Moore et al v. Paul Edward Koch, II

Filing 12

MEMORANDUM. Signed by Judge William M Nickerson on 7/21/2015. (bas, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

BRYANT MOORE et al.

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v.
PAUL EDWARD KOCH, II
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Civil Action No. WMN-15-620

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MEMORANDUM
Plaintiffs brought this action under the Fair Debt
Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., the
Maryland Consumer Debt Collection Act, Md. Code, Com. Law § 14201 et seq., and the Maryland Consumer Protection Act, Md. Code,
Com. Law § 13-101 et seq.

Plaintiffs acknowledge that in 2002,

William Allen Barwick, Jr., obtained a judgment against them for
unpaid rent in the amount of $11,896.16.

Defendant is a debt

collector and, on or about May 6, 2014, he sent Plaintiffs a
letter for the purpose of collecting on that judgment, with
interest.

Defendant sent an additional collection letter on

June 11, 2014, and filed a request for the garnishment of
Plaintiff Sherri Moore’s wages on January 8, 2015.

Plaintiffs

allege that Defendant made false and misleading representations
in these collection efforts.

Also alleging that these are

standard practices of Defendant in dealing with other debtors,
Plaintiffs bring this action as a potential class action.

Defendant answered the Complaint and also asserted four
counterclaims.

Defendant acknowledges that he has attempted to

collect this debt which was assigned to him by Mr. Barwick.

He

also asserts that Plaintiffs have filed numerous frivolous
motions and appeals in Maryland courts and filed one or more
frivolous complaints against him with various government
agencies.

He further alleges that Plaintiffs threatened to file

a lawsuit against him unless he stopped all collection efforts.
Based upon these allegations, Defendant asserts counterclaims
for “Tortious Interference with Business Relations” (Count I),
“Malicious Interference with the Right to Pursue a Lawful
Business, Trade, or Occupation” (Count II), “Abuse of Process”
(Count III), and “Set-off and/or Recoupment” (Count IV).
Plaintiffs have moved to dismiss the Counterclaim under
Rule 12(b)(6) of the Federal Rules of Civil Procedure, asserting
that the facts alleged are insufficient to support these causes
of action.

ECF No. 8.

Plaintiffs also suggest the “[t]he Court

may also dismiss the Counterclaim under Fed. R. Civ. P. 12(b)(1)
and in exercise of the discretion provided by 28 U.S.C. § 1367
to decline supplemental jurisdiction over the alleged
counterclaims because they are permissive, not mandatory, and do
not raise federal questions or invoke jurisdiction under 28

2

U.S.C. § 1331.”1

ECF No. 8-1 at 1 n.1.

For the reasons stated

below, the Court concludes that Counts I, II, and III are
sufficiently related to the Plaintiffs’ claims that they were
properly asserted as compulsory counterclaims.

The Court also

concludes, however, that as pled these counterclaims fail to
state claims upon which relief could be granted.

The Court

finds that Count IV of the Counterclaim is a permissive
counterclaim over which the Court has no jurisdiction.
In cases such as this, where neither diversity nor federal
question jurisdiction exists over the counterclaims, the Court
must determine whether the counterclaims are “compulsory” or
“permissive.”

A compulsory counterclaim “arises out of the

transaction or occurrence that is the subject matter of the
opposing party's claim,” while a permissive counterclaim does
not.

See Fed. R. Civ. P. 13(a)-(b).

A compulsory counterclaim

is “within the ancillary jurisdiction of the court to entertain
and no independent basis of federal jurisdiction is required.”
Painter v. Harvey, 863 F.2d 329, 331 (4th Cir. 1988).

By

contrast, a permissive counterclaim that lacks its own
independent jurisdictional basis is not within the jurisdiction
of the court.

Id.

1

Because 28 U.S.C. § 1331 addresses “federal question”
jurisdiction, the Court assumes Plaintiffs intended to cite 28
U.S.C. § 1332, the section addressing the other primary source
of this Court’s jurisdiction, “diversity jurisdiction.”
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Determining whether counterclaims are compulsory or
permissive requires four separate inquiries:
(1) Are the issues of fact and law raised in the claim
and counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on the
party's counterclaim, absent the compulsory
counterclaim rule?
(3) Will substantially the same evidence support or
refute the claim as well as the counterclaim? and
(4) Is there any logical relationship between the
claim and the counterclaim?
Id. at 331.

The Fourth Circuit has instructed that it is not

necessary to “answer all these questions in the affirmative for
the counterclaim to be compulsory”; rather, the inquiries serve
as a “guideline.”

Id.

“Where . . . the same evidence will

support or refute both the claim and counterclaim, the
counterclaim will almost always be compulsory.”

Id. at 332.

This “same evidence” test, however, is not “the exclusive
determinant of compulsoriness under [Rule 13(a)] because it is
too narrow a definition of a single transaction or occurrence.”
“A counterclaim may still arise from the same ‘transaction or
occurrence’, as a logically related claim even though the
evidence needed to prove the opposing claims may be quite
different.”

Id. at 333.

Plaintiffs’ claims and Defendant’s first three
counterclaims all relate to Defendant’s efforts to collect the
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debt that was assigned to him by Mr. Barwick.

Plaintiffs allege

that these efforts were deceptive, misleading, and unlawful and
Defendant maintains the Plaintiffs’ efforts to rebuff his
collection activities were frivolous and vexatious.

While

Plaintiffs’ claims focus on the correspondence sent by Defendant
and Defendant’s counterclaims focus on the court and
administrative proceedings initiated by Plaintiffs, the claims
and counterclaims all relate to the lawfulness of the collection
of the debt.

They certainly are logically related, will involve

some of the same evidence, raise some of the same legal and
factual issues, and at least implicate res judicata concerns.
The Court finds that these first three counterclaims are
compulsory.
Defendant’s “Set-off and/or Recoupment” counterclaim
asserted in Count IV, however, does not have quite the same
relationship to Plaintiffs’ claims.

That counterclaim deals not

with Defendant’s collection efforts but simply with the validity
of the underlying judgment obtained by Defendant.

The Court

concludes that this counterclaim is permissive, not compulsory.
See Ayres v. Nat'l Credit Mgmt. Corp., No. 90–5535, 1991 WL
66845, at *1 (E.D. Pa. Apr. 25, 1991) (concluding that
counterclaim was permissive where it “centers on evidence
regarding the existence of a contract, the failure to perform on
a contract, or other circumstances leading to the creation of a
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valid debt [but t]he [FDCPA claim] centers on evidence regarding
the improprieties and transgressions . . . in the procedures
used to collect the debt, regardless of the debt's validity”).
Because Count IV is a permissive counterclaim asserting a
state law cause of action, the Court must consider whether it
properly falls within this Court’s supplemental jurisdiction
under 28 U.S.C. § 1367.2

Although appellate courts in several

other circuits have held that supplemental jurisdiction under §
1367 may extend to permissive counterclaims in some
circumstances, this Court has recently noted that it remains the
law of the Fourth Circuit that “federal courts may not exercise
supplemental jurisdiction over permissive counterclaims.”
Ramirez v. Amazing Home Contractors, Inc., Civ. No. JKB-14-2168,
2014 WL 6845555, at *5 (D. Md. Nov. 25, 2014) (collecting

2

This section provides in relevant part that:

Except as provided in subsections (b) and (c) or as
expressly provided otherwise by Federal statute, in
any civil action of which the district courts have
original jurisdiction, the district courts shall have
supplemental jurisdiction over all other claims that
are so related to claims in the action within such
original jurisdiction that they form part of the same
case or controversy under Article III of the United
States Constitution.
28 U.S.C. § 1367(a).
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cases).

Thus, Count IV must be dismissed for lack of

jurisdiction.3
Turning to the merits of the other three counterclaims, to
survive a motion to dismiss under Rule 12(b)(6), a claim or
counterclaim must contain “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, 663 (2009) (quoting

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

Such

determination is a “context-specific task,” Iqbal, 556 U.S. at
679, in which the factual allegations of the complaint or
counterclaim must be examined to assess whether they are
sufficient “to raise a right to relief above the speculative
level.”

Twombly, 550 U.S. at 555.

“[A] court accepts all well-

pled facts as true and construes these facts in the light most
favorable to the plaintiff [or counter-plaintiff] in weighing
the legal sufficiency of the complaint.”

Nemet Chevrolet, Ltd.

v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009)
(citations omitted).

Such deference, however, is not accorded

3

Even were the Court to conclude that there was jurisdiction
over Counterclaim IV under the “case or controversy” test of §
1367(a), it would decline to exercise jurisdiction under
1367(c)(4), which permits it to do so, “in exceptional
circumstances, [if] there are [] compelling reasons for
declining jurisdiction.” “[S]trong policy reasons exist to
prevent the chilling effect of trying FDCPA claims in the same
case as state law claims for collection of the underlying debt,”
and this policy satisfies the exceptional circumstances of §
1367(c)(4). Sparrow v. Mazda Am. Credit, 385 F. Supp. 2d 1063
(E.D. Cal. Aug. 26, 2005).
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to labels and legal conclusions, formulaic recitations of the
elements of a cause of action, and bare assertions devoid of
further factual enhancement.

Iqbal, 556 U.S. at 678.

In their motion to dismiss, Plaintiffs treat Counts I and
II as identical.

ECF No. 8-1 at 3-4.

Defendant asserts that

Count II “is a different tort entirely” than Count I.
9.

ECF No.

To the extent that the Court can discern a difference

between the claims asserted in the two counterclaims, it would
appear that Count I is focused more specifically on the alleged
interference with the contractual relationship between Defendant
and Mr. Barwick, see ECF No. 5 ¶ 50, whereas Count II asserts
more general interference with Defendant’s ability to conduct
his debt collection business.

See id. ¶ 54.

Thus, it would

seem that Count I is more in the nature of a claim for wrongful
interference with an existing contractual relationship whereas
Count II is more in the nature of a claim for interference with
prospective economic relationships.

See Alexander & Alexander

Inc. v. B. Dixon Evander & Assoc., Inc., 650 A.2d 260, 268 (Md.
1994) (discussing these two forms of the tort of wrongful
interference with contractual or business relationships).
Regardless of the minor differences between the two claims,
the elements that need to be established are similar and, here,
both claims fail for similar reasons.

Under Maryland law, the

elements of tortious interference with contract are: “‘1)
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existence of a contract between plaintiff and a third party; 2)
defendant's knowledge of that contract; 3) defendant's
intentional interference with that contract; 4) breach of that
contract by the third party; and 5) resulting damages to the
plaintiff.’”

Ultrasound Imaging Corp. v. Am. Soc'y of Breast

Surgeons, 358 F. Supp. 2d 475, 479-80 (D. Md. 2005) (quoting
Fraidin v. Weitzman, 611 A.2d 1046, 1057 (Md. Ct. Spec. App.
1993)).

The elements to establish a claim for malicious

interference with the right to pursue a lawful business, trade
or occupation are: “(1) Intentional and willful acts; (2)
calculated to cause damage to the plaintiffs in their lawful
business; (3) done with the unlawful purpose to cause such
damage and loss, without right or justifiable cause on the part
of the defendants (which constitutes malice); and (4) actual
damage and loss resulting.”

Beane v. McMullen, 291 A.2d 37, 47

(1972) (quoting Willner v. Silverman, 71 A. 962, 964 (Md.
1909)).
Both claims fail because Defendant has failed, inter alia,
to allege the type of damage that would support such claims.

As

to Count I, there is no allegation that Defendant’s contract
with Mr. Barwick was even breached.

In fact, Defendant readily

admits that he has already obtained a judgment in his favor
based upon the debt assigned to him by Mr. Barwick.

As to Count

II, there is no allegation that Defendant has suffered any loss
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of business because of Plaintiffs’ conduct.

Even in the

opposition to Plaintiffs’ motion Defendant stops short of
representing that he suffered any actual damage to his business,
asserting instead that “Plaintiffs hoped to create a burden on
the Defendant’s business” and made a “deliberate attempt to
affect the relationship between Defendant and his clients.”

ECF

No. 9 at 4 (emphasis added).
The only “damages” mentioned in the Counterclaim or in the
opposition are the court costs, expenses, and attorney’s fees
expended in response to “Plaintiffs’ vexatious and litigious
behavior.”

ECF No. 9 at 4.

As Plaintiffs correctly note,

however, any claim for these types of damages should have been
brought in the previous actions by way of motions for sanctions
or for the award of attorneys’ fees.

These are not the type of

damages that would support the torts asserted in Counts I or II.
In moving to dismiss Count III, Plaintiffs note that to
assert a claim for abuse of process under Maryland law, “‘a
plaintiff must allege that he was unlawfully arrested or his
property unlawfully seized.’”

ECF No. 8-1 at 5 (quoting

Campbell v. Lake Hallowell Homeowners Ass’n, 852 A.2d 1029, 1044
(Md. Ct. Spec. App. 2004)); see also, One Thousand Fleet Ltd.
P’ship v. Guerriero, 694 A.2d 952, 960 (Md. 1997) (“A cause of
action for civil abuse of process in Maryland requires that the
plaintiff establish that an arrest of the person or a seizure of
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property of the plaintiff resulted from the abuse of process.”).
Defendant makes no response in his opposition regarding this
claim and thus it would appear to be abandoned.

See Grant–

Fletcher v. McMullen & Drury, P.A., 964 F. Supp. 2d 514, 525 (D.
Md. 2013) (opining that the plaintiff appeared to have abandoned
claims by not responding to arguments directed at those claims
in the defendant's motion).

Even if not abandoned, the claim

must be dismissed as Defendant does not allege either an
unlawful arrest or seizure in the Counterclaim.
For these reasons, the Counterclaim will be dismissed in
its entirety.

An Order consistent with this Memorandum will

issue.

_______________/s/________________
William M. Nickerson
Senior United States District Judge

DATED: July 21, 2015

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