Stratton v. Portfolio Recovery Assocs., LLC

• Decision Date: 21 March 2016
• Docket Number: Civil Action No. 5:13-147-DCR
• Citation: 171 F.Supp.3d 585
• Parties: Dede Stratton, Plaintiff, v. Portfolio Recovery Associates, LLC, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

171 F.Supp.3d 585

Dede Stratton, Plaintiff,

v.Portfolio Recovery Associates, LLC, Defendant.

Civil Action No. 5:13-147-DCR

United States District Court, E.D. Kentucky, Central Division. (at Lexington).

Signed March 21, 2016

James Hays Lawson, Lawson at Law, PLLC, Kenneth J. Henry, Henry & Associates, PLLC, Louisville, KY, for Plaintiff.

Elizabeth M. Shaffer, Dinsmore & Shohl, LLP, Cincinnati, OH, Joseph N. Tucker, R. Brooks Herrick, Dinsmore & Shohl, LLP, Louisville, KY, for Defendant.

MEMORANDUM OPINION AND ORDER

Danny C. Reeves

, United States District Judge

This matter is pending for consideration of cross-motions for summary judgment [Record Nos. 54; 56] filed by Plaintiff Dede Stratton and Defendant Portfolio Recovery Associates, LLC (“PRA”), in addition to the plaintiff's motion to strike an exhibit relied upon by the defendant [Record No. 62]. PRA argues that it is entitled to summary judgment because: (i) the applicable Credit Card Agreement is governed by Utah law; (ii) Stratton cannot demonstrate that PRA's assignor waived its contractual or statutory rights to collect prejudgment interest on the underlying debt prior to PRA's purchase of the debt; (iii) certain sections of the Fair Debt Collection Practices Act (“FDCPA”) do not apply to the present circumstances; and (iv) PRA is protected by the bona fide error defense. [Record No. 54, pp. 2–4]

Conversely, Stratton contends that the Court cannot rely on the Credit Card Agreement in determining whether to grant PRA's motion for summary judgment because the document does not fall within any exception to the rule against hearsay. [Record No. 62, p. 4] As a result, she contends that PRA has failed to produce evidence of its entitlement to contractual prejudgment interest for the time period prior to purchasing Stratton's debt. [Id. , p. 2] Further, Stratton claims that even, if the Agreement is admissible, PRA did not acquire its predecessor's contract rights. [Id. , p. 5] In the alternative, she alleges that PRA's predecessor intentionally waived any right it had to accrue interest on her debt, and that PRA does not qualify for the bona fide error defense. [Id. , pp. 24, 30] Finally, Stratton takes issue with PRA's argument that its acts do not constitute violations of the FDCPA. [Id. , p. 36] Due to the alleged inadmissibility of the Agreement and the law of the case, Stratton argues that she is entitled to summary judgment.

For the reasons outlined below, the Court will deny Stratton's motion to strike and motion for summary judgment, and grant PRA's motion for summary judgment.

I.

As explained previously, PRA purchases and collects on debt. [Record No. 27, ¶¶ 1, 27] On January 4, 2010, it purchased Stratton's credit card debt from GE Money Bank, F.S.B./Lowes (“GE”). [Record No. 10, ¶ 1] Stratton had opened the related credit card account in September 2007, but GE charged-off the account on December 19, 2008, at an amount of $2,630.95. [Record Nos. 10, ¶ 1; 54-2] From that date forward, GE did not charge interest on Stratton's debt. [Record No. 10, ¶¶ 17, 18] As a result, when PRA acquired the debt in 2010, it continued to list a principal amount of $2,630.95. [Id. , ¶ 18]

On June 20, 2012, PRA filed a collection action in Kentucky's Scott County District Court to collect on the account. [Record No. 10, ¶ 1] The state court complaint alleged that Stratton owed PRA $2,630.95, with interest “at the rate of 8% per annum from December 19, 2008[,] until the date of judgment with 12% per annum thereafter until paid, plus court costs.” [Record No. 10-1] Consequently, Stratton filed this against PRA, asserting that the company violated certain provisions of the FDCPA by attempting to collect on interest between the date GE charged-off her debt and the date that PRA bought it. [Record No. 1] First, she asserted that PRA violated 15 U.S.C. § 1692f(1)

because the 8% prejudgment interest rate was not authorized by any agreement or permitted by law. Second, she argued that PRA falsely represented the character of her debt under 15 U.S.C. § 1692e(2)(A). Third, she claimed that PRA's state court suit was a “threat” under 15 U.S.C. § 1692e(5).

When PRA filed a motion to dismiss the Class Action Complaint, Stratton filed an Amended Complaint to address issues outlined in the motion to dismiss. [Record No. 10] Originally, this Court dismissed Stratton's claims. However, on appeal, the Sixth Circuit reversed and remanded the matter, holding that Stratton “plausibly alleged that PRA violated the Fair Debt Collection Practices Act.”

Stratton v. Portfolio Recov ery Assoc., LLC , 770 F.3d 443, 452 (6th Cir.2014)

.

In its analysis, the court noted that PRA conceded, for purposes of the appeal, that GE had waived its right to collect prejudgment interest at the contractual rate. Id. at 447

. Because Ky. Rev. Stat. § 360.010(1) states that the statutory prejudgment interest rate does not apply where the parties agree to be “bound” to a contractual rate of interest, it reasoned that GE could not revive its statutory right to interest by waiving its contractual right to interest. Id. at 448. Further, the court concluded that PRA, as GE's “assignee,” was not entitled to collect either type of interest because GE had waived both. Id.

Because the plaintiff alleged that PRA demanded an amount to which it was not entitled, the court determined that she plausibly stated a claim that PRA violated the three aforementioned provisions of the FDCPA. Id. at 451

. However, the court stated that, “[i]t may be that the discovery process could reveal some contractual provision that entitles PRA to collect some sort of interest, but there is currently no such provision before us.” Id. at 448.

During discovery following remand, PRA obtained the Credit Card Agreement between GE and Stratton. [Record No. 41, ¶ 6] The Court permitted PRA to amend its Answer to include the Agreement. [Record No. 79] The Agreement identifies the annual percentage rate of 21.99%, which corresponds to Stratton's Account Statements. [Record Nos. 54-3; 54-2] In addition, the Agreement states that Utah law applies where federal law does not. [Record No. 54-3] Further, the Agreement contains a non-waiver clause. [Id. ]

Prior to PRA's filing of the Amended Answer, it moved for summary judgment on all Stratton's claims. [Record No. 54] Thereafter, Stratton moved for summary judgment in her favor. [Record No. 56] Subsequently, she filed a response in opposition to the defendant's motion for summary judgment [Record No. 61], along with a motion to strike the Credit Card Agreement [Record No. 62]. PRA then filed a reply regarding its motion for summary judgment [Record No. 84], a response in opposition to Stratton's motion for summary judgment [Record No. 63], and a response to her motion to strike [Record No. 83]. Next, Stratton filed replies regarding her motion for summary judgment and her motion to strike. [Record Nos. 85; 90] Finally, the Court permitted PRA to file sur-replies opposing Stratton's motion for summary judgment and motion to strike. [Record Nos. 88; 93] These matters are ripe for review. Because several of the parties' arguments concern the alleged Credit Card Agreement, the Court will first address Stratton's motion to strike.

II.

“[S]ummary judgment rulings must be based on admissible evidence.” Turner v. Scott , 119 F.3d 425, 430 (6th Cir.1997)

. As a result, “hearsay evidence cannot be considered on a motion for summary judgment” unless it falls within an evidentiary exception. Wiley v. United States , 20 F.3d 222, 226 (6th Cir.1994) ; see Fed. R. Civ. P. 56(c)(4) (affidavits used for summary judgment must be made on basis of personal knowledge, set forth admissible evidence, and show witness' competence to testify).

According to Rule 803(6) of the Federal Rules of Evidence

, business records are admissible. However, such records must satisfy four requirements:

(1) [they] must have been created in the course of a regularly conducted business activity; (2) [they] must have been kept in the regular course of that business; (3) the regular practice of that business must have been to have created the document[s]; and (4) the document[s] must have been created by a person with knowledge of the transaction or from information transmitted by a person with knowledge.

Yoder & Frey Auctioneers, Inc. v. EquipmentFacts, LLC , 774 F.3d 1065, 1071–72 (6th Cir.2014)

. “A custodian or otherwise qualified witness must attest that the proffered document meets these conditions.” Id. at 1072 (citing Fed. R. Evid. 803(6)(D) ).

“Rule 803(6)

does not require that the custodian personally gather, input, and compile the information memorialized in a business record.” United States v. Weinstock , 153 F.3d 272, 276 (6th Cir.1998). Further, an “other qualified witness” need not have “personal knowledge” of the preparation of the record. Dyno Construction Co. v. McWane, Inc. , 198 F.3d 567, 575–76 (6th Cir.1999). Instead, he or she must merely “be familiar with the company's recordkeeping practices.” Fambrough v. Wal–Mart Stores, Inc. , 611 Fed.Appx. 322, 328 (6th Cir.2015). In Fambrough, the Sixth Circuit held that two affiants were not “other qualified witnesses” because they did not indicate whether it was their company's regular practice to rely on the documents of another organization in the ordinary course of business, or whether the other organization merely sent their company the records at the beginning of litigation. Id. at 327.

Further, “Rule 803(6)

does not require that the document actually be prepared by the business entity proffering the document.” Air Land Forwarders, Inc. v. United States , 172 F.3d 1338, 1343 (Fed.Cir.1999). Rather, the affiant must demonstrate that the incorporating business relies upon the accuracy of the document incorporated and that there are “other circumstances indicating the trustworthiness of the document.” Id. In other words, the affiant must testify to the recordkeeping practices of the incorporating...