Malone v. Portfolio Recovery Associates, LLC
Filing
42
MEMORANDUM OPINION by Senior Judge Charles R. Simpson, III. For reasons set forth herein, Court will grant Portfolio's motion to dismiss for lack of jurisdiction (DN 20 ). Judgment will be entered in favor of Malone as an individual, and claim s of putative class will be dismissed without prejudice. Court will also grant Portfolio's motion for leave to file supplemental authority (DN 29 ). A separate order and judgment will be entered this date in accordance with this Memorandum Opinion. cc: counsel (JAC)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
ASHLEY MALONE
PLAINTIFF
CIVIL ACTION NO. 3:14-CV-00152-CRS
v.
PORTFOLIO RECOVERY ASSOCIATES, LLC
DEFENDANT
MEMORANDUM OPINION
This matter is before the Court on two motions of Defendant Portfolio Recovery
Associates, LLC (“Portfolio”). First, Portfolio moves to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1), arguing that this action became moot
upon a complete offer of judgment (DN 20). Second, Portfolio requests leave to file
supplemental authority in support of its motion to dismiss (DN 29).1 For the following reasons,
the Court will grant both motions.
I.
BACKGROUND
Plaintiff Ashley Malone incurred a debt on her credit card account with Capital One Bank
USA, N.A., which she ultimately failed to pay. (Am. Compl., DN 9, ¶¶ 9–10.) On February 25,
2013, Portfolio allegedly filed suit against Malone in Jefferson County District Court to collect
$1,354.78 associated with the credit card debt.2 (Am. Compl., DN 9, ¶¶ 11–13.)
Nearly a year later, on February 22, 2014, Malone acquired a consumer liability report,
containing data from several credit reporting agencies. (Am. Compl., DN 9, ¶¶ 18–19.) The
1
The Court will grant Portfolio’s motion for leave to file supplemental authority (DN 29). Portfolio wishes to
submit Mey v. North American Bancard, LLC, No. 14-CV-11331, 2014 U.S. Dist. LEXIS 165453 (E.D. Mich. Nov.
26, 2014), in support of its motion to dismiss. The new authority is pertinent to the issues presented by the Rule
12(b)(1) motion, and Plaintiff Ashley Malone did not object to the supplemental filing.
2
The Court is unaware of the current status of the state court proceedings, but such information is not necessary to
resolve the motions now pending.
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consumer liability report showed $1,757.00 as due and owing on her credit card debt at that time.
(Am. Compl., DN 9, ¶ 23.)
Malone then commenced this action against Portfolio for violation of the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. (Am. Compl., DN 9.) According
to Malone, Portfolio held no right to charge interest or fees on her credit card debt. (Am.
Compl., DN 9, ¶ 25.) Therefore, Portfolio allegedly violated the FDCPA, specifically 15 U.S.C.
§§ 1692e and 1692f, by furnishing false information to one or more credit reporting agencies for
purposes of collecting a debt. (Am. Compl., DN 9, ¶¶ 33–34.) Malone points to the reported
increase in her credit card debt between the filing of the state court action and the consumer
liability report as proof of the alleged violation. (Am. Compl., DN 9, ¶ 24.) Beyond her
individual claim, Malone asserts claims for the same violation on behalf of a putative class of
similarly situated Kentuckians pursuant to Federal Rule of Civil Procedure 23. (Am. Compl.,
DN 9, ¶¶ 27–41.)
In her Amended Complaint, Malone requested actual damages, the maximum amount of
statutory damages, and an award of reasonable attorney’s fees and costs. (Am. Compl., DN 9, at
7–8.) On July 7, 2014, however, Malone omitted any reference to actual damages in her initial
disclosure. (Pl.’s Initial Disclosure, DN 13, at 2.) Four days later, on July 11, Portfolio made an
offer of judgment (DN 20-3), the terms of which address only Malone’s individual demand for
statutory damages and reasonable attorney’s fees and costs. The offer remained open for
fourteen days, but Malone refused to accept. (Offer of J., DN 20-3, at 3.) Portfolio now calls
upon the Court to dismiss for lack of subject matter jurisdiction, arguing that the entire action
became moot when it offered Malone all of the relief she requested as an individual (DN 20).
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II.
STANDARD
Article III of the Constitution limits the jurisdiction of federal courts to “Cases” and
“Controversies,” U.S. Const. art. III, § 2, cl. 1, meaning “actual and concrete disputes, the
resolution of which have direct consequences on the parties involved,” Genesis Healthcare Corp.
v. Symczyk, — U.S. —, 133 S. Ct. 1523, 1528, 185 L. Ed. 2d 636 (2013). To proceed in federal
court, “a plaintiff must demonstrate that he possesses a legally cognizable interest, or ‘personal
stake,’ in the outcome of the action.” Id. (quoting Camreta v. Greene, — U.S. —, 131 S. Ct.
2020, 2028, 179 L. Ed. 2d 1118 (2011)). The presence of a case or controversy is a “cradle-tograve requirement”—necessary from the moment a suit is filed through its ultimate disposition.
Fialka-Feldman v. Oakland Univ. Bd. of Trs., 639 F.3d 711, 713 (6th Cir. 2011). If the plaintiff
loses his personal stake during the proceedings, “making it ‘impossible for the court to grant any
effectual relief whatever,’” the action must be dismissed as moot. Hrivnak v. NCO Portfolio
Mgmt., Inc., 719 F.3d 564, 567 (6th Cir. 2013) (quoting Church of Scientology of Cal. v. United
States, 506 U.S. 9, 12, 113 S. Ct. 447, 121 L. Ed. 2d 313 (1992)).
As the party invoking federal jurisdiction, the plaintiff bears the burden of establishing
that the exercise of jurisdiction is proper. Taylor v. KeyCorp, 680 F.3d 609, 612 (6th Cir. 2012).
The Court accepts the allegations in the complaint as true when deciding a Rule 12(b)(1) motion
that merely questions the sufficiency of the pleading. Gentek Bldg. Prods., Inc. v. Steel Peel
Litig. Trust, 491 F.3d 320, 330 (6th Cir. 2007). But, when the motion challenges the existence of
a jurisdictional fact—such as the plaintiff’s continuing interest in the litigation—“no
presumption of truthfulness applies to the allegations.” Id. The Court then may examine
evidence beyond the pleadings to ascertain whether the jurisdictional fact exists. Id.
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III.
DISCUSSION
Portfolio argues that this litigation, including the putative class action, is now moot,
because its offer of judgment eliminated any case or controversy by affording complete relief to
Malone as an individual. The Court must first determine whether Portfolio indeed offered every
form of individual relief Malone sought to obtain. If the offer withheld relief in some respect, a
finding of mootness would be improper. As long as Malone retains “‘a concrete interest,
however small, in the outcome of the litigation, the case is not moot.’” Knox v. Serv. Emps. Int’l
Union, Local 1000, — U.S. —, 132 S. Ct. 2277, 2287, 183 L. Ed. 2d 281 (2012) (quoting Ellis v.
Railway Clerks, 466 U.S. 435, 442, 104 S. Ct. 1883, 80 L. Ed. 2d 428 (1984)).
“To moot a case or controversy between opposing parties, an offer of judgment must give
the plaintiff everything he has asked for as an individual.” Hrivnak, 719 F.3d at 567. The
defendant cannot moot an action by offering only the relief he believes is appropriate or
deserved. Id. at 567, 569. Rather, a complete offer of judgment—one that ends a case or
controversy—satisfies the plaintiff’s “‘entire demand.’” Id. at 567 (quoting O’Brien v. Ed
Donnelly Enters., Inc., 575 F.3d 567, 574 (6th Cir. 2009)). “The question is whether the
defendant is willing to meet the plaintiff on his terms.” Id.
The potential recovery of an individual plaintiff suing for a violation of the FDCPA is
limited to “actual damages”; “such additional damages as the court may allow, but not exceeding
$1000”; and reasonable attorney’s fees and costs. 15 U.S.C. § 1692k(a). The FDCPA likewise
confines the named plaintiff in a class action to those same categories of relief. See id.
§ 1692k(a)(2)(B). Accordingly, Malone sought relief that tracked the damages specified by the
FDCPA in her Amended Complaint (DN 9). She requested “[a]ctual damages”; the “maximum
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amount of statutory damages”; and “[a]ttorney’s fees, litigation expenses and costs.” (Am.
Compl., DN 9, at 7–8.)
But Malone subsequently omitted any reference to actual damages in her initial
disclosure (DN 13). Federal Rule of Civil Procedure 26 mandates that a party disclose, without
awaiting a discovery request, certain basic information at the start of the litigation. Fed. R. Civ.
P. 26(a)(1)(A). As part of that initial disclosure, a party must provide the other litigants “a
computation of each category of damages claimed” and “make available . . . the documents or
other evidentiary material . . . on which each computation is based, including materials bearing
on the nature and extent of injuries suffered.” Fed. R. Civ. P. 26(a)(1)(A)(iii). Malone’s
computation of damages accounts for her statutory, or additional, damages and an award of
attorney’s fees and costs, but it asserts no entitlement to actual damages: “Plaintiff has statutory
damages of $1000.00 per defendant under the FDCPA, 15 U.S.C. § 1692k. Plaintiff also has the
right to recover her reasonable attorney’s fees and costs under 15 U.S.C. § 1692k. These
damages are ongoing and continuing.” (Pl.’s Initial Disclosure, DN 13, at 2.)
After reviewing Malone’s initial disclosure, Portfolio sent her an offer of judgment
pursuant to Federal Rule of Civil Procedure 68 in the amount of “One Thousand One Dollars
($1,001.00), plus costs, litigation expenses and reasonable attorney’s fees” as determined by the
Court. (Offer of J., DN 20-3, at 1.) Malone did not accept the offer. Nevertheless, Portfolio’s
offer of judgment plainly addresses all of the relief Malone claimed as an individual at the time
of her initial disclosure. First, Portfolio offered $1,001.00 to satisfy Malone’s demand for
statutory damages. That amount exceeds by one dollar the maximum award Malone could
possibly receive as additional damages under the FDCPA. See 15 U.S.C. § 1692k(a)(2).
Second, Portfolio agreed to compensate Malone for costs, litigation expenses, and reasonable
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attorney’s fees as later determined by the Court. Those terms are consonant with the language of
the statute, which contemplates an exercise of the Court’s discretion in judging the
reasonableness of attorney’s fees and costs. See id. § 1692k(a)(3).
Still, Malone argues that the offer of judgment is incomplete. She claims that Portfolio
withheld compensation for actual damages. On that point, Malone is correct. The offer of
judgment does not address actual damages. But the question is whether Portfolio needed to
include payment of actual damages for its offer to be complete. The stumbling block of
Malone’s argument is her right, or lack thereof, to reassert the demand for actual damages in
response to a motion after excluding those damages from her Rule 26 initial disclosure.
In responding to Portfolio’s motion to dismiss, Malone stated that her actual damages
consist of attorney’s fees and costs incurred in litigating the state court action and the expense of
obtaining a consumer liability report. As evidence of those losses, she attached to her brief an
invoice showing total charges in the amount of $3,885.00 (DN 22-3). Malone contends that she
has been steadfast in demanding actual damages since the filing of the Amended Complaint.
According to Malone, she submitted the Rule 26 initial disclosure before the Court granted leave
for her to file the Amended Complaint. But a review of the docket activity in this case shows
that Malone’s timeline is false. In fact, Malone obtained leave and filed the Amended Complaint
more than two months prior to making the initial disclosure in which she omitted any claim for
actual damages.
Malone may not resurrect her undisclosed—and seemingly abandoned—demand for
actual damages to defeat Portfolio’s motion to dismiss. Federal Rule of Civil Procedure 37
establishes a self-executing sanction for failure to disclose or supplement in accordance with
Rule 26: “If a party fails to provide information . . . as required by Rule 26(a) or (e), the party is
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not allowed to use that information . . . to supply evidence on a motion, at a hearing, or at a trial,
unless the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).
Relying wholly on her erroneous timeline, Malone made no argument to rebut Rule 37’s
automatic sanction. Of course, Malone’s attachment of the invoice to her responsive brief cannot
be deemed a proper supplementation of her initial disclosure. See Fed. R. Civ. P. 26(e)(1). If a
party could supplement by citing undisclosed information in response to a motion, the plain
language of Rule 37, which prohibits the use of such information “on a motion,” would be
ineffective. See Fed. R. Civ. P. 37(c)(1).
Moreover, Malone’s failure to disclose information concerning her actual damages was
not “substantially justified” or “harmless.” See id. First, Malone knew of the fees and costs
incurred in the state court litigation at the time of her initial disclosure. The most recent charge
on the invoice dates April 1, 2014—approximately three months before Malone filed the initial
disclosure—and the attorney who represented her in that state court suit continues to act as
counsel in this action. (Invoice, DN 22-3.) Second, Malone received notice that her initial
disclosure made no mention of actual damages. On July 11, 2014, Portfolio provided Malone
with the offer of judgment in which her computation of damages was discussed and quoted in its
entirety. (Offer of J., DN 20-3.) Despite being given notice of her disclosure’s contents, Malone
made no effort to revise or supplement the computation. Malone caused harm to Portfolio by
allowing it to expend resources litigating based on information she provided but now disputes.
For those reasons, her attempt to reassert the long-forsaken claim to actual damages must fail.
The Rule 68 offer made by Portfolio met Malone on her terms, a later effort to modify
those terms notwithstanding. By affording the maximum statutory damages, together with
reasonable attorney’s fees and costs, Portfolio offered every form of relief Malone sought to
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obtain as an individual. In light of that complete offer, the Court must decide the proper
disposition of Malone’s individual claim, as well as the claims of the putative class.
Genesis Healthcare, 133 S. Ct. at 1523, provides a useful starting point in determining
the effect of a complete offer of judgment on individual and class claims. There, the Supreme
Court considered whether a collective action brought under the Fair Labor Standards Act of 1938
(“FLSA”), 29 U.S.C. § 201 et seq., became moot once the named plaintiff received a Rule 68
offer in full satisfaction of her individual claim. Genesis Healthcare, 133 S. Ct. at 1526–27.
Assuming, without deciding, that the offer of judgment mooted the named plaintiff’s individual
claim, the Supreme Court held that, “[i]n the absence of any claimant’s opting in, [the named
plaintiff’s] suit became moot when her individual claim became moot, because she lacked any
personal interest in representing others in this action.” Id. at 1529. “[T]he mere presence of
collective-action allegations in the complaint cannot save the suit from mootness once the
individual claim is satisfied.” Id. But the Supreme Court declined to decide whether the same
principles extend to class actions generally, noting that “Rule 23 actions are fundamentally
different from collective actions under the FLSA.” Id. In a Rule 23 class action, “a putative
class acquires an independent legal status once it is certified.” Id. at 1530. By contrast, an FLSA
collective action uses an opt-in procedure in which other potential plaintiffs must file written
consent to join as parties. Id.
The precedent of the Sixth Circuit fills the gaps left open by the Genesis Healthcare
decision. First, a complete offer of judgment—even one that goes unaccepted—moots a
plaintiff’s claim. O’Brien, 575 F.3d at 574–75. When a plaintiff refuses an offer of judgment
that satisfies his entire demand, he does not lose outright with his claim simply dismissed. Id. at
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575. Instead, judgment is entered in favor of the plaintiff in accordance with the defendant’s
Rule 68 offer. Id.
Second, the claims of an uncertified class under Rule 23 must be dismissed without
prejudice when the case or controversy as to the named plaintiff terminates:
Once a class is certified, the mooting of the named plaintiff’s claim does not moot
the action, the court continues to have jurisdiction to hear the merits of the action
if a controversy between any class member and the defendant exists. Where, on
the other hand, the named plaintiff’s claim becomes moot before certification,
dismissal of the action is required.
Brunet v. City of Columbus, 1 F.3d 390, 399 (6th Cir. 1993) (citations omitted). A narrow
exception to that dismissal requirement exists “where ‘a motion for class certification has been
pursued with reasonable diligence and is then pending before the district court.’” Id. at 400
(quoting Susman v. Lincoln Am. Corp., 587 F.2d 866, 870 (7th Cir. 1978)); see Carroll v. United
Compucred Collections, Inc., 399 F.3d 620, 625 (6th Cir. 2005) (holding that a complete offer of
judgment to the named plaintiff did not moot the action where the motion to certify was
previously filed, fully briefed, and approved by the report and recommendation of a magistrate
judge).
Having concluded that Portfolio made a complete Rule 68 offer, the Court will enter
judgment in favor of Malone on her individual claim in the amount of $1,001.00, along with an
award of reasonable attorney’s fees and costs. See O’Brien, 575 F.3d at 574–75. Malone will be
allowed additional time as set forth in a separate order to file a petition for reasonable attorney’s
fees and costs, as well as any supporting documents. Of course, any fees and costs incurred after
July 11, 2014, when Portfolio’s offer mooted this action, are “per se unreasonable.” Conway v.
Portfolio Recovery Assocs., LLC, No. 13-07-GFVT, 2015 WL 3756410, at *7 (E.D. Ky. June 15,
2015).
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With her individual claim fully satisfied, Malone no longer holds a personal interest in
serving as the representative of the putative class. See Genesis Healthcare, 133 S. Ct. at 1529.
Malone never moved for certification under Rule 23, and therefore, the class claims must be
dismissed without prejudice. See Brunet, 1 F.3d at 399.
Malone disputes this outcome and the precedent on which it is based. She cites several
non-binding authorities to support her position,3 but nothing indicates that the Sixth Circuit plans
to adopt a new course. The district courts of the Sixth Circuit consistently apply the foregoing
mootness rules to dismiss uncertified class actions where the named plaintiff loses his stake in
the litigation. E.g., Conway, 2015 WL 3756410, at *3–8; Mey v. N. Am. Bancard, LLC, No. 14CV-11331, 2014 WL 6686773, at *1–3 (E.D. Mich. Nov. 26, 2014); Hanover Grove Consumer
Hous. Coop. v. Berkadia Commercial Mortg., LLC, No. 13-13553, 2014 WL 354674, at *4–6
(E.D. Mich. Jan. 31, 2014); Tallon v. Lloyd & McDaniel, 497 F. Supp. 2d 847, 851–53 (W.D.
Ky. 2007). Here, Malone will receive all of the relief she demanded, and the remaining members
of the putative class may pursue their claims in the future, individually or collectively. See
Tallon, 497 F. Supp. 2d at 853.
IV.
CONCLUSION
For the reasons stated above, the Court will grant Portfolio’s motion to dismiss for lack of
subject matter jurisdiction (DN 20). Judgment will be entered in favor of Malone as an
individual, and the claims of the putative class will be dismissed without prejudice. The Court
will also grant Portfolio’s motion for leave to file supplemental authority in support of its motion
3
See, e.g., Genesis Healthcare, 133 S. Ct. at 1532–37 (Kagan, J., dissenting); Stein v. Buccaneers Ltd. P’ship, 772
F.3d 698 (11th Cir. 2014); Diaz v. First Am. Home Buyers Prot. Corp., 732 F.3d 948 (9th Cir. 2013).
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to dismiss (DN 29). A separate order and judgment will be entered this date in accordance with
this Memorandum Opinion.
August 6, 2015
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