Ross v. Vakulskas Law Firm, PC et al
Filing
42
MEMORANDUM OPINION AND ORDER: Granting 10 Motion for Summary Judgment: See text of Order for further details. Signed by Senior Judge Donald E O'Brien on 09/17/12. (kfs)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
LINETTE ROSS,
Plaintiff,
No. 10-CV-4100-DEO
v.
Memorandum and Opinion Order
VAKULSKAS LAW FIRM, PC, and
NEIMAN, STONE AND MCCORMICK,
and RF FINANCIAL, LP,
Defendants.
____________________
This matter is before the Court on Defendants’ Motion for
Summary
Judgment
violations
of
against
the
Plaintiff’s
Federal
Debt
Complaint
Collection
alleging
Practices
Act
(hereinafter “FDCPA”), Iowa Debt Collection Practices Act
(hereinafter
“IDCPA”),
and
common
law
abuse
of
process.
Docket No. 2 and Docket No. 10.
I.
FACTS
On
November
20,
2007,
Defendant,
RF
Financial
LP
(hereinafter “RF Financial”), filed a lawsuit in Woodbury
County
Small
Claims
Court
against
Plaintiff
for
amounts
allegedly owed on a delinquent credit card.
Docket No. 10-3,
1.
failed
Prior
to
this
action,
RF
Financial
to
file
notification with the Iowa Attorney General identifying itself
as a debt collector in violation of law.
Docket No. 14-1, 5.
In the Small Claims Court proceedings, Defendant, Neiman,
Stone, and McCormick Law Firm, represented RF Financial.
Docket No. 10-3, 1.
Plaintiff initially contested the debt,
but, in a deposition, has since admitted to its legitamacy.
Docket No. 10-3, 2-3 (citing Docket No. 10-4, 7-8).
On
January 22, 2008, the Woodbury County District Small Claims
Court entered a judgment against Plaintiff in the amount of
$3,484.20, plus 16.8% interest.
Docket No. 10-3, 2.
After the judgment, and pursuant to Iowa Code Section
626.1, the Woodbury County Clerk of Court issued an execution
which
was
returned
unsatisfied.
Docket
No.
10-3,
3.
Thereafter, RF Financial filed an application for Plaintiff to
appear for a Judgment Debtor’s Exam pursuant to Iowa Code
Section 630.1.
Docket No. 10-3, 3.
On September 10, 2010,
the Honorable Judge Tott of the Woodbury County District Court
set the Debtor’s Exam for October 26, 2009.
Docket No. 10-3,
4.
On behalf of RF Financial, Defendant Neiman, Stone, and
McCormick Law Firm hired process server Ellen Vakulskas to
serve Plaintiff with the Order to Appear. Docket No. 10-3, 4.
2
On September 22, 2009, at 4:35 p.m., process server Vakulskas
contends
she
personally
served
Plaintiff
residence, 1287 Carroll Avenue, Lawton, Iowa.
at
Plaintiff’s
Docket No. 10-
3, 4. Process server Vakulskas testified in a deposition that
she
specifically
remembered
serving
Plaintiff
because
Plaintiff lived in a rural area and her house was difficult to
find.
Docket No. 10-3.
On the same day process server
Vakulskas contends she served Plaintiff, she completed an
Affidavit of Service swearing that she served the Order of
Appearance on Plaintiff personally.
Docket No. 10-4.
The
Affidavit mistakenly notes that Plaintiff was served at 1287
Carroll Avenue, Sioux City, Iowa, rather than Lawton, Iowa.1
Docket
No.
10-4,
17.
Plaintiff
insists
that
she
never
received the Order to Appear, and the affidavit of service is
false.
Docket No. 14-1, 4.
She contends she was visiting her
hospitalized son at the time of the alleged service.
Docket
No. 14-1, 4.
1
Defendants contend process server “Vakulskas
inadvertently stated Ross’s residential address as 1287
Carroll Avenue, Sioux City, Iowa . . . due to an automatic
response on the computer program used to draft Affidavits of
Service that defaults back to ‘Sioux City’ unless changed.”
Docket No. 10-3, 5.
3
In any event, Plaintiff failed to appear at the Debtor’s
Exam on October 26, 2010.
2010,
Niemann,
Stone,
Docket No. 10-3, 6.
and
McCormick
Law
On January 13,
Firm
filed
an
Application for a Civil Warrant pursuant to Iowa Code Section
630.11.
Docket No. 10-3, 6.
The Application did not request
bond to be set at a certain amount.
Docket No. 10-4, 22.
Docket No. 10-3, 6 and
On January 14, 2010, Judge Tott issued
an Order for Civil Warrant for Plaintiff. Docket No. 10-3, 6.
On
January
16,
authorities.
2010,
Plaintiff
Docket No. 10-3, 6.
turned
herself
into
Plaintiff’s husband put a
bond amount of $3,500, and Defendant requested the bond amount
in partial satisfaction of Plaintiff’s debt.
refused Defendants’ request.
Judge Tott
Plaintiff further contends she
suffered extreme emotional distress and humiliation due to
Defendants’ actions.
On February 8, 2010, the Vakulskas Law Firm appeared on
behalf
of
RF
Examination.2
Financial
to
conduct
Docket No. 10-3, 7.
2
a
Judgment
Debtor
Brian Vakulskas, process
Defendants contend that the Vakulskas Law Firm appeared
on behalf of Neiman, Stone, and McCormick Law Firm, but the
Order issued pursuant to the Debtor’s Exam, clearly indicates
that the plaintiff was RF Financial, not Neiman, Stone, and
McCormick Law Firm. Docket No. 10-3, 7 and Docket No. 10-4,
4
server Vakulskas’ husband, owns and operates Vakulskas Law
Firm.
Docket No. 14-1.
Plaintiff contends that process
server Vakulskas works at the Vakulskas Law Firm.
Docket No.
14-1, 4. However, Defendants contend process server Vakulskas
was not an employee of Vakulskas Law Firm but merely answered
phones without pay when an employee of the Law Firm called in
sick on occasion. Docket No. 18-1, 5 (citing Docket No. 10-4,
21 and 35).
II.
MOTION FOR SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate only if the record shows
“there is no genuine issue as to any material fact and that
the movant is entitled to judgment as a matter of law.”
R. Civ. P., Rule 56(c).
Fed.
A fact is material if it is necessary
“to establish the existence of an element essential to [a]
party’s case, and on which that party will bear the burden of
proof at trial.”
(1986).
Celotex Corp. v. Catrett, 477 U.S. 317, 322
There is a genuine issue as to a material fact if,
based on the record before the court, a “rational trier of
fact” could find for the non-moving party.
34.
5
Matsushita Elec.
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986).
When considering a motion for summary judgment, a “court
must view the evidence in the light most favorable to the
nonmoving party . . . .”
Hutson v. McDonnell Douglas Corp.,
63 F.3d 771 (8th Cir. 1995).
This requires a court to draw
any reasonable inference from the underlying facts in favor of
the nonmoving party and to refrain from weighing the evidence,
making credibility determinations, or attempting to discern
the truth of any factual issue in a manner which favors the
moving party unless there is no reasonable alternative.
Matsushita,
475
U.S.
at
587;
and
Morris
v.
City
See
of
Chillicothe, 512 F.3d 1013, 1018 (8th Cir. 2008) (citing
Thomas v. Corwin, 483 F.3d 516, 526-27 (8th Cir. 2007)).
Procedurally, the movant bears the initial burden “of
informing the district court of the basis for its motion and
identifying those portions of the record which show a lack of
a genuine issue.” Hartnagel v. Norman, 953 F.2d 394, 395 (8th
Cir. 1992) (citing Celotex, 477 U.S. at 323). Once the movant
has carried his burden, the non-moving party is required “to
go beyond the pleadings” and through “affidavits, or by the
6
‘depositions, answers to interrogatories, and admissions on
file,’ designate ‘specific facts showing that there is a
genuine issue for trial.’”
Celotex, 477 U.S. at 324 (citing
Fed. R. Civ. P. 56(e)).
III.
FAIR DEBT COLLECTION PRACTICES ACT (FDCPA)
Congress enacted the FDCPA to . . .
eliminate abusive debt collection practices
by debt collectors, to insure that those
debt collectors who refrain from using
abusive debt collection practices are not
competitively disadvantaged, and to promote
consistent
State
action
to
protect
consumers against debt collection abuses.
15 U.S.C. § 1692(e).
In
furtherance
of
these
goals,
the
FDCPA
makes
it
actionable for a debt collector to “use any false, deceptive
or misleading representation or means in connection with the
collection of any debt,” as well as the use of “unfair or
unconscionable means to collect or attempt to collect any
debt.”
15 U.S.C. §§ 1692(e) and 1692(f).
The Plaintiff’s FDCPA claims hinge on two contentions:
(1) the Defendants failed to properly serve Plaintiff with the
Order to Appear for a Judgment Debtor’s Examination; and (2)
Defendant RF Financial’s failure to file notification with the
7
Iowa Attorney General identifying itself as a debt collector
violates 15 U.S.C. Section 1692(e)(5).
A.
Whether
Defendants’
Failure
to
Properly
Serve
Plaintiff with the Order to Appear for the Judgment Debtor’s
Examination was a Violation of the FDCPA
As
previously
discussed,
Defendants
contend
process
server Vakulskas served Plaintiff with the Order to Appear for
the Judgment Debtor’s Examination in a timely manner and in
accordance with Iowa law.
Plaintiff contends she was never
served and was visiting her son at the hospital at the time
she was allegedly served.
Thus, there is a genuine issue as
to whether or not Plaintiff was in fact served.
However,
Defendants argue they were entitled to rely on process server
Vakulskas’ affidavit, swearing she had served Plaintiff; and,
therefore, whether she did in fact serve Plaintiff, though it
may be a genuine issue, is not a material issue because the
Iowa
Supreme
affidavits
Court
“has
presumptive
long
accorded
validity.”
return-of-service
Gutierrez
v.
Wal-Mart
Stores, Inc., 638 N.W.2d 702, 705 (Iowa 2002).
Plaintiff responds with five arguments:
(1) process
server Vakulskas does not qualify as a valid process server;
8
(2) service of process is a non-delegable duty for which
Defendants are liable regardless of whether Defendants relied
on process server Vakulskas’ affidavit; (3) Defendants have
failed
to
establish
that
they
relied
on
process
server
Vakulskas’ affidavit in good faith; (4) the FDCPA provides for
strict liability; and (5) Defendants may be held vicariously
liable for process server Vakulskas’ actions.
1.
Whether Mrs. Vakulskas Qualifies as a Valid
Process Server
Under
Iowa
law,
an
Order
to
Appear
for
a
Judgment
Debtor’s Examination must be “served in the same manner as an
original
notice
in
other
cases.”
Iowa
Code
§
630.12.
Original notice “may be served by any person who is neither a
party nor the attorney for a party to the action.”
I.C.A.
Rule 1.302(4).
Both parties agree process server Vakulskas is Brian
Vakulskas’ wife, and Brian Vaskulskas is an attorney for RF
Financial.
Plaintiff also contends process server Vakulskas
is an employee of the Vakulskas Law Firm, which, if true,
would, in this Court’s opinion, make her ineligible to serve
process, and Defendants’ reliance on her affidavit of service
9
unreasonable.
However, the Defendant contends process server
Vakulskas, though she has answered phones for the Vakulskas
Law Firm on occasion when an employee calls in sick, has never
been compensated for her work and is not an employee of the
firm. Furthermore, while it may be prudent for the spouses of
attorneys to a party not to serve process on the other party,3
especially
when
the
other
party’s
liberty
interests
are
implicated, the Iowa Legislature has not so determined, and
this Court lacks the authority to do so.
Simply stated,
process server Vakulskas is “neither a party nor the attorney
for a party to the action,” and, as such, she was a person who
was eligible to serve Plaintiff the Order to Appear for the
Judgment Debtor’s Examination.
2.
Whether Service of Process is a Delegable Duty
Plaintiff cites General Finance Corporation v. Smith, an
Alabama
Supreme
Court
case,
for
the
proposition
that
a
defendant is liable when an independent process server’s
performance is deficient. Docket No. 14-2, 11 (citing 505 So.
2d
1045,
1047
(Ala.
1987)).
3
However,
General
Finance
This Court expresses no opinion as to whether the use
of a process server who is also your spouse is an ethical, as
opposed to legal, violation.
10
Corporation
responsible
considered
for
the
whether
actions
of
a
a
finance
third
company
party
was
hired
to
repossess a plaintiff’s vehicle and did not consider issues
related to service of process.
1987).
505 So. 2d 1045, 1047 (Ala.
The General Finance Corporation Court noted “that an
employer is not ordinarily liable for the tortious acts
committed by an independent contractor” unless the employer
owed a specific duty to the plaintiff pursuant to contract or
law.
Id. at 247.
The statute at issue in General Finance
Corp. was Alabama Code § 7-9-503, which provides:
Unless otherwise agreed a secured party has
on default the right to take possession of
the collateral.
In taking possession a
secured party may proceed without judicial
process if this can be done without breach
of the peace or may proceed by action.
Alabama Code § 7-9-503 (emphasis added).
Thus, while the statute at issue in General Finance Corp.
imposed a specific duty not to breach the peace on the secured
party seeking to repossess, Iowa Rule of Civil Procedure 1.302
imposes a very different kind of specific duty - a duty to use
a process server who is a sufficiently independent party -
11
which is in distinct opposition to the type of statutory
language that establishes a non-delegable duty.
In addition and as previously noted, the Iowa Supreme
Court
“has
long
accorded
presumptive validity.”
return-of-service
affidavits
Gutierrez v. Wal-Mart Stores, Inc.,
638 N.W.2d 702, 705 (Iowa 2002). Return-of-service affidavits
“are impeachable only upon clear and convincing proof of
falsity.”
Id.
If Court’s are entitled to give return-of-
service affidavits presumptive validity, it is difficult to
understand
how
a
party
would
have
a
specific
duty
to
investigate the validity of such an affidavit, and this Court
is not familiar, and Plaintiff fails to cite any case law or
statute, imposing such a duty.
Finally, Defendant cites an Iowa Supreme Court case for
the proposition that a duty is non-delegable “‘where one
person owes another a contractual duty to act, [and] the law
imposes upon the person owing that duty the further duty of
acting with due care . . . .’” Docket No. 14-2, 11 (quoting
Glarratano v. Weitz Company, 147 N.W.2d 824 (Iowa 1967)).
While this is good law, it is inapplicable to this case.
Simply stated, any contractual duties the Defendants may have
12
owed to Plaintiff are not at issue here.
Therefore, service
of process is a delegable duty, and Defendants cannot be held
liable based on a non-delegable duty theory.
3.
Whether Defendants Relied on Process Server
Vakulskas’ Affidavit in Good Faith
Plaintiff argues Defendants “knew or should have known .
. . service was defective” for three reasons:
notified
Defendants
she
was
never
served
(1) Plaintiff
notice
at
the
Debtor’s Exam of February 8, 2010; (2) Plaintiff contends
process server Vakulskas served 29 people at 22 different
residences in five hours on September 27, 2009; and (3)
Defendants had Plaintiff arrested without providing her with
the opportunity to show cause.
Docket No. 14-2, 10.
As previously noted, Defendants hired process server
Vakaluskas prior to the purported service on September 22,
2009.
On January 13, 2010, Defendants filed for a Civil
Warrant against Plaintiff due to her failure to appear at the
Debtor’s Exam of October 26, 2009.
Therefore, Plaintiff’s
statement that she had not been served notice at the Debtor’s
Exam on February 8, 2010, does not create a fact issue as to
13
whether or not Defendants relied on process server Vakaluskas’
affidavit in good faith.
Though
Plaintiff
denies
Defendants’
contention
that
“neither RF Financial nor its counsel had a reason to doubt
the
sworn
affidavit
of
service
of
the
process
server,”
Plaintiff failed to provide this Court a persuasive reason for
her denial.
Docket No. 10-4, 2.
Plaintiff’s second argument
does imply the number of notices process server Vakaluskas
claims to have served on September 27, 2009, renders her
untrustworthy as a process server.
However, this Court is
neither aware how many documents a typical process server can
serve in a five hour period, nor is there enough information
about the circumstances of September 27, 2009, to support a
reasonable
inference
that
inherently
untrustworthy.
process
There
server
is
also
Vakaluskas
no
is
evidence
indicating Defendants had any knowledge of the number of
documents process server Vakulskas served on September 27,
2009, or that she was otherwise an untrustworthy process
server.
Finally, there is nothing in the record to show how
many notices process server Vakulskas served on the same day
she allegedly served Plaintiff.
14
For their third argument, Plaintiff cites Iowa Code
Section 665.7, for the proposition that an “offender must be
served personally with an order to show cause against the
punishment” before they may be held in contempt.
Apparently,
Plaintiff is contending that, because Plaintiff was not served
an order showing cause for punishment, Defendant was acting in
bad faith.
However, Iowa Code Section 665.7 also provides
that an offender may be brought before a Court pursuant to a
“warrant, if necessary,” which is precisely what happened in
this case.
Furthermore, Iowa Code Section 630.11, “Debtor Failing to
Appear–Contempt,” provides:
Should the judgment debtor fail to appear
after being personally served with notice
to that effect . . . the debtor will be
guilty of contempt, and may be arrested and
imprisoned until the debtor complies with
the requirements of the law in this
respect. If any person, party, or witness
disobey an order of the court, judge, or
referee, duly served, such person, party,
or witness may be punished for contempt.
Iowa Code § 630.11.
Again, this is precisely what happened in this case:
affidavit
indicated
Plaintiff
was
personally
served
an
with
notice of a Judgment Debtor’s Exam; Plaintiff failed to appear
15
at the Judgment Debtor’s Exam; and the court found Plaintiff
guilty of contempt and filed a Civil Warrant for her arrest
upon
Defendants’
application.
As
previously
noted,
the
affidavit was entitled to presumptive validity absent clear
and convincing proof to the contrary.
If Plaintiff was not,
in fact, served, any cause of action she has on this basis,
barring any applicable statute of limitations, is against
process server Vakaluskas, not Defendants.
4.
Whether Defendants may be Held Liable Under a
Theory of Strict Liability
The FDCPA imposes strict liability on debt collectors.
Picht v. John R. Hawks, Ltd., 236 F.3d 446 (8th Cir. 2001).
Strict liability is distinguished from fault based liability
in that a party may be held liable though they were not at
fault
for
violating
the
law
in
Dictionary, 998 (9th ed. 2009).
question.
Black’s
Law
In other words, liability
attaches upon proof that the party in question violated an
absolute duty imposed by law.
Id.
Though the FDCPA imposes an absolute duty to employ
lawful means to collect debts, and Iowa law imposes a duty on
a debt collector to serve the debtor “in the same manner as an
16
original notice in other cases,” this neither requires a debt
collector to actually physically serve the debtor nor serve as
surety for the actions of a third party process server.
Code § 630.12.
Iowa
A debt collector simply has no duty to make
sure that a party is actually served but only to follow the
requisite procedures related to service of process. If a debt
collector, through an honest mistake involving ignorance of
law, did not follow the proper procedure for serving process,
then strict liability would apply, but this did not occur
here.
Again, notice “may be served by any person who is
neither a party nor the attorney for a party to the action,”
and
“return
-of-service
“presumptive validity.”
affidavits”
are
entitled
to
I.R.A. Rule 1.302(4); and Gutierrez,
638 N.W.2d at 705.
Strict liability does not transmute a process server’s
alleged violations of the law into the serving party’s alleged
violations of the law.
A rule of law that would make
attorneys and their clients responsible for the tortious acts
of a process server would make those attorneys and those
clients de facto process servers; this result would be clearly
contrary to the independent nature of process servers required
17
under
the
law.
Thus,
though
the
FDCPA
imposes
strict
liability upon debt collectors, Defendants in this case did
not violate a duty imposed under the FDCPA or Iowa law and,
therefore, may not be held liable under a strict liability
theory.
5.
Whether Defendants may be Held Liable Pursuant
to a Theory of Vicarious Liability
There is no evidence in the record that would persuade
this Court that process server Vakulskas was an employee of
her
husband’s
firm.
She
was
acting
as
an
independent
contractor.
Iowa Courts have consistently employed the Restatement
(Second)
of
vicarious
contractor.
Torts
liability
for
questions
for
the
involving
actions
of
a
defendant’s
an
independent
See Van Fossen v. MidAmerican Energy Co., 777
N.W.2d 689 (Iowa 2009) and Kragel v. Wal-Mart Stores, Inc.,
537 N.W.2d 699 (Iowa 1995). The Restatement (Second) of Torts
recognizes
the
general
rule
that
an
“employer
of
an
independent contractor is not liable” for the actions of the
independent contractor or his servants.
§ 409.
The policy
behind the rule “is that, since the employer has no power of
18
control over the manner in which the work is to be done by the
contractor, it is to be regarded as the contractor’s own
enterprise, and [she], rather than the employer, is the proper
party to be charged with the responsibility of preventing the
risk, and bearing and distributing it.”
Though
the
Restatement
(Second)
§ 409, cmt. b.
of
Torts
recognizes
several exceptions to the general rule, Plaintiff does not
contend that any of those exceptions apply.
However, the
Plaintiff does cite Flamm v. Sarner & Associates, P.C., an
Eastern District of Pennsylvania case and Pollice v. National
Tax Funding, L.P., a Third Circuit case, for the proposition
that “an entity which itself meets the definition of ‘debt
collector’
may
be
held
vicariously
liable
for
unlawful
collection activities carried out by another on its behalf.”
Flamm, 2002 WL 31618443, 4 (E.D. Penn. 2002) and National Tax
Funding, L.P., 225 F.3d 379, 405 (3rd Cir. 2000).
While the
Eighth Circuit has not recognized this exception, this Court
agrees that the plain language of the FDCPA requires such an
exception.
However, Defendants did not hire process server
Vakulskas to engage in debt collection activities or act as a
debt collector. She was hired merely to serve the Plaintiff 19
to provide the Plaintiff notice of an Order to Appear - which
is common to a variety of actions and is not, properly
conceived, a collection activity or the actions of a debt
collector.
The
Plaintiff
also
cites
the
District
Court
of
Massachusetts’ decision in Alger v. Ganick, O’Brien & Sarin,
for
the
proposition
that
a
debt
collector
may
be
held
vicariously liable for the actions of a process server. 35 F.
Supp. 2d 148, 153-54 (D.Mass. 1999).
The decision of the
District Court of Massachussetts are not binding on this
Court.
Regardless, this Court is persuaded Plaintiff has
misread the Alger Court’s opinion.
The Alger Court held a
debt collector violates the FDCPA when they instruct a process
server to engage in conduct which is expressly prohibited
under the FDCPA.
Id.
More specifically, Alger involved
allegations that the debt collector falsely instructed the
process server to make a false representation of the amount of
debt owed, in direct violation of Section 1692(e)(2); and the
debt collector sought to collect an amount, through the
process server, which was not expressly authorized by the
agreement
creating
the
debt,
20
in
violation
of
Section
1692(f)(1).
Id.
Though the Alger Court discussed the debt
collector’s vicarious liability for the actions of the process
server, the discussion of vicarious liability was in the
context of a process server who made false representations as
to the amount of debt owed.
The actions of the debt collector
in Alger, regardless of the actions of the process server,
clearly
violated
collector’
from
the
FDCPA,
engaging
‘in
which
any
“prescribes
conduct
a
the
‘debt
natural
consequence of which is to harass, oppress, or abuse any
person in connection with the collection of a debt.’”
35 F.
Supp. at 153 (quoting 15 U.S.C. § 1692(d)) (emphasis added).
Furthermore, the process server in Alger was engaging in
activities that went beyond the mere service of process; that
is,
the
collection
process
server
activities.
was
In
actually
the
case
engaging
in
currently
debt
under
consideration, there is neither an allegation that Defendants
instructed process server Vakulskas to do anything unlawful,
nor that process server Vakulskas crossed the line into
activities that could be characterized as debt collection.
Given these facts and assuming process server Vakulskas did
not actually serve the Plaintiff, any liability arising from
21
her failure to serve the Plaintiff lies solely with her, not
the named Defendants.
B.
Defendant
RF
Financial’s
Failure
to
Provide
Notification to the Iowa Attorney General4
Iowa Code Section 537.6202(1) requires debt collectors to
provide notification to the Iowa Attorney General “within
thirty days after commencing business in [the] state . . . .”
The debt collector must provide their name, any alternate
names they use when conducting business, the address of their
principle office, the address of any offices within Iowa, an
explanation of how they conduct business in Iowa, the address
of a designated agent upon whom service of process may be made
in
Iowa,
and
a
supervised loans.
statement
of
whether
or
Iowa Code § 537.6202.
not
they
make
The purpose of the
Iowa notification statute is to alert the Attorney General,
consumers, and other debt collectors of the involvement of
said person or company in the Iowa debt collection business
4
Plaintiff
Financial.
included
this
22
issue
only
as
against
RF
and provide a means whereby they can be contacted, subpoenaed
or served.
15 U.S.C. § 1692(e)(5) provides that it is unlawful for
a debt collector to threaten “to take any action that cannot
legally be taken or that is not intended to be taken.”
interpreting
Section
1692(e)(5),
the
Eighth
Circuit
In
has
indicated that “the FDCPA was not meant to convert every
violation
of
violation.
state
debt
collection
law
into
a
federal
Only those collection activities that use ‘any
false, deceptive, or misleading representation or means,’” are
actionable.
Carlson v. First Revenue Assurance, 359 F.3d
1015, 1018 (8th Cir. 2004) (quoting 15 U.S.C. § 1692(e)).
After thoroughly reviewing the relevant case law, this
Court is persuaded Defendant’s actions taken while collecting
Plaintiff’s debt were not done in violation of Iowa law. Iowa
Code § 537.6202 merely requires a debt collector to provide
notification to the Iowa Attorney General within 30 days after
commencing such business.
It neither requires a license to
operate as a debt collector within the State, nor does it, if
violated, render all subsequent actions of the debt collector
unlawful.
Plaintiff
contends
23
the
difference
between
notification
and
a
license
“is
a
distinction
without
a
difference.” Docket No. 26, 11. Definitions demonstrate this
is not accurate. A license is “permission” to engage in “some
act that would otherwise be unlawful.” Black’s Law Dictionary
(9th ed. 2009), license. Registration, on the other hand, can
refer either to the “act of recording or enrolling.”
Law Dictionary (9th ed. 2009), registration.
Black’s
A business’s
violation of a licensing law necessarily renders each and
every
action
of
the
business
unlawful
(unless
otherwise
specified by law); however, a business’s violation of Section
537.6202 (notification within 30 days) is not a prerequisite
for them to do business in the state.
A violation of 537.6202
merely renders the action or inaction that constitutes the
violation in question unlawful, not each and every action
undertaken in furtherance of the business.
Plaintiff
Maryland
and
cites
a
decisions
District
Court
from
of
a
District
Rhode
Island
Court
of
for
the
proposition that a collection agency’s actions taken without
registering or obtaining a license required by state law was
a violation of 15 U.S.C. Section 1692(e)(5).
Bradshaw v.
Hilco Receivables, L.L.C., 765 F. Supp. 2d 719 (D.Md. 2011)
24
and Fiorenzano v. LVNV Funding, L.L.C., 2012 WL 256415 (D.R.I.
2012).
The Bradshaw Court was dealing with the “Maryland
Collection Agency Licensing Act,” which “requires that ‘a
person must have a license whenever the person does business
as a collection agency in the State.’” Bradshaw, 765 F. Supp.
2d
at
726
(quoting
Md.
Code
§
7-101,
et
seq.).
The
Fiorenzano Court was dealing with the Rhode Island Fair Debt
Collection Practices Act, which “unambiguously states that ‘no
person shall engage within this state in the business of a
debt collector . . . without first registering with the
director or the director’s designee.’” Fiorenzano, 2012 WL
2562415, 4 (quoting R.I. Gen. Laws § 19-14.9-12 (2012)).
Despite their holdings, the District Courts of Maryland and
Rhode Island recognized that not every “violation of state
law, no matter how trivial, constitutes a per se violation of
the FDCPA.”
Bradshaw, 765 F. Supp. 2d at 729 and Fiorenzano,
2012 WL 2562415 at 4.
Furthermore, neither the Maryland nor
the Rhode Island statute allows a debt collector a 30 day
grace period prior to registering as in Iowa Code Section
537.6202. Finally, Iowa Code Section 537.6202 simply does not
require
notification
to
the
25
Attorney
General
prior
to
operating as a debt collector within Iowa, and so the cases
cited by Plaintiff are inapplicable.
had
intended
compliance
with
If the Iowa Legislature
Section
537.6202
to
be
a
prerequisite to operating as a debt collector within the
State, they would have done so expressly, as did Maryland and
Rhode Island.
This Court is well aware that Plaintiff has cited a
number of other cases which hold that where the debt collector
had no license, the Court found there was a violation of the
Fair Debt Collection Practices Act. See Russey v. Rankin, 911
F. Supp. 1449 (D. N.M. 1995); Sibley v. Firstcollect, Inc.,
913 F. Supp. 469 (M.D. La. 1995); LeBlanc v. Unified CCR
Partners, 601 F.3d 1185 (11th Cir. 2010); and St. Denis v. New
Horizon Credit, Inc., 2006 WL 1965779 (D. Conn. 2006).
cases have been carefully considered by the Court.
These
However,
none of them have a “within thirty days after commencing
business” clause as does Iowa Code Section 537.6202; and all
of them involve state statutes that require licensing or
registration prior to operating as a debt collector within the
state.
26
Iowa Code Section 537.6117.1 sets out “that the Attorney
General or a designee may adopt and repeal rules which the
Attorney
General
deems
reasonably
necessary
for
the
enforcement of this chapter.” The issues before the Court are
complex, so this Court requested that the Attorney General
send it any such rules.
The Court received a copy of the
rules, carefully reviewed them, and found that there was no
provision in said rules that was pertinent to the pending
issue.
The Plaintiff attached to her pleading the case of Chase
Bank
v.
Solberg,
which
found
that
a
debt
collector’s
notification to the Attorney General is mandatory by use of
the
word
collector
“shall”
cannot
in
Section
pursue
a
537.6202,
debtor
compliance with Section 537.6202.
Claims, No. 49326, 2011.
in
and
state
that
court
a
debt
absent
Cerro Gordo D. Ct. Small
However, while the Eighth Circuit’s
decision in Carlson is binding on this Court, the Solberg
Court is an Iowa State District Court sitting in Cerro Gordo
County and does not constitute binding precedent for this
Court.
Furthermore, the Solberg Court was not considering,
and in fact could not consider even if presented to them,
27
whether
a
violation
of
Section
537.6202
constitutes
a
violation of the FDCPA; and, unlike the Plaintiff in Solberg,
the Plaintiff in this case does not contend that the Defendant
RF Financial’s failure to register resulted in her harms,
rather she contends it was the nature of the debt procedure
itself that resulted in her problems.5
This Court does not wish to downplay the seriousness of
Defendant’s failure to provide the requisite notification to
the
Iowa
Attorney
General.
Violations
of
the
Iowa
notification requirements should not go unpunished.
Iowa law
provides two means for enforcing those violations.
The Iowa
Attorney General “may bring a civil action against a person
for failure to file notification” pursuant to Iowa Code
Section 537.6113, and a debt collector’s failure to file
notification constitutes a simple misdemeanor pursuant to Iowa
Code Section 537.5301.
However, RF Financial’s failure to
provide notification to the Iowa Attorney General did not
5
The debtor in Solberg contended he was unable to defend
himself in small claims court because the debt collector did
not have a registered agent within the state upon whom to
serve papers or a subpoena.
The Plaintiff here does not
allege that Defendant RF Financial’s failure to register in
any way affected her defense in small claims court.
28
somehow render all of their actions in relation to Plaintiff
illegal or unintended under Iowa law; and, as previously
discussed,
the
steps
RF
Financial
took
to
collect
the
Plaintiff’s admitted debt, at each juncture, were reviewed and
ordered by Judge Tott.
IV.
IOWA DEBT COLLECTION PRACTICES ACT (IDCPA)
Plaintiff
contends
provisions of the IDCPA:
Defendants
violated
the
following
(1) Section 537.7103(4)(e), which
prohibits a “false threat that nonpayment of a debt may result
in
the
arrest
of
a
person
or
the
seizure,
garnishment,
attachment or sale of property or wages of that person;” (2)
Section 537.7103(1)(f), which prohibits “an action or threat
to take action prohibited by this chapter or any other law;”
(3)
Section
537.7103(1)(b),
which
prohibits
a
“false
accusation or threat to falsely accuse a person of fraud or
any other crime;” and (4) Section 537.5108(3), which prohibits
“unconscionable conduct” in collecting a debt. Docket No. 142, 15-16.
The Plaintiff’s IDCPA (Iowa) claims mirror Plaintiff’s
FDCPA (Federal) claims.
As with Plaintiff’s claims under the
FDCPA, Plaintiff’s IDCPA claims either hinge on the contention
29
that Plaintiff was never served notice of the Debtor’s Exam on
October 26, 2009, or that RF Financial failed to provide the
requisite notification to the Iowa Attorney General.
As previously noted, Defendants cannot be held liable for
process
server
Vakulskas’
alleged
failure
to
serve
the
Plaintiff. There is no evidence in the record that gives rise
to the reasonable inference that process server Vakulskas was
an employee of her husband’s firm.
Pursuant to Iowa law, she
was acting as an independent contractor; and, absent an
exception, she alone is accountable for her actions.
The Plaintiff cites the Iowa Supreme Court’s decision in
Monahan Loan Service, Inc. v. Janssen for the proposition that
violations of the Credit Code may be actionable as unfair debt
collection practices.
349 N.W.2d 752 (Iowa 1984).
In as far
as violations of the Credit Code affect a debt collector’s
collection
activities
in
relation
Plaintiff, this Court agrees.
to
a
particularized
However, the Monahan Court did
not hold that a debt collector’s each and every violation of
the Credit Code, no matter how tenuously related to the debt
collector’s collection at issue, is a violation of the FDCPA.
Id.
30
In Monahan, the debt collector failed to bring the action
in the county of the debtor’s residence as required by Iowa
Code Section 537.5113.
349 N.W.2d 752, 754 (Iowa 1984).
The
action that constituted the violation of the Credit Code at
issue in Monahan was taken against the debtor in order to
collect the debt. As previously noted, RF Financial’s failure
to provide notification to the Iowa Attorney General pursuant
to Section 537.6202(1) simply did not relate to any of the
Plaintiff’s alleged harms.
In fact, RF Financial’s actions
taken to collect Plaintiff’s legally enforceable debt were all
done in compliance with Iowa law.
Again, there is no dispute that Defendant RF Financial
violated Section 537.6202 (requiring notification to the Iowa
Attorney General).
However, this violation was unrelated to
its actions taken to collect the debt from Plaintiff.
As
previously noted, unlike state statutes that make registration
or licensing a prerequisite to operating as a debt collector
within the state, Section 537.6202 provides for a 30 day grace
period and fails to state that registration is a prerequisite
to engaging in debt collection activities within Iowa.
The
prohibited practices outlined in Iowa Code Section 537.7103,
31
including violations of the law, expressly apply only to a
debt collector’s efforts to “collect or attempt to collect a
debt” from a debtor.
Violations of other laws unrelated to
the collection of the debt in question do not give rise to a
cause of action for the debtor.
What the Plaintiff asks this
Court to do is tantamount to determining that a person is
liable for damages to another caused in a car accident,
without an examination of who was actually at fault, simply
because they failed to register the vehicle they were driving.
Given Section 537.6202 does not indicate it is a prerequisite
to collecting debt in Iowa, it would be unfair to hold
Defendant RF Financial liable for all their actions taken
against Plaintiff based on a violation thereof.
V.
ABUSE OF PROCESS
Abuse of process is “‘the use of legal process, whether
criminal or civil, against another primarily to accomplish a
purpose for which it was not designed.’”
Fuller v. Local
Union No. 106, 567 N.W.2d 419, 421 (Iowa 1997) (quoting Palmer
Tandem Management Servs., Inc., 505 N.W.2d 813, 817 (Iowa
1993)).
claim:
There are three elements to an abuse of process
“(1) the use of a legal process; (2) its use in an
32
improper
or
unauthorized
manner;
and
(3)
the
plaintiff
suffered damages as a result of the abuse.” Dobratz v. Krier,
2011 WL 5867067, 3 (Iowa App. 2011).
In order for the purpose to be improper, it must be “for
an immediate purpose other than that for which it was designed
and intended.”
1990).
Wilson v. Hayes, 464 N.W.2d 250, 267 (Iowa
Abuse of process is very hard to prove under Iowa law.
In Wilson v. Hayes, the Court stated, “the defendant is not
liable if he has done no more than carry the process to its
authorized conclusion, even with bad intention.”
464 N.W.2d
at 267.
Plaintiff contends Defendants used the Judgment Debtor’s
Exam process in an improper manner because the “arrest for
failing to attend the debtor’s exam was to obtain the cash
bond to satisfy the debt . . .”
Plaintiff
also
notes
that
the
bond
Docket No. 14-2, 17.
amount,
$3,500,
was
conveniently set at an amount close to the debt owed, which
was $3,484.20, plus interest at a rate of 16.8%.
14-2, 17.
Docket No.
However, under the Judgment Debtor’s Exam process,
it is a judge, pursuant to Iowa Code Section 630.11, who has
the authority to issue a Civil Warrant after a party fails to
33
attend a Judgment Debtor’s Exam, and an opposing party is well
within their rights to file an application for such a warrant.
Furthermore, Judge Tott, not Defendants, set the $3,500 bond
amount.
As Defendants note, the application for the warrant
did not request a bond amount.
Overall, Defendants employed the debt collection process
in the exact manner outlined under the law: Defendants sought
and
received
a
small
claims
judgment;
an
execution
was
returned unsatisfied; Defendants sought and received an Order
for a Judgment Debtor’s Exam; Defendants hired a sufficiently
independent third party to serve process; Plaintiff failed to
appear at the Judgment Debtor’s exam; based on an affidavit by
the process server stating Plaintiff was served, Defendant
filed an application for a Civil Warrant; Judge Tott issued
the Civil Warrant; and Plaintiff was arrested in conformance
with Chapter 630 of the Iowa Code.
Therefore, Plaintiff has
failed to present a genuine issue of material fact in relation
to her abuse of process claim, and Defendants’ motion for
summary judgment is hereby granted.
VI.
CONCLUSION
The record before this Court is insufficient to establish
34
a genuine issue of material fact sufficient to sustain a
trial, and Defendant is entitled to summary judgment as a
matter of law.
Therefore, each of Plaintiff’s causes of
action are hereby dismissed.
IT IS SO ORDERED this 17th day of September, 2012.
__________________________________
Donald E. O’Brien, Senior Judge
United States District Court
Northern District of Iowa
35
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