Heroux v. Callidus Portfolio Management Inc. et al

Filing 29

ORDER granting in part 12 Motion for Judgment on the Pleadings(Written Opinion) Signed by Senior Judge David S. Doty on 5/1/2018. (DLO)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 17-5132(DSD/HB)
Jason Heroux,
Plaintiff
v.

ORDER

Callidus Portfolio Management
Inc. and Messerli & Kramer, P.A.,
Defendants.
Darren B. Schwiebert, Esq. and DBS Law LLC, 301 Fourth Avenue
South, Suite 280N, Minneapolis, MN 55415, counsel for
plaintiff.
Derrick N. Weber, Esq., Stephanie Shawn Lamphere, Esq. and
Messerli & Kramer, P.A., 3033 Campus Drive, Suite 250,
Plymouth, MN 55441, counsel for defendants.

This matter is before the court upon the motion for judgment
on the pleadings by defendants Callidus Portfolio Management Inc.
and Messerli & Kramer, P.A.

Based on a review of the file, record,

and proceedings herein, and for the following reasons, the court
grants the motion in part.

BACKGROUND
This

debt-collection

dispute

arises

out

of

defendants’

attempts, through a state court action, to collect on credit card
debt allegedly owed by plaintiff Jason Heroux.

After Heroux

defaulted on the debt, it was charged off and sold to Callidus.
Callidus retained Messerli to collect the debt.

Compl. ¶ 8.

On

April 12, 2016, defendants served Heroux with a state court
complaint seeking $1,665.11 plus accrued and continuing interest.
Answer Ex. A at 4.

Defendants did not file the complaint at that

time. Heroux answered the complaint on March 16, 2017, denying any
liability and asserting various affirmative defenses.

Id. at 12-

13. Defendants served Heroux with their first set of “interlocking
discovery” on April 4, 2017, and filed the case in Hennepin County
the following day.
summary judgment.

Id. at 6, 17, 20-29.

Defendants then moved for

Heroux did not respond to the discovery, oppose

the summary judgment motion, or appear for the summary judgment
hearing.

Id. at 56-57.

The court determined that, based on the

evidence and Heroux’s failure to respond, defendants were entitled
to judgment and an award of $2,881.57.

Id. at 56-59.

On November 16, 2017, Heroux commenced this suit against
defendants alleging that the state-court action violated the Fair
Debt Collections Practices Act (FDCPA), 15 U.S.C. § 1692, et seq,
in several respects.

Heroux specifically alleges that defendants

violated the FDCPA by (1) serving misleading discovery; (2) seeking
false

admissions

through

discovery;

(3)

misrepresenting

the

identity of the creditors; (4) impermissibly seeking to collect
post charge-off interest; and (5) seeking to collect affidavit
costs. Defendants now move to dismiss arguing that the court lacks
jurisdiction and, alternatively, that the complaint fails to state
a claim.

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DISCUSSION
I.

Standard of Review
The same standard of review applies to motions under Federal

Rules of Civil Procedure 12(c) and 12(b)(6).

Ashley Cty., Ark. v.

Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009).

Thus, to survive

a motion for judgment on the pleadings, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.”

Braden v. Wal–Mart Stores,

Inc., 588 F.3d 585, 594 (8th Cir. 2009) (citation and internal
quotation marks omitted).

“A claim has facial plausibility when

the plaintiff [has pleaded] factual content that allows the court
to draw the reasonable inference that the defendant is liable for
the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).

Although a complaint need not contain detailed factual

allegations, it must raise a right to relief above the speculative
level.

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

“[L]abels and conclusions or a formulaic recitation of the elements
of a cause of action” are not sufficient to state a claim.

Iqbal,

556 U.S. at 678 (citation and internal quotation marks omitted).
II.

Rooker-Feldman Doctrine
Defendants argue that the court is precluded from hearing this

matter

under

the

Rooker-Feldman

doctrine

because

effectively appealing the state court’s judgment.
disagrees.
3

Heroux

is

The court

The Rooker–Feldman doctrine is implicated when a federal
action is commenced by “state-court losers complaining of injuries
caused by state-court judgments rendered before the district court
proceedings

commenced

and

inviting

rejection of those judgments.”

district

court

review

and

Exxon Mobile Corp. v. Saudi Basic

Indus. Corp., 544 U.S. 280, 284 (2005).

Under the doctrine,

federal district courts are without jurisdiction to review statecourt judgments or to address federal claims with allegations that
are inextricably intertwined with a state-court decision.

Prince

v. Ark. Bd. of Exam’rs in Psychology, 380 F.3d 337, 340 (8th Cir.
2004).

However, if a federal plaintiff presents an independent

claim, even “one that denies a legal conclusion that a state court
has reached in a case to which he was a party, then there is
jurisdiction

and

state

law

determines

prevails under principles of preclusion.”

whether

the

defendant

Exxon, 544 U.S. at 293

(citation omitted); see also Hageman v. Barton, 817 F.3d 611, 614
(8th Cir. 2016) (“The doctrine is limited in scope and does not bar
jurisdiction over actions alleging independent claims arising from
conduct in underlying state proceedings.”).
The Rooker–Feldman doctrine “bars both straightforward and
indirect

attempts

by

a

plaintiff

to

‘undermine

state

court

decisions.’” Prince, 380 F.3d at 340 (quoting Lemonds v. St. Louis
Cty., 222 F.3d 488, 492 (8th Cir. 2000)).

A claim is inextricably

intertwined under Rooker–Feldman if it “succeeds only to the extent

4

that the state court wrongly decided the issues before it [or] if
the relief requested ... would effectively reverse the state court
decision or void its ruling.” Fielder v. Credit Acceptance Corp.,
188 F.3d 1031, 1035 (8th Cir. 1999) (citation omitted).

The fact

that a judgment was entered on a party’s default does not alter the
applicability of the Rooker–Feldman doctrine and renders the court
without jurisdiction over defenses to the state court action that
the defaulting party failed to raise.1

See id. (holding that a

federal district court cannot amend a state court default judgment
based on claims and defenses the losing party failed to raise).
Here,

Heroux

does

not

seek

relief

from

the

state-court

judgment, nor does he claim that he has been injured by that
judgment.

Rather, Heroux asserts that defendants violated the

FDCPA based on their “actions in the process of obtaining the
judgment.”

Hageman, 817 F.3d at 616.

The Eighth Circuit has held

that Rooker-Feldman does not apply to such actions.

Id.; see also

Worley v. Engel, No. 17-1105, 2017 WL 3037558, at *2 (D. Minn. July
18, 2017) (determining that Rooker-Feldman did not apply because
the plaintiff did not seek review of the state-court judgment, but
instead complained of injuries caused by alleged FDCPA violations
in the underlying action); Ness v. Gustel Chargo, PA, 933 F. Supp.
2d 1156, 1162 (D. Minn. 2013) (“Rooker-Feldman does not bar an

1

Heroux effectively defaulted in the state-court action by
failing to appear after answering the complaint.
5

FDCPA

claim

challenging

only

a

defendant’s

debt-collection

practices, without challenging the validity of the state-court
judgment.”).

As a result, Rooker-Feldman does not bar Heroux’s

claims.
III. Preclusion
Defendants

also

argue

estoppel bar Heroux’s claims.

that

res

judicata

and

collateral

Under res judicata, a judgment on

the merits bars a subsequent suit for the same cause of action
including all alternative theories of recovery that could have been
asserted earlier.
(Minn. 2004).

Hauschildt v. Beckingham, 686 N.W.2d 829, 840

The doctrine of collateral estoppel more narrowly

bars the re-litigation of an issue that was “distinctly contested
and directly determined” in an earlier adjudication.

Id. at 837.

Because the court has already concluded that the issues raised
in the underlying case are separate and distinct from those raised
here, the court must also conclude that principles of claim and
issue preclude do not apply.

Indeed, the claims in this case are

centered on defendants’ conduct in the state-court action.

As

such, the instant claims could not have been raised in that case,
and Heroux is free to raise them for the first time here.

See

Peterson v. United Accounts, Inc., 638 F.2d 1134, 1137 (8th Cir.
1981) (“Although there is some overlap of issues raised in both
cases ... the suit on the debt brought in state court is not
logically related to the federal action initiated to enforce

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federal policy regulating the practices for the collection of such
debts.”).
IV.

Adequacy of Pleading
A.

Debt Collector Status

Callidus argues that it should be dismissed from this case
because it is not a “debt collector” as defined by the FDCPA.
Congress enacted the FDCPA to protect consumers “in response
to abusive, deceptive, and unfair debt collection practices.”
Schmitt v. FMA Alliance, 398 F.3d 995, 997 (8th Cir. 2005).
debt

collector

may

not

use

false,

deceptive,

or

“A

misleading

misrepresentation or means in connection with the collection of any
debt.”

15 U.S.C. § 1692(e).

A debt collector is “any person who

uses any instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any
debts, or who regularly collects or attempts to collect, directly
or indirectly, debts owed or due or asserted to be owed or due
another.”

Id. § 1692a(6).

Meanwhile, a creditor is “any person

who offers or extends credit creating a debt or to whom a debt is
owed, but such term does not include any person to the extent that
he receives an assignment or transfer of a debt in default solely
for the purpose of facilitating collection of such debt for
another.”

Id. § 1692a(4).

“A distinction between creditors and

debt collectors is fundamental to the FDCPA, which does not
regulate creditors’ activities at all.”
7

Schmitt, 398 F.3d at 998.

The complaint alleges that Callidus is a debt collector by
essentially reciting the elements set forth in § 1692a(6).
¶ 5.

Compl.

Callidus denies that it is a debt collector and asserts that

it is simply a passive debt buyer that forwards its accounts to
third parties for collection.

At least with respect to this case,

there is no dispute that Callidus is not a debt collector, because
in the state court action, it was collecting a debt on its own
account.

Under recent United States Supreme Court precedent, this

fact is dispositive. In Henson v. Santander Consumer USA Inc., 137
S. Ct. 1718, 1721-22 (2017), the Court held that a debt purchaser
“may indeed collect debts for its own account without triggering”
the FDCPA.
B.

As a result, Callidus must be dismissed from the case.2
Sufficiency of Allegations

Heroux claims that Messerli violated several provisions of the
FDCPA.

“A violation of the FDCPA is reviewed utilizing the

unsophisticated-consumer standard which ... protects the uninformed
or naive consumer, yet also contains an objective element of
reasonableness

to

protect

debt

collectors

from

liability

for

peculiar interpretations of collection [attempts].” Strand v.
Diversified Collection Serv., Inc., 380 F.3d 316, 317–18 (8th Cir.
2004) (citations and internal quotation marks omitted).

“The

unsophisticated consumer test is a practical one, and statements
that are merely susceptible of an ingenious misreading do not

2

The court will only reference Messerli going forward.
8

violate the FDCPA.”

Peters v. Gen. Serv. Bureau, Inc., 277 F.3d

1051, 1056 (8th Cir. 2002) (citation and internal quotation marks
omitted).
1.

Interest

Heroux first alleges that Messerli violated § 1692f(1) in the
underlying lawsuit by requesting pre-judgment interest at a rate of
six percent under the contract and post-judgment interest under
Minn. Stat. § 549.09.

Compl. ¶ 44; Answer Ex. A at 50.

Specifically, Heroux asserts that the original creditor waived prejudgment interest by failing to provide him with statements showing
the accumulation of interest post charge-off.

Id. ¶ 46.

He also

claims, rather confusingly, that Messerli improperly requested
interest under Minn. Stat. § 334.01 instead of § 549.09.3

Neither

the underlying complaint nor the summary judgment motion identifies
the statutory authority for interest, however.

And Messerli’s

request for costs and disbursements cites to § 549.09 as the
authority for post-judgment interest.
inconsistency

alone

is

sufficient

Answer Ex. A at 50.
to

warrant

This

dismissal.4

Additionally, having a “valid legal defense to the application of

3

Compounding the confusion, Heroux argues that “as a matter
of law, §549.09, and not §334.01, is not the applicable interest
statute in Minnesota.” Pl’s. Opp’n Mem. At 23-24 (emphases added).
4

Further, the Minnesota Supreme Court has never “discussed
the interplay between section 334.01 and section 549.09[,]” thus
leaving the issue open. Hogenson v. Hogenson, 852 N.W.2d 266, 273
(Minn. Ct. App. 2014).
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the [interest] statute does not mean that [the debt collector]
attempted to collect interest that is not permitted by law.”

Hill

v. Accounts Receivable Servs., LLC, No. 16-4356, 2018 WL 1864720,
at *2 (8th Cir. Apr. 19, 2018).

As a result, the interest claim is

dismissed.
2.
Heroux

Affidavit Costs
next

alleges

that

Messerli

violated

§

1692e

by

requesting $3.00 in affidavit costs in the underlying case without
Id. ¶¶ 53-56.

actually incurring such costs.

Section 1692e

prohibits debt collectors from using “any false, deceptive, or
misleading

representation

collection of any debt.”

or

means

in

connection

with

the

Even assuming costs imposed following

judgment on the debt falls within this provision, it is undisputed
that Messerli incurred affidavit costs in serving the complaint on
Heroux.5

Answer Ex. A at 51; Compl. 54.

maintain his claim on this basis.

Therefore, Heroux cannot

For the same reason, this claim

also fails to the extent it is based on § 1692f(1).
3.

Creditor Name

Heroux contends that Messerli violated § 1692e by incorrectly
identifying Callidus as “Callidus Portfolio Management” rather than
“Callidus Portfolio Management Inc.,” which is its registered name

5

The fact that Messerli also requested $35 in fees for
“Sheriff’s/Metro Legal Services Fees” does not establish that
Messerli did not also incur the $3.00 affidavit fee. See Answer
Ex. A at 51.
10

in

Minnesota.

He

also

alleges

that

Messerli

misidentified

Callidus’s predecessor in interest as HSBC Bank N.A. rather than
HSBC Bank Nevada, N.A.

Neither technical error supports a claim

under the FDCPA.
In Hill, the Eighth Circuit applied a materiality standard to
§ 1692e.

2018 WL 1864720, at *1.

The court was persuaded by Hahn

v. Triumph Partnerships, LLC, 557 F.3d 755, 758 (7th Cir. 2009),
which

held

that

“[a]

statement

cannot

mislead

unless

it

is

material, so a false but non-material statement is not actionable.”
In

other

words,

“[i]f

a

statement

would

not

mislead

the

unsophisticated consumer, it does not violate the [Act] - even if
it is false in some technical sense.”
citation omitted).

Id. (quotation marks and

Here, the minor errors in the corporate names

would not mislead even an unsophisticated consumer about the
identities of the creditors.
4.

This claim is also dismissed.

Discovery Requests

The crux of Heroux’s complaint is that Messerli violated the
FDCPA by serving “interlocking discovery” designed to deceive,
mislead, and confuse.

The court has carefully reviewed the

complaint and the discovery requests and finds that Heroux has
adequately stated a plausible claim.

See Dakowa v. MSW Capital,

LLC, No. 16-2753, 2017 WL 662975, at *5-7 (D. Minn. Feb. 17, 2017)
(denying debt collector’s motion to dismiss a claim based on
similar interlocking discovery). As a result, the court denies the

11

motion to dismiss on this claim.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

The motion for judgment on the pleadings [ECF No. 12] is

granted in part as set forth above; and
2.

Callidus Portfolio Management Inc. is dismissed from the

case with prejudice.
Dated: May 1, 2018
s/David S. Doty
David S. Doty, Judge
United States District Court

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