Evensen, Kevin et al v. Heights Finance Corporation et al

MOTION TO DISMISS for Lack of Jurisdiction Heights Finance Corporation's Counterclaim

W.D. Wis.December 29, 2016

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WISCONSIN KEVIN EVENSEN AND VALERIE EVENSEN Plaintiff, v. Case No. 16-cv-784-slc HEIGHTS FINANCE CORPORATION GREG’S TOWING AND REPAIR Defendants. MOTION TO DISMISS DEFENDANT’S COUNTERCLAIM Pursuant to Fed. R. Civ. P. 12(b)(6) and 28 U.S.C. § 1367(c)(4), Plaintiff moves to dismiss Defendant Heights Finance Corporation’s counterclaim for failure to plead a jurisdictional basis for its claims, or in the alternative to decline to exercise supplemental jurisdiction. Dated December 29, 2016. /s/ Zeshan Usman Zeshan Usman, 1069404 USMAN LAW FIRM, LLC 525 Junction Rd., Ste. 8520N Madison, WI 53717 (608) 829-1112; (888) 876-2636 - Fax E: Z@UsmanLaw.com Nathan E. DeLadurantey, 1063937 Heidi N. Miller, 1087696 DELADURANTEY LAW OFFICE, LLC 735 W. Wisconsin Ave, Suite 720 Milwaukee, WI 53233 (414) 377-0515; (414) 755-0860 - Fax E: nathan@dela-law.com E: heidi@dela-law.com Case: 3:16-cv-00784-slc Document #: 7 Filed: 12/29/16 Page 1 of 1 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WISCONSIN KEVIN EVENSEN AND VALERIE EVENSEN Plaintiff, v. Case No. 16-cv-784-slc HEIGHTS FINANCE CORPORATION GREG’S TOWING AND REPAIR Defendants. PLAINTIFFS’ BRIEF IN SUPPORT OF THEIR MOTION TO DISMISS DEFENDANT’S COUNTERCLAIM INTRODUCTION This case centers around the illegal collection and repossession of Plaintiffs’ vehicles. After the Plaintiff brought Defendants before this Court for their violation of federal debt collection laws (and state laws through supplemental jurisdiction involving the same illegal acts), Defendant Heights Finance Corporation (hereinafter “Defendant Heights”) decided it would be convenient to file a counter claim for the money alleged due them. In additional to failing to allege any jurisdictional basis for these state law contract claims, Defendant’s tactic should be solidly rejected on policy grounds to encourage private enforcement of federal consumer debt collection laws. Pursuant to Fed. R. Civ. P. 12(b)(1) and 28 U.S.C. § 1367(c)(4), the Court should dismiss the counterclaim. Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 1 of 7 2 FACTUAL AND PROCEDURAL BACKGROUND Plaintiffs filed this complaint concerning the events surrounding the repossession of their vehicle and motorhome by Defendant Heights (and the repossession company, Defendant Greg’s Towing). When the vehicle was being repossessed at Ms. Evensen’s place of employment, Ms. Evensen protested the repossession, telling the agent to cease his actions. Compl. ¶¶ 24-27. The agent pointed to a nearby police car, informing Ms. Evensen that he had already spoken to the police officer, and that to prevent the police officer from coming over, she would need to give up the keys to the car. Id. ¶ 28. When Ms. Evensen still would not agree to give up her keys, the repossession agent told her that he had the proper paperwork, and that he would cause a big disturbance in front of her coworkers by having the police come and make her give him the keys. Id. ¶¶ 29-30. It was through these threats and lies that Ms. Evensen felt she had no other choice but to give up her keys. Id. ¶¶ 31-32. That same day, the Evensen’s motorhome was also repossessed. Id. ¶ 35. The repossession was accomplished by the repossession agent breaking into a pickup truck to move the pickup truck in order to move the motorhome. They also used the pickup truck (which had a snow plow attached to it) to plow a path through the snow that was approximately 100 yards in length to gain access to the motorhome. Id. ¶ 35. This resulted in the repossession agent being charged and convicted of a misdemeanor for operating a motor vehicle without the owner’s consent. Id. ¶ 36. Greg’s Towing, the company responsible for the repossessions, was acting under the direction of Defendant Heights, and Greg’s Towing was performing services that contained a non-delegable duty that flows to Defendant Heights related to the repossession of vehicles. Id. ¶¶ 37-38. By breaching the peace when taking the vehicle and motorhome, Defendant Heights violated state repossession law, the federal Fair Debt Collection Practices Act ("FDCPA"), and state collection laws. See generally Id. ¶¶ 42-63. Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 2 of 7 3 Plaintiffs now respond to the Counterclaims by moving to dismiss of lack of subject matter jurisdiction. ARGUMENT 1. Defendant Height’s Counterclaim should be dismissed because it failed to plead a jurisdictional basis for its claims as required by Fed. R. Civ. P. 8(a)(1). Plaintiffs brought their case in federal court on the basis of federal question subject matter jurisdiction. Defendant has counterclaimed for relief and provided no basis or argument for subjection matter jurisdiction for that counterclaim. Defendant has the burden of proof in establishing that this Court has jurisdiction over its counterclaim. Defendant has plead no facts, even under the liberal notice pleading standards of Fed. R. Civ. P. 8, regarding the basis of subject matter jurisdiction over their counterclaim. For this reason alone, it should be dismissed. Even if there is, in general, a basis for supplemental jurisdiction over counterclaims, a "pleading that states a claim for relief must contain . . . a short and plain statement of the grounds for the court's jurisdiction, unless the court already has jurisdiction and the claim needs no new jurisdictional support.” Fed. R. Civ. P. 8(a)(1). "Rule 8(a)(1) is satisfied if the [pleading] 'say[s] enough about jurisdiction to create some reasonable likelihood that the court is not about to hear a case that it is not supposed to have the power to hear.'" Gardner v. First Am. Title Ins. Co., 294 F.3d 991, 994 (8th Cir. 2002) (quoting Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 778 (7th Cir.1994)). 2. In the alternative, the Court should decline supplemental jurisdiction over Defendant Height’s Counterclaim pursuant to 28 U.S.C. § 1367(c)(4). If the Court finds that Defendant need not plead a proper jurisdictional basis, Plaintiffs assume that Defendant would like jurisdiction under supplemental jurisdiction, since there is no Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 3 of 7 4 diversity jurisdiction or federal question raised in the counterclaim. Courts have supplemental jurisdiction "over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy." 28 U.S.C. § 1367(a). Plaintiffs are before this court on original, federal question jurisdiction. The question then must be asked: is the claim of Defendant a compulsory counterclaim, or merely permissive in nature? Fed. R. Civ. P. 13(a)(1)(A) states that a compulsory counterclaim must arise “out of the transaction or occurrence that is the subject matter of the opposing parties claim.” Plaintiffs’ claim is for a violation of federal law regarding unfair and abusive collection practices, the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692. Plaintiffs’ federal claim exists regardless of the existence or enforceability of any related contractual claim. 15 U.S.C. § 1692k(d). Defendant’s claim is contractual in nature and exists entirely apart and distinct of Plaintiffs’ FDCPA claim. In short, Plaintiffs’ claims relate to collection, not contract. Defendant’s claim relates to contract, not collection. Because Defendant’s claim arises against Plaintiffs outside the subject matter that brought this case into federal court, the claim is deemed a “permissive counterclaim.” Fed. R. Civ. P. 13(b). The Seventh Circuit standards for allowing supplemental jurisdiction requires a “loose factual connection between the claims.” Channell v. Citicorp Nat'l Servs., 89 F.3d 379, 385 (7th Cir. 1996) (quoting from Ammerman v. Sween, 54 F.3d 423, 424 (7th Cir. 1995). Given this liberal requirement, it is likely that the court could maintain supplemental jurisdiction over the counterclaim. Just because the Court could maintain supplemental jurisdiction does not mean that it must maintain it, or even that it should maintain it. 28 US.C. § 1367(c) provides four reasons wherein a court may decline to exercise supplemental jurisdiction: (1) the claim raises a novel or complex issue of State law, (2) the claim substantially predominates over the claim or claims over which the Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 4 of 7 5 district court has original jurisdiction, (3) the district court has dismissed all claims over which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction. 28 US.C. 1367(c). Plaintiffs submit that under 28 U.S.C. § 1367(c)(4), there is a compelling reason for this court to decline jurisdiction - the chilling effect that this type of counterclaim has on litigation. The Congressional purpose of the FDCPA is to “eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). If debt counterclaims were entertained, many federal consumer protection actions could end with the consumer taking a loss. A successful federal action to enforce federal consumer protection policy should feel like a win for the consumer and a loss for the creditor or debt collector. If debt counterclaims were entertained, federal consumer protection actions would not deter bad collection conduct; they would be a deterrent unto themselves. In this case, Plaintiffs allege that the Defendants illegally took both their vehicle and motorhome. Allowing Defendant Heights to counterclaim for a contract amount allegedly owed to them would have a chilling effect: To allow a debt collector defendant to seek to collect the debt in the federal action to enforce the FDCPA might well have a chilling effect on persons who otherwise might and should bring suits such as this. Moreover, it would involve this Court in questions of no federal significance. Given the remedial nature of the FDCPA "and the broad public policy which it serves, federal courts should be loath to become immersed in the debt collection suits of … the target of the very legislation under which" a FDCPA plaintiff states a cause of action. Leatherwood v. Universal Business Service Co., 115 F.R.D. 48, 50 (W.D.N.Y. 1987) (quoting Roberts v. Nat'l Sch. of Radio & Television Broadcasting, 374 F. Supp. 1266, 1271 (N.D. Ga. Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 5 of 7 6 1974)). See also Sparrow v. Mazda Am. Credit, 385 F. Supp. 2d 1063, 1071 (E.D. Cal. 2005) (“Strong policy reasons exist to prevent the chilling effect of trying FDCPA claims in the same case as state law claims for collection of the underlying debt.”); Taylor v. Cavalry Portfolio Servs., LLC, 2012 U.S. Dist. LEXIS 132307, *6 (E.D. Tex. Aug. 21, 2012). (“[T]he fourth provision in exceptional circumstances, there are other compelling reasons for declining jurisdiction is applicable to this case. There are strong policy reasons for declining supplemental jurisdiction. The exercise of supplemental jurisdiction in this case would chill the effectiveness of the FDCPA.”). Other courts, when faced with similar Motions to Dismiss have found the counterclaims to be inappropriate. Whatley v. AHF Fin. Servs., LLC, 2012 U.S. Dist. LEXIS 131749, *2 (E.D. Tex. Sept. 14, 2012) (“Whether a consumer is liable for the underlying debt that a debt collector is attempting to collect is irrelevant to whether the debt collector is liable for conduct that violates the FDCPA”). Jobe v. Alliance Collection Serv., 2012 U.S. Dist. LEXIS 128742, *10 (N.D. Miss. Sept. 11, 2012) (granting Motion to Dismiss collection counterclaim in FDCPA case) (“As have a number of other district courts that have confronted the issue, this Court finds that significant countervailing policy considerations exist here and the exercise of supplemental jurisdiction would be improper.”). CONCLUSION For the reasons stated above, Plaintiffs request that the Court either dismiss the Defendant’s counterclaim for failure to plead a jurisdictional basis or dismiss the counterclaim and abstain from supplemental jurisdiction, given the chilling effect that such counterclaims have on consumer protection litigation. Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 6 of 7 7 Dated December 29, 2016. /s/ Zeshan Usman Zeshan Usman, 1069404 USMAN LAW FIRM, LLC 525 Junction Rd., Ste. 8520N Madison, WI 53717 (608) 829-1112; (888) 876-2636 - Fax E: Z@UsmanLaw.com Nathan E. DeLadurantey, 1063937 Heidi N. Miller, 1087696 DELADURANTEY LAW OFFICE, LLC 735 W. Wisconsin Ave, Suite 720 Milwaukee, WI 53233 (414) 377-0515; (414) 755-0860 - Fax E: nathan@dela-law.com E: heidi@dela-law.com Case: 3:16-cv-00784-slc Document #: 7-1 Filed: 12/29/16 Page 7 of 7