Portnoy et al v. National Credit Systems, Inc. et al
Filing
108
ORDER granting 75 Motion for Extension of Time; denying without prejudice 81 Motion to Amend/Correct; denying without prejudice 89 Motion for Order to; denying without prejudice 90 Motion for Sanctions; and finding as moot 92 Motion for Protective Order; denying 84 request for award of attorney's fees; follow up status conference to be scheduled. Signed by Judge Michael R. Barrett on 7/19/21. (ba)
Case: 1:17-cv-00834-MRB Doc #: 108 Filed: 07/20/21 Page: 1 of 7 PAGEID #: 1030
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
ALYSSA PORTNOY, et al.,
Plaintiffs,
vs.
NATIONAL CREDIT SYSTEMS, INC., et
al.,
Defendants.
:
:
: Case No. 1:17-cv-834
:
: Judge Michael R. Barrett
:
:
:
:
:
:
OPINION & ORDER
This matter is before the Court on the Motion to Amend the Complaint, Motion for
an Order Prohibiting Defendant National Credit Systems, Inc. ("NCS") from Transferring
Business Assets, Motion for Sanctions, and Motion for a 30-Day Continuance to Disclose
Expert Witnesses and Reports, each filed by Plaintiffs Alyssa Portnoy and Darlene
Portnoy ("Plaintiffs"). (Docs. 75, 81, 89, 90). This matter is also before the Court on NCS's
Motion for Protective Order. (Doc. 92).
I.
MOTION TO AMEND COMPLAINT
Federal Rule of Civil Procedure 15(a) governs amendments to pleadings before
trial and provides that a "party may amend its pleading once as a matter of course within:
(A) 21 days after serving it, or (B) if the pleading is one to which a responsive pleading is
required, 21 days after service of a responsive pleading or 21 days after service of a
motion under Rule 12(b), (e), or (f), whichever is earlier." FED. R. CIV. P. 15(a)(1). "In all
other cases, a party may amend its pleading only with the opposing party's written
consent or the court's leave." FED. R. CIV. P. 15(a)(2). "The court should freely give leave
Case: 1:17-cv-00834-MRB Doc #: 108 Filed: 07/20/21 Page: 2 of 7 PAGEID #: 1031
when justice so requires." Id. Leave should be granted unless there is “undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party by virtue of
allowance of the amendment, [or] futility of amendment." Foman v. Davis, 371 U.S. 178,
182 (1962). “A proposed amendment is futile if the amendment could not withstand a
Rule 12(b)(6) motion to dismiss.” Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417,
420 (6th Cir. 2000) (citing Thiokol Corp. v. Dep't of Treasury, Revenue Div., 987 F.2d 376,
382-83 (6th Cir. 1993)).
Plaintiffs seek to add four individual defendants, Boyd Gentry, Katrina DeMarte,
Steven Saltzman, and Shelle Weisbaum; an additional corporate defendant, Resource
Real Estate Opportunities ("RREO"); and two additional putative class action claims,
fraud and a second Fair Debt Collection Practices Act ("FDCPA") claim. (Docs. 81, 811). Plaintiffs allege that, when they tried to pay the Judgment in this matter—that they
owe to former-Defendant Williamsburg of Cincinnati ("Williamsburg") for unpaid rent—the
proposed defendants knowingly and inaccurately informed Plaintiffs' counsel that RREO
had the legal authority to collect the Judgment on Williamsburg's behalf, and directed
Plaintiffs' counsel to pay the Judgment to RREO, when RREO has no such authority.
(Doc. 81-1). Defendants’ principal argument in opposition is that amendment would be
futile. (Doc. 84 PageID 630, 634-35, 637-38).
a. Proposed Fraud Claim
The elements of fraud in Ohio are: (1) a representation (or a concealment where
there is a duty to disclose), (2) that is material to the transaction, (3) made falsely, with
knowledge of its falsity or with such utter disregard and recklessness as to truth or falsity
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that knowledge may be inferred, (4) with the intent of misleading another into relying on
it, (5) justifiable reliance on the representation (or concealment), and (6) a resulting injury
proximately caused by the reliance. Volbers-Klarich v. Middletown Mgt., Inc., 125 Ohio
St. 3d 494, 929 N.E.2d 434, 440 (2010). The proposed amended complaint does not
allege that Plaintiffs relied on the proposed additional defendants' alleged statements
regarding RREO's legal authority to collect Plaintiffs' Williamsburg Judgment. (Doc. 811). The proposed amended complaint also does not contain an allegation that Plaintiffs
paid RREO the amount of the Williamsburg Judgment. Id. Absent any alleged reliance on
an alleged representation by the proposed additional defendants made to Plaintiffs, the
Court finds that Plaintiffs proposed fraud claim would not survive a Rule 12(b)(6) motion
to dismiss. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court holds
that Plaintiffs' proposed fraud claim is futile and amendment to add this claim is improper.
b. Proposed Additional FDCPA Claim
"Under the FDCPA, only a 'debt collector' may be held liable." Portnoy v. Nat'l
Credit Sys., Inc., 837 F. App'x 364, 370 (6th Cir. 2020) (citing 15 U.S.C. §§ 1692e, 1692f).
"A debt collector is 'any person who uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of which is the collection of any debts, or
who regularly collects or attempts to collect, directly or indirectly, debts owed or due or
asserted to be owed or due another.'" Id. (citing 15 U.S.C. § 1692a(6)). "An attorney may
qualify as a debt collector if they 'regularly engage in consumer-debt-collection activity,
even when that activity consists of litigation.'" Id. (citing Heintz v. Jenkins, 514 U.S. 291,
299 (1995)). "An attorney regularly collects debts when he 'collects debts as a matter of
course for [their] clients or for some clients, or collects debts as a substantial, but not
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principal, part of [their] general law practice.'" Id. (citing Schroyer v. Frankel, 197 F.3d
1170, 1176 (6th Cir. 1999)).
Although the proposed amended complaint alleges that "[t]he defendants
collecting the alleged debts are 'debt collectors' with then meaning of 15 U.S.C.A. Section
1692 (a) (6)," Doc. 81-1 ¶ 32) (emphasis in original), the proposed amended complaint
does not include any allegation or supporting facts indicating that the proposed additional
defendants regularly collect debt, collect debt as a matter of course for their clients, collect
debts as a substantial, but not principal part of his or her legal practice, or are engaged
in consumer-debt-collection activity. (Doc. 81-1). Plaintiffs proposed additional FDCPA
claim would not survive a Rule 12(b)(6) motion to dismiss because it does not state a
claim for relief that is plausible on its face. See Twombly, 550 U.S. at 570.
Further, the Court is “not bound to accept as true a legal conclusion couched as a
factual allegation.” Id. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). The
Court will not accept as true Plaintiffs' legal conclusion that the proposed additional
defendants are debt collectors under the FDCPA, 1 and an FDCPA claim without a debt
collector, or debt collectors, fails as a matter of law. See, e.g., Whittiker v. Deutsche Bank
Nat. Tr. Co., 605 F. Supp. 2d 914, 939 (N.D. Ohio 2009) (explaining that one of the four
required elements of a prima facia case for a violation of the FDCPA is that the defendant
collecting the debt is a "debt collector" within the meaning of 15 U.S.C. § 1692a(6) and
that the absence of any one of the four required elements is fatal to a FDCPA claim). The
1 In their Reply in support of their Motion to Amend, Plaintiffs state that "Gentry and DeMarte advertise on
their websites they represent debt collectors. In this case, these attorneys represent RREO and NCS to
collect payment of the Williamsburg judgments and any other debts Williamsburg claims the former tenants
owe. This proves they regularly engage in debt collection activities to collect consumer debts." (Doc. 85
PageID 670). The Court declines to consider these statements, as Plaintiffs may not use their Reply to
amend their operative Complaint in this matter.
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Court holds that Plaintiffs' proposed second FDCPA claim is futile and amendment to add
this claim is improper.
II.
MOTION FOR AN ORDER PROHIBITING NCS FROM TRANSFERRING
BUSINESS ASSETS
Plaintiffs move the Court for an order prohibiting NCS from transferring any and all
of its business assets during the pendency of this lawsuit. (Doc. 89). Plaintiffs assert only
that, "[b]ecause NCS is facing a class action lawsuit, there is a genuine concern that NCS
will transfer its business assets to another entity to avoid having its business assets
seized to pay a potential judgment." (Id. PageID 687). Plaintiffs do not provide evidence
to support this alleged concern, and the Court will not grant the expansive requested relief
based entirely on Plaintiffs' unsworn and unsubstantiated concern. Additionally, the only
legal authority Plaintiffs cite for support is "Ohio Revised Code Section 1336 et al." (Id.)
(emphasis in original). Plaintiffs do not provide any analysis regarding why or how those
provisions of the Ohio Revised Code apply to this matter. The Court will not manufacture
such arguments on Plaintiffs' behalf. The Court will deny Plaintiffs' Motion for an Order
Prohibiting NCS from Transferring Business Assets.
III.
MOTION FOR SANCTIONS
Plaintiffs move the Court for an order for sanctions against NCS and its counsel.
(Doc. 90). Plaintiffs argue that NCS and its counsel continue to withhold certain
information—namely contact information for a representative of Williamsburg and
collection letters that NCS sent to Williamsburg's former tenants in 2016 and 2017—that
the Court ordered NCS to produce at a March 23, 2021 telephone discovery dispute
conference. (Id.)
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Plaintiffs generally seek sanctions under Federal Rule of Civil Procedure 37, and
do not specify which section of Rule 37 they wish the Court to invoke. 2 The Court
assumes, based on Plaintiffs' requested relief, that Plaintiffs intended to move for relief
under Rule 37(b)(2), which governs sanctions for failure to obey an order to provide or
permit discovery. FED. R. CIV. P. 37(b)(2). Rule 37(b) sanctions are available to provide a
remedy to a party in circumstances when the opposing party fails to comply with a court
order 3 to provide discovery. N.T. by & through Nelson v. Children's Hosp. Med. Ctr., No.
1:13CV230, 2017 WL 5953118, at *4 (S.D. Ohio Sept. 27, 2017) (citations omitted)
(internal quotation marks omitted). Based on parties' representations to the Court at the
four subsequent discovery dispute conferences, the Court finds both that NCS is working,
albeit slowly, to provide the information that the Court ordered NCS to produce on
March 23, 2021, and that the parties are working, albeit in a needlessly contentious
manner, to complete discovery relevant to the appropriateness of the proposed class in
this putative class action matter. See Docket Entries for April 15, 2021, April 30, 2021,
June 30, 2021, and July 9, 2021 discovery conferences; cf. (Doc. 70) (Order, inter alia,
permitting Plaintiffs to begin discovery relevant to the appropriateness of the proposed
class and file a motion for class certification). The Court finds that Plaintiffs are not entitled
to sanctions based on NCS's actions related to the March 23, 2021 Court-ordered
Similarly, Plaintiffs reference a case with the name Ryan Baxter v. NCS, but do not provide the remainder
of the case citation. (Doc. 90 PageID 690). The Court will not assume to know which case, in which court,
Plaintiffs intended to cite.
2
3 NCS repeatedly states that Plaintiffs never served it formal written discovery requests regarding the 2016
and 2017 NCS collection letters. See, e.g., (Doc. 97 PageID 746, 749). After the Court's conversation with
NCS at the last two discovery conferences, NCS should now fully understand that the Court ordered the
production of the discussed information at the March 23, 2021 conference, that Court's order was and
remains sufficient to require NCS to provide Plaintiffs with the discussed information, and NCS must provide
that information.
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discovery at this time. The Court will deny Plaintiffs' Motion for Sanctions.
IV.
CONCLUSION
Based on the foregoing, it is hereby ORDERED that Plaintiffs' Motions to Amend
the Complaint, for an Order Prohibiting NCS from Transferring Business Assets, and for
Sanctions (Docs. 81, 89, 90) are each DENIED without prejudice. It is further
ORDERED that NCS's Motion for Protective Order. (Doc. 92) is DISMISSED as moot in
light of the parties' representations to the Court at the July 9, 2021 discovery conference,
i.e., that they will to submit an agreed protective order. It is also ORDERED that Plaintiffs'
Motion for a 30-Day Continuance to Disclose Expert Witnesses and Reports (Doc. 75) is
GRANTED, and the Court will discuss the calendar in this matter with the parties at the
next telephone status conference which the Court will schedule shortly. Finally, it is
ORDERED that NCS's request for an award of attorney's fees (Doc. 84 PageID 641) is
DENIED.
IT IS SO ORDERED.
_/s Michael R. Barrett_________
Michael R. Barrett, Judge
United States District Court
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