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Biber v. Pioneer Credit Recovery, Inc.

United States District Court, E.D. Virginia, Alexandria Division

January 11, 2017

ATTILA BIBER et al., Plaintiffs,
v.
PIONEER CREDIT RECOVERY, INC., Defendant.

          MEMORANDUM OPINION

          T. S. Ellis, III United States District Judge.

         This putative class action arises from defendant's issuance of a letter that allegedly violates the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. Plaintiff, Attila Biber, a Virginia resident who has defaulted on federal student loans, contends that defendant, Pioneer Credit Recovery, Inc. (“Pioneer”), a debt-collection corporation, violated the FDCPA by sending letters that mislead recipients into believing that their wages are about to be garnished if the recipients do not pay their debts. Pioneer has moved to dismiss the Second Amended Complaint (“SAC”), raising a facial challenge to Biber's Article III standing to bring an FDCPA claim[1] and contending that the SAC fails to state a claim upon which relief can be granted, pursuant to Rules 12(b)(1) and 12(b)(6), Fed. R. Civ. P.

         For the reasons that follow, the motions to dismiss are granted in part and denied in part.

         I.[2]

         The SAC alleges that on April 1, 2016, Pioneer sent a letter (“the Letter”) to Biber and others, which was captioned in bold, capitalized letters, “Administrative Wage Garnishment Proceedings Notice.” SAC ¶ 13 & Ex. A. Because the Letter, which was attached to the SAC as an exhibit, is the centerpiece and focus of Biber's SAC, it is appropriate to recite the following principal statements contained in the Letter:

• “This may be your last opportunity to make satisfactory payment arrangements on your student loan(s)”; • “If these arrangements are not made, we will begin or continue the process of verifying your employment for Administrative Wage Garnishment”;
• “The United States Congress has enacted a law . . . that allows guarantors . . . to offset the wages of student loan defaulters without filing a lawsuit”;
• “[A] guaranty agency . . . may garnish the disposable pay of an individual to collect the amount owed by the individual, if he or she is not currently making required repayment . . . [T]he amount deducted for any pay period may not exceed 15 percent of disposable pay”;
• “This [statutory] provision overrides all applicable state law, and allows for the garnishment of student loan defaulter's wages”;
• “Before an administrative order is issued, defaulters are given notice and an opportunity for a hearing as part of this federal wage offset program”;
• “After the completion of this administrative offset process, your employer may be ordered to deduct 15% of your disposable income before you are paid. If your employer does not comply with this order, a lawsuit may be filed against your employer”;
• “Because the use of this federal wage offset law could reduce your take-home pay substantially, we are providing you with the chance to establish a satisfactory payment arrangement so you can voluntarily satisfy your obligation on more reasonable terms. We are hoping we can reach a satisfactory agreement before we proceed with further action”; and
• “This is an attempt, by a debt collector, to collect a debt, and any information obtained will be used for that purpose.”
• The letter further lists that the remaining principal owed totals § 41, 893.53, the interest is $2, 212.80, and the collect charge amounts to $9, 706.95.

Id. Ex. A.

         Biber, in the SAC, alleges that Pioneer violated the FDCPA's prohibition on a debt collector's “use of any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.[3] Specifically, the SAC alleges that Pioneer used false, deceptive, or misleading representations or means in the following ways:

• Pioneer “falsely represent[ed] that it was going to perform an Administrative Wage Garnishment, without first providing the notices required by 20 U.S.C. § 1095a and 34 C.F.R. §§ 34.1-30”;
• Pioneer “falsely implied that [the Letter] was the Notice of Proposed Garnishment required under” federal law;
• Pioneer “falsely represented [that] it had the authority to garnish wages at the time of the letter, if payment arrangements were not made at that time”;
• Pioneer “falsely represented the character, amount or legal status of [plaintiffs] debts”;
• Pioneer “falsely represented and implied that the [Letter] was legal process”;
• Pioneer “deprived [Biber] of statutory verification rights which [Biber] would otherwise have under 20 U.S.C. § 1095a and 34 C.F.R. §§ 34.1-30 [such that] Plaintiff suffered an informational injury as a result of being deprived of information to which he was legally entitled”; and
• Pioneer “used unfair and unconscionable means to collect and attempt to collect from Plaintiff and the class members.”

SAC ¶¶ 23, 36.

         Pioneer challenges the adequacy of the SAC on two grounds. First, Pioneer contends that dismissal is required pursuant to Rule 12(b)(1), Fed. R. Civ. P., on the ground that Biber lacks standing to raise any of his FDCPA claims. Second, Pioneer asserts that the SAC must be dismissed pursuant to Rule 12(b)(6), Fed. R. Civ. P., on the ground that the SAC lacks adequate factual allegations to support Biber's claims for relief. These motions have been fully briefed and argued, and are therefore ripe for disposition. Each motion is separately addressed.

         II.

         Analysis necessarily begins with the question of subject matter jurisdiction, for absent such jurisdiction there is no power to adjudicate any issues. In support of its Rule 12(b)(1) motion, Pioneer contends that the allegations in the SAC do not plausibly allege an “injury in fact, ” and thus Biber lacks Article III standing to bring any of his FDCPA claims. For the reasons that follow, Pioneer's standing challenge succeeds in part and fails in part.

         The legal standard for a facial challenge to subject matter jurisdiction is “patterned on Rule 12(b)(6), ” such that “the truthfulness of the facts alleged” in the complaint must be assumed. Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009). To establish standing, a plaintiff must “clearly . . . allege facts demonstrating” three elements: “(1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016) (citations omitted). Pioneer has focused its jurisdictional challenge on the first prong, contending that the SAC failed to allege an injury in fact.

         As the Supreme Court reiterated in Spokeo, “[t]o establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Spokeo, 136 S.Ct. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). An injury is “particularized” if it “affect[s] the plaintiff in a personal and individual way.” Id. (quotation marks omitted). To be “concrete, ” the injury must “actually exist, ” though it need not be “tangible.” Id. at 1548-49 (quotation marks omitted). Importantly, Congress may “elevat[e] to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law.” Id. at 1549 (quotation marks and alterations omitted). But the Supreme Court in Spokeo cautioned that “Congress' role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Id. Thus, a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Id. In this regard, in evaluating the Fair Credit Reporting Act's (“FCRA”)[4] mandate that a reporting agency provide accurate information, the Supreme Court in Spokeo noted that a statutory violation will not always “cause harm or present any material risk of harm” sufficient to confer Article III standing. Id. at 1550. For example, in the Supreme Court's view, “[i]t is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm” in the FCRA context. Id. Yet, the Supreme Court in Spokeo observed that “the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact” and, in such circumstances, “a plaintiff . . . need not allege any additional harm beyond the one Congress has identified.” Id. (emphasis in original).

         Not surprisingly, in the wake of Spokeo, the overwhelming majority of courts have held that FDCPA claims similar to Biber's are sufficient to satisfy Article III's requirement that a plaintiff establish an injury in fact. The underlying logic in these opinions is (i) that Congress, in the FDCPA, created a right to accurate debt-related information and non-abusive collection practices, and (ii) that a debt collector's false, misleading, deceptive, or abusive conduct concretely harms a debtor by detrimentally affecting that debtor's decisions regarding his debt.[5] In other words, § 1692e provides certain debtors a right to be free from false, deceptive, or misleading conduct or representations by debt collectors, precisely because such conduct or representations may cause harm or a material risk of harm. Thus, in many instances, violations of § 1692e differ significantly from the innocuous, bare “procedural violations” described by the Supreme Court in Spokeo.[6] Applied here, the principles announced by the Supreme Court in Spokeo, and elucidated in the chorus of FDCPA cases decided following Spokeo, point persuasively to the conclusion that Biber has standing to raise most-but not all-of the FDCPA claims alleged in the SAC.

         Analysis thus turns to the SAC's individual FDCPA claims.

         A. False Representation that Pioneer Was Going to Perform an Administrative Wage Garnishment, 15 U.S.C. § 1692e et seq.

         The SAC alleges that Pioneer, by sending Biber the Letter, “falsely represent[ed] that [defendant] was going to perform an Administrative Wage Garnishment, without first providing the notices required by 20 U.S.C. § 1095a and 34 C.F.R. §§ 34.1-30.”[7] SAC ¶ 36. Biber has standing to assert this claim because the SAC alleges facts supporting a plausible inference (i) that Pioneer engaged false, misleading, or deceptive conduct by sending the Letter to Biber, (ii) that Biber was aware of the Letter, and (iii) that Biber could have been materially harmed by relying on the Letter in making debt-related decisions.[8] These are concrete, particularized injuries sufficient to satisfy Article III's injury in fact requirement in the FDCPA context. Moreover, given that Pioneer sent the Letter and that the FDCPA provides for statutory damages, Biber's alleged injury is fairly traceable to Pioneer's conduct and could be redressed by a favorable court decision. See Spokeo, 136 S.Ct. at 1547.

         Importantly, the SAC has alleged sufficient facts to support a plausible inference that Biber could have been harmed by a false, deceptive, or misleading representation in the Letter- namely, that Pioneer had already instituted wage garnishment proceedings and that garnishment was imminent, when, in reality, Pioneer had not yet instituted such proceedings and thus had no authority to garnish wages. The following allegations plausibly support such an inference:

• The Letters title is ADMINISTRATIVE WAGE GARNISHMENT PROCEEDINGS NOTICE.” SAC Ex. A. This title could logically read as conveying that garnishment proceedings have already been commenced, and that the Letter is precisely what it purports to be: Pioneer's notice to Biber that such proceedings have begun.
• The next two sentences of the Letter read: “This may be your last opportunity to make satisfactory payment arrangements on your student loan(s). If these arrangements are not made, we will begin or continue the process of verifying your employment for Administrative Wage Garnishment.” Id. (emphasis added.) These statements could also logically be read as a representation that garnishment proceedings have already begun. For instance, the “or continue” language could mean that the garnishment proceedings themselves have already begun. And the statement that Pioneer will “verify[] [Biber's] employment for Administrative Wage Garnishment” could ...

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