Conway v. Portfolio Recovery Assocs., LLC, Civil No. 13–07–GFVT.

• Court: U.S. District Court — Eastern District of Kentucky
• Writing for the Court: GREGORY F. VAN TATENHOVE, District Judge.
• Citation: Conway v. Portfolio Recovery Assocs., LLC, 13 F.Supp.3d 711 (E.D. Ky. 2014)
• Decision Date: 31 March 2014
• Docket Number: Civil No. 13–07–GFVT.
• Parties: Sean CONWAY, Plaintiff, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant.

13 F.Supp.3d 711

Sean CONWAY, Plaintiff

v.PORTFOLIO RECOVERY ASSOCIATES, LLC, Defendant.

Civil No. 13–07–GFVT.

United States District Court, E.D. Kentucky, Central Division, Frankfort.

Signed March 31, 2014.

James Hays Lawson, Lawson at Law, PLLC, Kenneth J. Henry, Henry & Associates, PLLC, Louisville, KY, for Plaintiff.

Elizabeth M. Shaffer, Sarah Billiter Cameron, Dinsmore & Shohl, LLP, Cincinnati, OH, Joseph N. Tucker, Dinsmore & Shohl, LLP, Louisville, KY, for Defendant.

MEMORANDUM OPINION & ORDER

GREGORY F. VAN TATENHOVE, District Judge.

This matter is before the Court upon the Motion to Dismiss [R. 7] filed by Defendant Portfolio Recovery Associates, LLC, and the Motion to Strike filed by Plaintiff Sean Conway, [R. 11] which is related to the Reply brief associated with the Motion to Dismiss. As will be explained below, this case turns on where the breach of contract to pay a debt occurred. Conway argues that the contract was breached in the location where the payment was supposed to be received (Virginia), while PRA contends that the breach occurred when and where Conway made the decision not to pay his debt (presumably Kentucky). For the reasons set forth herein, both motions are DENIED.

I

The relevant factual background is the same for both motions. The Defendant, Portfolio Recovery Associates, LLC (“PRA”), filed suit against Sean Conway in Shelby District Court of Shelby, Kentucky, on March 28, 2012, seeking to collect an alleged debt on a credit card. [R. 1 at 2; R. 8 at 2.] At all times relevant to this dispute Conway was a citizen and resident of Shelby County, Kentucky. [R. 7 at 2.] Capital One Bank (USA), N.A. (“Capital One”) issued a credit card to Plaintiff Conway in September, 2006, and Mr. Conley subsequently used the credit card to make personal purchases. [R. 7 at 2.] Conley made his last payment on his Capital One credit card on February 29, 2008, [R. 1–1 at 3] and failed to make the next payment in March, 2008, or any further payments afterward. In October, 2008, Capital One charged off Conway's balance of $1,288.89. PRA then purchased Conway's account from Capital One on November 17, 2008.

The parties do not dispute that PRA is the legitimate assignee of Capital One, thereby retaining all claims and defenses against Conway that Capital One would have had. [See R. 7 at 2; R. 8 at 2.] The parties also do not dispute that PRA acquired Capital One's cause of action against Conway, nor do they dispute that this cause of action accrued no later than late March, 2008, and no earlier than February 29, 2008. [See R. 8 at 2, 5.]

In March, 2012, approximately four years after PRA's cause of action against Conley accrued, PRA filed a debt collection lawsuit against Conley in district court in Shelby County, KY. On October 18, 2012, the parties filed a Joint Stipulation of Dismissal in Shelby District court, dismissing all claims against Conway. Conway then filed suit in this Court, alleging that PRA had violated the Fair Debt Collections Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. by bringing a collection suit against Conway that was time-barred by the statute of limitations. [R. 1.] Conway also brings this suit on behalf of all other persons in Kentucky similarly situated. Conway's complaint seeks statutory damages for the alleged violation of the Act, attorney's fees, litigation costs, and any other relief the Court deems appropriate.

PRA has filed a motion to dismiss Conway's claims pursuant to Fed.R.Civ.P. 12(b)(6), contending that Conway has failed to state a claim upon which relief may be granted because Conway relies upon the Virginia statute of limitations instead of Kentucky's statute. According to PRA, there has been no violation of the FDCPA because PRA brought the collection suit against Conway within Kentucky's five-year statute of limitations, and thus the suit was not time-barred. [R. 7 at 1–3.] Conway responded by arguing that Kentucky's borrowing statute is applicable in this case, and that under Kentucky's borrowing statute, Virginia's three-year statute of limitations should apply instead of Kentucky's. Thus, the issue before the Court is whether Kentucky's borrowing statute requires the application of Kentucky's or Virginia's statute of limitations. Because Conley's complaint is based entirely on the premise that PRA brought a time-barred collection suit against him, if PRA's suit was within the statute of limitations, then Conway has failed to state a claim that can survive a 12(b)(6) motion.

II

A

In a motion to dismiss brought pursuant to Rule 12(b)(6), “[t]he defendant has the burden of showing that the plaintiff has failed to state a claim for relief.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir.2007) (citing Carver v. Bunch, 946 F.2d 451, 454–55 (6th Cir.1991) ). When reviewing a Rule 12(b)(6) motion, the Court “construe[s] the complaint in the light most favorable to the plaintiff, accept[s] its allegations as true, and draw[s] all inferences in favor of the plaintiff.” Id. (citation omitted). Such a motion “should not be granted 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.” Id. (quoting Ricco v. Potter, 377 F.3d 599, 602 (6th Cir.2004) ). The Court, however, “need not accept as true legal conclusions or unwarranted factual inferences.” Id. (quoting Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir.2000) ).

Moreover, the facts that are pled must rise to the level of plausibility, not just possibility—a complaint containing “facts that are merely consistent with a defendant's liability ... stops short of the line between possibility and plausibility.”

Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks omitted)). “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.” Id. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ).

B

The purpose of the FDCPA is to prevent “the use of abusive, deceptive, and unfair debt collection practices” used “by many debt collectors.” 15 U.S.C. § 1692(a). Conley's complaint alleges that PRA has violated § 1692f(1) and § 1692e(5) of the Act by attempting to collect a debt that was barred by the statute of limitations. These sections prohibit debt collectors from using “any false, deceptive, or misleading representation” in collecting the debt, including a “threat to take any action that cannot legally be taken or that is not intended to be taken.” 15 U.S.C. § 1692e(5). According to § 1692f, a debt collector “may not use unfair or unconscionable means to collect or attempt to collect any debt,” which includes a prohibition on collecting any debt that is not “expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. § 1692f(1). Conley's complaint alleges that bringing a collection suit barred by the statute of limitations falls into one or both of these categories.

When evaluating whether a debt collector's particular action falls within the meaning of the FDCPA, “courts apply an objective test based on the understanding of the least sophisticated consumer.” Harvey v. Great Seneca Financial Corp., 453 F.3d 324, 331 (6th Cir.2006) (internal quotations omitted). Although the Sixth Circuit has not definitively ruled on exactly how attempts to collect time-barred debts fit within the framework of the FDCPA, there is broad agreement among other courts that the filing of a lawsuit to collect a time-barred debt may constitute a violation of various portions of § 1692e, if the debt collector knows or should have known that the debt is time-barred, largely because doing so is deceptive to the unsophisticated consumer. Id. at 332 (citing Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir.2001) ); Goins v. JBC & Assoc., 352 F.Supp.2d 262 (D.Conn.2005) ; Shorty v. Capital One Bank, 90 F.Supp.2d 1330 (D.N.M.2000) ; Kimber v. Fed. Fin. Corp., 668 F.Supp. 1480 (M.D.Ala.1987). See also Hall v. LVNV Funding, LLC, 2013 WL 5550838, at *2 (W.D.Ky. Oct. 8, 2013) ; Brewer v. Portfolio Recovery Assocs., 2007 WL 3025077, at *2 (W.D.Ky. Oct. 15, 2007) ; Lashbrook v. Portfolio Recovery Assocs., LLC, 2013 WL 4604281, at *8 (E.D.Mich. Aug. 29, 2013).

Here, the parties do not dispute that Conway breached his contract with Capital One and is a “debtor” within the meaning of the FDCPA, nor do they dispute that PRA has the right to collect on that debt as a “debt collector” and is therefore bound by certain requirements of the FDCPA. Instead, the parties' primary dispute at this juncture is whether the debt collection action was time-barred by the applicable statute of limitations because if the state court suit was in fact not barred by the statute, then Conley's claim should be dismissed.

III

A

Conway first argues that for statute of limitations purposes, an action concerning the collection of a credit card debt should be treated as an unwritten contract, rather than a written contract. Despite a lack of controlling precedent on this issue in Kentucky, many other jurisdictions commonly treat credit card agreements as contracts not in writing, because such agreements typically do not contain on their face all the essential terms necessary to constitute a written contract. [R. 8 at 6–13.] See, e.g., Portfolio Acquisitions, LLC v. Feltman, 391 Ill.App.3d 642, 330 Ill.Dec. 854, 909 N.E.2d 876, 883–84 (2009) (applying statute of limitations for an oral contract to a credit card action because the credit card agreement did not include all essential elements within its four corners); Delrey v. Capital One Bank, 2009 WL 5103229 (Fla.Cir.Ct. July 7, 2009) (examining Virginia law in determining that Virginia's statute of limitations for unwritten contracts should apply to a...