Vanderkodde v. Mary Jane M. Elliott, P.C.

• Decision Date: 26 February 2020
• Docket Number: Nos. 19-1091/1127/1128,s. 19-1091/1127/1128
• Citation: 951 F.3d 397
• Parties: Daniel VANDERKODDE; Susan Buck ; Ruby Robinson; Anita Beckley; Ritchie Swagerty, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-appellants/Cross-appellees (19-1091/1127/1128), v. MARY JANE M. ELLIOTT, P.C. (19-1091/1127); Berndt & Associates, P.C. (19-1091/1128), Defendants-appellees/cross-appellants, Lvnv Funding, LLC; Midland Funding, LLC; Midland Credit Management, Inc.; Encore Capital Group, Inc., Defendants-appellees (19-1091).
• Court: U.S. Court of Appeals — Sixth Circuit

951 F.3d 397

Daniel VANDERKODDE; Susan Buck ; Ruby Robinson; Anita Beckley; Ritchie Swagerty, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-appellants/Cross-appellees (19-1091/1127/1128),

v.MARY JANE M. ELLIOTT, P.C. (19-1091/1127); Berndt & Associates, P.C. (19-1091/1128), Defendants-appellees/cross-appellants,

Lvnv Funding, LLC; Midland Funding, LLC; Midland Credit Management, Inc.; Encore Capital Group, Inc., Defendants-appellees (19-1091).

Nos. 19-1091/1127/1128

United States Court of Appeals, Sixth Circuit.

Argued: January 29, 2020

Decided and Filed: February 26, 2020

GRIFFIN, Circuit Judge.

In Exxon Mobil Corp. v. Saudi Basic Industries Corp. , the Supreme Court made clear that the Rooker-Feldman doctrine—which prohibits the lower federal courts from reviewing appeals of state-court decisions—applies only to an exceedingly narrow set of cases. 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). This putative class action brought under the Fair Debt Collection Practices Act and Michigan consumer laws "is not the rare one that threads the Rooker-Feldman needle." Van Hoven v. Buckles & Buckles, P.L.C. , 947 F.3d 889, 892 (6th Cir. 2020). We therefore reverse its dismissal on Rooker-Feldman grounds and remand for further proceedings.

I.

Plaintiffs are consumers who held credit accounts with various financial institutions and later defaulted on their debts. Defendants LVNV Funding, LLC and Midland Funding, LLC bought these debts¹ and hired defendant Mary Jane M. Elliott, P.C., a law firm, to represent them in collection proceedings. In five separate actions, Elliott filed complaints and supporting affidavits in Michigan state court against plaintiffs on LVNV’s or Midland Funding’s behalf. Each suit resulted in a judgment against the debtor—by default in Buck’s, Robinson’s, and Swagerty’s cases, and by consent in Beckley’s and VanderKodde’s.

After obtaining a court judgment against a debtor, a "judgment creditor" may resort to garnishment "to intercept the debtor’s income at its source (say from the debtor’s employer) rather than trying to collect from the debtor herself." Van Hoven , 947 F.3d at 891. Michigan’s Court Rules "offer a simplified post-judgment garnishment procedure":

To collect, the creditor gives the court clerk a verified statement that describes the debt and the parties. MCR 3.101(D). If everything "appears to be correct," the clerk issues a writ of garnishment and the creditor serves it on the third party, the garnishee. MCR 3.101(D)–(E). Unless the garnishee or debtor objects, that’s usually it: The garnishee gives the money to the creditor rather than the debtor. MCR 3.101(J)(1).

Id. Following this roadmap, defendants filed multiple "request[s] and writ[s] for garnishment" in state court for each judgment debtor. At this stage, defendant Berndt & Associates, P.C., a law firm, represented LVNV in plaintiff Swagerty’s case, while Elliott remained counsel in the other cases. None of the judgment debtors (i.e., plaintiffs in this case) objected to any of the writs within the fourteen-day window for doing so.

This case concerns the rate of post-judgment interest used in creating the writ-of-garnishment requests. Michigan law provides specific methods for calculating judgment interest. In many cases, including this one, it "is calculated on the entire amount of the money judgment, including attorney fees and other costs," using the following method:

[I]nterest on a money judgment recovered in a civil action is calculated at 6-month intervals from the date of filing the complaint at a rate of interest equal to 1% plus the average interest rate paid at auctions of 5-year United States treasury notes during the 6 months immediately preceding July 1 and January 1, as certified by the state treasurer, and compounded annually, according to this section.

MCL § 600.6013(8). Section 600.6013(8) does not distinguish between pre-judgment and postjudgment interest. See Matich v. Modern Research Corp. , 430 Mich. 1, 420 N.W.2d 67, 75 (1988) ("Pre judgment interest vests or becomes fixed at the time the judgment is entered, while post judgment interest continues to accumulate or ‘accrue’ after the time the judgment is entered." (emphases omitted)). The Michigan Department of Treasury’s website lists every judgment interest rate calculated using this method, dating back to 1987. Interest Rates for Money Judgments , https://www.michigan.gov/treasury/0,4679,7-121-44402_44404-107013--,00.html (last visited Feb. 24, 2020). During the eleven-year period at issue here, it reached a peak of 4.033% and a valley of 0.687%. Id.

In the writs of garnishment in this case, the outstanding amounts of plaintiffs’ debts were calculated using the much higher post-judgment rate of 13%. This is the maximum interest rate allowed for a judgment "rendered on a written instrument evidencing indebtedness with a specified [or variable] interest rate." MCL § 600.6013(7). But the underlying judgments here were not so rendered. The three default judgments specify that they are "not based on a note or other written evidence of indebtedness," and none of the judgments include any supporting written instrument. So, plaintiffs allege, use of the 13% rate was improper under Michigan law.

Plaintiffs claim that defendants’ use of this impermissibly high interest rate in the writs of garnishment led to defendants (1) falsely communicating that plaintiffs owed more money than they actually did and (2) collecting (and attempting to collect) more money from plaintiffs than the law allowed. Both of these actions allegedly violate the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., which "prohibits debt collectors from employing ‘false, deceptive, or misleading’ practices." Sheriff v. Gillie , ––– U.S. ––––, 136 S. Ct. 1594, 1598, 194 L.Ed.2d 625 (2016) (quoting 15 U.S.C. § 1692e ); see §§ 1692e, 1692f. Seeking to represent thousands of Michigan consumers, plaintiffs brought suit in the United States District Court for the Western District of Michigan, alleging violations of the FDCPA; the Michigan Collection Practices Act, MCL § 445.251, et seq. ; and the Michigan Occupational Code, MCL § 339.101 et seq.

Elliott and Berndt filed motions to dismiss the claims against them pursuant to Federal Rule of Civil Procedure 12(b)(1). The district court granted their motions and dismissed the claims for lack of subject-matter jurisdiction. VanderKodde v. Mary Jane M. Elliott, P.C. , 314 F. Supp. 3d 836 (W.D. Mich. 2018). Plaintiffs’ lawsuit, the district court said, amounted to an appeal of the judgments and writs of garnishment in the state-court collection proceedings, and such appeals are barred under the Rooker-Feldman doctrine. Following Elliott and Berndt’s lead, the remaining defendants also filed a motion to dismiss, arguing that Rooker-Feldman barred the claims against them, too. The district court granted that motion in a short order, relying on the reasoning in its previous dismissal order, and entered judgment.

Plaintiffs timely appealed. Elliott and Berndt filed cross-appeals raising statute-of-limitations defenses.

II.

"This Court reviews questions of subject matter jurisdiction de novo ." Todd v. Weltman, Weinberg & Reis Co. , 434 F.3d 432, 435 (6th Cir. 2006).

A.

"The Rooker-Feldman doctrine bars lower federal courts from conducting appellate review of final state-court judgments because 28 U.S.C. § 1257 vests sole jurisdiction to review such claims in the Supreme Court." Berry v. Schmitt , 688 F.3d 290, 298 (6th Cir. 2012) ; see D.C. Court of Appeals v. Feldman , 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983) ; Rooker v. Fidelity Trust Co. , 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923). The doctrine has a limited scope. It does not, for example, bar "a district court from exercising subject-matter jurisdiction simply because a party attempts to litigate in federal court a matter previously litigated in state court." Exxon , 544 U.S. at 293, 125 S.Ct. 1517. It applies only to the "narrow" set of "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments."² Id. at 284, 125 S.Ct. 1517.

We determine whether Rooker-Feldman bars a claim by looking to the "source of the injury the plaintiff alleges in the federal complaint." McCormick v. Braverman , 451 F.3d 382, 393 (6th Cir. 2006). If the source of the plaintiff’s injury is the state-court judgment itself, then Rooker-Feldman applies. Id. "If there is some other source of injury, such as a third party’s actions, then the plaintiff asserts an independent claim." Lawrence v. Welch , 531 F.3d 364, 368–69 (6th Cir. 2008) (quoting McCormick , 451 F.3d at 394 ). "A court cannot determine the source of the injury ‘without reference to [the plaintiff’s] request for relief.’ " Berry , 688 F.3d at 299 (alteration in original) (quoting Evans v. Cordray , 424 F. App'x 537, 539 (6th Cir. 2011) ).

We recently considered the applicability of Rooker-Feldman in circumstances quite similar to those here. Van Hoven , 947 F.3d at 891. In Van Hoven , a judgment debtor brought an FDCPA class action against a law firm that filed requests for writs of garnishment in Michigan state court to collect on her (and others’) debts. Id. She alleged that those requests unlawfully "tacked on the costs of the request (a $15 filing fee) to the amount due" and "added the costs of prior failed garnishments." Id. Faced with the defendants’ jurisdictional challenge under Rooker-Feldman , we held that the doctrine did not apply for two reasons.

First, Rooker-Feldman "applies only when a state court renders a judgment —when the court ‘investigates, declares, and enforces liabilities’ based on application of law to fact." Id. at 892 (brackets omitted) (quoting Feldman , 460 U.S. at 479, 103 S.Ct. 1303 ). A writ of garnishment is not a...