Cameron v. LR Credit 22, LLC et al
OPINION & ORDER re: 14 MOTION to Dismiss Complaint filed by Rachel Hisler, Mel S. Harris and Associates, LLC, Mel S. Harris, LR Credit 22, LLC. For the foregoing reasons, the Court DENIES Defendants' motion to dismiss. (Signed by Judge Paul A. Crotty on 2/24/2014) (cd)
. USDC .';J)!\'Y
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
n [; ;Ti·J l:~!\.:. \LLY FILED
---- -._ -_._-- -
2 - PI -II(
13 Civ. 1493 (PAC)
-againstLR CREDIT 22, LLC, MEL S. HARRIS AND
ASSOCIATES, LLC, MEL S. HARRIS ,
RACHEL HISLER, and JOHN DOES # 1- 10,
OPINION & ORDER
HONORABLE PAUL A. CROTTY, United States District Judge:
Plaintiff Paulette Cameron claims that Defendants violated her rights under the Fair Debt
Collection Practices Act ("FDCP A") and related state laws by filing a time-barred lawsuit to
collect a debt from her. Defendants contend that the New York City Civil Court has already
resolved this matter pursuant to a stipulated settlement agreement. Defendants move (I) to
dismiss the complaint for lack of subject matter jurisdiction and (2) for judgment on the
pleadings. See Fed. R. Civ P. 12(b)(1), 12(c). For the reasons below, the motions are DENIED.
Defendants are debt collectors who sought to recover a debt that Cameron allegedly owed
to non-party Chase Bank USA, NA (" Chase,,).l The gravamen of Cameron's Complaint is that
Defendants deceived her into making payments on the debt by filing a time-barred complaint in
New York City Civil Court, Bronx County. (See Compl. ~~ 21 , 33- 34.) Cameron makes her
I Cameron does not dispute that she incurred the debt, but, as discussed below, asserts that Defend ants' state-court
claim to recover the debt was time-barred.
claims under the FDCPA, 15 U.S.c. § 1692d- f; New York General Business Law § 349; and
New York Judiciary Law § 487 2
Defendants filed their debt collection action against Cameron in Civil Court on April 4,
2012 for a cause of action that allegedly arose on December 17,2008. (See Compl.
Cameron alleges that Chase "resides" in Delaware, which subjects the debt to Delaware's threeyear statute oflimitations pursuant to New York 's borrowing statute. (Com pI.
27- 31 (citing
N.Y. C.P.L.R. § 202; Del. Code Ann. tit. 10, § 8106).) Cameron does not seek to recover the
funds she was induced to pay, but rather seeks damages for her pain and suffering, lost time, and
costs that she allegedly incurred from the lawsuit against her, in addition to applicable statutory
Defendants respond that the Complaint omits an important and judicially noticeable fact:
the parties agreed to a Stipulation of Settlement in the Civil Court that resolved this dispute. The
Settlement provided that Cameron would pay $550 in monthly installments of $25 (substantially
less than the amount claimed, $1,302), but that in the event of Cameron's default, the Civil Court
would enter judgment for the full amount claimed. The Settlement further provided that:
Any counterclaim set forth by or for [Cameron] is discontinued with prejudice.
Further, any and all potential defenses [Cameron] may have regarding this matter
and any other claims [Cameron] may have to date against [LR Credit 22, LLC] or
its counsel related to this matter are hereby waived.
(Wortman Decl. Ex. D.) Judge Elizabeth Taylor of the Civil Court "so ordered" this Stipulation
of Settlement on June 18, 2012. After Cameron defaulted on making payments, the Civil Court
entered judgment on the full amount claimed (adjusted for payments, costs, and interest).
2 The claims under New York Judiciary law are made only against Mel S. Harris and Associates, LLC, Mel S.
Harris, and Rachel Hisler, on the grounds that they are attorn eys who engaged in "deceit or collusion." (Co mpl.
60-62 (citing N.Y. Judiciary Law § 487).)
"The standard for granting a Rule l2(c) motion for judgment on the pleadings is identical
to that of a Rule 12(b)(6) motion for failure to state a claim." Patel v. Contemporary Classics of
Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001). That is, " [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. ", Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Upon a motion to dismiss, "[c]ourts may also properly
consider 'matters of which judicial notice may be taken, or documents either in plaintiffs'
possession or of which plaintiffs had knowledge and relied on in bringing suit. ", Halebian v.
Berv, 644 F.3d 122, 13 I n.7 (2d Cir. 2011).3 "Judicial notice may encompass the status of other
lawsuits in other courts and the substance of papers filed in those actions." Schenk v. Citibank,
No. 10-CV-5056, 2010 WL 5094360, at *2 (S.D.N.Y. Dec. 9, 2010).
Threshold Questions: Rooker-Feldman and Res Judicata
Defendants contend that there are two distinct, but related, threshold grounds for
dismissal: (I) under the Rooker- Feldman doctrine, the Court lacks subject matter jurisdiction
over the action because it invites review of a state court judgment; and (2) Cameron's claims are
barred by the doctrine of res judicata because they are inconsistent with the state-court
judgment. Neither argument is persuasive.
The Rooker- Feldman doctrine is inapplicable to this case. "[F]ederal plaintiffs are not
A court may also consider evidence outside the complaint to detemune whether it has subject matter jurisdiction.
See Korea Exp. USA, Inc. v. KKD. Imports, Inc., 103 F. Supp. 2d 682, 686 (S.D.N.Y. 2000).
subject to the Rooker- Feldman bar unless they complain of an injury caused by a state
judgment." Hoblockv. Albany Cnty. Bd. ofElections, 422 F.3d 77, 87 (2d Cir. 2005). Here,
Cameron complains about the allegedly deceptive means that Defendants used to induce her to
agree to the Settlement, not about the Settlement itself or the judgment enforcing it. Therefore,
Defendants' "argument fails, as plaintifq] assert[s] claims independent of the state-court
judgment and dol es] not seek to overturn [it]." Sykes v. Mel Harris & Associates, LLC, 757 F.
Supp. 2d 413, 429 (S.D.N.Y. 2010) (Chin, J.).
B. Res Judicata
Nor does res judicata bar Cameron's claims. Under New York law,4 "the doctrine of res
judicata gives 'binding effect to the judgment of a court of competent jurisdiction and prevents
the parties to an action, and those in privity with them, from subsequently relitigating any
questions that were necessarily decided therein.'" Watts v. Swiss Bank Corp., 265 N.E.2d 739,
743 (N.Y. 1970); accord Gramatan Home Investors Corp. v. Lopez, 386 N.E.2d 1328, 1331
(N.Y. 1979). "New York, unlike the federal system, does not have a compulsory counterclaim
rule, and, therefore, res judicata does not bar claims that could have been raised by the defendant
as counterclaims in a previous action but were not actually raised." Associated Fin. Corp. v.
Kleckner, No. 09-CV-3895, 2010 WL 3024746, at *3 (S.D.N.Y. Aug. 3, 2010) (citing Pace v.
Perk, 440 N.Y.S.2d 710,719-20 (App. Div. 2d Dep't 1981)), ajJ'd, 480 F. App'x 89 (2d Cir.
2012). In other words, a plaintiff is not "barred from asserting his claims simply because he
could have, had he so chosen, asserted them by way of defense or counterclaim in the action
"Under the full faith and credit statute, federal courts afford state court judgments the same preclusive effect as
would other courts in that state. Therefore, New York law governs this Court's resjudic3t3 analysis." Associated
Fin . Corp. v. Kleckner, No. 09-CV-3895, 20 10 WL 3024746, at *3 (S.D.N.Y. Aug. 3, 2010) (citations omitted),
ajJ'd. 480 F. App' x 89 (2d CiT. 2012).
already concluded." Abdella v. NeJame, 501 N.Y.S.2d 528, 529 (App . Div. 3d Dep 't 1986); cf
Schuykill Fuel Corp. v. B. & C. Nieberg Realty Corp., 165 N.E. 456, 457 (N.Y. 1929) (Cardozo,
J.) ("[The former judgment] is not conclusive, however, to the same extent when the two causes
of action are different, not in form only, but in the rights and interests affected.") (citations
Here, the Civil Court' s judgment determined Cameron's liability pursuant to the
Settlement, which she does not challenge in this action. Again, Cameron ' s claims relate to
Defendants ' alleged misconduct that preceded the Settlement and subsequent judgment.
Although she might have raised these allegations as defenses or counterclaims, New York law
did not require her to do so. Thus, her claims in this action were not "necessarily decided" in the
prior action, nor are they inconsistent with the Civil Court' s judgment. Furthermore, since the
judgment was entered pursuant to the Settlement, it required no determination of the timeliness
of the underlying complaint. See Restatement (Second)
0/ Contracts § 82(1) (1981) (a promise
to pay a time-barred debt is enforceable). Accordingly, as a matter of res judicata, the Civil
Court's judgment does not preclude the claims Cameron asserts here.
Cameron did not unambiguously release her present claims in the Stipulation of
Settlement, in what was arguably a time-baITed action. Defendants contend that Cameron's
"waive[r]" of "any other claims [she] may have" released them from her present claims for
deceptive debt-collection techniques. Given that she did not know of her claims or the alleged
deception when she signed the waiver, Defendants ' argument does not withstand scrutiny.
Under New York law, " [a] release will not be given effect unless it contains an ' explicit,
unequivocal statement of a present promise to release [a party] from liability." Golden Pac.
Bancorp v. F.D.I. c. , 273 F.3d 509, SIS (2d Cir. 2001). Thus, "a release may not be read to
cover matters which the parties did not desire or intend to dispose of." Cahill v. Regan, 157
N.E.2d 505, 510 (N.Y. 1959); see Maddaloni Jewelers, Inc. v. Rolex Watch U. S.A., Inc., 354 F.
Supp. 2d 293, 299 (S.D.N.Y. 2004) ("A release that employs general terms will not bar claims
outside the parties' contemplation at the time the release was executed."). "Moreover, because
the ' law looks with disfavor upon agreements intended to absolve [a party] from the
consequences of his [wrongdoing] ,' a release which purports to excuse a party from
responsibility for misconduct is subject to the ' closest of judicial scrutiny. ", Golden Pac.
Bancorp, 273 F.3d at SIS. Cj Restatement (Second) of Contracts § 153 (1981) (a party' s
unilateral material mistake renders a contract voidable if that party did not assume the risk of
mistake and "the other party had reason to know of the mistake or his fault caused the mistake").
Given the allegations of Defendants' misconduct in inducing Cameron to agree to the
Settlement that Defendants drafted, it is appropriate to subject the Settlement's terms to the
"closest of judicial scrutiny." Such scrutiny is particularly important where, as here, a settlement
purports to waive the very statutory remedies intended to protect unsophisticated, unrepresented,
individual creditors like Cameron. See generally 15 U.S.C. § 1692 (FDCPA intended to prevent
"abusive, deceptive, and unfair debt collection practices"). Here, the Settlement contains no
"explicit, unequivocal" statement that Cameron intended to waive claims for deceptive debt
collection practices. Thus, it would be error for the Court to construe the Settlement's general
waiver of "any other claims" to include claims that were unknown to Cameron and about which
Defendants had deceived her. See Nikkel v. Wakefield & Assocs. , No. 10-CV-02411 , 2011 WL
4479109, at *4 (D. Colo. Sept. 26, 2011) (denying motion to dismiss FDCPA claims even though
settlement purported to waive them, where plaintiff alleged that "the Settlement Agreement itself
was obtained in a manner that violated the FDCPA,,).5 Since the Settlement does not clearly
evince Cameron' s intention to release unknown FDCPA claims, the Court will not so construe it
on a motion to dismiss. See Golden Pac. Bancorp, 273 F.3d at SIS ("Where contract language is
ambiguous, the differing interpretations of the contract present a triable issue offacl."); see also
Jacobson v. Sassower, 489 N .E.2d 1283, 1284 (N.Y. 1985) (" In cases of doubt or ambiguity, a
contract must be construed most strongly against the party who prepared it, and favorably to a
party who had no voice in the selection of its language").
IV. Adequacy ofFDPCA Claims
Defendants argue that an additional, independent, basis for dismissal is that the
Complaint fails to adequately allege a claim under the FDCP A. That statute prohibits debt
collectors from using "any false, deceptive, or misleading representation or means in connection
with the collection of any debt." IS U.S .C. § 1692e. For example, a debt collector may not
make a "fal se representation of . .. the character, amount, or legal status of any debt .... [or]
threat[en] to take any action that cannot legally be taken .... " Id. § I 692e(2), (5).
Cameron alleges Defendants violated the FDCPA by filing a time-barred lawsuit against
her in Civil Court, which misrepresented the legal status of the debt. Under New York 's six-year
statute oflimitations for contract di sputes, N.Y. C.P.L.R. § 213(2), the lawsuit would have been
timely. Cameron contends, however, that Delaware' s three-year statute, Del. Code Ann. tit. 10 §
8106, barred Defendants' lawsuit in the Civil Court. As explained below, that depends on
5 As Cameron observes, the Settlement's use of the word "waived" rather than "released" further supports a
determination that it is ambiguous with respect to unknown claims. See Chapman v. C/zoiceCare Long Island Term
Disability Plan, 288 F.3d 506, 510 (2d Cir. 2002) ("Federal common law and New York common law both define
waiver as an intentional relinquishment and abandonment of a known right or privilege."); Restatement § 84 cmt. b
(waiver ineffective absent "reason to know the essential facts"). The allegedly unknown fact underl ying the claims
here was that Cameron 's creditor had its principal place of business in Delaware, which, if trlle, wo uld render the
collection complaint time-barred.
whether her original creditor, Chase, "resided" in Delaware when its cause of action arose.
Under New York's "borrowing statute," N.Y. C.P.L.R. § 202, a nonresident who asserts a
"cause of action accruing without the state" must do so within the "limitation periods of both
New York and the jurisdiction where the cause of action accrued." Porifolio Recovery
Associates, LLC v. King, 927 N.E.2d 1059, 1061 (N.Y. 2010). "If the claimed injury is an
economic one, the cause of action typically accrues 'where the plaintiff resides and sustains the
economic impact of the loss.'" fd. For a business organization, "one looks to its State of
incorporation or its principal place of business." Global Fin. Corp. v. Triarc Corp. , 715 N.E.2d
482, 485 (N.Y. 1999). Where a plaintiff sues to collect a debt assigned to it from a bank, the
debt collector "is not entitled to stand in a better position" than the bank. Porifolio, 927 N.E.2d
at 1060-61 (applying Delaware' s three-year statute oflimitations to debt collector where
assignor bank was "incorporated in Delaware and [was] not a New York resident").
The Complaint plausibly alleges that Chase resides in Delaware, on the grounds that its
articles of association state that its "main office" is there. (Compl.
29.) Chase has filed
numerous public documents stating that its "main office," "headquarters," "residence," and
"principal place of business" are in Delaware . (Pl. ' s Br. 7- 10 (citing Keshavarz Decl. Exs. 17).) If that is true,6 Defendants' lawsuit in Civil Court would be time-barred because it was not
brought until after the expiration of Delaware's three-year limitations period.
Therefore, the only remaining question is whether the filing of such a time-barred
At this stage, the Court draws no factual conclusions about Chase's residence. For purposes of this motion to
dismiss, it is sufficient that the Complaint' s allegation about Chase' s residence is "plausible on its face." Jqbal, 556
complaint is a violation of the FDCP A. 7 This Court joins others in concluding that it is. See,
e.g., Diaz v. Portfolio Recovery Associates, LLC, No. 10-CV-3920, 2012 WL 1882976, at *4
(E.D.N.Y. May 24, 2012); Baptist v. Global Holding & lnv. Co., L.L. c." No. 04-CV-2365, 2007
WL 1989450, at *5 (E.D.N.Y. July 9,2007); Beattie v. D.M. Coliections, Inc., 754 F. Supp. 383,
393 (D. Del. 1991). Indeed, "the threatening of a lawsuit which the debt collector knows or
should know is unavailable or unwinnable by reason of a legal bar such as the statute of
limitations is the kind of abusive practice the FDCPA was intended to eliminate." Beattie, 754
F. Supp. at 393 8
For the foregoing reasons, the Court DENIES Defendants' motion to dismiss.
Dated: New York, New York
United States District Judge
the FDCPA is "a strict liability statute," there is no need for a complaint to plead "intentional conduct on the
part of the debt collector." Ellis v. Solomon & Solomon, pc., 591 F.3d 130, 135 (2d Cir. 2010). A debt collector
may, however, plead "bona fide error" as an affirmative defense. IS U.S.C. ~ 1692k(c); Lee v. Kueker & Bn/h, LLP,
12-CV-4662, 2013 WL 3982427, at *5 (S.D.N,Y. Aug. 2, 2013). Defendants have not pleaded this affirmative
defense, though they plead 18 others. (See Answer ~~ 67- 84.)
8 The Court has considered and rejected Defendants' other purported bases for dismissal. For instance, the NoerrPennington doctrine does not apply here. See Sykes, 757 F. Supp. 2d at 429 (rejecting defendants' argument that,
under the Noerr- Penninglon doctrine, they had a First Amendment right to file time-barred lawsuits to collect
debts); Fritz v. Resurgent Capital Servs. , [P, 955 F. Supp. 2d 163, 176 (E.D.N.Y. 2013) (Block, J.) (same;
explaining that the FDCPA's "bona fide error" defense "respects whatever constitutional protections unintentional
misrepresentations enjoy"). Nor does any abstention doctrine apply. See Fritz, 955 F. Supp. 2d at 176 (Colorado
River abstention inapplicable where federal and state actions address different questions and thus are not "parallel").
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