District Court (Cal.) Finds FDCPA Defendant Not Entitled to Summary Judgment in Collecting on Out-of-Statute Debt

In Finley v. Dynamic Recovery Solutions LLC, 2015 WL 3750140 (N.D. Cal. 2015), Judge Henderson denied Defendant’s summary judgment motion as to Plaintiff’s claim that the Defendant violated the FDCPA for collecting on out-of-statute debt.

The Ninth Circuit has not yet determined whether a threat of litigation is required for such a debt collection letter to be actionable. Two cases in this district, both decided prior to the Seventh Circuit decision of McMahon, have followed the approach of the Eighth Circuit and required a threat of litigation in a debt collection letter. Abels v. JBC Legal Grp., P.C., 428 F.Supp.2d 1023, 1027 (N.D.Cal.2005); Perretta v. Capital Acquisitions & Mgmt. Co., No. C–02–05561 RMW, 2003 WL 21383757, at *4 (N.D.Cal. May 5, 2003). In Perretta, Judge Whyte applied the “least sophisticated debtor” standard to the potential threat of litigation, and found that a letter threatening “further steps would be taken” could be threatening to the least sophisticated debtor. 2003 WL 21383757, at *4.   Here, Defendants have neither shown the absence of dispute as to any material fact, nor that they are entitled to judgment as a matter of law. It should be noted, first, that Defendants only raised arguments under this section in their replies. Second, it is undisputed that Dynamic did not tell Plaintiff that the statute of limitations had expired on her debt when it communicated with her. Ex. J to King Decl. Third, Dynamic’s letter to Plaintiff offered to “settle her account.” Id. It is plausible that the least sophisticated consumer could view an offer to settle as a veiled threat of litigation, or, at the least, as a misrepresentation that a debt is still enforceable. McMahon, 744 F.3d at 1020.  Moreover, Defendants did not discuss Plaintiff’s claim that they failed to communicate the legal status of her debt to each other whatsoever in their briefing. Yet, under section 1692e(8), quoted above, there is a possible cause of action if any Defendant failed to communicate to another that Plaintiff was disputing the status of her debt. Because this cause of action potentially exists, and Defendants did not argue the issue at all, they are not entitled to summary judgment on this claim.