ANDREW J. ARDINO; JOSEPH ARDINO and LISA A. ARDINO, on behalf of themselves and all others similarly situated, Plaintiffs,
SOLOMON AND SOLOMON, P.C., and JOHN DOES 1-25, Defendants.
KEVIN McNULTY, District Judge.
Andrew J. Ardino obtained a student loan from the New Jersey Higher Education Student Assistance Authority ("HESAA"), which his parents, Joseph and Lisa Ardino, co-signed (Plaintiffs are collectively referred to as "the Ardinos.") HESAA employed Solomon and Solomon, P.C. ("Solomon") to be its debt collector. In this putative class action, the Ardinos allege that Solomon sent them collection letters, dated September 13 and 24, 2012, which misstated the amount they owed HESAA. In particular, they claim that the letters misleadingly stated that $4, 561.45 in attorneys' fees were then currently due and payable. In fact, the Ardinos allege, such fees had not yet accrued under Solomon's contract with HESAA, which contains a contingent fee arrangement. The Ardinos' single-count complaint claims violations of multiple provisions of the Fair Debt Collection Practice Act ("FDCPA"), 15 U.S.C. § 1692 et seq.
Solomon has moved to dismiss the Ardinos' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Solomon contends that its statements regarding attorneys' fees were accurate and that the Ardinos thus have no cognizable claim. As to the claim for damages, I disagree and deny the motion to dismiss. As to the claim for declaratory and injunctive relief, however, I grant Solomon's motion as a matter of law. I decide this motion without oral argument. See Fed.R.Civ.P. 78(b).
Facts and Contentions
In May 2008, the Ardinos applied for and obtained a student loan for Andrew J. Ardino in the amount of $20, 000. (Complaint at ¶¶ 15-20 (Doc. No. 1)). The Ardinos allegedly defaulted on the repayment of the loan. Solomon, acting on behalf of HESAA, sent letters to each of the Ardinos "in an attempt to collect a debt." ( Id. at Exs. B-D; the "September 13 Collection Letter"). Each of these substantially identical letters, dated September 13, 2012, states at the top:
"Amount due as>/13/2012: $25, 385.66."
( Id. ). The letter then states, in its second paragraph:
"Attorney fees of 22% of the claim referred are due to the State pursuant to the terms of the note(s) and N.J. Regulation 9A:10-6.16(b)."
( Id. at ¶¶ 35-36, Exs. B-D).
Plaintiff Joseph Ardino's attorney sent Solomon a letter dated September 20, 2012, disputing the amount owed and demanding an accounting. ( Id. at Ex. E). Solomon responded on September 24, 2012, with a collection letter itemizing the alleged balance. This letter stated that the amount demanded included $4, 561.25, representing "22% of the amount [of unpaid principal and interest] referred to our office." ( Id. at ¶ 51 and Ex. F; the "September 24 Collection Letter").
In the terms and conditions of the underlying promissory note between the Ardinos and HESAA, each Plaintiff promised that "If I am in Default, I agree to pay all amounts, including reasonable collection agency and attorneys fees and court and other collection costs that you incur in effecting collection of this Note, up to the maximum penalty permitted by law." (NJCLASS Loan Terms, Conditions, and Definitions, Certification of Gregg S. Kahn Ex. 2 at Ex. A thereto (emphasis added)).
The attorneys' fees that HESAA will incur are governed by a retainer letter agreement that it entered into with Solomon. In that retainer letter, HESAA advises Solomon that "You have agreed to handle all accounts referred to you on a contingent fee basis, with your fee to be calculated on the basis of monies collected by you from debtors referred to you by HESAA for handling." (Retainer Agreement, Kahn Cert. Ex. 1 at Ex. C thereto (emphasis added)). The agreement sets the contingency fee rate for services in New Jersey at 22%. ( Id. )
There is no dispute that state law, in general, permits the lender to recover attorneys' fees of up to 30% of the debt collected. The Ardinos deny, however, that Solomon's 22% fee is properly based on the amount referred for collection, as stated in the September 13 and 24 Collection Letters. This statement, they say, is contrary to the Note and the Retainer Agreement, which provide that HESAA will pay Solomon based on the amount actually collected.
Relatedly, the Ardinos contend that they did not (or at least did not yet) owe HESAA any attorneys' or collection fees as of September 13 and 24, 2012, when Solomon sent the Collection Letters. Solomon had not yet billed HESAA for any fees; indeed, Solomon could not have done so, because its fees, by contract, were contingent on the amount ultimately collected. The 22% fee, they contend, is not incurred or calculable until Solomon collects some amount from the Ardinos, and it becomes calculable and due from the Ardinos only at that time. Accordingly, say the ...