Reply Brief — Portfolio Recovery Associates, LLC, Petitioner v. Manuel Pantoja

No. 17-255

IN THE

Supreme Court of the United States

PORTFOLIO RECOVERY ASSOCIATES, LLC,

Petitioner,

v.

MANUEL PANTOJA,

Respondent.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

REPLY BRIEF FOR PETITIONER

David L. Hartsell

MCGUIREWOODS LLP

77 West Wacker Drive

Suite 4100

Chicago, Illinois 60601

Benjamin L. Hatch

Counsel of Record

E. Rebecca Gantt

MCGUIREWOODS LLP

2001 K Street N.W.

Suite 400

Washington, DC 20006-1040

(202) 857-1727

bhatch@mcguirewoods.com

i

CORPORATE DISCLOSURE STATEMENT1

PRA Group, Inc., a publicly held company, is

the parent corporation of Petitioner Portfolio Recovery

Associates, LLC. No publicly-held company owns 10

percent or more of the stock of Petitioner Portfolio

Recovery Associates, LLC because Petitioner does not

have any stock.

1 The Petition included the following disclosure: “PRA Group, Inc.

is the parent corporation of Petitioner Portfolio Recovery

Associates, LLC. No publicly-held company owns 10 percent or

more of the stock of Portfolio Recovery Associates, LLC.” There

has been no material change to this information, but the

statement has been revised to clarify that Petitioner has no stock

but that its previously identified parent corporation is publiclyheld.

ii

TABLE OF CONTENTS

Page

INTRODUCTION ....................................................... 1

ARGUMENT ............................................................... 2

A.

Recent court decisions show that the split

is

entrenched and consequential .......... 2

B.

Respondent’s explanations for why there is

no split fail to withstand scrutiny ............. 6

C.

The outdated and inapposite FTC Act cases

Respondent cites provide no support for the

decision below ........................................... 10

CONCLUSION ......................................................... 12

iii

TABLE OF AUTHORITIES

Page(s)

CASES

Buchanan v. Northland Group, Inc.,

776 F.3d 393 (6th Cir. 2015) .................................. 5

Caw v. Portfolio Recovery Associates, LLC,

No. 11-06117, 2013 WL 30567 (W.D.

Mo. Jan. 2, 2013) .................................................... 4

Chevron, U.S.A., Inc. v. Natural

Resources Defense Council, Inc.,

467 U.S. 837 (1984) ............................................ 1, 7

Christensen v. Harris County,

529 U.S. 576 (2000) ................................................ 7

Daugherty v. Convergent Outsourcing,

Inc.,

836 F.3d 507 (5th Cir. 2016) .................................. 2

Dittig v. Elevate Recoveries, LLC,

No. 16CV1155, 2016 WL 4447818

(W.D. Pa. Aug. 24, 2016) ........................................ 4

Freyermuth v. Credit Bureau Services,

Inc.,

248 F.3d 767 (8th Cir. 2001) ........................ passim

Haynes v. Allied Interstate, LLC,

No. 4:14CV3130, 2015 WL 429800

(D. Neb. Feb. 2, 2015)............................................. 4

iv

Huertas v. Galaxy Asset Management,

641 F.3d 28 (3d Cir. 2011) ........................... passim

Judah v. Total Card, Inc.,

No. 16-5881, 2017 WL 2345636

(D.N.J. May 30, 2017) ............................................ 3

Local No. 93, Int’l Ass’n of Firefighters

v. City of Cleveland, 478 U.S. 501

(1986) ...................................................................... 7

Lugo v. Firstsource Advantage, LLC,

No. 2:15-cv-06405, 2016 WL 3406230

(D.N.J. June 16, 2016) ........................................... 4

McMahon v. LVNV Funding, LLC,

744 F.3d 1010 (7th Cir. 2014) ................................ 2

Midland Funding, LLC v. Johnson,

No. 16-348, 581 U.S. ___ (2017) ................. 2, 11, 12

Nat’l Cable & Telecommunications Ass’n

v. Brand X Internet Services,

545 U.S. 967 (2005) ................................................ 7

Sullivan v. Allied Interstate, LLC,

No. 16-203, 2016 WL 7187507 (W.D.

Pa. Oct. 18, 2016) ................................................... 4

Tatis v. Allied Interstate, LLC,

No. 16-00109, 2016 WL 5660431

(D.N.J. Sept. 29, 2016), appeal filed,

No. 16-4022 (3d Cir. Nov. 3, 2016) .................... 4, 5

Warner-Lambert Co. v. F.T.C,

562 F.2d 749 (D.C. Cir. 1977) .............................. 12

v

Zuinga v. Jefferson Capital Sys., LLC,

No. 4:16-cv-526, 2016 WL 7242767

(E.D. Tex. Dec. 15, 2016) ........................................ 2

STATUTES

15 U.S.C. § 1692(e) .................................................... 11

15 U.S.C. § 1692e ..................................................... 8, 9

RULE

Sup. Ct. R. 10(a) .......................................................... 8

1

INTRODUCTION

Respondent principally disputes not whether

the circuits disagree, but whether the split is an active

one. He argues that after the Third and Eighth Circuits held that a debt collector does not violate the Fair

Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§

1692-1692p when it seeks to collect a time-barred debt

so long as it does not threaten litigation, the relevant

agencies took “action” in opposition to those decisions.

Thereafter, the Fifth, Sixth, and Seventh Circuits followed the agencies’ lead and, according to Respondent,

the split disappeared into thin air.

Respondent’s position would surely surprise the

court below—and others such as the Fifth Circuit—

which continue to recognize the division of authority.

It would also be news to the district courts rendering

a slew of decisions within the Third and Eighth Circuits which state that they are bound by prior circuit

precedent and rendering decisions diametrically opposed to the one below and to those of the Fifth and

Sixth Circuits. The split is entrenched and, in light

of Chevron, unsurprisingly unaffected by the informal

statements and individualized consent decrees Respondent relies on.

As to the merits, Respondent relies on inapposite advertising cases under the FTC Act, apparently

because that statute and the FDCPA both use the

word “deceptive.” Advertising and debt collection are

obviously very different contexts, and none of the

courts of appeals on either side of the split have looked

to these cases for guidance. Tellingly, Respondent

provides almost no defense of the decision below, and

2

appears to seek to prevent a debt collector from ever

seeking to collect a time-barred debt, despite this

Court’s recent affirmation of its right to do so in Midland Funding, LLC v. Johnson.

The decision below implicates a recurrent question of statutory interpretation on which the courts of

appeals are divided. This Court should grant review

to resolve this important and persistent issue.

ARGUMENT

A. Recent court decisions show that the split is

entrenched and consequential.

Respondent’s argument that no split exists

would, if true, be a revelation to the circuits

themselves that have repeatedly acknowledged the

split. The decision below recognized “[t]he point of

controversy” among the courts of appeals. Pet. App.

6a. Similarly, the Fifth Circuit stated just last year

that “[t]here is an apparent conflict in the circuits as

to whether a collection letter offering ‘settlement’ of a

time-barred debt can violate the FDCPA if the debt

collector does not disclose the debt’s unenforceability

or expressly threaten litigation.”

Daugherty v.

Convergent Outsourcing, Inc., 836 F.3d 507, 511 (5th

Cir. 2016). And in an earlier case the Seventh Circuit

“recognize[d] that [its] interpretation [of the FDCPA

to be misleading even if no litigation is threatened]

conflicts with that of the Eighth and Third Circuits.”

McMahon v. LVNV Funding, LLC, 744 F.3d 1010,

1020 (7th Cir. 2014). See also, e.g., Zuinga v. Jefferson

Capital Sys., LLC, No. 4:16-CV-526, 2016 WL 7242767,

3

at *2 (E.D. Tex. Dec. 15, 2016) (recognizing “circuit

split”).

Moreover, the Third and Eighth Circuit

decisions remain good law in their respective circuits.

District courts have very recently—years after the

agency actions that Respondent points to—expressly

relied on Huertas v. Galaxy Asset Management, 641

F.3d 28 (3d Cir. 2011), and Freyermuth v. Credit

Bureau Services, Inc., 248 F.3d 767 (8th Cir. 2001), to

render decisions that are impossible to reconcile with

the decision below and with the decisions of the Fifth

and Sixth Circuits. These district court decisions are

frequent and directly on point.

Contrary to

Respondent’s contention, this split is very much an

active one.

For example, in Judah v. Total Card, Inc.,

decided earlier this year, the district court considered

a letter very similar to the one here and granted the

debt collector’s motion to dismiss. No. 16-5881, 2017

WL 2345636 (D.N.J. May 30, 2017). The letter offered

to settle the debt and stated that “[t]he law limits how

long you can be sued on a debt. Because of the age of

your debt, [we] will not sue you for it.” Id. at *1. The

court rejected the debtor’s argument that Huertas was

no longer good law in light of agency opinions and that

the court should follow the Fifth, Sixth, and Seventh

Circuits instead. Id. at *5. Huertas “remains binding

precedent,” the district court reasoned, and the letter

“does not threaten to initiate legal action. In fact, it

specifically states that due to the age of the debt,

[Defendant] will not sue Plaintiff for the debt.” Id.

4

Similarly, in Lugo v. Firstsource Advantage,

LLC, No. 2:15-cv-06405, 2016 WL 3406230, at *2

(D.N.J. June 16, 2016), the court granted the debt

collector’s motion to dismiss where the letter “never

states that the debt is time-barred.” It stated,

“Plaintiff’s position that Huertas should not control

and that this Court should instead follow out-of-circuit

and district court opinions is unavailing.” Id. In

Dittig v. Elevate Recoveries, LLC, No. 16CV1155,

2016 WL 4447818, at *4 (W.D. Pa. Aug. 24, 2016), even

though the letter contained no disclosures and used

“settlement” language, the district court granted the

debt collector’s motion to dismiss. It reasoned that

“[u]nder Huertas, our task is to consider whether a

debt collection attempt threatens litigation in a

manner that would deceive or mislead the least

sophisticated debtor. The mere use of the word

‘settlement’ simply does not represent such a threat.”

Id. See also Sullivan v. Allied Interstate, LLC, No. 16203, 2016 WL 7187507, at *7 (W.D. Pa. Oct. 18, 2016)

(applying Huertas to a similar communication); Tatis

v. Allied Interstate, LLC, No. 16-00109, 2016 WL

5660431 (D.N.J. Sept. 29, 2016) (similar), appeal filed,

No. 16-4022 (3d Cir. Nov. 3 2016).

As in the Third Circuit, district courts in the

Eighth Circuit continue to apply Freyermuth to reject

debtors’ FDCPA claims where debt collectors make no

disclosures at all when they seek to collect a timebarred debt. See, e.g., Haynes v. Allied Interstate,

LLC, No. 4:14CV3130, 2015 WL 429800, at *4 (D. Neb.

Feb. 2, 2015); Caw v. Portfolio Recovery Assocs., LLC,

No. 11-06117, 2013 WL 30567, at *2 (W.D. Mo. Jan. 2,

2013).

5

Though Respondent does not rely on its

arguments in this regard, in Buchanan v. Northland

Group, Inc., 776 F.3d 393, 399 (6th Cir. 2015), the

Sixth Circuit asserted, over a dissent, that no conflict

exists. It gave two reasons for this conclusion, neither

of which is persuasive. First, it stated that both

Huertas and Freyermuth only held “that an attempt

to collect a time-barred debt is not a thinly veiled

attempt to sue” and did not address the possibility

that the debt collector’s communication caused

confusion. Id. at 399-400. But as discussed below,

both courts considered the full scope of the debtor’s

communications and applied the FDCPA’s false and

misleading standard to those communications.

Second, the Sixth Circuit believed there was no

conflict because neither case featured a letter offering

a “settlement.” Id. at 400. But as one court has

explained, “[w]hile the collection letter in Huertas did

not use the word ‘settle’ it did use the word ‘resolve.’

The definitions of the words ‘settle’ and ‘resolve’ are

strikingly similar and the Court does not see a

material difference between the two.” Tatis, 2016 WL

5660431, at *9. The letter in this case used similar

“settlement” language to that in Buchanan, yet the

Seventh Circuit did not discuss or rely on that

language as a ground for finding the letter misleading.

Thus, this is no basis for distinguishing the decision

below from Huertas and Freyermuth. Moreover,

Buchanan preceded the Seventh Circuit’s decision

below, which still held that there was a conflict. Pet.

App. 6a.

In sum, Respondent’s assertion that this issue

is no longer the subject of a live circuit split is belied

6

by the recent statements by the Fifth and Seventh

Circuits and by the ongoing district court decisions in

the Third and Eighth Circuits. That nearly identical

communications subject a debt collector to liability in

the Fifth, Sixth and Seventh Circuits, but not in the

Third and Eighth Circuits, is a scenario that invites

forum shopping, particularly in the class action

context. The split is entrenched and merits this

Court’s review.

B. Respondent’s explanations for why there is

no split fail to withstand scrutiny.

Respondent’s principal argument is that the

split has not remained active in light of recent agency

“actions” regarding time barred debts. Opp’n 2-10.

Specifically, he states that the agencies tasked with

enforcing the FDCPA reacted negatively to the Third

and Eighth Circuit decisions, and that the Fifth, Sixth,

and Seventh Circuits subsequently followed the

agencies’ positions.

The agency “action” that

Respondent cites, however, consists not of notice and

comment rulemaking,2 but of: 1) a statement by a FTC

official, Opp’n 3; 2) a 2012 FTC consent decree with an

individual debt collector, id.; 3) three 2012 CFPB

consent decrees with American Express related

entities, id.; and 4) a 2013 FTC report entitled The

2 In fact, the CFPB and FTC have not conducted any final notice

and comment rulemaking under the FDCPA, undermining Respondent’s assertion that the question presented should be resolved by “agency evaluation.” Opp’n 9.

7

Structure and Practices of the Debt Buying Industry,

Opp’n 4.3

While the Fifth, Sixth, and Seventh Circuits

have referenced some of these or other agency

materials, none have treated them as determinative of

the question of statutory interpretation at issue here,

or suggested that they eliminated the split. For good

reason: None of these materials are entitled to judicial

deference under Chevron, U.S.A., Inc. v. Natural Res.

Def. Council, Inc., 467 U.S. 837 (1984).

“Interpretations such as those in opinion letters—like

interpretations contained in policy statements, agency

manuals, and enforcement guidelines, all of which

lack the force of law—do not warrant Chevron-style

deference.” Christensen v. Harris County, 529 U.S.

576, 587 (2000). See also Local No. 93, Int'l Ass'n of

Firefighters v. City of Cleveland, 478 U.S. 501, 522

(1986) (consent decrees).

And without Chevron

deference, there is no basis for prior judicial holdings

to “give way” to later agency interpretations. Opp’n 9

(citing Nat’l Cable & Telecommunications Ass’n v.

Brand X Internet Servs., 545 U.S. 967 (2005)).

Respondent also contends that the decisions of

the courts of appeals on the other side of the split—the

Third and the Eighth Circuits—are not “directly in

point.” Opp’n 8. As a preliminary matter, this

argument is inconsistent with his primary argument.

It is unclear why the agencies would have reacted to

3 In a policy document Respondent does not mention, the CFPB

has rejected the Seventh Circuit’s reasoning that a debt collector

must disclose that the statute of limitations may be revived. Pet.

28.

8

Huertas and Freyermuth by “express[ing] their views

on the precise issue before the Court,” Opp’n 10, if

those cases did not actually decide “the precise issue

before the Court.”

Respondent’s argument appears to derive

mainly from his review of the briefs in those cases. He

contends that the debtors did not make the precise

argument that is at the center of this split. Opp’n 1-2.

Of course, what matters is whether the decisions of the

courts of appeals, and not the briefs of the parties, are

in conflict. Sup. Ct. R. 10(a) (a compelling reason

warranting this Court’s review is where “a United

States court of appeals has entered a decision in

conflict with the decision of another United States

courts of appeals on the same important matter”

(emphases added)).4 The decisions of the Third and

Eighth Circuits are in direct conflict with the decisions

of the Fifth, Sixth, and Seventh Circuits. Respondent

does not dispute that Petitioner’s letter complies with

the FDCPA as interpreted by the Third and Eighth

Circuits.

Based only on a district court decision that

actually upheld a letter using very language similar to

the one here, Respondent claims that neither the

Third nor the Eighth Circuit “squarely addressed” the

issue in this case. Opp’n 9-10. In so arguing,

Respondent advances an argument inconsistent with

4 The complaint in the Eighth Circuit case is not available, but

the debtor in the Third Circuit case argued in that complaint that

the debt collector violated 15 U.S.C. § 1692e, the provision at issue here. Huertas v. Galaxy Asset Management, No. 1:09cv2604

(D.N.J. May 26, 2009), ECF No. 1 at 6.

9

the Seventh Circuit’s decision below that he otherwise

seeks to defend. Both the Third and the Eighth

Circuits directly spoke to the question presented, as

the Seventh Circuit recognized below. Pet. App. 7a.

In Freyermuth, the Eighth Circuit quoted from the

statutory provision at issue in this case, 15 U.S.C. §

1692e, at the outset of its analysis. 248 F.3d at 770.

It stated that the appropriate inquiry “focuses on the

debt

collector’s

actions,

and

whether

an

unsophisticated consumer would be harassed, misled

or deceived by them.” Id. at 771. And, though there

had been no apparent disclosures by the debt collector

regarding the statute of limitations, it held that “no

violation of the FDCPA has occurred when a debt

collector attempts to collect on a potentially timebarred debt that is otherwise valid.” Id.

In Huertas, 641 F.3d at 33, the Third Circuit

undertook a similar analysis. It likewise set forth

Section 1692e’s prohibition of false, deceptive, or

misleading representations as a provision governing

the debtor’s FDCPA claim. It also indicated that it

was analyzing the full scope of the debt collector’s

communication, noting that under Freyermuth, the

debtor’s FDCPA claim “hinges on whether [the] letter

threatened litigation.” Id. It quoted the language of

the letter and analyzed whether it implicitly or

explicitly threatened litigation, and held that it did

not. Id.

10

C. The outdated and inapposite FTC Act cases

Respondent cites provide no support for the

decision below.

Respondent’s merits argument is built on a

straw man and betrays a broader agenda to foreclose

any effort to solicit payment of a time-barred debt.

Opp’n 11-23. Respondent devotes the great bulk of his

merits argument to opposing a claim that the

FDCPA’s prohibition of “deceptive” or misleading”

representations means that the statute should be

interpreted to prohibit only literal falsity and “cannot

be used to require affirmative disclosures of material

information.” Opp’n 11. Petitioner does not make

such an argument. Petitioner’s contention is instead

that the terms “deceptive” and “misleading” should be

construed in accordance with their accepted

definitions of causing a belief that is untrue. Pet. 21.

A representation may cause a wrong belief by what it

says or by what it does not say. In the context of a

time-barred debt, the Third and Eighth Circuit’s test

appropriately focuses on whether the communication

causes a debtor to believe that such a debt may be

enforced through litigation even though it is outside

the statute of limitations.

What is critical is that a communication has the

capacity to cause a wrong belief, and Respondent

offers no explanation for why the letter at issue in this

case—a letter saying in simple terms, “we will not sue

you”—satisfies that test. Respondent makes no effort

to defend the Seventh Circuit’s decision beyond

making the general argument that the FDCPA can

11

require affirmative disclosures.5 Opp’n 20-21. This

glaring omission demonstrates that the decision below

stretches the FDCPA’s prohibition of deceptive and

misleading communications beyond its breaking point.

Here, the Seventh Circuit required a debt collector to

disclose to a debtor the potential legal consequences of

its actions—the revival of the statute of limitations—

even though this is both uncertain as a matter of state

law and untrue as a matter of fact in light of

Petitioner’s unconditional statement that it will not

sue Respondent, period. Thus, the Seventh Circuit

appears to require representations that are

themselves potentially misleading and deceptive.

This Catch-22 is in tension with the FDCPA’s

express recognition that debt collectors are allowed to

collect the debts they are owed as long as they do so in

an ethical manner. 15 U.S.C. § 1692(e). This Court

has further recognized in Midland Funding, LLC v.

Johnson that time-barred debts are ones that remain

owed, and thus may be collected without running afoul

of the FDCPA. No. 16-348, 581 U.S. ___, ___ (2017)

(slip op., at 3). The Seventh Circuit’s decision violates

these basic principles.

Not only is Respondent’s extended discussion of

decades-old cases involving another statute—the FTC

Act, 15 U.S.C. §§ 41-58—an irrelevant non sequitur

because it mischaracterizes Petitioner’s argument,

but it is also flawed. The crux of his argument is that

Congress was aware of a D.C. Circuit decision under

the FTC Act issued a mere three days before the

5 Respondent also does not dispute that this case is a good vehicle

for considering the question presented.

12

Senate passed a bill that would become the FDCPA.

Opp’n 15-16. Respondent adduces no legislative

history—and Petitioner has found none—that even

suggests that the FDCPA was crafted, practically at

the last legislative minute, with a view to a D.C.

Circuit decision involving a different statute.

None of this is surprising as the case

Respondent cites is of almost no relevance to the issue

at hand. Warner-Lambert Co. v. F.T.C. involved

advertising, not debt collection, and held that “under

certain circumstances an advertiser may be required

to make affirmative disclosure of unfavorable facts,”

but did not require disclosure of hypothetical legal

consequences. 562 F.2d 749, 759 (D.C. Cir. 1977).

Respondent cites no case that holds that Congress is

presumed to legislate against the backdrop of a circuit

court decision under a different statute issued shortly

before passage of the act at hand. That rule of

statutory interpretation does not exist, as it is

inconsistent with reasonable assumptions of the

legislative process and would encourage the type of

opportunistic circuit trolling reflected in Respondent’s

arguments.

CONCLUSION

For these reasons and those stated previously,

the petition for a writ of certiorari should be granted.

In the alternative, the petition should be granted, the

judgment below vacated, and the case remanded for

further consideration in light of Midland Funding,

LLC v. Johnson, No. 16-348, 581 U.S. ___ (May 15,

2017).

13

Respectfully submitted,

David L. Hartsell

MCGUIREWOODS LLP

77 West Wacker Drive

Suite 4100

Chicago, Illinois 60601

Benjamin L. Hatch

Counsel of Record

E. Rebecca Gantt

MCGUIREWOODS LLP

2001 K Street N.W.

Suite 400

Washington, DC 20006-1040

(202) 857-1727

bhatch@mcguirewoods.com

December 22, 2017