Hill et al v. Midland Funding, LLC et al

Filing 25

MEMORANDUM. Signed by Judge Catherine C. Blake on 4/16/2013. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
SUZANNE HILL et al.

v.

MIDLAND FUNDING, LLC et al.

:
:
:
:
:
:
:

Civil Action No. CCB-12-2397

MEMORANDUM
Plaintiffs Suzanne Hill, Kadidat Cisse, and Jinyun Park filed this putative class action
against Midland and their attorneys, Lyons Doughty, Veldius, P.C. (“LDV”), alleging violations
of the Fair Debt Collection Practices Act (“FDCPA”), the Maryland Consumer Debt Colletion
Act (“MCDCA”), and the Maryland Consumer Protection Act (“MCPA”). Midland has filed a
motion to dismiss or, in the alternative, for summary judgment. Oral argument was held on April
5, 2013. For the reasons set forth below, the motion will be granted.
BACKGROUND
According to the complaint, each of the plaintiffs was sued once or twice by Midland to
collect unpaid credit card debt Midland bought from Chase.1 Each of the suits Midland filed
against the plaintiffs was an “affidavit judgment action pursuant to Maryland Rule 3-306.”
(Compl. ¶¶ 26, 33, 41, 54, 63). The plaintiffs allege that Midland violated the law in two ways.
First, all but one of the suits were apparently filed with the wrong address for Midland—listing
the address of its parent company—an address at which Midland Funding, the stated plaintiff in
each action, was not a licensed debt collector under Maryland law. Midland’s servicer company,
however, Midland Capital Management, was licensed as a debt collector at this address. Under

1

Midland does not dispute any of the facts contained in the complaint for the purposes of
resolving the motion as a motion to dismiss.
1

Maryland Code Ann., Bus. Reg., §§ 7-301; 7-305(a), collection agencies operating in Maryland
must have a license for each place of business from which they operate. The plaintiffs contend
that Midland’s suits listing an address at which it was not licensed were unlawful and, therefore,
a violation of the FDCPA, (Compl. ¶¶ 86-87), under 15 U.S.C. § 1692e(5), which prohibits
“[t]he threat to take any action that cannot legally be taken . . .[,]” and § 1692f , which prohibits
any “unfair or unconscionable means” of collecting debt.
Second, for each affidavit Midland filed, the plaintiffs allege each was false and “was not
made, as required, upon personal knowledge but was artfully and deceptively worded to falsely
appear to be made upon personal knowledge.” (See, e.g., Compl. ¶¶ 29-30). The plaintiffs argue
that these affidavits violated §§ 1692e(5) and 1692f of the FDCPA, as well as § 1692e(10),
which prohibits “[t]he use of any false representation or deceptive means to collect or attempt to
collect any debt . . . .” The plaintiffs incorporate these allegations into their claims under the
MCDCA as well as the MCPA.
Midland filed a collection suit against Park on February 25, 2011. (Compl. ¶ 38). Park
disputes that he was ever served, and, in fact, a default judgment against him was vacated based
on failure of service. (See id. ¶¶ 46, 48). He subsequently prevailed at trial. (Id. ¶ 51). Midland
filed suits against Hill on July 7, 2011, and June 13, 2012. (Id. ¶¶ 25, 32). Hill’s cases are both
pending. (Id. ¶ 37). Finally, Midland filed suits against Cisse on September 1 and December 6,
2011. (Id. ¶¶ 52, 62). Cisse was granted a dismissal with prejudice on Midland’s first suit,
allegedly based on misconduct by LDV. (Id. ¶ 60). Nevertheless, Midland subsequently refiled
an identical claim, which is still pending but appears to be dormant. (Id. ¶¶ 62, 68-70). The
plaintiffs filed this putative class action on August 13, 2012.

2

ANALYSIS
I. Standard of Review
When ruling on a motion under Rule 12(b)(6), the court must “accept the well-pled
allegations of the complaint as true,” and “construe the facts and reasonable inferences derived
therefrom in the light most favorable to the plaintiff.” Ibarra v. United States, 120 F.3d 472, 474
(4th Cir. 1997). “Even though the requirements for pleading a proper complaint are substantially
aimed at assuring that the defendant be given adequate notice of the nature of a claim being
made against him, they also provide criteria for defining issues for trial and for early disposition
of inappropriate complaints.” Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). “The
mere recital of elements of a cause of action, supported only by conclusory statements, is not
sufficient to survive a motion made pursuant to Rule 12(b)(6).” Walters v. McMahen, 684 F.3d
435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To survive a
motion to dismiss, the factual allegations of a complaint “must be enough to raise a right to relief
above the speculative level . . . on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal
citations and alterations omitted). “To satisfy this standard, a plaintiff need not ‘forecast’
evidence sufficient to prove the elements of the claim . . . . However, the complaint must allege
sufficient facts to establish those elements.” Walters, 684 F.3d at 439 (quotations and citation
omitted). “Thus, while a plaintiff does not need to demonstrate in a complaint that the right to
relief is ‘probable,’ the complaint must advance the plaintiff’s claim ‘across the line from
conceivable to plausible.’” Id. (quoting Twombly, 550 U.S. at 570). Because, as explained below,
the plaintiffs have failed to state a plausible claim under any legal theory, their complaint will be
dismissed.

3

II. Wrong Addresses
The plaintiffs first allege that Midland’s filing of lawsuits listing the incorrect address
(using the address of its servicer, not itself) violated § 1692e(5) of the FDCPA ,which prohibits
“threat[s] to take any action that cannot legally be taken.” Midland argues that the plaintiffs have
failed to state a claim on this basis because the incorrect addresses were not “material”
misrepresentations violating § 1692e. Setting aside the issue of materiality, which the Fourth
Circuit has suggested, but not yet held, is a necessary element of many alleged § 1692e
violations, see Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 374 (4th Cir. 2012) (“[C]ourts
have generally held that violations grounded in ‘false representations’ must rest on material
misrepresentations.”), the wrong addresses listed on Midland’s lawsuits were not “false
representations” under § 1692e. Courts have recognized that the filing of a collection action
“without a license” could amount to a “threat” to take an action the unlicensed collector could
not legally take, making it a “false representation” violating § 1692e(5). See Bradshaw v. Hilco
Receivables, LLC, 765 F. Supp. 2d 719, 729-31 (D. Md. 2011); Hauk v. LVNV Funding LLC,
749 F. Supp. 2d 358, 367-68 (D. Md. 2010). Mere technical violations of state law in the filing of
such suits, however, are not automatically violations of the FDCPA. See Bradshaw, 765 F. Supp.
2d at 729 (“[T]his Court declines to hold that any violation of state law, no matter how trivial,
constitutes a per se violation of the FDCPA.”). Thus, a plaintiff can demonstrate that a violation
of state law supports a claim under § 1692e(5) of the FDCPA only if the state law violation
undermines the defendant debt collector’s right to take the challenged action to such an extent
that the filing of the suit was not legal. Here, Midland’s filing of each lawsuit was not a “threat to
take . . . action that cannot legally be taken” because Midland, and its servicer whose address

4

was used, were both licensed and authorized to file suit in Maryland against the plaintiffs and
could, in fact, legally file suit against the plaintiffs.
The plaintiffs’ allegations that Midland “act[ed] as a collection agency in Maryland
without a license” and “operat[ed] illegally in Maryland without the mandatory license . . .”,
(Compl. ¶¶ 86-87), are overstated. Midland was licensed—it merely listed an address in its initial
filings at which it was not licensed, but a related company was, and it rectified this error, when it
was discovered, by filing change of address forms with the court. (See Def.’s Mem., ECF No.
13-1, at 16 n.10). This technical error is not a “false representation” or the kind of “abusive debt
collection practice[]” that the FDCPA was designed to prevent. See Warren, 676 F.3d at 373
(quoting Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 130 S. Ct.
1605, 1608 (2010)). There is no plausible allegation in the complaint that Midland intentionally
used the wrong address to somehow evade regulators or the plaintiffs, or that the plaintiffs were
in any way misled or prejudiced by this error. Accordingly, Midland’s mistaken use of the
address of its servicer was not a plausible violation of § 1692e(5) and the plaintiffs have failed to
state a claim on this ground.
II. “False” Affidavits
Similarly, the plaintiffs have failed to state a claim based on the affidavits they allege
were false and were “artfully and deceptively worded to falsely appear to be made upon personal
knowledge.” (See, e.g., Compl. ¶ 29-30). Although the complaint contains no specific allegations
as to how the affidavits were “false” or deceptive, at oral argument, plaintiffs’ counsel elaborated
on this claim. The plaintiffs’ claim is based entirely on the argument that, because the affidavit
may not be sufficient to withstand the requirements of Maryland Rule 3-306 or to warrant a
judgment in favor of Midland, it violated § 1692e. But the affidavits themselves, attached as

5

exhibits to Midland’s motion,2 do not actually contain any “false” statements. For example, the
affiant in the first Hill collection case states only that she has personal knowledge of the records
of the debt that Chase conveyed to Midland. (See Def.’s Mot., Ex. 9 (“Affidavits”), ECF No. 1310, at 4). The plaintiffs do not allege that this statement itself was false, and the court finds no
reason to believe it was.
Thus, the plaintiffs’ argument that this case is analogous to Midland Funding v. Brent,
644 F. Supp. 2d 961, 969-70 (N.D. Ohio 2009) is misplaced. There, the district court entered
summary judgment against Midland because the affiants in similar debt collection cases stated
they had personal knowledge “that the debt was valid.” See Midland Funding LLC v. Brent, 644
F. Supp. 2d 961, 970 (N.D. Ohio 2009). Here, Midland’s affiants do not make such statements.
At most, they only certify that they have looked at the business records of Chase that were
acquired by Midland. As plaintiffs’ counsel noted at oral argument, these affidavits may be
insufficient to support a judgment against any of the plaintiffs—and indeed the plaintiffs appear
to have prevailed in Midland’s suits against them where they have reached trial. But, the fact that
the affidavits may be legally insufficient does not make them “false.” Filing wholly truthful
affidavits that some state courts may hold to be insufficient in an attempt to obtain default
judgments is not a misrepresentation or other falsehood violating § 1692e. Cf. Winemiller v.
Worldwide Asset Purchasing, LLC, 2011 WL1457749, at *6 (D. Md. April 15, 2011) (refusing to
dismiss FDCPA claim alleging affidavits submitted under Maryland Rule 3-306 included

2

“[W]hen a defendant attaches a document to its motion to dismiss, a court may consider it in
determining whether to dismiss the complaint if it was integral to and explicitly relied on in the
complaint and if the plaintiffs do not challenge its authenticity.” Am. Chiropractic Ass'n v.
Trigon Healthcare Inc., 367 F.3d 212, 234 (4th Cir.2004) (internal quotations omitted). At oral
argument, the plaintiffs did not contest either the validity of the affidavits Midland submitted
with its motion to dismiss or that they were the same affidavits upon which the plaintiffs based
their allegations.
6

representations that were actually false and that the defendants knew were false).3 Accordingly,
the plaintiffs have failed to state a claim based on allegedly “false” or misleading affidavits.
III. Section 1692f
The plaintiffs also have failed to state a claim under § 1692f, which prohibits the using of
any “unfair or unconscionable means to collect or attempt to collect debt.” The statute contains a
non-exhaustive list of behavior that would violate this provision, but it does not define “unfair”
or “unconscionable.” Some courts have held that plaintiffs must allege misconduct “separate and
distinct” from violations of § 1692e to state a claim under § 1692f, see Stewart v. Bierman, 859
F. Supp. 2d 754, 765 (D. Md. 2012), and Midland argues the plaintiffs’ claims under this
provision are identical to their § 1692e claims. Even if the plaintiffs’ claims under § 1692f could
be construed as distinct from allegedly “[f]alse or misleading representations” under § 1692e, the
listing of the wrong address on the lawsuits or the use of potentially deficient affidavits does not
rise to the level of “unfair” or “unconscionable” behavior. As discussed above, the plaintiffs do
not appear to have been harmed by this alleged misconduct. Midland could still be reached at the
address listed in the suits, even if only its servicer was technically licensed there, and the
plaintiffs have, so far, prevailed in their state court challenges to the sufficiency of Midland’s
debt collection cases against them. The complaint contains no plausible violations of § 1692e or
§ 1692f.
IV. MCDCA and MCPA Claims
Finally, the MCDCA prohibits collectors from “claim[ing], attempt[ing], or threaten[ing]
to enforce a right with knowledge that the right does not exist.” Md. Code Ann., Comm. Law,
§ 14-202(8). “This has been held to mean that a party may not attempt to enforce a right with
3

Unpublished cases are cited only for the soundness of their reasoning, not for any precedential
value.
7

actual knowledge or with reckless disregard as to the falsity of the existence of the right.”
Kouabo v. Chevy Chase Bank, F.S.B., 336 F. Supp. 2d 471, 475 (D. Md. 2004) (citing Spencer v.
Hendersen-Webb Inc., 81 F. Supp. 2d 582, 594-95 (D. Md. 1999)). Any violation of the
MCDCA is a per se violation of the MCPA. See Md. Code Ann., Comm. Law, § 13-301(14)(iii).
For the same reasons discussed above, Midland’s actions—filing lawsuits with an incorrect
address and using truthful, but potentially insufficient, affidavits under Maryland Rule 3-306—
did not undermine its right to seek repayment of debt Midland reasonably believed it legally
owned. Thus, the plaintiffs have not plausibly alleged that Midland attempted to enforce any
right with knowledge it did not exist, and they have not stated a claim under either Maryland
statute.
CONCLUSION
For the reasons stated above, Midland’s motion to dismiss will be granted.4 A separate
Order follows.

April 16, 2013
Date

/s/
Catherine C. Blake
United States District Judge

4

In light of this ruling, the court does not need to reach the issues of arbitration or the
applicability of the statute of limitations raised by Midland in its motion to dismiss.
8