Hatfield v. Portfolio Recovery Associates, L.L.C. et al
OPINION and ORDER Granting Defendant Portfolio Recovery Associates, LLC's 21 Motion for Judgment on the Pleadings. Signed by District Judge Linda V. Parker. (RLou)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
Civil Case No. 15-14354
Honorable Linda V. Parker
ASSOCIATES, LLC, a foreign
limited liability company, and
WEBER & OLCESE, P.C., a
Michigan Professional Corporation,
OPINION AND ORDER GRANTING DEFENDANT PORTFOLIO
RECOVERY ASSOCIATES, LLC’S MOTION FOR JUDGMENT ON THE
PLEADINGS [ECF NO. 21]
This action arises from a complaint filed by Defendant Portfolio Recovery
Associates, LLC (“PRA”) and Defendant Weber & Olcese, P.C. (collectively,
“Defendants”) against Plaintiff Brenda L. Hatfield alleging defaulted debts in
Michigan state court. Shortly after the parties stipulated to a dismissal, Plaintiff filed
the complaint initiating this matter. In her complaint filed on December 15, 2015,
Plaintiff alleges two counts against PRA: (1) violation of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and (2) fraud. Presently before
the Court is Defendant PRA’s motion for judgment on the pleadings filed pursuant to
Federal Rule of Civil Procedure 12(c). The motions have been fully briefed. Finding
the facts and legal arguments sufficiently presented in the parties’ briefs, the Court is
dispensing with oral argument pursuant to Eastern District of Michigan Local Rule
7.1(f). For the reasons that follow, the Court is granting Defendant PRA’s motion.
Standard for Motion for Judgment on the Pleadings
A motion for judgment on the pleadings pursuant to Federal Rule of Civil
Procedure 12(c) is subject to the same standards of review as a Rule 12(b)(6) motion
to dismiss for failure to state a claim upon which relief can be granted. Grindstaff v.
Green, 133 F.3d 416, 421 (6th Cir. 1998). A motion to dismiss pursuant to Rule
12(b)(6) tests the legal sufficiency of the complaint. RMI Titanium Co. v.
Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). Under Federal Rule of
Civil Procedure 8(a)(2), a pleading must contain a “short and plain statement of the
claim showing that the pleader is entitled to relief.” To survive a motion to dismiss, a
complaint need not contain “detailed factual allegations,” but it must contain more
than “labels and conclusions” or “a formulaic recitation of the elements of a cause of
action . . ..” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint
does not “suffice if it tenders ‘naked assertions’ devoid of ‘further factual
enhancement.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550
U.S. at 557).
As the Supreme Court provided in Iqbal and Twombly, “[t]o survive a motion
to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’ ” Id. (quoting Twombly, 550 U.S.
at 570). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The plausibility standard
“does not impose a probability requirement at the pleading stage; it simply calls for
enough facts to raise a reasonable expectation that discovery will reveal evidence of
illegal [conduct].” Twombly, 550 U.S. at 556.
In deciding whether the plaintiff has set forth a “plausible” claim, the court
must accept the factual allegations in the complaint as true. Erickson v. Pardus, 551
U.S. 89, 94 (2007). This presumption is not applicable to legal conclusions, however.
Iqbal, 556 U.S. at 668. Therefore, “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Id. (citing
Twombly, 550 U.S. at 555).
Ordinarily, the court may not consider matters outside the pleadings when
deciding a Rule 12(b)(6) motion to dismiss. Weiner v. Klais & Co., Inc., 108 F.3d 86,
88 (6th Cir. 1997) (citing Hammond v. Baldwin, 866 F.2d 172, 175 (6th Cir. 1989)). A
court that considers such matters must first convert the motion to dismiss to one for
summary judgment. See Fed. R. Civ. P 12(d). However, “[w]hen a court is presented
with a Rule 12(b)(6) motion, it may consider the [c]omplaint and any exhibits
attached thereto, public records, items appearing in the record of the case and exhibits
attached to [the] defendant’s motion to dismiss, so long as they are referred to in the
[c]omplaint and are central to the claims contained therein.” Bassett v. Nat’l
Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). Thus, a court may take
judicial notice of “other court proceedings” without converting a motion to dismiss
into a motion for summary judgment. Buck v. Thomas M. Cooley Law Sch., 597 F.3d
812, 816 (6th Cir. 2010) (citing Winget v. J.P. Morgan Chase Bank, N.A., 537 F.3d
565, 575 (6th Cir. 2008)).
Factual and Procedural Background
According to Plaintiff’s complaint, Defendants routinely file collection lawsuits
against consumers on alleged defaulted debts. (Compl. ¶ 5.) On June 18, 2015,
Defendant PRA, through its counsel, filed a complaint against Plaintiff alleging that
she was in default on a debt. (Id.) In her answer, Plaintiff replied that Defendant
PRA could not bring its claim against her because it was an unlicensed foreign
corporation in violation of the Michigan Limited Liability Company Act (“MLLCA”),
Mich. Compl. Law § 450.5007, which governs the transaction of business within the
state. (ECF No. 1-2 at Pg ID 58.) Shortly thereafter, Plaintiff and Defendant PRA
stipulated to dismiss the prior proceeding without prejudice and costs to either party.
(ECF No. 1-4.)
On December 15, 2015, Plaintiff brought this lawsuit as a putative class action
on behalf of other Michigan consumers who were sued by Defendants for collection
of an alleged debt in Michigan. (Compl. ¶ 20.) In the complaint, Plaintiff alleges
three counts: (1) violation of the FDCPA against both Defendants; (2) violation of the
Michigan Regulation of Collection Practices Act (“MRCPA”), M.C.L. § 445.251 et
seq., against Defendant Weber & Olcese, P.C.; and (3) common law fraud against
both Defendants. (ECF No. 1 at Pg ID 6-10.) More specifically, Plaintiff alleges that
Defendants were in violation of MLLCA’s provision that requires a foreign limited
liability company transacting business in Michigan to obtain a certificate of authority.
Mich. Comp. Law § 450.5007(1). Without the certificate of authority, Plaintiff
contends that Defendants do not have the legal authority to bring actions against
Michigan consumers within the state pursuant to the FDCPA and MRCPA. (Compl.
¶¶ 14, 17-18). Because of the alleged unlawful misrepresentation of legal authority,
Plaintiff argues that Defendants “create[d] the illusion that PRA is clothed with legal
authority to lawfully and legally prosecute lawsuit in Michigan when PRA does not
and has the standing to sue in this State when it has not,” in violation of the MLLCA
and FDCPA. (Id. at ¶ 13.)
On May 31, 2016, Defendant PRA filed a motion for judgment on the
pleadings. (ECF No. 21.) Plaintiff responded on June 21, 2016, including a note that
Defendant Weber & Olcese, P.C. are no longer parties in this case.1 (ECF No. 22 at
Pg ID 147.) Defendant PRA filed a reply on July 12, 2016. (ECF No 25.)
Applicable Law and Analysis
Michigan Limited Liability Company Act
Plaintiff’s opposition brief states that Defendant Weber & Olcese, P.C. has “been
released from the case and an order of dismissal is pending.” (ECF No. 22 at Pg
ID 147.) The order of dismissal has not been filed with the Court as of this date.
Plaintiff argues that Defendants were in violation of the MLLCA by
“transacting business” without a certificate of authority in support of their FDCPA
claim.2 Defendant PRA contends that it is not transacting business in Michigan and
therefore is not required to have a certificate of authority. (ECF No. 21 at Pg ID 135.)
Plaintiff disagrees, noting that Kevin Holst, an employee of Defendant PRA, is
physically located in Michigan and therefore Defendant is “transacting business”
within the state. (ECF No. 22 at Pg ID 147.) Therefore, this issue turns on the
meaning of “transacting business.”
The MLLCA was enacted to govern the organization and regulation of limited
liability companies. M.C.L. § 450.5002 states that “[b]efore transacting business in
this state, a foreign limited liability company shall obtain a certificate of authority
from the administrator.” Id. A foreign limited liability company that is transacting
business without a certificate “shall not maintain an action, suit, or proceeding in a
court of this state until it has obtained a certificate of authority.” M.C.L. § 450.5007.
The Michigan Legislature provides guidance with a list of activities that are
“not considered to be transacting business in [Michigan].” M.C.L. § 450.5008. On
this list of activities that are not considered transacting business, the legislature
included “maintaining, defending, or settling any proceeding.” M.C.L. §
In its opposition brief, Plaintiff relies on Currier v. First Resolution Inv. Corp.,
762 F.3d 529 (6th Cir. 2014). In Currier, the Sixth Circuit indicated that a
violation of state law could be a violation of the FDCPA. Id. at 537.
A foreign limited liability company that engages in “transacting business”
within the state without a certificate of authority does not suffer an absolute bar from
filing or defending an action against a party. The Michigan Legislature provided an
opportunity for foreign limited liability companies transacting business within the
state to cure the defect of not having a certificate of authority:
An action commenced by a foreign limited liability company having no
certificate of authority shall not be dismissed if a certificate of authority
is obtained before the order of dismissal. Any order of dismissal shall be
without prejudice to the recommencement of the action, suit, or
proceeding by the foreign limited liability company after it obtains a
certificate of authority.
M.C.L. § 450.5007(2).
The Court finds that Defendant PRA’s activities within the state of Michigan
fall squarely into the plain reading of M.C.L. § 450.5008(1)(a). The basis of
Plaintiff’s claim rests with the role of Mr. Holst, Defendant PRA’s sole employee
within Michigan. (ECF No. 22 at Pg ID 147.) Plaintiff alleges that Mr. Holst’s role
as an employee “includes filing lawsuits, processing and securing judgments,”
implying that Mr. Holst’s actions do not fall within the statute’s exemption to
“transacting business.” (Id.) Plaintiff does not attempt to distinguish Mr. Holst’s role
with the language for activities excluded from the meaning of “transacting
business”—“maintaining, defending or settling any proceeding.” M.C.L. §
450.5008(1)(a). Plaintiff also fails to provide legal authority to support that the
commencement of a proceeding in Michigan qualifies as “transacting business” under
the meaning of the MLLCA. A plain reading of the statute indicates that it
encompasses Mr. Holst’s activities, and “it is neither the duty nor the privilege of the
courts to enter speculative fields in search of a different meaning.” Caminetti v.
United States, 242 U.S. 470, 490 (1917).
For these reasons, this Court concludes that Defendant PRA was not required to
have a certificate of authority because it was not engaged in “transacting business” in
“Congress enacted the FDCPA in order to eliminate ‘the use of abusive,
deceptive, and unfair debt collection practices by many debt collectors.’ ” Harvey v.
Great Seneca Fin. Corp., 453 F.3d 324, 329 (6th Cir. 2006) (quoting 15 U.S.C.
§ 1692(a)). “The statute is very broad, and was intended to remedy ‘what [Congress]
considered to be a widespread problem.’ ” Id. (quoting Frey v. Gangwish, 970 F.2d
1516, 1521 (6th Cir. 1992)). The statute proscribes certain conduct by debt collectors
and requires debt collectors to provide consumers with specific information under
certain circumstances. See 15 U.S.C. §§ 1692b-1692j.
The Sixth Circuit has adopted the “least-sophisticated-consumer” test for
analyzing whether a debt collector’s practice is deceptive. Lewis v. ACB Bus. Servs.,
Inc., 135 F.3d 389, 400 (6th Cir. 1998). This is an objective test, designed “ ‘to
ensure that the FDCPA protects all consumers, the gullible as well as the shrewd.’ ”
Fed. Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504, 509 (6th Cir. 2007) (quoting
Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993)). “ ‘Although this standard
protects naive consumers, it also prevents liability for bizarre or idiosyncratic
interpretations of collection notices by preserving a quotient of reasonableness and
presuming a basic level of understanding and willingness to read with care.’ ” Id. at
509-10 (quoting Wilson v. Quadramed Corp., 225 F.3d 350, 354-55 (3d Cir. 2000))
(brackets, internal quotation marks, and additional citations omitted).
Plaintiff alleges that Defendant PRA is “engaging in deceit by purposefully
failing to register and obtain certificate of authority in violation of M.C.L.A.
450.5007.” (ECF No. 22 at Pg ID 155.) Plaintiff directs the Court to 15 U.S.C. §
1692e(5), which states that a party is in violation of the statute if they “threat[en] to
take any action that cannot legally be taken or that is not intended to be taken.” 15
U.S.C. § 1692e(5). This claim rests on the same issue as Plaintiff’s MLLCA claim—
whether Defendant PRA was “transacting business” within the state and therefore
required to have a certificate of authority. For the reasons discussed in Section III.A.,
Plaintiff’s FDCPA claim also fails and Count I is dismissed.
In Count III of the complaint, Plaintiff purports to state a claim for fraud
against Defendant PRA. However, Plaintiff fails to satisfy the heightened pleading
requirements for stating her claim. A prima facie claim of fraud under Michigan law
requires proof that:
(1) the defendant made a material representation; (2) the representation
was false; (3) when the representation was made, the defendant knew
that it was false, or made it recklessly, without knowledge of its truth,
and as a positive assertion; (4) the defendant made [the representation]
with the intention that the plaintiff should act upon it; (5) the plaintiff
acted in reliance upon the representation; and (6) the plaintiff thereby
Roberts v. Saffell, 760 N.W.2d 715, 719 (Mich. Ct. App. 2008). Beyond containing
each of these elements, claims of fraud also must adhere to the pleading requirements
set forth in Rule 9 of the Federal Rules of Civil Procedure.
Rule 9 provides that a plaintiff alleging fraud or mistake “must state with
particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
To satisfy this requirement, a complaint must “(1) specify the statements that the
plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when
the statements were made, and (4) explain why the statements were fraudulent.”
Frank v. Dana Corp., 547 F.3d 564, 569-70 (6th Cir. 2008) (internal quotation marks
and citation omitted); see also Sanderson v. HCA-The Healthcare Co., 447 F.3d 873,
877 (6th Cir. 2006) (“As a sister circuit has phrased it,” Rule 9(b) requires a plaintiff
to “specify the ‘who, what, when, where, and how’ of the alleged fraud.”) (quoting
United States ex rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899,
903 (5th Cir. 1997)).
Plaintiff’s complaint falls woefully short of satisfying these requirements.
Plaintiff fails to identify the specific fraudulent statements, who made the statements,
and when and where the statements were made. Therefore, Plaintiff fails to plead
fraud or misrepresentation with the level of particularity required by Rule 9(b).
For the reasons set forth above, the Court concludes that Plaintiff fails to allege
viable MLLCA, FDCPA and fraud claims against Defendant PRA.
IT IS ORDERED that Defendant PRA’s motion for judgment on the pleadings
(ECF No. 21) is GRANTED.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: January 31, 2017
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, January 31, 2017, by electronic and/or U.S.
First Class mail.
s/ Richard Loury
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