Berg v. Ayesh et al
Filing
41
MEMORANDUM AND ORDER granting in part and denying in part 27 Motion to Dismiss for Failure to State a Claim. Signed by District Judge Daniel D. Crabtree on 06/11/2014. (mig)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
JERRY L. BERG,
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Plaintiff,
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v.
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MARK G. AYESH, et al.,
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Defendants.
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______________________________________ |
Case No. 13-1164-DDC-KGG
MEMORANDUM AND ORDER
The Court has under consideration Defendants’ Motion to Dismiss Pursuant to F.R.C.P.
12(b)(6) and 28 U.S.C. § 1927 (Doc. 27) [hereinafter “Motion to Dismiss”].1 Plaintiff opposes
the motion and it is fully briefed. For the following reasons, the Court grants the motion in part
and denies it in part.
I. BACKGROUND
Pro se plaintiff Jerry L. Berg commenced this action by filing a civil complaint on April
30, 2013, against Cedar Lakes Village Condominium Association (“CLVCA”); its attorney,
Mark G. Ayesh; its Property Manager, Simon Palmer Properties, Inc. (“SPP”); and eighteen
members of CLVCA and unit owners or residents.2 He sues all defendants for alleged tortious
interference with contract, alleged violations of the Kansas Uniform Common Interest Owners’
Bill of Rights Act (“KUCIOBORA”), K.S.A. § 58-4601 et seq.; and alleged violations of the
1
The parties have also electronically filed two documents as motions (Docs. 32 and 36) that are merely
supplemental briefs related to the motion to dismiss (Doc. 27). The Court will consider these two filings and the
filings prompted by them (Docs. 37, 38, and 39) as supplementing the briefing regarding the motion to dismiss. For
ease of reference, the Court will cite to the supplemental briefing only by their document number on the Court’s
CM-ECF docket. The Clerk of the Court is directed to edit the docket entries for Docs. 32 and 36 to reflect that the
filings are supplements – not motions – and to make any necessary changes to the related docket entries for Docs.
37, 38, and 39.
2
See Compl. (Doc. 1) ¶¶ 2-15.
Kansas Constitution and Bill of Rights.3 And he sues the two entities and Ayesh for alleged
violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.4
On June 7, 2013, defendants moved to dismiss this action pursuant to Fed. R. Civ. P.
12(b)(6) for failure to state a claim upon which relief can be granted and pursuant to 28 U.S.C. §
1927 because, defendant claims plaintiff should be declared a vexatious litigant.5 Upon the
filing of defendants’ Reply (Doc. 33), the motion became fully briefed and ready for ruling.
Given the filing of the motion and similarities between this case and another case filed by plaintiff – Case No. 12-1123-KHV – the Court essentially stayed all proceedings in this case pending
resolution of the Motion to Dismiss.6 And then, on December 12, 2013, the Court granted
defendants’ Motion for Summary Judgment in the related case, found that plaintiff’s FDCPA
claims failed as a matter of law, declined to exercise supplemental jurisdiction over plaintiff’s
state law claims, and remanded the case to state court. Berg v. Frobish [Berg I], No. 12-1123KHV, 2013 WL 6511877, at *4-7 (D. Kan. Dec. 12, 2013). This ruling prompted a series of
supplemental briefs on the Motion to Dismiss in this case.7 In that briefing, defendants urge the
Court to dismiss this case for lack of jurisdiction to be consistent with the dismissal of Case No.
12-1123-KHV.8
3
See id. ¶¶ 74-107.
4
See id. ¶¶ 65-73.
5
See Mot. Dismiss at 2; Mem. Facts & Law Supp. Defs.’ Mot. Dismiss (“Mem.”) (Doc. 28) at 4-5, 22.
6
See Minute Order Staying Discovery (Doc. 34) (noting “that the claims [in this case] appear to duplicate,
or at best continue, the claims presented in case number 12-1123-KHV, which is also subject to pending dispositive
motions”).
7
See Docs. 36-39.
8
See Doc. 36 at 2.
2
II. JURISDICTION
To be consistent with the ruling in the prior case, defendants urge the Court to dismiss
this action for lack of jurisdiction because plaintiff – as in his prior case – predicates federal
jurisdiction only on his FDCPA claims. Doc. 36 at 2. Defendants misconstrue the ruling in Berg
I. The Court in Berg I did not dismiss the FDCPA claims for lack of jurisdiction. See 2013 WL
6511877, at *4-7. It instead found that such claims failed as a matter of law because the
defendants, including SPP and CLVCA, were not debt collectors within the meaning of the
FDCPA and were not attempting to collect any consumer debt. See id. The jurisdictional issues
arose only when the Court considered whether to exercise supplemental jurisdiction over the
state law claims. See id. at *7. For jurisdictional purposes in this case, plaintiff adequately
alleges a violation of the FDCPA.
III. VEXATIOUS LITIGANT
Pursuant to 28 U.S.C. § 1927, defendants seek to dismiss this action because plaintiff
should be declared a vexatious litigant. Mem. at 22. That statute provides:
Any attorney or other person admitted to conduct cases in any court of the United
States or any Territory thereof who so multiplies the proceedings in any case
unreasonably and vexatiously may be required by the court to satisfy personally
the excess costs, expenses, and attorneys’ fees reasonably incurred because of
such conduct.
Although the Court may employ § 1927 to sanction attorneys and other persons admitted to
conduct cases, the statute provides no means to dismiss an action. “Section 1927 only authorizes
the taxing of excess costs arising from an attorney’s unreasonable and vexatious conduct; it does
not authorize imposition of sanctions in excess of costs reasonably incurred because of such
conduct.” Jackson v. Diversified Collection Servs., Inc., 485 F. App’x 311, 312 (10th Cir. 2012)
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(quoting United States v. Blodgett, 709 F.2d 608, 610-11 (9th Cir. 1983)). Consequently, the
Court declines to dismiss this action under § 1927. And, because defendants seek no sanction
permitted under the statute, it declines to otherwise consider whether plaintiff properly could be
declared a vexatious litigant under that statute.
IV. MOTION TO DISMISS
Pursuant to Fed. R. Civ. P. 12(b)(6), defendants seek to dismiss this action for failure of
plaintiff to state a claim upon which relief can be granted. Mem. at 4-5.
Among other things, pleadings that state “a claim for relief must contain . . . (2) a short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). This rule is intended to provide opposing parties “fair notice of what the . . . claim is
and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
In accordance with Fed. R. Civ. P. 12(b)(6), a party may move to dismiss a claim or
pleading. When considering such a motion, the courts “assess whether the plaintiff’s complaint
alone is legally sufficient to state a claim for which relief may be granted;” they do not “weigh
potential evidence that the parties might present at trial.” Cnty. of Santa Fe, N.M. v. Pub. Serv.
Co., 311 F.3d 1031, 1035 (10th Cir. 2002) (quoting Miller v. Glanz, 948 F.2d 1562, 1565 (10th
Cir. 1991)). They must examine only the pleadings, unless they treat the motion “as one for
summary judgment under Rule 56.” Fed. R. Civ. P. 12(d).
For purposes of Rule 12(d), the reach of the term “pleadings” frequently extends,
however, beyond the four corners of the actual complaint filed in the action. “Exhibits attached
to a complaint are properly treated as part of the pleadings for purposes of ruling on a motion to
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dismiss.” Tal v. Hogan, 453 F.3d 1244, 1265 n.24 (10th Cir. 2006). And when a document is
“referred to in and central to the complaint,” the courts may consider the document if “no party
disputes its authenticity.” Berneike v. CitiMortgage, Inc., 708 F.3d 1141, 1146 (10th Cir. 2013).
In addition, “facts subject to judicial notice may be considered in a Rule 12(b)(6) motion without
converting the motion to dismiss into a motion for summary judgment.” Tal, 453 F.3d at 1265
n.24. Courts also may permissibly “review ‘mere argument contained in a memorandum in
opposition to dismiss’ without converting the Rule 12(b)(6) motion into a motion for summary
judgment.” Cnty. of Santa Fe, N.M., 311 F.3d at 1035 (quoting Miller, 948 F.2d at 1565).
Courts “accept as true all well-pleaded factual allegations in the complaint and view them
in the light most favorable to the plaintiff.” Burnett v. Mtg. Elec. Registration Sys., Inc., 706
F.3d 1231, 1235 (10th Cir. 2013). And they “resolve all reasonable inferences in the plaintiff’s
favor.” Diversey v. Schmidly, 738 F.3d 1196, 1199 (10th Cir. 2013) (quoting Morse v. Regents
of the Univ. of Colo., 154 F.3d 1124, 1126-27 (10th Cir. 1998)). “[A] well-pleaded complaint
may proceed even if it strikes a savvy judge that actual proof of [the alleged] facts is improbable,
and ‘that a recovery is very remote and unlikely.’” Twombly, 550 U.S. at 556 (citation omitted).
But plaintiffs must provide “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Id. at 555; accord Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (emphasizing that “the tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions”). Complaints and other claimasserting pleadings must allege sufficient facts “to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555. In other words, they must plead “enough facts to state a
claim to relief that is plausible on its face.” Id. at 570.
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A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a defendant has
acted unlawfully. Where a complaint pleads facts that are “merely consistent
with” a defendant’s liability, it “stops short of the line between possibility and
plausibility of ‘entitlement to relief.’”
Iqbal, 556 U.S. at 678 (citations omitted). Unless plaintiffs allege sufficient facts to “nudge[ ]
their claims across the line from conceivable to plausible,” their claims are subject to dismissal
under Rule 12(b)(6). Twombly, 550 U.S. at 570.
“Determining whether a complaint states a plausible claim for relief is ‘a context-specific
task that requires the reviewing court to draw on its judicial experience and common sense.’”
Burnett, 706 F.3d at 1236 (quoting Iqbal, 556 U.S. at 679). The task requires “comparing the
pleading with the elements of the cause(s) of action.” Id. But a plaintiff may “set forth plausible
claims” without making “a prima facie case for each element.” Khalik v. United Air Lines, 671
F.3d 1188, 1193 (10th Cir. 2012). To state a claim sufficiently, a pleading must at least allow a
reasonable inference of the legally relevant facts. Burnett, 706 F.3d at 1236. “The relevant issue
is not whether the [plaintiff] will ultimately prevail, but whether the [plaintiff] is entitled to offer
evidence in support of his or her claims.” Mackley v. TW Telecom Holdings, Inc., 296 F.R.D.
655, 663 (D. Kan. 2014).
A. Fair Debt Collection Practices Act (“FDCPA”)
Plaintiff sues CLVCA, its attorney (Ayesh), and its Property Manager (SPP), for alleged
violations of the FDCPA. See Compl. ¶¶ 65-73. Plaintiff claims that he is a consumer within the
meaning of the FDCPA. See id. ¶ 65. He alleges that Ayesh
is an attorney engaged in the practice of the collection of condominium
association assessments and has threatened false amounts and illegal collection
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actions (15 USC § 1692f; 15 USC § 1692e), he has issued collections efforts
without the FDCPA notification requirements; directed the fines and assessments
in methods and amounts not even potentially authorized by the agreement of the
parties (15 USC § 1692f) and attempted collections on those false claimed debts
(15 USC § 1692e).
Id. ¶ 68. He further alleges that “Ayesh has threatened seizure of the Plaintiff’s home and
espoused that purpose in writing, rather than the collection of just debts” in violation of § 1692e,
and “has used unfair debt collection practices to intentionally interfere” with his contractual and
constitutional rights. Id. With respect to defendants SPP and CLVCA, he likewise alleges that
they have violated the FDCPA. Id. ¶¶ 69-70. Lastly, plaintiff alleges that each of these three
defendants “have separately violated the specific FDCPA requirements for cessation of
collection efforts after plaintiff’s demands and for validation of debt; by unfair collection
communications, abuse, false and misleading representations and unfair practices.” Id. ¶ 71.
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.” See 15 U.S.C. § 1692(e). The FDCPA defines
several terms used in its provisions, including the following:
(3) The term “consumer” means any natural person obligated or allegedly
obligated to pay any debt.
(4) The term “creditor” means any person who offers or extends credit creating a
debt or to whom a debt is owed, but such term does not include any person to the
extent that he receives an assignment or transfer of a debt in default solely for the
purpose of facilitating collection of such debt for another.
(5) The term “debt” means any obligation or alleged obligation of a consumer to
pay money arising out of a transaction in which the money, property, insurance,
or services which are the subject of the transaction are primarily for personal,
family, or household purposes, whether or not such obligation has been reduced
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to judgment.
(6) The term “debt collector” means 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. . .
.
See 15 U.S.C. § 1692a(3)-(6).
The Tenth Circuit has recognized that “[t]he substantive heart of the FDCPA lies in three
broad prohibitions” set out in §§ 1692d, 1692e, and 1692f. Johnson v. Riddle, 305 F.3d 1107,
1117 (10th Cir. 2002). The first, § 1692d, prohibits debt collectors from engaging “in any
conduct the natural consequence of which is to harass, oppress, or abuse any person in
connection with the collection of a debt.” The second, § 1692e, prohibits debt collectors from
using “any false, deceptive, or misleading representation or means in connection with the
collection of any debt.” And last, under § 1692f a “debt collector may not use unfair or
unconscionable means to collect or attempt to collect any debt.” In 2006, Congress added §
1692g to require debt collectors to provide consumers written notice containing certain
information about the alleged debt. Debt collectors may be subject to civil liability when they
violate any of these provisions. See 15 U.S.C. § 1692k.
Defendants contend that Ayesh is not a debt collector under the FDCPA because
attorneys are considered debt collectors only when they regularly collect debts. Mem. at 6.
Defendants also contend that the Court may take judicial notice of his firm’s website and the
legal directory of the Kansas Bar Association. Id. They also argue that this is not a debt
collection case, because “CLVCA made penalty assessments” but no one has made any
collection efforts. Id. Finally, defendants invoke the “business judgment rule” to insulate SPP
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and CLVCA against all claims, including any under the FDCPA. Id. at 6-14. Defendants’
supplemental briefing also argues that the Court should dismiss this action for the same reasons
it dismissed Berg I. (See Doc. 36 at 1-2.)
This case arises from the imposition and alleged collection of $7,050 in fines assessed
against plaintiff for various alleged violations of rules of the condominium association. See
Compl. ¶¶ 24, 29, 33, 38-48, 60; Ex. C attached to Compl. These alleged special assessments or
fines differ from the alleged debt sought to be collected in plaintiff’s prior action. See Berg I,
2013 WL 6511877, at *3 (noting that the FDCPA claims concerned efforts to collect attorney
fees and costs awarded in two prior state actions). But similar to Berg I, “the determinative
question is whether” the $7,050 in fines constitute an “obligation of a consumer to pay money
arising out of a transaction,” as is required to qualify as a debt under § 1692a(5). See id. at *5.
And like it did in Berg I, the Court concludes that the alleged debt – fines, in this case – does not
constitute a debt within the meaning of § 1692a(5). The fines assessed against plaintiff are
penalties for alleged violations of rules. They did not result from a business dealing or any obligation to pay for goods or services. Accordingly, the fines do not create a debt in the defined
sense of that term under the FDCPA. See Gulley v. Markoff & Krasny, 664 F.3d 1073, 1075 (7th
Cir. 2011) (holding that fines levied against an individual “cannot reasonably be understood as
‘debts’ arising from consensual consumer transactions for goods and services” and finding that
the district court properly dismissed amended complaint under Fed. R. Civ. P. 12(b)(6) for
failing to state a claim under the FDCPA); Omran v. Beach Forest Subdivision Ass’n, No. 1210116, 2012 WL 1676688, at *3 (E.D. Mich. May 11, 2012) (finding that fines imposed by a
homeowners association do not create a debt as defined by the FDCPA); Durso v. Summer Brook
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Pres. Homeowners Ass’n, 641 F. Supp. 2d 1256, 1265 (M.D. Fla. 2008) (finding that “fines
assessed against Plaintiff by the [homeowners association] do not create a ‘debt’ under the
FDCPA”).
In sum, the condominium association assessments imposed on plaintiff by CLVCA
functionally equate to the homeowner association assessments at issue in Omran and Durso.
The Court is persuaded by the analysis in those cases and thus concludes as a matter of law that
this case involves no “debt” within the meaning of the FDCPA and that no defendant qualifies as
a debt collector under that statute. Consequently, plaintiff has stated no plausible claim under
the FDCPA. The Court thus dismisses plaintiff’s FDCPA claims for failing to state a claim upon
which relief can be granted.
B. Other Claims
Plaintiff asserts various state claims and asks the Court to exercise its supplemental jurisdiction over them under 28 U.S.C. § 1367. See Compl. ¶¶ 66, 74-107. Because the Court has
dismissed plaintiff’s only federal claims, it thus must decide whether it should retain jurisdiction
over the state claims.
Whether to exercise supplemental jurisdiction “after dismissing every claim over which it
had original jurisdiction is purely discretionary.” Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S.
635, 639 (2009); accord United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966).
“Under Gibbs, a federal court should consider and weigh in each case, and at every stage of the
litigation, the values of judicial economy, convenience, fairness, and comity in order to decide
whether to exercise jurisdiction over a case brought in that court involving pendent state-law
claims.” Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988). Federal courts “should
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consider retaining state claims” when the balance of these factors “would be served by retaining
jurisdiction.” Wittner v. Banner Health, 720 F.3d 770, 781 (10th Cir. 2013) (quoting Anglemyer
v. Hamilton Cnty. Hosp., 58 F.3d 533, 541 (10th Cir. 1995)). On the other hand, “[w]hen the
balance of these factors indicates that a case properly belongs in state court, as when the federallaw claims have dropped out of the lawsuit in its early stages and only state-law claims remain,
the federal court should decline the exercise of jurisdiction by dismissing the case without prejudice.” Carnegie-Mellon Univ., 484 U.S. at 350 (footnote omitted).
Although plaintiff filed this case in April 2013, the Court stayed discovery pending
resolution of this Motion to Dismiss and deferred ordering the parties to meet and confer under
Fed. R. Civ. P. 26(f) and setting a scheduling conference under Fed. R. Civ. P. 16 until it had
resolved this motion. At such an early stage of the litigation, judicial economy does not favor
the exercise of supplemental jurisdiction over any state claims. And neither convenience nor
fairness would be better served by retaining jurisdiction over those claims. As noted in Wittner,
any fear that state law claims may have expired under a state statute of limitations is obviated by
§ 1367(d), which provides for tolling while claims are pending in federal court and for thirty
days after they are dismissed or even longer if State law provides a lengthier tolling period.9 See
720 F.3d at 781; 28 U.S.C. § 1367(d). In short, the balance of factors does not favor retaining
9
Kansas has a savings statute, K.S.A. § 60-518, that provides:
If any action be commenced within due time, and the plaintiff fail in such action
otherwise than upon the merits, and the time limited for the same shall have
expired, the plaintiff, or, if the plaintiff die, and the cause of action survive, his
or her representatives may commence a new action within six (6) months after
such failure.
“If the Kansas saving statute is applicable, the time frame provided therein controls over the 30-day period provided
in 28 U.S.C. § 1367(d).” Nicks v. Brewer, No. 10-CV-1220-JAR-JPO, 2011 WL 887544, at *2 n.2 (D. Kan. Mar.
11, 2011); accord Peoples v. Langley/Empire Candle Co., No. 11-2469-CM-JPO, 2012 WL 171340, at *4 (D. Kan.
Jan. 20, 2012) (citing K.S.A. § 60-518 as providing six months).
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jurisdiction over the state claims. Accordingly, the Court dismisses the state claims without
prejudice to plaintiff’s right to pursue them in state court.
V. SANCTIONS
Defendants appear to seek sanctions against plaintiff so as to prohibit him from filing
lawsuit after lawsuit. Mem. at 29. Federal courts may impose sanctions, including reasonable
filing restrictions, “that are necessary to regulate the docket, promote judicial efficiency, and
deter frivolous filings.” Gass v. United States, 4 F. App’x 565, 568 (10th Cir. 2001) (citing Van
Sickle v. Holloway, 791 F.2d 1431, 1437 (10th Cir. 1986)). But, “[t]he party seeking sanctions
has the burden to show that sanctions are warranted.” Rollins v. Cargill, Inc., No. 11-1147EFM, 2012 WL 3644927, at *4 (D. Kan. Aug. 24, 2012). Defendants here have not carried this
burden. They have not shown that plaintiff has engaged in sanctionable conduct in this action.
Although plaintiff has failed to state a federal claim upon which relief can be granted, the merits
of his state claims remain undecided because the Court has declined to reach the merits of those
claims. Plaintiff’s prior federal action in Berg I produced a similar outcome. These
circumstances do not warrant any filing restrictions.
VI. CONCLUSION
For the reasons explained above, the Court GRANTS in part and DENIES in part
Defendants’ Motion to Dismiss Pursuant to F.R.C.P. 12(b)(6) and 28 U.S.C. § 1927 (Doc. 27).
Pursuant to Fed. R. Civ. P. 12(b)(6), the Court dismisses plaintiff’s claims under the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692 et seq. for failure of plaintiff to state a claim upon
which relief can be granted. In accordance with 28 U.S.C. § 1367, the Court declines to exercise
supplemental jurisdiction over plaintiff’s state claims, and thus dismisses them without prejudice
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