Lucas v. NCO Financial Systems Incorporated et al

Filing 26

ORDER granting in part and denying in part 21 Motion to Dismiss for Failure to State a Claim, Motion to Dismiss for Lack of Jurisdiction, and Motion for Judgment on the Pleadings. The FDCPA claims against NCT asnd the IIED claim are dismissed. Signed by Judge David G Campbell on 1/21/2015.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Douglas Lucas,

No. CV-14-01266-PHX-DGC
Plaintiff,

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v.

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ORDER

NCO Financial Systems Incorporated, et al.,

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Defendants.

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Defendants NCO Financial Systems, Inc. (“NCO”), and National Collegiate

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Master Student Loan Trust I (“NCT”), have filed a motion to dismiss for lack of subject

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matter jurisdiction and for failure to state a claim, and for judgment on the pleadings.

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Doc. 21. The motion is fully briefed. Docs. 21, 22, 23, 25. The Court will grant the

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motion in part and deny it in part.1

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I.

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Background.
Plaintiff alleges the following facts in his complaint. Doc. 1. Plaintiff obtained a

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private student loan in order to fund his education.

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Defendant NCT obtained some interest in the loan. Id., ¶ 13. While NCT claims to have

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purchased Plaintiff’s debt from the original creditor, Plaintiff never received

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documentation that NCT is the assigned owner of the loan. Id., ¶ 14; Doc. 21 at 2. NCT

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hired Defendant NCO to pursue debt collection activities against Plaintiff. Doc. 1 at ¶ 15.

Id., ¶ 10-13.

Sometime later,

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The request for oral argument is denied because the issues have been fully
briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b);
Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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Plaintiff made regular payments on his loan to NCO from 2008 until December 2012.

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Id., ¶ 17. In January 2013, NCO claimed the debt was no longer with NCO and began

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refusing payments from Plaintiff. Id.

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On June 7, 2013, an NCO representative (“Okwan”) contacted Plaintiff and

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“insisted that Plaintiff should immediately take out a separate private loan or borrow

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money from family members in order to pay of the balance of the Debt in full and avoid a

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lawsuit and wage garnishment.” Id., ¶ 19. During that same phone conversation, a

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second NCO representative (“Wilson”) came on the line, claimed that the entire balance

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of the loan was due immediately, and threatened to pursue wage garnishment and a

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lawsuit against Plaintiff. Id., ¶ 20. Plaintiff claims that these threats pressured him into

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issuing a $1,000 post-dated electronic check. Id., ¶ 21.

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Plaintiff attempted to call Wilson at NCO on June 10, 2013, but the NCO

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employee who answered the call claimed Wilson was unavailable. Id., ¶ 22. Plaintiff

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asked NCO to validate his debt with written documentation and to cancel the $1,000

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check. Id., ¶¶ 23-24. The NCO employee informed Plaintiff she could not validate the

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debt, and that if Plaintiff cancelled the post-dated payment the entire debt would become

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immediately due and he would not receive a second chance to make payments. Id.

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Later that day, Plaintiff called NCO a second time and was able to reach Wilson.

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Id., ¶¶ 25-26. Plaintiff asked Wilson about both the wage garnishment threats Wilson

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and Okwan had made against Plaintiff as well as stopping the post-dated payment. Id.,

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¶¶ 27-28. Wilson denied making a wage garnishment threat, stating that it would have

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been inappropriate to do so, and told Plaintiff “next time you call here you will be paying

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the balance on this account. . . you have ten whole days to have the funds available.

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Clients are going to move the account.”

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documentation to Plaintiff, and that they would touch base again on June 12, 2013

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regarding Plaintiff’s request to cancel the payment.” Id., ¶ 30. Plaintiff did not receive

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the fax. Id., ¶ 31.

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Id., ¶¶ 28-29.

Wilson agreed to “fax

On June 12, 2013, Plaintiff called NCO and was informed that Wilson was again

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unavailable to speak with him. Id., ¶ 33. Plaintiff received a voicemail later that day

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from Okwan. Id., ¶ 34. When Plaintiff returned the call, NCO stated that Okwan was

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unavailable, Plaintiff’s account had once again been moved, and NCO was unable to

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provide Plaintiff with documentation. Id. NCO placed Plaintiff on an extended hold

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while NCO researched the account issue, and eventually informed Plaintiff there had

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been a mistake: NCO did possess Plaintiff’s account. Id. NCO transferred Plaintiff’s call

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to Wilson, who told Plaintiff NCO could not validate the debt without a payment

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arrangement of 60-90 days or more, but NCO was “really banking on [Plaintiff] getting a

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loan to pay it off.” Id., ¶¶ 34-35. Plaintiff sent a written request to NCO requesting

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validation of the debt, but received no response. Id., ¶¶ 37, 45.

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Following these phone calls, Plaintiff made additional attempts at reaching NCO

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and NCT in an attempt to find who had possession of his debt. Id., ¶ 39. NCO and NCT

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both informed Plaintiff that his debt had been transferred to a third entity, Gurstel

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Chargo, PA. Id., ¶ 40. When Plaintiff called Gurstel Chargo, they denied having

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possession of the account. Id., ¶ 41.

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Plaintiff alleges that each transfer of his account has resulted in invalid charges

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and rate hikes amounting to approximately $1,400. Id., ¶ 44; Doc. 22, 2-3. Additionally,

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Plaintiff claims his credit has been negatively impacted as a result of Defendant’s

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misrepresentations regarding the location of the debt, and refusal to accept payment.

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Doc. 1, ¶ 47. Plaintiff filed this action on June 6, 2014, alleging that Defendants violated

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the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, and intentionally

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inflicted emotional distress on Plaintiff. Id.

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II.

Analysis.

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Defendant asserts Plaintiff’s claims should be dismissed for three reasons: (1) the

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Court lacks subject matter jurisdiction over Defendant NCT because NCT is not a “debt

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collector” as defined under the FDCPA; (2) Plaintiff’s claim against Defendant NCO is

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moot following Defendant’s July 17, 2014 Offer of Judgment; and (3) Plaintiff has failed

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to plead any facts in support of his IIED claims. Doc. 21 at 2. The Court will address

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each issue in turn.

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A.

Defendant NCT as Debt Collector.

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“It is the purpose of [the FDCPA] to eliminate abusive debt collection practices by

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debt collectors.” 15 U.S.C. § 1692a (e). A defendant must be a “debt collector” as

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defined in the statute to be liable under the FDCPA. Izenberg v. ETS Servs., 589 F. Supp.

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1193, 1198 (C.D. Cal. 2008) (citing Heintz v. Jenkins, 514 U.S. 291, 294 (1995); Romine

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v. Diversified Collection Servs., Inc., 155 F.3d 1142, 1146 (9th Cir. 1998)).

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“The term ‘debt collector’ means any person who uses any instrumentality of

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interstate commerce or the mails in any business the principle purpose of which is the

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collection of any debts, or who regularly collects or attempts to collect, directly or

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indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a

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(6). The term “debt collector” does not include “any person collecting or attempting to

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collect any debt owed . . . to the extent such activity . . . (iii) concerns a debt which was

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not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a (6)(F)(iii).

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1.

Subject Matter Jurisdiction.

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Defendant argues that NCT cannot be considered a “debt collector” because NCT

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purchased Plaintiff’s debt before Plaintiff’s default, and that the Court therefore lacks

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subject matter jurisdiction. Whether a particular defendant is a “debt collector” under the

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FDCPA is a question on the claim’s merits, not an issue of subject matter jurisdiction.

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See Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 997-98 (9th Cir. 2010); Trs. of the

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Screen Actors Guild-Producers Pension & Health Plans v. NYCA, Inc., 572 F.3d 771,

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775 (9th Cir. 2009)). The Court will not dismiss the claims against NCT for lack of

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subject matter jurisdiction.

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2.

Failure to State a Claim.

Defendant claims that Plaintiff’s complaint fails to mention a single fact sufficient
to state a claim against NCT under the FDCPA. Doc. 23 at 5. The Court agrees.

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Plaintiff asserts in his complaint that NCT is “debt collector,” that NCT hired

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NCO to pursue the debt, and that NCT never provided Plaintiff with validation of his

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debt. Id., ¶¶ 7, 14, 45. But his complaint includes no factual allegations to show that

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NCT is in fact a debt collector, and no factual allegations regarding any actions taken by

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NCT that violated the FDCPA. Virtually all of Plaintiff’s factual allegations concern

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actions taken by NCO. Id., ¶¶ 14-41. Plaintiff contends in his response brief that NCT is

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liable under the FDCPA because NCT and NCO are “pretty much the ‘same’ entity”

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(Doc. 22 at 6), but the complaint – which must be the focus of the Court’s attention in

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ruling on a Rule 12(b)(6) motion – fails to allege a single fact that would support this

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theory. The Court will dismiss Plaintiff’s FDCPA claims against NCT for failure to state

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a claim.

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B.

Mootness of Plaintiff’s Claims.

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Defendants contend that Plaintiff’s claims against NCO have been rendered moot

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because Plaintiff refused Defendant’s Rule 68 offer of judgment. Doc. 21 at 9-10. As

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Defendants should have recognized, the Ninth Circuit has rejected this argument. Diaz v.

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First American Home Buyers Protection Corp., 732 F.3d 948, 954-55 (9th Cir. 2013)

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(“an unaccepted Rule 68 offer that would have fully satisfied a plaintiff’s claim does not

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render that claim moot.”).

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C.

Intentional Infliction of Emotional Distress.

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To support a claim for Intentional Infliction of Emotional Distress (“IIED”) in

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Arizona, a plaintiff must show: (1) the defendant’s conduct was extreme and outrageous;

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(2) the defendant intended to cause emotional distress or recklessly disregarded the near

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certainty that such distress would result from his conduct; and (3) severe emotional

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distress occurred as a result of defendant’s conduct. See Ford v. Revlon, 734 P.2d 580,

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585 (Ariz. 1987). In order to meet the first element, the plaintiff must show that the

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defendant’s acts were “so outrageous in character and so extreme in degree, as to go

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beyond all possible bounds of decency, and to be regarded as atrocious and utterly

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intolerable in a civilized community.” Mintz v. Bell Atl. Sys. Leasing Int’l, Inc., 905 P.2d

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559, 563 (Ariz. Ct. App. 1995) (citing Cluff v. Farmers Ins. Exchange, 460 P.2d 666, 668

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(1969)).

Defendants’ alleged actions fall well short of conduct typically deemed

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sufficient to sustain a claim for IIED under Arizona law.

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IT IS ORDERED that Defendant’s motion to dismiss (Doc. 21) is granted in

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part and denied in part. The FDCPA claims against NCT and the IIED claim are

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dismissed.

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Dated this 21st day of January, 2015.

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