Gallegos v. LVNV Funding LLC

Citations: 169 F. Supp. 3d 1235; 2016 WL 917930; 2016 U.S. Dist. LEXIS 31139Docket: Case No. 2:14-CV-516-DAK

Court: District Court, D. Utah; March 9, 2016; Federal District Court

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Plaintiff Luis Gallegos filed a Motion for Partial Summary Judgment against Defendants Constantino Law Office, P.C. and Gregory Constantino, alleging violations of the Fair Debt Collection Practices Act (FDCPA). The Constantino Defendants countered with a Cross-Motion for Summary Judgment, asserting compliance with the FDCPA and the Utah Consumer Sales Practices Act, as well as denying invasion of privacy. A hearing occurred on March 2, 2016, with both parties represented by counsel.

The key background details include that Luis Gallegos, born April 26, 1983, resides at the Clearfield Address, while his father, Luis Gallegos, Sr., born March 31, 1960, lives in Mexico and is the actual debtor. After Gallegos, Sr. defaulted on a debt to Credit One Bank, the account was sent for collection to the Constantino Defendants in September 2012. They served a summons and complaint to Luis Gallegos at the Clearfield Address on October 24, 2012, based on an affidavit listing that address for the debtor, despite Plaintiff asserting he was not responsible for the debt.

The Constantino Defendants pursued two lawsuits against Luis Gallegos at the Clearfield Address: the first case was dismissed for failure to prosecute, while a second case led to a default judgment granted on February 18, 2014, after Plaintiff disputed the debt and identified himself during phone calls with the Defendants. The court has since considered the legal and factual matters surrounding these motions in rendering its decision.

On March 6, 2014, the Constantino Defendants sought access to the plaintiff's private employment records, which the court approved on April 1, 2014. Subsequently, on April 29, 2015, the court vacated the previous judgment and dismissed the case with prejudice. On July 14, 2014, the plaintiff initiated a new action, claiming violations of the Fair Debt Collection Practices Act (FDCPA), the Utah Consumer Sales Practices Act (UCSPA), and invasion of privacy. LVNV Funding was dismissed from this action with prejudice on May 1, 2015. The plaintiff then filed a Motion for Partial Summary Judgment against the remaining defendants for FDCPA violations, while those defendants responded with a Cross-Motion for Summary Judgment on all claims.

Summary judgment can be granted when there is no genuine issue of material fact, as demonstrated by pleadings, depositions, and affidavits, thereby entitling the moving party to judgment as a matter of law. The moving party must first demonstrate the absence of evidence supporting the nonmoving party's case. If successful, the burden shifts to the nonmoving party to present specific facts indicating a genuine trial issue. The court must view evidence favorably towards the nonmovant, but mere conclusory statements or attorney arguments do not create a genuine issue of material fact.

The FDCPA, enacted in 1977, aims to eliminate abusive debt collection practices and protect consumers. It holds debt collectors civilly liable for false, deceptive, or misleading representations related to debt collection. A single violation, such as sending dunning letters to someone not obligated to pay a debt, can suffice for a plaintiff to achieve summary judgment in an FDCPA claim.

Relevant conduct violating the Fair Debt Collection Practices Act (FDCPA) includes: misrepresenting the character, amount, or legal status of a debt (15 U.S.C. § 1692e(2)(A)); employing false representations or deceptive means to collect a debt (id. § 1692e(10)); and collecting amounts not authorized by the debt agreement or law (id. § 1692f(1)). Courts have held that attempting to collect a debt from someone who is not the debtor constitutes a false representation under § 1692e. To assess violations, most courts apply an objective standard based on the "least sophisticated consumer," which protects consumers against deceptive practices while also shielding collectors from liability for unusual interpretations of notices. This standard presumes that consumers have basic awareness and will read collection notices carefully, yet notices can be deemed deceptive if they allow for multiple reasonable interpretations, at least one of which is false.

Some courts view the FDCPA as a strict liability statute, not requiring proof of intent to violate. However, filing a lawsuit with an affidavit confirming the debt does not typically violate the FDCPA. The plaintiff claims the Constantino Defendants violated the FDCPA by making false representations and attempting to collect unauthorized amounts. The defendants assert they lawfully pursued a debt against Gallegos, Sr. and did not misrepresent to the plaintiff that he owed a debt. Both parties acknowledge that the plaintiff received collection letters and legal documents identifying only Luis Gallegos. Additional documents provided further identification details, confirming the debtor as Gallegos, Sr. When viewed favorably towards the defendants, it seems they sought to serve and sue Gallegos, Sr., but the evaluation of FDCPA violations prioritizes the plaintiff's reasonable perceptions over technicalities.

Under the least-sophisticated-consumer standard, potential violations of the Fair Debt Collection Practices Act (FDCPA) are assessed from the consumer's perspective, acknowledging that some consumer perceptions may be reasonable despite being inaccurate. The Plaintiff received debt collection notices and legal documents that referenced his name and address, although he was not the debtor, leading him to reasonably believe the Constantino Defendants were pursuing a debt he did not owe. Attempts to collect from a non-debtor constitute FDCPA violations. While the Constantino Defendants' initial actions, based on an affidavit from their client regarding a Luis Gallegos, may not have violated the FDCPA, they were required to cease collection efforts upon receiving clear notice of incorrect information. After the Plaintiff informed the court in writing and verbally communicated multiple times that he was not the debtor, the Constantino Defendants continued to seek judgments and pursue collection without verifying the debtor's information. This disregard for the Plaintiff's clear notices constitutes a violation of the FDCPA, as debt collectors must verify debtor information after being alerted to potential inaccuracies. The court determined that using misleading representations while continuing collection activities after such notice is a violation of the FDCPA.

The bona fide error defense under the Fair Debt Collection Practices Act (FDCPA) allows debt collectors to claim an affirmative defense against violations if they demonstrate that the violation was unintentional, constituted a bona fide error, and occurred despite maintaining reasonable procedures to avoid such errors (15 U.S.C. § 1692k(c)). To successfully assert this defense, debt collectors must prove three elements: (1) the violation was unintentional, (2) it was a bona fide error, and (3) they maintained adequate procedures to prevent the error. The Tenth Circuit establishes that unintentionality is determined by the absence of specific intent to violate the FDCPA, which is a subjective test often inferred from evidence. In contrast, the bona fide and procedures elements are objective tests assessing reasonableness and implementation of procedures.

In the case at hand, the Constantino Defendants argue they did not intend to pursue debt collection against the Plaintiff; however, the Plaintiff contends that the error was intentional, not bona fide, and that the procedures were inadequate. The specific FDCPA violation involves targeting debt collection efforts at the Plaintiff's address after receiving multiple notices indicating it may be incorrect, without conducting research to verify accuracy. The court finds it challenging to infer that the Defendants did not intentionally continue these efforts after receiving clear warnings. Additionally, the court concludes that the violation was not a bona fide error due to the Defendants’ continued actions despite the warnings.

The Defendants cited two procedures aimed at preventing errors: providing birthdates to process servers and sending initial debt collection letters before filing lawsuits. However, they failed to substantiate that these procedures were regularly implemented or adequately designed to prevent targeting erroneous addresses, as process servers primarily rely on names and addresses rather than additional information like birthdates.

Sending debt collection letters to an incorrect address may violate the Fair Debt Collection Practices Act (FDCPA) and does not prevent further debt collection efforts at that address without proper procedures to verify accuracy or halt actions upon notice of a potential error. The Constantino Defendants failed to provide evidence of such procedures, resulting in the court's determination that they do not qualify for the bona fide error defense.

The Utah Consumer Sales Practices Act (UCSPA) prohibits deceptive or unconscionable acts by suppliers in consumer transactions. Attorneys and law firms engaged in debt collection can be considered suppliers under the UCSPA. The Act identifies intentional behavior as a key component of deceptive practices. To establish a practice as deceptive, the court must find no genuine issue regarding the intent to deceive. In contrast, unconscionability is assessed based on circumstances known or reasonably known to the supplier, without the need for specific intent.

The court allows parties to present evidence regarding the context of potentially unconscionable actions. Utah law differentiates between procedural and substantive unconscionability; the plaintiff claims substantive unconscionability, which arises from oppressive or unfair conditions. A supplier violating the UCSPA may incur liability for damages and costs, with the Act intended to be interpreted broadly to safeguard consumers.

The plaintiff alleges that the Constantino Defendants acted deceptively and unconscionably by knowingly suing him for a non-existent debt on two occasions. The Defendants counter that their intent was solely to collect a debt from another party and that their actions were lawful. However, the court previously identified that the Defendants employed false or misleading representations in their debt collection efforts, as assessed from the perspective of the least sophisticated consumer.

The court identified that, while certain records containing Gallegos, Sr.'s birthdate and Social Security number were not easily accessible to the Plaintiff, there remains a genuine issue of material fact regarding whether the Constantino Defendants acted with intent to deceive the Plaintiff. Consequently, the court deemed that a reasonable jury could find that the Constantino Defendants engaged in deceptive practices under the Utah Consumer Sales Practices Act (UCSPA), thus denying their motion for summary judgment on that aspect.

Conversely, the court found summary judgment appropriate regarding the unconscionability claims under the UCSPA, noting that the Plaintiff failed to demonstrate that the Defendants' actions, such as sending debt collection letters and filing lawsuits at an erroneous address, met the high standard required for unconscionability—specifically, that they constituted oppression or unfair surprise.

Regarding the invasion of privacy claim, the court referenced the criteria for intrusion upon seclusion, requiring proof of intentional and substantial intrusion that is highly offensive to a reasonable person. The Constantino Defendants contended that their actions did not rise to this level, while the Plaintiff argued that relentless pursuit and multiple lawsuits over a non-existent debt constituted a substantial intrusion. The court found a genuine issue of material fact regarding the intentionality and offensiveness of the Defendants' actions, similar to the deceptive acts claim.

In conclusion, the court ordered that the Plaintiff's Motion for Partial Summary Judgment be granted, while the Constantino Defendants’ Cross-Motion for Summary Judgment was granted in part and denied in part concerning the unconscionability claims. The Plaintiff's Motion for Discovery Under Rule 56(d) was denied as moot, except regarding unconscionability, since the court believed further discovery would not alter its ruling based on undisputed facts.