Hlista v. Safeguard Props., LLC

• Decision Date: 05 May 2016
• Docket Number: No. 15-1812,15-1812
• Parties: ALEXANDRA HLISTA; ANTHONY HLISTA, Appellants v. SAFEGUARD PROPERTIES, LLC; JOHN BRADLEY DUVALL, a/k/a Brad Duvall; ESSENTIAL SERVICES INC; MITCHELL HOME SERVICES; JEFF RIEMS
• Court: U.S. Court of Appeals — Third Circuit

ALEXANDRA HLISTA; ANTHONY HLISTA, Appellants v. SAFEGUARD PROPERTIES, LLC;

JOHN BRADLEY DUVALL,

a/k/a Brad Duvall; ESSENTIAL SERVICES INC;

MITCHELL HOME SERVICES; JEFF RIEMS

No. 15-1812

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Submitted: March 24, 2016

May 5, 2016

NOT PRECEDENTIAL

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(D.C. No. 2-13-cv-00835)

District Judge: Hon. Cathy Bissoon

Submitted Under Third Circuit LAR 34.1(a)

March 24, 2016

Before: GREENAWAY, JR., VANASKIE, and SHWARTZ, Circuit Judges.

OPINION^*

SHWARTZ, Circuit Judge.

Anthony and Alexandra Hlista sued several entities and individuals engaged in the property preservation and security business, claiming that their actions at the Hlistas' home in Bethel Park, Pennsylvania violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962, and state law. The District Court granted Defendants' motion for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), dismissing the Hlistas' FDCPA and RICO claims, and declined to exercise supplemental jurisdiction over their state law claims. We will affirm.

I¹

In August 2007, the Hlistas purchased their home secured by a mortgage. During the relevant period, Seterus serviced the mortgage. The Hlistas allege that the property was never subject to foreclosure,² and there is no allegation in the pleadings that they defaulted on the loan.

From December 2011 to December 2012, the Hlistas temporarily lived in South Carolina. During that time, Mrs. Hlista's parents maintained the property.

While the Hlistas were in South Carolina, Seterus hired Safeguard Properties, LLC "to break into the Hlistas' home." A. 17 (Compl. ¶ 14). In turn, Safeguard hired Essential Services Inc. to perform tasks such as nailing the windows shut, and Mitchell Home Services to install a Seterus-branded lockbox and doorknob on the back door.³ The Hlistas' home was broken into three times in July 2012 and once in December 2012. The Hlistas discovered the July break-ins in August 2012, when Mrs. Hlista's father noticed a Safeguard sign-in sheet inside the home and observed damage to the windows as well as the installation of the lockbox and doorknob. When the Hlistas returned to Pennsylvania in December 2012, they discovered that someone had used the lockbox on the back door to break in a fourth time.

The Hlistas sued Safeguard, Essential, Mitchell, Duvall, and Riems. After the Hlistas were permitted to amend their complaint multiple times, Defendants moved for judgment on the pleadings pursuant to Rule 12(c). The District Court granted the motions, concluding that Defendants are not "debt collectors" and hence not liable under the FDCPA, and that Plaintiffs failed to plausibly plead RICO claim. The District Court also declined to exercise supplemental jurisdiction over the remaining state law claims. The Hlistas appeal.

II⁴

A. FDCPA Claim

We will first review the order granting judgment on the pleadings in favor of Defendants on the FDCPA claim.⁵

The FDCPA addresses abusive, deceptive, and unfair debt collection practices by debt collectors, 15 U.S.C. § 1692, and "provides a remedy for consumers" aggrieved by such practices. Piper v. Portnoff Law Assocs., Ltd., 396 F.3d 227, 232 (3d Cir. 2005) (citing Pollice v. Nat'l Tax Funding, L.P., 225 F.3d 379, 400 (3d Cir. 2000)). "A threshold requirement of the FDCPA is that the prohibited practices are used in an attempt to collect a debt." Pollice, 225 F.3d at 400 (internal quotation marks omitted); Simon v. FIA Card Servs., N.A., 732 F.3d 259, 265 (3d Cir. 2013) (explaining that the FDCPA covers conduct "taken in connection with the collection of any debt" (internal quotation marks and citations omitted)). A "debt" is defined as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which themoney, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment." 15 U.S.C. § 1692a(5).

The Hlistas do not allege the existence of a debt or that Defendants broke into their home in an attempt to collect a debt that the Hlistas were allegedly obligated to pay.⁶ At most, they state that there was a mortgage on their property, but they do not assert that they were in or were perceived to be in default, and they specifically allege that the property was never subject to a foreclosure action.⁷ Because the prohibited conduct under § 1692f "presupposes that the actions are used in an attempt to collect a debt," failure to allege the existence of such a debt or draw any connection between Defendants' alleged conduct and an attempt to collect a debt places the conduct outside of the FDCPA. Gordon v. Bank of New York Mellon Corp., 964 F. Supp. 2d 937, 948-49 (N.D. Ind. 2013) (concluding that Safeguard's break-in activity, including damaging the home and removing belongings, "is not inherently associated with the collection of a debt," and the lack of "allegation[s] that these acts were done in an attempt to collect a debt" meant the pleadings were "not sufficient to bring plaintiffs under the protection ofthe FDCPA"). As a result, the FDCPA does not apply. To hold that it does apply would "extend the protections of the FDCPA well beyond its intended purpose to protect consumers from debt collection abuses, because it would make the FDCPA applicable to situations . . . where there is no hint of any attempt to collect a debt or any attempt to collect an alleged debt." Id. at 950 (citations omitted).

Accordingly, the District Court properly granted Defendants' Rule 12(c) motions on the FDCPA claim.⁸

B. RICO Claims

We next turn to the Hlistas' challenge to the District Court's order granting judgment on the pleadings on their RICO claims.

The Hlistas sued Essential, Duvall, and Riems for violating RICO and Safeguard for conspiring to violate RICO under 18 U.S.C. §§ 1962(c) and 1962(d), respectively.⁹

Section 1962(c) provides:

It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.

18 U.S.C. § 1962(c). Section 1962(d) provides: "It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section." 18U.S.C. § 1692(d). Because a conspiracy claim will fail "if the pleadings do not state a substantive RICO claim upon which relief may be granted," we will first examine the Hlistas' substantive claim under § 1962(c). Efron v. Embassy Suites (Puerto Rico), Inc., 223 F.3d 12, 21 (1st Cir. 2000) (citation omitted); see Lightning Lube v. Witco Corp., 4 F.3d 1153, 1191 (3d Cir. 1993) ("Any claim under section 1962(d) based on conspiracy to violate the other subsections of section 1962 necessarily must fail if the substantive claims are themselves deficient.").

A plaintiff bringing a substantive RICO claim under § 1962(c) must allege "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 362 (3d Cir. 2010) (internal quotation marks omitted). A pattern of racketeering activity "requires at least two acts of racketeering activity within a ten-year period." Id. (quoting 18 U.S.C. § 1961(5)); see Banks v. Wolk, 918 F.2d 418, 421 (3d Cir. 1990) ("[N]o defendant can be liable under RICO unless he participated in two or more predicate offenses sufficient to constitute a pattern."). These are known as "predicate acts" and "may include, inter alia, federal mail fraud under 18 U.S.C. § 1341 or federal wire fraud under 18 U.S.C. § 1343."¹⁰ Lum v. Bank of Am., 361 F.3d 217, 223 (3d Cir. 2004), abrogated in part on other grounds by Twombly, 550 U.S. at 557; 18 U.S.C. § 1961(1) (defining "racketeering activity").

Where, as here, the predicate acts alleged are mail and wire fraud, plaintiffs are subject to the heightened pleading standard for fraud set forth in Fed. R. Civ. P. 9(b), which states that "a party must state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b); e.g., Lum, 361 F.3d at 223. "[T]o place the defendant on notice of the 'precise misconduct with which [it is] charged,'" Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007) (alteration in original) (quoting Lum, 361 F.3d at 223-24), a plaintiff "must plead or allege the date, time and place of the alleged fraud or otherwise inject precision or some measure of substantiation into a fraud allegation," id. at 200 (citing Lum, 361 F.3d at 224), and "must allege who made a misrepresentation to whom and the general content of the misrepresentation." Lum, 361 F.3d at 224.

The Hlistas' Third Amended Complaint contains the following allegations of mail and wire fraud:

Defendants, Essential Services; Jeff Riems; and[] John Bradley Duvall violated RICO by committing mail and/or wire fraud to further a scheme designed to break into the Hlistas' and others' homes.

Defendants had the specific intent to engage in the substantive RICO conduct, mail fraud, to further the break-in scheme.

Defendants committed a number of break-ins and communicated with the Safeguard-Essential Enterprise by mail and/or wire (i.e., electronically) as well as through the U.S. mails in furtherance of the scheme. Defendants could not have carried out the break-in scheme absent use of the U.S. mails or interstate wires which constitute predicate acts of racketeering activity . . . .

Defendants committed acts constituting indictable offenses under 18 U.S.C. §§[ ] 1341 and 1343 in that [they] devised (or intended to devise) a scheme to defraud the Hlistas of their

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