United States District Court, D. Minnesota
Stacey Smeby, on behalf of herself and all others similarly situated, Plaintiff,
Messerli & Kramer, P.A., Defendant.
Bennett Hartz, Esq., and Jonathan L R Drewes, Esq., Drewes Law, PLLC; and David J. Carrier, Esq., and Kai H. Richter, Esq., Nichols Kaster, PLLP, counsel for Plaintiff.
Aram V. Desteian, Esq., and Christopher R. Morris, Esq., Bassford Remele, PA, counsel for Defendant.
REPORT AND RECOMMENDATION
JEFFREY J. KEYES, Magistrate Judge.
In this putative class action, the plaintiff, Stacy Smeby, seeks damages and injunctive relief from the defendant, Messerli & Kramer, P.A. ("Messerli"), for alleged violations of Minnesota's garnishment statutes and the Fair Debt Collection Practices Act ("FDCPA"). (Doc. No. 6, Am. Compl. ¶ 1.) Messerli moved to dismiss the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on grounds that Smeby has failed to state a claim on which relief can be granted. (Doc. No. 9, Mot. to Dismiss.) The District Court referred the motion to this Court for a report and recommendation in accordance with 28 U.S.C. § 636 and District of Minnesota Local Rule 72.1. On Wednesday, March 25, 2015, the Court held a hearing on the motion at which the parties were represented by counsel. Based on Messerli's motion and supporting memoranda, Smeby's opposition, and on the arguments of counsel presented at the hearing, this Court recommends that Messerli's motion be granted in part and denied in part.
Messerli's motion to dismiss Smeby's unlawful garnishment claim (Count I) should be granted for two reasons. First, Minnesota's garnishment statutes do not create a cause of action that a debtor can bring in a collateral proceeding such as this; instead the unlawful garnishment claim Smeby asserts must be made in the underlying collection action. Second, Smeby failed to plead facts showing that Messerli is a "creditor." This conclusion does not, as Smeby contends, eviscerate the remedies available for violations of the garnishment statutes. To the contrary, Minnesota's garnishment statutes allow a debtor to pursue relief in the underlying collection action from a party that is actually a creditor. This case is, of course, not the underlying collection action. And although Smeby sued a party, Discover Bank, that likely fit the definition of "creditor" when she commenced this collateral proceeding, she later voluntarily dismissed that party and amended her complaint to proceed against Messerli alone. This did not, however, transform Messerli into a creditor.
On the other hand, Smeby has stated a claim against Messerli under the FDCPA. Messerli argues that Smeby's Amended Complaint does not allege a "material" violation of the FDCPA, but Smeby plausibly alleges that in an attempt to collect a debt from her, Messerli made a misleading representation in a garnishment summons that Messerli sent to Smeby. That alleged misrepresentation could have induced Smeby to pay the debt in violation of one or more provisions of the FDCPA. Accordingly, this Court concludes that Messerli's motion to dismiss Smeby's FDCPA claim (Count II) should be denied.
Smeby incurred certain debts for personal, family, or household purposes. (Am. Compl. ¶ 22.) She owed those debts to Discover Bank, which was a party to this action when it began. (Id. ¶ 23, Ex. A.) To collect those debts, Discover Bank filed a civil suit against Smeby in state district court in October 2006. (Am. Compl. ¶ 23, Ex. A.) Messerli represented Discover Bank in the state-court collection action. ( See id. (listing counsel of record for Discover Bank as a Messerli attorney); see also Am. Compl., Ex. C at 2 (signature block on garnishment summons indicating Messerli represented Discover Bank, the "Plaintiff/Creditor").) The state court entered judgment against Smeby in the collection action in November 2006. (Am. Compl. ¶ 23; id., Ex. A.)
Over seven years after the state court entered judgment, in an attempt to collect on the judgment, Messerli sent a letter and garnishment summons to Smeby's employer and sent copies of each to Smeby as well. (Am. Compl. ¶ 24, Exs. B & C.) The letter contained a notice that "THIS COMMUNICATION IS FROM A DEBT COLLECTOR AND IS AN ATTEMPT TO COLLECT A DEBT." (Id. ¶ 25, Ex. B (emphasis in original).) And the garnishment summons informed the "garnishee" (Smeby's employer) of the following:
You shall retain garnishable earnings, other indebtedness, money, or other property in your possession in an amount not to exceed 110 percent of the creditor's claim until such time as the creditor causes a writ of execution to be served upon you, until the debtor authorizes you in writing to release the property to the creditor, or until the expiration of 270 days from the date of service of this garnishment summons upon you, at which time you shall return the disposable earnings, other indebtedness, money, or other property to the debtor.
(Id. ¶ 26, Ex. C at 1.)
Based on these facts, Smeby asserts two causes of action against Messerli. First, in Count I, Smeby asserts that Messerli violated Minnesota Statutes § 571.72, subd. 7, which prohibits creditors from using garnishment forms that change or alter statutory forms in a manner "that mislead[s] debtors as to their rights and the garnishment procedure generally." (Am. Compl. ¶¶ 40-41.) According to Smeby, the garnishment summons that Messerli sent to Smeby's employer included an unlawful change or alteration to the statutory garnishment summons form provided in Minn. Stat. § 571.74 because it included a 270-day retention period for the garnishment of Smeby's wages, rather than a 180-day retention period. (Id. ¶¶ 8-16.) The basis for this assertion is that another provision in Minnesota's garnishment statutes provides that for post-judgment garnishments, a garnishee is discharged from the obligation to retain the debtor's property after 180 days, whereas the 270-day period applies only to prejudgment garnishment. Minn. Stat. § 571.79. Smeby further alleges that Messerli did not include the wrong retention period for the Smeby's employer in the garnishment summons by accident. Rather, she contends that Messerli is "knowledgeable of Minnesota garnishment law" and "intentionally uses the same garnishment summons without regard to whether a judgment has been entered against the debtor." (Am. Compl. ¶ 14.)
In Count II of Smeby's Amended Complaint, she alleges that the "postjudgment garnishment summons that Messerli served on January 7, 2014 in connection with the collection of Smeby's debt was unlawful under Minn. Stat. §§ 571.72, 571.74, and 571.79, as it purported to be effective for up to 270 days instead of 180 days." (Am. Compl. ¶ 45.) She alleges that Messerli intentionally served the summonses "for the purpose of inducing payment in connection with the collection of [Smeby's] debt[.]" (Id. ¶ 46.) Thus, Smeby contends that Messerli's service of the post-judgment garnishments summonses violated the FDCPA "by serving unlawful post-judgment garnishment summonses, and misrepresenting that such summonses were effective for up to 270 days where such summonses were only lawfully effective for up to 180 days, " and "by threatening to take legal action that could not lawfully be taken." (Id. ¶ 50(a)-(b).) According to Smeby, these acts violated 15 U.S.C. § 1692e(4), which prohibits a debt collector from using any false, deceptive, or misleading representation in connection with the collection of a debt, including a "representation or implication that nonpayment of any debt will result in... the seizure, garnishment, attachment, or sale of any property or wages of any person unless such action is lawful and the debt collector or creditor intends to take such action, " and a "threat to take any action that cannot legally be taken or that ...