Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-01365/USCOURTS-cand-4_06-cv-01365-0/pdf.json

Parties Involved:
Anna Hancock
Plaintiff
Receivables Management Solutions, Inc.,
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ANNA HANCOCK, Individually and on

behalf of all other similarly

situated,

Plaintiff,

v.

RECEIVABLES MANAGEMENT SOLUTIONS,

INC.,

Defendant.

 /

No. C 06-1365 CW

ORDER GRANTING

DEFENDANT'S

MOTION TO DISMISS 

Defendant Receivables Management Solutions, Inc. moves to

dismiss this action, contending that the complaint fails to state a

cognizable claim upon which relief can be granted. Plaintiff Anna

Hancock opposes this motion. The matter was heard on May 26, 2006. 

Having considered all of the papers filed by the parties and oral

argument, the Court grants Defendant's motion.

BACKGROUND

On March 3, 2005, Defendant, a collection agency, sent

Plaintiff a collection letter. According to the letter, Plaintiff

Case 4:06-cv-01365-CW Document 10 Filed 05/30/06 Page 1 of 9
United States District Court

For the Northern District of California

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owed $2,912.02 to a business called MBIA. The letter stated:

MBIA authorized Receivables Management Solutions, Inc. to

settle the above reference account for $1456.01 if payment is

received in our office by 3-17-2005. If you have any

questions or wish to discuss your account with one of our

representatives please call us.

 

Once the one payment of $1456.01 has been paid to our office

on time, we will report to our client your above noted account

is settled in full.

Complaint, Ex. A.

Approximately six weeks later, Defendant sent Plaintiff

another collection letter. This letter stated:

MBIA is offering a settlement of $1456.01 that can be paid in

2 payments.

Once the first payment is applied to your account the second

payment should be paid no greater than 30 days later.

This offer may expire without notice or be revoked at any

time.

Once two payments of $728.00 have been paid to our office, we

will report to our client your above noted account is settled

in full. 

Complaint, Ex. B. 

Approximately six weeks after that, Defendant sent Plaintiff a

third collection letter. This letter stated:

MBIA is offering a settlement of $1456.01 that can be paid in

3 payments.

Once the first payment is applied to your account the second

payment should be paid no greater than 30 days later. The

third payment should be paid no greater than 60 days later

from the date of the first payment applied.

This offer may expire without notice or be revoked at any

time.

Once three payments of $485.34 have been paid to our office,

we will report to our client your above noted account is

settled in full. 

Complaint, Ex. C. 

Case 4:06-cv-01365-CW Document 10 Filed 05/30/06 Page 2 of 9
United States District Court

For the Northern District of California

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According to Plaintiff, the first collection letter was

drafted to convey the false impression that the offer was only

available for a brief time. She states that Defendant and MBIA

will settle for fifty percent of the debt at any time, and will

even settle for less than fifty percent. Plaintiff notes that

second and third letters leave uncertain the date the first payment

is due. She contends that, coupled with the threat to revoke the

settlement offer at any time, the second and third letters are

drafted to convey the false impression that the offer will be

withdrawn if the customer does not make the first payment promptly.

Plaintiff brings a consumer class action under the Fair Debt

Collection Practices Act (FDCPA), 15 U.S.C. § 1692e, and the

California Rosenthal Fair Debt Collection Practices Act, Cal. Civil

Code § 1788, claiming that Defendant's debt collection practices

violate both federal and State fair debt collection practice law. 

Defendant contends that, as a matter of law, the settlement offers

relayed in the collection letters at issue are not false, deceptive

or misleading representations, and that it did not violate the

FDCPA.

LEGAL STANDARD

A motion to dismiss for failure to state a claim will be

denied unless it is “clear that no relief could be granted under

any set of facts that could be proved consistent with the

allegations.” Falkowski v. Imation Corp., 309 F.3d 1123, 1132 (9th

Cir. 2002), citing Swierkiewicz v. Sorema N.A., 534 U.S. 506

(2002). All material allegations in the complaint will be taken as

true and construed in the light most favorable to the plaintiff. 

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United States District Court

For the Northern District of California

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NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 

Although the court is generally confined to consideration of the

allegations in the pleadings, when the complaint is accompanied by

attached documents, such documents are deemed part of the complaint

and may be considered in evaluating the merits of a Rule 12(b)(6)

motion. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th

Cir. 1987).

When granting a motion to dismiss, a court is generally

required to grant a plaintiff leave to amend, even if no request to

amend the pleading was made, unless amendment would be futile. 

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911

F.2d 242, 246-47 (9th Cir. 1990). In determining whether amendment

would be futile, a court examines whether the complaint could be

amended to cure the defect requiring dismissal “without

contradicting any of the allegations of [the] original complaint.” 

Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990). 

Leave to amend should be liberally granted, but an amended

complaint cannot allege facts inconsistent with the challenged

pleading. Id. at 296-97. 

DISCUSSION

Section 1692e of the FDCPA provides that debt collectors, such

as Defendant, "may not use any false, deceptive, or misleading

representation or means in connection with the collection of any

debt." 15 U.S.C. § 1692e. Defendant contends that the three

collection letters it sent Plaintiff did not contain any false,

deceptive or misleading representations and thus this case should

be dismissed. Plaintiff disagrees, arguing that, because Defendant

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had the authority from MBIA to settle the debt at any time for less

than fifty percent, Defendant's settlement offers were false,

deceptive and misleading. She contends that her claims are

cognizable under the FDCPA.

Whether the three letters violate the FDCPA depends on whether

they are “likely to deceive or mislead a hypothetical ‘least

sophisticated debtor.’” Wade v. Regional Credit Ass'n, 87 F.3d

1098, 1100 (9th Cir. 1996) (quoting Swanson v. Southern Oregon

Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988)). This

objective, least-sophisticated-debtor standard is “lower than

simply examining whether particular language would deceive or

mislead a reasonable debtor.” Swanson, 869 F.2d at 1227. But, as

another court in this district has explained, "Even 'the least

sophisticated debtor' is capable of understanding that parties

frequently strike deals through the course of several overlapping

proposals and that the terms of these offers may change with time."

Johnson v. AMO Recoveries, __ F. Supp. 2d __, 2005 WL 3968292, *3

(N.D. Cal.) (granting the defendant's motion for judgment on the

pleadings, after the plaintiff, at oral argument, declined the

court's invitation to amend).

Plaintiff, like the plaintiff in Johnson, relies on Goswami v.

American Collection Enterprise, Inc., 377 F.3d 488 (5th Cir. 2004).

In Goswami, the defendant sent the plaintiff a letter that stated,

"Effective immediately, and only during the next thirty days, will

our client agree to settle your outstanding balance due with a

thirty percent (30%) discount off your above balance owed. This

settlement must be in one payment and must be received in our

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office no later than 30 business days from the date of this letter

unless you contact our office to make other arrangements." Id. at

492. This was untrue. The defendant had been authorized to give a

thirty percent discount at any time, not only in the next thirty

days, and indeed to give the plaintiff a fifty percent discount. 

Id. at 495. The Fifth Circuit reversed the trial court's grant of

summary judgment in favor of the defendant, concluding that "the

letter leads an unsophisticated consumer to falsely believe that

the settlement offer is a one time, take-it-or-leave-it offer" that

would expire in thirty days. Id. at 491, 495. The court stated,

"The obvious purpose of the statement was to push Goswami to make a

rapid payment to take advantage of the purported limited time

offer." Id. at 495.

Goswami is distinguishable. Here, none of the letters stated

that the settlement offer was "only" valid for the next thirty 

days; none of the letters gave the false impression that the offer

would irrevocably lapse. Instead, Defendant sent Plaintiff a

series of offers. Johnson, 2005 WL 3968292 at *3. There is

nothing false, deceptive or misleading about offering to settle

Plaintiff's account if the payment was received two weeks later,

and then, after that payment was not received, presenting Plaintiff

with two options: pay with either two or three payments.

As Johnson notes, several district courts have limited

Goswami's holding to letters that expressly state that the

opportunity to settle the debt at a discount will be lost after a

specific date. Id., see. e.g., Headen v. Asset Acceptance, LLC, 

383 F. Supp. 2d 1097 (S.D. Ind. 2005) (granting judgment on the

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pleadings on claim that debt collectors who made settlement offers

with deadlines for acceptance violated the FDCPA because the

letters neither said that they were one-time offers nor "that the

offered amount was as low as the collectors are now or ever will be

prepared to accept”); Gully v. Van Ru Credit Corp., 381 F. Supp. 2d

766, 772 (N.D. Ill. 2005) (granting motion to dismiss FDCPA claim

and concluding that "a settlement offer that states the proposed

discount and the length of the offer, but does not expressly nor

implicitly indicate that no other offer will be made, passes muster

even though future more favorable terms are likely"). Without

guiding Ninth Circuit authority, the Court finds that the reasoning

of these cases and Johnson is persuasive and sound: "Not only would

'the least sophisticated debtor' understand that the expiration of

a mere 'offer' does not necessarily foreclose the possibility of

the parties later agreeing to its terms, but '[t]he practical

consequence of holding [offer] letters unlawful would be to

prohibit settlement offers that are anything but the debt

collector's best and final offer.'" Johnson, 2005 WL 3968292 at *3

(quoting Headen, 383 F. Supp. 2d at 1103). 

Defendant cites numerous cases, including those above, where

district courts have found that similar collection letters are not

false, deceptive or misleading and do not violate the FDCPA. For

example, the letter the defendant sent to the plaintiff in Gully

states, "We are authorized to settle your account with the above

client which, as of the date of this letter, is $796.87 for the sum

of $318.75, provided this sum is received by [defendant] by

November 11, 2003. The offer automatically will be revoked if your

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payment is not received by November 11, 2003." 381 F. Supp. 2d at

768. In her opposition, Plaintiff fails to distinguish any of

these cases. Instead, she cites Goswami and argues that discovery

will disclose the falsity of the collection letter. Because this

is a motion to dismiss, however, the Court has taken all material

allegations in her complaint as true, including that "Defendant and

its client will in fact take 50% of the debt at any time, and will

also settle for less than 50%." Complaint, ¶ 13. The fact that

Defendant does not disclose the full extent of its settlement

authority, however, does not render the letters false and

misleading. As stated in Gully, "There is a substantial difference

between not disclosing the extent of one's settlement authority and

misrepresenting that authority." 381 F. Supp. 2d at 772. 

Defendant argues that Plaintiff's claim under the California

Rosenthal Fair Debt Collection Practices Act is contingent on her

FDCPA claim and thus also fails as a matter of law. But the case

Defendant cites does not support that argument. In Renick v. Dun &

Bradstreet Receivable Management Services, 290 F.3d 1055 (9th Cir.

2002), the court found that the plaintiff's claim of “unlawful,

unfair or fraudulent business act or practice,” in violation of the

California Unfair Business Practices Act, hinged on the plaintiff's

rejected FDCPA claim. The Court will, however, exercise its

discretion to dismiss Plaintiff's State law claim without prejudice

to refiling in State court.

CONCLUSION

 Because it is clear that no relief could be granted under any

set of facts that could be proved consistent with Plaintiff's

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allegations, the Court GRANTS Defendant's Motion to Dismiss (Docket

No. 5). Plaintiff's FDCPA claim is dismissed with prejudice. 

Plaintiff's remaining State law claim is dismissed without

prejudice to bringing the claim in State court.

IT IS SO ORDERED.

Dated: 5/30/06

 

CLAUDIA WILKEN

United States District Judge

Case 4:06-cv-01365-CW Document 10 Filed 05/30/06 Page 9 of 9