Tyler v. DH Capital Mgmt., Inc.

Decision Date07 November 2013
Docket NumberNo. 13–5021.,13–5021.
Citation736 F.3d 455
PartiesDionte TYLER, Plaintiff–Appellant, v. DH CAPITAL MANAGEMENT, INC., Defendant–Appellee.
CourtU.S. Court of Appeals — Sixth Circuit


ARGUED: James McKenzie, Pedley & Gordinier, PLLC, Louisville, Kentucky, for Appellant. John R. Tarter, Mapother & Mapother, P.S.C., Louisville, Kentucky, for Appellee. ON BRIEF: James McKenzie, Pedley & Gordinier, PLLC, Louisville, Kentucky, for Appellant. John R. Tarter, Mapother & Mapother, P.S.C., Louisville, Kentucky, for Appellee.

Before: BOGGS and SILER, Circuit Judges; and DOWD, District Judge. *


BOGGS, Circuit Judge.

Dionte Tyler brought this action under the Fair Debt Collection Practices Act (FDCPA) and Kentucky's usury laws, alleging that the debt-collection action instituted by DH Capital Management (DHC) sought to collect an amount to which DHC was not legally entitled. The district court dismissed the suit, because it was procedurally barred as not having been raised previously as a counterclaim, and because Tyler's bankruptcy trustee, not Tyler, was the proper party in interest. This appeal raises various issues of procedural timing, which arise out of an unusual order of events caused by the interaction between DHC's collection suit and Tyler's declaration of bankruptcy. In particular, we must answer 1) whether Tyler's suit is barred for failure to raise his claims as counterclaims in the original debt-collection action, during the brief period before it was voluntarily dismissed and 2) whether Tyler's suit is a pre-petition cause of action that only his bankruptcy trustee has authority to pursue. We find that the district court erred in holding that Tyler's claim was barred under res judicata principles, but agree that Tyler's claim is based on a pre-petition violation and thus is property of the bankruptcy estate. As a result, we affirm the judgment of the district court.


By 2009, Tyler had accumulated $1,041.89 of debt on his Chase Bank credit card. On October 14, 2010, Chase Bank assigned the debt to Turtle Creek Assets, LTD. Turtle Creek assigned Tyler's debt, along with 200 other accounts, to DHC on October 26, 2010. On March 23, 2011, DHC filed suit against Plaintiff in state court in Jefferson County, Kentucky, seeking collection of the debt, plus 21 % interest from February 27, 2009, and reasonable attorney's fees. The complaint was not yet served.

Tyler filed for Chapter 7 bankruptcy on June 28, 2011, three months after the debt-collection suit was filed. Because Tyler had not yet been notified of DHC's debt-collection suit or served with process, Tyler did not list this suit as debt or his potential FDCPA counterclaims as assets on the original bankruptcy schedules. It is unclear whether the debt to Chase Bank was listed in his original schedules; while Tyler did list a debt owed on a Chase Bank credit card (of “Unknown” amount), DHC asserts that the account number for the debt it holds is different. Electronic notice of that debt was provided to Chase, although there is no record of involvement by Chase in the bankruptcy proceeding. No further amendments were made to the schedules indicating the amount of the unknown debt, and Tyler was granted a discharge on October 4, 2011.

Eight days later, on October 12, DHC served process on Tyler in the debt-collection action. On October 18, DHC filed a voluntary Notice of Dismissal without prejudice after it learned of Tyler's bankruptcy. On October 20, Tyler filed his answer, denying all allegations. As affirmative defenses, he asserted that the claim was stale, that the account was non-existent, and provisionally any other defenses “to be determined during [ ] discovery.” On October 26, the court entered DHC's Notice of Dismissal, dismissing the case without prejudice. On March 9, 2012, Tyler filed the instant case, a class action that alleged violations of the FDCPA and Kentucky's usury laws. In particular, he alleged that the 21 % interest rate sought was usurious 1 and that DHC was not entitled to collect attorney's fees or interest before the date of acquiring the debt, since DHC was only assigned a right to the receivables, not the underlying contract.

DHC subsequently filed a motion to dismiss, arguing that the claims were barred by Tyler's failure to present them as counterclaims in the prior state-court action, and that Tyler had no standing because the cause of action was property of the bankruptcy estate. The district court granted the motion on both grounds, finding that 1) Tyler “elected to forego filing compulsory counterclaims” and 2) that Tyler's claims were “rooted in the allegations in DHC's state court complaint” and thus part of the bankruptcy estate. In the alternative, the district court held that because Tyler failed to amend his bankruptcy forms to include the collection suit, his claims belonged to the bankruptcy trustee. Tyler appeals.


We review de novo a dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Estate of Barney v. PNC Bank, N.A., 714 F.3d 920, 924 (6th Cir.2013). On review, we “accept all allegations in the complaint as true” and “determine whether the allegations plausibly state a claim for relief.” Roberts v. Hamer, 655 F.3d 578, 581 (6th Cir.2011).

The district court dismissed Tyler's claims under Federal Rule of Civil Procedure 13, reasoning that they were compulsory counterclaims that Tyler failed to assert in DHC's collection suit. Rule 13(a) provides that a responsive pleading “must” assert a compulsory counterclaim; a compulsory counterclaim that “is not brought is thereafter barred.” Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 41 L.Ed.2d 243 (1974). Tyler argues that, in a case voluntarily dismissed without prejudice, unraised compulsory counterclaims should not be subsequently barred.2 Although there will be situations where such claims are barred, on the facts in this case Tyler's claims can go forward. There are a few reasons why this is so, but in essence the case had not proceeded to a sufficiently advanced stage to warrant application of the bar.


First, as DHC filed a notice of dismissal “before service by the adverse party of an answer,” the claim could be dismissed “without order of court.” Ky. R. Civ. P. 41.01(1). Under the terms of Federal Rule 13, a compulsory counterclaim is asserted in a “pleading.” Fed.R.Civ.P. 13(a)(1). Where the adverse party has no opportunity to file a pleading, it has no opportunity to assert its counterclaim, and thus its claim will not be barred. This rule applies more broadly than just to voluntary dismissals: a party is not required to assert a counterclaim where it successfully files a pre-answer motion to dismiss. United States v. Snider, 779 F.2d 1151, 1157 (6th Cir.1985). “Without a valid claim there can be no counterclaim, compulsory or permissive.” Ibid.

Nevertheless, the district court reasoned that the “timing of Tyler's responsive pleading is immaterial.” The court pointed to Tyler's failure to present his claims at any relevant time and explained that under Kentucky Rule 13.09 counterclaims may survive dismissal of the opposing party's claims. This line of reasoning misconceives how Federal Rule 13 works. Rule 13 serves the purpose of bringing all relevant claims before the court in a single action, Snider, 779 F.2d at 1157, but is not a tool for plaintiffs to force defendants' counterclaims into court prematurely, Lawhorn v. Atl. Refining Co., 299 F.2d 353, 357 (5th Cir.1962) (noting the “general proposition that a claimant should be able to choose his own forum” and concluding that [i]f one hauled into Court as a defendant has a claim but the adversary plaintiff has not, the nominal defendant ought to be allowed to name the time and place to assert it.”) Where a claim has been dismissed, Rule 13 imposes no obligation to respond or oppose the dismissal. This is especially true when the action has been unilaterally dismissed without the need for court approval.

The facts in this case are unusual in that Tyler actually did file an answer, two days after DHC's notice of dismissal, and the court did not enter an order of dismissal for another six days. A review of Kentucky law, however, confirms that—consistent with a plain reading of the rule—a Rule 41.01 notice of dismissal is effective immediately. See Whaley v. Whitaker Bank, Inc., 254 S.W.3d 825, 828–829 (Ky.Ct.App.2008) ([V]oluntary dismissal ... is self-executing.... That document itself closes the file.... [W]e conclude that the Whaleys' case was dismissed without prejudice, effective immediately upon their filing of the notice on May 8, 2007.”) (internal quotation marks omitted). As a result, the case was closed before Tyler filed his answer, and thus its content is immaterial. Likewise, the court's subsequent order did not have legal effect, other than to confirm that DHC's October 18th dismissal was properly taken. Indeed, the court had no discretion to do otherwise: the court had no power to deny dismissal when given notice before service of the answer, nor did the court have the power to grant dismissal under Rule 41.01(1) after service of the answer. For the court to grant post-answer dismissal, DHC would have had to file a new motion to dismiss under Rule 41.01(2), to which Tyler could have objected.3


Second, even if we consider Tyler's failure to plead any specific counterclaims in his answer, the principles of res judicata (claim preclusion) only apply to adjudications on the merits. Federal courts are required to “give the same preclusive effect to a state-court judgment as another court of that State would give.” Parsons Steel, Inc. v. First Ala. Bank, 474 U.S. 518, 106 S.Ct. 768, 88 L.Ed.2d 877 (1986). In Kentucky, [f]or claim preclusion to bar further litigation ... the action must have been resolved on the merits.” Yeoman v. Kentucky, 983 S.W.2d 459, 465 (Ky.1...

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