Alnabulsi v. Midland Funding, LLC

Filing 40

ORDER. For the reasons stated herein, Defendant's 33 Motion to Dismiss is DENIED. Alnabulsi shall file a signed statement that sets forth the principal place of business of Midland Portfolio Services, Inc., within 21 days. Failure to do so will result in dismissal of this action. Signed by Judge Michael P. Shea on 3/23/2017. (Connelly, L.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
ZOHAIR ALNABULSI,

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Plaintiff
v.
MIDLAND FUNDING, LLC,
Defendant.

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No. 3:15-cv-00247

RULING ON MOTION TO DISMISS
Plaintiff Zohair Alnabulsi (“Alnabulsi”) filed a single-count first amended complaint
(“FAC”) against Defendant Midland Funding, LLC (“Midland”), alleging a violation of the
Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110 (Count One). Midland moves
to dismiss for lack of subject matter jurisdiction, arguing that the FAC fails to meet the amount
in controversy requirement for diversity cases under 28 U.S.C. § 1332. For the reasons stated
below, the Court DENIES Midland’s motion to dismiss. (ECF No. 33.)
I.

BACKGROUND
The following factual allegations are taken from the FAC and are accepted as true for the

purpose of deciding Midland’s motion to dismiss.
A. Factual Background
Alnabulsi is a resident of Guilford, Connecticut. (FAC, ECF No. 32 at ¶ 1.) In 2008,
Alnabulsi underwent a “failed back surgery and was diagnosed with Complex Regional Pain
Syndrome (“CRPS”).” (Id. at ¶ 29.) Alnabulsi lost his job as a result of his disability (id.), and
this apparently led him to incur substantial credit card debt.

Midland is a Delaware limited liability corporation the sole member of which is Midland
Portfolio Services, Inc., a Delaware corporation. (ECF No. 32 at ¶ 2, 4.)1
On November 23, 2011, Midland sued Alnabulsi for credit card debt it had purchased
from Chase Bank. (Id. at ¶ 30.) On March 27, 2012, Midland secured a default judgment against
Alnabulsi for $5,836.63. (Id. at ¶ 31.) On April 3, 2012, Midland placed a judgment lien on 2
Covey Crossing in Guilford, Connecticut. (Id. at ¶ 32.) It is not clear whether Midland
performed a title search on the property at 2 Covey Crossing. (Id. at ¶ 33.) Alnabulsi did not
own 2 Covey Crossing at the time of the judgement lien. (Id. at ¶ 32.) The owner of 2 Covey
Crossing learned of the lien in March 2013, after being unable to close on a mortgage
refinancing agreement until the judgment was satisfied. The lien halted the refinancing process.
(Id. at ¶ 34-35.) A Midland employee failed to resolve the issue in a phone call with the owner.
(Id. at ¶ 36.) “The delay in closing ended up costing an extra 25 basis point[s], 0.25% on the
entire amount of the loan, [and] additional attorney fees to deal with the lien problem.” (Id. at ¶
37.)
After being notified of the presence of the lien, Alnabulsi was blamed for the delay in the
closing, the higher rate on the mortgage, and the additional costs imposed on the owner of 2
Covey Crossing. (Id. at ¶ 38.) As a result, Alnabulsi had increased episodes of migraine
headaches and sleep disturbances, and became depressed. (Id.) Alnabulsi borrowed $7,500 from

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On May 4, 2016, the Court ordered Alnabulsi to file an amended complaint alleging the
citizenship of each of Midland’s members. (ECF No. 31.) For purposes of diversity jurisdiction,
a limited liability company has the citizenship of its members. Handelsman v. Bedford Vill.
Assocs. Ltd. P'ship, 213 F.3d 48, 51-52 (2d Cir. 2000). Alnabulsi filed his amended complaint
on May 17, 2016, but did not fully comply with the order. He stated that Midland’s sole member
is Midland Portfolio Services, Inc., a Delaware corporation, but he did not provide its principal
place of business. Therefore, Alnabulsi shall file a signed statement that sets forth the principal
place of business of Midland Portfolio Services, Inc., within 21 days.
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a friend to give to the owner of 2 Covey Crossing to put in escrow. (Id. at ¶ 39.) He had to drive
from Guilford, Connecticut to Bloomingdale, New Jersey to get the money. (Id.) Alnabulsi was
charged a $500 “upfront fee” and an “additional 2% a month in interest” by his friend, which
caused Alnabulsi more stress due to other financial obligations. (Id.)
The owner of 2 Covey Crossing had no relationship with Midland. (Id. at ¶ 42.)
Alnabulsi alleges that Midland engaged in “unfair, deceptive conduct to collect a debt,” and
“caused the Plaintiff to come up with money he does not have, to make sure the refinancing
process will continue.” (Id. at ¶ 41.) It further caused “fights and hardship in addition to
monetary losses” and “embarrassment [and] humiliation in front of the attorney, and the bank
officers involved in the closing process.” (Id. at ¶ 43.)2 As a result of the stress, Alnabulsi was
prescribed Duloxetine, Alprazolam, and Bupropion for his major depression, anxiety, and pain.
(Id. at ¶ 4.) Additionally, Alnabulsi suffered increased episodes of migraines and insomnia. (Id.)
Alnabulsi alleges that Midland generates “a significant portion of their revenue by filing
lawsuits and collecting on judgments against individual consumers.” (Id. at ¶ 13.) Midland filed
245,000 collection lawsuits in 2009. (Id. at ¶ 20.) The majority of the collection lawsuits
resulted in default judgment in favor of Midland due to lack of defendant appearance or
response. (Id.) Midland Credit Management (“MCM”) is a subsidiary of Encore Group, Inc.,
which is also the parent company of Midland. (Id. at ¶ 3.) At least three MCM employees
“admitted under oath in different sworn testimony that they signed false statements that were
filed in courts around the country to obtain judgments against individual citizens in favor of
Midland.” (Id. at ¶ 21.) The MCM employees testified that they would sign 300 to 400 computer

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Although the complaint does not specify the relationship between Alnabulsi and the owner of 2
Covey Crossing, Midland’s brief states that the owner is Alnabulsi’s ex-wife. (ECF No. 34 at 2
n.1.)
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generated affidavits each day without reading them, having any knowledge of the information
contained in them, or checking the accuracy of the information to which they were swearing to.
(Id. at ¶ 22.) MCM employees testified that Midland used “robo-signed affidavits attesting to the
authenticity of documents attached to the affidavit that purported to substantiate the debt.” (Id.
at ¶ 26.) These practices allowed Midland to obtain a judgment against Alnabulsi, based on
“incomplete information supported by what could be false or fraudulent affidavits.” (Id. at ¶ 28.)
B. Procedural History
Alnabulsi filed his original complaint on February 20, 2015. (ECF No. 1.) On
September 28, 2015, Midland filed a motion to dismiss Count Two because the one-year statute
of limitations under the Fair Debt Collection Practices Act (FDCPA) had expired. (ECF No. 11.)
On January 27, 2016, the Court dismissed Count Two as untimely. (Order, ECF No. 22.) The
Court gave Alnabulsi an opportunity to “submit a signed statement setting forth the citizenship of
each of Midland’s members” showing that there was diversity jurisdiction to proceed on Count
One. (Id.) On February 11, 2016, Alnabulsi filed a “Statement in Support of Diversity
Jurisdiction,” responding to the Court’s order and Midland’s amount in controversy argument.
(ECF No. 26.) On May 4, 2016, the Court gave Alnabulsi an opportunity to file an amended
complaint “alleging facts demonstrating (1) the citizenship of each of Midland’s members, and
(2) the amount he claims in emotional damages as a result of Midland’s alleged violation of
CUTPA.” (Order, ECF No. 31.) Subsequently, Alnabulsi filed his First Amended Complaint
(FAC) on May 17, 2016. (ECF No. 32.)
On February 9, 2016, Midland filed a motion for leave to file a memorandum regarding
the Court’s jurisdiction, in which it argued that even if the parties in this case are diverse, the
amount in controversy does not exceed $75,000. (ECF Nos. 23, 24, 25.) On May 31, 2016,

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Midland filed a motion to dismiss Alnabulsi’s FAC under Rule 12(b)(1) of the Federal Rules of
Civil Procedure. (ECF No. 33.) On January 19, 2017, the Court ordered Midland to file a
“Notice to Pro Se Litigant.” (ECF No. 37.) Midland filed a “Notice to Self-Represented Litigant
Concerning Motion to Dismiss” on January 19, 2017 (ECF No. 38.), and Alnabulsi filed a
“Motion in Opposition of Dismissal” on February 6, 2017. (ECF No. 39.)
II.

STANDARD
“The standards of review for a motion to dismiss under Rule 12(b)(1) for lack of subject

matter jurisdiction and under 12(b)(6) for failure to state a claim are substantively identical.”
Gonzalez v. Option One Mortgage Corp., No. 3:12-CV-1470, 2014 WL 2475893, at *2 (D.
Conn. June 3, 2014) (citations and internal quotation marks omitted). “In deciding both types of
motions, the Court must accept all factual allegations in the complaint as true, and draw
inferences from those allegations in the light most favorable to the plaintiff.” Id. “On a Rule
12(b)(1) motion, however, the party who invokes the Court's jurisdiction bears the burden of
proof to demonstrate that subject matter jurisdiction exists . . . . ” Id. “A case is properly
dismissed for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) when the district
court lacks the statutory or constitutional power to adjudicate it.” Id. “[P]leadings of a pro
se plaintiff must be read liberally and should be interpreted to ‘raise the strongest arguments that
they suggest.’” Graham v. Henderson, 89 F.3d 75, 79 (2d Cir. 1996) (quoting Burgos v.
Hopkins, 14 F.3d 787, 790 (2d Cir. 1994)).
III.

DISCUSSION
Midland argues that the FAC should be dismissed because it fails to meet the amount in

controversy requirement. The Supreme Court has stated, “if, from the face of the pleadings, it is
apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the

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proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that
amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the
suit will be dismissed.” St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938).
“A party invoking the jurisdiction of the federal court has the burden of proving that it appears to
a ‘reasonable probability’ that the claim is in excess of the statutory jurisdictional amount.”
Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994) (citing Moore v.
Betit, 511 F.2d 1004, 1006 (2d Cir. 1975)). “This burden is hardly onerous, however, for we
recognize ‘a rebuttable presumption that the face of the complaint is a good faith representation
of the actual amount in controversy.’” Scherer v. Equitable Life Assurance Soc’y of U.S., 347
F.3d 394, 397 (2d Cir. 2003) (quoting Wolde-Meskel v. Vocational Instruction Project Cmty.
Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999)).
The Second Circuit has “held that the legal impossibility of recovery must be so certain
as virtually to negat[e] the plaintiff’s good faith in asserting the claim. If the right of recovery is
uncertain, the doubt should be resolved . . . in favor of the subjective good faith of the plaintiff.”
Chase Manhattan Bank, N.A. v. Am. Nat. Bank & Trust Co. of Chicago, 93 F.3d 1064, 1070 (2d
Cir. 1996) (internal quotation marks and citation omitted). “Even where the allegations leave
grave doubt about the likelihood of a recovery of the requisite amount, dismissal is not
warranted.” Scherer, 347 F.3d at 397 (internal quotation marks and citation omitted). “The
jurisdictional determination is to be made on the basis of the plaintiff's allegations, not on a
decision on the merits.” Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d. Cir. 1982)
(holding that a defense on the merits may not be considered or adjudicated on jurisdictional
motions). A court “assess[es] the amount in controversy at the time the action is commenced,
without regard to the merits of the claims or defenses, and without regard to subsequent events

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which bring the amount in controversy below the jurisdictional requirement.” Kry v. Poleschuk,
892 F. Supp. 574, 576 (S.D.N.Y. 1995).
Alnabulsi alleges that Midland violated CUTPA by placing a lien on property not
belonging to its debtor or without conducting research on the owner or completing a title search.
(FAC, ECF No. 32 ¶ 44.) He alleges that he borrowed $7,500 from a friend, at a cost of a $500
fee and 2% monthly interest, to enable the owner of the wrongly liened property to proceed with
the refinancing. (Id. at ¶ 39.) Alnabulsi claims that he “suffered an ascertainable loss of money,
and suffered emotional distress as a result of Midland’s unfair or deceptive commerc[ial]
practice.” (Id. at ¶ 44.) He seeks damages for emotional distress in the amount of $80,000 “and
any actual, compensatory and statutory damages, appropriate equitable relief, costs of suit and
attorney’s fees pursuant to § 42-110g, and such other relief as the Court deems just and proper.”
(Id. at 9, “Prayer.”) He also asks for $5,000,000 in punitive damages to be paid to the State of
Connecticut “or any other amount the Court finds equitable.” (Id.)
Midland argues that Alnabulsi’s claim does not meet the jurisdictional amount of $75,000
because he cannot recover emotional damages under CUTPA. (ECF No. 34.) Midland points to
a Connecticut Appellate Court decision holding that emotional distress or injury does not satisfy
the threshold requirement of an “ascertainable loss” under CUTPA. Di Teresi v. Stamford
Health System, Inc., 149 Conn. App. 502, 512 (2014) (citing Builes v. Kashinevsky, No. CV-095022520S, 2009 WL 3366265 at *2 (Conn. Super. Ct. Sept. 15, 2009) (explaining that Superior
Court decisions have consistently held that emotional distress on its own is not an ascertainable
loss under CUTPA)). CUTPA’s “ascertainable loss” requirement stems from the following
language in the statute: “[A]ny person who suffers any ascertainable loss of money or property,
real or personal, as a result of the use or employment of a method, act or practice prohibited by

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section 42-110b, may bring an action in the judicial district in which the plaintiff or defendant
resides or has his principal place of business or is doing business, to recover actual damages.”
Conn. Gen. Stat. § 42-110g (emphasis added.)  The Di Teresi court held that “the plaintiffs’
claim of emotional distress does not constitute an ascertainable loss of money or property for
purposes of CUTPA,” because there was no claim that the plaintiff “suffered any actual
monetary or physical loss.” 149 Conn. App. at 510, 512; see also Larobina v. Wells Fargo Bank,
N.A., 2014 WL 3419534, at 1 (D. Conn. July 10, 2014), aff’d, 632 F. App’x 55 (2d Cir. 2016).
While it is true that Di Teresi and Larobina hold that emotional damages on their own do
not constitute an ascertainable loss, the Court has found no Connecticut appellate or Second
Circuit decision holding that actual damages under CUTPA cannot include damages for
emotional harm where there is otherwise an ascertainable loss. The language of the statute itself
leaves open the possibility that once a CUTPA claimant has satisfied the threshold requirement
of an ascertainable loss by alleging some monetary harm  as Alnabulsi has by claiming interest
and other costs for the loan from his friend , he may recover his “actual damages,” a term that
might include damages for emotional harm. Conn. Gen. Stat. § 42-110g(a) (“Any person who
suffers any ascertainable loss of money or property . . . as a result of the use or employment of a
method, act or practice prohibited by section 42-110b, may bring an action . . . to recover actual
damages.”). To be sure, the term “actual damages” does not always include damages for
emotional distress. F.A.A. v. Cooper, 566 U.S. 284, 292 (2012) (holding that “actual damages”
as used in provision of Privacy Act, 5 U.S.C. § 552a, authorizing actions against federal
government does not include damages for emotional distress, because the “meaning of ‘actual
damages’ is far from clear,” and “changes with the specific statute in which it is found.”;
although the term “is sometimes understood [in other federal statutes] to include nonpecuniary

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harm,” the Supreme Court construed it not to include such harm in a provision authorizing
damages against the federal government, because waivers of sovereign immunity are narrowly
construed.) Furthermore, the Court has been unable to find any Connecticut appellate decisions
construing the term within the context of CUTPA. See Meade v. Briarwood Acquistions, LLC,
2014 WL 7271955, at *5 (Conn. Super. Ct. Nov. 12, 2014) (“It is an unsettled question whether
‘actual damages’ awardable to a successful CUTPA plaintiff include damages for pain and
suffering, or emotional distress.”)
Still, CUTPA is “remedial in character ... and must be liberally construed in favor of
those whom the legislature intended to benefit.” Fairchild Heights Residents Ass'n, Inc. v.
Fairchild Heights, Inc., 310 Conn. 797, 817, (2014). A liberal construction of the term “actual
damages” in CUTPA would allow recovery for emotional harm, at least where there was also
economic harm sufficient to satisfy the threshold requirement of an “ascertainable loss,” as there
is in this case. In any event, the uncertainty as to whether the term “actual damages” in CUTPA
embraces damages for emotional harm is enough to defeat Midland’s challenge to the amount in
controversy set forth in the amended complaint, which includes an allegation that Alnabulsi
suffered emotional distress damages exceeding $75,000. That uncertainty prevents the Court
from concluding that “the legal impossibility of recovery [is] so certain as virtually to negat[e]
the plaintiff’s good faith in asserting the claim.” Chase Manhattan Bank, N.A. v. Am. Nat. Bank
& Trust Co. of Chicago, 93 F.3d 1064, 1070 (2d Cir. 1996).
IV.

CONCLUSION
For the reasons stated above, the Court DENIES Defendant Midland’s motion to dismiss.

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As directed in Footnote 1, Alnabulsi shall file a signed statement that sets forth the
principal place of business of Midland Portfolio Services, Inc., within 21 days. Failure to do so
will result in dismissal of this action.
IT IS SO ORDERED.

/s/
Michael P. Shea, U.S.D.J.
Dated:

Hartford, Connecticut
March 23, 2017

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