MARSHALL-MOSBY v. CORP. RECEIVABLES, INC

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Docket Number

No. 99-1217

Attorney(S)

Daniel A. Edelman, Cathleen M. Combs (argued), Edelman, Combs, Latturner, Chicago, IL, for plaintiff-appellant. David J. Chizewer (argued), Goldberg, Kohn, Bell, Black, Rosenbloom Moritz, Chicago, IL, for defendant-appellee.

Judges

Michael Stephen Kanne

Acts

Commerce And Trade — Consumer Credit Protection — Debt Collection Practices — Congressional Findings And Declaration Of Purpose
Commerce And Trade — Consumer Credit Protection — Debt Collection Practices — Exemption For State Regulation
Commerce And Trade — Consumer Credit Protection — Debt Collection Practices — Validation Of Debts

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Smart Summary

Factual and Procedural Background

Jewel Marshall-Mosby received a collection letter from Corporate Receivables, Inc. ("CRI") on March 18, 1998, which included a validation notice as required by the Fair Debt Collection Practices Act ("FDCPA"). However, Marshall-Mosby alleged that additional language in the letter contradicted and overshadowed the required disclosures. She filed a complaint in district court on July 20, 1998, claiming that the letter violated 15 U.S.C. § 1692g of the FDCPA. The district court granted CRI's motion to dismiss under Rule 12(b)(6), ruling that the letter did not create confusion for the unsophisticated consumer. The Seventh Circuit initially affirmed the dismissal but later vacated that affirmance and granted rehearing in light of a recent decision in Walker v. National Recovery, Inc. The court then reversed the dismissal and remanded for further proceedings.

Legal Issues Presented

Whether a collection letter that includes the required FDCPA validation notice but contains additional language that contradicts or overshadows that notice violates the FDCPA.
Whether a complaint alleging that a collection letter is confusing under the FDCPA survives a motion to dismiss under Rule 12(b)(6).
Whether the statute of limitations defense can be raised for the first time on appeal in an FDCPA case.

Arguments of the Parties

Plaintiff-Appellant's Arguments

The collection letter, despite containing the required validation notice, includes language that contradicts and overshadows the notice, rendering it confusing in violation of the FDCPA.
A complaint alleging confusion under the FDCPA should survive a Rule 12(b)(6) motion to dismiss and allow presentation of evidence supporting the claim.

Defendant-Appellee's Arguments

The CRI letter complies with the FDCPA and does not create confusion that would mislead the unsophisticated consumer.
On appeal, CRI raised the statute of limitations as an affirmative defense regarding claims against John Does 1-10.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Porter v. DiBlasio, 93 F.3d 301 (7th Cir. 1996)	Standard for reviewing Rule 12(b)(6) motions: accept well-pleaded allegations as true and draw reasonable inferences in favor of the plaintiff.	Applied to determine that dismissal was improper if any set of facts could entitle plaintiff to relief.
Conley v. Gibson, 355 U.S. 41 (1957)	Rule 12(b)(6) dismissal is proper only if no set of facts can support a claim for relief.	Supported the standard for evaluating the sufficiency of the complaint.
Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997)	FDCPA violation occurs if a dunning letter is confusing to the unsophisticated consumer, even if it includes the required notice.	Used to support the claim that overshadowing or contradictory language can violate the FDCPA.
Chauncey v. JDR Recovery Corp., 118 F.3d 516 (7th Cir. 1997)	Similar principle that confusing language in collection letters violates FDCPA.	Reinforced the standard protecting unsophisticated consumers from confusion.
Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996)	Confusion caused by collection letters can constitute FDCPA violations.	Supported the court's approach to evaluating confusing language.
Russell v. Equifax A.R.S., 74 F.3d 30 (2d Cir. 1996)	Protection of unsophisticated consumers from confusing debt collection practices.	Provided persuasive authority reinforcing the Seventh Circuit's analysis.
Graziano v. Harrison, 950 F.2d 107 (3d Cir. 1991)	Confusion in debt collection letters violates FDCPA protections.	Supported the principle that the statute protects against confusing communications.
Swanson v. Southern Or. Credit Serv., 869 F.2d 1222 (9th Cir. 1988)	Unsophisticated consumer standard in FDCPA cases.	Used to emphasize the standard of protecting unsophisticated debtors.
Gammon v. GC Servs. Ltd. Partnership, 27 F.3d 1254 (7th Cir. 1994)	Key consideration is protection of unsophisticated consumers against confusion.	Reinforced the court’s focus on consumer protection from confusing debt collection letters.
Johnson v. Revenue Management Corp., 169 F.3d 1057 (7th Cir. 1999)	Determining whether a dunning letter is confusing is a critical question under FDCPA.	Applied to frame the central inquiry in this case.
Walker v. National Recovery, Inc., 1999 WL 1257386 (7th Cir. Dec. 21, 1999)	Confusion under FDCPA is a question of fact; complaints alleging confusion survive Rule 12(b)(6).	Guided the court to reverse dismissal and remand for further proceedings.
Central States, Southeast Southwest Areas Pension Fund v. Navco, 3 F.3d 167 (7th Cir. 1993)	Statutes of limitations are non-jurisdictional and cannot be raised for the first time on appeal.	Applied to reject CRI’s statute of limitations defense raised for the first time on appeal.

Court's Reasoning and Analysis

The court reviewed the district court's dismissal de novo, accepting the plaintiff's allegations as true and drawing all reasonable inferences in her favor. The court noted that although the CRI letter contained the required validation notice, additional language could contradict or overshadow that notice, potentially confusing the unsophisticated consumer. The court emphasized that FDCPA violations occur when collection letters confuse the unsophisticated debtor, citing prior precedent establishing that confusion is a key consideration. The court relied heavily on the recent Walker decision, which held that confusion is a factual question and that complaints alleging confusion survive a Rule 12(b)(6) motion. Consequently, the court concluded that Marshall-Mosby’s complaint was legally sufficient and that the district court erred in dismissing it at the pleading stage. The court also addressed CRI’s statute of limitations defense raised for the first time on appeal, ruling it was not properly before the court as such defenses are non-jurisdictional and cannot be raised for the first time on appeal.

Holding and Implications

The court REVERSED the district court's dismissal of the complaint under Rule 12(b)(6) and REMANDED the case for further proceedings consistent with this opinion.

The direct effect of this decision is that Marshall-Mosby's FDCPA claim alleging confusing language in the collection letter survives the pleading stage and may proceed to discovery or further litigation. The court did not establish new legal precedent beyond reaffirming the applicability of the Walker decision. The statute of limitations defense raised on appeal was rejected as procedurally improper to consider at this stage.

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Jewel Marshall-Mosby, Plaintiff-Appellant, v. Corporate Recei

KANNE, Circuit Judge.

The Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692- 15 U.S.C. § 1692o, mandates that debt collectors send a written validation notice containing certain information to a consumer debtor within five days after initial communication. The notice must include the amount of the debt, the name of the creditor and a statement that, unless the debtor "disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector." 15 U.S.C. § 1692g(a)(1)-(3). In addition, the notice must disclose that the debt collector, upon written request by the debtor within thirty days, will provide verification of the debt and/or provide the name and address of the original creditor, if different from the current creditor. 15 U.S.C. § 1692g(a)(4)-(5). If the debtor notifies the debt collector that the debt is disputed, or requests the name and address of the original creditor, within the thirty-day period, then the debt collector "shall cease collection of the debt" until the debt collector obtains verification of the debt or the requested information is mailed to the debtor. 15 U.S.C. § 1692g(b).

On March 18, 1998, plaintiff Jewel Marshall-Mosby received a one-page form collection letter from defendant Corporate Receivables, Inc. ("CRI") that stated in pertinent part:

*** THIS HAS BEEN SENT TO YOU BY A COLLECTION AGENCY ***

THE ABOVE ACCOUNT HAS BEEN PLACED WITH THIS OFFICE FOR IMMEDIATE COLLECTION. IF WE DO NOT RECEIVE THE BALANCE IN FULL OR HEAR FROM YOU, WE WILL BEGIN AGGRESSIVE COLLECTION PROCEDURES TO RECOVER THIS DEBT. PROTECT YOUR CREDIT — YOUR MOST VALUABLE ASSET.

UNRESOLVED QUESTIONS REGARDING COLLECTION AGENCY LAW OR PRACTICE May BE SENT TO THE STATE BANKING DEPARTMENT, STATE OF ARIZONA, 2910 N. 44TH STREET STE. 310, PHOENIX, AZ 85018.

FOR EACH CHECK THAT IS RETURNED DUE TO NON-SUFFICIENT FUNDS, THERE WILL BE A $15.00 SERVICE CHARGE.

THIS IS AN ATTEMPT TO COLLECT A DEBT. ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.

UNLESS YOU NOTIFY THIS OFFICE WITHIN THIRTY DAYS AFTER RECEIVING THIS NOTICE THAT YOU DISPUTE THE VALIDITY OF THE DEBT OR ANY PORTION THEREOF, THIS OFFICE WILL ASSUME THIS DEBT IS VALID. IF YOU NOTIFY THIS OFFICE WITHIN THIRTY DAYS FROM RECEIVING THIS NOTICE, THIS OFFICE WILL OBTAIN VERIFICATION OF THE DEBT OR OBTAIN A COPY OF A JUDGMENT AND MAIL YOU A COPY OF SUCH JUDGMENT OR VERIFICATION. IF YOU REQUEST THIS OFFICE WITHIN THIRTY DAYS AFTER RECEIVING THIS NOTICE, THIS OFFICE WILL PROVIDE YOU WITH THE NAME AND ADDRESS OF THE ORIGINAL CREDITOR, IF DIFFERENT FROM THE CURRENT CREDITOR.

Marshall-Mosby does not dispute that the collection letter which she received from CRI contained the validation notice required by the FDCPA.

On July 20, 1998, Marshall-Mosby filed her complaint in district court against CRI and John Does 1-10 claiming that the letter violated 15 U.S.C. § 1692g under the FDCPA because language in the letter contradicts and "overshadows" the disclosures required by the FDCPA. A copy of the CRI letter was appended to the complaint as the lone exhibit. The complaint identified defendants John Does 1-10 as unnamed officers, directors and employees of CRI personally involved in the execution of the letter. On November 6, 1998, CRI filed a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

On January 21, 1999, the district court granted CRI's motion to dismiss. It ruled that the CRI letter "does not create the confusion and contradiction that other collection letters struck down in this court have" and "even the most unsophisticated consumer would know that other options, besides immediate payment, exist." Plaintiff appealed the district court's Rule 12(b)(6) dismissal, and we affirmed the dismissal in Marshall-Mosby v. Corporate Receivables, Inc., 194 F.3d 830 (7th Cir. 1999).

A month later, the opinion in Walker v. National Recovery, Inc., No. 99-2119, 1999 WL 1257386 (7th Cir. Dec. 21, 1999), was circulated to all judges of this court in regular active service pursuant to Circuit Rule 40(f). A majority did not favor a rehearing en banc on the question addressed in Walker, concerning the application of Rule 12(b)(6) of the Federal Rules of Civil Procedure in FDCPA cases. As a result, the original decision in this case was rendered inconsistent with the approach approved by a majority of the court in the Rule 40(f) circulation of Walker. Therefore, on December 21, 1999, we vacated our original affirmance and granted rehearing in light of Walker. For the reasons presented in the following discussion, we reverse dismissal under Rule 12(b)(6) and remand to the district court.

Circuit Judges Daniel A. Manion, Michael S. Kanne and Terence T. Evans voted to rehear Walker en banc. Circuit Judge Ann Claire Williams did not participate.

I. Analysis

We review de novo a district court's decision to grant a motion to dismiss under Rule 12(b)(6), accepting the well-pleaded allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiff. See Porter v. DiBlasio, 93 F.3d 301, 305 (7th Cir. 1996). Dismissal under Rule 12(b)(6) is proper only where the plaintiff can prove no set of facts that would entitle him to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Porter, 93 F.3d at 305.

Marshall-Mosby does not allege that the CRI letter omits the required validation notice. Instead, she claims that additional language in the letter contradicts and "overshadows" the validation notice and thus violates the FDCPA. Indeed, we have held that a violation of the FDCPA occurs when a dunning letter is confusing to the unsophisticated reader, even if the letter technically complies with the FDCPA by including the required validation notice. See Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997); Chauncey v. JDR Recovery Corp., 118 F.3d 516 (7th Cir. 1997); Avila v. Rubin, 84 F.3d 222 (7th Cir. 1996). Debt collectors "may not defeat the statute's purpose by making the required disclosures in a form or within a context in which they are unlikely to be understood by the unsophisticated debtors who are the particular objects of the statute's solicitude." Bartlett, 128 F.3d at 500; see also Russell v. Equifax A.R.S., 74 F.3d 30, 34-35 (2d Cir. 1996); Graziano v. Harrison, 950 F.2d 107, 111 (3d Cir. 1991); Swanson v. Southern Or. Credit Serv., 869 F.2d 1222, 1225 (9th Cir. 1988). The key consideration is "that the unsophisticated consumer is to be protected against confusion whatever form it takes." Bartlett, 128 F.3d at 500; see also Gammon v. GC Servs. Ltd. Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994). In analyzing dunning letters under the FDCPA, the critical question is "whether a dunning letter is confusing." See Johnson v. Revenue Management Corp., 169 F.3d 1057, 1060 (7th Cir. 1999).

Marshall-Mosby contends that dismissal was improper because a plaintiff alleging that a collection letter is confusing in violation of the FDCPA survives Rule 12(b)(6) and is entitled to present evidence in support of her claim. We resolved this issue in Walker v. National Recovery, Inc., 1999 WL 1257386. We determined that confusion is a question of fact rather than a question of law, so plaintiffs are entitled to present empirical evidence that might show the dunning letter in question to be confusing in the eyes of the unsophisticated consumer. Id. at *3. In Walker, the district court dismissed the plaintiff's FDCPA complaint under Rule 12(b)(6) reasoning that "there was no possibility of confusion as a matter of law." See Walker v. National Recovery, Inc., 42 F. Supp.2d 773, 783 (N.D.Ill. 1999). We reversed because we determined that a FDCPA complaint states a legal claim, and therefore a FDCPA complaint survives a motion to dismiss under Rule 12(b)(6) simply by alleging that a dunning letter was confusing. Walker, 1999 WL 1257386 at *3. The complaint was legally sufficient because "it [was] possible to imagine evidence consistent with the allegations of the complaint that would establish confusion." Id. Likewise, Marshall-Mosby's complaint alleged that CRI's dunning letter was confusing. Under Walker, her complaint was thus legally sufficient and survives a motion to dismiss under Rule 12(b)(6). The district court improperly dismissed Marshall-Mosby's complaint under Rule 12(b)(6), and we will reverse and remand for further proceedings.

Without having raised the statute of limitations in district court, CRI invoked for the first time in its appellee's brief the statute of limitations as an affirmative defense with respect to Marshall-Mosby's claims against John Does 1-10. Despite CRI's contrary assertions, the statute of limitations provision in the FDCPA is not a jurisdictional restriction. See Central States, Southeast Southwest Areas Pension Fund v. Navco, 3 F.3d 167, 173 (7th Cir. 1993) (holding that periods of limitations in federal statutes are "universally regarded as non-jurisdictional."). As such, CRI cannot raise on appeal its statute of limitations defense, nor can we review it sua sponte.

II. Conclusion

For the foregoing reasons, we REVERSE the district court's dismissal under Rule 12(b)(6) and REMAND for further proceedings consistent with this opinion.