Smith v. Mariner Fin., LLC
| Decision Date | 26 May 2020 |
| Docket Number | CIVIL ACTION NO. 1:19-CV-00096-GNS |
| Parties | JONATHAN SMITH PLAINTIFF v. MARINER FINANCE, LLC; and PIONEER CREDIT COMPANY DEFENDANTS |
| Court | U.S. District Court — Western District of Kentucky |
This matter is before the Court on Defendants' Motions to Dismiss (DNs 18, 28). These matters are now ripe for adjudication. For the reasons that follow, Defendants' first motion to dismiss is DENIED AS MOOT, and Defendants' second motion to dismiss is GRANTED IN PART and DENIED IN PART.
This matter arises from a series of financial and judicial interactions between Plaintiff Jonathan Smith ("Smith") and Defendants Mariner Finance, LLC ("Mariner") and Pioneer Credit Company ("Pioneer") (collectively, the "Defendants"). On May 31, 2018, Smith entered into a Note, Security Agreement & Arbitration Agreement (the "Note") with Defendants that included $2,494.44 in financing and a precomputed "finance charge" of $1,014.13, which corresponds to a 35.99% APR and a 33.38% annual interest rate. .1 Smith made several payments on the Note, but he became unable to pay in late 2018.(Compl. ¶ 18). Defendants initiated a collection action in Warren District Court, Case No. 19-C-00162, which resulted in a default judgment (the "Default Judgment") against Smith on March 19, 2019, for $2,666.90 plus interest, court costs, and $880.08 in attorney's fees.2 . On April 1, 2019, Defendants' attorneys served a wage garnishment on Smith's employer for $4,015.79, which Smith alleges overstated the amount due by $468.81. . Since then, Defendants have garnished an unidentified amount of Smith's wages. (Compl. ¶ 51).
On July 26, 2019, Smith filed the present lawsuit alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), the Fair Credit Reporting Act ("FCRA"), and the Kentucky Consumer Protection Act, KRS 367.110-.360 ("KCPA"). (Compl. ¶ 1). On September 5, 2019, Defendants filed their first motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). (Defs.' Mot. Dismiss, DN 18). Smith filed a First Amended Complaint on November 11, 2019, dropping the claim under the FCRA, retaining claims under the FDCPA and the KCPA, and adding additional state law claims. (Am. Compl. ¶ 1, DN 26).3 On November 29, 2019, Defendants again moved to dismiss. (Defs.' Mot. Dismiss, DN 28). Smith responded, and Defendants replied. .
The Court has subject matter jurisdiction over this action via federal question, 28 U.S.C. § 1331, because the Complaint alleges violations of the FDCPA. (Am. Compl. ¶¶ 1-2). The Court has supplemental jurisdiction over the remaining state law claims because they arise from the same case and controversy as the federal claim. 28 U.S.C. § 1367(a). (Am. Compl. ¶¶ 1-2).
A motion to dismiss under Fed. R. Civ. P. 12(b)(1) considers whether the court has subject matter jurisdiction over the matter. The standards for dismissal under Fed. R. Civ. P. 12(b)(1) and 12(b)(6) differ in the Sixth Circuit. See RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996). Threshold challenges to subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) should generally be decided before any ruling on the merits under Fed. R. Civ. P. 12(b)(6). See Bell v. Hood, 327 U.S. 678, 682 (1946). In most circumstances, a plaintiff bears the burden to survive Fed. R. Civ. P. 12(b)(1) motions to dismiss for lack of subject matter jurisdiction. Id.
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) considers the sufficiency of the complaint. In order to survive dismissal for failure to state a claim under Fed. R. Civ. P. 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[A] district court must (1) view the complaint in the light most favorable to the plaintiff and (2) take all well-pleaded factual allegations as true." Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir. 2009) (citing Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir. 2009)). Even so, the Court need not accept a party's "bare assertion of legal conclusions." Columbia Nat. Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995) (citationomitted). Ultimately, this inquiry is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.
As clarified in the First Amended Complaint, Smith alleges the following claims against Defendants: (1) violations of the FDCPA; (2) violations of the KCPA; (3) violations of Kentucky's usury statute, KRS 360.020; (4) violations of both KRS 453.050 and KRS 286.4-533(3), as actionable under Kentucky's negligence per se statute, KRS 446.070; (5) abuse of process; and (6) unjust enrichment. (Am. Compl. ¶¶ 75-162). Defendants contend that each of these claims must be dismissed in full for claim-specific reasons and generally under the Rooker-Feldman doctrine. (Defs.' Mot. Dismiss 1-2).
The FDCPA generally prohibits a "debt collector" from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. To establish a prima facie case for a violation of the FDCPA, a plaintiff must show (1) the plaintiff is a "consumer" within the meaning of 15 U.S.C. § 1692a, (2) the debt arises out of a transaction entered primarily for personal, family, or household purposes, (3) the defendant collecting the debt is a "debt collector" within the meaning of 15 U.S.C. § 1692a, and (4) the defendant violated the FDCPA. Whittiker v. Deutsche Bank Nat'l Tr. Co., 605 F. Supp. 2d 914, 939 (N.D. Ohio 2009) (citing Duncan v. Citibank, No. Civ. 06-0246, 2006 WL 4063022, at *5 (D.N.M. June 30, 2006); Grimard v. Palmer, Reifler & Assocs., No. 07-CV-12128, 2007 WL 2287831, at *2 (E.D. Mich. July 31, 2007)).
Defendants do not contest the first two elements, that Smith is a consumer and that the debt was used primarily for personal, family, or household purposes. Rather, Defendants contend thatthe third element is not met because they are "creditors," not "debt collectors" as defined in 15 U.S.C. § 1692a. (Defs.' Mot. Dismiss 4). Under the FDCPA, these terms are defined as follows:
15 U.S.C. § 1692a(4), (6). With regards "to a specific debt, one cannot be both a 'creditor' and a 'debt collector,' as defined in the FDCPA, because those terms are mutually exclusive." Bridge v. Ocwen Fed. Bank, FSB, 681 F.3d 355, 359 (6th Cir. 2012) (citations omitted).
Smith primarily argues that, as to Mariner, the second part of the "debt collector" definition is met because Mariner initiated the state collection lawsuit in order to collect a debt "due another," namely Pioneer. . Similarly, Smith maintains that Pioneer is a debt collector under the third part of the definition because the use of Mariner's name indicates that a third party, Mariner, is attempting to collect such debts. . In other words, the crux of Smith's argument is that Mariner acted as a third-party debt collector when it attempted to collect the debt originated by Pioneer. As recently accepted by the Supreme Court, the general rule under the FDCPA is that "third party debt collection agents generally qualify as 'debt collectors' under the relevant statutory language, while those who seek only to collect for themselves loans they originated generally do not." Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718, 1721 (2017). In Henson, the Supreme Court went on to further conclude that those who purchased debt originated elsewhere were not "debt collectors"because they were still collecting a debt owed to themselves, not to someone else—i.e., they were not acting as a third-party debt collection agency who would clearly qualify as a debt collector for FDCPA purposes. Id. at 1726.
It is with these general rules in mind that the confusion in the case sub judice becomes apparent. Pioneer originated the loan to Smith, so if Pioneer were to collect that debt it would be collecting the debt it originated and thus not be collecting debt that is "due another." Similarly, if Mariner owned the debt at the time of collection, then under Henson, Mariner would be collecting the debt now owed to itself and would not be a debt collector. The problem is that, based on the current record, it is unclear who owned the debt and who collected the debt. Pioneer originated the debt to Smith, and then Pioneer merged with Mariner.4 After Smith defaulted, a collection action was initiated to collect on this debt, which identified the plaintiff as Mariner Finance, LLC FKA ...
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