Burton v. Kohn Law Firm SC

Filing 21

ORDER signed by Magistrate Judge Nancy Joseph on 11/16/2016 denying 7 Motion to Dismiss. (cc: all counsel) (teb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
JOHN H. BURTON,
Plaintiff,
v.

Case No. 16-CV-594

KOHN LAW FIRM, S.C.,
Defendant.
DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS
John H. Burton filed a complaint against Kohn Law Firm, S.C. alleging violations of
both the Fair Debt Collection Practices Act (“FDCPA”) and the Wisconsin Consumer Act
(“WCA”) based on actions taken (or not taken) by Kohn in the course of a state court
collections lawsuit against Burton. Kohn has filed a motion to dismiss Burton’s complaint
pursuant to Fed. R. Civ. 12(b)(1) and Fed. R. Civ. P. 12(b)(6) on the grounds that this Court
lacks subject matter jurisdiction and that, even if this Court did have jurisdiction, it should
abstain from the case while the underlying state court case is pending. Subsequent to the
completion of briefing on this motion, the state court case was dismissed. I asked that the
parties submit brief statements on whether the dismissal of the state court case mooted
Kohn’s abstention argument. Kohn agreed that it did, and it waived its abstention
argument. (Docket # 18.) Therefore, the motion to dismiss concerns only whether or not
this Court has subject matter jurisdiction over the lawsuit. For the reasons that follow, the
defendant’s motion to dismiss is denied.

BACKGROUND
As relevant here, Burton alleges in his complaint that on February 17, 2015, Kohn
Law Firm filed a small claims action against him in Brown County Circuit Court (case
number 15SC1271) on behalf of its client, Unifund CCR LLC. (Compl., Docket # 1 at ¶ 6.)
The complaint in that case alleged that Burton entered into a credit agreement with
Citibank, NA and failed to make payments when due. (Id. ¶ 7.) The complaint alleged
claims for breach of contract, account stated, and implied contract/unjust enrichment and
sought damages of $9,302.52 plus interest. (Id.) Burton alleges that at no time was he served
with either a notice of right to cure default with respect to the debt allegedly owed to
Unifund or a notice of assignment with respect to the transfer of the alleged debt from
Citibank to Unifund. (Id. ¶¶ 9-10.) He alleges that prior to the lawsuit, he had never heard of
Unifund and had no awareness that Unifund claimed to be a creditor to which he owed
money. (Id. ¶ 11.) Burton further alleges that “[t]o the extent that Burton entered into a
credit agreement with Citibank, NA, such agreement was entered into for personal, family
or household purposes.” (Id. ¶ 12.)
APPLICABLE RULE
Kohn moves to dismiss for lack of subject matter jurisdiction pursuant to Fed. R.
Civ. P. 12(b)(1) and 12(b)(6). Rule 12(b)(1) permits a court to dismiss a case for lack of
subject matter jurisdiction because, unlike state courts, federal courts are courts of limited
subject matter jurisdiction. However, courts have uniformly held that “[w]hen both the
subject matter jurisdiction of the federal court and the substantive claim for relief are based
on a federal statute, dismissal” should be under Fed. R. Civ. P. 12(b)(6)—for failure to state
a claim—rather than under Rule 12(b)(1)—for lack of subject matter jurisdiction. Health Cost

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Controls v. Skinner, 44 F.3d 535, 537 (7th Cir. 1995) (citing 2A JAMES WM. MOORE ET
AL., MOORE’S FEDERAL PRACTICE ¶ 12.07[2.-1] (2d ed. 1994)); see also Shapiro v.
McManus, 136 S.Ct. 450, 455-56 (2015) (internal citations omitted) (“We have long
distinguished between failing to raise a substantial federal question for jurisdictional
purposes . . . and failing to state a claim for relief on the merits; only ‘wholly insubstantial
and frivolous’ claims implicate the former.”). Stated differently, “when a question arises on
the applicability of a federal statute, ‘the preferable practice is to assume jurisdiction exists
and proceed to determining the merits of the claim pursuant to [Rule 12(b)(6)].’” Daley v.
Provena Hospitals, 88 F. Supp. 2d 881, 885 (N.D. Ill. 2000) (internal citations and quotation
marks omitted). Because Kohn argues that this court lacks subject matter jurisdiction on the
basis that the FDCPA is not applicable (that is, that Burton has not alleged that the debt is a
consumer debt, as required), this motion must be decided under Rule 12(b)(6), not Rule
12(b)(1).
And unlike a motion pursuant to Rule 12(b)(1), which permits the consideration of
matters “beyond the jurisdictional allegations of the complaint” and “whatever evidence has
been submitted on the issue,” Long v. Shorebank Development Corp., 182 F.3d 548, 554 (7th
Cir. 1999) (internal quotations marks and citation omitted), Rule 12(b)(6) does not permit
the court to consider matters outside the complaint without converting the motion into a
motion for summary judgment, Fed. R. Civ. P. 12(d). While there are exceptions to this
rule, such as documents that are referred to in the complaint (that are unquestionably
authentic) or documents of which I can take judicial notice, Whitehead v. Discover Bank, 118
F. Supp. 3d 1111, 1117-18 (E.D. Wis. 2015) (internal citations omitted), the documents

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accompanying Kohn’s motion to dismiss 1 do no not fall under an exception to this rule.
Therefore, the additional materials submitted by Kohn will not be considered.
ANALYSIS
The only question before me, therefore, is whether Burton has sufficiently pled that
the debt at issue was a consumer debt. A motion to dismiss under Fed. R. Civ. P. 12(b)(6)
challenges the sufficiency of the complaint on the basis that the plaintiff has failed to state a
claim upon which relief can be granted. A complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
The Supreme Court has interpreted this language to require that the plaintiff plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007). In Ashcroft v. Iqbal, the Supreme Court elaborated further on the
pleadings standard, explaining that a “claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged,” though this “standard is not akin to a ‘probability
requirement.’” 556 U.S. 662, 678 (2009). The allegations in the complaint “must be enough
to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (internal
citation omitted).
Under both the FDCPA and the WCA, the debt at issue must be consumer debt; that
is, it must be for personal, family, or household purposes. 15 U.S.C. § 1692(a)(5); Wis. Stat.
§ 421.301(17). Therefore, in order to state a claim under both the FDCPA and the WCA,
and plaintiff must, among other things, allege that the debt at issue is a consumer debt.
Burton’s complaint does just that. In paragraph 12, Burton alleges “To the extent that
1

Kohn attached three documents to its motion to dismiss: the plaintiff’s first set of interrogatories, requests for
admission, and requests for production of documents; the defendant’s response to those requests; and the court
commissioner’s notes from a July 6, 2015 hearing.

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Burton entered into a credit agreement with Citibank, NA, such agreement was entered into
for personal, family or household purposes.” While Kohn’s point about the equivocal nature
of that allegation is noted, for the purpose of alleging a debt is a consumer debt under the
FDCPA and WCA, this is sufficient. Because the motion has been decided under Rule
12(b)(6) rather then 12(b)(1), I will not consider Kohn’s arguments about inconsistencies
with the state court collection case. The defendant’s motion to dismiss, therefore, is denied.
NOW, THEREFORE, IT IS HEREBY ORDERED that the defendant’s motion to
dismiss (Docket # 7) is DENIED.

Dated at Milwaukee, Wisconsin this 16th day of November, 2016.

BY THE COURT
s/Nancy Joseph_____________
NANCY JOSEPH
United States Magistrate Judge

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