Dial v. Midland Funding LLC et al
MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 2/23/15. (SAC )
2015 Feb-23 PM 04:23
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
MIDLAND FUNDING, LLC, and
MIDLAND CREDIT MANAGEMENT,
CIVIL ACTION NO.
On January 15, 2015, the magistrate judge entered a report and
recommendation (Doc. 26) in this action, in which he recommended
that the court grant in part and deny in part the motion to dismiss
(Doc. 17) filed by defendants Midland Funding, LLC, and Midland
Credit Management, Inc. (collectively “Midland”). Midland objected
to the report and recommendation on January 29, 2015. (Doc. 28).
The clerk randomly selected the undersigned judge to review the
objections to the report and recommendation.
When a party objects to a magistrate judge’s report and
recommendation, “[a] judge of the court shall make a de novo
determination of those portions of the report or specified proposed
findings or recommendations to which objection is made.” 28 U.S.C.
§ 636(b)(1) (2012). The portions of the report and recommendation
from which no objection is taken are reviewable only for clear
error. Macort v. Prem, Inc., 208 Fed. App’x 781, 784 (11th Cir.
2006). “A judge of the court may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the
magistrate judge.” 28 U.S.C. § 636(b)(1).
Midland has objected to the magistrate judge’s refusal to
dismiss five counts of plaintiff Rasheda Dial’s amended complaint.
Each of these counts will be discussed in turn. The court has
reviewed the portions of the report and recommendation from which
Midland did not object and finds no clear error to be present.
A. Count One - Violation of 15 U.S.C. § 1692d
Section 1692d of the Fair Debt Collection Practices Act states
that “[a] debt collector may not engage in any conduct the natural
consequence of which is to harass, oppress, or abuse any person in
connection with the collection of a debt.” 15 U.S.C. § 1692d
(2012). In her amended complaint, Dial alleges that Midland brought
suit against her in state court to collect a debt that Midland knew
Dial did not owe, Midland did not own, and was time-barred. Midland
allegedly pursued the action solely in hopes of obtaining a default
judgment — it provided its collection counsel with no witnesses or
summarily obtained a verdict in her favor. According to Dial,
Midland’s use of these tactics is widespread, and Midland has been
sued for this conduct many times under the FDCPA.
The magistrate judge recommended that Midland’s motion to
sufficiently state a claim under § 1692d. Midland objected to this
recommendation, primarily on two grounds: (1) Midland simply filed
a collections suit, which is not actionable under § 1692d; and (2)
the magistrate judge improperly accepted conclusory allegations as
As to the first contention, Midland has made such an argument
before nearly every judge of this district, and its position has
been unanimously rejected. See Millican v. Midland Funding, LLC,
No. 4:09-cv-1206-JEO, *7-8 (N.D. Ala. Dec. 2, 2009); Morgan v.
Midland Funding, LLC, No. 2:12-cv-3846-RDP, *2 (N.D. Ala. Jan. 4,
2013); Wood v. Midland Funding, LLC, No. 2:12-cv-2703-KOB, 2013 WL
360146, *3 (N.D. Ala. Jan. 29, 2013); Vinson v. Midland Funding,
LLC, No. 2:12-cv-4187-VEH, 2013 WL 625111, *2 (N.D. Ala. Feb. 20,
2013); Gamble v. Midland Funding, LLC, No. 2:12-cv-4186-AKK, 2013
WL 979202, *2 (N.D. Ala. Mar. 7, 2013). The undersigned will add
his name to the list. As held in these cases, Dial has alleged
additional conduct besides the mere filing of a lawsuit — primarily
that, for multiple reasons, Midland knew the lawsuit was baseless
when the suit was filed and, even if meritorious, had no intention
of proving its case. This additional conduct could reasonably be
expected to harass, oppress, or abuse Dial, so the allegations are
Second, Midland argues that the magistrate judge improperly
accepted conclusory allegations as true, in contravention of the
standards of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)
and Ashcroft v. Iqbal, 556 U.S. 662 (2008). This court finds
Midland’s contention to be meritless. First, Midland claims that
the court cannot accept Dial’s allegations that Midland knew that
it did not own and that Dial did not owe the alleged debt.
According to Midland, the court should look to the record of the
state-court collections action to show that these allegations are
conclusorily untrue. While judicial notice of documents in statecourt litigation may sometimes be appropriate when resolving a
motion under Rule 12(b)(6), see U.S. ex rel. Osherhoff v. Humana,
Inc., No. 13–15278, 2015 WL 223705, *5 n.4 (11th Cir. Jan. 16,
2015), such notice is not appropriate in this case. Midland is
essentially seeking to introduce evidence to contradict Dial’s
masquerading such evidence as a showing of the conclusory nature of
the allegations. These allegations, however, are not conclusory;
they are as specific as can be expected of a plaintiff who, without
benefit of discovery, pleads the defendant’s mental state. The
allegations will of course later need to be proven, but the court
will impose no further burden at this stage.
Midland also argues that Dial did not allege sufficient facts
to show that the state-court action was time-barred because she did
not allege when the claim accrued or the applicable statute of
limitations. This court will not require Dial to prove at this
stage that the suit was actually time-barred; that burden will come
Finally, Midland is correct that Dial’s two positions — (1)
she did not owe the debt; and (2) the debt was time-barred — are
inconsistent; since there is no right to collect a debt not owed,
such a right cannot be time-barred. Dial, however, need not elect
between these alternative theories without benefit of discovery.
recommendation that Midland’s motion to dismiss be denied as to
B. Count Five - Violation of 15 U.S.C. § 1692e(5)
Title 15, section § 1692e(5) prohibits debt collectors from
using “any false, deceptive, or misleading representation or means
in connection with the collection of any debt,” including “[t]he
threat to take any action that cannot legally be taken or that is
not intended to be taken.” Some courts, including the magistrate
judge in this action, have concluded that “[s]ection 1692e(5)
protects consumers against debt collectors that actually complete
illegal acts as well as against debt collectors who merely threaten
to complete those acts.” Bradshaw v. Hilco Receivables, LLC, 765 F.
Collections, Inc., 107 F.3d 347, 350–51 (5th Cir.1997); Collins v.
Erin Capital Mgmt., LLC, 991 F. Supp. 2d 1195, 1211-12 (S.D. Fla.
2013). According to these courts, “[i]t simply strains credulity to
believe that the FDCPA, a law that safeguards consumers from
abusive and deceptive debt collection practices by debt collectors,
would prohibit threats of illegal action but not the illegal
actions themselves . . . . To find otherwise would undermine the
consumer protection goals of the FDCPA.” Bradshaw, 765 F. Supp. 2d
at 730 (internal citations omitted). Other courts, however, have
found that § 1692e(5) applies only to threats and not actions, a
Receivables, LLC, 726 F. Supp. 2d 659, 666 (N.D. Tex. 2010); Okyere
v. Palisades Collection, LLC, 961 F. Supp. 2d 508, 519-20 (S.D.N.Y.
“Interpretation of a statute begins ‘with the language of the
statute itself.’ As a general rule, if the language of the statute
is plain, then our interpretative function ceases and we should
‘enforce [the statute] according to its terms.’” In re Griffith,
206 F.3d 1389, 1393 (11th Cir. 2000) (quoting United States v. Ron
Pair Enters., 489 U.S. 235, 241 (1989)).
Section 1692e(5), by its
plain language, only applies to threats — it says nothing of other
actions] suggest that the plain meaning of the statute prohibits
anything other than threats. These courts’ conclusion that the
Congress’s chosen language would result in ‘futility.’” Okyere, 961
F. Supp. 2d at 519 (quoting Sprinkle v. SB&C Ltd., 472 F. Supp. 2d
1235, 1247 (W.D. Wash. 2006)).
The plain meaning of § 1692e(5) should not be so easily
discarded. The courts applying the broader view have found it
“illogical to read the FDCPA to condemn the mere threat to file a
lawsuit that could not be legally instituted, but actually permit
the filing of illegal lawsuits.” Balthazor v. Sec. Credit Serv.,
LLC, No. 11-60867-CIV, 2012 WL 171097, *5 (S.D. Fla. Jan. 20,
2012); see also Dial v. Midland Funding, LLC, No. 2:14-cv-663-TMP,
*16 (N.D. Ala. Jan. 15, 2015) (Doc. 26) (“It falls outside the
realm of common sense for a statutory system to protect against
threatened illegal acts while failing to provide recourse for acts
actually committed.”). This court, however, finds several potential
justifications for Congress’s omission of actions from § 1692e(5).
First, “Congress might have decided that actual violations of law
would be protected by state tort law and processes whereas threats,
which are often not prohibited as vigorously by state tort or
statutory law, required special protection.” Okyere, 961 F. Supp.
2d at 519. Indeed, in this case, Dial can proceed while asserting
12 causes of action, both of federal and state law, all concerning
the exact same conduct. Because Dial is already provided with a
potential remedy, there is simply no reason to “shoehorn a claim
under subsection (5) where a debt collector merely acts to collect
on a debt but never makes either an explicit or implicit threat.”
Thompson v. CACH, LLC, No. 14 CV 0313, 2014 WL 5420137, *4 (N.D.
Ill. Oct. 24, 2014).
Further, Congress could have viewed threats as posing a
“Distinct from the other types of prohibited conduct contained in
§ 1692e, threats in and of themselves are harmful conduct because
they cause consumers to fear that debt collection efforts may be in
consequences that animate § 1692e(5), not what unfolds following
the taking of a debt collection action.” Id.
Lastly, the language of § 1692e(5) did not result from a
simple drafting error. “Elsewhere in the FDCPA, Congress was
explicit when it intended to prohibit both threats to act and
actually acting. That Congress did not do the same thing in §
1692e(5) confirms that Congress intended that provision to prohibit
only threats, not actions.” Bravo v. Midland Credit Mgmt., Inc.,
No. 14 C 4510, 2014 WL 6980438, *3 (N.D. Ill. Dec. 9, 2014)
(internal citations omitted).
Dial does not allege that Midland threatened her with illegal
Therefore, she cannot state a claim under § 1692e(5). Accordingly,
this court REJECTS the magistrate judge’s recommendation that
Midland’s motion to dismiss be denied as to count five. The motion
will be granted, and the count will be dismissed.
C. Count Nine - Violation of 15 U.S.C. § 1692f
Title 15, section 1692f provides that “[a] debt collector may
not use unfair or unconscionable means to collect or attempt to
collect any debt.” Midland does not argue that the alleged conduct
does not rise to the level of a § 1692f violation. Instead, Midland
cites an army of district court cases for the proposition that “a
claim under § 1692f must be based on conduct either within the
listed provisions [a non-exhaustive list of acts violating §
1692f], or be based on conduct which falls outside of those
provisions, but which does not violate another provision of the
FDCPA.” Winberry v. United Collection Bureau, Inc., 697 F. Supp. 2d
1279, 1292 (M.D. Ala. 2010). According to these courts, “Section
practices” which somehow manage to slip by §§ 1692d & 1692e,’”
Osborn v. Ekpsz, LLC, 821 F. Supp. 2d 859, 878 (S.D. Tex. 2011)
(quoting Edwards v. McCormick, 136 F. Supp. 2d 795, 806 (S.D. Ohio
2001)), so plaintiffs should not be permitted “to bootstrap a §
1692f claim onto a claim of an alleged § 1692d [or other FDCPA]
violation,” Eslava v. AllianceOne Receivables Mgmt., Inc., No.
12–0425–WS–N, 2012 WL 4336012, *4 (S.D. Ala. Sept. 20, 2012).
From these cases, Midland argues that Dial cannot assert a §
1692f claim because the claim is only based upon alleged conduct
that violates other FDCPA provisions. The magistrate judge refused
to apply this standard, and this court will do the same. As
recognized by the magistrate judge, the Eleventh Circuit has not
adopted Midland’s proposed view. Instead, in Crawford v. LVNV
Funding, LLC, 758 F.3d 1254, 1259 (11th Cir. 2014), the court
stated that the alleged conduct in that case violated both §§ 1692e
and 1692f. Despite Midland’s rather perplexing protestations to the
simultaneously violate § 1692f and another FDCPA provision. This
court will follow Crawford and reject the view of the cited
district courts. Therefore, the court ACCEPTS the recommendation of
the magistrate judge that Midland’s motion to dismiss be denied as
to count nine.
D. Count Ten - Violation of 15 U.S.C. § 1692f(1)
Title 15, section § 1692f states that a debt collector may not
“collec[t] any amount . . . unless such amount is expressly
authorized by the agreement creating the debt or permitted by law.”
Midland objects to the magistrate judge’s recommendation to deny
the motion as to this count. Midland argues that the focus of this
statutory provision is on the amount of the debt sought to be
collected, not the validity of the debt as a whole. According to
Midland, because Dial challenges the validity of the entire debt
and not the amount sought, she has not stated a claim under §
The court fails to understand how the Eleventh Circuit’s statement that
conduct violates both §§ 1692e and 1692f actually shows that the court was
speaking of the two statutes disjunctively.
Midland, however, makes this argument for the first time in
its objection to the report and recommendation. Because neither
Dial nor the magistrate judge had an opportunity to consider or
respond to this argument, this court, in its discretion, will not
consider it. Williams v. McNeil, 557 F.3d 1287, 1292 (11th Cir.
2009) (“[A] district court has discretion to decline to consider a
party’s argument when that argument was not first presented to the
magistrate judge.”). “‘[I]t would be fundamentally unfair to permit
a litigant to set its case in motion before the magistrate, wait to
see which way the wind was blowing, and — having received an
judge.’” Id. (quoting Paterson-Leach Co. v. Mass. Mun. Wholesale
efficiencies would be frustrated and the magistrate judge's role
reduced to that of a mere dress rehearser if a party were allowed
to feint and weave at the initial hearing, and save its knockout
punch for the second round.’” Id. (quoting United States v. Howell,
231 F.3d 615, 622 (9th Cir. 2000)). Accordingly, this court ACCEPTS
the recommendation of the magistrate judge that Midland’s motion to
dismiss be denied as to count ten.
E. Count Fourteen - Invasion of Privacy
Dial also asserts a claim under Alabama law for invasion of
privacy, premised on two forms of conduct: (1) Midland’s filing of
the state-court suit; and (2) Midland’s false credit reporting.
Midland argues that neither of these actions constitutes a basis
for Dial’s invasion of privacy claim. First, Midland asserts that
its statements in the state-court suit are protected by Alabama’s
litigation privilege. Under Alabama law, pertinent statements made
in a judicial proceeding are absolutely privileged and cannot give
rise to liability, either civil or criminal. O’Barr v. Feist, 296
So. 2d 152 (Ala. 1974). The privilege protects even “‘slanderous
statements made by parties, counsel, or witnesses in the course of
judicial proceedings, and . . . libelous charges in pleadings,
affidavits, or other papers used in the course of the prosecution
or defense of an action.’” Id. at 157 (quoting Moore v. Mfr. Nat’l
Bank, 25 N.E. 1048, 1049 (N.Y. 1890)). “‘However malicious the
intent, or however false the charge may have been, the law, from
considerations of public policy, and to secure the unembarrassed
and efficient administration of justice, denies to the defamed
party any remedy through an action for libel or slander.’” Id. The
privilege applies to claims of invasion of privacy. Drees v.
Turner, 45 So. 3d 350, 358 (Ala. Civ. App. 2010).
Dial argues that the litigation privilege does not bar her
claim because the privilege applies only to statements made during
litigation, not “to actions undertaken by parties in the course of
litigation.” Matherly v. Wells Fargo Bank, N.A., No. 1:13-cv-852WHA, 2014 WL 345397, *3 (M.D. Ala. Jan. 30, 2014). In Matherly, the
plaintiff’s bank turned over financial documents concerning the
plaintiff, its customer, as required by a subpoena in a divorce
proceeding. A week later, the bank turned over additional documents
to the plaintiff’s wife that were well outside the scope of the
subpoena. Id. at *1. In a suit against the wife, the court refused
to consider the wife’s attempts to procure the second set of
documents as privileged because the attempts constituted action,
not statements, occurring during the litigation. Id. at *3.
Dial, relying on Matherly, argues that while the statements in
the complaint may be privileged, the act of filing an improper
lawsuit is not. This court will not accept Dial’s characterization;
while Dial labels Midland’s actions as conduct and not statements,
Midland’s filing of the lawsuit is only actionable because of the
statements in the complaint, which O’Barr explicitly protects, see
O’Barr, 296 So. 2d at 157 (protecting “libelous pleadings”).
Allowing Dial to assert a claim based on the conduct of filing an
unlawful complaint — which must be determined by looking to the
statements contained in the complaint — would effectively vitiate
allegations concerning Midland’s filing of the state-court suit are
protected by the litigation privilege and cannot support her
invasion of privacy claim.
Midland also argues that Dial’s claim, as it relates to
preemption provisions, 15 U.S.C. §§ 1681h(e) and 1681t(b)(1)(F).
Section 1681h(e) provides:
Except as provided in sections 1681n and 1681o of this
title, no consumer may bring any action or proceeding in
the nature of defamation, invasion of privacy, or
negligence with respect to the reporting of information
against any consumer reporting agency, any user of
information, or any person who furnishes information to
a consumer reporting agency, based on information
disclosed pursuant to section 1681g, 1681h, or 1681m of
this title, or based on information disclosed by a user
of a consumer report to or for a consumer against whom
the user has taken adverse action, based in whole or in
part on the report except as to false information
furnished with malice or willful intent to injure such
prohibition may be imposed under the laws of any State with respect
to any subject matter regulated under section 1681s-2 of this
title, relating to the responsibilities of persons who furnish
information to consumer reporting agencies . . . .” Section 1681s2, in turn, describes duties and responsibilities of those who
provide information to consumer credit reporting agencies.
When dealing with a furnisher of credit information like
Midland, these two preemption provisions are difficult to reconcile
— they both appear to apply, but § 1681t(b)(1)(F) is an absolute
bar to state causes of action, while § 1681h(e) only bars claims
unless the information was “furnished with malice or willful intent
to injure such consumer.” Because Dial has alleged that Midland
acted with the requisite malice, this court must determine which
preemption provision applies.
Judicial attempts to apply these provisions have spawned a
number of different approaches, even among judges of this court:
Four judges, including the magistrate judge in this action,
have found that § 1681h(e) applies and permits claims based upon
malice against furnishers of credit information. Morgan v. Midland
Funding, LLC, No. 2:12-cv-3846-RDP, *3 (N.D. Ala. Jan. 4, 2013);
Wood v. Midland Funding, LLC, No. 2:12-cv-2703-KOB, 2013 WL 360146,
*4 (N.D. Ala. Jan. 29, 2013); Gamble v. Midland Funding, LLC, No.
2:12-cv-4186-AKK, 2013 WL 979202, *2 (N.D. Ala. Mar. 7, 2013); Dial
v. Midland Funding, LLC, No. 2:14-cv-663-TMP, *20 (N.D. Ala. Jan.
15, 2015) (Doc. 26).
Three judges have found that § 1681t(b)(1)(F) applies and bars
all related state law claims against furnishers. Barnett v. JP
Morgan Chase Bank, N.A., No. 1:12-cv-1745-VEH, 2013 WL 3242739, *13
(N.D. Ala. June 26, 2013); Williams v. Student Loan Guar. Found. of
Ark., No. 5:12-cv-2940-JHE, 2015 WL 241428, *13 (N.D. Ala. Jan. 20,
2015) (Haikala, J., adopting report and recommendation of England,
Two judges have found that § 1681h(e) applies to state torts,
while § 1681t(b)(1)(F) applies to statutory causes of action.
McCloud v. Homeside Lending, 309 F. Supp. 2d 1335, 1341-42 (N.D.
Ala. 2004) (Smith, J.); Champion v. Global Credit Card Serv., LLC,
No. 2:12-cv-1966-IPJ, 2012 WL 3542225, *6 (N.D. Ala. Aug. 15,
One judge has found that § 1681h(e), by its language, does not
cover furnishers, while § 1681t(b)(1)(F) does, so state law claims
are preempted. Schlueter v. BellSouth Telecommunications, 770 F.
Supp. 2d 1204, 1211 (2010) (Blackburn, J.).
One judge has applied § 1681h(e) to actions taken before
dispute; § 1681t(b)(1)(F) applies after the dispute. Woltersdorf v.
Pentagon Fed. Credit Union, 320 F. Supp. 2d 1222, 1224 (N.D. Ala.
2004) (Hancock, J.).
The undersigned has not had opportunity to weigh in on this
Schlueter. Section 1681h(e) applies to claims for invasion of
privacy brought against furnishers of credit information like
Midland, but it only applies as to “information disclosed pursuant
to section 1681g, 1681h, or 1681m” or to “information disclosed by
a user of a consumer report.” As Judge Blackburn noted, “[t]he
three sections covered by § 1681h(e) — 1681g, 1681h, and 1681m —
information. These sections do not concern a furnisher's duties of
reporting and investigation.” Schlueter, 770 F. Supp. 2d at 1209.
consumer reporting agencies; she does not allege that Midland
disclosed the information to consumers or otherwise used it.
Therefore, § 1681h(e), by its language, does not apply to Midland.
By contrast, § 1681t(b)(1)(F) does apply. The statute preempts
all state causes of action “relating to the responsibilities of
persons who furnish information to consumer reporting agencies”
under 15 U.S.C. § 1681s-2. That statute, entitled “Responsibilities
of furnishers of information to consumer reporting agencies,”
directly covers the conduct for which Dial seeks to hold Midland
liable — false credit reporting. See 15 U.S.C. § 1681s-2(a)(1)(A)
(2012) (“A person shall not furnish any information relating to a
consumer to any consumer reporting agency if the person knows or
inaccurate.”). Accordingly, § 1681t(b)(1)(F) applies and absolutely
bars Dial’s cause of action as it relates to Midland’s credit
reporting. Therefore, because no factual basis for the invasion of
privacy claim remains, the court REJECTS the magistrate judge’s
recommendation that Midland’s motion to dismiss be denied as to
count fourteen. The motion will be granted, and the count will be
Based on the court’s de novo review of the portions of the
report and recommendation to which Midland objected and the court’s
review for clear error of the portions to which Midland did not
object, the court ADOPTS the magistrate judge’s report and ACCEPTS
his recommendation as to all but counts five and fourteen of Dial’s
amended complaint. The court REJECTS the report and recommendation
as to counts five and fourteen, and those counts will be dismissed.
A separate order effectuating this opinion will be entered.
DONE this 23rd day of February, 2015.
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE
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