Summary
stating that the FDCPA "creates a cause of action against independent debt collectors rather than creditors seeking to enforce collection of their own debts"
Summary of this case from Larsen v. JBC Legal Group, P.C.Opinion
98 Civ. 2938 (RWS)
March 14, 2001
MEMORANDUM OPINION, ORDER, AND FINAL JUDGMENT
For the reasons set forth below, the motion of plaintiff Gal Shevach ("Shevach") to reinstate a subpoena in aid of execution against defendant American Fitness Franchise Corp. ("American Fitness") is denied, the case against all defendants shall be dismissed with prejudice, and final judgment shall enter against the plaintiff.
Facts
On April 27, 1998, plaintiff Gal Shevach "Shevach" filed a complaint alleging that defendants American Fitness Franchise Corp. ("American Fitness"), a/k/a Fitness Everlasting, and its owner, defendant Russell Henis ("Henis"), had engaged in harassing and abusing communications, use of false and misleading representations, and unfair practices, in the collection of a $329.09 debt owed to them pursuant to a judgment of the Small Claims Part of the Civil Court of the City of New York ("Small Claims Court"). (Complaint, Docketed Doc. 1.)
The complaint alleges that a dispute arose when defendants failed to honor coupons and vouchers Shevach had been provided at the time he became a member of the defendant health club. Shevach filed suit against the defendants in Small Claims Court and won a judgment for $240.52. Thereafter, defendant American Fitness initiated a small claims case against Shevach for an alleged breach of contract, for which a judgment of $329.09 was issued against Shevach. (See id.)
Shevach alleges that he received three threatening or harassing communications from defendants, by means of a telephone call to one of his employees, a fax to his place of business from defendant Henis, and a verbal threat from Henis outside the Small Claims courthouse after Shevach's motion to reconsider the judgment against him, in violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Shevach sought to recover $3,000 pursuant to 15 U.S.C. § 1692k, plus attorney fees and costs. (Id.) He proceeded pro se.
Upon Shevach's motion, this Court issued default judgment #98, 2120 in the amount of $3,195.00 against American Fitness on September 22, 1998. (Doc. #7.)
A pretrial conference was held on October 28, 1998 at which both Shevach and Henis appeared pro se, and attorney Jeffrey Weinhaus appeared by telephone on behalf of the corporate defendant. (See Doc. #11 memo endorsement; Oct. 27, 1998 letter from Weinhaus.) This Court issued an order on October 30, 1998 granting Henis leave to file an answer, and vacating default judgment #98, 2120. (Doc. #8).
On November 23, 1998, Shevach sent a letter to the Court requesting that the default judgment against American Fitness be enforced on the grounds that it had neither appeared nor filed an answer. By endorsement of November 30, 1998, this Court granted Shevach's motion. (Doc. 9.)
Pursuant to the advice of the parties that they had settled the action, this Court dismissed it with prejudice on December 8, 1998. (Doc. 10.)
On February 4, 1999, Shevach wrote to the Court seeking to enforce one of the terms of the settlement, claiming that Henis had not vacated the $323.09 small claims judgment as per the agreement. After considering the terms of the settlement that was reached in consideration for dismissing this action, as well as the representation of attorney Weinhaus, this Court ordered on February 17, 1999 that the $323.09 judgment be vacated and expunged. (Doc. 11.)
Despite the dismissal of the action with prejudice as against both the corporate and individual defendant pursuant to the settlement among all parties, Shevach sought in December 2000 to obtain court-ordered subpoenas in execution of the prior judgment issued against the successor in interest to American Fitness, the New York Sports Club, for $3,195.00. The Court erroneously issued the subpoenas pursuant to Shevach's representation that the judgment against American Fitness survived the dismissal of the action with prejudice.
On January 8, 2001 and January 10, 2001, counsel for the defendants Weinhaus moved to quash the subpoena on the grounds that the action had been dismissed with prejudice as to both Henis and American Fitness pursuant to the October 28, 1998 pretrial conference. The motion was granted by order of January 22, 2001.
Shevach again wrote to the Court on February 5, 2001 seeking to lift the quashing of the subpoena on the grounds that the original default was enforced against American Fitness on November 30, 1998. This letter was treated as a motion and is addressed in this memorandum opinion.
The defendants oppose the motion and seek clarification from the Court that the action was in fact dismissed as to all parties, and that the default judgment against American Fitness was vacated as a condition of the settlement. In addition, they argue that 15 U.S.C. § 1692 does not provide jurisdiction over this action, that the claims have already been addressed in Small Claims court, and that this action cannot not be maintained (and any default judgment not vacated therefore could not be enforced) because defendants are not "debt collectors" under the definition of that term set forth in 15 U.S.C. § 1692a(6)(A).
Discussion
Shevach's motion is denied for two reasons. First, as set forth above, pursuant to the terms of the settlement reached between all the parties at the October 28, 1998 conference, the default judgment against American Fitness was vacated in the judgment dismissing the entire action with prejudice on December 8, 1998. To the extent that the record does not clearly reflect this outcome, it shall be so ordered pursuant to this opinion. Second, the defendants are not "debt collectors" within the meaning of the FDCPA, so no federal statute provides subject matter jurisdiction over this action.
In 1977, Congress enacted the Fair Debt Collection Practices Act in response to national concern over "the use of abusive, deceptive and unfair debt collection practices by many debt collectors." 15 U.S.C. § 1692(a). The purpose of the FDCPA is "to protect consumers from a host of unfair, harassing, and deceptive debt collection practices without imposing unnecessary restrictions on ethical debt collectors." S. Rep. No. 382, 95th Cong., 1st Sess. 1-2, reprinted in 1977 U.S. Code Cong Ad. News 1695, 1696.
Section 1692k(d) provides that an actions brought to enforce liability under the FDCPA "may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs." 15 U.S.C. § 1692k(d).
However, the FDCPA provides a cause of action only against a "debt collector." See, e.g., U.S. v. Trans Continental Affiliates, No. C-95-1627-JLQ, 1997 WL 26297, *3 (N.D. Cal. Jan. 8, 1997) ("liability under the FDCPA is possible only if a Defendant is a `debt collector' within the meaning of the Act."). The FDCPA defines a "debt collector" as:
who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.15 U.S.C. § 1692a(6). The FDCPA specifically excludes from the definition of "debt collector," "any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor." 15 U.S.C. § 1692a(6)(A). Thus, the statute creates a cause of action against independent debt collectors rather than creditors seeking to enforce collection of their own debts. See Wadlington v. Credit Acceptance Corp., 76 F.3d 103, 108 (6th Cir. 1996) (holding that FDCPA imposes liability only on a debt collector, not on those "such as a consumer's creditors or assignees of a debt"); Beck v. Alliance Funding Co., 113 F. Supp.2d 274, 275 (D. Conn. 2000) ("The Act is quite clear that it is directed at independent debt collectors and not creditors attempting to collect their own debts."); Byes v. Edison Bros. Stores, Inc., Civ. A. No. 94-3100, 1995 WL 24441, *2 (E.D. La. April 26, 1995) (granting summary judgment for defendant chain store because it did not qualify as "debt collector" because it attempted to collect on check bounced at its store through its affiliated check recovery service, therefore qualifying for § 1692a(6)(B) exception).
Both American Fitness and its owner, Russell Henis, qualify as creditors, rather than "debt collectors," under these standards. Neither American Fitness nor Henis is in the business of collecting debts — rather, they are (or were) in the business of selling memberships in health clubs and fitness-related services. The mere fact that the need to collect a debt arose incidentally to their primary business does not transform these defendants into "debt collectors" who may be sued in federal court pursuant to 15 U.S.C. § 1692. In Berkery v. Bally's Health and Tennis Corp., No. 95-7178, 1996 WL 310163 (D.C. Cir. May 28, 1996) (table), the District of Columbia Circuit held that Bally's, a national fitness club chain that is in the identical position as American Fitness, was a creditor, not a "debt collector," under the meaning of the FDCPA. See also Transamerica Financial Serv., Inc. v. Mary Sykes, 171 F.3d 553, 556 n. 1 (7th Cir. 1999) (no cause of action against creditor who sought to collect a debt under FDCPA); Kinnell v. Convenient Loan Co., 77 F.3d 492, 1996 WL 80368, *2 (10th Cir. 1996) (table) (holding that loan company was creditor rather than "debt collector" under FDCPA); James v. Ford Motor Credit Co., 842 F. Supp. 1202, 1206 (D. Minn. 1994) (finding that automobile finance companies that make loans to auto purchasers are not debt collectors).
As defendants are not "debt collectors" within the meaning of the FDCPA, that statute does not provide subject matter jurisdiction over this action and it must be dismissed. See Kinnell, 1996 WL 80368, at *2 (affirming district court's dismissal of FDCPA claim for lack of subject matter jurisdiction because defendant was not "debt collector."); James, 842 F. Supp. at 1209 (D. Minn. 1994) (dismissing FDCPA complaint for lack of subject matter jurisdiction because repossessor was not "debt collector").
In lieu of FDCPA jurisdiction, the action could not be sustained for lack of subject matter jurisdiction, because neither the requirement of diversity between the parties (all reside in New York) nor the requirement that there be at least $75,000 in controversy, is met. See 28 U.S.C. § 1332.
Therefore, for the foregoing reasons, it is hereby
ORDERED that Shevach's motion to reinstate the subpoena to American Fitness in aid of execution is denied; and it is further
ORDERED that any other outstanding subpoenas in this matter are hereby quashed; and, to the extent that the record is unclear, it is further
ORDERED that the default judgment against American Fitness be vacated; and it is further
ORDERED that this action be dismissed with prejudice as against all defendants; and it is further
ORDERED that this document shall also serve as a final judgment entered against plaintiff Shevach.
It is so ordered.