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Escobar v. Midland Credit Management

United States District Court, D. Connecticut

August 8, 2019

JOSE RAMIREZ ESCOBAR, Plaintiff,
v.
MIDLAND CREDIT MANAGEMENT, Defendant.

          RULING ON MOTION TO DISMISS

          MICHAEL P. SHEA, U.S.D.J.

         Plaintiff, Jose Ramirez Escobar, brings this suit against Defendant, Midland Credit Management (“Midland”), alleging that Midland violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. Midland has moved to dismiss Escobar's Second Amended Complaint (ECF No. 18 (hereinafter “SAC”)) for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). (ECF No. 22.) For the following reasons, Midland's motion to dismiss is DENIED.

         I. Factual Allegations

         The factual allegations below are drawn from Escobar's Second Amended Complaint and are accepted as true for the purpose of adjudicating this motion.

         On an unspecified date, Escobar “incurred a credit card debt through personal use.” (SAC ¶ 7.) Midland is a debt collector, as the principal purpose of its business is to collect debts and it regularly attempts to collect on debts primarily incurred for personal, family, or household purposes. (Id. at ¶¶ 5, 9.) Midland voluntarily and continuously reported Escobar's debt to credit reporting agencies in an attempt to collect on Escobar's credit card debt. (Id. at ¶ 10.)

         Midland's credit reporting collection attempts failed, so Midland “sent” the debt to a third-party collector, London & London. (Id. at ¶ 11.) London & London subsequently filed litigation against Escobar. (Id. at ¶ 12.) Through a check dated August 21, 2017, Escobar paid and settled the outstanding debt and the litigation was withdrawn. (Id. at ¶ 13.) Escobar understood that by paying the debt, his credit report would no longer reflect that the debt was due and owing. (Id.) Had Escobar known that Midland would continue reporting the debt as unpaid despite his payment, Escobar would not have paid the debt in the first place, or would have negotiated substantially better terms. (Id.)

         On or about October 10, 2017, Escobar reviewed a trade line on his credit report placed by Midland for the paid debt. (Id. at ¶ 14.) He observed that Midland failed to report the trade line as paid with each of the credit bureaus. (Id. at ¶ 15.) Escobar alleges on information and belief that Midland continued to voluntarily report the debt as owed after receiving Escobar's August 21, 2017 payment. (Id. at ¶ 16.) In the alternative, Escobar alleges that Midland failed to mark the debt as paid after receiving payment, and thus continued to hurt Escobar's credit score and credit worthiness. (Id. at ¶ 17.) By continuing to report a delinquency or alternatively allowing the debt to remain reported as unpaid, Midland caused injury to Escobar's credit reputation. (Id. at ¶ 18.) By making the August 21, 2017 payment with the “inherent understanding that once a debt is paid [his] credit report would reflect that he no longer owes money, ” Escobar suffered actual damages by not getting the benefit of his settlement bargain. (Id. at ¶ 19.) He further claims mental anguish from Midland's continued representation to third parties that the debt was due and owing when it was not. (Id. at ¶ 20.)

         Escobar claims that the above actions violated various provisions of the FDCPA. Specifically, he claims that Midland knowingly reported false information to the credit bureaus concerning his credit card debt in violation of 15 U.S.C. §§ 1692e, e(2), e(8) and e(10). (SAC ¶ 22.) He also contends that Midland, through its agent London & London, violated 15 U.S.C. § 1692e by allowing Escobar to believe that his payment would be accurately reflected within his credit report, yet continuing to report, or allow the reporting of, the trade line as unpaid. (SAC ¶ 23.) Finally, Escobar claims that Midland violated 15 U.S.C. § 1692f by allowing Escobar's credit to be harmed even after Escobar made payment and even though Escobar understood that the credit report would not continue to show a balance owing. (Id. at ¶ 24.) Escobar seeks declaratory relief, statutory and actual damages, and costs and reasonable attorney's fees under 15 U.S.C. § 1692k.

         II. Legal Standard

         On a motion to dismiss under Rule 12(b)(6), I take the plaintiff's factual allegations in the complaint “to be true and draw[] all reasonable inferences in” his favor. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and quotation marks omitted). “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. A court need not accept legal conclusions as true and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.

         III. Discussion

         Midland's arguments to dismiss the SAC fall along three lines: first, that Escobar lacks Article III standing because he has not suffered an injury-in-fact (ECF No. 22-2 at 17-19); second, that the SAC fails to state a claim for a violation of the FDCPA (ECF No. 22-2 at 9-17), and third, that Escobar's allegations concerning actual damages are conclusory (ECF No. 22-2 at 19-21.)

         For the reasons set forth below, I conclude that Escobar has standing to sue and that his claims under 15 U.S.C. §§ 1692e and 1692f as well as his claim for actual damages may proceed.

         A. Standing

         The jurisdiction of federal courts under Article III of the Constitution is limited to “Cases” or “Controversies.” U.S. Const, art. III, § 2, cl. 1. One consequence of this limitation is that a plaintiff must demonstrate Article III standing to invoke the jurisdiction of a federal court. To do so, “a plaintiff must demonstrate (1) ‘injury in fact,' (2) a ‘causal connection' between that injury and the complained-of conduct, and (3) a likelihood ‘that the injury will be redressed by a favorable decision.'” Strubel v. Comenity Bank, 842 F.3d 181, 187-88 (2d Cir. 2016) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). Here, Midland asserts Escobar lacks Article III standing because he has not suffered an injury-in-fact. (ECF No. 22-2 at 17-19.)

         An injury-in-fact involves the “invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560 (1992) (citation and quotation marks omitted). “The party invoking federal jurisdiction bears the burden of establishing th[is] element[].” Id. at 561. However, “[a]t the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice.” Id. Midland argues that Escobar's injury is not concrete, particularized, nor actual or imminent. (ECF No. 22-2 at 17-19.) I disagree.

         First, Midland argues that Escobar has not alleged a concrete injury, citing the Supreme Court's decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). (ECF No. 22-2 at 18.) In Spokeo, the Supreme Court reversed the Ninth Circuit for failing to address whether particular procedural violations of the Fair Credit Reporting Act (FCRA) were sufficiently concrete to confer Article III standing. Spokeo, 136 S.Ct. at 1549. The Court expanded on the definition of “concreteness.” While the Court recognized that a “bare procedural violation, divorced from any concrete harm, ” does not confer Article III standing, it also acknowledged that “the risk of real harm” “can[] satisfy the requirement of concreteness.” Id. at 1549-50. In such a case, a plaintiff does not need to allege “any additional harm beyond the one Congress has identified.” Id. at 1549. The Court left open the question of “whether the particular procedural violations [of the FCRA] alleged in this case entail a degree of risk sufficient to meet the concreteness requirement.” Id. at 1150. It warned, however, that “violation of one of the FCRA's procedural requirements may result in no harm” and that “not all inaccuracies cause harm or present any material risk of harm.” Id. More recently, the Second Circuit stated, “We understand Spokeo, and the cases cited therein, to instruct that an alleged procedural violation can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff's concrete interests and where the procedural violation presents a ‘risk of real harm' to that concrete interest.” Strubel, 842 F.3d at 190.

         Midland contends that Escobar alleges a bare procedural violation of the FDCPA that is insufficient to confer standing. (ECF No. 22-2 at 19.) I disagree. First, most courts have found that the FDCPA creates a substantive, not merely procedural, right “the violation of which would itself give rise to a concrete injury.” Guerrero v. GC Services Limited Partnership, 2017 WL 1133358 at *10 (E.D.N.Y. Mar. 23, 2017). Second, even if FDCPA rights are viewed as procedural, Escobar alleges more than a “bare procedural violation” because a violation of the FDCPA risks real harm to Escobar's interests as a consumer. See Williams v. Rushmore Loan Mgmt. Servs., LLC, No. 3:15-CV-673 (RNC), 2018 WL 1582515, at *6 (D. Conn. Mar. 31, 2018) (post-Spokeo case noting a violation of § 1692e risks real harm to consumers' interests, including to be free from financial stress and invasions of privacy); Sayles v. ...


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