Consumer Financial Protection Bureau et al v. Mackinnon et al

Filing 41

DECISION AND ORDER: Plaintiffs' 27 Joint Motion for Judgment on the Pleadings as to Defendants' Counterclaims is GRANTED, and Defendants' [13, 18] counterclaims are DISMISSED. The Clerk of Court is directed to update the caption to reflect the dismissal of these counterclaims. SO ORDERED. Signed by Hon. Frank P. Geraci, Jr. on 1/8/18. (KSB)-CLERK TO FOLLOW UP-

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
CONSUMER FINANCIAL PROTECTION
BUREAU, et al.,
Plaintiffs,
Case # 16-CV-880-FPG
v.
DECISION AND ORDER
DOUGLAS MACKINNON, et al.,
Defendants.

INTRODUCTION
Defendants Enhanced Acquisitions, LLC (“Enhanced”), Northern Resolution Group, LLC
(“NRG”), Delray Capital, LLC (“Delray”), Douglas MacKinnon, and Mark Gray bring these
counterclaims pursuant to the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412 (2012),
against Plaintiffs Consumer Financial Protection Bureau (“CFPB”) and the People of the State of
New York (“the State”). See ECF Nos. 13, 18. Defendants claim that, pursuant to the EAJA, they
are entitled to their fees and expenses incurred.
Plaintiffs filed their Complaint on November 2, 2016. ECF No. 1. On February 27, 2017,
Defendants Enhanced, NRG, and MacKinnon filed their Answer, which includes the counterclaim
at issue. 1 ECF No. 13. Defendants Delray and Gray filed their Answer with a near-identical
counterclaim on March 29, 2017. See ECF No. 18. The CFPB answered the two counterclaims on
March 20, 2017 (ECF No. 17) and April 21, 2017 (ECF No. 22), respectively, and the State
answered on March 9, 2017 (ECF No. 16) and April 10, 2017 (ECF No. 21), respectively. On June

1

Defendants Enhanced, NRG, and MacKinnon filed what appears to be the same document, entitled “Answer and
Counterclaims,” on both February 24, 2017 and February 27, 2017. See ECF Nos. 11, 13. The Court refers to ECF
No. 13 throughout its Decision and Order.

1

8, 2017, the CFPB and State filed their Joint Motion for Judgment on the Pleadings as to
Defendants’ Counterclaims under Federal Rule of Civil Procedure 12(c). ECF No. 27. For the
reasons that follow, Plaintiffs’ Motion is GRANTED.
BACKGROUND
Plaintiffs allege that Defendants created and operated “a massive, illegal debt-collection
scheme” in violation of “the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§
5531(a), 5536(a), the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692p,
N.Y. Executive Law 63(12), and N.Y. General Business Law §§ 349 and 601.” ECF No. 1, at 1–
2. In both of the Answers, Defendants maintain that “Plaintiffs’ investigation, allegation and
prosecution in this matter are not justified and, upon information and belief, were made in violation
of 28 U.S.C. § 2412.” ECF No. 13, at 14; ECF No. 18, at 14. Accordingly, each Answer includes
a counterclaim for Defendants’ “fees, costs, and other further relief.” See ECF No. 13, at 14; ECF
No. 18, at 14.
LEGAL STANDARD
The standard of review for a Rule 12(c) motion for judgment on the pleadings is the same
as that governing a Rule 12(b)(6) motion to dismiss for failure to state a claim. E.g., Cleveland v.
Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006). To be sufficient, a pleading “does not require
‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2002) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). In that vein, “[a] pleading that offers ‘labels and conclusions’
or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Id. (quoting Twombly,
550 U.S. at 555). Rather, “a complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’ ” Id. (quoting Twombly, 550 U.S. at 570). That

2

measure of plausibility requires “more than a sheer possibility that a defendant has acted
unlawfully”—the pleaded facts must permit a “reasonable inference” of liability for the alleged
misconduct. Id.; see also Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (instructing
that “all reasonable inferences” are to be taken in the plaintiff’s favor). Beyond the complaint, a
court ruling on a 12(c) motion also considers “the answer, any written documents attached to [the
complaint or answer], and any matter of which the court can take judicial notice for the factual
background of the case.” E.g., L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir.
2011) (quoting Roberts v. Babkiewicz, 582 F.3d 418, 419 (2d Cir. 2009) (per curiam)).
DISCUSSION
Section (d)(1)(A) of the EAJA provides that, subject to any statutory exceptions,
a court shall award to a prevailing party other than the United States fees and other
expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party
in any civil action (other than cases sounding in tort) . . . brought by or against the United
States in any court having jurisdiction of that action, unless the court finds that the position
of the United States was substantially justified or that special circumstances make an award
unjust.

28 U.S.C. § 2412(d)(1)(A). The Second Circuit has instructed that, with respect to the EAJA, a
“prevailing party” is one that has “achieve[d] some material alteration of the legal relationship of
the parties, [and] the change must also be judicially sanctioned.” Ma v. Chertoff, 547 F.3d 342,
344 (2d Cir. 2008) (quoting Roberson v. Guiliani, 346 F.3d 75, 79 (2d Cir. 2003)) (adopting the
definition of “prevailing party” articulated in Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t
of Health and Human Res., 532 U.S. 598 (2001), for fee requests under the EAJA).
Defendants’ counterclaims must be dismissed as procedurally improper. Defendants
cannot be construed as “prevailing parties” entitled to fees because they have not achieved the
requisite alteration in legal relationship with Plaintiffs. To the contrary, Defendants packaged their
premature fee requests as counterclaims in their respective Answers to Plaintiffs’ Complaint.

3

Tellingly, the EAJA instructs that the proper vehicle for a fee request is an application showing
eligibility after a party has prevailed—not as a counterclaim within an answer. See 28 U.S.C. §
2412(d)(1)(B). Defendants’ counterclaims thus fail to state any claim on which relief can be
granted, and they must be dismissed.
CONCLUSION
For the reasons stated, Plaintiffs’ Joint Motion for Judgment on the Pleadings as to
Defendants’ Counterclaims (ECF No. 27) is GRANTED, and Defendants’ counterclaims (ECF
Nos. 13, 18) are DISMISSED.
IT IS SO ORDERED.
Dated: January 8, 2018
Rochester, New York
______________________________________
HON. FRANK P. GERACI, JR.
Chief Judge
United States District Court

4