Galdamez v. I.Q. Data Int'l, Inc.

170 F.Supp.3d 890

Sara Judith Garcia Galdamez, et. al., Plaintiffs

v.I.Q. Data International, Inc., Defendant.

1:15-CV-1605(LMB/JFA).

United States District Court, E.D. Virginia, Alexandria Division.

Signed March 15, 2016

Simon Yehuda Sandoval–Moshenberg, Simon Sandoval Moshenburg, Fall Church, VA, for Plaintiffs.

Charles Michael Sims, David Sutton Hirschler, III, LeClairRyan, A Professional Corporation, Richmond, VA, for Defendant.

MEMORANDUM OPINION

Leonie M. Brinkema, United States District Judge

Before the Court is defendant's Motion to Dismiss [Dkt. No. 3], which has been fully briefed and argued. For the reasons that follow, the motion will be granted in part and denied in part.

I. BACKGROUND

Sara Judith Garcia Galdamez, Jorge Armando Escobar Barillas, and Virginia de Jesus Pena Pozuelos (collectively, “plaintiffs”) filed a two-count complaint against I.Q. Data International, Inc. (“IQ” or “defendant”), alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. Compl. ¶ 1 [Dkt. No. 1], Dec. 1, 2015. In short, plaintiffs allege that defendant added interest to a purported outstanding balance without any basis in law or contract and in doing so used false, deceptive, and misleading representations about the amount of the alleged debt and engaged in unfair debt collection practices. Id.

The debt relates to a residential lease plaintiffs signed jointly and severally as co-lessees with Fairmont Residential, LLC on May 11, 2012 for an apartment in Fairmont's Annandale, Virginia complex. Id. ¶ 4. The form lease did not provide for interest charges on unpaid balances; rather, the lease provides only for a one-time late fee on unpaid balances. Id. ¶¶ 11, 12. Plaintiffs moved out of their apartment when their lease expired on June 10, 2015. Id. ¶ 8. Shortly after plaintiffs vacated their apartment, the landlord contended that they owed a balance of $3,276.84 in unpaid rent, unpaid utility bills, and charges for repair of alleged minor damages to the apartment. Id. ¶ 9. This alleged debt is not itemized on the collection letter. Plaintiffs contest that they owe anything to the landlord. Id. ¶ 9 n.1. The landlord never sued plaintiffs for any of the unpaid balances or repairs and accordingly has not obtained a judgment against them; instead, the landlord assigned plaintiffs' account to IQ for collections, and IQ sent each plaintiff a collection letter on July 17, 2015. Id. ¶¶ 10, 13, 14. This collection letter is attached to the complaint and states that $19.93 of interest is due on the debt, and asserts that the “unpaid principal balance will accrue interest at a rate of 006.00 percent per annum.” Id. ¶ 15. Plaintiffs assert that the statements about interest were false and that there is no interest due or accruing under Virginia law or according to the terms of the lease. Id. ¶ 16. The complaint alleges that each individual plaintiff experienced a measurable amount of stress and anxiety at the idea that his or her balance would continue to grow, id. ¶ 20; and in the alternative, plaintiffs maintain that even if interest were legally allowed to accrue, the collection letter falsely represented the amount of interest owed because it calculated interest starting from a date preceding their alleged breach of the lease contract.¹ Id . ¶ 21.

In Count I, plaintiffs allege that IQ used false, deceptive, or misleading representations in connection with the collection of any debt in violation of §§ 1692e(2)(A), 1692e(10), and 1692f(1). Id. ¶ 44. In Count II, they claim that IQ misrepresented the actual amount alleged to be owed by plaintiffs and created a false sense of urgency that overshadowed the 30–day right to request verification by including an interest provision in the same paragraph in violation of § 1692g and § 1692g(a)(1). Id. ¶¶ 47, 48. Plaintiffs request statutory damages pursuant to § 1692k(a)(2) ($1,000); actual damages pursuant to § 1692k(a)(1); and costs and reasonable attorney's fees pursuant to § 1692k(a)(3).

II. DISCUSSION

In its Motion to Dismiss, defendant argues that the bulk of plaintiffs' claims are based on the incorrect premise that Virginia law does not permit interest on unpaid rent² owed pursuant to a residential lease, and that to the extent that plaintiffs' claims rely on that premise, they should be dismissed.³ In response, plaintiffs argue that Virginia law does not allow a debt collector to automatically impute interest to an unpaid balance of rent—rather, such interest is available only if explicitly contained in the terms of the lease or alter the debt has been reduced to a judgment.

A. Standard of Review

To survive a Fed. R. Civ. P. 12(b)(6) motion to dismiss, a complaint must allege facts that “state a plausible claim for relief” and “are sufficient to raise a right to relief above the speculative level.” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir.2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Although a plaintiff “need not forecast evidence sufficient to prove the elements of the claim,” the complaint must “allege sufficient facts to establish those elements.” Id. (quoting Robertson v. Sea Pines Real Estate Cos., 679 F.3d 278, 291 (4th Cir.2012) ) (internal quotation marks omitted). Thus, “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

In evaluating whether a plaintiff has successfully “nudg[ed] [his] claims across the line from conceivable to plausible,” a court must “accept the truthfulness of all factual allegations.” Burnette v. Fahey, 687 F.3d 171, 180 (4th Cir.2012) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); however, it is not required to “assume the veracity of ‘bare legal conclusions.” ’ Id. (quoting Aziz v. Alcolac, Inc., 658 F.3d 388, 391 (4th Cir.2011) ).

B. Pre-judgment Interest

Count I is a claim that the allegedly false statement about the accrual of interest violated both § 1692e and § 1692f. To prevail on a claim under § 1692e, plaintiffs must show that IQ, as a debt collector, used a “false, deceptive, or misleading representation or means in connection with the collection of any debt.” § 1692e. To prevail under § 1692f, they must show that IQ used “unfair or unconscionable means to collect or attempt to collect any debt.” § 1692f. A false representation of the “amount ... of any debt” would violate the former, § 1692e(2)(A), whereas § 1692f would be violated by “[t]he collection of any amount (including interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” § 1692f(1).

IQ argues that Virginia law permits it to collect 6% interest per annum on overdue balances of residential leases.⁴ If IQ is correct in its view of Virginia law, its collection letter was neither false nor misleading and did not employ any deceptive means. Def.'s Mem. in Supp. of Its Mot. to Dismiss at 4 [Dkt. No. 4], Feb. 1, 2016 (“Def.'s Mem.”). Defendant bases its position about entitlement to interest on Va.Code Ann. § 55–227, which provides that

Rent of every kind may be recovered by distress or action. A landlord may also, by action, recover, when the agreement is not by deed, a reasonable satisfaction for the use and occupation of lands. On the trial of such action, if any parol demise or any agreement not by deed whereon a certain rent was reserved shall appear in evidence, the plaintiff shall not therefor be nonsuited, but may use the same as evidence of the amount of his debt or damages. In any action for rent, or for such use and occupation, interest shall be allowed as on other contracts

Va.Code Ann. § 55–227 (emphasis added). IQ claims that the language “shall be allowed” removes any discretion associated with the award of interest. Def.'s Mem. at 4. Although it is true that under Virginia law, “[in] the ordinary case of a failure to comply with a contract to pay money at a stipulated time[,] ... the measure of damages for the breach of the contract is the principal sum due, and legal interest thereon,” Bethel v. Salem Imp. Co., 93 Va. 354, 25 S.E. 304 (1896), it is not clear that interest is imputed automatically.

Relying on the plain language of the statute, which discusses recovery of rent “by distress or action,” plaintiffs argue that in Virginia pre-judgment interest for unpaid rent is only permitted when that rent has been collected through a judicial proceeding. Pls.' Opp'n at 3. They point to the Virginia Residential Landlord and Tenant Act (“VRLTA”), which defines an “action” as a “recoupment, counterclaim, set off, or other civil suit and any other proceeding in which rights are determined, including without limitation actions for possession, rent, unlawful detainer, unlawful entry, and distress for rent.” Va, Code Ann. § 55–248.4 ; Pls.' Opp'n at 3 n.4. Under the plaintiffs' reading of the relevant law, a landlord who has not included interest in the lease at issue may only seek interest as a court-ordered remedy. Id. at 4. Here, no suit has been filed against the plaintiffs; accordingly, plaintiffs contend, defendant is not permitted to collect interest under a plain reading of Va.Code Ann. § 55–227. Id. at 3.

In addition, plaintiffs argue that even when interest is permitted, it is always discretionary under § 55–227. As the Virginia Supreme Court has stated in a breach of contract case, “the principal distinction between pre-judgment and post-judgment interest is that the decision whether to award pre-judgment interest is discretionary with the trier of fact, while the application of post-judgment interest for all money judgments is mandatory.” Upper Occoquan Sewage Auth. v. Blake Const. Co., Incorporated/Poole & Kent, 275 Va. 41, 63, 655 S.E.2d 10 (2008). Indeed, plaintiffs correctly point out that the Virginia ca...