Henderson v. General Revenue Corporation
Filing
154
MEMORANDUM OPINION. Signed by Senior Judge Glen E. Conrad on 08/30/2019. (ssm)
CLERK'S OFFICE U.S. DIST. COURT
AT ROANOKE, VA
FILED
AUG 3 0 2019
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
ROANOKE DIVISION
WILLIE HENDERSON, individually and
behalf of all others similarly situated,
Plaintiff,
v.
GENERAL REVENUE CORPORATION,
et al.,
Defendants.
)
)
) Civil Action No. 7:17CV00292
)
) · MEMORANDUM OPINION
)
) By: Ron. Glen E. Conrad
) Senior United States District Judge
)
)
)
On August 20, 2019, the parties appeared before the court for a hearing on pending
motions. This memorandum opinion sets forth the court's rulings on certain issues raised by the
parties.
Background
On June 22, 2017, plaintiff Willie Henderson filed the instant action against General
Revenue Corporation {"GRC"), alleging that GRC violated the Fair Debt Collection Practices
Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, in its efforts to collect student loan debts from
Henderson and others similarly situated. Because the loans at issue originated under the Federal
Family Education Loan Program, they are governed by federal reg~lations adopted under the
Higher Education Act. Henderson's original complaint was based on a letter dated February 7,
2017, in which GRC advised Henderson that he had defaulted on his student loan debt and owed
over $100,000 in principal, interest, and collection costs.
Henderson alleged, among other
claims, that GRC violated the FDCPA in sending the letter because GRC had not made
disclosures required under the applicable regulations.
On December 21, 2017, the court granted Henderson's motion for leave to file an
amended complaint. The amended complaint included additional facts regarding GRC's alleged
violations of the FDCPA.
It also added claims against a new defendant, Pioneer Credit
Recovery, Inc. ("Pioneer"), stemming from Pioneer's communications with Henderson, which
included a garnishment notice.
On January 10, 2018, Henderson moved to compel GRC to respond to his discovery
requests. The court subsequently referred all non-dispositive pretrial motions, including the
motion to compel, to United States Magistrate Judge RobertS. Ballou for disposition, pursuant
to 28 U.S.C. § 636(b)(1)(A). On March 12, 2018, the motion to compel was granted in part and
den!ed in part by Judge Ballou.
In the meantime, GRC and Pioneer moved to dismiss certain counts of the amended
complaint under Rule 12(b)(6). The court referred the motion to dismiss to Judge Ballou for a
report and recommendation under 28 U.S.C. § 636(b)(l)(B). On September 25, 2018, the court
adopted Judge Ballou's report and recommendation, and denied the defendants' partial motion to
dismiss.
The parties proceeded with discovery, including the depositions of GRC and Pioneer
under Federal Rule of Civil Procedure 30(b)(6). Prior to the depositions, GRC and Pioneer
lodged objections to the topics identified in the respective deposition notices. The parties were
unable to resolve the objections on their own. The record indicates that Judge Ballou "offered an
informal resolution process," and that Henderson, GRC, and Pioneer ultimately "conferred with
[Judge Ballou] at length on each objection." Pl.'s Br. Supp. Mot. Sanctions 2-3, n.2, Dkt. No.
141. The Rule 30(b)(6) depositions ofGRC and Pioneer were conducted in December of2018.
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On February 4, 2019, Henderson moved for leave to file a second amended complaint,
which added Navient Portfolio Management, LLC ("NPM") as a defendant and asserted claims
of vicarious liability against NPM. The court granted Henderson's motion on March 21, 2019.
On April 22, 2019, GRC, Pioneer, and NPM filed their respective answers to the second
amended complaint.
On May 29, 20 19, the parties appeared before the court for a hearing on the plaintiffs
amended motion for class certification. During the hearing, the defendants advised that they
intended to move for summary judgment on the class claims asserted in the second amended
complaint. The court elected to postpone ruling on the class-certification motion pending the
resolution ofthe defendants' forthcoming motion for summary judgment.
The parties then filed the following motions that are now pending before the court: (1)
plaintiffs motion to compel NPM to respond to discovery requests; (2) plaintiffs motion for
sanctions; (3) plaintiffs motion for partial summary judgment on defendants' affirmative
defenses or, in the alternative, motion to strike defendants' affirmative defenses or, in the further
alternative, motion to strike NPM's third and fifth affirmative defenses; and (4) defendants'
motion for partial summary judgment. The parties appeared before the court for a hearing on
these motions on August 20, 2019.
Discussion
I.
Plaintiff's Motions
A.
Motion to Compel and Motion for Sanctions
Henderson has filed two discovery-related motions directed to NPM. In the first motion,
Henderson seeks to compel NPM to respond to particular interrogatories and requests for
production of documents. In the second motion, Henderson seeks sanctions against NPM on the
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basis that it failed to prepare for and respond to topics listed in its Rule 30(b)(6) deposition
notice.
For the reasons stated during the hearing, the court finds it appropriate to refer these
motions to Judge Ballou for consideration. In support of both motions, Henderson references
previous rulings made by Judge Ballou--either formally or informally-in connection with
related discovery disputes between Henderson and NPM's co-defendants. It appears that the oral
rulings on which Henderson relies were not reduced to writing and are therefore not reflected in
the record. See, e.g., Pl.'s Reply Br. Supp. Mot. Compel I,. n.l, Dkt. No. 143 ("Magistrate Judge
Ballou decided this issue by teleconference.").
Consequently, the court believes that the
discovery issues raised in the pending motions should be presented to Judge Ballou in the first
instance. Accordingly, the motion to compel will be referred to Judge Ballou for disposition
under 28 U.S.C. § 636(b)(l)(A), and the motion for sanctions will be referred for a report and
recommendation under 28 U.S.C. § 636(b)(l)(B).
B.
Motion Challenging Affirmative Defenses
Henderson has also filed a motion challenging the affirmative defenses asserted in the
defendants' answers to the second amended complaint. Relying on the pleading standard set
forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S.
662 (2009), Henderson argues that all of the affirmative defenses are insufficiently pled and that
the court should either grant partial summary judgment to Henderson or strike the affirmative
defenses from the defendants' answers. Alternatively, Henderson requests that the court strike
NPM's third and fifth affirmative defenses on the basis that NPM failed to respond to requests
for discovery related to those defenses.
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1.
Pleading Challenge under Rules 56(a) and 12(f) of the Federal Rules of
Civil Procedure
"Courts differ as to whether a motion for summary judgment under Rule 56 or a motion
to strike under Rule 12(f) is the appropriate procedure by which to challenge an affirmative
defense." N.J. Mfrs. Ins. Co. v. Brady, No. 3:15-cv-02236, 2017 U.S. Dist. LEXIS 8268, at *12
(M.D. Pa. Jan. 20, 2017) (citation omitted). In this case, the plaintiffs argument under both
rules is the same-namely, that the defendants' affirmative defenses are insufficiently pled. See
Pl.'s Br. Supp. Mot. Partial .Summ. J. 5, Dkt. No. 134 ("An insufficiently pled affirmative
defense may be dismissed on motion for partial summary judgment or struck from the pleading
on a motion to strike (or on the Court's own initiative)."); Id. at 10 ("For the same reasons
articulated with respect to partial summary judgment, Defendants' respective affirmative
defenses should be stricken from their pleadings because they were not articulated with sufficient
particularity."). In making this argument, Henderson asks the court to hold that the plausibility
standard established in Twombly and Iqbal applies not only to claims, but to affirmative defenses
as well. See Pl.'s Br. Supp. Mot. Partial Summ. J. 8 ("Judged by the appropriate pleading
standards of Twombly and Iqbal, all of Defendants' respective affirmative defenses fall well
short of the required mark.").
The United States Court of Appeals for the Fourth Circuit has not addressed whether the
Twombly and Iqbal standard for pleading claims also applies to affirmative defenses. District
courts within the Fourth Circuit are divided on the question, but at least two district judges in the
Western District of Virginia have declined to apply the heightened pleading standard in this
context. See Warren v. Tri Tech Labs., Inc., No. 6:12-cv-00046, 2013 U.S. Dist. LEXIS 69261,
at *25, n. 7 (W.D. Va. May 15, 2013) (Moon, J.); Odyssey Imaging, LLC v. Cardiology Assocs.
of Johnston, LLC, 752 F. Supp. 2d 721, 726 (W.D. Va. 2010) (Wilson, J.); but see Palmer v.
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Oakland Farms, Inc., No. 5:10-cv-00029, 2010 U.S. Dist. LEXIS 63265, at* (W.D. Va. June 24,
2010) (Welsh, M.J.) (holding the same heightened pleading standard should apply to affirmative
defenses). A review of district court decisions within the Fourth Circuit reveals that "the trend
... in recent years has been not to apply the Twombly/Iqbal standard to affirmative defenses."
Benedict v. Hankook Tire Co., No. 3:17-cv-00109, 2018 U.S. Dist. LEXIS 26129, at *6 (E.D.
Va. Feb. 16, 2018); see also Hand Held Prods. v. Code Corp., No. 2:17-cv-00167, 2017 U.S.
Dist. LEXIS 89271, at *18 (D.S.C. June 9, 2017) (holding, consistent with the "recent trend,"
that "Twombly and Iq hal do not provide the pleading standard applicable to affirmative
defenses").
After reviewing decisions on both sides of the issue and the applicable Federal Rules of
Civil Procedure, this court also concludes that affirmative defenses are not subject to the
heightened pleading requirements of Twombly and Iqbal. As another district court recently
explained:
The pleading standards for defenses differ from the plausibility
standard for complaints. Rule 8 of the Federal Rules of Civil
Procedure establishes the pleading standards in federal court. Rule
8(a) establishes what constitutes a cognizable claim: the party
seeking relief must provide (1) a "short and plain statement of the
grounds for the court's jurisdiction," (2) a "short and plain
statement showing that the pleading is entitled to relief," and (3) a
demand for the relief sought. The rule sets out a different standard
for responding to a complaint. In responding to a pleading, the
responding party must "state" in short and plain terms its defenses
to each claim asserted against it" and "affirmatively state any
avoidance or affirmative defense." By its plain text, the Rule does
not require the responding party to make a "showing"; instead, the
responding party meets minimum pleading standards by stating its
defenses. in short and plain terms. If the drafters of Rule 8 intended
for defendants to plead affirmative defenses with the factual
specificity required of complaints, they would have included the
same language requiring a showing of entitle[ment] to relief in the
subsections governing answers and affirmative defenses. [T]he
purpose of Rule 8(c) is simply to guarantee that the opposing party
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has notice of any additional issue that may be raised at trial so that
he or she is prepared to properly litigate it.
Moreover, a defendant must answer the complaint within twentyone days. Unlike plaintiffs, defendant[s] do not have the luxury of
prefiling investigations . . . . [R]equiring factual pleading of
affirmative defenses is likely to accomplish nothing more than
encouraging a flurry of motions to strike affirmative defenses.
Tuggle v. Mamaroneck Capital, LLC, No. 3:19-cv-00025, 2019 U.S. Dist. LEXIS 135668, at
*3--4, (M.D. Ga. Aug. 12, 2019) (citations and additional quotation marks omitted); see also
Cohen v. SunTrust Mortg., Inc., No. 3:16-cv-02513, 2017 U.S. Dist. LEXIS 47678, at *6 (D.S.C.
Mar. 30, 2017) (noting that the text of Rule 8 does not support extending the Twombly/Iqbal
standard to affirmative defenses, and that "the 21-day response period is insufficient to gather
information to include supporting factual allegations") (citation omitted). For these reasons, the
court joins the growing number of courts holding that the heightened pleading standard
established in Twombly and Iqbal does not' apply to affirmative defen.ses.
Prior to the Supreme Court's decisions in Twombly and Iqbal, the Fourth Circuit held
that "[a]n affirmative defense may be pleaded in general terms and will be held to be sufficient
... as long as it gives plaintiff fair notice of the nature of the defense." Clem v. Corbeau, 98 F.
App'x 197, 203 (4th Cir. 2004) (citation omitted). The court is satisfied that the defendants'
respective answers satisfy this standard, and that the inclusion of the enumerated defenses will
not prejudice Henderson in any way.
See Warren, 2013 U.S. Dist. LEXIS 69261, at *25
(declining to strike allegedly boilerplate defenses where the plaintiff had not demonstrated any
resulting prejudice). If and when the case is tried, the parties will have the opportunity to
address any 'remaining affirmative defenses on which the defendants intend to rely. Accordingly,
Henderson's motion to dismiss or strike all of the defendants' affirmative defenses as
insufficiently pled will be denied.
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2.
Discovery-Related Challenge
Henderson alternatively asserts that NPM's third and fifth affirmative defenses should be
stricken as a sanction for failing to adequately respond to interrogatories seeking the factual
bases for such defenses. For the reasons set forth above, the court finds it appropriate to refer
this and other discovery-related challenges to Judge Ballou for consideration in the first instance.
Thus, this portion of Henderson's motion will be taken under advisement pending the issuance of
a report and recommendation.
II.
Defendants' Motion for Partial Summary Judgment
The defendants have moved for partial summary judgment with respect to Counts V and
VI. In Count V, Henderson claims, on behalf of Class "A," that the February 7, 2017 letter from
GRC violated §§ 1692e and 1692f of the FDCPA because, among other reasons, Henderson and
potential class members had· not been advised of their rights under the applicable federal
regulations.
In Count VI, Henderson claims, on behalf of Class "B," that the subsequent
garnishment notice from Pioneer violated §§ 1692e and 1692f of the FDCPA because, among
other reasons, the notice failed to comport with various regulatory requirements.
During the hearing on the pending motions, the court advised the parties that it did not
believe that the defendants' motion for partial summary judgment could be fully adjudicated
until all of the outstanding discovery disputes are resolved.
The court also noted that the
defendants raised new arguments in their reply brief to which Henderson had not received the
opportunity to respond. The court invited argument on any discrete legal issues that the parties
wished to address, and agreed to allow for supplemental briefing on the new arguments raised in
the defendants' reply brief, including the defendants' reliance on the Seventh Circuit's
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application of the bona fide error defense in Kort v. Diversified Collection Services, Inc., 394
F.3d 530 (7th Cir. 2005).*
The parties proceeded to present argument on the issue of standing. Article III of the
United States Constitution limits the jurisdiction of federal courts to actual cases and
controversies. U.S. Const. art. III, § 2. "As a result, a litigant seeking redress in a federal court
must have standing, which requires proving that he has '(1) suffered an injury in fact, (2) that is
fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed
by a favorable judicial decision." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016).
· • The FDCPA provides a statutory defense for bona fide errors: "A debt collector may not be held
liable in any action brought under [the FDCPA] if the debt collector shows by a preponderance of
evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the
maintenance of procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c). In Kort,
the Seventh Circuit held that a defendant was entitled to the bona fide error defense as a matter of law
because the challenged garnishment notice followed a Department of Education form verbatim. 394 F.3d
at 538-40. The Court found that the defendant's "wholesale adoption of the DOE's language"
sufficiently showed that any error by the defendant was "a good faith, genuine, bona fide error." Id. at
538.
In reaching its decision, the Seventh Circuit recognized that courts were then "divided on whether
the bona fide error defense applies to mistakes of law." Id. at 538 n. 9. "[W]ithout engaging in the
mistake-of-law analysis," the Seventh Circuit noted that because the defendant did not exercise any legal
judgment of its own, any mistake by the defendant was not a mistake of law. Id. Subsequent to Kort, the
Supreme Court issued its decision in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich L.P.A., 559
U.S. 573 (2010), in which the Court held that the bona fide error defense in§ 1692k(c) applies to clerical
or factual mistakes, but not to FDCPA violations that result from a debt collector's incorrect interpretation
of the Act's requirements. 559 U.S. at 587, 604.
In light of the foregoing, the court will permit the parties to submit supplemental briefmg on the
potential application of the bona fide error defense in the instant case. During the hearing, the plaintiff
indicated that documents relevant to this particular defense had not been provided during discovery. If
the plaintiff believes that pertinent documents were improperly withheld, he may file an appropriate
motion. On the present record, without further factual development, the court is unable to conclude that
the defendants are entitled to the bona fide error defense as a matter of law.
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In their motion for partial summary judgment, the defendants contend that Henderson
does not have standing to pursue an FDCPA claim based on the alleged failure to provide a full
60 days to request administrative review of the legal enforceability or past-due status of his loan
obligation prior to assessing collection costs.
See 30 C.P.R. § 682.410(b)(5)(iv)(B) ("The
deadline established by the agency for requesting administrative review ... must allow the
borrower at least 60 days from the date the notice described in paragraph (b)(5)(ii)(A) of this
· section is sent to request that review."). Likewise, the defendants argue that Henderson does not
have standing to pursue an FDCPA claim based on the alleged failure to provide a full 30 days to
request a hearing in response to the garnishment notice. See id. § 682.41 O(b)(9) (requiring that a
written notice be sent at least 30 days before the initiation of garnishment proceedings and
setting forth the information that must be contained in such notice). The defendants argue that
these alleged deficiencies are "bare procedural violation[s], divorced from any concrete harm,"
which are insufficient to satisfy the injury-in-fact requirement under Spokeo. Defs.' Br. Supp.
Mot. Partial Summ. J. 4, Dkt. No. 149. For the following reasons, the court is unpersuaded.
First, "Spokeo does not 'categorically ... preclude[] violations of statutorily mandated
procedures from qualifying as concrete injuries supporting standing."'
Cohen v. Rosicki,
Rosicki & Assocs., P.C., 897 F.3d 75, 81 (2d Cir. 2018) (quoting Strubel v. Comenity Bank, 842
F.3d 181, 189 (2d Cir. 2016)).
"It teaches, instead, that in order 'to determine whether a
procedural violation manifests injury in fact, a court properly considers whether Congress
conferred the procedural right in order to protect an individual's concrete interests."'
ld.
(quoting Strubel, 842 F.3d at 189). "[W]here Congress confers a procedural right in order to
protect a concrete interest, a violation of the procedure may demonstrate a sufficient 'risk of real
harm' to the underlying interest to establish concrete injury without 'need [to] allege any
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additional harm beyond the one Congress has identified."' Strubel, 842 F.3d at 189 (emphasis in
original) (quoting Spokeo, 136 S. Ct. at 1549).
In this case, Henderson claims that the defendants violated §§ 1692e and 1692f of the
FDCPA. Congress enacted the FDCPA "to eliminate abusive debt collection practices by debt
collectors." 15 U.S.C. § 1692(e). Sections 1692e and 1692f advance this purpose: the former
prohibits debt collectors from using "any false, deceptive, or misleading representation or means
in connection with the collection of any debt," 15 U.S.C. § 1692e, and the latter prohibits debt
collectors from using "unfair or unconscionable means to collect or attempt to collect any debt,"
15 U.S.C. § 1692f. In the wake of Spokeo, "most courts," including this one, "have found that
the FDCPA creates a substantive, not merely procedural, right 'the violation of which would
itself give rise to a concrete injury."' Escobar v. Midland Credit Mgmt., No. 3:18-cv00819,
2019 U.S. Dist. LEXIS 133382, at *7 (D. Conn. Aug. 8, 2019) (quoting Guerrero v. GC Services
Ltd. P'ship, No. 2:15-cv-07449, 2017 U.S. Dist. LEXIS 42884, at *29 (E.D.N.Y. Mar. 23,
2017)); see also Drew v. Valley Credit Serv., Inc., No. 3:17-cv-00083, 2018 U.S. Dist. LEXIS
42321, at *7 (W.D. Va. Mar. 14, 2018) (Conrad, J.) (holding that the plaintiff "plausibly alleged
violations of § 1692e that, standing alone, satisfy the concreteness requirement for an injury in
fact"); Yergovich v. Small Cmty. Specialists LLC, 337 F. Supp. 3d 635, 642 (E.D. Va. 2008)
(observing that "a violation of the FDCPA is itself a substantive injury regardless of out of
pocket loss").
Second, even if the rights at issue are viewed as procedural, Henderson "has satisfied
Spokeo by alleging facts to establish that [the defendants'] alleged FDCPA violations created a
material risk ofharm." Byrne v. Oregon One, Inc., No. 3:16-cv-01910, 2017 U.S. Dist. LEXIS
132538, at *26 (D. Ore. July 18, 2017); see also Sayles v. Advanced Recovery Sys., 865 F.3d
11
246, 250 (5th Cir. 2017) ("[T]he violation of a procedural right granted by statute can be
sufficient in some circumstances to constitute injury in fact. Among those circumstances are
cases where a statutory violation creates the risk of real harm.") (citations and internal quotation
marks omitted). As indicated above, Henderson claims that he was misinformed as to the correct
deadlines for requesting administrative review of the legal enforceability of his loan obligation
and for requesting a hearing in response to the garnishment notice. Courts have recognized that
"[p]rotecting consumers from misinformation is a significant goal behind the FDCPA," and that
"the risk of harm is greater" if "a consumer is misinformed, rather than merely uninformed."
Untershine v. Encore Receivable Mgmt., Inc., No. 2:18-cv-01484, 2019 U.S. Dist. LEXIS
134377, at *8 (E.D. Wis. Aug. 9, 2019). Applying these principles, the court concludes that
Henderson also has standing to pursue the challenged claims on the basis that the allegedly false
or misleading information at issue created an appreciable risk of harm.
Third and finally, Henderson has presented evidence that the defendants' allegedly
violative communications caused stress-related problems, including difficulty sleeping.
See
Henderson Dep. 87-88, Dkt. No. 152-2. The Fourth Circuit has recognized that a plaintiff can
establish the existence of an injury in fact by showing that he suffered from emotional distress as
a consequence of alleged violations of the FDCPA. See Moore v. Blibaum & Assocs., P .A., 693
F. App'x 205, 206 (4th Cir. 2017); Ben-Davies v. Blibaum & Assocs., P.A., 695 F. App'x 674,
676 (4th Cir. 2017). Thus, the evidence cited by Henderson further supports the conclusion that
he suffered an injury in fact.
For all of these reasons, the court concludes that Henderson has standing to bring the
FDCPA claims asserted in Counts V and VI. To the extent the defendants seek partial summary
judgment on the issue of standing, the motion will be denied.
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Conclusion
For the reasons set forth above, the plaintiffs motion to compel will be referred to Judge
Ballou for consideration under 28 U.S.C. § 636(b)(l)(A), and the plaintiffs motion for sanctions
will be referred to Judge Ballou for a report and recommendation under 28 U.S.C.
§ 636(b)(l)(B). The plaintiffs motion challenging the defendants' affirmative defenses will be
denied in part and referred in part to Judge Ballou for a report and recommendation on the
requested sanction. The defendants' motion for partial summary judgment will be denied in part
and taken under advisement in part pending the resolution of outstanding discovery issues and
the submission of supplemental briefing. The parties shall have thirty days from the date of
entry of this order to file supplemental briefs on the new issues raised in the defendants' reply
brief. Any response shall be filed ten days thereafter. If the parties believe that additional
briefing is necessary after the outstanding discovery issues are resolved, they shall so advise the
court.
The Clerk is directed to send copies of this memorandum opinion and the accompanying
order to Judge Ballou and all counsel of record .
.,1>4
DATED: This-~-~_ day of August, 2019.
Senior United States District Judge
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