Navon v. Cavalry Portfolio Services, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

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DANIEL NAVON, on behalf of Plaintiff and a

class,

Plaintiff,

MEMORANDUM & ORDER

- against - 19-CV-63 (PKC) (CLP)

SCHACHTER PORTNOY, L.L.C., and

CAVALRY PORTFOLIO SERVICES, LLC,

Defendants.

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PAMELA K. CHEN, United States District Judge:

On January 4, 2019, Plaintiff Daniel Navon filed this putative class action against two debt

collectors,1 Defendants Schachter Portnoy, L.L.C. and Cavalry Portfolio Services, LLC

(collectively, “Defendants”), for violating the Fair Debt Collection Practices Act (“FDCPA”) by

mailing debt collection letters that allegedly (1) misrepresented information to create a “false

record” that “could” later be used to extend the statute of limitations for debt collection litigation,

and (2) failed to effectively state the amount of the alleged debt. Schachter has moved to dismiss

Plaintiff’s amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the

reasons that follow, Schachter’s motion is granted in its entirety.

1 The FDCPA defines a debt collector as “any person who uses any instrumentality of

interstate commerce or the mails in any business the principal purpose of which is the collection

of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or

due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6).

BACKGROUND

Prior to filing this action, Plaintiff incurred an unspecified amount of personal credit card

debt to Citibank, N.A.2 (Amended Complaint (“Am. Compl.”), Dkt. 18, ¶ 25–26.) On June 29,

2018, Citibank notified Plaintiff that it had sold his debt to Cavalry SPV I, LLC. (Id. ¶ 26; Citibank

Notice, Dkt 18-1, at ECF3 2.) The notice from Citibank stated that the balance of the debt was

$6,257.68. (Am. Compl., Dkt. 18, ¶ 26; Citibank Notice, Dkt 18-1, at ECF 2.) Also on June 29,

2018, Cavalry sent Plaintiff a debt collection letter informing him that it would service his account

on behalf of Cavalry SPV. (Am. Compl., Dkt. 18, ¶ 27; Cavalry Letter, Dkt. 18-2, at ECF 2.) The

Cavalry letter stated that the “debt due as of charge-off”4 was $6,331.07, that the “total amount of

debt” owed to Cavalry SPV was $6,257.68, and that “any difference” between the two amounts

was “due to the application of credits to [the] account prior to the date of [the] letter. (Cavalry

Letter, Dkt. 18-2, at ECF 2.) Subsequently, Schachter sent Plaintiff yet another debt collection

letter on November 19, 2018, stating that Cavalry SPV had retained Schachter to collect the debt

that Plaintiff owed to it. (Schachter November 19 Letter, Dkt. 18-3, at ECF 2.) Schachter’s letter

confirmed the amounts listed in the earlier letter from Cavalry and further stated that the “[t]otal

amount of payments and/or credits made on the debt since charge-off” was $73.39. (Id.)

2 The amended complaint does not indicate the principal amount of the debt or when it was

incurred.

3 Citations to “ECF” refer to the pagination generated by the Court’s CM/ECF docketing

system and not the document’s internal pagination.

4 “A ‘charge-off’ is a declaration by a creditor that a debt is unlikely to be collected,

typically, because the borrower is severely delinquent in his repayment of the debt.” Weinstock v.

Chase Card Servs., No. 07-CV-3087 (ENV), 2009 WL 10706507, at *1 n.3 (E.D.N.Y. Oct. 5,

2009); see also Swafford v. Unifund CCR Partners, No. 13-CV-1572 (SDY), 2013 WL 5701045,

at *1 (N.D. Ill. Oct. 18, 2013) (defining “charge off” as “the point that the credit card receivable

was no longer carried on [the creditor’s] books as an asset”).

Plaintiff was confused by the reference to “payments and/or credits,” and he did not

understand what the $73.39 payment and/or credit amount was attributable to, so he called

Schachter on December 12, 2018.5 (Am. Compl., Dkt. 18, ¶ 42.) On this call, Plaintiff was told

that “Cavalry had credited back interest that had been added post-charge-off.”6 (Id.) On December

28, 2018, Schachter sent a follow-up letter confirming the amounts previously stated in the

November 19 letter. (Schachter December Letter, Dkt. 18-4.) This action followed. (See

Complaint, Dkt. 1.)

PROCEDURAL HISTORY

Plaintiff initiated this action on January 4, 2019. (See id.) Cavalry filed an answer on

February 28, 2019. (See First Cavalry Answer, Dkt. 17.) On the same day, Plaintiff filed an

amended complaint, attaching as exhibits the various letters that he had received from Defendants.

(See Am. Compl., Dkt. 18.) On March 14, 2019, Cavalry filed its answer to the amended

complaint. (See Operative Cavalry Answer, Dkt. 21.) The Honorable Cheryl L. Pollak granted an

extension of time for Schachter to answer the amended complaint (see March 14, 2019 Order), and

on March 26, 2019, Schachter filed a letter motion for a pre-motion conference in anticipation of

filing a motion to dismiss (see Schachter Br., Dkt. 26). The Court construed Schachter’s letter as

its motion to dismiss and set a briefing schedule. (See April 4, 2019 Order.) Schachter’s motion

was fully briefed on May 9, 2019. (See Schachter Reply, Dkt. 31.)

5 The November 19 letter provided a telephone number for Cavalry. (November 19, 2018

Letter, Dkt. 18-3, at ECF 2.)

6 “As a standard practice, most banks waive interest on credit card debts after charge

off . . . .” Danley v. Encore Capital Grp., Inc., No. 15-CV-11535 (GCS), 2015 WL 7733450, at

*1 (E.D. Mich. Dec. 1, 2015).

STANDARD OF REVIEW

To survive a motion to dismiss pursuant to Rule 12(b)(6), “a complaint must contain

sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570 (2007)); see also Hogan v. Fischer, 738 F.3d 509, 514 (2d Cir. 2013). “A claim has facial

plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678; see also

Hogan, 738 F.3d at 514. “The plausibility standard is not akin to a ‘probability requirement,’ but

it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at

678; see also Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v.

Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 729–30 (2d Cir. 2013). Determining whether a

complaint states a plausible claim for relief is “a context-specific task that requires the reviewing

court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679 (citation

omitted).

In considering a motion to dismiss for failure to state a claim, courts “may consider the

facts alleged in the complaint, documents attached to the complaint as exhibits, and documents

incorporated by reference in the complaint.” DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111

(2d Cir. 2010). “[T]he tenet that a court must accept as true all of the allegations in a complaint is

inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678; see also Pension Benefit Guar. Corp.,

712 F.3d at 717 (“Although for the purposes of a motion to dismiss we must take all of the factual

allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched

as a factual allegation.” (internal quotation marks omitted)). “While legal conclusions can provide

the framework of a complaint, they must be supported by factual allegations.” Pension Benefit

Guar. Corp., 712 F.3d at 717 (quoting Iqbal, 556 U.S. at 679).

DISCUSSION

Plaintiff asserts that Schachter violated the FDCPA by “lumping together ‘payments and/or

credits’ without explaining that this was not done with the involvement of Plaintiff, because it

creates a false record with respect to events that might (a) restart the statute of limitations and (b)

constitute[] an admission of debt.” (Pl. Supp., Dkt. 30, at 2.) Plaintiff also argues that Schachter’s

November 19 letter failed to clearly and effectively state the amount of the debt owed. (See id.)

Schachter responds that Plaintiff’s “idiosyncratic and illogical interpretation” of its letters cannot

support a valid claim under the FDCPA. (Schachter Supp., Dkt. 29, at 2.) The Court agrees with

Schachter.

I. The FDCPA

By enacting the FDCPA, Congress sought “to eliminate abusive debt collection practices

by debt collectors, to insure that those debt collectors who refrain from using abusive debt

collection practices are not competitively disadvantaged, and to promote consistent State action to

protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). To that end, “[t]he

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

professional debt collectors for collection, and requires that such debt collectors advise the

consumers whose debts they seek to collect of specified rights.” Kropelnicki v. Siegel, 290 F.3d

118, 127 (2d Cir. 2002) (internal quotation marks omitted). Debt collectors are generally forbidden

“from engaging in unfair, deceptive, or harassing behavior,” id., and are strictly liable for such

behavior, “meaning that a consumer need not show intentional conduct by [a] debt collector to be

entitled to damages,” Easterling v. Collecto, Inc., 692 F.3d 229, 234 (2d Cir. 2012) (internal

quotation marks omitted). A debt collector may be held liable for even a single, isolated violation

of the FDCPA. See Ellis v. Solomon & Solomon, P.C., 591 F.3d 130, 133 (2d Cir. 2010).

“[T]he question of whether a communication complies with the FDCPA is determined from

the perspective of the ‘least sophisticated consumer.’” Jacobson v. Healthcare Fin. Servs., Inc.,

516 F.3d 85, 90 (2d Cir. 2008) (citation omitted). “[T]he least sophisticated consumer may lack

‘the astuteness of a Philadelphia lawyer or even the sophistication of the average, everyday,

common consumer,’ [but] he can nonetheless ‘be presumed to possess a rudimentary amount of

information about the world and a willingness to read a collection notice with some care.”

Kolbasyuk v. Capital Mgmt. Servs., LP, 918 F.3d 236, 239 (2d Cir. 2019) (internal citation

omitted).

II. Claims Under 15 U.S.C. § 1692e

Plaintiff’s claim that Schachter’s letters were misleading is brought under 15 U.S.C.

§ 1692e, which provides, in relevant part, that:

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:

. . . .

(2) The false representation of (A) the character, amount, or legal status of any debt;

or (B) any services rendered or compensation which may be lawfully received by

any debt collector for the collection of a debt[;]

. . . .

(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.

“Section 1692e mainly targets practices that take advantage of a debtor’s naivete or lack of legal

acumen.” Arias v. Gutman, Mintz, Baker & Sonnenfeldt LLP, 875 F.3d 128, 136 (2d Cir. 2017).

“A representation is ‘deceptive’ under [§] 1692e if it is ‘open to more than one reasonable

interpretation, at least one of which is inaccurate.’” Id. at 135 (quoting Easterling, 692 F.3d at

233).

Even if a representation is deceptive within the meaning of § 1692e, it must be a material

misrepresentation in order to give rise to liability. Gabriele v. Am. Home Mortg. Servicing, Inc.,

503 F. App’x 89, 94 (2d Cir. 2012) (summary order) (collecting citations recognizing that courts

generally read a materiality requirement into the FDCPA’s prohibition on false, deceptive, or

misleading debt collection practices); see also Lane v. Fein, Such & Crane LLP, 767 F. Supp. 2d

382, 389–90 (E.D.N.Y. 2011) (finding that a misstatement was “not materially false or misleading”

under the FDCPA). “The materiality inquiry focuses on whether the false statement would

‘frustrate a consumer’s ability to intelligently choose his or her response.’” Cohen v. Rosicki,

Rosicki & Associates, P.C., 897 F.3d 75, 86 (2nd Cir. 2018). Accordingly, “‘mere technical

falsehoods that mislead no one’ are immaterial” and do not give rise to liability under § 1692e. Id.

(quoting Donohue v. Quick Collect, Inc., 592 F.3d 1027, 1034 (9th Cir. 2010)).

A. Section 1692e(2)

“To state a claim under section 1692e(2)[,] a consumer must allege that the [representation]

by the collector is incorrect.” Dick v. Enhanced Recovery Co., LLC, No. 15-CV-2631 (RRM)

(SMG), 2016 WL 5678556, at *7 (E.D.N.Y. Sept. 28, 2016). Plaintiff hinges his Section 1692e(2)

claim on the notion that, by listing “payments and/or credits” together, Schachter created a “false

record” that “might” later be used in debt collection litigation to extend the statute of limitations

by “creat[ing] the impression on a judge . . . that the $73.39 is somehow attributable to Plaintiff.”

(Pl. Supp., Dkt. 30, at 3.) Plaintiff’s § 1692 claim, then, is that Schachter’s letters contained a

“false representation of the . . . legal status” of Plaintiff’s debt. See 15 U.S.C. § 1692e(2)(A). This

claim is far-fetched and meritless.

New York law provides a six-year limitations period for actions to collect on a debt.

Espinal v. AFNI, Inc., No. 17-CV-3439 (KPF), 2018 WL 2733366, at *1 (S.D.N.Y. June 7, 2018)

(citing N.Y. C.P.L.R. § 213). This limitations period may be extended pursuant to the “partial

payment exception,” which “has the effect of extending or renewing the statute of limitations

period” when there is “a payment of a portion of an admitted debt, made and accepted as such,

accompanied by circumstances amounting to an absolute and unqualified acknowledgement by the

debtor of more being due.” McNeary v. Charlebois, 95 N.Y.S.3d 421, 424 (3d Dep’t 2019)

(internal quotation marks omitted). Based on this exception, Plaintiff contrives a theory that the

allegedly false representation in a debt notice that partial payment was made (so as to extend the

statute of limitations in a later debt collection litigation) violates § 1692e(2)’s requirement that a

debt notice accurately represent the “legal status” of the debt.

Aside from the absence of any legal support for this theory, discussed supra, as a factual

matter, Plaintiff has not alleged—indeed, cannot allege—that Schachter’s letters falsely or

inaccurately represented the legal status of Plaintiff’s debt: As stated in the letters, the amount of

the debt “due as of charge-off” was $6,331.07, but the “total amount of debt” owed by Plaintiff

was less, $6,257.68, and that any difference was “due to the application of credits to [the] account

prior to the date of [the] letter.” (Cavalry Letter, Dkt. 18-2, at ECF 2.) Plaintiff, in fact, confirmed,

by calling Schachter at the telephone number provided in the letters, that the credits referred to the

removal of post-charge-off interest and not a partial payment by Plaintiff. Thus, there is no factual

allegation in Plaintiff’s complaint that supports Plaintiff’s theory that Schachter’s letters created a

“false record” regarding the legal status of Plaintiff’s debt.

Furthermore, even assuming arguendo that the Schachter letters erroneously represented,

intentionally misrepresented, or misleadingly suggested that Plaintiff had made a partial payment

on the debt that was credited against the charge-off amount, there is no legal support for Plaintiff’s

convoluted theory that this conduct constitutes a material violation of § 1692e(2). See Cohen,

897 F.3d at 85 (defining a material misstatement as one “capable of influencing the decision of the

least sophisticated consumer” (internal quotation marks and alterations omitted)). The letters’

reference to the “application of credits” to the debt amount could not be read by the “least

sophisticated consumer” as a claim that the limitations period was being, or could be, in effect,

extended.7 Plaintiff’s inference or suspicion that Schachter’s letters might be used deceptively in

this manner in subsequent litigation simply does not qualify as a concrete, false representation as

to the legal status of the debt owed by Plaintiff.8 Only a consumer who searches for an ambiguity,

and not the least sophisticated consumer relevant here, would interpret Schachter’s letters as a

claim that the statute of limitations to pursue collection on the debt had been extended.9 See Taylor

7 Although there is a line of cases holding that it is an FDCPA violation to threaten legal

action on a time-barred debt, see, e.g., Larsen v. JBC Legal Grp., P.C., 533 F. Supp. 2d 290, 302–

03 (E.D.N.Y. 2008); see also Buchanan v. Northland Grp., Inc., 776 F.3d 393, 399 (6th Cir. 2015)

(finding that a settlement offer with respect to a time-barred debt falsely implies that a debt is

legally enforceable), these cases have no application here. There is a meaningful difference

between attempting to collect on a time-barred debt without disclosing the fact that it is time-

barred—i.e., making an actual, material omission regarding the “legal status” of the debt to the

consumer—and affirmatively creating a false record so as to enable otherwise time-barred debt

litigation in the future. The former has to do with false or deceptive notice to the consumer, which

is the target of the FDCPA’s provisions, see Cohen, 897 F.3d at 85 (“The FDCPA was designed

to give consumers reliable information so that they can make informed decisions about how to

address debts . . . .”), whereas the latter has to do with simple fraud. The fundamental defect in

Plaintiff’s theory, as discussed more supra, is that it presumes a consumer who is a lawyer, and an

extremely sophisticated one at that.

8 In reality, Plaintiff’s theory makes no sense. If, as Plaintiff posits, Schachter had wanted

to falsely argue in a future debt collection action that Plaintiff had made partial payments,

Schachter would not have disclosed this concocted information to Plaintiff in the debt notice.

Rather, Schachter’s letters simply would have advised Plaintiff of the total debt amount due,

without any reference to credits. Then, Schachter would have produced whatever “records” it

needed in connection with the debt collection action to fraudulently assert that Plaintiff had made

partial payments that extended the statute of limitations. If anything, by referencing the credit in

Plaintiff’s debt notices, Schachter was not “deceiving” Plaintiff with regard to Schachter’s alleged

nefarious plot, but instead alerting Plaintiff to, and undermining, it.

9 As previously noted in this district, many FDCPA cases appear to be lawyers’ cases,

alleging “defect[s] of which only a sophisticated lawyer, not the least sophisticated consumer,

would conceive.” Ocampo, v. Client Servs., Inc., No. 18-CV-4326 (BMC), 2019 WL 2881422, at

*3 (E.D.N.Y. July 3, 2019). The inferential leap purportedly made by Plaintiff places this case

among them and surely contributes to systemic costs that will be passed on to consumers in the

form of higher interest rates and decreased access to credit. See id.

v. Fin. Recovery Servs., Inc., 252 F. Supp. 3d 344, 352 (S.D.N.Y. 2017), aff’d, 886 F.3d 212 (2d

Cir. 2018).

Accordingly, Plaintiff’s claim under § 1692e(2) is dismissed.

B. Section 1692e(10)

Plaintiff’s claim under Section 1692e(10) is similarly meritless. As discussed supra,

Section 1692e(10) prohibits “[t]he 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(10). While Plaintiff may be correct that the use of a “false record” in debt collection

litigation to try to extend the statute of limitations would violate § 1692e(10), that scenario has

nothing to do with the representations made to Plaintiff in the debt collection letters that Schachter

sent. See Sykes v. Mel S. Harris and Associates LLC, 780 F.3d 70, 96–97 (2d Cir. 2015)

(considering allegations that the defendants had filed false affidavits in court and distinguishing

such false representations to a court from false representations to a debtor). Here, it cannot

plausibly be inferred that, by sending letters informing Plaintiff of credits applied to his debt

amount, Schachter had engaged in a deceptive means of debt collection. Rather, the allegations in

the complaint establish that Schachter simply conveyed information about the amount due on the

debt and the manner in which that amount was calculated. Viewed most charitably, Plaintiff’s

§ 1692e(10) claim is a premature and speculative attack on a deceptive debt collection practice

that might arise in a future debt collection action, rather than a viable claim for relief based on a

past means of debt collection that is false or deceptive on its face.

Accordingly, Plaintiff’s claim for relief under § 1692e(10) is dismissed.

III. Claim Under Section 1692g

Plaintiff also seeks relief under 15 U.S.C. § 1692g(a)(1), which provides, inter alia, that

“[w]ithin five days after the initial communication with a consumer in connection with the

collection of any debt, a debt collector shall . . . send the consumer a written notice containing . . .

the amount of the debt.” Plaintiff claims that Schachter’s November 19 letter violated this

provision because its reference to a $73.39 “payment and/or credit” was confusing, causing the

letter to “fail[] to clearly and effectively state the amount of the debt.” (Am. Compl., Dkt. 18,

¶¶ 42, 46.) He argues that “[w]hether or not the amount Schachter alleges is due in its letter is

accurate in hindsight,” the letter’s inclusion of different amounts for the “amount of the debt due

as of charge-off,” the amount of “payments and/or credits,” and the “amount of the debt due” failed

to clearly and effectively communicate the required information. (Id.; see also November 19, 2018

Letter, Dkt. 18-3.)

Plaintiff’s claim is without merit. Schachter’s letter clearly stated: “Total amount of the

debt due: $6,257.68.” (November 19, 2018 Letter, Dkt. 18-3.) The information required by

§ 1692g(a), i.e., “the amount of the debt,” is stated unambiguously. The additional amounts, which

indicate that the debt was $6,331.07 at the time of charge-off and later reduced by a $73.39

“payment and/or credit,” simply clarify how the total amount of the debt was calculated. Though

Plaintiff claims that the inclusion of these amounts was “confusing,” the FDCPA does not impose

liability based on unreasonable misinterpretations of collection notices. See Eades v. Kennedy,

PC Law Offices, 799 F.3d 161, 173 (2d Cir. 2015). As even the least sophisticated consumer is

capable of “making basic, reasonable[,] and logical deductions and inferences,” Dewees v. Legal

Servicing, LLC, 506 F. Supp. 2d 128, 132 (E.D.N.Y. 2007) (internal quotation marks omitted),

Plaintiff’s claim under § 1692g(a) fails.10

10 Plaintiff’s citation to Carlin v. Davidson Fink LLP, 852 F.3d 207 (2d Cir. 2017), is

unavailing. (See Pl.’s Supp., Dkt. 30, at 5.) The debt collection letter at issue in Carlin indicated

that the total amount of the debt due “may include estimated fees and costs.” Carlin, 852 F.3d at

217. Because Schachter’s November 19 Letter contains no such vague, Delphic language, Carlin

is distinguishable.

CONCLUSION

For the reasons stated, the Court grants Schachter’s motion to dismiss. Schachter Portnoy,

L.L.C.11 is hereby terminated as a party to this action.

SO ORDERED.

/s/ Pamela K. Chen

Pamela K. Chen

United States District Judge

Dated: September 11, 2019

Brooklyn, New York

11 The Court notes that co-Defendant Cavalry has not moved to dismiss the complaint as

to it, despite allegedly having sent debt collection letters containing the same language as the

Schachter letters. Accordingly, the Court is ordering Plaintiff to show cause, by October 11, 2019,

why the FDCPA claims against Calvary should not also be dismissed.