And v. Thrasher Buschmann & Voelkel, P.C.

TRACEY JAFFRI Individually and on behalfof all others similarly situated, Plaintiff, v. THRASHER BUSCHMANN & VOELKEL, P.C., Defendant.

No. 1:14-cv-01704-TWP-MJD

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

March 10, 2015

ORDER ON DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS

This matter comes before the Court on Defendant's Motion for Judgment on the Pleadings. [Dkt. 17.] For the reasons set forth below, the Court GRANTS Defendant's motion.

I. Background

Tracey Jaffri ("Plaintiff") is an Indiana resident who lives in a subdivision managed by the Huntwick Community Association, Inc. ("Huntwick"). [Dkt. 12 ¶¶ 3, 6 (Pl.'s Am. Compl.).] Homeowners in the subdivision are subject to the Declaration of Covenants, Conditions and Restrictions of Huntwick (the "Huntwick Covenants" or the "Covenants"). [Dkt. 15-1.] Among other provisions, the Covenants require homeowners such as Plaintiff to pay homeowners' association fees in the form of "Regular Assessments" and "Special Assessments" as imposed by Huntwick's Board of Directors. [Id. ¶¶ 7.2, 7.3.]

Plaintiff became delinquent on her payment of these fees and eventually owed Huntwick $144.00. [Dkt. 24 at 1.] Huntwick then arranged for a local law firm, Thrasher Buschmann & Voelkel, P.C. ("Defendant"), to try to collect the delinquent fees. [See Dkt. 12 ¶¶ 4,6.] Defendant did not file a lawsuit against Plaintiff, [Dkt. 12 ¶ 1], but on August 21, 2014, Defendant sentPlaintiff a dunning letter. [Dkt. 12-1.] The letter first sought to collect the $144.00 in homeowners' assessments that Plaintiff owed to Huntwick. [Id. at 1.] The letter then also attempted to collect $125.00 in attorney's fees that Defendant had incurred in its efforts to collect the assessments. [Id.]

The request for attorney's fees is the basis for this lawsuit. On October 19, 2014, Plaintiff filed suit in this Court alleging that Defendant's attempt to collect attorney's fees violated the Fair Debt Collection Practices Act ("FDCPA"). [Dkt. 1.] Plaintiff then amended her complaint to add allegations on behalf of a purported class of similarly situated homeowners. [Dkt. 12.]

Plaintiff's amended complaint alleges that Defendant violated §§ 1692e(2)(A), 1692e(2)(B), 1692e(10), and 1692f of the FDCPA. The first two provisions state that it is a violation of the FDCPA to falsely represent "(A) the character, amount, or legal status of any debt;" or "(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt." 15 U.S.C.A. § 1692e(2). The third provision states that it is a violation of the FDCPA to use "any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Id. § 1692e(10). The final provision states a debt collector may not attempt to collect "any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law." Id. § 1692f(1).

Plaintiff's allegations rest on her contention that the contract governing collection of the assessments at issue does not permit recovery of attorney's fees unless and until a lawsuit has been filed against the debtor. [Dkt. 24 at 2.] Defendant in this case did not file such a lawsuit, and Plaintiff thus argues that Defendant's request for attorney's fees misrepresented the amountof the debt at issue; deceived Plaintiff about the amount owned; and constituted an attempt to recover amounts that were not expressly authorized by the agreement creating the debt.

On January 16, 2015, Defendant answered Plaintiff's amended complaint. [Dkt. 15.] Three weeks later, Defendant moved for judgment on the pleadings. [Dkt. 17.] Defendant contends that the Huntwick Covenants provide for collection of attorney's fees during debt collection efforts regardless of whether a lawsuit has been filed against the debtor. [See Dkt. 18.] Defendant therefore argues that its attempt to collect such fees without filing a lawsuit against Plaintiff was authorized by the agreement creating the debt and did not misrepresent the amount of the debt owed. [See id.] As such, it contends that its conduct did not violate the FDCPA.

The parties consented to the Magistrate Judge's jurisdiction "to hear and render a final decision regarding Defendant's motion for judgment on the pleadings," [Dkt. 19], and the motion was referred to the undersigned for that purpose. [Dkt. 27] The parties also agree that the dispositive issue is whether the Huntwick Covenants permit the recovery of attorney's fees only after a lawsuit has been filed, as Plaintiff contends, or whether the Covenants allow the recovery of attorney's fees even when no lawsuit has been filed, as Defendant contends. [See Dkt. 24 at 2 & n.1.] If the former, then Defendant's motion must be denied; if the latter, then Defendant is entitled to an entry of judgment on the pleadings.

II. Discussion

Rule 12(c) allows the parties to move for judgment after the close of the pleadings. Fed. R. Civ. P. 12(c). Courts review such motions under the same standards that apply when reviewing a motion under Fed. R. Civ. P. 12(b)(6). Hayes v. City of Chicago, 670 F.3d 810, 813 (7th Cir. 2012). The Court must thus take all well-pleaded allegations as true and draw all reasonable inferences in favor of the non-movant. Id. The Court will grant judgment in thedefendant's favor if the plaintiff's complaint does not "set[] forth facts sufficient to support a cognizable legal theory." Laborers Local 236, AFL-CIO v. Walker, 749 F.3d 628, 632 (7th Cir. 2014) (quotation omitted).

Under Rule 12(c), the Court may consider only the pleadings. N. Indiana Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998). "The pleadings include the complaint, the answer, and any written instruments attached as exhibits." Id. If a conflict exists between the allegations in the complaint or the answer and any attached exhibit, then "the exhibit trumps the allegations." Id. at 454.

The parties in this case do not contest the relevant facts giving rise to this litigation. [See, e.g., Dkt. 24 at 2.] Further, Defendant's amended answer included as an exhibit the Huntwick Covenants that are in dispute. [Dkt. 15-5.] The Court may thus consider the Huntwick Covenants and assess whether they support Plaintiff's claim that Defendant was not entitled to seek attorney's fees when it sent the dunning letter. If so, then Plaintiff's complaint states a "cognizable legal theory," and the Court will deny Defendant's motion; if not, then Plaintiff's complaint does not state such a cognizable legal theory, and the Court will grant Defendant's motion. See Laborers Local 236, 749 F.3d at 632.

A. Applicable Law

The Court must first determine which body of law governs the interpretation of the Huntwick Covenants. In this case, the Court has federal question jurisdiction based on an alleged violation of the FDCPA. Courts exercising federal question jurisdiction typically apply the choice-of-law rules of federal common law. See, e.g., Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 795 (2d Cir. 1980) ("This is a federal question case, however, and it is appropriate that we apply a federal common law choice-of-law rule in order to decide which of the concerned jurisdiction's substantive law of fraud . . . should govern.").

Federal common law endorses the choice-of-law analysis set out in the Restatement (Second) of Conflict of Laws. In re ATA Airlines, Inc., No. 08-03675-BHL-11, 2009 WL 701728, at *4 (Bankr. S.D. Ind. Mar. 16, 2009) (citing Eli Lilly Do Brasil, Ltda. v. Fed. Express Corp., 502 F.3d 78, 81 (2d Cir. 2007)). Under this approach, a court will give effect to a contract's choice of law provision unless 1) "the chosen state has no substantial relationship to the parties or the transaction and there is no reasonable basis for the parties' choice;" or 2) the "application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state." Id. (quoting Restatement (Second) of Conflict of Laws § 187)).

The Huntwick Covenants provide that they "shall be governed by and construed in accordance with the laws of the State of Indiana." [Dkt. 15-1 ¶ 12.5.] Neither party has argued that the choice of Indiana law is unreasonable or that application of Indiana law would be contrary to the policy of another state. [See Dkts. 18 & 24.] Further, Defendant relies on Indiana law in its brief, and Plaintiff does not contest this choice of law. [See Dkt. 18 at 5-6; Dkt. 24.] The Court thus concludes that Indiana law governs the interpretation of the Huntwick Covenants.¹

B. Indiana Law of Contract Interpretation

The Huntwick Covenants are a set of restrictive covenants that run with the land within the Huntwick subdivision. [See Dkt. 15-1 at 1-2.] Neither party disputes that the Covenants arebinding on Plaintiff and Huntwick, [see Dkts. 18 & 24], and in Indiana, restrictive covenants are express contracts that courts interpret in the same manner as any other contract. Johnson v. Dawson, 856 N.E.2d 769, 772 (Ind. Ct. App. 2006) ("Because covenants are a form of express contract, we apply the same rules of construction.").

Interpretation of a contract is a matter of law for decision by the court. Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992). If the terms of the contract are clear and unambiguous, then the contract is binding on the parties and the court need only apply the terms of the contract. Trustcorp Mortgage Co. v. Metro Mortgage Co., 867 N.E.2d 203, 212 (Ind. Ct. App. 2007). In contrast, if the contract is ambiguous, then the interpretation depends on the nature of the ambiguity: if the ambiguity exists because of extrinsic facts, then the court must allow the fact-finder to construe the contract; if, on...