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Heredia v. Capital Management Services L.P.

United States District Court, E.D. Wisconsin

January 22, 2019

MABEL L. HEREDIA, on behalf of herself and all others similarly situated, Plaintiff,
v.
CAPITAL MANAGEMENT SERVICES, L.P., Defendant.

          DECISION AND ORDER GRANTING MOTION TO DISMISS

          William C. Griesbach, Chief Judge.

         Plaintiff Mabel L. Heredia, individually and on behalf of all others similarly situated, filed this action against Capital Management Services, L.P. (CMS), alleging that CMS violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692, et seq., when it sent a series of letters to Heredia that sought to collect a debt she owed to Discover Bank (Discover) and stated in part: “Settling a debt for less than the balance owed may have tax consequences and Discover may file a 1099C form.” Am. Compl., ECF No. 32, Exs. B, C, D. Heredia alleges that CMS's use of the statement “Discover may file a 1099C form” is false, deceptive, and misleading in violation of 15 U.S.C. § 1692e and an unfair or unconscionable means of collection in violation of § 1692f. Presently before the court are CMS's motion to dismiss Heredia's first amended complaint for failure to state a claim and Heredia's motion for leave to amend the complaint. For the reasons that follow, CMS's motion to dismiss will be granted and Heredia's motion for leave to amend will be denied.

         LEGAL STANDARD

         “A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014); Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), a complaint must provide “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When reviewing a motion to dismiss for failure to state a claim, a court must “accept as true all of the well-pleaded facts in the complaint and draw all reasonable inferences in favor of the plaintiff.” Kubiak v. City of Chicago, 810 F.3d 476, 480-81 (7th Cir. 2016). While, as a general matter, the confusing nature of a dunning letter is a question of fact that, if well-pleaded, avoids dismissal under Rule 12(b)(6), dismissal is appropriate when it is “apparent from a reading of the letter that not even a significant fraction of the population would be misled by it.” Zemeckis v. Global Credit & Collection Corp., 679 F.3d 632, 636 (7th Cir. 2012) (citing Taylor v. Cavalry Inv., L.L.C., 365 F.3d 572, 574 (7th Cir. 2004)).

         ALLEGATIONS OF THE AMENDED COMPLAINT

         Heredia's claims arise out of a series of letters she received from CMS, who sought to collect a debt she owed to Discover. Heredia's debt arose from one or more transactions for a credit card account that Heredia used primarily for personal, family, or household purposes. After Heredia defaulted and the Debt was charged off, CMS, a debt collector, sought to collect the Debt on Discover's behalf. In its attempt to collect the Debt, CMS sent Heredia four collection letters. Although Heredia appears to generally allege that each of the four letters violates the FDCPA, see ECF No. 32 at ¶ 120, she only alleges that three of the letters violate specific sections of the Act, namely §§ 1692e and 1692f. See Id. at ¶ 139.

         The four letters contain near-identical captions. In the top-right corner of each letter, under CMS's logo, Discover is listed as the “Original Creditor” and “Current Creditor, ” the “Description” reads “Discover Card, ” the last four digits of Heredia's account number are listed, and $1, 892.43 is listed as the “Amount of Debt.” See id., Exs. A, B, C, D. Although the bodies of the letters differ in some respects, each states: “This is an attempt to collect a debt; any information obtained will be used for that purpose. This communication is from a debt collector.” Id.

         According to the amended complaint, CMS's first letter, dated October 5, 2016, was the initial written communication mailed to Heredia to collect the Debt. The letter states that “[CMS] has been engaged by DISCOVER BANK to resolve your delinquent debt of $1, 892.43.” Id., Ex. A. The letter also offers Heredia thirty days after her receipt of the letter to dispute the validity of the Debt or any portion thereof, otherwise CMS will assume the Debt is valid. If Heredia timely files a written notice of dispute, CMS will obtain verification of the Debt or obtain a copy of a judgment and mail Heredia a copy of such verification or judgment. The letter then instructs Heredia to submit her payment by check, money order, or online. Although the amended complaint alleges that the October 5, 2016 letter “fails to disclose how much of the ‘Amount of Debt' consists is [sic] principal, ” id. at ¶ 34, the complaint does not allege that such a failure violates a particular provision of the FDCPA.

         The second letter, dated November 6, 2016, offers three payment arrangements, or “settlement offers.” Id., Ex. B. The offers are as follows:

A. 29% reduction of [Heredia's] present balance to the amount of $1343.63, if paid in full on or before 11/30/2016. (A savings of: $548.80)
B. 24% reduction of [Heredia's] present balance to the amount of $1438.25. The first payment of $719.13 or more is due on or before 11/30/2016. The second and final payment of $719.12 or more is due on or before 12/30/2016. (A savings of: $454.18)
C. 19% reduction of [Heredia's] present balance to the amount of $1532.87. The first payment of $510.96 or more is due on or before 11/30/2016. The second payment of $510.96 or more is due on or before 12/30/2016. The third and final payment of $510.95 or more is due on or before 1/30/2017. (A savings of: $359.56).

Id. After the settlement offers, the letter states: “The amount of money you want to save is in your control” and that, “[i]n addition, upon clearance of these funds, we will provide, upon request, an account paid letter.” Id. After presenting information on payment arrangements, the letter states: “Settling a debt for less than the balance owed may have tax consequences and Discover may file a 1099C form. We cannot provide you with tax advice. If you have any questions, Discover encourages you to consult a tax advisor of your choosing.” Id.

         According to the complaint, “[w]hen, among other required conditions exist, Discover writes off or forgives $600 or more of the principal amount of a debt, it may be required by law to file IRS Form 1099C and to send a copy to obligor.” Id. at ¶ 47. The complaint alleges that “Discover (like other credit card issuing banks) does not, however, file IRS Form 1099C when the amount of principal forgiven is less than $600.” Id. at ΒΆ 48. The complaint further alleges that the settlement offers do not state what amount of principal, if any, is to be written off if Heredia accepts. Because none of the settlement offers involve a savings of $600 or more, the complaint alleges that, principal ...


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