20-1134
Cortez v. Forster & Garbus, LLP
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2020
(Argued: January 28, 2021 Decided: June 4, 2021)
No. 20-1134
––––––––––––––––––––––––––––––––––––
CRISTIAN D. CORTEZ
Plaintiff-Appellee,
v.
FORSTER & GARBUS, LLP
Defendant-Appellant.
––––––––––––––––––––––––––––––––––––
Before: LIVINGSTON, Chief Judge, CABRANES, and LYNCH, Circuit Judges.
In Avila v. Riexinger & Associates, LLC, 817 F.3d 72, 76 (2d Cir. 2016), we
held that the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e, requires “debt
collectors, when they notify consumers of their account balance, to disclose that
the balance may increase due to interest and fees.” This appeal requires us to
clarify whether Avila’s disclosure requirement applies to collection notices that
extend offers to settle outstanding debt. We hold that it does not.
Accordingly, the judgment of the United States District Court for the Eastern
District of New York is REVERSED.
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FOR PLAINTIFF-APPELLEE: DAVID M. BARSHAY, Craig B. Sanders, on the
brief, Barshay Sanders PLLC, Garden City,
New York, for Cristian D. Cortez.
FOR DEFENDANT-APPELLANT: ROBERT L. ARLEO, New York, New York, for
Forster & Garbus, LLP.
DEBRA ANN LIVINGSTON, Chief Judge:
The Fair Debt Collection Practices Act (“FDCPA”) prohibits debt collectors
from using “any false, deceptive, or misleading representation or means in
connection with the collection of any debt.” 15 U.S.C. § 1692e. In Avila v.
Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016), we held this provision to
require “debt collectors, when they notify consumers of their account balance, to
disclose that the balance may increase due to interest and fees.” Id. at 76. This
appeal requires us to clarify whether this disclosure requirement applies to
collection notices that extend offers to settle outstanding debt. We hold that it
does not. Consequently, we REVERSE and REMAND with directions to enter
summary judgment in favor of Defendant Forster & Garbus, LLP.
BACKGROUND
Plaintiff Cristian D. Cortez incurred credit card debt to Discover Bank.
Discover Bank placed Cortez’s debt with Forster & Garbus for collection. In
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2011, Forster & Garbus filed a collection action in New York state court and
obtained a default judgment. Over the years, Forster & Garbus mailed Cortez a
number of collection notices.
In one such notice dated February 2, 2017, Forster & Garbus indicated that
Cortez’s debt balance at that time was $13,457.65 and stated in relevant part:
This office has been authorized to advise you that a
settlement of the above account can be arranged. You
are being offered a substantial discount off the current
balance due. You may choose one of the three
payment options as follows:
A. One payment of $5,383.06, which we shall expect by
February 24, 2017.
B. Two payments of $3,364.42 each, totaling $6,728.84,
which we shall expect by February 24, 2017, and
March 24, 2017.
C. Three payments of $2,691.53 each, totaling $8,074.59,
which we shall expect by February 24, 2017, March
24, 2017, and April 24, 2017.
Please note that we are not obligated to repeat this offer.
Please return the bottom portion of this letter with your
selection checked to confirm your settlement choice. If
you are unable to take advantage of the above
settlement opportunities, please contact this office so
that we may arrange a payment plan on the account.
3
Joint App’x at 19. Cortez sued Forster & Garbus, claiming that this notice, by
failing to disclose that interest was continuing to accrue on his balance, violated
the FDCPA as interpreted by Avila.
Forster & Garbus moved for summary judgment, which the United States
District Court for the Eastern District of New York (Block, J.) denied in a
memorandum and order dated June 12, 2019. See Cortez v. Forster & Garbus,
LLP, 382 F. Supp. 3d 259 (E.D.N.Y. 2019). The district court observed that the
February 2 notice did not state whether interest and fees were accruing on
Cortez’s account even though Avila mandated that “debt collectors, when they
notify consumers of their account balance,” must “disclose that the balance may
increase due to interest and fees.” Id. at 261 (quoting Avila, 817 F.3d at 76).
Forster & Garbus argued that the notice did not violate Section 1692e because
under Avila, “a debt collector will not be subject to liability” under the FDCPA if
it makes a settlement offer “clearly stat[ing] that the holder of the debt will
accept payment of the amount set forth in full satisfaction of the debt if payment
is made by a specified date,” 817 F.3d at 77; the district court read Avila to require
that such a settlement offer must nevertheless be accompanied by a disclosure of
whether interest would continue to accrue if the debtor “do[es] not make the
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payment by the specified date.” Cortez, 382 F. Supp. 3d at 261. In any event,
the district court found it “debatable” whether the February 2 notice clearly
stated that the specified amounts in the notice would fully satisfy Cortez’s debt if
made by the specified date. Id. at 262. The district court further decided that
“because there are no genuine issues of material fact and [Forster & Garbus] has
had adequate opportunity to develop and present its case,” it would enter
“summary judgment on the issue of liability in favor of [Cortez].” Id. (internal
quotation marks omitted).
Forster & Garbus unsuccessfully moved for reconsideration, Cortez v.
Forster & Garbus, LLP, No. 17-cv-06501, 2020 WL 1083680, at *1 (E.D.N.Y. Mar. 6,
2020), judgment in favor of Cortez entered March 6, 2020, and Forster & Garbus
timely appealed the district court’s grant of summary judgment for Cortez.
DISCUSSION
“We review a grant of summary judgment de novo, examining the evidence
in the light most favorable to, and drawing all inferences in favor of, the
non-movant.” Huebner v. Midland Credit Mgmt., Inc., 897 F.3d 42, 50 (2d Cir.
2018) (quoting Blackman v. N.Y.C. Transit Auth., 491 F.3d 95, 98 (2d Cir. 2007) (per
curiam)). Summary judgment is appropriate only when “there is no genuine
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dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a).
I
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, and, among other things, prohibits
debt collectors from making any “false representation of the character, amount,
or legal status of any debt,” id. § 1692e(2)(A). To determine whether a debt
collection notice violates these provisions, we employ the least sophisticated
consumer standard, according to which a notice is deceptive or misleading if it is
“open to more than one reasonable interpretation, at least one of which is
inaccurate.” Clomon v. Jackson, 988 F.2d 1314, 1319 (2d Cir. 1993). 1
In Avila, we held that a collection notice that states a debtor’s current
balance but does not disclose whether interest and fees are accruing is
1 “This objective standard is designed to protect all consumers, ‘the gullible as
well as the shrewd,’ while at the same time protecting debt collectors from liability for
‘bizarre or idiosyncratic interpretations of collection notices.’” Maguire v. Citicorp Retail
Servs., Inc., 147 F.3d 232, 236 (2d Cir. 1998) (quoting Clomon, 988 F.2d at 1318, 1320); see
also Clomon, 988 F.2d at 1319 (“[C]ourts have consistently applied the
least-sophisticated-consumer standard in a manner that protects debt collectors against
liability for unreasonable misinterpretations of collection notices.”).
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“misleading within the meaning of Section 1692e” because “[a] reasonable
consumer could read the notice and be misled into believing that she could pay
her debt in full by paying the amount listed on the notice” when, in fact, “if
interest is accruing daily, or if there are undisclosed late fees, a consumer who
pays the ‘current balance’ stated on the notice will not know whether the debt
has been paid in full.” 817 F.3d at 76. Consequently, we held “that the FDCPA
requires debt collectors, when they notify consumers of their account balance, to
disclose that the balance may increase due to interest and fees.” Id.
However, we proceeded to explain that
a debt collector will not be subject to liability under
Section 1692e for failing to disclose that the consumer’s
balance may increase due to interest and fees if the
collection notice either [1] accurately informs the
consumer that the amount of the debt stated in the letter
will increase over time, or [2] clearly states that the
holder of the debt will accept payment in the amount
set forth in full satisfaction of the debt if payment is
made by a specified date.
Id. at 77. Together, these two disclosure options, or safe harbors, fully address
the concern we articulated in Avila that a debtor might remit the listed balance
without realizing that she has not fully paid off her debt. The first disclosure
option contemplates debt collectors informing debtors that paying the specified
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amount will not satisfy the debt. See, e.g., Kolbasyuk v. Capital Mgmt. Servs., LP,
918 F.3d 236, 242 (2d Cir. 2019). The second disclosure option contemplates
collectors informing debtors that paying the specified amount will satisfy the
debt. When apprised of either of these two disclosures, no debtor reasonably
could be unaware of the effect payment of the balance specified in the notice
would have on her outstanding debt.
II
We reaffirm Avila’s holding that a debt collector “will not be subject to
liability under Section 1692e for failing to disclose” in a collection notice whether
an account is accruing interest and fees so long as the notice “clearly states that
the holder of the debt will accept payment of the amount set forth in full
satisfaction of the debt if payment is made by a specified date.” 817 F.3d at 77.
Such collection notices do not present the risk that a debtor might pay the listed
balance only to find herself still owing more. Payment of an amount that the
collector indicates will fully satisfy a debt excludes the possibility of further debt
to pay.
Our decision in Taylor v. Financial Recovery Services, Inc., 886 F.3d 212 (2d
Cir. 2018), is instructive. There, debtors whose balances were static sued their
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debt collector, Financial Recovery Services (“FRS”), under the FDCPA for failing
to disclose that interest and fees were not accruing on their accounts. They
argued that under Avila, “a debt collector commits a per se violation of Section
1692e whenever it fails to disclose whether interest or fees are accruing on a
debt.” Id. at 214. We disagreed. While in Avila the collection notice’s
implication that payment of the outstanding balance would fully satisfy the debt
was “prejudicially misleading,” in Taylor “prompt payment of the amounts
stated in [plaintiffs’] notices would have satisfied their debts.” Id. (emphasis in
original). For this reason, we held that FRS’s notices to plaintiffs, which stated
their respective balances without disclosing that interest and fees were not
accruing on their accounts, did not violate the FDCPA. Id.; see also Chuway v.
Nat’l Action Fin. Servs., Inc., 362 F.3d 944, 949 (7th Cir. 2004) (Posner, J.) (“If the
debt collector is trying to collect only the amount due on the date the letter is
sent, then he complies with the Act by stating the ‘balance’ due . . . and asking
the recipient to remit the balance listed — and stopping there[.]”). This
reasoning extends to a collection notice proposing to accept a specified amount
in full satisfaction of a debt. As with debtors faced with a collection notice for a
static debt, who are not prejudicially misled by the collector’s failure to disclose
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that interest is not accruing, debtors faced with a settlement offer are not misled
by the failure to disclose that interest is accruing because in both situations,
payment of the amount indicated in a collection notice would extinguish the
debt.
Nevertheless, here the district court held that debt collectors extending
offers of full satisfaction must also “advise consumers that their debt [is] still
accruing interest and/or fees.” Cortez, 382 F. Supp. 3d at 261. In doing so, the
court was drawn to our suggestion in Avila that
a debt collector who is willing to accept a specified
amount in full satisfaction of the debt if payment is
made by a specific date could considerably simplify the
consumer’s understanding by so stating, while advising
that the amount due would increase by the accrual of
additional interest or fees if payment is not received by
that date.
Id. (quoting Avila, 817 F.3d at 77).
However, Avila held only that a debt collector must “either” disclose that
interest and fees continue to accrue “or” offer to extinguish the debt in exchange
for a specified payment. 817 F.3d at 77 (emphasis added). Avila’s use of a
precatory word to suggest that a debt collector “could” simultaneously avail
itself of both safe harbors is consistent with the conclusion, explained above, that
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either disclosure option alone dispels the risk of a collection notice misleading a
debtor about the effect paying the specified amount would have on the
outstanding debt.
The district court was concerned that a settlement offer from a debt
collector could mislead the debtor if the offer set forth a payment deadline but
failed to disclose whether interest or fees would accrue if payment were tendered
after the deadline. The least sophisticated consumer, it reasoned, could interpret
such an offer “as implying either that interest and/or fees would accrue after that
date or that the balance will stay the same after that date.” Cortez, 382 F. Supp.
3d at 262 (emphasis in original). We disagree that, to the extent such a
settlement offer is ambiguous along the lines suggested by the district court, a
collection notice containing it would be rendered misleading under Section
1692e. For one thing, as we have already explained, Avila expressly held that a
debt collector clearly extending an offer of full satisfaction if payment is made by
a specified date is not “subject to liability under Section 1692e for failing to
disclose that the consumer’s balance may increase due to interest and fees[.]”
817 F.3d at 77. But more generally, Section 1692e does not require that a
collection notice anticipate every potential collateral consequence that could arise
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in connection with the payment or nonpayment of a debt. See, e.g., Altman v.
J.C. Christensen & Assocs., Inc., 786 F.3d 191, 194 (2d Cir. 2015) (settlement offer
that did not factor potential tax liability into stated discount was not misleading);
Taylor, 886 F.3d at 215 (“[C]ollection notice that fails to disclose that interest and
fees are not currently accruing on a debt is not misleading[.]”). Instead, the
FDCPA merely requires that a collection notice, by its terms, not be susceptible of
a reasonable but inaccurate interpretation. See Clomon, 988 F.2d at 1319.
Therefore, a settlement offer need not enumerate the consequences of failing to
meet its deadline or rejecting it outright so long as it clearly and accurately
informs a debtor that payment of a specified sum by a specified date will satisfy
the debt.
III
With these principles in mind, we hold that Forster & Garbus’s February 2
notice to Cortez did not violate Section 1692e because it extended a settlement
offer that, if accepted through payment of the specified amount(s) by the
specified date(s), would have cleared Cortez’s account. The district court found
it “debatable” that the notice “‘clearly state[d] that [the defendant would] accept
payment of the amount set forth in full satisfaction of the debt if payment is
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made by a specific date’” because the notice “[did] not state explicitly that the
debt will be discharged fully upon receipt of payment.” Cortez, 382 F. Supp. 3d
at 262 (alterations and emphasis in original) (quoting Avila, 817 F.3d at 77).
However, the notice extended three “settlement choice[s],” each affording a
“substantial discount off the current balance due,” Joint App’x at 19,
unmistakably communicating that acceptance of one of the options would
extinguish Cortez’s debt. We therefore conclude that, even when viewed from
the perspective of the least sophisticated consumer, the February 2 notice could
only reasonably be read one way: as extending an offer to clear the outstanding
debt upon payment of the specified amount(s) by the specified date(s). Since
this sole reasonable interpretation was accurate, the notice did not violate the
FDCPA.
CONCLUSION
For these reasons, we REVERSE and REMAND with directions to enter
judgment in favor of Defendant Forster & Garbus, LLP.
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