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Martsolf v. JBC Legal Group


January 30, 2008


The opinion of the court was delivered by: Judge Conner



This is a class action instituted by Ashlee Martsolf ("Martsolf"), on behalf of herself and others similarly situated, alleging that defendants' debt collection practices violate the Fair Dept Collection Practices Act ("FDCPA" or "the Act"), 15 U.S.C. §§ 1692-1692p. Martsolf and defendants have filed cross-motions (Docs. 105, 108) for summary judgment. For the reasons that follow, both motions will be granted in part and denied in part.*fn1

I. Statement of Facts*fn2

During early 1994, two blank checks signed by Martsolf, a resident of Pennsylvania, and drawn on her bank account were presented to Service Merchandise, a now-defunct chain of retail stores. (Doc. 107 ¶ 1; Doc. 110 ¶ 19; Doc. 117 ¶ 1; Doc. 120 ¶ 19.) The checks, dated March 18 and March 20, 1994, were dishonored soon after presentment. (Doc. 107 ¶ 1; Doc. 107, Ex. G; Doc. 107, Ex. H; Doc. 110 ¶ 19; Doc. 117 ¶ 1; Doc. 120 ¶ 19.) Defendant Outsource Recovery Management ("ORM") purchased the debt associated with the two checks during the years between their issuance and the institution of the present action.*fn3 (Doc. 107, Ex. F at 39; Doc. 110 ¶ 7; Doc. 120 ¶ 7.) ORM retained defendant JBC Legal Group ("JBC") to attempt to collect the debt. JBC is a law firm that engages in the collection of defaulted debt. (Doc. 107 ¶¶ 2-3, 13; Doc. 110 ¶¶ 2, 8; Doc. 117 ¶¶ 2-3, 13; Doc. 120 ¶¶ 2, 8.) Defendant Jack H. Boyajian ("Boyajian") is the president of both JBC and ORM and the sole owner of JBC. He has no ownership interest in ORM. (Doc. 107 ¶ 6; Doc. 114 ¶ 3; Doc. 110 ¶ 2; Doc. 114 ¶ 3; Doc. 117 ¶ 6; Doc. 120 ¶ 2.)

ORM's primary business is the purchase of defaulted debt, and it retains JBC and other law firms to collect the obligations it acquires. (Doc. 107 ¶ 9; Doc. 107, Ex. F at 33-34; Doc. 117 ¶ 9.) JBC regularly receives large bundles of data about the debt purchased by ORM, and a single data set may contain information about a large number of debtor accounts. (Doc. 107, Ex. D at 63-65; Doc. 128 at 23-25; cf. Doc. 107, Ex. I (listing quantities of collection letters sent by JBC).) Boyajian performs a series of technological and statistical analyses that he developed on the data to identify anomalies within a data set. (Doc. 107, Ex. D at 63-65; Doc. 114 ¶ 5.) Based on the results of these analyses, Boyajian determines which accounts contain sufficient information to issue a collection letter and which ones contain only incomplete information upon which no letter can be issued. (Doc. 107, Ex. D at 64; Doc. 114 ¶ 5.) ORM retains JBC to collect accounts that contain complete information. (Doc. 107, Ex. D at 64; Doc. 114 ¶ 5.) Accounts lacking crucial information are returned to ORM. (Doc. 107, Ex. D at 64; Doc. 114 ¶ 5.) This review occurs very rapidly and allows Boyajian to accept or reject large quantities of accounts at one time. (Doc. 107, Ex. D at 64; Doc. 114 ¶ 5; Doc. 128 at 25-26.)

Boyajian performed these procedures on Martsolf's account. He agreed that JBC would represent ORM in the collection of Martsolf's debts. JBC then sent two collection letters dated April 24, 2004 to Martsolf. (Doc. 107, Exs. G & H.) Both letters appear on letterhead reading: "JBC LEGAL GROUP, P.C. / Attorneys at Law / A California Professional Corporation." (Id.) JBC's letterhead lists four attorneys, who collectively are licensed in California, the District of Columbia, Kansas, Massachusetts, New Jersey, and New York. (Id.)

The bodies of the letters read as follows: This firm represents the successors in interest of the obligation you created and have not yet satisfied when you passed the bad check(s) identified below. Below are the details of each dishonored check. In addition to the full amount of the check(s), under applicable provisions of the Uniform Commercial Code, our client is entitled to a $30.00 per check fee as a service charge to handle your dishonored check(s). . . .

Pursuant to Pennsylvania law, you have thirty (30) days from receipt of this letter to pay the full amount of each check plus a service charge of $30.00 per check . . . . You are cautioned that unless this total amount is paid in full within thirty (30) days after the date this letter is received, you may be subject to a civil penalty, court costs and reasonable attorney fees after suit has been filed. (Id.) Both letters are signed: "Very truly yours, / JBC LEGAL GROUP, P.C. / Attorneys at Law." (Id.)

Martsolf filed the complaint instituting the present case on June 23, 2004. (Doc. 1.) The court certified the matter as a class action on February 7, 2005, and Martsolf filed an amended complaint the same day. (Docs. 29, 30.) The complaint alleges that the collection practices of Boyajian and JBC violated the FDCPA in several respects.*fn4 She alleges that defendants' collection letters threatened to institute suit to collect a time-barred debt, and attempted to collect a $30 returned- check fee not authorized under Pennsylvania law. She further argues that Boyajian and JBC misrepresented the amount of her debt (due to inclusion of the returned-check fee in the total debt amount) and misrepresented the level of attorney review that her account received.*fn5 She avers that these actions violated specific provisions of the Act and its general prohibition on the use of "false representation[s] or deceptive means to collect" a debt. 15 U.S.C. § 1692e(10). Finally, she contends that ORM, itself a debt collector, is vicariously liable for FDCPA violations committed by JBC and Boyajian in the course of collecting debts on its behalf. The parties have fully briefed these issues, which are now ripe for disposition.

II. Standard of Review

Through summary judgment the court may dispose of those claims that do not present a "genuine issue as to any material fact," and for which a jury trial would be an empty and unnecessary formality. See FED. R. CIV. P. 56(c). It places the burden on the non-moving party to come forth with "affirmative evidence, beyond the allegations of the pleadings," in support of its right to relief. Pappas v. City of Lebanon, 331 F. Supp. 2d 311, 315 (M.D. Pa. 2004); FED. R. CIV. P. 56(e); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). This evidence must be adequate, as a matter of law, to sustain a judgment in favor of the non-moving party on the claims. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-57 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-89 (1986); see also FED. R. CIV. P. 56(c), (e). Only if this threshold is met may the cause of action proceed. Pappas, 331 F. Supp. 2d at 315.

The court is permitted to resolve cross-motions for summary judgment concurrently. Cf. Assicurazioni Generali, S.P.A. v. Pub. Svc. Mut. Ins. Co., 77 F.3d 731, 733 & n.2 (3d Cir. 1996) (observing that district court may dispose of case through cross-motions for summary judgment); see also 10A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2720 (3d ed. 1998). When doing so, the court is bound to view the evidence in the light most favorable to the non-moving party with respect to each motion. FED. R. CIV. P. 56; United States v. Hall, 730 F. Supp. 646, 648 (M.D. Pa.1990).

III. Discussion

The FDCPA is a remedial statute designed to protect consumers from the ills that often accompany abusive debt-collection practices.*fn6 See 15 U.S.C. § 1692(a), (e); Schaffhauser v. Citibank (S.D.) N.A., No. 1:05-CV-2075, 2007 WL 2752141, at *2 (M.D. Pa. Sept. 19, 2007) (describing policies of FDCPA, including elimination of abusive collection practices.) Congress implemented the statute to regularize debt collection practices on a national scale and to ensure that all debt collectors seek repayment of debts without threatening, intimidating, or harassing consumers. See 15 U.S.C. § 1692(e). As a remedial statute, courts apply the language of the FDCPA broadly to effectuate these policies among financially savvy and economically unfledged consumers alike. See Campuzano-Burgos v. Midland Credit Mgmt., 497 F. Supp. 2d 660, 662 (E.D. Pa. 2007) (quoting Clomon v. Jackson, 988 F.2d 1314, 1318 (3d Cir. 1993)) ("The basic purpose of the least-sophisticated consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd.").

Courts evaluate whether a debt collector's communication with a debtor complies with the Act under the "least sophisticated consumer" or "least sophisticated debtor" standard. This standard requires that courts consider the impression that the least sophisticated debtor would receive from the debt collector's communications. Brown v. Card Svc. Ctr., 464 F.3d 450, 453 (3d Cir. 2006); see also Schaffhauser, 2007 WL 2752141, at *3. "The least sophisticated debtor standard requires more than 'simply examining whether particular language would deceive or mislead a reasonable debtor' because a communication that would not deceive or mislead a reasonable debtor might still deceive or mislead the least sophisticated debtor." Brown, 464 F.3d at 454. This standard ensures that all consumers receive similar protection under the FDCPA regardless of their financial expertise. Id.

Whether a communication is misleading under the FDCPA presents a question of law for the court; disputed facts must be resolved by a jury. See Wilson v. Quadramed, 225 F.3d 350, 353 n.2 (3d Cir. 2000) (holding that collection letter's compliance with FDCPA presents a question of law); Dupuy v. Weltman, Weinberg & Reis Co., 442 F. Supp. 2d 822, 824 (N.D. Cal. 2006) (quoting Van Westrienen v. Americontinental Collection Corp., 94 F. Supp. 2d 1087, 1099 (D. Or. 2000)) ("Whether language employed in connection with the collection of debt violates the FDCPA is a question of law for the court to decide."); Gionis v. Javitch, Block & Rathbone, 405 F. Supp. 2d 856, 873 (S.D. Ohio 2005) (same); Shimek v. Weissman, Nowack, Curry & Wilso, P.C., 323 F. Supp. 2d 1344, (N.D. Ga. 2003) (same). With these considerations in mind, the court will turn to the substance of Martsolf's FDCPA allegations.

A. Liability for Violation of the FDCPA

Martsolf alleges that defendants' collection letters violate the FDCPA by (1) threatening to institute suit to collect a time-barred obligation; (2) representing that Pennsylvania law authorized collection of a $30 returned-check fee; (3) misrepresenting the total amount of the debt; and (4) misrepresenting that an attorney had reviewed her debts and reached a profession opinion that they were effective. She also alleges that these actions violated the FDCPA's general prohibition against the use of misleading or deceptive communications to collect a debt.

1. Attempts to Collect Martsolf's Time-Barred Debts

FDCPA provisions codified at § 1962e(5) provide that "[a] debt collector may not use any false, deceptive, or misleading representation in connection with the collection of any debt[ including:] . . . [t]he threat to take any action that cannot legally be taken or that is not intended to be taken." 15 U.S.C. § 1692e(5). Subdivision (2)(A) of the same section prohibits debt collectors from falsely representing "the character, amount, or legal status of any debt." 15 U.S.C. § 1692e(2)(A). "A threat to sue a consumer on a claim that the debt collector knows is barred by the statute of limitations violates § 1692e(2)(A) of the FDCPA."*fn7

Aronson v. Commercial Fin. Svcs., Inc., No. Civ. A. 96-2113, 1997 WL 1038818, at *2 (W.D. Pa. Dec. 22, 1997) (citing Kimber v. Fed. Fin. Corp., 668 F. Supp. 1480, 1489 (M.D. Ala. 1987); see also Beattie v. D.M. Collections, Inc., 754 F. Supp. 383, 393 (D. Del. 1991) ("[T]he threatening of a lawsuit which the debt collector knows or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is the kind of abusive practice the FDCPA was intended to eliminate."). The state law under which the debt arises provides the applicable statue of limitations for purposes of determining whether the obligation is time-barred. See Johnson v. Riddle, 305 F.3d 1107, 1119 (10th Cir. 2002) (holding that state law provides applicable legal regulations for collection of a dishonored check).*fn8

This prohibition applies with equal force in all states, regardless of whether expirations of the limitations period completely extinguishes a debt or merely prevents judicial enforcement of it. See Wallace, 168 F. Supp. 2d at 128 (noting that when expiration of a limitations period does not extinguish debt, a debt collector is nevertheless barred from threatening suit upon it). In states, including Pennsylvania, that adopt the latter provision, a debt collector may request voluntary repayment of the debt but may not threaten suit based upon it. See Freyermuth v. Credit Bureau Svcs., Inc., 248 F.3d 767, 771 (8th Cir 2001); Ehsanuddin v. Wolpoff & Abramson, No. Civ. A. 06-708, 2007 WL 543052, at *4 n.1 (W.D. Pa. Feb. 16, 2007); Wallace v. Capital One Bank, 168 F. Supp. 2d 526 (D. Md. 2001) (holding that when expiration of a limitations period does not extinguish debt, a debt collector may send a collection letter that does no more than request voluntary repayment). The debt collector may not engage in tactics that would cause the least sophisticated consumer to believe that he or she could be subject to litigation for failure to fulfill the obligation. See Ehsanuddin, 2007 WL 543052, at *4; Beattie, 754 F. Supp. at 393.

In the case sub judice, the Pennsylvania Uniform Commercial Code ("UCC") governs sales transactions such as that in which Martsolf's checks were presented. Under the UCC a suit for recovery upon a dishonored check "must be commenced within three years after dishonor of the [check] or ten years after the date of the [check], whichever period expires first." 13 PA. CONS. STAT. § 3118(c). Martsolf's dishonored checks were dated March 18, 1994 and March 20, 1994. The ten-year statute of limitations for suit on the checks expired on March 18, 2004 and March 20, 2004, respectively. The three-year post-dishonor limitations period is irrelevant because the running of the ten-year period extinguished the creditor's right to file suit regardless of whether three-year period had yet to expire. See id. JBC did not send the demand letters to Martsolf until April 24, 2004, after expiration of the statute of limitations. The FDCPA therefore prohibited JBC from threatening suit to collect the debt. The court must evaluate the language of the collection letters to determine whether the least sophisticated debtor would perceive them as a litigation threat.

The letters JBC sent to Martsolf state: "You are cautioned that unless this total amount is paid within thirty (30) days after the date this letter is received, you may be subject to a civil penalty, court costs, and reasonable attorney fees after suit has been filed." (Doc. 107, Exs. G & H (emphasis added)). JBC suggests that this sentence is nothing more than an innocuous entreaty, requesting Martsolf to make voluntary recompense for the outstanding debt. (See Doc. 109 at 11 (quoting Abels v. JBC Legal Group, P.C., 428 F. Supp. 2d 1023, 1029 (N.D. Cal. 2005)) (arguing that letters are a "prudential reminder" to debtors about their obligations)). The court disagrees. JBC's collection letter charges the debtor with potential liability for "a civil penalty, court costs, and reasonable attorney fees." (Doc. 107, Exs. G & H.) JBC's exhortation regarding potential liability for costs recoverable through court proceedings certainly casts an ominous shadow of litigation over the collection letters. Cf. Abels, 428 F. Supp. at 1029 (concluding that collection letter did not threaten suit in part because words such as "suit," "action," "case," and "litigation" were absent from its text).*fn9 Warning that JBC may recoup these costs "after suit has been filed" is a transparent threat of litigation. See, e.g., Goins v. JBC & Assocs., P.C., 352 F. Supp. 2d 262, 265, 272 (D. Conn. 2005) (concluding that use of language stating "[y]ou may wish to settle this matter before we seek appropriate relief before a court of proper jurisdiction" violates the FDCPA); Francis v. Snyder, 389 F. Supp. 2d 1034, 1037, 1041-42 (N.D. Ill 2005) (finding that letter violated FDCPA when it advised: "[i]f you contact this office on receipt of this letter you may qualify for a payment plan. If you do not call, the balance will be pursued in full, including collection costs" ); Nance v. Friedman, No. 98 C 6270, 2000 WL 1700156, at *2 (N.D. Ill. Nov. 8, 2000) (holding that collection letter threatened litigation because it contained language discussing the "necessity of filing suit" and referenced "possible legal action"). The court finds that the collection letters would cause the least sophisticated debtor to believe that he or she would be presented with summons and a complaint if repayment was not made. JBC's letter threatens litigation, and sending it to Martsolf after expiration of the limitations period violated the FDCPA. Martsolf's motion for summary judgment will be granted to the extent that JBC and Boyajian have threatened suit on time-barred debts.

2. Attempt to Collect a Returned Check Fee

The FDCPA prohibits a debt collector from collecting or attempting to collect "any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law." 15 U.S.C. § 1692f(1). This section governs the collection of charges for returned checks. See Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 408 (3d Cir. 2000); Still v. JBC Assocs., P.C., No. Civ. 02-3550, 2005 WL 1334715, at *2 (D.N.J. June 3, 2005).

In the present matter, defendants argue that the UCC provisions authorizing recovery of incidental and consequential damages, see 13 PA. CONS. STAT. § 2710, permit collection of the $30 returned check fee. Relatively few courts have considered whether the UCC incidental damage provisions authorize a seller to collect a returned check fee. Several courts have concluded that the UCC affirmatively authorizes sellers to collect such a fee as an incidental damage, thereby preventing an FDCPA violation. See Tuttle v. Equifax Check, 190 F.3d 9, 15 (2d Cir. 1999) (concluding that debt collector did not violate FDCPA when collecting a returned check fee because "under the UCC, [a debt collector i]s permitted to impose and collect its service charge (commercially reasonable 'incidental damages') as part of its recovery of the face value of [the debtor's] check); Abels v. JBC Legal Group, P.C., 434 F. Supp. 2d 763, 765-66 (N.D. Cal. 2006) (noting that UCC incidental damages provision allows assignee of debt to collect returned check because original seller could have done so as an incidental damages of buyer's breach); Lee v. Sec. Check, LLC, 203 F. Supp. 2d 657, 661-62 (N.D. Miss. 2000) (holding that a seller may collect a returned check charge as an incidental damage under the UCC.). The Federal Trade Commission ("FTC"), charged with enforcing the FDCPA, has similarly concluded that the Act permits recovery of collection fees to the extent authorized by state law. See FTC Commentary on the Fair Debt Collection Practices Act, 53 Fed. Reg. 50097, 50108 (1988) ("For purposes of [§ 1692f(1), 'amount' includes not only the debt, but also any incidental charges, such as collection charges, interest, service charges, late fees, and bad check handling fees."). However, a returned check fee must represent the seller's reasonable incidental costs of collecting the debt. See Tuttle, 190 F.3d at 15. The court observes that returned check fees of $30 have been found reasonable as a matter of law. See Lee, 203 F. Supp. 2d at 661 ("[T]he court is of the opinion that the uniform commercial statutes permitted Security Check to impose the $30.00 service charge.").

In the instant case, the collection letters sent to Martsolf state that the UCC allows JBC and Boyajian to collect a $30 service charge for each returned check. The court finds persuasive the conclusions of other tribunals that the UCC authorizes collection of such a charge. FTC commentaries stating that collection of such fees aligns with the policies of the FDCPA lends further support to this conclusion. Accordingly, JBC's request for a $30 returned check fee per dishonored check did not violate the FDCPA prohibition on collection amounts beyond those permitted by applicable law or agreement. Defendants' motion for summary judgment will be granted on this claim.*fn10 Martsolf's motion will be denied.

3. Representation of the Total Amount of the Debt

The FDCPA prohibits a debt collector from misrepresenting the amount of a debt upon which collection attempts are made. See 15 U.S.C. § 1692e(2)(A) (proscribing debt collectors from making a "false representation of . . . the . . . amount . . . of any debt). A debt collector that inflates the amount of the debt, whether through unauthorized service fees or otherwise, violates this provision of the FDCPA. See Irwin v. Mascott, 112 F. Supp 2d 937, 947-48 (N.D. Cal. 2000) (holding that collection letter demanding charges and fees not permitted by law violated § 1692e(2) prohibition against misrepresenting the amount of the debt); Sandlin v. Shapiro & Fishman, 919 F. Supp. 1564, 1569 (M.D. Fla. 1996) (denying defendants' motion to dismiss a claim alleging that they misrepresented total amount of debt because defendants attempted to collect mortgage payoff fees not permitted under terms of mortgage).

In the present matter, JBC's collection letters demand payment for the face value of dishonored checks and a $30 returned check fee. The letters list the amount of the debt separate from the returned-check charges and include the total amount due for both liabilities. They inform the debtor: "[O]ur client is entitled to a $30.00 per check fee as a service charge to handle your dishonored checks. Accordingly, demand is hereby made for a total payment of [the amount outstanding on the debt plus the $30 returned check charge]." (Doc. 107, Exs. G & H.) The letters do not artificially inflate either the amount of the debt or the service fee, do not seek to collect any amounts extraneous to the debt. Therefore, the letters do not misrepresent the amount due in violation of § 1692e(2)(A). Defendants' motion will be granted with respect to that claim; Martsolf's motion will be denied.

4. Representation of Attorney Review

The FDCPA prohibits a debt collector from "false[ly] represent[ing] or impl[ying] that any individual is an attorney or that any communication is from an attorney" if, in fact, no attorney reviewed the debt. 15 U.S.C. § 1692e(3). The purpose of this provision is twofold: First, it prohibits non-attorney debt collectors from posturing as attorneys. See Check Investors, 502 F.3d at 166 ("The prohibition on false, deceptive or misleading representations precludes a debt collector from falsely representing that a dunning letter was sent by an attorney."). Second, it prevents attorneys performing debt collections from communicating with debtors in a manner that suggests that the attorney has professionally evaluated the debtor's alleged obligations when no such review has occurred. See Boyd v. Wexler, 275 F.3d 642, 644 (7th Cir. 2001) ("[A] lawyer who . . . is a debt collectors violates section 1692e(3) . . . if he sends a collection letter that he has not reviewed, since his lawyer's letter then falsely implies that he has reviewed the creditor's claim."); Crossley v. Lieberman, 868 F.2d 566, 570 (3d Cir. 1989) ("Abuses by attorney debt collectors are more egregious than those of lay collectors because a consumer reacts with far more duress to an attorney's improper threat of legal action than to a debt collection agency committing the same practice."). An attorney debt collector therefore violates this provision if: (1) the attorney send a collection letter to a debtor that implies that the attorney has reviewed the debt; and (2) the attorney has not, in fact, performed an independent, professional examination of the debtor's portfolio. Cf. Clomon, 988 F.2d 1321 (holding that, in the absence of actual attorney review of a debtor's file, the use of an attorney signature on collection letters violates the FDCPA because it conveys that an attorney has evaluated the debt).

The United States Court of Appeals for the Third Circuit has not had occasion to evaluate which types of collection letters convey an impression of attorney review; however, its sister court for Second Circuit has explicated this question in some detail. The Second Circuit has instructed that attorneys may not sign collection letters on law firm letterhead unless they have personally reviewed the debtors' file. The combined effect of the signature and the letterhead implies that an attorney has reached a professional judgment that the debt is legally effective. Clomon, 988 F.2d at 1321 ("[T]he use of an attorney's signature on a collection letter implies . . . that the attorney directly controlled or supervised the process through which the letter was sent."); Campuzano-Burgos., 497 F. Supp. 2d at 664. Similarly, "a letter sent on law firm letterhead, standing alone, . . . represent[s] a level of attorney involvement to the debtor receiving the letter," even if no attorney signature appears on the document. Greco v. Trauner, Cohen & Thomas, LLP, 412 F.3d 360, 364 (2d Cir. 2005) (holding that issuance of collection letter on law firm letterhead implies that attorneys have been involved in analysis of the debt and that, if no such involvement occurred, the letter may violate the FDCPA); cf. Rosenau v. Unifund Corp., No. Civ. A. 06-1355, 2007 WL 1892888, at *3 n.26 (E.D. Pa. June 28, 2007) (observing that collection letter sent by non-attorneys did not imply that it originated with an attorney because phrases such as "attorney-at-law" and "lawyer" were absent). "An attorney can, in fact, send a debt collection letter without being meaningfully involved as an attorney within the collection process, so long as that letter includes disclaimers that should make clear even to the 'least sophisticated consumer' that the law firm or attorney sending the letter is not, at the time of the letter's transmission, acting as an attorney." Greco, 412 F.3d at 364.

In the present case, the letter Martsolf received appears on JBC's law firm letterhead. Its header reads "JBC LEGAL GROUP, P.C. / Attorneys at Law" and contains the names of four attorneys and three law offices. The letter is signed "JBC LEGAL GROUP, P.C. / Attorneys at Law." The firm name appears in capital letters in both places, and the words "Attorneys at Law" are boldface, italic type, and larger than that used throughout the remainder of the document. The body of the letter confirms that JBC is a law firm, and the first line states: "This firm represents the successors in interest of the obligation you created and have not yet satisfied when you passed the bad check(s) identified below." (Doc. 107, Exs. G & H.) The court finds that these indicia of attorney involvement would cause the least sophisticated debtor to believe that the letter originated with a lawyer.*fn11

An attorney who represents that he or she has evaluated the debtor's obligation must actually perform such a review. The hallmark of this review is the use of independent, professional judgment by the attorney. See Miller v. Wolposs & Abramson, LLP, 321 F.3d 292, 301 (2d Cir. 2003) (stating that a collection letter from an attorney implies that attorney has been involved in handling the debt); Clomon, 988 F.2d at 1321; Campuzano-Burgos, 497 F. Supp. 2d at 665. This review need not be lengthy, but it must permit the attorney to form a professional opinion about whether the debt is potentially viable, barred by the statute of limitations, uncollectable due to the debtor's bankruptcy, and to evaluate similar legal considerations. See Miller, 321 F.3d at 305-06 (stating that collection letter on attorney letterhead implies that attorney has made various types of legal judgments, including the status of the debt); Bezpalko v. Gilfillan, Gilpin & Brehman, No. Civ. A. 97-4923, 1998 WL 321268, at *8 (E.D. Pa. June 17, 1998) (stating that FDCPA requires attorney to be involved in the mailing of a collection letter if letter appears to originate from an attorney). A high-speed, automated review bereft of independent professional judgment does not demonstrate the type of considered review that a collection letter on attorney letterhead implies. See Miller, 321 F.3d at 306; Boyd v. Wexler, 275 F.3d 642 (7th Cir. 2001) (stating that an attorney whose firm issued approximately 50,000 collection letters per month could be found to lack the type of involvement necessary to prevent an FDCPA violation); Semper v. JBC Legal Group, No. C04-2204L, 2005 WL 2172377, at *2 (W.D. Wash. Sept. 6, 2005.) (holding that letter signed by "JBC Legal Group, PC / Compliance Department" would cause the least sophisticated debtor to believe that an attorney was involved in the issuance of the letter.) Automated technological processes are permissible methods for collecting debt, but-when practiced by attorneys-they must be accompanied by a disclaimer sufficient to inform the least sophisticated debtor that no lawyer has personally reviewed the debtor's account. See Greco, 412 F.3d at 364. Any less intensive review misleads the debtor to believe the "communication is from an attorney" who has fully assessed the legal status of the debt. 15 U.S.C. § 1692e(3).

In the present case, Boyajian testified that, when reviewing debts, he uses a variety of software applications, to evaluate large numbers of accounts quickly. He described his data analysis as follows:

My review is a very high level review which involves a great deal of sorting and other type of selection queries that are predetermined in most cases and also drafted in other ways. . . . So my review is a review that I can do at a very high speed with a great deal of drill-down and thoroughness without a great deal of time on similarly situated types of data.

(Doc. 128 at 23-24.) Similar testimony by Boyajian confirms that JBC software programs evaluate accounts by verifying the availability of data such as the payee and payor of a check, the amount and date thereof, and the bank routing number. (Doc. 114 ¶ 5.) Accounts that contain complete information are electronically transmitted to a third-party printing house, which produces and mails collection letters on behalf of JBC. (Doc. 114 ¶ 6.) Boyajian subjects accounts with incomplete data to additional computer analysis that sift potentially collectable debts from those that lack sufficient information to justify a collection letter. (Doc. 107, Ex. D at 63-64; Doc. 128 at 25.) All of these processes are performed at a rate of megabytes per second with minimal human involvement. (Doc. 128 at 25-26.) Boyajian and JBC attorneys personally review files in bulk numbers based on the results of computer programs applied to large amounts of data. (Doc. 107, Ex. D at 64-65; Doc. 128 at 24-25.)*fn12

The court concludes that these rapid, technologically aided review processes do not demonstrate the sort of independent analysis and professional opinion that must occur when a debt collector represents that an attorney has reviewed a debt. An attorney using these processes becomes little more than a computer operator unengaged in a considered legal analysis of the debtor's account. See Miller, 321 F.3d at 306 (observing that a hurried review of collection files followed by issuance of collection letters "with the push of a button" supports the conclusion that the attorney failed to perform any professional review of debtor's file). In fact, the statute of limitations, which an attorney reviewing a debt should consider before representing that it is collectable, see id.; supra Part III.A.1, wholly escaped the review of Boyajian's computer programs in the instant case.*fn13

The court does not doubt the utility or efficacy of the technological processes in evaluating debt accounts, nor should the court's opinion be construed to discourage the use of technological processes. The court's holding simply reflects the FDCPA mandate that attorney debt collectors' communications with debtors must be truthful and accurately represent the extent of the review of the debtor's account. See 15 U.S.C. § 1692e ("A debt collector may not use any false, deceptive, or misleading representation in connection with the collection of any debt.") An attorney debt collector who represents that the attorney has personally evaluated the debtor's accounts must have actually performed such a review. If technological process make such a review unnecessary, the attorney simply cannot represent that such a review has occurred. See Greco, 412 F.3d at 365 (holding that a collection letter from an attorney did not violate § 1692e(3) because it contained a disclaimer that "no attorney with this firm has personally reviewed the particular circumstances of your account"). Any misinterpretations can be easily dispelled by including a disclaimer in the collection letter describing the level of the attorney's involvement in analyzing the debt. Id. at 364

In the instant matter, JBC and Boyajian performed only cursory technological reviews of debt accounts, but their letters represent a significantly greater level of attorney involvement. The letters do not include a disclaimer stating that no attorney has personally reviewed the debt. The least sophisticated debtor would believe that a JBC attorney has participated in the handling of their debt when, in fact, no attorney has done so. JBC and Boyajian have therefore violated the FDCPA. Accordingly, Martsolf's motion for summary judgment will be granted to the extent Martsolf claims that defendants misrepresented the level of attorney involvement in the debt; defendant's motion will be denied.

B. Vicarious Liability of ORM

An entity that owns a debt may be liable for FDCPA violations of a debt collector it engages to collect the obligation provided that the owner of the debt is itself a debt collector. See Pollice, 225 F.3d at 404. "[F]ederal courts that have considered the issue have held that the client of an attorney who is a 'debt collector,' as defined in § 1692a(6), is vicariously liable for the attorney's misconduct if the client is itself a debt collector as defined by the statute." Id.; see also Fox v. Citicorp Credit Svcs., 15 F.3d 1507, 1516 (2d Cir. 1994) (concluding that FDCPA liability may be vicariously applied to a client who retains an attorney to act on the client's behalf). Hence, FDCPA liability levied upon an attorney debt collector may be equally imposed upon the attorney's debt collector client. See id.; Dahlhammer v. Citibank (S.D.) N.A., No. 05-CV-1749, 2006 WL 3484352, at *7 (M.D. Pa. Nov. 30, 2006); Flamm v. Sarner & Assocs., P.C., No. Civ. A. 02-4302, 2006 WL 42770, at *4 (E.D. Pa. Jan. 3, 2006.)

As an initial matter, the court notes that ORM is a debt collector within the definition of the FDCPA. See 15 U.S.C. § 1692a(6) (stating that an entity is a debt collector if it engages "in any business the primary purpose of which is the collection of any debts"); (Doc. 107, Ex. G at 33-34 ("Outsource Recovery Management does financial transactions[,] . . . predominantly buying and selling distressed debt.")). ORM advances two legal arguments against vicarious liability. First, it contends that vicarious FDCPA liability is appropriate only if a debt collector's attorney violates venue provision of the FDCPA, 15 U.S.C. § 1692i. (See Doc. 116 at 21.) The court rejects this conclusion in light of Pollice v. National Tax Funding, LP, 225 F.3d 379 (3d Cir. 2000), which applied vicarious liability under the FDCPA to a debt collector agent whose attorney violated § 1692f of the codified Act. See Pollice, 225 F.3d at 405-06. "This is a fair result because an entity that is itself a 'debt collector'-and hence subject to the FDCPA-should bear the burden of monitoring the activities of those it enlists to collect debts on its behalf." Id. at 405.

Second, ORM argues that vicarious liability is inappropriate because it lacks an agency relationship with JBC sufficient to allow it to control JBC's action and warrant imposing vicarious liability. "An agency relationship is formed by the 'manifestation of consent by one person to another that the other shall act on his behalf and subject to this control, and consent by the other to so act." See Phillips v. Andrews, 128 F. App'x 935, 937 (3d Cir. 2005) (quoting RESTATEMENT (SECOND) OF AGENCY § 15 (1981)). ORM purchases defaulted debts for collection purposes. It retains various law firms to engage in collection efforts on its behalf. Defendants admit that an attorney-client relationship exists between ORM and JBC for that purpose. (Doc. 110 ¶8; Doc. 114 ¶¶ 3-4; Doc. 120 ¶ 8.) In furtherance of their relationship, ORM transmits large amounts of data to JBC, and JBC in turn produces collection letters such as those received by Martsolf. Each letter includes a notice of ORM's privacy and instructs debtors to direct questions to JBC. (See Doc. 107, Ex. G & H.) Boyajian, as the president of both companies and the owner of JBC, designed and administered this process.

The court finds that the ORM and JBC undisputedly maintain an attorney-client and agent-principal relationship for the purpose of collecting debts. Hence, ORM is vicariously liable for FDCPA infractions that JBC commits while acting on its behalf. See Pollice, 225 F.3d at 404-05; Gary v. Goldman & Co., 180 F. Supp. 2d 668, 673 (E.D. Pa. 2002). Plaintiff's motion for summary judgment on the vicarious liability claims against ORM will therefore be granted; defendants' motion for summary judgment on the same claims will be denied.

IV. Conclusion

Defendants JBC, ORM, and Boyajian violated the FDCPA by threatening to initiate litigation on a time-barred debt and by representing that her debt had been reviewed by an attorney when, in fact, no such review had occurred. Summary judgment will be entered in favor of plaintiff and against these defendants on these claims. They did not violate the FDCPA by representing that they were entitled to returned-check fees under Pennsylvania law or by representing that the total amount of Martsolf's debt included such fees. Summary judgment will be entered in favor of defendants and against plaintiffs as to these claims. Plaintiff no longer maintains any claims against defendant Brandon, and summary judgment will be entered in his favor on all counts.

The instant case will be set for trial on the issue of damages, which present an issue of fact for resolution by a jury. Kobs v. Arrow Svc. Bureau, Inc., 134 F.3d 893, 897 (7th Cir. 1998) (holding that plaintiff has a right to jury trial on the issue of damages under the FDCPA); Sibley v. Fulton Dekalb Collection Svc., 677 F.2d 830, 834 (11th Cir. 1982) (same); Smith v. Law Offices of Mitchell N. Kay, 124 B.R. 182, 193 (D. Del. 1991) (holding that jury trial to determine issue of damages under FDCPA is appropriate after entry of declaratory judgment on liability).

An appropriate order will issue.

Dated: January 30, 2008


AND NOW, this 30th day of January, 2008, upon consideration of plaintiff's motion to strike (Doc. 124), of defendant's request for judicial notice (Doc. 112), and of the cross-motions for summary judgment (Docs. 105, 108), it is hereby ORDERED that:

1. Plaintiff's motion to strike (Doc. 124) is DENIED.

2. Plaintiff's motion for summary judgment (Doc. 105) is GRANTED in part and DENIED in part as follows:

a. The motion is GRANTED with respect to plaintiff's claims alleging that defendants JBC Legal Group, P.C., Jack H. Boyajian, and Outsource Recovery Management, Inc. threatened to institute litigation to enforce time barred debts and represented that plaintiff's debt had been reviewed by an attorney when, in fact, no such review had occurred.

b. The motion is otherwise DENIED.

3. Defendants' motion for summary judgment (Doc. 108) is GRANTED in part and DENIED in part as follows:

a. The motion is GRANTED with respect to all claims against defendant Marvin Brandon.

b. The motion is GRANTED with respect to claims alleging that defendants JBC Legal Group, P.C., Jack H. Boyajian, and Outsource Recovery Management, Inc. misrepresented their right collect returned-check fees and misrepresented the total amount of plaintiff's debt.

c. The motion is otherwise DENIED.

4. The Clerk of Court is directed to defer entry of judgment until the conclusion of this case.

5. A revised pre-trial and trial schedule shall issue by future order of court.

CHRISTOPHER C. CONNER United States District Judge

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