Hewitt et al v. 21st Mortgage Corporation

MOTION to Dismiss , MOTION to Dismiss for Lack of Jurisdiction AMENDED COMPLAINT

D.N.J.January 25, 2017

BRADLEY ARANT BOULT CUMMINGS LLP Stephanie M. Hoffmann (NJ State Bar ID: 8862012) Roundabout Plaza, 1600 Division Street Nashville, TN 37211 Tel. (615) 244-2852 Fac. (615) 252-6380 Michael R. Pennington (admitted pro hac vice) Edward S. Sledge IV (admitted pro hac vice) Zachary A. Madonia (admitted pro hac vice) One Federal Place, 1819 Fifth Avenue North Birmingham, AL 35203 Tel. (205) 521-8000 Fac. (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AUBREY L. HEWITT and PATRICIA A. HEWITT, on behalf of themselves and all others similarly situated, Civil Action No. 2:16-cv-05719-WHW- CLW Motion Day: February 21, 2017 Oral Argument Requested Plaintiffs, v. 21ST MORTGAGE CORPORATION, Defendant. NOTICE OF MOTION TO DISMISS THE AMENDED COMPLAINT PLEASE TAKE NOTICE that Defendant 21st Mortgage Corporation, by and through its undersigned counsel, will move before the Honorable William H. Walls, United States District Judge on February 21, 2017 for an Order dismissing Plaintiffs’ Aubrey L. Hewitt and Patricia A. Hewitt Amended Complaint (Doc. 11) pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Case 2:16-cv-05719-WHW-CLW Document 14 Filed 01/25/17 Page 1 of 2 PageID: 118 In support of this Motion, Defendant relies on its Memorandum in Support filed concurrently herewith. Dated: January 25, 2017 Respectfully submitted, s/ Stephanie M. Hoffmann Stephanie M. Hoffmann (NJ State Bar ID: 8862012) smhoffmann@bradley.com Bradley Arant Boult Cummings LLP Roundabout Plaza 1600 Division Street Nashville, TN 37211 Telephone: (615) 244-2852 Facsimile: (615) 252-6380 Michael R. Pennington (admitted pro hac vice) mpennington@bradley.com Edward S. Sledge IV (admitted pro hac vice) esledge@bradley.com Zachary A. Madonia (admitted pro hac vice) zmadonia@bradley.com Bradley Arant Boult Cummings LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 Telephone: (205) 521-8000 Facsimile: (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation Case 2:16-cv-05719-WHW-CLW Document 14 Filed 01/25/17 Page 2 of 2 PageID: 119 BRADLEY ARANT BOULT CUMMINGS LLP Stephanie M. Hoffmann (NJ State Bar ID: 8862012) Roundabout Plaza, 1600 Division Street Nashville, TN 37211 Tel. (615) 244-2852 Fac. (615) 252-6380 Michael R. Pennington (admitted pro hac vice) Edward S. Sledge IV (admitted pro hac vice) Zachary A. Madonia (admitted pro hac vice) One Federal Place, 1819 Fifth Avenue North Birmingham, AL 35203 Tel. (205) 521-8000 Fac. (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AUBREY L. HEWITT and PATRICIA A. HEWITT, on behalf of themselves and all others similarly situated, Civil Action No. 2:16-cv-05719-WHW- CLW Plaintiffs, v. 21ST MORTGAGE CORPORATION, Defendant. MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS AMENDED COMPLAINT Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 1 of 38 PageID: 120 ii TABLE OF CONTENTS _ TABLE OF AUTHORITIES ......................................................................................................... iii INTRODUCTION .......................................................................................................................... 1 BACKGROUND ............................................................................................................................ 3 I. Factual Allegations ............................................................................................................... 3 II. Procedural History ................................................................................................................ 5 LEGAL STANDARDS .................................................................................................................. 5 I. Standard Of Review Under Federal Rule Of Civil Procedure 12(b)(1). .............................. 5 II. Standard Of Review Under Federal Rule Of Civil Procedure 12(b)(6). .............................. 6 ARGUMENT .................................................................................................................................. 7 I. Plaintiffs Do Not Have Standing To Pursue Their Claim Because They Have Not Suffered An Injury-In-Fact. .................................................................................................. 7 A. In Spokeo, The Supreme Court Confirmed That The Mere Allegation Of A Technical Violation Of A Statute Is Not Sufficient To Satisfy Article III’s Injury-in-Fact Requirement. ......................................................................................... 7 B. Plaintiffs Have Not Alleged A Concrete Injury Resulting From 21st Mortgage’s Alleged Statutory Violation. ....................................................................................... 11 II. The Court Should Dismiss The Amended Complaint Under Rule 12(b)(6) Because Plaintiffs Have Not Plausibly Alleged That 21st Mortgage Is A “Debt Collector.” ........... 14 A. The FDCPA does not apply to persons who regularly collect debts for themselves, not others, even if those persons acquired the debts when the debts were in default. ............................................................................................................ 16 B. Plaintiffs have not plausibly alleged that 21st Mortgage is a debt collector. .............. 22 III. Alternatively, The Court Should Stay This Case And Defer Consideration Of This Motion Pending The Supreme Court’s Ruling In Santander. ............................................ 28 CONCLUSION ............................................................................................................................. 30 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 2 of 38 PageID: 121 iii TABLE OF AUTHORITIES Page(s) Cases Ashcroft v. Iqbal, 556 U.S. 662 (2009) .........................................................................................................6, 7, 25 Beals v. Bank of America, N.A., No. 10-cv-5427, 2011 WL 5415174 (D.N.J. Nov. 4, 2011) ....................................................20 Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702 (6th Cir. 2009) .....................................................................................................8 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...............................................................................................................6, 7 Bender v. Williamsport Area School Dist., 475 U.S. 534 (1986) ...................................................................................................................7 Bermudez v. Goldman Russell, P.C., No. 12-cv-5674, 2013 WL 1405251 (D.N.J. Apr. 5, 2013) .....................................................25 Bock v. Pressler & Pressler, LLP, 658 F. App’x 63 (3d Cir. 2016) .............................................................................................8, 9 Braitberg v. Charter Communications, Inc., 836 F.3d 925 (8th Cir. 2016) .....................................................................................................9 Coles v. Zucker Goldberg & Ackerman, No. 14-cv-1612, 2015 WL 4578479 (D.N.J. July 29, 2015) ...................................................25 Constitution Party of Pennsylvania v. Aichele, 757 F.3d 347 (3d Cir. 2014).......................................................................................................5 Crenshaw v. Computer Info. Servs., Inc., Civ. No. 10-01493 (DRD), 2010 WL 2951506 (D.N.J. July 21, 2010).............................15, 20 David v. Alphin, 704 F.3d 327 (4th Cir. 2013) .....................................................................................................8 Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309 (11th Cir. 2015) ....................................................................................... passim DeFazio v. Leading Edge Recovery Solutions, LLC, No. 2:10-cv-02945, 2010 WL 5146765 (D.N.J. Dec. 13, 2010) .............................................26 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 3 of 38 PageID: 122 iv Estate of Egenious Coles v. Zucker, Goldberg & Ackerman, 658 F. App’x 108 (3d Cir. 2016) .......................................................................................14, 26 Ehrich v. Credit Protection Ass’n, L.P., 891 F. Supp. 2d 414 (E.D.N.Y. 2012) .......................................................................................8 Ewing v. SQM US, Inc., No. 3:16-cv-1609, 2016 WL 5846494 (S.D. Cal. Sept. 29, 2016) ..........................................10 Federal Trade Commission v. Check Investors, Inc., 502 F.3d 159 (3d Cir. 2007)...............................................................................................21, 22 Fisher v. Enterprise Holdings, Inc., No. 4:15-cv-00372, 2016 WL 4665899 (E.D. Mo. Sept. 7, 2016) ..........................................10 Granite State Outdoor Adver., Inc. v. City of Clearwater, 351 F.3d 1112 (11th Cir. 2003) .................................................................................................6 Groshek v. Time Warner Cable, Inc., No. 15-cv-157, 2016 WL 4203506 (E.D. Wis. Aug. 9, 2016) .................................................11 Gubala v. Time Warner Cable, Inc., __ F.3d ___, 2017 WL 243343 (7th Cir. Jan. 20, 2017) ............................................................9 Gubala v. Time Warner Cable, Inc., No. 15-cv-1078, 2016 WL 3390415 (E.D. Wis. June 17, 2016) .............................................11 Hancock v. Urban Outfitters, Inc., 830 F.3d 511 (D.C. Cir. 2016) .................................................................................................10 Hardin v. Bank of Am., N.A., No. 7:16-CV-75-D, 2017 WL 44709 (E.D.N.C. Jan. 3, 2017) ................................................21 Henson v. Santander Consumer USA, Inc., 817 F.3d 131 (4th Cir. 2016), cert. granted, No. 16-349 ................................................ passim Hochendoner v. Genzyme Corp., 823 F.3d 724 (1st Cir. 2016) ....................................................................................................10 In re Horizon Healthcare Servs. Inc. Data Breach Litig., __ F.3d ___, 2017 WL 242554 (3d Cir. Jan. 20, 2017) .............................................................9 Hunt v. U.S. Bank, Nat. Ass’n, No. 12-cv-02171, 2013 WL 1398964 (C.D. Cal. Apr. 3, 2013) ..............................................18 Jackson v. Abendroth & Russell, P.C., No. 4:16-cv-00113, 2016 WL 4942074 (S.D. Iowa Sept. 12, 2016) .................................12, 14 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 4 of 38 PageID: 123 v Jamison v. Bank of America, N.A., No. 2:16-cv-00422-KJM-AC, 2016 WL 3653456 (E.D. Cal. July 7, 2016) ...........................11 Jenkins v. Chase Bank USA, N.A., No. 14-cv-5685, 2015 WL 4988103 (E.D.N.Y. Aug. 19, 2015) .............................................16 Johnson v. NovaStar Mortgage, Inc., 698 F. Supp. 2d 463 (D.N.J. 2010) ............................................................................................6 Kendall v Emps. Ret. Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009).......................................................................................................8 Lance v. Coffman, 549 U.S. 437 (2007) ...................................................................................................................5 Landis v. N. Am. Co., 299 U.S. 248 (1936) .................................................................................................................28 Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) ...........................................................................................................5, 6, 7 In re Michaels Stores, Inc., No. 14-cv-07563, 2016 WL 947150 (D.N.J. Mar. 14, 2016) ............................................28, 29 Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th Cir. 2006) .....................................................................................................8 Nicklaw v. CitiMortgage, Inc., 839 F.3d 998 (11th Cir. 2016) ...................................................................................................9 Nokchan v. Lyft, Inc., No. 15-cv-03008, 2016 WL 5815287 (N.D. Cal. Oct. 5, 2016) ..............................................10 Oppong v. First Union Mortgage Corp., 215 F. App’x 114 (3d Cir. 2007) .............................................................................................22 Perez v. JPMorgan Chase Bank, N.A., No. 14-cv-2279, 2016 WL 816752 (D.N.J. Feb. 29, 2016) .........................................17, 20, 27 Perry v. Columbia Recovery Group, L.L.C., No. 16-cv-191, 2016 WL 6094821 (W.D. Wash. Oct. 19, 2016) ......................................10, 13 Perry v. Oxford Law, LLC, No. 12-cv-3312, 2012 WL 3731802 (E.D. Pa. Aug. 29, 2012) ...............................................25 Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000).....................................................................................................22 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 5 of 38 PageID: 124 vi Provo v. Rady Children’s Hosp. – San Diego, No. 15-cv-00081, 2016 WL 4625556 (S.D. Cal. Sept. 6, 2016)..............................................10 Resco Products, Inc. v. Bosai Minerals Grp. Co., No. Civ. A. 06–235, 2010 WL 2331069 (W.D. Pa. June 4, 2010) ..........................................28 Salvatore v. Microbilt Corp., No. 4:14-cv-1848, 2015 WL 5008856 (M.D. Pa. Aug. 20, 2015) .....................................28, 29 Sartin v. EKF Diagnostics, Inc., No. 15-cv-1816, 2016 WL 3598297 (E.D. La. July 5, 2016) ..................................................11 Sayre v. Customers Bank, No. 14-cv-3740, 2015 WL 3458790 (E.D. Pa. May 29, 2015) ..............................15, 17, 20, 27 Schlegel v. Wells Fargo Bank, N.A., 720 F.3d 1204 (9th Cir. 2013) .....................................................................................21, 23, 26 Smith v. Capital One Fin. Corp., No. 11-3425 PJH, 2012 WL 259515 (N.D. Cal. Jan. 27, 2012) ..............................................23 Smith v. The Ohio State Univ., No. 2:15-cv-3030, 2016 WL 3182675 (S.D. Ohio June 8, 2016) ............................................11 Soltman v. Capital One (N.A.), No. 11-cv-01867, 2012 WL 4506204 (D.N.J. Sept. 25, 2012) (Walls, J.) ............14, 17, 20, 27 Spokeo, Inc. v. Robins, 578 U.S. ___, 136 S. Ct. 1540 (2016) .............................................................................. passim Staub v. Harris, 626 F.2d 275 (3d Cir. 1980).....................................................................................................14 Thomas v. U.S. Bank Nat’l Ass’n, __ F. App’x ___, 2017 WL 117121 (11th Cir. Jan. 12, 2017) .................................................21 Thomasson v. Bank One, La., N.A., 137 F. Supp. 2d 721 (E.D. La. 2001) .......................................................................................23 Thorne v. Accounts Receivable Mgmt., Inc., No. 11-22290-CIV, 2012 WL 3108662 (S.D. Fla. July 24, 2012) ............................................7 Tyus v. U.S. Postal Service, No. 15-cv-1467, 2016 WL 6108942 (E.D. Wis. Oct. 19, 2016) ..............................................10 United States v. Steele, 147 F.3d 1316 (11th Cir. 1998) (en banc) ...............................................................................19 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 6 of 38 PageID: 125 vii United Steelworks of America, AFL-CIO-CLC v. North Star Steel Co., Inc., 5 F.3d 39 (3d Cir. 1993).....................................................................................................19, 27 Wall v. Mich. Rental, No. 15-cv-13254, 2016 WL 3418539 (E.D. Mich. June 22, 2016) .........................................11 Statutes and Rules 15 U.S.C. § 1692 ..............................................................................................................................1 15 U.S.C. § 1692a(4) ............................................................................................................. passim 15 U.S.C. § 1692a(6) ............................................................................................................. passim 15 U.S.C. § 1692e ................................................................................................................5, 10, 14 15 U.S.C. § 1692e(2) .......................................................................................................................1 15 U.S.C. § 1692e(10) .....................................................................................................................1 15 U.S.C. § 1692g ................................................................................................................5, 13, 14 15 U.S.C. § 1692g(a) .............................................................................................................1, 4, 12 15 U.S.C. § 1692g(b) .................................................................................................................4, 12 Fed. R. Civ. P. 12(b)(1).......................................................................................................... passim Fed. R. Civ. P. 12(b)(6).......................................................................................................... passim District of New Jersey Local Rule 7.1 .............................................................................................1 Other Authorities Restatement (Second) of Torts § 525.............................................................................................12 S. Rep. No. 382, 95th Cong., 1st Sess., 1977 WL 16047 (Aug. 2, 1977) ................................20, 27 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 7 of 38 PageID: 126 Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) and Local Rule 7.1, Defendant 21st Mortgage Corporation (“21st Mortgage”) respectfully submits this Memorandum in Support of its Motion to Dismiss Plaintiffs’ Amended Complaint (Doc. 11) for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted (the “Motion”). INTRODUCTION In this class action lawsuit, Plaintiffs allege that 21st Mortgage violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”) because, as Plaintiffs allege, 21st Mortgage disclosed only Plaintiffs’ “Current Principal Balance” in 21st Mortgage’s first communication with Plaintiffs after becoming servicer of Plaintiffs’ mortgage loan, expressly excluding Plaintiffs’ outstanding fee and escrow balances. Section 1692g(a)(1) of the FDCPA requires that a “debt collector” disclose the “total amount” of a consumer’s debt five days of the debt collector’s first communication with the debtor in connection with the collection of the debt, and according to Plaintiffs, the “total amount” of the “debt” must include fee and escrow balances. Plaintiffs contend that by disclosing only the current unpaid principal balance, 21st Mortgage violated Section 1692g(a)(1), as well as Sections 1692e(2) and e(10). The Amended Complaint, like the initial complaint, should be dismissed for two independent reasons. First, the Court does not have subject matter jurisdiction over this case because Plaintiffs have not suffered a sufficiently concrete injury to confer standing under Article III. According to Plaintiffs, they were injured because their ability to “effectively dispute” their debt was impaired. But Plaintiffs do not allege (1) that they did not owe the fee and escrow balances that 21st Mortgage allegedly failed to disclose; (2) that they were not otherwise informed of the amount of those fee and escrow balances in other documents such as the regular monthly statements regarding their loan; (3) that they, in fact, would have disputed any part of those fee and escrow balances had 21st Mortgage disclosed them in its first communication; or (4) that 21st Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 8 of 38 PageID: 127 2 Mortgage has made any attempt to collect any amount that Plaintiffs do not owe. In other words, Plaintiffs do not allege that they have in any real way been harmed by 21st Mortgage’s purported technical statutory violation. Indeed, they seek only statutory. As the Supreme Court recently reiterated in Spokeo, Inc. v. Robins, 578 U.S. ___, 136 S. Ct. 1540 (2016), allegations of a bare statutory violation “divorced from any concrete harm,” like in this case, do not satisfy the injury- in-fact requirement of Article III. 136 S. Ct. at 1548. Accordingly, the Court should dismiss the Amended Complaint for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1). Second, the Amended Complaint also fails to state a claim upon which relief may be granted and should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). The FDCPA applies only to “debt collectors,” i.e., those who collect debts for others. By contrast, “creditors,” i.e., those who are owed the debts, are not covered. In the Amended Complaint, Plaintiffs concede that they owe their debt to 21st Mortgage and that to the extent 21st Mortgage was collecting their debt, it was then doing so on its own behalf. They nonetheless contend that 21st Mortgage was their debt collector, not their creditor, because 21st Mortgage acquired Plaintiffs’ debt when it was in default. However, the plain language of the FDCPA, its legislative history, and relevant case law make clear that, unless the “principal purpose” of a person’s business is debt collection, a person who is owed a debt is a creditor, not a debt collector, regardless of whether the debt was in default at the time the person acquired it. There are no allegations that 21st Mortgage’s principal purpose was collecting debts (nor could Plaintiffs so allege, given that 21st Mortgage principally extends credit), which means Plaintiffs have failed to plausibly allege that 21st Mortgage is a debt collector. Plaintiffs’ allegations regarding the purported extent of 21st Mortgage’s acquisition of defaulted debt are simply irrelevant. Thus, the FDCPA does not even apply. For these reasons, the Court should dismiss the Amended Complaint in its entirety. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 9 of 38 PageID: 128 3 Alternatively, the Court should stay this case and defer consideration of this Motion pending the Supreme Court’s decision in Henson v. Santander Consumer USA, Inc., No. 16-349, which will resolve whether a person who regularly collects debts for itself, not for anyone else, is nevertheless a debt collector under the FDCPA if it purchased the debts after they had fallen into default. BACKGROUND I. Factual Allegations Plaintiffs allege that they obtained a mortgage loan in February 2002 and defaulted on that loan in February 2014. Am. Compl. ¶¶ 20, 23. As Plaintiffs admit in the Amended Complaint, 21st Mortgage acquired Plaintiffs’ mortgage and debt in February 2016 (id. ¶ 24, Ex. A), and only later became servicer of Plaintiffs’ loan on April 12, 2016, replacing prior servicer Wells Fargo Home Mortgage (“Wells Fargo”). Id. ¶¶ 25-26. As such, 21st Mortgage was at all times servicing Plaintiffs’ mortgage for itself, not for anyone else. 21st Mortgage’s first communication with Plaintiffs after becoming Plaintiffs’ loan servicer was an April 15, 2016 letter, sent well after 21st Mortgage had become Plaintiffs’ creditor. That letter is attached as Exhibit B to the Amended Complaint. Id. ¶¶ 24, 30, Ex. B. In that letter, 21st Mortgage stated that the loan’s “Current Principal Balance[,]” excluding “amounts, if any due for fees or escrow[,]” was “$128624.02.” Id., Ex. B. Plaintiffs do not allege that 21st Mortgage misstated the current principal balance. Instead, Plaintiffs allege that they had in fact incurred amounts “due for fees and escrow” while the loan was being serviced by Well Fargo, which, they say, means the total debt they then owed was greater than the current principal balance of $128,624.02. Id. ¶¶ 43, 61. Plaintiffs contend that they were subjected to a “risk of harm” as a result of 21st Mortgage’s alleged failure to disclose their total amount due because it took away their ability to challenge the amounts that were not disclosed. Id. ¶ 78. However, Plaintiffs do not allege that they had not already been informed of Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 10 of 38 PageID: 129 4 the escrow and fee balances from regular monthly statements or other documents sent by Wells Fargo or by 21st Mortgage, nor do they allege that they would in fact have disputed any of those amounts had they been disclosed in that particular letter. Moreover, Plaintiffs’ ignore the fact that their ability to dispute the validity of their debt, or any portion thereof, does not commence until they receive the notice informing them of the amount of that debt. 15 U.S.C. § 1692g(a)(3), g(b). In other words, Plaintiffs’ time within which to dispute the amounts “due for fees or escrow” that were not disclosed in the April 15, 2016 letter does not begin to run until those amounts are disclosed. See id. Tellingly, Plaintiffs seek only statutory, not actual, damages. Am. Compl. at 17. Noticeably absent from the Amended Complaint are any allegations regarding the “principal purpose” of 21st Mortgage’s business. Thus, the Amended Complaint does not allege that the principal purpose of 21st Mortgage’s business is the collection of debts. Nor could it, because 21st Mortgage is a mortgage lender and broker whose principal purpose is the extension of credit, not the collection of debts. See Bloomberg Profile, 21st Mortgage Corp., available at http://www.bloomberg.com/profiles/companies/547702Z:US-21st-mortgage-corp (last accessed on January 25, 2017) (listing 21st Mortgage’s business as “Mortgage Finance” and also stating that “[t]he Company’s line of business includes arranging loans for others on a commission or fee basis”). Indeed, 21st Mortgage’s website states that: [s]ince its beginning, 21st Mortgage has offered financing for customers interested in purchasing a manufactured home. At first, the company focused on the Southern United States. Today, we provide mortgages to home buyers all across America. See 21st Mortgage Corporation Website, available at https://www.21stmortgage.com/web/21stSite .nsf/about-history.html (last accessed on January 25, 2017). Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 11 of 38 PageID: 130 5 II. Procedural History Plaintiffs filed the initial complaint (Doc. 1) in this case on September 20, 2016, alleging that 21st Mortgage violated Sections 1692e and 1692g of the FDCPA by disclosing the “Current Principal Balance” rather than the “total amount due” under Plaintiffs’ mortgage loan. Doc. 1 ¶ 56. Plaintiffs sought to represent a purported class of similarly situated individuals. See id. ¶ 71. On December 9, 2016, 21st Mortgage moved to dismiss the initial complaint in its entirety for lack of standing pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docs. 7, 8.) In lieu of responding to 21st Mortgage’s motion to dismiss, Plaintiffs filed the Amended Complaint on December 28, 2016. The Amended Complaint again alleges that 21st Mortgage violated Sections 1692e and 1692g of the FDCPA by disclosing the “Current Principal Balance” rather than the “total amount due” under Plaintiffs’ mortgage, and again asserts class allegations. LEGAL STANDARDS I. Standard Of Review Under Federal Rule Of Civil Procedure 12(b)(1). “Article III of the Constitution limits the jurisdiction of federal courts to ‘Cases’ and ‘Controversies.’” Lance v. Coffman, 549 U.S. 437, 439 (2007). One key aspect of this case-or- controversy requirement is standing. See id. “The standing inquiry focuses on whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was filed.” Constitution Party of Pennsylvania v. Aichele, 757 F.3d 347, 360 (3d Cir. 2014) (citing Davis v. FEC, 554 U.S. 724, 734 (2008)). The party invoking federal jurisdiction bears the burden of establishing standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). To establish standing, a plaintiff must show “(1) an injury in fact, meaning an injury that is concrete and particularized, and actual or imminent, (2) a causal connection between the injury and the causal conduct, and (3) a likelihood that the injury Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 12 of 38 PageID: 131 6 will be redressed by a favorable decision.” Granite State Outdoor Adver., Inc. v. City of Clearwater, 351 F.3d 1112, 1116 (11th Cir. 2003). Each element is “an indispensable part of the plaintiffs case” and “must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.” Lujan, 504 U.S. at 561. “Where, as here, a case is at the pleading stage, the plaintiff must ‘clearly ... allege facts demonstrating’ each element.” Spokeo, 136 S. Ct. at 1547 (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)). Thus, a court must grant a motion to dismiss under Rule 12(b)(1) if the court determines, taking all allegations as true and construing them in the light most favorable to the plaintiff, that it lacks subject matter jurisdiction over the claim because the plaintiff does not have standing. See Johnson v. NovaStar Mortgage, Inc., 698 F. Supp. 2d 463, 467 (D.N.J. 2010). II. Standard Of Review Under Federal Rule Of Civil Procedure 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), “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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although this pleading standard “does not require ‘detailed factual allegations,’ … it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id. (quoting Twombly, 550 U.S. at 555). Pleadings must contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). Indeed, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556). To meet this “plausibility standard,” a plaintiff must “plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678 (citing Twombly, 550 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 13 of 38 PageID: 132 7 U.S. at 556). Allegations that are mere “legal conclusions,” without factual support, must be disregarded. See Iqbal, 556 U.S. at 664, 678; Twombly, 550 U.S. at 555. ARGUMENT I. Plaintiffs Do Not Have Standing To Pursue Their Claim Because They Have Not Suffered An Injury-In-Fact. Because it is apparent on the face of the Amended Complaint that Plaintiffs do not have Article III standing to pursue their claim, dismissal under Rule 12(b)(1) is warranted. A. In Spokeo, The Supreme Court Confirmed That The Mere Allegation Of A Technical Violation Of A Statute Is Not Sufficient To Satisfy Article III’s Injury-in-Fact Requirement. The Supreme Court has long held that Article III’s injury-in-fact requirement demands that a plaintiff “show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant.” Bender v. Williamsport Area School Dist., 475 U.S. 534, 542 (1986). That injury must be both “concrete and particularized,” “affect[ing] the plaintiff in a personal and individual way.” Lujan, 504 U.S. at 560 & n.1. In Spokeo, the Supreme Court resolved confusion amongst lower courts regarding whether an allegation of a mere statutory violation is alone sufficient to satisfy Article III’s injury-in-fact requirement, even where the plaintiff has not alleged that she suffered a concrete harm. See Spokeo, Inc. v. Robins, No. 13-1339, Petition for Writ of Certiorari, 2014 WL 1802228, at *1 (filed May 1, 2014) (defining the question presented as, “[w]hether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action on a bare violation of a federal statute”).1 The Court reiterated that, even in the context of a statutory violation, a 1 Prior to Spokeo, courts had disagreed about whether the bare violation of a statute that provides for statutory damages is in and of itself sufficient to confer Article III standing. For instance, in Thorne v. Accounts Receivable Management, Inc., No. 11-22290-CIV, 2012 WL 3108662, at *6 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 14 of 38 PageID: 133 8 plaintiff must demonstrate that he or she suffered “an injury in fact” that is not only “particularized,” but also “concrete,” to satisfy Article III. 136 S. Ct. at 1548. That is, the plaintiff must show that his or her alleged injury “actually exist[s]” and that it is “‘real,’ and not ‘abstract.’” Id.; see also Bock v. Pressler & Pressler, LLP, 658 F. App’x 63, 65 (3d Cir. 2016) (“In Spokeo, the Supreme Court “used strong language indicating that a thorough discussion of concreteness is necessary in order for a court to determine whether there has been an injury-in-fact”). Noting that “intangible injuries can … be concrete,” Spokeo, 136 S. Ct. at 1548, the Court explained that in assessing whether a particular claim of intangible harm satisfies the concreteness standard, “it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.” Id. In addition, the Court stated that Congress may attempt to “identify intangible harms that meet minimum Article III requirements,” and that Congress’s judgment is “instructive and important.” Id. (S.D. Fla. July 24, 2012), the court denied a motion for summary judgment on standing grounds, after concluding that Congress, in enacting the FDCPA, had “define[d] new legal rights” and that, accordingly, consumers had standing to seek statutory damages for any violation of those rights. By contrast in Ehrich v. Credit Protection Ass’n, L.P., 891 F. Supp. 2d 414, 415-16 (E.D.N.Y. 2012), the court granted the defendant debt collector’s motion for judgment on the pleadings after finding that the plaintiff “ha[d] suffered no actual injury stemming from [the debt collector’s] allegedly illegal collection notice.” As the court explained, “the FDCPA’s statutory damages provision” does not “confer standing in the absence of actual injury.” Id. at 416; compare also, e.g., Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702, 705-07 (6th Cir. 2009) (“No Article III (or prudential) standing problem arises” when Congress authorizes damages for violation of a statutory right) and Murray v. GMAC Mortgage Corp., 434 F.3d 948, 952-53 (7th Cir. 2006) (holding that statutory damages are available under the FCRA “without proof of injury”) with David v. Alphin, 704 F.3d 327, 338-39 (4th Cir. 2013) (rejecting the theory that the mere” deprivation of [a] statutory right … is sufficient to constitute an injury-in-fact for Article III standing”) and Kendall v Emps. Ret. Plan of Avon Prods., 561 F.3d 112, 121 (2d Cir. 2009) (finding that a plaintiff cannot maintain a claim for breach of “a statutory duty to comply with ERISA” without also “alleg[ing] some injury or deprivation of a specific right that arose from a violation of th[e] duty”). Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 15 of 38 PageID: 134 9 The Court cautioned, however, that a plaintiff does not Automatically satisf[y] the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation. Id.; Bock, 658 F. App’x at 64-65 (remanding a case sua sponte to address whether plaintiffs had alleged injury in fact and holding that “[i]n determining whether there is a concrete injury, the presentation of an alleged statutory violation is not always sufficient.”); In re Horizon Healthcare Servs. Inc. Data Breach Litig., __ F.3d ___, 2017 WL 242554, at *10 (3d Cir. Jan. 20, 2017) (“It is nevertheless clear from Spokeo that there are some circumstances where the mere technical violation of a procedural requirement of a statute cannot, in and of itself, constitute an injury in fact.”). In other words, a plaintiff cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” Spokeo, 136 S. Ct. at 1548 (emphasis added). As the Court explained, “[i]njury in fact is a constitutional requirement” that “Congress cannot erase” by statute. Id. at 1547-48. Thus, for example, Spokeo teaches that a defendant’s “fail[ure] to provide [a] required notice” does not itself confer standing because the failure to provide that notice “may result in no harm,” while Article III demands in “injury in fact.” Id. at 1548, 1550. Accordingly, since Spokeo, court after court has dismissed claims premised on bare, technical statutory violations, where there were no allegations that the plaintiffs suffered “concrete injury.” See Gubala v. Time Warner Cable, Inc., __ F.3d ___, 2017 WL 243343, at *3 (7th Cir. Jan. 20, 2017) (affirming dismissal where the alleged substantive statutory violation “need not [and] … did not” cause a concrete injury); Nicklaw v. CitiMortgage, Inc., 839 F.3d 998, 1001-03 (11th Cir. 2016) (dismissing appeal for lack of jurisdiction where plaintiff failed to allege harm or a material risk of harm from the alleged statutory violation); Braitberg v. Charter Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 16 of 38 PageID: 135 10 Communications, Inc., 836 F.3d 925, 930-31 (8th Cir. 2016) (affirming dismissal where plaintiff alleged only a bare statutory violation but identified no harm or material risk of harm); Hancock v. Urban Outfitters, Inc., 830 F.3d 511, 513-15 (D.C. Cir. 2016) (concluding that the plaintiffs’ Consumer Protection Act and Consumer Identification Information Act claims should have been dismissed for lack of jurisdiction where the plaintiffs did not allege that the disclosure of their zip codes to the defendants caused them any harm); Hochendoner v. Genzyme Corp., 823 F.3d 724, 731-34 (1st Cir. 2016) (affirming dismissal, without leave to amend, of all but one putative class representatives’ claims due to their “utter failure … to plausibly allege that [they] suffered an injury in fact[;]” Spokeo requires a plaintiff to allege not only “injurious conduct” but also “that he, himself, is among the persons injured” by that conduct in a “concrete,” “personal[,] and individual way”).2 2 See also, e.g., Perry v. Columbia Recovery Group, L.L.C., No. 16-cv-191, 2016 WL 6094821, at *6, 8 (W.D. Wash. Oct. 19, 2016) (dismissing FDCPA claim premised on a debt collector’s alleged failure to provide disclosures required by section 1692g of the FDCPA, where the plaintiff failed to allege that he suffered any concrete harm by the alleged disclosure violation); Tyus v. U.S. Postal Service, No. 15-cv-1467, 2016 WL 6108942, at *6-7 (E.D. Wis. Oct. 19, 2016) (dismissing FCRA claim premised on the allegation that defendant had failed to give plaintiff sufficient notice before taking an adverse action based on his background because plaintiff failed to adequately allege that defendant would not have taken the same adverse action even had defendant given plaintiff adequate notice); Nokchan v. Lyft, Inc., No. 15-cv-03008, 2016 WL 5815287, at *9 (N.D. Cal. Oct. 5, 2016) (dismissing FCRA claim for lack of standing, determining that a “violation of a disclosure requirement under the FCRA, by itself, is [not] sufficient to confer Article III standing on a plaintiff”); Ewing v. SQM US, Inc., No. 3:16-cv-1609, 2016 WL 5846494, at *2 (S.D. Cal. Sept. 29, 2016) (dismissing TCPA claim alleging that defendants improperly used an auto dialer to call plaintiff’s cell phone and that plaintiff was injured because he had to pay an incoming telephone call charge to his cell phone carrier because the plaintiff did not and could not allege that he would not have paid the charge had defendants “manually dialed his number, which would not have violated the TCPA”); Fisher v. Enterprise Holdings, Inc., No. 4:15-cv-00372, 2016 WL 4665899, at *4 (E.D. Mo. Sept. 7, 2016) (dismissing FCRA claim premised on the allegation that the disclosure that defendant would conduct a background check was not “clear and conspicuous” because plaintiff did not allege that she did not in fact see and understand the disclosure or that she was otherwise harmed); Provo v. Rady Children’s Hosp. – San Diego, No. 15-cv-00081, 2016 WL 4625556, at *1-2 (S.D. Cal. Sept. 6, 2016) (dismissing FDCPA claim because “Plaintiffs failed to allege an injury that ‘actually exist[ed]’ and that affected them ‘in a personal and individual way.’” Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 17 of 38 PageID: 136 11 In sum, a plaintiff has standing to bring a statutory claim only when the asserted violation encompasses an allegation of concrete harm beyond a “bare procedural violation”—either because (1) an element of the cause of action requires proof of such a harm and the plaintiff alleges facts sufficient to establish that element, see Spokeo, 136 S. Ct. at 1549-50; or (2) the plaintiff separately alleges facts establishing a concrete harm, see id. at 1549. B. Plaintiffs Have Not Alleged A Concrete Injury Resulting From 21st Mortgage’s Alleged Statutory Violation. Here, Plaintiffs have not alleged that they suffered a sufficiently concrete injury to confer Article III standing. (quoting Spokeo, 136 S. Ct. at 1548)); Groshek v. Time Warner Cable, Inc., No. 15-cv-157, 2016 WL 4203506, at *2-3 (E.D. Wis. Aug. 9, 2016) (dismissing FDCPA claim based on the defendant’s failure to warn plaintiff before obtaining his credit report because there were no allegations that the defendant’s acquisition of the credit report caused the plaintiff any harm whatsoever); Jamison v. Bank of America, N.A., No. 2:16-cv-00422-KJM-AC, 2016 WL 3653456, at *4-5 (E.D. Cal. July 7, 2016) (dismissing TILA claim premised on alleged failure to disclose “undisbursed insurance funds” on account statements because plaintiffs failed to allege a “concrete” injury; such a “bare procedural violation” “does not inherently establish concrete harm” and “conclusory allegations of harm” were insufficient); Sartin v. EKF Diagnostics, Inc., No. 15-cv-1816, 2016 WL 3598297, at *3-4 (E.D. La. July 5, 2016) (dismissing putative class action alleging that the defendant violated the TCPA by sending unsolicited fax advertisements because the plaintiff “fail[ed] to plead facts demonstrating how [the] statutory violation caused him concrete harm”); Wall v. Mich. Rental, No. 15-cv-13254, 2016 WL 3418539, at *2-3 (E.D. Mich. June 22, 2016) (dismissing complaint that alleged that the defendant landlord had moved the plaintiff tenants’ security deposits from one bank to another, which purportedly constituted a technical violation of state statute; “Plaintiffs do not assert a risk that exposed them to ‘real’ financial harm in the landlord’s treatment of their security deposits. … Instead, they divine harm from the possibility of a violation of the statute. This is not the sort of ‘concrete’ injury for which Plaintiffs have standing to seek redress in federal court.”); Gubala v. Time Warner Cable, Inc., No. 15-cv-1078, 2016 WL 3390415, at *4-5 (E.D. Wis. June 17, 2016) (dismissing claim that the defendant had retained the personal information of the plaintiff, a former subscriber to defendant’s service, in violation of the Cable Communications Policy Act, because there was no allegation that the retention of personal information caused the plaintiff any concrete injury); Smith v. The Ohio State Univ., No. 2:15-cv-3030, 2016 WL 3182675, at *1, *4 (S.D. Ohio June 8, 2016) (dismissing FCRA claims alleging that the disclosure form “improperly included extraneous information such as a liability release” due to the plaintiff’s failure to allege any resulting injury-in-fact: “[w]ithout a concrete and particularized injury-in-fact, there is no Article III standing in this Court.”). Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 18 of 38 PageID: 137 12 As an initial matter, the disclosure of a debtor’s current principal balance rather than total amount due has no analog to any harm that traditionally provided a basis for relief in American and English courts. See Spokeo, 136 S. Ct. at 1549. Although the common law system traditionally provided redress for harms closely related to fraudulent or mistaken demands for payment, see Restatement (Second) of Torts § 525 (discussing fraudulent misrepresentation), being informed in one particular item of correspondence (among many) about the current principal balance and not the total amount due under a loan, without any claim of detrimental reliance on that one piece of paper, among many, is not closely related to any traditional bases for relief. See Jackson v. Abendroth & Russell, P.C., No. 4:16-cv-00113, 2016 WL 4942074, at *10 (S.D. Iowa Sept. 12, 2016). Moreover, Plaintiffs clearly were neither prejudiced nor otherwise harmed by 21st Mortgage’s disclosure of their current principal balance. The purpose of the disclosure requirements in Section 1692g(a) are to prevent debt collectors (not creditors) from attempting to collect debts from “the wrong person or attempting to collect debts which the consumer has already paid.” Jackson, 2016 WL 4942074, at *10 (citing S. Rep. No. 95-382 at 4 (1977)). Although Plaintiffs contend that their ability to dispute the allegedly undisclosed fee and escrow balances was impaired (Am. Compl. ¶¶ 70, 78), that allegation is simply wrong as a matter of law. Under the FDCPA, a consumer’s 30-day statutory window within which to protest his or her debt, or any portion thereof, does not begin to run until he or she “recei[ves] the notice” informing him of the amount of the debt. See 16 U.S.C. § 1692g(a)(3) (stating that a debt collector must notify the consumer “that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid” (emphasis added)); 16 U.S.C. § 1692g(b) (“if the consumer notifies the debt collector in writing within the thirty-day Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 19 of 38 PageID: 138 13 period described in subsection (a) that the debt, or any portion thereof, is disputed … the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt … .”). In other words, the Plaintiffs’ time within which to dispute the amounts “due for fees or escrow” that were not disclosed in the April 15, 2016 letter did not begin to run until those amounts are disclosed. Plaintiffs have not been prejudiced. In any event, Plaintiffs do not allege: (1) that they in fact would have disputed the fee and escrow balances had 21st Mortgage disclosed the total amount of their debt; (2) that monthly statements or other documents received from their lender and servicers did not separately disclose the fee and escrow balances; or (3) that they suffered any other actual harm from the purported technical omission. To the contrary, Plaintiffs do not dispute that they owed the entire debt that was the subject of the April 15, 2016 letter, including the allegedly undisclosed fee and escrow balances. Nor do they contend that 21st Mortgage has ever made any attempt to collect any amount, whether a fee or escrow balance or something else entirely, that Plaintiffs do not owe.3 In short, Plaintiffs do not allege that it would have caused them to take any different action whatsoever had 21st Mortgage disclosed the “total amount due” rather than their “Current Principal Balance.” Moreover, as a matter of law, and contrary to the allegations of the Amended Complaint, Plaintiffs’ ability to dispute the fee and escrow balances that were not disclosed in the April 15, 2016 letter was not in fact impaired. Accordingly, the Court cannot reasonably infer that Plaintiffs “suffered the type of harm the disclosure requirements of 15 U.S.C. § 1692g were designed to prevent.” Perry, 2016 WL 6094821, at *6. Plaintiffs have alleged nothing more than, at best, a 3 Although Plaintiffs allege that they were “completely unaware of the existence” of the fee and escrow balances, that allegation is implausible and contradicted by the April 15, 2016 letter attached as Exhibit B. To the contrary, the letter expressly stated that the “Current Principal Balance” did not include “amounts, if any, due for fees or escrow incurred while your loan was being serviced by the prior servicer.” Am. Compl., Ex. B. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 20 of 38 PageID: 139 14 technical violation of a statute with no resulting concrete harm to them. The Court should dismiss the Amended Complaint. See id. at *5-8 (dismissing FDCPA claim alleging that defendant overshadowed that plaintiff had thirty days to dispute the validity of the debt where plaintiff did not allege that he “intended to dispute the debt”); Jackson, 2016 WL 4942074, at *5, *10-11 (dismissing FDCPA claim alleging that defendant “improperly demanded payment … within the thirty-day period the FDCPA provides for a consumer to validate a debt” where the complaint did not allege that this technical, procedural violation caused any concrete harm). II. The Court Should Dismiss The Amended Complaint Under Rule 12(b)(6) Because Plaintiffs Have Not Plausibly Alleged That 21st Mortgage Is A “Debt Collector.” The Court should also dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) because Plaintiffs have not plausibly alleged that 21st Mortgage is a “debt collector.” By its plain text, the FDCPA applies only to “debt collectors,” not “creditors.” 15 U.S.C. § 1692e (“A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”); id. § 1692g (applying to debt collectors); see also Staub v. Harris, 626 F.2d 275, 277 (3d Cir. 1980) (“The [FDCPA] does not apply to persons or businesses collecting debts on their own behalf.”); Soltman v. Capital One (N.A.), No. 11-cv- 01867, 2012 WL 4506204, at *3 (D.N.J. Sept. 25, 2012) (Walls, J.) (“Because the debts in question were at all relevant times owed directly to defendant[] Capital One, Capital One is a creditor, not a debt collector under the FDCPA. Capital One is not subject to the provisions of the FDCPA.”). Thus, to survive 21st Mortgage’s motion to dismiss, Plaintiffs must have pleaded “factual content that allows the court to draw the reasonable inference that [21st Mortgage] is a ‘debt collector’ under the FDCPA,” rather than a “creditor.” See Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309, 1313 (11th Cir. 2015) (internal quotation marks omitted); see also Estate of Egenious Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 21 of 38 PageID: 140 15 Coles v. Zucker, Goldberg & Ackerman, 658 F. App’x 108, 110-11 (3d Cir. 2016) (affirming dismissal of FDCPA claim for failure to adequately allege that defendant was a “debt collector”); Sayre v. Customers Bank, No. 14-cv-3740, 2015 WL 3458790, at *14-15 (E.D. Pa. May 29, 2015) (dismissing FDCPA claim for failure to adequately allege that defendant was a “debt collector”); Crenshaw v. Computer Info. Servs., Inc., Civ. No. 10-01493 (DRD), 2010 WL 2951506, at *6-7 (D.N.J. July 21, 2010) (same). The FDCPA defines “debt collector” as: any person 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) (emphasis added). Thus, there are two definitions of debt collector: (1) a person whose “principal purpose” is the collection of debts; and (2) a person who “regularly” collects debts that are owed to others. A creditor, on the other hand, is a “person who offers or extends credit creating a debt” or a person “to whom a debt is owed.” Id. § 1692a(4). There is no dispute that at the time of the alleged misconduct, Plaintiffs’ debt was owned by and owed to 21st Mortgage. See Am. Compl. ¶¶ 24-27; id., Exs. A, B. Thus, to the extent 21st Mortgage was attempting to collect Plaintiffs’ debt, it was doing so on its own behalf, not for anyone else. Even so, Plaintiffs contend that 21st Mortgage was nevertheless their “debt collector,” not their “creditor,” because, Plaintiffs say, 21st Mortgage acquired ownership of Plaintiffs’ debt when it was in default and regularly acquires other debts that are in default. Id. ¶ 29. According to Plaintiffs, an assignee of a debt is a “debt collector” if the debt was in default at the time of assignment, regardless of whether the assignee is also the person to whom the debt is owed. Id. Plaintiffs’ position has no basis in law. The plain language of the FDCPA, its legislative history, and relevant case law make clear that, unless the “principal purpose” of a person’s business Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 22 of 38 PageID: 141 16 is debt collection, a person who is owed a debt is a creditor, not a debt collector, regardless of whether the debt was in default at the time the person acquired it. Accordingly, Plaintiffs have not adequately alleged that 21st Mortgage is a “debt collector” and the Court should dismiss the Amended Complaint. A. The FDCPA does not apply to persons who regularly collect debts for themselves, not others, even if those persons acquired the debts when the debts were in default. 1. Under the FDCPA’s plain text, persons who are owed the debts they collect are “creditors,” not “debt collectors,” unless their principal purpose is the collection of debts. At bottom, Plaintiffs contend that the default status of a debt determines whether a person is a debt collector. According to them, any person who regularly acquires debts that are in default is a “debt collector” under the FDCPA. Am. Compl. ¶ 29. But Plaintiffs’ position is contrary to the plain text of the FDCPA. The FDCPA, as noted, defines a “debt collector” as either (1) a person “in any business the principal purpose of which is the collection of any debts” or (2) a person “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) (emphasis added).4 A “creditor,” by contrast, is the person “to whom [the] debt is owed.” Id. § 1692a(4). Thus, to meet the first definition of “debt collector,” the “principal purpose” of one’s business must be the collection of “any debts,” as opposed to the extension of credit, regardless of to whom those debts are owed. See, e.g., Jenkins v. Chase Bank USA, N.A., No. 14-cv-5685, 2015 4 The definition of “debt collector” also “includes any creditor who, in the process of collecting his own debt, uses any name other than his own which would indicate that third person is collecting or attempting to collect such debts” is treated as if it were a “debt collector.” 15 U.S.C. § 1692a(6). There are no such allegations here. To the contrary, the April 15, 2016 letter attached to the Amended Complaint identifies “21st Mortgage Corporation” as both Plaintiffs’ creditor and servicer. See Am. Compl., Ex. B. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 23 of 38 PageID: 142 17 WL 4988103, at *5 (E.D.N.Y. Aug. 19, 2015) (recognizing that a bank that “extends credit to consumers” does not meet the first definition of debt collector because its “principal purpose” is not the collection of debts);. On the other hand, to meet the second definition of “debt collector,” which is the only definition invoked by Plaintiffs, the person must regularly collect debts owed to others; persons who collect debts for themselves are creditors. See Henson v. Santander Consumer USA, Inc., 817 F.3d 131, 140 (4th Cir. 2016) (“Santander”), cert. granted, No. 16-349 (a “debt collector” must be “engaged in collection activity on behalf of another.” (emphasis in original)); Perez v. JPMorgan Chase Bank, N.A., No. 14-cv-2279, 2016 WL 816752, at *5 (D.N.J. Feb. 29, 2016) (dismissing FDCPA claims with prejudice where “the Complaint does not state facts supporting an inference Chase sought to collect a debt on behalf of another”); Sayre, 2015 WL 3458790, at *14-15 (defendant was not a “debt collector” because it “was attempting to collect its own debt”); Soltman, 2012 WL 4506204, at *3 (recognizing that FDCPA does not apply when the debt was owed to the defendant). Neither of the two definitions of debt collector contain any language regarding whether the debt that is being collected was acquired while it was in default. Instead, the only reference to the term “default” is actually in an exclusion for certain persons who would otherwise meet the definition of “debt collector.” In particular, subsection 1692a(6)(F)(iii) provides that “[t]he term [debt collector] does not include … any person collecting or attempting to collect any debt owed or due another to the extent such activity … concerns a debt which was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)(iii). Congress enacted this exclusion to exempt mortgage servicers who collect debt owed to others if that debt is not in default. See S. Rep. No. 95-382, at 3-4 (1977), as reprinted in 1977 U.S.C.C.A.N. 1695, 1698 (“[T]he committee does not intend the definition [of debt collector] to cover the activities of … mortgage service Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 24 of 38 PageID: 143 18 companies and others who service outstanding debts for others, so long as the debts were not in default when taken for servicing.”). Under subsection (F)(iii)’s exclusion, a mortgage servicer is not a “debt collector” so long as it began servicing the mortgage and collecting the debt owed to another when the mortgage was current, but it may be a debt collector if it began collecting a debt owed to another when the debt was in default. The existence of subsection (F)(iii)’s exclusion for mortgage servicers who collect non- defaulted debts for others, however, does not mean that a mortgage owner collecting a debt for itself, not anyone else, is also a debt collector if the debt was in default at the time the mortgage owner acquired it. To the contrary, the fact that a person does not meet subsection (F)(iii)’s exclusion for mortgage servicers who collect current, non-defaulted debts owed to others does not make that person a debt collector. As the Eleventh Circuit recently explained, “[Plaintiffs] cannot rely on § 1692a(6)(F)(iii) to bring entities that do not otherwise meet the definition of ‘debt collector’ within the ambit of the FDCPA solely because the debt on which they seek to collect was in default at the time they acquired it. § 1692a(6)(F)(iii) is an exclusion; it is not a trap door.” Davidson, 797 F.3d at 1315; see also Hunt v. U.S. Bank, Nat. Ass’n, No. 12-cv-02171, 2013 WL 1398964, at *8 (C.D. Cal. Apr. 3, 2013) (“While Plaintiffs have alleged that their debt was in default at the time it was assigned to U.S. Bank, this allegation only establishes that U.S. Bank does not qualify for the exemption in 15 U.S.C. § 1692a(6)(F)(iii); it does not establish that U.S. Bank is a debt collector.”). Thus, a plaintiff must still allege, and prove, that the person meets one of the two definitions “debt collector”: (1) that the person’s “principal purpose” is debt collection or (2) that the person “regularly” collects debts that are owed to others, not itself. And, as noted above, those definitions simply do not turn on the default status of the debt. To the contrary, the second definition, the one relevant here, expressly and unambiguously applies only to persons Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 25 of 38 PageID: 144 19 collecting debts that are “owed or due” to others, regardless of whether the debts were in default at the time they were acquired. 15 U.S.C. § 1692a(6); Davidson, 797 F.3d at 1315. Moreover, if, as Plaintiffs contend, persons to whom debts are owed are debt collectors, not creditors, then that would effectively gut the definition of “creditor.” As noted, creditors are persons “to whom a debt is owed.” 15 U.S.C. § 1692a(4). That includes persons who acquired the debt when it was in default, unless the person was assigned the “debt in default solely for the purpose of facilitating collection of such debt for another.” Id. (emphasis added). In other words, under the FDCPA’s plain text, persons who acquire and collect on defaulted debts for themselves, not for others, meet the statutory definition of creditor. If, however, Plaintiffs are correct that a any person who acquires a defaulted debt is a debt collector, not a creditor, regardless of whether that defaulted debt is owed to the person or to someone else, then the exclusion from the definition of creditor for persons who acquire defaulted debt “solely for the purpose of facilitating collection of such debt for another” would be entirely superfluous. Plaintiffs’ interpretation is thus contrary to a fundamental maxim of statutory construction, that courts “avoid a construction of a statute that renders any provision superfluous.” United Steelworks of America, AFL-CIO-CLC v. North Star Steel Co., Inc., 5 F.3d 39, 42 (3d Cir. 1993). If Congress had meant to exclude all persons who acquire defaulted debt from the definition of “creditor,” not just persons “facilitating collection of such debt for another,” it clearly knew how to do so. That Congress did not presumptively means that Congress did not intend that result. United States v. Steele, 147 F.3d 1316, 1318 (11th Cir. 1998) (en banc) (courts must “presume that Congress said what it meant and meant what it said”).5 5 The FDCPA’s legislative history confirms that Congress did not intend for the FDCPA to apply to persons who regularly collect debts for themselves, not others, regardless of whether those debts were in default at the time of acquisition. As explained in the relevant Senate committee report, Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 26 of 38 PageID: 145 20 2. Relevant case law confirms that a person who regularly acquires debts in default and collects those debts for itself not for others is not a debt collector. In light of this statutory text, courts have recently and repeatedly held that persons who collect debts for themselves, not for others, are “creditors,” not “debt collectors.” See, e.g., Perez, 2016 WL 816752, at *5; Sayre, 2015 WL 3458790, at *14-15; Soltman, 2012 WL 4506204, at *3; Crenshaw, 2010 WL 2951506, at *6-7. That a debt was in default at the time it was acquired does not change this result. For example, in Beals v. Bank of America, N.A., No. 10-cv-5427, 2011 WL 5415174 (D.N.J. Nov. 4, 2011), this Court dismissed FDCPA claims because the defendant was the plaintiffs’ creditor, not their debt collector, even though the defendant had acquired the plaintiffs’ loan when it was in default. As the Court explained: Even assuming that plaintiffs defaulted before Bank of America acquired the loan, Bank of America is still a creditor and not a debt collector. The statute provides that a party is not a creditor “to the extent that he receives an assignment or transfer of a debt solely for the purpose of facilitating collection of such debt for another.” 15 U.S.C. § 1692a(4). Although Bank of America would have become the owner of the debt after the default, it did not become the owner “solely for the purpose of facilitating collection of such debt for another.” Id. at *18. Two recent circuit court decisions similarly confirm that the determination of whether a person is a “debt collector” does not turn on whether the debt was in default at the time it was acquired, squarely rejecting the theory that Plaintiffs posit here. In Santander, the defendant had purchased the plaintiff’s loan and was thus collecting for its own account. 817 F.3d at 134. Plaintiffs alleged that Santander was nevertheless a “debt collector” because the loan was in default the term “debt collector” was intended “to cover all third persons who regularly collect debts for others” to the exclusion of “a person who collects a debt for another in an isolated instance” or “those who [do not] collect for others in the regular course of business.” See S. Rep. No. 382, 95th Cong., 1st Sess., 1977 WL 16047, at *3 (Aug. 2, 1977) (emphasis added). No mention was made to the term covering persons who collects debts for themselves. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 27 of 38 PageID: 146 21 at the time that Santander obtained it. Id. The Fourth Circuit disagreed, concluding that the determination of whether someone is a “debt collector” is “based on whether a person collects a debt on behalf of another or for its own account.” Id. at 135 (emphasis in original). “[T]he default status of a debt has no bearing.” Id. And in Davidson, the Eleventh Circuit affirmed dismissal of an FDCPA claim where the defendant was collecting the debt for itself, not for anyone else, even though the debt was in default at the time that the defendant acquired it. 797 F.3d at 1317-18. The court expressly rejected the argument that Plaintiffs make here: “[W]e reject [plaintiff]’s argument that a non-originating debt holder is a ‘debt collector’ for purposes of the FDCPA solely because the debt was in default at the time it was acquired.” Id. As the court explained, “our inquiry is whether Capital One regularly collects on debts owed or due another at the time of collection. … That the credit card accounts were in default at the time they were acquired by Capital One does not bear on our determination here.” Id. at 1318. Many other courts agree. See, e.g., Thomas v. U.S. Bank Nat’l Ass’n, __ F. App’x ___, 2017 WL 117121, at *4-5 (11th Cir. Jan. 12, 2017) (“[T]he fact that a person acquired a debt after the borrower defaulted on that debt is not sufficient to indicate that the person who acquired the debt qualifies as a ‘debt collector’ under the FDCPA.”); Schlegel v. Wells Fargo Bank, N.A., 720 F.3d 1204, 1209 (9th Cir. 2013) (holding that defendant who acquired defaulted loan was not a debt collector); Hardin v. Bank of Am., N.A., No. 7:16-CV- 75-D, 2017 WL 44709, at *4 (E.D.N.C. Jan. 3, 2017) (“[T]he default status of a debt has no bearing on whether a person qualifies as a debt collector under the threshold definition set forth in the FDCPA.” (internal quotation marks omitted)). Plaintiffs cite a few Third Circuit decisions in their Amended Complaint, but none support Plaintiffs’ position that a person is a debt collector merely because that person regularly acquires defaulted debt. To the contrary, both Federal Trade Commission v. Check Investors, Inc., 502 Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 28 of 38 PageID: 147 22 F.3d 159 (3d Cir. 2007), and Pollice v. Nat’l Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000), turned on the FDCPA’s first definition of “debt collector,” which, as noted, applies to any business whose “principal purpose” is the collection of debts and who does not extend credit. See Check Investors, Inc., 502 F.3d at 172 (“[T]here is no question that the ‘principal purpose’ of” the defendant’s business was the “collection of debts.”); Pollice, 225 F.3d at 404 (same). Accordingly, Check Investors and Pollice stand at most for the principle that where a person’s principal purpose is debt collection, the first definition of “debt collector” is satisfied, even if that person in a given case is collecting a debt for itself. They do not, however, hold that a person meets the second definition of debt collector—the only definition relevant here—merely because that person has acquired a defaulted debt (or regularly acquires such debts). Unlike for the first definition of debt collector, to meet the second definition, the debt must be “owed or due or asserted to be owed or due another.” Santander, 817 F.3d at 139-40.6 Ultimately, then, the text, legislative history, and relevant case law all point to one conclusion: a person collecting debts owed to itself is not a debt collector unless its principal purpose is the collection of debts, regardless of whether ownership of a particular debt was acquired while the debt was in default. B. Plaintiffs have not plausibly alleged that 21st Mortgage is a debt collector. In the Amended Complaint, Plaintiffs concede that their debt was owed or due to 21st Mortgage. They contend that 21st Mortgage was nonetheless their debt collector because 21st Mortgage acquired their debt when it was in default and, as they allege, 21st Mortgage regularly 6 Plaintiffs also cite Oppong v. First Union Mortgage Corp., 215 F. App’x 114 (3d Cir. 2007), but that case involved a mortgage servicer collecting a debt owed to another, not a mortgage owner collecting a debt owed to itself. Id. at 116 (“[First Union], the company that serviced the loan, instituted a foreclosure action. Effective March 15, 2001, First Union assigned the servicing rights to Oppong’s mortgage to Wells Fargo.”). It thus has no bearing on this issue. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 29 of 38 PageID: 148 23 “acquires ownership of mortgage loans that are in default and then attempts to collect upon said defaulted mortgage loans.” Am. Compl. ¶ 13. But as explained above, neither statutory definition of a debt collector turns on whether that person acquired a debt while it was in default or regularly acquires ownership of defaulted debt. A plaintiff must instead demonstrate that the person meets one of the two actual statutory definitions of debt collector, not n imagined alternative. Plaintiffs have utterly failed to do that here. 1. Plaintiffs do not and cannot allege that 21st Mortgage’s “principal purpose” is debt collection. Plaintiffs do not even attempt to allege that 21st Mortgage meets the first definition of “debt collector,” as the Amended Complaint makes no mention of the “principal purpose” of 21st Mortgage’s business. This should come as no surprise, given that 21st Mortgage is a mortgage lender whose “principal purpose” is the extension of credit, not the collection of outstanding debts. See supra at 4. Cf. Smith v. Capital One Fin. Corp., No. 11-3425 PJH, 2012 WL 259515, at *3 (N.D. Cal. Jan. 27, 2012) (“A credit card company is in the business of extending credit, not the business of collecting debts.”); Thomasson v. Bank One, La., N.A., 137 F. Supp. 2d 721, 724 (E.D. La. 2001) (“Bank One is not a ‘debt collector’ because as a bank it primarily loans money to consumers rather than collects outstanding debts.”). At most, the Amended Complaint’s factual matter, viewed in the light most favorable to Plaintiffs, alleges only that acquiring defaulted debt is some part of 21st Mortgage’s business in this state. See, e.g., Am. Compl. ¶ 11 (“Defendant … regularly engaged in the business of collecting debts nationwide and within the state of New Jersey.”). But that purely conclusory allegation is insufficient to plausibly allege that 21st Mortgage’s “principal purpose” is debt collection, particularly given that 21st Mortgage is a mortgage lender who extends credit to consumers. See Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204, 1208-09 (9th Cir. 2013) Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 30 of 38 PageID: 149 24 (dismissing complaint that alleged defendant was “in the business of collecting debts[;]” “The complaint fails to provide any factual basis from which we could plausibly infer that the principal purpose of Wells Fargo’s business is debt collection.”). 2. Plaintiffs have not adequately alleged that 21st Mortgage “regularly” collects debts owed to others. Plaintiffs have also not plausibly alleged that 21st Mortgage meets the second definition of debt collector because they have not adequately alleged that 21st Mortgage regularly collects debts that are owed or due to others at the time of collection. As an initial matter, the Amended Complaint offers several allegations regarding 21st Mortgage’s collection activities of debts that are owed to itself but that were acquired while in default. See, e.g., Am. Compl. ¶ 13 (“As part of their regular business practices, 21MC acquires ownership of mortgage loans that are in default and then attempts to collect upon said defaulted mortgage loans.”); id. ¶ 15 (“21MC regularly begins to collect or attempts to collect, directly or indirectly, debts … after they have gone into default.”); id. ¶ 16 (“21MC has filed at least 129 foreclosure lawsuits in New Jersey since 2014.”); id. ¶ 17 (“21MC has filed thousands of foreclosure lawsuits nationwide since 2015.”). But these allegations are immaterial. For all of the reasons discussed above, see supra at 16-22, 21st Mortgage’s efforts to collect or foreclose on debts that are owed to it, not to others, are simply irrelevant to the determination of whether the 21st Mortgage meets the second definition of debt collector, even if those debts were acquired by 21st Mortgage while they were in default. To satisfy the second definition of debt collector, a company must regularly collect debt that is then owed to others. See id. The Amended Complaint contains just a single, conclusory allegation regarding 21st Mortgage’s collection activities of debts that are owed or due to others: Plaintiffs allege that 21st Mortgage “regularly begins to collect or attempts to collect, directly or indirectly, debts owed or Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 31 of 38 PageID: 150 25 due to be asserted to be owed or due another.” Am. Compl. ¶ 15 (emphasis added). But this conclusory allegation should not be credited because it is nothing more than the “formulaic recitation of the” statutory definition of a “debt collector.” See Perry v. Oxford Law, LLC, No. 12- cv-3312, 2012 WL 3731802, at *4 (E.D. Pa. Aug. 29, 2012) (refusing to credit allegation that defendant “regularly attempts to collect debts alleged to be due another, and therefore is a ‘debt collector’ as defined by the FDCPA” because it “merely parrot[ted] the applicable statutory language”).7 The allegation says nothing about any of the factors that courts generally evaluate when determining whether debt collection is sufficiently “regular” to be actionable under the FDCPA, such as, for instance, the number of loans that the 21st Mortgage collects for others; “the absolute number” of collection-related activities for others that 21st Mortgage has pursued during the relevant period; the “frequency” of 21st Mortgage’s collection-related communications; and whether 21st Mortgage has personnel, systems, or contractors specifically in place to facilitate debt collection activity for others. See Coles v. Zucker Goldberg & Ackerman, No. 14-cv-1612, 2015 WL 4578479, at *6-7 (D.N.J. July 29, 2015) (dismissing FDCPA claims where the complaint did not allege facts “indicating the number of debt collection communications issued, [] the frequency of such communications,” or “whether [defendant] ha[d] personnel specifically assigned to work on debt collection activity”). 7 See also Iqbal, 556 U.S. at 680-81 (disregarding allegations that “petitioners knew of, condoned, and willfully and maliciously agreed to subject [respondent] to harsh conditions of confinement as a matter of policy, solely on account of [his] religion, race, and/or national origin” and that “[one defendant] was the principal architect of this invidious policy” because those allegations were “nothing more than a formulaic recitation of the elements of a constitutional discrimination claim”); Bermudez v. Goldman Russell, P.C., No. 12-cv-5674, 2013 WL 1405251, at *3-4 (D.N.J. Apr. 5, 2013) (disregarding allegations that “Defendant left a voicemail message without identifying that the communication was from a debt collector” and that “Defendant demanded payment within the first 30-days” of becoming plaintiff’s debt collector as “bald assertions” and “unsupported conclusions”). Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 32 of 38 PageID: 151 26 Such a content-less conclusion does not provide the factual substrate from which the Court can plausibly infer that 21st Mortgage in fact “regularly” collects debts owed to others. See DeFazio v. Leading Edge Recovery Solutions, LLC, No. 2:10-cv-02945, 2010 WL 5146765, at *3 (D.N.J. Dec. 13, 2010) (dismissing complaint that alleged that defendant was “primarily in the business of acquiring and/or collecting debts that are allegedly due to another and is therefore a ‘Debt Collector’” because that allegation was “an unsupported conclusion disguised as a factual allegation”). As the Third Circuit recently recognized in Estate of Egenious Coles, simply “quoting the relevant definition” of “debt collector” as Plaintiffs do here, without providing “factual allegations that suggest [the defendant] regularly collects or attempts to collect debts owed to another” is insufficient to survive a motion to dismiss. Estate of Egenious Coles, 658 F. App’x at 111. 3. Even if 21st Mortgage “regularly” collects debts owed to others, 21st Mortgage was not Plaintiffs’ “debt collector” because Plaintiffs’ owed their debt to 21st Mortgage. Even if the Court did credit Plaintiffs’ single, conclusory allegation that 21st Mortgage regularly collects debts owed to others, the Amended Complaint still should be dismissed because in this case it is uncontroverted that 21st Mortgage was not collecting a debt owed to another. As Plaintiffs concede, 21st Mortgage was already Plaintiffs’ creditor when it began servicing Plaintiffs’ loan, which means it was collecting a debt owed to itself. See Am. Compl. ¶ 24, Exs. A, B. This fact dooms Plaintiffs’ Amended Complaint. As noted, the plain text of the FDCPA is explicit that a person is a debt collector when it regularly collects debts “owed or due or asserted to be owed or due another,” 15 U.S.C. § 1692a(6), but a creditor when it is the person “to whom [the] debt is owed,” id. § 1692a(4). See supra at 16-19; see Santander, 817 F.3d at 140 (a “debt Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 33 of 38 PageID: 152 27 collector” must be “engaged in collection activity on behalf of another.” (emphasis in original)); Schlegel, 720 F.3d at 1209-10 (Wells Fargo did not satisfy the “second definition” of “debt collector” because “Wells Fargo’s collection efforts in this case relate only to debts owed to itself”). The legislative history is similarly in accord. See S. Rep. No. 95-382 at 3 (“The committee intends the term ‘debt collector’ … to cover all third persons who regularly collect debts for others.”). That means that even if a person “regularly” collects the debts of others, the person is not a “debt collector” under the FDCPA when “collect[ing] its own debts.” See Santander, 817 F.3d at 140 (emphasis added); Perez, 2016 WL 816752, at *5 (dismissing FDCPA claims with prejudice where “the Complaint does not state facts supporting an inference Chase sought to collect a debt on behalf of another”); Sayre, 2015 WL 3458790, at *14-15 (defendant was not a “debt collector” because it “was attempting to collect its own debt”); Soltman, 2012 WL 4506204, at *3 (recognizing that FDCPA does not apply when the debt was owed to the defendant). To hold otherwise would result in “every creditor that collects on its own loans and that also engages in the business of regularly collecting debts on behalf of others” being “pulled under the regulation of the FDCPA not just when it collects for others, but also when it collects for itself,” even as to loans that creditor originated. Santander, 817 F.3d at 140. That result would be contrary to the plain text of the FDCPA, which, as shown above, distinguishes between a creditor and a debt collector on the basis of whether the debt is owed to the entity doing the collection or owed to someone else. Compare 15 U.S.C. § 1692a(4) with id. § 1692a(6). It would also render the first definition of “debt collector” entirely superfluous, violating the fundamental tenet of statutory construction that a statute be construed so that effect is given to all its provisions. United Steelworkers of Am., 5 F.3d at 42. That is, if the mere “regular” collection of debts owed to others were sufficient to subject all of a person’s collection activities to the FDCPA, even collection Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 34 of 38 PageID: 153 28 activities for debts owed to that person, then it would be unnecessary to ever demonstrate the higher standard that the “principal purpose” of the person’s business is collecting debts. Accordingly, because 21st Mortgage was collecting Plaintiffs’ loan for itself, not for anyone else, 21st Mortgage is Plaintiffs’ “creditor” under the FDCPA, not their “debt collector.” For these reasons, the Court should dismiss the Amended Complaint. III. Alternatively, The Court Should Stay This Case And Defer Consideration Of This Motion Pending The Supreme Court’s Ruling In Santander. In the alternative, 21st Mortgage requests that this Court stay this case and defer ruling on this Motion until after the Supreme Court decides Henson v. Santander Consumer USA, Inc., No. 16-349. “[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.” Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). “Central to this power is a court's ability to ‘hold one lawsuit in abeyance to abide the outcome of another which may substantially affect it or be dispositive of the issues.’” Resco Products, Inc. v. Bosai Minerals Grp. Co., No. Civ. A. 06–235, 2010 WL 2331069, at *4 (W.D. Pa. June 4, 2010) (quoting Bechtel Corp. v. Local 215, Laborers’ Int'l Union, 544 F.2d 1207, 1215 (3d Cir.1976)). In determining whether to stay proceedings, courts in the Third Circuit consider four factors: (1) the length of the stay; (2) the hardship to the moving party if the stay were not granted; (3) the injury that a stay would cause to the non-movant; and (4) whether granting a stay would streamline the proceedings by simplifying issues and promoting judicial economy. See In re Michaels Stores, Inc., No. 14-cv- 07563, 2016 WL 947150, at *4 (D.N.J. Mar. 14, 2016). These factors strongly weigh in favor of a stay. Most importantly, a stay is highly likely “to promote a more orderly course of justice, and judicial economy,” as the Supreme Court will soon address an issue that could be dispositive of the case. See Salvatore v. Microbilt Corp., No. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 35 of 38 PageID: 154 29 4:14-cv-1848, 2015 WL 5008856, at *2 (M.D. Pa. Aug. 20, 2015) (granting stay pending Supreme Court’s decision in Spokeo). As this Motion makes clear, whether 21st Mortgage has violated the FDCPA turns on whether 21st Mortgage was Plaintiffs’ “debt collector” under the FDCPA. That question, in turn, turns on whether Plaintiffs are correct that a person is a debt collector merely because that person acquires defaulted debt. In Santander, 817 F.3d 131, the Fourth Circuit rejected Plaintiffs’ theory, making clear that whether a person is a debt collector does not turn on the default status of the debt; to be a debt collector, either the principal purpose of the person’s business must be collecting debts or the person must regularly collect debts owed to others. Id. at 134-35. If a person is collecting a debt owed to itself, then it does not meet this second definition of debt collector, even if it acquired the debt when it was in default. Id. at 139. On January 13, 2017, the Supreme Court granted certiorari in Santander on the following question: “Whether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a ‘debt collector’ subject to the Fair Debt Collection Practices Act?” Santander, No. 16-349 (attached hereto as Exhibit 1). If the Supreme Court affirms the Fourth Circuit, then Plaintiffs will not be able to prevail in this lawsuit. Moreover, even if the Supreme Court reverses the Fourth Circuit, the Court’s decision will undoubtedly clarify what Plaintiffs must show in order to prove that 21st Mortgage is a debt collector. Given the potential importance of Santander to an issue that could be dispositive of this case, a stay is warranted. See Salvatore, 2015 WL 5008856, at *2. This is especially true because the length of the stay is finite (21st Mortgage expects the Supreme Court to decide Santander during its October 2017 term) and because Plaintiffs face no prejudice whatsoever from a stay, given that their claims are preserved and they seek only statutory damages. By contrast, both the parties and Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 36 of 38 PageID: 155 30 the Court could face prejudice if the Court permits the case to proceed, by expending time, money, and resources for a claim that may have no basis after the Supreme Court’s decision. Accordingly, in the interests of judicial economy, the Court should stay this case and defer its consideration of this Motion pending the Supreme Court’s decision in Santander and the parties’ opportunity to consider the implications of that decision for this case. See id.; In re Michaels Stores, Inc., 2016 WL 947150, at *4-5. CONCLUSION For any and all of the foregoing reasons, Plaintiffs’ Amended Complaint should be dismissed. Alternatively, the Court should stay this case and defer consideration of this Motion until after the Supreme Court’s ruling in Santander. Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 37 of 38 PageID: 156 31 Dated: January 25, 2017 Respectfully submitted, s/ Stephanie M. Hoffmann Stephanie M. Hoffmann (NJ State Bar ID: 8862012) smhoffmann@bradley.com Bradley Arant Boult Cummings LLP Roundabout Plaza 1600 Division Street Nashville, TN 37211 Telephone: (615) 244-2852 Facsimile: (615) 252-6380 Michael R. Pennington (admitted pro hac vice) mpennington@bradley.com Edward S. Sledge IV (admitted pro hac vice) esledge@bradley.com Zachary A. Madonia (admitted pro hac vice) zmadonia@bradley.com Bradley Arant Boult Cummings LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 Telephone: (205) 521-8000 Facsimile: (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation Case 2:16-cv-05719-WHW-CLW Document 14-1 Filed 01/25/17 Page 38 of 38 PageID: 157 EXHIBIT 1 Case 2:16-cv-05719-WHW-CLW Document 14-2 Filed 01/25/17 Page 1 of 2 PageID: 158 16-349 HENSON V. SANTANDER CONSUMER USA DECISION BELOW: 817 F.3d 131 CERT. GRANTED 1/13/2017 QUESTION PRESENTED: The Fair Debt Collection Practices Act, 15 U.S.C.§ 1692 et seq., regulates the conduct of "debt collector[s] ." Respondent Santander Consumer USA, Inc., is in the business of purchasing defaulted debt for pennies on the dollar then attempting to collect on that debt from the defaulting consumer. The Question Presented, upon which the circuits are deeply divided, is: Whether a company that regularly attempts to collect debts it purchased after the debts had fallen into default is a "debt collector" subject to the Fair Debt Collection Practices Act? LOWER COURT CASE NUMBER: 15-1187 Case 2:16-cv-05719-WHW-CLW Document 14-2 Filed 01/25/17 Page 2 of 2 PageID: 159 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AUBREY L. HEWITT and PATRICIA A. HEWITT, on behalf of themselves and all others similarly situated, Civil Action No. 2:16-cv-05719-WHW- CLW [PROPOSED] ORDER GRANTING DEFENDANT’S MOTION TO DISMISS THE AMENDED COMPLAINT Plaintiffs, v. 21ST MORTGAGE CORPORATION, Defendant. Before the Court is Defendant 21st Mortgage Corporation’s (“21st Mortgage”) Motion to Dismiss Plaintiffs’ Aubrey L. Hewitt and Patricia A. Hewitt (“Plaintiffs”) Amended Complaint (Doc. 11) pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Having reviewed all submissions in support of and in opposition to the Motion to Dismiss, IT IS on this ____________ day of ______________, 2017, ORDERED that 21st Mortgage’s Motion to Dismiss the Amended Complaint is granted and ORDERED that Plaintiffs’ Amended Complaint is dismissed with prejudice. Hon. William H. Walls United States District Judge Case 2:16-cv-05719-WHW-CLW Document 14-3 Filed 01/25/17 Page 1 of 1 PageID: 160 BRADLEY ARANT BOULT CUMMINGS LLP Stephanie M. Hoffmann (NJ State Bar ID: 8862012) Roundabout Plaza, 1600 Division Street Nashville, TN 37211 Tel. (615) 244-2852 Fac. (615) 252-6380 Michael R. Pennington (admitted pro hac vice) Edward S. Sledge IV (admitted pro hac vice) Zachary A. Madonia (admitted pro hac vice) One Federal Place, 1819 Fifth Avenue North Birmingham, AL 35203 Tel. (205) 521-8000 Fac. (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AUBREY L. HEWITT and PATRICIA A. HEWITT, on behalf of themselves and all others similarly situated, Civil Action No. 2:16-cv-05719-WHW- CLW Plaintiffs, v. 21ST MORTGAGE CORPORATION, Defendant. The undersigned hereby certifies that on January 25, 2017, I caused a copy of the foregoing (1) Notice of Motion to Dismiss the Amended Complaint; (2) Memorandum in Support of Motion to Dismiss the Amended Complaint; (3) Exhibit 1 to Motion to Dismiss the Amended Complaint; (4) Proposed Order Granting Defendant’s Motion to Dismiss the Amended Complaint; and (5) Certificate of Service to be filed electronically with the Clerk of Court using the CM/ECF system, which will send electronic notification of such filing to the following counsel of record: Case 2:16-cv-05719-WHW-CLW Document 14-4 Filed 01/25/17 Page 1 of 2 PageID: 161 Ryan Gentile, Esq. 110 Jericho Turnpike – Suite 100 Floral Park, NY 11001 Tel. (201) 873-7675 Fac. (212) 675-4367 rlg@lawgmf.com Attorney for Plaintiffs Dated: January 25, 2017 Respectfully submitted, s/ Stephanie M. Hoffmann Stephanie M. Hoffmann (NJ State Bar ID: 8862012) smhoffmann@bradley.com Bradley Arant Boult Cummings LLP Roundabout Plaza 1600 Division Street Nashville, TN 37211 Telephone: (615) 244-2852 Facsimile: (615) 252-6380 Michael R. Pennington (admitted pro hac vice) mpennington@bradley.com Edward S. Sledge IV (admitted pro hac vice) esledge@bradley.com Zachary A. Madonia (admitted pro hac vice) zmadonia@bradley.com Bradley Arant Boult Cummings LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 Telephone: (205) 521-8000 Facsimile: (205) 521-8800 Attorneys for Defendant 21st Mortgage Corporation Case 2:16-cv-05719-WHW-CLW Document 14-4 Filed 01/25/17 Page 2 of 2 PageID: 162