McGown v. Silverman & Borenstein PLLC et al

Filing 30

REPORT AND RECOMMENDATIONS re 13 GRANTING the MOTION to Dismiss the Second Amended Complaint filed by ADP, Inc.. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Obje ctions (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 2/24/2014. Signed by Judge Mary Pat Thynge on 2/7/14. (kjk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

HOLLY McGOWN,
Plaintiff,

Case No.: 13-cv-748-RGA/MPT

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SILVERMAN & BORENSTEIN, PLLC,
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Defendants.

REPORT AND RECOMMENDATION

I.

N

INTRODUCTION

A.

Procedural Background

On April 29, 2013, plaintiff Holly McGown ("McGown") filed suit against
Silverman & Borenstein, PLLC, ("S&B") and ADP, Inc. ("ADP") alleging violations of the
Fair Debt Collection Practices Act ("FDCPA") and both Delaware and Colorado
common law. 1 McGown amended the complaint on May 20, 2013 to correct ADP's
name. 2 McGown again amended her complaint on July 23, 2013 to add New Jersey
common law claims against ADP, while withdrawing her Delaware common law claims. 3
Both S&B and ADP filed motions to dismiss pursuant to FED. R. C1v. P. 12(b)(6}. 4 This
Report and Recommendation only addresses ADP's motion to dismiss.

D.l. 1; id. at 1f 1; see also D.l. 3 (correcting defendant name from "Automatic
Data Processing, Inc." to "ADP, Inc.").
2
D.l. 3.
3
D.l. 8.
4
D.l. 13 (ADP's motion to dismiss dated September 27, 2013); D.l. 16 (S&B's
motion to dismiss dated October 1, 2013).
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B.

Factual Background

McGown is a Delaware resident. 5 S&B is a professional limited liability company
with its principal office in Colorado. 6 ADP is a payroll processor with its principal office
in New Jersey. 7 S&B performed collection work for Capital One Bank (USA) N.A.
("Capital One") and obtained a judgment for Capital One against Oscar P. Flores
("Flores") on May 17, 2007. 8 S&B subsequently obtained a writ of garnishment against
Flores which listed Flores by name as well social security number that turned out to be
McGown's social security number. 9 The writ was then served upon Wai-Mart who
forwarded the writ to its payroll processor, ADP. 10 ADP matched the social security
number on the writ to McGown's social security number and processed the
garnishment, resulting in a $232.84 deduction from McGown's paycheck. 11 On March
11, 2013, prior to the deduction, McGown notified ADP of the incorrect information
contained in the writ. 12 However, the garnishment was still processed and the money
was not returned to McGown by Wai-Mart until March 28,2013. 13

C.

Legal Standard- Motion to Dismiss Under Rule 12(b)(6)

In considering a motion to dismiss under FED. R. C1v. P. 12(b)(6), a court must
also consider Rule 8(a)(2). Rule 8(a)(2) requires "a short and plain statement of the
5

D.I 8 at 11 7.
/d. at 11 9.
7
/d. at 11 11 .
8
/d. at 1111 21-22.
9
/d. at 1111 24-25, 27; D.l. 17 at 2.
10
D. I. 8 at W 25, 42.
11
/d. at W 42, 48 (alleging a garnishment of McGown's paycheck on March 14,
6

2013).
12
13

/d. at 11 45; D. I. 20 at 11 17.
See D.l. 8 at 11 52; D.l. 13 at 11 21; 0.1. 20 at 11 21.

2

claim showing that the pleader is entitled to relief." 14 As such, a plaintiff must plead
sufficient facts to render the claim facially plausible. 15 The court is required to consider
all material allegations of the complaint as true when evaluating a motion to dismiss
under Rule 12(b)(6). 16 "'The issue is not whether a plaintiff will ultimately prevail, but
whether the claimant is entitled to offer evidence to support the claims."' 17 A motion to
dismiss may be granted only if, after, "accepting all well-pleaded allegations in the
complaint as true, and viewing them in the light most favorable to the plaintiff, plaintiff is
not entitled to relief." 18
"[C]ourts generally consider only the allegations contained in the complaint,
exhibits attached to the complaint and matters of public record" when reviewing a
motion to dismiss. 19 In the event that matters outside of the pleadings are considered,
the court is required to consider the motion as a Rule 56 motion for summary
judgment. 20 However, a court may consider '"matters incorporated by reference or
integral to the claim, items subject to judicial notice, matters of public record, and orders
[and] items appearing in the record of the case"' without converting the motion to
dismiss to a motion for summary judgment. 21 A plaintiff is entitled to notice and a fair
14

FED. R. CIV. P. 8(a)(2).
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)).
16
Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993).
17
In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1420 (3d Cir. 1997)
(quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
18
Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (internal quotation
marks and citations omitted).
19
Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192,
1196 (3d Cir.1993).
2
FED. R. CIV. P. 12(d).
21
Buck v. Hampton Tp. School Dist., 452 F.3d 256, 260 (3d Cir. 2006) (alteration
in original) (quoting 58 Charles A. Wright & Arthur R. Miller, Federal Practice &
15

°

3

opportunity to respond to evidence considered by the court, but where such notice was
available, it is proper for the court to consider that evidence. 22

D.

Positions of the Parties

McGown alleges ADP violated the FDCPA under 15 U.S.C. § 1692f, 23 and New
Jersey common law via conversion. 24 Specifically, she contends by processing a
garnishment of her wages, ADP's conduct constitutes "unfair or unconscionable means
to collect or attempt to collect any debt," not expressly authorized by agreement or law,
and thereby violates of both§§ 1692f and 1692f(1 ). 25 The premise of her argument is
that her wages were garnished to collect another person's debt-Fiores' debt. 26
In its motion to dismiss, ADP contends: (1) McGown has not sufficiently alleged
ADP is a "debt collector" and whether Flores' "debt" is covered by the FDCPA; 27 (2) her
claims for conversion under Delaware or New Jersey state law fail as a matter of law; 28
and (3) she failed to assert recoverable damages from ADP. 29

II.

ANALYSIS
A.

Applicability of the FDCPA
i.

"Debt Collector"

Procedure§ 1357 (3d ed. 2004)).
22
Pension Benefit, 998 F.2d at 1196-97 ("When a complaint relies on a
document, however, the plaintiff is obviously on notice of the contents of the document,
and the need for a chance to refute evidence is greatly diminished.") (internal citations
omitted).
23
D.l. 8 at 1f 54.
24
/d. at 1f 57.
25
D. I. 8 at 1f 54; see a/so 15 U.S.C. § 1692f.
26
D.l. 8 at 1f 54.
27
D .I. 13 at 7-1 0.
28
/d. at 10-12.
29
/d. at 12-14.

4

AOP contends McGown failed to sufficiently plead it is a "debt collector," 30
characterizing her pleadings as conclusory and without a factual basis. 31 AOP instead
characterizes itself as a payroll and data processor and asserts garnishments are not a
regular occurrence in its business practice. 32 Further, it points out the employer-in this
case, Wai-Mart-actually deducts the garnishment and AOP never took possession or
deprived McGown of her wages or interest in those wages. 33
McGown counters AOP is the quintessential debt collector within the broad
purview of the FOCPA because it regularly processes garnishments as evidenced by
AOP having a separate department for such processing. 34 She further argues the
percentage of AOP's business committed to garnishments is irrelevant, and analogizes
its conduct to a process server which would be subject to the FOCPA as a debt
collector, except for a specific exemption. 35 McGown also disputes AOP's contention
that possession of her wages is required for application of the FOCPA. 36
The FOCPA applies only when the attempt to collect is made by a debt collector
as defined by 15 U.S.C. § 1692a(6). The statute defines a "debt collector" as "any
person who ... in any business the principal purpose of which is the collection of any
debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed
or due or asserted to be owed or due another." 37 In the present case, AOP processed a
30

0.1. 13 at 1f32.

31
32

/d.
/d. at 1l1f33-34.
/d. at 1l1f 34-35.

33
34

0.1. 20 at 1f33 (citing to an alleged AOP website which claims "1 in 8
employees has at least one garnishment over his or her lifetime").
35
/d. at 1f 34.
36
/d. at 1f35.
37
15 U.S.C. § 1692a(6).

5

garnishment delivered to it by Wai-Mart, received from S&B in an attempt to collect a
debt. However, just as Wai-Mart is not a debt collector, its payroll and garnishment
processor cannot be a debt collector. 38 While McGown argues AOP regularly
processes garnishments, she is unable to cite authority for the proposition that
processing a garnishment is collection activity. AOP correctly characterizes McGown's
allegation it is a debt collector as conclusory and without factual support. Thus, AOP's
motion to dismiss should be granted.

ii.

"Debt"

AOP contends McGown failed to sufficiently allege the debt owed by
Flores satisfies the FOCPA definition of "debt." 39 Instead, AOP characterizes McGown's
allegations as conclusory and lacking factual support. 40
McGown, however, counters S&B, as the debt collector, is privy to information
concerning the basis of the underlying debt. 41 As a third party non-debtor, McGown is
unable to publicly access information confirming the nature of the debt. 42 McGown,
though, points out the underlying suit against Flores was an action against an individual
and not a business. 43 She further argues S&B admits it collects consumer debts, and
Flores is not associated with a business, precluding the possibility the underlying debt is

38

The Third Circuit, in discussing the legislative history of the FOCPA, found an
intent to apply the Act to "independent debt collectors." F. T.C. v. Check Investors, Inc.,
502 F.3d 159, 173 (3d Cir. 2007). Here, AOP was not acting as an independent debt
collector attempting to collect the debt; it was the recipient of a writ of garnishment
which it attempted to process.
39
0.1. 13 at 1J 36.
40 /d.
41
0.1. 20 at 1J 36.
42 /d.
43

/d.
6

commercial in nature. 44 McGown also refers to S&B's disclosure from its website
acknowledging "[t]his firm is acting as a debt collector. This is an attempt to collect a
debt and any information obtained will be used for that purpose[)." 45
The FDCPA applies only when a "debt" arises from a transaction where the
subject of the transaction is "primarily for personal, family, or household purposes."46
As discussed in the Report & Recommendation regarding S&B's motion to dismiss and
incorporated herein by reference, 47 McGown has sufficiently pled the underlying debt is
covered by the FDCPA.

iii.

Authorized By Law Under § 1692f

ADP maintains even if McGown has sufficiently alleged it is a debt
collector under the FDCPA, her complaint fails to support a reasonable inference that it
violated the FDCPA. 48 Specifically, ADP argues because it was permitted by law to
process the garnishment, it is not subject to§ 1692f. 49 As a result, ADP contends
McGown's remaining state claims must be dismissed as there is no federal
jurisdiction. 50
McGown counters the garnishment of her wages for the debt of another when
she is not responsible for the debt is covered by the FDCPA. 51 Because the writ was

44
45

/d.

/d.; Sblaw, http://www.sblawpllc.com (last accessed Feb. 7, 2014).
15 U.S.C. § 1692a(5).
47
D.l. 29.
48
D.l. 13 at 111137-38.
49
/d. at 11 38.
50
/d. at 11 40 (pointing out McGown is a Delaware resident and ADP is a
Delaware corporation and without a federal question there is no diversity to maintain
jurisdiction in federal court).
51
D. I. 20 at 11 37.
46

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addressed to Flores, she argues ADP was not permitted by law to process the
garnishment. 52 McGown alleges ADP knew it was processing the garnishment against
a non-debtor and inconsistent laws are pre-empted by the FDCPA. 53 Thus, McGown
maintains this court has jurisdiction over this matter. 54

§ 1692f(1) provides an exception to its application when the collection "is
expressly authorized by the agreement creating the debt or permitted by law." 55 A
garnishment is, by its nature, a court order. Although ADP may have erred in its
processing of the writ, the writ of garnishment still permitted ADP, under the law, to
process the garnishment, and therefore, as a matter of law, McGown's claims under

§ 1692f fail. Without federal question jurisdiction or diversity of parties, the court cannot
exercise jurisdiction over the remaining state law claims. 56

B.

State Law Claim for Conversion

ADP argues McGown's claims for conversion fail under both Delaware and New
Jersey law. 5 7 ADP posits it did not exercise rights of ownership over her wages as
required by New Jersey conversion law. 58 Instead, ADP insists it merely processed the
garnishment for Wai-Mart. 59 It points out the money did not belong to McGown at the

52

/d. at 1[38.
/d. at 1[39.
54
/d. at 1J 40.
55
15 U.S.C. § 1692f(1 ).
56
See 15 U.S.C. § 1692k(d) (providing for federal court jurisdiction over FDCPA
claims); see a/so 28 U.S.C. § 1367 (providing for supplemental jurisdiction over state
53

claims in a matter before the court on original jurisdiction).
57
D.l. 13 at 1J1J41-43.
58
/d. at 1J 44.
59

/d.

8

time of garnishment but, rather, to Wai-Mart. 60 Thus, ADP maintains McGown has
failed to state a claim under New Jersey conversion law. 61
McGown counters ADP intentionally exercised control over her wages, seriously
interfering with her control over the money. 62 She argues ADP violated New Jersey
conversion law by wrongfully exercising control over her money which she had
earned. 63
Although ADP discusses the application of Delaware law regarding conversion,
Delaware law is not at issue based on the second amended complaint, and the court
need not address the impact of Delaware law on McGown's claims. Under New Jersey
law, conversion consists of "an unauthorized assumption and exercise of the right of
ownership over goods or personal chattels belonging to another, to the alteration of
their condition or the exclusion of an owner's rights." 64 Control over money may satisfy
the requirements for conversion under New Jersey Law. Therefore, at this stage,
McGown has pled a plausible claim for conversion under New Jersey law. 65

C.

Failure to Claim Recoverable Damages

ADP contends McGown failed to allege any recoverable damages, 66 arising from
the two weeks in which she was deprived of her wages. 67 ADP further notes it returned
the funds within twenty-four (24) hours after the garnishment, and loan interest on a
60

/d. at 1J 46.
/d. at 1J 43.
62
D.l. 20 at 1J 44.
63
/d. at 1l1J 43-45.
64
LaPlace v. Briere, 962 A.2d 1139, 1144 (N.J. Super. Ct. App. Div. 2009).
65
In light of the prior findings herein, the court cannot exercise supplemental
jurisdiction over the state law claims absent the FDCPA claims.
66
D. I. 13 at 1J1J47-52.
67
/d. at 1J 48.
61

9

two-week delay would be only $0.84. 68 ADP further argues§ 1692k does not provide
for damages if the FDCPA violation was "not intentional and resulted from a bona fide
error notwithstanding the maintenance of procedures reasonably adapted to avoid any
such error," 69 and was the result of S&B's error. 70
McGown counters she was injured by being denied her pay for two weeks, which
caused her to miss payment obligations and hastened her into bankruptcy. 71 She notes
the size of damages is irrelevant if they are real and actual. 72 McGown also points out
the source of the funds-Wai-Mart or herself-is irrelevant as she was harmed by the
wrongful garnishment. 73 Finally, she asserts ADP failed to factually support its
affirmative defense of a bona fide error, making dismissal inappropriate. 74
On a motion to dismiss, factual disputes are irrelevant and more appropriately
addressed on summary judgment. Indeed, ADP admits McGown may have sustained
actual damages and merely downplays the damage amount. Further, ADP has failed to
support its affirmative defense of bona fide error. Thus, ADP's argument of lack of
recoverable damages is not supported.

Ill.

CONCLUSION
Since ADP is not a "debt collector" within the meaning of the FDCPA, and its

conduct falls within the exception of§ 1692f, McGown's federal claims fail as a matter

68
69
70
71
72
73

74

mr

/d. at
49-50.
/d. at 1f 51 .
/d. at 1f 52.
0.1. 20 at 1f 48.
/d. at 1f 50.
/d. at 1f 49.
/d. at
51-52.

mr

10

of law. Without a federal question, supplemental jurisdiction may not be exercised on
her state claims and ADP's motion to dismiss should be granted.

IV.

ORDER & RECOMMENDED DISPOSITION
For the reasons contained herein, the court recommends ADP's motion to

dismiss (D.I. 13) be GRANTED.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1 )(8),
FED. R. C1v. P. 72(a) and D. Del. LR 72.1. The parties may serve and file specific
written objections within fourteen ( 14) days after being served with a copy of this Report
and Recommendation. The objections and response to the objections are limited to ten
(10) pages each.
The parties are directed to the Court's Standing Order in Non-Pro Se matters for
Objections Filed under FED. R. C1v. P. 72, dated October 9, 2013, a copy of which is
available on the Court's website, www.ded.uscourts.gov.
February 7, 2014

Is/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE

11