McMurray v. Forsythe Fin.
| Docket Number | 21-4014 |
| Decision Date | 01 August 2023 |
| Parties | RICHARD L. MCMURRAY, Plaintiff - Appellant, v. FORSYTHE FINANCE, LLC, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
(D.C. No. 1:20-CV-00008-TS) (D. Utah)
Before MORITZ, EBEL, and EID, Circuit Judges.
Plaintiff-Appellant Richard McMurray entered an agreement with CarFinance Capital, LLC ("CarFinance") to buy a motor vehicle through installment payments, for which the vehicle itself served as collateral. McMurray defaulted, and the repossession and sale of his car yielded a deficiency balance. Forsythe Finance, LLC ("Forsythe") bought the debt from CarFinance and sued McMurray in Utah state court after he failed to pay it. McMurray filed an answer but did not reply to Forsythe's motion for summary judgment which resulted in a default judgment in Forsythe's favor.
McMurray then filed an action in Utah state court, alleging that Forsythe was not licensed as a collection agency when it attempted to collect his debt. The action was removed to the District of Utah. The district court granted Forsythe's motion for summary judgment, holding that McMurray's claims were barred by claim preclusion.[1] McMurray timely appealed. We affirm the district court's grant of summary judgment to Forsythe on McMurray's Unfair Claims Settlement Practices Act ("UCSPA"), Fair Debt Collection Practices Act ("FDCPA"), and damages claims.[2]
I.
McMurray purchased a motor vehicle pursuant to a retail installment contract, which was assigned to CarFinance and secured by the purchased vehicle as collateral. When McMurray defaulted, the car was repossessed and sold at auction. The sale resulted in a deficiency balance, and CarFinance sold the debt to Forsythe.
Because McMurray did not pay the outstanding debt when Forsythe demanded it, Forsythe brought suit against him in Utah state court. McMurray answered and asserted, among other things that Forsythe was not entitled to relief, but did not provide any further details. Forsythe filed a motion for summary judgment, to which McMurray did not reply, and the court entered a default judgment in Forsythe's favor.
McMurray then brought a putative class action in state court asserting claims under the UCSPA and the FDCPA based on his allegation that Forsythe was not registered as a collection agency under state law when it attempted collection, as well as a damages claim for emotional distress. McMurray's action was removed to the United States District Court for the District of Utah under 28 U.S.C. § 1441(b). Forsythe moved for summary judgment, which the district court granted on January 11, 2021. Among other reasons, Forsythe's motion was granted on the ground that McMurray's claims were barred by claim preclusion. McMurray timely appealed.
II.
We review "a district court's grant of summary judgment de novo, using the same standard applied by the district court pursuant to Fed.R.Civ.P. 56(a)." Cillo v. City of Greenwood Vill., 739 F.3d 451, 461 (10th Cir. 2013). Summary judgment must be granted if "there is no genuine dispute as to any material fact" and the moving party is "entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). This Court views "facts in the light most favorable to the non-moving parties, . . . resolving all factual disputes and reasonable inferences in their favor." Cillo, 739 F.3d at 461 (internal quotation marks omitted).
III.
Claim preclusion "prevent[s] a party from litigating a legal claim that was or could have been the subject of a previously issued final judgment." Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 847 F.3d 1221, 1239 (10th Cir. 2017) (quoting MACTEC, Inc. v. Gorelick, 427 F.3d 821, 831 (10th Cir. 2005)); see also Haik v. Salt Lake City Corp., 393 P.3d 285, 289 (Utah 2017).
We apply Utah state law on claim preclusion to this case because, "[i]n determining whether a state court judgment precludes a subsequent action in federal court, we must afford the state judgment full faith and credit, giving it the same preclusive effect as would the courts of the state issuing the judgment." Reed v. McKune, 298 F.3d 946, 949 (10th Cir. 2002).
Utah state law dictates that the following elements must be satisfied for claim preclusion to apply: (1) "both cases must involve the same parties or their privies"; (2) "the claim that is alleged to be barred must have been presented in the first suit or must be one that could and should have been raised in the first action"; and (3) "the first suit must have resulted in a final judgment on the merits." Madsen v. Borthick, 769 P.2d 245, 247 (Utah 1988).
Utah state courts employ a "transactional" test to determine if claims "could and should have been raised" in a prior action. "[C]laims are the same if they arise from the same operative facts, or in other words from the same transaction." Pioneer Home Owners Ass'n v. TaxHawk Inc., 457 P.3d 393, 404 (Utah Ct. App. 2019) (quoting Van Leeuwen v. Bank of Am. NA, 387 P.3d 521, 525 (Utah Ct. App. 2016)). "What . . . constitutes a 'transaction' . . . [is] to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage." Pioneer Home Owners Ass'n, 457 P.3d at 403 (quoting Restatement (Second) of Judgments § 24(2) (Am. L. Inst. 1982)).
While Utah law is clear that claim preclusion does not apply to claims arising out of operative facts that have occurred after the initial complaint is filed, see id. at 403-04, the parties in this case disagree over whether claim preclusion applies to claims arising at the time the initial complaint is filed. Here, McMurray alleges the injury occurred when Forsythe filed to collect on the debt as an unlicensed debt collector. We interpret Utah state law to preclude claims that arose at the time of filing of the initial complaint.
McMurray points out that, in Macris & Assocs., Inc. v. Neways, Inc., 16 P.3d 1214 (Utah 2000), the Utah Supreme Court stated that "a party is required to include claims in an action for res judicata purposes only if those claims arose before the filing of the complaint in the first action." Aplt. Br. at 22 (quoting Macris & Assocs., Inc., 16 P.3d at 1220). However, in the same case, the Utah Supreme Court affirmed the Utah Court of Appeals's statements that "[t]he scope of litigation is framed by the complaint at the time it is filed" and claim preclusion "does not apply to new rights acquired pending the action," indicating that a claim that arises at the time of filing would be precluded under the doctrine. Macris & Assocs., Inc. v. Neways, Inc., 986 P.2d 748, 751 (Utah Ct. App. 1999) (emphases added) (quoting NAACP v. Los Angeles, 750 F.2d 731, 739 (9th Cir. 1984)); see also Pioneer Home Owners Ass'n, 457 P.3d at 404. Our case applying Utah claim preclusion law, Hatch v. Boulder Town Council, 471 F.3d 1142 (10th Cir. 2006), confirms the latter understanding, stating, Id. at 1148. We therefore conclude that claim preclusion applies to this case, where the claims arose at the time the initial complaint was filed.
The first and third elements of the Utah claim preclusion test are not disputed by either party. See Aplt. Br. at 23 (). Thus, we must determine whether the claims that McMurray brought in federal court could have been raised in the Utah state court action.
McMurray asserted in his federal complaint that "[t]his case has to do with the prosecution of bogus debt collection actions by Forsythe when it did not have the right to engage in the business of debt collection in the State of Utah." App'x at 25. According to McMurray, by filing a lawsuit in Utah state court without having obtained the necessary debt collection license, Forsythe engaged in (1) "action[s] that cannot be legally taken" in violation of the FDCPA and (2) deceptive and unconscionable practices in violation of the UCSPA. Id. at 26 (internal quotation marks omitted).
In his complaint, McMurray requested the following: (1) "a declaration on behalf of Plaintiff class members, that since Defendant Forsythe was acting unlawfully as an unlicensed collection agency, Forsythe: (i) did not have legal standing to pursue recovery on assigned debts through litigation" and "(ii) did not have legal standing to obtain any judgment in Utah Courts against Plaintiff Class Members and those judgments should be declared (a) void and unenforceable"[3] and "(b) Forsythe should not be entitled to collect any sums on those judgments or debts related to the Plaintiff Class members"; (2) disgorgement of "all sums [Forsythe] collected on a judgment amounts [sic] from the Plaintiff Class member's [sic] amounts that Forsythe obtained as a result of the judgments" improperly entered; (3) injunction "from attempting to collect any judgment amounts entered improperly against the Plaintiff Class Members"; (4) "statutory damages of $2,000 each or their actual damages (whichever is greater) under the [UCSPA]"; and (5) damages for the emotional distress, with physical manifestations, that McMurray suffered "as a result of the litigation pursued by [Forsythe]." Id. At 15-16.
McMurray's first four claims-regarding the unenforceability of the judgment, and requesting disgorgement, an injunction, and statutory...
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