Brinkley v. Midland Funding Llc et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

E.D. Tenn.July 14, 2016

IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE AT KNOXVILLE JEFFERY BRINKLEY ) ) Plaintiff, ) ) v. ) Civil Action No. 3:16-cv-152 ) MIDLAND FUNDING, LLC, and ) HOSTO & BUCHAN, PLLC ) ) Defendants. ) SEPARATE DFENDANT HOSTO AND BUCHAN’S MOTION TO DISMISS PLAINTIFF’S AMENDED COMPLAINT Defendant Hosto & Buchan, PLLC, (“Hosto” or “Defendant”), by and through its undersigned counsel and pursuant to Rule 8(a)(2) and Rule 12(b)(6) of the Federal Rules of Civil Procedure, submits this Motion to Dismiss and Incorporated Brief in response to Plaintiff’s Amended Complaint, and in support thereof, states as follows: I. INTRODUCTION On April 3, 2016, Plaintiff brought suit against Defendants alleging Defendants violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq. Separate Defendant Midland Funding, LLC (“Midland”) filed a Motion to Dismiss Plaintiff’s Complaint on May 20, 2016. On May 25, 2016, Separate Defendant Hosto filed a Motion to join Midland’s Motion Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 1 of 17 PageID #: 87 2 to Dismiss. In response to the Motion to Dismiss, Plaintiff filed an Amended Complaint on June 13, 2016. Plaintiff re-alleges, in his Amended Complaint, that Defendants failed to comply with Section 1692e (11) when a certified copy of a judgment granted against him was registered in the Sevier County Register of Deeds for the purpose of creating a judgment lien against real property owned by Plaintiff. Doc. 13, Plaintiff’s Amend. Compl., ¶¶ 17-26. The crux of Plaintiff’s Section 1692e (11) claim is that the certified copy of the General Sessions Default Judgment registered with the Sevier County Register of Deeds was a subsequent communication and should have included a “mini-Miranda” notice. Defendant Midland filed a Motion to Dismiss, to which Defendant Hosto filed a Motion to Join. Midland fully briefed the basis for dismissal of Plaintiff’s Section 1692e (11) claim. Doc. 8, Midland’s Motion to Dismiss. As set argued more fully, below Plaintiff ‘s Section 1692e (11) claim fails to state a claim upon which relief can be granted. In his Amended Complaint, Plaintiff alleges a new cause of action related to the issuance of an execution/garnishment against him by Defendant Hosto on behalf of its client Defendant Midland. Plaintiff contends that the execution/garnishment form used by Defendant Hosto and issued by the Sevier County General Session Clerk violated his due process rights under the United States and Tennessee Constitutions. Doc. 13, Plaintiff’s Amend. Compl., ¶¶ 27-35. Plaintiff further alleges that his due process rights were violated because the constable who served the execution/garnishment allegedly failed to serve a copy of the execution/garnishment as required by Tenn. Code Ann. § 26-2-405. Ibid. at ¶¶ 32, 43, Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 2 of 17 PageID #: 88 3 46, 47, and 49. Finally, Plaintiff alleges that his due process rights were violated when the constable allegedly failed to serve a copy of the execution/garnishment, thus preventing him from asserting exemptions on personal property provided by Tennessee law. Ibid. at ¶¶ 37-43. As argued more fully below, Plaintiff’s allegation that his due process rights were violated thus forming alleged violations of 15 U.S.C. §§ 1692e, 1692e (5), 1692e (10), and 1692f also fail to state a claim upon which relief can be granted. II. LEGAL STANDARD Rule 12(b)(6) provides that a defendant may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court must treat all well-pleaded allegations in favor of the non-moving party. Cole v. Homier Distributing Co., Inc., 599 F.3d 856 (8th Cir. 2010). A claim survives this motion where its factual allegations are “enough to raise a right to relief above the speculative level” on the assumption that all the complaint’s allegations are true.” Drobnak v. Andersen Corp., 561 F.3d 778, 783 (8th Cir. 2009) (quoting Bell Atl. Corp v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed. 2d 929 (2007)). Where no more than a “mere possibility of misconduct” can be inferred from the factual allegations, the complaint must be dismissed. Id. at 861 (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950). In sum, the complaint must present “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570. A plaintiff’s obligation to provide grounds for relief requires “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 3 of 17 PageID #: 89 4 555, 557. In applying this standard, a court is free to disregard “legal conclusions” and “unwarranted factual inferences.” Eidson v. State of Tenn. Dep’t of Children’s Servs., 510 F.3d 631,634 (6th Cir. 2007). Again, a plaintiff must state “a claim to relief that is plausible on its face.” Twonbly at 570. In Aschcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009), the Court held that in order to survive a Rule12 (b)(6) motion to dismiss, a complaint must set forth facts in order to show that a claim is plausible: “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense . . . But where the well pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’ ” Fed. R. Civ. P. 8(a) (2). 129 S.Ct. at 1950. “The purpose of [Rule 12(b)(6)] is to allow the court to eliminate actions that are fatally flawed in their legal premises and destined to fail.” Advanced Cardiovascular Sys. Inc. v. ScimedLife Sys., Inc., 988 F.2d 1157, 1160 (Fed. Cir. 1993). A Rule 12(b)(6) motion should be granted when plaintiff can prove no facts which would entitle him or her to relief. Therefore, in order to survive a motion to dismiss, a complaint must plead “enough facts to state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 570. A claim has “facial plausibility,” according the United States Supreme Court, “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. If, however, the allegations in a complaint Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 4 of 17 PageID #: 90 5 cannot support a claim for entitlement to relief, the claim should be dismissed for failure to state a claim under Fed. R. Civ. P. 12(b)(6). Twombly, 550 U.S. at 558; see also Iqbal, 129 S.Ct. at 1949 (“Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility.”)(internal citation omitted). III. ARGUMENT A. Plaintiff’s Section 1692e (11) Claim Fails to State a Claim For Relief In his Amended Complaint, Plaintiff re-alleges that Defendant failed to include the language required by 15 U.S.C. § 1692e (11), commonly known as the “mini-Miranda,” on the certified judgment filed with the Sevier County Register of Deeds. Doc. 8, Plaintiff’s Amend. Compl., ¶¶ 17-26. Under Tennessee law, a judgment lien is perfected when a certified copy of the judgment is filed in the lien book of the registered office. Tenn. Code Ann. § 25-5- 101(b)(1); see Tenn. R. Civ. P. 69.07(2). The judgment creditor must request a certified copy of the judgment from the court where the judgment was taken and then file it in the office of the Register of Deeds. It is important to note that a certified copy of judgment must be filed with the office of the Register of Deeds in order the perfect the lien. Andrews v. Fifth Third Bank, 228 S.W. 3d 102, 108 (Tenn. Ct. App. 2007). The statutory requirements must be strictly followed or the lien is lost. Young v. RAC Express, Inc., 2006 WL 1699001, at * (Tenn. Ct. App. June 21, 2006). Defendant followed the statutory requirements when it requested a certified copy of the judgment from the Sevier County General Session Court. Defendant then filed the certified copy of the judgment with the Sevier County Register of Deeds to perfect the judgment it had Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 5 of 17 PageID #: 91 6 obtained on behalf of its client Defendant Midland against Plaintiff. Defendant Hosto would have been required to alter the certified judgment to include the mini-Miranda on the certified judgment. This act would have been both unethical and unlawful. However, if Plaintiff’s allegations that the mini-Miranda must be included on a certified copy of a judgment filed with the office of the Register of Deeds are correct, then Defendant Hosto would be required to engage in a blatantly unethical act and alter the certified copy of the judgment in order register and perfect its client’s judgment lien or advise its client that they must forego their right under Tennessee law to register and perfect their judgment liens. In short, Plaintiff’s allegations of a violation, if accepted, would lead to an absurd result. Moreover, Plaintiff fails to state a claim upon which relief can be granted because the filing of a certified copy of a judgment with the register of deeds is not a communication with the consumer. 15 U.S.C. § 1692e (11) requires the “mini-Miranda” be included in all communications with the consumer. See Frey v. Gangwish, 970 F. 2d 1516 (6th Cir. 1992). However, Defendant Hosto’s filing the certified copy of the judgment with the Sevier County Register of Deeds was not a communication with Plaintiff. There are no allegations that Defendant Hosto sent the certified copy of the judgment to Plaintiff. If a communication with the Plaintiff took place as defined under Section 16922(11), it was with the Sevier County Register of Deeds. The Sevier County Register of Deeds is a third party and Section 1692e(11) does not apply to third party communications. See, e.g., Sanchez v. Client Servs., Inc., 520 F. Supp. 2d 1149, 1162 (N.D. Cal. 2007). Defendant Hosto on behalf of its client was following the Tennessee statutory Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 6 of 17 PageID #: 92 7 requirements to perfect its client’s judgment. It requested a certified copy of its client’s judgment from Sevier County General Session Court and then filed it with the Sevier County Register of Deeds. If a communication occurred as defined by Section 1692e (11), that communication was between Defendant Hosto and the Sevier County Register of Deeds. In sum, the notice requirement contained in Section 1692(e) 11 does not apply to the act of recording a certified copy of Sevier County General Session judgment with the Sevier County Register of Deeds. See, e.g. Cohen v. Beachside Two-I Homeowner’s Assoc., 2006 WL 1795140, at *10 ( D. Minn. June 29, 2006) (dismissing plaintiff’s claim because filing a document with the Register “is not the type of communication that Congress sought to bar within the scope of § 1692e(11)”). Therefore, Plaintiff fails to allege a claim under Section 1692e (11) upon which relief can be granted. B. Plaintiff’s Execution/Garnishment Claim Fails to State a Claim for Relief 1. The Execution/Garnishment Form Required by the Sevier County General Session Court and Used by Defendant Hosto Did Not Violate Tennessee Law. Plaintiff contends that the execution/garnishment form forwarded by Defendant Hosto to the Sevier County General Session Clerk, which the Clerk later issued, violates both the United States and Tennessee Constitution and Tennessee law. These alleged violations of constitutional law and statutory law form the basis, according to Plaintiff, of alleged violations of FDCPA. More particularly, Plaintiff claims the use of the execution/garnishment form was false, deceptive and misleading and constituted a threat to take action that cannot be legally taken in violation of Sections 1692e, 1692e (5), and 1692e (10), which in turn also allegedly Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 7 of 17 PageID #: 93 8 violate the FDCPA. Plaintiff also contends that the use of the execution/garnishment form was an unfair or unconscionable means to collect or attempt to collect a debt in violation of Section 1692f. While Plaintiff cites Tenn. Code Ann. §§ 26-2-401, et seq. in support of his claim that his due process rights were violated which in turn violates the FDCPA, his claim is actually based on the failure to use the execution/garnishment form he contends is located on www.tncourts.gov website. Doc. 13, Plaintiff’s Amend. Compl., ¶¶ 28, 31, and 32 and Exhibit 3 to Plaintiff’s Amended Complaint. Plaintiff has failed to allege that the Tennessee Supreme Court, or any other court in Tennessee, has mandated the use of that form. In fact, the form Plaintiff relies on to support his due process claims is not accepted by the Sevier County General Sessions Court. Connie Holt, General Session Clerk for Sevier County General Session Court, has stated in the attached Affidavit that the Sevier County General Sessions Court requires a judgment creditor to use the form attached to her Affidavit when submitting an execution/garnishment to be issue by her office. See Exhibit 1 attached hereto.1 The form attached to her Affidavit is 1 Defendant Hosto requests this court take judicial notice of the Affidavit of Connie Holt, Sevier County General Session Clerk, for purposes of establishing the execution/garnishment form Sevier County General Session Court requires to be used when a judgment creditor requests the clerk issue an execution/garnishment. A court that is ruling on a motion to dismiss for failure to state a claim may consider materials in addition to the complaint if such material are public records or otherwise are appropriate for taking judicial notice of, without converting the motion to dismiss into a motion for summary judgment. Schmidt v. PennyMac Loan Services, LLC, 106 F. Supp. 3d 859, 865 (E.D. Mich. 2015). Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 8 of 17 PageID #: 94 9 identical to the form Defendant Hosto submitted to the Sevier County General Session Court. Clerk Holt further stated no other execution/garnishment forms are accepted by the Sevier County General Sessions Court. While the form required by the Sevier General Session Court and used by Defendant Hosto differs from the 2008 execution/garnishment form found on the www.tncourts.gov website, it does not violate the laws of the State of Tennessee. To the contrary, the form required to be used by the Sevier General Sessions Court tracks the language of the Tennessee statutory law. Plaintiff contends that the execution/garnishment form required by Sevier County and used by Defendant Hosto did not contain an affidavit for a constable to sign in front of a notary public to confirm that a copy of the execution/garnishment was served on the judgment debtor. The 2008 execution/garnishment form attached as Exhibit 3 to Plaintiff’s Amended Complaint does contain such an affidavit for the sheriff or other officer to sign. However, none of the statutes cited by Plaintiff require an affidavit be signed by the officer serving the execution/affidavit. See Tenn. Code Ann. §§ 26-2-401, 402, 403, 404, 405, 407 and 408 and Tenn. Code Ann. 16-15-901. In fact, the statutory section that directly addresses the duty to provide a copy of the execution to the judgment debtor provides as follows: A sheriff or other officer who levies an execution upon property of a judgment debtor shall immediately thereafter on that same or next working day provide the judgment debtor with a copy of the execution that describes the property levied upon and with a completed copy of the notice set forth in § 26-2-404 by mailing them first class, postage prepaid, to the judgment debtor at the address provided pursuant to § 26-2-402, or by actual delivery to the judgment debtor. Tenn. Code Ann § 26-405. While the above statute requires a copy of the execution to be Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 9 of 17 PageID #: 95 10 served on the judgment debtor, it does not require the sheriff or officer to execute an affidavit that the judgment debtor was served. The garnishment form required by Sevier County General Session Court and used by Defendant does, in fact, comply with the above statute. The execution/garnishment form provides the address for mailing purposes required by TCA, Title 26, Section 2. In short, Defendant Hosto used the execution/garnishment form required by the Sevier County General Session Court and that form complied with Tennessee statutory requirements. The use of the required execution/garnishment form was not false, deceptive or misleading, was not a threat to take legal action that cannot be legally taken, and was not an unfair or unconscionable means to collect or attempt to collect a debt. Therefore, the claims that Defendant Hosto violated 15 U.S.C. §§ 1692e, 1692e (5), 1692e (10), and 1692f should be dismissed for failure to state a claim upon relief can be granted. 2. Defendant Hosto Is Not Liable for The Constable’s Alleged Failure to Serve Plaintiff With a Copy of the Execution/Garnishment. Plaintiff attempts to impute the constable’s alleged failure to serve him with a copy of the execution/garnishment to Defendant Hosto. Although Plaintiff does not clearly allege how Defendant Hosto is liable for the constable’s actions or inactions, it appears that Plaintiff is claiming that the alleged faulty exaction/garnishment form required by the Sevier County General Session Court and used by Defendant Hosto somehow cause the constable to allegedly fail to carry out his duties under Tenn. Code Ann. § 26-2-405. However, as established above, the required execution form does not violate any Tennessee statute, and meets requirements regarding the contents of an execution/garnishment form. Moreover, Plaintiff has not pleaded Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 10 of 17 PageID #: 96 11 any facts which would establish that Defendant Hosto knew or should have known that the constable failed to serve him with the execution other than that it allegedly used an improper execution/garnishment form. In this case, the constable, a county official, was responsible for serving the execution on both the garnishee and Plaintiff. While Hosto is a debt collector for purposes of the FDCPA, the constable is not a debt collector as defined by the FDCPA. Therefore, Defendant Hosto cannot be held vicariously liable for the constable’s alleged actions or inactions. Byrd v. Law office of John D. Clunk Co., LPA., 1:09-cv-076, 2010 WL 816932, at *7-8 (S.D. Ohio, March 8, 2010) (A debt collector is not responsible for a process server’s actions because a process sever is not a debt collector and is not subject to the FDCPA). Other courts have held that an entity that “itself meets the definition of debt collector may be held vicariously liable for unlawful collection activities carried out by another on its behalf.” Okyere v. Palisades Collection, LLC, 916 F. Supp. 508, 516 (S.D.N.Y. 2013) (quoting Police v. Nat’l Tax Funding, L.P., 225 F.3d 379, 404 (3d Cir.2000)); see also Suquilanda v. Cohen & Slamowitz, LLP, 10 Civ. 5868(PKC), 2011 WL 4344044, at *4-5 (S.D.N.Y. Sept. 7, 2011) (collecting cases) (“Courts have concluded that where the principal is a ‘debt collector,’ the principal may be liable for its agent’s FDCPA violations.”). However, “[t]o be vicariously liable under the FDCPA, ‘‘the principal must exercise control over the conduct or activities of the agent.’ ”Bodur v. Palisades Collection, LLC, 829 F.Supp.2d 246, 259 (S.D.N.Y.2011) (quoting Clark v. Capital Credit & Collection Servs., Inc., 460 F.3d 1162, 1173 (9th Cir.2006)); see also Byrd v. Law office of John D. Clunk Co., LPA., 1:09-cv-076, 2010 WL 816932, at *7-8(S.D. Ohio, March 8, 2010) Ross v. Vakulskas Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 11 of 17 PageID #: 97 12 Law Firm, 10-cv-4100-DEO, 2012 WL 4092419, at *6-7 (N.D Iowa, September 17, 2012) (law firm not vicariously liable for actions of the process server where it exercised no control over the process server’s conduct or activities); Harbison v. Litwo & Pech, P.C., 4:12-cv-2180 SNLJ, 2013 WL 1095654,at *4-5 (E.D.MO., March 18, 2013); Nichols v. Niagara Credit Recovery. Inc., 5:12-cv-1068 (MAD/TWD), 2013 WL 1899947, at *5 (N.D.N.Y. May 7, 2013) (“[T]o hold a debt collector vicariously liable for the acts of the agent, the plaintiff must show ... the principal has exercised control over the agent’s conduct or activities.”); Sanchez v. Abderahman, 10-cv-3641(CBA)(LB), 2013 WL 81707157 ,at *4-5 (E.D.N.Y. July 24, 2013) (law firm is not liable for action of a process server unless law firm exercised control over the process server’s conduct and activities). Plaintiff has failed to plead that the constable meets the definition of a debt collector under the FDCPA. Plaintiff has also failed to plead any facts that would demonstrate that Defendant Hosto controlled the constable’s conduct in effecting, or failing to effect, service of the execution/garnishment on judgment debtors generally or in this case particularly. Therefore, Plaintiff’s claim that Defendant Hosto is vicariously liable for the constable’s action fails to allege a claim upon which relief can be granted. 3. Plaintiff Was Not Denied His Right to Claim Exemptions Under Tennessee Law As a Result of His Alleged Failure to Receive a Copy of the Execution/Garnishment. Plaintiff claims he was denied the right to assert property exemptions allowed in Tennessee law as a result of the constable’s alleged failure to serve him with a copy of the execution/garnishment. However, Plaintiff waived his right to assert exemptions when he failed to exercise his personal property exemptions pursuant to Tenn. Code Ann. § 26-2-114. Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 12 of 17 PageID #: 98 13 Under § 26-2-114(b), a judgment creditor must exercise his exemption right before the execution is issued. Plaintiff has not pled that he exercised his exemption rights either before or after the default judgment was entered against. Plaintiff does claim he was denied the right to file a motion to quash the execution/garnishment pursuant to Tenn. Code Ann. §§ 26-2-407 and 408 as a result of the constable’s alleged failure to serve him with the execution/garnishment. However, the right to file a motion to quash is predicated on Plaintiff’s having exercised his exemptions rights under Tenn. Code Ann. § 26-2-114 and the property executed upon being subject to the claimed exemption. See Op. Atty Gen. No. 90-89, Oct 1, 1990, 1990 WL 513072. As noted above, Plaintiff has not alleged that he exercised his exemption rights prior the issuance of the execution/garnishment. Even assuming the constable failed to serve the execution/garnishment upon Plaintiff, his failure to exercise his exemptions prior to the issuance of the execution/garnishment was waived. Therefore, these allegations fail to plead facts sufficient to assert a claim upon which relief can be granted. IV. CONCLUSION For the reasons set forth above, Plaintiff has failed to state a claim against Separate Defendants Midland Funding, LLC and Hosto & Buchan, PLLC upon which relief can be granted and Plaintiff’s claims, therefore, must be dismissed in their entirety, on their merits and with prejudice. Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 13 of 17 PageID #: 99 14 Hosto & Buchan, PLLC BY: s/Carol Humphrey Carol Humphrey (TBR# 012427) Hosto & Buchan, PLLC 301 S Gallaher View Rd., Suite 111 Knoxville, Tennessee 37919 Telephone: (501) 320-0347 chumphrey@hosto.com CERTIFICATE OF SERVICE I certify that on July 14, 2016, I electronically filed the foregoing with the clerk of the court using the CM/ECF system which sent notification of such filing to those registered in this matter to: Alan C. Lee Attorney at Law P. O. Box 1357 Talbott, Tennessee 37877-1357 aleeeattorney@gmail.com Frank Springfield J. Christopher Suedekum BURR & FORMAN, LLP BURR & FORMAN 420 North 20th Street, Suite 3400 511 Union Street, Suite 2300 Birmingham, Alabama 35203 Nashville, Tennessee 37219 fspringf@burr.com s/Carol Humphrey Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 14 of 17 PageID #: 100 Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 15 of 17 PageID #: 101 Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 16 of 17 PageID #: 102 Case 3:16-cv-00152-CLC-CCS Document 19 Filed 07/14/16 Page 17 of 17 PageID #: 103