Summary
concluding that materiality determination "at the motion to dismiss stage is premature" as to Fair Debt Collection Practices Act claim
Summary of this case from Clear Spring Prop. & Causalty Co. v. Viking Power LLCOpinion
Case No. 1:20-cv-20372-KMM
2020-05-20
Jacqueline D. HILL, Plaintiff, v. RESURGENT CAPITAL SERVICES, L.P., Defendant.
Douglas Jason Jeffrey, Law Offices of Douglas J. Jeffrey, P.A., Miami Lakes, FL, Scott David Owens, Scott D. Owens, P.A., Hollywood, FL, for Plaintiff. Lauren Marshall Burnette, Messer Strickler, Ltd., Jacksonville, FL, John Michael Marees, II, Messer Strickler, Ltd., Jacskonville, FL, for Defendant.
Douglas Jason Jeffrey, Law Offices of Douglas J. Jeffrey, P.A., Miami Lakes, FL, Scott David Owens, Scott D. Owens, P.A., Hollywood, FL, for Plaintiff.
Lauren Marshall Burnette, Messer Strickler, Ltd., Jacksonville, FL, John Michael Marees, II, Messer Strickler, Ltd., Jacskonville, FL, for Defendant.
ORDER ON MOTION TO DISMISS
K. MICHAEL MOORE, UNITED STATES CHIEF DISTRICT JUDGE THIS CAUSE came before the Court upon Defendant Resurgent Capital Services, L.P.’s ("Defendant") Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). ("Mot.") (ECF No. 9). Plaintiff Jacqueline Hill ("Plaintiff") filed a response in opposition. ("Resp.") (ECF No. 10). Defendant filed a reply. ("Reply") (ECF No. 11). Plaintiff filed a Notice of Supplemental Authority. (ECF No. 12). The Motion is now ripe for review.
The following background facts are taken from the Complaint ("Compl.") (ECF No. 1) and are accepted as true for purposes of ruling on this Motion to Dismiss. Fernandez v. Tricam Indus., Inc. , No. 09-22089-CIV-MOORE/SIMONTON, 2009 WL 10668267, at *1 (S.D. Fla. Oct. 21, 2009).
This case arises under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. ("FDCPA"). Plaintiff is a "consumer" as defined by the FDCPA. Compl. ¶ 13. Defendant is registered in the state of Florida as a consumer collection agency and is engaged in the collection of "debt" as defined by the FDCPA. Id. ¶ 15.
Prior to the filing of the Complaint, Plaintiff regularly used a Merrick Bank credit card (the "Credit Card"). Id. ¶ 18. After struggling to make regular monthly payments on the balance of the Credit Card, Plaintiff stopped making payments in April of 2006. Id. ¶¶ 19–20. On or about September 29, 2009, Merrick Bank engaged Defendant for the purposes of debt collection and the filing of bankruptcy proofs of claim. Id. ¶ 21. At some point thereafter, Plaintiff's Credit Card account was assigned to Defendant for collection. Id. ¶ 22.
On February 12, 2019, Plaintiff filed for Chapter 13 bankruptcy. Id. ¶ 23. Accordingly, Defendant filed a proof of claim ("POC") against Plaintiff alleging that Plaintiff owed Merrick Bank $1,225.74 in principal. Id. ¶ 24. However, the $1,225.74 amount also included accrued interest, finance charges, late fees, and over-limit fees. Id. ¶ 33. Defendant intentionally characterized interest charges and fees as principal to avoid dismissal of the proof of claim for failure to provide an itemized statement of such charges and fees. Id. ¶ 28.
Defendant now moves the Court to dismiss Plaintiff's Complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) —on the grounds that Plaintiff does not have standing to sue under the FDCPA—and 12(b)(6)—on the grounds that Plaintiff has failed to state a claim upon which relief can be granted. See generally Mot.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(1) requires a court to dismiss an action for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A court lacks subject matter jurisdiction over a claim when a plaintiff fails to bear the burden of establishing the "irreducible constitutional minimum" of standing. See Spokeo Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547, 194 L.Ed.2d 635 (2016) (clarifying the contours of constitutional standing); Duty Free Ams., Inc. v. Estee Lauder Cos. , 797 F.3d 1248, 1271 (11th Cir. 2015) (The constitutional standing doctrine "implicates [a court's] subject matter jurisdiction, and accordingly must be addressed as a threshold matter."); Parker v. Scrap Metal Processors, Inc. , 386 F.3d 993, 1002–03 (11th Cir. 2004) ("[S]tanding must exist with respect to each claim.").
Federal Rule of Civil Procedure 12(b)(6) provides that a court may dismiss a complaint for failing to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation and internal quotation marks omitted). This requirement "give[s] the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citation and alterations omitted). The court takes the plaintiff's factual allegations as true and construes them in the light most favorable to the plaintiff. Pielage v. McConnell , 516 F.3d 1282, 1284 (11th Cir. 2008).
A complaint must contain enough facts to plausibly allege the required elements. Watts v. Fla. Int'l Univ. , 495 F.3d 1289, 1295–96 (11th Cir. 2007). A pleading that offers "a formulaic recitation of the elements of a cause of action will not do." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ). "[C]onclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal." Oxford Asset Mgmt., Ltd. v. Jaharis , 297 F.3d 1182, 1188 (11th Cir. 2002).
III. DISCUSSION
Defendant moves to dismiss the Complaint on two grounds. First, Defendant argues that Plaintiff has no standing to bring suit because Plaintiff has not alleged an injury-in-fact beyond a hyper-technical violation of the FDCPA. Second, Defendant argues that Plaintiff has failed to state an FDCPA violation claim upon which relief can be granted because (1) the POC accurately characterized the total amount owed as principal, (2) Plaintiff's injury fails to meet the materiality threshold, and (3) the Bankruptcy Code offers the sole avenue for relief under these facts. See generally Mot. In response, Plaintiff argues that (1) in the Eleventh Circuit, the facts as alleged constitute a violation of a substantive right conferred by the FDCPA, (2) the POC is false and misleading in violation of § 1692e of the FDCPA, (3) her injury is material, and (4) her claim does not arise under the Bankruptcy Code, and therefore the Bankruptcy Code does not preempt the FDCPA. See generally Resp. The Court addresses each issue in turn.
A. Plaintiff has Standing to Sue under the FDCPA
Defendant contends that Plaintiff does not have standing to bring suit under the FDCPA. Specifically, Defendant argues that such a mischaracterization amounts to a mere procedural violation and is not an injury in fact. Mot. at 8–10. Plaintiff responds that the FDCPA confers substantive rights upon debtors, including the right to receive accurate disclosures in communications with debt collectors. Resp. at 4–5. Therefore, technical violations constitute concrete injuries for the purposes of Article III standing. Id.
A plaintiff has the burden of clearly alleging facts demonstrating standing to bring suit. Spokeo , 136 S. Ct. at 1547. To demonstrate standing, a plaintiff must show that she "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Florence Endocrine Clinic, PLLC v. Arriva Medical, LLC , 858 F.3d 1362, 1366 (11th Cir. 2017). Defendant only challenges the injury in fact requirement. See generally Mot. A plaintiff has suffered an injury in fact if "she suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical." Church v. Accretive Health, Inc. , 654 F. App'x 990, 993 (11th Cir. 2016).
Plaintiff relies on Church for the proposition that Defendant's failure to comply with the disclosure requirements of the FDCPA is a concrete injury in fact for the purposes of Article III standing. Mot. at 5. Defendant argues that Church has "been repeatedly questioned by district and circuit courts because of the expansive reading the Church court took of Spokeo ," and suggests that the United States Court of Appeals for the Eleventh Circuit abandoned the Church reasoning in Nicklaw v. Citimortgage, Inc. , 839 F.3d 998 (11th Cir. 2016). Reply at 2–4.
In Church , the defendant sent the plaintiff a letter advising her that she owed a debt to Providence Hospital but failing to include disclosures required by the FDCPA. Church , 654 F. App'x at 991. The Court considered whether the plaintiff had suffered a concrete injury in fact for the purposes of conferring Article III standing in light of the then-recent decision in Spokeo . Id. at 992–95. The court held:
Church has sufficiently alleged that she has sustained a concrete—i.e. , "real"—injury because she did not receive the allegedly required disclosures. The invasion of Church's right to receive the disclosures is not hypothetical or uncertain; Church did not receive information to which she alleges she was entitled. While this injury may not have resulted in tangible economic or physical harm that courts often expect, the Supreme Court has made clear an injury need not be tangible to be concrete. Rather, this injury is one that Congress has elevated to the status of a legally cognizable injury through the FDCPA. Accordingly, Church has sufficiently alleged that she suffered a concrete injury, and thus, satisfies the injury-in-fact requirement.
Id. at 995.
Church is binding precedent in this district and has not been overruled. See, e.g. , Castellanos v. Portfolio Recovery Assocs., LLC , 297 F. Supp. 3d 1301, 1306 (S.D. Fla. 2017) ("The Court agrees with the reasoning in Church and, in addition, agrees with decisions from virtually every court in this Circuit, which uniformly apply Church ."); Zia v. CitiMortgage, Inc. , 210 F. Supp. 3d 1334, 1342–43 (S.D. Fla. 2016) (distinguishing Church while noting that " Church falls right in line with" informational standing cases applying Spokeo and finding that plaintiffs have standing where they seek to enforce a statutory disclosure requirement).
In Nicklaw , the plaintiff alleged that the defendant failed to timely record a certificate of discharge with the county clerk in violation of a New York statute. Nicklaw , 839 F.3d at 1002. The Eleventh Circuit found that "[b]y alleging only that [the defendant] recorded the certificate late and nothing else, [the plaintiff] failed to establish that he suffered or could suffer any harm that could constitute a concrete injury." Id. at 1003. Contrary to Defendant's assertion that this holding calls Church into question, the court separately acknowledged that "a plaintiff who alleges a violation of a statutory right to receive information alleges a concrete injury." Id. at 1002 (emphasis added) (citations omitted).
Pursuant to the FDCPA, debt collectors are prohibited from falsely representing the "character, amount, or legal status of any debt." FDCPA § 1692e(2)(A). Here, the POC falsely characterized "accrued interest, finance charges, late fees, and overlimit fees as principle." Compl. ¶ 33. A mischaracterization of Plaintiff's debt constitutes an injurious withholding of information that the FDCPA requires the debt collector to disclose to Plaintiff, and an invasion of Plaintiff's right to such information. Thus, Plaintiff has suffered a concrete injury under the FDCPA. See Church , 654 F. App'x at 995.
B. Plaintiff has Stated a Claim upon which Relief can be Granted
Plaintiff has stated a claim upon which relief can be granted under the FDCPA because (1) the Court need not consider whether the POC was false or misleading at the motion to dismiss stage, (2) the Court need not consider the materiality of Plaintiff's claim at the motion to dismiss stage, and (3) the Bankruptcy Act does not preempt the FDCPA.
i. The Court Declines to Consider Whether the POC is False or Misleading
Defendant argues that the POC is not false or misleading in characterizing interest as principal because interest becomes principal after it has been compounded. Mot. at 11–12. In response, Plaintiff argues that (1) Bankruptcy Rule 3001 requires itemization of an owed balance regardless of the capitalization of the interest, and (2) the legal authority upon which Defendant relies predates the amendment to Bankruptcy Rule 3001 that introduced the itemization requirement. Resp. at 10.
Rule 3001 of the Federal Rules of Bankruptcy Procedure requires a debt collector to file "an itemized statement of the interest, fees, expenses, or charges" with a proof of claim against a debtor who is an individual. Fed. R.B.P. 3001(c)(2)(A). The itemization of interest, fees, expenses, and other charges in a proof of claim was introduced in a 2011 amendment to the Rule. Id. advisory committee's note to 2011 amendment. Defendant does not cite to any case where this Court or any court within the Eleventh Circuit has considered whether interest that has been capitalized would be characterized as interest or principle for the purposes of Bankruptcy Rule 3001(c).
As an initial matter, whether the POC violates Rule 3001 has no bearing on whether Plaintiff has stated a claim upon which relief can be granted under the FDCPA. The relevant question is whether the POC falsely represents the character, amount, or status of Plaintiff's debt in violation of § 1692e(2)(A) of the FDCPA. Defendant does not cite to any case law binding on this Court determining whether the mischaracterization of fees or charges as principal in a debt collection communication is a false representation per § 1692e(2)(A).
Defendant relies on the Seventh Circuit's decision in Hahn v. Triumph Partnerships LLC , 557 F.3d 755 (7th Cir. 2009) for the proposition that "all past-due amounts accurately may be described as ‘principal due.’ " Mot. at 11 (quoting Hahn , 557 F.3d at 757 ). However, the Seventh Circuit's reasoning does not square with the Eleventh Circuit's treatment of FDCPA claims. As discussed in Section III.A, the Eleventh Circuit found there to be a concrete injury caused by a violation of the FDCPA even absent a showing of some tangible economic or physical harm suffered by the plaintiff. See supra Section III.A. The logic employed in Church —that Congress conferred upon debtors a right to accurate information in communications from debt collectors, and a violation of that right is injurious—is at odds with the Seventh Circuit's reasoning underlying Hahn's rule that "[i]f a statement would not mislead the unsophisticated consumer, it does not violate the FDCPA—even if it is false in some technical sense." Wahl v. Midland Credit Mgmt., Inc. , 556 F.3d 643, 645–46 (7th Cir. 2009) (finding that a proof of claim was not false or misleading where it characterized interest accrued prior to the debt collector's assumption of the debt as "principal"). Thus, Defendant's reliance on Hahn is misplaced.
Courts in this district have declined to consider whether debt collection communications constitute false, deceptive or misleading statements per the FDCPA at the motion to dismiss stage. See Savino v. Federated Law Grp., PLLC , No. 18-60956-CIV-ALTONAGA/Seltzer, 2018 WL 7917058, at *3 (S.D. Fla. Aug. 9, 2018) ("[T]he question of whether the [communication from the debt collector] constitutes false, deceptive, or misleading information under the FDCPA is one for a jury to decide."); Melillo v. Shendell & Assoc's., P.A. , No. 11-62048-CIV, 2012 WL 253205, at *6 (S.D. Fla. Jan. 26, 2012) ("[A]ny factual dispute[ ] regarding ... whether the letter is deceptive or misleading, or whether Defendant falsely represented the character, amount, or legal status of the debt will be for the jury to decide."). Accordingly, the Court declines Defendant's invitation to decide whether the POC is false or misleading and reserves such determination for a jury.
ii. The Court Need Not Consider Materiality at the Motion to Dismiss Stage
Defendant argues that Plaintiff does not claim a material violation of § 1692e because the procedural violation "could not materially affect anyone's ability to determine whether or how to respond to the POC." Mot. at 15. In response, Plaintiff argues that (1) the claim does constitute a material violation of the FDCPA, and (2) in any event, the Eleventh Circuit has not adopted a materiality threshold for FDCPA violations. Resp. at 10–11.
The Eleventh Circuit has not addressed whether FDCPA claims must meet a materiality threshold. See Jones v. Jason A. Craig & Assocs., P.C. , No. 5:18-CV-207 (MTT), 2019 WL 362273, at *3 (M.D. Ga. Jan. 29, 2019). Other courts routinely apply a materiality threshold to FDCPA claims. See, e.g. , Hahn , 557 F.3d at 757 ; Miljkovic v. Shafritz & Dinkin, P.A. , No. 8-14-CV-635-T-33TBM, 2014 WL 3587550, at *8 (M.D. Fla. July 18, 2014). This Court has employed a materiality test to FDCPA claims, but only at the summary judgment stage. See Rivas v. Midland Funding LLC , 398 F. Supp. 3d 1294, 1304 (S.D. Fla. 2019) ; Anselmi v. Shendell and Assocs., P.A. , No. 12-61599-CIV-WILLIAMS, 2015 WL 11121357, *6–7 (S.D. Fla. Jan. 7, 2015) ; Johnson v. Credit Protection Ass'n, L.P. , No. 11-80604-CIV, 2012 WL 5875605, at *5 (S.D. Fla. Nov. 20, 2012). However, a determination of whether Defendant's mischaracterization of interest as principal is material at the motion to dismiss stage is premature. See Savino , 2018 WL 7917058, at *3 ("[T]he Court will not decide whether the alleged misrepresentation is material [for the purposes of the FDCPA] at the motion to dismiss stage.") Therefore, the Court declines to consider whether Plaintiff's claim is material.
iii. The Bankruptcy Code does not Preempt the FDCPA
Defendant argues, relying on Midland Funding, LLC v. Johnson , ––– U.S. ––––, 137 S. Ct. 1407, 197 L.Ed.2d 790 (2017), that "[a] debtor's remedy for alleged procedural violations during the bankruptcy process lies within the Bankruptcy Code." Mot. at 18. In response, Plaintiff argues that (1) the Bankruptcy Code does not preempt the FDCPA where the remedies provided by both acts do not conflict, and (2) because Plaintiff terminated her bankruptcy proceeding, Johnson does not apply. Resp. at 12–13. "A proceeding is within the bankruptcy jurisdiction ... if it ‘arises’ under the Bankruptcy Code or ‘arises in’ or is ‘related to’ a case under the Code." Carter v. Rodgers , 220 F.3d 1249, 1253 (11th Cir. 2000) (internal citation omitted). To arise under the bankruptcy code, the matter must invoke a "substantive right" created by the Bankruptcy Code. Id. Likewise, the test to determine whether a case is related to a case in bankruptcy is "whether the outcome of the proceeding could conceivably have an effect on the estate being administered in bankruptcy." Id. (quoting Miller v. Kemira, Inc. (In re Lemco Gypsum, Inc.) , 910 F.2d 784, 788 (11th Cir. 1990)).
Plaintiff brings the termination of her bankruptcy proceeding to the Court's attention for the first time in her Response. She does not state when the proceedings were terminated or whether the case was pending when the Complaint was filed. Accordingly, the Court does not rely on this assertion.
In Johnson , the petitioner filed a proof of claim with the bankruptcy court during the respondent's Chapter 13 bankruptcy proceedings. Johnson , 137 S. Ct. at 1411. The proof of claim asserted that the respondent owed a credit-card debt of $1,879.71. Id. The proof of claim also stated that the petitioner last charged the account in 2003. Id. The bankruptcy court disallowed the claim because it was barred by a six-year statute of limitations under Alabama law. Id. Respondent sued under the FDCPA claiming that the proof of claim violated § 1692 because it was false, deceptive, and misleading in that it claimed a time-barred debt. Id. The Supreme Court held that "filing (in a Chapter 13 bankruptcy proceeding) a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the [FDCPA]." Id. at 1415–16. Additionally, the Supreme Court found that the FDCPA empowers civil courts to "help consumers ... by preventing consumer bankruptcies," while the Bankruptcy Code directs "bankruptcy-related questions"—such as which party holds the burden of proving untimeliness of a claim in a bankruptcy proceeding, and how must that party meet its burden—to the bankruptcy court. Id. at 1414–15. Accordingly, the Supreme Court held that applying the FDCPA would upset the "delicate balance of a debtor's protections and obligations" created and maintained by the Bankruptcy Code. Id. at 1415.
Although the Court acknowledges that the facts of Johnson are similar to the facts before this Court, Johnson is distinguishable because the deficiency in the proof of claim in Johnson was that the debt was time-barred, where, as here, the POC is deficient for mischaracterizing the amount as principal. In Johnson , respondent's argument that the proof of claim was untimely implicated an in-depth discussion as to (1) whether an untimely proof of claim is (i) "false" or "misleading," or (ii) unenforceable, but not necessarily inaccurate; (2) the protections available in a Chapter 13 bankruptcy proceeding; and (3) the availability of untimeliness as an affirmative defense, rather than as a complete prohibition, under the Bankruptcy Code. Id. at 1414. By contrast, Plaintiff's claim here—that she did not receive the accurate and complete communications that the FDCPA entitles her to—does not implicate such "bankruptcy-related questions," even if Defendant made the communication in the furtherance of the bankruptcy proceeding. Thus, Plaintiff's claim does not fall within the scope of the Supreme Court's narrowly tailored holding in Johnson . Further, Plaintiff's claim does not implicate a substantive right created by the Bankruptcy Code, nor could the outcome of this proceeding affect the administration of Plaintiff's estate in bankruptcy. See Carter , 220 F.3d at 1253. First, while the Bankruptcy Code does create rights relating to proofs of claim, such as Rule 3001, it does not create a substantive right to receive accurate and complete information from debt collectors. See supra Section III.A (discussing Church ). Second, regardless of whether the $1,225.74 is 100% principal or partially interest, neither Party argues that Defendant is entitled to or would receive anything more or less than $1,225.74. See generally Mot.; Resp. Accordingly, the Bankruptcy Code does not preempt the FDCPA in this case.
As Justice Sotomayor pointed out in her dissent, Johnson does not stand for the proposition that "the Bankruptcy Code altogether displaces the FDCPA, leaving it with no role to play in bankruptcy proceedings." Johnson , 137 S. Ct. at 1419 (Sotomayor, J., dissenting). The majority declined to adopt the petitioner's contention—echoed by Defendant here—that the FDCPA should never apply to a debt collector's conduct in a bankruptcy proceeding. See id.
IV. CONCLUSION
UPON CONSIDERATION of the Motion, the pertinent portions of the record, and being otherwise fully advised in the premises, it is hereby ORDERED AND ADJUDGED that Defendant's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) (ECF No. 9) is DENIED.
DONE AND ORDERED in Chambers at Miami, Florida, this 20th day of May, 2020.