Cole v. Stephen Einstein & Assocs., P.C.

• Decision Date: 05 February 2019
• Docket Number: 6:18-cv-06230 EAW
• Parties: Alex J. COLE, individually and on behalf of others similarly situated, Plaintiff, v. STEPHEN EINSTEIN & ASSOCIATES, P.C. and Second Round, L.P. d/b/a/ Third Round, L.P., Defendants.
• Court: U.S. District Court — Western District of New York

365 F.Supp.3d 319

Alex J. COLE, individually and on behalf of others similarly situated, Plaintiff,

v.STEPHEN EINSTEIN & ASSOCIATES, P.C. and Second Round, L.P. d/b/a/ Third Round, L.P., Defendants.

6:18-cv-06230 EAW

United States District Court, W.D. New York.

Signed February 5, 2019

Alexander Jerome Douglas, Douglas Firm, P.C., Rochester, NY, for Plaintiff.

Hilary F. Korman, Scott Evan Wortman, Andrea Marie Roberts, Blank Rome LLP, New York, NY, for Defendants.

DECISION AND ORDER

ELIZABETH A. WOLFORD, United States District Judge

INTRODUCTION

Plaintiff Alex J. Cole ("Plaintiff") commenced this putative class action, on behalf of himself and others similarly situated, on March 20, 2018, alleging that defendant Stephen Einstein & Associates, P.C. ("Einstein") and Second Round, L.P. d/b/a Third Round, L.P. ("Second Round") (collectively, "Defendants") sought to collect a debt from Plaintiff and others in violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. ("FDCPA"). (Dkt. 1). Plaintiff claims that the collection letter he received from Einstein failed to articulate that the "charges or fees" identified therein related only to those incurred after Plaintiff's debt had been charged off. (See Dkt. 20 at 6). According to Plaintiff, Einstein's letter was misleading because it could be interpreted as reflecting all charges or fees incurred since the account's inception. (Dkt. 25 at 11). Plaintiff also claims that because his credit account had accrued interest at a rate exceeding that permitted by New York's usury statutes while the balance was pending with the original creditor, Defendants unlawfully attempted to take or receive interest in violation of New York law by seeking to collect the principal due after the account was charged off. (See Dkt. 20 at 7-8; Dkt. 25 at 19-22).

Presently before the Court are Defendants' motion to dismiss for failure to state a claim and request for sanctions (Dkt. 22), and Plaintiff's cross-motion for sanctions (Dkt. 25). For the following reasons, Defendants' motion to dismiss is granted, Plaintiff's Amended Complaint is dismissed, and Defendants' and Plaintiff's respective motions for sanctions and costs are denied.

BACKGROUND

The following facts are drawn from Plaintiffs Amended Complaint unless otherwise indicated and are assumed true for purposes of this motion. (Dkt. 20). On April 12, 2017, Einstein mailed a letter to Plaintiff seeking to collect an alleged debt relating to a Lowe's credit card account (the "Letter"). (Id. at ¶¶ 13-14; see Dkt. 20-1). Although the Letter stated, "CHARGES OR FEES: $ 0.00," Plaintiff alleges that, "[u]pon information and belief, substantial amounts of late fees have accrued on this account." (Id. at ¶¶ 15-16). Plaintiff further alleges that "interest at the rate of 26.99% APR had accrued on this credit card." (Id. at ¶ 17). In addition, because Second Round allegedly "controls, approves, supervises, and oversees Einstein's collection activities" (id. at ¶ 18), "Einstein is Second Round's agent" (id. at ¶ 19).

Plaintiff has identified two putative classes, one for each cause of action asserted in his Amended Complaint. (Id. at 3-9). Plaintiff alleges that members of the first putative class were harmed because, "[b]y falsely stating that the amount of accrued charges or fees was ‘$ 0.00,’ Einstein made a false and misleading representation in violation of 15 U.S.C. § 1692e." (Id. at ¶ 38). Plaintiff also states that because "interest at the rate of 26.99% APR had accrued on this credit card[,] ... Einstein attempted to collect interest at a rate which exceeds New York's maximum rate under its criminal usury state." (Id. at ¶¶ 52-53). As a result, Plaintiff claims that members of the second putative class were harmed by Einstein's misrepresentation of the "character, legal status, or amount of the debt" as well as its ability to collect interest above the rate set by New York's criminal usury statute, and by Einstein's threat "to collect interest which could not legally be collected" and its collection of interest in "[a]n amount which was not permitted by New York law," all in violation of 15 U.S.C. §§ 1692e, (2)(A), (5), and 1692f(1). (Id. at ¶¶ 54-57). Plaintiff further alleges that Second Round is vicariously liable for Einstein's conduct because Einstein is Second Round's agent. (Id. at ¶¶ 43-44, 60-61). Plaintiff seeks statutory and actual damages on behalf of himself and the members of the putative classes as well as recoupment of reasonable attorney's fees. (Id. at 9-10).

PROCEDURAL HISTORY

On March 20, 2018, Plaintiff commenced this putative class action against Defendants, alleging that the Letter constituted "a false and misleading representation in violation of 15 U.S.C. § 1692e." (Dkt. 1 at ¶ 36). On May 4, 2018, Defendants filed a motion to dismiss Plaintiffs complaint (the "first motion to dismiss"). (Dkt. 17). Defendants' notice of motion did not indicate whether they intended to submit reply papers in further support of their motion. (See id. ). Fourteen days later, Defendants filed an "amended motion to dismiss." (Dkt. 19). The amended motion to dismiss consisted solely of an amended notice of motion that stated Defendants' intent to file reply papers in support of the first motion to dismiss. (Id. ).

On May 22, 2018, Plaintiff filed his Amended Complaint, which remains the operative pleading in this matter. (Dkt. 20). Three days later, Plaintiff filed his response to Defendants' first motion to dismiss, arguing that the motion had been rendered moot as a result of his filing of the Amended Complaint. (Dkt. 21). On June 5, 2018, Defendants filed a third motion to dismiss, which also included a request for court-ordered sanctions and costs. (Dkt. 22). Plaintiff opposes Defendants' third motion to dismiss. (Dkt. 25). On July 11, 2018, the Court granted Plaintiffs request to file a sur-reply in further opposition to Defendants' third motion to dismiss (Dkt. 28), which was filed the next day (Dkt. 29). On November 2, 2018, Defendants filed a notice of supplemental authority, drawing the Court's attention to a recent Second Circuit decision. (Dkt. 30).

DISCUSSION

I. Defendants' First and Amended Motions to Dismiss Are Dismissed as Moot

After Plaintiff filed his original Complaint on March 20, 2018 (Dkt. 1), Defendants filed the first motion to dismiss on May 4, 2018 (Dkt. 17). Two weeks later, Defendants filed an amended notice of motion, belatedly indicating their intent to file reply papers in support of the first motion to dismiss.¹ (Dkt. 19); see L.R. Civ. P. 7(a)(1) ("A moving party who intends to file and serve reply papers must so state in the notice of motion."). On May 22, 2018, four days later, Plaintiff filed his Amended Complaint. (Dkt. 20).

Pursuant to Rule 15(a)(1)(B) of the Federal Rules of Civil Procedure, "[a] party may amend its pleading once as a matter of course within ... 21 days after service of a motion under Rule 12(b)...." Accordingly, Plaintiff's Amended Complaint was timely filed within 21 days after Defendants filed their first two motions to dismiss.

"It is well settled that an amended pleading ordinarily supersedes the original and renders it of no legal effect." In re Crysen/Montenay Energy Co. , 226 F.3d 160, 162 (2d Cir. 2000) ; see Hancock v. County of Rensselaer , 882 F.3d 58, 63 (2d Cir. 2018) (same). "When a plaintiff amends its complaint while a motion to dismiss is pending the court may den[y] the motion as moot [or] consider [ ] the merits of the motion in light of the amended complaint." Illiano v. Mineola Union Free Sch. Dist. , 585 F.Supp.2d 341, 349 (E.D.N.Y. 2008) (internal quotation omitted and alterations in original); see also McIntyre v. City of Rochester , 228 F.Supp.3d 241, 242 (W.D.N.Y. 2017) ("[T]he filing of the amended complaint moots the motion to dismiss the original complaint."). In this case, because Defendants have filed a third motion to dismiss that directly addresses the allegations in the Amended Complaint, the Court finds it appropriate to dismiss the first and amended motions to dismiss as moot. See Holliday v. Augustine , No. 3:14-CV-855 SRU, 2015 WL 136545, at *1 (D. Conn. Jan. 9, 2015) ("The defendants have filed a separate motion to dismiss the amended complaint which includes the arguments raised in the first motion. In light of the second motion, the motion to dismiss the original complaint is denied as moot."); Sussman-Automatic Corp. v. Spa World Corp. , 15 F.Supp.3d 258, 265 (E.D.N.Y. 2014) ("In this case, the [d]efendants filed a second motion to dismiss directed at the amended complaint. Therefore, the Court finds that any consideration of the initial complaint and motion to dismiss is unnecessary and denies that motion as moot."); Davis v. Am. Optical Corp. , No. 11-CV-562S, 2012 WL 639698, at *3 (W.D.N.Y. Feb. 27, 2012) ("Finding the amended complaint to constitute a response to the first motion to dismiss, this Court will deny that motion as moot, and will proceed to consider the amended complaint, and [the d]efendants' second motion to dismiss."); Bimler v. Stop & Shop Supermarket Co. , 965 F.Supp. 292, 296 (D. Conn. 1997) ("[B]ecause Stop & Shop has filed a second motion to dismiss which incorporates the arguments made in its original motion, there is no need to separately decide both the original and the second motions to dismiss. For the sake of procedural clarity, the court recommends that the first motion to dismiss be denied.").

II. Defendants' Third Motion to Dismiss

A. Legal Standard

"In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable L.L.C. , 622 F.3d 104, 111 (2d Cir. 2010). A court should consider the motion by "accepting all factual allegations as true and drawing all reasonable inferences in...