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Baye v. Midland Credit Management, Inc.

United States District Court, E.D. Louisiana

October 31, 2017

JOAN BAYE
v.
MIDLAND CREDIT MANAGEMENT, INC., ET AL

         SECTION "F"

          ORDER AND REASONS

          MARTIN L. C. FELDMAN UNITED STATES DISTRICT JUDGE

         Before the Court is the plaintiff's motion to reconsider the Court's Order and Reasons dated August 9, 2017, in which the Court granted defendants' motion to dismiss the plaintiff's complaint for failure to state a claim. For the following reasons, the motion is GRANTED in part (as to Counts III-VI) and DENIED in part (as to Counts I and II).

         Background

         Joan Baye had debt. And in 2009 and 2010 her creditors acknowledged, in what is called a charge-off date, that they likely would not be successful at collecting the debt, and would consider it a loss for the company. Within a few years, the statute of limitations to judicially enforce collection tolled. Accordingly, creditors who owned her debt could not sue Baye to collect the outstanding balances or report her to a credit bureau. Sometime after the debt became time-barred, Midland Funding, Inc. bought the debt for pennies on the dollar.[1] It contracted with Midland Credit Management, Inc. (MCM) to collect it on Midland's behalf. Earlier this year, MCM mailed Baye three letters, on Midland's behalf, attempting to collect on the expired debt. In May 2017, Baye sued Midland and MCM, on behalf of herself and those similarly situated, claiming that the letters violated the Fair Debt Collection Practices Act (FDCPA).

         According to the complaint, Baye had defunct accounts with three separate entities: she had a balance of $3, 416.35 with Target National Bank, a balance of $1, 234.94 with Citibank, and a balance of $4, 017.49 with Chase Bank. All of these debts have been time-barred for years. On February 3, 2017, MCM sent Baye two letters; one regarding her Chase account and the other her Target account. MCM's letters provided information about the debt in the top right corner, including the original creditor, the current balance, the current owner (Midland), and the “discount” it would offer her if she paid (40%). Then it says “Available Payment Options, ” and lists three options. The first offers 40% off the balance if she makes one payment, the second offers 20% off if paid over 6 months, and the third offers monthly payments as low as $50 per month. Below the options it states:

Benefits of Paying Your Debt
- Save $1, 366.54 if you pay by 03-05-2017
-Put this debt behind you
-No more communication on this account
- -Peace of Mind

         The bottom of the letter, in small but readable font, states:

The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.

         Below the disclaimer is information on how to make the payment.

         On March 15, 2017, MCM sent Baye a communication regarding all three accounts. It included a cover letter, stating that Baye qualified for a special discount because she had three accounts with MCM. It lists “benefits” for accepting one of the “offers, ” including “Savings based on all accounts with us” and “Peace of mind.” The final sentence states, “Act now to maximize your savings and put these debts behind you.” There is no mention on the cover letter that the debts are time-barred. Enclosed are three, 3-page letters regarding the Target Debt, Citi Debt, and Chase Debt. Each letter contains nearly identical language as the ones sent in February, offering three options to “maximize your savings and put this debt behind you.” They each state that the offer expires April 14, 2017, and the initial payments are due by then. They also contain the same disclosure below the signature line stating that MCM will not sue to collect the debt.

         In her May 10, 2017 complaint, Baye alleged that MCM's letters, sent on Midland's behalf, violate the FDCPA. The FDCPA prevents debt collectors (which MCM and Midland both are) from harassing any debtor, misleading or deceiving the consumer, or using unfair or unconscionable means to collect any debt. Baye faults the defendants for failing to sufficiently disclose the time-barred nature of the debt. Further, Baye alleges that under Louisiana law, debtors can renounce prescription and revive their time-barred debt by entering a payment plan, so as to reset the clock on the statute of limitations and become obligated to pay their original balance in full. The letters, Baye complains, fail to notify the consumer of this risk.

         Midland and MCM moved to dismiss her complaint for failure to state a claim on June 26, 2017. The defendants contended that debt collectors are permitted to seek voluntary payment, even if the debt is unenforceable, as long as they do not threaten litigation or make false statements as to the enforceability of the debt. Moreover, they assert that their disclosure adequately informs the consumer that they will not sue on the debt. Further, they contend that they do not have an obligation to warn about the potential revival of a time-barred debt. Any warning would be unnecessary because under Louisiana law, a debtor cannot revive a time-barred debt by making partial payment on a prescribed debt.

         On August 9, 2017, this Court issued an Order and Reasons granting the defendants' motion to dismiss, embracing their arguments and interpretation of the law. Order and Reasons dtd. 8/9/17. The plaintiff now moves the Court to reconsider its Order and Reasons, pursuant to Federal Rule of Civil Procedure Rule 59(e) and Rule 60(b).

         I. Legal Standard: Reconsideration

         Federal Rule of Civil Procedure 59(e) provides, “[a] motion to alter or amend a judgment must be filed no later than 28 days after the entry of the judgment.” “A Rule 59(e) motion to alter or amend a judgment ‘serve[s] the narrow purpose of allowing a party to correct manifest errors of law or fact or to present newly discovered evidence.'” Merritt Hawkins & Assocs. v. Gresham, 861 F.3d 143, 157 (5th Cir. 2017) (quoting Waltman v. Int'l Paper Co., 875 F.2d 468, 473 (5th Cir. 1989)). It “calls into question the correctness of a judgement.” In re Transtexas Gas Corp., 303 F.3d 571, 581 (5th Cir. 2002). Accordingly, “[r]econsideration of a judgment after its entry is an extraordinary remedy that should be used sparingly.” Templet v. HydroChem Inc., 367 F.3d 473, 479 (5th Cir. 2004).

         The plaintiff's motion is appropriately considered under Rule 59(e). It was filed within 28 days after the entry of judgement, and seeks to correct errors of law. However, the Court is only considering this motion under Rule 59(e). Rule 60(b)(3) is appropriate when the opposing party unfairly obtained a judgment by misleading the Court. Although the defendants did not always accurately characterize the cases they were citing, the Court does not believe that they actively misled it, or that they are responsible for the Court's error. Accordingly, the Court will consider the motion according to the standards set forth by Rule 59(e).

         II. Legal Standard: Motion to Dismiss

         Because the plaintiff is asking the Court to reconsider its grant of defendants' motion to dismiss under Rule 12(b)(6), reviewing the standard for a motion to dismiss is appropriate. In considering a Rule 12(b)(6) motion, the Court “accept[s] all well-pleaded facts as true and view[s] all facts in the light most favorable to the plaintiff.” See Thompson v. City of Waco, Texas, 764 F.3d 500, 502 (5th Cir. 2014) (citing Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012)(en banc)). But in deciding whether dismissal is warranted, the Court will not accept conclusory allegations in the complaint as true. Id. at 502-03 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

         To survive dismissal, “‘a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009)(quoting Iqbal, 556 U.S. at 678)(internal quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations and footnote omitted). “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.” Iqbal, 556 U.S. at 678 (“The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.”). This is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Id. at 678 (internal quotations omitted) (citing Twombly, 550 U.S. at 557). “[A] plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief'”, thus, “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (alteration in original) (citation omitted).

         III. Issues Presented for Reconsideration

         On August 9, 2017, the Court issued an Order and Reasons granting the defendants' motion to dismiss the plaintiff's claim. In her initial complaint, Baye argued generally that: (1) Midland and MCM's letters are misleading and unfair because they are designed to reduce the likelihood that the consumer will read the disclosure; (2) the disclosure misleads the consumer into believing that Midland is choosing not to sue, where it is actually prohibited from enforcing the debt; (3) the letters are deceptive and mislead the consumer as to the character of the debt because they do not disclose that by entering a payment plan, the consumer may revive the prescribed debt under Louisiana law; (4) the suggestion that making payments to Midland provides benefits like putting the debt behind you and “peace of mind” is deceptive because the consumer has no obligation to pay ...


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