Haverstick v. J&M Securities, LLC

Filing 22

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Plaintiffs Complaint (ECF No. 4 ) and Plaintiffs Motion to Voluntarily Dismiss With Prejudice (ECF No. 15 ) are GRANTED. Plaintiffs Complaint is DISMISSED with pre judice. IT IS FURTHER ORDERED that Plaintiffs Motion to Dismiss Defendant's Counterclaims (ECF No. 16 ) is GRANTED, in part. Defendant's Counterclaims are DISMISSED WITHOUT PREJUDICE. An appropriate Judgment will be filed herewith. Signed by District Judge Ronnie L. White on November 3, 2016. (BRP)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
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SUSAN HAVERSTICK,
Plaintiff,

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No. 4:16-CV-441 RLW

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v.

J&M SECURITIES, LLC,
Defendant.

MEMORANDUM AND ORDER

This matter is before the court on Defendant's Motion to Dismiss Plaintiff's Complaint
(ECF No. 4), Plaintiffs Motion to Voluntarily Dismiss With Prejudice (ECF No. 15), and
Plaintiffs Motion to Dismiss Defendant' s Counterclaims (ECF No. 16). These matters are fully
briefed and ready for disposition.
BACKGROUND

J&M Securities, LLC ("J&M") is a debt collector on behalf of third parties.

J&M

Securities was hired by Echo Rental Properties LLC ("Echo") to collect a debt owed by Plaintiff
Susan Haverstick ("Haverstick") (hereinafter the "Debt").
On or about December 17, 2010, Haverstick signed a residential lease for a property
located at 3728 Keokuk, 2nd Floor St. Louis, MO 63116 for a lease term beginning December 17,
2010 and ending April 30, 2012. Haverstick terminated the lease in September 2011.

On

September 20, 2011 , Echo filed a lawsuit in the Missouri Circuit Court for the Twenty-Second
Judicial Circuit, Echo Rental Properties LLC v. Susan Haverstick, 1122AC14011 , seeking
possession of the premises and further seeking a monetary judgment against Haverstick for rent

in the amount of $1 ,045. On November 3, 2011 , default judgment was entered in favor of Echo
and against Haverstick.
Haverstick alleged in her Complaint that the Judgment entered by the Missouri Circuit
Court reflected a $0.00 amount in favor of Echo and against Haverstick. Haverstick alleged that
the Missouri Circuit Court entered judgment in favor of her on Echo ' s claim for monetary
damages. However, the Judgment entered by the Missouri Circuit Court actually reflects that the
Judgment was "PENDING." (ECF No. 5-4).
On or about August 4, 2015, J&M reported to one or more of the three major credit
reporting agencies that Haverstick' s Debt had an outstanding balance of $6,202.00, and that the
Debt was past due. Haverstick alleged in her Complaint that J&M' s reporting of the Debt to one
or more of the three major credit reporting agencies misrepresented the character, amount, and/or
legal status of the Debt.
Haverstick learned about the allegedly false reporting of the Debt when she was denied
for a home equity line of credit because she had "an open collection from J&M Securities in the
amount of $6,202."
On March 31 , 2016, Haverstick filed an action under the Federal Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. §1692, et seq. On May 2, 2016, J&M filed an Answer,
Affirmative Defenses, and Counterclaims. (ECF No. 5). J&M alleged counterclaims for Bad
Faith Litigation for Purposes of Harassment In Violation of the FDCPA (Count I) and State Law
Claim for Breach of Contract (Count II).

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DISCUSSION
I.

Plaintiff's Claims

Defendant and Plaintiff have both moved to dismiss Plaintiffs complaint with prejudice.
Because these motions are not opposed, the Court dismisses Plaintiffs complaint with prejudice.

II.

Defendant's Counterclaims
A. Standard of Review

To survive a motion to dismiss, a complaint (or, in this case, a counterclaim) "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, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009)
(quoting Bell Atlantic Corp., v. Twombly, 550 U.S 544, 570 (2007). A "formulaic recitation of
the elements of a cause of action" will not suffice. Twombly, 550 U.S. at 555. "The plausibility
standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility
that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
556).

B. Counterclaim pursuant to §1692k(a)(3)
15 U.S .C. § 1692k(a)(3) provides, "On a finding by the court that an action under this
section was brought in bad faith and for the purpose of harassment, the court may award to the
defendant attorney's fees reasonable in relation to the work expended and costs." Haverstick
moves to dismiss J&M's FDCPA counterclaim based upon the inadequacies of its factual
allegations. Haverstick argues that J&M's FDCPA counterclaim is "nothing more than a single
conclusory allegation that 'Upon information and belief, [the] complaint was filed in bad faith
and for the purpose of harassment."' (ECF No. 17 at 8). Haverstick contends that J&M's claim

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should be dismissed because Haverstick has pleaded no set of facts upon which relief can be
granted. (ECF No. 17 at 8).
In response, J&M notes that Courts disagree regarding whether claim under § 1692k(a)(3)
claim should be sought through counterclaim or by a motion subsequent to disposition of the
claim against the defendant.

(ECF No. 20 at 2 (citing Rodriguez v. Portfolio Recovery

Associates, LLC, 841 F. Supp. 2d 1208, 1210 (W.D. Wash. 2012)). 1 J&M contends that "[i]f this

1

Rodriguez v. Portfolio Recovery Associates, LLC, 841 F. Supp. 2d 1208, 1210-11 (W.D. Wash.
2012) outlined the current state of the law in this area:
A few courts have allowed § 1692k(a)(3) counterclaims. See Hylkema v.
Palisades Collection, LLC, C07-1679RSL, 2008 WL 623469 (W.D.Wash. Mar.
4, 2008); *1211 Ayres v. Nat'! Credit Mgmt. Corp. , Civ. A. No. 90-5535, 1991
WL 66845, at *5 (E.D.Pa. Apr. 25, 1991). However, notably more courts have
found that § 1692k(a)(3) should not be pursued as a counterclaim, but should be
resolved only after a defendant prevails on the merits. See, e.g., Kropf v. TCA,
Inc., 752 F.Supp.2d 797, 798 (E.D.Mich.2010) ("the Fair Debt Collection
Practices Act does not create an independent cause of action for attorney's fees");
Perry v. Stewart Title Co., 756 F.2d 1197, 1211 (5th Cir.1985) ("[t]o recover
attorney's fees under the FDCP A, the prevailing defendant must show
affirmatively that the plaintiff brought the FDCP A claim in bad faith and for the
purpose of harassment") (emphasis added); Hardin v. Folger, 704 F.Supp. 355,
356-5 7 (W .D .N. Y.198 8) (dismissing the counterclaim because section
1692k(a)(3) "provides relief, but not a claim, to defendants"); Kirscher v.
Messerli & Kramer, P.A., 2006 WL 145162 at *7 (D.Minn. Jan. 18, 2006)
(dismissing the defendant's counterclaim, but permitting it to request attorney's
fees by a separate motion filed at a later stage in the proceedings); Young v.
Reuben, 2005 WL 1484671 at *1-2 (S.D.Ind. June 21, 2005) (same); Allen v.
Scott, 2011 WL 219568 at *2 (N.D.Tex. Jan. 19, 2011) (noting that the
"conclusion that § 1692k does not permit a bad faith counterclaim is consistent
with the majority of decisions reached by other courts"); Allers- Petrus v.
Columbia Recovery Group, LLC, C08-5533 FDB, 2009 WL 1160061 at *1
(W.D.Wash. Apr. 29, 2009) ("if a plaintiff brings an FDCPA action and loses,
subsection 1692k(a)(3) permits the court to award attorney's fees and costs to the
defendant") (emphasis added).

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Court determines that the appropriate procedure is post-trial motion, then J&M' s counterclaim
should be dismissed without prejudice.
The Court agrees that the prevailing case law holds that the appropriate procedure is a
post-trial motion.

Therefore, the Court dismisses J&M's FDCPA counterclaim without

prejudice. See Rodriguez, 841 F. Supp. 2d at 1210- 11.

C. Breach of Contract Claim
Haverstick argues that this Court should decline to exercise supplemental jurisdiction
over J&M' s state law counterclaim pursuant to 28 U.S.C. §1367(c)(3). 28 U.S.C. §1367(c)(3)
provides: "The district courts may decline to exercise supplemental jurisdiction over a claim
under subsection (a) if the district court has dismissed all claims over which it has original
jurisdiction." Because this Court has dismissed Haverstick' s Complaint, she argues that the
appropriate forum for J&M' s state law claim for breach of contract is state court. (ECF No. 17 at
3-4). Therefore, Haverstick contends that this Court should refuse to exercise supplemental
jurisdiction over J&M' s counterclaim for breach of contract pursuant to 28 U.S.C. §1367(c)(3).
Haverstick also asserts that this Court should decline to exercise supplemental
jurisdiction over J&M' s counterclaims pursuant to 28 U.S.C. §1367(c)(4).

28 U.S.C.

§1367(c)(4) provides: "The district court may decline to exercise supplemental jurisdiction over
a claim under subsection (a) if in exceptional circumstances, there are other compelling reasons
for declining jurisdiction." Haverstick contends that J&M's counterclaims are state law claims
for breach of contract and account stated. (ECF No. 17 at 4). Haverstick contends that her
FDCPA claim and J&M' s state law debt collection counterclaim are not sufficiently related to
form part of the same case or controversy and, therefore, this Court lacks supplemental
jurisdiction to hear J&M ' s counterclaims. (ECF No. 17 at 4-5). Haverstick asks this Court to

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dismiss J&M's counterclaims for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P.
12(b)(l).

Haverstick finally argues that, even if her claims and J&M' s counterclaims are related,
the Court should nevertheless decline to exercise its discretion to hear this case because of
judicial economy.

(ECF No. 17 at 6-8). Haverstick notes that the FDCPA is a remedial

consumer protection statute that is designed to provide a statutory basis for recovery to
consumers. Haverstick contends that this Court should not exercise supplemental jurisdiction
over J&M's counterclaims because the FDCPA should not provide an opportunity for the debt
collector to bring a state collection action into federal court.
The Court declines to exercise supplemental jurisdiction over J&M's state law
counterclaim for breach of contract. The Court holds that the breach of contract counterclaim is
insufficiently related to her Complaint to support supplemental jurisdiction and that the Court
should decline to exercise supplemental jurisdiction over a state law collection action. The Court
thereby dismisses J&M's state law claim for breach of contract.
Accordingly,
IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Plaintiffs Complaint
(ECF No. 4) and Plaintiffs Motion to Voluntarily Dismiss With Prejudice (ECF No. 15) are
GRANTED. Plaintiffs Complaint is DISMISSED with prejudice.
IT IS FURTHER ORDERED that Plaintiffs Motion to Dismiss Defendant's
Counterclaims (ECF No. 16) is GRANTED, in part.
DISMISSED WITHOUT PREJUDICE.
An appropriate Judgment will be filed herewith.

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Defendant's Counterclaims are

Dated this 3rd day of November, 2016.

-M.~

~TE

UNITED STATES DISTRICT JUDGE

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