Bugg v. Midland Funding, LLC
| Decision Date | 19 August 2019 |
| Docket Number | NO. 6:19-CV-06017-RTD,6:19-CV-06017-RTD |
| Parties | DANNY BUGG and ELDON BUGG PLAINTIFFS v. MIDLAND FUNDING, LLC and FINKELSTEIN, KERN, STEINBERG & CUNNINGHAM, P.C. DEFENDANTS |
| Court | U.S. District Court — Western District of Arkansas |
Now before the Court is Defendant Midland Funding's Motion to Dismiss (ECF No. 8). Plaintiffs' have filed a Motion to Amend and Response in opposition (ECF No. 10), and Defendant has filed a Reply (ECF No. 11). Also before the Court are Plaintiffs' Motion to Strike Reply and Motion for Extension of Time (ECF No. 12); Defendant's Response in Opposition to Plaintiff's Motion to Strike (ECF No. 14); and Plaintiffs' Reply to Response to Motion (ECF No. 15). This matter is ripe for consideration. For the reasons set forth herein below, the Motion to Dismiss will be granted in part and denied in part.
Plaintiffs Danny Bugg and Eldon Bugg originally filed this action in the Circuit Court of Garland County, Arkansas on June 26, 2018, asserting claims arising under state law: abuse of process; negligence; and violations of the Arkansas Fair Debt Collection Practices Act (AFDCPA). On January 23, 2019, Plaintiffs amended their complaint to include a civil rights claim under 42 U.S.C.§ 1983; claims under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.; the Arkansas Fair Debt Collection Practices Act, Ark.Code Ann. §§17-27-506(a) and 505(b); abuse of process; negligence; negligence per se; and breach of contract under Arkansas common law. Citing 29 U.S.C. § 1441(a), Defendant Midland Funding removed the case to this court on February 12, 2019 on grounds of federal question jurisdiction under 28 U.S.C. § 1331 and supplemental jurisdiction under 28 U.S.C. § 1367. (Notice of Removal, Feb. 12, 2019, ECF No. 1.)
The facts are taken from Plaintiffs' First Amended Complaint (ECF No. 4) and matters of public record that do not conflict with the facts set forth in the complaint.1 Facts taken from the complaint are considered true for purposes of analyzing this motion under Rule 12(b)(6). Plaintiff Danny Bugg (Danny) is a resident of Garland County, Arkansas. Plaintiff Eldon Bugg (Eldon) is a resident of Cooper County, Missouri, and at all relevant times the assignee of certain rights, title and interest of the causes of action alleged in the complaint. Defendant Midland Funding (Midland) is a debt collector who became successor-in-interest creditor on two credit card contracts between two separate lenders and Danny. Both contracts had an unpaid balance. (Am. Compl. ¶ 8, Feb. 12, 2019, ECF No. 4.)
In September 2015, Midland caused to be filed in the district court for Garland County, Arkansas a complaint against Danny to collect the unpaid balance due on one of the credit card contracts. (Midland v. Bugg, HTCV-15-849, "Credit One Collection Lawsuit".) Midland caused to be filed with the district court a proof of service affidavit stating that service of process had been accomplished by delivering a copy of the summons and complaint to Danny's Lakeshore Drive residence and leaving it with a female family resident that was gray-haired and weighed approximately 100 pounds. (Am. Compl. ¶ 9). The affidavit of service was materially false because "there has never been a family resident fitting that description" at Danny's Lakeshore Drive residence. Id. Because he did not receive notice of the lawsuit, Danny did not file an answer, and Midland obtained a default judgment based on an affidavit of debt that was materially false inthat the affidavit had been "robo-signed" (that is to say the affidavit was signed by an individual having no personal knowledge about the validity of the debt.) Id. On or about September 1, 2017, Midland executed on the judgment by garnishing Danny's wages. Learning of the collection lawsuit for the first time upon receipt of the notice of garnishment in the mail, Danny filed a motion to enjoin the garnishment and return the garnished wages. The motion was granted. Danny also filed a motion to vacate the underlying default judgment, and the state court has not yet ruled on that motion. Id.
On or about March 8, 2017, Midland caused to be filed in the district court of Garland County, Arkansas a complaint against Danny to collect the unpaid balance due on the second credit card contract. (Midland v. Bugg, HTCV-17-187, "Best Buy Collection Lawsuit".) (Am. Compl. ¶ 10.) Danny filed an answer denying that he owed the debt as alleged in the complaint. Danny also pleaded affirmative defenses and a counterclaim against Midland alleging that the affidavit of debt Midland filed in support of the complaint was materially false in that the affidavit had been "robo-signed," and was inadmissible in a court of law. Danny assigned his interest in the counterclaim to Eldon. During discovery on or about July 10, 2017, Midland served Danny with Requests for Admission. Eighteen days later, Danny responded to the discovery and denied that he owed the debt. Midland filed a motion for summary judgment on August 21, 2017 stating that Danny admitted owing the debt because he did not answer Midland's requests for admission. Plaintiff contends the summary judgment motion was materially false, deceptive, misleading, and malicious because Midland knew Danny had answered and served responses to discovery, and Midland knew Danny denied owing the debt. Danny attached a copy of the discovery responses to his response to the motion for summary judgment. Midland withdrew its summary judgment motion on September 14, 2017. Id.
On December 18, 2018, both the Credit One Collection Lawsuit and the Best Buy Collection Lawsuit were called for hearing and trial in the district court, and it was announced that the parties had settled both cases.
Dismissal is proper if Plaintiffs' complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The factual allegations in the complaint must be taken as true and construed in the light most favorable to the plaintiff. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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. Only a complaint that states a plausible claim for relief survives a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009); McIvor v. Credit Control Servs., Inc., 773 F.3d 909 912-13 (8th Cir. 2014). A complaint should not be dismissed for failure to state a claim unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas W. Garland, Inc. v. City of St. Louis, 596 F.2d 784, 787 (8th Cir. 1979). "[A] dismissal under Rule 12(b)(6) is likely to be granted only in the unusual case in which a plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." Id.
Midland seeks dismissal of the First Amended Complaint contending the underlying litigation conduct in the state court is not sufficient basis for any of Plaintiffs' claims: Plaintiffs' federal civil rights claim should be dismissed because Midland was not a "state actor"; Plaintiffs' claims under the Fair Debt Collection Practices Act (FDCPA) and the Arkansas Fair Debt Collection Practices Act (AFDCPA) fail because the underlying state court litigation filings at issue do not give rise to a claim under either statute; the abuse of process claim should be dismissed because process was not abused; Plaintiffs' claim for negligence should be dismissed because Arkansas law does not recognize a claim for negligent misrepresentation and because a negligently filed court document cannot support a claim for negligence; the negligence per se claim fails because violations under the FDCPA and AFDCPA do not constitute negligence per se under Arkansas law; the breach of contract claim does not allege a specific "obligation" supposedly owedby Midland, and the allegations sound in tort, rather than contract; Plaintiffs cannot allege any real, actionable damages; and the underlying lawsuits have been settled.
Plaintiffs filed a cause of action under 42 U.S.C. § 1983 claiming that private parties using the state court system are state actors within the meaning of section 1983, and that Midland used the Arkansas court system to deprive Danny Bugg of his Constitutional rights under the Fifth and Fourteenth Amendments when Midland filed or caused to be filed the "materially false affidavit of service, default and garnishment, filed the false summary judgment; and provided robo-signed affidavits." In other words, Plaintiffs complain Midland misused the court system or that Midland acted contrary to the relevant policy or procedures articulated by the State of Arkansas. Assuming Midland did invoke state law collection procedures without the grounds to do so or that Midland misrepresented the grounds, Midland's actions can in no way be attributed to a State rule or State decision. Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 102 S.Ct. 2744, 73 L.Ed.2d 482 (1982) (). Plaintiffs cannot state a valid cause of action under § 1983 based on Defendant's litigation conduct in the underlying state court proceedings, and the civil rights claim should be dismissed with prejudice.
The complaint alleges several violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §1692, et seq., by Midland in connection with its efforts to collect debts from Danny.Specifically, Plaintiffs allege Midland violated 15 U.S.C. §§1692d2, e3 and f4 by filing the false affidavit of service, the default motion and...
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