Damian v. Berman

Filing 8

ORDER DISMISSING CASE Closing Case. Signed by Judge Marcia G. Cooke on 7/20/2015. (tm) NOTICE: If there are sealed documents in this case, they may be unsealed after 1 year or as directed by Court Order, unless they have been designated to be permanently sealed. See Local Rule 5.4 and Administrative Order 2014-69.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 15-22579-CIV-COOKE
MELANIE E. DAMIAN, as Receiver for the
Receivership Estate of CONSUMER COLLECTION
ADVOCATES, CORP.,
Plaintiff,
v.
MITCHELL BERMAN,
Defendant.
_________________________________________________/
ORDER OF DISMISSAL
THIS MATTER is before me on a sua sponte review of the record. Plaintiff, Melanie
E. Damian, in her capacity as court-appointed Receiver of the Receivership Estate of
Consumer Collection Advocates Corp., filed a Complaint on July 9, 2015 (ECF No. 1).
After reviewing the Complaint, the record, and relevant legal authorities, Plaintiff’s
Complaint is dismissed without prejudice.
I.

BACKGROUND

Plaintiff Melanie E. Damian (“Plaintiff” or “Receiver”) was appointed Permanent
Receiver of the Receivership Estate of Consumer Collection Advocates Corp.
(“Receivership Estate” or “CCA”) in an order by Judge Beth Bloom in the action styled
Federal Trade Commission v. Consumer Collection Advocates, Corp. and Michael Robert Ettus, Case
No. 14-CIV-62491-Bloom. Compl. ¶¶ 1-2, ECF No. 1. In that action currently before
Judge Bloom, the Federal Trade Commission (“FTC”) filed a complaint against CCA for
various forms of relief as a result of CCA’s telemarketing operations. Id. at ¶ 10. More
specifically, the FTC alleged that CCA offered, via telemarketing, purported recovery
services to individuals who had previously lost money to telemarketing fraud if they first
paid CCA an up-front fee. Id. at ¶ 11. The FTC alleged that CCA’s offered services, as well
as its misrepresentations to consumers that it would recover a substantial portion of
consumer’s losses within six months, violated the Telemarketing Sales Rule and Section 5 of

the FTC Act.

Id.

The parties entered into a Stipulated Preliminary Injunction on

November 17, 2014, wherein CCA was “enjoined from misrepresenting, directly or
indirectly, expressly or by implication, that, as a result of purchasing CCA’s services,
consumers will recover, or are highly likely to recover, a substantial portion of the monies
that the consumers previously lost to telemarketers typically within 30 to 180 days.” Id.
In the action presently before me, Plaintiff alleges that Defendant Mitchell Berman
(“Defendant” or “Mr. Berman”) was a part of CCA’s sales staff and participated in CCA’s
scheme to convince consumers to pay up-front fees in exchange for purported collections
services. Id. at ¶ 15. Plaintiff further alleges that Defendant was compensated for his work
in the form of commissions based both on the upfront fees he was able to convince
consumers to pay and on any funds actually collected.

Id.

According to Plaintiff’s

Complaint, Defendant was aware that CCA typically did not recover funds for its
customers, and as such, of the fraudulent conduct occurring at CCA. Id. at ¶ 16. However,
Defendant accepted payments in the amount of $62,149.00 from CCA; payments that
contributed to CCA’s insolvency and undercapitalization. Id. at ¶¶ 19, 22. Defendant has
since refused the Receiver’s requests to return any funds received from CCA, thereby
prompting the Receiver to file the instant action for unjust enrichment (Count 1), restitution
(Count 2), fraudulent transfer (Counts 3 and 4), and civil conspiracy (Count 5). See generally
Compl.
II.

DISCUSSION

A federal district court may exercise supplemental jurisdiction over state law claims
that arise out of the same case or controversy as the federal subject matter claim. 28 U.S.C.
§ 1367(a); see United Mine Workers of America v. Gibbs, 383 U.S. 715, 725 (1966) (explaining
that supplemental jurisdiction exists when state and federal claims derive from a common
nucleus of operative fact). However, a district court may decline to exercise supplemental
jurisdiction over a claim under subsection (a) if:
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or
claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has
original jurisdiction, or

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(4) in an exceptional circumstances, there are other compelling
reasons for declining jurisdiction.
28 U.S.C. § 1367(c). When only state law claims remain, a court may consider whether it
should continue exercising supplemental jurisdiction under 28 U.S.C. § 1367(c)(3). See Acri
v. Varian Assocs., Inc., 114 F.3d 999, 1000 (9th Cir. 1997) (en banc) (suggesting that a district
court may, but need not, sua sponte decide whether to continue exercising supplemental
jurisdiction under 28 U.S.C. § 1367(c)(3) after all federal law claims have been dismissed).
In Plaintiff’s allegations regarding jurisdiction, Plaintiff states that “this action … is
related to the claims in the Receivership Action, over which this Court has original
jurisdiction pursuant to Title 28, United States Code, Section 1331, in that this action forms
“‘part of the same case or controversy under Article III of the United States Constitution.’”
However, the instant case presents a unique jurisdictional situation. While the underlying
federal action remains before Judge Bloom, the supplemental state court issues are before
me. It is indisputable that the instant action arises from the same set of operative facts as the
action currently pending before Judge Bloom. In fact, Counts 3, 4, and 5 of Plaintiff’s
Complaint in this action allege state law claims directly against CCA, the Defendant in the
action currently pending before Judge Bloom.
A ruling on the state law issues pending before me might have a potentially adverse
effect on the issues currently before Judge Bloom. The case before Judge Bloom remains
active and any findings as to CCA’s alleged liability in this case may potentially differ from
those reached in the case before Judge Bloom. The situation presented here is no different
from a situation wherein a Plaintiff pursues the same claims against the same parties in two
different courts at the same time. Given that the original federal action remains pending
before Judge Bloom, and in an effort to promote judicial efficiency and avoid incongruous
rulings and piecemeal litigation, I find that this case presents “exceptional circumstances”
pursuant to 28 U.S.C. § 1367(c)(4) that militate against a broad exercise of supplemental
jurisdiction over the instant state law claims.

Therefore, I am declining to exercise

supplemental jurisdiction over the instant state law claims. See, e.g. Kent County Mem. Hosp.
v. Balasco, C.A. No. 89-0075B, 1990 WL 17157, at *5 (D.R.I. Feb. 13, 1990) (“This Court has
previously held that in situations … where the plaintiff has filed parallel state and federal

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proceedings, the federal court may decline to exercise jurisdiction over the claims and
dismiss the action”).
III.

CONCLUSION

Therefore, for the reasons stated herein, I decline to assert supplemental jurisdiction
over Plaintiff’s claims. Plaintiff’s Complaint (ECF No. 1) is DISMISSED without prejudice.
The Clerk is directed to CLOSE this case. All pending motions, if any, are DENIED as
moot.
DONE and ORDERED in Chambers, in Miami, Florida, this 20th day of July 2015.

Copies furnished to:
Counsel of Record

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