2008 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

8-20-2008

Rosenau v. Unifund Corp

Precedential or Non-Precedential: Precedential

Docket No. 07-3019

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

No. 07-3019

 

RICHARD ROSENAU,

INDIVIDUALLY AND ON BEHALF OF

ALL OTHERS SIMILARLY SITUATED

v.

UNIFUND CORP.

a/k/a UNIFUND GROUP CORP.;

UNIFUND CCR PARTNERS

 Richard Rosenau,

 Appellant

 

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 06-cv-01355)

District Judge: Honorable Cynthia M. Rufe

 

Argued June 30, 2008

Before: RENDELL, SMITH and FISHER, Circuit Judges.
2

(Filed: August 20, 2008)

Cary L. Flitter (Argued)

Lundy, Flitter, Beldecos & Berger

450 North Narberth Avenue

Narberth, PA 19072-1898

Attorney for Appellant

Richard J. Perr (Argued)

Fineman, Krekstein & Harris

1735 Market Street

Mellon Bank Center, Suite 600

Philadelphia, PA 19103

Attorney for Appellees

 

OPINION OF THE COURT

 

FISHER, Circuit Judge.

Richard Rosenau claims that a debt-collection letter he

received from Unifund Corporation and/or Unifund CCR

Partners (“Unifund”) was deceptive under the Fair Debt

Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e. The

District Court granted Unifund’s motion for judgment on the

pleadings. Rosenau appeals, arguing that the letter was

deceptive because (1) it implied that it came from an attorney

and (2) it stated that it came from the “Legal Department.” For

the reasons that follow, we will reverse the District Court’s

order and remand.
3

I.

Unifund purchases old consumer debt. It buys the debt

from credit card companies in the form of data files that contain

information on thousands of consumer accounts. Unifund’s

proprietary software then runs queries to determine which

accounts Unifund will pursue for collection and which it will

resell. Once the system has flagged the accounts that will be

collected, another automated process generates letters that are

mailed to consumers to begin the collection efforts. Unifund

mails about 2,000 of these collection letters each day.

On January 9, 2006, Unifund sent a collection letter to

Richard Rosenau. The letter demanded payment on a Citibank

credit card account that had a balance of over $12,000. It stated:

“If we are unable to resolve this issue within 35

days we may refer this matter to an attorney in

your area for legal consideration. If suit is filed

and if judgment is rendered against you, we will

collect payment utilizing all methods legally

available to us, subject to your rights below . . . .

This communication is from a debt collector.

This is an attempt to collect a debt . . . .”

In place of a signature, the bottom of the letter read:

“Unifund

Legal Department”
4

Unifund’s Vice President of Legal Operations supervises

the Legal Department’s six employees. Neither the Vice

President nor the Legal Department employees are lawyers. The

Legal Department maintains a network of contract attorneys

throughout the United States to whom it forwards claims for

litigation. Four of the six Legal Department employees are

Legal Liaisons who (1) place accounts with attorneys in the

network, (2) handle daily disputes, (3) provide documents for

litigation, and (4) act as witnesses when necessary. The

remaining two Legal Department employees are a project

coordinator and an administrative assistant.

The Vice President of Legal Operations manages the

flow of letters out of the office. According to his deposition

testimony, his function is akin to controlling a “spigot.” No one

reviews the consumers’ files before the letters are mailed.

Unifund employs a small number of attorneys. Three

attorney-employees handle “internal litigation,” that is, litigation

against consumers in certain states where Unifund does not use

contract attorneys. In addition, Unifund employs an attorney as

General Counsel. None of these attorneys work in the Legal

Department.

Rosenau filed a class complaint against Unifund in the

United States District Court for the Eastern District of

Pennsylvania. He alleged that Unifund violated the FDCPA by

sending him a letter that falsely created the impression that it

was reviewed or sent by a Legal Department, as he defines that

term, or by a lawyer. The parties engaged in discovery.

Unifund then filed a motion for judgment on the pleadings, or in
1

In its Memorandum Opinion, the District Court initially

stated that it would “grant [Unifund’s] Motion for Summary

Judgment.” Rosenau v. Unifund Corp., No. 06-01355, 2007 WL

1892888, at *1 (E.D. Pa. 2007). The subsequent text of the

opinion and order clarifies that the Court actually intended to,

and did, grant the motion for judgment on the pleadings instead.

Id. at *2, *5.

5

the alternative, for summary judgment. At the same time,

Rosenau filed a motion for class certification.

The District Court granted Unifund’s motion for

judgment on the pleadings and dismissed Rosenau’s complaint.

Rosenau v. Unifund Corp., No. 06-01355, 2007 WL 1892888,

at *1 (E.D. Pa. 2007).1

 The Court stated that it “need not treat

Unifund’s Motion as one for summary judgment” because

“judgment on the pleadings [was] appropriate.” Id. at *2. The

Court concluded that the letter was not deceptive and that it

would be “bizarre or idiosyncratic” to infer that it came from an

attorney. Id. at *3.

For the sake of completeness, the Court also ruled on

Rosenau’s motion for class certification. Id. at *3-5. The Court

concluded that Rosenau satisfied the requirements for class

certification, but dismissed the motion nonetheless because of

its dismissal of the complaint. Id. at *5. Rosenau filed this

timely appeal.

II.
6

The District Court had jurisdiction under 28 U.S.C.

§§ 1331, 1337 and 15 U.S.C. § 1692k(d). We have jurisdiction

under 29 U.S.C. § 1291. We have explained our standard of

review as follows:

“Our standard of review of a motion for judgment

on the pleadings under Federal Rule of Civil

Procedure 12(c) is plenary. Under Rule 12(c),

judgment will not be granted unless the movant

clearly establishes that no material issue of fact

remains to be resolved and that he is entitled to

judgment as a matter of law. In reviewing the

grant of a Rule 12(c) motion, we must view the

facts presented in the pleadings and the inferences

to be drawn therefrom in the light most favorable

to the nonmoving party.”

Jablonski v. Pan Am. World Airways, Inc., 863 F.2d 289, 290-91

(3d Cir. 1988) (internal quotation marks and citations omitted).

A.

In 1977, Congress enacted the FDCPA, 15 U.S.C.

§§ 1692-1692p, to address abusive debt collection practices.

Brown v. Card Serv. Ctr., 464 F.3d 450, 453 (3d Cir. 2006). It

is a remedial statute that we “construe . . . broadly, so as to

effect its purpose.” Id. The FDCPA prohibits the use of

deception in the debt-collection process:

“A debt collector may not use any false,

deceptive, or misleading representation or means
7

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: . . . (3) The false representation or

implication that any individual is an attorney or

that any communication is from an attorney . . . .

(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.”

15 U.S.C. § 1692e.

“[L]ender-debtor communications potentially giving rise

to claims under the FDCPA . . . should be analyzed from the

perspective of the least sophisticated debtor.” Brown, 464 F.3d

at 454. This standard is lower than the standard of a reasonable

debtor. Wilson v. Quadramed, 225 F.3d 350, 354 (3d Cir.

2000). “[A] communication that would not deceive or mislead

a reasonable debtor might still deceive or mislead the least

sophisticated debtor.” Brown, 464 F.3d at 454. We use the

“least sophisticated debtor” standard in order to effectuate “the

basic purpose of the FDCPA: . . . to protect ‘all consumers, the

gullible as well as the shrewd’ . . . .” Id. (quoting Clomon v.

Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993)).

Although the “least sophisticated debtor” standard is a

low standard, it “‘prevents liability for bizarre or idiosyncratic

interpretations of collection notices by preserving a quotient of

reasonableness and presuming a basic level of understanding
8

and willingness to read with care.’” Quadramed, 225 F.3d at

354-55 (quoting Clomon, 988 F.2d at 1319).

B.

Rosenau argues that Unifund’s debt collection letter

violates 15 U.S.C. § 1692e(3) because it is likely to lead the

least sophisticated debtor to believe that it came from an

attorney. Unifund responds that the letter is not deceptive

because it is not from a law firm and is not signed by an

attorney. The District Court agreed with Unifund’s position.

However, the District Court’s reading of the letter is

unconvincing in light of the procedural posture of this case and

the least sophisticated debtor standard.

There are no precedential Third Circuit opinions that

discuss the legality of a debt-collection letter under § 1692e(3).

The narrower question in this case, whether a letter from a Legal

Department that employs no lawyers is misleading under

§ 1692e(3), appears to be an issue of first impression in the

federal courts of appeals. To determine whether the District

Court properly granted judgment on the pleadings in Unifund’s

favor, we look to our opinions that discuss collection letters that

were alleged to violate other subsections of the FDCPA.

“A debt collection letter is deceptive where it can be

reasonably read to have two or more different meanings, one of

which is inaccurate.” Brown, 464 F.3d at 455 (internal

quotation marks and citation omitted). In Quadramed, we

concluded that a collection letter was not deceptive under 15
2

15 U.S.C. § 1692g(a) requires the debt collector to notify

the consumer in writing “that unless the consumer, within thirty

days after receipt of the notice, disputes the validity of the debt,

or any portion thereof, the debt will be assumed to be valid by

the debt collector . . . . [I]f the consumer notifies the debt

collector in writing within the thirty-day period that the debt . . .

is disputed, the debt collector will obtain verification of the debt

. . . and a copy of such verification . . . will be mailed to the

consumer by the debt collector.”

9

U.S.C. § 1692g.2

 225 F.3d at 351-52. The letter began: “Our

client has placed your account with us for immediate collection.

We shall afford you the opportunity to pay this bill immediately

and avoid further action against you.” Id. at 352. A few

paragraphs later, the letter provided the debt-validation notice

required by § 1692g: “Unless you notify this office within 30

days after receiving this notice that you dispute the validity of

this debt or any portion thereof, this office will assume this debt

is valid.” Id.

We determined that the opening paragraphs of the letter

did not “overshadow[] or contradict[] the validation notice such

that the ‘least sophisticated debtor’ would be confused . . .

[about] his rights.” Id. at 353. The letter presented the debtor

with the option to “(1) . . . pay the debt immediately and avoid

further action, or (2) notify [the collection agency] within thirty

days . . . that he disputes the validity of the debt.” Id. at 356.

The letter did not “emphasize one option over the other” or

encourage the debtor to waive his right to contest the debt. Id.

Thus, the letter could not be reasonably read to have two or
3

15 U.S.C. § 1692e(5) prohibits a debt collector from

threatening “to take any action that cannot legally be taken or

that is not intended to be taken.”

10

more different meanings and it was not deceptive under 15

U.S.C. § 1692g. Id.

In Brown, on the other hand, we ruled that the debtor had

stated a claim under § 1692e(5)3

 and that the District Court had

therefore incorrectly dismissed her suit. 464 F.3d at 451. The

letter in question stated:

“You are requested to contact the Recovery Unit

of the Card Service Center . . . to discuss your

account. Refusal to cooperate could result in a

legal suit being filed for collection of the account.

You now have five (5) days to make arrangements

for payment of this account. Failure on your part

to cooperate could result in our forwarding this

account to our attorney with directions to continue

collection efforts.”

Id. at 451-52. We concluded that “it would be deceptive under

the FDCPA for [the collection agency] to assert that it could

take an action that it had no intention of taking and has never or

very rarely taken before.” Id. at 455. We explained:

“Upon reading the . . . [l]etter, the least

sophisticated debtor might get the impression that

litigation or referral to a . . . lawyer would be

imminent if he or she did not respond within five
11

days. We . . . conclude that further proceedings

are warranted to determine if such a reading is

‘reasonable’ in light of the facts of this case . . . .

If Brown can prove, after discovery[,] that [the

collection agency] seldom litigated or referred

debts such as Brown’s . . . to an attorney, a jury

could conclude that the . . . [l]etter was deceptive

or misleading vis-à-vis the least sophisticated

debtor.”

Id.

In light of our precedent, the issue in this case is whether

under the least sophisticated debtor standard, Unifund’s letter to

Rosenau “can be reasonably read to have two different

meanings, one of which is inaccurate.” Quadramed, 225 F.3d

at 354. Rosenau maintains that the letter can be reasonably read

to have come from an attorney, even though an attorney did not

send it, and that it therefore violates § 1692e(3).

The question that this claim turns upon is how the least

sophisticated debtor would interpret the fact that the letter came

from Unifund’s Legal Department. Contrary to the District

Court’s determination, it is possible that a debtor receiving a

collection letter from Unifund could reasonably infer that the

Legal Department contains attorneys who played a role in

writing or sending the letter. Thus, Unifund has not “clearly

establishe[d] that no material issue of fact remains to be resolved

and that it is entitled to judgment as a matter of law.” Jablonski,

863 F.2d at 290.
12

The District Court stated that because the letter notes,

“This communication is from a debt collector,” even the least

sophisticated consumer could not reasonably conclude that it

was sent by an attorney. Rosenau, 2007 WL 1892888, at *3.

Both common sense and case law confirm, however, that the

categories of “debt collector” and “attorney” are not mutually

exclusive. The Supreme Court has determined that “the term

‘debt collector’ in the [FDCPA] applies to a lawyer who

‘regularly,’ through litigation, tries to collect consumer debts.”

Heintz v. Jenkins, 514 U.S. 291, 292 (1995). Moreover, the

statement that the letter “is from a debt collector” is a

statutorily-required notification, 15 U.S.C. § 1692e(11), that

should not be viewed as nullifying any implication that the letter

is from an attorney.

The District Court also stated that the letter could not

reasonably be interpreted to be from an attorney because it says

that Unifund “may refer this matter to an attorney in your area

for legal consideration.” Rosenau, 2007 WL 1892888, at *3.

The District Court seemed to believe that a future referral to a

lawyer and the current involvement of a lawyer are

incompatible. They are not. Lawyers commonly refer cases to

other lawyers who practice where particular debtors are located,

and the sentence could reasonably be understood to mean that

the lawyer who sent the letter plans to enlist the help of local

counsel in order to move the matter forward. Read in this

fashion, the sentence would not dispel any impression that the

letter was sent by a lawyer employed in Unifund’s Legal

Department.
13

Unifund argues that the letter to Rosenau did not state or

imply that it was from an attorney because it was not signed by

an attorney, was not on law firm letterhead, and used language

routinely used by debt collectors. In other words, Unifund

argues that using the term “Legal Department” is not equivalent

to using the letterhead or signature of an attorney.

Unifund is correct. However, the statute forbids “[t]he

false representation or implication that . . . any communication

is from an attorney.” 15 U.S.C. § 1692e(3). Therefore, a debtcollection letter can be deceptive under the FDCPA even if it

only implies that it is from an attorney. It is possible that the

phrase “Legal Department” could imply to the least

sophisticated debtor that a lawyer was involved in drafting or

sending the letter.

In concluding that judgment on the pleadings was

appropriate, the District Court invoked the reasoning of three

cases from the Eastern District of New York. Rosenau, 2007

WL 1892888, at *3 n.26. Unifund argues that the logic of these

cases is persuasive. However, the cases are factually inapposite,

since they deal with collection letters sent on law firm letterhead

or signed by attorneys. In addition, we find their logic

unpersuasive. See Tromba v. M.R.S. Assocs., 323 F. Supp. 2d

424, 428 (E.D.N.Y. 2004) (noting that the Court “harbor[ed]

grave doubts” as to whether the title “Senior Legal Associate”

would allow even the least sophisticated consumer to conclude

that a fax came from an attorney); Rumpler v. Phillips & Cohen

Assocs., 219 F. Supp. 2d 251, 257 (E.D.N.Y. 2002) (holding that

the least sophisticated consumer could not conclude that a letter

signed “Adam S. Cohen, Esq., Executive Vice President” came
4

It is not necessary for Rosenau to denominate this

argument as a 15 U.S.C. § 1692e(10) claim, because § 1692e as

a whole prohibits the use of deceptive means to collect debt.

The introductory sentence of § 1692e states: “A debt collector

may not use any false, deceptive, or misleading representation

14

from an attorney); Grief v. Wilson, Elser, Moskowitz, Edelman

& Dicker, LLP, 217 F. Supp. 2d 336, 341-42 (E.D.N.Y. 2002)

(stating that a letter sent on law firm letterhead did not give the

impression that it came from a law firm). Our application of the

least sophisticated debtor standard is not compatible with the

approach employed by the Eastern District of New York in these

cases, so the District Court erred to the extent that it concluded

that these cases provided support for its grant of summary

judgment.

We conclude that as in Brown, “the facts pled . . . , if

proven, state a claim upon which a court might grant relief.”

464 F.3d at 456. Therefore, we will remand for further

proceedings.

C.

Second, Rosenau argues that Unifund’s letter is deceptive

under § 1692e(10). This subsection is a catchall-type provision

prohibiting “[t]he use of any false representation or deceptive

means to collect . . . any debt.” Rosenau claims that it was

deceptive to indicate that the letter came from the Legal

Department because Unifund does not have any such

department – only a collections department that is staffed by

non-attorney Legal Liaisons.4
or means in connection with the collection of any debt.”

Nevertheless, we follow Rosenau’s lead in referring to this

argument as his § 1692e(10) claim because the label

differentiates it from his first argument under § 1692e(3).

15

The District Court correctly determined that this

argument lacks merit. Rosenau assumes that there is an

objective standard by which we can measure whether a

particular corporate department is a “Legal Department,” but

this is not so. Different legal departments have different

functions and emphases. The fact that Unifund’s Legal

Department consists of non-lawyer Legal Liaisons who

coordinate the activities of contract attorneys does not make the

title “Legal Department” inaccurate.

Rosenau claims that his § 1692e(10) argument is

supported by the Federal Trade Commission’s (“FTC’s”)

Official Staff Commentary, which states: “A debt collector may

not send a collection letter from a ‘Pre-Legal Department,’

where no legal department exists.” Statements of General

Policy or Interpretation: Staff Commentary on the Fair Debt

Collection Practices Act, 53 Fed. Reg. 50097-02 (December 13,

1988), at 50105.

We have determined that “the FTC’s advisory opinions

are not entitled to deference in FDCPA cases except perhaps to

the extent that their logic is persuasive.” Dutton v. Wolpoff &

Abramson, 5 F.3d 649, 654 (3d Cir. 1993). The FTC

Commentary is not persuasive in this case because it is factually

inapposite. The Commentary essentially states that debt

collection letters may not be sent out under the aegis of fictitious
16

and threatening-sounding corporate departments, such as a “PreLegal Department.” Unifund’s Legal Department is not

fictitious. Therefore, the Commentary provides no guidance on

the factual situation presented here.

We do agree with Rosenau on one procedural point

relating to his § 1692e(10) claim: the factual question of

whether Unifund has a Legal Department is inappropriate for

resolution on a Fed. R. Civ. P. 12(c) motion for judgment on the

pleadings. The District Court stated that it was confining its

ruling to the pleadings, Rosenau, 2007 WL 1892888, at *2, but

in order to dispose of Rosenau’s claim, it is necessary to

examine documents outside of the pleadings. It is the deposition

transcripts and other discovery materials, not solely the

pleadings, that show that Unifund has a Legal Department, thus

rendering the § 1692e(10) claim meritless. On remand, the

District Court should therefore consider Unifund’s motion as a

Fed. R. Civ. P. 56 motion, which permits examination of

documents outside the pleadings. Fed. R. Civ. P. 12(d) (“If, on

a motion under Rule 12(b)(6) or 12(c), matters outside the

pleadings are presented to and not excluded by the court, the

motion must be treated as one for summary judgment under

Rule 56. All parties must be given a reasonable opportunity to

present all the material that is pertinent to the motion.”); see also

Fagin v. Gilmartin, 432 F.3d 276, 284-85 (3d Cir. 2005)

(confronting a similar situation in the context of a Rule 12(b)(6)

motion). We leave it to the District Court to determine whether

both parties have had the opportunity to present all material that

is pertinent to a Rule 56 motion. See id. at 285.
17

III.

For the foregoing reasons, we will reverse the District

Court’s grant of judgment on the pleadings in favor of Unifund.

We will remand for proceedings consistent with this opinion.