Martin et al v. Trott Law P.C. et al
OPINION AND ORDER Granting in Part and Denying in Part Plaintiffs' 55 Motion for Judgment on the Pleadings or to Strike Certain Affirmative Defenses, and Denying Defendant David Trott's 89 Motion to Dismiss or for Summary Judgment. Signed by District Judge David M. Lawson. (SPin)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
BRIAN J. MARTIN, YAHMI NUNDLEY,
and KATHLEEN CADEAU,
Case Number 15-12838
Honorable David M. Lawson
TROTT LAW, P.C. and DAVID A. TROTT,
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART
PLAINTIFFS’ MOTION FOR JUDGMENT ON THE PLEADINGS OR TO STRIKE
CERTAIN AFFIRMATIVE DEFENSES, AND DENYING DEFENDANT
DAVID TROTT’S MOTION TO DISMISS OR FOR SUMMARY JUDGMENT
This second round of dispositive motions deals with the plaintiffs’ second amended
complaint and the defendants’ answers and affirmative defenses to it. Plaintiffs Brian Martin,
Yahmi Nundley, and Kathleen Cadeau, as members of a putative class, allege that the defendants
violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the
Michigan Regulation of Collection Practices Act (RCPA), Mich. Comp. Laws § 445.251, by sending
certain letters to these consumers in an effort to foreclose their residential mortgages. The facts of
the case are discussed at length in the Court’s opinion adjudicating the first round of motions.
Martin v. Trott Law, P.C., 198 F. Supp. 3d 794, 797-801 (E.D. Mich. 2016). They will not be
The plaintiffs have filed a motion for judgment on the pleadings or to strike, directed at
various affirmative defenses asserted by defendants Trott Law, P.C. and David Trott in their
respective answers to the second amended complaint. Defendant David Trott has filed a motion to
dismiss or for summary judgment arguing that the Court does not have subject matter jurisdiction
under the Class Action Fairness Act, 28 U.S.C. § 1332(d), and the plaintiffs lack standing to pursue
claims against him individually. For the reasons that follow, the plaintiffs’ motion will be granted
in part and denied in part. Defendant Trott’s motion will be denied.
I. Plaintiffs’ Motion to Strike or for Judgment on the Pleadings
The plaintiffs argue that the defendants’ recitals of various pro forma or vestigial affirmative
defenses in their answers to the second amended complaint are either defective as a matter of law,
based on the Court’s previous ruling on their motions to dismiss, or fail to disclose any discernible
factual basis for the defenses. They contend that the defenses of “failure to state a claim,” “statute
of limitations,” and that the defendants are not “regulated persons” under state law are precluded by
the Court’s rulings that the surviving claims in the complaint plausibly allege actionable violations
of state and federal law, that those claims are timely, and that the defendants’ behavior is controlled
by the pertinent statutes. The plaintiffs contend that the bare recitations of putative defenses
premised on estoppel, laches, consent, unclean hands, “bona fide error,” and lack of intent, all are
lacking any factual support, and have no apparent application to any of the circumstances so far
disclosed by the record. The plaintiffs assert that exploration of these vestigial and unfounded
defenses only will complicate and prolong discovery in the case, for no apparent productive purpose.
In responding to a complaint, a defendant generally must “state in short and plain terms its
defenses to each claim asserted against it.” Fed. R. Civ. P. 8(b)(1)(A). Avoidance defenses must
be stated affirmatively, and the rules furnish a non-exhaustive list of certain specific affirmative
defenses that must be raised in the answer. Fed. R. Civ. P. 8(c)(1). Those include the defenses of
estoppel, laches, and the statute of limitations. Ibid.
The plaintiffs’ motion is based alternatively on Rule 12(c) and Rule 12(f). A motion for
judgment on the pleadings under Federal Rule of Civil Procedure 12(c) applies the same standards
that govern motions to dismiss under Rule 12(b)(6). See Fed. R. Civ. P. 12(c); Vickers v. Fairfield
Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12
(6th Cir. 2001). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter
of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken
as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod,
988 F.2d 635, 638 (6th Cir. 1993)).
Under Rule 12(f), on the other hand, a court may “strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).
Although the Sixth Circuit has not addressed the subject, the rigorous pleading rules applicable to
complaints as outlined in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v.
Iqbal, 556 U.S. 662 (2009), generally do not apply to pleading affirmative defenses. See The Odd
State of Twiqbal Plausibility in Pleading Affirmative Defenses, 70 Wash & Lee L. Rev. 1573,
1602-05 (2013); see also Rosul v. Klockemann, No. 15-00996, 2015 WL 5233187, at *6 (N.D. Ohio
Sept. 8, 2015). “An affirmative defense may be pleaded in general terms and will be held to be
sufficient . . . as long as it gives plaintiff fair notice of the nature of the defense.” 5 Wright & Miller,
Federal Practice and Procedure § 1274. However, “[i]n alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
It appears that Rule 12(f) is more suited to a challenge to the sufficiency of affirmative
defenses. “A motion to strike should be granted if ‘it appears to a certainty that plaintiffs would
succeed despite any state of the facts which could be proved in support of the defense and are
inferable from the pleadings.’” Operating Engineers Local 324 Health Care Plan v. G & W Const.
Co., 783 F.3d 1045, 1050 (6th Cir. 2015) (quoting Williams v. Jader Fuel Co., 944 F.2d 1388, 1400
(7th Cir. 1991)).
A. Failure to State a Claim
Defendant Trott Law has agreed to withdraw this defense. Defendant David Trott has not
done so. However, the Court’s prior opinion on the defendants’ respective motions to dismiss has
settled the question whether that pleading adequately alleges plausible claims for relief under the
surviving counts. That defense, therefore, will be struck.
B. Statute of Limitations
The plaintiffs correctly point out that the Court previously held that the surviving counts of
the complaint allege claims that, at least in some part, describe conduct within the relevant limitation
periods. However, the scope of the plaintiff class has yet to be defined, and the particulars of the
defendants’ respective conduct, although alleged in some detail in the complaint, have yet to be fully
explored through discovery. The parties have not yet stipulated to a time frame for the class
definition, and it appears possible that at least some of the conduct potentially at issue in the case
may have occurred before the earliest possible date for the commencement of that time frame (e.g.,
defendant David Trott asserts that the composition of the original version of the letter templates at
issue occurred in 2007).
Of course, the fact that the defendants first may have conceived some of the particulars of
their allegedly deceptive dunning letters outside the limitations period does not absolve them from
liability if they personally were involved in the ongoing use of those forms during more recent years.
Also, there may be a dispute as to when the statute of limitations began to run. But the temporal
scope of the potential liability in the case has not yet been fixed, and the determination of what
conduct lies within and outside the relevant limitations period is not one amenable to resolution on
the bare pleadings, without the benefit of a factual record to establish who did what, and when, and
what were the results of their actions. The “statute of limitations” defense therefore may yet be
pertinent to the decision of issues remaining in the case. At this early stage of the proceedings, it
does not “appear to a certainty” that the plaintiffs would succeed in defeating every conceivable
nuance of the limitations defense “despite any state of the facts which could be proved in support
of the defense and are inferable from the pleadings.” Operating Engineers, 783 F.3d at 1050. The
Court will deny the plaintiffs’ motion with respect to the statute of limitations defense.
C. “Regulated Person”
This affirmative defense is defective as a matter of law as pleaded by both defendants,
because it purports to put at issue the question whether David Trott and his law firm qualify as
“regulated persons” under Michigan state law. However, the defendants’ arguments in their briefing
merely regurgitate positions previously (and repeatedly) advanced in their several earlier motions,
which the Court’s previous opinion addressed directly:
The defendants insist that neither David Trott nor his law firm qualify as “regulated
persons” subject to the prohibitions of the Michigan RCPA because the firm is a
“collection agency” exempted from regulation under the Act, and neither he nor his
firm acted “in [their] own name” when communicating with the plaintiffs and
attempting to collect their debts. Those arguments are non-starters. The question
has not squarely been addressed by either the Sixth Circuit or the Michigan state
appellate courts, but every judge in this district that has confronted the question has
held that a “law firm and its employees ‘fit squarely within the definition of a
regulated person’ under the MCPA” regardless of whether the firm’s collection
activities were carried out “in its own name” or on behalf of its clients.
Martin, 198 F. Supp. 3d at 811 (collecting cases).
In his response, David Trott relies solely on the Court’s analysis on following pages of the
opinion, which he contends “left open the question” whether he is a “regulated person” under state
law. But the section of the opinion on which he relies did not address the “regulated person”
concept under the RCPA. Instead, the Court there separately addressed his argument that he is not
a “debt collector” as defined under the FDCPA, based on his premise that he did not personally
compose, sign, or mail the offending letters. See id. at 811-12. The Court concluded that “the
allegations that Trott personally drafted, approved, and directed the use of the form letters or
‘templates’ at issue in this case are not ‘legal conclusions,’” but instead are “facts that may be
proven, or not, depending on the evidence that the plaintiffs ultimately may present.” And it found
that, if proven, those facts sufficiently would establish Trott’s personal involvement in the debt
collection activities at issue for him to be found liable under controlling circuit law. E.g., Kistner
v. Law Offices of Michael P. Margelefsky, LLC, 518 F.3d 433, 440 (6th Cir. 2008).
Trott has not offered any other factual or legal basis for his position that the Court “left open”
any question regarding his status as a “regulated person” under state law. And the Court’s opinion
did not leave open that question; it expressly rejected both of the defendants’ positions that they
were exempt from regulation under the pertinent state law as “non-starters.” Because the defendants
cannot succeed on this defense, the Court will grant the plaintiffs’ motion to strike it.
The plaintiffs argue that this defense should be struck because the defendants’ intent is not
an element of a claim under either the FDCPA or RCPA. On one point, the plaintiffs are correct.
“Under the FDCPA, a plaintiff does not need to prove knowledge or intent to establish liability, nor
must he show actual damages, which ‘places the risk of penalties on the debt collector that engages
in activities which are not entirely lawful, rather than exposing consumers to unlawful debt-collector
behavior without a possibility for relief.’” Wise v. Zwicker & Assocs., P.C., 780 F.3d 710, 713 (6th
Cir. 2015) (citing Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 449 (6th Cir. 2014)).
“In other words, if a debt collector seeks fees to which it is not entitled, it has committed a prima
facie violation of the Act, even if there was no clear prior judicial statement that it was not entitled
to collect the fees.” Ibid.
Moreover, even if intent were an element, a defendant need not plead affirmatively that an
essential element of a plaintiff’s claim is lacking. See Fed. R. Civ. P. 8(c)(1) (requiring only that
“a party must affirmatively state any avoidance or affirmative defense”).
However, the FDCPA states that whether the conduct in question is “intentional” should be
weighed when assessing the extent of damages. 15 U.S.C. § 1692k(b)(1) (“In determining the
amount of liability . . ., the court shall consider . . . the extent to which such noncompliance was
intentional . . . .”). In addition, intent is relevant to the award of statutory damages, because the
statute allows the Court to exercise its discretion in awarding “such additional damages as the court
may allow, but not exceeding $1,000,” for each named plaintiff, and “such [further] amount as the
court may allow for all other class members, without regard to a minimum individual recovery, not
to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector.” 15 U.S.C.
Although proof of intent may well be an element of the plaintiffs’ damages presentation, the
defendants are prudent in informing the plaintiffs of their intention to offer evidence in avoidance
of statutory damages. The Court, therefore, will deny the plaintiffs’ motion to strike this affirmative
E. Bona Fide Error
The FDCPA states that a “debt collector may not be held liable in any action brought under
[this Act] if the debt collector shows by a preponderance of evidence that the violation was not
intentional and resulted from a bona fide error notwithstanding the maintenance of procedures
reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c). “Mistake” is an appropriate
affirmative defense to an FDCPA claim.
The plaintiffs argue that the defendants have not pleaded sufficient facts to support this
defense, and that it appears that the focus is on a mistake of law, which is not a defense to an
FDCPA claim. “Notably, in Jerman v. Carlisle, 559 U.S. 573 (2010), the Supreme Court held that
mistakes of law regarding the FDCPA itself constitute violations of the Act for which a
debt-collector attorney may not invoke the Act’s bona fide error defense.” Wise, 780 F.3d at 713
(citing Jerman, 559 U.S. at 604-05; 15 U.S.C. § 1692k(c)). “The Supreme Court declined to address
whether the defense is available for mistakes of law other than the FDCPA itself, but the discussion
of the affirmative defense makes clear that mistakes of state law can give rise to liability.” Ibid.
(citing Jerman, 559 U.S. at 580 n.4).
When pleading this defense, Rule 9(b) requires that “a party must state with particularity the
circumstances constituting . . . mistake.” Here, however, the defendants have articulated some set
of facts on which it appears they could prevail, at least as to some of the claims, by some plaintiffs,
that ultimately may be involved in the case. The plaintiffs contend that the sending of the allegedly
deceptive letters could not be found to be a result of “bona fide error” if the jury concludes that the
“least sophisticated consumer” would have been confused by the wording of the letters, and where
it is essentially undisputed that the defendants intentionally caused the letters to be composed and
mailed to class members. However, the defendants have taken the position that, at least as to the
“attorney letterhead” claims, if any of the letters were not, in fact, “meaningfully reviewed” by an
attorney before they were sent, then that lack of review was contrary to their established policies,
and occurred despite diligent efforts to enforce those policies. If they can support that position with
adequate evidence, as to some or all of the letters that the evidence may establish were not in fact
“meaningfully reviewed” by any lawyer, then they may be able to obtain some relief on their “bona
fide error” defense.
Although the defendants have offered little in the way of positive evidence to sustain their
present position, the plaintiffs have not, at this early stage of the case, shown that it “appears to a
certainty” that the defendants will be categorically unable to support any permutation of this
affirmative defense on any conceivable “state of the facts which could be proved in support of the
defense and are inferable from the pleadings.” Operating Engineers, 783 F.3d at 1050. The motion
to strike this defense will be denied.
F. No Actual Damages
The plaintiffs correctly point out that they are not required either to plead or to prove that
they suffered any “actual damages” in order to establish liability under the FDCPA. And, as
discussed below, the absence of any pleading of pecuniary loss also does not deprive either
individual plaintiff of standing to pursue their claims. However, the statute plainly allows for the
award of actual damages, if any have occurred, and, notwithstanding that the named plaintiffs have
not suffered any, other potential class member may have. The assertion that no actual damages were
incurred (by these plaintiffs, or perhaps by any members of the putative class) plainly is relevant to
the ultimate calculation of any damages award, which may include both actual damages and
“statutory damages” of up to $1,000 for each individual plaintiff. The motion to strike this defense
will be denied.
Defendant Trott Law has agreed to withdraw this affirmative defense. Defendant Trott
contends that plaintiff Martin is well aware of the basis of the “estoppel” defense, which is premised
on Martin’s prior lawsuit against Bank of America. Trott asserts that the existence of that previous
lawsuit bars Martin from “relitigating” the FDCPA claims at issue in this case, although he does not
discuss any of the particulars of the case, or explain how, exactly, the elements of claim or issue
preclusion would be satisfied with respect to any issues that he believes were raised or decided in
that earlier case.
The doctrine of res judicata, also know as claim preclusion, “instructs that a final judgment
on the merits ‘foreclos[es] successive litigation of the very same claim.’” Bravo-Fernandez v.
United States, --- U.S. ---, 137 S. Ct. 352, 357 (2016) (quoting New Hampshire v. Maine, 532 U.S.
742, 748 (2001)). “The allied doctrine of issue preclusion[, also known as collateral estoppel,]
ordinarily bars relitigation of an issue of fact or law raised and necessarily resolved by a prior
judgment.” Id. at 358.
The boilerplate recitation of this defense is not adequate to give that plaintiff fair notice of
the nature of the defense. Defendant Trott vaguely alludes in his brief to litigation between Martin
and Bank of America, and he asserts that the earlier litigation occurred after Trott Law, P.C. notified
Martin that the firm “represented” the Bank. But he has not identified any particulars of the time
frame or forum of that litigation, and he does not refute the plaintiffs’ assertion that Trott and his
law firm were not named as parties in that earlier case. In any event, the previous lawsuit
presumably concerned the foreclosure (or attempt to foreclose, if one was made) of Martin’s
residence, and, if that is true, then it conclusively would have resolved nothing more or less than the
right to possession of the property. Trott has not asserted that the Bank was in any way involved
in the creation or sending of the dunning letters at issue here, beyond retaining Trott and his law firm
for the purpose of sending the letters, and presumably supplying borrower contact information to
facilitate that process. There is, therefore, no readily conceivable set of facts on which Trott could
prevail on any claim that the issues relating to his law firm’s handling of the communications
through those letters ever conclusively were decided by a judgment of any other court, in any prior
The Court will strike this defense.
Defendant Trott Law has agreed to withdraw this defense. Defendant David Trott stands by
his assertion of it, relying on state court decisions for the proposition that the equitable doctrine of
laches may in some cases apply to bar claims brought within the statutory limitations period.
“‘Laches consists of two elements: (1) unreasonable delay in asserting one’s rights; and (2)
a resulting prejudice to the defending party.’” Operating Engineers, 783 F.3d at 1053 (quoting
Brown-Graves Co. v. Cent. States, Se. & Sw. Areas Pension Fund, 206 F.3d 680, 684 (6th Cir.
2000)). The Sixth Circuit “recognize[s] a strong presumption against asserting a laches defense to
shorten a statute of limitations,” and has “cautioned that only rarely might a laches defense bar relief
before the applicable statute of limitations has run.” Id. at 1054 (citing Chirco v. Crosswinds
Communities, Inc., 474 F.3d 227, 233 (6th Cir. 2007); Tandy Corp. v. Malone & Hyde, Inc., 769
F.2d 362, 365 (6th Cir. 1985); Herman Miller, Inc. v. Palazzetti Imps. & Exps., Inc., 270 F.3d 298,
321 (6th Cir. 2001)). “Recently, the Supreme Court held that, where Congress has established a
statute of limitations (such as the three-year limitations period in the Copyright Act), laches may not
be invoked to bar damages relief if the action was brought within the limitations period.” Ibid.
(citing Petrella v. Metro-Goldwyn-Mayer, Inc., --- U.S. ---, 134 S. Ct. 1962, 1972-74 (2014)).
“Laches, the Court explained, ‘is a defense developed by courts of equity; its principal application
was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time
limitation.’” Ibid. (quoting Petrella, 134 S. Ct. at 1973).
Defendant Trott has made no effort to establish either that the plaintiffs indulged in
“inexcusable delay” in filing their complaint, or that he was in any way “prejudiced” by any such
supposed delay. He offers nothing to rebut the strong presumption that prevails in this circuit
“against asserting a laches defense to shorten a statute of limitations,” and he has made no effort to
explain how this case is one of those rare cases in which “a laches defense bar[s] relief before the
applicable statute of limitations has run.” Operating Engineers, 783 F.3d at 1054.
The only authority that defendant Trott cites to sustain his “laches” defense is Tenneco Inc.
v. Amerisure Mut. Ins. Co., 281 Mich. App. 429, 761 N.W.2d 846 (2008), which he relies upon for
the proposition that “laches may bar a legal claim even if the statutory period of limitations has not
yet expired.” 281 Mich. App. at 457, 761 N.W.2d at 864. But Trott ignores the requirement, which
the Tenneco court explicitly recognized, that “[f]or laches to apply, inexcusable delay in bringing
suit must have resulted in prejudice.” Ibid. Here, Trott has made no attempt to explain either how
a one- to two-year delay within a six-year limitations period constituted “inexcusable delay,” or how
he was prejudiced by any such delay.
Moreover, Tenneco readily is distinguishable on the facts, because there the court of appeals
found that the plaintiff insured had made no attempt ever to notify its insurer of the alleged breach,
and that it filed suit for an alleged failure to defend the insured in lawsuits that had been concluded
by the plaintiff’s entry into settlements at times well outside the relevant limitations period. As the
court noted “all events giving rise to [the defendant insurer’s] alleged duties of performance with
respect to defending plaintiff against environmental ‘suits’ or indemnifying plaintiff for property
damage claims plaintiff became legally obligated to pay, except in one instance, occurred more than
six years before this lawsuit was filed in June 2003.” Tenneco, 281 Mich. App. at 461, 761 N.W.2d
at 866 (emphasis added). The Tenneco court concluded that, notwithstanding the plaintiff insured’s
prolonged litigation of and eventual execution of settlements in the subject lawsuits, it never had
notified the insurer of the cases or made any demand for performance of the contractual duty to
defend. The court therefore found that the “plaintiff’s breach of the notice condition combined with
an inexcusable delay of longer than the statutory limitations period in filing suit created the
‘exceptional circumstances’ or ‘compelling equities’ for laches to bar this claim,” and it held that
the plaintiff’s claims were “time-barred either by the statute of limitations or by laches.” Tenneco,
281 Mich. App. at 458-462, 761 N.W.2d at 865-67 (emphasis added).
In this case, the complaint was filed well within the applicable statutory limitations period,
and the defendant has not pointed to any information in the record — or any evidence that
reasonably could be expected to result from development of it — to sustain his position that the
doctrine of laches could have any conceivable application to any claims in the case.
I. Right to a Jury Trial
The parties appear to agree that this is not an affirmative defense subject to a motion to strike
under Rule 12(f). It also is not an issue of fact or law pertinent to any of the plaintiffs’ claims that
appropriately may be presented via a motion under Rule 12(c) or decided on the pleadings at this
stage of the case. The question more appropriately may be raised by the parties as part of the final
pretrial proceedings in the case, after all relevant information about the putative plaintiff class and
the scope of their claims and defenses has been disclosed.
II. Motion to Dismiss or for Summary Judgment
Defendant David Trott argues that all of the claims brought against him in the second
amended complaint by individual plaintiffs Brian Martin, Yahmi Nundley, and Kathleen Cadeau
must be dismissed because (1) the plaintiffs lack Article III standing to pursue their claims, since
they have merely alleged “procedural violations” of the FDCPA and RCPA, and their deposition
testimony establishes that they have not suffered any “actual damages” as a result of the alleged
nominal statutory transgressions; (2) the plaintiffs lack “statutory standing” to pursue any claims
under the RCPA, because they do not allege, and have not testified, that they suffered any “injury,
loss, or damage,” and they are not persons “from whom money was collected” as a result of any
alleged deceptive practices by defendant Trott, see Mich. Comp. Laws § 445.257(1); (3) the
plaintiffs have failed to put forth any support for their assertions that the Court has jurisdiction under
the Class Action Fairness Act, because they admitted at their depositions that “they do not know
anyone else who received a complained-of letter, much less who moved out of Michigan”; and (4)
the Court should decline to exercise supplemental jurisdiction over the state-law claims, because the
issues and potential recovery sought on those claims heavily predominate over the questions and
amounts at issue on the FDCPA claims, where the plaintiffs have valued their collective FDCPA
claims at $500,000, and their state law class claims at more than $5 million.
Federal Rule of Civil Procedure 12(b)(1) “provides for the dismissal of an action for lack of
subject matter jurisdiction.” Cartwright v. Garner, 751 F.3d 752, 759 (6th Cir. 2014). “A Rule
12(b)(1) motion for lack of subject matter jurisdiction can challenge the sufficiency of the pleading
itself (facial attack) or the factual existence of subject matter jurisdiction (factual attack).” Ibid.
(citing United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994)). “A facial attack goes to the
question of whether the plaintiff has alleged a basis for subject matter jurisdiction, and the court
takes the allegations of the complaint as true for purposes of Rule 12(b)(1) analysis,” but “[a] factual
attack challenges the factual existence of subject matter jurisdiction.” Ibid.
“In the case of a factual attack, a court has broad discretion with respect to what evidence
to consider in deciding whether subject matter jurisdiction exists, including evidence outside of the
pleadings, and has the power to weigh the evidence and determine the effect of that evidence on the
court’s authority to hear the case.” Id. at 759-60. The “[p]laintiff bears the burden of establishing
that subject matter jurisdiction exists.” Id. at 760 (citing DLX, Inc. v. Commonwealth of Kentucky,
381 F.3d 511, 516 (6th Cir. 2004)).
A. Subject Matter Jurisdiction Under CAFA
In The Class Action Fairness Act, Congress “loosened the requirements for diversity
jurisdiction, authorizing federal district courts to hear a ‘class action’ if the class has more than 100
members, the parties are minimally diverse, and the matter in controversy exceeds the sum or value
of $5,000,000.” Mason v. Lockwood, Andrews & Newnam, P.C., 842 F.3d 383, 386 (6th Cir. 2016)
(quoting Mississippi ex rel. Hood v. AU Optronics Corp., --- U.S. ---, 134 S. Ct. 736, 739 (2014);
Standard Fire Ins. Co. v. Knowles, --- U.S. ---, 133 S. Ct. 1345, 1348 (2013); 28 U.S.C. §
1332(d)(2), (d)(5)(B)). Defendant Trott does not dispute that this case involves a potential class of
more than 100 members, that some potential class members’ citizenship is diverse from the
defendants’, and the amount in controversy exceeds the jurisdictional threshold. Instead, he points
to the “home state exception” and contends that it applies here to deprive the Court of subject matter
Under that exception, “[a] district court shall decline to exercise jurisdiction [over] a class
action in which . . . two-thirds or more of the members of all proposed plaintiff classes in the
aggregate, and the primary defendants, are citizens of the State in which the action was originally
filed.” 28 U.S.C. § 1332(d)(4)(B). That statutory language, however, does not deprive the Court
of jurisdiction. Clark v. Lender Processing Servs., 562 F. App’x 460, 465 (6th Cir. 2014) (“The
statute speaks only of a district court’s declining jurisdiction if the exceptions apply. This language
clearly indicates that the exceptions do not deprive the court of jurisdiction it otherwise possesses
because a court could not ‘decline’ jurisdiction that it never had in the first place.”). Instead, that
exception “require[s] a court to decline jurisdiction [when] ‘two-thirds or more of the members of
all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State
in which the action was originally filed.’” Ibid. (quoting 28 U.S.C. § 1332(d)(4)(B)).
Trott’s argument that the home state exception applies is based on deposition testimony of
the named plaintiffs expressing ignorance of the number of letter recipients who have moved out of
the state, and published census data that tracks migration of the general population in and out of
various states. That evidence is hardly compelling. The party seeking relief under one of the
enumerated exceptions in section 1332(d)(4) “bears the burden of establishing each element of the
exception by a preponderance of the evidence.” Mason v. Lockwood, Andrews & Newnam, P.C.,
842 F.3d 383, 388 (6th Cir. 2016). Here, Trott has pointed to nothing beyond this speculation and
general census trends to support his assertion that more than two-thirds of the prospective members
of the (as yet undefined) plaintiff classes presently are citizens of Michigan. That may be true, or
it may not be. As yet, the record contains no actual evidence to suggest even a reasonable inference
that the circumstances must be either way.
Moreover, Trott’s assertion that the Court has no jurisdiction is inconsistent with the position
he has taken earlier in the case. Previously, he invoked the authority of the Court to adjudicate the
dispute when he moved under Ruled 12(b)(6) to exercise its jurisdiction, grant his dispositive
motion, and render judgment as a matter of law in his favor on the merits of those claims. There is
no general bar to parties taking inconsistent positions in a lawsuit, but a party that wants a federal
court to decline jurisdiction under one of CAFA’s exceptions must timely assert his objection, and
if he does not do so, then he may not raise it later. See Clark, 562 F. App’x at 465 (“Because the
exceptions are not jurisdictional and the plaintiffs did not alert the district court of their potential
applicability, this court will not consider whether they should have applied on appeal.”). “[M]otions
to dismiss under CAFA’s home state exception must  be made within a reasonable time.” Gold
v. N.Y. Life Ins. Co., 730 F.3d 137, 142 (2d Cir. 2013). “While what is reasonable will vary
according to the relevant facts, it is preferable that such motions be made at the earliest practicable
In this case, Trott contends that he had “no reason to suspect” that there was a basis for his
motion to dismiss before the individual plaintiffs’ depositions. But he has not pointed to any
testimony by Martin or Nundley that disclosed any knowledge about the present citizenship of any
other class members. Moreover, he certainly had access over the past two years to ample
information — from the records of his former law firm that sent the many thousands of dunning
letters involved in this case — from which to infer basic facts about the state of residence of
potential class members at least as of the time when his firm sent the letters. The only other
information on which he relies is derived from published census data on rates of migration, which
certainly also were available to him. See Gold, 730 F.3d at 142 (“We note at the outset that we are
skeptical of the contention that nearly three years is a reasonable time for an employer to determine
where its sales force lives, particularly where, as here, the sales force in question is limited to those
who worked in the very ‘home state’ at issue.”). Trott has not explained any reason why he could
not have timely raised, at the very outset of this case, the same arguments that he now makes, based
on the same facts on which he now relies.
There is no basis in the present record to apply CAFA’s home state exception based on
defendant Trott’s tardy request.
B. Supplemental Jurisdiction
Defendant Trott also asks the Court to decline to exercise supplemental jurisdiction over the
plaintiffs’ state law claims brought under Michigan’s Regulation of Collection Practices Act,
because the main thrust of the case has to do with the FDCPA, which heavily predominates. Under
28 U.S.C. § 1367(c), the district court may decline to exercise supplemental jurisdiction over state
law claims under certain circumstances. That statute generally is invoked when the state law claims
are brought in this court as pendant to federal question claims, which have been dismissed. See
Weeks v. Portage County Executive Offices, 235 F.3d 275, 280 (6th Cir. 2000) (observing that
section 1367(c) “permit[s] the district court to decline to exercise supplemental jurisdiction when
that court has dismissed all of the claims over which it has original jurisdiction”). It has no
application, however, when state law claims are brought in federal court under diversity jurisdiction.
Foster v. Fed. Exp. Corp., No. 04-10325, 2005 WL 3369484, at *2 (E.D. Mich. Dec. 12, 2005)
(stating that “the Court may not remand [or dismiss] the state law claims after the federal claim is
dismissed because it has an obligation to exercise jurisdiction independently invoked by the
defendant on the basis of diversity of citizenship”) (citing Colorado River Water Conservation Dist.
v. United States, 424 U.S. 800, 817 (1976)).
In this case, the plaintiffs invoked the Court’s diversity jurisdiction under CAFA. Even if
the home state exception applied, there would be no basis to dismiss the state law claims under
section 1367(c), because that exception does not deprive the Court of subject matter jurisdiction.
Clark, 562 F. App’x at 465 (“Because the applicability of the home-state or local-controversy did
not deprive the district court of jurisdiction under the Class Action Fairness Act, it had federal
jurisdiction and did not need to rely on supplemental jurisdiction to consider the plaintiffs’ [state law
consumer protection act] claims.”).
C. Article III Standing
Defendant Trott insists that the plaintiffs have no standing to pursue their statutory claims
against him because they have suffered no actual damages and they have not established a concrete
injury. However, the three named plaintiffs adequately have alleged facts to establish that they have
standing to pursue their individual claims against David Trott for violation of their rights under
FDCPA and RCPA, and any testimony by them to the effect that they did not suffer any direct
pecuniary loss (“actual damages”) does not vitiate that standing.
“[T]he ‘irreducible constitutional minimum’ of standing consists of three elements.” Spokeo,
Inc. v. Robins, --- U.S. ---, 136 S. Ct. 1540, 1547 (2016) (quoting Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992)). “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly
traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a
favorable judicial decision.” Ibid.
“To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a
legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not
conjectural or hypothetical.’” Id. at 1548 (quoting Lujan, 504 U.S. at 560). For an injury to be
‘particularized,’ it ‘must affect the plaintiff in a personal and individual way.’” Ibid. “A ‘concrete’
injury must be ‘de facto’; that is, it must actually exist.” Ibid. “Concreteness, therefore, is quite
different from particularization.” Ibid. “‘Concrete’ is not, however, necessarily synonymous with
‘tangible.’” Id. at 1549.
The plaintiffs’ allegations and the information so far presented in the record satisfies all of
the elements. First, it is undisputed that the defendants sent the dunning letters in question to the
named plaintiffs. Therefore, if the communications produced an “injury in fact,” that injury
certainly is “fairly traceable to the challenged conduct of the defendant[s].” Second, there is no
question that the FDCPA provides a remedy likely to redress that injury, where it authorizes an
award of any “actual damages,” plus an amount of “statutory damages,” up to $1,000, in an amount
to be determined by the Court, based on consideration of several factors bearing on the culpability
of the defendant’s conduct under the circumstances. 15 U.S.C. § 1692k(a), (b).
Third, the undisputed facts here adequately establish that the injury alleged was
“particularized” to the named individual plaintiffs. Here, there is no dispute that the individual
plaintiffs received the letters in question. The injury, therefore, if it was sufficiently “concrete,”
indisputably was “particularized” to them. The facts of this case are distinguishable from those
where courts have found a lack of particularity. For instance, in Soehnlen v. Fleet Owners Ins.
Fund, 844 F.3d 576 (6th Cir. 2016), the Sixth Circuit concluded that the plaintiffs lacked standing
to pursue claims that their ERISA-governed benefit plan imposed certain unlawful restrictions on
benefit payments, because they never alleged that they personally had been affected in any way by
the benefit caps. It was not sufficient to allege that absent class members suffered an injury.
Soehnlen, 844 F.3d at 582 (holding that the named plaintiffs “‘cannot acquire such standing merely
by virtue of bringing a class action’”) (quoting Fallick v. Nationwide Mut. Ins. Co., 162 F.3d 410,
423 (6th Cir. 1998)). In this case, by contrast, the plaintiffs specifically assert, and it is undisputed,
that the allegedly misleading dunning letters were mailed and directed particularly to them, and
concerned the status of their individual legal rights and home mortgage debts.
Finally, the facts alleged and so far disclosed by the record adequately establish that the
named plaintiffs’ injuries were sufficiently “concrete” to confer standing.
Contrary to the
defendants’ position, the fact that the plaintiffs do not allege or seek to recover any “actual damages”
(i.e., direct pecuniary loss) resulting from their receipt of the dunning letters does not defeat that
conclusion. As noted above, “[a] ‘concrete’ injury must be ‘de facto’; that is, it must actually exist.”
Spokeo, 136 S. Ct. at 1548. But “‘[c]oncrete’ is not . . . necessarily synonymous with ‘tangible.’
Although tangible injuries are perhaps easier to recognize . . . intangible injuries can nevertheless
be concrete.” Id. at 1549.
The FDCPA confers a statutory right on the plaintiffs: The right, when dealing with the
defendant as a debt collector, to receive from him nothing more — and nothing less — than accurate
and fairly presented information regarding the extent of their debts, their legal rights, and the status
of any legal proceedings related to collection of those debts. When it enacted the statute, “‘Congress
[exercised its] power to define injuries and articulate chains of causation that will give rise to a case
or controversy where none existed before.’” Spokeo, 136 S. Ct. at 1549 (quoting Lujan, 504 U.S.
at 580 (Kennedy, J., concurring)). As the defendant correctly points out, “Article III standing
requires a concrete injury even in the context of a statutory violation,” and, therefore, a plaintiff
cannot merely “allege a bare procedural violation, divorced from any concrete harm, and satisfy the
injury-in-fact requirement of Article III.” Ibid. But “[t]his does not mean . . . that the risk of real
harm cannot satisfy the requirement of concreteness.” Ibid. (emphasis added). “For example, the
law has long permitted recovery by certain tort victims even if their harms may be difficult to prove
or measure.” (citing Restatement (First) of Torts §§ 569 (libel), 570 (slander per se) (1938)). “Just
as the common law permitted suit in such instances, the violation of a procedural right granted by
statute can be sufficient in some circumstances to constitute injury in fact.” Ibid. “In other words,
a plaintiff in such a case need not allege any additional harm beyond the one Congress has
identified.” Ibid. The pertinent inquiry is “whether the particular procedural violations alleged in
[such a] case entail a degree of risk sufficient to meet the concreteness requirement.” Id. at 1550.
In this case, the plaintiffs adequately have alleged and seek to recover for a distinct injury
to their statutory right: They contend that they were deceived by the information presented to them
by the defendants, and misled about the extent of their debts and the status of legal proceedings
related to collection of them. The defendant’s alleged prevarications — or, alternatively, his
abstinence from truth-telling where truth is compelled by the law — is sufficient in itself to
constitute a “concrete” injury to the plaintiffs’ rights. See Federal Election Comm’n v. Akins, 524
U.S. 11, 20-25 (1998) (holding that a group of voters’ “inability to obtain information” that
Congress had decided to make public is a sufficient injury in fact to satisfy Article III); Public
Citizen v. Department of Justice, 491 U.S. 440, 449 (1989) (holding that two advocacy
organizations’ failure to obtain information subject to disclosure under the Federal Advisory
Committee Act “constitutes a sufficiently distinct injury to provide standing to sue”) (cited with
approval in Spokeo, 136 S. Ct. at 1549-50).
The Court already has held in its prior opinion that a jury reasonably could conclude that the
letters at issue in this case were objectively misleading to the “least sophisticated consumer.” There
is a readily apparent “real risk of harm” in such a situation that a debtor presented with such
deceptive communications, deprived of an accurate understanding of his situation by the defendants’
misinformation, could make decisions detrimental to his personal financial position or legal rights
that he otherwise would make, if he were fully and accurately informed. “An inherent danger posed
by harassing or deceptive collection practices is that consumers will be pressed into making
uninformed decisions about debt prioritization, which affects their daily lives.” Gillie v. Law Office
of Eric A. Jones, LLC, 785 F.3d 1091, 1097 (6th Cir.), rev’d on other grounds, Sheriff v. Gillie, 136
S. Ct. 1594 (2016); see also Lox v. CDA, Ltd., 689 F.3d 818, 827 (7th Cir. 2012) (“Whether or not
[the false statement about attorney fees] would have led [the debtor] to alter his course of action, it
would have undoubtedly been a factor in his decision-making process, and very well could have led
to a decision to pay a debt that he would have preferred to contest.”). That, of course, is exactly the
harm that Congress sought to prevent by enacting the FDCPA and prohibiting deceptive conduct and
communications by debt collectors such as the defendant. 15 U.S.C. § 1692(a) (“There is abundant
evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt
collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to
marital instability, to the loss of jobs, and to invasions of individual privacy.”); § 1692(e) (“It is the
purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure
that those debt collectors who refrain from using abusive debt collection practices are not
competitively disadvantaged, and to promote consistent State action to protect consumers against
debt collection abuses.”); Barany-Snyder v. Weiner, 539 F.3d 327, 611 (6th Cir. 2008) (citing Frey
v. Gangwish, 970 F.2d 1516, 1521 (6th Cir. 1992) (“[T]he FDCPA is ‘extraordinarily broad,’ crafted
in response to what Congress perceived to be a widespread problem.”).
As the Supreme Court explicitly recognized in Spokeo, there is no requirement in the
FDCPA, or in Article III jurisprudence, that a plaintiff must in every case allege some form of direct
pecuniary loss in order to establish a sufficiently concrete injury to support standing. “[T]he
violation of a procedural right granted by statute can be sufficient in some circumstances to
constitute injury in fact. In other words, a plaintiff in such a case need not allege any additional
harm beyond the one Congress has identified.” Spokeo, 136 S. Ct. at 1549 (emphasis added). This
is such a case, and, for all of the reasons discussed above, the injury to the plaintiffs’ statutory rights
alleged here is sufficient to make out a concrete and particularized injury. Nothing more is required.
Other courts have subscribed to this view. The Eleventh Circuit has held on similar facts that
the allegation of misleading disclosures in violation of the FDCPA was sufficient in itself to show
a concrete injury and to establish that the plaintiffs had standing to pursue their claims, regardless
of the fact that they did not seek to recover for any direct pecuniary loss resulting from the
deception. Church v. Accretive Health, Inc., 654 F. App’x 990, 994-95 (11th Cir. 2016) (“The
invasion of Church’s right to receive the disclosures is not hypothetical or uncertain; Church did not
receive information to which she alleges she was entitled. While this injury may not have resulted
in tangible economic or physical harm that courts often expect, the Supreme Court has made clear
an injury need not be tangible to be concrete.”). Similarly, in Anda v. Roosen Varchetti & Olivier,
PLLC, No. 14-295, 2016 WL 7157414 (W.D. Mich. Oct. 31, 2016), the district court denied the
defendant’s motion to dismiss premised on the same standing defect that the defendant contends
requires dismissal in this case. The court noted that “Courts following Spokeo have held that the
allegation of a failure to accurately disclose information required by the FDCPA is sufficient to
confer standing.” 2016 WL 7157414, at *5 (collecting cases; citations omitted).
This case also is distinguishable from others where the allegations made out nothing more
than a “mere procedural violation,” which did not result in any misleading or deceptive
communication. For example, in Johnston v. Midland Credit Mgmt., No. 16-437, 2017 WL 370929
(W.D. Mich. Jan. 26, 2017), the district court found that the plaintiff had failed to make out any
sufficiently concrete injury where, despite the inclusion of certain obviously counter-factual and
confusing statements in the letter, the amount of the debt stated was accurate, and the plaintiff could
not have been misled by the letter about his legal rights or obligation to pay the amount owed.
D. “Statutory” Standing
Defendant Trott also argues that the plaintiffs have failed to establish that they have
“statutory standing” under the Michigan RCPA, because they have not alleged or testified that they
suffered any “injury, loss, or damage” as a result of the defendants’ conduct. See Mich. Comp. Laws
§ 445.257(1) (“A person who suffers injury, loss, or damage, or from whom money was collected
by the use of a method, act, or practice in violation of this act may bring an action for damages or
other equitable relief.”) (emphasis added). For all of the same reasons discussed above, the plaintiffs
adequately have made out an “injury” to their statutory rights under state law, which parallel those
guaranteed under the FDCPA.
The defendant contends that the plaintiffs cannot show that they suffered an “injury”
sufficient to warrant recovery under the statute unless they can prove some form of direct pecuniary
or non-economic loss. However, in CFE Racing Products, Inc. v. BMF Wheels, Inc., 793 F.3d 571
(6th Cir. 2015), the Sixth Circuit squarely rejected the defendant’s reasoning equating “injury” or
“loss” with “actual damages,” when construing a similar requirement under the Michigan Consumer
Protection Act that a plaintiff must prove that he “suffered loss” in order to recover damages or
attorney fees for a statutory violation. See Mich. Comp. Laws § 445.911(2) (“[A] person who
suffers loss as a result of a violation of this act may bring an action to recover actual damages or
$250.00, whichever is greater, together with reasonable attorneys’ fees.”) (emphasis added). As the
Sixth Circuit observed, “the weight of authority in Michigan is contrary” to the proposition that
proving a “loss” requires a showing of “actual damages.” CFE Racing, 793 F.3d at 597. Instead,
the court of appeals concluded that the fact of the plaintiff’s “loss” conclusively was proved by the
jury’s finding that its statutory trademark rights had been violated by the defendant’s use of its
infringing mark, notwithstanding the jury’s assessment of its damages at a value of zero dollars. The
court of appeals concluded, therefore, “[c]onsistent with the interpretation that ‘loss’ incorporates
the common law concept of injury” under Michigan law, that the plaintiff was entitled to recover
both statutory damages of $250 and its reasonable attorney fees. Id. at 598.
Finally, at the tail end of his reply brief, the defendant attempts to rouse the specter of
looming “substantial questions” under state law as to whether the plaintiffs can proceed at all in a
class action litigation to recover statutory damages only under the RCPA, in the face of a provision
in a state court rule — Michigan Court Rule 3.501(A)(5) — That argument is foreclosed, however,
by well-established precedent holding that it is the federal procedural rules that govern cases in
federal courts, not their state counterparts. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins.
Co., 559 U.S. 393, 416 (2010); Am. Copper & Brass, Inc. v. Lake City Indus. Prod., Inc., 757 F.3d
540, 546 6th Cir. 2014) (“We agree with the district court’s conclusion that MCR 3.501(A)(5) does
not apply in this case.”). The Sixth Circuit noted in American Copper & Brass that “the Supreme
Court [has] held in a case involving a conflict between Rule 23 and a New York procedural rule
prohibiting class actions in cases involving a statutory penalty [that] a ‘Federal Rule governing
procedure is valid whether or not it alters the outcome of the case in a way that induces forum
shopping,’” and it “therefore reject[ed] [the defendant’s] argument that the district court erred in
declining to apply MCR 3.501(A)(5).” 757 F.3d at 546 (affirming denial of motion to dismiss class
action claims under the TCPA premised on Mich. Ct. Rule 3.501(A)(5)) (citing Shady Grove, 559
U.S. at 416).
The plaintiffs may proceed with their claims under the Michigan RCPA.
Although some of the defendants’ affirmative defenses are demonstrably insufficient, most
of them are properly raised. The Court has subject matter jurisdiction over the named plaintiffs’
claims against defendant David Trott.
Accordingly, it is ORDERED that the plaintiffs’ motion for judgment on the pleadings or
to strike certain affirmative defenses [dkt. #55] is GRANTED IN PART AND DENIED IN PART.
The following affirmative defenses raised by defendant Trott Law are stricken: failure to state a
claim; estoppel, waiver, consent, laches and/or unclean hands; regulated person. The following
affirmative defenses raised by defendant David Trott are stricken: failure to state a claim; estoppel;
laches; regulated person. The motion is DENIED in all other respects.
It is further ORDERED that the motion to dismiss or for summary judgment by defendant
David Trott [dkt. #89] is DENIED.
s/David M. Lawson
DAVID M. LAWSON
United States District Judge
Dated: July 12, 2017
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on July 12, 2017.
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