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Klein v. Stewart, Zlimen & Jungers, Ltd.

United States District Court, D. Minnesota

January 2, 2019


          Darren Brayer Schweibert, Esq., DBS LAW LLC, for plaintiffs.

          Brad D. Welp, Esq., STEWART, ZLIMEN & JUNGERS, for defendant.



         Plaintiffs Michael Klein (“Michael”) and Dina Klein (“Dina”) (collectively the “Kleins”) instituted these two similar actions against Stewart Zlimen & Jungers (“Stewart”), a law firm engaged in debt collection for Allina. Although the two cases are separate, they present nearly identical facts and legal issues, and will be examined together. The Kleins brought these actions alleging that Stewart violated the Fair Debt Collection Practices Act (“FDCPA”) on multiple occasions. Stewart moved for judgment on the pleadings as to all claims alleged by the Kleins. The Court finds that the Kleins have satisfied their burden of pleading for the following four claims (1) Stewart bringing a collection lawsuit in an attempt to collect a debt not authorized by contract or law in violation of 15 U.S.C. § 1692f(1); (2) Stewart making a false representation regarding ownership of an alleged consumer debt in violation of 15 U.S.C. § 1692e; (3) Stewart suing on behalf of a party who lacked standing in violation of 15 U.S.C. § 1692f(1); and (4) Stewart suing under an account stated theory in the absence of a statement of account in violation of 15 U.S.C. § 1693e and 1692f(1) because the Kleins have plead sufficient facts to show that relief is plausible on its face. Thus, the Court will deny the motion as to those claims. The Court will, however, grant the motion for two claims. First, the Court will grant the motion as to the claim that Stewart violated the FDCPA by seeking statutory interest in its conciliation court case against Dina and dismiss the claim with prejudice. The Eighth Circuit has held that collecting statutory interest does not violate the Minnesota law, and thus the FDCPA is not violated. The Kleins do not allege any harassing, oppressive, or abusive conduct by Stewart in violation of § 1692d, thus the Court will grant the motion and dismiss the claim without prejudice. The Kleins may plead additional facts to support such a claim should they choose.


         On July 20, 2017 the Kleins each received a letter (“July Letter”) from Stewart advising them that Stewart was attempting to collect on debt owed by the Kleins. (Civ. No. 18-658, Docket No. 1, Compl. (“Dina Compl.”) ¶ 6; Civ. No. 18-710, Docket No. 1, Compl. (“Michael Compl.”) ¶ 6.) The Kleins allege that Stewart regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. (Dina Compl. ¶ 5; Michael Compl. ¶ 5.) The two letters and their attachments addressed to the Kleins show the account balance, file number, dates for charges, account numbers, and that Stewart's client is Allina. (Civ. No. 18-658, Docket No. 6-7, Answer (“Dina Answer”) ¶ 5, Exhibit A; Civ. No. 18-710, Docket No. 9-10, Answer (“Michael Answer”) ¶ 5, Exhibit A.) The letters further state “[t]he account indicated above has been placed with this office for collection. A listing of the separate accounts included in our file is attached showing the breakdown of principal and interest.” (Id.) Enclosed with these letters are two pages referenced as “a listing of the separate accounts” with the heading “Accounts Receivable Services d/b/a Reliance Recoveries” (“ARS”) that contain account information and a breakdown of principal and interest for each account. (Id.) This is essentially a list of each time the Kleins received services from Allina, and the charges they incurred for those services. These enclosures show the date June 7, 2017. (Id.) The Kleins allege that ARS is a different legal entity from Allina and that Allina sells debts to ARS. (Dina Compl. ¶ 13; Michael Compl. ¶ 12.) The Kleins also allege that Allina sold the Kleins' debt to ARS, or in the alternative, that Allina did not do so. (Dina Compl. ¶ 14- 15; Michael Compl. ¶ 13-14.) Depending on which version is true, the Kleins advance different theories of harm. (Id.)

         In 2005, Allina entered into an agreement (“AG Agreement”) with the Minnesota Attorney General's Office to change its patient billing and medical debt collection practices. (Dina Compl. ¶ 16; Michael Compl. ¶ 15.) The AG Agreement was renewed in 2007, 2012, and 2017. (Id.) On June 22, 2012, the AG Agreement was inserted in an order executed by the Ramsey County District Court. (Dina Compl. ¶ 17; Michael Compl. ¶ 16.) The AG Agreement prohibits Allina from commencing legal action against a patient unless “the patient has been given a reasonable opportunity to submit an application for Charity Care, if the facts and circumstances suggest that the patient may be eligible for Charity Care . . . .” (Dina Compl. ¶ 19; Michael Compl. ¶ 18.) The AG Agreement further requires that Allina serve with any summons and complaint a lawsuit information sheet approved by the Attorney General's Office. (Dina Compl. ¶ 20; Michael Compl. ¶ 19.)

         On November 15, 2017, Stewart commenced lawsuits on behalf of Allina against each of the Kleins in Washington County Conciliation Court. (Dina Compl. ¶ 21; Michael Compl. ¶ 20.) The summons and complaints were served on the Kleins. (Dina Compl. ¶ 22; Michael Compl. ¶ 21.) The summons and complaints were not accompanied by a lawsuit information sheet. (Dina Compl. ¶ 24; Michael Compl. ¶ 23.) Stewart's complaint against Dina alleged that she owed $287.92 of interest as allowed by Minn. Stat. § 334.01, in addition to other charges totaling $8, 123.18. (Dina Compl. ¶ 27.) Stewart did not seek pre-judgment interest against Michael. A hearing on these cases was set for March 1, 2018. (Dina Answer ¶ 14, Exhibit F; Michael Answer ¶ 13, Exhibit G.) The Kleins each secured a day off work to attend the hearing. (Dina Compl. ¶ 31; Michael Compl. ¶ 26.) The Kleins each incurred out-of-pocket costs in connection with attending the hearing, including lost wages. (Dina Compl. ¶ 36; Michael Compl. ¶ 31.) Before the hearing began, Stewart agreed to dismiss the lawsuit without prejudice to provide the Kleins an opportunity to apply for charity care. (Dina Compl. ¶ 32; Michael Compl. ¶ 27.) In the case of Dina, Stewart also indicated that it would no longer be seeking statutory interest. (Dina Compl. ¶ 32.) The Kleins then brought the instant actions on March 9, 2018, in the case of Dina, and on March 14, 2018, in the case of Michael. (Dina Compl.; Michael Compl.) Stewart then moved for judgment on the pleadings-the motions currently before the Court-in both cases. (Civ. No. 18-658, Mot. for J. on Pleadings, June 13, 2018, Docket No. 11; Civ. No. 18-710, Mot. for J. on Pleadings, June 13, 2018, Docket No. 15.)



         When reviewing a motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, the Court applies the same standard of review applied to a motion to dismiss pursuant to Rule 12(b)(6). Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009). That is, the Court considers all facts alleged in the complaint as true to determine if the complaint states a claim for “relief that is plausible on its face.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court is required to “‘accept as true all factual allegations set out in the complaint' and to ‘construe the complaint in the light most favorable to the plaintiff [], drawing all inferences in [the plaintiff's] favor.'” Ashley Cty. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009) (quoting Wishnatsky v. Rovner, 433 F.3d 608, 610 (8thCir. 2006)).

         To survive a motion to dismiss, however, a complaint must provide more than “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action.'” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Although the Court accepts the complaint's factual allegations as true, it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). “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.” Iqbal, 556 U.S. at 678. “Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility, '” and therefore must be dismissed. Id. (quoting Twombly, 550 U.S. at 557).

         In addition to the pleadings, the Court may properly consider materials that are necessarily embraced by the pleadings. Enervations, Inc. v. Minn. Mining & Mfg. Co., 380 F.3d 1066, 1069 (8th Cir. 2004). “Documents necessarily embraced by the pleadings include ‘documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading.'” Ashanti v. City of Golden Valley, 666 F.3d 1148, 1151 (8th Cir. 2012) (quoting Kushner v. Beverly Enters., Inc., 317 F.3d 820, 831 (8th Cir. 2003)).


         Although the Eighth Circuit has not recognized specific elements to a violation of the FDCPA, the Court finds that an FDCPA claim must meet three elements: (1) the plaintiff has been the object of collection activity arising from a consumer debt; (2) the defendant is a debt collector as defined by the FDCPA; (3) the defendant has engaged in an act or omission prohibited by the FDCPA.

         In doing so the Court construes the language in 15 U.S.C. §§ 1692d, 1692e, and 1692f that prohibits debt collectors from engaging in activities prohibited by any section of the FDCPA while collecting a debt. The FDCPA defines debt as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are subject of the transaction are primarily for personal, family, or household purposes . . . .” 15 U.S.C. § 1692a(5). The elements for proving a prima facie case of violation of the FDCPA adopted by this Court thus incorporates into the first element the definition of debt, and its corresponding requirements that the plaintiff be a consumer. The second element incorporates the requirement that the collector in question is a debt collector, as required by all three sections of the FDCPA analyzed here. The third element requires that the defendant's actions violate sections 1692d, 1692e, or 1692f by engaging in activities prohibited by those sections. Other courts have recognized similar elements in proving a prima facie FDCPA violations case. See Helman v. Bank of America, 685 Fed.Appx. 723, 726 (11th Cir. 2017); Weast v. Rockport Financial, LLC, 115 F.Supp.3d 1018, 1021 (E.D. Mo. 2015); Reynolds v. Credit Management Services, Inc., Civ. No. 8:14CV391, 2016 WL 756469 at *2 (D. Neb. Feb. 25, 2016).

         The first two elements are not at issue in this case. The third element-whether the defendant has engaged in an act or omission prohibited by the FDCPA-requires a violation of specific sections of the FDCPA.

         “The FDCPA was passed ‘to eliminate abusive debt collection practices.'” Janson v. Katharyn B. Davis, LLC, 806 F.3d 435, 437 (8th Cir. 2015) (quoting Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010)). It “prohibits a debt collector from making a ‘false, deceptive or misleading representation or means in connection with the collection of any debt, '” id. (quoting 15 U.S.C. § 1692e), and “from using ‘unfair or unconscionable means to collect or attempt to collect any debt, '” id. (quoting 15 U.S.C. § 1692f). “When evaluating whether a communication is false, deceptive, or misleading, we consider the perspective of an ‘unsophisticated consumer.'” Id. (quoting Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051, 1055 (8th Cir. 2002)). This standard is “designed to protect consumers of below average sophistication or intelligence without having the standard tied to ‘the very last rung on the sophistication ladder.'” Strand v. Diversified Collection Serv., Inc., 380 F.3d 316, 317 (8th Cir. 2004) (quoting Duffy v. Landberg, 215 F.3d 871, 874 (8th Cir. 2000)). “Th[e] standard protects the uninformed or naive consumer, yet also contains an objective element of reasonableness to protect debt collectors from liability for peculiar interpretations of collection letters.” Id. at 317-18.

         Dina alleges six violations of the FDCPA, and Michael alleges five violations of the FDCPA ...

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