United States District Court, D. Minnesota
Thomas J. Lyons, Jr., Esq., Consumer Justice Center P.A., for Plaintiff/Counter-Defendant.
Janet G. Stellpflug, Wyatt S. Partridge, and Sarah E. Roeder, Esqs., Foley & Mansfield PLLP, for Defendant/Counter-Claimant.
REPORT AND RECOMMENDATION
STEVEN E. RAU, Magistrate Judge.
The above-captioned case comes before the undersigned on Plaintiff Raymond Graf's ("Graf") Motion to Dismiss Defendant Pinnacle's Counterclaim Pursuant to Fed.R.Civ.P. 12(b)(1) ("Motion to Dismiss") [Doc. No. 22]. This matter was referred to the undersigned by the Honorable Susan Richard Nelson pursuant to 28 U.S.C. § 636(b)(1) for a report and recommendation. (Order of Referral) [Doc. No. 30]. For the reasons stated below, the Court recommends granting the Motion to Dismiss.
On June 6, 2014, Graf filed his Complaint against Defendant/Counter-Claimant Pinnacle Asset Group, LLC ("Pinnacle"), alleging numerous violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C § 1692 et seq., abuse of process, invasion of privacy, and respondeat superior and vicarious liability. (Compl. ¶¶ 113-42) [Doc. No. 1]. Graf alleges violations of the FDCPA based on Pinnacle's conduct in attempting to collect an alleged debt, including: Pinnacle's alleged actions in failing to identify itself as a debt collector; making misleading statements regarding its intent to take legal action against Graf; falsely implying that Graf had committed a crime; falsely representing the character, amount, or status of the alleged debt; misrepresenting its ability to seize Graf's assets in the event of non-payment; and communicating with third parties regarding Graf's debt without his consent. (Id. ¶¶ 115-21). Similarly, Graf's claims for abuse of process and invasion of privacy are based on "threat[s]" and "harassing debt collection calls" by Pinnacle. (Id. ¶¶ 124-33).
Pinnacle answered the Complaint on July 28, 2014, and filed an amended answer and counterclaim on August 19, 2014. (Separate Answer of Def. Pinnacle Asset Group, LLC) [Doc. No. 11]; (First Am. Answer and Countercl. of Def. Pinnacle Asset Group, LLC, "Am. Answer and Countercl.") [Doc. No. 21]. In its Amended Answer and Counterclaim, Pinnacle denies Graf's allegations against it and asserts two counterclaims against Graf. (Am. Answer and Countercl. ¶¶ 113-42 of Ans., ¶¶ 1-18 of Countercl.). Specifically, Pinnacle alleges claims for breach of contract and account stated. (Id. ¶¶ 11-18 of Countercl.). With respect to both counterclaims, Pinnacle alleges that "Graf owes Pinnacle..., as current owner of [a demand draft] account, [an] outstanding balance of $185.49, plus interest at the rate of 22.00% from and after September 7, 2009, plus incidental and consequential damages." (Id. ¶¶ 13, 18 of Countercl.).
In response to the Amended Answer and Counterclaim, Graf filed his Motion to Dismiss, seeking dismissal of Pinnacle's counterclaims on two grounds. See (Mot. to Dismiss); (Pl.'s Mem. of Law in Supp. of Mot. to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1), "Mem. in Supp.") [Doc. No. 24]. First, Graf contends that the counterclaims should be dismissed because Pinnacle has failed to sufficiently plead jurisdiction. (Mem. in Supp. at 4-5). Graf's primary argument, however, is that Pinnacle's counterclaims related to the alleged debt are not compulsory counterclaims, and that, regardless of whether, as permissive counterclaims, the claims come within the Court's supplemental jurisdiction under 28 U.S.C. § 1367(a), the Court should decline to exercise such jurisdiction "using its discretion conferred by the supplemental jurisdiction statute." (Id. at 5-7). Graf argues that "federal consumer protection laws exist to deter bad commercial conduct by providing a statutory recovery to consumers" and that "[e]ntertaining jurisdiction over debt counterclaims against consumers would substantially undermine that goal." (Id. at 8).
Pinnacle contends that it "has stated facts sufficiently establishing jurisdiction" and that the Court should exercise its supplemental jurisdiction over Pinnacle's counterclaims, citing "[j]udicial economy, efficiency, and fairness." (Def.'s Mem. in Opp'n to Pl.'s Mot. to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1), "Mem. in Opp'n") [Doc. No. 27 at 4-7].
On December 5, 2014, the Court held a hearing on the Motion to Dismiss and took the motion under advisement. (Minute Entry Dated Dec. 5, 2014) [Doc. No. 33]. For the reasons described below, the Court concludes that dismissal of Pinnacle's counterclaims is appropriate and therefore recommends granting Graf's Motion to Dismiss.
A. Legal Standard
Federal district courts have original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States" and "all civil actions" where the amount in controversy exceeds $75, 000 and complete diversity of citizenship exists between the parties. 28 U.S.C. §§ 1331, 1332. Here, the Court has original jurisdiction over Graf's FDCPA claims, since these claims arise under federal law. See (Compl. ¶¶ 113-22). The Court does not, however, have original jurisdiction over Pinnacle's counterclaims, as Pinnacle's breach of contract and account stated claims arise under state law and the amount in controversy does not exceed the jurisdictionally required $75, 000. See (Ans. and Countercl. ¶¶ 8-10, 13, 17-18 of Countercl.). Indeed, Pinnacle does not contend that the Court has original ...