Schwebel v. Resurgent Capital Services L.P.
- Kenneth Karas
- 7:19-cv-08821
- U.S. District Court · Southern District of New York
- 14
In Schwebel v. Resurgent, Judge Karas denied dismissal, allowing Fair Debt Collection Practices Act claims over a potentially confusing collection letter to proceed.
The ruling affects Avrohom Schwebel’s Fair Debt Collection Practices Act claims against Resurgent Capital Services L.P., LVNV Funding, and John Does 1–25 by allowing those claims to continue. It also concerns the proposed New York class, but the court did not decide class certification.
What happened
Avrohom Schwebel sued Resurgent Capital Services L.P., LVNV Funding, and John Does 1–25 under the Fair Debt Collection Practices Act, claiming a letter about his debt gave conflicting instructions about disputing it. He brought the case as a proposed class action.
The defendants argued that the letter was not a debt-collection communication and did not mislead Schwebel or interfere with his statutory rights. The court held that Schwebel plausibly alleged that the letter’s inquiry notice could make a least sophisticated consumer think a phone call or no further action was enough, even though the letter’s validation notice required a written dispute within 30 days.
Judge Kenneth M. Karas denied the defendants’ motion to dismiss. The ruling allowed Schwebel’s claims under the Fair Debt Collection Practices Act to continue; it did not decide whether the defendants ultimately violated the law or certify a class.
The detailed version
- Schwebel v. Resurgent Capital Services L.P. · No. 7:19-cv-08821
- Kenneth Karas
- Sept. 23, 2020
Background
Avrohom Schwebel brought a proposed class action against Resurgent Capital Services L.P., LVNV Funding, and John Does 1–25. He alleged that the defendants were debt collectors and violated the Fair Debt Collection Practices Act, a federal law regulating debt-collection practices. His claims arose from a letter Resurgent sent about a debt originally held by Credit One Bank, N.A. and later acquired by LVNV.
The letter contained an “Inquiry Notice” stating that Resurgent had begun reviewing a recent inquiry and directing Schwebel to call for further assistance. It also contained a “Validation Notice” explaining that Schwebel had 30 days to dispute the debt and that a dispute had to be made in writing for the debt collector to obtain verification. Schwebel alleged that these notices conflicted and could leave a consumer unsure whether a written dispute was necessary.
Schwebel sought actual damages, statutory damages, costs, and attorneys’ fees under 15 U.S.C. §§ 1692e and 1692g. He also sought to represent a proposed class of people in New York who received certain allegedly misleading collection letters from Resurgent on behalf of LVNV. The opinion does not rule on class certification.
The Motion to Dismiss
The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Schwebel had not stated a legally sufficient claim. They argued that the letter was not sent as part of an attempt to collect a debt, adequately informed Schwebel of his rights, and created no meaningful risk of confusion.
On a motion to dismiss, the court must accept the complaint’s factual allegations as true and draw reasonable conclusions in the plaintiff’s favor. The complaint must contain enough factual detail to make the claimed legal violation plausible, rather than merely possible. The court generally may not consider facts outside the complaint at this stage.
Court’s Analysis
The court first concluded that Schwebel plausibly alleged that the letter was sent in connection with collecting a debt. The letter itself stated, “This is an attempt to collect a debt and any information obtained will be used for that purpose.” The court also relied on Second Circuit decisions treating nearly identical language as indicating a debt-collection purpose.
The court next addressed the claim under Section 1692e(10), which prohibits false, deceptive, or misleading methods of collecting a debt. Courts apply an objective “least sophisticated consumer” standard, asking whether the communication could reasonably mislead a consumer who is inexperienced or unsophisticated but still reasonable. The court found it plausible that such a consumer could read the Inquiry Notice as suggesting that no written dispute was needed because the account was already under review or because a phone call would be sufficient. That possible interpretation could cause the consumer to fail to submit a written dispute and lose statutory protections.
The court also held that Schwebel plausibly alleged a violation of Section 1692g. That provision requires a debt collector to clearly explain the consumer’s 30-day right to dispute the debt and requires the collector not to overshadow or contradict that explanation. Although the Validation Notice accurately described the right to dispute the debt, the court found that the Inquiry Notice could make a consumer think that an investigation was already underway, that communication should occur by phone, and that further written action was unnecessary.
The defendants argued that Schwebel was not actually confused and that the letter was sent in response to an earlier written dispute. The court rejected those arguments at this stage because the complaint did not allege those facts, and the court could not consider factual assertions outside the complaint when deciding the motion. The court also stated that the objective least-sophisticated-consumer test does not depend on whether Schwebel himself was actually confused.
Disposition
Judge Kenneth M. Karas denied the defendants’ motion to dismiss and directed the Clerk of Court to terminate the pending motion. The opinion therefore allowed Schwebel’s Fair Debt Collection Practices Act claims to continue, without deciding the ultimate merits of those claims.
Read the full 14-page opinion on CourtListener, the free public archive maintained by the Free Law Project.