Joseph Anthony Favors, Appellant,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0642

Joseph Anthony Favors,
Appellant,

vs.

Chase Bank USA, N.A.,
Respondent,

Alltran Financial LP, et al.,
Defendants.

Filed January 11, 2021
Affirmed
Gaïtas, Judge

Carlton County District Court
File No. 09-CV-19-2103

Joseph Anthony Favors, St. Peter, Minnesota (pro se appellant)

Christopher L. Lynch, Barnes & Thornburg LLP, Minneapolis, Minnesota (for respondent)

Considered and decided by Reyes, Pres iding Judge; Connolly, Judge; and Gaïtas,
Judge.
NONPRECEDENTIAL OPINION
GAÏTAS, Judge
Appellant-debtor Joseph Anthony Favors challenges the district court’s rule
12.02(e) dismissal of his Fair Debt Colle ction Practices Act (FDCPA) and breach-of-
contract claims against respondent-creditor Chase Bank USA, N.A. (Chase Bank). Favors
argues that the district court erred by determ ining, first, that Chase Bank is not a debt

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collector subject to the FDCPA and, second, th at the complaint does not allege that any
contract was formed. Because the allegations in the complaint, even if true, are insufficient
to establish that Chase Bank is a debt collector and not a creditor, and because Favors’s
own complaint asserts that there was no mee ting of the minds, which is necessary for
contract formation, we affirm.
FACTS
Favors, a self-represented litigant, comme nced this lawsuit in regards to his
delinquent credit card account with Chase Bank.1 He asserts various FDCPA and breach-
of-contract claims, and he requests moneta ry damages and a judgment ordering Chase
Bank to allow him to reopen the credit card account; to deduct all fees, penalty costs, and
interest from the amount owing on the acco unt; and to “delete” any negative credit
reporting reflecting a delinquency on his cred it card account. In determining whether
Favors’s complaint sets forth a legally suffi cient basis for relief, we assume the facts

1 Favors previously sued Chase Bank regarding the same account in federal district court,
asserting FDCPA, Fair Credit Reporting Act (FCRA), and breach-o f-contract claims.
Complaint at 3, 9, 36, Favors v. Chase Bank, No. 18-cv-3198 (D. Mi nn. Nov. 15, 2018).
Public documents from the fede ral case are included in the r ecord on appeal, so we may
consider them in analyzing this matter. See, e.g., Greenpond S., LLC v. Gen. Elec. Capital
Corp., 886 N.W.2d 649, 653 n.4 (Minn. App. 2016), review denied (Minn. Sept. 27, 2017)
(explaining that the appellate record contai ned facts from a bankruptcy proceeding and
including those facts when analyzing a rule 12.02(e) dismissal of a complaint). The federal
district court dismissed Favors’s claims under the FCRA with prejudice and dismissed his
FDCPA and breach-of-contract claims without prejudice. R&R at 20, Favors v. Chase
Bank, No. 18-cv-3198 (D. Minn. June 28, 2019); Order at 2, Favors v. Chase Bank , No.
18-cv-3198 (D. Minn. Aug. 9, 2019). The FDCPA claims were dismissed because Favors
failed to sufficiently allege that Chase Bank is a “debt collector” subject to the FDCPA;
Favors’s complaint instead suggested that Chase Bank was a creditor seeking to collect its
own debt. Id.

3
alleged in the complaint are true. See Walsh v. U.S. Bank, N.A. , 851 N.W.2d 598, 606
(Minn. 2014).
Factual allegations in complaint
According to the complaint, Favors opened an account with Chase Bank at an
unspecified time. Sometime thereafter, he “allegedly became delinquent on said account.”
Chase Bank engaged Alltran Financial LP (Alltran) and ARS National Services (ARS) to
collect the debt owed by Favors.
On March 8, 2018, Alltran sent Favors what the complaint characterizes as a
“Settlement Offer.”2 Alltran offered to settle Favors’s $4,790.66 debt owed to Chase Bank
“for a discount amount” of “3 equal paymen ts of $239.53.” A few weeks later, Favors
mailed Alltran one $239.53 payment. He be lieved that the act of mailing the payment
reduced his debt to an outstanding balance of $479.06.
On March 25, 2018, Favors sent a letter to Chase Bank disputing his debt. Favors
requested that Chase Bank provide “validat ion” in the form of “competent evidence
bearing [his] signature” showing that he had a contractual obligation to pay Chase Bank.
He also expressed that he believed Chase Bank would violate his rights under the FDCRA
and FCRA if Chase Bank reported his debt to third parties in a way that negatively affected
his credit reports.
Sometime thereafter, Chase Bank reported to at least three consumer reporting
agencies that Favors was behind on payments and that he owed $4,790.66. Additionally,

2 While Favors’s complaint refers to atta ched exhibits, purportedly containing the
“Settlement Offer,” he did not file any attachments with the complaint. The alleged offer
itself is accordingly not part of the record.

4
according to Favors, either Chase Bank, Alltran, or ARS contacted his employer about the
debt. Favors sent Chase Bank another letter near the end of April 2018, again stating that
he disputed the amount that he owed.
In July 2018, Favors rece ived a copy of the “Chase Slate Card Member Agreement”
from Chase Bank. Favors alleges that he was “previously unaware such a document
existed,” and that he never signed a card member agreement in connection with his account.
In addition to the above a llegations about his account, Favors’s complaint makes a
number of general allegations about Chase Bank’s relationship with Alltran and ARS. He
asserts that Chase Bank has a longstanding relationship with both Alltran and ARS, which
are debt-collection services, but that their arrangement “has never been reduced to writing.”
Under the arrangement, when Chase Bank is unsuccessful in obtaining payment from its
customers, it “sends the name and address of the customer to [Alltran] and/or [ARS], which
writes the customer demanding payment of the sum that Chase Bank” has stated is due.
The letters threaten that further collection efforts may follow if the demand is ignored.
Favors’s complaint alleges that, before Alltran or ARS send demand letters, they “run[] a
computer check on the customer’s name in order to eliminate debtors who it would be futile
to dun.” The complaint also alleges that the contents of the letters “are a collaborative
product” of Alltran, ARS, and Chase Bank, and that the letters direct the customer to pay
Chase Bank directly.
Favors’s complaint further alleges that although the letters from Alltran and ARS
list phone numbers for those entities, Chase Bank ultimately handles any correspondence.
He states that if Chase Bank receives no payment from a customer, it may direct Alltran or

5
ARS to send another letter. Favors alleges that Chase Bank pays Alltran or ARS a flat fee
for each letter sent. If the letters “fail to elicit payment of the debt,” Chase Bank
“retransmits the customer’s na me and address” to the debt-collection service providers,
who then decide whether to make additional efforts to collect the debt. The complaint
asserts that the debt-collecti on service providers “probably [ do] nothing further in most
cases, although the record is barren of data,” but that, if they do collect money from the
debtor, they retain 35% of the “take” as compensation and transmit the rest to Chase Bank.
Procedural history of this action
Favors filed his complaint in October 2019, along with a certificate of service stating
that he served the complaint on Chase Bank via mail. In November 2019, after the district
court entered a notice of noncompliance with Minnesota General Rule of Practice 11.04,
Favors refiled the complaint, again with a certificate of service stating he mailed the
complaint to Chase Bank. Th e following month, the distri ct court, acting on its own
initiative, dismissed the complaint without prejudice for invalid service of process. At the
end of January 2020, Chase Bank moved to dismiss the complaint with prejudice for failure
to state a claim under Minnesota Rule of Civil Procedure 12.02(e).
The district court held a motion heari ng on March 5, 2020. But Favors did not
appear, and the district court granted Chase Bank’s request to decide the motion to dismiss
based on the written filings. A few week s later, Favors filed a motion for summary
judgment, which Chase Bank opposed as substantively and procedurally flawed.
On April 13, 2020, the district court i ssued an order granting Chase Bank’s motion
to dismiss Favors’s claims with prejud ice, denying Favors’s motion for summary

6
judgment, and directing entry of judgment fo r Chase Bank. The district court concluded
that Favors failed to state viable FDCPA claims because Chase Bank is not a debt collector
under the act, and he failed to state valid breach-of-contract claims because the complaint
does not allege formation of a contract between Favors and Chase Bank.
This appeal follows.
DECISION
When a case is dismissed pursuant to Minn. R. Civ. P. 12.02(e) for failure to state a
claim for which relief can be granted, the appe llate court reviews the legal sufficiency of
the claim de novo and determines whether the complaint sets forth a legally sufficient claim
for relief. Hebert v. City of Fifty Lakes, 744 N.W.2d 226, 229 (Minn. 2008). In doing so,
we “accept the facts alleged in the complaint as true and construe all reasonable inferences
in favor of the nonmoving party.” Walsh, 851 N.W.2d at 606. But we need not accept a
plaintiff’s legal conclusions as true; a sufficient complaint “must provide more than labels
and conclusions.” Bahr v. Capella Univ., 788 N.W.2d 76, 80 (Minn. 2010).
I. The district court properly concluded that the FDCPA does not apply to Chase
Bank.

The FDCPA—enacted to prevent abusive debt collection practices—“imposes civil
liability on debt collectors for certain prohibited” conduct. Jerman v. Carlisle, McNellie,
Rini, Kramer & Ulrich LPA, 559 U.S. 573, 576-77, 130 S. Ct. 1605, 1608 (2010) (quotation
omitted); 15 U.S.C. § 1692(e) (2016) (FDCPA purpose statement). A plaintiff may sue a
debt collector for FDCPA violations in federal or state court and recover actual damages,
statutory damages, attorney fees, and co sts. 15 U.S.C. § 1692k(a), (d) (2016); see, e.g.,
McIvor v. Credit Control Servs., Inc. , 773 F.3d 909, 913 (8th Ci r. 2014). Various courts

7
have liberally construed the FDCPA to achieve its broad remedial purpose. See Hart v.
FCI Lender Servs., Inc., 797 F.3d 219, 225 (2d Cir. 2015); Picht v. Hawks, 77 F. Supp. 2d
1041, 1043 (D. Minn. 1999), aff’d, 236 F.3d 446 (8th Cir. 2001).
The FDCPA defines “debt collectors” to in clude anyone who “regularly collects . . .
debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6) (2016).
A business that collects a debt for its own account is not a debt collector under the FDCPA.
Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718, 1721-22 (2017); see 15 U.S.C.
§ 1692a(6)(F) (specifically excluding from the definition of “debt collector” “any person
collecting or attempting to coll ect any debt owed or due or asserted to be owed or due
another to the extent such activity . . . con cerns a debt which was originated by such
person”). A “creditor,” on the other hand, is “any person who offers or extends credit
creating a debt or to whom a debt is owed.” 15 U.S.C. § 1692a(4) (2016). The FDCPA
does not regulate the activities of creditors. Schmitt v. FMA All., 398 F.3d 995, 998 (8th
Cir. 2005) (“[A] distinction be tween creditors and debt collectors is fundamental to the
FDCPA, which does not regulate creditors’ activities at all.” (quotation omitted)).
Favors’s complaint makes cl ear that his debt originated with Chase Bank and that
Chase Bank sought to collect the debt for its own account. Accordingly, Chase Bank is a
creditor and does not qualify as a debt collector under the FDCPA. Favors therefore cannot
invoke the act’s protections against Chase Bank unless an exception applies. See Henson,
137 S. Ct. at 1721-22.
Favors asserts that an ex ception does apply, claiming that Chase Bank can still be
held liable under the FDCPA if Chase Bank ac ted as “flat-rater.” He refers to two

8
provisions of the FDCPA in support of his argument: 15 U.S.C. § 1692j(a) (2016) and 15
U.S.C. § 1692a(6) (2016).
The first statutory provision, 15 U.S.C. § 1692j(a), provides that:
It is unlawful to design, co mpile, and furnish any form
knowing that such form would be used to create the false belief
in a consumer that a person ot her than the creditor of such
consumer is participating in the collection of or in an attempt
to collect a debt such consumer allegedly owes such creditor,
when in fact such person is not so participating.

The term “flat-rater” describes the person fu rnishing the form to the creditor under this
statutory provision. See, e.g. , Hartley v. Suburban Radiologic Consultants, Ltd. , 295
F.R.D. 357, 369-71 (D. Minn. 2013); Gutierrez v. AT&T Broadband, LLC, 382 F.3d 725,
734 (7th Cir. 2004) (“The cla ssic ‘flat-rater’ effectively sells his letterhead to the
creditor . . . so that the creditor can prepare its own delinquency letters on that letterhead.”
(quotation omitted)). But section 1692j(a) only imposes liability on the party that supplies
the form, not on the creditor who uses it. Hartley, 295 F.R.D. at 370. Favors alleges that
Alltran and ARS write letters to debtors in an effort to collect debts on Chase Bank’s behalf.
He does not allege that Chase Bank supplies any deceptive letters. Thus, Favors cannot
rely on this provision to hold creditor Chase Bank liable under the FDCPA.
A creditor participating in a flat-rating scheme may, however, “be liable under the
provision of the FDCPA prohibiting a credito r from using a name to create the false
impression that a third party is involved in the collection of the creditor’s debt.” Id. at 370
(quotation omitted). The second statut ory provision that Favors invokes, see 15 U.S.C.
§ 1692a(6), is this “false-name exception.” See Medica Self-Insured v. Tenet Healthcare
Corp., No. 06-4747, 2007 WL 1385589, at *3 (D. Minn. Ma y 4, 2007). Under the false-

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name exception, a creditor may qualify as “debt collector” for the purposes of the act if the
creditor “in the process of collecting his own debts, uses any name other than his own
which would indicate that a third person is collecting or attempting to collect such debts.”
15 U.S.C. § 1692a(6).
Chase Bank argues that Favors’s complaint fails to allege sufficient facts regarding
its participation in any flat-rating scheme. According to Chase Bank, federal courts apply
various standards to review flat-rating claims, but, under any standard, Favors’s claim fails.
As Chase Bank notes, some c ourts have held that creditors can only be liable as debt
collectors under the false-name exception wh en the creditor “actua lly pretends to be
someone else or uses a pseudonym or alias.” Hartley, 295 F.R.D. at 371 (quotation
omitted). Under this approach, “so long as a creditor hires a debt collector to send out
letters, the creditor cannot itsel f be deemed a debt collector, no matter how minimal the
role of the letter sender in the collection scheme.” Id. The United States District Court for
the District of Minnesota has rejected this approach as being inflexible, though, and has
instead applied a multifactor test to determine whether the creditor has “merely implie[d]
that a third party is collecting a debt[,] when in fact it is th e creditor that is attempting to
do so.” Id. at 371-72. Regardless of the appropri ate standard, we conclude that Favors
failed to adequately allege a flat-rating scheme.
Several aspects of Favors’s complaint s upport our determinat ion. First, his
complaint alleges that Chase Bank has a lo ngstanding relationship with debt-collection
agencies Alltran and ARS. He alleges th at, once Chase Bank engages their services,
Alltran and ARS—not Chase Bank—send demand letters to cu stomers. Favors does not

10
allege that Chase Bank controls the content of the letters. Instead, he claims that these
letters are a “collaborative product” between Chase Bank and the debt-collection agencies.
He admits that the letters contain phone numbers for Alltran an d ARS. And although
Favors alleges that the debt-collection agencies are paid a “flat rate” to send these letters,
he also alleges that, if the letters prove futile, the debt-collection agencies have discretion
as to whether to take further collection acti on. Moreover, he alleges that if the debt-
collection agencies do collect money, they retain a percentage of the recovered sum.
Assuming that all of Favors’s asserted facts 3 are true, his complaint fails to
adequately plead that Chase Ba nk acted as a debt collector by using a different name to
deceptively suggest that another party was in volved in collecting the debt. Thus, the
limited false-name exception cannot apply. See 15 U.S.C. § 1692a(6). Instead, Favors’s
complaint effectively alleges that Alltran and ARS are separate entities that are attempting
to collect the debt. The district court acco rdingly did not err when it dismissed Favors’s
complaint for failure to state a claim unde r the FDCPA because Chase Bank does not
qualify as a debt collector under the act.

3 Chase Bank contends that Favors’s complaint does not actually allege any facts regarding
its involvement in a supposed false-name scheme, but merely asserts unsupported
conclusions and speculation that this court need not take as true. This is because the
complaint concedes that Favors has no pers onal knowledge of Chase Bank’s relationship
with Alltran and ARS. For instance, Favors asserts that the entit ies’ arrangement has
“never been reduced to writing” and that, after nonpayment by customers, Alltran and ARS
“probably [do] nothing further in most cases, though the record is barren of data.” Chase
Bank is correct that unsupported conclusions need not be taken as true in the course of our
review. See Bahr, 788 N.W.2d at 80. Bu t here, we need not deci de which assertions to
reject because, even if all are taken as true, Favors’s FDCPA claims still fail.

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II. The district court properly concluded that the complaint fails to state a claim
for breach of contract.

“A contract consists of a binding promise or set of promises. A breach of contract
is a failure, without legal excuse, to perform any promise that forms the whole or part of
the contract.” Lyon Fin. Servs., Inc. v. Ill. Pater & Copier Co. , 848 N.W.2d 539, 543
(Minn. 2014) (citation omitted). To prevail on a breach-of-con tract claim, the plaintiff
must show (1) the formation of a contract, (2) the plaintiff’s performance of any conditions
precedent to its right to demand performance from the defendant, and (3) the defendant’s
breach of the contract. Id. Contract formation requires a “meeting of the minds” as to its
essential terms. Malevich v. Hakola, 278 N.W.2d 541, 544 (Minn. 1979).
Favors’s complaint asserts that Chase Bank breached a contract with him by
attempting to hold him liable under the “C hase Slate Cardmember Agreement” when
Favors never saw or signed the ag reement. He contends that he is “not subject to any of
the written terms,” including fees, interest, and other rates, because he never assented to
them.4
The district court conclude d that the complaint fails to state a breach-of-contract
claim because Favors affirmatively alleges that no contract formation occurred.
Specifically, Favors alleges that “Chase Bank . . . prevented him from any ‘mutual assent’

4 In his appellate briefing, Favors argues that he also alleged that a contract was formed
when Chase Bank offered, through Alltran, to reduce his debt and Favors accepted the offer
by mailing a payment of $239.53. He asserts that Chase Bank breached this “settlement
contract” by contacting Favors’s employer. Favors did not allege a breach of contract on
this basis in the complaint though, and the district court did not address this argument. We
therefore decline to reach the issue of an alleged contract formation for debt reduction, as
it is not properly before us.

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or ‘meeting of the minds’ regarding the ‘Cha se Slate Cardmember Agreement’ terms and
conditions.”
We agree with the district court. Becau se Favors’s complaint asserts that there was
no meeting of the minds as to the terms of the “Cardmember Agreement,” he cannot prove
contract formation and accordingly has no breach-of-contract claim. See Malevich, 278
N.W.2d at 544. As Chase Bank notes, while Favors could potentially make this argument
in defense to a breach-of-contract claim brought against him by Chase Bank, the argument
does not, on its own, support a breach of contract by Chase Bank. We also note that, even
if Favors had sufficiently pleaded contract formation, he does not assert any facts showing
his performance under the contract or Chase Bank’s breach of a particular term of the
contract. We accordingly conclude that the district court properly dismissed Favors’s claim
for breach of contract.
Affirmed.