Zortman v. J.C. Christensen & Assocs., Inc.

• Citation: 870 F.Supp.2d 694
• Decision Date: 02 May 2012
• Docket Number: Civil No. 10–3086 (JNE/FLN).
• Court: U.S. District Court — District of Minnesota
• Parties: Christina ZORTMAN, Plaintiff, v. J.C. CHRISTENSEN & ASSOCIATES, INC., Defendant.

870 F.Supp.2d 694

Christina ZORTMAN, Plaintiff,

v.J.C. CHRISTENSEN & ASSOCIATES, INC., Defendant.

Civil No. 10–3086 (JNE/FLN).

United States District Court, D. Minnesota.

May 2, 2012.

Thomas J. Lyons, Esq., Lyons Law Firm, PA, appeared for Plaintiff Christina Zortman.

Christopher R. Morris, Esq., Bassford Remele, PA, appeared for Defendant J.C. Christensen & Associates, Inc.

ORDER

JOAN N. ERICKSEN, District Judge.

In this case Defendant J.C. Christensen & Associates, Inc. (JCC), a debt collector, called the cellular telephone of Plaintiff Christina Zortman, a consumer, and left a message that identified itself as a debt collector. Zortman loaned her phone to her children and they heard the message. Zortman maintains that JCC's action violated the Fair Debt Collection Practices Act's (FDCPA) prohibition on communications with third parties. 15 U.S.C. § 1692c(b) (2006). The case is before the Court on JCC's motion for summary judgment. JCC argues that the case is moot. In the alternative, JCC argues that it did not violate the FDCPA because its message was required by the Act's mandate that debt collectors identify themselves; it maintains that a contrary interpretation would render voicemail unusable by debt collectors and that this result is at odds with the Act.

JCC's previous motion—for dismissal on the pleadings—was denied by this Court on April 29, 2011. In that motion, the question presented was whether, to state a claim, a plaintiff must allege that a debt collector intentionally made contact with a third party. The Court denied that motion in part because the Complaint did not “plead a case where a message that contained only the disclosure requirements [mandated by statute] is what caused the alleged violation of § 1692c(b).” Zortman v. J.C. Christensen & Assocs., Inc., 819 F.Supp.2d 874, 878 (D.Minn.2011). After denial of the Rule 12 motion, the parties proceeded with discovery, which is now closed. The facts, as now known after discovery, show that the debt collector's message in this case contained only the minimum disclosure requirements. Although only JCC has moved for summary judgment, the parties appear to agree that there are no factual disputes in this case.

Since the Court considered the Rule 12 motion, JCC made a Rule 68 offer of judgment that was rejected by Zortman. The offer was for $1,001 (one dollar more than the maximum statutory damages), plus costs and fees through the date of the offer.

The pertinent facts are as follows. Zortman, who is an employee of a debt collection agency, incurred a Kohl's Department Store debt in the amount of $648.39. Kohl's records listed a home and a work telephone number for Zortman. The work number was Zortman's cellular phone number. The debt went unpaid and was assigned to JCC for collection. In an attempt to contact Zortman, JCC called the telephone numbers supplied by Kohl's. No live person answered the telephone. Both numbers were connected to voicemail, the outgoing messages of which did not contain personal information but rather stated the phone number that had been reached. JCC left the following message: “We have an important message from J.C. Christensen & Associates. This is a call from a debt collector. Please call 866–319–8619.” (Williams Aff. ¶ 2, Nov. 1, 2011, ECF No. 51).

It was Zortman's practice to lend her cellular phone to her children when they were out, and the children accessed the voicemail and heard the message. The children asked Zortman about the message, and in response to their inquiries, she revealed the fact that the family was under financial stress. Around the same time, other debt collectors had been calling and Zortman was also concerned that her oldest child had been acquiring debts that he could not pay. Zortman experienced emotional distress and loss of sleep.

I. DISCUSSION

Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Because the parties do not dispute any facts in this case, the Court considers whether JCC is entitled to judgment as a matter of law.

A. Jurisdiction

Before turning to the merits of the FDCPA claim, the Court must address JCC's assertion that Zortman's rejection of its Rule 68 offer of judgment mooted this case, thereby depriving the Court of jurisdiction because no case or controversy remains between the parties. For the following reasons, the Court concludes that it does have jurisdiction to consider the case.

Rule 68 of the Federal Rules of Civil Procedure permits a defendant to offer that judgment be entered against it under specified terms that include the costs then accrued. Fed.R.Civ.P. 68(a). If a plaintiff rejects a Rule 68 offer, and the judgment the plaintiff ultimately obtains is less than the unaccepted offer, “the [plaintiff] must pay the costs incurred after the offer was made.” Fed.R.Civ.P. 68(d). The purpose of Rule 68 is to encourage settlements. Marek v. Chesny, 473 U.S. 1, 10, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985).

Federal jurisdiction is, of course, limited to cases and controversies. United States Parole Comm'n v. Geraghty, 445 U.S. 388, 395, 100 S.Ct. 1202, 63 L.Ed.2d 479 (1980). Absent an actual case or controversy, the Court lacks subject matter jurisdiction. See U.S. Const. Art. III, § 2; see also Geraghty, 445 U.S. at 395, 100 S.Ct. 1202. Where the Court lacks subject matter jurisdiction, it must dismiss the case. SeeFed.R.Civ.P. 12(h)(3). The plaintiff bears the burden of proving by a preponderance of the evidence that the Court has subject matter jurisdiction. See Newhard, Cook & Co. v. Inspired Life Ctrs., Inc., 895 F.2d 1226, 1228 (8th Cir.1990). The controversy ceases and a case becomes moot when a party no longer has a personal stake in the outcome of the litigation. See Powell v. McCormack, 395 U.S. 486, 496, 89 S.Ct. 1944, 23 L.Ed.2d 491 (1969).

Some courts have, as JCC observes, determined that a Rule 68 offer that would provide all the relief a plaintiff requests has the effect of mooting the action even if the offer is not accepted. See, e.g., Warren v. Sessoms & Rogers, P.A., 676 F.3d 365, 370–71 (4th Cir.2012); O'Brien v. Ed Donnelly Enters., 575 F.3d 567, 575–76 (6th Cir.2009); Thomas v. Law Firm of Simpson & Cybak, 244 Fed.Appx. 741, 743–44 (7th Cir.2007); Goodmann v. People's Bank, 209 Fed.Appx. 111, 115 (3d Cir.2006). The Eighth Circuit Court of Appeals has not decided whether a Rule 68 offer that includes all the relief sought moots an action.

JCC first argues that its offer of $1,001—$1.00 over the maximum allowable statutory damages of $1,000—represented all the damages sought by Zortman. It argues, including in a notice of subsequent authority submitted to the Court on March 29, 2012, that emotional distress damages are not recoverable as part of actual damages. Even if they are recoverable, JCC argues, the facts in Zortman's case render her ineligible for emotional distress damages. Zortman asserts that she is entitled to an unspecified amount in emotional distress damages. Zortman also argues that the Rule 68 offer failed to encompass all the relief sought for an entirely separate reason, namely that it did not include post-offer fees. For the reasons that follow, the Court agrees with Zortman and it will not reach the emotional distress argument.

JCC argues that the language of Rule 68 precludes recovery of attorney's fees accrued after an offer was extended. Zortman disagrees, asserting that reasonable attorney's fees incurred in deciding whether to accept the offer are included under the rule. Rule 68 provides: “a party defending a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued.” Fed.R.Civ.P. 68(a) (emphasis added). In Marek v. Chesny, the United States Supreme Court held that Rule 68 provides for “all costs properly awardable under the relevant substantive statute or other authority.” Marek, 473 U.S. at 9, 105 S.Ct. 3012. Thus, attorney's fees can be included in Rule 68 “costs” if the substantive statute defines costs to include attorney's fees. Id. Unlike the statute at issue in Marek, the FDCPA separates costs and attorney's fees. Compare id. at 9, 105 S.Ct. 3012 (“[A] prevailing party in a § 1983 action may be awarded attorney's fees ‘as part of the costs.’ ” (quoting 42 U.S.C. § 1988(b))), with15 U.S.C. § 1692k(a)(3) (allowing recovery of “costs of the action, together with a reasonable attorney's fee as determined by the court”). Because the FDCPA separates costs and fees, the Rule 68 limitation on costs does not also apply to fees under the FDCPA. Thus, a plaintiff in a FDCPA case may recover attorney's fees accrued in deciding whether to accept a Rule 68 offer provided that they are reasonable. The district courts that have addressed similar arguments conclude that, under the FDCPA, a plaintiff is entitled to attorney's fees accumulated after a Rule 68 offer including those associated with preparing a fee petition and resulting litigation. See, e.g., Hernandez v. Asset Acceptance, LLC, 279 F.R.D. 594, 597–98 (D.Colo.2012); Andrews v. Prof'l Bureau of Collections of Md., Inc., 270 F.R.D. 205, 207 (M.D.Pa.2010); Valencia v. Affiliated Grp., Inc., 674 F.Supp.2d 1300, 1304 (S.D.Fla.2009).

Here, it is reasonable that Zortman would accrue some attorney's fees after the offer of judgment, including those associated with preparing a motion for attorney's fees. Although fees accumulated after JCC's offer of judgment are likely minimal, they nevertheless prevent the Rule 68 offer from encompassing all of the relief to which Zortman is entitled under the FDCPA.

The ability of a Rule 68 offer to moot a case in the Eighth Circuit is untested. But even if such an offer would moot an action, JCC's offer does not qualify: Zortman retains a legally cognizable interest in post-offer attorney's fees. The Court concludesthat it has not been...