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Martin v. Trott Law P.C.

United States District Court, E.D. Michigan, Southern Division

July 12, 2017

TROTT LAW, P.C. and DAVID A. TROTT, Defendants.


          DAVID M. LAWSON United States District Judge.

         This second round of dispositive motions deals with the plaintiffs' second amended complaint and the defendants' answers and affirmative defenses to it. Plaintiffs Brian Martin, Yahmi Nundley, and Kathleen Cadeau, as members of a putative class, allege that the defendants violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the Michigan Regulation of Collection Practices Act (RCPA), Mich. Comp. Laws § 445.251, by sending certain letters to these consumers in an effort to foreclose their residential mortgages. The facts of the case are discussed at length in the Court's opinion adjudicating the first round of motions. Martin v. Trott Law, P.C., 198 F.Supp.3d 794, 797-801 (E.D. Mich. 2016). They will not be repeated here.

         The plaintiffs have filed a motion for judgment on the pleadings or to strike, directed at various affirmative defenses asserted by defendants Trott Law, P.C. and David Trott in their respective answers to the second amended complaint. Defendant David Trott has filed a motion to dismiss or for summary judgment arguing that the Court does not have subject matter jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d), and the plaintiffs lack standing to pursue claims against him individually. For the reasons that follow, the plaintiffs' motion will be granted in part and denied in part. Defendant Trott's motion will be denied.

         I. Plaintiffs' Motion to Strike or for Judgment on the Pleadings

         The plaintiffs argue that the defendants' recitals of various pro forma or vestigial affirmative defenses in their answers to the second amended complaint are either defective as a matter of law, based on the Court's previous ruling on their motions to dismiss, or fail to disclose any discernible factual basis for the defenses. They contend that the defenses of “failure to state a claim, ” “statute of limitations, ” and that the defendants are not “regulated persons” under state law are precluded by the Court's rulings that the surviving claims in the complaint plausibly allege actionable violations of state and federal law, that those claims are timely, and that the defendants' behavior is controlled by the pertinent statutes. The plaintiffs contend that the bare recitations of putative defenses premised on estoppel, laches, consent, unclean hands, “bona fide error, ” and lack of intent, all are lacking any factual support, and have no apparent application to any of the circumstances so far disclosed by the record. The plaintiffs assert that exploration of these vestigial and unfounded defenses only will complicate and prolong discovery in the case, for no apparent productive purpose.

         In responding to a complaint, a defendant generally must “state in short and plain terms its defenses to each claim asserted against it.” Fed.R.Civ.P. 8(b)(1)(A). Avoidance defenses must be stated affirmatively, and the rules furnish a non-exhaustive list of certain specific affirmative defenses that must be raised in the answer. Fed.R.Civ.P. 8(c)(1). Those include the defenses of estoppel, laches, and the statute of limitations. Ibid.

         The plaintiffs' motion is based alternatively on Rule 12(c) and Rule 12(f). A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) applies the same standards that govern motions to dismiss under Rule 12(b)(6). See Fed. R. Civ. P. 12(c); Vickers v. Fairfield Med. Ctr., 453 F.3d 757, 761 (6th Cir. 2006); Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 511-12 (6th Cir. 2001). “The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true.” Rippy ex rel. Rippy v. Hattaway, 270 F.3d 416, 419 (6th Cir. 2001) (citing Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993)).

         Under Rule 12(f), on the other hand, a court may “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). Although the Sixth Circuit has not addressed the subject, the rigorous pleading rules applicable to complaints as outlined in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), generally do not apply to pleading affirmative defenses. See The Odd State of Twiqbal Plausibility in Pleading Affirmative Defenses, 70 Wash & Lee L. Rev. 1573, 1602-05 (2013); see also Rosul v. Klockemann, No. 15-00996, 2015 WL 5233187, at *6 (N.D. Ohio Sept. 8, 2015). “An affirmative defense may be pleaded in general terms and will be held to be sufficient . . . as long as it gives plaintiff fair notice of the nature of the defense.” 5 Wright & Miller, Federal Practice and Procedure § 1274. However, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b).

         It appears that Rule 12(f) is more suited to a challenge to the sufficiency of affirmative defenses. “A motion to strike should be granted if ‘it appears to a certainty that plaintiffs would succeed despite any state of the facts which could be proved in support of the defense and are inferable from the pleadings.'” Operating Engineers Local 324 Health Care Plan v. G & W Const. Co., 783 F.3d 1045, 1050 (6th Cir. 2015) (quoting Williams v. Jader Fuel Co., 944 F.2d 1388, 1400 (7th Cir. 1991)).

         A. Failure to State a Claim

         Defendant Trott Law has agreed to withdraw this defense. Defendant David Trott has not done so. However, the Court's prior opinion on the defendants' respective motions to dismiss has settled the question whether that pleading adequately alleges plausible claims for relief under the surviving counts. That defense, therefore, will be struck.

         B. Statute of Limitations

         The plaintiffs correctly point out that the Court previously held that the surviving counts of the complaint allege claims that, at least in some part, describe conduct within the relevant limitation periods. However, the scope of the plaintiff class has yet to be defined, and the particulars of the defendants' respective conduct, although alleged in some detail in the complaint, have yet to be fully explored through discovery. The parties have not yet stipulated to a time frame for the class definition, and it appears possible that at least some of the conduct potentially at issue in the case may have occurred before the earliest possible date for the commencement of that time frame (e.g., defendant David Trott asserts that the composition of the original version of the letter templates at issue occurred in 2007).

         Of course, the fact that the defendants first may have conceived some of the particulars of their allegedly deceptive dunning letters outside the limitations period does not absolve them from liability if they personally were involved in the ongoing use of those forms during more recent years. Also, there may be a dispute as to when the statute of limitations began to run. But the temporal scope of the potential liability in the case has not yet been fixed, and the determination of what conduct lies within and outside the relevant limitations period is not one amenable to resolution on the bare pleadings, without the benefit of a factual record to establish who did what, and when, and what were the results of their actions. The “statute of limitations” defense therefore may yet be pertinent to the decision of issues remaining in the case. At this early stage of the proceedings, it does not “appear[] to a certainty” that the plaintiffs would succeed in defeating every conceivable nuance of the limitations defense “despite any state of the facts which could be proved in support of the defense and are inferable from the pleadings.” Operating Engineers, 783 F.3d at 1050. The Court will deny the plaintiffs' motion with respect to the statute of limitations defense.

         C. “Regulated Person”

         This affirmative defense is defective as a matter of law as pleaded by both defendants, because it purports to put at issue the question whether David Trott and his law firm qualify as “regulated persons” under Michigan state law. Howe ver, the defendants' arguments in their briefing merely regurgitate positions previously (and repeatedly) advanced in their several earlier motions, which the Court's previous opinion addressed directly:

The defendants insist that neither David Trott nor his law firm qualify as “regulated persons” subject to the prohibitions of the Michigan RCPA because the firm is a “collection agency” exempted from regulation under the Act, and neither he nor his firm acted “in [their] own name” when communicating with the plaintiffs and attempting to collect their debts. Those arguments are non-starters. The question has not squarely been addressed by either the Sixth Circuit or the Michigan state appellate courts, but every judge in this district that has confronted the question has held that a “law firm and its employees ‘fit squarely within the definition of a regulated person' under the MCPA” regardless of whether the firm's collection activities were carried out “in its own name” or on behalf of its clients.

Martin, 198 F.Supp.3d at 811 (collecting cases).

         In his response, David Trott relies solely on the Court's analysis on following pages of the opinion, which he contends “left open the question” whether he is a “regulated person” under state law. But the section of the opinion on which he relies did not address the “regulated person” concept under the RCPA. Instead, the Court there separately addressed his argument that he is not a “debt collector” as defined under the FDCPA, based on his premise that he did not personally compose, sign, or mail the offending letters. See Id. at 811-12. The Court concluded that “the allegations that Trott personally drafted, approved, and directed the use of the form letters or ‘templates' at issue in this case are not ‘legal conclusions, '” but instead are “facts that may be proven, or not, depending on the evidence that the plaintiffs ultimately may present.” And it found that, if proven, those facts sufficiently would establish Trott's personal involvement in the debt collection activities at issue for him to be found liable under controlling circuit law. E.g., Kistner v. Law Offices of Michael P. Margelefsky, LLC, 518 F.3d 433, 440 (6th Cir. 2008).

         Trott has not offered any other factual or legal basis for his position that the Court “left open” any question regarding his status as a “regulated person” under state law. And the Court's opinion did not leave open that question; it expressly rejected both of the defendants' positions that they were exempt from regulation under the pertinent state law as “non-starters.” Because the defendants cannot succeed on this defense, the Court will grant the plaintiffs' motion to strike it.

         D. Intent

         The plaintiffs argue that this defense should be struck because the defendants' intent is not an element of a claim under either the FDCPA or RCPA. On one point, the plaintiffs are correct. “Under the FDCPA, a plaintiff does not need to prove knowledge or intent to establish liability, nor must he show actual damages, which ‘places the risk of penalties on the debt collector that engages in activities which are not entirely lawful, rather than exposing consumers to unlawful debt-collector behavior without a possibility for relief.'” Wise v. Zwicker & Assocs., P.C., 780 F.3d 710, 713 (6th Cir. 2015) (citing Stratton v. Portfolio Recovery Assocs., LLC, 770 F.3d 443, 449 (6th Cir. 2014)). “In other words, if a debt collector seeks fees to which it is not entitled, it has committed a prima facie violation of the Act, even if there was no clear prior judicial statement that it was not entitled to collect the fees.” Ibid.

         Moreover, even if intent were an element, a defendant need not plead affirmatively that an essential element of a plaintiff's claim is lacking. See Fed. R. Civ. P. 8(c)(1) (requiring only that “a party must affirmatively state any avoidance or affirmative defense”).

         However, the FDCPA states that whether the conduct in question is “intentional” should be weighed when assessing the extent of damages. 15 U.S.C. § 1692k(b)(1) (“In determining the amount of liability . . ., the court shall consider . . . the extent to which such noncompliance was intentional . . . .”). In addition, intent is relevant to the award of statutory damages, because the statute allows the Court to exercise its discretion in awarding “such additional damages as the court may allow, but not exceeding $1, 000, ” for each named plaintiff, and “such [further] amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500, 000 or 1 per centum of the net worth of the debt collector.” 15 U.S.C. § 1692k(a).

         Although proof of intent may well be an element of the plaintiffs' damages presentation, the defendants are prudent in informing the plaintiffs of their intention to offer evidence in avoidance of statutory damages. The Court, therefore, will ...

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