Summary
In Clark, the court considered an action that had in fact been found legal by the state court; the federal plaintiff was now asking the federal court to collaterally contradict the state court's interpretation of state law, which it refused to do.
Summary of this case from Harrington v. CACV of Colorado, LLCOpinion
Cause No. IP 99-1414-C H/G.
December 28, 2000.
ENTRY ON DEFENDANT'S MOTION TO DISMISS
Plaintiff Yvonne B. Clark has sued Rebecca Pollard under the federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("the FDCPA"). Defendant Pollard has moved to dismiss the action for lack of jurisdiction and failure to state a claim upon which relief can be granted. As explained below, defendant's motion is granted, and the action is dismissed without prejudice.
The case is before the court on the complaint, with respect to both the jurisdictional argument and the asserted failure to state a claim. The court takes as true all well-pleaded allegations in the complaint and gives the plaintiff the benefit of reasonable inferences from those allegations. See, e.g., Kamilewicz v. Bank of Boston Corp., 92 F.3d 506, 509 (7th Cir. 1996) (affirming dismissal of collateral challenge to state court judgment in civil class action).
The complaint alleges that a creditor of Clark's contracted with Priority Financial Services to try to collect a $48.00 debt, which was a consumer debt for purposes of the FDCPA. Priority filed a suit against Clark in the Warren Township Small Claims Court in Marion County, Indiana. Priority obtained a default judgment against Clark in the amount of $272.00, including a collection fee and an attorney's fee.
Defendant Pollard is the president of Priority. The judgment of the Small Claims Court was signed by Pollard, who is not an attorney. Cplt. Ex. B. Pollard also signed a motion for proceedings supplemental on behalf of Priority. Cplt. Ex. C.
Clark claims that Pollard violated the FDCPA by practicing law in the Indiana small claims court without a license to do so. In general, Indiana law requires a corporation that is a party to a lawsuit to be represented by an attorney licensed to practice law in Indiana. Ind. Code § 34-9-1-1(c). Priority in fact was represented by counsel in the action against Clark. See Cplt. Ex. A (state court complaint bearing signature of attorney). Clark contends, though, that when Pollard signed the two documents in question, Pollard was engaged in the unauthorized practice of law.
The statute makes exceptions, however, for corporations organized under Ind. Code § 23-1-1-1 et seq. (general business corporation), Ind. Code § 23-1.5-1-1 et seq. (professional corporations), and Ind. Code § 23-17-1-1 et seq. (not-for-profit corporations), for civil cases filed on a small claims docket of a circuit, superior, or county court. See Ind. Code § 34-9-1-1(c). The parties have not addressed these exceptions, which do not appear to apply to the Marion County Small Claims Court, which is established by separate statute.
The FDCPA provides in relevant part:
A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
* * *
(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.15 U.S.C. § 1692e. Clark's theory is that Pollard's allegedly unauthorized signatures on the state court's judgment form and motion for proceeding supplemental amounted to a "threat to take any action that cannot legally be taken. . . ."
Defendant Pollard is understandably somewhat mystified as to how and why a federal court should be asked to determine whether a party to a state small claims court action has engaged in the unauthorized practice of law by signing two forms for a corporate plaintiff in that case. In casting about for theories to express this mystification, Pollard has invoked the Rooker-Feldman doctrine and the Supreme Court of Indiana's exclusive jurisdiction over the unauthorized practice of law. Pollard also contends the complaint fails to allege a violation of the FDCPA.
The Rooker-Feldman doctrine instructs that the lower federal courts may not exercise what amounts to appellate jurisdiction over state courts. See Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District Court of Appeals v. Feldman, 460 U.S. 462 (1983). Under the Rooker-Feldman doctrine, a person who claims that her federal rights were violated by a state court judgment must assert those rights through an appeal of the judgment in the state courts — not by an action in a federal district court — with the only potential federal court review coming from the Supreme Court of the United States. See, e.g., Kamilewicz v. Bank of Boston Corp., 92 F.3d at 509-10; Garry v. Geils, 82 F.3d 1362, 1365-66 (7th Cir. 1996) ("the fundamental and appropriate question to ask is whether the injury alleged by the federal plaintiff resulted from the state court judgment itself or is distinct from that judgment").
In response to the Rooker-Feldman challenge, Clark contends that she does not challenge the validity of the state court judgment against her. She also does not ask this court to set aside the judgment against her. This disclaimer may avoid the Rooker-Feldman problem, but it creates problems for Clark on the merits of her FDCPA claim, as discussed below.
Under the Indiana Constitution, the Supreme Court of Indiana has exclusive jurisdiction over the unauthorized practice of law. Ind. Const. art. 7, § 4; In re Mittower, 693 N.E.2d 555, 558 (Ind. 1998). Pollard contends that Clark is asking this court to exercise jurisdiction over such a matter. In response, Clark explains that she does not want damages for the unauthorized practice of law, but that she merely wants remedies under the FDCPA because Pollard "took an action that could not legally be taken in violation of 15 U.S.C. § 1692e(5)." Pl. Br. at 4.
The parties' arguments on the Rooker-Feldman doctrine and the unauthorized practice of law raise on the legal horizon some potentially challenging problems concerning the relationship between state and federal courts, and between the FDCPA and state law concerning debt collection, especially with respect to procedures used in and approved by state courts. Compare, e.g., Poirier v. Alco Collections, Inc., 107 F.3d 347, 350-51 (5th Cir. 1997) (finding FDCPA violation where debt collector violated state law on unauthorized practice of law), with Higgins v. Capitol Credit Services, Inc., 762 F. Supp. 1128, 1136-38 (D. Del. 1991) (finding no FDCPA violation where state law did not clearly prohibit debt collector's practices in state court). However, the particulars of this case do not require exhaustive consideration of those issues.
Clark has failed to state a claim upon which relief can be granted under the FDCPA. Clark relies on the provision of the FDCPA that bars a debt collector from using a "threat to take any action that cannot legally be taken or that is not intended to be taken." The claim fails for two independent reasons.
First, Clark is not challenging here any "threat," which is the term used in the portion of the FDCPA she relies upon. She is challenging instead action actually taken — and action that has received the blessing of the state courts. By its plain language, subsection (5) applies to threats of action, not to actions actually taken. Courts have repeatedly applied subsection (5) according to its terms to threats of unlawful action and to threats of action the collector does not actually intend to take. See, e.g., United States v. National Financial Services, Inc., 98 F.3d 131, 136-38 (4th Cir. 1996) (affirming summary judgment against debt collector who threatened legal action without any actual intention to follow through with legal action); Bentley v. Great Lakes Collection Bureau, 6 F.3d 60, 62 (2d Cir. 1993) (false threat of imminent litigation violated § 1692e(5)); Patzka v. Viterbo College, 917 F. Supp. 654, 660 (W.D. Wis. 1996) (granting summary judgment for plaintiff and finding violation of § 1692e(5) by threat to file suit to collect a collection cost prohibited by state law). See generally Wade v. Regional Credit Ass'n, 87 F.3d 1098, 1100 (9th Cir. 1996) (debt collector's violations of state licensing law did not constitute per se violations of FDCPA).
In support of the theory that an act made illegal by state law can support a claim under § 1692e(5), Clark cites Poirier v. Alco Collections, Inc., 107 F.3d 347, 350-51 (5th Cir. 1997). In Poirier the Fifth Circuit held that a debtor was entitled to summary judgment for a violation of § 1692e(5) where the debt collector took action in the state courts that amounted to unauthorized practice of law. The Fifth Circuit did not address the significance of the term "threat" in § 1692e(5). See 107 F.3d at 349 ("Since Louisiana law prohibits non-lawyers from practicing law, * * * Alco and Allen threatened to take, and actually took, action they were not legally permitted to take."). This court respectfully disagrees with the Poirier court's apparent equation of a threat and an action under § 1692e(5), both as a matter of the plain language of the statute and because, as in cases like this one, where the issue is whether action that led to a state court judgment was consistent with state law, it would enmesh FDCPA actions unduly in Rooker-Feldman issues and de facto "appellate" review of state court judgments.
In any event, the second reason Clark fails to state a claim for relief is independent of Poirier and distinguishes this case from that one. The decisive fact in Poirier was that the state court of appeals had reversed the judgment in the underlying collection judgment precisely because the debt collector had been engaged in the unauthorized practice of law. See 107 F.3d at 350. In this case, by contrast, the record shows a presumptively valid and unchallenged state court judgment. The record shows that, whatever action Pollard actually took in the state court lawsuit, it was action that she took legally, at least by a positivist definition of that term. Any such action by Pollard was part and parcel of a state court case and judgment, the validity of which Clark does not challenge.
In other words, while Clark says she does not challenge the validity of the state court judgment against her, she could prevail on her FDCPA claim only by showing that actions taken in state court and with the approval of the state court violated state law. The plaintiff in Poirier made such a showing, and did so properly in state court. While the state court judgment stands unchallenged, however, as it does in this case, Clark has failed to allege a violation of the FDCPA upon which relief can be granted. Cf. Higgins v. Capitol Credit Services, Inc., 762 F. Supp. 1128, 1136-38 (D. Del. 1991) (where debt collector's ability to pursue action in small claims court without attorney was not clearly foreclosed by state law, collector was entitled to summary judgment on § 1692e(5) claim that it had threatened to take action that could not be taken legally).
The importance of the reversal in the state courts in Poirier parallels the doctrine of Heck v. Humphrey, 512 U.S. 477 (1994). In Heck the Supreme Court held that a person may not seek damages under 42 U.S.C. § 1983 for alleged violations of federal constitutional rights if a judgment in favor of the plaintiff would necessarily call into question the lawfulness of a state court's criminal conviction or sentence that has not been reversed on direct appeal, expunged by executive order, declared invalid by a state tribunal authorized to make such determination, or called into question by a federal court's issuance of a writ of habeas corpus. See 512 U.S. at 486-87. Under the reasoning of Heck (from civil rights jurisprudence) and Poirier (under the FDCPA), Clark could prevail on her theory in this case only if she could succeed in first setting aside the state court judgment against her.
To the extent Clark may try to rely on the broader introductory language of § 1692e, she has not identified any "false, deceptive, or misleading representation or means in connection with the collection" of the debt. She has merely claimed that the wrong person signed two documents in state court, including the judgment itself and the motion for proceedings supplemental, the ultimate validity of which Clark does not challenge. She does not claim to have been injured or deceived an any cognizable way.
Accordingly, defendant's motion to dismiss is granted. The dismissal is without prejudice (like dismissals under Heck v. Humphrey, see Clemente v. Allen, 120 F.3d 703, 705 (7th Cir. 1997)). If the state courts were to set aside the judgment against Clark, she might then arguably have a claim under the FDCPA. Final judgment will be entered.
So ordered.