United States District Court, W.D. Oklahoma
JEFF SMITH, on behalf of himself and all others similarly situated, Plaintiff,
NATIONAL ENTERPRISE SYSTEMS, INC., Defendant.
TIMOTHY D. DeGIUSTI UNITED STATES DISTRICT JUDGE
the Court is Defendant National Enterprise Systems,
Inc.'s Motion for Judgment on the Pleadings [Doc. No.
29], filed pursuant to Fed.R.Civ.P. 12(c). Defendant moves
for a judgment in its favor on all claims asserted in the
First Amended Complaint, on the ground that Plaintiff's
factual allegations fail to state a plausible claim under the
Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §
1692 et seq. Plaintiff has filed a response [Doc.
No. 34] in opposition to the Motion, and Defendant has
replied [Doc. No. 35]. Thus, the Motion is fully briefed and
under Rule 12(c) and Rule 12(b)(6) are governed by the same
standard. See Colony Ins. Co. v. Burke, 698 F.3d
1222, 1228 (10th Cir. 2012); Aspenwood Inv. Co. v.
Martinez, 355 F.3d 1256, 1259 (10th Cir. 2004).
“To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its
face.'” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Iqbal, 556 U.S. at 678. “We
accept all facts pleaded by the non-moving party as true and
grant all reasonable inferences from the pleading in favor of
the same.” Colony, 698 F.3d at 1228 (internal
quotation omitted); see also Sprint Nextel Corp. v.
Middle Man, Inc., 822 F.3d 524, 530 (10th Cir. 2016);
Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d
1138, 1141 (10th Cir. 2012). Limited materials outside the
pleadings may be considered. See GFF Corp. v. Associated
Wholesale Grocers, Inc., 130 F.3d 1381, 1384 (10th Cir.
1997); see also Berneike v. CitiMortgage, Inc., 708
F.3d 1141, 1144 (10th Cir. 2013); Gee v. Pacheco,
627 F.3d 1178, 1186 (10th Cir. 2010. Viewing the factual
allegations in this manner and considering only these
materials, a Rule 12(c) motion should be granted if
“the moving party has clearly established that no
material issue of fact remains to be resolved and the party
is entitled to judgment as a matter of law.”
Colony, 698 F.3d at 1228 (internal quotation
omitted); Sprint, 822 F.3d at 530; Sanders,
689 F.3d at 1141.
is engaged in the business of collecting debts and is a
“debt collector” as defined by the FDCPA.
See 15 U.S.C. § 1692a(6). Plaintiff is a
“consumer” who had previously incurred a student
loan debt. See id. § 1692a(3). He received a
series of form letters from Defendant beginning with one
dated April 30, 2014, regarding his debt to Sallie Mae, Inc.
in the amount of $4, 517.65. The letters are attached to the
First Amended Complaint, and the parties agree they may
properly be considered in determining the sufficiency of
Plaintiff's pleading. Plaintiff claims three of these
letters, which offered to settle the debt by accepting a
lesser amount, contained false, deceptive, or misleading
statements in violation of § 1692e. See First
Am. Compl. ¶¶ 77-80. Plaintiff also claims
statements in the letters that he could save money by
accepting a settlement offer - “without informing [him]
that such settlement would result in additional tax
liability” - constituted unfair or unconscionable
conduct in violation of § 1692f. Id. ¶ 83.
Although the letters invited Plaintiff to call or contact
Defendant to discuss the debt, he did not do so; his claims
hinge entirely on the content of the letters. Thus, they are
described in detail in the discussion infra.
Plaintiff seeks to recover actual and statutory damages,
interest, attorney fees, and costs. See 15 U.S.C. § 1692k.
Violation of § 1692e - Use of False, Deceptive, or
claims Defendant violated § 1692e by using a
“false, deceptive, or misleading representation or
means” to collect a debt due to certain statements in
Defendant's collection letters or the timing of them.
Amount Saved by Accepting Settlement Offers
sent three letters to Plaintiff that were identical except
for dates and dollar amounts. Each contained a prominently
displayed box that stated an outstanding balance owed on the
debt, a lesser amount Defendant would accept as payment, and
the difference between these two amounts denominated as the
“Amount You Save.” For example, the first letter
dated April 30, 2014, contained this legend:
AS OF TODAY FOR YOUR
WE WILL ACCEPT THIS
AMOUNT YOU SAVE:
First Am. Compl., Ex. A [Doc. No. 27-1]. In two subsequent
letters dated June 20, 2014, and July 2, 2014 (referred to,
respectively, as the third and fifth letters), the amount
Defendant would accept remained the same but the outstanding
balance and the amount of savings increased. The body of each letter
encouraged Plaintiff to pay the reduced amount to settle the
account “at a tremendous savings, ” and promised
Defendant would “waive your remaining debt, saving you
a significant amount of money.” Id.
claims Defendant misrepresented the amount of savings to be
realized from the proposed settlement because the forgiven
debt would be considered taxable income under federal tax
law. See 26 U.S.C. § 61(a)(12) (defining gross
income to include “[i]ncome from discharge of
indebtedness”); id. § 108 (containing
specific provisions for discharges of indebtedness).
According to Plaintiff, the true amount that he would have
saved by accepting a settlement offer stated in the first,
third and fifth letters was less than the amounts stated as
the “Amount You Save” in the letters
“because this amount would be offset by the income tax
Plaintiff would owe” on the discharged debt.
See First Am. Compl. [Doc. No. 27], ¶¶ 22,
37, 52. Plaintiff contends each statement regarding the
amount saved “is a false statement by Defendant which
misleads the reader into believing the offer is better than
it really is.” See Pl.'s Resp. Br. [Doc.
No. 34] at 15. Thus, Plaintiff claims “Defendant
violated 15 U.S.C. § 1692e by stating in the First,
Third, and Fifth Letter[s] that Plaintiff would save more
money by entering into a settlement agreement with Defendant
than he actually would save.” See First Am.
Comp. [Doc. No. 27], ¶ 77.
question presented is whether Defendant's statement that
Plaintiff would save a certain amount of money by accepting
its settlement offer - representing an “Amount You
Save” as the difference between the amount due on the
account and the reduced amount Defendant would accept as full
payment of Plaintiff's debt - is false, deceptive, or
misleading due to income tax consequences of a discharge of
indebtedness. Plaintiff urges the Court to find a violation
of § 1692e by applying an objective “least
sophisticated consumer” standard that has been adopted
to serve FDCPA's remedial purpose to protect consumers.
See Pl.'s Resp. Br. [Doc. No. 34] at 11-12,
Plaintiff argues that prior cases finding no FDCPA violation
from a failure to disclose income tax consequences are
distinguishable or wrongly decided. Id. at 17-20.
Plaintiff contends a debt collector's statement
“‘is deceptive when it can be reasonably read to
have two or more different meanings, one of which is
inaccurate'” or “if the statement is subject
to an interpretation or contains an implication with the
capacity to deceive.” Id. at 19 (quoting
Russell v. Equifax A.R.S., 74 F.3d 30, 35 (2d Cir.
1996), and citing other cases).
overwhelming majority of federal courts, and the only
appellate court to reach the issue, have rejected
Plaintiff's position that a failure to alert a consumer
to possible tax liability from forgiven debt renders
representations regarding the amount to be saved or
discounted in settlement of a debt, deceptive or misleading.
See Altman v. J.C. Christensen & Assocs., Inc.,
786 F.3d 191 (2d Cir. 2015); Daugherty v. Convergent
Outsourcing, Inc., Civil Action No. H-14-3306, 2015 WL
3823654 (S.D. Tex. June 18, 2015), rev'd on other
grounds, 836 F.3d 507 (5th Cir. 2016); Rigerman v.
Forster & Garbus, LLP, No. 14-CV-1805, 2015 WL
1223760 (E.D.N.Y. Mar. 16, 2015); Landes v. Cavalry
Portfolio Servs., LLC, 774 F.Supp.2d 800 (E.D.
Va. 2011); Schaefer v. ARM Receivable Mgmt., Inc.,
Civil Action No. 09-11666-DJC, 2011 WL 2847768 (D. Mass. July
Second Circuit emphasized in Altman that the debt
collector's letter offered a savings to the consumer
based on the “outstanding account balance.”
See Altman, 786 F.3d at 194. The court of appeals
concluded: “The fact that a debtor may then have to pay
tax on the amount saved is simply not deceptive in the
context of what the savings are on a debtor's
‘outstanding account balance.'” Id.
The Second Circuit cited approvingly in Altman a
district court's view that “‘requiring, as a
matter of law, debt collectors to inform a debtor of such a
potential collateral tax consequence of settling a
pre-existing debt seems far afield from even the broad
mandate of FDCPA to protect debtors from abusive debt
collection practices.'” Id. (quoting
Schaefer, 2011 WL 2847768 at *5).
in this case, the Court finds that a reasonable reading of
Defendant's first, third and fifth letters is that they
conveyed offers to compromise and settle the debt on terms
that would result in a certain amount of savings to Plaintiff
based on the outstanding account balance. The fact that
Plaintiff might owe income tax on the amount saved (as
alleged in his pleading), or that an unsophisticated consumer
might be unaware of the tax consequences of forgiven debt,
simply does not make representations of savings from the
outstanding balance false, deceptive, or misleading. Further,
Plaintiff's reading of the letters - as possibly making a
representation of net savings after considering income taxes
- “is objectively unreasonable under the least
sophisticated consumer standard[;] it cannot form the basis
for a FDCPA claim.” Id.
appellate courts have unanimously held that debt collectors
are not responsible for “‘bizarre or
idiosyncratic interpretations of debt collection
letters.'” Id. at 194 (quoting Greco
v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360,
363 (2d Cir. 2005)); see Gonzales v. Arrow Fin. Servs.,
LLC, 660 F.3d 1055, 1062 (9th Cir. 2011); Lesher v.
Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 997
(3d Cir. 2011); LeBlanc v. Unifund CCR Partners, 601
F.3d 1185, 1194 (11th Cir. 2010); Gonzalez v. Kay,
577 F.3d 600, 603 (5th Cir. 2009); Kistner v. Law Offices
of Michael P. Margelefsky, LLC, 518 F.3d 433, 438 (6th
Cir. 2008); Peters v. Gen. Serv. Bureau, Inc., 277
F.3d 1051, 1055 (8th Cir. 2002); United States v.
Nat'l Fin. Servs., Inc., 98 F.3d 131, 136 (4th Cir.
1996); Gammon v. GC Servs. Ltd. P'ship, 27 ...