State ex rel. Koster v. Portfolio Recovery Assocs., LLC

• Decision Date: 05 April 2011
• Docket Number: No. ED 95271.,ED 95271.
• Citation: 351 S.W.3d 661
• Parties: STATE of Missouri, ex rel. Chris KOSTER, Attorney General, Appellant, v. PORTFOLIO RECOVERY ASSOCIATES, LLC, Respondent.
• Court: Missouri Court of Appeals

351 S.W.3d 661

STATE of Missouri, ex rel. Chris KOSTER, Attorney General, Appellant,

v.PORTFOLIO RECOVERY ASSOCIATES, LLC, Respondent.

No. ED 95271.

Missouri Court of Appeals, Eastern District, Division Six.

April 5, 2011.

Supreme Court Denied May 24, 2011.

Dec. 6, 2011.

Application for Transfer Denied

Chris Koster, Attorney General, Debra K. Lumpkins, Assistant Attorney General, Jefferson City, MO, for Appellant.

Robert Thompson, Bryan Cave LLP, Kansas City, MO, John Michael Clear, Jeffrey S. Russell, James R. Wyrsch, Bryan Cave LLP, St. Louis, MO, for Respondent.

KURT S. ODENWALD, Judge.

Introduction

The State of Missouri, through the attorney general (State), appeals from the circuit court's dismissal of its action alleging violations of Missouri's Merchandising Practices Act (MPA) by Portfolio Recovery Associates, LLC, (Portfolio, LLC). The State had filed a Petition against both Portfolio, LLC and its parent company, Portfolio Recovery Associates, Inc. (Portfolio, Inc.). The circuit court granted Portfolio, LLC's motion to dismiss on the grounds that the MPA does not apply to the collection of debts and against the parent company, Portfolio, Inc. on the grounds that the court lacked personal jurisdiction over Portfolio, Inc. The State appeals with regard to Portfolio, LLC only on the grounds that the MPA does not apply to the collection of debts. Because the alleged acts of deception and unfair practices were not committed in connection with the sale or advertising of merchandise as required by the plain and ordinary language of the MPA, we affirm the trial court's ruling.

Background

On August 19, 2009, the State filed a Petition for Permanent Injunctions, Restitution, Civil Penalties, and Other Court Orders (Petition) against Portfolio, Inc. and Portfolio, LLC, the parent and subsidiary corporation, respectively. In its Petition, the State alleged that both defendants violated the MPA, Sections 407.020, et al., by repeatedly using deception and unfair practices to collect debts that are not owed or are past the relevant statute of limitation; misrepresenting actions that can be taken against alleged debtors; engaging in deception by filing cases in Missouri without documentation supporting a good faith basis for the suit and dismissing when the consumer contests the action; engaging in unfair practice through unethical, oppressive and unscrupulous conduct in forcing consumers to choose between paying a debt they do not owe and having false collection information on their credit reports; and assessing fees and interest above the usury limit without written documentation evidencing an agreement to pay the higher interest or fees. The State made no allegations that defendants were a party to the initial transactions with the consumers, or that there were any unfair practices or acts of deception made with regard to the initial consumer transactions.

Portfolio, Inc. and Portfolio, LLC filed a motion to dismiss on April 6, 2010, arguing that the State's Petition failed to meet the pleading requirements of Rules 55.05 and 55.15, and that it failed to state a claim under the MPA because the MPA does not apply to the debt collection activities, and the conduct alleged in the State's Petition is not illegal under any debt collection law. Additionally, defendants argued that the court lacked personal jurisdiction over the parent company, Portfolio, Inc.

In its Memorandum, Order and Judgment entered on June 25, 2010, the court concluded first that the State "failed to carry his burden of proving that the Court can exercise personal jurisdiction over [Portfolio], Inc.," citing State ex rel. Nixon v. Beer Nuts, Ltd., 29 S.W.3d 828 (Mo.App. E.D.2000), and dismissed the State's action without prejudice with regard to the parent company. Secondly, regarding the State's Petition against the subsidiary, Portfolio, LLC, the court found that the MPA does not apply to debt collection practices and dismissed the State's action with prejudice. The court acknowledged that the MPA, as a remedial statute, broadly prohibits false, fraudulent, or deceptive merchandising practices, but found its application to deception only in connection with the purchase or lease of "merchandise" and unfair practice must actually mislead a consumer to his or her detriment. The court rejected the State's interpretation of the MPA's requirement that the deceptive practice was in connection with the sale or lease of merchandise in that the statute includes everything from the advertising or solicitation of the transaction through the collection of payment related to the transaction. Instead, the court found that the MPA's plain and ordinary language controlled and did not cover deception involved in the acquisition of a debt after the sale, the terms of which debt are not themselves infected by the deception.

This appeal follows with regard to the State's claim against the subsidiary, Portfolio, LLC.

Point on Appeal

In its sole point on appeal, the State alleges that the trial court erred in finding the MPA has no application to the collection of debts and its dismissal of the State's case on that basis. The State argues that the MPA, by its terms, applies to unfair and deceptive practices in connection with the sale of merchandise, "whether committed before, during or after the sale." The State contends that post-sale unfair practices and deceptive acts and practices perpetrated on consumers, which occur after the sale in the debt collection process, fall within the MPA's coverage.

Standard of Review

Appellate review of a trial court's grant of a motion to dismiss is de novo. Lynch v. Lynch, 260 S.W.3d 834, 836 (Mo. banc 2008). "When this Court reviews the dismissal of a petition for failure to state a claim, the facts contained in the petition are treated as true and they are construed liberally in favor of the plaintiffs." Id. The State's petition states a cause of action if "its averments invoke principles of substantive law [that] may entitle the plaintiff to relief." Id. , quoting Asaro v. Cardinal Glennon Mem'l Hosp., 799 S.W.2d 595, 597 (Mo. banc 1990). Our review of a motion to dismiss for failure to state a claim is solely a test of the adequacy of the plaintiff's petition. Dooley v. St. Louis County, 187 S.W.3d 882, 885 (Mo.App. E.D.2006). We make no attempt to weigh any alleged facts to determine whether they are credible or persuasive, but review the petition only to determine if the facts alleged meet the elements of a recognized cause of action or of a cause that might be adopted. Id.

Discussion

The threshold issue to be addressed in this appeal is whether the broad reach of the MPA extends to unfair or deceptive debt collection activities that are alleged to have occurred after the initial transactions, and by a third-party debt collector who was not a party to the original consumer transaction. The State suggests the statute's intentionally broad language and the courts' liberal construction of that language support its position that the MPA extends its reach to include such third-party debt collection activities. As a means of comparison and guidance, the State presents in its brief examples of several other state statutes, as well as federal legislation, which have been determined to apply to post-sale debt collection activities; however, we find no reported Missouri cases that provide clear precedent for this question, which we consider a matter of first impression. After a thorough review of the applicable case law and statutes, this Court is guided by the unequivocal plain language of the MPA as drafted by the legislature, and holds that the debt collection activities alleged in the Petition are not activities "in connection with" the sale or advertisement of merchandise, and thus, do not state a claim under the MPA.

The Missouri Merchandising Practices Act (MPA) provides, in relevant part, as follows:

The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce ... in or from the state of Missouri, is declared to be unlawful practice. The use by any person, in connection with the sale or advertisement of any merchandise in trade or commerce ... in or from the state of Missouri of the fact that the attorney general has approved any filing required by this chapter as the approval, sanction or endorsement of any activity, project or action of such person, is declared to be an unlawful practice. Any act, use or employment declared unlawful by this subsection violates this subsection whether committed before, during or after the sale, advertisement or solicitation.

Section 407.020.1 (emphasis added). Section 407.100 allows the attorney general to seek injunctions prohibiting such unlawful practices, orders or judgments to prevent such continued acts, and restitution, including civil penalties.

The MPA was created to supplement the common-law definition of fraud. Danforth v. Independence Dodge, Inc., 494 S.W.2d 362, 368 (Mo.App.1973). The Act serves to preserve fundamental honesty, fair play and right dealings in public transactions. Id. The MPA lacks a precise definition of deceptive practices and was drafted intentionally broad in scope to prevent "evasion by overly meticulous definitions." Clement v. St. Charles Nissan, Inc., 103 S.W.3d 898, 900 (Mo.App. E.D.2003). The determination of whether the requirements for fair dealing have been violated turns on the unique facts and circumstances of each case. Id. It is not necessary to prove the elements of common law fraud in order to establish a violation of the MPA. Id.

"Absent a statutory definition, this Court considers the plain and ordinary meaning of the words themselves, which, in this case, are unrestricted, all-encompassing and exceedingly broad." Ports Petroleum Co.,...