Brown v. Card Service Center

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit

9-29-2006

Brown v. Card Ser Ctr
Precedential or Non-Precedential: Precedential

Docket No. 05-4160

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 PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 05-4160

ELIZABETH BROWN, ON BEHALF OF HERSELF
AND ALL OTHERS SIMILARLY SITUATED,
formerly known as ELIZABETH SCHENCK,

Appellant

v.

CARD SERVICE CENTER;
CARDHOLDER MANAGEMENT SERVICES.

On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 05-cv-0498)
District Judge: Honorable William H. Yohn, Jr.

Argued June 1, 2006

Before: AMBRO, FUENTES, and
GREENBERG, Circuit Judges.

(Filed: September 29, 2006)
Cary L. Flitter (Argued)
Lundy, Flitter, Beldecos & Berger, P.C.
450 N. Narberth Avenue
Narberth, PA 19072

David A. Searles
Donovan Searles, LLC
1845 Walnut Street
Suite 1100
Philadelphia, PA 19103

Attorneys for Appellant

Thomas W. Dymek
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103

Thomas J. Cahill
Joshua M. Rubins (Argued)
Daniel G. Gurfein
Satterlee Stephens Burke & Burke LLP
230 Park Avenue
New York, NY 10169

Attorneys for Appellees

OPINION OF THE COURT

FUENTES, Circuit Judge.
Seeking to recover what it considered a bad debt, Card
Service Center sent Elizabeth Brown a collection letter telling her
that unless she made arrangements to pay within five days, the
matter “could” result in referral of the account to an attorney and
“could” result in “a legal suit being filed.” Brown sued, claiming
that because Card Service Center had no intention of referring her
account to an attorney and no intention of filing a law suit, the

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letter violates the Fair Debt Collection Practices Act’s ban on false,
misleading or deceptive communications. The District Court
dismissed Brown’s suit, concluding that because “[t]he letter
neither states nor implies that legal action is imminent, only that it
is possible,” Brown had failed to state a claim upon which relief
could be granted. We disagree, and for the reasons that follow we
vacate the District Court’s judgment and remand for further
proceedings.
I. Background
Card Service Center and Cardholder Management Services
(collectively, “CSC”) are debt-collection firms. In February of
2004, CSC sent Brown a collection letter (the “CSC Letter”)
demanding payment of a delinquent credit card balance of $1,874,
which it stated was due. The letter threatened referral of Brown’s
account to CSC’s attorney if payment was not made within five
days. In relevant part, the letter reads:
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.
(JA 1.) Though Brown did not make arrangements for payment on
her delinquent account within five days, CSC did not institute a suit
or otherwise enlist an attorney to assist with its collection efforts.
Rather, Brown’s decision not to comply with CSC’s request
resulted only in her receiving additional debt-collection letters from
CSC.
In February of 2005, Brown filed suit against CSC in the
United States District Court for the Eastern District of
Pennsylvania on behalf of herself and all other similarly situated
Pennsylvania consumers. In her complaint Brown alleged that the
CSC Letter contained “false and misleading” statements “designed

3
to coerce and intimidate the consumer . . . by false threat” and that
the complaint suggested a deadline for debtor action that was “false
and overstated.” (Amend Compl. ¶¶ 11, 13, 15.) In support of this
claim, Brown alleged that the 5-day deadline was illusory because
CSC never intended to bring suit against her or to refer her debt–or
that of the members of her putative class–to an attorney.
In response to the complaint, CSC filed a motion under Rule
12(b)(6) of the Federal Rules of Civil Procedure to dismiss the
complaint for failure to state a claim under the Fair Debt Collection
Practices Act (the “FDCPA” or the “Act”), 15 U.S.C. § 1692 et
seq. The District Court granted the motion without prejudice in
June of 2005. The District Court’s order dismissing the complaint,
which was amended by a second order in August of 2005, granted
Brown through the end of September to conduct further
investigation so that she might amend her complaint, with the
caveat that if she failed to do so, the June dismissal would
automatically become a dismissal with prejudice. Brown opted not
to amend her complaint, and the dismissal became final. This
appeal followed.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction over this matter pursuant
to 28 U.S.C. § 1331 and 15 U.S.C. § 1692k(d). We have
jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary
review over the grant of a motion to dismiss. Delaware Nation v.
Pennsylvania, 446 F.3d 410, 415 (3d Cir. 2006). When
considering an appeal from a Rule 12(b)(6) dismissal, we must
accept all well-pled allegations in the complaint as true and draw
all reasonable inferences in favor of the non-moving party. In re
Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 215 (3d Cir.
2002). In doing so, we must determine whether the plaintiff may
be entitled to relief under any reasonable reading of the complaint.
Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 374 n.7 (3d Cir.
2002).
III. Analysis
Brown maintains that the CSC Letter ran afoul of § 1692e
of the FDCPA, which reads in relevant part:
§ 1692e. False or misleading representations

4
 A debt collector may not use any false,
deceptive, or misleading representation or means
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:
...
(5) The threat to take any action
that cannot legally be taken or that
is not intended to be taken.
Because CSC qualifies as a “debt collector” under the Act, see 15
U.S.C. § 1692a(6), to the extent the CSC Letter is “false, deceptive,
or misleading” or constitutes a “threat to take any action . . . not
intended to be taken,” it violates § 1692e.
A. FDCPA Background
Congress enacted the FDCPA in 1977 after noting the
“abundant evidence of the use of abusive, deceptive, and unfair
debt collection practices by many debt collectors.” 15 U.S.C.
§ 1692(a). At the time the Act was being considered, Congress
was concerned that “[a]busive debt collection practices contribute
to the number of personal bankruptcies, to marital instability, to the
loss of jobs, and to invasions of individual privacy.” Id. A
significant purpose of the Act is not only to eliminate abusive
practices by debt collectors, but “to insure that those debt collectors
who refrain from using abusive debt collection practices are not
competitively disadvantaged.” 15 U.S.C. § 1692(e).
In its findings Congress observed that “[e]xisting laws and
procedures” enacted to remedy the injuries occasioned by abusive
debt collectors “are inadequate to protect consumers.” 15 U.S.C.
§ 1692(b). Accordingly, the Act provides consumers with a private
cause of action against debt collectors who fail to comply with the
Act. 15 U.S.C. § 1692k. A prevailing plaintiff under the Act is
entitled to an award of damages, costs of suit and reasonable
attorneys’ fees. Id.
Because the FDCPA is a remedial statute, Hamilton v.
United Healthcare of La., 310 F.3d 385, 392 (5th Cir. 2002), we
construe its language broadly, so as to effect its purpose, See Stroh

5
v. Director, OWCP, 810 F.2d 61, 63 (3d Cir. 1987). Accordingly,
in considering claims under another provision of the FDCPA, we
have held that certain communications from lenders to debtors
should be analyzed from the perspective of the “least sophisticated
debtor.” See Wilson v.Quadramed Corp., 225 F.3d 350, 354
(applying the perspective of the least sophisticated debtor to the
notice provision of the Act, § 1692g) (citation omitted); Graziano
v. Harrison, 950 F.2d 107, 111 (3d Cir. 1991) (“Statutory notice
under the Act is to be interpreted from the perspective of the ‘least
sophisticated debtor.’”).
Analyzing lender-debtor communications from this
perspective is consistent with “basic consumer-protection
principles.” United States v. Nat’l Fin. Servs., 98 F.3d 131, 136
(4th Cir. 1996). As the Second Circuit has observed, “[t]he basic
purpose of the least-sophisticated consumer standard is to ensure
that the FDCPA protects all consumers, the gullible as well as the
shrewd. This standard is consistent with the norms that courts have
traditionally applied in consumer-protection law.”1 Clomon v.
Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993). That it may be
obvious to specialists or the particularly sophisticated that a given
statement is false or inaccurate does nothing to diminish that
statement’s “power to deceive others less experienced.” Federal
Trade Comm’n v. Standard Educ. Soc’y, 302 U.S. 112, 116 (1937).
As Justice Black has observed, our laws “are made to protect the
trusting as well as the suspicious,” and this is particularly the case
within the realm of consumer protection laws. Id. Bearing all of
this in mind, we conclude that any lender-debtor communications
potentially giving rise to claims under the FDCPA, such as the
CSC Letter, should be analyzed from the perspective of the least
sophisticated debtor.

1
For our purposes, “least sophisticated debtor” and “least
sophisticated consumer” can be used interchangeably. Our analysis
of the least sophisticated debtor/consumer standard focuses on the
level of sophistication, rather than whether the purported debtor
actually owes the debt claimed. See Graziano, 920 F.2d at 111 n.5
(noting the distinction in terminology, but ultimately deciding to
employ “least sophisticated debtor” in a Third Circuit FDCPA
case).

6
 The least sophisticated debtor standard requires more than
“simply examining whether particular language would deceive or
mislead a reasonable debtor” because a communication that would
not deceive or mislead a reasonable debtor might still deceive or
mislead the least sophisticated debtor. Quadramed, 225 F.3d at 354
(internal quotation marks and citation omitted). This lower
standard comports with a basic purpose of the FDCPA: as
previously stated, to protect “all consumers, the gullible as well as
the shrewd,” “the trusting as well as the suspicious,” from abusive
debt collection practices. However, while the least sophisticated
debtor standard protects naive consumers, “it also prevents liability
for bizarre or idiosyncratic interpretations of collection notices by
preserving a quotient of reasonableness and presuming a basic level
of understanding and willingness to read with care.” Quadramed,
225 F.3d at 354-55 (internal quotation marks and citation omitted).2

B. Applying the Least Sophisticated Debtor Standard
to the CSC Letter
In its thorough analysis, the District Court determined that,
even accepting all of Brown’s factual allegations as true and

2
Other Courts of Appeals have also approached the
adjudication of matters under the Act from the perspective of the
least sophisticated debtor or consumer. See, e.g., Swanson v.
Southern Or. Credit Serv., 869 F.2d 1222, 1226-30 (9th Cir. 1988)
(adopting the least sophisticated debtor standard in a case relating
to FDCPA claims under §§ 1692a, 1692c and 1692e); Bentley v.
Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d Cir. 1993) (“We
apply an objective test based on the understanding of the ‘least
sophisticated consumer’ in determining whether a collection letter
violates section 1692e.”); Smith v. Transworld Sys., 953 F.2d
1025, 1028-30 (6th Cir. 1992) (applying the least sophisticated
consumer standard in a case relating to FDCPA claims under
§§ 1692e and 1692g); Jeter v. Credit Bureau, 760 F.2d 1168, 1175
(11th Cir. 1985) (adopting the least sophisticated consumer
standard in addressing FDCPA claims under the §§ 1692d and
1692e); Nat’l Fin. Servs., 98 F.3d at 135-36, 139 (citing with
approval the district court’s application of the least sophisticated
consumer standard to a debtor’s § 1692e claim).

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drawing all reasonable inferences in her favor, no reasonable
reading of her complaint could entitle her to relief. In reaching this
conclusion, the District Court emphasized that the CSC Letter
employed the conditional term “could” as opposed to the
affirmative term “will.”3 The District Court observed that the CSC
Letter “neither states nor implies that legal action is imminent, only
that it is possible.” Brown v. Card Serv. Ctr., No. 05-cv-0498,
2005 U.S. Dist. LEXIS 12810, at *23 (E.D. Pa. Jun. 27, 2005). As
a result, the District Court concluded that the CSC Letter “poses no
‘threat’ pursuant to § 1692e(5), and because the letter simply
advises plaintiff of options available to CSC, the letter is not ‘false,
deceptive, or misleading’ under § 1692e, even if action were not
intended to be taken.” Id. The District Court found the CSC Letter
in compliance with the FDCPA because it merely stated what CSC
could do, if it so chose. The District Court drew a sharp contrast
between the CSC Letter and debt-collection letters that other courts
have held to be in violation of the Act because those letters made
false claims about what debt collectors would do if a given debtor
failed to respond. See, e.g., Crossley v. Lieberman, 868 F.2d 566,
567 (3d Cir. 1989) (finding an FDCPA violation where a letter
falsely stated, “Unless I receive payment in full within one week
from the date of this letter, I will be compelled to proceed with suit
against you.”). Though we express no opinion as to whether the
language of the CSC Letter constitutes a “threat” under § 1692e(5),
we believe that the facts as alleged in Brown’s complaint, if
proven, could render the CSC Letter a “deceptive” or “misleading”
communication, in violation of § 1692e.
We disagree with the District Court because we conclude
that it would be deceptive under the FDCPA for CSC to assert that
it could take an action that it had no intention of taking and has
never or very rarely taken before. The CSC Letter highlights two
possible outcomes for debtors failing to respond within five days:
the commencement of a lawsuit or the referral of the debt to CSC’s
attorney. In her complaint, Brown alleges that CSC never intended

3
For example, the CSC Letter states, “[r]efusal to cooperate
could result in a legal suit being filed for collection of the account”
and “Failure on your part to cooperate could result in our
forwarding this account to our attorney with directions to continue
collection efforts” (emphases added).

8
to file a suit against her for collection, never had any intention of
referring her case to its attorney, and that as a matter of course,
CSC does not “refer class member’s [sic] alleged debts to their
attorney for prosecution, but only refer[s] the alleged debt(s) to
another collection agency.” (Amend Compl. ¶ 17) In light of these
allegations, Brown has stated a claim under § 1692e upon which
relief can be granted.
Upon reading the CSC Letter, the least sophisticated debtor
might get the impression that litigation or referral to a CSC lawyer
would be imminent if he or she did not respond within five days.
We do not believe that such a reading would be “bizarre or
idiosyncratic,” see Quadramed, 225 F.3d 354, and we thus
conclude that further proceedings are warranted to determine if
such a reading is “reasonable” in light of the facts of this case. A
debt collection letter is deceptive where “it can be reasonably read
to have two or more different meanings, one of which is
inaccurate.” Id. (citation omitted). If Brown can prove, after
discovery that CSC seldom litigated or referred debts such as
Brown’s and those of the putative class members to an attorney, a
jury could conclude that the CSC Letter was deceptive or
misleading vis-à-vis the least sophisticated debtor.
The Federal Trade Commission’s commentary (the “FTC
Commentary”) to the FDCPA further supports this conclusion.
The FTC Commentary observes that a debt collector “may state
that a certain action is possible, if it is true that such action is legal
and is frequently taken by the collector or creditor with respect to
similar debts,” but where the debt collector “has reason to know
there are facts that make the action unlikely in the particular case,
a statement that the action was possible would be misleading.” 53
Fed. Reg. 50097, 50106 (1988). In other words, were it proven
that the CSC had reason to know that the legal action described in
its letter to Brown was unlikely, its statement in the CSC Letter that
it was possible could be deemed misleading. In this sense, the facts
alleged by Brown fall squarely within the scope of the behavior
proscribed by the FTC language. Though the FTC Commentary
does not have the force of law and is “not entitled to deference in
FDCPA cases except perhaps to the extent [its] logic is
persuasive,” Dutton v. Wolpoff & Abramson, 5 F.3d 649, 654 (3d

9
Cir. 1993), in the context of this case we find it persuasive.4 We
are therefore satisfied that the facts pled by Brown, if proven, state
a claim upon which a court might grant relief.
Accordingly, because a court “may dismiss a complaint only
if it is clear that no relief could be granted under any set of facts
that could be proved consistent with the allegations,” Hishon v.
King & Spalding, 467 U.S. 69, 73 (1984), the District Court erred
in dismissing Brown’s complaint. We therefore vacate the
judgment of the District Court and remand for further proceedings
consistent with this opinion.

4
We note that Kaltenbach v. Richards, No. 05-30132, 2006
WL 2588994, *2 (5th Cir. Sept. 11, 2006) supports our decision to
defer to the FTC’s persuasive interpretation in this case. We are
mindful, however, that the standard applied in Kaltenbach is more
deferential than ours in Dutton v. Wolpoff & Abramson, 5 F.3d
649, 654 (3d Cir. 1993). Kaltenbach relies on Fifth Circuit
precedent that courts “must defer to [an] agency’s interpretation of
a statute that it administers if (1) Congress has not spoken directly
to the issue; and (2) the agency’s interpretation is based on a
permissible construction of the statute.” Kaltenbach, 2006 WL
2588994, *2 (citing Walton v. Rose Mobile Homes, 298 F.3d 470,
475 (5th Cir. 2002)) (internal quotation marks omitted).

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