Kenneth Jon GUERRERO, Plaintiff-Appellee, v. RJM ACQUISITIONS LLC, Defendant-Appellant, 499 F.3d 926

Per Curiam Opinion; Partial Concurrence and Partial Dissent by Judge WILLIAM A. FLETCHER. PER CURIAM. Kenneth Jon Guerrero, a consumer, sued RJM Acquisitions, LLC, a purchaser of consumer debt, in the United States District Court for the District of Hawaii, alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. After extensive pretrial litigation, the district court issued two orders. The first denied RJM’s motion to dismiss Guerrero’s first amended complaint and ruled on the parties’ cross

summary judgment motions, concluding that RJM violated the Act and therefore Guerrero was entitled to actual and statutory damages and reasonable attorneys’ fees. The second order adopted a special master’s report recommending an award to Guerrero of over $45,000 in attorneys’ fees. RJM appeals from these orders, claiming the district court incorrectly interpreted the Act. We have jurisdiction pursuant to 28 U.S.C. § 1291, and after carefully reviewing the district court’s rulings, we reverse and remand.

I RJM claims the district court erroneously denied RJM’s motion to dismiss, in which RJM asserted that Guerrero’s first amended complaint did not relate back to the date he filed his original complaint, and therefore his action was barred by the Act’s one-year statute of limitations. As for the rulings on the parties’

summary judgment motions, RJM claims the district court incorrectly interpreted the Act’s provisions and what they require of debt collectors.

Specifically, RJM challenges the district court’s conclusions that RJM violated the Act when it (1) sent Guerrero two collection letters containing slightly different account and file numbers, in an attempt to collect one debt, in violation of § 1692g(a); (2) continued collection efforts, in violation of § 1692g(b), after receiving notice that Guerrero disputed the debt and before providing verification of the debt; and (3) misrepresented to Guerrero’s counsel, in violation of § 1692e, that it was not a debt collection agency and not subject to the Act.

In light of these allegedly erroneous conclusions, RJM argues, the district court’s conclusion that RJM violated Hawaii consumer protection statutes is likewise incorrect. RJM claims also that Guerrero’s complaint was brought in bad faith and to harass, and therefore the district court should have awarded RJM attorneys’ fees. Finally, RJM challenges the district court’s award of over $45,000 in attorneys’ fees to Guerrero.

RJM and amici the National Association of Retail Collection Attorneys and the Debt Buyers’ Association urge us to consider also whether communications that violate the Act when directed at a consumer do not violate the Act when directed at a consumer’s legal counsel. RJM and ami-ci argue for an affirmative answer to this question.

RJM argued before the court, and amici argued in its brief, that the Act’s purpose is to protect unsophisticated debtors from abusive debt collectors, and once a consumer obtains this protection by procuring legal counsel, the Act’s protections become superfluous and therefore its provisions no longer apply. We agree. The Act’s language and underlying purposes recognize a distinction between a consumer and a consumer’s legal counsel. They are distinct legal entities.

We therefore hold that the letter directed to the consumer’s attorney after receiving notice that the consumer disputed an alleged debt does not violate the Act. RJM and amici urge us also to correct the district court’s conclusion that “even if [RJM] had ceased with its efforts to collect the alleged debt, [RJM] still would have been obligated to verify” it. We respectfully disagree with the district court, and hold that the Act requires a debt collector who receives notice that a consumer disputes an alleged debt to cease collection efforts until it provides the consumer with verification of the debt.

The Act does not impose an independent obligation to verify a debt where the collector ceases all collection efforts directed at the consumer. II In May of 2002, RJM sent Guerrero two “WE ARE YOUR NEW CREDITOR” collection letters, one to his home address and one to his post office box. Each letter informed Guerrero that RJM had purchased a debt Guerrero originally owed to Shell Oil Corp., each contained the same partially redacted social security number, and each indicated a balance of $1291.86.

The letters were identical except that Guerrero’s mailing address on each letter was different, and the last letter in both the “account” and “RJM file” identifiers, which appeared at the top and the bottom of each letter, were slightly different. The account and file numbers in the letter sent to Guerrero’s post office box each consisted of a series of numbers followed by the letter “A”. The account and file numbers in the letter sent to his street address were identical to those in the other letter in all respects but one — they ended with a “B”.

In small print below the account information in each letter, the words “Please see reverse side for important information” appeared. On the reverse side of each letter appeared language the Act requires debt collectors to include in initial communications with consumers regarding collection of debts, informing Guerrero that if he disputed the debt in writing within thirty days of receiving the letter, RJM would obtain and provide Guerrero with verification of the debt or a copy of a judgment against him.

As mandated by the Act, each letter concluded with the statement that “[t]his is an attempt to collect a debt.” Between May 20 and June 10, Guerrero contacted his lawyer, Mr. Paer, regarding RJM’s debt collection effort. Electing to turn the tables on RJM, attorney Paer wrote RJM on June 10, asserting violations of the Act and related Hawaii state laws by RJM, and offering to settle Guerrero’s claims arising from these alleged violations within ten days for a payment from RJM of $8,000.00. He threatened also to sue RJM in federal court.

The subject line of attorney Paer’s letter went so far as to read: “Re: Guerrero v. RJM Acquisitions LLC.” At this point in time, RJM had sent to Guerrero only the two letters dated May 20. Attorney Paer, threatening to transform a simple debt collection matter into a federal case, wrote: Please be advised that this office represents Mr. Kenneth Jon Guerrero. It is his position that your letters of May 20, 2002, and its [sic] other collection attempts do not comply with the Fair Debt Collection Practices Act.... Mr.

Guerrero will accept payment of $3000.00 covering both actual and statutory damages as well as attorneys fees in full settlement of his claims. This offer will remain open for ten days from today, after which, Mr. Guerrero expects to file his action in Federal District Court to obtain the sums due him. Please respond within that time if you are interested in resolving this matter without litigation. In addition, Mr. Guerrero hereby indicates formally that he disputes this alleged debt and requests that you send him verification of the debt....

Send verification and other communication to this office and not to Mr. Guerrero, (emphasis added). Attorney Paer’s letter can only be described as a hardball tactic aimed either at resolving his client’s debt at less than the amount RJM believed Guerrero owed, or at generating a lawsuit against RJM, or both. The letter had as one of its objectives the collection from RJM of alleged damages and attorneys’ fees for violations of the Act for which attorney Paer claimed RJM was clearly liable.

In point of fact, all RJM had done was send a letter to the two addresses, provided by the debtor, seeking to collect a relatively small debt. As we shall explain, the letters did not violate the Act, and attorney Paer’s claims to the contrary were baseless. In return, RJM received a short ten-day turnaround demand for more than double the amount of the debt, including attorneys’ fees, and a threat of immediate federal litigation. Upon receipt of attorney Paer’s letter, RJM ceased all direct collection activity from Guerrero.

As instructed by Guerrero’s attorney, and in compliance with the Act, RJM wrote attorney Paer on June 14, 2002, stating that it had acquired the Shell Oil account opened in the name of Kenneth Guerrero from Citibank, and providing Guerrero’s complete social security number and the date of last payment. Enclosed with this letter was a copy of a June 11, 2002 letter from Citibank to Kenneth J. Guerrero. The letter reads, Dear Mr.

Guerrero, The inquiry we received in reference to Associates/ Shell Oil account number 146240502 should be directed to: RJM Acquisitions, LLC 575 Underhill Blvd Suite 224 Syosset, N.Y. 11791 800-541-0824 Citibank no longer owns this account. This account was sold to RJM in March, 2002. All communication concerning this account should be addressed to the new owner. Sincerely, [signed] Portfolio Analyst This letter responding to an inquiry presumably by Guerrero was sent to him by Citibank at his address approximately one month after he received from RJM the May, 2002 letters attempting to collect this debt.

The dates and sequences of the letters suggest an inquiry by Guerrero to Citibank upon receipt of RJM’s May, 2002 letters. In the June 14, 2002 letter, RJM stated that it “was in the process of verifying the account.” We note that RJM’s June 14, 2002 letter referenced both the account number from Shell Oil and its own file number without the As and Bs appearing in the two earlier letters to Guerrero.

RJM asserted also in the letter its own (correct) legal position that it “respectfully maintains that it has violated no laws,” and its (partially incorrect) position that it was “not a collection agency and therefore, not subject to the [Act].” RJM purchased the debt from Guerrero’s original creditor. Therefore, RJM was not a “collection agency” employed by the creditor to collect the creditor’s delinquent debts. Nevertheless, it does not follow that RJM was not subject to the Act. RJM further clarified that its only attempt to communicate directly with Mr.

Guerrero was by letter before attorney Paer’s intervention. RJM reiterated the current balance and requested attorney Paer to contact the office to discuss the matter. Apparently taking every precaution to comply with the Act, RJM included in its letter, as it did in its earlier letters to Guerrero, the statement “This is an attempt to collect a debt. Any information obtained will be used for that purpose.” This language is required by the Act in all initial communications -with a consumer, see 15 U.S.C. § 1692e(ll) — the failure to include it is a violation.

While it is true that § 1692e(ll) requires in subsequent communications only a statement that the “communication is from a debt collector,” we cannot conclude that RJM continued to collect a debt in violation of the Act merely because in attempting to comply with the Act it included in a letter to a debtor’s counsel a statement the Act generally requires. Moreover, the word “this,” in RJM’s disclosure, without more, does not necessarily mean “this letter.” “This” can also mean “this initiative,” which began with the earlier letters to Guerrero.

No further communications between RJM and Guerrero or RJM and attorney Paer occurred. Six months later, in January of 2003, having yet to receive full verification of the alleged debt, Guerrero filed his complaint in the district court, alleging that RJM violated the Act and Hawaii consumer protection law. Later that year, RJM filed a motion for judgment on the pleadings, and Guerrero filed a motion for

summary judgment. The protracted legal battle was on. In January of 2004, after extensive briefing on the motions and an unnecessarily antagonistic discovery process, the district court issued an order vacating the hearing date set for the motions and stating it would decide the motions without a hearing. In early February, the district court denied Guerrero’s motion for

summary judgment and granted RJM’s motion for judgment on the pleadings, subject to a grant of leave to Guerrero to file an amended complaint. A little over a week later, Guerrero filed a first amended complaint, stating the same general allegations as the original complaint but alleging additional facts and identifying specific provisions of the Act. In March of 2004, RJM filed its motion to dismiss Guerrero’s first amended complaint, arguing inter alia that Guerrero’s claims in the amended complaint did not relate back to his original complaint, and therefore his claims were barred by the Act’s one-year statute of limitations. In mid-April, Guerrero filed another motion for

summary judgment. Two weeks later RJM filed a cross motion for

summary judgment. In the months following these filings, both parties briefed the issues extensively. The amount of briefing throughout this case, coupled with a combative discovery process, resulted in what Judge Gillmor, at the hearing on the motions, referred to as an amount of lawyer-ing disproportionate to the issues involved. In July of 2004, the district court entered an order denying RJM’s motion to dismiss and granting in part and denying in part the parties’

summary judgment motions. Judgment was entered in December, awarding Guerrero $2,545.00 in actual and statutory damages plus reasonable attorneys’ fees and costs. A week later, Guerrero filed a motion for award of attorneys’ fees and a memorandum in support of the motion. RJM filed a memorandum opposing it. The district court referred the motion to a magistrate judge who, as special master, prepared a report on the motion for attorneys’ fees, which the district court adopted in a June 2005 order awarding Guerrero $45,237.21 in attorneys’ fees.

Ill Whether an amended pleading relates back to an original pleading is a question of law, and is therefore reviewed de novo. Oja v. U.S. Army Corps of Eng’rs, 440 F.3d 1122, 1127 (9th Cir.2006) (“We ... review de novo the district court’s application of the Federal Rules of Civil Procedure, including Rule 15(c)’s relation back doctrine.”). A district court’s ruling on a motion to dismiss is reviewed de novo. Decker v. Advantage Fund, Ltd., 362 F.3d 593, 595-96 (9th Cir.2004). We review de novo a district court’s

interpretation of the Act, and a district court’s ruling on cross motions for

summary judgment. Romine v. Diversified Collection Serv., Inc., 155 F.3d 1142, 1145 (9th Cir.1998); Slenk v. Transworld Sys., Inc., 236 F.3d 1072, 1074 (9th Cir.2001). In the context of claims brought under the Act, we review a district court’s denial of attorneys’ fees to a debt collector under two standards of review. The district court’s finding on the issue of bad faith and harassment is reviewed for clear error; the district court’s ultimate denial is reviewed for an abuse of discretion. Swanson v. S. Oregon Credit Serv., Inc., 869 F.2d 1222, 1229 (9th Cir.1989). A.

An amendment of a pleading relates back to the date of the original pleading when the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading. Fed.R.Civ.P. 15(c)(2). The district court concluded that the claims asserted in both of Guerrero’s complaints arose out of the same underlying transaction; namely, RJM’s attempt to collect a debt Guerrero allegedly owed.

RJM argues that the claims Guerrero raised in his first amended complaint did not arise from the same conduct, transaction, or occurrence set forth in the original complaint. To support this contention, RJM cites to SEC v.

Seaboard Corp., 677 F.2d 1301, 1314 (9th Cir.1982), which identified the basic inquiry in a relation back issue as “whether the opposing party has been put on notice about the claim or defense raised in the amended pleading.” RJM argues that because the amended complaint mentioned specifically, for the first time, the June 14 letter RJM sent to counsel, the factual allegations in the original complaint provided “absolutely no notice of those claims raised for the first time” in the amended complaint. RJM’s reliance on Seaboard Corp. is misplaced.

Unlike Guerrero’s amended complaint, the amended pleading in Seaboard Corp. added a new cause of action. 677 F.2d at 1314. It added, to a pleading alleging illegal market manipulation, a claim alleging illegal misrepresentation in a document. Id. Guerrero’s original and first amended complaints alleged violations of the Act and Hawaii consumer protection law.

While the amended complaint added the specific facts involving the June 14 letter, and was more specific than the original in identifying provisions of the Act, the claims it asserted arose out of the same conduct, transaction, or occurrence the district court identified; namely, RJM’s attempt to collect a debt from Guerrero. RJM’s argument is further undermined by the policy the rules governing amendments to pleadings is meant to effectuate. In Hurn v.

Retirement Fund Trust, 648 F.2d 1252, 1254 (9th Cir.1981), we noted “that the Supreme Court has instructed the lower federal courts to heed carefully the command of Rule 15(a), F.R.Civ.P., by freely granting leave to amend when justice so requires.” (internal quotes and citations omitted). Nothing in the record suggests the district court’s decision to allow Guerrero to amend his complaint, and its conclusion that the amended complaint related back to the original, resulted in injustice to RJM. RJM’s argument rests on an exaggerated

interpretation of the rules of civil procedure and Ninth Circuit precedent. The district court concluded correctly that Guerrero’s amended complaint related back to the original. We therefore proceed to evaluate the merits of the district court’s rulings. B. The district court agreed with Guerrero that RJM violated the Act when it sent two supposedly confusing letters to him in an attempt to collect one debt. The district court construed this claim as alleging violations of §§ 1692d, 1692e, and/or 1692f.

These provisions of the Act prohibit debt collectors from, respectively, using harassing or abusive collection methods, making false or misleading representations, and employing unfair practices. The principle governing the Ninth Circuit’s evaluation of claims under these provisions of the Act is set forth in Swanson: If the least sophisticated debtor would “likely be misled” by a communication from a debt collector, the debt collector has violated the Act. 869 F.2d at 1225.

The district court observed that neither letter contained a statement indicating it was a copy of an original notice sent to a separate address, and concluded a least sophisticated debtor likely would have been confused and would believe that he was being dunned for two distinct accounts. We respectfully disagree. As an initial matter, we note that RJM suggests incorrectly that the least sophisticated debtor standard’s application is limited to claims arising under §§ 1692g and 1692e(5) of the Act. The Ninth Circuit has applied the standard to other sections as well. See, e.g., Clark v.

Capital Credit & Collection Serv., 460 F.3d 1162, 1171 (9th Cir.2006) (applying the standard to

section 1692c); see also Wade v. Regional Credit Ass’n, 87 F.3d 1098, 1099-1100 (9th Cir.1996) (applying the standard to sections 1692e(10) and 1692f). Nonetheless, we agree with RJM that sending the two letters does not amount to a violation of the Act, because even the least sophisticated debtor would understand that this collection effort was aimed at one, and not two, delinquent accounts. First and foremost, the letters were sent to the two addresses that Guerrero gave the original creditor. The same social security identifier appeared on each.

Each letter indicated a balance identical to the other, each owed to the same original creditor, Shell Oil Corp. The account and file identifiers were identical, except for the designation “A” on the first letter, and “B” on the second. Each letter showed the same “Last Payment Date.” We find untenable Guerrero’s assertion that the letters were sufficiently confusing so as to mislead the least sophisticated debtor into believing RJM was attempting to collect on two accounts.

RJM was attempting to collect on one account, as the identical balance amounts, original creditor identification, date of last payment, and virtually identical account and file numbers indicated. In addition, the June 11, 2002 letter from Citibank to Guerrero in response to the inquiry suggests that Guerrero recognized the delinquent account at issue. We conclude with no doubt that RJM did not violate § 1692g(

a) under the “least sophisticated debtor” standard, and therefore reverse the district court on this issue. C.

Section 1692g(

b) of the Act requires a debt collector, who receives from a consumer written notice disputing a debt, to cease collection of the debt directly from the consumer until it has obtained either verification of the debt or a copy of a judgment and provided it to the consumer.

Section 1692e prohibits a debt collector from using false, deceptive, or misleading means to collect a debt. The district court concluded that the June 14 letter RJM faxed to Guerrero’s counsel was a prohibited collection effort in violation of both these provisions. We respectfully disagree, and hold that communications directed solely to a debtor’s attorney are not actionable under the Act. Therefore, we hold that the responsive letter to counsel, and not to his client — “the consumer”— was not a prohibited collection effort and did not violate §§ 1692g(

b) or 1692e. A consumer and his attorney are not one and the same for purposes of the Act. They are legally distinct entities, and the Act consequently treats them as such. For example, a debt collector who knows that a consumer has retained counsel regarding the subject debt may contact counsel, but may not generally contact the consumer directly, unless the attorney gives his consent. See 15 U.S.C. § 1692e(a)(2).

Subject to certain exceptions, a debt collector may not communicate in connection with a debt with “any person other than the consumer, his attorney, a consumer reporting agency ..., the creditor, the attorney of the creditor, or the attorney of the debt collector.” 15 U.S.C. § 1692c(b) (emphasis added). And “consumer” is defined broadly in § 1692c to include “the consumer’s spouse, parent (if the consumer is a minor), guardian, executor, or administrator.” 15 U.S.C. § 1692e(d). Notably absent from this list of relatives and fiduciaries sharing in common the identity of “consumer” is a consumer’s attorney.

The statute as a whole thus suggests a congressional understanding that, when it comes to debt collection matters, lawyers and their debtor clients will be treated differently. See U.S. Nat’l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455, 113 S.Ct. 2173, 124 L.Ed.2d 402 (1993) (“In expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.”) (quoting United States v. Heirs of Boisdore, 49 U.S. (8 How.) 113, 122, 12 L.Ed. 1009 (1850)).

Specifically, it appears that Congress viewed attorneys as intermediaries able to bear the brunt of overreaching debt collection practices from which debtors and their loved ones should be protected.

Section 1692c, for instance, covers “[c]ommunications in connection with debt collection.” In regulating the ability of debt collectors to commence such communications, the Act is plainly concerned with harassment, deception, and other abuse. Accordingly, Congress sought to protect not just debtors themselves from illegal communications, but also others who would be vulnerable to the more sinister practices employed in the debt collection industry.

Section 1692c(d), as explained above, thus defines “consumer” broadly to include a range of the debt- or’s relatives and fiduciaries. The conspicuous absence of the debtor’s attorney from that otherwise extensive list is telling. It suggests that in approaching the debt collection problem, Congress did not view attorneys as susceptible to the abuses that spurred the need for the legislation to begin with, and that Congress built that differentiation into the statute itself. See Zaborac v. Phillips & Cohen Assocs., Ltd., 330 F.Supp.2d 962, 967 (N.D.Ill.2004). Analyzing § 1692c(a)(2) leads to the same conclusion.

Under that provision, a debt collector who knows how to contact a debtor’s attorney must target all communications to the attorney, and not to the debtor himself. The rationale behind this rule is clear. Unsophisticated consumers are easily bullied and misled. Trained attorneys are not. Turning to the provisions at issue here, the plain language sheds pale light at best on the question of whether RJM’s June 14, 2002 letter, targeted solely at a debtor’s attorney, is actionable.

Section 1692g(

b) reads in relevant part: Disputed debts. If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (

a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

RJM is charged with violating the command that it “cease collection of the debt” when it mailed its June 14 letter to Attorney Paer before verifying the debt. Thus, the crucial question is whether “collection of the debt” can include efforts directed exclusively to a debtor’s attorney, but not at the debtor himself.

Section 1692g(b)’s repeated emphasis on the “consumer,” along with the Act’s clear distinction between consumer and attorney, compel the conclusion that a collection effort must be aimed directly to the consumer himself to be prohibited by § 1692g(b).

Section 1692e prohibits debt collectors from “us[ing] any false, deceptive, or misleading representation or means in connection with the collection of any debt.” We do not disagree with the dissent that such prohibited representations or means may take the form of a communication. But we hold that communications directed only to a debtor’s attorney, and unaccompanied by any threat to contact the debtor, are not actionable under the Act. D.

All but one published federal decision to have given reasoned consideration to the question has determined that communications to a debtor’s attorney are not actionable under the Act. See, e.g., Kropelnicki v. Siegel, 290 F.3d 118, 127-28 (2d Cir.2002); Diesi v. Shapiro, 330 F.Supp.2d 1002, 1004 (C.D.Ill.2004); Zaborac, 330 F.Supp.2d at 966-67; Tromba v. M.R.S. Assocs., Inc., 323 F.Supp.2d 424, 428 (E.D.N.Y.2004); but see Sayyed v. Wolpoff & Abramson, 485 F.3d 226, 232-33 (4th Cir.2007). At least six unpublished district court opinions have come to the same conclusion.

In Kropelnicki, debt collectors had allegedly made misleading statements to a debtor’s attorney about when, if ever, they might file suit in state court to collect on the debt. 290 F.3d at 127. Plaintiffs argued that these misleading statements violated 15 U.S.C. § 1692e, a provision also at issue here. Id. The Second Circuit ultimately dismissed the action for lack of subject matter jurisdiction, id. at 129, but the panel first addressed the underlying merits of the plaintiffs claim.

The court expressed its “grave reservations about concluding that this sort of claim is actionable under the FDCPA.... [A]lleged misrepresentations to attorneys for putative debtors cannot constitute violations of the FDCPA.” Id. at 127 (emphasis in original).

Noting the Act’s underlying policy of “proteet[ing] consumers from deceptive or harassing actions taken by debt collectors,” the panel came to the sensible conclusion that when “an attorney is interposed as an intermediary between a debt collector and a consumer, we assume the attorney, rather than the FDCPA, will protect the consumer from a debt collector’s fraudulent or harassing behavior.” Id. at 127-28. Several other federal courts have confronted the issue squarely and have reached the same conclusion.

In Zaborac, for example, a consumer disputed a debt and requested verification, and the debt collector responded by “placing] an immediate hold” on all collection efforts pending verification of the debt. 330 F.Supp.2d at 965. Counsel for the consumer then contacted the debt collector to alert it that the consumer might file for bankruptcy, at which point the consumer’s counsel and the debt collector attempted to negotiate a settlement. Id. The consumer filed suit, alleging that the settlement negotiations with his attorney before verification violated § 1692g(b). Id. at 966.

In a persuasive opinion, the district court held that statements made to a debt- or’s attorney are not actionable under § 1692g(b). Id. (“While the statute commands a debt collector to cease demanding payment from the consumer until a requested validation is obtained, its language is certainly not expansive enough to create a ban on all communications between a consumer’s lawyer and a debt collector.”) (emphasis in original). The court noted that § 1692g(b) “speak[s] solely of the consumer and the debt collector,” id., while other provisions in the Act explicitly single out a consumer’s attorney, id. at 967.

And, like the Second Circuit in Kropel-nicki, the Zaborac court focused on the underlying purposes served by the Act, finding they would be ill-served by applying the Act’s strictures to communications with a debtor’s counsel. Id. at 966-67. The dissent cites two types of cases for support: cases that do not actually analyze the issue we must now decide, and cases that erroneously rely on those cases for their implicit assumptions. In Heintz v.

Jenkins, the Supreme Court was concerned with a single question: “The issue before us is whether the term ‘debt collector’ in the [Act] applies to a lawyer who regularly, through litigation, tries to collect consumer debts.” 514 U.S. 291, 292, 115 S.Ct. 1489, 131 L.Ed.2d 395 (1995) (internal quotation marks and emphasis omitted). The offending communication in that case happened to be sent to a debtor’s counsel, id. at 293, 115 S.Ct. 1489, but the question on review was the entirely different matter of whether a law firm engaged in collecting a debt is a debt collector for purposes of the Act.

The identity of the recipient was mentioned in passing; neither the Court nor the parties addressed the issue now before us. We are not required to follow what amounts to, at most, an implicit assumption, because “[s]uch unstated assumptions on non-litigated issues are not precedential holdings binding future decisions.” Sakamoto v. Duty Free Shoppers, Ltd., 764 F.2d 1285, 1288 (9th Cir.1985); see also Brecht v. Abrahamson, 507 U.S. 619, 630-31, 113 S.Ct. 1710, 123 L.Ed.2d 353 (1993) (holding that stare decisis is not applicable unless the issue was “squarely addressed” in a prior decision); Webster v.

Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1925) (“Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.”); Captain, 2006 WL 1886177, at *4, 2006 U.S. Dist. LEXIS 47796, at *10 (“The issue presented here did not arise [in Heintz ]. Neither[the Supreme Court nor the Seventh Circuit’s Heintz ] opinion should be treated as binding authority on an issue that did not arise and was not addressed.”).

The dissent also relies upon Sayyed, which held that communications sent to a debtor’s attorney are covered by the Act. 485 F.3d at 232-33. But the Fourth Circuit’s decision in Sayyed, which did not even acknowledge the great weight of authority holding to the contrary, relied on the implicit assumption by the Supreme Court in Heintz, which we find inappropriate for the reasons just discussed. Moreover, Sayyed found support for its position in § 1692c(a)(2), which, with limited exceptions, requires a debt collector who knows that a debtor is represented by an attorney to communicate only with that attorney.

That provision cuts in the opposite direction, however, because it demonstrates that the Act contemplates different roles for, and different treatment of, attorneys and their debtor clients.

Section 1692c(a)(2) actually reinforces our view that Congress treated attorneys as intermediaries between debtors and debt collectors, and that a debtor’s attorney does not require the same protections as a debtor himself. E. The purpose of the FDCPA is to protect vulnerable and unsophisticated debtors from abuse, harassment, and deceptive collection practices. See S. Rep. 95-389, at 2, 4 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1696, 1699; Clark v.

Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1171 (9th Cir.2006) (“[T]he FDCPA protects all consumers, the gullible as well as the shrewd ... the ignorant, the unthinking and the credulous.”) (quoting Clomon v. Jackson, 988 F.2d 1314, 1318-19 (2d Cir.1993)). The Act’s purposes are not served by applying its strictures to communications sent only to a debtor’s attorney, particularly in the context of settlement negotiations. Congress was concerned with disruptive, threatening, and dishonest tactics.

The Senate Report accompanying the Act cites practices such as “threats of violence, telephone calls at unreasonable hours [and] misrepresentation of a consumer’s legal rights.” S. Rep. 95-389, at 2, 1977 U.S.C.C.A.N. at 1696. In other words, Congress seems to have contemplated the type of actions that would intimidate unsophisticated individuals and which, in the words of the Seventh Circuit, “would likely disrupt a debtor’s life.” Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir.2000).

When an individual is represented by counsel who fields all communications relevant to the debt collection, these concerns quickly evaporate. Attorneys possess exactly the degree of sophistication and legal wherewithal that individual debtors do not. See Kropelnicki, 290 F.3d at 127-28 (when “an attorney is interposed as an intermediary between a debt collector and a consumer, we assume the attorney, rather than the FDCPA, will protect the consumer from a debt collector’s fraudulent or harassing behavior.”).

The dissent overstates the scope of our holding, asserting, for example, that we hold that “a debtor is protected against false, deceptive, or misleading representations only so long as she does not retain an attorney.” Diss. Op. at 946. But under our rule, the Act applies to conduct aimed at a debtor himself regardless of whether he has retained counsel. We merely hold that when the debt collector ceases contact with the debtor, and instead communicates exclusively with an attorney hired to represent the debtor in the matter, the Act’s strictures no longer apply to those communications. F.

While no purpose of the Act is furthered by the unwarranted extension of its prohibitions to communications targeted exclusively at a debtor’s attorney, the facts of this case illustrate well how a contrary rule would actively frustrate some of these objectives. One purpose of the Act is to avoid “forcing] honest debt collectors seeking a peaceful resolution of the debt to file suit in order to resolve the debt — something that is clearly at odds with the language and purpose of the FDCPA.” Clark, 460 F.3d at 1170 (quoting Lewis v. ACB Bus. Servs., 135 F.3d 389, 399 (6th Cir.1998)).

Congress in passing the Act sought to encourage the prompt and amicable settlement of debts. There is also, of course, the “strong judicial policy that favors settlements” of disputes in general. Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1276 (9th Cir.1992). Here, Attorney Paer sent RJM an incendiary letter alleging violations of the Act and offering to settle RJM’s alleged violations for a lump-sum payment of $3,000 to Guerrero. The letter further stated: “Please respond within [ten days] if you are interested in resolving this matter without litigation....

Send verification and other communication to this office and not to Mr. Guerrero.” (emphasis added). Only at that point did RJM contact Attorney Paer as requested, restating the amount allegedly owed by Guerrero. Moreover, RJM enclosed a copy of a letter from Citibank verifying the existence of the debt and its sale to RJM. Then, instead of working toward resolving a rather small debt, counsel succeeded in morphing it into a federal battle royale complete with attorneys’ fees far in excess of the amount in controversy.

We can think of no better way to frustrate settlement attempts than to adopt the rule urged by Guerrero, which here would penalize a person attempting to pursue an outstanding debt who did little more than respond to a threat by a debt- or’s attorney to file a lawsuit for violations and damages.

This is a perverse result that Congress could never have intended, and its only effect can be to make debt collectors in this circuit extremely reluctant to respond to any settlement negotiations or offers made by attorneys on behalf of their clients, or, for that matter, to extend unilaterally an offer of settlement to a debtor’s attorney. G.

Because we hold that the district court erred in concluding that RJM continued collection efforts in violation of the Act, we must address the district court’s conclusion that even if RJM had ceased collection efforts, the Act nevertheless required it to verify the alleged debt. The relevant provision of the Act,

section 1692g(b), states, “If the consumer notifies the collector in writing within the thirty-day period ... that the debt ... is disputed ... the debt collector shall cease collection of the debt ... until the debt collector obtains verification of the debt or a copy of a judgment[.]” (emphasis added). On this subject, the plain language of the statute is clear. When a debt is disputed, collection efforts must stop until the debt is verified. Once the debt is verified, collection efforts may continue.

Nothing in the provision suggests an independent obligation to verify a disputed debt where the collector abandons all collection activity with respect to the consumer. We agree with the Seventh Circuit’s

interpretation of this provision in Jang v. A.M. Miller & Assocs., 122 F.3d 480 (7th Cir.1997). In Jang, consumer plaintiffs claimed that defendants, two debt collection agencies, violated the Act because they never verified the alleged debts after plaintiffs disputed them. Id. at 482. The Seventh Circuit, affirming the district court’s grant of defendants’ motion to dismiss, noted correctly that the Act “does not require debt collectors to actually provide validation. Rather, it requires that the debt collector cease all collection activity until it provides the requested validation to the debtor.” Id.

A collector, notified that a debt is disputed, thus has a choice. As the Court in Jang put it, the collector “may provide the requested validations and continue their [sic] debt collection activities, or [it] may cease all collection activities.” Id. at 483 (citing Smith v. Transworld Systems, Inc., 953 F.2d 1025, 1031 (6th Cir.1992)). It would make little sense to impose an independent obligation to verify an alleged debt on a collector who, for example, decides a disputed debt is not worth the effort and chooses to close or sell the account.

Or, as the court in Jang noted, on a collector who, upon receiving a dispute notice, realizes the consumer does not in fact owe the debt and so abandons all costly collection efforts. Here, once attorney Paer notified RJM that Guerrero disputed the debt, RJM ceased all collection efforts directed at Guerrero, and instead responded as requested to Paer’s demand letter. RJM was therefore under no obligation to verify the alleged debt at that time. H.

When defending against a claim under the Act, a debt collector may recover attorneys’ fees and costs upon a district court’s finding that the consumer brought the action in bad faith and for purposes of harassment. See 15 U.S.C. § 1692k(a)(3). We are inclined to find Guerrero’s counsel’s aggressive use of the Act unworthy of commendation, and are skeptical of his claim that even he, an experienced consumer protection attorney, found the two letters confusing and misleading. Nevertheless, Guerrero’s argument that the letters would mislead the least sophisticated debtor is minimally colorable.

RJM offers no evidence, other than its eonelusory assertion that Guerrero’s claims were frivolous, to support a finding that Guerrero’s claims were necessarily brought in bad faith and with the purpose of harassing RJM. In view of a lack of Ninth Circuit authority on these issues, the district court did not clearly err in finding Guerrero brought his suit in good faith, and did not abuse its discretion in denying RJM attorneys’ fees. However, because we reverse the district court’s conclusion that RJM violated the Act, we hold that its award of attorneys’ fees to Guerrero was in error.

IV The Act was meant to shield debtors from abusive collection practices, but it was never intended to shift the balance of power between debtors and creditors such that a debt collector cannot work with a debtor’s attorney to settle claims without exposing itself to liability out of proportion to the debt allegedly owed. Nor was it intended as a sword to be brandished by debtors who have retained counsel — the very debtors least in need of the Act’s protections. RJM Acquisitions did not violate the Act in its June 14 letter to Paer, or in its original letters to Guerrero.

Consequently, we REVERSE and REMAND with instructions to vacate the award of attorneys’ fees to Guerrero and to enter judgment on both Counts I and II in favor of RJM Acquisitions. . See 15 U.S.C. § 1692c(a)(2) ("a debt collector may not communicate with a consumer ... if the debt collector knows the consumer is represented by an attorney.... ”). . Similarly, when a debt collector knows that a consumer has retained counsel with regard to the subject debt, he may not generally contact anyone other than that attorney to determine the consumer’s whereabouts. 15 U.S.C. § 1692b(6). .

The Act notes the "abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.” 15 U.S.C. § 1692(a). . Our holding applies where the debtor is represented by an attorney and the communication is directed only to that attorney. A debt collector is not insulated from liability under the Act merely because a debtor also happens to be an attorney. . See, e.g., Captain v. ARS Nat’l Servs. of N.Am., 2006 WL 1886177, at *3-4, 2006 U.S. Dist. LEXIS 47796, at *9 (S.D.Ind.2006); Lauer v. Mason, Silver, Wenk & Mishkin, LLC, 2006 WL 1005090, at *2, 2006 U.S.

Dist LEXIS 20080, at *6 (N.D.Ill.2006); Hill v. Mutual Hospital Service, Inc., 454 F.Supp.2d 779, 780 (S.D.Ind.2005); Young v. Manley, 2000 WL 1280968, at *1, 2000 U.S. Dist. LEXIS 13035, at *3 (N.D.Ill.2000); Phillips v. N. Am. Capital Corp., 1999 WL 299872, at *2-3, 1999 U.S. Dist. LEXIS 7000, at *7 (N.D.Ill.1999); Ringer v. Credit Bureau, Inc., 1983 U.S. Dist. LEXIS 20346, at *3-*4 (D.Or.1983). . The dissent's claim that Zaborac's reasoning is limited to § 1692g(b), and irrelevant to § 1692e, is off the mark.

The relevant portion of Zaborac arose under § 1692g(b), but its reasoning is broader than that, reaching to the Act as a whole. Indeed, the court cited favorably to Kropelnicki, which arose under § 1692e, for the proposition that a consumer’s attorney serves as "an intermediary between the debt collector and the consumer.” 330 F.Supp.2d at 967 n. 5; see also Tromba, 323 F.Supp.2d at 427-28 (dismissing claim brought under § 1692e because communications to a debtor’s attorney are not actionable under the Act). .

Heintz’s Petition for Certiorari sought review of only one question: "Is an attorney engaged solely to prosecute litigation against a consumer a ‘debt collector' within the meaning of the [Act]?” Petition for Writ of Certiorari, Heintz, 514 U.S. 291, 115 S.Ct. 1489, 131 L.Ed.2d 395. . Similarly, in Dikeman v. National Educators, Inc., another case the dissent relies upon, the Tenth Circuit bypassed the threshold question of whether communications sent only to a debtor's attorney are actionable and jumped instead to consider what an attorney might find misleading. 81 F.3d 949, 953-54 (10th Cir.1996). .

We do not, contrary to the dissent, hold that policy arguments favoring settlement trump the provisions of the Act. Rather, we look to te Act's purposes and objectives because the statutory text and structure do not offer a clear answer. . The merits of Count II, alleging violations of HRS § 480-2, depend on our resolution of the merits of Count I, counsel for each party having stipulated to the element of damages sustained as required by HRS § 480-2. . Guerrero’s request for attorneys' fees on appeal is denied.