Good v. Nationwide Credit, Inc.

55 F.Supp.3d 742

Bradley GOOD et al., Plaintiffs

v.NATIONWIDE CREDIT, INC., Defendant.

Civil Action No. 14–4295.

United States District Court, E.D. Pennsylvania.

Signed Oct. 24, 2014.

Filed Oct. 27, 2014.

Cary L. Flitter, Andrew M. Milz, Flitter Lorenz, P.C., Narberth, PA, Carlo Sabatini, Sabatini Law Firm LLC, Dunmore, PA, for Plaintiffs.

Alfred W. Putnam, Jr., Andrew P. Reeve, Drinker Biddle & Reath LLP, Philadelphia, PA, for Defendant.

MEMORANDUM

EDUARDO C. ROBRENO, District Judge.

Plaintiffs Bradley Good and Edward Soucek bring this suit against Defendant Nationwide Credit, Inc., alleging that it sent them collection notices including language that is false, deceptive, or misleading under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e. Defendant has moved to dismiss the complaint and, for the reasons that follow, the Court will deny the motion.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On September 9, 2013, Defendant sent Plaintiff Soucek a dunning letter on behalf of GE Capital Retail Bank offering Soucek the opportunity to settle his account of $613.03 for $183.90, representing a savings of $429.13. Compl. Ex. A. The letter also included the following language: “GE CAPITAL RETAIL BANK is required to file a form 1099C with the Internal Revenue Service for any cancelled debt of $600 or more. Please consult your tax advisor concerning any tax questions.” Id. On December 10, 2013, Defendant sent Plaintiff Good a letter on behalf of American Express inviting him to pay off his account balance of $10,094.47. Id. Ex. B. The letter included the following language: “American Express is required to file a form 1099C with the Internal Revenue Service for any cancelled debt of $600 or more. Please consult your tax advisor concerning any tax questions.” Id. Plaintiffs claim that this language is false, deceptive, and misleading, id. ¶¶ 24, 26, and that it constitutes a “collection ploy,” id. ¶ 26, all in violation of the FDCPA, id. ¶ 36.

On July 14, 2014, Plaintiffs commenced this action by filing a complaint in federal court. The complaint alleges one count, that the collection letter violates the FDCPA, and requests statutory damages as provided for under 15 U.S.C. § 1692k(a). Compl. at 7.¹

On September 5, 2014, Defendant filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), to which Plaintiffs responded on September 22, 2014. The motion is ripe for disposition.

II. STANDARD OF REVIEW

When considering a party's motion to dismiss a complaint under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, the Court must “accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party.” DeBenedictis v. Merrill Lynch & Co., 492 F.3d 209, 215 (3d Cir.2007) (internal quotation marks removed). To withstand a motion to dismiss, the complaint's “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

This “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. Although a plaintiff is entitled to all reasonable inferences from the facts alleged, a plaintiff's legal conclusions are not entitled to deference and the Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986).

The pleadings must contain sufficient factual allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir.2009). “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.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ) (internal quotation marks omitted). In deciding a Rule 12(b)(6) motion, the Court limits its inquiry to the facts alleged in the complaint and its attachments, matters of public record, and undisputedly authentic documents if the complainant's claims are based upon these documents. See Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir.1994) ; Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.1993).

III. DISCUSSION

A. The Fair Debt Collection Practices Act and the Requirement to Report a Discharge of Indebtedness

Congress's purposes in enacting the FDCPA were “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. Plaintiffs claim that Defendant violated § 1692e and e(10).

The relevant provisions of § 1692e read as follows:

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.

§ 1692e. Plaintiffs allege that the challenged statements are false, deceptive, and misleading under § 1692e and e(10), in part because they fail to accurately state the law with respect to filing 1099–C forms with the Internal Revenue Service (“IRS”). Compl. ¶¶ 15–25.

The law requiring 1099–C filings is codified in the Internal Revenue Code, stating:

(a) In general. Any applicable entity which discharges (in whole or in part) the indebtedness of any person during any calendar year shall make a return (at such time and in such form as the Secretary [of the Treasury] may by regulations prescribe) setting forth—

(1) the name, address, and [Taxpayer Identification Number] of each person whose indebtedness was discharged during such calendar year,

(2) the date of the discharge and the amount of the indebtedness discharged, and

(3) such other information as the Secretary may prescribe.

(b) Exception. Subsection (a) shall not apply to any discharge of less than $600.

I.R.C. § 6050P. The related IRS regulation fleshes out the requirements of § 6050P in more detail. It states:

Except as provided in paragraph (d) of this section, any applicable entity (as defined in section 6050P(c)(1) ) that discharges an indebtedness of any person (within the meaning of section 7701(a)(1)) of at least $600 during a calendar year must file an information return on Form 1099–C with the Internal Revenue Service. Solely for purposes of the reporting requirements of section 6050P and this section, a discharge of indebtedness is deemed to have occurred ... if and only if there has occurred an identifiable event described in paragraph (b)(2) of this section....

26 C.F.R. § 1.6050P–1(a)(1). The parties do not dispute that Defendant is an “applicable entity” under I.R.C. § 6050P(c)(1) or that Plaintiffs are “persons” under § 7701(a)(1). In addition, the regulation defines an “identifiable event” as “[a] discharge of indebtedness pursuant to an agreement between an applicable entity and a debtor to discharge indebtedness at less than full consideration.” 26 C.F.R. § 1.6050P–1(b)(2)(F). The regulation lists seven other types of qualifying identifiable events. See § 1.6050P–1(b)(2) (including, notably, discharges of indebtedness due to bankruptcy). As indicated in the above-quoted language, the regulation excepts certain situations from its reporting requirement. These seven exceptions include, inter alia, bankruptcy discharges, interest discharges, and discharges, “[i]n the case of a lending transaction,” of amounts “other than stated principal.” § 1.6050P–1(d).

B. Analysis

Against this legal backdrop, Plaintiffs allege that the statement Defendant included in its letters is improperly unqualified and fails to mention any of the § 1.6050P–1(d) exceptions. Compl. ¶¶ 15–25. In addition, Plaintiffs claim the statement is a “collection ploy”—that is, “a deception which suggests to the least sophisticated consumer that he or she could get in trouble with the IRS for refusal to pay the debt, or for obtaining any debt forgiveness of $600 or more.” Id. ¶ 26. Defendant argues in response that Plaintiffs have failed to state a claim on which relief could be granted because: (1) the statement is true in that it accurately reflects controlling law, Mot. Dismiss 9–10; (2) the statement is neither deceptive nor misleading, id. at 10–18; (3) even if the statement is false or misleading, it is not material, id. at 18–21; and (4) Plaintiff Good has no claim, since he owed more than $600 in principal, rendering the statement literally true with respect to him, id. at 21–22. The Court will assess each of these arguments in turn.

1. The Statement Is Not True in the Sense that It Fails To Accurately Reflect Controlling Law

Defendant asserts that the statement indicating the creditor is “required to file a form 1099C with the Internal Revenue Service for any cancelled debt of $600 or more” accurately reflects the statutory and regulatory language. Specifically, Defendant argues that the statute only refers to one exception, related to discharges of less than $600, see Mot. Dismiss 9 (quoting I.R.C. § 6050P ), and that the regulation's text supports this, see id. at 10 (“[A]ny applicable entity ... that discharges an indebtedness of any person ... of at least $600 during a calendar year must file an information return on Form 1099–C with the Internal Revenue Service.” (quoting 26 C.F.R. § 1.6050P–1(a)(1) )). This oversimplifies the issue, for two reasons. First, the statute cannot be...