Phelps v. Pressler & Pressler, LLP, Civil Action No. 12-5223 (DMC)

ALLEN PHELPS, Plaintiff, v. PRESSLER & PRESSLER, LLP, Defendant.

Civil Action No. 12-5223 (DMC)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Dated: November 19, 2013

NOT FOR PUBLICATION

MEMORANDUM OPINION

CLARK, Magistrate Judge

This matter having been opened to the Court upon Plaintiff Allen Phelps' ("Plaintiff") motion for leave to file an amended complaint pursuant to FED.R.CIV.P. 15(a)(1)(B) (the "Motion to Amend") to add three defendants: 1) Encore Capital Group Inc. ("Encore"); 2) Midland Funding, LLC, ("Midland Funding"); and 3) Midland Credit Management, Inc. ("Midland Credit") to this action. [Docket Entry No. 11]. Defendant Pressler & Pressler, LLP ("Defendant") opposes Plaintiff's motion. [Docket Entry No. 15, 18]. The Court has fully reviewed and considered all arguments made in support of, and in opposition to, Plaintiff's motion. The Court considers Plaintiff's motion without oral argument pursuant to L.CIV.R. 78.1(b). For the reasons set forth more fully below. Plaintiff's Motion to Amend is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

Defendant is a New Jersey entity engaged in the business of collecting debts. Compl. ¶4. An alleged debt of the Plaintiff (the "alleged debt") was, either directly or through intermediate transactions, assigned, placed, transferred, or sold to Defendant. Id. at ¶10. The alleged debt wasowing on Beneficial Account 9517060057XXXX (the "Beneficial Account"). Id. at ¶34. At some time during the year prior to the filing of this action, Defendant began its to attempt collection of the alleged debt from Plaintiff. Id. at ¶12. Specifically, on April 12, 2012, Defendant caused a collection or "dunning" letter (the "First Collection Letter") to be sent to Plaintiff. Id. at ¶14. The First Collection Letter states in relevant part, "We shall afford you this opportunity to pay this debt immediately and avoid further action against you... At this time, no attorney with this firm has personally reviewed the particular circumstances of your account. However, if you fail to contact this office, our client may consider additional remedies to recover the balance due." Id. at Exhibit A.

On or about May 21, 2012, Midland Funding filed a lawsuit against Plaintiff in the Superior Court of New Jersey, Special Civil Part, Hunterdon County (the "State Court Action"). Defendant's Brief in Opposition at 2; Docket Entry No. 12-1. Subsequently, Defendant also sent a second collection or "dunning" letter to Plaintiff (the "Second Collection Letter"), demanding payment of the alleged debt. Compl. ¶¶23-24. The Second Collection Letter states in relevant part, "As you probably know, this office has filed a law suit against you in which the amount claimed is $4,862.55. This includes costs and other amounts the creditor is seeking." Id. at ¶25. On September 4, 2012, Plaintiff signed a settlement agreement (the "Settlement Agreement") in the State Court Action. Def. Br. Opp. at 2. The Settlement Agreement purported that Plaintiff and Midland Funding have settled the State Court Action for the amount of $1,200.00. Id. Plaintiff complied with these terms whereas he paid Defendant $1,200.00. Id. at 4.

Plaintiff filed a complaint (the "Complaint") in this Court on August 16, 2012, alleging a violation of the Fair Debt Collection Practices Act ("FDCPA")¹, 15 U.S.C. §1692, et seq. Seegenerally Compl. Defendant responded to the Complaint with separate defenses on November 19, 2012. [Docket Entry No. 7]. This Court then set a schedule for discovery by Order dated February 1, 2013 (the "Scheduling Order'), and ordered that any motion to add new parties, whether by amended or third-party complaint, was to be filed not later than April 15, 2013. [Docket Entry No. 10].

On April 15, 2013 Plaintiff timely filed the instant motion, seeking leave to file an amended complaint (the "Proposed Amended Complaint") to name Encore, Midland Funding, and Midland Credit, as additional defendants to this action. See generally Am. Compl.² Plaintiff argues that an amended complaint is necessary to assert claims against additional entities with direct involvement in the collection of debts. Am. Compl. ¶¶5-8. Specifically, Plaintiff asserts that Defendant, along with Encore, Midland Funding, and Midland Credit, acted jointly and in concert to collect consumer debts incurred primarily for personal, family, or household purposes, such as the alleged debt. Am. Compl. ¶10.

Midland Credit and Midland Funding are under common control and ownership by Encore. Id. at ¶8. Encore purchases portfolios of defaulted consumer debt and manages their collection through its subsidiary entities. Am. Compl. ¶15. Defendant is a law firm that has represented and continues to represent Midland Funding and Midland Credit. Id. ¶33. Plaintiff's proposed Amended Complaint alleges that Midland Funding and/or Midland Credit placed Plaintiff's account with Defendant pursuant to a collection agreement. Id. Plaintiff further alleges that Midland Funding then, either directly or through intermediate transactions assigned, placed, transferred, or sold the alleged debt to Defendant, Pressler and Pressler, LLP, for collection. Id. at ¶¶35-36.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 15(a)(1), "[a] party may amend its pleading once as a matter of course within: (A) 21 days after serving it; or (B) if the pleading is one to which a responsive pleading is required, 21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." Otherwise, pursuant to Rule 15(a)(2) "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires."

Pursuant to FED.R.CIV.P. 15(a)(2), leave to amend the pleadings is generally granted freely. See Foman v. Davis, 371 U.S. 178, 182 (1962); Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000). Nevertheless, the Court may deny a motion to amend where there is "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment." Id. However, where there is an absence of undue delay, bad faith, prejudice or futility, a motion for leave to amend a pleading should be liberally granted. Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004).

An amendment is futile if it "is frivolous or advances a claim or defense that is legally insufficient on its face." Harrison Beverage Co. v. Dribeck Imp., Inc., 133 F.R.D. 463, 468 (D.N.J. 1990) (internal quotation marks and citations omitted). To evaluate futility the District Court uses "the same standard of legal sufficiency" as applied for a motion to dismiss under Rule 12(b)(6). Shane v. Fauver, 213 F.3d 113, 115 (3d Cir. 2000). "Accordingly, if a claim is vulnerable to dismissal under Rule 12(b)(6), but the plaintiff moves to amend, leave to amend generally must be granted unless the amendment would not cure the deficiency." Id.

The Supreme Court refined the standard for summary dismissal of a complaint that fails to state a claim in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). The Court examined Rule 8(a)(2) of the Federal Rules of Civil Procedure which provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED.R.CIV.P. 8(a)(2).³ Citing its opinion in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), for the proposition that "[a] pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do,'" Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 555), the Supreme Court identified two working principles underlying the failure to state a claim standard.

First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice .... Rule 8 ... does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged--but it has not "show[n]"--"that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

Iqbal, 129 S. Ct. at 1949-1950 (citations omitted). The Court further explained that:

a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausible give rise to an entitlement to relief.

Id. at 1950.

Thus, to prevent a summary dismissal, a civil complaint must allege "sufficient factual matter" to show that the claim is facially plausible. Id. at 1949. This then "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. TheSupreme Court's ruling in Iqbal emphasizes that a plaintiff must demonstrate that the allegations of his complaint are plausible. Id. at 1949-50.

III. DISCUSSION

A. Midland Funding

As its primary argument, Defendant contends that Plaintiff's Motion to Amend against Midland Funding should be denied as futile on the grounds that Plaintiff "signed a settlement agreement which...