Santana v. Cavalry Portfolio Services, LLC
Filing
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OPINION & ORDER re: 13 MOTION to Dismiss Plaintiff's Complaint: For the foregoing reasons, the Court grants Cavalry's motion insofar as it seeks a stay of litigation as an alternative form of relief. The Court denies Cavalry 39;s motion insofar as it seeks outright dismissal of Santana's complaint. The Court directs the parties to submit a joint letter updating the Court as to the status of the Wallace Action in 60 days, and every 60 days thereafter. The Court furth er directs the parties to submit a joint status letter within 10 days of resolution of any class certification motion or any settlement in Wallace. The Clerk of Court is respectfully directed to terminate the motion pending at docket 13 and to stay this case. (Signed by Judge Paul A. Engelmayer on 11/19/2019) (jwh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IVELISSE SANTANA,
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Plaintiff,
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-v:
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CAVALRY PORTFOLIO SERVICES, LLC,
:
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Defendant.
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19 Civ. 3773 (PAE)
OPINION & ORDER
PAUL A. ENGELMAYER, District Judge:
This case involves alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C.
§ 1692, et seq. (the “FDCPA”), stemming from the use of an allegedly confusing form letter sent
by defendant Cavalry Portfolio Services, LLC (“Cavalry”), in its attempt to collect a debt owed
by plaintiff Ivelisse Santana.
The immediate issue before the Court involves the pending of a parallel, earlier-filed
lawsuit. Four days before Santana initiated this action, a plaintiff in the Eastern District of New
York filed a putative class action lawsuit on behalf of all persons similarly situated in the State of
New York against Cavalry, alleging identical violations of the FDCPA stemming from the use of
the same form letter.
Before the Court is Cavalry’s motion to dismiss. Cavalry argues that the first-filed rule
requires dismissal of Santana’s complaint because the parties, claims, and relief are substantially
similar to those first asserted in the Eastern District of New York lawsuit. Alternatively, Calvary
argues, if the Court does not dismiss Santana’s complaint, it should stay or transfer this case.
For the reasons that follow, the Court stays this litigation.
I.
Background
A.
Factual Background 1
1.
The Parties
Santana is a citizen of New York who resides in Bronx County, New York. Compl. ¶ 5.
Cavalry is a New York Limited Liability Company with its principal place of business in
Westchester County, New York. Id. ¶ 8. Santana alleges that Cavalry regularly attempts, for
profit, to collect debts asserted to be owed to others, including debts allegedly owed by
consumers. Id. ¶¶ 9–11.
2.
The Debt Collection
Santana’s allegations stem from Cavalry’s attempts to collect a debt that she purportedly
owed. According to Santana, the debt at issue arose from transactions she entered primarily for
personal, family, or household purposes, and not in connection with any business. Id. ¶¶ 25–27. 2
Santana alleges that Cavalry acquired the debt via assignment or other transfer. Id. ¶ 30. In an
effort to collect the debt, Cavalry sent an allegedly confusing form letter dated May 1, 2018, to
1
The facts are drawn primarily from the Complaint, Dkt. 1 (“Compl.”). For the purpose of
resolving the motion to dismiss under Rule 12(b)(6), the Court presumes all well-pled facts to be
true and draws all reasonable inferences in favor of plaintiff. See Koch v. Christie’s Int’l PLC,
699 F.3d 141, 145 (2d Cir. 2012). The Court has also taken judicial notice of certain court
filings from the United States District Court for the Eastern District of New York, which Cavalry
attached to its memorandum in support of its motion to dismiss, Dkts. 13-2–5, 13-7. The Court
considers these filings “not for the truth of the matters asserted in the other litigation, but rather
to establish the fact of such litigation and related filings.” Kalimantano GmbH v. Motion in
Time, Inc., 939 F. Supp. 2d 392, 404 (S.D.N.Y. 2013) (quoting Liberty Mut. Ins. Co. v. Rotches
Pork Packers Inc., 969 F.2d 1384, 1388 (2d Cir.1992)); see also, e.g., Staehr v. Hartford Fin.
Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008) (“[I]t is proper to take judicial notice of the
fact that press coverage, prior lawsuits, or regulatory filings contained certain information,
without regard to the truth of their contents.”) (emphasis omitted).
2
The Complaint does not provide further information regarding the nature of the debt Santana
allegedly owed.
2
Santana, conveying information regarding the debt. Id. ¶¶ 30–32. This letter was the first
written communication Santana received from Cavalry. Id. ¶ 34.
Santana alleges that the form letter failed accurately to convey unambiguously, from the
perspective of an unsophisticated consumer, the actual amount of the debt she owed, in violation
of the FDCPA. Id. ¶¶ 36–41. In particular, she alleges, the letter states that “[t]he amount you
owe is the amount stated at the top of this letter as Outstanding Balance,” but the letter does not,
in fact, anywhere designate an amount as the “Outstanding Balance.” Id. ¶¶ 42–44. The letter
also, she states, “buries” within its text a statutorily required notice of the debtor’s right to
dispute the alleged debt. Id. ¶ 66. Additionally, Santana alleges that Cavalry falsely invoked the
threat of reporting information about the debt to credit reporting agencies without, in fact, ever
intending to take such action. Id. ¶¶ 94–96.
B.
The Wallace Litigation
On April 25, 2019, four days before Santana initiated this action, Zakema T. Wallace
initiated a putative class action lawsuit against Cavalry in the Eastern District of New York for
violations of the FDCPA. See Dkt. 13-2 (“Wallace Compl.”); see generally Wallace v. Cavalry
Portfolio Servs., LLC, No. 19 Civ. 2425 (DLI) (JO) (E.D.N.Y. 2019) (the “Wallace Action”).
Wallace, represented by the same counsel as Santana, seeks to certify a class consisting of all
consumers in the State of New York to whom Cavalry sent a similar form collection letter within
one year prior to the date of filing the Wallace Action. Wallace Compl. ¶¶ 101–02.
Wallace’s lawsuit alleged FDCPA violations nearly identical to the ones Santana alleges
here. See Dkt. 13-6 (comparing Wallace and Santana Complaints, paragraph by paragraph); see
generally Dkt. 13-1 ¶¶ 10–12. Like Santana, Wallace alleged that Cavalry violated the FDCPA
in that its form letter does not make clear the amount owed, the statutorily required notice of the
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debtor’s rights is buried within text of the letter, and Cavalry threatened to report information
about Wallace’s debt to credit reporting agencies despite having no intent to do so. See Wallace
Compl. ¶¶ 42–44, 57–89, 94–96.
C.
Procedural History
On April 29, 2019, Santana filed the Complaint against Cavalry, asserting claims for
violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692. Compl. On July 24,
2019, Cavalry filed its motion to dismiss on account of the first-filed doctrine, Dkt. 13, and its
brief in support, Dkt. 13-1 (“Def. Mem.”). On October 14, 2019, Santana filed its opposition.
Dkt. 23 (“Pl. Mem.”). On October 28, 2019, Cavalry filed its reply. Dkt. 24.
II.
Applicable Legal Standards
1.
Motion to Dismiss Pursuant to Rule 12(b)(6)
To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). A claim will only have “facial plausibility when the plaintiff pleads 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). A complaint is properly
dismissed where, as a matter of law, “the allegations in a complaint, however true, could not
raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. Although the court must
accept as true all well-pled factual allegations in the complaint and draw all reasonable
inferences in the plaintiff’s favor, Steginsky v. Xcelera Inc., 741 F.3d 365, 368 (2d Cir. 2014),
that tenet “is inapplicable to legal conclusions,” Iqbal, 556 U.S. at 678.
2.
The First-Filed Rule
The first-filed rule provides that “[w]here there are two competing lawsuits, the first suit
should have priority.” N.Y. Marine and Gen. Ins. Co. v. LaFarge N. Am., Inc., 599 F.3d 102, 112
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(2d Cir. 2010) (quoting D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006)); see
City of New York v. Exxon Corp., 932 F.2d 1020, 1025 (2d Cir. 1991) (“where an action is
brought in one federal district court and a later action embracing the same issue is brought in
another federal court,” the first court has priority “unless there are special circumstances which
justify giving priority to the second action”). The doctrine serves to “avoid duplication of
judicial effort, to avoid vexatious litigation in multiple forums, to achieve comprehensive
disposition of litigation among parties over related issues, and to eliminate the risk of
inconsistent judgments.” Fleet Capital Corp. v. Mullins, No. 03 Civ. 6660 (RJH), 2004 WL
548240, at *4 (S.D.N.Y. Mar. 18, 2004). Because parties “‘should be free from the vexation of
concurrent litigation over the same subject matter,’ there is a strong presumption that a later
lawsuit will be dismissed in favor of the first-filed lawsuit.” Oleg Cassini, Inc. v. Serta, Inc.,
No. 11 Civ. 8751 (PAE), 2012 WL 844284, at *3 (S.D.N.Y. Mar. 13, 2012) (quoting Adam v.
Jacobs, 950 F.2d 89, 93 (2d Cir. 1991)).
For the first-filed rule to apply, the parties and issues must be substantially similar, but
they need not be identical. Regions Bank v. Wieder & Mastroianni, P.C., 170 F. Supp. 2d 436,
441 (S.D.N.Y. 2001); Castillo v. Taco Bell of Am., LLC, 960 F. Supp. 2d 401, 404
(E.D.N.Y. 2013). In determining whether to apply the first-filed doctrine, “the court considers
whether the lawsuits at issue assert the same rights, and seek relief based upon the same facts.”
Castillo, 960 F. Supp. 2d at 404. The rule operates based on the date of the suits’ filing, not on
the date of service. See Schnabel v. Ramsey Quantitative Sys., Inc., 322 F. Supp. 2d 505, 511
(S.D.N.Y. 2004).
In this Circuit, only two “special circumstances” will defeat the strong presumption in
favor of application of the first-filed rule. N.Y. Marine, 599 F.3d at 112 (quoting Emp’rs. Ins. of
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Wausau v. Fox Entm’t Grp., Inc., 522 F.3d 271, 276 (2d Cir. 2008)). First, courts do not apply
the first-filed rule where there has been “manipulative or deceptive behavior on the part of the
first-filing plaintiff.” Id. Second, courts in this Circuit generally will not apply the rule where
the “balance of convenience favors the second-filed action.” Id. Courts determine the “balance
of convenience” by considering the same factors considered in connection with motions to
transfer venue:
(1) the plaintiff’s choice of forum, (2) the convenience of witnesses, (3) the location
of relevant documents and relative ease of access to sources of proof, (4) the
convenience of the parties, (5) the locus of operative facts, (6) the availability of
process to compel the attendance of unwilling witnesses, [and] (7) the relative
means of the parties.
Emp’rs. Ins. of Wausau, 522 F.3d at 275.
“The party seeking to deviate from the rule must
demonstrate that circumstances justifying an exception exist, and it is within the trial court’s
discretion to determine if a departure is warranted.” Pharm. Res., Inc. v. Alpharma USPD, Inc.,
No. 02 Civ. 1015 (LMM), 2002 WL 987299, at *2 (S.D.N.Y. May 13, 2002); see also Oleg
Cassini, 2012 WL 844284, at *8 (“The proponent of the second-filed suit has the burden of
demonstrating that the overall balance of conveniences weighs in favor of its chosen forum in
order to establish this exception to the presumption favoring the first-filed action.”).
III.
Discussion
Cavalry argues that this action should be dismissed or transferred pursuant to the first-
filed rule on account of the earlier-filed Wallace Action. Santana contends that her case is not
similar to the Wallace Action, and thus the first-filed rule is not applicable.
A.
The First-Filed Rule Applies
The Wallace Action is substantially similar to the present suit.
First, the two actions have similar claims; indeed, the complaints in each lawsuit are
virtually identical. See Dkt. 13-6. Each action arises from Cavalry’s use of the same form letter.
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Santana brings the same three claims against Cavalry in this suit as Wallace brought in the
Wallace Action. Compare Compl. ¶¶ 42–44, 57–89, 94–96, with Wallace Compl. ¶¶ 42–44,
57–89, 94–96. As Cavalry notes, the only real distinction is that the Wallace Complaint includes
putative class allegations, while Santana’s does not. However, the claims in the two cases need
not be identical for the rule to apply. “Rather, the core question is whether there are common
violations of law alleged.” Liberty Mut. Ins. Co. v. Fairbanks, 17 F. Supp. 3d 385, 393
(S.D.N.Y. 2014) (internal quotation marks and citation omitted). Clearly, here, there are.
The two actions also involve substantially similar parties. In each action, Cavalry is the
sole defendant. The plaintiff in the Wallace Action seeks to lead a class consisting of “[a]ll
consumers to whom [Cavalry] sent a collection letter substantially and materially similar to the
letter sent to [p]laintiff, which letter was sent on or after a date one year prior to the filing of this
action to the present.” Wallace Compl. ¶ 102. On the face of her complaint, Santana fits
squarely within this class.
Santana counters that the parties in the two actions must either be identical in both
actions or, in the case of a putative class action, the class must be certified for the parties to be
considered similar. However, in this Circuit, the first-filed rule applies where the competing
litigations involve merely similar issues and parties. See, e.g., Oleg Cassini, 2012 WL 844284,
at *3 (“For the rule to apply, the claims, parties, and available relief must not significantly differ
between the actions. However, the issues need not be identical, and the named parties need not
be entirely the same.” (internal quotation marks and citation omitted)); Thomas v. Apple-Metro,
Inc., No. 14 Civ. 4120 (VEC), 2015 WL 505384, at *2 (S.D.N.Y. Feb. 5, 2015) (collecting
cases). That a first-filed class action has not yet reached the class certification stage does not
prevent application of the first-filed rule. See, e.g., Baatz v. Columbia Gas Transmission, LLC,
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814 F.3d 785, 790 (6th Cir. 2016) (first-filed rule applies when “there is substantial overlap with
the putative class even though the class has not yet been certified”); cf. Bukhari v. Deloitte &
Touche LLP, No. 12 Civ. 4290 (PAE), 2012 WL 5904815, at *4 (S.D.N.Y. 2012) (declining to
apply first-filed rule only after finding that “there are no common legal claims between this case
and Berndt . . . [and] the putative classes in Berndt and in this case do not overlap”).
Santana’s assertion that the only similarity between her case and the Wallace Action is
that the plaintiffs are represented by the same counsel blinks reality. The claims and parties in
each case are not only substantially similar—the complaints are nearly identical. “There is
simply no reason for this Court to decide nearly identical questions of law and fact as those now
being adjudicated in the Eastern District . . . with regard to the same requested relief, the same
Defendants and the same class of plaintiffs.” See Thomas, 2015 WL 505384, at *4.
Further, no special circumstances defeat the application of the first-filed rule here.
Santana bears the burden of demonstrating that “circumstances justifying an exception [to the
first-filed rule] exist.” Pharm. Res., Inc., 2002 WL 987299, at *2; see also Oleg Cassini, 2012
WL 844284, at *8 (same). Santana, however, has not responded at all to Cavalry’s argument that
no special circumstances exist here, much less carried her burden on that point. See, e.g., W.
Bulk Carriers KS v. Centauri Shipping Ltd., No. 11 Civ. 5952 (RJS), 2013 WL 1385212, at *4
n.4 (S.D.N.Y. Mar. 11, 2013) (“[A] party ‘concedes through silence’ arguments by its opponent
that it fails to address.” (quoting In re UBS AG Secs. Litig., No. 07 Civ. 11225 (RJS), 2012 WL
4471265, at *11 (S.D.N.Y. Sept. 28, 2012))); First Capital Asset Mgmt., Inc. v. Brickellbush,
Inc., 218 F. Supp. 2d 369, 392–393 & n.116 (S.D.N.Y. 2002) (considering argument not
addressed in opposition brief waived). For the avoidance of doubt, however, the Court finds
that: (i) there has been no manipulative behavior on the part of the first-filing plaintiff that would
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justify an exception, given that plaintiffs in each action are represented by the same counsel; and
(ii) the balance of conveniences does not tip in Santana’s favor, because the first-filed case is
proceeding in a federal court in such close proximity to this one and a second-filing plaintiff’s
choice of forum “is not entitled to substantial weight,” Wyler-Wittenberg v. MetLife Home
Loans, Inc., 899 F. Supp. 2d 235, 249 (E.D.N.Y. 2012). The first-filed rule, therefore, applies in
full force here.
B.
A Stay Is Warranted
Where the first-filed rule applies, a court may dismiss the second-filed case, transfer it to
the first-filed district, or stay the second case pending resolution of the first-filed case. Thomas,
2015 WL 505384, at *2; see Adam, 950 F.2d at 93 (“Under the first-filed rule, a district court is
vested with broad discretion to dismiss, stay, or transfer a suit that is found to be duplicative of a
previously filed action.”). In determining which remedy is proper, a court must consider the
goals of the doctrine—to “avoid duplication of judicial effort . . . and eliminate the risk of
inconsistent adjudication.” Regions Bank, 170 F. Supp. 2d at 439 (citations omitted).
A stay of litigation represents a better-tailored resolution than transfer or dismissal here.
Although the parties did not address the issue in their briefing, transfer to the first-filed district
may not be an appropriate disposition where, as here, plaintiff and defendant each reside in this
district, and a substantial portion of the events giving rise to the claim occurred here. See
28 U.S.C. § 1391. Cavalry has not supplied a basis on which the Court could conclude that
Santana’s case could have been brought in the Eastern District of New York in the first place.
See id. §§ 1391, 1404.
Cavalry argues that dismissal of Santana’s claim is the proper application of the first-filed
rule here. Cavalry argues that such an outcome leaves Santana with her claims and options
intact. See Def. Mem. at 12–13. Specifically, Calvary notes, if the putative class in the Wallace
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Action—of which Santana undisputedly would be a member—is certified and succeeds in
litigation on the merits, Santana would be able to recover statutory damages under the FDCPA in
her capacity as a class member, just as she seeks here as an individual plaintiff. 3 See 15 U.S.C.
§ 1692k(a)(2). And, if the Wallace class were certified and resulted in a class settlement with
which Santana was dissatisfied, Santana would be able to opt out or object. Fed. R. Civ. P.
23(c)(2)(b), (e)(4)–(5). Alternatively, Calvary notes, if the class were not certified, Santana’s
individual claim would survive and would have been tolled for as long as the Wallace Action
endured as a putative class action, and Santana could then pursue an individual action such as the
one here. See China Agritech, Inc. v. Resh, 138 S. Ct. 1800, 1806–07 (2018) (citing Am. Pipe &
Constr. Co. v. Utah, 414 U.S. 538, 553 (1974)).
Calvary’s central point is correct—that there is no good reason for both the Wallace
litigation and Santana’s later-filed lawsuit to proceed forward in tandem on the merits. Such
would be wasteful and non-productive. Indeed, the “needless multiplicity of actions filed by
class members” is “precisely the situation that Federal Rule of Civil Procedure 23 and the tolling
rule of American Pipe were designed to avoid.” Id. at 1806 (internal quotation marks and
citation omitted).
As between stay or dismissal, however, Calvary overreaches. Had Santana brought class
claims tracking those brought in Wallace, dismissal of her putative class allegations would be
appropriate. See Castillo, 960 F. Supp. 2d at 405 (dismissing second-filed class claims and
directing plaintiff to advise whether he intended to pursue individual claims or opt into the
class); Thomas, 2015 WL 505384, at *5 (same). However, because Santana brings only
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Indeed, Santana’s own counsel has argued in the Wallace case that—with regard to claims
against Cavalry for use of its form letter—“[a] class action is superior to other available methods
for the fair and efficient adjudication of this controversy.” Wallace Compl. ¶ 105.
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individual claims, a stay of this lawsuit pending resolution of the putative class claims in the
Wallace Action is a better-tailored solution than dismissal here. See Thomas, 2015 WL 505384,
at *5 (“In the event that Plaintiff wishes to pursue her individual claims before this Court, her
case will be stayed pending resolution of the [first-filed class actions].”). Among other virtues,
in the event that a class is not certified in that litigation or that Santana opts out of a certified
class, the Court would need only to lift the stay here for her individual claim to proceed.
Given the nearly identical claims, parties, facts, and law at issue here and in the Wallace
Action, as well as Santana’s representation by the same counsel as the putative class counsel in
Wallace, the first-filed rule clearly applies. A stay of this case will fulfill the doctrine’s goals of
achieving fairness and comprehensive disposition of litigation while avoiding inconsistent
adjudications and duplication of judicial effort and other inefficiencies.
CONCLUSION
For the foregoing reasons, the Court grants Cavalry’s motion insofar as it seeks a stay of
litigation as an alternative form of relief. The Court denies Cavalry’s motion insofar as it seeks
outright dismissal of Santana’s complaint.
The Court directs the parties to submit a joint letter updating the Court as to the status of
the Wallace Action in 60 days, and every 60 days thereafter. The Court further directs the
parties to submit a joint status letter within 10 days of resolution of any class certification motion
or any settlement in Wallace.
The Clerk of Court is respectfully directed to terminate the motion pending at docket 13
and to stay this case.
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