Johnston v. Midland Credit Mgmt.

Decision Date26 January 2017
Docket NumberCase No. 1:16–cv–437
Citation229 F.Supp.3d 625
Parties Chris JOHNSTON, Plaintiff, v. MIDLAND CREDIT MANAGEMENT, et al., Defendants.
CourtU.S. District Court — Western District of Michigan

Curtis Charles Warner, Warner Law Firm, LLC, Park Ridge, IL, Bert Thomas Golden, Golden Law Offices, P.C., Lowell, MI, for Plaintiff.

Aaron L. Vorce, Erin A. Sedmak, Theodore W. Seitz, Dykema Gossett PLLC, Lansing, MI, for Defendants.



Plaintiff brings an action under the Fair Debt Collection Practices Act ("Act"), alleging false, deceptive, and misleading statements in violation of 15 U.S.C. § 1692e. Defendants are Midland Credit Management ("MCM"), Plaintiff's debt servicer, Midland Funding, Plaintiff's debt owner, and Encore Capital Group, their parent company. Defendants have filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). (ECF No. 31.) Plaintiff has filed a response (ECF No. 33) and Defendants have filed a reply (ECF No. 34).


The relevant facts are not in dispute. Plaintiff incurred credit card debt totaling $1,406.43. He failed to make his monthly payments and defaulted. On February 24, 2016, MCM sent a letter to Plaintiff, which stated that he had been pre-approved for a discount program to pay off his debt and provided him with three repayment options. (Am. Compl. Ex. A, ECF No. 21–1, PageID.131.) The first option listed a discount rate of 90% and required one payment of $140.64 due on March 25, 2016. (Id. ) The second option listed a blank discount rate percentage and a monthly payment of $0.00 due on March 25, 2016. (Id. ) The third option provided monthly payments as low as $50 per month, but requested that the recipient of the letter call for more details. (Id. ) At issue is Defendants' statement in the second option. After receiving the letter, Plaintiff retained counsel, who advised Plaintiff to call MCM and indicate that he wanted to proceed with the second option.

Plaintiff followed counsel's advice, and on March 24, 2016, he spoke with two MCM representatives. (ECF No. 21–2, PageID.137, PageID.141.) During the calls, Plaintiff told both representatives that he had spoken with his attorney, who advised him to take the zero-dollar payment option. In response, an MCM customer-service representative explained that there was an error in the letter he received; the second option had not populated correctly. (Id. at PageID.142.) The representative also explained that the first option was still available and offered to speak with Plaintiff's attorney about it. (Id. ) Plaintiff rejected the first option and stated that he only wanted the zero-dollar payment option. (Id. ) Again, the representative reminded Plaintiff that the second option was an error, but the first option was still available. (Id. ) Plaintiff once more confirmed that the only option was the 90–percent discount and ended the call. (Id. )

Plaintiff's amended complaint alleges that the second option in the letter was false, misleading, or deceptive, in violation of the Act's §§ 1692e(10) and 1692e. Defendants filed a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) and for failure to state a claim upon which relief can be granted under Rule 12(b)(6). Defendants also argue that Plaintiff cannot plead facts to support the requirements of a class action under Rules 23(a) and 23(b).

A. Standing

A plaintiff invoking federal jurisdiction bears the burden of establishing the "irreducible constitutional minimum" of standing under Article III by demonstrating (1) an injury in fact, (2) fairly traceable to the challenged conduct of the defendant, and (3) likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). " ‘It is settled that Congress cannot erase Article III's standing requirements by statutorily granting the right to sue to a plaintiff who would not otherwise have standing.’ " Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 1547–48, 194 L.Ed.2d 635 (2016) (quoting Raines v. Byrd , 521 U.S. 811, 820 n.3, 117 S.Ct. 2312, 138 L.Ed.2d 849 (1997) ). "To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’ " Spokeo , 136 S.Ct. at 1548. (quoting Lujan , 504 U.S. at 560, 112 S.Ct. 2130 ). A concrete injury must be "de facto ; that is, [it must] actually exist." Id. Simply alleging a "bare procedural violation" does not satisfy the concrete-harm requirement. Id. at 1550. Although intangible injuries "can nevertheless be concrete," id. at 1549, Plaintiff must suffer "real" and "not abstract" injury, id. at 1556. Further, "not all inaccuracies cause harm or present any material risk of harm." Id. at 1550.

B. Rule 12(b)(6)

Under Federal Rule of Civil Procedure 8(a), a complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Detailed factual allegations are not required, but "a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). When assessing a 12(b)(6) motion, the Court must accept all of Plaintiff's factual allegations as true and construe the complaint in the light most favorable to Plaintiff. Gunasekera v. Irwin , 551 F.3d 461, 466 (6th Cir. 2009). The Court must determine whether the complaint contains "enough facts to state a claim to relief that is plausible on its face." Twombly , 550 U.S. at 570, 127 S.Ct. 1955.

"If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56." Fed. R. Civ. P. 12(d). Defendants attached Plaintiff's Rule 26(a) disclosures as an exhibit to their motion to dismiss, but only refer to the exhibit to support their 12(b)(1) motion. Therefore, the Court will only consider Defendants' exhibit for the 12(b)(1) motion, and will assess both grounds for relief under the motion-to-dismiss standard.1

A. Standing

Defendants argue that Plaintiff has failed to allege a concrete injury. A plaintiff cannot "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III." Spokeo , 136 S.Ct. at 1549. Defendants argue that Plaintiff's amended complaint does just that. Defendants contend that the mistaken language of the letter does not change the fact that Plaintiff owed the full amount of the debt at issue. Defendants also cite recent cases from the United States Courts of Appeals for the Sixth Circuit, Soehnlen v. Fleet Owners Ins. Fund , 844 F.3d 576 (6th Cir. 2016), and the Seventh Circuit, Meyers v. Nicolet Rest. of De Pere , 843 F.3d 724 (7th Cir. 2016), in support.

For claims arising under a federal statute, a plaintiff is "not absolved from showing that the elements of Article III are met." Soehnlen , 844 F.3d at 581 (citing Loren v. Blue Cross & Blue Shield of Mich. , 505 F.3d 598, 606–07 (6th Cir. 2007) ). The Court must determine whether Plaintiff has " ‘such a personal stake in the outcome of the controversy’ as to warrant [his] invocation of federal-court jurisdiction and to justify exercise of the court's remedial powers on their behalf." Id. (quoting Warth v. Seldin , 422 U.S. 490, 498–99, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) (internal quotations omitted)). In Soehnlen , the Sixth Circuit rejected the plaintiff's claim that a statutory violation established Article III standing. Id. at 584. The court opined that, although "the Supreme Court [has] acknowledged that non-tangible injuries, including violations of statutory rights, may satisfy the constitutional showing of an injury-in-fact," the Supreme Court has also cautioned "that Congress's role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.’ " Id. at 581. Thus, even if the Court assumes that Plaintiff's alleged injury is sufficiently particularized, Plaintiff "must still show that the deprivation of a right created by statute is accompanied by ‘some concrete interest that is affected by the deprivation.’ " Id. (quoting Spokeo , 136 S.Ct. at 1548 ). In other words, an "injury based on a statutory violation must constitute a ‘risk of real harm’ to the plaintiff." Id.

Further, the Seventh Circuit's decision in Meyers supports Defendants' argument. In Meyers , the Seventh Circuit held that the plaintiff lacked standing, explaining that "Congress does not have the final word on whether a plaintiff has alleged a sufficient injury for the purposes of standing, because ‘not all inaccuracies cause harm or present any material risk of harm.’ " Id. at 727 (quoting Spokeo , 136 S.Ct. at 1550 ). "More than a ‘bare procedural violation, divorced from any concrete harm’ is required to satisfy Article III's injury-in-fact requirement." Id. (quoting Spokeo , 136 S.Ct. at 1549 ). The Seventh Circuit explained that Spokeo compelled the conclusion that the plaintiff's allegations were insufficient to satisfy the injury-in-fact requirement. Id. Moreover, the court held that the plaintiff's allegations "demonstrate that [he] did not suffer any harm[.] Nor has the violation created any appreciable risk of harm." Id.

Here, Plaintiff generally alleges that he has suffered actual damages as a result of Defendants' conduct. (Pl.'s Am. Compl., ECF No....

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