Reynolds v. Credit Management Services, Inc.
MEMORANDUM AND ORDER - Defendants' motion for summary judgment 48 is denied. Plaintiff's motions for partial summary judgment 58 and for class certification 51 are denied. Ordered by Senior Judge Lyle E. Strom. (GJG)
IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
CREDIT MANAGEMENT SERVICES,
INC., JASON MORLEDGE, MEGAN L.)
BISCHOFF, and MICHAEL
MEMORANDUM AND ORDER
This matter is before the Court on three motions filed
by the parties.
See Filing Nos. 48, 58, and 51.
Credit Management Services, Inc. (“CMS”), Michael Morledge, Jason
Morledge, and Megan Bischoff (collectively “defendants”) move for
summary judgment (Filing No. 48).
Plaintiff, Kenneth Reynolds
(“plaintiff” or “Reynolds”) has filed a cross motion for partial
summary judgment (Filing No. 58), and a motion for class
certification (Filing No. 51).
briefed by the parties.
The matters have been fully
See Filing Nos. 49, 52, 55, 59, 61, 67,
After review of the motions, the parties’ briefs, and the
applicable law, the Court finds as follows.
Plaintiff’s putative class action suit arises from
defendants’ filing of certain wage-garnishment affidavits in
attempt to collect on consumer debts.
See Filing No. 5.
order to collect on the judgments, CMS and attorneys within the
company’s legal department regularly execute certain affidavits
required to obtain wage garnishments against the judgment debtor.
(Filing 49 at 3-4).
The affidavit in plaintiff’s case, signed by
defendant attorney Megan Bischoff, stated in pertinent part, “I
have good reason to and do believe that this sum is based upon a
judgment that: . . . is not for the support of a person, and the
judgment debtor is not the head of a family.”
(Id.; Filing No. 5
These affidavits are patterned after the Nebraska
Judicial Branch form (Filing No. 49 at 4, 9).
On July 8, 2014, CMS obtained a judgment in the amount
of $979.06 plus fees, costs, and interest against plaintiff.
(Id. at 3).
Defendants subsequently filed the above mentioned
affidavit representing to the state court a “good reasoned
belief” that plaintiff was not the head of a family.
See id. at
However, it is undisputed that plaintiff is presently, and
in fact was, at all relevant times, the head of his family
entitled to the lower statutory garnishment percentage (Filing
No. 49 at 2; Filing No. 59 at 13).
On December 1, 2014, plaintiff filed this putative
class action alleging violations of the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq., and the
Nebraska Consumer Protection Act (“NCPA”), Neb. Rev. Stat. §§ 591601 et seq.
Plaintiff alleges defendants’ practice and
policies, or lack thereof, resulted in his and other potential
class members’ wages being wrongfully garnished at a rate of 25%
instead of the lower 15% when the debtor is identified as the
head of the family according to Nebraska law.
See Filing No. 5;
see also Neb. Rev. Stat. § 25-1558(1) (providing a garnishment
rate at 25% of “disposable earnings” per week or 15% per week “if
the individual is a head of a family.”).
Both parties now move
for summary judgment and plaintiff seeks class certification.
See Filing Nos. 48, 58, 51.
I. Summary Judgment
Summary judgment is only proper when the Court
determines the evidence “show[s] that there is no genuine issue
as to any material fact and that the movant is entitled to
judgment as a matter of law.”
Fed. R. Civ. P. 56(a),(c); Semple
v. Federal Exp. Corp., 566 F.3d 788, 791 (8th Cir. 2009) (quoting
Fed. R. Civ. P. 56(c)).
The evidence must be viewed in the light
most favorable to the nonmoving party, giving the nonmoving party
the benefit of all reasonable inferences.
Kenney v. Swift
Transp., Inc., 347 F.3d 1041, 1044 (8th Cir. 2003).
summary judgment stage, it is not the function of the Court to
“weigh the evidence and determine the truth of the matter but to
determine whether there is a genuine issue for trial.”
v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L.
Ed. 2d 202 (1986).
II. Class Certification under Federal Rule 23
In order to certify a class, a plaintiff bears the
burden of demonstrating that all the requirements of Fed. R. Civ.
P. 23 have been met.
Amchem Prods., Inc. v. Windsor, 521 U.S.
591, 614, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997).
States Court of Appeals for the Eighth Circuit has ruled that
district courts must conduct a “‘rigorous analysis’” of Rule 23's
Powers v. Credit Management Services, Inc., 776
F.3d 567, 569 (8th Cir. 2015) (quoting Elizabeth M. v. Montenez,
458 F.3d 779, 786 (8th Cir. 2006)).
Under Rule 23, a plaintiff must establish the four
prerequisites of Rule 23(a):
typicality; and adequate representation.
Amchem, 521 U.S. at
Then the plaintiff must demonstrate the putative class
falls into one of three types provided under Rule 23(b).
District courts have discretion in making decisions
regarding class certification.
See In re St. Jude Med. Inc., 425
F.3d 1116, 1119 (8th Cir. 2005).
III. Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (“FDCPA”) was
enacted in order to curb “the use of abusive, deceptive, and
unfair debt collection practices.”
15 U.S.C. § 1692.
violation of the FDCPA, a plaintiff must prove:
plaintiff has been the object of collection activity arising from
a consumer debt; (2) the defendant is a debt collector as defined
by the FDCPA; (3) the defendant has engaged in an act or omission
prohibited by the FDCPA.
Pace v. Portfolio Recovery Assocs.,
L.L.C., 872 F. Supp. 2d 861, 864 (W.D. Mo. 2012).
IV. Nebraska Consumer Protection Act
The Nebraska Consumer Protection Act (“NCPA”) prohibits
“[u]nfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce” that “affect
the public interest.”
Neb. Rev. Stat. § 59-1602; see also Neb.
Rev. Stat. § 59-1601; Infogroup, Inc. v. DatabaseLLC, 95 F. Supp.
3d 1170, 1184 n.11 (D. Neb. 2015) (citing Eicher v. Mid America
Fin. Inv. Corp., 748 N.W.2d 1, 12 (Neb. 2008); Arthur v.
Microsoft Corp., 676 N.W.2d 29, 36 (Neb. 2004)).
‘unfair’ and ‘deceptive’ are not defined in by the [NCPA]”
leaving courts to “try to predict how the Nebraska Supreme Court
would define and then apply those words . . . .”
Raad v. Wal-
mart Stores, Inc., 13 F. Supp. 2d 1003, 1011 (D. Neb. 1998).
I. Defendants’ Motion for Summary Judgment
For reasons discussed below, the Court will deny
defendants’ motion for summary judgment in its entirety as to
both CMS and the individually named defendants.
Defendants argue the Court should grant summary
judgment as to plaintiff’s FDCPA and NCPA claims because “the
garnishment affidavit at issue accurately stated Ms. Bischoff’s
belief at that time that Mr. Reynolds was not the head of the
family, and because CMS promptly modified the garnishment
affidavit . . . there was no ‘misrepresentation’ . . . .”
(Filing No. 49 at 2).
Furthermore, defendants suggest that
“[a]ny ‘mistake’ in the affidavit as initially filed constitutes
a good faith error, notwithstanding reasonable procedures, to
which no liability can attach.”
(Id. at 17).
See also 15 U.S.C.
Plaintiff counters “[d]efendants have universally
applied the same flawed method of processing and filing sworn
[g]arnishment [a]ffidavits [by] . . . stating they have ‘good
reason’ and ‘do believe’ the consumer should be garnished [at]
the higher rate of 25% without knowing whether the wage earner
qualifies for the lower statutory withholding rate of 15%
. . . .”
(Filing No. 69 at 1) (emphasis added).
In support of
his allegations, plaintiff points to an alleged CMS policy (“CMS
100") which states “In [the] state of Nebraska all employment
garns are sent at 25% (Not HOH) unless we know previously they
were HOH we will send at 15% (HOH).”
(Filing No. 54-3 at 5).
However, defendants contend CMS 100 “is not part of [the
(Filing No. 67 at 5) (emphasis in original).
The factual resolution of questions and issues relating
to CMS 100 are likely to provide valuable direction to
plaintiff’s claims and defendants’ liability thereto.
it is unclear to the Court based on the parties’ discovery
whether CMS 100 is in fact part of CMS’s internal policies and/or
It is also unclear to whom CMS 100 is addressed,
what personnel have access to it, and whether it is followed and
to what extent.
These and other issues pertaining to CMS 100
require resolution by a trier of fact and not the Court.
Therefore, the Court finds that a genuine issue of material fact
exists making judgment as a matter of law inappropriate.
Defendant CMS’s motion for summary judgment as to plaintiff’s
FDCPA and NCPA claims will be denied.
B. Michael Morledge
Defendants argue summary judgment should be granted in
favor of CMS’s previous owner, Michael Morledge.
assert summary judgment is proper because “there is no evidence
that . . . [Mr.] Morledge worked as [a] ‘collector’ with
respect to Mr. Reynolds’ account, or that [he] played any role in
preparing the subject garnishment affidavit, much less in
asserting a ‘good’ belief that Mr. Reynolds was not head of a
(Filing No. 49 at 21).
Defendants also contend “there
is no basis to ‘pierce the corporate veil’ in an attempt to hold
owner Michael Morledge personally liable.”
(Id. at 2).
Plaintiff alleges “Michael Morledge is the owner of
CMS, an officer and director and shareholder of CMS and is
involved in the day to day operations of the business and engaged
in the business of collecting debts . . . and . . . is a ‘debt
collector’ within the meaning of 15 U.S.C. 1692(a)(6).”
No. 59 at 7).
Plaintiff also “specifically alleges that both
Morledges are responsible for implementing the challenged
policies and practices and that they are thus liable for their
(Id. at 71-72).
The FDCPA defines “debt collector” as “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 assessed to be owed
or due another.”
15 U.S.C. § 1692a(6).
The Court here notes a
split of authority between the United States Courts of Appeals as
to whether individuals can be held personally liable under the
Compare White v. Goodman, 200 F.3d 1016, 1019 (7th Cir.
2000) (stating the FDCPA “is not aimed at the shareholders of
debt collectors operating in the corporate form unless some basis
is shown for piercing the corporate veil.”) and Pettit v.
Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1059
(7th Cir. 2000) (“the extent of control exercised by an officer
or shareholder is irrelevant to determining his liability under
the FDCPA.”) with Kristner v. Law Offices of Michael P.
Margelefsky, LLC, 518 F.3d 433, 437 (6th Cir. 2008) (collecting
cases, discussing split, and concluding “the FDCPA will require
proof that the individual is a ‘debt collector,’ but does not
require piercing the corporate veil.”).
The United States Court of Appeals for the Eighth
Circuit has yet to affirmatively rule on this issue.
the Eighth Circuit did provide some guidance in its recent
decision in Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567
(8th Cir. 2015).
In Powers, the Eighth Circuit reversed the
district court’s decision to grant plaintiff’s motion for class
Powers, 776 F.3d at 569.
The Eighth Circuit
indicated a likelihood that individual “collectors” could be held
See id. at 572 (stating “[e]ach class member
may have a stronger claim against the individual attorney who
signed the pleadings in that consumer’s collection lawsuit.”).
Within this district, Judge Joseph Bataillon has
determined that individual “collectors” can be held personally
liable under the FDCPA.
See, Henggeler v. Brumbaugh & Quandahl,
P.C., LLO, No. 8:11CV334, 2012 WL 2855104, at *3 (D. Neb. July 5,
2012) (“Subjecting a member of a limited liability corporation to
individual liability requires proof that the individual is a
‘debt collector,’ but does not require piercing of the corporate
veil.”) (citing Kristner, 518 F.3d at 437-38).
plain reading of the statutory language seems to lead to the
conclusion that “debt collectors” can be held personally liable
under the FDCPA without piercing the corporate veil.
generally, 15 U.S.C. § 1692 et seq.; see also Brumbelow v. Law
Offices of Bennett and Deloney, P.C., 372 F. Supp. 2d 615, 618-19
(D. Utah 2005) (providing “[t]his holding appears to be faithful
to the plain language of the FDCPA.”).
(1) the Eighth
Circuit’s language in Powers; (2) Judge Bataillon’s holding in
Henggeler; and (3) the Court’s reading of Congress’s statutory
language, the Court finds that individuals can be held personally
liable under the FDCPA without piercing the corporate veil if
they fit within the statute’s definition of “debt collector.”
The Court finds that summary judgment is inappropriate
at this time with respect to Michael Morledge because a genuine
issue of material fact exists as to whether Michael Morledge fits
under the FDCPA’s definition of “debt collector.”
plaintiff can establish that Michael Morledge is a debt collector
under the definition outlined in the FDCPA is a question of fact.
The defendants have failed to satisfy their burden under summary
judgment’s heavy standard.
Thus, the Court finds that
defendants’ motion for summary judgment as to Michael Morledge
should be denied.
C. Jason Morledge
The Court likewise finds that defendants’ motion for
summary judgment as to Jason Morledge’s personal liability should
be denied at this time for the reasons outlined above.
Defendants have failed to satisfy their burden as to how, as a
matter of law, Jason Morledge does not fit under the statute’s
definition of a “debt collector.”
The Court finds that a genuine
issue of material fact exists as to whether Jason Morledge fits
the statute’s definition and will thus deny defendants’ motion
for summary judgment as to Jason Morledge.
D. Megan Bischoff
Attorneys engaged in debt collection qualify under the
FDCPA’s definition of “debt collector.”
Heintz v. Jenkins, 514
U.S. 291, 292, 115 S. Ct. 1489, 131 L. Ed. 2d 395 (1995).
FDCPA also “applies to litigating activities of lawyers.”
Heintz, 514 U.S. at 294.
Thus, defendant Megan Bischoff’s filing
of the garnishment affidavit is governed by the FDCPA.
Defendants have moved for summary judgment arguing “[t]here is no
evidence to contradict Ms. Bischoff’s testimony regarding her
garnishment affidavit work, and no material fact in dispute as to
the central issue.”
(Filing No. 67 at 10).
The Court disagrees.
The Court finds genuine issues of material fact exist with
respect to whether defendants’ policies and procedures and Ms.
Bischoff’s actions related thereto violate the FDCPA and NCPA,
making summary judgment inappropriate at this time.
defendants’ motion for summary judgment will be denied in its
entirety as to both CMS and each of the individually named
II. Plaintiff’s Partial Motion for Summary Judgment
Plaintiff argues “[n]o genuine issues of material fact
exist with respect to liability determinations [and] . . .
partial summary judgment as to liability, should be entered and
the matter . . . [should] proceed to trial with regard to
(Filing No. 59 at 76).
However, the Court
finds that genuine issues of material fact do in fact exist
prohibiting summary judgment.
The Court has already discussed
CMS 100 and noted the questions and issues related thereto.
the reasons already stated above relating to CMS 100 and whether
the individually named defendants can be considered “debt
collectors” or can be shown to have violated the FDCPA, the Court
finds that plaintiff’s motion for summary judgment should be
III. Plaintiff’s Motion to Certify a Class
Plaintiff requests the Court certify the putative class
under Fed. R. Civ. P. 23.
See Filing No. 51.
the class be comprised of
(I) all Nebraska residents against
whom a judgment was obtained by CMS
(ii) in an attempt to collect a
debt incurred for personal, family,
or household purposes as shown by
[d]efendants or the creditors’
records (iii) in which a Praecipe
and Affidavit for Garnishment
Summons was filed with the box
checked that the garnishment ‘is
not for the support of a person,
and the judgment debtor is not the
head of the family’ (iv) pursuant
to [d]efendant’s policy, that in
Nebraska all employment
garnishments are sent at 25% (Not
HOH) unless CMS’s records showed
that the judgment debtor had been
previously designated as HOH,
[d]efendants had not confirmed the
veracity of [d]efendants’ sworn
statement prior filing.
(Filing No. 52 at 1-2).
The Court finds that although
plaintiff’s motion meets the requirements under Fed. R. Civ. P.
23(a), the proposed class fails under both Fed. R. Civ. P.
23(b)(2) and 23(b)(3).
Fed. R. Civ. P. 23(a) provides four prerequisites for
521 U.S. at 613.
See Fed. R. Civ. P. 23(a); see also Amchem,
With respect to the first prerequisite–
numerosity, Rule 23(a)(1) requires the class be “so numerous that
joinder of all members is impracticable.”
Fed. R. Civ. P.
The Court finds plaintiff has satisfied the numerosity
requirement of Rule 23.
Under the second requirement of Fed. R.
Civ. Pro. 23(a)(2) there must be “questions of law or fact common
to the class.”
Fed. R. Civ. P. 23(a)(2).
The Court finds
plaintiff has satisfied the commonality requirement for class
The third prerequisite under Rule 23(a) requires
that “the claims or defenses of the representative parties are
typical of the claims or defenses of the class.”
Fed. R. Civ. P.
The Court is satisfied that the typicality requirement
has been met.
The fourth and final prerequisite under Rule 23(a)
requires adequate representation.
The Rule requires that “the
representative parties will fairly and adequately protect the
interests of the class.”
Fed. R. Civ. P. 23(a)(4).
of Rule 23(a)(4) is whether:
(1) the class representatives have
common interests with the members of the class, and (2) whether
the class representatives will vigorously prosecute the interests
of the class through qualified counsel.’”
Evans v. Am. Credit
Sys., Inc., 222 F.R.D. 388, 395 (D. Neb. 2004) (quoting Paxton v.
Union Nat. Bank, 688 F.2d 552, 562 (8th Cir. 1982)) (internal
The Court finds the plaintiff and his
counsel have established the representation element under Rule
Although the plaintiff has met the prerequisites under
Rule 23(a), more is required under Rule 23(b) before a class can
“A class action may be maintained if Rule 23(a) is
satisfied and if” the plaintiff meets one of the three types of
Fed. R. Civ. P. 23(b); see also Paxton, 688 F.2d
Plaintiff seeks class certification under Rule 23(b)(3)
alleging the predominance “and superiority elements . . . have
(Filing No. 52 at 48).
Plaintiff alternatively seeks
certification under Rule 23(b)(2) or a hybrid of Rule 23(b)(2)
See Filing No. 52 at 44-51.
Defendants argue class certification should be denied
[t]he class definition is overbroad and non-sensical by including
persons properly designated as not
head of family and persons whose
incorrect designations were
immaterial . . . [and even] if the
class definition were [sic] limited
to persons receiving wage
garnishments incorrectly designated
. . . this would lead to endless
mini-trials . . . needed to
ascertain who is within the class,
and whether there was a good reason
to ‘believe’ that the judgment
debtor was not head of family.
(Filing No. 55 at 2) (emphasis in original).
Under Rule 23(b)(3) a “district court may certify a
class action if it ‘finds that the questions of law or fact
common to class members predominate over any questions affecting
only individual members, and that a class action is superior to
other available methods for fairly and efficiently adjudicating
Avritt v. Reliastar Life Ins. Co., 615 F.3d
1023, 1029 (8th Cir. 2010) (quoting Fed. R. Civ. P. 23(b)(3)).
“At the core of Rule 23(b)(3)’s predominance requirement is the
issue of whether the defendant’s liability to all plaintiffs may
be established with common evidence.”
Avritt, 615 F.3d at 1029.
The plaintiff contends “[d]efendants’ practices and
policies are uniform across all class members because every wage
garnishment is reviewed and prepared in exactly the same way.”
(Filing No. 61 at 3).
Plaintiff also argues the same evidence
could be utilized because “no individual inquiry is needed.”
(Id. at 39).
The Court disagrees.
Although plaintiff urges the
Court to focus on the practice and procedure performed by
defendants and although some of the same evidence could be
utilized, plaintiff’s proposed class would require many distinct
Some of these include a determination as to:
(1) which CMS attorney signed the affidavit; (2) the date the
affidavit was signed; (3) whether the individual was in fact the
head of family; (4) whether the individual was designated by CMS
as not head of family; and (5) what steps and processes were
followed by CMS and its attorneys to make the head of household
The list above is not exhaustive but enough for
the Court to determine that Rule 23(b)(3)’s predominance
requirement has not been sufficiently established by the
Therefore, class certification under Rule 23(b)(3)
will be denied.
Plaintiff alternatively requests the Court certify a
class under Rule 23(b)(2).
See Filing No. 52 at 48-50.
23(b)(2) allows for class certification when “the party opposing
the class has acted or refused to act on grounds that apply
generally to the class, so that final injunctive relief or
corresponding declaratory relief is appropriate respecting the
class as a whole.”
Fed. R. Civ. P. 23(b)(2).
certification under Rule 23(b)(2) is proper only when the primary
relief sought is declaratory or injunctive.”
In re St. Jude
Medical, Inc., 425 F.3d 1116, 1121 (8th Cir. 2005).
23(b)(2) does not extend to cases in which the appropriate final
relief relates exclusively or predominately to money damages.”
Clayborne v. Omaha Pub. Power Dist., 211 F.R.D. 573, 599 (D. Neb.
2002) (internal citations omitted).
The Court has determined
that plaintiff has failed to establish his burden to show that
the primary relief sought is declaratory or injunctive rather
than monetary damages.
The Court will deny plaintiff’s motion to
certify a class under Rule 23(b)(2).
Finally plaintiff seeks class certification under a
hybrid of 23(b)(2) and 23(b)(3).
Because the Court denies class
certification under both Rule 23(b)(2) and 23(b)(3) the Court
will deny plaintiff’s hybrid class for the reasons already stated
IT IS ORDERED:
1) Defendants’ motion for summary judgment is denied.
2) Plaintiff’s motions for partial summary judgment and
for class certification are denied.
DATED this 25th day of February, 2016.
BY THE COURT:
/s/ Lyle E. Strom
LYLE E. STROM, Senior Judge
United States District Court
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