Keith v. Bruce

JACK KEITH, Plaintiff, v. JAMES E. BRUCE, Defendant.

Civil Action No. 3:20-cv-00766-CHB

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION

June 9, 2021

MEMORANDUM OPINION AND ORDER*** *** *** ***

This matter is before the Court on two motions. First, Defendant James E. Bruce filed a Motion to Dismiss Plaintiff's Complaint [R. 6]. Plaintiff Jack Keith responded [R. 9], and Defendant replied to Plaintiff's Response [R. 11]. Second, Plaintiff filed a Motion for Leave to File His First Amended Complaint ("Motion for Leave") [R. 8]. Defendant responded to the Motion for Leave [R. 12].¹ Both motions are ripe for review. For the reasons discussed below, the Court will grant Defendant's Motion to Dismiss [R. 6] and deny Plaintiff's Motion for Leave [R. 8].

I. Background

This action arises from a debt-payment dispute. On May 2, 2019, Plaintiff Jack Keith borrowed $2,648.09 from loan company Mariner Finance, LLC. [R. 1 (Complaint), ¶¶ 6, 8; R. 6, p. 3; R. 6-1, p. 4] The terms of the loan included a "finance charge" (essentially pre-computed interest) of $1,717.63. [R. 1 (Complaint), ¶ 8; R. 6-1, p. 4] The principal was due on May 2, 2022. [R. 6, p. 3; R. 6-1, p. 4] By the terms of the loan agreement, if Plaintiff defaulted on hispayments, a portion of the pre-computed and unearned interest/finance charge would be rebated. [R. 6, p. 4; R. 6-1, p. 4]

In August 2019, Plaintiff defaulted on his payments. [R. 1 (Complaint), ¶ 9; R. 6-1, p. 2] Mariner contracted with Defendant James E. Bruce, an attorney, to recover the balance of the loan. [R. 6, p. 4; R. 6-1, pp. 2-3] On August 29, 2019, Defendant filed a collection complaint on behalf of Mariner in Jefferson District Court. [R. 6, p. 4; R. 6-1, pp. 2-3] The state-court complaint requested $3,096.56 for the balance of the loan—representing the principal, finance charges and late charges, less pre-computed interest subject to rebate—as well as attorney's fees. [R. 6, p. 4; R. 6-1, p. 2]

On October 18, 2019, Defendant moved for default judgment ("First Motion for Default Judgment") on the collection complaint, again for $3,096.56, plus attorney's fees calculated at $1,021.18 (1/3 of the collection amount). [R. 6-2, pp. 2-4; R. 8-4] On November 12, 2019, the Jefferson District Court denied the motion, remarking that the attorney's fees sought were unreasonable and that Defendant's motion lacked a balance estimate amount.² [R. 8-4] Three days later, on November 15, 2019, Defendant again moved for default judgment ("Second Motion for Default Judgment") in the amount of $3,096.56, plus attorney's fees. [R. 8-6] This time, Defendant reduced the requested attorney's fees to $464.48, or 15% of the collection amount. Id. The court denied Defendant's Second Motion for Default Judgment, this time finding that the alleged judgment amount was incorrect because Defendant undercalculated the prepaid interest subject to rebate.³ Id. Defendant maintains that the state court miscalculated the amount of interest subject to rebate and that his calculations were correct. [R. 6, p. 5] On November 13, 2020, Plaintiff sued in this Court, claiming two violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. Specifically, Plaintiff alleges that Defendant violated the FDCPA first "by misrepresenting the amount and status of [the] Mariner Note in the Second Motion for Default and [second] by adding interest and/or fees to the amount claimed due under the Mariner Note that Mariner had no legal right to collect from Mr. Keith." [R. 1, ¶ 15] Defendant filed a Motion to Dismiss [R. 6], arguing that Plaintiff's claims are time barred under the FDCPA's one-year statute of limitations, 15 U.S.C. § 1692k. Defendant asserts that the limitations period started to run on August 29, 2019, when the collection complaint was filed in state court, and Plaintiff's Complaint was filed over fourteen months later, on November 13, 2020. Id. at 12-13.

On February 15, 2021, Plaintiff filed a Motion for Leave to Amend Complaint [R. 8], attaching a Proposed First Amended Complaint [R. 8-1], and responded to the Motion to Dismiss. [R. 9] In the Response, Plaintiff argues that the Complaint and Proposed Amended Complaint were timely filed because they are based on new, different violations of the FDCPA that arose upon Defendant's filing of the Second Motion for Default Judgment on November 15, 2019 (not the original state-court collection complaint). [R. 9, pp. 6-8] Plaintiff's Proposed Amended Complaint repeats the original two claims from the Complaint and adds two additional claims based on Defendant's filing of the Second Motion for Default Judgment. [R. 8-1 (Proposed Amended Complaint), ¶ 15] Defendant replied and simultaneously responded to the Motion for Leave, arguing that the Court should not give leave to amend because the amendments would be futile. [R. 11; R. 12]

II. Standards

A. Motion to Dismiss

Dismissal is proper pursuant to Fed. R. Civ. P. 12(b)(6) where the plaintiff "fails to state a claim upon which relief can be granted." "To survive a motion to dismiss, 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is factually plausible if the complaint contains factual allegations that "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. To meet this plausibility standard, the complaint must contain more than "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Id. In order to survive a Rule 12(b)(6) motion, the complaint must "contain either direct or inferential allegations respecting all material elements necessary for recovery under a viable legal theory." D'Ambrosio v. Marino, 747 F.3d 378, 383 (6th Cir. 2014). The "complaint is viewed in the light most favorable to [the plaintiff]; the allegations in the complaint are accepted as true, and all reasonable inferences are drawn in [the plaintiff's] favor." Gavitt v. Born, 835 F.3d 623, 640 (6th Cir. 2016).

A statute of limitations defense is properly raised by a Rule 12 motion to dismiss when the complaint shows that the action was not brought within the statutory period. Rauch v. Day & Night Mfg. Corp., 576 F.2d 697, 702 (6th Cir. 1978); Duncan v. Leeds, 742 F.2d 989, 991 (6th Cir. 1984) If "the time alleged in the complaint" clearly demonstrates that "the action was not brought within the statutory period," the plaintiff's claims are barred. Rauch, 742 F.2d at 991.

B. Motion for Leave to Amend Complaint

A plaintiff may amend its complaint as a matter of course within 21 days from the original complaint or a responsive pleading. Fed. R. Civ. P. 15(a)(1). After that 21-day window, a plaintiff "may amend its pleading only with the opposing party's written consent or the court'sleave." Fed. R. Civ. P. 15(a)(2). "The court should freely give leave when justice so requires." Id. Courts generally only deny leave to amend for three reasons: "when there has been undue delay, when an amendment would be futile, or when the amendment would prejudice the other party." 3 James Wm. Moore et al., Moore's Federal Practice - Civil § 15.14 (3d ed.); accord United States ex rel. Customs Fraud Investigations, LLC. v. Victaulic Co., 839 F.3d 242, 249 (3d Cir. 2016); see also Foman v. Davis, 371 U.S. 178, 182 (1962)). An amendment is futile "if the amended complaint would not withstand a motion to dismiss for failure to state a claim." Doe v. Mich. State Univ., 989 F.3d 418, 427 (6th Cir. 2021); accord Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000).

III. Discussion

A. Motion to Dismiss

Congress enacted the FDCPA to eliminate abusive, deceptive, and unfair debt collection practices by regulating the collection methods of debt collectors. See Purnell v. Arrow Fin. Servs., LLC, 303 F. App'x 297, 301 (6th Cir. 2008). The FDCPA prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. It also prohibits debt collectors from using "unfair or unconscionable means to collect or attempt to collect any debt." § 1692f. The statute applies to the litigation activities of lawyers. Heintz v. Jenkins, 514 U.S. 291, 299 (1995). When a plaintiff brings an FDCPA claim, the court tests the claims under the "least sophisticated consumer standard," meaning "whether the least sophisticated consumer would be misled by the defendant's actions." Wallace v. Wash. Mut. Bank, F.A., 683 F.3d 323, 326-27 (6th Cir. 2012). The FDCPA imposes a one-year statute of limitations. § 1692k(d) ("An action to enforce any liability created by this title may be brought in any appropriate United States district courtwithout regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.").

Turning first to the allegations in the original Complaint, Plaintiff alleges two violations of the FDCPA. [R. 1 (Complaint), ¶ 15] Rather than anchoring his claims to the state-court collection complaint, Plaintiff instead cites to Defendant's actions in filing the Second Motion for Default Judgment on November 15, 2019. Id. Specifically, Plaintiff alleges that Defendant violated the FDCPA first "by misrepresenting the amount and status of [the] Mariner Note in the Second Motion for Default and [second] by adding interest and/or fees to the amount claimed due under the Mariner Note that Mariner had no legal right to collect from Mr. Keith." Id. Essentially, Plaintiff's Complaint alleges Defendant sought interest and fees that were not recoverable under the Note.

In his Motion to Dismiss, Defendant argues Plaintiff's Complaint is untimely because the...