Taylor v. Midland Funding, LLC

ARLANDER TAYLOR, Plaintiff, v. MIDLAND FUNDING, LLC, et al., Defendants.

Case No.: 2:14-cv-00854-SGC

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

July 15, 2015

MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

This case involves actions the defendants, Midland Funding, LLC and Midland Credit Management, Inc., allegedly took to attempt to collect a purported debt from the plaintiff, Arlander Taylor. Presently before the undersigned for a report and recommendation pursuant to 28 U.S.C. § 636(b) is the defendants' motion to dismiss the amended complaint (Doc. 12), which the parties have fully briefed (Docs. 19 & 22; see also Docs. 29, 31, 33 & 36). For the reasons discussed below, that motion is due to be granted in part and denied in part.

I. Background

Midland Funding is in the business of buying defaulted consumer debts and then assigning collection activities to Midland Credit Management. (Doc. 10 at ¶¶ 10-11). According to the plaintiff, the factual allegations underlying this case represent a growing trend in the debt collection and credit reporting industries that has spawned similar litigation against the defendants and other debt collectors: After purchasing a defaulted debt, a debt buyer files a collection action the debtor. (Id. at ¶¶ 19, 23). Most often, the debtor fails to answer or otherwise respond to the collection action, and the debt buyer obtains a defaultjudgment against the debtor. (Id. at ¶ 25). The debt buyer banks on this probability. It has no intention of proving or ability to prove its case against the debtor. (Id. at ¶¶ 27-32). For example, although the debt buyer represents it has accurate records, this is not true because the purchase agreement between the debt seller and the debt buyer makes no representation as to the accuracy of the information provided to the debt buyer regarding the debt. (Id. at ¶¶ 21-22).

In this case, the plaintiff alleges the defendants filed a collection action against him in Jefferson County, Alabama small claims court to collect a $2,500.16 debt they misrepresented to the court the plaintiff owed and they owned. (Id. at ¶¶ 46, 48-49, 61-64, 67-68). According to the plaintiff, the defendants knew they did not own the debt in question, knew the plaintiff did not owe that debt, and knew or should have known the statute of limitations on an action to collect the debt had run. (Id. at ¶ 52-54, 60). Contrary to the defendants' expectations, the plaintiff filed an answer denying the allegations of the complaint. (Id. at ¶¶ 71-71). Nonetheless, the defendants filed a motion for default judgment, stating the plaintiff had failed to answer the complaint. (Id. at ¶¶ 80-81). The small claims court denied that motion because the plaintiff had, in fact, answered the complaint. (Id. at ¶ 84). When the action came to be tried, the small claims court entered a judgment in favor of the plaintiff. (Id. at ¶ 91). The defendants did not attempt to offer any evidence or otherwise attempt to prove their case at trial. (Id. at ¶¶ 92-96). The plaintiff alleges the defendants commenced the collection action to obtain a default judgment against him and, when they were unable to do so, chose to allow the action to move forward to attempt to force the plaintiff to settle the debt in question, all the while knowing there was no merit to the case and without any intention of proving or ability to prove their case. (Id. at ¶¶55-56, 59, 69, 77). The plaintiff further alleges the defendants attempted to force him to settle the debt by reporting the debt to consumer reporting agencies before, during, and after the collection action, even though they knew the plaintiff did not owe the debt. (Id. at ¶¶ 99-103).

The plaintiff states ten counts (Counts I-X) for violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the "FDCPA"). The plaintiff further alleges the defendants' conduct supports claims for invasion of privacy (Count XI); negligent, wanton, and/or intentional hiring and supervision (Count XII); wanton, malicious, and intentional conduct (Count XIII); malicious prosecution (Count XIV); and abuse of process (Count XV). The defendants seek dismissal of Counts I, IV, VII-XI, and XV of the amended complaint. (Doc. 12). The plaintiff has agreed to withdraw Counts VII (§ 1692e(11) violation), X (§ 1692g violation), and XV (abuse of process). (Doc. 19 at 6 n.1, 19 n.8). Therefore, these counts are due to be dismissed. The remainder of this report and recommendation addresses the defendants' motion to dismiss Counts I (§ 1692d violation), IV (§ 1692e(5) violation), VIII (§ 1692f violation), IX (§ 1692f(1) violation), and XI (invasion of privacy).

II. Motion to Dismiss Standard

"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Rule 8 "does not require 'detailed factual allegations,' but it demands more than an unadorned, the defendant-unlawfully-harmed me accusation." Ashcroft v. Iqbal, 556 U.S.662, 677 (2009) (quoting Twombly, 550 U.S. at 555). "[L]abels and conclusions," "a formulaic recitation of the elements of a cause of action," and "naked assertion[s] devoid of further factual enhancement" are insufficient. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557) (internal quotation marks omitted).

To survive a motion to dismiss for failure to state a claim on which relief may be granted brought pursuant to Rule 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). "Factual allegations must be enough to raise a right to relief about the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555-56 (internal citations omitted).

III. Discussion

A. § 1692d Claim

In Count I of the amended complaint, the plaintiff alleges the defendants' actions violated § 1692d, which prohibits a debt collector from "engag[ing] in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt." (Doc. 10 at ¶¶ 143-46). "Ordinarily, whether conduct harasses, oppresses, or abuses will be a question for the jury." Jeter v. Credit Bureau, Inc., 760 F.2d1179 (11^th Cir. 1985). The defendants argue the mere act of pursuing a judicial action to collect a defaulted debt does not serve to harass, oppress, or abuse within the meaning of § 1692d and that the plaintiff has failed otherwise to plead any facts that would support a § 1692d claim against them. (Doc. 12 at 2-7). The only precedent binding on this district court the defendants cite to support their argument is Jeter. (Doc. 12 at 3-4, 6). In Jeter, the Eleventh Circuit held that a debt collector's act of sending a letter to a debtor advising the debtor that if she did not pay her debt it would institute a collection action that might cause her "embarrassment, inconvenience, and further expense" did not violate § 1692d. 760 F.2d at 1179. The court reasoned

[t]hat a lawsuit might cause a consumer 'embarrassment, inconvenience, and further expense' is a true statement. Such consequences of a debt collection (or any other) lawsuit are so common place that even a consumer susceptible to harassment, oppression, or abuse would not have been harassed, oppressed, or abused by the statement in and of itself.

Id. (emphasis in original).

Here, however, the plaintiff does not allege merely that the defendants harassed, oppressed, and abused him by advising him they intended to commence a potentially embarrassing, inconvenient, and expensive collection action against him. He alleges that with no intention of proving or ability to prove their case, the defendants pursued a collection action in an attempt to obtain a default judgment against him as to a debt they knew he did not owe and they did not own and on which they knew or should have known the statute of limitations had run. (Doc. 10 at ¶¶ 52-56, 59-60, 69, 77, 99-103). This conduct, viewed from the perspective of a consumer whose circumstances make him relatively more susceptible to harassment, oppression, or abuse, is sufficient to state a claim under § 1692d.See Jeter, 760 F.2d at 1179 (holding that "claims under § 1692d should be viewed from the perspective of a consumer whose circumstances make him relatively more susceptible to harassment, oppression, or abuse"); Ferrell v. Midland Funding, LLC, 2015 WL 2450615, at *3 (N.D. Ala. May 22, 2015) (England, Mag. J.); Dial v. Midland Funding, LLC, 2015 WL 751662, at *6 (N.D. Ala. Jan. 15, 2015) (Putnam, Mag. J.) (finding factual allegations similar to those made in this case sufficient to state a § 1692d claim), report and recommendation adopted in part, rejected in part, 2015 WL 751690, at *1 (N.D. Ala. Feb. 23, 2015) (Acker, J.) (adopting finding as to § 1692d claim).

The defendants further contend that even if § 1692d protects against the type of conduct alleged in the amended complaint, the plaintiff's allegations are legal conclusions unsupported by facts. (Doc. 22 at 3-5). For example, the defendants argue the plaintiff's failure to allege when he...