Johnson v. Daubert Law Firm LLC et al

Filing 17

ORDER DISMISSING CASE signed by Judge Rudolph T Randa on 8/4/2015 GRANTING 11 Defendants MOTION to Dismiss for Lack of Subject Matter Jurisdiction. (cc: all counsel)(Zik, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
INGRID JOHNSON,
also known as INGRID SLEET,
Individually,
Plaintiff,
Case No. 14-CV-1420

-vsDAUBERT LAW FIRM LLC, and
LVNV FUNDING, LLC,
Defendants.

DECISION AND ORDER

INTRODUCTION
Plaintiff Ingrid Johnson (“Johnson”) seeks redress for alleged violations
of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (the
“FDCPA”), the Wisconsin Consumer Act, Chapters 421-427, Wisconsin
Statutes (the “WCA”), and her common law right to privacy by the
Defendants, Daubert Law Firm, LLC (“Daubert”) and LVNV Funding, LLC
(“LVNV”), (collectively the “Defendants”). (Compl. ¶¶ 3-9, 47-62.) (ECF No.
1.) Johnson alleges that Daubert improperly garnished her wages after she
filed a voluntary amortization of her debts in Milwaukee County Circuit
Court. (Id. at ¶¶ 28-34.)

The Defendants argue that this Court lacks subject matter jurisdiction
and Johnson’s claims should be dismissed pursuant to Fed. R. Civ. P.
12(b)(1). (Defs.’ Br. Mot. Dismiss 2.) (ECF No. 12.) More specifically, the
Defendants argue that the Rooker-Feldman doctrine, which “prevents the
lower federal courts from exercising jurisdiction over cases brought by ‘statecourt losers’ challenging ‘state-court judgments rendered before the district
court proceedings commenced,’” applies to the case at bar. Lance v. Dennis,
546 U.S. 459, 460 (2006) (quoting Exxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284 (2005)).
BACKGROUND
Johnson became delinquent on a financial obligation which was
consigned, placed, or transferred to LVNV.

(Compl. ¶¶ 15-16.)

LVNV

obtained a judgment against Johnson in Indiana state court (Id. at ¶ 17, Ex.
A), and it hired and instructed Daubert to collect the debt on LVNV’s behalf
(Id. ¶ 18). Daubert began collection efforts with Johnson. (Id. at ¶ 19.)
In June 2014, Johnson sent a letter to Daubert requesting that it verify
the debt, disputing the validity of the debt and, citing the FDCPA,
instructing Daubert not to contact her regarding the debt. (Id. at ¶ 20, Ex.
B.) Johnson sent a copy of the letter to LVNV. (Id. at ¶ 21.) Daubert replied
in a letter which verified the amount owing as $3,087.86. (Id. at ¶¶ 22-23,
Ex. C.)
-2-

Daubert’s Foreign Judgment Action
On August 4, 2014, Daubert filed a foreign judgment action (the
“Foreign Judgment Action”) in Milwaukee County Circuit Court, and the
Indiana judgment was docketed in that action the same day. (Stueland Aff.
Ex. 1.) (ECF No. 14.) On August 21, Daubert mailed earnings garnishment
notices to the Milwaukee County Clerk of Court requesting that the clerk
authenticate and return the file-stamped notices. (Id. at ¶ 5, Ex. 2.) The
earnings garnishment notice was docketed on September 11. (Larsen Aff. Ex.
1.) (ECF No. 13.) Daubert received authenticated and file-stamped copies on
September 16 and forwarded the garnishment papers to Johnson’s employer
on September 18. (Id. at ¶¶ 7, 8, Ex. 4.) Daubert received a completed and
signed garnishment form from Johnson’s employer on September 26. (Id. at
¶ 9, Ex. 5.)
Johnson’s Voluntary Amortization Action
n August 27, 2014, Johnson filed a voluntary amortization of her debts
pursuant to Wis. Stat. § 128.21 in Milwaukee County Circuit Court (the
“Amortization Action”).

The petition listed Daubert as a creditor for

$3,087.86. (See Compl. Ex. E.) 1 On September 12, Judge Daniel Noonan
signed an order appointing a trustee and enjoining creditors from collecting
on their debts. (Compl. ¶ 32.) The order explicitly states “[u]pon filing of this
The Complaint alleges that Daubert was listed as the sole creditor. However,
Miller & Miller LLC is also listed as a creditor. (See Compl. Ex. F.)
1

-3-

[o]rder and while the case is proceeding, no execution, attachment, activation
of wage assignment or garnishment may be initiated or enforced by creditors
of the above-names [sic] debtor unless such creditor is not included in the
plan.” (See id. at ¶ 33; see also Ex. F.) Despite the order enjoining Daubert
from collecting the specified debt, Daubert garnished Johnson’s wages for
paychecks issued October 9 and 23, 2014. (Compl. ¶ 34.)
ANALYSIS
The Rooker-Feldman doctrine is jurisdictional in nature.

Freedom

Mortg. Corp. v. Burnham Mortg., Inc., 569 F.3d 667, 670 (7th Cir. 2009).
Rooker-Feldman precludes federal district courts from reviewing state court
judgments because only the United States Supreme Court has appellate
jurisdiction over state court judgments. Exxon Mobil Corp. v. Saudi Basic
Indus. Corp., 544 U.S. 280, 283 (2005) (citing Rooker v. Fidelity Trust Co.,
263 U.S. 413 (1923); Dist. of Columbia Ct. of Appeals v. Feldman, 460 U.S.
462 (1983)).
More specifically, Rooker-Feldman bars federal claims in two instances:
(1) if the plaintiff requests that a federal district court overturn an adverse
state court judgment, and (2) if a case involves federal claims that were not
raised in state court or do not on their face require review of a state court’s
decision. Brown v. Bowman, 668 F.3d 437, 442 (7th Cir. 2012). “In this latter
instance, Rooker-Feldman will act as a jurisdictional bar if those claims are
-4-

‘inextricably intertwined’ with a state court judgment.” Id. (quoting Taylor v.
Fed. Nat. Mortg. Ass’n, 374 F.3d 529, 533 (7th Cir. 2004)).
The pivotal inquiry when determining if a claim is inextricably
intertwined is whether the federal claim alleges that the supposed injury was
caused by the state court judgment or, alternatively, whether the claim is an
independent injury that the state court failed to remedy. Id.; see also Long v.
Shorebank Dev. Corp., 182 F.3d 548, 555 (7th Cir. 1999). If the alleged injury
resulted from the state court judgment, Rooker-Feldman prevents this Court
from hearing the claim because it lacks subject matter jurisdiction, even if
the state court judgment was erroneous or unconstitutional. See Centres, Inc.
v. Town of Brookfield, 148 F.3d 699, 702 (7th Cir. 1998). Conversely, if the
alleged injury is distinct from and not inextricably intertwined with the state
court judgment, Rooker-Feldman does not apply. Id.
However, finding that a federal claim is inextricably intertwined with a
state court judgment does not end the inquiry.

Brown, 668 F.3d at 442.

“Once it is determined that a claim is inextricably intertwined, we must then
inquire whether ‘the plaintiff [did or] did not have a reasonable opportunity
to raise the issue in state court proceedings.’” Id. (quoting Brokaw v. Weaver,
305 F.3d 660, 667 (7th Cir. 2002)). If the plaintiff could have reasonably
raised the issue in state court, the claim is barred by Rooker-Feldman. Id.
Johnson’s Amortization Action was filed pursuant to Wis. Stat.
-5-

§ 128.21 (See Defs.’ Br. Mot. Dismiss 3), which provides that a debtor who is
earning wages or salary, but is unable to pay her bills on time may amortize
those debts over a period of three years. Wis. Stat. § 128.21(1) (2013-2014). A
debtor commences a § 128.21 proceeding by filing a petition with the court.
Id. After a debtor files her petition, the court appoints a disinterested trustee
to administer the plan. Wis. Stat. § 128.21(3). The debtor and the trustee
develop a plan to pay the debts subject to the petition in full within three
years.

Id.

Creditors may object to the plan, and the plan may also be

rejected by the court. Id. If the plan is approved, the debtor makes payments
to the trustee who then pays the creditors pursuant to the plan.

Id.

“However, unlike in a federal bankruptcy, the creditors are not prohibited
from commencing or continuing any other collection activity against the
debtor.” Eisberner v. Discover Prods., Inc., 921 F.Supp.2d 946, 947 (E.D. Wis.
2013).
While the plan is pending, any creditors’ prior executions, attachments,
or garnishment are enjoined, and the creditors are also prohibited from using
the same to collect the debt. Wis. Stat. § 128.21(1)-(2). “Once a judgment is
obtained, however, the creditor may not proceed to collect on it . . . ; doing so
violates the court order and the automatic stay. Jeffery L. Murrell, Chapter
128: Wisconsin’s Bankruptcy Alternative, Wis. Law., May 2008, at 10.
Under Wisconsin Statute § 812.35, a creditor wishing to garnish a
-6-

debtor’s wages must serve the debtor with an exemption notice, an answer
form, and adopted schedules and worksheets. Wis. Stat. § 812.35(4)(b) (20132014). The creditor must serve the debtor within seven business days after
the date of service on the garnishee and at least three business days before
the garnishment is to take effect. Wis. Stat. § 812.35(4)(c).
Claims are typically barred by Rooker-Feldman if the plaintiff had the
opportunity to raise the claims before the state court. See Long, 182 F.3d at
557-58. Plaintiff Long entered into a lease agreement with Shorebank, and
Shorebank alleged that Long was delinquent on her obligations. Id. at 552.
Prior to filling an eviction proceeding against Long, Shorebank fraudulently
induced Long to sign a final judgment by representing that the document
provided for the postponement of the eviction proceeding. Id. at 552. The
state court entered judgment in favor of Shorebank and Long was evicted
shortly thereafter.

Id. at 552-53.

Long filed suit against Shorebank in

federal court for alleged violations of the FDCPA, which the district court
determined were barred by Rooker-Feldman. Id.
On appeal, the district court’s decision was overturned because “[t]he
counts in Long’s complaint alleging violations of the FDCPA are independent
from the eviction order and, therefore, Rooker-Feldman does not apply to
these claims.” Id. at 555. Shorebank’s alleged violations of the FDCPA were
independent because prior to the eviction proceeding Shorebank knowingly
-7-

made a false representation of the amount owed by Long. Id. at 556. The
court further reasoned that the violations alleged by Long were independent
and complete prior to the entry of the eviction order. Id.
Further, the Seventh Circuit examined whether Long had a reasonable
opportunity to raise her due process claim in state court proceedings. Id.
Long’s due process claim could not be considered separate from the state
court’s eviction order because had the state court judgment resulted in her
favor, the injury Long complained of would not have occurred. Id. However,
the court found that Rooker-Feldman did not bar Long’s claim because
procedurally she did not have a reasonable opportunity to address the claim
in state court. Id. at 558-59. More specifically, Long’s claims could not have
been presented during the eviction proceeding because state procedure
barred all non-possessory claims. Id. at 559. Therefore, Long’s claims were
not inextricably intertwined with the state court judgment. Id. at 560.
Jung v. Cottonwood Fin. Wis., LLC, 14-cv-241-jdp, 2014 WL 4796756,
at *1-6 (W.D. Wis. Sept. 26, 2014), examined Rooker-Feldman in the context
of garnishment proceedings. Plaintiff Kelli Jung defaulted on a short-term
loan owed to Defendant Cottonwood.

Id. at *1.

After having judgment

entered against Jung, Cottonwood sought the assistance of a law firm to
collect the debt. Id. at *2. Cottonwood’s attorneys filed garnishment notices
with the Wisconsin state court and served garnishment notices on Jung and
-8-

her employer. Id. Over the course of the garnishment proceedings, Jung did
not object to the garnishment. Id.
Almost a year after Cottonwood had satisfied its judgment, Jung
asserted that the garnishment violated the WCA. Id. The Defendants moved
to dismiss under Rooker-Feldman. Id. The district court granted the motion
to dismiss, reasoning that “Jung’s ‘actual injury’ [was] the state court’s
approval of defendants’ request to garnish her wages, without which there
would not have been any alleged unlawful collection practices.” Id. at *3.
The court further reasoned that although Jung did not specifically request
reversal of the state court judgment, the injury was a result of the state court
determination. Id.
A party may advance a jurisdictional challenge either by a facial or
factual attack. Wallenfang v. Havel, 707 F. Supp. 2d 800, 805 (E.D. Wis.
2010). “Facial challenges require only that the court look to the complaint
and see if the plaintiff has sufficiently alleged a basis for subject matter
jurisdiction.” Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443
(7th Cir. 2009).
A factual attack, on the other hand, concedes that the complaint is
formally sufficient, but contends that there is in fact no subject matter
jurisdiction. Id. at 444. In considering a factual attack, the Court is free to
weigh the evidence to determine whether jurisdiction exists. Wallenfang, 707
-9-

F. Supp. 2d at 806. More specifically, “[t]he district court may properly look
beyond the jurisdictional allegations of the complaint and view whatever
evidence has been submitted on the issue to determine whether in fact
subject matter jurisdiction exists.” Capitol Leasing Co. v. F.D.I.C., 999 F.2d
188, 191 (7th Cir. 1993) (quoting Grafon v. Hausermann, 602 F.2d 781, 783
(7th Cir. 1979)).
The plaintiff has the obligation to establish jurisdiction by competent
proof. Commodity Trend Serv., Inc. v. Commodity Futures Trading Comm’n,
149 F.3d 679, 685 (7th Cir. 1998). The presumption of correctness given to
the complaint’s allegations falls away on the jurisdictional issue once a
defendant proffers evidence that calls the court’s jurisdiction into question.
Id.
Here Daubert makes a factual attack, conceding Johnson has a
formally sufficient complaint but alleging Rooker-Feldman bars jurisdiction.
This Court may look beyond the jurisdictional allegations of the Complaint
and view other relevant evidence that has been submitted.

While the

presumption of correctness given to Johnson’s Complaint falls off because
Daubert has proffered evidence that calls this Court’s jurisdiction into
question, the Court is free to weigh the evidence.
According

to

the

Complaint,

Daubert

received

notice

of

the

amortization action prior to October 9, 2014. (Compl. ¶ 34 (alleging Daubert
- 10 -

proceeded to “willfully ignore” the order.) However Daubert, by means of the
Stueland Affidavit, avers that it did not receive notice of the amortization
action until October 15.

(Stueland Aff. ¶ 10.)

The Court can weigh the

evidence; however, even accepting Johnson’s allegations as true, her claim is
still inextricably intertwined in the state court judgment.
Johnson brought a voluntary amortization action in state court that
stayed all garnishment actions against her; she alleges by this federal action
that Daubert violated the state court’s stay. Johnson’s alleged injuries are
distinguishable from those of Long. In Long, Shorebank’s violation of the
FDCPA was complete and independent prior to the eviction order, whereas
Daubert’s alleged violations of the FDCPA are inextricably intertwined with
the state court judgment because without the authorization of the
garnishment action Johnson would not have a claim.
Further, Johnson had a reasonable opportunity to address her claim in
state court proceedings. The amortization plan was approved November 17,
2014, and this suit was filed on November 11.
generally Compl.)

(Larsen Aff. Ex. 2; see

Once she received notice of the garnishment action,

Johnson had the opportunity to bring Daubert into state court prior to the
October 9 and 23 garnishments and prior to filing this suit. Consequently,
Johnson’s failure to enforce the state court order inextricably intertwines her
current claims with the state court judgment.
- 11 -

Johnson alleges that her claims are wholly independent of the state
court judgment. (See Compl. ¶¶ 28-42.) Johnson’s allegation are similar to
Jung’s because both allege violations of the WCA due to garnishment of their
wages.

Jung defaulted on a short-term loan, which Cottonwood collected

through garnishment of Jung’s wages.

After Cottonwood satisfied its

judgment, Jung asserted Cottonwood had violated the WCA.

Similarly,

Johnson became delinquent on a debt owed to LNVN, and Daubert was hired
to collect that debt.

Daubert began the process of garnishing Johnson’s

wages, and once that process started she filed this suit.
In Jung, the court found that Jung’s actual injury was the result of a
state court determination — the court’s approval of Cottonwood’s request to
garnish her wages.

Here, Johnson complains that Daubert unlawfully

garnished her wages while the state-court ordered stay in the Amortization
Action was in effect. Johnson’s injury was a result of a separate state court
determination in the Foreign Judgment Action to allow Daubert to garnish
her wages, and she could have sought redress by seeking enforcement of the
stay. Therefore, Johnson’s claim is dependent upon the state court judgment,
and this Court lacks jurisdiction pursuant to the Rooker-Feldman doctrine.

- 12 -

NOW, THEREFORE, BASED ON THE FOREGOING, IT IS
HEREBY ORDERED THAT:
Defendants’ motion to dismiss for lack of subject matter jurisdiction
pursuant to Fed. R. Civ. P. 12(b)(1) (ECF No. 12) is GRANTED;
This action is DISMISSED; and
The Clerk of Court is directed to enter judgment accordingly.
Dated at Milwaukee, Wisconsin, this 4th day of August, 2015.

BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

- 13 -