CLOWERS v. MANDARICH LAW GROUP LLP et al

Filing 30

ORDER DENYING 21 Motion to Strike; DENYING 22 Motion to Strike; DENYING 23 Motion to Strike; and DENYING 24 Motion to Strike. Ordered by US DISTRICT JUDGE MARC THOMAS TREADWELL on 10/8/2019. (kat)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
MACON DIVISION
VERA CLOWERS,
Plaintiff,
v.
MANDARICH LAW GROUP LLP, et al,
Defendants.

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CIVIL ACTION NO. 5:19-CV-179 (MTT)

ORDER
Plaintiff Vera Clowers moves to strike the second affirmative defense of
Defendants Mandarich Law Group, LLP; CACH, LLC; LVNV Funding, LLC; and
Resurgent Capital Services, LP. Docs. 21; 22; 23; 24. The motions (Docs. 21; 22; 23;
24) are denied.
I. BACKGROUND
Clowers alleges CACH previously filed a lawsuit against her in 2016 to collect a
consumer debt (“first lawsuit”). Doc. 1 at 1. In October 2016, the parties entered into a
settlement agreement, pursuant to which CACH paid Clowers $3,500.00 and agreed to
dismiss the lawsuit with prejudice. Docs. 1 at 1; 1-10 at 5.
CACH subsequently hired new counsel, Mandarich, and attempted to collect the
same debt alleged in the first lawsuit. Doc. 1 at 3. Mandarich sent Clowers a demand
letter on November 28, 2018 demanding payment of $4.739.40. Id. at 3-4. Clowers, of
course, alleges that the debt has been extinguished and, in any event, Georgia’s six-year
statute of limitations bars the claim. Id. at 4.

On May 10, 2019, Clowers filed suit in this Court “to recover all available remedies”
under the Fair Debt Collection Practices Act (“FDCPA”) (15 USC § 1692 et. seq.), the Fair
Business Practices Act (OCGA § 10-1-390 et seq.), the Unfair or Deceptive Practices
Toward the Elderly Act (OCGA § 10-1-850 et seq.), and the Defendants’ breach of the
settlement agreement. Id. at 5.
All Defendants answered on July 3, 2019. Docs. 11; 12; 13; 14. Clowers moves to
strike the second affirmative defense alleged in all four Answers. Docs. 21; 22; 23; 24.
II. DISCUSSION
The FDCPA provides for a bona fide error defense: “A debt collector may not be
held liable in any action brought under this subchapter if the debt collector shows by a
preponderance of evidence that the violation was not intentional and resulted from bona
fide error notwithstanding the maintenance of procedures reasonably adapted to avoid
such error.” 15 U.S.C. § 1692k(c). All four Defendants raised a bona fide error defense
as their second affirmative defense.
Mandarich alleged that
[a]t all relevant times, Defendant acted in good faith. Any alleged violation
of the FDCPA was neither willful nor intentional and would have resulted
from a bona fide error notwithstanding the maintenance of reasonable
procedures designed to avoid such error. Specifically, Defendant does not
collect on out-of-statute debts and has, at all relevant times, had a policy
in place to close out accounts for which the statute of limitations has
expired. Similarly, Defendant, at all relevant times has maintained a policy
to close out accounts, cease collection activity and return accounts to the
creditor on all settled debts. Defendant did not know the subject debt was
settled or beyond the statute of limitations at the time i[t] was placed with it
for collection.
Doc 13 at 32.
CACH alleged that
at all relevant times, Defendant acted in good faith. Any alleged violation
of the FDCPA was neither willful nor intentional and would have resulted
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from a bona fide error notwithstanding the maintenance of reasonable
procedures designed to avoid such error. Specifically, on information and
belief, at all relevant times, Defendant’s debt servicer, Resurgent, had a
policy in place to close out accounts for which the statute of limitations has
expired. Similarly, on information and belief, at all relevant times
Resurgent maintained a policy to close out accounts on all settled debts.
At all relevant times, Defendant did not know the subject debt was settled
and/or beyond the statute of limitations.
Doc. 11 at 32.
LVNV Funding alleged that although it denies
that it made any attempt to collect a debt from Plaintiff and/or controlled or
directed any attempts to collect a debt from Plaintiff (and thereby contends
it cannot be held vicariously liable for any such collection activity),
Defendant pleads in the alternative that the alleged violations of the
FDCPA were neither willful nor intentional and would have resulted from a
bona fide error notwithstanding the maintenance of reasonable
procedures designed to avoid such error. Specifically, on information and
belief, at all relevant times, Defendant’s debt servicer had a policy in place
to close out accounts for which the statute of limitations has expired.
Similarly, on information and belief, at all relevant times Defendant’s debt
servicer maintained a policy to close out accounts on all settled debts.
Doc. 12 at 33.
Resurgent Capital Services alleged that it
[a]t all relevant times, . . . acted in good faith. Any alleged violation of the
FDCPA was neither willful nor intentional and would have resulted from a
bona fide error notwithstanding the maintenance of reasonable
procedures designed to avoid such error. Specifically, Defendant does not
service or attempt to collect out-of-statute debts and has, at all relevant
times, had a policy in place to close out accounts for which the statute of
limitations has expired. Similarly, Defendant, at all relevant times has
maintained a policy to close out accounts on all settled debts. Defendant
did not know the subject debt was settled or beyond the statute of
limitations at the time is was placed with Mandarich for collection.
Doc. 14 at 32-33.
Clowers argues that Fed. R. Civ. P. 9(b) is applicable when bona fide error is
raised as an affirmative defense. Docs. 21-1 at 2-3; 22-1 at 2-3; 23-1 at 2-3; 24-1 at 2-3.
Fed. R. Civ. P. 9 provides that “[i]n alleging fraud or mistake, a party must state with
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particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge,
and other conditions of a person’s mind may be alleged generally.” Relying on several
cases from the Middle District of Florida, Clowers argues that all Defendants’ bona fide
error defenses must be stricken under Fed. R. Civ. P. 12(f) 1 for failure to comply with Fed.
R. Civ. P. 9. Docs. 21-1 at 2-4; 22-1 at 2-4; 23-1 at 2-4; 24-1 at 2-4 (citing Wiebe v.
Zakheim & Lavrar P.A., 2012 WL 5382181 (M.D. Fla. 2012); Walker v. Credit Control
Serv. Inc., 2015 WL 4571158 (M.D. Fla. 2015); and Schmidt v. Synergentic Commc’n,
Inc., 2015 WL 997828 (M.D. Fla. 2015)) 2.
The Defendants argue that Fed. R. Civ. P. 9(b) does not apply to the FDCPA’s
bona fide error defense. They point out that “[n]either the Eleventh Circuit nor any court
in this district has concluded . . . that the particularity requirement for mistake allegations
[under Fed. R. Civ. P. 9(b)] extends to bona-fide-error allegations under the FDCPA.”
Doc. 28 at 2. Instead, Fed. R. Civ. P. 8(b), which requires a defendant to “state in short
and plain terms its defenses to each claim asserted against it,” applies. Id. at 2-3.
The Court agrees with the Defendants that the Eleventh Circuit has not addressed
this issue. 3 The Court was unable to locate, and the parties have not cited, an opinion
from any Circuit court addressing whether the particularity requirement of Fed. R. Civ. P.
9(b) applies when bona fide error is raised as an affirmative defense. The district courts
are split on the issue. Ruff v. Credit Adjustment, Inc., 2018 WL 4019464 (S.D. Ohio
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Fed. R. Civ. P. 12(f) provides that “[t]he court may strike from a pleading an insufficient defense or any
redundant, immaterial, impertinent, or scandalous matter.”
2 The Court notes that Clowers’ reliance on Schmidt is somewhat misplaced because the court did not even
address whether Fed. R. Civ. P. 9 was applicable. Instead, the defendant’s bona fide error defense was
stricken for failure to comply with Fed. R. Civ. P. 8’s general pleading requirement. Schmidt, 2015 WL
997828, at *2.
3 In her Reply, Clowers states that “contrary to Defendants’ claim, the Eleventh Circuit has considered
standards for pleading mistake and fraud under Fed. R. Civ. P. 9(b).” Doc. 29 at 2. It certainly has. See
United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1308 (11th Cir. 2002).
But it is has not determined if these standards are applicable when bona fide error is raised as an
affirmative defense to alleged FDCPA violations
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2018) (compiling cases, stating that “district courts have varied widely with their approach
to which pleading standard a defendant must meet when asserting a bona fide error
defense,” and determining that Fed. R. Civ. P. 8 applies); Sellers v. Rushmore Loan
Mgmt. Serv., LLC, 2016 WL 11431489, at *4 n.4 (M.D. Fla. 2016) (declining to find that
Fed. R. Civ. P. 9(b)’s particularity requirement applies to bona fide error allegations under
the FDCPA because, inter alia, to strike the defense and allow amendment would only
slow progress and increase the costs of litigation); Amaya v. Crowson & Crowson, LLP,
2013 WL 12126784, at *2 (W.D. Tex. 2013) (compiling cases, finding that “a review of
courts nation-wide reveals that applying Rule 8’s pleading standard when considering a
motion to strike a §1692k(c) ‘bona fide error’ defense is the majority position,” and
determining that the heightened pleading standard of Fed. R. Civ. P. 9 is not applicable to
a bona fide error defense).
Ultimately, this Court need not decide the issue. Even if the heightened pleading
standard of Rule 9 applies, the Defendants pled their second affirmative defense with
sufficient particularity. Under Rule 9(b), allegations of fraud or mistake “‘must include
facts as to time, place, and substance. . . .’” United States ex rel. Clausen v. Laboratory
Corp. of America, Inc., 290 F.3d 1301, 1308 (11th Cir. 2002) (citations omitted). Each
Defendant alleged that it or its agents had a policy in place to close out all accounts that
(1) were outside of the statute of limitations and/or (2) had been settled. Docs. 11 at 32;
12 at 33; 13 at 32; 14 at 32-33. Each Defendant stated it was unaware that the debt had
been settled or was beyond the statute of limitations at the time collection commenced.
Id. “This is sufficient under the circumstances so that Plaintiff should not be unfairly
surprised by the defense.” Wiebe, 2012 WL 5382181, at *2. The two FDCPA cases cited
by Plaintiff in which the Court struck the bona fide error defense are distinguishable
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because the Defendants in both simply parroted the statutory language. Walker, 2015
WL 4571158, at *2-*3. (finding a “one-sentence ‘bare-bones allegation’ is insufficient”);
Schmidt, 2015 WL 997828, at *2 (applying standard under Fed. R. Civ. P. 8 and striking
defense when defendant merely recited the statutory language and provided no additional
detail).
Clowers’ motions to strike each of the Defendants’ second affirmative defense
(Docs. 21; 22; 23; 24) are DENIED.
SO ORDERED, this 8th day of October, 2019.
S/ Marc T. Treadwell
MARC T. TREADWELL, JUDGE
UNITED STATES DISTRICT COURT

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