Nelson v. Repossessors, Inc. et al

Filing 48

ORDER granting 29 Motion to Alter/Amend/Supplement Pleadings (Written Opinion). Signed by Magistrate Judge Steven E. Rau on 4/18/2018. (EMA)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
______________________________________________________________________________
Kurk Matthew Nelson,
Plaintiff,

Case No. 17-cv-3727 (WMW/SER)

Repossessors, Inc.; Consumer Portfolio
Services, Inc.; and Chase Towing &
Transport, Inc.,

ORDER

v.

Defendants.
Katelyn Rae Cartier and Thomas J. Lyons, Jr., Esq., Consumer Justice Center, P.A.,
Vadnais Heights, Minnesota, for Plaintiff.
Chad A. Snyder, Esq., Rubric Legal LLC, Minneapolis, Minnesota, for Defendants.
Jeffrey D. Pilgrim, Esq., Pilgrim Christakis LLP, Chicago, Illinois, for Defendants.

STEVEN E. RAU, United States Magistrate Judge
The above-captioned case comes before the undersigned on Defendants Repossessors,
Inc.; Chase Towing & Transport, Inc.; and Consumer Portfolio Services, Inc.’s (collectively,
“Defendants”) Motion to Amend Pleadings and Add a Party (the “Motion”) [Doc. No. 29]. This
matter was referred for the resolution of pretrial matters pursuant to 28 U.S.C. § 636(b)(1)(A)
and District of Minnesota Local Rule 72.1. For the reasons stated below, the Court grants the
Motion.
I.

BACKGROUND
Jeremy Floyd (“Floyd”) purchased a Jeep Patriot (the “vehicle”) using financing from

Defendant Consumer Portfolio Services, Inc. (“CPS”) in October 2014. (Compl.) [Doc. No. 1
¶¶ 9–10]. On January 11, 2017, Professional Recovery Services (“PRS”) towed and stored the
vehicle because it was parked illegally. (Id. ¶ 11). PRS sent CPS and Floyd a legal notice

informing them that the vehicle “was being stored and that failure to redeem would result in sale
or salvage of the Vehicle.” (Id. ¶ 12). CPS received the notice on February 6, 2017, but did not
respond. (Id. ¶¶ 13–14). On February 28, 2017, Plaintiff Kurk Matthew Nelson (“Nelson”)
purchased the vehicle from PRS for $1,000. (Id. ¶¶ 15–16). Defendant Chase Towing &
Transport, Inc. (“Chase”) repossessed the vehicle from Nelson on June 17, 2017, between 2:00
and 3:00 a.m. (Id. ¶ 17). Nelson called Chase that morning, and its agent confirmed that it
repossessed the vehicle on CPS’s instruction. (Id. ¶¶ 18, 20). Specifically, Chase’s agent
explained that Floyd owed CPS money for the vehicle, and CPS had a lien on the vehicle. (Id.
¶ 20). Nelson, who believed he “owned the car and possessed title ‘clear and free,’” attempted to
report the vehicle stolen; attempted to obtain CPS’s information regarding Floyd from Defendant
Repossessors, Inc.; and called CPS two more times (Id. ¶¶ 19, 21, 23–30). The vehicle was
returned to Nelson at 12:30 p.m. on the same day. (Id. ¶ 31). It had approximately $781 worth of
damage when it was returned. (Id. ¶¶ 32–33).
Nelson alleges the following claims: Count 1—violations of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692f(6); 1 Count 2—common law trespass to chattels;
Count 3—wrongful repossession in violation of Minnesota Statute section 336.9-609; Count 4—
conversion; and Count 5—intrusion upon seclusion. (Compl. at 6–9).
Through discovery, Defendants learned that PRS did not meet the statutory requirements
necessary to sell the so-called abandoned vehicle to Nelson, who is an agent and/or employee of
PRS. (Defs.’ Mem. of Law in Supp. of Mot., “Mem. in Supp.”) [Doc. No. 32 at 2–3] (citing
Minn. Stat. § 168B.01, et seq.). Defendants seek the Court’s permission to file: (1) an amended
answer on behalf of Repossessors, Inc. and Chase to assert an additional affirmative defense; (2)
1

This count is only alleged against Repossessors, Inc. and Chase. (Compl. at 6). The
remaining claims are alleged against all Defendants. See (id. at 7–9).
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an amended answer on behalf of CPS to add an affirmative defense, add counterclaims against
Nelson and PRS, and add PRS as a party; and (3) a third-party complaint on behalf of
Defendants against PRS. (Id. at 3).
Nelson only opposes the Motion to the extent it seeks leave to file a counterclaim against
him. See (Pl.’s Resp. in Opp’n to Mot., “Mem. in Opp’n”) [Doc. No. 38]. Thus, the Court’s
analysis is confined to this issue and the remainder of the Motion is granted without discussion.
At the hearing, the Court asked for supplemental briefing regarding whether CPS’s proposed
counterclaim was a compulsory counterclaim under Rule 13 of the Federal Rules of Civil
Procedure that was required to be brought at the time of its answer. (Minute Entry Dated Apr. 3,
2018) [Doc. No. 45]. If so, the Court asked the parties to address whether the compulsory
counterclaim was waived if not asserted in the original answer. (Id.). The parties submitted
supplemental briefing on April 10, 2018, and the matter is now ripe for adjudication.
II.

DISCUSSION
The Court first addresses the subject of the parties’ supplemental briefing: whether

Defendants’ counterclaim is compulsory and whether it is waived because it was not asserted in
their original answer. See (id.). A counterclaim is compulsory if the claim “arises out of the
transaction or occurrence that is the subject matter of the opposing party’s claim; and . . . does
not require adding another party over whom the court cannot acquire jurisdiction.” Fed. R. Civ.
P. 13(a)(1). The parties agree that Defendants’ claim against Nelson is compulsory. (Nelson’s
Letter to Mag. J.) [Doc. No. 46 at 2]; (Defs.’ Letter to Mag. J.) [Doc. No. 47 at 2–3]. The Court
agrees. The central issue raised in the Complaint is whether Defendants had authority to
repossess the vehicle. Defendants’ proposed counterclaim against Nelson and PRS alleges that
their sale of the vehicle to Nelson failed to satisfy the statutory requirements for abandoned

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vehicles. (CPS’s Proposed (1) Am. Answer & Aff. Defenses to Compl. & (2) Countercl. Against
Nelson & PRS, Ex. B., Attached to Ex. Index) [Doc. No. 33-2 at 24–29]. Thus, the Complaint
and proposed counterclaim both require resolution of who or what entity owned the vehicle at
the time of its repossession from Nelson.
Additionally, Defendants’ counterclaim is not waived. A compulsory counterclaim that is
not brought is waived in subsequent litigation. Schinzing v. Mid-States Stainless, Inc., 415 F.3d
807, 813 (8th Cir. 2005). A party’s amendment that seeks the court’s permission to assert a
compulsory counterclaim in the same litigation as the common “transaction or occurrence,”
however, is analyzed under Rule 15(a). See Costello, Porter, Hill, Heisterkamp & Bushnell v.
Providers Fidelity Life Ins. Co., 958 F.2d 836, 839–40 (8th Cir. 1992); Wayzata Bank & Tr. Co.
v. A & B Farms, 855 F.2d 590, 594 (8th Cir. 1988); Fed. R. Civ. P. 13, advisory committee note
to 2009 amendment (“An amendment to add a counterclaim will be governed by Rule 15.”). The
transaction or occurrence at issue in this case is (1) the removal of the vehicle from Nelson’s
possession; and (2) who or what entity owned the vehicle at that time. See generally (Compl.).
Defendants’ counterclaim addresses the ownership issue and is therefore the same transaction or
occurrence. Thus, the Defendants’ counterclaim is not waived and the Motion must be analyzed
under Rule 15(a).
A.

Legal Standard

Leave to amend must be freely given “when justice so requires.” Fed. R. Civ. P. 15(a)(2);
see also Becker v. Univ. of Neb. at Omaha, 191 F.3d 904, 907 (8th Cir. 1999). In interpreting
Rule 15, the United States Supreme Court stated:
If the underlying facts or circumstances relied upon by a plaintiff may be a proper
subject of relief, he ought to be afforded an opportunity to test his claim on the
merits. In the absence of any apparent or declared reason—such as undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to cure
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deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of amendment, etc.—the
leave sought should, as the rules require, be “freely given.”
Foman v. Davis, 371 U.S. 178, 182 (1962); see Fed. R. Civ. P. 15(a)(2).
B.

Analysis

Nelson objects to the proposed counterclaims against him for three reasons, each of them
unavailing.
First, Nelson argues that the Court lacks jurisdiction because the circumstances of his
purchase of the vehicle are not the same set of facts as the circumstances of the repossession.
(Mem. in Opp’n at 4–5). The Court has original jurisdiction over this case because of Nelson’s
claim for violations of the FDCPA. 28 U.S.C. § 1331; (Compl. ¶ 6). Thus, this Court has
supplemental jurisdiction over state law claims that arise from the same case or controversy. 28
U.S.C. § 1367(a). As stated above, a central issue in this case is the ownership of the vehicle at
the time of repossession, and facts related to the counterclaim against Nelson are part of “the
same case or controversy” as required to exercise supplemental jurisdiction under § 1367(a).
Additionally, there is no reason that the court should decline to exercise supplemental
jurisdiction. See § 1367(c) (stating that a district court may decline to exercise supplemental
jurisdiction when “(1) the [state law] claim raises a novel or complex issue of State law, (2) the
claim substantially predominates over the claim or claims over which the district court has
original jurisdiction, (3) the district court has dismissed all claims over which it has original
jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining
jurisdiction”).
Second, Nelson argues that the counterclaim is brought in retaliation because Defendants
did not initiate litigation against him first. See (Mem. in Opp’n at 5). There is no legal authority

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supporting Nelson’s assertion that the party who loses the proverbial “race to the courthouse”
cannot assert a counterclaim, and Defendants have explained that the basis of their counterclaim
against Nelson and PRS was not known until December 2017. (Mem. in Supp. at 3–4).
Finally, Nelson argues the proposed counterclaim is futile. (Mem. in Opp’n at 6). “Denial
of a motion for leave to amend on the basis of futility means the district court has reached the
legal conclusion that the amended complaint could not withstand a motion to dismiss under Rule
12(b)(6) of the Federal Rules of Civil Procedure.” Zutz v. Nelson, 601 F.3d 842, 850 (8th Cir.
2010) (internal quotation marks omitted). In other words, a proposed pleading “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, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)); see also Zutz, 601 F.3d at 850 (stating that a proposed amended pleading is
reviewed “under the Twombly pleading standard”).
Nelson argues the counterclaim is futile for two reasons. Nelson first argues that he is not
an “impound lot operator” within the meaning of Minnesota Statue section 168B.06, the basis of
the counterclaim. (Id.). But Defendants allege that Nelson, as an employee of PRS, was obligated
to follow the statute, and the definition of an impound lot operator is broad. See Minn. Stat.
§ 168B.011, subdiv. 8 (defining an “impound lot operator” as “a person who engages in
impounding or storing, usually temporarily, unauthorized or abandoned vehicles”). Thus, the
Court cannot conclude that the counterclaim is futile for this reason. Nelson also argues that the
counterclaim is futile because “a third party’s technical violation of these . . . statutory notice
provisions does not covert [Nelson’s] purchase of the Vehicle . . . into tortious conduct.” (Mem.
in Opp’n at 6). In other words, Nelson’s argument does not address the plausibility of

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Defendants’ claim; he merely disagrees with it. This argument establishes a disagreement
between the parties, but does not establish futility.
The Court concludes that Nelson’s objections to the proposed counterclaim are
unavailing, and grants Defendants’ motion.
III.

CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS

HEREBY ORDERED that Defendants Repossessors, Inc.; Chase Towing & Transport, Inc.;
and Consumer Portfolio Services, Inc.’s Motion to Amend Pleadings and Add a Party [Doc. No.
29] is GRANTED.

Dated: April 20, 2018
s/Steven E. Rau
STEVEN E. RAU
United States Magistrate Judge

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