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Henry Rogers v. Capital One Services

February 19, 2011

HENRY ROGERS, PLAINTIFF,
v.
CAPITAL ONE SERVICES, LLC,
UNITED RECOVERY SYSTEMS,LP,
AND CAPITAL ONE BANK (USA), N.A.



The opinion of the court was delivered by: Vanessa L. Bryant United States District Judge

MEMORANDUM OF DECISION GRANTING IN PART AND DENYING IN PART DEFENDANTS CAPITAL ONE SERVICES, LLC AND CAPITAL ONE BANK (USA), N.A.'S MOTION TO DISMISS [Doc. #20], GRANTING DEFENDANT UNITED RECOVERY SYSTEMS, LP'S MOTION TO

DISMISS [Doc. #22], AND GRANTING IN PART AND DENYING IN PART PLAINTIFF HENRY ROGERS' MOTION TO AMEND HIS COMPLAINT [Doc. #43]

The plaintiff, Henry Rogers ("Rogers"), brought this putative class action against defendants Capital One Services, LLC ("Capital One Services"), Capital One Bank (USA), N.A. ("Capital One Bank"), and United Recovery Systems, LP ("URS") alleging violations of the Fair Debt Collections Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq.*fn1

Presently pending before the Court are motions to dismiss filed by Capital One Services and Capital One Bank (collectively the "Capital One Defendants") [Doc. #20], and by URS [Doc. #22]. Also pending is a motion to amend filed by Rogers. [Doc. #43]. Rogers seeks leave to amend his complaint to eliminate his two withdrawn claims and to assert against the Capital One Defendants violations of the Connecticut Creditors' Collection Practices Act ("CCPA"), Conn. Gen. Stat. § 36a-645 et seq., and regulations promulgated thereunder. Id. For the reasons stated below, the Capital One Defendants' motion to dismiss is GRANTED IN PART and DENIED IN PART, and URS's motion to dismiss is GRANTED. Rogers' motion to amend is GRANTED IN PART and DENIED IN PART.

I. FACTUAL AND PROCEDURAL BACKGROUND Rogers' amended complaint alleges the following facts, which are taken as true for purposes of the instant motions. Rogers, a resident of Mystic, Connecticut, holds a consumer credit account with Capital One Bank, which has its principle of business in McLean, Virginia. Capital one Bank is a National Banking Association and wholly owned subsidiary of Capital One Financial Corporation ("COFC"). In or around February 2010, Rogers received a letter signed by Capital One Services (hereinafter the "Letter"), a Delaware limited liability company and subsidiary of Capital One Bank, which is engaged in the business of collecting debts on behalf of Capital One Bank and other COFC subsidiaries. The Letter, which is incorporated into the amended complaint, identifies Capital One Bank as the "creditor" on Rogers' account and advises Rogers that the annual percentage rate on his credit card account will be reduced to 0% if he calls a toll-free number to makes arrangements for an acceptable repayment plan. The Letter further states that, if he fails to make payments as agreed under the repayment plan, then his annual percentage rate will return to 19.90%.

The Letter does not specifically indicate that Rogers' account is delinquent, but contains language suggesting as much. For instance, the first paragraph of the Letter states "We realize circumstances can sometimes make it difficult to manage your finances. The good news is -- there's a way to pay it off." Am. Compl. ¶ 10. Similarly, there is a post-script inviting Rogers to "Call today at 1-800-258-9319 to make payment arrangements and start to resolve your debt." Id. The final paragraph of the Letter notifies Rogers that if his account is being served by "one of our external agencies, they will be able to assist you and will notify us when you have made acceptable arrangements with them." Am. Compl.

¶ 10. Telephone calls to the toll-free number listed in the Letter are redirected to URS, a Texas corporation engaged in the business of collecting, or attempting to collect, debts owed or due or asserted to be owed or due to another. While the Letter informed Rogers that his account might be handled by an external agency, it did not specifically identify URS.

The bottom of the first page of the Letter contains the following text: "NOTICE: PLEASE SEE REVERSE SIDE FOR IMPORTANT INFORMATION." Id. The reverse side of the Letter makes a series of disclosures. Capital One Services makes clear that it is the entity sending the Letter, that it is a subsidiary of Capital One Bank, and that it provides services to Capital One affiliates:

Who We Are and Who We Service. Capital One Services, LLC is a subsidiary of Capital One, National Association, and services the following Capital One affiliated companies:

Capital One Bank (USA), National Association; Capital One, National Association; and Capital One Auto Finance, Inc. Id. ¶ 11. The reverse side of the Letter also includes a series of disclosures required by state and local law of various jurisdictions. One of these disclosures, which applies to individuals receiving the Letter in Connecticut as well as multiple other States, provides as follows: "This is an attempt to collect a (consumer) debt (claim). Any information obtained will be used for that purpose." Id. Another disclosure, which applies only to individuals receiving the Letter in Iowa, states: "This communication is from a debt collector." Id.

Rogers claims that the Letter deceives and misleads consumers in the following ways. First, he claims it omits "any mention of the consumer's right, under Federal law, to dispute the debt or to obtain verification of the debt. Id. ¶15. Second, he claims it deceives and misleads by "creating the false impression that it is transmitted by Capital One [Bank]," when in fact it is transmitted by Capital One Services, "on its own behalf and on behalf of" URS. Id. ¶ 16. Third, he claims the Letter fails to "effectively communicate that it is transmitted by a 'debt collector.'" Id. ¶ 17. Finally, he claims the Letter entices the addressee to contact Capital One Services and URS by offering an annual percentage rate of 0% on his debt if he makes an acceptable repayment plan and threatening that his annual percentage rate will "return to 19.90%" on the entire debt if that agreement is not honored. Id. ¶ 18.

The Letter was the first written communication transmitted to and received by Rogers in which any debt was noted with reference to his credit account with Capital One Bank. He does not indicate whether he had previously received a bill from Capital One Bank. Nor does not allege what, if any, action he took in response to the Letter.

The amended complaint also contains class action allegations asserting that the Letter received by Rogers is a mass-mailed form letter substantially similar to thousands of letters sent to consumers across the country. Accordingly, Rogers seeks certification of a class pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of himself and all others similarly situated. The proposed class is defined as: "All consumers to whom a letter in the form of the Letter was sent by the Defendants into the State of Connecticut within one year prior to the filing date of this action and which was not returned as undeliverable." Id. ¶ 20.

Rogers filed this action on March 16, 2010. [Doc. #1]. He filed his amended complaint on May 6, 2010. [Doc. #18]. The defendants filed their motions to dismiss on May 20, 2010. [Doc. ##20, 22]. They move to dismiss the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the alternative, to strike the class action allegations in the amended complaint. Rogers filed a joint opposition to both motions on June 10, 2010. [Doc. #31]. The defendants filed a joint reply on June 17, 2010. [Doc. #33]. Subsequently, on July 19, 2010, Rogers filed his motion to amend his complaint in order to omit his two withdrawn claims and to add four additional claims against the Capital One Defendants for violation of the CCPA and regulations promulgated thereunder. [Doc. #43]. The Capital One Defendants filed an opposition to the motion to amend on August 9, 2010, arguing that the proposed CCPA claims are futile. [Doc. #47].

II. STANDARD OF REVIEW "Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain a 'short and plain statement of the claim showing that the pleader is entitled to relief.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). While Rule 8 does not require detailed factual allegations, "[a] pleading that offers 'labels and conclusions' or 'formulaic recitation of the elements of a cause of action will not do.' Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Id. (internal quotations omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' 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." Id. (internal citations omitted).

In considering a motion to dismiss for failure to state a claim, the Court should follow a "two-pronged approach" to evaluate the sufficiency of the complaint. Hayden v Paterson, 594 F.3d 150, 161 (2d Cir. 2010). "A court 'can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.'" Id. (quoting Iqbal, 129 S.Ct. at 1949-50). "At the second step, a court should determine whether the 'well-pleaded factual allegations,' assumed to be true, 'plausibly give rise to an entitlement to relief.'" Id. (quoting Iqbal, 129 S.Ct. at 1950). "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, 129 S.Ct. at 1949 (internal quotation marks omitted).

III. DISCUSSION A. FDCPA Claims Against Capital One Defendants The Capital One Defendants argue that Rogers' FDCPA claims against them should be dismissed because neither company is a "debt collector" under the FDCPA. Rogers alleges violations of 15 U.S.C. §§ 1692e, 1692f, and 1692g. Each of these provisions proscribes the conduct of debt collectors solely. See id.; Williams v. Citibank, N.A., 565 F. Supp. 2d 523, 528 (S.D.N.Y. 2008). Therefore, the Court must determine whether Rogers has sufficiently alleged that both of the Capital One Defendants are debt collectors under the FDCPA.

The FDCPA defines a "debt collector" as:

[A]ny 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). Generally, creditors are not subject to the FDCPA. See Maguire v. Citicorp Retail Servs., Inc., 147 F.3d 232, 235 (2d Cir. 1998). However, under the "false name" exception, a creditor becomes subject to the FDCPA as a debt collector if the creditor "in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts." 15 U.S.C. § 1692a(6).

1. Claims as against Capital One Bank

Rogers refers to Capital One Bank as a creditor in his amended complaint. Further, the Letter explicitly identifies Capital One Bank as Rogers' creditor. In his opposition to the motion to dismiss, Rogers does not dispute that Capital One Bank is a creditor under the FDCPA.*fn2 Nevertheless, Rogers contends that Capital One Bank may be held liable under the FDCPA based upon the "false name" exception set forth in 15 U.S.C. § 1692a(6). This exception applies to any creditor who, in the process of collecting or attempting to collect its debts, "indicate[s] that a third party is collecting or attempting to collect such debts, . . . pretends to be someone else or uses a pseudonym or alias, . . . or [who] owns and controls the debt collector, rendering it the creditor's alter ego." See Mazzei v. Money Store, 349 F. Supp. 2d 651, 659 (S.D.N.Y.2004) (internal quotations and citations omitted).

Conspicuously absent from Rogers' amended complaint is any allegation that Capital One Bank, his creditor, is collecting or attempting to collect its own debt, as he would need to demonstrate in order for the false name exception to apply. Rather, the amended complaint states that the debt was "transferred" to debt collectors, namely Capital One Services and URS, "for handling." Am. Compl. ¶ 40. Further, the Letter is signed by Capital One Services, and the amended complaint acknowledges that the Letter was transmitted by Capital One Services, "on its own behalf and on behalf of [URS]." Id. ¶ 16. Capital One Bank cannot be held liable under the false name exception merely because it employed a debt collector to recover its debt. See Williams, 565 F. Supp. 2d at 529 ("[T]he mere fact that a creditor employs a debt collector to recover its debts does not make the creditor vicariously liable for the acts of the debt collector.").

The cases cited by Rogers in his opposition are inapposite because they involve situations in which the creditor itself or an employee of the creditor was attempting to collect the creditor's debt. See Maguire, 147 F.3d at 237 (reversing grant of summary judgment where Letter from creditor created the erroneous impression that a third party was collecting its debts); Britton v. Weiss, No. 89-CV-143, 1989 WL 148663, at *2 (N.D.N.Y. Dec. 8, 1989) (applying false name exception where Letter written by creditor's employee gave impression that debt was being collected by an independent attorney not collecting debts in the name of the creditor). Rogers has not alleged that anyone at Capital One Bank ever communicated with him at all, let alone used the name of Capital One Services, URS, or any other person or entity for the purpose of attempting to collect its debt. Nor has Rogers alleged any facts to support a theory that Capital One Services or URS is an "alter ego" of Capital One Bank. In his amended complaint, Rogers alleges that Capital One Services is a subsidiary of Capital One Bank; however, the amended complaint does not allege the extent of Capital One Bank's ownership or that it controls the activities of Capital One Services. Therefore, the false name exception cannot apply, and the Capital One Defendants' motion to dismiss is granted with respect to the FDCPA claims against Capital One Bank. See Jenkins v. Union Corp., 999 F. Supp. 1120, 1143-44 (N.D. Ill. 1998) (holding that parent corporation could not be held liable for its subsidiary's debt collection practices because there was no evidence that subsidiary was subject to parent's total control); Wood v. Capital One Services, LLC, 718 F. Supp. 2d 286, 291 (N.D.N.Y. June 18, 2010) (holding, in a similar case against the Capital One Defendants, that Capital One Bank was not liable under the "false name" exception because plaintiff's complaint failed to allege that Capital One Bank was collecting or attempting to collect its own debts).

2. Claims as against Capital One Services

The amended complaint further alleges that Capital One Services is engaged in the principal business of collecting debts on behalf of Capital One Bank and other COFC subsidiaries. Am. Compl. ¶ 8. The FDCPA excludes from its definition of "debt collector" any entity acting as a debt collector for another entity where both entities are "related by common ownership or affiliated corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts." 15 U.S.C. § 1692a(6)(B). Thus, "a corporate affiliate is excluded from the [FDCPA's] coverage so long as it satisfies two conditions: [i] the affiliate collects debts only for entities with which it is affiliated or related; and [ii] the principal business of the affiliate is not debt collection." Burns v. Bank of America, 655 F. Supp. 2d 240, 255 (S.D.N.Y. 2008).

Rogers concedes that Capital One Services satisfies the first condition, as the amended complaint affirmatively alleges that Capital One Services is a subsidiary of Capital One Bank and collects debts only for COFC-related entities. Am. Compl. ¶ 8. The Capital One Defendants argue, however, that Capital One Services nevertheless qualifies for the affiliate exception because Rogers has not alleged sufficient facts to support his allegation that Capital One Services' principal business is debt collection.

The Court finds that the amended complaint sufficiently alleges that Capital One Services is not covered by the affiliate exception. Rogers alleges "upon information and belief" that the principal business of Capital One Services is the collection of debts on behalf of Capital One Bank and other COFC subsidiaries. Am. Compl. ¶ 8. Furthermore, Rogers asserts that Capital One Services sent the Letter regarding his delinquent account with Capital One Bank. Am. Compl. ¶ 10-11, 16. The reverse side of the Letter contains the following disclosure pertaining to individuals, such as Rogers, who received the Letter in Connecticut: "This is an attempt to collect a (consumer) debt (claim). Any information obtained will be used for that purpose." Id. at 11.*fn3 These allegations go beyond the conclusory assertion that Capital One Services is a debt collector under the FDCPA. See Wood, 718 F. Supp. 2d at 290 (holding the same in a very similar case against the Capital One Defendants).

The Capital One Defendants argue that Rogers' allegation that the principal business of Capital One Services is debt collection is contradicted by language in the Letter stating that Capital One Services "services . . . Capital One affiliated companies" and is "the current servicer of your Account." Am. Compl. ¶ 11. In support of this argument, the Capital One Defendants cite cases in which district courts dismissed FDCPA claims against mortgage servicers on the basis that servicers do not qualify as debt collectors under the FDCPA. See Schuh v. Druckman & Sinel, L.L.P., 602 F. Supp. 2d 454, 463 (S.D.N.Y. 2009) (dismissing FDCPA claim on the basis that complaint did not allege facts showing that defendant was in the principal business of collecting debts, but instead alleged that defendant was a servicer of mortgages); Mitchell v. EMC Mortgage Corp., No. CV-09-1362-PHX-NVW, 2009 WL 3274407, at *5 (D. Ariz. Oct. 13, 2009) (dismissing FDCPA claim on the ground that defendant, a mortgage servicing company, was not a debt collector under the FDCPA). These cases are distinguishable, however, because there is no indication that the plaintiffs made an allegation that the defendants regularly engaged in the business of debt collection as does Rogers.

Here, by contrast, Rogers factually alleges that the principal business of Capital One Services is debt collection and that Capital One Services sent a Letter to him attempting to collect a debt owed on his credit card account. The fact that Capital One Services may also be in the business of servicing credit card accounts does not necessarily mean that its principal business is not debt collection. A determination as to what is the principal business of Capital One Services is best left for the summary judgment stage, after the parties have an opportunity to exchange discovery regarding this matter. For purposes of a motion to dismiss, Rogers has plausibly alleged that Capital One ...


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