Rosenau v. Unifund Corp

Opinions of the United
2008 Decisions 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Precedential or Non-Precedential: Precedential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.
 (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.

2
 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”

3
 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

4
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.

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 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

6
 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

7
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

8
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

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
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

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
 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.

11
 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.

12
 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 debt-
collection 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

13
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

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
 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

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
and threatening-sounding corporate departments, such as a “Pre-
Legal 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.

16
 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.

17