In Annunziato v. Collecto, Inc., 2016 WL 5407871, at *15–16 (E.D.N.Y. 2016), Judge Spatt held that a debt collector’s goodwill is included in calculating the defendant’s net worth under the FDCPA’s class action penalty calculus. This is contrary to the 7th Circuit’s decision in Sanders v. Jackson, 209 F.3d 998, 1001 (7th Cir. 2000), which held that goodwill was not to be included in determining a defendant’s net worth in an FDCPA class action, except that in Sanders, the plaintiff asked the Court to calculate the goodwill. Here, goodwill appeared in the defendants own financial statements.
“Net worth” is not defined by the FDCPA. Although the Second Circuit has not addressed the issue, other courts that have held that “net worth” should be calculated according to the “book value of the company,” as in the company’s total assets minus the company’s total liability as reported on its balance sheet consistent with the generally accepted accounting principles (“GAAP”). See Sanders v. Jackson, 209 F.3d 998, 1001 (7th Cir.2000) ( “Accordingly, because there is no indication in the FDCPA that the term net worth should be used in anything but its normal sense, we also look to book net worth or balance sheet net worth as reported consistently with GAAP.”); Stolicker v. Muller, Muller, Richmond, Harms, Myers & Sgroi, P.C., No. 1:04–CV–733, 2006 WL 1547274, at *3 (W.D.Mich. June 2, 2006) (“[T]he Court adopts the approach of the Seventh Circuit in Sanders and finds that the term net worth, as used in the FDCPA, means book value net worth or balance sheet net worth[.]”). In the present case, the Plaintiff relies on the Defendant’s February 28, 2014 Financial Statements, which list the Defendant’s total assets as $84,959,306 and its total liabilities as $19,278,862. (See Mauro’s Nov. 16, 2015 Decl., Ex. F, at p. 25.) Thus, the Plaintiff contends that the Defendant’s “book value” according to the GAAP is $65,680,440 and urges the Court to adopt that figure as the Defendant’s “net worth” for the purpose of calculating statutory damages under the FDCPA. (See the Pl.’s Mem. of Law at 13.) Construed in this way, the Defendant’s maximum liability under Section 1692k is equal to the lesser of $500,000 or 1% of $65,680,440, which is $656,804.40. Thus, according to the Plaintiff, the Defendant’s maximum liability to the class for statutory damages should be set at $500,000. For its part, the Defendant does not dispute the accuracy of the February 28, 2014 Statements or that the Statements were created in accordance with the GAAP. (See the Pl.’s 56.1 Statement at ¶¶ 17–19.) It also does not appear to dispute that “net worth” under the FDCPA should be calculated according to the Defendant’s “book value.” However, the Defendant contends that the Court should subtract the $32,706,493 listed on its Financial Statements as “Goodwill” from its “net worth.” (See the Def.’s Opp’n Mem. of Law at 14.) The Court disagrees for a number of reasons. First, the $32,706,493 in “Goodwill” is listed as an “asset” on the Defendant’s February 28, 2014 Financial Statements. The Defendant fails to explain why a figure listed on its own financial disclosures as an “asset” should not be included in calculating the value of its company. Indeed, the Defendant does not dispute that the Financial Statements are accurate and were prepared according to the GAAP. If GAAP requires the Defendant to report this “Goodwill” as an asset, then why should the Court not calculate it as such in determining the Defendant’s “book value”? The Defendant fails to answer that question. Second, the Defendant points out that in Sanders v. Jackson, supra, a case relied on by the Plaintiff, the Seventh Circuit expressly held that “goodwill” should not be included in the calculation of the Defendant’s “net worth” for purposes of Section 1692k. (See the Def.’s Opp’n Mem. of Law at 14–15.) In Sanders, the plaintiff urged the district court to calculate the defendant’s “net worth” under the FDCPA based on the “fair market value of the company,” which included internally developed “goodwill”; while the defendant urged the court to adopt the GAAP method of calculating the company’s “book value.” See Jackson, 209 F.3d at 999. The district court adopted the latter approach, and the Seventh Circuit agreed on appeal. Id. In so doing, the Circuit Court held, analogizing to other statutes, that “net worth” should be calculated according to the GAAP. See id. at 1001. The Seventh Circuit defined “goodwill” as “an intangible asset that represents the ability of a company to generate earnings over and above the operating value of the company’s other tangible and intangible assets.” Id. at 1000 n. 1 (internal quotation marks and citations omitted). It then noted that under the GAAP, “goodwill is not reported absent a business combination because ‘its lack of physical qualities makes evidence of its existence elusive, [and] its value … often difficult to estimate, and its useful life … indeterminable.” Id. at 1002 (emphasis added) (quoting Accounting Principles Board, Opinion. No. 17, ¶ 17.02 (1970)). As the plaintiff’s proffered “goodwill” valuation of the company was not reported on the company’s balance sheet as an asset, the Court of Appeals found that it would be inconsistent to include it in the calculation of the company’s “net worth” under the FDCPA. See id. at 1001–02 (“The balance sheet does not report goodwill. While Sanders contends that we should increase Universal Fidelity’s listed assets by the value of its goodwill, which at this point is unknown, that would be inconsistent with GAAP …. Thus, applying GAAP, as we believe Congress would have wanted, … balance sheet valuation should not include goodwill.”) (alterations added, internal citations omitted). Here, by contrast, we have the exact opposite scenario. The Defendant did report “goodwill” on its balance sheet as an asset. Further, unlike the plaintiff in Sanders, the Defendant states that the $32,706,493 listed on its balance sheet as “goodwill” was the result of a “series of business combinations,” and therefore was properly reported as an “asset” in accordance with the principles of GAAP. (See the Pl.’s 56.1 Statement at ¶ 23; see also the Def.’s May 31, 2013 Responses to the Pl.’s Interrogs., Dkt. No. 87–9.) Thus, applying the principles of GAAP as outlined in Sanders, the $32,706,493 is reportable as an asset and should therefore be included in the calculation of the Defendant’s “net worth.” Third, the Defendant asserts that the Court should not determine the meaning of “goodwill” without the benefit of expert accountant testimony. (See the Def.’s Opp’n Mem. of Law at 14.) However, the Court need not rely on expert testimony, where, as here, the Plaintiff has offered a balance sheet and persuasive case law establishing how to calculate the Defendant’s “net worth.” The Defendant was, of course, free to file an expert report with its cross-motion disputing the Plaintiff’s theory. However, it did not do so, nor did it offer any evidence to the contrary. Rather, it simply attacks the Plaintiff’s proof with unsupported assertions. That is not enough to create a genuine issue of material fact on this issue. See Robinson v. Concentra Health Servs., Inc., 781 F.3d 42, 44 (2d Cir.2015) (“[The opposing party] must do more than simply show that there is some metaphysical doubt as to the material facts, and may not rely on conclusory allegations or unsubstantiated speculation.”) (internal quotation marks and citations omitted). For these reasons, the Court finds that there is no genuine issue of material fact that the Defendant’s “net worth” is $65,680,440. Accordingly, the Court grants the Plaintiff’s request and holds that the maximum amount of statutory damages that the class is entitled to under the FDCPA is $500,000.