11-3209

Easterling v. Collecto, Inc.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

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August Term, 2012

(Argued: August 22, 2012 Decided: August 30, 2012)

________________________________________________________

BERLINCIA EASTERLING, on behalf of herself and all 

others similarly situated,

Plaintiff-Appellant,

—v.—

COLLECTO, INC., dba Collection Company of America,

Defendant-Appellee.

Docket No. 11-3209-cv

________________________________________________________

B e f o r e : KATZMANN, WESLEY, and LYNCH, Circuit Judges.

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Plaintiff-Appellant Berlincia Easterling appeals from the judgment of the United States District

Court for the Western District of New York (Curtin, J.) granting the motion of Defendant-Appellee

Collecto, Inc. (“Collecto”) for summary judgment dismissing her claim under the Fair Debt

Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA”). We hold that Collecto violated the

FDCPA’s proscription against “false, misleading, or deceptive” debt collection practices by sending

Easterling a debt collection letter incorrectly informing her that her student loans were “ineligible

for bankruptcy discharge” and therefore that her account “must be resolved.” Although Easterling

may face significant hurdles to discharging her student loans in bankruptcy, we hold that the least

sophisticated consumer would interpret Collecto’s letter as representing, incorrectly, that bankruptcy

discharge of her loans was wholly unavailable to her. Accordingly, the judgment of the district court

is REVERSED and the case is REMANDED.

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Counsel for Plaintiff-Appellant: BRIAN LEWIS BROMBERG, Bromberg Law Office,

P.C., New York, N.Y. (Michael N. Litrownik,

Bromberg Law Office, P.C., New York, N.Y.; Seth

J. Andrews, Joseph D. Clark, Kenneth R. Hiller,

Law Offices of Kenneth R. Hiller, PLLC, Amherst,

N.Y., on the brief). 

Counsel for Defendant-Appellee: BRADLEY J. LEVIEN, Mintzer Sarowitz Zeris 

 Ledva & Meyers, LLP, Hicksville, N.Y. 

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PER CURIAM:

This case requires us to determine whether a debt collector’s inaccurate representation to a

debtor that her student loans were “ineligible” for bankruptcy discharge is a “false, misleading, or

deceptive” debt collection practice, in violation of the Fair Debt Collection Practices Act

(“FDCPA”), 15 U.S.C. § 1692, et seq. We conclude that it is. 

BACKGROUND

In or around 1987, Plaintiff-Appellant Berlincia Easterling obtained a student loan

guaranteed by the United States Department of Education. On August 23, 2001, with the assistance

of counsel, Easterling filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code. At that

time, her student loan balance amounted to $2,469. In her bankruptcy petition, Easterling classified

her student loan debt as “not dischargeable,” App. 269, and she did not subsequently seek to

discharge her student loan debt during the course of her bankruptcy proceeding. Accordingly,

Easterling’s student loan debt was not discharged upon the conclusion of her bankruptcy

proceeding on November 29, 2001, and the debt remained due and owing thereafter. 

Student loans are presumptively nondischargeable in bankruptcy. 11 U.S.C. § 523(a)(8);

see also U.S. Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 1381 n.13 (2010). However, student

loans can be discharged in bankruptcy if a debtor demonstrates, by a preponderance of the
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evidence, that requiring their repayment “would impose an undue hardship on the debtor.” 11

U.S.C. § 523(a)(8); see In re Traversa, 444 F. App’x 472, 474 (2d Cir. 2011) (summary order)

(debtor bears the burden of proof to show undue hardship by a preponderance of the evidence). To

seek an undue hardship discharge of student loans, a debtor must “commence an adversary

proceeding by serving a summons and complaint on affected creditors.” Espinosa, 130 S. Ct. at

1376; see also id. at 1377-78 (holding that Bankruptcy Courts may not discharge student debt

without a finding of undue hardship in an adversary proceeding between the debtor and her

creditors). To succeed in such a proceeding, the debtor must show:

(1) that the debtor cannot maintain, based on current income and expenses, a

“minimal” standard of living for herself and her dependents if forced to repay the

loans; (2) that additional circumstances exist indicating that this state of affairs is

likely to persist for a significant portion of the repayment period of the student loans;

and (3) that the debtor has made good faith efforts to repay the loans. 

Brunner v. N.Y. State Higher Educ. Servs. Corp., 831 F.2d 395, 396 (2d Cir. 1987) (per curiam). 

After a debtor has been granted a discharge of her debts pursuant to Chapter 7 of the

Bankruptcy Code, she is not entitled to file another Chapter 7 petition for eight years, and is not

entitled to file a petition pursuant to Chapter 13 of the Bankruptcy Code for four years. 11 U.S.C.

§§ 727(a)(8) & (9), 1328(f)(1) & (2). However, under section 350(b) of the Bankruptcy Code, “[a]

case may be reopened in the court in which such case was closed to administer assets, to accord

relief to the debtor, or for other cause.” 11 U.S.C. § 350(b); see also Fed. R. Bankr. P. 5010 (“A

case may be reopened on motion of the debtor or other party in interest pursuant to § 350(b) of the

Code.”); In re Smith, 645 F.3d 186, 189 (2d Cir. 2011) (per curiam) (“A bankruptcy judge’s

decision to grant or deny a motion to reopen pursuant to 11 U.S.C. § 350(b) shall not be disturbed

absent an abuse of discretion.”). 
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*****ACCOUNT INELIGIBLE FOR BANKRUPTCY DISCHARGE*****

Your account is NOT eligible for bankruptcy discharge and must be resolved.

Defendant-Appellee Collecto is in the business of collecting debts, and has a contract with

the U.S. Department of Education to collect overdue student loans. When attempting to collect

overdue student loans owed by bankrupt debtors, Collecto acts in accordance with the following set

of internal procedures: When Collecto learns that a student loan debtor has filed for bankruptcy, it

suspends collection activity and assigns the overdue account to an administrative resolution

department to determine whether the student loan debt was discharged in bankruptcy. If the student

loan debt was discharged in bankruptcy, Collecto sends the account back to the Department of

Education because the debts cannot be collected. However, if Collecto finds that the bankrupt

student loan debtor did not initiate an undue hardship adversary proceeding to discharge the debt, it

recommences collection efforts by mailing a letter to the debtor with the following pertinent

language: 

App. 18. The letter then offers the debtor several options for repaying the debt. 

As of September 24, 2008, Easterling’s student loan debt remained due and owing in the

amount of $3359.76, which included accrued interest. On that same date, Collecto sent the abovedescribed form Collection Letter to Easterling in an effort to collect on her student loan debt.

Subsequently, Easterling commenced this action, on behalf of herself and the 181 other individuals

in New York State who had also received the Collection Letters.

By Order dated July 7, 2011, the district court granted Collecto’s motion for summary

judgment and dismissed Easterling’s Complaint. In so doing, the district court acknowledged that
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“it is technically possible that plaintiff’s student loan debt could be discharged in bankruptcy” by

“either reopen[ing] her 2001 bankruptcy case or fil[ing] a new bankruptcy case, and then seek[ing]

a discharge of her student loan debt in an adversary proceeding by showing undue hardship.” 

Easterling v. Collecto, Inc., No. 09-CV-669(JTC), 2011 WL 2730924, at *4 (W.D.N.Y. July 12,

2011). Nevertheless, the court concluded that the Collection Letter was “not inaccurate” because

“[i]n her original bankruptcy case filed with the advice of counsel in 2001, [Easterling] never even

attempted to bring an adversary proceeding to show that repaying her student loan would cause her

undue hardship” and because she “has neither reopened her 2001 bankruptcy case nor filed a new

bankruptcy case to seek a discharge of her student loan.” Id. Accordingly, the district court

concluded that, even though Easterling “still has the opportunity . . . to challenge th[e] presumption

of nondischargeability [of student loans] . . . in bankruptcy court” by making a showing of undue

hardship, “until she can make [such] a showing . . . , her student loan debt is, in fact, not

dischargeable in bankruptcy.” Id. The district court further held that “the difficult nature of

prevailing in an undue hardship adversary proceeding undermines the reasonableness of

[Easterling’s] interpretation of [Collecto’s] letter.” Id. 

Easterling timely appealed the district court’s July 13, 2011 judgment dismissing her

Complaint.

DISCUSSION

We review a district court’s grant of summary judgment de novo, viewing the facts in the

light most favorable to the non-moving party. Pilgrim v. Luther, 571 F.3d 201, 204 (2d Cir. 2009). 

In reviewing a summary judgment decision, this Court “utilizes the same standard as the district

court: summary judgment is appropriate where there exists no genuine issue of material fact and,
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based on the undisputed facts, the moving party is entitled to judgment as a matter of law.” 

D’Amico v. City of N.Y., 132 F.3d 145, 149 (2d Cir. 1998). 

The FDCPA “establishes certain rights for consumers whose debts are placed in the hands

of professional debt collectors for collection.” DeSantis v. Computer Credit, Inc., 269 F.3d 159,

161 (2d Cir. 2001). In particular, section 1692e of the FDCPA provides that “[a] debt collector

may not use any false, deceptive, or misleading representation or means in connection with the

collection of any debt.” 15 U.S.C. § 1692e. Whether a collection letter is “false, deceptive, or

misleading” under the FDCPA is determined from the perspective of the objective “least

sophisticated consumer.” Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993) (internal

quotation marks omitted). Under this standard, “collection notices can be deceptive if they are

open to more than one reasonable interpretation, at least one of which is inaccurate.” Id. at 1319. 

However, “in crafting a norm that protects the naive and the credulous the courts have carefully

preserved the concept of reasonableness.” Id. Accordingly, FDCPA protection “does not extend to

every bizarre or idiosyncratic interpretation of a collection notice” and courts should apply the

standard “in a manner that protects debt collectors against liability for unreasonable

misinterpretations of collection notices.” Id. (internal quotation marks and citation omitted). Debt

collectors that violate the FDCPA are strictly liable, meaning that “a consumer need not show

intentional conduct by the debt collector to be entitled to damages.” Russell v. Equifax A.R.S., 74

F.3d 30, 33 (2d Cir. 1996). 

Here, Easterling contends that the Collection Letter’s statement that her student loan debt

was “ineligible for bankruptcy discharge” was false, deceptive, or misleading under the least

sophisticated consumer standard because:
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Easterling could have obtained, and may still obtain, a discharge of her student-loan

indebtedness (a) by filing a new bankruptcy petition and seeking a discharge of [her]

student loans in the new proceeding; or (b) by moving to reopen her prior

bankruptcy cases for the purpose of filing a proceeding seeking a discharge of her

student loans.

Appellant’s Reply Br. at 2-3 (emphasis in original). The district court agreed that it is “technically

possible that [Easterling’s] student loan debt could be discharged in bankruptcy.” Easterling, 2011

WL 2730924, at *4. Nevertheless, the court held that the Collection Letter did not violate the

FDCPA, primarily because: (a) Easterling did not seek to discharge her student loan debt in 2001,

when she filed a petition for bankruptcy, and (b) student loan debt is presumptively nondischargeable unless the debtor establishes in an adversarial proceeding that requiring repayment

“would impose an undue hardship on the debtor,” 11 U.S.C. § 523(a)(8). See Easterling, 2011 WL

2730924, at *4. 

This was error. It is true that Easterling did not seek an undue hardship discharge of her

student loan debt during the course of her 2001 bankruptcy proceedings, and that she has made no

subsequent effort to reopen those proceedings to seek such a discharge. However, the district

court’s focus on whether Easterling has received, or is likely to receive in the future, a discharge of

her student loan debt is misplaced. The least sophisticated consumer test is an objective inquiry

directed toward “ensur[ing] that the FDCPA protects all consumers, the gullible as well as the

shrewd.” Clomon, 988 F.2d at 1318. The district court, by contrast, placed considerable -- if not

dispositive -- weight on the facts and circumstances surrounding Easterling’s background,

seemingly in an effort to establish that she was not, in fact, deceived by the Collection Letter. See

Easterling, 2011 WL 2730924, at *4 (noting that Easterling “has neither reopened her 2001

bankruptcy proceeding nor filed a new bankruptcy case” and that she was represented by counsel in
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her 2001 bankruptcy proceedings); see also id. (“[T]he difficult nature of prevailing in an undue

hardship adversary proceeding undermines the reasonableness of [Easterling’s] interpretation of

[Collecto’s] letter.”). By its very nature, however, the least sophisticated consumer test pays no

attention to the circumstances of the particular debtor in question, and it was error for the district

court to rely on such circumstances here. See Clomon, 988 F.2d at 1318.

Instead, the operative inquiry in this case is whether the hypothetical least sophisticated

consumer could reasonably interpret the Collection Letter’s statement that “Your account is NOT

eligible for bankruptcy discharge,” App. 18, as representing, incorrectly, that the debtor is

completely foreclosed from seeking bankruptcy discharge of the debt in question. When properly

framed in this manner, we think it clear that the Collection Letter is “false, deceptive, or

misleading” in violation of the FDCPA. See 15 U.S.C. § 1692e. There may be several steep

procedural and substantive hurdles standing in the way of Easterling achieving bankruptcy

discharge of her student loans. However, this does not alter the fact that, as Collecto and the

district court acknowledge, Easterling at all times fully retained her right to seek bankruptcy

discharge of her debt. Moreover, as anyone familiar with life’s fragility can attest, it is possible that

Easterling’s life circumstances could have changed since her November 2001 bankruptcy

proceeding (or will change in the future), such that she could meet the “undue hardship” standard

articulated by this Court in Brunner. Accordingly, we conclude that the Collection Letter’s

statement that Easterling’s student loan debt was “ineligible for bankruptcy discharge” was false on

its face. 

Moreover, not only is the Collection Letter’s representation in this regard literally false, it is

also fundamentally misleading in that it suggests that the debtor has no possible means of
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discharging her student loans in bankruptcy. We think that, upon reading the Collection Letter, the

least sophisticated consumer might very well refrain from seeking the advice of counsel, who could

then assist her in pursuing all available means of discharging her debt through bankruptcy. The

Collection Letter’s capacity to discourage debtors from fully availing themselves of their legal

rights renders its misrepresentation exactly the kind of “abusive debt collection practice[]” that the

FDCPA was designed to target. See 15 U.S.C. § 1692(e).

For the foregoing reasons, the judgment of the district court is hereby REVERSED and the

case is REMANDED to the district court for further proceedings consistent with this Opinion.