Hrdlicka v. Bruce

ERIC HRDLICKA, Plaintiff, v. JAMES E. BRUCE, Defendant.

Civil No. 3:21-cv-00033-GFVT

United States District Court, E.D. Kentucky, Central Division

May 11, 2022

MEMORANDUM OPINION & ORDER

Gregory F. Van Tatenhove United States District Judge.

When Plaintiff Eric Hrdlicka defaulted on a personal loan collection attorney James E. Bruce filed suit against him on behalf of Lendmark Financial Services, LLC. Though the collection suit was eventually dismissed with prejudice, Mr Hrdlicka now contends that several of Mr. Bruce's efforts to collect violated the Fair Debt Collection Practices Act. [R. 8.] Before the Court is Mr. Bruce's Motion to Dismiss. [R. 10.] For the reasons that follow, the Motion [R 10] is GRANTED in part and DENIED in part.

I

In July 2020, Plaintiff Eric Hrdlicka entered into a personal loan with Lendmark Financial Services, LLC. [R. 8 at 2.] Mr. Hrdlicka's loan “was a precomputed finance charge loan that included a liquidated finance charge [] added to the loan principal up front, ” and “was secured by a lien on [his] 2007 Chevrolet Silverado.” Id. Later in 2020, Mr. Hrdlicka was involved in a vehicular accident that totaled his Silverado. Id. Mr. Hrdlicka's vehicle insurance provider subsequently “paid Lendmark by check” the value of his Silverado which covered a large portion of his loan's balance. Id. By January 2021, however, the remaining portion of the loan remained unpaid and Lendmark declared it in default. Id. On January 29, Defendant James E. Bruce, on behalf of Lendmark, filed a collection suit complaint against Mr. Hrdlicka in the Shelby County Circuit Court. [R. 8-2.] According to the state court docket sheet in the collection suit, Mr. Hrdlicka filed a pro se answer on February 12. [R. 8-3.] On March 8, despite Mr. Hrdlicka's appearance in the matter, Mr. Bruce filed a Motion for Default Judgment and a Motion for Attorney's Fees, in which he certified that Mr. Hrdlicka had “fail[ed] to plead or otherwise defend against the action.” [R. 8 at 3; R. 8-5.] Mr. Bruce did not serve either motion on Mr. Hrdlicka. [R. 11 at 2.] Seemingly based on Mr. Bruce's representation, the Shelby Circuit Court granted default judgment and found Mr. Bruce's requested attorney's fees reasonable on March 24. [R. 8-4; R. 10-1.]

Having been awarded default judgment, Mr. Bruce next filed and served a wage garnishment on Mr. Hrdlicka's employer. [R. 8 at 4.] Mr. Hrdlicka responded with a wage garnishment challenge “on grounds that the Default Judgment failed to give him full and proper credit for the [...] insurance payment for the totaled Silverado.” [R. 8-7 at 2-3.] Mr. Bruce opposed the challenge. Upon review, the state court vacated its entrance of default judgment and ordered Lendmark to engage in contractually obligated arbitration. [R. 8 at 5; R. 10 at 23.] Because Lendmark “fail[ed] to initiate arbitration proceedings” within sixty days, however, the court ultimately dismissed the collection suit against Mr. Hrdlicka with prejudice. [R. 10 at 24.]

Now, Mr. Hrdlicka has filed suit against Mr. Bruce. In his Complaint, Mr. Hrdlicka alleges that Mr. Bruce violated various portions of the Fair Debt Collections Act by improperly seeking default judgment, failing to serve his motion for default judgment, opposing his wage garnishment challenge, and requesting disingenuous attorney's fees. [See R. 8 at 11-12.] In opposition, Mr. Bruce moves for dismissal pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). [R. 10.] Mr. Bruce specifically contends that Mr. Hrdlicka neither has Article III standing to bring his claims nor states a claim upon which relief may be granted. Id. This matter is now ripe for review.

II

A

An initial matter is the question of standing. Town of Chester, N.Y. v. Laroe Estates, Inc., 137 S.Ct. 1645 1650, 198 L.Ed.2d 64 (2017) (“a plaintiff must demonstrate standing for each claim he seeks to press and for each form of relief that is sought”) (quoting Davis v. Fed. Election Comm'n, 554 U.S. 724, 734 (2008)); see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). Standing is a threshold inquiry in every federal case that may not be waived by the parties. See, e.g., Warth v. Seldin, 422 U.S. 490 498 (1975); Planned Parenthood Ass'n of Cincinnati, Inc. v. Cincinnati, 822 F.2d 1390, 1394 (6th Cir. 1987). “To satisfy the ‘case' or ‘controversy requirement' of Article III, which is the ‘irreducible constitutional minimum' of standing, a plaintiff must, generally speaking, demonstrate that he has suffered an ‘injury in fact,' that the injury is ‘fairly traceable' to the actions of the defendant, and that the injury will likely be redressed by a favorable decision.” Bennett v. Spear, 520 U.S. 154 (1997) (citations omitted).

Plaintiffs' injury-in-fact must be both particularized and concrete. Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016) (citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000)). “For an injury to be particularized, it must affect the plaintiff in a personal and individual way.” Id. (internal quotation marks omitted). Further, a “concrete” injury is a de facto injury that actually exists. Id. Finally, “a plaintiff must also establish, as a prudential matter, that he or she is the proper proponent of the rights on which the action is based.” Haskell v. Washington Twp., 864 F.2d 1266, 1275 (6th Cir. 1988) (citations omitted).

In his Complaint, Mr. Hrdlicka alleges that Mr. Bruce violated various portions of 15 U.S.C. §§ 1692e and 1692f by filing for “erroneous entry of default, ” causing him to lose the use of funds wrongfully garnished and withheld from him during the pendency of his wage garnishment proceedings, by causing “interest on wrongfully garnished funds, ” and by moving for improper attorney's fees. [R. 8 at 12.]

In opposition, Mr. Bruce contends that Mr. Hrdlicka cannot establish standing for three reasons. [R. 10 at 21-25.] First, Mr. Bruce argues that even “[t]aking the Amended Complaint as true and assuming Mr. Hrdlicka actually suffered [damages], ” the damages “were all caused by the entry of Judgment by the Shelby Circuit Court, ” not his motion requesting default judgment. Id. at 24. Second, Mr. Bruce contends that any damages that Mr. Hrdlicka allegedly suffered dissipated upon the dismissal of his collection suit with prejudice. Id. (“Due to a dismissal with prejudice of the [lawsuit], Mr. Hrdlicka will never be forced to pay those amounts [...]. [T]he result of the [lawsuit] appears to have actually benefitted Mr. Hrdlicka.”). Third, Mr. Bruce argues that standing cannot alternatively be established by pointing to “a statutory violation, by itself.” Id. at 21-23 (citing Bucholz v. Tanick, 946 F.3d 855, 867 (6th Cir. 2020) (quoting Spokeo, Inc. v. Robins, 578 U.S. 330, 341 (2016)) (“a bare procedural violation, ‘divorced from any concrete harm,' cannot satisfy Article Ill's injury-in-fact requirement, even if the plaintiff has a statutory basis for litigating the claim in federal court.”).

In response, Mr. Hrdlicka argues that Mr. Bruce's “false representations that [he] failed to plead or defend” against the collection lawsuit caused him both particularized and concrete injuries. [R. 11 at 21.] Mr. Hrdlicka specifically contends that, by indicating that he had not answered the collection lawsuit complaint and by failing to serve the motion for default, he had to “go to the time, effort, and expense of a) filing the wage garnishment challenge, and b) mov[e] to vacate the default judgment, ” as well as having “lost the use of garnished funds.” Id. at 22. Mr. Hrdlicka further challenges Mr. Bruce's shifting of blame onto the state court and cites a ruling in which a circuit court sanctioned a different collection agency represented by Mr. Bruce after it included an inaccurate statement in its request for default judgment. [Id. at 23; R. 11-1 at 3.] In that case, the circuit court indicated that “collection actions [...] place a heavy burden on the Court's docket and workload. Consequently, courts rely on the representations of counsel to be true, accurate, and correct in connection with moving default judgment.” Id. Accordingly, Mr. Hrdlicka argues that, because the state court relied on Mr. Bruce's representation, he cannot now argue that he is not to blame for its error. See id. Mr. Hrdlicka did not respond to Mr. Bruce's contention that an injury could not be alternatively established by a statutory violation of the FDCPA itself. [See R. 11 at 20-25.]

Upon review, the Court finds that Mr. Hrdlicka has properly pled standing. First, Mr. Hrdlicka has sufficiently alleged the that he was monetarily harmed by Mr. Bruce's request for default judgment, failure to serve, and request for wage garnishment. Despite Mr. Bruce's argument that the state court, not he, caused Mr. Hrdlicka's injuries by entering default improperly, the court entered default upon Mr Bruce's request and indication that Mr. Hrdlicka had “failed to plead or otherwise defend” against the collection lawsuit. [R. 8-5 at 1.] Mr. Hrdlicka has therefore sufficiently pled that Mr. Bruce caused him monetary injury by attempting to garnish his wages and by causing him to lose access, at least temporarily, to money rightfully owed to him by his employer. [R. 8 at 12.] See TransUnion LLC v. Ramirez, 141 S.Ct. 2190, 2198 (2021) (“Physical or monetary harms readily qualify as concrete injuries under Article III [.]”); Demarais v. Gurstel Chargo, P.A., 869 F.3d 685, 697 (8th Cir. 2017)) (“An erroneous garnishment does not mislead a consumer; it deprives him or her of property in violation of the law.”). The Court notes, however, that neither party sufficiently briefed whether Mr. Hrdlicka's successful garnishment challenge remedied...