Yentin v. Michaels, Louis & Assocs. Inc., 11-0088

YELENA YENTIN, et al.

v.MICHAELS, LOUIS & ASSOCIATES, INC., et al.

NO. 11-0088

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

September 14, 2011

CIVIL ACTION

MEMORANDUM

Dalzell, J.

Plaintiffs Yelena ("Yelena") and Alexander Yentin ("Alexander") sue defendants Michaels, Louis & Associates, Inc. ("MLAI") and Louis M. Ciccone ("Ciccone"), alleging claims under the Fair Debt Collection Practices Act ("FDCPA" or "the Act"), 15 U.S.C. §§ 1692, et seq., as well as state-law claims under the Pennsylvania Fair Credit Extension Uniformity Act ("FCEUA"), 73 Pa. Cons. Stat. §§ 2270.1, et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"). 73 Pa. Cons. Stat. §§ 201.1, et seq.. The Yentins' suit arises out of defendants' efforts -- including institution of a suit in the Magisterial District Court of Bucks County, Pennsylvania -- to collect on a debt that the Yentins allegedly did not owe.

Defendants filed a motion to dismiss plaintiffs' complaint pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6), to which plaintiffs filed a response in opposition, leading defendants to file a reply. Defendants advance seven reasonsthat we should dismiss plaintiffs' claims against them: (1) the bulk of plaintiffs' factual allegations do not concern the defendants, Defs.' Mem. in Supp. of Mot. to Dismiss ("Defs.' Mem.") at 8; (2) plaintiffs' allegations as to the defendants are legal and conclusory in nature, Defs.' Mem. at 9, 13-14; (3) contrary to plaintiffs' contention, the FDCPA imposes no duty to investigate the validity of debts, id. at 9-11; (4) even if the FDCPA did impose a duty to investigate, defendants carried out a sufficient investigation, id. at 11-12; (5) plaintiffs cannot succeed on their claims against Ciccone because they have not attempted to pierce the corporate veil, id. at 14-15; (6) Yelena has no standing to bring claims against the defendants, id. at 15; and (7) plaintiffs' state-law claims are derivative of their FDCPA claims, and hence fail due to the inadequacy of those federal claims. Id. at 15. Defendants also seek attorney's fees and costs from plaintiffs pursuant to 15 U.S.C. § 1692k(a)(3) for maintaining this action in bad faith. Id.

The allegations in plaintiffs' complaint are sparse, especially as regards defendants, and plaintiffs attempt both to invent facts that might support causes of action and to fabricate rights under the applicable statutes that do not exist. Nonetheless, for the reasons discussed below, we will only grantdefendants' motion to dismiss plaintiffs' FDCPA claims in part, and will give plaintiffs leave to file an amended complaint that cures the deficiencies we identify herein. Because a plaintiff that states a claim for violation of the FDCPA has also stated a claim under the FCEUA and UTPCPL, we deny defendants' motion to dismiss with respect to plaintiffs' state-law claims.

I. Factual Background

In evaluating a motion to dismiss under Rule 12(b)(6),¹ we "'accept all factual allegations in the complaint as true andgive the pleader the benefit of all reasonable inferences that can be fairly drawn therefrom.'" Ordonez v. Yost, 289 Fed. Appx. 553, 554 (3d Cir. 2008) (quoting Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993)). We may "'consider only allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim,'" Brown v. Daniels, 128 Fed. Appx. 910, 913 (3d Cir. 2005) (quoting Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004)) (quotation marks omitted), where a document forms the basis of a claim if it is "'integral to or explicitly relied upon in the complaint.'" Id. (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)) (emphasis omitted).

The parties have included with their submissions to the Court a number of exhibits. Plaintiffs attach to their complaint certified mail receipts that allegedly document communications plaintiffs mailed to credit reporting agencies and creditors, as well as the complaint that was filed against plaintiffs in Bucks County. See Pls.' Compl. ¶¶ 3-4; Exs. A & B to Pls.' Compl. For their own part, defendants attach to their motion correspondence between MLAI and Alexander that purportedly establishes the adequacy of MLAI's debt investigations and plaintiffs' lack of good faith in maintaining this action. See Defs.' Mem. at 4-5;Exs. A-C to Defs.' Mem. Plaintiffs' response includes a letter pertaining to the resolution of the action in Bucks County, Exs. B to Pls.' Resp. in Opp. to Defs.' Mot. ("Pls.' Resp."), and defendants' reply includes public documents regarding MLAI and "Michael, Louis & Associate's" ("MLA's") status as entities. See Ex. E to Pls.' Resp.; Ex. A to Defs.' Reply in Support of Mot. to Dismiss ("Defs.' Reply"). This proliferation of exhibits risks "'converting the motion to dismiss into one for summary judgment,'" In re Burlington Coat Factory, 114 F.3d 1410 at 1426 (brackets omitted) (quoting Shaw v. Digital Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)), when we are only supposed to "'consider an undisputedly authentic document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff's claims are based on the document.'" Id. (quoting In re Trump Casino Sec. Litig., 7 F.3d 357, 368 n.9 (3d Cir. 1993)). Of the documents the parties offer, only the documents relating to the action in Bucks County meet these requirements, while the documents defendants proffer regarding MLA and MLAI's entity status qualify as public records. We will consider only these attachments in ruling on defendants' motion.

Plaintiffs allege that they are adult citizens of Pennsylvania, Pls.' Compl. ¶ 2, and that MLAI is "a corporateentity that conducts business in the Commonwealth of Pennsylvania." Id. ¶ 4. As for Ciccone, plaintiffs claim that he is an adult citizen of Pennsylvania "who is the officer, majority shareholder, and/or majority interest holder" of MLAI.² Id. ¶ 5.

According to plaintiffs, they learned in May of 2004 that unknown individuals had used their personal information to open credit card accounts and lines of credit with financial institutions and then "cashed out" these accounts and lines of credit to the maximum available limit. Id. ¶¶ 11-12. Plaintiffs aver that they immediately contacted the Northampton Township Police Department ("NTPD"), which initiated an investigation regarding the alleged identity theft and fraudulent use of information. Id. ¶ 13. Plaintiffs also allege that they mailed notifications and disputes to credit reporting agencies andcreditors seeking payment for the fraudulently opened accounts and lines of credit, advising them that the identity theft had occurred, id. ¶ 14. In particular, plaintiffs allege that they informed the original creditors of the accounts on which defendants later sought payment, as well as defendants themselves, of the identity theft by telephone. Id. ¶ 15. Nonetheless, plaintiffs claim that they have been subjected to at least three lawsuits by debt collectors that sought payment for fraudulently incurred debts -- plaintiffs state that they prevailed in each of these lawsuits. Id. ¶¶ 16-17.

In the summer of 2007, "[t]o the best of Plaintiffs' knowledge," someone used their personal information to open at least one unauthorized account or line of credit with CashCall, Inc. ("CashCall"). This person then began withdrawing funds from plaintiffs' bank account without their knowledge or authorization. Id. ¶¶ 18-19. Plaintiffs state that they informed CashCall that they had "nothing to do" with any credit card or line of credit it had issued, and asked CashCall to cease collection activities against them. Id. ¶¶ 20-21. Furthermore, plaintiffs aver that Alexander spoke on several occasions with a female representative of CashCall. In the course of these conversations, the representative called Alexander a thief and aliar, told him that his family should be in jail, and warned that plaintiffs would lose their home if they did not immediately pay CashCall. Id. ¶¶ 22-23. According to plaintiffs, they then contacted the NTPD to report that CashCall was withdrawing funds from their accounts without authorization. Following this report, plaintiffs received no further communications from CashCall. Id. ¶¶ 24-25.

On November 29, 2010, MLA/MLAI³ filed a civil complaint against Alexander in the Magisterial District Court of Bucks County. In plaintiffs' words, MLAI sought "to collect upon an alleged debt owed to CashCall, Inc." Id. ¶ 26; see also Ex. B to Pls.' Compl. (attaching hearing notice and complaint in Bucks County action). Ciccone verified this complaint in his capacity as "Owner." Pls.' Compl. ¶ 27; Ex. B to Pls.' Compl. According to plaintiffs, defendants dismissed their claims in this matter on December 17, 2010. Pls.' Compl. ¶ 29.

II. Analysis

As the Supreme Court has explained, "only a complaint that states a plausible claim for relief survives a motion to dismiss" pursuant to Rule 12(b)(6), giving rise to a "context-specific" inquiry that "requires the reviewing court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). To survive this inquiry, "[f]actual allegations must be enough to raise a right to relief above the speculative level," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While this standard is not as demanding as a "probability requirement," a plaintiff must allege facts sufficient to show that there is "more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 129 S. Ct. at 1949 (internal quotation marks omitted). In essence, a plaintiff must provide "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quotation marks omitted). Moreover, a pleading may not simply offer "labels and...