The opinion
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
a
TIMOTHY BROWN,
Plaintiff,
Civil Action No. 20-6762 (MAS) (DEA)
MEMORANDUM ORDER
DYNAMIC RECOVERY SOLUTIONS, LLC,
et al.,
Defendants.
This matter comes before the Court upon Defendants Dynamic Recovery Solutions, LLC
(“Dynamic”) and LVNV Funding, LLC’s (*“LVNV”) (collectively, “Defendants”) Motion to
Compel Arbitration or, Alternatively, to Dismiss Plaintiff Timothy Brown’s (“Plaintiff”) putative
Class Action Complaint. (ECF No. 6.) Plaintiff opposed (ECF No. 10), and Defendants replied
(ECF No. 15). Plaintiff also filed an unopposed Motion to File a Sur-Reply or, Alternatively, to
Strike certain documents submitted with Defendants’ reply (ECF No. 16), to which Defendants
responded (ECF No. 17), and Plaintiff replied (ECF No. 18). The Court has carefully considered
the parties” submissions and decides the matter without oral argument pursuant to Local Civil Rule
78.1, For the reasons set forth herein, Defendants’ Motion is denied. In addition, Plaintiff's Motion
to File a Sur-Reply is granted.
I. BACKGROUND
This action arises out of alleged violations of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692, et seg. In February 2013, Plaintiff incurred a credit card debt with
WebBank. (Compl. 27, ECF No. 1.) WebBank sold the debt, which was ultimately acquired by
LVNV, (See Sexton Aff. 2, ECF No. 15-1; Compl. 4 34.) In October 2016, LVNV filed an action
against Plaintiff in the Superior Court of New Jersey, seeking to collect the debt. (Compl. § 37.)
In March 2017, LVNV obtained a default judgment against Plaintiff in the amount of $1,036.33,
which included a statutory attorney fee of $33.91. (/d. $9 38-40; see Default J., Ex. A to Compl.,
ECF No. 1-1.) Sometime thereafter, LVNV referred the debt to Dynamic for collection. (Compl.
741.)
On April 24, 2020, Dynamic sent Plaintiff a debt collection letter (“Dynamic Letter”). Ud.
see Dynamic Letter, Ex. B to Compl., ECF No. 1-2.) Among other things, the Dynamic Letter
identified LVNV as the current creditor and indicated that the total outstanding balance was
$1,043.70, which included the statutory attorney fee of $33.91. (Compl. 44 56, 64.) The Dynamic
Letter did not disclose the fact that interest was accruing on the debt. (/d. □□ 62-63.)
The following day, on April 25, 2020, LVNV had a debt collection letter sent to Plaintiff
through a different third party (“LVNV Letter”). (/d. § 72; see LVNV Letter, Ex. C to Compl.,
ECF No, 1-3.) The LVNV Letter indicated that the balance owed was $1,044.25, which included
the statutory attorney fee of $33.91. (Compl. ff 81-82.) The increase in the total balance owed
was due to the interest that was accruing on the debt. (/d. 4 83.)
Plaintiff asserts that he, “as would any least sophisticated consumer, incorrectly believed
from reading the Dynamic Letter that the amount of the [d]ebt was static and that his payment of
the $1,043.70 amount listed in the Dynamic Letter would satisfy the [d]ebt irrespective of when
the payment was remitted.” (/¢. § 85.) In addition, Plaintiff asserts that “Dynamic and LVNV had
no legal right to collect the [s]tatutory [a]ttorney [flee of $33.91 because” the fee “was not legally
owed to LVNV” but rather “legally owed to, directly payable to, and the sole property of LVNV’s
counsel in the state court action. (/d. 7 87.)
On June 2, 2020, Plaintiff filed the instant two-count putative class action against
Defendants alleging violations of the FDCPA. (See generally Compl.) Count One alleges that
Dynamic violated provisions of 15 U.S.C. §§ 1692e and 1692g by failing to disclose that interest
was accruing on the debt and by seeking to collect the statutory attorney fee. Ud. 4 94-111.)
Count Two alleges that LVNV violated provisions of 15 U.S.C. § 1692e by seeking to collect the
statutory attorney fee. (/d ff] 112-17.) On October 1, 2020, Defendants moved to compel
arbitration and to dismiss the Complaint.
Il. DISCUSSION
Defendants argue that Plaintiff's claims are subject to arbitration or, alternatively, barred
by the Rooker-Feldman doctrine and fail to state a claim upon which relief may be granted. (Defs.”
Moving Br. 1-2, ECF No. 6-1.) The Court addresses each argument in turn.
A, Arbitration
Defendants assert that Plaintiff's Credit Account Agreement contained an arbitration
provision that permitted either Plaintiff or WebBank to “choose to have any dispute arising out of
or relating to [the] Agreement or [their] relationship resolved by binding arbitration.” (/d. at 8
(quoting Agreement, Ex. A to Defs.” Moving Br., 6-4).) According to Defendants, LVNV acquired
the right to enforce the arbitration provision when they purchased Plaintiff’s account. (/d. at 2, 8.)
Defendants contend, therefore, that “the Court should order the parties to arbitration because there
is no genuine issue of fact as to whether the arbitration clause in the Agreement is valid and
enforceable, or that Plaintiff's claims fall within the scope of that agreement.” (ic. at 8.)
“It is well established that the Federal Arbitration Act (FAA) reflects a ‘strong federal
policy in favor of the resolution of disputes through arbitration.*” Kirleis v. Dickie, MeCamey &
Chilcote, P.C., 560 F.3d 156, 160 (3d Cir, 2009) (quoting Alexander v. Anthony Int'l, L.P., 341
F.3d 256, 263 (3d Cir. 2003)). “The strong federal policy favoring arbitration, however, does not
lead automatically to the submission of a dispute to arbitration upon the demand of a party to the
dispute.” Century Indem. Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513, 523 (3d Cir. 2009).
“Before compelling a party to arbitrate pursuant to the FAA, a court must determine that (1) there
is an agreement to arbitrate and (2) the dispute at issue falls within the scope of that agreement.”
fd. (citing Kirfleis, 560 F.3d at 160). When deciding a motion to compel arbitration, a court must
first determine the applicable standard of review. The Third Circuit has instructed that:
When it is apparent, based on the face of a complaint, and
documents relied upon in the complaint, that certain of a party’s
claims are subject to an enforceable arbitration clause, a motion to
compel arbitration should be considered under a Rule 12(b)(6)
standard without discovery’s delay. But if the complaint and its
supporting documents are unclear regarding the agreement to
arbitrate, or if the plaintiff has responded to a motion to compel
arbitration with additional facts sufficient to place the agreement to
arbitrate in issue, then the parties should be entitled to discovery on
the question of arbitrability before a court entertains further briefing
on [the] question. After limited discovery, the court may entertain a
renewed motion to compel arbitration, this time judging the motion
under a summary judgment standard.
Guidotti v. Legal Helpers Debt Resol, LLC, 716 F.3d 764, 776 (3d Cir. 2013) (alteration in original)
(internal quotation marks and citation omitted).
Here, whether Plaintiff's claims are subject to an enforceable arbitration provision is not
apparent from the face of the Complaint or the supporting documents attached thereto. Although
the Complaint and supporting documents reference Plaintiff's account and agreement with
WebBank, none of those filings address the multiple sales of Plaintiffs account, including
LVNV’s acquisition. Rather, those sales are addressed for the first time in the exhibits attached to
Defendants’ Reply Brief. (See Sexton Aff. € 2; Ownership Chain of Pl.’s Account *5—8! (reflecting
' Page numbers preceded by an asterisk refer to the page number on the ECF header.
the following transfers: WebBank to Bluestem Brands, Inc. (“Bluestem”); Bluestem, for itself and
as agent for Santander Consumer USA (“Santander”), to Sherman Originator IIT LLC (*SOLLC
III”); SOLLC I{I to Sherman Originator LLC (“SOLLC”); and SOLLC to LVNV), Ex. A to Defs.”
Reply Br. ECF No. 15-1.) Consequently, whether Defendants acquired the right to compel
arbitration is not readily determinable from Plaintiff's filings. Under similar circumstances, courts
have denied motions to compel arbitration because “the issue of arbitrability could not be resolved
without considering evidence extraneous to the pleadings.” See Kress v. Cavalry SPV’ I, LLC, No.
20-3176, 2021 WL 1139875, at *2 (D.N.J. Mar. 24, 2021) (collecting cases).
Even if the Court considered Defendants’ evidence, that evidence does not conclusively
establish that Plaintiff is subject to arbitration. As Plaintiff notes, certain documents relating to the
sale of Plaintiff's account indicate that they were subject to other documents that are not part of
the record. (See Pl.*s Sur-Reply Br. 9-10, ECF No. 16-2.) For example, the bill of sale between
WebBank and Bluestem provides that it is “subject to the terms and conditions of [their] Charged-
Off Account Purchase Agreement.” (Bill of Sale *5, ECF No, 15-1.) Defendants, however, did not
submit the referenced Charged-Off Account Purchase Agreement, which may clarify whether the
right to compel arbitration was in fact transferred as part of that sale. Similarly, the bill of sale
between Bluestem/Santander and SOLLC III references a purchase agreement that is also not part
of the record. (Bill of Sale *6, ECF No. 15-1.) In short, based on the present record, it is unclear
whether Defendants ultimately acquired the right to compel arbitration.
On these facts, the Court denies Defendants’ Motion to the extent it seeks to compel
arbitration and will permit the parties to engage in limited discovery on the issue of arbitrability.
See Kress, 2021 WL 1139875, at *3 (reaching same conclusion where the issue of arbitrability was
not readily determinable from either parties’ filings).
B. Rooker-Feldman
Defendants also contend that even if Plaintiff's claims are not subject to arbitration, those
claims are nonetheless barred by the Rooker-Feldman doctrine. (Defs." Moving Br. 9-10).
The Rooker-Fe/dman doctrine constitutes a bar to suits brought by the losing party in state
court that “seek[] what in substance would be appellate review of the state judgment in a [federal]
district court, based on the losing party’s claim that the state judgment itself violates the loser’s
federal rights.” Jofnson v. De Grandy, 512 U.S. 997, 1005-06 (1994), The “party’s recourse for
an adverse decision in state court is an appeal to the appropriate state appellate court, and
ultimately to the Supreme Court under § 1257, not a separate action in federal court.” Parkview
Assocs. P’ship v. City of Lebanon, 225 F.3d 321, 324 (3d Cir. 2000).
The Rooker-Feldman doctrine applies when: “(1) the federal plaintiff lost in state court;
(2) the plaintiff ~complain{s] of injuries caused by [the] state-court judgments’; (3) those
judgments were rendered before the federal suit was filed; and (4) the plaintiff is inviting the
district court to review and reject the state judgments.” Great W. Mining & Min. Co. v. Fox
Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010) (alterations in original) (quoting Exxon Mobil
Corp. v. Saudi Basic Indus. Corp., 544 U.S, 280, 284 (2005)). “The second and fourth
requirements are the key to determining whether a federal suit presents an independent, non-barred
claim.” fed.
Here, the essential and closely related second and fourth elements are not satisfied. “The
second element is viewed, primarily, as ‘an inquiry into the source of the plaintiff's injury.”
Farzan v. Bayview Loan Servicing, LLC. No, 20-3330, 2021 WL 613843, at *6 (D.N.J. Feb. 17,
2021) (quoting Great W. Mining, 615 F.3d at 166). Defendants, in a conclusory manner, posit that
“Plaintiff's injuries were caused by the [j]udgment, which was awarded to LVNV and provided
no instruction that LVNV could only seek to collect the [jJudgment total minus the attorney fee.”
(Defs.” Moving Br, 10.) The Complaint, however, does not challenge the state court judgment or
the validity of the debt, but rather alleges that Defendants’ collection practices violate the FDCPA
by failing to disclose that interest was accruing on the debt and/or by seeking to collect the statutory
attorney fee. (See Compl. 94-117). Thus, the source of Plaintiff's alleged injury is Defendants’
conduct in relation to the collection of the state court judgment, not the state court judgment itself.
For the same reasons, the fourth Rooker-Feldman element—whether Plaintiff “asks this Court ‘to
determine that the prior judgment was [in]correctly decided’”’—is not met. Farzan, 2021 WL
613843, at *7 (citations omitted). “Indeed, a decision favorable to Plaintiff would not negate the
fact that there is an outstanding judgment against [him].” Latteri vy. Mayer, No. 17-13707, 2018
WL 2317531, at *4 (D.N.J. May 22, 2018).
Latteri is instructive. There, the plaintiff filed a complaint alleging that the defendant
violated the FDCPA by attempting to collect on a state court judgment debt on behalf of an
unlicensed entity. /c. at *1. The defendant moved to dismiss, arguing (among other things) that
the Rooker-Feldman doctrine barred the plaintiff's claims because the plaintiff was complaining
about losing in the state court action and sought to bar enforcement of the resulting judgment. /d.
at *4. The district court disagreed. In finding Rooker-Fe/dman inapplicable, the court noted that
the plaintiff was “not attacking the [s]tate [cJourt judgment, but rather she [was] complaining about
[the] /dJefendant’s conduct in relation to the collection of said judgment.” Id. Consequently, the
district court concluded that the plaintiff was not seeking to have the state court judgment
“review[ed] and/or negat[ed]”; instead, the *[p]laintiff merely s[ought] sanctions against [the]
[djefendant for violating the FDCPA[.]” /e.
Similarly, here, Plaintiff is not challenging the state court judgment or the validity of the
debt. As in Latteri, the Court finds that “a decision favorable to Plaintiff would not negate the fact
that there is an outstanding judgment against [him]. Rather, any such decision, if obtained, would
merely require Defendant[s] herein to pay Plaintiff damages for [their] allegedly violative
conduct.” /d. The Court, accordingly, denies Defendants’ Motion to the extent it seeks to dismiss
the Complaint based on the Rooker-Feldman doctrine.
Cc. FDCPA Claims
Finally, Defendants contend that Plaintiff's claims fail to state a claim for relief. (Defs.’
Moving Br. 10-13.) Having found, however, that the parties may engage in limited discovery on
the issue of arbitration and that Plaintiff's claims are not barred by the Rooker-Feldman doctrine,
the Court will reserve judgment on Defendants’ Motion to dismiss for failure to state a claim
pending resolution of the arbitrability issue. Accordingly,
IT IS on this 24th day of May, 2021 ORDERED that:
I. Defendants’ Motion (ECF No. 6) is DENIED to the extent it seeks to compel
arbitration and to dismiss the Complaint based on the Reoker-Feldman doctrine.
2. Plaintiff's unopposed Motion (ECF No. 16) is GRANTED to the extent it seeks to
file a Sur-Reply.
3. The parties are directed to conduct limited discovery on the issue of arbitrability;
the Court reserves judgment on Defendants’ Motion to dismiss for failure to state a
claim pending resolution of the arbitrability issue.
? Defendants’ attempt to distinguish Latferi is unpersuasive. Defendants claim that “Latteri simply
does not apply here because Plaintiff does not contend that LVNV was not properly licensed.”
(Defs.” Reply Br. 4, ECF No. 15.) But the fact that the defendant in Latteri was attempting to
collect a debt on behalf of an unlicensed entity was merely the conduct that allegedly violated the
FDCPA. The FDCPA’s protections, however, are not limited to those circumstances as Defendants
seem to suggest. Defendants also insist that “Plaintiff here is asking this Court to interpret how the
funds of the [jJudgment were to be allocated. In doing so, this Court would need to review and
negate the state court [jJudgment.” (/d.} For the above-state reasons, however, the Court disagrees.
4, By June 7, 2021, the parties shall e-file joint correspondence to the Honorable
Douglas E. Arpert. U.S.M.J., proposing a schedule for limited discovery.
5 Within seven days of the completion of limited discovery, the parties shall e-file
joint correspondence updating the Court on the status of the matter and whether
additional briefing is necessary.
MICHAEL A, wet
UNITED STATES DISTRICT JUDGE