E.D.N.Y.: Avila Safe Harbor Language Trumps Carlin/Balke Requirements Where Amount Due Clearly Stated

In two recent cases, the Eastern District of New York entered favorable decisions for the ARM industry regarding the Avila safe harbor language. In both cases, the court found no violation of the FDCPA where the Avila safe harbor language was used and the letter clearly stated the amount due on the date of the letter.

The two cases are Kolbasyuk v. Capital Management Services, LP, 17-CV-07499, 2018 WL 1785489 (E.D.N.Y. Apr. 4, 2018) and Timoshenko v. Mullooly, Jeffrey, Rooney & Flynn, LLP, 17-CV-4472, 2018 WL 1582220 (E.D.N.Y. Mar. 30, 2018). 

You can read the Kolbasyuk decision here and the Timoshenko decision here. 

Factual and Procedural Background 

The cases share similar facts. Capital Management Services and Mullooly, Jeffrey, Rooney & Flynn, LLP, are debt collectors. Both sent letters to the respective plaintiffs that included the safe harbor interest disclosure language from the Seventh Circuit’s decision in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000), which was adopted by the Second Circuit in Avila v. Riexinger & Associates, LLC, 817 F.3d 72 (2d Cir. 2016).  The disclosure in both cases included the sentence “As of the date of this letter, you owe $[balance].” 

Plaintiffs filed lawsuits in Eastern District of New York claiming that the letters violate the FDCPA by failing to provide a true and accurate statement of the amount owed. Capital Management Services filed a motion to dismiss the claims, while Mullooly filed a motion for judgment on the pleadings.   

Decision 

The Eastern District of New York granted both Capital Management Services’ and Mullooly’s motions.  Additionally, the court issued an order for plaintiff’s counsel Igor Litvak to show cause why the court should not issue sanctions for filing a frivolous case in the Mullooly matter. 

Kolbasyuk

In the Kolbasyuk decision, the court analyzed both the 1692e (false or misleading representation) and 1692g (validation of debt) allegations and ruled decidedly in Capital Management Services’ favor on both. 

The court rejected plaintiff’s argument that Carlin v. Davidson Fink LLP, 852 F.3d 207 (2d. Cir. 2017) requires an extensive itemization of the debt so the consumer can calculate a future amount due. The court found that Carlin and Kolbasyuk were distinguishable because in Kolbasyuk, unlike in Carlin, the letter clearly stated the amount due as of the date of the letter. The reasoning behind the Carlin decision was that the “letter stated the total amount due including unspecified fees, costs, additional payments, and/or escrow disbursements that were not yet due at the time the statement was issued.” (Internal quotations excluded.) It therefore omitted information allowing the least sophisticated consumer to determine the minimum amount she owes at the time of the notice, what she will need to pay to resolve the debt at any given moment in the future, and an explanation of any fees and interest that will cause the balance to increase.”  

The court decided that Carlin is limited in application, stating that “Carlin addresses what a letter needs to do when it does not state the minimum amount owed. Carlin does not add on additional requirements if the letter already states the minimum due, rather than an estimate.” 

Since Capital Management Services’ letter included the amount due as of the date of the letter and otherwise followed the safe harbor disclosure provided by the Second Circuit in Avila, the court found there was no violation of 1692e, and no violation of 1692g of the FDCPA. 

Timoshenko 

In Timoshenko, the court ruled very similarly to Kolbasyuk, albeit it was only on the 1692e claim. The more interesting portion of the Timoshenko decision is the order for plaintiff’s counsel to show cause as to why he should not be sanctioned for filing a frivolous claim. 

The court found that Timoshenko’s claims were “patently frivolous” since the disclosure in the letter mirrored the safe harbor disclosure provided in Avila. The court also took note that plaintiff’s attorney, Igor Litvak, was notified by Mullooly’s counsel that the letter did not violate the FDCPA because it conforms to Avila’s requirements.  According to the court: 

Any competent attorney would know Avila forecloses Timoshenko’s claim, and once made aware of that case (assuming, generously, that he did not already know about it), Litvak should have advised his client to voluntarily dismiss this action.  Instead, he responded with the same frivolous argument that the Court dispensed with above, pointing to Carlin and Balke and vowing to press on.  But the patina of legality afforded by reference to plainly inapposite case law does little to cloak what looks to the Court suspiciously like a shakedown.  Defendant likely could have settled this case for significantly less than the legal expenses it has incurred in filing its answer and motion, and no doubt Litvak knew as much when he decided to defend an indefensible position. 

(Emphasis added.)  The court’s decision on the order to show cause remains pending. 

Analysis 

The recent court decisions out of New York show a turn in the tide for FDCPA claims. Thanks to the many debt collection agencies and firms that made the decision to defend the Avila (including ones like the above) and reverse Avila claims, the courts are becoming aware of the struggles faced by debt collectors who in good faith try to comply with the law.  There are several recent decisions and court comments acknowledging that debt collectors are often placed in a “damned if you do, damned if you don’t” situation and the clogging of court dockets by the incredibly high volume of FDCPA suits filed. Now we have a court that acknowledges the “shakedown” that many debt collectors feel they are subject to. While the 'show cause' issue is still pending in Timoshenko, the acknowledgment of the industry’s litigation struggles by one of the most litigious states for debt collectors is a step in the right direction.