Hinkle v. Matthews

Decision Date31 August 2018
Docket NumberCivil Action No. 2:15-cv-13856
Citation337 F.Supp.3d 674
CourtU.S. District Court — Southern District of West Virginia
Parties Robin L. HINKLE, individually and on behalf of those similarly situated, Plaintiff, v. Casey Joe MATTHEWS; Timothy May and Connie May, husband and wife; Santander Consumer, USA, Inc., an Illinois corporation; Safe-Guard Products International, LLC, a Georgia limited liability company; and Johnny Hinkle, Defendants.

Howard M. Persinger, III, Persinger & Persinger, Jonathan R. Marshall, Raymond S. Franks, II, Sandra Henson Kinney, Bailey & Glasser, Charleston, WV, for Plaintiff.

C. William Davis, Richardson & Davis, Bluefield, WV, David F. Nelson, Allen Kopet & Associates, Charleston, WV, Daniel J. Konrad, Dinsmore & Shohl, Huntington, WV, Debra Tedeschi Varner, James A. Varner, Sr., Jeffrey D. Van Volkenburg, McNeer Highland McMunn & Varner, Clarksburg, WV, for Defendants.

Johnny Hinkle, Varney, WV, pro se.

MEMORANDUM OPINION AND ORDER

John T. Copenhaver, Jr., United States District Judge

Pending is plaintiff Robin L. Hinkle's motion, filed July 20, 2016, for reconsideration of the court's memorandum opinion and order of July 19, 2016.

I. Reconsideration Under Federal Rule of Civil Procedure 54(b)

On July 19, 2016, the court entered a memorandum opinion and order dismissing Hinkle's claims under the debt collection provisions of the West Virginia Consumer Credit and Protection Act ("WVCCPA"), West Virginia Code sections 46A-2-122 to 129a. (ECF # 52 at 6-9.) In doing so, the court analogized the definition of "claim" under the WVCCPA to the definition of "debt" under the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 etseq., in accordance with the prior practice of the Supreme Court of Appeals of West Virginia. (Id. at 8 (citing Fleet v. Webber Springs Owners Ass'n, Inc., 235 W. Va. 184, 193, 772 S.E.2d 369 (2015) ).)

Turning to cases parsing the FDCPA, the court solely relied upon dicta from the United States Court of Appeals for the Third Circuit's opinion in Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3d Cir. 1987). In Zimmerman, the Third Circuit stated

that the type of transaction which may give rise to a "debt" as defined in the FDCPA, is the same type of transaction as is dealt with in all other subchapters of the [FDCPA], i.e., one involving the offer or extension of credit to a consumer. Specifically it is a transaction in which a consumer is offered or extended the right to acquire ‘money, property, insurance, or services’ which are "primarily for household purposes" and to defer payment.

Id. at 1168-69. This court likewise "[saw] no reason that a ‘claim’ under the WVCCPA should not also require a deferral of payment." (ECF # 52 at 8-9.) Consequently, because there was no deferral of payment in this case, as will be discussed in greater detail below, the court dismissed Hinkle's debt collection claim. (Id. at 9.)

The next day, Hinkle moved for the court to reconsider its decision. Federal Rule of Civil Procedure 54(b) provides that an interlocutory order "that adjudicates fewer than all the claims ... may be revised at any time before the entry of a judgment adjudicating all the claims." There exist three circumstances under which a district court may revise an interlocutory order: "(1) ‘a subsequent trial produc[ing] substantially different evidence’; (2) a change in applicable law; or (3) clear error causing ‘manifest injustice.’ " Carlson v. Bos. Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017) (quoting Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 515 (4th Cir. 2003) ). Hinkle asks the court to revise its July 19 dismissal order under the third circumstance, arguing that the court's reliance upon Zimmerman was clear error warranting reconsideration of the court's previous memorandum opinion and order.

Hinkle correctly notes that the Third Circuit later repudiated the deferral-of-payment portion of Zimmerman upon which this court relied. In Pollice v. National Tax Funding, L.P., the Third Circuit held as follows:

We are not bound by the ... statement in Zimmerman, as it was dictum. In our view, the plain meaning of [the FDCPA] indicates that a "debt" is created whenever a consumer is obligated to pay money as a result of a transaction whose subject is primarily for personal, family or household purposes. No "offer or extension of credit" is required.

225 F.3d 379, 401 (3d Cir. 2000). Indeed, the Third Circuit observed that the dictum in Zimmerman"has been widely disavowed by several other courts of appeals." Id. (citing, as examples, Romea v. Heiberger & Assocs., 163 F.3d 111, 114 n.4 (2d Cir. 1998) ; Brown v. Budget Rent-A-Car Sys., Inc., 119 F.3d 922, 924 n.1 (11th Cir. 1997) ; Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 1325-26 (7th Cir. 1997) ); see also Duffy v. Landberg, 133 F.3d 1120, 1124 (8th Cir.), cert. denied, 525 U.S. 821, 119 S.Ct. 62, 142 L.Ed.2d 49 (1998) ; Snow v. Jesse L. Riddle, P.C., 143 F.3d 1350, 1352-53 (10th Cir. 1998) ; Charles v. Lundgren & Assocs., P.C., 119 F.3d 739, 741-42 (9th Cir.), cert. denied, 522 U.S. 1028, 118 S.Ct. 627, 139 L.Ed.2d 607 (1997). The Fourth Circuit has not spoken on this issue. See generally Mabe v. G. C. Servs. Ltd. P'ship, 32 F.3d 86, 88 (4th Cir. 1994) (citing a separate portion of Zimmerman for the proposition that administratively-ordered child support payments are not "debts" under the FDCPA).

In light of the post- Zimmerman authority developed above – the Third Circuit's repudiation in particular – the court finds that its reliance on Zimmerman was clear error warranting revision. Hinkle's motion for reconsideration is granted, and the court revises its memorandum opinion and order of July 19, 2016, as set forth herein.

II. Factual and Procedural Background

Hinkle is a resident of Delbarton, West Virginia. (Am. Compl. ¶ 1.) Defendant Safe-Guard Products International, LLC ("Safe-Guard"), a Georgia limited liability company doing business in West Virginia, offered Guaranteed Auto Protection ("GAP") insurance to vehicle purchasers in West Virginia. (Id. ¶¶ 5, 17.) In the event of an accident resulting in the total loss of a vehicle, GAP insurance is alleged by Hinkle to cover any "gap" between the purchaser's outstanding balance owed on the vehicle and the amount paid by the purchaser's primary insurer. (See id. ¶ 26.)

In July 2006, Hinkle entered into a "Retail Installment Contract and Security Agreement" for the purchase of a vehicle. (Id. ¶ 25.) As part of that transaction, Hinkle also purchased GAP insurance from Safe-Guard by signing a " ‘Gap Contract Insurance Policy’ or ‘Deficiency Waiver Addendum.’ " (Id. ¶ 26.) The Security Agreement and the Insurance Policy, both of which are referenced in the amended complaint, are attached to Safe-Guard's motion for partial dismissal as Exhibits A and B, respectively. Both documents show that Hinkle paid $495 upfront for the GAP insurance, which was the only payment due to Safe-Guard for the purchase of the policy. (See Mot. Partial Dismissal, Exs. A and B.)

On June 1, 2011, Hinkle was involved in an automobile accident resulting in the total loss of her vehicle. (Am. Compl. ¶¶ 7, 12, 29.) At the time, Hinkle's outstanding balance on the vehicle was $11,983.81. After Hinkle's primary insurer paid the vehicle's cash value, Hinkle still owed a "gap" of $4,698.81. (Id. ¶ 29.) By letter of July 21, 2011, Safe-Guard denied Hinkle's claim under the GAP policy and did not pay the deficiency, stating that Hinkle lacked coverage because of "inconsistencies in [her] payment history, such as late payments, [that caused] the loan [to be] re-amortized." (Id. ¶¶ 30-31; Mot. Partial Dismissal, Ex. E.) In effect, Safe-Guard asserts that had payments been timely made, the amount owing at the time of the accident would have been around $5 thousand, which is less than the $7 thousand insurance accident recovery, leaving no gap to be covered by the Safe-Guard policy. (See Mot. Partial Dismissal, Exs. B, E.)

Hinkle initiated this action on July 20, 2012, in the Circuit Court of Mingo County. In the state court, Safe-Guard sought a writ of prohibition from the Supreme Court of Appeals of West Virginia to prevent enforcement of an order finding that the GAP policy Safe-Guard sold to Hinkle was insurance. State ex rel. Safe-Guard Prods. Int'l, LLC v. Thompson, 235 W. Va. 197, 198, 772 S.E.2d 603 (2015). In that case, on March 11, 2015, the Supreme Court of Appeals found as a matter of first impression that Safe-Guard's GAP policy is insurance under the laws of West Virginia. See id. Syl. Pt. 2 ("[A] contract that requires a third party to indemnify a lender, as a result of a specified event that causes the lender not to be repaid by a borrower, ... is an insurance contract that is governed by the insurance laws of the State of West Virginia.").

Following that ruling, on May 28, 2015, Hinkle moved to amend her complaint to include class claims against Safe-Guard on behalf of all purchasers of GAP insurance in West Virginia. In the amended complaint,1 Hinkle claims that Safe-Guard sold GAP insurance without a license in violation of West Virginia Code section 33-3-1. (Am. Compl. ¶ 46.) Hinkle alleges that this unlawful sale of insurance constituted a violation of various provisions of the WVCCPA's debt collection provisions of article 2 and general consumer protections of article 6. (Id. ¶ 47.) The operative paragraph of the amended complaint states as follows:

By collecting premiums that [it was] not entitled to recover and selling an insurance product while not licensed to sell such product, Safe-Guard ... violated West Virginia Code § 46A-2-127 and engaged in unfair or deceptive acts or practices as set forth in 46A-6-102, -104, and -106.

(Id. ) Hinkle seeks, inter alia, compensatory damages, a refund of premiums paid, punitive damages, and statutory penalties pursuant to the WVCCPA. (Id. WHEREFORE Clause.)

After Hinkle moved to amend her...

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