Horowitz et al v Federal Insurance Company

Filing 14

MEMORANDUM OPINION. Signed by Judge Deborah K. Chasanow on 1/4/2016. (sat, Chambers)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
:
ROBERT HOROWITZ, et al.
:
v.

:

Civil Action No. DKC 15-1959

:
FEDERAL INSURANCE COMPANY
d/b/a Chubb & Son

:

MEMORANDUM OPINION
Presently

pending

and

ready

for

resolution

in

this

insurance case is a motion to dismiss or, in the alternative,
for

summary

judgment

filed

by

Defendant

Company (“Federal” or “Defendant”).

Federal

Insurance

(ECF No. 6).

The issues

have been fully briefed, and the court now rules, no hearing
being deemed necessary.

Local Rule 105.6.

For the following

reasons, the motion to dismiss will be granted.
I.

Background
This

action

suit

in

Horowitz

stems

state

(the

from

court

string

regarding

of

the

“Horowitzes”

or

employment,

Plaintiffs

Robert

“Plaintiffs”)

and

and
and

the

tort
Cathy

McLean

The current action is the latest in a

subsequent
disputes

contract,

between

School of Maryland, Inc.
long

a

can

opinion in a related case.

litigation.
be

found

Additional
in

a

recent

background
memorandum

See Horowitz v. Continental Casualty

Co., No. DKC-14-3698, 2015 WL 9460111 (D.Md. Dec. 28, 2015).

The underlying state court suit that ultimately gave rise
to this action was brought by the law firm Selzer, Gurvitch,
Rabin, Wertheimer, Polott & Obecny, P.C. (“Selzer”) against the
Horowitzes to collect for unpaid legal work done in an earlier
suit.

(ECF No. 1 ¶ 11).

against

Selzer

alleging

The Horowitzes filed a counterclaim
malpractice

in

that

prior

suit.

Federal, as Selzer’s malpractice insurance provider, retained
the law firm Miles & Stockbridge P.C. to defend the malpractice
claim.

Miles & Stockbridge also represented Selzer in its fee

recovery claim against the Horowitzes.
On July 2, 2015, Plaintiffs initiated this action by filing
a complaint against Federal.

(ECF No. 1).

Plaintiffs contend

that Federal “funded the cost for legal services to Selzer for
debt

collection”

Horowitzes.

in

Selzer’s

(Id. ¶ 17).

state

court

suit

against

the

The complaint alleges that Federal’s

funding of Selzer’s fee collection claim violated the Maryland
Consumer Debt Collection Act (“MCDCA”).
14-201, et seq.

Md. Code Com. Law. §

Specifically, Plaintiffs allege that Federal

attempted to collect a debt “with knowledge that the right [did]
not

exist.”

202(8))).

(Id.
On

¶

August

33
14,

(quoting
2015,

Md.

Code

Defendant

Com.
filed

Law.
the

§

14-

pending

motion to dismiss or, in the alternative, for summary judgment.
(ECF No. 6).

Plaintiffs responded in opposition (ECF No. 10),

and Defendant replied (ECF No. 13).
2

II.

Standard of Review
Ordinarily,

a

court

cannot

consider

matters

outside

the

pleadings or resolve factual disputes when ruling on a Rule
12(b)(6) motion to dismiss.
F.3d

442,

450

(4th

Cir.

See Bosiger v. U.S. Airways, 510

2007).

If

the

court

does

consider

matters outside the pleadings, “the motion must be treated as
one for summary judgment under Rule 56,” and “[a]ll parties must
be given a reasonable opportunity to present all the material
that is pertinent to the motion.”

Fed.R.Civ.P. 12(d); see also

Finley Lines Joint Protective Bd. Unit 200 v. Norfolk S. Corp.,
109 F.3d 993, 997 (4th Cir. 1997) (“[A] Rule 12(b)(6) motion to
dismiss supported by extraneous materials cannot be regarded as
one

for

summary

judgment

until

the

district

court

acts

to

convert the motion by indicating that it will not exclude from
its

consideration

materials.”).
matters

of

the

motion

the

supporting

extraneous

Here, because it is not necessary to consider

outside

the

pleadings,

Defendant’s

motion

will

be

treated as a motion to dismiss.
The purpose of a motion to dismiss under Rule 12(b)(6) is
to test the sufficiency of the complaint.
Charlottesville,

464

F.3d

480,

483

(4th

Presley v. City of
Cir.

2006).

A

plaintiff’s complaint need only satisfy the standard of Rule
8(a), which requires a “short and plain statement of the claim
showing that the pleader is entitled to relief.”
3

Fed.R.Civ.P.

8(a)(2).

“Rule 8(a)(2) still requires a ‘showing,’ rather than

a blanket assertion, of entitlement to relief.”
v. Twombly, 550 U.S. 544, 556 n.3 (2007).

Bell Atl. Corp.

That showing must

consist of more than “a formulaic recitation of the elements of
a cause of action” or “naked assertion[s] devoid of further
factual enhancement.”

Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009) (citations and internal quotation marks omitted).
At this stage, all well-pleaded allegations in a complaint
must be considered as true, Albright v. Oliver, 510 U.S. 266,
268 (1994), and all factual allegations must be construed in the
light

most

favorable

to

the

plaintiff.

See

Harrison

v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir.
1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134
(4th Cir. 1993)).

In evaluating the complaint, unsupported legal

allegations

not

need

be

accepted.

Revene

Comm’rs, 882 F.2d 870, 873 (4th Cir. 1989).

v.

Charles

Cnty.

Legal conclusions

couched as factual allegations are insufficient, Iqbal, 556 U.S.
at 678, as are conclusory factual allegations devoid of any
reference to actual events.
604

F.2d

844,

847

(4th

United Black Firefighters v. Hirst,
Cir.

1979);

see

also

Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009).

Francis

v.

“[W]here the

well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has alleged—
but

it

has

not

‘show[n]’—‘that
4

the

pleader

is

entitled

to

relief.’”
8(a)(2)).

Iqbal,

556

U.S.

at

679

(quoting

Fed.R.Civ.P.

Thus, “[d]etermining whether a complaint states a

plausible claim for relief will . . . be a context-specific task
that

requires

the

reviewing

experience and common sense.”

court

to

draw

on

its

judicial

Id.

III. Analysis
Plaintiffs assert liability under the MCDCA (ECF No. 1 ¶¶
30-37),

which

provides

in

relevant

part:

“In

collecting

or

attempting to collect an alleged debt a collector may not . . .
[c]laim, attempt, or threaten to enforce a right with knowledge
that the right does not exist.”

Md. Code, Com. Law § 14-202(8).

To state a claim under this MCDCA provision, a plaintiff must
allege

sufficient

facts

to

show

that

the

defendant

was

a

“collector,” did not possess the right to collect the amount of
debt sought, and attempted to collect the debt knowing that it
lacked the right to do so.

See, e.g., Pugh v. Corelogic Credco,

LLC, No. DKC-13-1602, 2013 WL 5655705, at *4 (D.Md. Oct. 16,
2013).
Plaintiffs assert that Defendant did not have the right to
“collect” on the debt because it did not obtain the license
required
(“MCALA”).

by

the

Maryland

Collection

Agency

Md. Code, Bus. Reg. § 7-301(a).

Licensing

Act

Plaintiffs also

contend that Defendant violated “several enumerated subparts of
the

[Md.

Code

Ins.]

§

27-212
5

by

funding

these

collection

services

for

facilitating
completely

Selzer,”
Miles

and

[&

that

Defendant’s

Stockbridge]

undermine[d]

its

as

“conduct

collection

responsibility

to

be

in

counsel
properly

advised by Miles [& Stockbridge] on liability, so as to meet its
obligations . . . to make a prompt, fair, and equitable good
faith attempt, to settle claims for which liability has become
reasonably clear.”

(ECF No. 1 ¶ 34).

These summary assertions

do not plausibly allege that Defendant violated the MCDCA.
First, Plaintiffs allege no facts showing that the MCDCA
applies

to

Defendant.

“collectors,”

which

The

are

MCDCA’s

defined

prohibitions

as

to

“collecting

people

apply

or

attempting to collect an alleged debt arising out of a consumer
transaction.”
conclusory

Plaintiffs do not allege facts supporting their

assertion

malpractice

insurance

litigation.

Rather,

that

Defendant,

provider,
the

which

funded

alleged

was

the

facts

fee

show

Selzer’s
collection

that

Defendant

funded Selzer’s defense of the malpractice claim, which happened
to

be

handled

by

collection claims.

the

same

law

firm

that

to

argue

inapposite

that

because

the

fee

Funding a malpractice defense does not make

an insurance company a debt “collector.”
cite

handled

Defendant

they

either

falls
dealt

The cases Plaintiffs
under

with

the

entities

MCDCA

are

that

are

expressly in the business of debt collection, or did not apply
the

MCDCA.

See

Bradshaw

v.
6

Hilco

Receivables,

LLC,

765

F.Supp.2d 719, 731-32 (D.Md. 2011) (applying the MCDCA to a law
firm

that

was

in

the

business

of

buying

consumer

debt

and

initiating suits to collect); Finch v. LVNV Funding, LLC, 212
Md.App. 748, 751 (2013) (applying the MCDCA to a debt collection
agency);

Alexander

&

Alexander,

Inc.

v.

B.

Dixon

Evander

&

Assocs., Inc., 88 Md.App. 672 (1991) (not applying the MCDCA).
Even

if

Defendant

were

somehow

properly

categorized

as

a

“collector,” Plaintiffs nonetheless have not alleged that, in
this case, Defendant was “collecting or attempting to collect an
alleged

debt”

sufficient

to

state

a

viable

that

the

claim

under

the

MCDCA.
Moreover,

assuming

arguendo

MCDCA

Defendant, Plaintiffs have not stated a claim.

applies

to

The primary

basis of Plaintiffs’ MCDCA claim is that Defendant failed to
register as a “collection agency” in violation of the MCALA.
Md. Code, Bus. Reg. § 7-301(a).

Failure to register properly as

a collection agency in violation the MCALA may lead to liability
under the MCDCA.
Plaintiffs

do

See, e.g., Bradshaw, 765 F.Supp.2d at 731-32.

not,

however,

allege

Defendant is a “collection agency.”

any

facts

showing

that

A “‘collection agency’ [is]

a person who engages directly or indirectly in the business of”
collecting or soliciting consumer claims.
§ 701(c).
provider.

Md. Code., Bus. Reg.

Again, Defendant is Selzer’s malpractice insurance
Plaintiffs do not allege plausibly that Defendant is
7

engaged in the business of collecting or soliciting consumer
debt claims.

Plaintiffs’ other allegations fare no better.

The

complaint’s recitation of the elements of various insurance laws
that Defendant allegedly violated are not enough to survive a
motion to dismiss, and it is not clear how, even if plausible,
these allegations would lead to liability under the MCDCA.1
IV.

Conclusion
For the foregoing reasons, the motion to dismiss filed by

Defendant Federal Insurance Company will be granted.

A separate

order will follow.

/s/
DEBORAH K. CHASANOW
United States District Judge

1

Defendant also argues that res judicata bars Plaintiffs’
claims inasmuch as they mount a collateral attack on a state
court judgment. (ECF No. 6, at 4-6). This may be true for some
of the damages sought by Plaintiff.
It is not necessary,
however, to consider this question in light of Plaintiffs’
failure to state a claim under the MCDCA.
8