Hall v. LVNV Funding, LLC
Filing
10
MEMORANDUM OPINION AND ORDER by Judge John G. Heyburn, II on 10/7/2013; 7 Motion to Dismiss is DENIED. cc:counsel (TLB)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
CIVIL ACTION NO. 3:13-CV-00399-H
DANA HALL
PLAINTIFF
V.
LVNV FUNDING, LLC
DEFENDANT
MEMORANDUM OPINION AND ORDER
Plaintiff, Dana Hall, brings this action under the Fair Debt Collections Practices Act
(“FDCPA”), 15 U.S.C. §§ 1692 et seq. He alleges that Defendant, LVNV Funding, LLC, filed a
debt collection action against him in Kentucky state court that was barred by the applicable
statute of limitations. Plaintiff purports to represent a class of similarly situated debtors who
reside in Kentucky. Defendant moved to dismiss under Rule 12(b)(6) premised on the argument
that its state court action against Plaintiff was not, in fact, time-barred. For the reasons that
follow, the Court will deny the motion.
I.
The Court will summarize relevant facts as Plaintiff presents them. Hall is a “consumer”
and LVNV is “debt collector” as defined by the FDCPA. LVNV is in the business of purchasing
debt from creditors and collecting these debts in Kentucky. As assignee of Hall’s credit card
account with Virginia corporation Capitol One Bank, LVNV brought suit against him in
Jefferson District Court on November 19, 2012 to collect a “debt” within the meaning of the
FDCPA. Hall had made his last payment on the account on June 27, 2008, so LVNV’s cause of
action against Hall accrued on or before the next payment due date, July 26, 2008. Hall moved
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to dismiss LVNV’s complaint on grounds that Virginia’s three-year statute of limitations applied
via Kentucky’s borrowing statute and barred LVNV’s claims.1 After briefing the issue, the
Jefferson District Court dismissed LVNV’s complaint, holding that Virginia’s statute did govern
and LVNV’s claim was time-barred.
Plaintiff alleges that Defendant violated two sections of 15 U.S.C. § 1692: Section
1692f(1) by “attempting to collect a debt that is not authorized by agreement or permitted by
law, including but not limited to, by bringing suit on a claim that is barred by the applicable
statute of limitations” and Section 1692e(5) by “filing suit on a debt that is barred by the statute
of limitations, or threatening to take legal action on a debt that is barred by the statute of
limitations.” E.C.F. No. 4.
II.
Defendant made a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which
relief may be granted. E.C.F. No. 7. When considering a motion to dismiss pursuant to Rule
12(b)(6), courts must “construe the complaint in the light most favorable to the plaintiff” and
“accept all well-pleaded factual allegations as true.” La. Sch. Emps.’ Ret. Sys. v. Ernst & Young,
LLP, 622 F.3d 471, 477 (6th Cir. 2010). The Court will draw all reasonable inferences in favor
of the plaintiff. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A plaintiff “must
plead ‘enough factual matter’ that, when taken as true, ‘state[s] a claim to relief that is plausible
on its face.’” Fabian v. Fulmer Helmets, Inc., 628 F.3d 278, 280 (6th Cir. 2010) (quoting Bell
Atl. Corp., 550 U.S. at 556). “Plausibility requires showing more than the ‘sheer possibility’ of
1
Ky. Rev. Stat. § 413.320 states:
When a cause of action has arisen in another state or country, and by the laws of this state or
country where the cause of action accrued the time for the commencement of an action thereon is
limited to a shorter period of time than the period of limitation prescribed by the laws of this state
for a like cause of action, then said action shall be barred in this state at the expiration of said
shorter period.
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relief but less than a ‘probab[le]’ entitlement to relief.” Id. (quoting Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)).
III.
Congress enacted the FDCPA to eliminate “the use of abusive, deceptive, and unfair debt
collection practices by many debt collectors.” 15 U.S.C. § 1692(a). The statute is broad and
intended to remedy a widespread problem. See Harvey v. Great Seneca Fin. Corp., 453 F.3d
324, 329 (6th Cir. 2006). To evaluate whether a debt collector's practice falls within the meaning
of the Act, “courts apply an objective test based on the understanding of the least sophisticated
consumer.” See id. at 331 (citing Lewis v. ACB Bus. Servs., 135 F.3d 389, 400 (6th Cir. 1998))
(internal quotations omitted).
Section 1692f of the FDCPA prohibits a debt collector from using “unfair or
unconscionable means to collect or attempt to collect any debt.” Plaintiff’s amended complaint
points to specifically listed actionable conduct: “[t]he collection of any amount . . . unless such
amount is expressly authorized by the agreement creating the debt or permitted by law.” 15
U.S.C. § 1692f(1). This provision has been interpreted as encompassing attempts to collect such
amounts as well. See Gallagher v. Gurstel, Staloch, & Chargo, P.A., 645 F. Supp. 2d 795, 801
(D. Minn. 2009) (citing Duffy v. Landberg, 215 F.3d 871, 873−75 (8th Cir. 2000).
Section 1692e of the FDCPA prohibits a debt collector from using “any false, deceptive,
or misleading representation or means in connection with the collection of any debt.” Plaintiff
points to “[t]he threat to take any action that cannot legally be taken or that is not intended to be
taken.” 15 U.S.C. § 1692e(5).
The FDCPA likely does not prohibit Defendant from collecting on a time-barred debt per
se. However, courts widely agree that § 1692e does prohibit filing a time-barred lawsuit to
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collect a debt, although the Sixth Circuit has not squarely spoken on the issue. See, e.g,. Kimber
v. Fed. Fin. Corp., 668 F. Supp. 1480 (M.D. Ala. 1987) (violations of sections 1692f and 1692e
where debt collector brought suit on time-barred debt); Freyermuth v. Credit Bureau Servs., Inc.,
248 F.3d 767, 771 (8th Cir. 2001); Jenkins v. Gen. Collection Co., 538 F. Supp. 2d 1165, 1172
(D. Neb. 2012); Larsen v. JBC Legal Grp., P.C., 533 F. Supp. 2d 290, 302-03 (E.D.N.Y. 2008);
Dunaway v. JBC Assocs., Inc., 2005 WL 1529574, at *4 (E.D. Mich. June 20, 2005); Goins v.
JBC & Assocs. P.C., 352 F. Supp. 2d 262 (D. Conn. 2005); Shorty v. Capital One Bank, 90 F.
Supp. 2d 1330 (D.N.M. 2000); Lashbrook v. Portfolio Recovery Assocs., LLC, 2013 WL
4604281, at *8 (E.D. Mich. Aug. 29, 2013).
Generally, a violation is found when the debt collector knew or should have known the
lawsuit was time-barred. See Jackson v. Midland Funding, LLC, 754 F. Supp. 2d 711, 715
(D.N.J. 2010) (listing cases utilizing the “knew or should have known” standard). Indeed, even a
threat to file such a lawsuit can support a § 1692e claim. See Brewer v. Portfolio Recovery
Assocs., 2007 WL 3025077, at *2 (W.D. Ky. Oct. 15, 2007) (“where a debt collector threatens to
sue on a debt it knew was time-barred by the statute of limitations, a violation of the FDCPA will
lie.” (quoting Gervais v. Riddle & Assocs, P.C., 479 F. Supp. 2d 270, 273 (D. Conn. 2007)
(internal quotations omitted)). See also Parkis v. Arrow Fin. Servs., LLS, 2008 WL 94798, at *7
(N.D. Ill. Jan. 8, 2008) (“threatening . . . a lawsuit which the debt collector knows or should
know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is
the kind of abusive practice the FDCPA was intended to eliminate” (quoting Beattie v. D.M.
Collections, Inc., 754 F. Supp. 383, 393 (D. Del. 1991))).
Here, Plaintiff alleges, with sufficient facts, that Plaintiff “consumer,” Defendant “debt
collector,” and their relationship “debt,” fall within the definition of the FDCPA. Plaintiff
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further presents a state court judgment declaring that Defendant’s lawsuit against Plaintiff to
collect on this debt was time-barred. In its motion to dismiss, Defendant argues solely that
“[c]ontrary to Plaintiff’s claims, Kentucky’s statute of limitations applies to Plaintiff’s debt, not
Virginia’s, and therefore Plaintiff’s claim fails on its face.” E.C.F. No. 7. In support of its
argument, Defendant points out that “[a]s the Combs court recognized, federal courts in
Kentucky are bound by the Sixth Circuit Court of Appeals decision interpreting the Kentucky
borrowing statute.” Id. In essence, it argues that the Jefferson District Court was wrong. While
this may well be an argument that resonates with a jury, it is not sufficient to warrant dismissal
of Plaintiff’s claims at this time.
The Court can find no Sixth Circuit opinion directly on point. Even if it could, the Court
is bound only when it is, in fact, interpreting the Kentucky borrowing statute. Here, the Court
has no occasion to engage in such interpretation. A Kentucky state court has already applied the
Kentucky borrowing statute to the parties in this very issue, determining that LVNV’s claim was
subject to the Virginia three-year statute of limitations. Therefore, the time-barred dismissal of
LVNV’s lawsuit against Plaintiff is, for the purposes of Plaintiff’s FDCPA claim, an underlying
fact, not an appellate issue open to question.2
The cases Defendant cites in support of a contrary view are not convincing because they
each address fundamentally different circumstances. In Dudek, the district court was charged
with determining which state’s statute of limitations applied after the defendant dismissed the
state court complaint without prejudice immediately before trial was scheduled to begin. See
Dudek v. Thomas & Thomas Attys. & Counselors at Law, LLC, 702 F. Supp. 2d 826, 829 (N.D.
Ohio 2010).
In Combs, the plaintiff appealed a federal district court’s application of the
2
The appropriate place to challenge the Jefferson District Court’s determination that LVNV’s lawsuit was timebarred is the Kentucky Court of Appeals. A motion to dismiss in federal court is not the appropriate place to do so,
and this Court will not act as an appellate court to the Jefferson District Court’s resolution of the issue.
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Kentucky borrowing statute. See Combs v. Int’l Ins. Co., 354 F.3d 568, 572 (6th Cir. 2004).
Similarly, in Willits, the defendant cross-appealed a federal district court’s determination of its
statute of limitations defense. See Willits v. Peabody Coal Co., 188 F.3d 510, 1999 WL 701916,
at *5 (6th Cir. Sept. 1, 1999). Finally, in White, this Court “discuss[ed] but [did] not rule on the
statute of limitations issues” in an insurance payment context. White v. Hartford Life Ins. Co.,
2008 WL 4104487, at *1 (W.D. Ky. Sept. 3, 2008). Here, the Court is not reviewing the state
court decision and has no power to do so under these circumstances.
Defendant may well be correct that it had every reason to believe that a Kentucky state
court would apply its own statute of limitations rather than Virginia’s in these circumstances.
That argument, however, is for a later occasion. There are a number of ways that Defendant may
raise this issue, including but probably not limited to the “bona fide error defense” pursuant to 15
U.S.C. §1692k(c).
For these reasons, Plaintiff’s FDCPA claims will not be dismissed.
Being otherwise sufficiently advised,
IT IS HEREBY ORDERED that Defendant’s motion to dismiss is DENIED.
October 7, 2013
cc:
Counsel of Record
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