Malone v. Cavalry Portfolio Services, LLC

Filing 40

MEMORANDUM OPINION signed by Senior Judge Charles R. Simpson, III on 11/24/2015, re 33 MOTION to Dismiss Plaintiff's Second Amended Complaint filed by Cavalry Portfolio Services, LLC. cc: Counsel (RLK)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
PLAINTIFF

ASHLEY MALONE

v.

CIVIL ACTION NO. 3:14-CV-00428-CRS

CAVALRY PORTFOLIO SERVICES, LLC

DEFENDANT

MEMORANDUM OPINION
This matter is before the Court on Defendant Cavalry Portfolio Services, LLC’s (“CPS”)
motion to dismiss Plaintiff Ashley Malone’s Second Amended Complaint for failure to state a
claim. The Court will grant Defendant’s motion to dismiss.
BACKGROUND
This matter concerns the collection of a GE Money Bank debt with an account number
ending in “0451.” Second Am. Compl. ¶ 12, 23, ECF No. 30. Plaintiff alleges, upon information
and belief, that GE Money Bank “charged off” this debt. The GE Money Bank debt was
“controlled by written terms and conditions that established interest rates that applied to the …
account.” Id. ¶ 22. Cavalry SPV I, LLC purchased this debt from GE Money Bank and assigned
CPS to collect the debt. Id. ¶ 16-19.
CIN Legal Data Services provided Malone with a Consumer Liability Report in February
2014. Id. ¶ 9. The Report included information “recovered from the three major credit reporting
agencies: Experian, Equifax, and Trans Union.” Id. ¶ 10. The Report said that CPS had furnished
negative credit information to one or more consumer reporting agencies in an effort to collect the
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GE Money Bank debt from Malone. Id. ¶¶ 10-13. According to the Report, CPS “opened the
account for reporting on the debt in November of 2010 and last furnished information concerning
the GE Money Bank debt on February 10, 2014.” Id. ¶ 12. On February 10, 2014, CPS reported
to “one or more consumer reporting agencies” that $1,766 was the total amount due on the debt.
Id. ¶¶ 13, 20.
Malone disputes that the GE Money Bank debt is hers and also argues that GE Money
Bank waived interest accrual in charging off the debt. Id. ¶ 4. Plaintiff filed suit alleging various
violations of the Fair Debt Collection Practices Act (“FDCPA”). Defendant CPS moves to
dismiss all Plaintiff’s claims.
STANDARD
When evaluating a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the Court must
determine whether the complaint alleges “sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)) (internal quotations omitted). A claim is
plausible if “the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S.
at 556). The Court will “construe the complaint in the light most favorable to the plaintiff.” La.
Sch. Emps.’ Ret. Sys. v. Ernst & Young, LLP, 622 F.3d 471, 477 (6th Cir. 2010). Although the
complaint need not contain “detailed factual allegations,” “a plaintiff’s obligation to provide the
grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal
quotations and alterations omitted).

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DISCUSSION
Defendant moves to dismiss Plaintiff’s claims for failure to state a claim on which relief
can be granted. The Court will assess each argument in turn.
1. Statute of Limitations
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). When a plaintiff brings an
FDCPA claim, the Court tests the claims under the “least sophisticated consumer” standard; that
is, “whether the least sophisticated consumer would be misled by the defendant's actions.”
Wallace v. Wash. Mut. Bank, F.A., 683 F.3d 323, 326–27 (6th Cir. 2012) (internal quotations
omitted).
A plaintiff must bring a FDCPA claim “within one year from the date on which the
violation occurs.” 15 U.S.C. § 1692k(d). The statute of limitations begins to run for an FDCPA
claim on the date of the alleged violation, not the date on which a consumer learns of the
violation. Id.; see also Purnell v. Arrow Fin. Servs., LLC, 303 F. App’x. 297, 301 (6th Cir.
2008).
The Court must determine whether Plaintiff successfully alleged a discrete FDCPA
violation within the limitations period or merely a “later effect[ ] of an earlier time-barred
violation.” Slorp v. Lerner, Sampson & Rothfuss, 587 F. App’x 249, 259 (6th Cir. 2014) (citing
Purnell, 303 F. App’x. at 301–02). The narrow question the Court must initially confront is
whether Defendant reporting negative credit information to “one or more consumer reporting
agencies” on a previously reported debt constitutes a discrete action under the FDCPA. Second
Am. Compl. ¶ 13. This Court finds that it does.

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In Purnell, the Sixth Circuit stated that “It is not the taint of the original decision to report
the debt, but the repeated reporting of the debt within the limitations period that is the basis for
plaintiff’s claims.” Purnell, 303 F. App’x at 303. In that case, the defendant repeatedly reported
an alleged unverified debt to a credit reporting agency. Id. The Sixth Circuit allowed the claims
to go forward in part, but “[t]o the extent that the[] violations [were] alleged to have occurred
outside the limitations period they [were] barred by the statute of limitations.” Id. However, “to
the extent that plaintiff can prove that such violations occurred within the limitations period, they
are not time-barred.” Id.; see also Blackburn v. Mapother & Mapother, P.S.C., No. 3:14-CV-55R, 2014 WL 1418224, at *1-2 (W.D. Ky. Apr. 14, 2014); Bihn v. Fifth Third Mortgage Co., No.
3:13-CV-00057, 2013 WL 5657598, at *4 (S.D. Ohio Oct. 16, 2013) (“In Purnell, monthly
reports submitted by a debt collector to a credit reporting agency were considered by the Sixth
Circuit to be separate harms.”).
In Slorp, the Sixth Circuit relied on Purnell in finding that filing pleadings or memoranda
“reaffirming the legitimacy of [the defendants’] state-court suit” were not discrete violations of
the FDCPA. Slorp, 587 F. App’x at 259. Rather, the defendants’ actions “were the continuing
effects of their initial violation,” which was their filing of an allegedly “unfair, misleading, and
abusive” lawsuit against the plaintiff. Id.
Plaintiff alleges Defendant “opened the account for reporting on the debt in November,
2010 and last furnished information concerning the GE Money Bank debt on February 20,
2014.” Second Am. Compl. ¶ 12. Reporting information to a consumer reporting agency
markedly differs from continuing to file pleadings or memoranda in an already initiated lawsuit.
Indeed, “debt collectors use the reporting mechanism as a tool to persuade consumers to pay, just
like dunning letters and telephone calls.” Purnell, 303 F. App’x at 304, n.5 (internal citations
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omitted); see also Sullivan v. Equifax, Inc., 2002 WL 799856, at *4 (E.D. Pa. Apr. 19, 2002)
(“reporting a debt to a credit reporting agency is a powerful tool designed, in part, to wrench
compliance with payment terms”) (internal citations and quotations omitted). Each report a
creditor sends to a consumer reporting agency constitutes a separate attempt to collect a debt,
while initiating a lawsuit – and all actions that litigating that suit entails – constitutes a single
attempt to collect a debt. The information furnished on February 20, 2014 is itself an alleged
“discrete violation of the FDCPA within the limitations period” and not merely a “later effect[]”
of the initial November 2010 reporting. Slorp, 587 F. App’x at 259.
Plaintiff filed this action on May 14, 2014. Def.’s Notice of Removal ¶ 1, ECF No. 1. The
statute of limitations bars Plaintiff’s alleged FDCPA claims that occurred outside the limitations
period, including the initial reporting of the debt in November, 2010 and other violations that
may have occurred before May 14, 2013. “But, to the extent that plaintiff can prove that such
violations occurred within the limitations period, they are not time-barred.” Purnell, 303 F.
App’x at 303. Hence, Plaintiff’s pleaded February 2014 violations are not time-barred.
2. Failure to State a FDCPA Claim
To state a claim under the FDCPA, the following elements must be present: (1) the
plaintiff must be a consumer under the FDCPA; (2) the debt must arise from transactions
“primarily for personal, family or household purposes,” (3) the defendant must be a debt
collector under the FDCPA; and (4) the defendant must have violated a provision of the FDCPA.
See Wash. Mut. Bank, F.A., 683 F.3d at 326 (internal citation omitted). Under the FDCPA, “A
debt collector may not use any false, deceptive, or misleading representation or means in
connection with the collection of any debt.” 15 U.S.C. § 1692e. Similarly, “A debt collector may
not use unfair or unconscionable means to collect or attempt to collect any debt.” 15 U.S.C.
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§ 1692f. Under 15 U.S.C. §§ 1692e-f, there are non-exhaustive lists of conduct that constitute an
FDCPA violation.
Plaintiff specifically alleges that Defendant violated the FDCPA under 15 U.S.C.
§§ 1692e-f by (1) reporting a debt Plaintiff does not owe and (2) attempting to collect an amount
not authorized by the credit agreement or permitted by law. Second Am. Compl. ¶ 34. At issue is
whether Plaintiff sufficiently alleged facts to meet the fourth element of an FDCPA claim. The
majority of Plaintiff’s allegations stem from an assumption that GE Money Bank charged off the
relevant debt and, therefore, waived its right to collect interest on that debt as “controlled by
written terms and conditions that established interest rates that applied to the … account.” Id.
¶ 22. Plaintiff alleges that this accumulated interest is the reported specious debt and the amount
the credit agreement or law does not authorize. Id. ¶¶ 31-33. In dismissing these claims, the
Court does not need to go further than determining whether Plaintiff sufficiently pleaded the
foundation for this house of cards.
Plaintiff says in her complaint that GE Money Bank charged off the relevant debt. Id.
¶ 23. This is pleaded, however, “[u]pon information and belief,” and Plaintiff provides no actual
information for the conclusory allegation that GE Money Bank charged off a debt. Plaintiff has
not alleged any act of waiver. A belief devoid of further factual enhancement is insufficient to
state a claim as a matter of law. See Iqbal, 556 U.S. at 678. Without this foundational factual
allegation, Plaintiff has failed to state a claim for relief under the FDCPA that is plausible on its
face.
As an alternative basis for her claims, Plaintiff alleges that she “has disputed the GE
Money Bank debt and does not believe that it is hers.” Second Am. Compl. ¶ 14. Plaintiff’s

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pleadings supporting this theory, however, are completely conclusory. First, while it is
unreasonable to burden Plaintiff with explaining who the debt actually belongs to, the Plaintiff
must provide a modicum of factual explanation as to why it is not hers. This is especially
important when the crux of the pleadings attack the debt’s interest, not the principal. Also,
Plaintiff alleges that the debt was “used solely for personal, family, or household purposes”
without any accompanying factual allegations. Id. ¶ 15. “[A] plaintiff’s obligation to provide the
grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal
quotations and alterations omitted). Even construing the complaint in Plaintiff’s favor, Plaintiff’s
pleadings are insufficient to state a cause of action under the FDCPA. Notably, Plaintiff has
failed to state a cause of action even though this is her third attempt to craft her complaint. See
Second Am. Compl.
The Court will grant Defendant’s motion to dismiss Plaintiff’s Second Amended
Complaint for failure to state a claim.
A separate order will be entered in accordance with this opinion.

November 24, 2015

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