Gordon v. Cavalry SPV I, LLC

• Decision Date: 24 July 2018
• Docket Number: Case No. 18-10148
• Parties: Jil Gordon et al., Plaintiffs, v. Cavalry SPV I, LLC et al., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

Jil Gordon et al., Plaintiffs, v. Cavalry SPV I, LLC et al., Defendant.

Case No. 18-10148

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

July 24, 2018

Sean F. Cox United States District Court Judge

OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS FOR JUDGMENT ON THE PLEADINGS

In late 2017, Defendant Cavalry SPV I, LLC sued three individuals in state-court, seeking to collect on debts they allegedly owed to Citibank that Cavalry had purchased in bulk. In turn, those individuals have now sued Cavalry, its servicing arm, and its attorneys, alleging that the debt-collection suits were false and deceptive, in violation of the Fair Debt Collection Practices Act, the Regulation of Michigan Collection Practices Act, and the Michigan Occupational Code. Defendants have moved for judgment on the pleadings.

For the reasons below, the Court shall grant Defendants' motions. Although Plaintiffs' complaint contends that the state-court debt-collection suits were the product of falsehoods and misrepresentations, they have failed to offer any well-pleaded factual allegations, rather than conclusory allegations and legal conclusions, to allow the Court to reasonably infer that Defendants violated the FDCPA.

BACKGROUND

This is a debt-collection dispute between several parties. Plaintiffs-Jil Gordon, Marcy Goyette, and Wendell Schuemann-are all Michigan residents. Complaint, ¶ 11. They have sued four Defendants-Cavalry SPV I, LLC, its servicing arm Cavalry Portfolio Services, LLC, law firm collection agency Roosen, Varchetti & Olivier, PLLC, and one of the firm's partners, Richard Roosen. Id. at ¶¶ 12-15. Plaintiffs generally allege that Defendants are mutually engaged in the filing of false collection lawsuits for false amounts against Michigan debtors. Id. at ¶ 2.

More specifically, Plaintiffs allege that Calvary's principal business is the collection of debts. Id. at ¶ 47. To this end, it purchased a large portfolio of defaulted debt from Citibank. Id. When Calvary makes a purchase such as this one, it receives a computerized summary of the debts included in the portfolio, although the purchase agreements disavow responsibility for the accuracy of the included data. Id. at ¶ 51. Plaintiffs allege that this information that Cavalry receives is insufficient to establish the validity of the debts Plaintiffs purportedly owe, the calculation of the claimed balance, or that they, as the consumers, even owe the debt. Id. at ¶ 53.

Despite this deficiency, when Cavalry receives the debt portfolio, it then provides the information to Michigan attorneys, such as the Roosen firm, to file lawsuits to collect on the debts. Id. at ¶ 49, 53. The full and complete purchase/sale agreements from the debt-portfolio purchase are never attached to those suits. Id. at ¶ 51. Nor do the suits include proof that Cavalry is the owner of the sued-upon debt. Id. at ¶ 54, 64. In fact, the suits are merely "computer template" collection suits that lack meaningful attorney review by the attorneys (Roosen and the Roosen law firm here) that sign them. Id. Plaintiffs allege that Cavalry's only intent in filing these suits is to obtain a default. Id. at ¶ 53.

All three Plaintiffs are parties to debt-collection suits filed by the Roosen firm on behalfof Cavalry SPV I, LLC. Complaint, Ex. 1-3. The complaints in those suits were nearly identical, differing only in the listed account numbers and the amounts owed. Id. They stated:

1. Defendant(s) entered into a Contract with Plaintiff or Plaintiff's Assignor, the account/loan number of which is: [account number], and pursuant to MCR 2.113(F)(1)(b) Plaintiff's claim is based on a written instrument which is not attached as it is in the possession of the adverse party.

2. Defendant(s) defaulted under the terms and conditions of the Contract.

3. Plaintiff and/or its assignor(s) completed performance under the terms and conditions of the Contract.

4. That statements were sent to the Defendant(s) detailing the amount owed on the account and Defendant(s) has failed to object to said statements.

5. The account has been stated and/or is open between the parties.

6. As a result of Defendant's default Plaintiff claims breach of contract, open account, account stated, and/or unjust enrichment.

7. The current claim amount due and owing by Defendant(s) to Plaintiff is [debt amount] plus interest, costs and attorney fees.

Id. The complaints all requested judgment in the amount of the debt owed plus allowable costs, attorney fees, and interest. Id.

Each complaint was accompanied by several exhibits. First, a bill of sale of assignment, identical across complaints except for the listed dates, that stated:

THIS BILL OF SALE AND ASSIGNMENT dated [date], is by Citibank, N.A., a national banking association organized under the laws of the United States, located at 701 East 60th Street North, Sioux Falls, SD 57117 (the "Bank") to Cavalry SPV I, LLC, organized under the laws of the State of Delaware, with its headquarters/principal place of business at 500 Summit Lake Drive, Suite 400, Valhalla, NY 10595 ("Buyer").

For value received and subject to the terms and conditions of the Purchase and Sale Agreement dated June 22, 2016, between Buyer and the Bank (the "Agreement"), the Bank does hereby transfer, sell, assign, convey, grant, bargain, set over and deliver to Buyer, and to Buyer's successors and assigns, theAccounts described in Exhibit 1 and the final electronic file.

Id. These bills were signed by a Citibank official. Id. Each bill was also accompanied by an exhibit describing the accounts assigned-here, the bulk-debt portfolios. Id. And each complaint was accompanied by documentation from Citibank, specific to each Plaintiff, listing the account information and the debt-amount due for the specific Citibank accounts at issue. Id.

Despite this documentation, Plaintiffs allege that the complaints are silent on the authenticity of the documents from Citibank. Complaint, ¶ 57. And they allege that the debt-collection suits are merely hearsay computer-generated complaints, identical to others filed by the Roosen firm, that lack any proof that Cavalry owns the specific debt sued upon. Id. at ¶¶ 57, 59, 61. Indeed, Plaintiffs allege that the suits against them are just three examples of the suits that the Roosen firm has filed throughout the state with no assignments, debt proof, or evidentiary documents specific to the debt of the debtors sued. Id. at ¶ 62. The suits all seek false debt amounts without properly authenticated copies of the relevant bill of sale, credit cardholder agreement, or other document evidencing and authorizing the amount sought. Id. at ¶ 63. And here, absent the false allegations and missing paperwork, there is no proof that Cavalry had the right to sue Plaintiffs for the credit card debts. Id. at ¶ 67. The attachments to the state-court pleadings are insufficient to establish factual support for Cavalry's claim that it acquired Plaintiffs' accounts by assignment. Id. at ¶ 70. Indeed, Plaintiffs allege that there was no valid assignment between Citibank and Cavalry for the specific debt sued upon. Id. at ¶ 68.

In light of the above, Plaintiffs have filed suit against Defendants, alleging a litany of violations of the FDCPA, including:

• (a) Using false, deceptive, and misleading representations and means inconnection with the collection lawsuits, violating 15 U.S.C. §§ 1692e, 1692e(10)

• (b) Designing and furnishing the lawsuits against Plaintiffs while knowing that the format used would create the false belief in Plaintiffs and the courts that the suits were supported by legally recognized and non-hearsay documentation, which was not the case, violating § 1692f(1)

• (c) Seeking to collect on a debt with no proof, chain of title or transfer, authorization or card holder agreement, violating § 1692f

• (d) Designing and furnishing false and hearsay proof and false evidence of a debt ownership to falsely accuse, threaten, and sue Plaintiffs without the necessary proof, violating § 1692e(5)

• (e) Falsely representing that a collection lawsuit and judgment is supported by the assignment of Citibank debt to Cavalry, violating § 1692e(2)(A)

• (f) Approving and verifying false lawsuits where there is no meaningful involvement by the attorney other than signing something that the attorney has not read, violating § 1692e, § 1692e(3).

Plaintiffs also allege that Defendants' conduct violated a multitude of provisions under Michigan's Regulation of Collection Practices Act and the Michigan Occupational Code.

Defendants have moved for judgment on the pleadings (Doc. # 11, 13) and Plaintiffs have responded (Doc. # 22, 23). The Court held a hearing on these motions on July 19, 2018.

STANDARD OF DECISION

Motions for judgment on the pleadings under Rule 12(c) are adjudicated under the same standard as those under Rule 12(b)(6). Lindsay v. Yates, 498 F.3d 434, 437 n. 5 (6th Cir. 2007).That rule provides for the dismissal of a case where the complaint fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The Court must construe the complaint in the light most favorable to the plaintiff and accept its allegations as true. DirectTV, Inc. v. Treesh, 487 F3d 471, 476 (6th Cir. 2007). To survive a motion to dismiss, the complaint must offer sufficient factual allegations that make the asserted claims plausible on their face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Legal conclusions couched as factual allegations will not suffice. Rondigo, LLC v. Township of Richmond, 641 F.3d 673, 670 (6th Cir. 2011). Rather, "[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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

ANALYSIS

The parties' briefs revolve around a central dispute: Whether the complaint alleges that Defendants failed to provide sufficient proof to...