Necak v. Select Portfolio Servicing, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

TRACEY A. NECAK, :

:

Plaintiff, : Case No. 2:19-cv-3997

:

v. : CHIEF JUDGE ALGENON L. MARBLEY

:

SELECT PORTFOLIO SERVICING, : Magistrate Judge Jolson

INC., :

:

Defendant. :

OPINION & ORDER

This matter is before the Court on Defendant Select Portfolio Servicing, Inc.’s (“SPS”)

Motion to Dismiss (ECF No. 3) and Plaintiff Tracey A. Necak’s Motion for Partial Summary

Judgment (ECF No. 6). For the following reasons, Defendant’s Motion to Dismiss is

GRANTED and Plaintiff’s Motion for Partial Summary Judgment is DENIED.

I. BACKGROUND

On February 9, 2017, U.S. Bank filed a foreclosure action against Tracey Necak and her

husband in the Medina County Court of Common Pleas. (ECF No. 6 Ex. 1). Mrs. Necak

prevailed after a bench trial and the foreclosure action was dismissed. (ECF No. 6 Ex. 2). While

the state foreclosure action was ongoing, Mrs. Necak filed suit in Northern District of Ohio on

July 13, 2017 against Defendant SPS after SPS acquired servicing rights to the mortgage loan,

alleging violations of the Real Estate Settlement Procedures Act (“RESPA”). Necak v. Select

Portfolio Servicing, Inc., 1:17-cv-1473, 2019 WL 1877174 (N.D. Ohio April 26, 2019). In her

response to SPS’s motion to dismiss or stay the RESPA litigation, Mrs. Necak argued the actions

“must receive independent resolution” because the RESPA suit was “strictly for money damages

and cannot affect the ownership or disposition of the subject property at issue in the foreclosure.”

(ECF No. 10 Ex. A). After losing the RESPA case after a jury trial, SPS filed a motion to tax

costs in connection with the litigation. (ECF No. 6 Ex. 3). On July 25, 2019, the Court entered an

order finding the majority of SPS’s request not recoverable. (ECF No. 6 Ex. 6). SPS’s motion to

tax costs forms the basis of Mrs. Necak’s FDCPA claim in this lawsuit.

Mrs. Necak filed this complaint on September 11, 2019 against SPS seeking monetary

damages for alleged violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C.

§ 1692, alleging SPS unlawfully attempted to collect expenses for the state foreclosure case in its

motion to tax costs in federal court. (ECF No. 1). SPS moved to dismiss Plaintiff’s complaint on

November 7, 2019 for failure to state a claim, arguing its motion to tax costs was not an attempt

to collect a “debt” and it was not acting as a “debt collector” under the statute. (ECF No. 3). On

December 12, 2019, Plaintiff submitted a response in opposition to Defendant’s motion to

dismiss and moved for partial summary judgment on liability and statutory damages, while

requesting a trial to determine emotional distress damages. (ECF No. 6). Defendant filed a

response on January 9, 2020 (ECF No. 10) and Plaintiff filed her reply on February 6, 2020 (ECF

No. 15). Both motions are now ripe for review.

II. STANDARD OF REVIEW

A. Motion to dismiss for failure to state a claim

The Court may dismiss a cause of action under Federal Rule of Civil Procedure 12(b)(6)

for “failure to state a claim upon which relief can be granted.” Such a motion “is a test of the

plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual

allegations.” Golden v. City of Columbus, 404 F.3d 950, 958–59 (6th Cir. 2005). The Court must

construe the complaint in the light most favorable to the non-moving party. Total Benefits

Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008).

If more than one inference may be drawn from an allegation, the Court must resolve the conflict

in favor of the plaintiff. Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). The Court cannot

dismiss a complaint for failure to state a claim “unless it appears beyond doubt that the plaintiff

can prove no set of facts in support of his claim which would entitle him to relief.” Id. The Court

is not required, however, to accept as true mere legal conclusions unsupported by factual

allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009).

Although liberal, Rule 12(b)(6) requires more than bare assertions of legal conclusions. Allard v.

Weitzman, 991 F.2d 1236, 1240 (6th Cir. 1993) (citation omitted). Generally, a complaint must

contain a “short and plain statement of the claim showing that the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2). A complaint's factual allegations “must be enough to raise a right to relief

above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167

L. Ed. 2d 929 (2007). It must contain “enough facts to state a claim to relief that is plausible on

its face.” Id. at 570. A claim is plausible when it contains “factual content that allows the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556

U.S. at 678.

B. Summary judgment

Federal Rule of Civil Procedure 56(a) provides, in relevant part, that summary judgment

is appropriate “if the movant shows that there is no genuine issue as to any material fact and the

movant is entitled to judgment as a matter of law.” In evaluating such a motion, the evidence

must be viewed in the light most favorable to the nonmoving party, and all reasonable inferences

must be drawn in the non-moving party’s favor. United States Sec. & Exch. Comm'n v. Sierra

Brokerage Servs., Inc., 712 F.3d 321, 327 (6th Cir. 2013) (citing Tysinger v. Police Dep't of City

of Zanesville, 463 F.3d 569, 572 (6th Cir. 2006)).

A fact is deemed material only if it “might affect the outcome of the lawsuit under the

governing substantive law.” Wiley v. United States, 20 F.3d 222, 224 (6th Cir. 1994) (citing

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The nonmoving party must then

present “significant probative evidence” to show that “there is [more than] some metaphysical

doubt as to the material facts.” Moore v. Philip Morris Cos., Inc., 8 F.3d 335, 340 (6th Cir.

1993). The mere possibility of a factual dispute is insufficient to defeat a motion for summary

judgment. See Mitchell v. Toledo Hospital, 964 F.2d 577, 582 (6th Cir. 1992). Summary

judgment is inappropriate, however, “if the dispute about a material fact is ‘genuine,’ that is, if

the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”

Anderson, 477 U.S. at 248.

The necessary inquiry for this Court is “whether ‘the evidence presents a sufficient

disagreement to require submission to a jury or whether it is so one-sided that one party must

prevail as a matter of law.’” Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting

Anderson, 477 U.S. at 251-52). It is proper to enter summary judgment against a party “who fails

to make a showing sufficient to establish the existence of an element essential to that party’s

case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986). Where the nonmoving party has “failed to make a sufficient showing on an

essential element of her case with respect to which she has the burden of proof,” the moving

party is entitled to judgment as a matter of law. Id. (quoting Anderson, 477 U.S. at 250).

III. LAW & ANALYSIS

A. FDCPA claims

The relevant sections of the FDCPA provide:

15 U.S.C. § 1692(e):

A debt collector may not use any false, deceptive, or misleading representation or means

in connection with the collection of any debt. Without limiting the general application of

the foregoing, the following conduct is a violation of this section:

(2) The false representation of--

(A) the character, amount, or legal status of any debt; or

(B) any services rendered or compensation which may be lawfully received by

any debt collector for the collection of a debt.

(5) The threat to take any action that cannot legally be taken or that is not intended to be

taken.

(10) The use of any false representation or deceptive means to collect or attempt to

collect any debt or to obtain information concerning a consumer.

15 U.S.C. § 1692(f):

A debt collector may not use unfair or unconscionable means to collect or attempt to

collect any debt. Without limiting the general application of the foregoing, the following

conduct is a violation of this section:

(1) The collection of any amount (including any interest, fee, charge, or expense

incidental to the principal obligation) unless such amount is expressly authorized by the

agreement creating the debt or permitted by law.

The FDCPA, 15 U.S.C. § 1692(a), defines “consumer,” “debt,” and “debt collector,” as follows:

(3) The term “consumer” means any natural person obligated or allegedly obligated to

pay any debt.

(5) The term “debt” means any obligation or alleged obligation of a consumer to pay

money arising out of a transaction in which the money, property, insurance, or services

which are the subject of the transaction are primarily for personal, family, or household

purposes, whether or not such obligation has been reduced to judgment.

(6) The term “debt collector” means any person who uses any instrumentality of

interstate commerce or the mails in any business the principal purpose of which is the

collection of any debts, or who regularly collects or attempts to collect, directly or

indirectly, debts owed or due or asserted to be owed or due another. […]

Plaintiff alleges Defendant’s erroneous attempt to collect costs associated solely with the

state foreclosure action in its motion to tax costs in the RESPA litigation violated § 1692(e)(2)

“because its inflated and unlawful demands” in its motion “were a false representation of the

character, amount, or legal status of a debt.” (ECF No. 1 at ¶ 71). She further claims SPS

violated § 1692(e)(5) because its motion was “a threat to take an action that could not legally be

taken” and (f)(1) “because the amount SPS attempted to collect was not expressly authorized by

an agreement or permitted by law.” (Id. at ¶¶ 72-73). SPS moves to dismiss Plaintiff’s complaint

for failure to state a claim under Rule 12(b)(6) on the grounds that its application to tax costs is

not a “debt” nor was SPS acting as a “debt collector” under the statute when it filed its

application. (ECF No. 3).

Fed. R. Civ. P. 54(d)(1) allows a court to award costs, and to tax costs, to the prevailing

party. Plaintiff’s argument is that Defendant’s inclusion of some costs in its motion that the

district court found unrecoverable constituted an unlawful attempt to collect a debt. This

argument is not supported by the statute or case law. Defendant’s partially unsuccessful motion

for costs to the district court cannot constitute debt collection under the FDCPA. First, SPS is not

a debt collector in this context because it is attempting to collect its own fees—not “debts owed

or due or asserted to be owed or due another.” 15 U.S.C. § 1692(a)(6) (emphasis added).

Furthermore, SPS’s motion to collect costs is not a “debt” because the RESPA litigation was not

a consumer transaction and civil litigation costs are not debts “primarily for personal, family, or

household purposes.” 15 U.S.C. § 1692(a)(5). See Shorts v. Palmer, 155 F.R.D. 172, 174-75

(S.D. Ohio 1994) (obligation to pay money that arises out of a civil liability is not a debt under

the FDCPA).

The Eleventh Circuit in Miljkovic v. Shafritz & Dinkin, adopted the broad view that

“documents filed in court in the course of judicial proceedings to collect on a debt…are subject

to the FDCPA.” 791 F.3d 1291, 1295 (11th Cir. 2015). But even under this approach, SPS’s

motion to tax costs is not a “debt” because it is not a document filed in a proceeding to collect on

a debt. The motion filed in Milijkovic still pertained to Defendant’s attempt to collect the original

consumer debt—in that case, plaintiff’s automobile debt. Miljkovic, 791 F.3d at 1294-95

(holding the FDCPA applied to defendant’s filing of a reply brief attempting to garnish

plaintiff’s wages for an unpaid automobile debt after knowing plaintiff was exempt).

Plaintiff attempts to characterize the underlying debt as the mortgage debt, citing the

Sixth Circuit’s decision in Glazer v. Chase Home Finance, LLC for the proposition that a

mortgage foreclosure constitutes a consumer debt collection action. 704 F.3d 453, 461 (6th Cir.

2013). But the RESPA litigation was a separate civil suit for damages brought by Mrs. Necak.

As SPS points out, SPS was not party to the original foreclosure action and Plaintiff herself

argued that her RESPA lawsuit was distinct from the state foreclosure suit. (ECF No. 6 Ex. 1;

ECF No. 10 Ex. A).

SPS prevailed in the RESPA lawsuit after a jury trial and filed for costs pursuant to Rule

54(d). SPS’s motion to tax litigation costs as a prevailing party in the RESPA litigation is the

subject of Plaintiff’s complaint in this suit, not the original foreclosure action. “[T]he FDCPA

limits its reach to those obligations to pay arising from consensual transactions, where parties

negotiate or contract for consumer-related goods or services.” Taylor v. Javitch, Block &

Rathbone, LLC., No. 1:12CV708, 2012 WL 2375494, at *2 (N.D. Ohio June 22, 2012) (quoting

Bass v. Stolper, Koritzinsky, Brewster & Neider, S. C., 111 F.3d 1322, 1326 (7th Cir.1997)).

SPS’s Rule 54 motion to the court to collect associated costs incurred from the RESPA litigation

is not a consumer-related or consensual transaction and thus not a “debt” under the statute.

In her combined Response to Defendant’s Motion to Dismiss and Motion for Partial

Summary Judgment, Mrs. Necak again attempts to characterize SPS’s motion to collect costs in

the RESPA litigation as “arising from” the original consumer transaction, or mortgage debt.

(ECF No. 6 at 8). She makes analogies to situations where a debt collector attempts to collect

bogus fees or makes false statements in their foreclosure action, but these fact patterns have no

bearing on the instant case about fees incurred in separate ligation. (Id. at 8-9). The Court finds

Plaintiff has failed to state a claim under the FDCPA because the alleged action by Defendant

does not constitute a “debt” under the statute and therefore there are “no set of facts in support of

[Plaintiff’s] claim which would entitle [her] to relief.” See Mayer, 988 F.2d at 638.

Because this Court finds Plaintiff has failed to state a claim under the FDCPA, her

Complaint is DISMISSED and her Motion for Partial Summary Judgment is DENIED.

B. Attorneys’ fees

Finally, SPS asks the Court to award attorneys’ fees because it argues Plaintiff’s counsel

filed this lawsuit “in bad faith and for the purpose of harassment” pursuant to 15 U.S.C. §

1692(k)(a)(3). While the Court ultimately finds Plaintiff’s legal arguments unpersuasive, it does

not find the action rises to the level of bad faith or was pursued solely with the intent to harass.

See Deere v. Javitch, Block and Rathbone LLP, 413 F.Supp.2d 886, 889 (S.D. Ohio 2006)

(“zealous advocacy about the parameters of FDCPA’s consumer protection… does not suggest

any nefarious motive or bad faith”). Courts have declined to award attorney fees “when a claim

is 'minimally colorable' and without additional facts supporting bad faith or harassment.” Sohi v.

Diversified Adjustment Serv., Inc., No. 1:15-CV-563, 2016 WL 2745298, at *9 (S.D. Ohio May

10, 2016) (citing Brown v. Van Ru Credit Corp., No. 14-12136, 2015 WL 225727, at *5 (E.D.

Mich. Jan. 16, 2015), aff'd, 804 F.3d 740 (6th Cir. 2015)). The Court finds Plaintiff’s continued

pursuit of her claim despite Defendant’s “communica[tion] with Plaintiff… regarding the merit

of her Complaint” (ECF No. 3 at 15) does not constitute sufficient “additional facts supporting

bad faith or harassment.” Sohi, 2016 WL 2745298, at *9.

IV. CONCLUSION

For the foregoing reasons, Defendant Select Portfolio Servicing, Inc.’s Motion to Dismiss

is GRANTED and Plaintiff Tracey Necak’s Motion for Partial Summary Judgment is DENIED.

IT IS SO ORDERED.

ALGENON EL. MARB —

CHIEF UNITED STATES DISTRICT JUDGE

DATE: July 27, 2020