Oakley v. Coast Prof'l, Inc.

570 F.Supp.3d 365

Carla OAKLEY, Plaintiff,

v.COAST PROFESSIONAL, INC., Performant Financial Corp., and Performant Recovery, Inc., Defendants.

CIVIL ACTION NO. 1:21-00021

United States District Court, S.D. West Virginia, at Bluefield.

Signed November 4, 2021

Jonathan R. Marshall, Bailey & Glasser, Charleston, WV, Patricia M. Kipnis, Bailey & Glasser, Cherry Hill, NJ, Steven R. Broadwater, Jr., Hamilton Burgess Young & Pollard, Fayetteville, WV, for Plaintiff.

Albert C. Dunn, Jr., Bailey & Wyant, Charleston, WV, for Defendant Coast Professional, Inc.

Alex J. Zurbuch, Joseph M. Ward, Mary Claire Davis, Frost Brown Todd, Charleston, WV, for Defendants Performant Financial Corp., Performant Recovery, Inc.

MEMORANDUM OPINION

David A. Faber, Senior United States District Judge

On September 30, 2021, the court entered an order (1) granting without prejudice the motion to dismiss of defendant Performant Financial Corp. ("PFC") for lack of personal jurisdiction (ECF No. 9); (2) denying the motion to dismiss of defendants PFC and Performant Recovery, Inc. ("PRI") (ECF No. 11); and (3) denying the motion to dismiss of defendant Coast Professional, Inc. ("Coast") (ECF No. 13). (ECF No. 52.) In this Memorandum Opinion, the court sets forth its reasoning for denying PFC and PRI's motion to dismiss (ECF No. 11) and Coast's motion to dismiss (ECF No. 13).

I. Background

This is a putative class action alleging deceptive debt collection practices by defendants in violation of the West Virginia Consumer Credit and Protection Act ("WVCCPA"). Plaintiff says defendants violated the WVCCPA when they sent her a letter regarding her defaulted student loan. She says that the letter was deceptive and misleading under the WVCCPA because it represented that the collection agency's contingency fee was due and owing as part of the "current balance" even though the agency had not yet earned the contingency fee by collecting the debt. The contingency fee was listed in the category "FEES & COSTS" and was computed assuming that there would be a full recovery of the principal and interest then due on the defaulted loan. There was a false implication, says plaintiff, that the contingency fee (in the amount listed) was "unavoidable" and "fixed." (See, e.g., First Am. Compl. ¶ 66.)

Plaintiff says that defendants compounded the deception by using language in the body of the letter that attached the U.S. Department of Education's ("ED") imprimatur to the amount due, and further, by attempting to qualify the "FEES & COSTS" with an asterisk and cryptic note (on the back of the letter) suggesting that the amount listed may not be due presently after all, and may change. Plaintiff also points to language on the front page of the letter stating that the amount ultimately due may be greater than the current balance but failing to acknowledge that the amount due may be less (because the contingency fee is ultimately less).

Plaintiff has named three defendants in her First Amended Complaint ("FAC"): Coast, PFC, and PRI. Coast allegedly contracted with the ED to collect the debt and then subcontracted with PRI, which is a wholly owned subsidiary of PFC. PRI sent the collection letter at issue. The letter states that PRI sent it while acting on behalf of Coast. Although PFC is not mentioned in the letter, plaintiff alleges that PFC and PRI sent the letter jointly. Moreover, plaintiff alleges that PFC operates as a single business with a single management team that reports to its CEO.

II. Legal Standard

"The purpose of a Rule 12(b)(6) motion is to test the [legal] sufficiency of a complaint; importantly, [a Rule 12(b)(6) motion] does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Edwards v. City of Goldsboro, 178 F.3d 231, 243–44 (4th Cir. 1999) (citations and internal quotation marks omitted). A Rule 12(b)(6) defense asserts that even if all the factual allegations in a complaint are true, they remain insufficient to establish a cause of action. This court is also mindful that "[w]hether a particular ground for opposing a claim may be the basis for dismissal for failure to state a claim depends on whether the allegations in the complaint suffice to establish that ground, not on the nature of the ground in the abstract." Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007).

Accordingly, Federal Rule of Civil Procedure 8(a)(2) requires that "a pleading ... contain a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’ " Ashcroft v. Iqbal, 556 U.S. 662, 677—78, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Fed. R. Civ. P. 8(a)(2) ). The purpose of Rule 8(a)(2) is to ensure that "the defendant [receives] fair notice of what the ... claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). A plaintiff must allege "enough facts to state a claim to relief that is plausible on its face" and "raise a right to relief above the speculative level." Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 615 n.26 (4th Cir. 2009).

The United States Supreme Court has maintained that "[w]hile a complaint ... does not need detailed factual allegations, ... a plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 550, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations and internal quotation marks omitted). The court need not "accept as true unwarranted inferences, unreasonable conclusions, or arguments." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). Courts must also take care to avoid confusing the veracity or even accuracy underlying the allegations that a plaintiff has leveled against a defendant with the allegations’ likelihood of success. While "the pleading must contain something more ... than ... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action," 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004), "assum[ing]" of course "that all the allegations in the complaint are true (even if doubtful in fact)," Twombly, 550 U.S. at 555, 127 S.Ct. 1955, it is also the case that "Rule 12(b)(6) does not countenance ... dismissals based on a judge's disbelief of a complaint's factual allegations." Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). Therefore, courts must allow a well-pleaded complaint to proceed even if it is obvious "that a recovery is very remote and unlikely." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

III. Discussion

Defendants jointly make three arguments in support of dismissal: (1) plaintiff did not comply with the WVCCPA's right-to-cure notice requirement; (2) federal law preempts plaintiff's claims; and (3) the collection letter at issue is not deceptive or misleading within the meaning of the WVCCPA. The first argument is unavailing because the statutory language contemplates sending the right-to-cure notice after a case is filed, and plaintiff did so long ago. The second argument fails because the allegations do not limit this case to a nondisclosure case and because the claims here obstruct no important federal interest in the manner required to invoke obstacle preemption successfully. Finally, because the third argument presents a close call that is best suited for determination after further development of the record, it does not prevail at the pleading stage.

Coast separately argues that it must be dismissed because it did not send the letter at issue and because plaintiff does not sufficiently allege an agency relationship between Coast and the sender, PRI. The court disagrees with this argument. Plaintiff quotes a portion of the letter in the FAC which states that Coast had authorized PRI to act on Coast's behalf. Although PRI qualifies this statement with "as a subcontractor," plaintiff is entitled to the benefit of a reasonable inference at this stage that there was an agency relationship. Coast may seek to establish with a summary judgment motion that PRI was acting as a mere independent contractor.

a. Right to Cure

The WVCCPA contains a right-to-cure provision, the operative version of which¹ reads in pertinent part as follows:

No action may be brought pursuant to this article ... until the consumer has informed the creditor or debt collector in writing and by certified mail, return receipt requested ... of the alleged violation and the factual basis for the violation and provide the creditor or debt collector forty-five days from receipt ... of the notice of violation but twenty days in the case a cause of action has already been filed to make a cure offer ....

W. Va. Code § 46A-5-108(a) (2017).

Plaintiff sent the required notice to PRI prior to filing her original complaint in state court. However, at the time plaintiff filed her FAC, adding Coast and PFC, on November 24, 2020, she had not provided additional notices to these new defendants. She provided such notices on February 5, 2021 (after Coast's removal of the case to this court and the same day defendants filed their motions to dismiss).

Plaintiff argues that there is no deficiency now that she has sent the right-to-cure notices and the requisite time has elapsed. She asserts that the statutory provision contemplates the sending of such notices when "a cause of action has already been filed." She further contends that the defendants are all closely related; thus, notice to one was effectively notice to all. Finally, plaintiff contends that in these circumstances, the appropriate remedy for any non-compliance the court may find is leave to amend.

The right-to-cure notice requirement is non-jurisdictional. Adkins v. Midland Credit Mgmt., Inc., No. 5:17-CV-04107, 2019 WL 1370872, at *3 (...