In re FDCPA Mailing Vendor Cases

551 F.Supp.3d 57

IN RE FDCPA MAILING VENDOR CASES.

Civil Action Nos. 21-2312

21-2587

21-3002

21-3383

21-3434 & 21-3462

United States District Court, E.D. New York.

Signed July 23, 2021

Julie Clark, Pro Hac Vice, Edelman, Combs, Latturner & Goodwin, Chicago, IL, Abraham Kleinman, Kleinman, LLC, Uniondale, NY, for Peter Stergakos.

Joseph Proulx, Golden Scaz Gagain, Tampa, FL, for I.C. System, Inc.

MEMORANDUM & ORDER

GARY R. BROWN, United States District Judge:

This memorandum addresses pending cases predicated upon purported violations of the Fair Debt Collection Practices Act ("FDCPA") emanating from the provision of data by debt collectors to mailing vendors. No actual damages are alleged by plaintiffs in any of these cases, all of which have been filed as class actions. Recent developments in the law, including the Supreme Court's decision in TransUnion LLC v. Ramirez , ––– U.S. ––––, 141 S. Ct. 2190, 210 L.Ed.2d 568 (2021), suggest that the plaintiffs in these cases lack standing and the Court therefore has no jurisdiction over these matters. In each of the cases referenced herein, the Court issued a show cause order directing that each plaintiff demonstrate standing and providing the plaintiff an opportunity to providing factual material and authority. In each case, the plaintiff has failed to demonstrate a concrete injury that would provide a basis for standing. As such, for the reasons discussed and to the extent described herein, these cases are dismissed.

The FDCPA and its Use and Abuse in this Judicial District

The FDCPA was enacted in response to a "serious national problem" of debt collection abuse. S. Rep. 95–382, at 2 (1977), reprinted in 1977 U.S.C.C.A.N. 1695, 1696. Congress enacted the statute "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." Greco v. Trauner, Cohen & Thomas, L.L.P. , 412 F.3d 360, 363 (2d Cir. 2005) (quoting 15 U.S.C. § 1692(e) ); see also Benzemann v. Citibank, N.A. , 806 F.3d 98, 100 (2d Cir. 2015) (same); see also Moukengeschaie v. Eltman, Eltman & Cooper, P.C. , No. 14-CV-7539 (MKB), 2016 WL 1274541, at *3 (E.D.N.Y. Mar. 31, 2016) ("The FDCPA was enacted to protect consumers from abusive debt collection practices by third-party debt collectors, to create parity in the debt collection industry and to standardize governmental intervention in the debt collection market."). In order to achieve these objectives, "the FDCPA creates a private right of action for debtors who have been harmed by abusive debt collection practices." Benzemann , 806 F.3d at 100 (citation omitted). As the Second Circuit has explained:

The legislative history of the passage of the FDCPA explains that the need for the FDCPA arose because of collection abuses such as use of "obscene or profane language, threats of violence, telephone calls at unreasonable hours, misrepresentation of a consumer's legal rights, disclosing a consumer's personal affairs to friends, neighbors, or an employer, obtaining information about a consumer through false pretense, impersonating public officials and attorneys, and simulating legal process."

Kropelnicki v. Siegel , 290 F.3d 118, 127 (2d Cir. 2002) (quoting S. Rep. No. 95–382, at 2 ).

The history of the deployment of the statute before this Court includes actions that appear fully consistent with its laudable Congressional purpose. See, e.g. , Hamlett v. Santander Consumer USA Inc. , 931 F. Supp. 2d 451, 457 (E.D.N.Y. 2013) (involving allegations that "defendants called plaintiffs—including one plaintiff who suffers from mental disabilities and was uninvolved in the underlying loan—9,500 times over 11 months," and "made threats including false threats of arrest").

Legions of FDCPA cases that have little to do with the purposes of the statute have appeared on this Court's docket. "As my colleagues in the Eastern District of New York have observed [in confronting] lawyers [who] have attempted to apply [the FDCPA] in ways Congress never imagined or intended, ‘remedial laws can themselves be abused and perverted into money-making vehicles for individuals and lawyers.’ " Ostreicher v. Chase Bank USA, N.A. , No. 19-CV-8175 (CS), 2020 WL 6809059, at *6 (S.D.N.Y. Nov. 19, 2020) (quoting Saunders v. NCO Fin. Sys., Inc. , 910 F. Supp. 2d 464, 465 (E.D.N.Y. 2012) ) (collecting cases). Judge Cogan in Saunders , in turn, raised a "serious concern that this lawsuit reflects an attempt by plaintiff and/or his attorney to manipulate the law for an improper purpose," to wit: "whether plaintiff deliberately misled NCO for the purpose of creating a claim against it under the FDCPA and the TCPA that could be settled for nuisance value plus attorneys’ fees." Saunders , 910 F. Supp. 2d at 471 (ordering Rule 11 hearing).

In another case, Judge Garaufis considered a claim that a letter referring to a plaintiff as a "customer" of the debt collector constituted an actionable violation of the statute. In rejecting this claim, Judge Garaufis observed:

Both parties assert that no court has considered whether the word "customer" is deceptive under the FDCPA. This dearth of authority likely exists because only attorneys willing to engage in "bizarre or idiosyncratic interpretations" of a collection notice would advance such claims. Plaintiff's attorney's willingness to advance such a far-fetched legal theory is due, in all likelihood, to the provisions in the consumer protection statute at issue affording statutory damages without proof of harm and the availability of class action treatment. Congress enacted the FDCPA in order to combat egregious abuses of debtors, abuses that are real and troubling. It is almost as troubling, however, for an attorney to take unreasonable advantage of Congress's good intentions and the sound legislation it has enacted.

Turner v. Asset Acceptance, LLC , 302 F. Supp. 2d 56, 59 (E.D.N.Y. 2004). Or as Judge Cogan observed:

In this Court, however, and I suspect in many others, the use of the statute has evolved into something quite different than its original purpose would suggest. The majority of cases that I see under the statute are brought by a handful of the same lawyers, based on complaints that read much more like legal briefs than complaints. Frequently, these cases are brought on behalf of the same debtor-plaintiffs, who seize on the most technical alleged defects in collection notices or telephone communications, often raising claims of "confusion" or "deception" regarding practices as to which no one, not even the least sophisticated consumer, could reasonably be confused or misled. These cases are often brought for the non-salutary purpose of squeezing a nuisance settlement and a pittance of attorneys’ fees out of a collection company, which it will often find cheaper to pay than to litigate. A cottage industry among limited players—plaintiffs’ lawyers, debtors, and even defendants’ lawyers—appears to be the primary progeny of the statute.

Huebner v. Midland Credit Mgmt., Inc. , 85 F. Supp. 3d 672, 673 (E.D.N.Y. 2015).

In still another case, Judge Glasser observed:

Given the innocuous nature of the Letter, the Court could not help but wonder: How did Kraus find herself in federal court? This question was posed to plaintiff's counsel during oral argument, and his answer is enlightening: "[F]inancial distress." Tr. at 17:3. According to plaintiff's counsel, Kraus sought him out because "she's in debt and she would like some guidance as to what she can do in terms of getting out." Id. at 18:2–4. In other words, according to her counsel, Kraus did not seek an attorney because she felt abused, deceived, or otherwise aggrieved; she did so because she wanted help getting out of debt. The FDCPA is not a debt-relief statute, however, and courts should not indulge thinly veiled attempts to use it as one.

Sadly, abuse of the statute is unsurprising given the development of the law in this area, and the Court suspects such abuse is fairly widespread. In 2006, the Court observed that "[t]he interaction of the least sophisticated consumer standard with the presumption that the FDCPA imposes strict liability has led to a proliferation of litigation in this district." Jacobson v. Healthcare Fin. Servs., Inc. , 434 F.Supp.2d 133, 138 (E.D.N.Y. 2006), aff'd in part, vacated in part, rev'd in part , 516 F.3d 85 (2d Cir. 2008). Since then, the number of FDCPA cases filed yearly in this District has more than quintupled. And small wonder, when all required of a plaintiff is that he plausibly allege a collection notice is "open to more than one reasonable interpretation, at least one of which is inaccurate." Clomon v. Jackson , 988 F.2d 1314, 1319 (2d Cir. 1993). This standard prohibits not only abuse but also imprecise language, and it has turned FDCPA litigation into a glorified game of "gotcha," with a cottage industry of plaintiffs’ lawyers filing suits over fantasy harms the statute was never intended to prevent.

Kraus v. Pro. Bureau of Collections of Maryland, Inc. , 281 F. Supp. 3d 312, 321–22 (E.D.N.Y. 2017).¹

Graff v. United Collection Bureau, Inc. , 132 F. Supp. 3d 470 (E.D.N.Y. 2016) provides yet another example of the present state of FDCPA litigation. In that case – the second class action brought against the same debt collector for the very same activity – counsel proposed a class action settlement that provided for hundreds of thousands of dollars in attorneys’ fees and administrative costs, but nothing – absolutely zero – in damages to be awarded to more than a half million members of the class. Id. at 473. This Court rejected the settlement, in which the total payout to those other than legal personnel amounted to a cy pres charitable donation equal to seven cents per plaintiff. Id.

For cases involving statutory violations without actual...