g's requirements to attorneys like Jackson and providing an additional avenue for debtors to obtain debt verification. Moreover, because "the current practice of most debt collectors is to send similar information to consumers, this provision will not result in additional expense or paperwork." S. Rep. 95-382, at 4. Indeed, Jackson could have easily satisfied his obligations by simply replacing references to Universal in his collection letter's notification provision with references to himself. Moreover, as an attorney agent, any validation requests returned to Jackson could be quickly answered through coordination with his collection agency client. To extent this is not the case, such costs are the reasonable price to be paid in exchange for the economic benefits conferred by debt collection.
In sum, the Court finds that, as a matter of law, attorneys may qualify as "debt collectors" under the FDCPA if they regularly engage in consumer-debt-collection activity. This is true even when an attorney serves as an agent on behalf of a debt collector client. Moreover, the notification provisions of § 1692g apply to the initial communication made in connection with the collection of a debt by each successive debt collector. Finally, an attorney debt collector making this notification must provide his own debt notice in addition to, or in lieu of, that of his client.
Defendants' Motion to Dismiss [21] is denied. The Court grants Plaintiff leave to amend her operative complaint for the limited purpose of incorporating Universal's March 22, 2016 notice to Plaintiff. The status hearing previously set for December 7, 2016 stands. At that time, the parties shall be prepared to discuss additional case management dates.
