Mitchell Rubenstein & Assocs., P.C. v. Sunrise Credit Servs., Inc.
| Decision Date | 05 January 2017 |
| Docket Number | Civil Action No. PX 16-2497 |
| Parties | MITCHELL RUBENSTEIN & ASSOCIATES, P.C. Plaintiff, v. SUNRISE CREDIT SERVICES, INC. and ARROWOOD INDEMNITY COMPANY, Defendants. |
| Court | U.S. District Court — District of Maryland |
Pending in this declaratory judgment action is a motion to dismiss (ECF No. 18) filed by Defendants Sunrise Credit Services, Inc. and Arrowood Indemnity Company. The issues have been fully briefed and a hearing was held on Tuesday, December 20, 2016. For the following reasons, Defendants' motion to dismiss is granted.
The present indemnity action arises from a separate lawsuit filed by debtor, Demetra Baylor, against the debt collector and plaintiff in this case, Mitchell Rubenstein & Associates, P.C. ("MRA"), in the United States District Court for the District of Columbia ("D.C. case"). The following facts are taken from MRA's amended complaint (ECF No. 17) and the published opinions of the D.C. district court in the underlying litigation.1 See Baylor v. Mitchell Rubenstein & Assocs., P.C., 174 F. Supp. 3d 146 (D.D.C. 2016) (); Baylor v. Mitchell Rubenstein & Assocs., P.C., 77 F. Supp. 3d 113 (D.D.C. 2015) (); Baylor v. Mitchell Rubenstein & Assocs., P.C., 55 F. Supp. 3d 43 (D.D.C. 2014) (). All facts are construed in the light most favorable to MRA as the nonmoving party.
Demetra Baylor is a 2004 graduate of the Pratt Art Institute in Brooklyn, New York. To finance her education, Ms. Baylor took out six separate student loans but failed to pay those loans back in full. Baylor, 174 F. Supp. 3d at 149-50. On or before December 17, 2013, Arrowood Indemnity Company ("AIC"), through its agent, Sunrise Credit Services ("SCS"), referred Ms. Baylor's loans to Mitchell Rubenstein & Associates, P.C. ("MRA") for collection. Amended Complaint, ECF No. 17 at 2. AIC and SCS were not involved in the underlying D.C. litigation but are the defendants in the present indemnity action. They will be referred to collectively as the "Defendants" throughout this Memorandum Opinion.
On February 21, 2013, Ms. Baylor received a letter from MRA notifying her that she owed an alleged debt of $26,471.07 to a creditor, Arrowood Indemnity Company, under the file number R80465. Baylor, 174 F. Supp. 3d at 150. Ms. Baylor disputed the amount of the debt and sent MRA a letter to that effect on March 21, 2013. Id. MRA responded in another letter dated March 26, 2013. Id. This letter itemized Ms. Baylor's debt obligation and advised her that, through July 28, 2011, she owed her creditor $31,268. By May 2013, Ms. Baylor had retained counsel regarding the debt described in the February 21 and March 25 letters. Her attorney requested information associated with the debt collection and requested that MRA not contact her client directly. Id.
Ms. Baylor's attorney then entered into settlement negotiations with MRA. On August 22, 2013, MRA sent another letter to Ms. Baylor concerning additional amounts due under a different file number, R83798, and listed the creditor as Tuitionguard Arrowood Indemnity. The letter was addressed to "Radi Dennis Consumer Justice ESQ, 1014 Florida Avenue, NE Apartment 1, Washington DC 20002," naming Ms. Baylor's attorney as the addressee but sending the correspondence to Ms. Baylor's address. This letter stated that Ms. Baylor owed a debt of $27,459.48. Ms. Baylor's attorney responded to the August 22 letter on September 12, 2013, reminding MRA that Ms. Baylor disputed the debt and that Ms. Baylor was represented by counsel and thus should not be contacted directly. Id. at 150-51. MRA responded to Ms. Baylor's attorney's September 12 letter on September 26, 2013. That letter stated that the amount due for the debt under file number R83798 was "$27,459.48 plus interest from 10/21/11 at the rate of 3.75% until paid." Id. at 151.
On December 17, 2013, Ms. Baylor filed a three count complaint in the United States District Court for the District of Columbia against MRA. The complaint alleged that MRA engaged in unfair and deceptive trade practices in violation of the Fair Debt Collection Practices Act ("FDCPA"), the District of Columbia Debt Collection Law, and the District of Columbia Consumer Protection and Procedures Act. At base, Ms. Baylor alleged that MRA violated both state and federal law when it misstated the amount of debt Ms. Baylor owed, as well as the name of the creditor, and her account number. Baylor also complained of being contacted directly despite MRA knowing she was represented by counsel.
MRA conceded that its communications with Baylor created confusion concerning the amount of her debt because certain letters included interest and others did not. MRA further conceded that it sent the August 22 letter to Baylor directly after MRA knew that she hadretained counsel. MRA, therefore, extended an Offer of Judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure to Ms. Baylor on January 17, 2014, which Ms. Baylor ultimately accepted. The Offer of Judgment only addressed and settled Ms. Baylor's FDCPA claims because, unlike Ms. Baylor's D.C. law claims, the FDCPA does not require proof that the violation was willful. See Pl.'s Opp. to Def.'s Motion to Dismiss, ECF No. 19 at 8 n.4. The Offer of Judgment required MRA to pay Ms. Baylor $1,001.00 plus costs and reasonable attorney's fees as to all claims under the FDPCA. See Baylor, 174 F. Supp. at 151.
Ms. Baylor then filed a motion pursuant to 15 U.S.C. § 1692k(a)(3) seeking $442.95 in costs and $155,700.00 in attorney's fees for 346 hours of work on Ms. Baylor's successful FDCPA claim at the "prevailing market rate" of $450.00 per hour. See Baylor v. Mitchell Rubenstein & Assocs., P.C., 77 F. Supp. 3d 113, 115 (D.D.C. 2015). The D.C. District Court referred the matter to a magistrate judge for preparation of a report and recommendation. MRA opposed Ms. Baylor's fee motion, arguing that Ms. Baylor's fees were "grossly and intolerably exaggerated," and requested that the Court deny Ms. Baylor's request in its entirety. Baylor, 77 F. Supp. at 115. Ms. Baylor subsequently requested additional fees for drafting and filing her reply to MRA's opposition, bringing her fee request to $195,332.01 for work expended on the complaint, the opposition to MRA's motion to dismiss, and the fee petition and reply. Id. at 115-16.
On October 24, 2014, the magistrate judge issued a report and recommendation recommending that Ms. Baylor's initial fee request of $195,332.00 be reduced by 85% to $41,989.80. Both parties challenged the magistrate judge's report and recommendation. On January 6, 2015, the D.C. District Court adopted the report and recommendation in its entirety. See id. at 124.
Over the course of the D.C. case, all of Ms. Baylor's state law claims were dismissed except two. See Baylor v. Mitchell Rubenstein & Assocs., P.C., 55 F. Supp. 3d 43 (D.D.C. 2014). Ms. Baylor was permitted to proceed on her claim under § 28-3814(f)(5) of the D.C. Debt Collection Law, which prohibits a debt collector from willfully making "any false representation or implication of the character, extent, or amount of a claim against a consumer, or of its status in any legal proceeding." D.C. Code § 28-3814(f)(5). Ms. Baylor was also allowed to proceed with her claim under § 28-3814(g)(5), which provides that a debt collector cannot engage in "any communication with a consumer wherever it appears that the consumer has notified the creditor that he is represented by an attorney and the attorney's name and address are known." D.C. Code § 28-3814(g)(5). MRA moved for summary judgment on these two claims. The D.C. District Court granted MRA's motion because there was no evidence that MRA's conduct was willful, which is a required element under the D.C. Debt Collection Law. See generally Baylor v. Mitchell Rubenstein & Assocs., P.C., 174 F. Supp. 3d 146, 160 (D.D.C. 2016).
On May 26, 2016, Ms. Baylor appealed both the decision to grant MRA's motion for summary judgment on the two state law claims and its decision to adopt the magistrate judge's report and recommendation regarding her FDCPA-related attorney's fees. That same day, MRA filed its own appeal also challenging the decision to award Ms. Baylor $41,989.80 in attorneys' fees. Both appeals remain pending in the District of Columbia Circuit Court of Appeals. See Case Nos. 16-7070 & 16-7071.
On May 25, 2016, MRA filed a complaint for declaratory judgment in the Circuit Court for Montgomery County, Maryland against AIC and SCS for the damages and expenditures MRA incurred in the underlying D.C. litigation. ECF No. 2. Defendants removed the complaintto this Court based on federal question jurisdiction or, in the alternative, diversity of citizenship pursuant to 28 U.S.C. §§ 1331, 1332, 1441, and 1446.
On July 29, 2016, MRA filed an amended complaint, alleging that it sent Ms. Baylor demand letters containing inaccurate debt information because, "[u]benownst to MRA, SCS did not accurately state the amount of the outstanding debt on the dates that it referred the Loans to MRA." ECF No. 17 at 2.2 As a direct result of SCS's misrepresentation of the debt owed, Ms. Baylor filed the underlying suit against MRA. Id. It therefore requests that this Court enter a declaratory judgment that Defendants are required to indemnify MRA for all of its expenditures related to the defense of the underlying D.C. case.
Specifically MRA seeks to recover the following: (1) the $1,001 in damages plus $400 in court costs it paid to Ms. Baylor pursuant to the parties' Offer of Judgment regarding MRA's alleged violations of the FDCPA; (2) Ms. Baylor's FDCPA-related attorney's fees that, pursuant to the FDCPA, MRA is required to pay; and (3) MRA's own attorney's fees in defending against Ms. Baylor's...
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