to different law firms which address the issue raised here.
District courts need not give the decisions of other courts of appeals automatic deference because, within reason, the parties are entitled to an independent judgment. Colby v. JC Penney Co., Inc., 811 F.2d 1119, 1123 (7th Cir. 1987). Although decisions of other circuits are not necessarily controlling, district courts should give them substantial weight. Richards v. Local 134, International Brotherhood of Electrical Workers, 790 F.2d 633, 636 (7th Cir. 1986). In contrast, a decision of a district judge has persuasive rather than authoritative effect, Alliance to End Repression v. City of Chicago, 820 F.2d 873, 875 (7th Cir. 1987), and is not binding on the circuit or even on other district judges in the same district, United States v. Articles of Drug Consisting of 203 Paper Bags, 818 F.2d 569, 572 (7th Cir. 1987).
Although § 1692k(e) of the Act, provides that no liability shall be imposed for any act done or omitted in good faith in conformity with any advisory opinion of the Federal Trade Commission (FTC), informal letters of the FTC staff outlining the current enforcement position of the staff do not limit liability. Hulshizer v. Global Credit Services, 728 F.2d 1037, 1038 (8th Cir. 1984). The precedential value of informal advisory letters is limited by the restricted interpretive power given to the FTC under the Act. Pressley v. Capital Credit & Collection Service, 760 F.2d 922, 925 (9th Cir. 1985). Such letters are merely suggestions that the stated interpretations are the more likely meaning of the statute. Staub v. Harris, 626 F.2d 275, 279 (3rd Cir. 1980).
Therefore, all the authority relied upon by the parties will be given the weight that each is due. The opinions of the court of appeals from other circuits receive the greatest weight; other district court decisions receive some weight, and the informal letters receive the least weight.
A two-step process is used to determine if a debt collector violated the Act: first, the court must interpret the statute, and second, the court must determine if defendant violated the Act as interpreted by the court. Higgins v. Capitol Credit Services, Inc., 762 F. Supp. 1128, 1131 (D. Del. 1991). As defendant concedes, the clear weight of authority for determining if a debt collector violated the Act requires that the court apply the least sophisticated consumer analysis. See, e.g., Smith v. Transworld Systems, Inc., 953 F.2d 1025, 1028 (6th Cir. 1992); Graziano v. Harrison, 950 F.2d 107, 111 (3rd Cir. 1991); Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225 (9th Cir. 1988); Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1175 (11th Cir. 1985); but see Blackwell v. Professional Business Services of Georgia, Inc., 526 F. Supp. 535, 538 (N.D. Georgia 1981).
The statutory section at issue here is 15 U.S.C. § 1692g(a). This section is commonly referred to as the debt validation notice section. Gaetano v. Payco of Wisconsin, Inc., 774 F. Supp. 1404, 1409 (D. Conn. 1990). This section of the Act requires a debt collector to send a consumer, either in its initial communication or within five days of its initial communication, a written notice containing: 1) the debt amount; 2) the name of the current creditor; 3) a statement that if the consumer disputes the debt in writing within thirty days, the collector will send verification of the debt to the consumer; 4) a statement that if the consumer does not dispute the debt within thirty days, the collector will assume the debt to be valid; and 5) a statement that the collector will send the name of the original creditor, upon written request within thirty days. Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 483 (4th Cir. 1991).
In Swanson v. Southern Oregon Credit Service, Inc., 869 F.2d 1222, 1225-26 (9th Cir. 1988), the court held that although the communication, a letter, contained the validation notice required by § 1692g, the notice, in small, ordinary type face at the bottom of the page, was not effective because it was overshadowed and contradicted by the debt collector's bold-faced, underlined statement which said, "IF THIS ACCOUNT IS PAID WITHIN THE NEXT 10 DAYS IT WILL NOT BE RECORDED IN OUR MASTER FILE AS AN UNPAID COLLECTION ITEM. A GOOD CREDIT RATING -- IS YOUR MOST VALUABLE ASSET." While this statement visually overshadowed the § 1692g notice, the court also stated, "More importantly, the substance of the language stands in threatening contradiction to the text of the debt validation notice." Swanson, 869 F.2d at 1226 (Emphasis added.). The contradiction is that the notice allows for 30 days, yet harm is threatened if the consumer did not act within ten days. Swanson, 869 F.2d at 1226.
Since Swanson, several courts have applied this overshadowing and threatening factor to the least sophisticated consumer analysis. See, e.g., Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 484 (4th Cir. 1991); Graziano v. Harrison, 950 F.2d 107, 111 (3rd Cir. 1991); Gaetano v. Payco of Wisconsin, Inc., 774 F. Supp. 1404, 1412 (D. Conn. 1990); see also, Masuda v. Thomas Richards & Co., 759 F. Supp. 1456, 1463 (C.D. Cal. 1991). However, there is authority to the contrary, particularly from the United States District Court for Delaware. See, e.g., Anthes v. Transworld Systems, Inc., 765 F. Supp. 162, 170 (D. Del. 1991); Higgins v. Capitol Credit Services, Inc., 762 F. Supp. 1128, 1135 (D. Del. 1991); Smith v. Financial Collection Agencies, 770 F. Supp. 232, 237-38 (D. Del. 1991); see also Letter from Laureen J. France, Research Analyst, Federal Trade Commission, to Michael A. Kent, Strang, Fletcher, Carriger, Walker, Hodge & Smith (December 10, 1986); Letter from Rachelle V. Browne, Attorney, Federal Trade Commission, to Kevin W. Luby, Attorney, Niehaus, Hanna, Murphy, Green, Osaka & Dunn (December 5, 1986). The cases generally distinguish Swanson and its progeny on the facts. See, e.g., Smith, 770 F. Supp. at 238. Smith v. Financial Collection Agencies, 770 F. Supp. 232 (D. Del. 1991), which was not cited by defendant, contains the most persuasive reasoning for not applying the overshadowing and contradicting factor in determining whether a validation notice does not meet the requirements of § 1692g. In Smith, the court noted that the Act itself was inherently contradictory, that a debt collector can inform a consumer of his rights and demand immediate payment, and that Congress did not intend for the Act to impose unnecessary restrictions on ethical debt collectors. Smith, 770 F. Supp. at 237.
While there is some appeal to the reasoning in Smith, absent any authority from the Seventh Circuit, the clear weight of authority and persuasiveness stands behind the rationale of Swanson and its progeny. This court declines to follow Smith for the following reasons: first, Smith failed to give the proper deference to the circuit court opinion in Swanson as required; second, both the Third and Fourth Circuits have since applied the overshadowing and contradicting factor in their analyses; and third, most importantly, Smith failed to mention the least sophisticated consumer in analyzing the validation notice.
Viewing defendant's letter in light of the least sophisticated consumer, the letter violates § 1692g(a) because the body of the letter contradicts and overshadows the validation notice. The letter demands that the balance due be paid immediately and that possible legal action would result if the balance due was not paid within 10 days despite the 30 day validation requirement. See Graziano, 950 F.2d at 111; Miller, 943 F.2d at 484; Masuda, 759 F. Supp. at 1463; contra Smith, 770 F. Supp. at 237; Higgins, 762 F. Supp. at 1135. Although the letter is not as threatening visually as some described in cases finding violations of § 1692g(a), see, e.g., Miller, 943 F.2d at 483, defendant's letter appears on law firm stationary and states that it may be necessary to file a lawsuit at any time after 10 days, and that a lawsuit could obligate plaintiffs to pay for court costs and miss time from work. The least sophisticated consumer reading defendant's letter would not effectively receive the validation notice in standard size print based on the information which contradicts the notice contained in the body of the letter which was in capital letters.
Therefore, plaintiffs' motion for partial summary judgment as to liability is granted as to the first claim in the complaint.
Because plaintiffs complaint was not frivolous, defendant's motion for sanctions pursuant to F.R.C.P. 11 is denied.
For the above mentioned reasons, defendant's motion for summary judgment is granted as to plaintiffs' "alternate cause of action." Defendant's motion for summary judgment as to the remainder of the complaint is denied. Plaintiffs' motion for partial summary judgment as to liability on the first claim is granted. Defendant's motion for sanctions is denied.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: April 1, 1992