Schultz et al v. Portfolio Recovery Associates, LLC
Filing
22
ORDER granting 16 Motion to Dismiss. The Clerk of Court is directed to dismiss the claims against PRA, Inc. Signed by Chief Judge Linda R Reade on 10/26/2012. (pac)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
EASTERN DIVISION
CRAIG SCHULTZ and BELEN
SCHULTZ,
Plaintiffs,
No. 12-CV-2022-LRR
vs.
ORDER
PORTFOLIO RECOVERY
ASSOCIATES, LLC and PORTFOLIO
RECOVERY ASSOCIATES, INC.,
Defendants.
____________________
TABLE OF CONTENTS
I.
INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II.
PROCEDURAL HISTORY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
III.
SUBJECT MATTER JURISDICTION .. . . . . . . . . . . . . . . . . . . . . . . . . 2
IV.
STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
V.
FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A.
B.
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Overview of Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
VI.
PERSONAL JURISDICTION FRAMEWORK . . . . . . . . . . . . . . . . . . . . 4
VII.
ANALYSIS .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A.
B.
Alter Ego Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.
Parties’ arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.
Applicable law .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.
Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Vicarious Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1
1.
2.
3.
Parties’ arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Applicable law .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
VIII. ATTORNEY’S FEES AND COSTS .. . . . . . . . . . . . . . . . . . . . . . . . . . 13
IX.
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
I. INTRODUCTION
The matter before the court is Defendant Portfolio Recovery Associates, Inc.’s
(“PRA, Inc.”) “Motion to Dismiss Under Rule 12(b)(2) for Lack of Personal Jurisdiction”
(“Motion”) (docket no. 16).
II. PROCEDURAL HISTORY
On April 6, 2012, Plaintiffs Craig Schultz and Belen Schultz filed an Amended
Complaint (docket no. 5) against Portfolio Recovery Associates, LLC (“PRA, LLC”) and
PRA, Inc. alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15
U.S.C. §§ 1692-1692p, and the Iowa Debt Collection Practices Act (“IDCPA”), Iowa
Code §§ 537.7101-537.7103. On May 11, 2012, PRA, Inc. filed the Motion, which
requests that the court dismiss the claims against PRA, Inc. for lack of personal
jurisdiction. On May 25, 2012, Plaintiffs filed a Resistance (docket no. 17). On May 31,
2012, PRA, Inc. filed a Reply (docket no. 18). Neither party requests oral argument on
the Motion, and the court finds that oral argument is unnecessary. The Motion is fully
submitted and ready for decision.
III. SUBJECT MATTER JURISDICTION
The court has subject matter jurisdiction over the claims arising under the FDCPA
pursuant to 15 U.S.C. § 1692k(d), which states that “[a]n action to enforce any liability
created by this subchapter may be brought in any appropriate United States district
court . . . .” 15 U.S.C. § 1692k(d); see also 28 U.S.C. § 1331 (“The district courts shall
have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties
of the United States.”).
2
The court has supplemental jurisdiction over Plaintiffs’ state-law claims arising
under the IDCPA because they are so related to the claims over which the court has federal
question jurisdiction that they form part of the same case or controversy. See 28 U.S.C.
§ 1367(a) (“[T]he district courts shall have supplemental jurisdiction over all other claims
that are so related to claims in the action within such original jurisdiction that they form
part of the same case or controversy . . . .”). In other words, “[t]he federal-law claims
and state-law claims in the case derive from a common nucleus of operative fact and are
such that [a plaintiff] would ordinarily be expected to try them all in one judicial
proceeding.” Kan. Pub. Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063,
1067 (8th Cir. 1996) (alteration in original) (quoting Carnegie-Mellon Univ. v. Cohill, 484
U.S. 343, 349 (1988)) (internal quotation marks omitted).
IV. STANDARD OF REVIEW
Pursuant to Federal Rule of Civil Procedure 12(b)(2), PRA, Inc. moves to dismiss
this case for lack of personal jurisdiction. “‘[T]o defeat a motion to dismiss for lack of
personal jurisdiction, the nonmoving party need only make a prima facie showing of
jurisdiction[,]’ and may do so by affidavits, exhibits, or other evidence.” Romak USA,
Inc. v. Rich, 384 F.3d 979, 983 (8th Cir. 2004) (quoting Epps v. Stewart Info. Servs.
Corp., 327 F.3d 642, 647 (8th Cir. 2003)). Although the court must view the evidence
in the light most favorable to the nonmoving party and resolve all factual conflicts in its
favor, “‘[t]he party seeking to establish the court’s in personam jurisdiction[, that is, the
nonmoving party,] carries the burden of proof, and the burden does not shift to the party
challenging jurisdiction.’” Id. at 983-84 (quoting Epps, 327 F.3d at 647). “While the
plaintiffs bear the ultimate burden of proof, jurisdiction need not be proved by a
preponderance of the evidence until trial or until the court holds an evidentiary hearing.”
Epps, 327 F.3d at 647.
3
V. FACTUAL BACKGROUND
A. Parties
Viewed in the light most favorable to Craig Schultz and Belen Schultz (collectively,
“Plaintiffs”), the facts are as follows: Plaintiffs are citizens of the State of Iowa. PRA,
Inc. is a Delaware corporation with its principal place of business in Virginia. Brief in
Support of Motion (docket no. 16-1) at 3. PRA, LLC is a wholly owned subsidiary of
PRA, Inc. Resistance at 2. PRA, LLC is registered with the Iowa Secretary of State. See
Iowa Secretary of State Search (docket no. 17-3).
B. Overview of Dispute
The dispute in this case centers around a debt that Plaintiffs allegedly owe to a
creditor other than PRA, LLC or PRA, Inc. In the Complaint, Plaintiffs claim that PRA,
LLC contacted Plaintiffs on behalf of the creditor that in an effort to collect the debt.
Plaintiffs sent letters dated April 17, 2007 and May 27, 2007 demanding that PRA, LLC
and PRA, Inc. cease and desist communications with Plaintiffs. Complaint at ¶ 15.
Between the dates of March 17, 2011 and August 8, 2011, PRA, LLC placed eleven
telephone calls to Plaintiffs. Over this same time period, PRA, LLC left Plaintiffs seven
voicemail messages. In the voicemail messages, PRA, LLC never disclosed that it was
in the business of collecting debt, and it did not disclose its business name.
VI. PERSONAL JURISDICTION FRAMEWORK
Personal jurisdiction is governed by the law of the forum state. Omni Capital Int’l,
Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 97 (1987) (holding that personal jurisdiction was
governed by the forum state’s long-arm statute because the applicable federal statute was
silent about service of process); see also Velez, 2012 WL 3038535, at *4 (“When the
relevant federal statute is silent as to service of process, as is the case here, a court may
exercise personal jurisdiction only to the extent permitted by the forum state’s long-arm
statute.”).
“A federal court may exercise personal jurisdiction over a nonresident
4
defendant only if doing so is consistent with both the forum state’s long-arm statute and
the requirements of the Due Process Clause.” Primus Corp. v. Centreformat Ltd., 221 F.
App’x 492, 493 (8th Cir. 2007) (per curiam) (citing Romak USA, 384 F.3d at 984).
Iowa’s long-arm statute extends personal jurisdiction over nonresidents to the fullest extent
permissible under the Due Process Clause. See Iowa R. Civ. P. 1.306; see also Hicklin
Eng’g, Inc. v. Aidco, Inc., 959 F.2d 738, 739 (8th Cir. 1992) (per curiam) (“[P]ersonal
jurisdiction in Iowa reaches to the fullest extent permitted by the Constitution . . . .”);
Roquette Am., Inc. v. Gerber, 651 N.W.2d 896, 899 (Iowa Ct. App. 2002). Therefore,
in determining whether the court has personal jurisdiction over an out-of-state defendant,
the crucial inquiry is whether the exercise of personal jurisdiction is in accord with due
process. Hicklin Eng’g, 959 F.2d at 739.
“The Due Process Clause requires that ‘minimum contacts’ exist between the
nonresident defendant and the forum state before the court can exercise jurisdiction over
the defendant.” Miller v. Nippon Carbon Co., 528 F.3d 1087, 1090 (8th Cir. 2008)
(citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980)).
“‘Sufficient contacts exist when the defendant’s conduct and connection with the forum
state are such that he should reasonably anticipate being haled into court there, and when
maintenance of the suit does not offend traditional notions of fair play and substantial
justice.’” Id. at 1090-91 (quoting Bell Paper Box, Inc. v. U.S. Kids, Inc., 22 F.3d 816,
818 (8th Cir. 1994)). “The contacts with the forum state must be more than random,
fortuitous, or attenuated.” Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d
1384, 1389 (8th Cir. 1991) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475
(1985)) (internal quotation marks omitted).
“The Supreme Court has recognized two theories for evaluating personal
jurisdiction: general and specific jurisdiction.” Steinbuch v. Cutler, 518 F.3d 580, 586
(8th Cir. 2008) (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
5
414-15 (1984)); see also Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1073 (8th Cir.
2004) (“The Supreme Court has set forth two theories for evaluating minimum contacts,
general jurisdiction and specific jurisdiction.”). General jurisdiction exists “if a defendant
has carried on in the forum state a continuous and systematic, even if limited, part of its
general business; in such circumstances, the alleged injury need not have any connection
with the forum state.” Steinbuch, 518 F.3d at 586 (citing Keeton v. Hustler Magazine,
Inc., 465 U.S. 770, 779 (1984)). However, “[t]he plaintiff must make a prima facie
showing . . . that the defendant’s contacts were not ‘random,’ ‘fortuitous,’ or
‘attenuated.’” Id. (quoting Keeton, 465 U.S. at 774). “Specific jurisdiction . . . is
appropriate only if the injury giving rise to the lawsuit occurred within or had some
connection to the forum state, meaning that the defendant purposely directed its activities
at the forum state and the claim arose out of or relates to those activities.” Id. (citing
Burger King Corp., 471 U.S. at 472).
“Both theories of personal jurisdiction require ‘some act by which the defendant
purposely avails itself of the privilege of conducting activities within the forum [s]tate, thus
invoking the benefits and protections of its laws.’” Dever, 380 F.3d at 1073 (quoting
Hanson v. Denckla, 357 U.S. 235, 253 (1958)). The Eighth Circuit Court of Appeals has
instructed courts to consider the following factors when
resolving a personal jurisdiction inquiry: ‘(1) the nature and
quality of [a defendant’s] contacts with the forum state; (2) the
quantity of such contacts; (3) the relation of the cause of action
to the contacts; (4) the interest of the forum state in providing
a forum for its residents; and (5) [the] convenience of the
parties.’
Id. at 1073-74 (alterations in original) (quoting Burlington Indus., Inc. v. Maples Indus.,
Inc., 97 F.3d 1100, 1102 (8th Cir. 1996)); see also Aftanase v. Econ. Baler Co., 343 F.2d
187, 197 (8th Cir. 1965) (creating five-factor inquiry).
The first three factors are the most important.
6
Dever, 380 F.3d at 1074
(“Significant weight is given to the first three factors.”); Dakota Indus., 946 F.2d at 1390
(noting that the first three factors are the most important). The factors must not be applied
mechanically; they are not a “slide rule by which fundamental fairness can be ascertained
with mathematical precision.” Austad Co. v. Pennie & Edmonds, 823 F.2d 223, 226 (8th
Cir. 1987) (quoting Toro Co. v. Ballas Liquidating Co., 572 F.2d 1267, 1270 (8th Cir.
1978)) (internal quotation mark omitted). Few answers to jurisdictional questions “will
be written in black and white.” Burger King Corp., 471 U.S. at 486 n.29 (quoting Kulko
v. Superior Court of Cal., 436 U.S. 84, 92 (1978)) (internal quotation mark omitted).
VII. ANALYSIS
PRA, Inc. moves to dismiss the instant action pursuant to Federal Rule of Civil
Procedure 12(b)(2), arguing that it is not subject to personal jurisdiction in Iowa because
PRA, Inc. is not a debt collector, does not conduct any business in the State of Iowa and
has had no contact with Plaintiffs. Plaintiffs resist, arguing that the court has both general
and specific personal jurisdiction over PRA, Inc. Resistance at 6-12. Plaintiffs base their
argument on two theories. First, Plaintiffs claim that PRA, LLC is the alter ego of PRA,
Inc., and therefore, the court has personal jurisdiction over PRA, Inc. due to PRA, LLC’s
contacts with Iowa. Second, Plaintiffs argue that PRA, Inc. qualifies as a “debt collector”
under the FDCPA and that it should be held vicariously liable for the actions of its agent,
PRA, LLC.
A. Alter Ego Doctrine
1.
Parties’ arguments
In the Motion, PRA, Inc. argues that this court cannot exercise personal jurisdiction
over it because PRA, Inc. “does not engage in the collection of consumer debts” and does
not “conduct any other business in Iowa.” Brief in Support of Motion at 3. Plaintiffs
counter that the court should disregard the corporate form because PRA, LLC is the alter
ego of PRA, Inc. Resistance at 4. Plaintiffs claim that PRA, LLC is the alter ego of
7
PRA, Inc. because: (1) PRA, Inc. owns all outstanding membership units of PRA, LLC;
(2) PRA, Inc.’s website does not distinguish between the parent and its subsidiaries; (3)
in its filings with the Securities and Exchange Commission (“SEC”), PRA, Inc. and its
subsidiaries are collectively referred to as “the Company,” id. at 4-5; and (4) PRA, Inc.’s
Form 10-Q, a quarterly report filed with the SEC, provides that the Company’s “primary
business is the purchase, collection and management of portfolios of defaulted consumer
receivables,” PRA, Inc. Form 10-Q (docket no. 17-5) at 8. In support of their arguments,
Plaintiffs cite Brown v. Portfolio Recovery Associates, No. H-11-2869 (S.D. Tex. Jan. 20,
2012) (docket no. 17-6).
2.
Applicable law
It is well-settled that a parent corporation is “not doing business in a state merely
by the presence of its wholly owned subsidiary.” Epps, 327 F.3d at 649 (quoting Lakota
Girl Scout Council, Inc. v. Havey Fund-Raising Mgmt., Inc., 519 F.2d 634, 637 (8th Cir.
1975)). When a defendant is a nonresident parent company that owns a subsidiary over
which the court has personal jurisdiction, the court must determine whether personal
jurisdiction can be properly asserted over the parent company. See Lakota Girl Scout
Council, 519 F.2d at 637. “If the resident subsidiary corporation is the alter ego of the
nonresident corporate defendant, the subsidiary’s contacts are those of the parent
corporation’s, and due process is satisfied.” Epps, 327 F.3d at 649. The court may
disregard the corporate entity “where one corporation is so organized and controlled . . .
that it is, in fact, a mere instrumentality or adjunct of another corporation.” Id. (quoting
Lakota Girl Scout Council, 519 F.2d at 637); see also Velez, 2012 WL 3038535, at *6
(“The alter ego test is satisfied only where ‘the record indicates that the parent dictates
every facet of the subsidiary’s business—from broad policy decisions to routine matters of
day-to-day operation.’” (quoting In re Genetically Modified Rice Litig., 576 F. Supp. 2d
1063, 1072 (E.D. Mo. 2008))).
8
The court’s determination as to whether a wholly owned subsidiary is the alter ego
of a parent corporation “is contingent on the ability of the plaintiffs to pierce the corporate
veil.” Epps, 327 F.3d at 649. In determining whether to pierce the corporate veil, the
court applies state law. Id. Iowa courts have held that “[a] court may disregard a
corporate structure by piercing the corporate veil only under circumstances ‘where the
corporation is a mere shell, serving no legitimate business purpose, and used primarily as
an intermediary to perpetuate fraud or promote injustice.’” In re Marriage of Ballstaedt,
606 N.W.2d 345, 349 (Iowa 2000) (quoting C. Mac Chambers Co. v. Iowa Tae Kwon Do
Acad., Inc., 412 N.W.2d 593, 597-98 (Iowa 1987)); see also Briggs Transp. Co. v. Starr
Sales Co., 262 N.W.2d 805, 810 (Iowa 1978) (“In the parent-subsidiary context, [Iowa
courts] have stated the corporate entity should be disregarded where doing so would
prevent the parent from perpetuating a fraud or injustice, evading just responsibility or
defeating public convenience.”).
In determining whether the corporate veil should be pierced, the Iowa Supreme
Court has held that the factors that the court should consider include:
whether (1) the corporation is undercapitalized, (2) the
corporation lacks separate books, (3) its finances are not kept
separate from individual finances, or individual obligations are
paid by the corporation, (4) the corporation is used to promote
fraud or illegality, (5) corporate formalities are not followed,
or (6) the corporation is a mere sham.
Briggs Transp. Co., 262 N.W.2d at 810 (citing Lakota Girl Scout Council, 519 F.2d at
638).
3.
Application
The court finds that it does not have specific personal jurisdiction over PRA, Inc.
Based on the evidence, PRA, Inc. is not doing business in Iowa and is not authorized by
the Iowa Secretary of State to do business in Iowa. Further, PRA, Inc. never contacted
Plaintiffs and “does not, and never has, owned or held [Plaintiffs’] debt.” Brief in Support
9
of Motion at 3. Therefore, in order for this court to properly exercise personal jurisdiction
over PRA, Inc., it must be based on general jurisdiction because PRA, Inc. itself does not
have the requisite minimum contacts with Iowa. See Epps, 327 F.3d at 650 (finding that
a holding company itself did not have sufficient minimum contacts to establish specific
jurisdiction before considering whether it could “properly pierce [the subsidiary’s]
corporate veil under the alter-ego approach to establish general personal jurisdiction over
[the parent company]”).
In order for this court to have general jurisdiction over PRA, Inc., the court must
find that it is appropriate to pierce the corporate veil under the alter ego approach. After
reviewing the parties’ briefs and exhibits, the court finds that no basis exists for doing so.
First, Plaintiffs do not allege that any of the Lakota Girl Scout Council factors are present,
nor do they allege that PRA, Inc. “dictates every facet of [PRA, LLC’s] business.” Velez,
2012 WL 3038535, at *6 (quoting In re Genetically Modified Rice Litig., 576 F. Supp. 2d
at 1072).
Second, the facts that Plaintiffs rely on are insufficient grounds for piercing the
corporate veil. PRA, Inc.’s mere ownership of PRA, LLC is not a sufficient contact with
Iowa to provide this court with personal jurisdiction over PRA, Inc. See Epps, 327 F.3d
at 650 (“SISCO’s mere ownership of Stewart Guaranty is too distant and limited a contact
with Arkansas to justify subjecting it to the District Court’s exercise of personal
jurisdiction.”); Velez, 2012 WL 3038535, at *6 (finding that the parent company’s
ownership of the subsidiary “and its inclusion of the [subsidiary’s] assets and liabilities on
its balance sheets and SEC filings is insufficient to satisfy the alter ego test . . . . [The
parent company’s] ownership interest in the [subsidiary] is too distant and limited a contact
with Missouri to justify subjecting it to personal jurisdiction” (internal citation omitted)).
Moreover, the court agrees with PRA, Inc. that the fact that its SEC filings and website
“refer to debt collection activities and refer to PRA[, Inc.] and PRA[, LLC] collectively,”
Resistance at 4, is not a sufficient reason to pierce the corporate veil.
10
The facts of this case are nearly identical to those in Velez. The plaintiff in Velez
brought an action in the Eastern District of Missouri against PRA, Inc., alleging violations
of the FDCPA. Velez, 2012 WL 3038535, at *1. PRA, Inc. moved to dismiss the claims
against it on the basis that the district court did not have personal jurisdiction over PRA,
Inc. Id. The Plaintiff urged the district court to find that PRA, LLC was PRA, Inc.’s
alter ego. The district court, however, found no basis for disregarding the corporate form
and, thus, dismissed the claims against PRA, Inc. for lack of personal jurisdiction. Id. at
*6.
The facts in Velez and the instant action can be distinguished from those in Brown,
which is a case that Plaintiffs urge the court to follow. In Brown, the plaintiff brought
claims against PRA, Inc., alleging violations of the FDCPA. Brown, No. H-11-2869, at
1. In that case, the court held that the plaintiff made a prima facie showing of personal
jurisdiction. Id. at 2. However, in Brown, “[i]nformation from PRA[, Inc.]’s website
establishe[d] that it ha[d] an office and employees in Texas.” Id. Therefore, because
PRA, Inc. had sufficient contacts with Texas to enable the court to exercise personal
jurisdiction over it, the Brown court did not address the alter ego theory. Id. Here, there
is no evidence suggesting that PRA, Inc. has an office or any other contacts sufficient to
establish minimum contacts with Iowa.
Therefore, for the foregoing reasons, the court finds that PRA, LLC is not the alter
ego of PRA, Inc., and the court cannot exercise personal jurisdiction over PRA, Inc. based
on the alter ego theory.
B. Vicarious Liability
1.
Parties’ arguments
In the Motion, PRA, Inc. claims that it is not a debt collector as defined by 15
U.S.C. § 1692a(6) because it “does not engage in the collection of consumer debts.” Brief
in Support of Motion at 3. In the Resistance, Plaintiffs argue that the court should exercise
personal jurisdiction over PRA, Inc. based on an agency theory of vicarious liability.
11
Resistance at 7-8. Plaintiffs contend that PRA, Inc. qualifies as a “debt collector” under
15 U.S.C. § 1692a(6) and, therefore, as a principal, it may be held vicariously liable for
the collection practices of its agents pursuant to the FDCPA. Resistance at 7. Plaintiffs
cite Pollice v. National Tax Funding, L.P., 225 F.3d 379 (3d Cir. 2000), in support of this
proposition. Plaintiffs also cite the Restatement (Second) of Agency § 217B (1958) to
support their contention that a principal can be joined with an agent in an action resulting
from the agent’s torts.
2.
Applicable law
The Eighth Circuit has recently held that personal jurisdiction based on the “agency
theory” of liability is not appropriate. Viasystems, Inc. v. EBM-Papst St. Georgen GmbH
& Co., KG, 646 F.3d 589, 596 (8th Cir. 2011) (holding that plaintiff’s argument that
jurisdiction based on an agency relationship should be implied between the subsidiary and
the parent company because the subsidiary performed certain services on behalf of the
parent company was “inconsistent with [Eighth Circuit] precedent”); see also Velez, 2012
WL 3038535, at *7 (“Viasystems explicitly rejected an agency theory . . . that an entity
‘perform[ed] services sufficiently important to [defendant] that if it did not have a
representative to perform them, [defendant’s] own officials would undertake to perform
substantially similar services.’”) (alterations in original) (quoting Viasystems, 646 F.3d at
596).
The FDCPA states that the term “debt collector” refers to “any person who uses
any instrumentality of interstate commerce or the mails 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.”
15 U.S.C. § 1692a(6). The IDCPA defines “debt collector” as “a person engaging,
directly or indirectly, in debt collection, whether for the person, the person’s employer,
or others, and includes a person who sells, or offers to sell, forms represented to be a
collection system, device, or scheme, intended to be used to collect debts.” Iowa Code
12
§ 537.7102(5). In Pollice, the court stated that a principal that qualifies as a “debt
collector” under the FDCPA “may be held vicariously liable for unlawful collection
activities carried out by another on its behalf.” Pollice, 225 F.3d at 404. Therefore, as
Plaintiffs note in their Resistance, this theory of liability only applies if PRA, Inc., the
principal, qualifies as a “debt collector.”
3.
Application
The parties dispute whether PRA, Inc. is a “debt collector” within the meaning of
the FDCPA and IDCPA. However, even if this court found that PRA, Inc. qualifies as
a “debt collector,” the court cannot base personal jurisdiction on the “agency theory,” for
the reasons discussed above. Therefore, the court need not address this issue.
The court concludes that “agency theory” is not an appropriate basis for personal
jurisdiction. Plaintiffs assert that the agency theory provides this court with jurisdiction
over PRA, Inc. because PRA, Inc. used PRA, LLC to collect debts on its behalf.
However, based on the Eighth Circuit’s holding in Viasystems, the court finds that it
cannot exercise personal jurisdiction over PRA, Inc. under an agency theory of vicarious
liability. Viasystems, 646 F.3d at 596; see also Velez, 2012 WL 3038535, at *7 (rejecting
plaintiff’s argument that the court should base personal jurisdiction on an agency theory).
VIII. ATTORNEY’S FEES AND COSTS
PRA, Inc. argues that Plaintiffs should pay PRA, Inc.’s attorney’s fees and costs
pursuant to 15 U.S.C. § 1692k(a)(3). This provision provides that, if an action brought
under the FDCPA “was brought in bad faith and for the purpose of harassment, the court
may award to the defendant attorney’s fees reasonable in relation to the work expended and
costs.” 15 U.S.C. § 1692k(a)(3). PRA, Inc. claims that Plaintiffs had no “factual or legal
good faith basis for naming PRA[, Inc.] in this suit.” Reply at 4.
To avoid discouraging private litigation under the FDCPA, courts have interpreted
§ 1692k(a)(3) narrowly when determining whether to award damages to debt collectors.
See Rouse v. Law Offices of Rory Clark, 603 F.3d 699, 705 (9th Cir. 2010) (noting that
13
Congress’s intent in passing the FDCPA is to protect consumers from abusive debt
collection practices. Therefore, “insulating consumers from the prospect of paying
defendants’ costs by requiring a finding that the action was brought in bad faith and for
harassment is consistent with the stated intent of Congress.”); Guerrero v. RJM
Acquisitions L.L.C., 499 F.3d 926, 941 (9th Cir. 2007) (The FDCPA was not “intended
as a sword to be brandished by debtors who have retained counsel—the very debtors least
in need of the Act’s protections.”); Velez, 2012 WL 3038535, at *7 (“Section 1692k(a)(3)
should be construed narrowly as to not discourage private litigation under the FDCPA.”)
(quoting Kondratick v. Beneficial Consumer Disc. Co., No. Civ.A. 04-4895, 2006 WL
305399, at *10 n.4 (E.D. Pa. Feb. 8, 2006)) (internal quotation mark omitted). “For an
award to be made, there must be evidence that the plaintiff knew that his claim was
meritless and that plaintiff pursued his claims with a purpose of harassing the defendant.”
Velez, 2012 WL 3038535, at *7 (quoting Allers-Petrus v. Columbia Recovery Grp.,
L.L.C., No. C08-5533 FDB, 2009 WL 1160061, at *1 (W.D. Wash. April 29, 2009))
(internal quotation marks omitted).
The court finds that an award of attorney’s fees and costs is not justified in this
case. Although the court agrees with PRA, Inc. that the court does not have personal
jurisdiction over PRA, Inc., “there is no indication that Plaintiff[s’] claim is frivolous,
designed to harass, or to avoid the repayment of debt.” Velez, 2012 WL 3038535, at *7.
See Simmons v. Roundup Funding, L.L.C., 622 F.3d 93, 97 (2d Cir. 2010); cf. Smith v.
Argent Mortg. Co., 331 Fed. App’x 549, 559 (10th Cir. 2009). Therefore, PRA, Inc.’s
request for attorney’s fees and costs under 15 U.S.C. § 1692k(a)(3) is denied.
IX. CONCLUSION
In light of the foregoing, Defendant PRA, Inc.’s Motion to Dismiss Under Rule
12(b)(2) for Lack of Personal Jurisdiction (docket no. 16) is GRANTED. The Clerk of
the Court is DIRECTED to dismiss the claims against PRA, Inc.
IT IS SO ORDERED.
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DATED this 26th day of October, 2012.
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