Geary et al v. Green Tree Servicing LLC
Filing
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ORDER granting in part and denying in part 3 Motion to Dismiss. Defendants Motion to Dismiss is denied as to Counts Two and Three, and as to Class Count One. Defendants Motion to Dismiss is granted as to Count Four and Class Count Two. Signed by Judge Algenon L. Marbley on 3/20/2015. (cw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
BRIAN GEARY, et al.,
Plaintiffs,
v.
GREEN TREE SERVICING, LLC,
Defendant.
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Case No. 2:14-cv-00522
JUDGE ALGENON L. MARBLEY
Magistrate Judge Deavers
OPINION & ORDER
I.
INTRODUCTION
This matter is before the Court on Defendant Green Tree Servicing LLC’s Motion to
Dismiss Complaint, or in the Alternative, to Strike Class Allegations With Request for Oral
Argument (“Motion to Dismiss”). (Doc. 3). For the reasons set forth herein, Defendant Green
Tree Servicing LLC’s Motion to Dismiss is DENIED IN PART and GRANTED IN PART.
II.
BACKGROUND
Plaintiffs Brian and Connie Geary (“Plaintiffs”) bring this action against Defendant
Green Tree Servicing LLC (“Green Tree” or “Defendant”) for alleged violations of the Fair Debt
Collection Practices Act (“FDCPA” or “the Act”). On August 18, 2011, Plaintiffs, residents of
Lancaster, Ohio, jointly filed a voluntary petition for Chapter 7 bankruptcy in the United States
Bankruptcy Court for the Southern District of Ohio. (Compl., Doc. 1, ¶ 9). Plaintiffs each
received a Chapter 7 discharge on December 6, 2011. (Id., ¶ 11). On December 22, 2011, their
bankruptcy case was closed. (Id.).
At the time Plaintiffs filed their Chapter 7 bankruptcy petition, they were “behind” on
payments for an automobile loan (the “Loan”) serviced by CitiFinancial through CitiFinancial
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Servicing LLC (collectively, “CitiFinancial”). (Id., ¶ 12-13). CitiFinancial was a secured
creditor and received notice of Plaintiffs’’ bankruptcy case.
Plaintiffs entered into a Reaffirmation Agreement with CitiFinancial (the “Reaffirmation
Agreement”), which was filed in Plaintiffs’ bankruptcy action on December 2, 2011. (Id., ¶ 1415). The Reaffirmation Agreement reaffirmed the Loan debt in the amount of $2,350.00 with a
6.00% annual interest rate. It also included a repayment schedule, which established that,
beginning December 1, 2011, Plaintiffs would make 24 monthly payments of $140.15 each for a
total payment of $3,363.00. (Id., ¶ 16-17). Desiring to pay the Loan off in 20 months instead of
24, Plaintiffs timely made 20 monthly payments to CitiFinancial (from December 2011 through
July 2013), each for $174.00, for a total payment of $3,480.00. (Id., ¶ 18).
Plaintiffs allege that, although “[t]he Gearys total payments on the Loan were sufficient
to fully pay the reaffirmed debt…CitiFinancial continued sending statements to the Gearys, and
placing phone calls to Gearys, attempting to collect additional amounts.” (Id., 19-20). Plaintiffs
claim that they “made several attempts” to resolve the matter with CitiFinancial, “but
CitiFinancial refused to properly adjust the account,” “continued its collection efforts,” and
“refused multiple requests from the Gearys’ to deliver title to the subject automobile.” (Id., ¶ 2022).
Plaintiffs aver that “[i]n or around October 2013, CitiFinancial sold and/or assigned
servicing of the Loan to Green Tree Servicing LLC.” (Id., ¶ 23). The servicing transfer of
Plaintiffs’ Loan was effective on November 1, 2013. (Id., ¶ 24).
Plaintiffs allege that on October 16, 2013, Green Tree sent Plaintiffs a letter (“Initial
Communication”). (Pl. Exh. A, Doc. 1-2). The letterhead on which the Initial Communication
was typed displayed the logos of both CitiFinancial and Green Tree. (Id.). The Initial
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Communication welcomed Plaintiffs to Green Tree and informed them that, effective November
1, 2013, “the servicing of your loan – that is, the right to collect loan payments from you – is
being transferred from CitiFinancial to Green Tree.” (Id.). The letter also notified Plaintiffs that
Green Tree would begin posting payments to Plaintiffs’ account “on or about November 11,
2013,” and that Plaintiffs “should be receiving [their] first statement…the week of November 18,
2013.” Further, the Initial Communication included information about a variety of methods
Plaintiffs could contact or get more information about Green Tree, including Green Tree’s
website, phone number, and mailing address. In addition, the letter noted that Plaintiffs’
“monthly payment amount” was $140.32, listed a “payment due” date of “11/15/2013,” and
stated a “principal balance” or $904.13.
The Initial Communication also included a detachable “Initial Payment Coupon.” The
Initial Payment Coupon included Plaintiffs’ names, address, and account number. It stated the
“Total Due” as $140.32. The Initial Communication also contained information about auto-pay
options and bill payment services. Plaintiffs’ Complaint avers that the Initial Communication
did not include “the 30-day Debt Validation language specified in 15 U.S.C. §1692g(a)(3)-(5).”
(Doc. 1, ¶ 25(e)).
Plaintiffs allege that after the Initial Communication was sent, “Green Tree continued
sending the Gearys ‘Monthly Billing Statements’ and other written correspondence attempting to
collect” on the Loan. (Id., ¶ 28). On November 14, 2013, Plaintiffs assert that they received a
letter from Green Tree informing them that $1,101.60 was owed. This letter contained “the 30day Debt Validation language” required by the FDCPA in §1692g. (Pl. Exh. B, Doc. 1-2).
In response to the November 14, 2013 letter, Plaintiffs claim they sent Green Tree a letter
via certified mail (the “Dispute Letter”), dated November 21, 2013, “disputing the debt and
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informing Green Tree that the amount in question had been discharged pursuant to the Gearys’
bankruptcy and the Reaffirmation Agreement.” (Doc. 1, ¶ 31). Plaintiffs allege that Green Tree
received and signed for the Dispute Letter on December 4, 2013. (Id., ¶ 32). Plaintiffs assert
that they had several conversations with Green Tree representatives from December 2013
through March 2014, during which Plaintiffs explained that the Loan had been reaffirmed, the
reaffirmed debt had been paid in full, and any further amounts owed were discharged pursuant to
bankruptcy. (Id., ¶¶ 37-54). Nevertheless, Plaintiffs allege that Green Tree continued to attempt
to collect on the Loan through written correspondence and collection calls demanding payment.
(Id., ¶ 35).
Plaintiffs also claim that, despite multiple requests, Green Tree has refused to deliver the
automobile’s title to Plaintiffs, and that Green Tree provided negative reporting to various credit
bureaus which has resulted in Plaintiffs being denied credit. (Id., ¶¶ 56-59). On March 11, 2014,
Plaintiffs’ counsel sent a “demand letter” to Defendant “seeking to resolve the matter.” Plaintiffs
allege that their counsel never received a response from Defendants. (Id., ¶¶ 54-55).
On June 3, 2014, Plaintiffs filed their Complaint against Defendant, alleging violations of
the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (“FDCPA”). Specifically, Plaintiffs’
Complaint asserts that Defendant committed four distinct FDCPA violations: (i) violation of 15
U.S.C. §1692e(2)(A) (Count One), for the use of a false, deceptive, or misleading representations
in connection with the collection of a debt and for falsely representing the character, amount, or
legal status of the Loan debt, in billing statements, collection calls, and/or other Loan account
correspondence; (ii) violation of 15 U.S.C. §1692g(a) (Count Two), for failing to send a followup written notice containing the 30-day Debt Validation language within five days of sending the
Initial Communication; (iii) violation of 15 U.S.C. §1692g(b) (Count Three), for Defendant’s
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failure to send written documentation providing verification of the debt it sought to collect; and
(iv) violation of 15 U.S.C. §1692e(14) (Count Four), for use, in the Initial Communication, of
letterhead containing the name “CitiFinancial,” a business, company, or organization name other
than the true name of Green Tree’s business, company, or organization.
In addition, Plaintiffs bring two separate class action claims. First, in Class Count One,
Plaintiffs allege systemic violations of 15 U.S.C. §1692g(a) for Defendant’s failure to send
borrowers written notice containing the required 30-day Debt Validation language within five
days of sending the initial form letter described (the same conduct alleged in individual Count
Two). In Class Count Two, Plaintiffs allege systemic violations of 15 U.S.C. 1692e(14) for the
use of letterhead containing the name of a financial institution other than the true name of Green
Tree’s business, company, or organization (the same conduct alleged in individual Count Four).
In Class Counts Three and Four, Plaintiffs request declaratory relief for the alleged violations
described in Class Count One and Class Count Two.
In response to Plaintiffs’ Complaint, Defendant filed its Motion to Dismiss, asking this
Court to dismiss Counts II, III, and IV of Plaintiffs’ Complaint for failure to state a claim upon
which relief can be granted, pursuant to Fed.R.Civ.P 12(b)(6). In the alternative, Defendants ask
this Court to strike Plaintiffs’ class allegations in Class Counts I and II, pursuant Rule
23(c)(1)(A). This matter has been fully briefed and is ripe for review.
III.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) allows for a case to be dismissed for “failure to
state a claim upon which relief can be granted.” Such a motion “is a test of the plaintiff’s cause
of action as stated in the complaint, not a challenge to the plaintiff’s factual allegations.” Golden
v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir. 2005). Thus, the Court must construe the
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complaint in the light most favorable to the non-moving party. Total Benefits Planning Agency,
Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008). The Court is not
required, however, to accept as true mere legal conclusions unsupported by factual allegations.
Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). Although liberal, Rule 12(b)(6) requires more than
bare assertions of legal conclusions. Allard v. Weitzman, 991 F.2d 1236, 1240 (6th Cir. 1993)
(citation omitted).
Further, a complaint need not set down in detail all the particularities of a plaintiff's claim
against a defendant. See United States v. School Dist. of Ferndale, 577 F.2d 1339, 1345 (6th Cir.
1978); Westlake v. Lucas, 537 F.2d at 858; Dunn v. Tennessee, 697 F.2d 121, 125 (6th Cir.
1983). The complaint simply requires a “short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The function of the complaint is to “‘give
the defendant fair notice of what the claim is, and the grounds upon which it rests.’” Nader v.
Blackwell, 545 F.3d 459, 470 (6th Cir. 2008) (quoting Erickson v. Pardus, 551 U.S. 89, 93
(2007)). In short, a complaint’s factual allegations “must be enough to raise a right to relief
above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). It must
contain “enough facts to state a claim to relief that is plausible on its face.” Id. at 570.
When determining the sufficiency of a complaint in the face of a motion to dismiss
pursuant to Fed.R.Civ.P. 12(b)(6), “a complaint should not be dismissed for failure to state a
claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2
L.Ed.2d 80 (1957); see also McClain v. Real Estate Bd. of New Orleans, Inc., 444 U.S. 232, 100
S.Ct. 502, 62 L.Ed.2d 441 (1980); Windsor v. The Tennessean, 719 F.2d 155, 158 (6th Cir.1983);
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Neil v. Bergland, 646 F.2d 1178, 1184 (6th Cir.1981); Parker v. Turner, 626 F.2d 1, 7 (6th
Cir.1980).
The court will grant a defendant's motion for dismissal under Fed.R.Civ.P. 12(b)(6) if the
complaint is without any merit because of an absence of law to support a claim of the type made,
or of facts sufficient to make a valid claim, or if on the face of the complaint there is an
insurmountable bar to relief indicating that the plaintiff does not have a claim. See generally
Rauch v. Day & Night Mfg. Corp., 576 F.2d 697 (6th Cir. 1978); Ott v. Midland–Ross Corp., 523
F.2d 1367; Brennan v. Rhodes, 423 F.2d 706 (6th Cir. 1970).
The Court generally may only consider evidence contained within the pleadings without
converting the motion into one for summary judgment. Fed.R.Civ.P. 12(d). Exhibits to the
pleadings are “part of the pleadings for all purposes.” Fed.R.Civ.P. 10(c). Documents not
attached to a plaintiff's complaint but introduced by the defendant on a motion to dismiss will be
considered as part of the pleadings if “‘they are referred to in the plaintiff's complaint and are
central to [his] claim.’” Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997) (quoting Venture
Assoc. v. Zenith Data Sys., 987 F.2d 429, 431 (7th Cir. 1993)); see also City of Monroe Emp.
Ret. Sys. v. Bridgestone Corp., 399 F.3d 651, 659 (6th Cir. 2005) (relying on Weiner ). The
Court may also consider “materials that are public records or otherwise appropriate for taking
judicial notice without converting a Rule 12(b)(6) motion to a Rule 56 motion.” Whittiker v.
Deutsche Bank Nat'l Trust Co., 605 F.Supp.2d 914, 925 (N.D. Ohio 2009) (citing New England
Health Care Employees Pension Fund v. Ernst & Young, LLP, 336 F.3d 495, 501 (6th Cir.
2003)).
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IV.
ANALYSIS
The FDCPA is designed “to eliminate the abusive debt collection practices by debt
collectors, to insure that those debt collectors who refrain from using abusive debt collection
practices are not competitively disadvantaged, and to promote consistent State action to protect
consumers against debt collection abuses.” 15 U.S.C. § 1692(e).
The Sixth Circuit has determined that, “[t]he Fair Debt Collection Practices Act is an
extraordinarily broad statute. Congress addressed itself to what it considered to be a widespread
problem, and to remedy that problem it crafted a broad statute.” Frey v. Gangwish, 970 F.2d
1516, 1521 (6th Cir. 1992). Because the Court’s “actions are guided by the hand of Congress,”
the Sixth Circuit, as well as other Circuits, have noted that the FDCPA should be applied broadly
according to its terms. See, e.g., Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 362 (6th Cir.
2012); Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1325 (7th Cir.
1997) (noting that “the plain language of the Act defines ‘debt’ quite broadly”).
Because liability under the FDCPA attaches only to a “debt collector,” as defined by the
Act, see Kistner v. Law Offices of Michael P. Margelefsky, LLC, 518 F.3d 433, 436 (6th Cir.
2008), and Plaintiffs allege that Defendant violated various provisions of the Act, this Court must
first address whether Defendant is a “debt collector” under the FDCPA.
A. Whether Defendant is a “Debt Collector” Under the FDCPA
The FDCPA defines a “debt collector” as:
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….[T]he term includes any creditor who, in
the process of collecting his own debts, uses any name other than his own which
would indicate that a third person is collecting or attempting to collect such debts.
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15 U.S.C. § 1692a(6). The Act includes a number of exceptions to this definition, one of which
is relevant here: under the FDCPA, a debt collector “does not include ... any person collecting or
attempting to collect any debt owed or due or asserted to be owed or due another to the extent
such activity ... concerns a debt which was not in default at the time it was obtained by such
person.” 15 U.S.C. § 1692a(6)(F)(iii); Bridge, 681 F.3d at 364 (“For an entity that did not
originate the debt in question but acquired it and attempts to collect on it, that entity is either a
creditor or a debt collector depending on the default status of the debt at the time it was
acquired.”); McKay v. JPMorgan Chase Bank, N.A., No. 2:14-CV-00512, 2014 WL 5529672, at
*6 (S.D. Ohio Nov. 3, 2014) (“Creditors and mortgage servicers are excluded from the definition
of “debt collector” if the creditor or servicer did not acquire the debt when it was in default or
treat the debt as if it were in default at the time of acquisition.”).
The Sixth Circuit has clarified, however, that, in light of the breadth of the FDCPA, “the
definition of debt collector pursuant to §1692a(6)(F)(iii) includes any non-originating debt
holder that either acquired a debt in default or has treated the debt as if it were in default at the
time of acquisition. It matters not whether such treatment was due to a clerical mistake, other
error, or intention.” Bridge, 681 F.3d at 364 (emphasis added); see also In re Rostorfer, 497
B.R. 873, 874-76 (Bankr. S.D. Ohio 2013) (“An entity acting in its capacity a loan servicer is not
a debt collector for purposes of the FDCPA unless the debt was in default or treated as though it
were in default when the entity obtained the loan for servicing.”).
Defendant argues that the § 1692a(6)(F)(iii) exception excludes it from being considered
a “debt collector” under the FDCPA because, as Plaintiffs’ assert, the Loan was not in default at
the time Defendant acquired the Loan – indeed, the Loan had already been paid-in-full according
to the Reaffirmation Agreement. Further, Defendant insists, Plaintiffs only make an “entirely
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conclusory” allegation that Defendant treated the Loan as if it was in default without identifying
any written or verbal communications from the time of the transfer supporting their allegation.
Plaintiffs counter that they have made sufficient allegations in their complaint that the
Loan was being treated as in default at the time Green Tree began servicing it. (Doc. 6 at 6,
citing Doc. 1, ¶¶ 15-29, 62). Specifically, Plaintiffs maintain that the fact that Defendant
identified itself as a “debt collector” and employed the FDCPA’s debt verification process
indicates Defendant was treating Plaintiffs’ Loan as in default. Further, Plaintiffs insist that they
have “clearly alleged” that Defendant attempted to collect a debt which they had already paid,
which Plaintiffs argue is grounds for being considered a debt collector under Sixth Circuit
precedent. (Doc. 6 at 5-6). Therefore, Plaintiffs argue, Defendant qualifies as a debt collector
under the FDCPA. This Court finds that Defendant is in fact a debt collector under the FDCPA.
1. Legislative History and Purpose of the FDCPA
The Sixth Circuit has clarified that the purpose of the FDCPA is, at least in part, to
regulate the collection of already-paid debts:
The legislative history of the FDCPA indicates that Congress intended to address
the very situation the Bridges allege. A Senate Report states that the purpose of
the Act's debt verification is to ‘eliminate the recurring problem of debt collectors
dunning the wrong person or attempting to collect debts which the consumer has
already paid.’ S. Rpt. 95–382 at 4, reprinted in 1977 U.S.C.C.A.N. 1695, 1699. A
House Report noted congressional intent to regulate collection activities based on
either ‘mistaken identity or mistaken facts.’ H.R.Rep. No. 131, at 8. Congress
recognized that computer errors are a related problem, and that ‘[c]onsumers who
are victims of computer error find it extremely difficult to obtain correction of
records. This may lead to collection agency harassment.’ Id.; see also Barany–
Snyder v. Weiner, 539 F.3d 327, 333 (6th Cir. 2008) (‘[T]he FDCPA is
extraordinarily broad, crafted in response to what Congress perceived to be a
widespread problem.’) (citations omitted).
…
Throughout the FDCPA coverage is based upon actual or merely alleged debt.
Thus, a debt holder or servicer is a debt collector when it engages in collection
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activities on a debt that is not, as it turns out, actually owed. This stands to reason
since the pursuit of collection activities presupposes that the collector alleges or
asserts that the subject of those activities is obligated.
Bridge, 681 F.3d at 361-362.
Further, the Sixth Circuit previously has rejected the argument that a party cannot
be considered a debt collector under the FDCPA when a plaintiff’s own allegations
claimed that the account was not in default at the time of acquisition. In Bridge v. Ocwen
Fed. Bank, FSB, 681 F.3d 355, 362 (6th Cir. 2012), the plaintiffs twice attempted to make
their April mortgage payment to defendant Aimes Capital Corporation, and plaintiffs’
bank erroneously dishonored the payments. Bridge, 681 F.3d at 357. In the meantime,
Aimes assigned the mortgage to defendant Ocwen. Plaintiffs’ two payments ultimately
were honored, and so the plaintiff did not submit a payment for May. Ocwen then began
“dunning” plaintiffs for the May payment. The Sixth Circuit rejected the defendant’s
argument that it was not a debt collector because the plaintiffs own allegations claimed
that the account was not in default at the time:
Further, we find disingenuous Ocwen Bank's argument that ‘Ocwen also is not a
debt collector because servicing transferred to Ocwen on May 1, 2002, and
Plaintiffs themselves allege that the account was not in default at that time.’ (R.
98 at 7). We note this argument is exemplary of an unsettling trend in FDCPA
claims. Defendants seek to have it both ways: after having engaged in years of
collection activity claiming a mortgage is in default, Defendants now seek to
defeat the protections of the FDCPA by relying on Plaintiffs’ position throughout
those years that the mortgage is not in default. As noted in the analysis of the
Third Circuit, FDCPA coverage is not defeated by clever arguments for technical
loopholes that seek to devour the protections Congress intended.
Bridge, 681 F.3d at 361 (emphasis in original).
Similarly here, Defendant seeks to “have it both ways” by arguing that it cannot be
considered a debt collector, after engaging in what appears to be extensive debt collection
activity, because Plaintiff maintains that they are not, and indeed were not, in default when
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Defendant acquired the Loan. Defendant’s argument undermines the purpose of the FDCPA and
is contrary to Sixth Circuit precedent; therefore, it is unavailing.
2. Default or Treated as in Default
The FDCPA does not define “default.” See Alibrandi v. Fin. Outsourcing Servs., Inc.,
333 F.3d 82, 86 (2d Cir.2003); Justice v. Ocwen Loan Servicing, LLC, No. 2:13-CV-00165, 2014
WL 526143, at *5 (S.D. Ohio Feb. 7, 2014); Martin v. Select Portfolio Serving Holding Corp.,
No. l:05–CV–273, 2008 WL 618788, at *5 (S.D.Ohio March 3, 2008) (“The FDCPA does not
define default nor establish the time period after which a default occurs. Rather it is generally
left to the parties, i.e., the creditor and the debtor, to define their own period of default.”)
(internal citations omitted). In addition, the Sixth Circuit has not directly spoken to the matter.
As this Court has previously held, “[e]ven if a debt was not actually in default when the
servicing company acquired it, if the servicing company acquired it as a debt in default, and
based its collection activities on that understanding, the servicer will be subject to the Act as a
‘debt collector.’” Martin v. Select Portfolio Serving Holding Corp., No. 1:05-CV-273, 2008 WL
618788, at *4 (S.D. Ohio Mar. 3, 2008) (citing Schlosser, 323 F.3d at 539); see also Bauman v.
Bank of Am., N.A., No. 2:12-CV-00933, 2014 WL 1884266, at *5-6 (S.D. Ohio May 9, 2014);
Shugart v. Ocwen Loan Servicing, LLC, 747 F. Supp. 2d 938, 942-43 (S.D. Ohio 2010); Martin
v. Select Portfolio Servicing Holding Corp., Case No. 1:05–cv–273, 2008 WL 618788, at *4
(S.D.Ohio Mar. 3, 2008). In other words, “even if the servicing company was mistaken as to
whether the loan was (or was not) actually in default, if it treated the account as if it were in
default, the § 1692a(6)(F)(iii) exclusion does not apply.” Id.; see also Bridge, 681 F.3d at 362
(emphasis added) (finding that the FDCPA applies to “any non-originating debt holder that either
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acquired a debt in default,” or to any non-originating debt holder that “treated the debt as if it
were in default at the time of acquisition.”) (emphasis added).
As another factor, some courts have advocated that the issue of default should be left up
to the contractual agreement of the parties. See Alibrandi, 333 F.3d at 87 n. 5. Here, however,
Defendants do not identify any company policy, see Martin, 2008 WL 618788, at *5 (“SPS
considers a loan in default when a payment is 45 days overdue.”), or any agreement between the
parties that defines “default.” Thus, the Court would be left to let Defendants define default
according to Defendant’s terms. As this Court has previously held, “allowing parties potentially
qualifying as debt collectors to unilaterally define ‘default’ as used in the FDCPA would
frustrate the intent of the statute.” Justice v. Ocwen Loan Servicing, LLC, No. 2:13-CV-00165,
2014 WL 526143, at *5 (S.D. Ohio Feb. 7, 2014).
In this case, the Complaint alleges that, although Green Tree began servicing Plaintiffs’
loan after it had been reaffirmed and indeed paid in full, Plaintiffs were sent an Initial
Communication that included a payment coupon, informed Plaintiffs’ of the amount due, gave a
due date for their payment, as well as other information on how to make payments to Green
Tree. Additionally, Plaintiffs allege that following the Initial Communication, they were sent
additional communications via mail, including at least one that informed them that their account
was delinquent; they received collection calls from Green Tree attempting to collect payment on
the Loan; and Defendant gave negative reports to credit reporting agencies regarding Plaintiffs’
Loan. Viewing the pleadings in a light most favorable to Plaintiffs, they have stated at least a
facially plausible claim that Defendants were treating the Loans as if they were in default at the
time of acquisition.
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Therefore, taking all factual allegations in the Complaint as true, Plaintiff's claim does
not fail pursuant to the 15 U.S.C. § 1692a(6)(F)(iii) exception. Plaintiffs have alleged sufficient
facts to support a plausible inference that Green Tree treated its Loan as if it was in default and,
therefore, is a debt collector. Accordingly, Defendant’s Motion to Dismiss is DENIED on this
ground.
B. Whether the Initial Communication Constitutes a “Debt Collection
Communication” Under the FDCPA
Defendant next argues that the Initial Communication is not a “connection with the
collection of any debt” (i.e. a debt collection communication) under the FDCPA. To be liable
under the FDCPA’s substantive provisions, a debt collector's conduct must have been taken “in
connection with the collection of any debt,” e.g., 15 U.S.C. §§ 1692c(a)-(b), 1692d, 1692e,
1692g, or in order “to collect any debt,” id. § 1692f; see also Glazer v. Chase Home Fin. LLC,
704 F.3d 453, 459-60 (6th Cir. 2013). Otherwise stated, to state a claim under the Act, “a
plaintiff must show that a defendant violated one of the substantive provisions of the FDCPA
while engaging in a debt collection activity.” Clark v. Lender Processing Services, 2014 WL
1408891, at *5 (6th Cir. 2014).
Defendant argues that, for Plaintiffs to prevail on Counts II-IV, Plaintiffs must first show
that the Initial Communication was a debt collection communication under the FDCPA.1
Defendant maintains that the Initial Communication was not a debt collection communication;
instead, it merely informed Plaintiffs that the servicing of the Loan was transferred to Green Tree
and summarized the Loan’s current status. (Doc. 3 at 10). Plaintiffs, on the other hand, argue
1
Specifically, Defendant insists that, if the Initial Communication is not a debt collection communication, Count III
fails because Defendant would not have been required to provide the 30-day debt validation language within five
days of sending the communication, as required under 1692g(a). Similarly, Defendant maintains that Count II fails
if the Initial Communication is not a debt collection communication because the second letter would not be
implicated by 1692g unless the Initial Communication was not a debt collection communication. Finally, Defendant
argues that Count IV can only state a claim if the Initial Communication was a debt collection communication
because it alleges that the Initial Communication violated 1692e(14) on its face.
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that the Initial Communication “was intended not only to provide information that the debt had
been transferred, but also to induce Plaintiffs to make a payment to Defendant.” (Doc. 6 at 11).
As such, Plaintiffs aver, the Initial Communication should be considered a communication in
connection with the collection of a debt under the FDCPA.
Although an important concept in the Act, it does not define debt collection. Glazer, 704
F.3d at 460. The Sixth Circuit, however, has described a debt collection communication under
the FDCPA as follows:
The text of § 1692e makes clear that, to be actionable, a communication need not
itself be a collection attempt; it need only be “connect[ed]” with one. Thus, we
agree with the Seventh Circuit that an “explicit demand for payment” is not
always necessary for the statute to apply. But it is just as clear that the statute does
not apply to every communication between a debt collector and a debtor. So the
question is where to draw the line. We draw it at the same place the Seventh
Circuit did in Gburek: for a communication to be in connection with the
collection of a debt, an animating purpose of the communication must be to
induce payment by the debtor. See id. at 385 (“a communication made specifically
to induce the debtor to settle her debt will be sufficient to trigger the protections”
of the Act). Obviously, communications that expressly demand payment will
almost certainly have this purpose. But so too might a communication that merely
refers the debtor to some other communication that itself demands payment. See,
e.g., id. at 386 (third-party letter directing debtor to contact creditor was sent in
connection with collection of a debt). Thus, to use the language of § 1692e, a
letter that is not itself a collection attempt, but that aims to make a such an attempt
more likely to succeed, is one that has the requisite connection.
Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011) (internal citations and
quotations omitted) (holding that balance statements were “merely a ministerial response to a
debtor inquiry, rather than part of a strategy to make payment more likely,” thus a reasonable
jury could not find that an animating purpose of the statements was to induce payment; the
“decisive point” was that defendant made the balance statements only after plaintiff called and
asked for them).
15
This Circuit has also stated that, while “debt collection” is not defined, the statute
includes certain “guideposts” that illuminate the proper interpretation of the term:
the Act's substantive provisions indicate that debt collection is performed through
either “communication,” id. § 1692c, “conduct,” id. § 1692d, or “means,” id. §§
1692e, 1692f. These broad words suggest a broad view of what the Act
considers collection. Nothing in these provisions cabins their applicability to
collection efforts not legal in nature. Cf. Heintz v. Jenkins, 514 U.S. 291, 292, 115
S.Ct. 1489, 131 L.Ed.2d 395 (1995) (holding that “a lawyer who ‘regularly,’
through litigation, tries to collect consumer debts” is a “debt collector” under the
Act).
Glazer, 704 F.3d at 461 (emphasis added). Indeed, the FDCP defines “communication” broadly
as “the conveying of information regarding a debt directly or indirectly to any person through
any medium.” 15 USC § 1692a(2). Therefore, “if a purpose of an activity taken in relation to a
debt is to ‘obtain payment’ of the debt, the activity is properly considered debt collection.” Id.
Because the Sixth Circuit has not given more explicit guidance on this issue, Defendant
insists that this Court should follow the reasoning of Thompson v. BAC Home Loans Serviceing,
L.P., No. 2:09-CV-311-TS, 2010 WL 1286747, at *4 (N.D. Ind. Mar. 26, 2010). In Thompson,
the debtor alleged that a loan servicer violated the FDCPA by failing to send the statutorilyrequired notice, known as the Validation Notice, within five days of sending a notice of transfer
of servicing rights. The loan servicer claimed that the notice of transfer was not a
communication in connection with debt collection under the FDCPA. Id. at *1. The court
agreed. In finding that the notice of transfer was not a debt collection communication, the Court
noted that:
The Notice does not address the status of the Plaintiff's home mortgage loan,
declare that it is in default, or demand any payment pursuant to such
default….[t]here is no indication that the Defendants are undertaking collection
efforts for missing or late payments. Rather, they are providing information about
the new servicer, including its payment remittance address, so that the consumer
can avoid missing payments or making late payments which might necessitate the
sending of a real dun.
16
…
Although ensuring payment of the debt cannot be denied as the Defendant's
ultimate goal, the Notice itself did not provide terms of payment or deadlines,
threaten further collection proceedings, or demand payment in any form.
Id. at *4-5.
Thompson, however, is readily distinguishable from the present case. In Thompson, the
notice at issue was six pages long, and included a variety of documents, including a statement of
rights granted to consumers under the Real Estate Settlement Procedures Act, Bank of America’s
privacy policy, a “Federally Required Affiliate Marketing Notice,” and a statement directed to
borrowers who were in bankruptcy proceedings. The Court determined that the combination of
materials was such that it did not necessarily indicate defendants were trying to collect a debt. In
the case sub judice, on the other hand, Plaintiffs received a two page document focused
exclusively on their debt – the servicing transfer, the current balance owed, and a due date for the
next payment – and information related to payment of that debt.
Additionally, a key factor in the Thompson Court’s analysis was that the final page of the
notice explicitly advised the plaintiff that the document was intended for informational purposes
only:
[The Notice] also states that the purpose of the Notice is to advise of the transfer
of the servicing of the mortgage, that if the borrower is currently in a bankruptcy
proceeding that the notice is for informational purposes only, that the “notice and
courtesy payment coupon attached are not intended as an action to recover or
enforce a claim,” and that if he is a Chapter 13 debtor he should continue to make
payments in accordance with his plan and ignore the courtesy payment coupon.
The notice concludes by stating that it is an “informational statement only.”(DE 1,
Ex. A (emphasis in original).)
Thompson, 2010 WL 1286747, at *5. The Thompson Court found that, in part because of this
clear disclaimer, an objective recipient would have understood that the defendant was taking no
17
position on the status of the debt at issue. The Initial Communication at issue here, on the other
hand, contained no such explicit advisement.
Finally, the Thompson Court’s interpretation construes a remedial statute in a narrow
fashion, flouting the traditional canon of statutory interpretation that “remedial statutes should be
liberally construed.” Peyton v. Rowe, 391 U.S. 54, 65, 88 S. Ct. 1549, 1555, 20 L. Ed. 2d 426
(1968). For example, although the Thompson Court determined that “ensuring payment of the
debt cannot be denied as the Defendant’s ultimate goal,” it then strictly construed the phrase “in
connection with the collection of any debt” to require a communication to mention default or
delinquency, threaten further collection proceedings, or explicitly demand payment. Thompson,
2010 WL 1286747, at *4-5. Such a narrow reading of the FDCPA also contravenes the explicit
direction of the Sixth Circuit in cases interpreting the FDCPA, to construe the Act with the
understanding that it is “extraordinarily broad.” Frey, 970 F.2d at 1521. See also Barany–
Snyder v. Weiner, 539 F.3d 327, 333 (6th Cir. 2008) (“[T]he FDCPA is extraordinarily broad,
crafted in response to what Congress perceived to be a widespread problem.”); Glazer, 704 F.3d
at 461 (stating that the “broad words” used in the FDCPA’s substantive provisions “suggest a
broad view of what the Act considers [debt] collection.”); Grden, 643 F.3d at 173 (finding that,
to be actionable, “a communication need not itself be a collection attempt; it need only be
‘connect[ed]’ with one.”). For these reasons, the Court declines to follow Thompson’s reasoning
in the present case.
Plaintiffs, on the other hand, argue that this Court should adopt the reasoning of
McLaughlin v. Phelan Hallinan & Schmieg, LLP, 756 F.3d 240 (3d Cir. 2014) cert. denied, 135
S. Ct. 487, 190 L. Ed. 2d 360 (2014). In McLaughlin, the plaintiff’s mortgage company put him
into default in error and referred the matter to a law firm (“PHS”). Id. at 243-244. PHS then
18
sent plaintiff a letter stating the amount of the debt, that PHS was a “debt collector attempting to
collect a debt,” and told plaintiff how to obtain current payoff quotes. Id. at 246. PHS argued
that the letter was not a “debt collection activity” subject to the FDCPA because it did not make
a demand for payment, suggest that plaintiff settle the underlying debt, or propose that plaintiff
enter into a payment plan. Id. at 245. Even though the letter did not contain a demand for
payment, the Third Circuit Court of Appeals rejected PHS’ argument, finding:
The FDCPA ‘regulates debt collection’ but does not define the term. Simon v. FIA
Card Servs., N.A., 732 F.3d 259, 265 (3d Cir.2013). The statute's substantive
provisions, however, make clear that it covers conduct ‘taken in connection with
the collection of any debt.’ Id. (internal quotation marks and citations omitted).
Put differently, activity undertaken for the general purpose of inducing payment
constitutes debt collection activity. Id.; see also Gburek v. Litton Loan Servicing
LP, 614 F.3d 380, 385 (7th Cir.2010) (describing “the commonsense inquiry of
whether a communication from a debt collector is made in connection with the
collection of any debt”). Thus, a communication need not contain an explicit
demand for payment to constitute debt collection activity. Simon, 732 F.3d at 266.
It is reasonable to infer that an entity that identifies itself as a debt collector, lays
out the amount of the debt, and explains how to obtain current payoff quotes has
engaged in a communication related to collecting a debt. Thus, the Letter
constitutes debt collection activity under the FDCPA and misrepresentations
contained therein may provide a basis for relief.
McLaughlin, 756 F.3d at 245. The Court noted that communications discussing details and
information about the debt at issue – such as the status ofr payment and requests for financial
information – are reasonably considered “part of a dialogue to facilitate satisfaction of the debt
and hence can constitute debt collection activity.” See id. at 246.
In light of Sixth Circuit precedent determining that the FDCPA is an “extraordinarily
broad statute,” Frey, 970 F.2d at 1516, and in light of the Grden Court’s finding that an explicit
demand for payment is not always required for a document to be considered a debt collection
communication, this Court adopts the reasoning of McLaughlin. See Grden v. Leikin Ingber &
Winters PC, 643 F.3d 169, 173 (6th Cir. 2011) (“Obviously, communications that expressly
19
demand payment will almost certainly have this purpose. But so too might a communication that
merely refers the debtor to some other communication that itself demands payment…Thus, to
use the language of § 1692e, a letter that is not itself a collection attempt, but that aims to make a
such an attempt more likely to succeed, is one that has the requisite connection.”).
In this case, the Initial Communication does not include a title, heading, or statement of
purpose indicating it is a merely a notice of transfer. Neither does it contain language
specifically indicating it was sent merely for informational purposes, unlike the communication
sent in Thompson. In addition, it included a ‘total amount due’ and, again, unlike in Thompson, a
due date. Further, the Initial Communication included a self-addressed payment coupon
indicating an amount due, with Plaintiffs’ account number and address, and instructions as to
whom Plaintiffs’ should make their check payable.
Moreover, the letter also included language required by the FDCPA for any initial
communication with a consumer – “this communication is this communication is from a debt
collector attempting to collect a debt, and any information obtained will be used for that
purpose.” Although this language alone may not be enough to transform a document into a debt
collection communication, see, e.g., Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 399 (6th Cir.
1998), in combination with the other information included in the Initial Communication and,
importantly, the information omitted therefrom, it is reasonable for a party to infer that the Initial
Communication is a communication related to collection of a debt. See McLaughlin, 756 F.3d at
246 (holding that it was “reasonable to infer that an entity that identifies itself as a debt collector,
lays out the amount of the debt, and explains how to obtain current payoff quotes has engaged in
a communication related to collecting a debt” under the FDCPA).
20
Thus, the Court finds that it is a communication in connection with the collection of a
debt under the FDCPA. As in Grden and McLaughlin, the Initial Communication, while
informative, also is viewed reasonably as part of a dialogue to facilitate the satisfaction of a debt
and aiming to make a collection attempt more likely to succeed; thus, it has the requisite
connection to debt collection under the FDCPA. For these reasons, Defendant’s Motion to
Dismiss on this basis is DENIED.
C. Whether Count Four of Plaintiffs’ Complaint, Alleging Violations Under FDCPA
§1692e(14) fails as a matter of law
In Count Four of their Complaint, Plaintiffs allege that Defendant’s violated §1692e(14)
by using the logos of both CitiFinancial and Green Tree at the top of the letterhead on which it
sent the Initial Communication, and because the letter was “robo-signed” by both CitiFinancial
and Green Tree. Plaintiffs aver that Green Tree’s use of letterhead containing the name
“CitiFinancial” was the “use of a business, company, or organization name other than the true
name of Green Tree’s business, company, or organization” in violation of § 1692e(14).
Moreover, Plaintiffs claim that they “were confused as to who was the source” of the Initial
Communication.
Defendant argues, in the alternative to its previous arguments for dismissal, that Count
Four fails to state a claim because Plaintiffs fail to plead that they was confused as to which
entity was collecting the debt based on the use of both CitiFinancial’s and Green Tree’s logos at
the top of the Initial Communication; instead, Defendant maintains, Plaintiffs merely pled that
they were confused as to the source of the letter. Further, Defendants aver that Plaintiff does not
allege that, at any time, Green Tree used the name of another entity to collect on the Loan. Thus,
Defendants insist, Count Four fails to state a claim.
21
Plaintiffs respond first that their subjective confusion is not a determining factor to plead
sufficiently a violation of § 1692e(14); instead, Plaintiff insists that when a debt collector uses
any name other than its own in a communication it is a per se violation of § 1692e(14). (Doc. 6
at 16 citing Boyko v. American Intern. Group, Inc., 2012 WL 1495372 (Dist. Ct. D. N.J. April
26, 2012)). Plaintiffs also counter that, to the extent their confusion is a factor in alleging a
violation of § 1692e(14), their Complaint adequately alleges that they were confused about the
source of the Initial Communication. (Doc. 6 citing Compl,, Doc. 1 at 97-99).
1. The “Least Sophisticated Consumer” Standard
Among other things, the FDCPA prohibits a debt collector from making “[a]ny false,
deceptive, or misleading misrepresentation or means in connection with the collection of any
debt.” 15 U.S.C. § 1692e. Section 1692e(14) specifically disallows “[t]he use of any business,
company, or organization name other than the true name of the debt collector's business,
company, or organization.” 15 U.S.C. § 1692e(14). In determining whether a debt collection
practice is deceptive or misleading, that practice “must be viewed objectively from the
standpoint of the ‘least sophisticated consumer.’ ” Foster v. D.B.S. Collection Agency, 463 F.
Supp. 2d 783, 800-01 (S.D. Ohio 2006); Gionis v. Javitch, Block & Rathbone, 405 F.Supp.2d
856, 864 (S.D. Ohio 2005) (Holschuh, J.) (quoting Taylor v. Perrin, Landry, deLaunay &
Durand, 103 F.3d 1232, 1236 (5th Cir.1997)); see also Edwards, 136 F.Supp.2d at 798 (citing
Smith v. Transworld Sys., Inc., 953 F.2d 1025, 1028 (6th Cir. 1992)). Against this backdrop, to
withstand a motion to dismiss, Plaintiffs must plead facts supporting their § 1692e(14) claim
sufficient to show that the least sophisticated consumer would be misled by the practice at issue.
The least sophisticated consumer standard “recognizes that the FDCPA protects the
gullible and the shrewd alike, while simultaneously presuming a basic level of reasonableness
22
and understanding on the part of the debtor, thus preventing liability for bizarre or idiosyncratic
interpretations of debt collection notices.” Currier v. First Resolution Inv. Corp., 762 F.3d 529,
533 (6th Cir. 2014) (citing Barany–Snyder v. Weiner, 539 F.3d 327, 333 (6th Cir. 2008)).
Moreover, “[E]ven the ‘least sophisticated consumer’ can be presumed to possess a rudimentary
amount of information about the world and a willingness to read a collection notice with some
care.” Powell v. Computer Credit, Inc., 975 F. Supp. 1034, 1039 (S.D. Ohio 1997) aff'd, No. 973979, 1998 WL 773989 (6th Cir. Oct. 15, 1998) (citing Clomon v. Jackson, 988 F.2d 1314, 1319
(2d Cir.1993)).
The Sixth Circuit has held that “a collection notice is deceptive when it can be reasonably
read to have two or more different meanings, one of which is inaccurate.” Fed. Home Loan
Mortgage Corp. v. Lamar, 503 F.3d 504, 512 (6th Cir. 2007) (quoting Russell v. Equifax A.R.S.,
74 F.3d 30, 35 (2d Cir. 1996)). Courts have also found that the focus of the FDCPA and
§1692e(14) is see “not on whether the name used by the creditor is permitted by law, but on
whether the name used results in the debtor's deception in terms of what entity is trying to collect
his debt.” Gutierrez v. AT & T Broadband, LLC, 382 F.3d 725, 740 (7th Cir.2004); see also
Suquilanda v. Cohen & Slamowitz, LLP, No. 10 CIV. 5868 PKC, 2011 WL 4344044, at *5
(S.D.N.Y. Sept. 8, 2011).
In this case, even when construing the Plaintiffs’ allegations as true, Plaintiffs have not
stated a claim for violation of §1692e(14). The Initial Communication clearly identifies both
CitiFinancial and Green Tree, and their relationship to each other: the letter states that it is from
both CitiFinancial, as the “Present Servicer” and Green Tree, as the “New Servicer,” and informs
Plaintiffs that “the right to collect loan payments…is being transferred from CitiFinancial to
Green Tree.” In addition, the Initial Payment Coupon attached to the letter indicates that checks
23
for payment of the account should be made payable to Green Tree. Moreover, Plaintiffs’
Complaint fails to allege that Green Tree is misidentified or unidentified in the Initial
Communication or at any time in communications made to collect on the Loan. Indeed, despite
the fact that Plaintiffs were “confused as to who was the source of the Initial Communication,”
Plaintiffs apparently understood that Green Tree was the party attempting to collect on the Loan
because they only allege that they sent a notice disputing the debt collection to, and conducted
subsequent communications with, Green Tree. (Doc. 1, ¶¶ 35-37).
Thus, the Court finds that Plaintiffs have not stated a plausible claim that the least
sophisticated consumer would not have understood that Green Tree was attempting to collect on
the debt. Although Plaintiff points to one case from the District Court of New Jersey that held
debt collectors strictly liable under § 1692e(14), see Boyko, 2012 WL 1495372, the case is not
binding authority on this Court, and this Court is unable to find any authority from the Sixth
Circuit creating such a per se rule. For these reasons, Count Four is DISMISSED for failure to
state a claim.
D. Plaintiffs’ Class Allegations in Class Count Two
Plaintiff also seeks to bring a putative class claim for systemic violations of 15 U.S.C.
1692e(14) for Defendant’s alleged use of letterhead containing the use of a name of a different
financial institution other than the true name of Green Tree’s business, company, or organization,
the same conduct Plaintiff alleges in individual Count Four. “When a plaintiff does not have an
individual claim,” however, as the Court has found here, “he cannot serve as a class
representative.” See, e.g., Moore v. First Advantage Enter. Screening Corp., No. 4:12
CV00792, 2013 WL 1662959, at *8 (N.D. Ohio Apr. 17, 2013) (citing Chambers v. American
Trans Air, Inc., 17 F.3d 998, 1006 (7th Cir.1994)).
24
Thus, because the Court dismisses Plaintiffs’ individual claims under Count Four, and
because Plaintiff's Complaint does not identify any additional putative class representatives, the
putative class claim contained in Class Count Two must be dismissed. For these reasons, Class
Count Two is DISMISSED.
E. Whether Plaintiffs’ Class Allegations in Class Count One Should be Stricken as a
Matter of Law
In the alternative to dismissal, Defendant moves to strike the class action claims asserted
in Class Count One of Plaintiffs’ Complaint. The Court denies Defendant’s request.
In Class Count One, Plaintiffs seek to represent a putative plaintiff class that consists of
“[e]very consumer who was sent, from June 3, 2013 to present, an initial communication from
Green Tree as more particularly described in ¶106 conveying information about a consumer debt
sold and/or transferred to Green Tree when in default or being treated as in default.” (Doc. 1, ¶
109).2
Rule 23 of the Federal Rules of Civil Procedure governs class actions brought in federal
court. In general, district courts have broad discretion to decide whether to certify a class. See
In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir. 1996). To obtain class certification,
Plaintiffs must establish the following prerequisites set out in Rule 23(a): (1) the class is so
2
Paragraph 106 of Plaintiffs’ Complaint, referenced in ¶ 109, states:
106. Upon information and belief, Green Tree intentionally and systematically sends such
borrowers an initial letter of the same form and nature as the “Initial Communication” sent to the
Gearys (attached as “Exhibit A”), with the following notable characteristics:
a) Letterhead containing both the name “Green Tree” and the name of the financial institution that
sold and/or assigned the consumer debt to Green Tree;
b) Information regarding the subject debt and Green Tree;
c) Robo-signature of both Green Tree and the financial institution that sold and/or assigned the
debt to Green Tree;
d) Attached payment coupon with instruction to make payment to Green Tree;
e) Absence of the 30-day language specified in 15 U.S.C. §1692g(a)(3)-(5).
(Doc. 1, ¶ 106).
25
numerous that joinder of all members is impracticable; (2) there are questions of law or fact
common to the class; (3) the claims or defenses of the representative parties are typical of the
claims or defenses of the class; and (4) the representative parties will fairly and adequately
protect the interests of the class. Fed.R.Civ.P. 23(a); see also Pilgrim v. Universal Health Card,
LLC, 660 F.3d 943, 945 (6th Cir. 2011). In addition to meeting the prerequisites of Rule 23(a), a
party seeking class certification also must show that the class action is maintainable under one of
the three provisions of Rule 23(b). Pilgrim, 660 F.3d at 945.
Rule 23 is more than “a mere pleading standard”; a party seeking class certification must
demonstrate sufficient facts to meet its requirements. Wal–Mart Stores, Inc. v. Dukes, –U.S. –,
131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011)). Indeed, certification of a class is only
appropriate if, after conducting a “rigorous analysis,” the trial court determines that the
prerequisites of Rule 23 have been met. Id.; Fed.R.Civ.P. 23(c)(1)(A).
Either party may move for resolution of the class-certification question at any stage of the
proceedings, and the class action allegations may be stricken prior to a motion for class
certification where the complaint itself demonstrates that the requirements for maintaining a
class action cannot be met. Pilgrim, 660 F.3d at 949; see also, e.g., Vinole v. Countrywide Home
Loans, Inc., 571 F.3d 935, 941–44 (9th Cir. 2009). Plaintiff bears the burden of proving that the
class certification elements are satisfied. In re Am. Med. Sys., Inc., supra, 75 F.3d at 1079.
Defendant moves to strike Plaintiffs’ class allegations made in Class Count One, arguing
that the Plaintiffs’ proposed class is an impermissible “fail safe” class.3 According to the
3
The Sixth Circuit defines a ‘fail-safe’ class as one that cannot be defined until the case is resolved on its merits.
Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 539 (6th Cir. 2011). A fail-safe class “includes only those who
are entitled to relief.” Young, 693 F.3d at 538. “Such a class is prohibited because it would allow putative class
members to seek a remedy but not be bound by an adverse judgment—either those ‘class members win or, by virtue
of losing, they are not in the class' and are not bound.” Id. (internal quotations omitted); see also Sauter v. CVS
Pharmacy, Inc., No. 2:13-CV-846, 2014 WL 1814076, at *4 (S.D. Ohio May 7, 2014).
26
Defendant, for the Court to ascertain who is in the putative class based on the characteristics
Plaintiffs put forth, the Court would be not only deciding that a class exists, but also would be
deciding the merits of the claim.
Plaintiffs respond that, in light of the requirement that courts make certification
determinations only after a “rigorous analysis,” Defendant’s motion to strike class allegations is
premature and disfavored under the law. (Doc. 6 at 20-21). Further, Plaintiffs argue that
Defendant improperly reads legal conclusions into the class definition contained in Class Count
One. (Id. at 20). Plaintiffs insist that the Court need not make any determination on the merits
of the case before class members can be identified. (Id. at 20-21).
Defendant relies on authority standing for the proposition that a court may strike class
action allegations before a motion for class certification where the complaint demonstrates that
the requirements for maintaining a class action cannot be met. See Pilgrim v. Universal Health
Card, LLC, 660 F.3d 943, 949 (6th Cir. 2011) (affirming the district court's judgment striking
class allegations and dismissing an action prior to discovery where the defect in the class action
at issue involved “a largely legal determination” that “no proffered factual development offer[ed]
any hope of altering”).
This Court has also noted, however, that “courts should exercise caution when striking
class action allegations based solely on the pleadings, because class determination generally
involves considerations that are enmeshed in the factual and legal issues comprising the
plaintiff's cause of action.” Sauter v. CVS Pharmacy, Inc., No. 2:13-CV-846, 2014 WL
1814076, at *2 (S.D. Ohio May 7, 2014) (ultimately finding plaintiff improperly pled a fail-safe
class, but granting plaintiff leave to amend its pleadings) (internal quotations and citations
omitted). See also Mazzola v. Roomster Corp., 849 F.Supp.2d 395, 410 (S.D.N.Y. 2012) (“[A]
27
motion to strike class actions ... is even more disfavored because it requires a reviewing court to
preemptively terminate the class aspects of ... litigation, solely on the basis of what is alleged in
the complaint, and before plaintiffs are permitted to complete the discovery to which they would
otherwise be entitled on questions relevant to class certification”).
While the Court may strike class allegations prior to a motion to certify, the Court
declines to do so at this early stage. The Court deems it prudent to assess the propriety of class
certification in the context of a fully briefed class certification motion rather than in the context
of a motion to strike class claims at the pleading stage. The docket reflects that discovery has
been stayed until the court rules on the present motion. (See Doc. 13). Without further insight
into the facts, the Court lacks the foundation to conduct the “rigorous analysis” required by Rule
23 and determine the appropriateness of class certification. See, e.g., Allen v. Andersen
Windows, Inc., 913 F. Supp. 2d 490, 516 (S.D. Ohio 2012) (declining to strike class allegations
at the pleading stage, deeming it prudent to evaluate plaintiff’s putative class after class
certification briefing); Eliason v. Gentek Building Prods., Inc., No. 1:10–cv–2093, 2011 WL
3704823 at *2–3, 2011 U.S. Dist. LEXIS 94032, at *7–8 (N.D.Ohio Aug. 23, 2011) (noting that
a motion to strike class allegations is not a substitute for class determination); Faktor v. Lifestyle
Lift, No. 1:09-CV-511, 2009 WL 1565954, at *2 (N.D. Ohio June 3, 2009) (finding that
defendant’s arguments about class certification premature where they were made prior to the
parties’ first case management conference in part because courts must have time to conduct a
rigorous analysis before ruling on class certification).
For these reasons, Defendant’s Motion to Strike Class Count One is DENIED.
28
V.
CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss (Doc. 3) is GRANTED IN
PART and DENIED IN PART. Defendant’s Motion to Dismiss is denied as to Counts Two
and Three, and as to Class Count One. Defendant’s Motion to Dismiss is granted as to Count
Four and Class Count Two.
IT IS SO ORDERED.
s/Algenon L. Marbley
ALGENON L. MARBLEY
UNITED STATES DISTRICT JUDGE
Dated: March 20, 2015
29
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