Viernes v. DNF Assocs., LLC

582 F.Supp.3d 738

Ronald VIERNES, and all others similarly situated, Plaintiffs,

v.DNF ASSOCIATES, LLC, Defendant.

CIV. NO. 19-00316 JMS-KJM

United States District Court, D. Hawai‘i.

Signed January 27, 2022

Brian Lewis Bromberg, Pro Hac Vice, Bromberg Law Office, P.C., New York, NY, Joshua Tarrant-Windt, Pro Hac Vice, Bromberg Law Office, P.C., Brooklyn, NY, Justin A. Brackett, Honolulu, HI, for Plaintiffs.

Andrew James Lautenbach, Starn O'Toole Marcus & Fisher, Honolulu, HI, Brendan H. Little, Pro Hac Vice, Lippes Mathias Wexler Friedman LLP, Buffalo, NY, for Defendant.

ORDER DENYING DEFENDANT'S "MOTION TO DISMISS FOR LACK OF STANDING AND TO DECERTIFY THE CLASSES," ECF NO. 124

J. Michael Seabright, Chief United States District Judge

I. INTRODUCTION

Before the court is Defendant DNF Associates, LLC's ("DNF") "Motion to Dismiss for Lack of Standing and to Decertify the Classes," ECF No. 124 ("Motion"). In its Motion, DNF makes three principal arguments: (1) claims asserted by Plaintiff Ronald Viernes ("Viernes") should be dismissed because Viernes has not suffered an injury in fact sufficient to confer standing under Article III of the Constitution ; (2) claims asserted on behalf of Plaintiff Class Members, see ECF No. 92, should also be dismissed because there is no allegation supporting the conclusion that the Class Members suffered injuries in fact; and (3) even if the Plaintiff Class Members could have suffered injuries in fact, the classes should be decertified because determining whether each Class Member has suffered such an injury undermines the class vehicle. See ECF No. 124-1. For the reasons provided below, the Motion is DENIED in full.

II. BACKGROUND

A. Factual Background

This case concerns an attempt by DNF to collect a debt from Plaintiff Viernes, which Viernes now admits was originally owed to third-party Kay Jewelers and was subsequently purchased by DNF. See ECF No. 63-8 at PageID # 417, ¶ 5; ECF No. 68-3 at PageID # 515, ll. 23–25. Despite now admitting the debt, Viernes previously disputed the debt, see, e.g. , ECF No. 1 at PageID # 11, ¶ 56, including by "sending [two] dispute letters to DNF and its attorney" on March 8, 2019, which sought verification of facts supporting the attempt to collect the debt. See ECF No. 124-3 at PageID ## 1620, 1624–25. Sending those two dispute letters cost Viernes $13.70. See ECF No. 124-4 at PageID ## 1643–52 (copies of the two dispute letters and related postage receipts, each bearing a price of $6.85).

Viernes sent those dispute letters in response to the collection lawsuit that DNF—which was not properly registered in Hawaii—filed against Viernes in the State of Hawaii District Court of the First Circuit, Honolulu Division. See ECF No. 1 at PageID ## 7–8; see also ECF No. 60-3 at PageID ## 302–04 (complaint in DNF's collection lawsuit). DNF also sent Viernes a debt-settlement letter dated March 5, 2019, i.e., three days before the date listed on Viernes's dispute letters, but it is unclear whether Viernes sent his dispute letters before or after receiving DNF's demand letter. See ECF No. 132-2; ECF No. 124-3 at PageID # 1618. Regardless, the dispute letters are a direct response to the collection lawsuit, as both letters list the docket number for the collection lawsuit in their introductory paragraphs. See ECF No. 124-4 at PageID ## 1643, 1648. Viernes alleges that, as a result of DNF's attempt to collect the debt, he suffered harm in the form of postage costs and "additional damages" incurred in responding to the collection lawsuit, including emotional distress. ECF No. 1 at PageID # 8.

B. Procedural Background

Viernes filed his Complaint in this case on June 19, 2019, asserting the facts described above. See ECF No. 1. As for legal theories, the Complaint asserts that DNF was unlawfully attempting to collect Viernes's jewelry debt because DNF had not registered as a debt-collection agency in the State of Hawaii. Id. at PageID ## 10–11. Specifically, the Complaint alleges that Viernes was a "debtor" and that DNF was attempting to collect a "debt," as those terms are defined in Hawaii Revised Statutes ("HRS") § 443B-1, making DNF a "collection agency" under that statute and thus in violation of HRS § 443B-3, which specifies that "[n]o collection agency shall collect or attempt to collect any money or any other forms of indebtedness ... in this State without first registering under this chapter." ECF No. 1 at PageID ## 3–5. DNF does not dispute that it is not registered in the State of Hawaii. See ECF No. 63-2 at PageID # 361, ¶ 6.

The alleged violation of HRS § 443B-3 is a predicate fact supporting Viernes's ultimate legal claims: The first claim is that DNF violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. ("FDCPA"), by filing a lawsuit seeking to collect a debt that DNF had no legal authority to collect. ECF No. 1 at PageID ## 8–9. More specifically, DNF violated 15 U.S.C. § 1692e because filing the collection lawsuit constitutes a false, deceptive, or misleading representation regarding DNF's ability to lawfully collect debts in the State of Hawaii. ECF No. 1 at PageID ## 8–9.

The second claim is that DNF violated Hawaii's statute prohibiting unfair or deceptive acts or practices when conducting trade or commerce ("UDAP"), also by filing a lawsuit seeking to collect a debt that DNF had no legal authority to collect. Id. at PageID ## 9–11. More specifically, DNF committed an "unfair or deceptive act or practice against [Viernes]," in violation of HRS § 480-2(a), when it attempted to collect a debt while unregistered; attempting to collect while unregistered also gave DNF an "unfair competitive advantage," in violation of § 480-2(a). ECF No. 1 at PageID ## 10–11.

And the third claim is that DNF violated Hawaii's more specific collection-agency statute, HRS § 443B-18(5). DNF violated that statute, according to the Complaint, because DNF's filing a lawsuit as an unregistered collector constitutes a "false implication of [DNF's] ability to collect the debt in a legal proceeding before the courts of the State of Hawaii." ECF No. 1 at PageID # 11.

The Complaint is also a Class Action Complaint filed on behalf of an "FDCPA Class" and a "Hawaii Class." See id. at PageID ## 3, 5–7; ECF No. 95 at PageID # 1333 (order adopting findings and recommendation to grant Viernes's class-certification motion). The FDCPA Class consists of Hawaii residents subjected to debt-collection lawsuits filed by DNF within a year preceding the filing of the Complaint. ECF No. 95 at PageID # 1333. The Hawaii Class consists of Hawaii "consumers," as defined in HRS § 480-1, subjected to debt-collection lawsuits filed by DNF within four years preceding the filing of the Complaint. Id.

The Complaint alleges the same facts described above on behalf of the Class Members, the notable exception being the differences in the allegations of harm. The Complaint asserts that Viernes incurred postage costs, mileages costs, and emotional distress in responding to DNF's collection lawsuit—but the Complaint does not assert similarly specific harms on behalf of the Class Members. See ECF No. 1 at PageID ## 5–11. Instead, the Complaint asserts the same legal claims on behalf of the Class Members as it does for Viernes, see id. , and it requests overlapping relief on behalf of the Class Members and Viernes: "[t]hat Plaintiff and the FDCPA [C]lass be awarded statutory damages pursuant to 15 U.S.C. § 1692k(a)"; "[t]hat Plaintiff and the Hawaii[ ] Class be awarded statutory damages ... pursuant to [HRS] § 480-13"; and "[i]njunctive relief ordering [DNF] to cease and desist from collecting debts in the State of Hawaii unless, and until, they have registered ... as a debt collector." ECF No. 1 at PageID ## 12–13. Despite the Complaint not alleging specific harms on behalf of the Class Members, the claims asserted and relief requested by that Complaint—particularly, that any "damage sustained" by the Class Members from DNF's lawsuit be remedied, see 15 U.S.C. § 1692k(a) and HRS § 480-13(b) — imply that the Class Members were harmed by DNF's collection lawsuits against them.

DNF filed its Motion on October 28, 2021, seeking to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(1) based on a lack of constitutional standing, and seeking to decertify the classes given the requirements of Federal Rule of Civil Procedure 23. See ECF Nos. 124, 124-1. Viernes filed an Opposition on behalf of the Class Members and himself on November 30, 2021. ECF No. 129. In that Opposition, Viernes no longer asserts that he incurred "mileages costs" in responding to DNF's lawsuit. See id. (not mentioning or providing evidence demonstrating mileage costs). DNF filed a Reply on December 8, 2021. ECF No. 130. The court held a hearing on the Motion on December 22, 2021. ECF No. 131. At that hearing, Viernes's counsel represented that Viernes was no longer seeking to recover damages for the alleged emotional distress, but that he was still asserting that alleged distress in his effort to show an injury in fact. On January 4, 2022, the parties filed a Joint Declaration clarifying the timeline of events following the collection lawsuit. See ECF No. 132.

III. STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(1) authorizes a court to dismiss claims over which it lacks subject-matter jurisdiction, including claims for which a plaintiff lacks standing. See Chandler v. State Farm Mut. Auto. Ins. Co. , 598 F.3d 1115, 1121 (9th Cir. 2010). Under Rule 12(b)(1), a defendant may challenge the plaintiff's jurisdictional allegations in one of two ways—a "facial" or "factual" challenge. Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). A "facial" challenge accepts the truth of the plaintiff's allegations but asserts that they "are insufficient on their face to invoke federal jurisdiction." Id. The district court resolves a facial challenge as it would a motion to dismiss under Rule 12(b)(6) :...