Liles v. American Corrective Counseling Services

• Decision Date: 12 January 2001
• Docket Number: No. CIV. 4-00-CV-10497.,CIV. 4-00-CV-10497.
• Citation: 131 F.Supp.2d 1114
• Parties: Lori LILES, on her own behalf and on behalf of all others similarly situated, Plaintiff, v. AMERICAN CORRECTIVE COUNSELING SERVICES, INC., Defendant.
• Court: U.S. District Court — Southern District of Iowa

131 F.Supp.2d 1114

Lori LILES, on her own behalf and on behalf of all others similarly situated, Plaintiff, v. AMERICAN CORRECTIVE COUNSELING SERVICES, INC., Defendant.

No. CIV. 4-00-CV-10497.

United States District Court, S.D. Iowa, Central Division.

January 12, 2001.

Steven E. Ort, Bell Hansen Ort & Cornell PC, New London, IA, for Lori Liles, On her behalf and on behalf of all others similarly situated, plaintiffs.

Brent R. Appel, Dickinson Mackaman Tyler & Hagen, Steven L. Serck, Ahlers Cooney Dorweiler Haynie Smith & Allbee, Des Moines, IA, for American Corrective Counseling Services, defendants.

ORDER

LONGSTAFF, District Judge.

I. FACTUAL BACKGROUND

Before the Court is defendant's combined motion to dismiss and motion for summary judgment. Plaintiff, Lori Liles ("Liles"), filed a class action complaint against defendant, American Corrective Counseling Services, Inc. ("ACCS"). Count I of the complaint alleges a violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692o; Count II alleges common-law abuse of process; and Count III alleges a violation of the Iowa Debt Collection Practices Act ("IDCPA"), Iowa Code § 537.7101-7103. Defendant moves to dismiss Count II and moves for summary judgment on Counts I and III. In the alternative, defendant moves to strike plaintiff's claims for punitive damages and injunctive relief in Counts I and III. Plaintiff filed a resistance, and defendant filed a reply. Although oral argument was requested, the Court finds it unnecessary. The motion is fully submitted.

The following facts relevant to this combined motion either are not in dispute, or are viewed in a light most favorable to the nonmovant. ACCS is a for-profit business entity that contracts with local prosecutors throughout the country to process claims from merchants related to "bad checks," or checks dishonored by the check writer's bank due to insufficient funds. In approximately fifteen of the seventy jurisdictions with which it has contracts, ACCS also provides services related to petty theft, assault, domestic violence, and juvenile offenses. ACCS has no contracts with the owners of bad checks, and does not accept assignments of third-party rights with respect to bad checks or other debts.

ACCS mails notices to bad check writers regarding their dishonored checks, and also charges between $75 and $125 for "program fees" under threatened penalty of criminal prosecution. Although the stated purpose for the fees is payment for a special eight-hour educational class, 15-20% of all "suspects" are never offered an actual class to attend. If a "suspect" makes a payment equal to the face value of the dishonored check, ACCS's standard contract provides that 50% of the amount received goes to the "victim," and 50% to ACCS to cover its program fees. If the full amount listed on the notice is paid, the face value of the dishonored check is paid to the "victim," and ACCS receives the entire program fee. In the last year, ACCS program fees totaled over $4 million. Approximately eighty to eighty-five full-time ACCS employees are primarily engaged in duties connected with the bad check program. In administering its program, ACCS uses the DAKCS software package, which is a modified commercial debt collection software package.

ACCS entered into a contract with the County Attorney of Jefferson County, Iowa in 1999 to establish a "Bad Check Restitution Program" on behalf of the prosecutor. The contract authorizes ACCS to conduct counseling education for bad check writers and to provide administrative support services to the prosecutor. Pursuant to Jefferson County's Bad Check Restitution Program, ACCS receives bad check claims directly from merchants and processes those checks where the writer is subject to criminal prosecution under state law. ACCS is not an agent of the Jefferson County Attorney, and instead operates as an independent contractor. ACCS has no authority to initiate, accept, or process bona fide criminal complaints or initiate criminal prosecutions in Jefferson County, has no discretion to decide whether or not to settle a case, and does not send a copy of the claims it receives from merchants to the County Attorney.

Plaintiff Lori Liles received an "Official Notice" dated July 7, 2000 stating it was from the "County Attorney Bad Check Restitution Program." The notice declares that "[a] criminal complaint has been received by this office" in connection with a dishonored check in the amount of $42.08 written to Wal-Mart. Plaintiff's Exh. 5 ("Official Notice" mailed to Liles).¹ It also lists the total balance due as $177.08, which includes the $42.08 check, a $10.00 "returned item fee," and a $125.00 "program fee." The "criminal complaint" referred to in the notice is not a criminal complaint within the meaning of Iowa law.² In addition, the notice is not associated with any court, and is not the result of any court process. Although the form of the notice has been approved for use by the Jefferson County Attorney, the County Attorney had never seen Liles's check, had no knowledge of its existence, and had never spoken to a representative of Wal-Mart regarding Liles. Liles filed this action on her own behalf and on behalf of all others similarly situated.

II. LEGAL ANALYSIS

A. Motion to Dismiss Count II

1. Standard of Review

In addressing a motion to dismiss, the allegations of the complaint must be taken as true. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972). "[A] complaint should not be dismissed for failure to state a claim 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." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In Scheuer v. Rhodes, the Supreme Court articulated the test as follows:

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test. Moreover, it is well established that, in passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader.

416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), abrogated on other grounds by Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 73 L.Ed.2d 396 (1982).

2. Abuse of Process

The common-law tort of abuse of process is "the use of legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it was not designed." Fuller v. Local Union No. 106, 567 N.W.2d 419, 421 (Iowa 1997) (quoting Palmer v. Tandem Mgmt. Servs., Inc., 505 N.W.2d 813, 817 (Iowa 1993)). The three elements of an abuse-of-process claim are: (1) the use of a legal process; (2) its use in an improper or unauthorized manner; and (3) the plaintiff suffered damages as a result of the abuse. Fuller, 567 N.W.2d at 421-22.

Iowa courts have not precisely defined "legal process" for purposes of this tort. Id. at 422. In Fuller, the Iowa Supreme Court collected definitions from other authorities, explaining that one authority defines legal process as "process which emanates from or rests upon court authority, and which constitutes a direction or demand that the person to whom it is addressed perform or refrain from doing some prescribed act." Id. (quoting 1 AM. JUR. 2D Abuse of Process § 2, at 411 (1994)). A second authority states "it is clear that the judicial process must in some manner be involved." Id. (quoting W. PAGE KEATON ET AL., PROSSER AND KEATON ON THE LAW OF TORTS § 121, at 898 (5th ed.1984)). The Massachusetts Court of Appeals defines process as "the papers issued by a court to bring a party or property within its jurisdiction ...." Id. (quoting Chemawa Country Golf, Inc. v. Wnuk, 9 Mass.App.Ct. 506, 402 N.E.2d 1069, 1071 (1980)). In reviewing the decision in Fuller, Judge Vietor noted the Iowa Supreme Court's rejection of the view that merely threatening criminal charges to encourage settlement in a civil suit constitutes abuse of process. Marley Co. v. FE Petro, Inc., 38 F.Supp.2d 1070, 1085 (S.D.Iowa 1998) (stating that "The Fuller court found this case to be in the minority and disagreed with its broad definition of legal process.").

Plaintiff's complaint³ states that defendant used a legal process by sending her an "Official Notice" improperly threatening criminal prosecution for purposes of private debt collection and demanding that she pay fees that are not part of the debt at issue. A copy of the notice is attached to the complaint as Exhibit A. Although the upper left-hand corner of the notice contains a seal with a "scales of justice" emblem and the words "County Attorney Bad Check Restitution Program," there is nothing to indicate that it is issued by a court. Plaintiff does not allege that the notice results from any court process. Her complaint alleges, inter alia, that the notice falsely implies that it comes from a county attorney's office, rather than a private California-based collection agency; falsely implies that a bona fide criminal complaint has been generated in connection with the debt and received by a county attorney's office; and falsely states that the criminal complaint is being processed for criminal prosecution. Taking the allegations of the complaint as true, this Court concludes that plaintiff can prove no set of facts which would entitle her to relief. Without the involvement of a court, the threat of criminal prosecution is insufficient to constitute "legal process" as required by this tort. Therefore, defend...