State ex rel. Koster v. Prof'l Debt Mgmt., LLC

• Decision Date: 05 April 2011
• Docket Number: No. ED 95270.,ED 95270.
• Citation: 351 S.W.3d 668
• Parties: STATE of Missouri, ex rel. Chris KOSTER, Attorney General, Appellant, v. PROFESSIONAL DEBT MANAGEMENT, LLC, Respondent.
• Court: Missouri Court of Appeals

351 S.W.3d 668

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

v.PROFESSIONAL DEBT MANAGEMENT, LLC, Respondent.

No. ED 95270.

Missouri Court of Appeals, Eastern District, Division Four.

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.

Sean M. Sturdivan, Sanders Warren & Russell LLP, Overland Park, KS, 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 Professional Debt Management, LLC, (PDM). The circuit court granted PDM's motion to dismiss 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 18, 2009, the State filed a Petition for Permanent Injunctions, Restitution, Civil Penalties, and Other Court Orders (Petition) against PDM. In its Petition, the State alleged that PDM 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; 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 PDM was a party to the initial transactions with the consumer, or that there were any unfair practices or acts of deception made with regard to the initial consumer transactions.

PDM filed a motion to dismiss on January 8, 2010, arguing that the State's Petition failed to state a claim upon which relief could be granted because the MPA does not apply to the debt collection activities alleged in the State's Petition.

In its Order and Judgment entered on August 26, 2010, the court granted PDM's motion to dismiss. While acknowledging the broad language and construction of the MPA, the trial court found that the MPA provides a remedy only for "unfair practices" that are connected "with the sale or advertisement of any merchandise," and that although the actions alleged by the State might be unfair and deceptive, the acts were not performed "in connection with the sale or advertisement of any merchandise."

This appeal follows.

Point on Appeal

In its sole point on appeal, the State alleges 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 unfair practices and deceptive acts 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 sale of merchandise, 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., Inc. of Ohio v. Nixon, 37 S.W.3d 237, 240 (Mo. banc 2001). As the Missouri Supreme Court recognized in Ports Petroleum, the attorney general's regulation, 15 CSR 60–8.020, reflect the "literal words [that] cover every practice imaginable and every unfairness to whatever degree." The regulation describes an "unfair practice" as:

a practice which—

Either—

Offends any public policy as it has been established by the Constitution, statutes or common law of this state, or by the Federal Trade Commission, or its interpretive decisions; or

Is unethical, oppressive or unscrupulous; and Presents a risk of, or causes, substantial injury to consumers.

Id.

While we acknowledge the Supreme Court's broad description of the term "unfair practices" under the MPA, this Court does not find an equivalent broad interpretation by the Supreme Court of the phrase "in connection with" the sale or advertisement of any merchandise in trade or commerce. The phrase "in connection with," for purposes of the MPA, is not statutorily defined. "Connection" is defined in Webster's dictionary as meaning "relationship in fact." Merriam–Webster Online Dictionary, http://www.merriam-webster. com/dictionary/ connection, accessed March 3, 2011. Applying this definition, we look for a "relationship in fact" between the advertising and sale of the merchandise at issue in the State's Petition and the unfair practices alleged against PDM. The unfair practices as detailed in the Petition are not alleged to have been made before or at the time of the advertising or purchase of the merchandise, and PDM is not alleged to have been a party to or have had any involvement with the initial sales transaction between the buyer and seller. Upon reviewing the Petition and record before us, we do not find allegations of the "relationship in fact" required to state a cause of action under the MPA.

The State argues that the MPA is made "particularly expansive" by the use of the phrase "in connection with" and cites unreported cases as support for its position. The State...