Lyon v. American Recovery Services, Inc.
Filing
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Memorandum of Opinion and Order For the reasons set forth herein, Defendant's Motion for Summary Judgment (ECF No. 17 ) is granted. Final judgment will be entered in favor of Defendant and against Plaintiff on the Complaint (ECF No. 1 ). Judge Benita Y. Pearson on 9/6/2016. (JLG)
PEARSON, J.
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
MICHAEL C. LYON,
Plaintiff,
v.
AMERICAN RECOVERY SERVICE, INC.,
Defendant.
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CASE NO. 1:14CV2541
JUDGE BENITA Y. PEARSON
MEMORANDUM OF OPINION
AND ORDER
[Resolving ECF No. 17]
Plaintiff Michael C. Lyon brought this action against American Recovery Service, Inc.
alleging claims pursuant to the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692
et seq. Pending is Defendant’s Motion for Summary Judgment (ECF No. 17). The Court has
been advised, having reviewed the record, the parties’ briefs, and the applicable law. For the
reasons set forth below, the motion is granted.
I. Stipulated Facts
The stipulated facts1 are as follows:
1. There are two American Express accounts that are relevant to this case, both of which
were opened on behalf of MGM Construction, Inc.
2. One of these accounts ended in 1008.
3. The other account ended in 1003.
1
See Written Stipulation as to All Uncontested Facts (ECF No. 19).
(1:14CV2541)
4. Both American Express accounts were used solely for company expenses.
5. Michael Lyon is the owner of MGM Construction, Inc.
6. American Express sued Michael Lyon personally on both accounts in Cuyahoga
Common Pleas Court.
7. In Cuyahoga Common Pleas Case 681987, the arbitration panel found in favor of
Michael Lyon.
8. Cuyahoga Common Pleas Cases 685097 and 771067 were both dismissed as to
Michael Lyon by American Express without prejudice.
9. American Recovery Service, Inc. contacted Michael Lyon to collect on those accounts
because they were delinquent.
10. In 2011, American Recovery Service, Inc. sent demand letters addressed only to
Michael Lyon that do not mention the name of MGM Construction, Inc. See ECF No. 1 at
PageID #: 4, 8.
II. Background
On November 18, 2014, Plaintiff filed a Complaint (ECF No. 1) against Defendant. It
alleges:
6.
9.
On April 4, 2011, Defendant through its employee or agent contacted
Plaintiff in writing and alleged in writing that there was a “CURRENT
JUDGMENT BAL DUE” from Plaintiff to American Express [in] the sum
of $63,619.65 ARISING OUT OF Cuyahoga County Common Pleas Court
case CV 09 681987. See Exhibit A.
* * *
Defendant, despite having been provided with a copy of the actual court
finding, on October 19, 2011 still insists that there is in fact a “courtordered judgment” against Plaintiff in favor of American Express in the
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10.
sum of $63,619.55 and attempts to collect payment on the alleged debt.
See Exhibit C.
On November 18, 2013 Defendant through its employee or agent once
again contacted Plaintiff by telephone alleging that there was a civil
judgment rendered against him personally.
ECF No. 1 at PageID #: 2. The Complaint (ECF No. 1) specifically alleges violations of 15
U.S.C §§ 1692e (“falsely representing the character or legal status of an alleged debt”), 1692f
(“failing to validate the alleged debt”),2 and 1692b (“communicating directly with the Plaintiff
after having actual knowledge that the Plaintiff is represented by counsel”). ECF No. 1 at
PageID #: 2, ¶ 12.3
III. Standard of Review
Summary judgment is appropriately granted when the pleadings, the discovery and
disclosure materials on file, and any affidavits show “that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a);
see also Johnson v. Karnes, 398 F.3d 868, 873 (6th Cir. 2005). The moving party is not required
to file affidavits or other similar materials negating a claim on which its opponent bears the
burden of proof, so long as the movant relies upon the absence of the essential element in the
pleadings, depositions, answers to interrogatories, and admissions on file. Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). The moving party must “show that the non-moving party has
2
Section 1692f does not deal with the validation of debts, so the Court construes
¶ 12b. as alleging a violation of § 1692g. See Section IV.D. infra.
3
On October 7, 2015, the above-entitled action was reassigned from Judge Lesley
Wells to the undersigned pursuant to General Order No. 2015-12.
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failed to establish an essential element of his case upon which he would bear the ultimate burden
of proof at trial.” Guarino v. Brookfield Twp. Trustees., 980 F.2d 399, 403 (6th Cir. 1992).
Once the movant makes a properly supported motion, the burden shifts to the non-moving
party to demonstrate the existence of a genuine dispute. An opposing party may not simply rely
on its pleadings; rather, it must “produce evidence that results in a conflict of material fact to be
resolved by a jury.” Cox v. Ky. Dep’t. of Transp., 53 F.3d 146, 150 (6th Cir. 1995). The
non-moving party must, to defeat the motion, “show that there is doubt as to [whether] the
material facts and that the record, taken as a whole, does not lead to a judgment for the movant.”
Guarino, 980 F.2d at 403. In reviewing a motion for summary judgment, the court must view the
evidence in the light most favorable to the non-moving party when deciding whether a genuine
issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587-88 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144 (1970).
The United States Supreme Court, in deciding Anderson v. Liberty Lobby, Inc., 477 U.S.
242 (1986), stated that in order for a motion for summary judgment to be granted, there must be
no genuine issue of material fact. Id. at 248. The existence of some mere factual dispute
between the parties will not defeat an otherwise properly supported motion for summary
judgment. Scott v. Harris, 550 U.S. 372, 380 (2007). A fact is “material” only if its resolution
will affect the outcome of the lawsuit. In determining whether a factual issue is “genuine,” the
court must decide whether the evidence is such that reasonable jurors could find that the
non-moving party is entitled to a verdict. Id. Summary judgment “will not lie . . . if the evidence
is such that a reasonable jury could return a verdict for the nonmoving party.” Id. To withstand
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summary judgment, the non-movant must show sufficient evidence to create a genuine issue of
material fact. Klepper v. First Am. Bank, 916 F.2d 337, 342 (6th Cir. 1990). The existence of a
mere scintilla of evidence in support of the non-moving party’s position ordinarily will not be
sufficient to defeat a motion for summary judgment. Id.
IV. Analysis
A.
The FDCPA Claim Fails Because There Was No “Debt” Pursuant to 15
U.S.C. § 1692a(5)
Because the debt at issue in the case at bar is admittedly a commercial debt, Defendant is
entitled to judgment as a matter of law. As stated by the district court in Harden v. Autovest,
L.L.C., No. 1:15-cv-34, 2016 WL 3049308 (W.D. Mich. May 31, 2016):
To prevail on a claim under the FDCPA . . ., Plaintiff must establish, among other
things, that he is a “consumer” as defined by those statutes and that the “debt” at
issue arose out of a transaction which was “ ‘primarily for personal, family or
household purposes[.]’” Wallace v. Wash. Mut. Bank, F.A., 683 F.3d 323, [326]
(6th Cir. 2012) ([citing] Whittiker v. Deutsche Bank Nat’l Trust Co., 605 F.
Supp.2d 914, 926 (N.D. Ohio 2009)); see 15 U.S.C. § 1692a(5) (defining “debt”
under the FDCPA); . . . . The Court must focus on the purpose for which the debt
was incurred. Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 698
F.3d 290, 294 (6th Cir. 2012). Debts that were not incurred primarily for
personal, family or household reasons are not “debts” covered by the FDCPA.
See Van Eck v. BAL Global Finance, LLC, No. 08-CV-13436, 2009 WL 3210992,
at *1 (E.D. Mich. Sept. 30, 2009) (dismissing FDCPA claim where debt was
incurred for commercial purposes).
Id. at *1. The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to
pay money arising out of a transaction in which the money, property, insurance, or services
which are the subject of the transaction are primarily for personal, family, or household
purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5)
(emphasis added). “Based upon this language, courts have found that attempts to collect
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business debt are not covered by the Act, even where the collection efforts were directed at an
individual.” Schram v. Federated Fin. Corp. of Am., No. 06-12700, 2007 WL 1238863, at *1
(E.D. Mich. April 27, 2007) (citing First Gibraltar Bank FSB v. Smith, 62 F.3d 133, 135-36 (5th
Cir.1995); Slenk v. Transworld Sys., 236 F.3d 1072, 1074 (9th Cir. 2001)). “[A]ctions arising
out of commercial debts are not covered by the protective provisions of the FDCPA.” Goldman
v. Cohen, 445 F.3d 152, 154 n. 1 (2d Cir. 2006) (citing First Gibraltar, 62 F.3d at 135-36).
Plaintiff testified as follows:
Q.
What was the dispute?
A.
That it wasn’t -- that [the credit bureaus] linked -- they were
linking it to me, personally, and it wasn’t personal debt.
* * *
Q.
Two American Express accounts that were opened on behalf of
MGM, Inc. or MGM Construction, Inc.?
A.
MGM Construction, Inc.
* * *
Q.
And the company -- or the cards would have been used for
company expenses only, right?
A.
Correct.
Deposition of Michael C. Lyon (ECF No. 17-1) at PageID #: 92 (emphasis added). The parties in
the case at bar have also stipulated that “[b]oth American Express accounts were used solely for
company expenses.” ECF No. 19 at PageID#: 151, ¶ 4.
Plaintiff argues that there are certain situations where a “business debt” falls under the
definition of “debt” in 15 U.S.C. § 1692a(5), i.e., “when an individual is wrongly accused of
owing a debt” based solely upon the debt collector’s actions in attempting to collect.
Memorandum in Opposition (ECF No. 20) at PageID #: 157. Plaintiff contends that Defendant
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transformed the business accounts into “primarily for personal, family, or household” debt when
it said that Plaintiff was personally liable.
Plaintiff is incorrect for two reasons. First, whether a person is personally liable for an
obligation is not the test for determining if the obligation is a “debt” under § 1692a(5).
Moreover, whether Defendant believed Plaintiff had personally guaranteed the commercial
obligation to American Express does not change the purpose for which the obligation was
incurred. Second, a debt collector’s actions are not relevant to a determination of whether the
obligation in question is “debt” that is regulated by the FDCPA. See Haddad, 698 F.3d at 294
(“the statute’s definition of a ‘debt’ focuses on the transaction creating the obligation to pay”).
Defendant’s statements or actions are irrelevant to the purpose for which the obligation was
incurred.
Furthermore, the non-binding cases cited by Plaintiff in support of his reasoning,4 are
distinguishable from the case at bar for the reasons articulated by Defendant. See Reply
Memorandum (ECF No. 21) at Pages 183-85. Unlike the cases cited by Plaintiff, the instant case
does not involve mistaken or stolen identity, nor does it involve a debt, the nature of which is
unknown to the parties.
4
Swearingen v. Portfolio Recovery Assoc., LLC, 892 F. Supp.2d 987, 991 (N.D.
Ill. 2012); Crafton v. Law Firm of Jonathan B. Levine, 957 F. Supp.2d 992 (E.D. Wisc.
2013); Davis v. Midland Funding, LLC, 41 F. Supp.3d 919, 925 (E.D. Cal. 2014);
Dunham v. Portfolio Recovery Assoc., LLC, 663 F.3d 997, 1002 (8th Cir. 2011);
Gonzalez v. Law Firm of Sam Chandra, APC, No. 13-CV-0097-TOR, 2013 WL 4758944,
at *2-3 (E.D. Wash. Sept. 4, 2013); and Riveria v. MAB Collections, Inc., 682 F. Supp.
174 (W.D.N.Y. 1988).
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Assuming arguendo that the accounts in question fall under the FDCPA, the Court
addresses the remaining arguments of Defendant.
B.
Statute of Limitations
Defendant also moves the Court to dismiss any FDCPA claim made by Plaintiff that is
based upon allegations occurring prior to November 18, 2013 on the ground that they are barred
by the one-year statute of limitations for FDCPA claims. Civil actions under the FDCPA may be
brought “within one year from the date on which the violation occurs.” 15 U.S.C. § 1692k(d).
The FDCPA violations described in ¶¶ 6 and 9 of the Complaint (ECF No. 1) fall outside the
statute of limitations, as the November 18, 2014 complaint was filed over a year after the
interactions with Defendant that occurred between April 4, 2011 and October 19, 2011.
C.
Alleged Violation of 15 U.S.C. § 1692e
Plaintiff claims that Defendant falsely represented the character or legal status of the debt
to him. ECF No. 1 at PageID #: 2, ¶ 12a. “In order to establish a claim under § 1692e: (1)
plaintiff must be a ‘consumer’ as defined by the Act; (2) the ‘debt’ must arise out of transactions
which are ‘primarily for personal, family or household purposes;’ (3) defendant must be a ‘debt
collector’ as defined by the Act; and (4) defendant must have violated ‘§ 1692e’s prohibitions.’”
Wallace, 683 F.3d at 326 (citing Whittiker, 605 F. Supp.2d at 926. As stated above, because the
accounts are admittedly business debts, any alleged FDCPA claim fails.
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D.
Alleged Violation of 15 U.S.C. § 1692f
Next, Plaintiff alleges that “Defendant violated 15 U.S.C.A. § 1692(f) (sic) by failing to
validate the alleged debt.” ECF No. 1 at PageID #: 2, ¶ 12b. Section 1692f does not deal with
the validation of debts, but rather with “unfair practices.”
Under 15 U.S.C. § 1692g, a debt collector’s initial communications with a consumer
must state that the consumer has a thirty-day period in which to demand verification of the debt.5
“If the consumer notifies the debt collector in writing within the thirty-day period . . . that the
debt, or any portion thereof, is disputed . . . the debt collector shall cease collection of the debt, or
any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a
judgment. . . .” 15 U.S.C. § 1692g(b). A debt collector is only required to validate a debt under
§ 1692g when the debt falls within the scope of the FDCPA. Because the accounts are business
debts, Defendant was not required to validate the alleged debt in the same manner as it would a
consumer debt. In addition, for the reasons stated above, this alleged April 2011 violation is
beyond the statute of limitations.
E.
Alleged Violation of 15 U.S.C. § 1692b
Finally, Plaintiff alleges that Defendant “communicating directly with [him] after having
actual knowledge that the Plaintiff is represented by counsel” in violation of § 1692b. ECF No. 1
at PageID #:2, ¶ 12c. Because this debt is not subject to the FDCPA, this claim also fails.
5
The letter dated April 4, 2011 (ECF No. 1 at PageID #: 4) complies with the
notice and content requirements of § 1692g(a).
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V. Conclusion
Viewing Plaintiff’s probative evidence and all reasonable inferences drawn therefrom in
the light most favorable to Plaintiff, the Court concludes that there is no genuine issue of material
fact and the movant is entitled to a judgment as a matter of law. For the foregoing reasons,
Defendant’s Motion for Summary Judgment (ECF No. 17) is granted. Final judgment will be
entered in favor of Defendant and against Plaintiff on the Complaint (ECF No. 1).
IT IS SO ORDERED.
September 6, 2016
Date
/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge
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