POUNDS, et al v. PORTFOLIO RECOVERY ASSOCIATES, LLC
Filing
37
MEMORANDUM OPINION AND ORDER signed by JUDGE WILLIAM L. OSTEEN, JR. on 3/28/2018. Plaintiffs' Motion to Remand (Doc. 11 ) is GRANTED IN PART and DENIED IN PART. The claims of Plaintiffs Pounds, Miller, Sayaphet-Tyler, and Hall are REMANDED to the General Court of Justice, Superior Court Division, Durham County, North Carolina, for further disposition. The motion is DENIED as to the claims of Plaintiff Pia Townes. FURTHER ORDERED that the Clerk of Court is directed to send a certified c opy of this Memorandum Opinion and Order to the Clerk of Superior Court in Durham County. FURTHER ORDERED that Plaintiffs' Motion for Expedited Determination of Motion to Remand (Doc. 22 ) is DENIED AS MOOT. FURTHER ORDERED that Plaintiffs& #039; Motion to Defer Time to File Federal Motion for Class Certification (Doc. 27 ) is GRANTED as to Plaintiff Pia Townes and DENIED AS MOOT as to remaining Plaintiffs. Plaintiff Townes shall have sixty (60) days from the date of this Order to file any motion for class certification as prescribed by LR 23.1 and Fed. R. Civ. P. 23(c)(1). (Daniel, J)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
IRIS POUNDS, CARLTON MILLER,
VILAYUAN SAYAPHET-TYLER,
RHONDA HALL, and PIA TOWNES,
on behalf of themselves and
all others similarly situated,
Plaintiffs,
v.
PORTFOLIO RECOVERY ASSOCIATES,
LLC,
Defendant.
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1:16CV1395
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., District Judge
This matter comes before the court on Plaintiffs’ Motion to
Remand. (Doc. 11.) Defendant Portfolio Recovery Associates, LLC
(“PRA”) responded, (Doc. 17), and Plaintiffs replied, (Doc. 21).
An oral argument was held October 5, 2017, and the parties
submitted supplemental briefing. (Docs. 32-33, 35-36.) This
matter is now ripe for resolution, and, for the reasons stated
fully below, the court will grant in part and deny in part
Plaintiffs’ Motion to Remand.
Also before the court are Plaintiffs’ Motion for Expedited
Determination of Motion to Remand, (Doc. 22), and Motion to
Defer Time to File Federal Motion for Class Certification, (Doc.
27). These motions have been briefed and are also ripe for
resolution. (Docs. 23, 28, 29.) This court will deny Plaintiffs’
Motion to Expedite as moot and, having considered the parties’
arguments, will grant in part and deny as moot in part the
Motion to Defer Time to File Federal Motion for Class
Certification.
I.
PROCEDURAL HISTORY
Plaintiffs commenced the present putative class action in
Durham County in the Superior Court Division of the General
Court of Justice of the State of North Carolina on November 21,
2016, against Defendant PRA. (Class Action Complaint (“Compl.”)
(Doc. 3) at 1.)1 Defendant was served on November 21, 2016.
(Notice of Removal (“NOR”) (Doc. 1) at 2; Civil Summons (Doc.
4).)
Defendant filed its NOR in this court on December 9, 2016,
(NOR (Doc. 1) at 3), on the basis of diversity jurisdiction
pursuant to the Class Action Fairness Act of 2005 (“CAFA”). 28
All citations in this Memorandum Opinion and Order to
documents filed with the court refer to the page numbers located
at the bottom right-hand corner of the documents as they appear
on CM/ECF.
1
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U.S.C. §§ 1332(d), 1453.2 In the NOR, Defendant, relying on
Plaintiffs’ allegations and its own assertions, alleged complete
diversity of citizenship, an aggregate amount in controversy
exceeding $5 million, and a proposed class size greater than 100
persons. (NOR (Doc. 1) at 3-4.) Plaintiffs move this court under
28 U.S.C. § 1447(c) to remand the case on the grounds that the
court lacks jurisdiction over the claims pursuant to the RookerFeldman doctrine. (Mot. to Remand (Doc. 11) at 1-2.)
II.
BACKGROUND
Plaintiffs’ Complaint seeks to set aside certain default
judgments obtained by PRA in North Carolina state courts, and
seeks to recover actual damages and civil penalties for alleged
violations of N.C. Gen. Stat. §§ 58-70-115(7), 58-70-130, and
58-70-155. (Compl. (Doc. 3) at 1-2, 6-7, 12-17.)
PRA is a debt buyer and collection agency under North
Carolina law. See N.C. Gen. Stat. §§ 58-70-15(b)(4), 58-70-155.
As a debt buyer, PRA is required to file certain “properly
authenticated” evidence with a court “[p]rior to entry of a
Subject to exceptions not applicable here, § 1332(d)
creates federal jurisdiction over class actions in which the
amount in controversy exceeds $5 million, exclusive of interests
and costs; any member of the class is a citizen of a state
different from any defendant; and the “number of members of all
proposed plaintiff classes” equals 100 or more when aggregated.
28 U.S.C. § 1332(d).
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default judgment” against a debtor. See id. § 58-70-155. Rule
55(b) of the North Carolina Rules of Civil Procedure also
governs the entry of default judgments. Id. § 1A-1, Rule 55(b).
When a plaintiff’s claim is for a “sum certain or for a sum
which can by computation be made certain,” then the clerk has
the authority to enter a default judgment. Id. § 1A-1, Rule
55(b)(1). Absent a sum certain, the default judgment must be
entered by a judge. Id. § 1A-1, Rule 55(b)(2).
Since § 58-70-155 became effective in October 2009, PRA has
filed thousands of lawsuits in North Carolina state courts in
which it subsequently obtained default judgments. (Compl. (Doc.
3) ¶¶ 32-35.) PRA obtained default judgments against each of the
named plaintiffs in this action. (Id. ¶¶ 26-31.) Plaintiffs
claim that “PRA failed to satisfy the [§] 58-70-155
prerequisites that required it to file properly authenticated
business records providing an itemization of the amount claimed
to be owed.” (Id. ¶ 26.) Plaintiff Pia Townes has additionally
filed and been granted a motion pursuant to Rule 60(b) of the
North Carolina Rules of Civil Procedure to set aside her default
judgment. (Id. ¶¶ 31, 39.)
Plaintiffs filed this action seeking relief on behalf of
“[a]ll persons against whom PRA obtained a default judgment
entered by a North Carolina court in a case filed on or after
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October 1, 2009.” (See id. ¶ 15.) On behalf of all proposed
class members whose default judgments have not yet been vacated,
Plaintiffs’ first claim (“Claim I”) seeks a declaratory judgment
that the default judgments violate § 58-70-155 (and, in some
cases, Rule 55(b)(1)) and are void, and seeks an associated
injunction requiring PRA to cease collection activity and file
notices of vacatur. (Id. ¶¶ 50-57.)
On behalf of all class members, Plaintiffs’ second claim
for relief (“Claim II” or “statutory penalties claim”) seeks
statutory penalties authorized by N.C. Gen. Stat. § 58-70130(b). (Id. ¶¶ 58-63.) Section 58-70-130 imposes civil
liability in the form of actual damages and statutory penalties
on collection agencies that engage in prohibited practices,
including specific “unfair practices.” § 58-70-115. One such
unfair practice is “[f]ailing to comply with Part 5 of this
Article.” Id. § 58-70-115(7). Part 5 includes § 58-70-155,
entitled “Prerequisites to entering a default or summary
judgment against a debtor under this Part.” Id. § 58-70-155.
Plaintiffs thus claim that PRA violated § 58-70-115(7) by
“requesting and obtaining default judgments” that do not conform
to § 58-70-155’s prerequisites, entitling them to statutory
penalties under § 58-70-130(b). (Compl. (Doc. 3) ¶¶ 59-61.)
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Similarly, Plaintiffs’ third claim for relief (“Claim III”
or “actual damages claim”) seeks actual damages authorized by
§ 58-70-130(a) in the amount PRA has collected from the
Plaintiffs’ default judgments, on behalf of any proposed class
members who made post-default-judgment payments to PRA. (Compl.
(Doc. 3) ¶¶ 64-66.)
III. ANALYSIS
Plaintiffs argue that this court lacks subject matter
jurisdiction over this action under the Rooker-Feldman3 doctrine.
(Plaintiffs’ Brief in Support of Motion to Remand (“Pls.’ Br.”)
(Doc. 12); Plaintiffs’ Reply Brief in Support of Motion to
Remand (Doc. 21).) The Rooker-Feldman doctrine is a
jurisdictional doctrine that prohibits federal district courts
from “‘exercising appellate jurisdiction over final state-court
judgments.’” See Thana v. Bd. of License Comm’rs, 827 F.3d 314,
319 (4th Cir. 2016) (quoting Lance v. Dennis, 546 U.S. 459, 463
(2006) (per curiam)). The presence or absence of subject matter
jurisdiction under Rooker-Feldman is a threshold issue that this
D.C. Ct. of App. v. Feldman, 460 U.S. 462 (1983); Rooker
v. Fid. Tr. Co., 263 U.S. 413 (1923).
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court must determine before considering the merits of the case.
Friedman’s, Inc. v. Dunlap, 290 F.3d 191, 196 (4th Cir. 2002).
Although Rooker-Feldman originally limited federal-question
jurisdiction, the Supreme Court has recognized the applicability
of the doctrine to cases brought under diversity jurisdiction:
Rooker and Feldman exhibit the limited
circumstances in which this Court’s appellate
jurisdiction over state-court judgments, 28 U.S.C.
§ 1257, precludes a United States district court from
exercising subject-matter jurisdiction in an action it
would otherwise be empowered to adjudicate under a
congressional grant of authority, e.g., § 1330 (suits
against foreign states), § 1331 (federal question),
and § 1332 (diversity).
See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280,
291-92 (2005). Diversity proceedings removed to federal court
under CAFA, likewise, are within the doctrine’s purview. See,
e.g., Dell Webb Cmtys., Inc. v. Carlson, 817 F.3d 867, 872 (4th
Cir.), cert. denied, ____ U.S. ____, 137 S. Ct. 567 (2016);
Bergquist v. Mann Bracken, LLP, 592 F.3d 816, 818 (7th Cir.
2010); Murray v. Midland Funding, LLC, Civil No. JKB-15-0532,
2015 WL 3874635, at *1, *3-4 (D. Md. June 23, 2015).
Under the Rooker-Feldman doctrine, courts lack subject
matter jurisdiction to hear “cases brought by [1] state-court
losers complaining of [2] injuries caused by state-court
judgments [3] rendered before the district court proceedings
commenced and [4] inviting district court review and rejection
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of those judgments.” Exxon, 544 U.S. at 284. The doctrine is
“narrow and focused.” Thana, 827 F.3d at 319. “[I]f a plaintiff
in federal court does not seek review of the state court
judgment itself but instead ‘presents an independent claim, it
is not an impediment to the exercise of federal jurisdiction
that the same or a related question was earlier aired between
the parties in state court.’” Id. at 320 (quoting Skinner v.
Switzer, 562 U.S. 521, 532 (2011)). Rather, “any tensions
between the two proceedings should be managed through the
doctrines of preclusion, comity, and abstention.” Id. (citing
Exxon, 544 U.S. at 292–93).
A.
PRA’s argument that a proposed threshold test must be
met
PRA asserts that Exxon “established a two-part test” and
argues that all of Plaintiffs’ claims fail the first,
“threshold” step of the test. (Brief in Opposition to
Plaintiffs’ Motion to Remand and Request for Oral Argument
(“Def.’s Br.”) (Doc. 17) at 4-11.) First, PRA asserts that void
judgments are categorically carved out of the doctrine. (Id. at
5-6 (citing Rooker, 263 U.S. at 415-16).) At the outset, this
court notes that it is not convinced that, even if Plaintiffs
prove their claims, that the judgments they challenge are void.
While this court must take Plaintiffs’ factual allegations as
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true as this stage, it is not bound by Plaintiffs’ legal
conclusion — that § 58-70-155 is jurisdictional — that forms the
basis of its voidness argument and vacatur request. Plaintiffs
allege one fact in support of their legal conclusion: that PRA
failed to file properly authenticated evidence of the debt in
accordance with § 58-70-155 and, in certain cases, Rule
55(b)(1). But that fact alone is not necessarily enough to
establish that the state courts lacked subject matter
jurisdiction over the proceedings. Cf. Pak v. Unifund CCR
Partners, No. 7:13-CV-70-BR, 2014 WL 238543, at *9 (E.D.N.C.
Jan. 22, 2014) (describing § 58-70-155 as imposing
“conditions”).
Moreover, the state court in each of Plaintiffs’ cases made
a finding that the personal and subject matter jurisdiction
requirements under state law were met before entering the
default judgment. Perhaps, if this court were to review
Plaintiffs’ claims on the merits, it would find that the default
judgments were merely voidable — that is, entered erroneously
based on the sufficiency of the evidence PRA provided — and
subject to reversal. In any event, courts applying
Rooker-Feldman may not “challenge the state decision,” see
Davani v. Va. Dep’t of Transp., 434 F.3d 712, 719 (4th Cir.
2006), including but not limited to entertaining a plaintiff’s
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request to “declare void a state court judgment,” see Horowitz
v. Cont’l Cas. Co., 681 F. App’x 198, 200 (4th Cir. 2017) (per
curiam); see also Chien v. Grogan, 710 F. App’x 600, 600-01 (4th
Cir. 2018) (per curiam). Therefore, this court declines to adopt
PRA’s proposed rule.
PRA next argues that Rooker-Feldman is only applicable to
claims implicating certiorari jurisdiction under 28 U.S.C.
§ 1257 and is therefore inapplicable to Plaintiffs’ claims
because they rest exclusively on state law grounds and are not
“‘a final judgment from the highest court of a State in which a
decision could be had.’” (Def.’s Br. (Doc. 17) at 7-11 & n.6
(quoting Thana, 827 F.3d at 321).) While the Fourth Circuit in
Thana emphasized the narrowness of Rooker-Feldman, that case
dealt with review of the actions of a state administrative
agency, not a state court, with the Court ultimately concluding
that “[a]t bottom, . . . this federal action, commenced . . .
under 42 U.S.C. § 1983 and alleging injury inflicted by actions
of a state administrative agency, qualifies as an independent,
concurrent action that does not undermine the Supreme Court’s
appellate jurisdiction over state court judgments[.]” Thana, 827
F.3d at 322–23. This court does not read Thana’s holding to
overrule its prior binding precedent that Rooker-Feldman may
apply to final judgments from lower state courts. See Brown &
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Root, Inc. v. Breckenridge, 211 F.3d 194, 199 (4th Cir. 2000)
(recognizing that Rooker-Feldman precludes review of lower court
state judgments); see also Johnson v. Byrd, No. 1:16CV1052, 2016
WL 6839410, at *5–7 (M.D.N.C. Nov. 21, 2016), appeal dismissed,
693 F. App’x 219 (4th Cir. 2017) (per curiam). Courts routinely
recognize that diversity cases may implicate Rooker-Feldman.
See, e.g., Dell Webb Cmtys., 817 F.3d at 870-72 (analyzing
whether Rooker-Feldman barred review of a suit brought under
diversity jurisdiction and rejecting Rooker-Feldman’s
applicability on other grounds); see also Exxon, 544 U.S. at 291
(recognizing the applicability of Rooker-Feldman to diversity
cases). The Fourth Circuit has declined to adopt a threshold
test for any of the categories Defendant urges. See, e.g.,
Thana, 827 F.3d at 321-23; Dell Webb Cmtys., 817 F.3d at 872;
Horowitz, 681 F. App’x at 200. This court accordingly declines
to adopt Defendant’s threshold test.
B.
PRA’s argument that Rooker-Feldman does not apply when
the action would be allowed in state court
PRA argues that Plaintiffs’ characterization of their
Complaint as an independent action precludes application of
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Rooker-Feldman. (See Def.’s Br. (Doc. 17) at 16-17.)4 At oral
argument and in supplemental briefing, PRA reiterated its
position that the doctrine does not apply where the action in
federal court “would be allowed in the state court of the
rendering state” because Plaintiffs could have brought (and did
bring) their action in state court. (Transcript of Oral Argument
(“Tr.”) (Doc. 34) at 38:2-41:25); PRA’s Supplemental Memorandum
in Opposition to Plaintiffs’ Motion to Remand (“Def.’s Suppl.
Mem.”) (Doc. 33) at 2-3 (quoting Davis v. Bayless, 70 F.3d 367,
376 (5th Cir. 1995)); PRA’s Response to Plaintiffs’ Supplemental
Brief (Doc. 36) at 1-3.)
However, the cases cited by PRA were not, as outlined by
Exxon, “brought by state-court losers complaining of injuries
caused by state-court judgments rendered before the district
court proceedings commenced and inviting district court review
and rejection of those judgments.” Exxon, 544 U.S. at 284.
Therefore, the court finds them to be of limited utility in its
analysis. See, e.g., Standard Oil Co. of Cal. v. United States,
PRA also argues that this court should address PRA’s
pending Motion to Dismiss regardless of Rooker-Feldman. (Def.’s
Br. (Doc. 17) at 15-16.) That motion remains under advisement,
but because Rooker-Feldman is jurisdictional, this court notes
that it must address the doctrine’s applicability before
proceeding to the merits of any claims. See Friedman’s, 290 F.3d
at 196.
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429 U.S. 17, 17-19 (1976) (per curiam) (plaintiff’s challenge
was not to a state-court judgment); Yale v. Nat’l Indem. Co.,
602 F.2d 642, 644-50 (4th Cir. 1979) (plaintiff was a statecourt winner attempting to collect on a state-court judgment
against a defendant insurer, who was not a party to the original
state suit granting judgment against insureds); Westlake Legal
Grp. v. Yelp, Inc., 599 F. App’x 481, 483 (4th Cir. 2015) (per
curiam) (plaintiffs were state-court winners whose judgment
defendants sought to set aside, removing the existing action to
federal court); Fontana Empire Ctr., LLC v. City of Fontana, 307
F.3d 987, 995-96 (9th Cir. 2002) (plaintiffs did not seek to set
aside foreclosure judgment but, according to state statute,
sought to set aside the foreclosure sale, which would have
revived the judgment); Davis v. Bayless, 70 F.3d at 371-72
(plaintiffs, who were not parties to the state-court case
awarding a malpractice judgment and who lived with the judgment
debtor, sought damages for actions, including a nonconsensual
home search, taken by a court-appointed receiver and an attorney
of the judgment creditor in attempts to collect on the
judgment); Ill. Cent. R.R. Co. v. Harried, Civil Action No.
5:06CV160-DCB-JMR, 2010 WL 4553640, at *1, *4 (S.D. Miss.
Nov. 3, 2010) (underlying state-court proceeding resulted in
settlement so the plaintiffs were not state-court losers nor was
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there a state-court judgment). The court thus is not persuaded
to adopt PRA’s proposed rule.
Having rejected PRA’s proposed rules, the court now turns
to determine, as set out by Exxon, whether any of Plaintiffs’
claims are “brought by state-court losers complaining of
injuries caused by state-court judgments rendered before the
district court proceedings commenced and inviting district court
review and rejection of those judgments.” Exxon, 544 U.S. at
284.
C.
Claim I
Plaintiffs’ first claim seeks a declaratory judgment that
its proposed class members’ default judgments violate § 58-70155 and are void and seeks an injunction in part requiring PRA
to file notices of vacatur in the state courts. (See Compl.
(Doc. 3) ¶¶ 50-57.) With the exception of Plaintiff Pia Townes,
no one disputes that for Claim I, Plaintiffs are state-court
losers challenging state-court judgments rendered before the
district court proceedings commenced and that the injuries were
caused by the state-court judgments. PRA argues, however, that
Claim I fails to “invite the district court to conduct appellate
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review of the merits of the state-court judgments”5 and instead
simply “seeks a declaration interpreting the statute or rule at
issue[.]” (Def.’s Br. (Doc. 17) at 11-12 (citing Feldman, 460
U.S. at 486-87); see also Def.’s Suppl. Mem. (Doc. 33) at 3-5.)
In Feldman, the plaintiffs brought a “general attack on the
constitutionality of [a rule,]” asking the court to “assess
[its] validity[.]” Feldman, 460 U.S. at 486-87. Plaintiffs here
do not mount a general challenge to the statute; rather, they
ask this court to apply the statute to vacate their state-court
judgments. Moreover, PRA would have the court break Claim I’s
request for declaratory judgment into two claims: one requesting
an interpretation of § 58-70-155 and another requesting a
declaration that the default judgments violate § 58-70-155. But
Plaintiffs are masters of their own complaint, see Johnson v.
Advance Am., 549 F.3d 932, 937 (4th Cir. 2008), and both Claim I
and the Complaint’s prayer for relief ask this court to declare
that individual default judgments obtained by PRA “violate
[§] 58-70-155 and are void[,]” (Compl. (Doc. 3) at 15-16.) This
court declines to construe the Complaint otherwise, and the
cases PRA cites do not compel a different conclusion. See, e.g.,
PRA asserts in passing that this argument applies to all
of Plaintiffs’ claims but only develops the argument for Claim
I. (Def.’s Br. (Doc. 17) at 11-12.)
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Skinner, 562 U.S. at 532 (plaintiff did not challenge the
adverse state-court decisions); Adkins v. Rumsfeld, 464 F.3d
456, 460, 464 (4th Cir. 2006) (plaintiffs did not challenge the
state-court judgments but rather sought only a declaratory
judgment); Morrison v. City of New York, 591 F.3d 109, 112-15
(2d Cir. 2010) (declining to adopt defendant’s “illegal
interpretation” of ambiguous state-court order and construe
plaintiff’s complaint as attacking the order).
Any statutory interpretation this court would have to
undertake to interpret § 58-70-155 as jurisdictional or not
would be in service of deciding Plaintiffs’ challenge to the
individual state-court decisions, which is outside the court’s
jurisdiction pursuant to Rooker-Feldman. See, e.g., Davani, 434
F.3d at 718-19; Horowitz, 681 F. App’x at 200; Murray, 2015 WL
3874635, at *3; Radisi v. HSBC Bank USA, Nat’l Ass’n, No.
5:11CV125-RLV, 2012 WL 2155052, at *4 (W.D.N.C. June 13, 2012),
aff’d, 479 F. App’x 468 (4th Cir. 2012) (per curiam). As a
result, except for Plaintiff Townes, this court lacks
jurisdiction to hear Plaintiffs’ Claim I.
D.
Claim II
Plaintiffs assert that because their statutory penalties
claim only became cognizable “as a result of” the state courts’
entries of default judgment, that this claim is “inextricably
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intertwined” with the default judgments and outside the court’s
jurisdiction. (Pls.’ Br. (Doc. 12) at 12-14.) However, as the
Fourth Circuit has explained, post-Exxon:
Feldman’s “inextricably intertwined” language does not
create an additional legal test for determining when
claims challenging a state-court decision are barred,
but merely states a conclusion: if the state-court
loser seeks redress in the federal district court for
the injury caused by the state-court decision, his
federal claim is, by definition, “inextricably
intertwined” with the state-court decision, and is
therefore outside of the jurisdiction of the federal
district court.
Davani, 434 F.3d at 719 (citations omitted). The relevant
question, then, is whether the injuries in Plaintiffs’ remaining
claims are caused by the default judgments themselves, “fairly
alleg[ing] injury caused by the state court in entering [the]
order.” Vicks v. Ocwen Loan Servicing, LLC, 676 F. App’x 167,
169 (4th Cir. 2017) (per curiam). PRA contends that Plaintiffs’
statutory penalty claim stems from “litigation conduct occurring
during the course of obtaining a judgment” and is merely an
allegation of “unfair or deceptive acts or practices” under
§ 58-70-130. (Def.’s Br. (Doc. 17) at 13.)
The court first notes that it is not aware of, and the
parties have not cited to, any case analyzing whether RookerFeldman bars review of a claim for statutory penalties or actual
damages, where the statutory violation giving rise to the
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penalty or damages is the entry of a state-court default
judgment. While PRA correctly points out that civil penalties
for pre- or post-judgment litigation conduct are not within
Rooker-Feldman’s purview, see, e.g., Elyazidi v. SunTrust Bank,
780 F.3d 227, 232–33 (4th Cir. 2015), PRA fails to account for
the fact that here the particular conduct challenged is
“requesting and obtaining default judgments in violation of
[§] 58-70-155.” (Compl. (Doc. 3) ¶ 59 (emphasis added).)
There are any number of instances where determining whether
a defendant incurred liability under § 58-70-130 may not invite
review and rejection of a state-court judgment and where the
state-court judgment itself is not the source of a plaintiff’s
injury. For example, prohibited practices incurring liability
under § 58-70-130 include collecting a debt “by means of any
unfair threat, coercion, or attempt to coerce,” § 58-70-95,
“unreasonably publiciz[ing] information regarding a consumer’s
debt,” id. § 58-70-105, or communicating with a consumer the
collection agency knew was represented by an attorney, id.
§ 58-70-115(3). Here, however, § 58-70-155 is not simply an
unfair practice that a debt buyer commits in attempting to
collect a debt; rather, the statute sets specific requirements
for what the debt buyer and the court must do when entering a
default judgment. § 58-70-155 (“Prior to entry of a default
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judgment . . . against a debtor in a complaint initiated by a
debt buyer, the [debt buyer] shall file evidence with the
court . . . .” (emphasis added)). Plaintiffs’ Complaint alleges
that § 58-70-155 would not be violated until the entry of
default judgment, a theory reiterated by Plaintiffs’ counsel at
the October 5 hearing. (Tr. (Doc. 34) 8:19-9:15; Compl. (Doc. 3)
¶ 59.)
Davani, upon which Defendant’s rely, is inapposite — there,
the plaintiff appealed his employment termination to a state
court, where the appeal was dismissed. 434 F.3d at 715. Davani
sued his former employer and supervisors in district court,
bringing discrimination claims, federal retaliation claims, and
a state law claim relating to conspiracy to injure his
reputation. Id. Unlike in Davani, where the plaintiff “d[id] not
challenge the state decision[,]” id. at 719, Plaintiffs’
specific injury here stems only from the allegedly unlawful
entry of default judgment, which gives rise to the claim for a
statutory penalty.
The unfair practice itself results from, at a minimum, a
combination of Defendant’s conduct (the filing of the allegedly
inadequate business records) and the state court’s conduct
(entering of the default judgment in the absence of the adequate
business records). Therefore, this court finds the injuries
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asserted in Claim II to be caused, at least in part, by the
state-court judgments. As a result, except with respect to
Plaintiff Townes, this court lacks jurisdiction to hear
Plaintiffs’ Claim II.
E.
Claim III
Plaintiffs’ last claim seeks actual damages authorized by
§ 58-70-130(a) in the amount PRA has collected from Plaintiffs,
on behalf of any proposed class members who made post-defaultjudgment payments to PRA. (Compl. (Doc. 3) ¶¶ 64-66.) The theory
behind the actual damages claim is the same as that of the
statutory penalties claim. (Id. ¶ 66 (“Post-judgment payments on
debt established by PRA default judgments in cases filed on or
after October 1, 2009, including assets lost through the
execution process, are ‘actual damages sustained by [class
members] as a result of [PRA’s] violation,’ as these payments
resulted from the default judgments PRA obtained in violation of
[§] 58-70-155.”).) Plaintiffs assert that the damages sought
“would effectively annul PRA’s state-court default judgments by
requiring that payments on the default judgments be returned.”
(Pls.’ Br. (Doc. 12) at 15.)
Defendant asserts that “[p]aying a valid debt” cannot be an
injury arising from a judgment and that, like for Claim II,
payments rendered and any PRA’s actions to collect on the
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judgments are “post-judgment collection activities[.]” (Def.’s
Br. (Doc. 17) at 13-14); Def.’s Suppl. Mem. (Doc. 33) at 5-7.)
However, none of the cases Defendant cite involve statutorily
authorized damages for violating a statute prescribing
prerequisites for entry of default judgment. See Johnson v.
Pushpin Holdings, LLC, 748 F.3d 769, 770 (7th Cir. 2014)
(asserting damages claim against debt collector for operating
without a license and common law torts for actions in collecting
the debts); Fontana Empire Ctr., 307 F.3d at 995-96 (seeking, as
authorized by state law, to revive a foreclosure judgment by
separately challenging the foreclosure sale); Khath v. Midland
Funding, LLC, C.A. No. 14-14184-MLW, 2016 WL 1275606, at *1, *3
(D. Mass. Mar. 30, 2016) (alleging that debt collector operated
without a license and seeking damages for allegedly unlawful
debt collection based on an unjust enrichment theory); Sheenan
v. Mortg. Elec., Registration Sys., Inc., Civil No. 10-6837
(RBK/KMW), 2011 WL 3501883, at *4 (D.N.J. Aug. 10, 2011)
(challenging post-judgment payoff calculations).
Here, Plaintiffs do not seek to recover from PRA because of
PRA’s licensure status or the nature of PRA’s conduct in
collecting on the debts. They challenge the debts themselves as
resulting from a judgment allegedly entered in violation of a
statute prescribing prerequisites to entering that judgment; the
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damages they estimate amount to the debt collected on the
judgment because they challenge the judgment itself. Like in
Claim II, the injury stems from the entry of the judgment.
Because this court finds that Claim III complains of injuries
caused by the state-court judgments and invites district court
review and rejection of that judgment, this court finds that,
except with respect to Plaintiff Townes, this court lacks
jurisdiction to hear Plaintiffs’ Claim III.
F.
Plaintiff Pia Townes
The court concludes based on the above analysis that all
named Plaintiffs except Pia Townes are “state-court losers
complaining of injuries caused by state-court judgments rendered
before the district court proceedings commenced and inviting
district court review and rejection of those judgments.” Exxon,
544 U.S. at 284. Townes, however, is not a state-court loser —
her default judgment has been vacated by the state court.
(Compl. (Doc. 3) ¶¶ 31, 39.) Because Townes is not a state-court
loser, her claims cannot be barred by Rooker-Feldman. This puts
the court in the position of evaluating a case where most
Plaintiffs are state-court losers, whose claims the court lacks
subject matter jurisdiction over pursuant to Rooker-Feldman, and
where one Plaintiff is not a state-court loser, whose claims the
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court does have subject matter jurisdiction over provided that
the jurisdictional requirements of CAFA are met.
“Because ‘no antiremoval presumption attends cases invoking
CAFA . . . a defendant’s notice of removal need include only a
plausible allegation that the amount in controversy exceeds the
jurisdictional threshold.’” Scott v. Cricket Commc’ns, LLC, 865
F.3d 189, 194 (4th Cir. 2017) (quoting Dart Cherokee Basin
Operating Co. v. Owens, ____ U.S.____, ____, 135 S. Ct. 547, 554
(2014) (citations omitted)). “If the plaintiff challenges
removal, however, the defendant ‘bears the burden of
demonstrating that removal jurisdiction is proper.’” Id.
(emphasis removed) (quoting Strawn v. AT & T Mobility LLC, 530
F.3d 293, 297 (4th Cir. 2008)). In determining CAFA jurisdiction
in response to a challenge, courts look to the plaintiff’s
complaint and to the proposed class as defined by the plaintiff
in her complaint. See Strawn, 530 F.3d at 298–99.
Plaintiffs have indeed challenged removal with their Motion
to Remand but do not challenge any of PRA’s assertions as to the
threshold requirements triggering CAFA jurisdiction. Plaintiff
Townes brings all claims on behalf of certain groups of the
proposed class, (Compl. (Doc. 3) ¶¶ 15, 50-66), and these
aggregated claims undisputedly meet CAFA’s requirements.
Therefore, this court concludes that it has CAFA jurisdiction
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over the claims of Plaintiff Pia Townes. See Bartels ex rel.
Bartels v. Saber Healthcare Grp., LLC, No. 16-2247, No. 16-2416,
2018 WL 503173, at *3 n.2 (4th Cir. Jan. 23, 2018) (“Because the
plaintiffs do not challenge the defendants’ calculations, the
defendants adequately established that the amount in controversy
exceeds $5 million.”).6
Plaintiff Townes does not have a default judgment nor has
she alleged that she made post-default-judgment payments to PRA.
Therefore, she brings claims on behalf of two proposed class
groups to which she herself is not similarly situated. (See
Compl. (Doc. 3) ¶¶ 50-57, 64-66.) Moreover, any proposed class
members who are state-court losers (i.e., whose default
judgments have not been vacated), would find their claims unable
to be heard in this court due to the court lacking subject
matter jurisdiction under Rooker-Feldman. Although a
representative party must “fairly and adequately protect the
interests of the class” and the representative’s claims must be
“typical of the claims by the class[,]” Fed. R. Civ. P.
23(a)(3)-(4), questions about the suitability of Townes as class
representative and the definition of any potential class are
more appropriately addressed during the class certification
process.
6
Bergquist v. Mann Bracken, LLP, 592 F.3d 816 (7th Cir.
2010), is instructive on this point. There, a plaintiff sought
to have state-court judgments confirming unfavorable arbitral
awards vacated on behalf of proposed class members, even though
her own state-court judgment confirming her unfavorable arbitral
award had already been set aside. Id. at 817-19. The Seventh
Circuit directed the district court to define the proposed class
to include only claims typical of the named plaintiff (which
would exclude claims seeking to set aside state-court judgments,
since the named plaintiff no longer had a state-court judgment).
See id. at 819-20.
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IV.
CONCLUSION
For the reasons set forth herein, this court lacks
jurisdiction over the claims of Plaintiffs Iris Pounds, Carlton
Miller, Vilayuan Sayaphet-Tyler, and Rhonda Hall pursuant to the
Rooker-Feldman doctrine. IT IS HEREBY ORDERED that Plaintiffs’
Motion to Remand (Doc. 11) is GRANTED IN PART and DENIED IN
PART. The claims of Plaintiffs Pounds, Miller, Sayaphet-Tyler,
and Hall are REMANDED to the General Court of Justice, Superior
Court Division, Durham County, North Carolina, for further
disposition. The motion is DENIED as to the claims of Plaintiff
Pia Townes.
IT IS FURTHER ORDERED that the Clerk of Court is directed
to send a certified copy of this Memorandum Opinion and Order to
the Clerk of Superior Court in Durham County.
IT IS FURTHER ORDERED that Plaintiffs’ Motion for Expedited
Determination of Motion to Remand (Doc. 22) is DENIED AS MOOT.
IT IS FURTHER ORDERED that Plaintiffs’ Motion to Defer Time
to File Federal Motion for Class Certification (Doc. 27) is
GRANTED as to Plaintiff Pia Townes and DENIED AS MOOT as to
remaining Plaintiffs. Plaintiff Townes shall have sixty (60)
days from the date of this Order to file any motion for class
certification as prescribed by LR 23.1 and Fed. R. Civ. P.
23(c)(1).
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This the 28th day of March, 2018.
_______________________________________
United States District Judge
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