The opinion of the court was delivered by: Wolfson, United States District Judge:
Presently before the Court is Defendants Hudson Law Offices ("Hudson Law") and Lauri A. Hudson a/k/a Lauri A. Hudson, Esq. ("Hudson") (collectively, "Defendants") motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), this putative class action brought by Plaintiff Marjorie Chulsky ("Plaintiff" or "Chulsky"). Plaintiff's claims arise of out of Hudson Law's purchase of, and attempts to collect, a consumer debt. Defendants seek to dismiss all of the claims asserted in Plaintiff's Complaint, which claims are brought under the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., the New Jersey Consumer Fraud Act ("NJCFA" or "the Act"), N.J.S.A. 56:8-1, et seq., and the New Jersey Truth in Consumer Contract, Warrant and Notice Act ("TCCWNA"), N.J.S.A. 56:12-14, et seq. In addition, Defendants contend that Defendant Lauri A. Hudson cannot be held individually liable for the challenged actions and should, therefore, be dismissed from the suit. For the reasons that follow, the Court grants Defendants' motion with respect to the NJCFA and TCCWNA claims, but denies Defendants' motion with respect to Plaintiff's FDCPA claim.*fn1
On March 26, 2010, Defendant Hudson Law filed a complaint ("Hudson Complaint") against Plaintiff in the Superior Court of New Jersey, Special Civil Part, Small Claims in Monmouth County, New Jersey, to collect on a $1,194.72 credit card debt. Compl. ¶ 24. The Hudson Complaint states that Hudson Law "is a successor in interest to this credit card account first issued by First Bank of Delaware for a Continental Finance MasterCard ...." Compl., Exh. A ("Hudson Compl.") at 1. The Bill of Sale attached to the Hudson Complaint states that Hudson Law purchased the debt from Credit Solutions, Corp. See Bill of Sale dated Mar. 30, 2008. The Hudson Complaint was signed by Defendant Hudson as attorney for Hudson Law. Plaintiff alleges that Hudson Law has purchased over 100 similar consumer debts and that Defendant Hudson files actions to collect on those debts. Compl., ¶ 29. According to Plaintiff, on May 11, 2010, the Hudson Complaint was dismissed via a Stipulation of Dismissal with Prejudice.*fn2
Plaintiff filed the instant action on May 12, 2010, challenging Defendants' filing of the Hudson Complaint under the FDCPA, NJCFA, and TCCWNA, and Defendant removed to this Court on June 16, 2010. In connection with each claim asserted, Plaintiff alleges that Hudson Law's purchase of the debt was an ultra vires corporate act because professional services corporations, such as law firms, are prohibited from engaging in the purchase of consumer debts.
In support of Plaintiff's legal conclusion that Hudson Law's purchase was an ultra vires act, Plaintiff cites to New Jersey's Professional Services Corporation Act ("PSCA"), N.J.S.A. 14A:17-1 et seq., which limits the business and investment activities of professional service corporations. In her complaint, Plaintiff points specifically to the following language found in the PSCA:
No professional corporation shall engage in any business other than the rendering of the professional services for which it was specifically incorporated; and no foreign professional legal corporation shall engage in any business in this State other than the rendering of legal services of the type provided by attorneys-at-law; provided, that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments, or from owning real or personal property necessary for, or appropriate or desirable in, the fulfillment or rendering of its professional services.
N.J.S.A. 14A:17-9. Defendant disputes Plaintiff's reliance on this statutory provision and moves to dismiss each of Plaintiff's claims.
In reviewing a motion to dismiss for failure to state a claim under 12(b)(6), a Court must take all allegations in the complaint as true, viewed in the light most favorable to the plaintiff "and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court "retired" the language in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Twombly, 550 U.S. at 561 (quoting Conley, 355 U.S. at 45-46). Rather, the factual allegations in a complaint "must be enough to raise a right to relief above the speculative level." Id. at 555. The Third Circuit summarized the pleading requirement post- Twombly:
The Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest 'the required element.' This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of 'the necessary element.'
Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).
In affirming that the Twombly standard applies to all motions to dismiss, the Supreme Court recently further clarified the 12(b) (6) standard. "First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, ---U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S.Ct. at 1950. Accordingly, "a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. In short, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
Defendants raise several challenges to each of Plaintiff's causes of action. I address each in turn.
A. The Purchase and Collection of Consumer Debts by a Professional Services Corporation
As an initial matter, the Court addresses Defendants' argument that Plaintiff fails to state claim under the Professional Services Corporation Act. It is clear from the face of Plaintiff's Complaint; however, that she is not asserting a direct claim under that Act. Instead, she merely references the PSCA in connection with her substantive claims under the FDCPA, NJCFA, and TCCWNA. That said, in light of Plaintiff's reliance on the PSCA in connection with her substantive claims, the Court addresses whether Plaintiff's reliance is appropriate.
N.J.S.A. 14A:17-9 provides, in pertinent part:
No professional corporation shall engage in any business other than the rendering of the professional services for which it was specifically incorporated; . . . provided, that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments ....
Id. Plaintiff alleges that Hudson Law violates this statute "by engaging in a business outside of [the practice] it was organized to engage in or allowed by law to engage in." Compl., ¶ 48C. The statute, on its face, precludes a professional corporation from engaging in "any business other than the rendering of professional services," hence Plaintiff's allegation, which must be taken as true on a motion to dismiss, sufficiently alleges a violation of the statute. Indeed, Defendants have not argued, in their papers, that Hudson Law did not engage in such a business.
This is not to say, however, that Hudson Law's mere purchase of Plaintiff's debt violates N.J.S.A. 14A:17-9. To the contrary, the plain language of the Act provides "that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments." Id. (emphasis added). The statute's use of "any of other types of investments" is broad enough to include the purchase of debt obligations, such as Plaintiff's credit card debt, for investment purposes. It is only Plaintiff's allegation that Hudson Law engaged in the business of purchasing and collecting debts that alleges a violation of the PSCA.
Based on this alleged violation, Plaintiff contends that Hudson Law's purchase of, and attempt to collect, Plaintiff's debt are ultra vires or illegal acts that render Hudson Law's purchase of the debt void. Further, as stated in Plaintiff's opposition brief, Plaintiff alleges that "[b]ecause [Hudson Law] is barred from acting as a debt buyer and cannot legally perform the activities of a debt buyer, it was a misrepresentation for HLO to claim that Plaintiff owed a debt to [Hudson law]." Pl. Opp. at 8. And, Plaintiff further suggests, "[b]ecause HLO was barred by law from the purchase, the contract between Credit Solutions. [sic] Corp. and HLO is likely void ab initio for reasons of illegality." Id. at 8, n.1.
As noted, while Hudson Law's purchase of the debt does not facially violate the PSCA, its alleged operation of a separate debt collection business under the auspices of its professional practice does. In this sense, Plaintiff is correct that a professional corporation's attempt to collect on a debt that is in violation of the statute would not likely be enforced by New Jersey courts. Indeed, New Jersey courts will invalidate, as void against public policy, [a]n agreement [that] is . . . injurious to the interest of the public, contravenes some established interest of society, violates some public statute, is against good morals, tends to interfere with the public welfare or safety, or ... is at war with the interests of society and is in conflict with public morals.
Marcinczyk v. State of New Jersey Police Training, 203 N.J. 586, 594 (2010) (quoting Frank Briscoe Co. v. Travelers Indem. Co., 65 F.Supp.2d 285, 312 (D.N.J. 1999)). Simply put, "contractual provisions that tend to injure the public in some way will not be enforced." Id. (quoting Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 403-04 (1960)) (citation omitted). While not all violations of a statute are ipso facto void for public policy, see Williston at § 12:4; Exit A Plus Realty v. Zuniga, 395 N.J.Super. 655, 664 (App. Div. 2007) (refusing to invalidate a contract, reasoning "if the Legislature had wanted to invalidate agreements entered in contravention of N.J.S.A. 45:15-17, it could have done so explicitly ...."), "[l]egislation intended to secure general objectives of public policy or morals cannot be circumvented by private agreements." General Motors Acceptance Corp. v. Cahill, 375 N.J.Super. 553, 566 (App. Div. 2005). Thus, where the public policy violated by the contract "is to secure general objects of policy or morals," as opposed to a statutory provision designed for the benefit of individuals, courts are more likely to hold the offending contract void. Id.
For example, in Sedaghat v. Jabbary, Docket No. L-7303-01, 2005 WL 3242263 (N.J. App. Div. Dec. 2, 2005), the New Jersey Appellate Division held a professional corporation contract void as against public policy. In that case, the plaintiff, a Florida businessman, filed suit against two New Jersey-licensed dentists that had borrowed money from him to purchase their dental practice. In connection with that loan, the defendant-dentists created a trust designating the dental practice as the trustee holding the assets of the practice, and listed themselves and the plaintiff as beneficiaries. The trust, further, provided that after five (5) years, or upon written demand of all beneficiaries, the assets and accrued income of the trust estate was to be paid over to the beneficiaries. The Appellate Division held that the trust violated N.J.S.A. 14A:17-10(a), a provision of the PSCA that prohibits professional corporations from issuing shares to non-licensed persons, as well as N.J.A.C. 13:30-8.13, a regulation that prohibits dentists from sharing fees with non-dentists. Id. at *4. Citing the maxim that "[a]n agreement or contract that is contrary to public policy is void and unenforceable as a matter of law," the court ruled thereafter that "the trial court properly granted summary judgment dismissing all of plaintiff's claims arising out of the declaration of trust." Id.
I find Sedaghat persuasive in that it is consistent with New Jersey
contracts that violate public policy discussed supra.*fn3
Applying Sedaghat's reasoning here, I further conclude that
Plaintiff has sufficiently alleged that Hudson Law's operation of a
debt collection business would render its collection of Plaintiff's
debt unenforceable under New Jersey law. Accord Dalton, 412 F.Supp. at
1007 (holding that, where contract was unenforceable, all claims
arising out of or "directly connected with the illegal contract . . .
are equally tainted").
That New Jersey public policy would be affronted by Hudson Law's alleged operation of a debt collection business under the auspices of its professional offices is supported by the New Jersey Supreme Court's ruling that "[c]ontracts that violate the [New Jersey's Rules of Professional Conduct ("RPCs")] violate public policy, and courts must deem them unenforceable." Jacob v. Norris, McLaughlin & Marcus, 128 N.J. 10, 17 (1992). And, though the Plaintiff does not allege violation of a specific RPC, Advisory Committee on Professional Ethics Opinions express New Jersey's public policy that "lawyers must keep their practices entirely separate from their business enterprises ...." Advisory Comm. on Prof. Ethics, Op. No. 688, 159 N.J.L.J. 1050 (Mar. 13, 2000).
In short, the Court must accept as true, on this motion to dismiss,
Plaintiff's allegation that Defendants operated a debt collection
business under the auspices of
Hudson Law, and in such a manner as to violate the PSCA.*fn4
Having concluded that New Jersey courts would not enforce an
attempt to collect on a contract violative of the PSCA, the Court will
now turn to Plaintiff's substantive claims and Defendants challenges
The FDCPA was enacted to "eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.SC. § 1692(e). Specifically, the FDCPA prohibits the use of any conduct the natural consequences of which is to harass, oppress, or abuse any person, 15 U.S.C. § 1692d, any false, deceptive, or misleading representations or means, 15 U.S .C. § 1692e, and any unfair or unconscionable means, 15 U.S.C. § 1692f, to collect or attempt to collect any debt. The FDCPA creates a private cause of action against debt collectors who violate its provisions. Brown v. Card Service Center, 464 F.3d 450, 453 (3d Cir. 2006) (15 U.S.C. § 1692k).*fn5
In determining whether a communication from a debt collector violates the FDCPA, a court must analyze the debt collector's statements from the perspective of the "least sophisticated debtor," id. at 454; Campuzano-Burgos v. Midland Credit Mgmt., 550 F.3d 294, 301 (3d Cir. 2008), in order to protect "all consumers, the gullible as well as the shrewd." Rosenau v. Unifund Corp., 539 F.3d 218, 221 (3d Cir. 2008) (quoting Brown, 464 F.3d at 454). Although the "least sophisticated consumer" standard is a low standard, it nonetheless "'prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.' " Rosenau, 539 F.3d at 221 (quoting Wilson v. Quadramed Corp., 225 F.3d 350, 355 (3d Cir. 2000)).
As an initial matter, I address Defendants' argument that the 15 U.S.C. § 1692e(11) exemption for formal pleadings bars Plaintiff's FDCPA claim. That provision reads, in pertinent part:
[T]he following conduct is a violation of [§ 1692e] . . . [t]he failure to disclose in the initial written communication with the consumer . . . that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose . . . except that this paragraph shall not apply to a formal pleading made in connection with a legal action. 15 U.S.C. § 1692e(11). By its own terms, the exemption for legal pleadings is limited to the disclosure requirement that a debt collector state it is "attempting to collect a debt and that any information obtained will be used for that purpose." See Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 231 (4th Cir. 2007); id. ("This provision expressly exempts formal pleadings from a sole, particularized requirement of the FDCPA: the requirement that all communications state that they come from a debt collector."); Sebrow v. Fein, Such, Kahn, & Shephard, P.C., Civ. Action No. 10-215, 2010 WL 4553559, *2 n.3 (D.N.J. Nov. 1, 2010) ("[I]t is unlikely that a complaint alleging violations of Section 1692e(11) based solely on a formal pleading in another action could survive a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6)."). Since Plaintiff has not alleged a violation of the § 1692e(11) disclosure requirement, the exemption for formal pleadings is inapplicable here.
Moreover, Congress has enacted a similarly circumscribed provision in 2006, exempting pleadings specifically from the FDCPA's initial communication notice requirement. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, --- U.S. ---, 130 S.Ct. 1605, 1612 (2010) (citing 15 U.S.C. § 1692g).*fn6 That Congress enacted this separate provision of the same nature as the § 1692e(11) exemption buttresses my conclusion that the latter does not apply generally to all FDCPA claims, but is limited to the particular paragraph in which the exemption is found. Accordingly, I reject Defendants' argument that the § 1692e(11) exemptions bars Plaintiff's FDCPA claim.*fn7
Turning to Plaintiff's substantive allegations, each of the alleged FDCPA violations is predicated upon the notion that Hudson Law's purchase of Plaintiff's debt was invalid, that Hudson Law cannot act as a debt collector, and, thus, Hudson Law is not the true owner of the debt under New Jersey law. Plaintiff, generally, alleges a violation of § 1692e, which prohibits the use of "any false, deceptive, or misleading representations or means in connection with the collection of any debt." 15 U.S.C. § 1692e. In addition, Plaintiff alleges that Defendants' actions violate two specific subsections of § 1692, namely, subsections § 1692e(2)(A) and § 1692e(10). The former bars debt collectors from misrepresenting the "legal status of any debt." The latter bars the "use of any false representation or deceptive means to collect or attempt to collect a debt ...." "Courts have long held that after finding a valid claim under a more specific subsection of § 1692e . . . further analysis under § 1692e(10) is 'somewhat duplicative." Gervais, 479 F.Supp.2d at 276 -77 . Hence, this Court's § 1692e ...