Chulsky v. Offices

• Decision Date: 22 March 2011
• Docket Number: Civil No. 10–3058 (FLW).
• Citation: 777 F.Supp.2d 823
• Parties: Marjorie CHULSKY, on Behalf of Herself and Those Similarly Situated, Plaintiffs,v.HUDSON LAW OFFICES, P.C., Lauri A. Hudson a/k/a Lauri A. Hudson, Esq., and John Does 1 to 10, Defendants.
• Court: U.S. District Court — District of New Jersey

777 F.Supp.2d 823

Marjorie CHULSKY, on Behalf of Herself and Those Similarly Situated, Plaintiffs,

v.HUDSON LAW OFFICES, P.C., Lauri A. Hudson a/k/a Lauri A. Hudson, Esq., and John Does 1 to 10, Defendants.

Civil No. 10–3058 (FLW).

United States District Court, D. New Jersey.

March 22, 2011.

Andrew R. Wolf, Galex Wolf LLC, North Brunswick, NJ, Christopher J. McGinn, Law Office of Christopher J. McGinn, New Brunswick, NJ, for Plaintiffs.John L. Slimm, Marshall, Dennehey, Warner, Coleman & Goggin, PC, Cherry Hill, NJ, for Defendants.

OPINION

WOLFSON, District Judge:

Presently before the Court is Defendants Hudson Law Offices (“Hudson Law”) and Lauri A. Hudson a/k/a Lauri A. Hudson, Esq. (“Hudson”) (collectively, “Defendants”) motion to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), this putative class action brought by Plaintiff Marjorie Chulsky (“Plaintiff” or “Chulsky”). Plaintiff's claims arise of out of Hudson Law's purchase of, and attempts to collect, a consumer debt. Defendants seek to dismiss all of the claims asserted in Plaintiff's Complaint, which claims are brought under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq., the New Jersey Consumer Fraud Act (“NJCFA” or “the Act”), N.J.S.A. 56:8–1, et seq. , and the New Jersey Truth in Consumer Contract, Warrant and Notice Act (“TCCWNA”), N.J.S.A. 56:12–14, et seq. In addition, Defendants contend that Defendant Lauri A. Hudson cannot be held individually liable for the challenged actions and should, therefore, be dismissed from the suit. For the reasons that follow, the Court grants Defendants' motion with respect to the NJCFA and TCCWNA claims, but denies Defendants' motion with respect to Plaintiff's FDCPA claim.¹

I. BACKGROUND

On March 26, 2010, Defendant Hudson Law filed a complaint (“Hudson Complaint”) against Plaintiff in the Superior Court of New Jersey, Special Civil Part, Small Claims in Monmouth County, New Jersey, to collect on a $1,194.72 credit card debt. Compl. ¶ 24. The Hudson Complaint states that Hudson Law “is a successor in interest to this credit card account first issued by First Bank of Delaware for a Continental Finance MasterCard....” Compl., Exh. A (“Hudson Compl.”) at 1. The Bill of Sale attached to the Hudson Complaint states that Hudson Law purchased the debt from Credit Solutions, Corp. See Bill of Sale dated Mar. 30, 2008. The Hudson Complaint was signed by Defendant Hudson as attorney for Hudson Law. Plaintiff alleges that Hudson Law has purchased over 100 similar consumer debts and that Defendant Hudson files actions to collect on those debts. Compl., ¶ 29. According to Plaintiff, on May 11, 2010, the Hudson Complaint was dismissed via a Stipulation of Dismissal with Prejudice. ²

Plaintiff filed the instant action on May 12, 2010, challenging Defendants' filing of the Hudson Complaint under the FDCPA, NJCFA, and TCCWNA, and Defendant removed to this Court on June 16, 2010. In connection with each claim asserted, Plaintiff alleges that Hudson Law's purchase of the debt was an ultra vires corporate act because professional services corporations, such as law firms, are prohibited from engaging in the purchase of consumer debts.

In support of Plaintiff's legal conclusion that Hudson Law's purchase was an ultra vires act, Plaintiff cites to New Jersey's Professional Services Corporation Act (“PSCA”), N.J.S.A. 14A:17–1 et seq. , which limits the business and investment activities of professional service corporations. In her complaint, Plaintiff points specifically to the following language found in the PSCA:

No professional corporation shall engage in any business other than the rendering of the professional services for which it was specifically incorporated; and no foreign professional legal corporation shall engage in any business in this State other than the rendering of legal services of the type provided by attorneys-at-law; provided, that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments, or from owning real or personal property necessary for, or appropriate or desirable in, the fulfillment or rendering of its professional services.

N.J.S.A. 14A:17–9. Defendant disputes Plaintiff's reliance on this statutory provision and moves to dismiss each of Plaintiff's claims.

II. STANDARD OF REVIEW

In reviewing a motion to dismiss for failure to state a claim under 12(b)(6), a Court must take all allegations in the complaint as true, viewed in the light most favorable to the plaintiff “and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008) (citation and quotations omitted). In Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court “retired” the language in Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that “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.” Twombly, 550 U.S. at 561, 127 S.Ct. 1955 (quoting Conley, 355 U.S. at 45–46, 78 S.Ct. 99). Rather, the factual allegations in a complaint “must be enough to raise a right to relief above the speculative level.” Id. at 555, 127 S.Ct. 1955. The Third Circuit summarized the pleading requirement post- Twombly:

The Supreme Court's Twombly formulation of the pleading standard can be summed up thus: ‘stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest the required element.’ This ‘does not impose a probability requirement at the pleading stage,’ but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element.’

Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955).

In affirming that the Twombly standard applies to all motions to dismiss, the Supreme Court recently further clarified the 12(b)(6) standard. “First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556U.S. 662, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). “Second, only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 129 S.Ct. at 1950. Accordingly, “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id. In short, “a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to ‘show’ such an entitlement with its facts.” Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir.2009).

III. DISCUSSION

Defendants raise several challenges to each of Plaintiff's causes of action. I address each in turn.

A. The Purchase and Collection of Consumer Debts by a Professional Services Corporation

As an initial matter, the Court addresses Defendants' argument that Plaintiff fails to state claim under the Professional Services Corporation Act. It is clear from the face of Plaintiff's Complaint; however, that she is not asserting a direct claim under that Act. Instead, she merely references the PSCA in connection with her substantive claims under the FDCPA, NJCFA, and TCCWNA. That said, in light of Plaintiff's reliance on the PSCA in connection with her substantive claims, the Court addresses whether Plaintiff's reliance is appropriate.

N.J.S.A. 14A:17–9 provides, in pertinent part:

No professional corporation shall engage in any business other than the rendering of the professional services for which it was specifically incorporated; ... provided, that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments....

Id. Plaintiff alleges that Hudson Law violates this statute “by engaging in a business outside of [the practice] it was organized to engage in or allowed by law to engage in.” Compl., ¶ 48C. The statute, on its face, precludes a professional corporation from engaging in “any business other than the rendering of professional services,” hence Plaintiff's allegation, which must be taken as true on a motion to dismiss, sufficiently alleges a violation of the statute. Indeed, Defendants have not argued, in their papers, that Hudson Law did not engage in such a business.

This is not to say, however, that Hudson Law's mere purchase of Plaintiff's debt violates N.J.S.A. 14A:17–9. To the contrary, the plain language of the Act provides “that nothing in this act or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments.” Id. (emphasis added). The statute's use of “any of other types of investments” is broad enough to include the purchase of debt obligations, such as Plaintiff's credit card debt, for investment purposes. It is only Plaintiff's allegation that Hudson Law engaged in the business of purchasing and collecting debts that alleges a violation of the PSCA.

Based on this alleged violation, Plaintiff contends that Hudson Law's purchase of, and attempt to collect, Plaintiff's debt are ultra vires or illegal acts that render Hudson Law's purchase of the debt void. Further, as stated in Plaintiff's opposition brief, Plaintiff alleges that “[b]ecause [Hudson Law] is barred from acting as a debt buyer and cannot legally perform the activities of a debt buyer, it was a...