Hagy et al v. Demers & Adams, LLC et al

Filing 164

OPINION AND ORDER denying 157 Motion to Dismiss for Lack of Jurisdiction; denying 158 Motion to Dismiss for Lack of Jurisdiction; denying 160 Motion for Order to Certify the Case for an Interlocutory Appeal. Signed by Magistrate Judge Terence P. Kemp on 3/27/2017. (agm)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
James R. Hagy, III, et al.,
Plaintiffs,

:
:

v.

:

Case No. 2:11-cv-530

:
Demers & Adams, LLC, et al.,

Magistrate Judge Kemp
:

Defendants.
OPINION AND ORDER
I.

Introduction

Plaintiffs James R. Hagy III and his wife, Patricia R. Hagy,
(who has since died) filed this case against defendants David J.
Demers and the Law Firm of Demers and Adams (“the Law Firm
Defendants”) and against Defendant Green Tree Servicing LLC
alleging violations of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. §§1692, et seq., the Ohio Consumer Sales
Practices Act (“OCSPA”), O.R.C. §§1345.01 et seq., and Ohio
common law.

The facts are not complicated; as the Court noted in

Hagy v. Demers & Adams, LLC, 2014 WL 791357, *1 (S.D. Ohio Feb.
26, 2014),
this case arises from a foreclosure action initiated by
the Law Firm Defendants on behalf of Green Tree against
the Hagys. After the foreclosure action was filed, the
Hagys signed a warranty deed in lieu of foreclosure in
return for which it was agreed that there would be no
attempt to collect any deficiency balance. Thereafter,
the foreclosure complaint was dismissed, but Green Tree
began contacting the Hagys by telephone for the
collection of an alleged deficiency.
Obviously, that was improper, and Green Tree and the Hagys, who
had agreed to arbitrate their dispute, have now resolved their
differences.

See Doc. 139 (Stipulation of Settlement of

Arbitration Claims Only).

The Law Firm Defendants got involved as a result of their
representation of Green Tree.

They participated in the

negotiations which led to the agreement that if the Hagys signed
a deed in lieu, there would be no further collection efforts.
Mr. Demers wrote a letter to that effect on June 30, 2010.

This

Court held that the June 30 letter violated both the FDCPA and
the OCSPA because it was a letter from a debt collector which did
not, as required by law, make that disclosure.

The Court also

held that the Law Firm Defendants’ failure to make that same
disclosure in a June 8, 2010 letter violated the OCSPA (it fell
outside the limitations period for the Hagys’ FDCPA claim), as
did their failure to provide the Hagys with a “civil Miranda
warning” within five days thereafter.

See Hagy v. Demers &

Adams, LLC, 2013 WL 434053 (S.D. Ohio Feb. 5, 2013).

As a result

of that and subsequent orders, the Court has awarded the Hagys
statutory damages and attorneys’ fees.

See Hagy v. Demers &

Adams, LLC, 2013 WL 5728345 (S.D. Ohio Oct. 22, 2013).
There have been additional proceedings since that time,
primarily directed at collection efforts, but on May 16, 2016,
the Supreme Court issued its ruling in Spokeo, Inc. v. Robins,
136 S.Ct. 1540 (2016), clarifying some aspects of the question of
when a plaintiff asserting a statutory cause of action has
Article III standing.

The Law Firm Defendants, through a motion

for reconsideration, have argued that under Spokeo, the Hagys
lack standing to pursue their claims.
briefed.

The motion is fully

For the following reasons, the Court will deny that

motion, as well as two other pending motions.
II.

Reconsideration of Summary Judgment

The Court begins by addressing, briefly, its ability to
reconsider an earlier grant of summary judgment.

Under Rule

54(b) of the Federal Rules of Civil Procedure, a district court
may revise its own interlocutory orders “at any time before the

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entry of judgment adjudicating all the claims and all the
parties’ rights and liabilities.”

Fed. R. Civ. P. 54(b).

This

authority vests in district courts “significant discretion....to
afford such relief from [interlocutory orders] as justice
requires.”

Rodriguez v. Tenn. Laborers Health & Welfare Fund, 89

Fed.Appx. 949, 959 (6th Cir. 2004) (citing Mallory v. Eyrich, 922
F.2d 1273, 1282 (6th Cir. 1991)).

Traditional justifications for

reconsideration include “(1) an intervening change of controlling
law; (2) new evidence available; or (3) a need to correct a clear
error or prevent manifest injustice.”

Louisville/Jefferson Co.

Metro Govt. v. Hotels.com L.P., 590 F.3d 381, 389 (6th Cir.
2009).

Justice does not require that the district court grant

reconsideration on an issue that would not alter its prior
decision.

Rodriquez, supra, 89 Fed.Appx. At 959-960.

Because

the Spokeo decision constitutes, at least arguably, a change of
controlling law, the Court will address the merits of the motion
for reconsideration.
III.

Discussion

A. Article III Standing
Pursuant to Article III of the United States Constitution,
federal jurisdiction is limited to “cases” and “controversies,”
and standing is “an essential and unchanging part of” this
requirement. U.S. Const. art. III, §2; Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560 (1992).

A federal court must not go

“beyond the bounds of authorized judicial action and thus
offend[] fundamental principles of separation of powers.”

Steel

Co. v. Citizens for a Better Env't., 523 U.S. 83, 94 (1998). If
the plaintiff lacks standing, the federal court lacks
jurisdiction. Thus, standing is “the threshold question in every
federal case.” Warth v. Seldin, 422 U.S. 490, 498 (1975). “In
essence the question of standing is whether the litigant is
entitled to have the court decide the merits of the dispute or of

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particular issues.” Id. Standing under Article III has three
elements. “First, the plaintiff must have suffered an ‘injury in
fact'-an invasion of a legally protected interest which is (a)
concrete and particularized, and (b) actual or imminent, not
conjectural or hypothetical.” Lujan, 504 U.S. at 560 (internal
citations and quotation marks omitted).

Second, the injury must

be “fairly traceable to the challenged action of the defendant.”
Id. (Internal alterations omitted).

Third, it must be likely

that the injury will be “redressed by a favorable decision.” Id.
at 561. The burden is on the party invoking federal jurisdiction
to demonstrate Article III standing.

Stalley v. Methodist

Healthcare, 517 F.3d 911, 916 (6th Cir. 2008). Last, each element
of standing must be supported with the “manner and degree of
evidence required at the successive stages of litigation.” Lujan,
504 U.S. at 561.

The Court and the parties agree that the

plaintiffs have established the second and third elements of
Article III standing.

Thus, the sole issue here is whether the

Hagys can satisfy the injury-in-fact requirement.
B.

Spokeo v. Robins

Because this is the first occasion that the undersigned has
had to apply Spokeo v. Robins to a case involving a statute-based
cause of action, the Court will take some time to set forth its
understanding of that decision.
Spokeo was filed under the Fair Credit Reporting Act, 15
U.S.C. 1681 et seq.

According to the Supreme Court’s opinion,

Spokeo operates a “people search engine” and may report, online,
information about people whose names it searches.

It allegedly

reported some inaccurate information about Thomas Robins, and he
sued, claiming a violation of his statutory rights under the
FCRA, particularly the section which obligates consumer reporting
agencies to try to make sure their reports are accurate.

The Act

provides for statutory damages if its provisions are violated.
The issue presented to the Supreme Court was whether Mr. Robins
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had adequately pleaded an “injury-in-fact” that satisfied Article
III.
The Supreme Court’s discussion in Spokeo focused on two
questions: was the injury which Mr. Robins allegedly suffered
sufficiently “particularized” and was it sufficiently “concrete”?
It pointed out that a particularized injury is one which has both
been suffered by the plaintiff and is not an injury common to an
entire class of persons affected by the statute in question that is, it is not “undifferentiated.”

It then discussed

concreteness, stating that an injury, to be concrete, must be
“‘real’ and not ‘abstract.’” Spokeo, 136 S.Ct. at 1548.

Such an

injury can be either tangible or intangible, but it must flow
from the infliction of actual harm; that is, a plaintiff cannot
merely allege a “bare procedural violation” of a statute - even
one which purports to provide a remedy for such violations - and
still satisfy Article III.

Id. at 1550.

The majority opinion

did not believe that the Ninth Circuit Court of Appeals had
applied these principles properly, and remanded for a new
determination of whether Mr. Robins had standing.

Two Justices

dissented as to that disposition, concluding that the record was
sufficient to show that real harm could come to Mr. Robins as a
result of the type of misinformation (concerning his age, marital
status, employment, and family composition) Spokeo had posted on
its website.
C.

Id. at 1554-56.
The Adequacy of the Hagys’ Claimed Injury

It is important for the Court to begin its analysis by
looking at what the Hagys alleged in the complaint.

They did, of

course, allege that the June 8, 2010 and June 30, 2010 letters
and associated omissions violated statutory provisions.

Beyond

that, they claimed that “[a]s a result [of] Defendants’ actions
and inactions, Plaintiffs suffered headaches, nausea,
embarrassment, anxiety, fear, mental anguish/emotional distress,
loss of sleep, humiliation, outrage and anger.”
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(Amended

Complaint, Doc. 18 at ¶21).

It is also important to note that

the disclosures at issue here - notice that someone is acting as
a debt collector and the provision of “civil Miranda warnings” are designed to insure that unsophisticated consumers are not
misled about their rights, and that the Hagys pleaded that they
were not provided with these required disclosures.
The Court has no difficulty concluding that the Hagys’
injury is “particularized.”

Their claims are based on actions

taken directly against them, or matters communicated directly to
them, as opposed to being predicated on some generalized
grievance about the Law Firm Defendants’ conduct under the
statutes in question.

The only issue, then, is whether the

injuries they claim are “real” or “abstract.”
There are a fair number of federal court decisions which
consider (or at least touch on) how Spokeo applies in the context
of the FDCPA, including seven from federal courts within the
Sixth Circuit.

The only decision from this Court which appears

on WestLaw, Kline v. Mortgage Electronic Registration System,
2016 WL 3926481 (S.D. Ohio July 18, 2016), simply drops a
footnote to the effect that a prior Court of Appeals decision,
Federal Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504, 513 (6th
Cir. 2007), may no longer be good law to the extent that it holds
that a plaintiff “can recover statutory damages against [a
defendant] for [an] alleged FDCPA violation, even in the absence
of any damages.”

Id. at *7 n.5.

If the word “harm” is

substituted for “damages,” that may be an accurate statement of
the law, but it does not really assist the Court in deciding the
particular issue raised in this case.
More directly on point is the case of Macy v. GC Services
Limited Partnership, 2016 WL 5661525 (E.D. Ky. Sept. 29, 2016).
That case, like this one, involved a violation of the “civil
Miranda warning” provision of the Act.

The defendant argued that

its failure to provide this warning in writing was the type of
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mere procedural violation that did not give rise to an Article
III “injury-in-fact.”

The court rejected that argument, holding

that the possibility that the failure to provide such warnings
might lead a “least sophisticated debtor” to waive certain
statutory rights was an adequate injury for standing purposes.
Id. at *4.

Another on-point decision, Anda v. Roosen Varchetti &

Olivier, PLLC, 2016 WL 7157414 (W.D. Mich. Oct. 31, 2016), held
that the type of informational injury which the FDCPA was
designed (at least in part) to guard against is a sufficiently
real injury to support Article III standing, and it cites to
decisions from three other courts also holding, post-Spokeo, that
“the allegation of a failure to accurately disclose information
required by the FDCPA is sufficient to confer standing.”

Id. at

*5 n.2, citing Church v. Accretive Health, Inc., 654 Fed. Appx.
990, 994 (11th Cir. 2016); Sayles v. Advanced Recovery Systems,
2016 WL 4522822, at *2 (S.D. Miss. Aug. 26, 2016); Dickens v. GC
Servs. Ltd. P'ship, 2016 WL 3917530, at *2 (M.D. Fla. July 20,
2016).

The same result was reached in Fausz v. NPAS, Inc., 2017

WL 708725, *5 (W.D. Ky. Feb. 22, 2017), which quotes Church,
supra, for the proposition that “through the FDCPA, Congress has
created a new right — the right to receive the required
disclosures in communications governed by the FDCPA — and a new
injury — not receiving such disclosures.”
Church has been widely followed, and other courts have also
recognized that “violations of the FDCPA are distinguishable from
... other statutes and have been repeatedly found to establish
concrete injuries” flowing from the failure to make required
disclosures in communications to debtors.

See, e.g., Long v.

Fenton & McGarvey Law Firm P.S.C., 2016 WL 7179367, *3 (S.D. Ind.
Dec. 9, 2016); Lane v. Bayview Loan Servicing, LLC, 2016 WL
3671467, *4 (N.D. Ill. July 11, 2016)(noting that “[t]he
information-access cases cited by Spokeo suggest that, in this
case, [Plaintiff] has alleged a sufficiently concrete injury
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because he alleges that [Defendant] denied him the right to
information due to him under the FDCPA.”

These decisions are

consistent with pre-Spokeo cases from the Court of Appeals for
the Sixth Circuit such as Stratton v. Portfolio Recovery
Associates, LLC, 770 F.3d 443, 448–49 (6th Cir. 2014).

And, as

explained in Fausz, supra, Stratton is still cited post-Spokeo in
support of the proposition that the FDCPA allows suit to be
brought for violation of its provision without proof of actual
monetary damages.

See, e.g., Hawksley v. Weltman, Weinberg &

Reis Co., P.S.C, 2017 WL 63033 (W.D. Ky. Jan. 5, 2017).
The Court finds these decisions persuasive.

The FDCPA does

create an informational right which did not exist prior to its
enactment, and that right is tied to the harm which a consumer
may suffer if not provided with that information.

Consequently,

the deprivation of that information is, in most cases, sufficient
to confer Article III standing.

That was the law before Spokeo,

and that law was not based on an erroneous understanding of
Article III like the one corrected by Spokeo, but by application
of well-settled principles of standing jurisprudence which Spokeo
did not change (and, in fact, upon which Spokeo relied).

The

Court therefore declines to reconsider its prior grant of summary
judgment to the Hagys on the ground that they lack standing to
sue.
IV.

Motion to Dismiss Supplemental Complaint

The Law Firm Defendants’ motion to dismiss the supplemental
complaint is based solely on the argument that the Hagys lacked
Article III standing to bring the original FDCPA claim.

Because

the Court has found that the Hagys have pleaded a sufficiently
particularized and concrete injury-in-fact and that the Court has
subject matter jurisdiction over this case, the motion to dismiss
the supplemental complaint will be denied as well.
V.

Motion to Certify Interlocutory Appeal

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The Hagys have moved to certify the Court’s October 22, 2013
judgment for immediate appeal.

They argue that there is a split

of authority on the question of whether a letter to a debtor’s
attorney (which describes the June 30, 2010 letter at issue in
this case) can violate the FDCPA, and that allowing the Court of
Appeals to decide this issue before they pursue their
supplemental complaint will materially advance the termination of
this case.

The Law Firm Defendants have taken no position on

this issue.
The legal standard applicable to this motion is not in
dispute.

A court “may permit an appeal to be taken from an order

certified for interlocutory appeal if (1) the order involves a
controlling question of law, (2) a substantial ground for
difference of opinion exists regarding the correctness of the
decision, and (3) an immediate appeal may materially advance the
ultimate termination of the litigation. 28 U.S.C. §1292(b).”
re City of Memphis, 293 F.3d 345, 350 (6th Cir. 2002).

In

The Court

agrees that there appears to be a difference of opinion on the
issue relating to the June 30, 2010 letter under the FDCPA, but
that is not the only issue on which the Court entered judgment.
Staying the balance of the case while that issue is litigated in
the Court of Appeals will not materially advance the termination
of this case.

Since certification of issues for interlocutory

appeal is to be “granted sparingly and only in exceptional
cases,” In re City of Memphis, supra, and because the Court does
not believe this is such a case, that motion will be denied.
VI. Conclusion
For the reasons set forth above, the Law Firm Defendants’
motions to dismiss and for reconsideration (Docs. 157, and 158)
and the motion to certify the case for an interlocutory appeal
(Doc. 160) are denied.

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/s/ Terence P. Kemp
United States Magistrate Judge

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