Knight v. Midland Credit Mgmt. Inc.

RENEISHA KNIGHT v. MIDLAND CREDIT MANAGEMENT INC.

CIVIL ACTION NO. 17-3118

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

April 5, 2019

MEMORANDUM

KEARNEY, J.

A debt collector's letter demanding payment must be capable of being understood by the least sophisticated debtor under the Fair Debt Collection Practices Act as interpreted by our Court of Appeals. When the debt collector sends the same language to thousands of debtors in Philadelphia County, it runs the risk the identical language may allow us to certify her case as a class action under the Fair Debt Collection Practices Act. After discovery and guided by our Court of Appeals' findings of ambiguity in this same collection language, we today grant the debtor's motion for partial summary judgment on liability for violating the Fair Debt Collection Practices Act. We also grant the debtor's narrowed motion for class certification. We now proceed into discovery on the amount of damages available to the certified class of Philadelphia County debtors who received the identical language from the debt collector.

I. Undisputed facts.¹

Reneisha Knight used her Capital One Bank credit card to purchase groceries and home items.² She did not pay back the credit card in full. Capital One Bank sold her debt obligation to Midland Funding LLC ("Midland Funding"). Its affiliate, Midland Credit Management ("Midland Credit"), attempted to collect this debt. On July 20, 2016, Midland Credit sent her a letter concerning her outstanding debt. In its July 20, 2016 letter, Midland Credit listed Ms. Knight's outstanding balance, her account number, and the original creditor Capital One. Midland Credit also offered her options to resolve the debt:

Did y u forg t somethi g?

We can't change the past, but we can help with your future.

Reneisha L Branch, mistakes can happen to anyone. Midland Credit Management believes that everyone deserves a second chance. Call (800) 282-2644 or visit us online at www.midlandcreditonline.com by 08-19-2016 to accept one of these discounts.

We are offering you 40% OFF your balance to help you eliminate your debt while saving money.

Midland Credit Management will help you put this debt burden behind you. Call us today to pay off your account, and regain your financial free-dom!

After receiving your final payment, we will consider the account paid*.

* If you pay your full balance, we will report your account as Paid in Full. If you pay less than your full balance, we will report your account as Paid in Full for less than the full balance.³

Midland Credit offered three options for resolving the debt: (1) Option 1 of "40% Off, Payment Due Date: 8-19-2016"; (2) Option 2, "20% OFF, Over 6 months"; (3) Option 3 of "Monthly Payments As Low As: $50 per month."⁴

Ms. Knight alleges this language would confuse, deceive, or mislead the least sophisticated debtor. She sues Midland Credit for violating Sections 1692e and 1692f of the Fair Debt Collection Practices Act. Ms. Knight alleges Midland Credit sent standardized letters with the same violating language to approximately 3,489 consumers in Philadelphia County owing a debt to Capital One Bank. She sues on behalf of herself and a class of similarly situated consumers who received Midland Credit's standardized letter.

II. Analysis.⁵

The parties proceeded through discovery and now move for summary judgment on Ms. Knight's Section 1692e claims. Ms. Knight moves for class certification under Federal Rule of Civil Procedure 23.⁶

Ms. Knight moves for summary judgment arguing three elements of Midland Credit's letter violate Section 1692e of the Act: (1) Midland Credit's offer to "report" payment of her debt, (2) when Midland Credit will report her account as "Paid in Full" and "Paid in Full for less than the full balance," and (3) the difference between "Paid in Full" and "Paid in Full for less than the full balance."

Midland Credit moves for summary judgment arguing Ms. Knight fails to establish its letter violates Section 1692e. Midland Credit argues (1) its offer to "report" payment is not false, deceptive or misleading; (2) Option 3 in Midland Credit's letter is not false, deceptive, or misleading; (3) when Midland Credit reports an account as "Paid in Full" and "Paid in Full for less than the full balance" is not false, deceptive, or confusing; and (4) Midland Credit does not offer credit reporting benefits in its letter with the language "We can't change the past, but we can help with your future."

In accompanying Orders, we grant Ms. Knight's motion for summary judgment, deny Midland Credit's motion for summary judgment, and grant Ms. Knight's motion for class certification.

A. We grant Ms. Knight summary judgment for her Section 1692e claims.

Ms. Knight moves for summary judgment arguing portions of Midland Credit's July 20, 2016 letter violate the Fair Debt Collection Practices Act. Midland Credit also moves for summary judgment arguing the letter does not violate the Act.

To establish a claim under the Act, Ms. Knight must prove "(1) she is a consumer, (2) the defendant is a debt collector, (3) the defendant's challenged practice involves an attempt to collect a 'debt' as the [the Act] defines it, and (4) the defendant has violated a provision of the [the Act] in attempting to collect the debt."⁷ The parties do not dispute the first two elements. Midland Credit argues Ms. Knight fails to establish the last two elements. We address each of the disputed elements in turn.

1. Ms. Knight establishes Midland Credit attempted to collect a "debt" as defined in the Act.

Ms. Knight argues she establishes Midland Credit attempted to collect as "debt" as defined in the Act. Midland Credit argues we should grant it summary judgment since Ms. Knight fails to establish she owed a debt. Congress defines "debt" in the Act as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment."⁸

Midland Credit argues the evidence Ms. Knight cites in her Statement of Undisputed Material Facts does not establish she owed a "debt" as defined in the Act. In her Statement of Facts, Ms. Knight states she "is a consumer as defined by 15 U.S.C. 1692a and the debts at issue in this case were credit card debt from Capital One Bank, N.A., which were incurred for a personal basis."⁹ She cites to Midland Credit's July 20, 2016 letter, showing she owed her debt to Capital One.¹⁰ She also cites to a declaration from her counsel containing no mention of the nature of her debt.¹¹ She also cites to Midland Credit's response to her interrogatories. She served interrogatories on Midland Credit requesting (1) the identity of the original creditor, (2) the nature of the goods and services purchased, (3) the amount sought when Midland Credit sent the letter, and (4) the amount owed on the date Ms. Knight filed her lawsuit.¹² Midland Credit responded it "is not awareof the nature of the goods or services purchased by [Ms. Knight] giving rise to her valid and delinquent debt obligation[.]"¹³ We agree with Midland Credit this evidence does not establish she owed a "debt."

Ms. Knight cites her October 30, 2017 responses to Midland Credit's interrogatories to establish she owed a "debt" as defined in the Act. Midland Credit served interrogatories on Ms. Knight: "Please state all facts supporting your allegation in paragraph 7 of the Amended Complaint that the 'personal bill was a debt incurred for personal, family or household purposes and not for business purposes.'"¹⁴ Ms. Knight responded, "I used the card to purchase items for my home, including groceries."¹⁵ Midland Credit does not dispute her October 30, 2017 response, nor does it provide evidence contradicting her response.

Ms. Knight establishes Midland Credit attempted to collect a "debt" as defined in the Act. We acknowledge "[t]here is cause for concern where a movant presents new arguments or evidence for the first time in a summary judgment reply brief, particularly if the District Court intends to rely upon that new information in granting summary judgment to the movant."¹⁶ But Ms. Knight's evidence is not new—she attaches her verified October 30, 2017 response to Midland Credit's interrogatories. Ms. Knight argues she failed to include this evidence in her Motion because she believed Midland Credit "would not seriously dispute Plaintiff's verified discovery responses."¹⁷ Midland Credit does not dispute it possessed Ms. Knight's answers to its interrogatories and cannot credibly argue it did not have access to this evidence. Ms. Knight's verified interrogatory responses do not constitute "new evidence." Ms. Knight establishes Midland Credit attempted to collect a "debt" as defined in the Act.

2. Ms. Knight establishes Midland Credit violated Section 1692e of the Act.

Having established the first three elements of her claim, Ms. Knight argues she satisfies the final element because portions of Midland Credit's July 20, 2016 letter violate Section 1692e of the Act. Midland Credit argues Ms. Knight fails to establish it violated the Act.

Under Section 1692e, Congress prohibits the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt."¹⁸ In particular, Congress prohibits the "use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer."¹⁹

We apply the "least sophisticated debtor" standard to Ms. Knight's claims under Section 1692e of the Act. The "least sophisticated debtor" standard is "lower than simply examining whether particular language would deceive or mislead a reasonable debtor."²⁰ This standard "protect[s] the gullible as well as the shrewd."²¹ But it also "prevents liability for bizarre or...