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Hemmy v. Midland Funding, LLC

United States District Court, D. Hawaii

March 21, 2017

MINA E. HEMMY, Plaintiff,
v.
MIDLAND FUNDING LLC, et al., Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT ERC'S MOTION TO DISMISS COMPLAINT AND GRANTING IN PART AND DENYING IN PART DEFENDANT MIDLAND'S MOTION FOR JUDGMENT ON THE PLEADINGS

          Leslie E. Kobayashi United States District Judge

         Before the Court are: Defendant Enhanced Recovery Company, LLC's (“ERC”) Motion to Dismiss Complaint, Filed 7/25/16 [Dkt. 1] (“ERC's Motion”), filed on October 11, 2016; and Defendant Midland Funding, LLC's (“Midland”) Motion for Judgment on the Pleadings (“Midland's Motion”), filed on November 7, 2016. [Dkt. nos. 17, 40.] Pro se Plaintiff Mina E. Hemmy (“Plaintiff”) filed a memorandum in opposition to ERC's Motion on October 21, 2016, and Midland filed a statement of no position as to ERC's Motion on December 6, 2016. [Dkt. nos. 29, 47.] ERC filed a reply in support of its motion (“ERC Reply”) on December 13, 2016. [Dkt. no. 48.] Plaintiff failed to file a timely response to Midland's Motion. On December 13, 2016, Midland filed a reply in support of its motion (“Midland Reply”). [Dkt. no. 49.] Plaintiff filed a response to the Midland Reply (“Plaintiff's Midland Response”) on December 16, 2016, and Midland filed a reply to Plaintiff's Midland Response (“Supplemental Midland Reply”) on December 22, 2016. [Dkt. nos. 53, 54.]

         On December 14, 2016, the Court issued an entering order finding these matters suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawai`i (“Local Rules”). After careful consideration of the motions, supporting and opposing memoranda, and the relevant legal authority, the ERC Motion and the Midland Motion are HEREBY GRANTED IN PART AND DENIED IN PART for the reasons set forth below. Specifically, the motions are GRANTED insofar as all of Plaintiff's claims against ERC and Midland are DISMISSED. The dismissal of Plaintiff's claim against Midland in Count IV is WITH PREJUDICE, but the dismissal of all Plaintiff's other claims against Midland and all of Plaintiff's claims against ERC is WITHOUT PREJUDICE. In other words, this Court will allow Plaintiff to try to amend her Complaint to cure the defects in those claims that this Court has identified in this Order.

         BACKGROUND

         On July 25, 2016, Plaintiff filed her Complaint for Permanent Injunction and Other Relief (“Complaint”) against Midland, ERC, and Defendant “Kirk Neste of Cades and Schutte” (“Neste”). Plaintiff brings this action pursuant to sections 5(a) and 13(b) of the Fair Debt Collections Practices Act (“FDCPA”), 15 U.S.C. §§ 1692-1692p, and the Hawai`i Uniform Commercial Code (“UCC”), Haw. Rev. Stat. Chapter 490, Article 9. [Complaint at ¶¶ 1-2.] According to the Complaint, “[t]he alleged debt instrument has been treated as a tradable security secured by [Plaintiff's] legal name in commerce for alleged goods and services or other money owed, which was by an alleged contract/instrument sold or assigned to a third party.” [Id. at ¶ 13.]

         Attached to the Complaint as Exhibit A is a letter dated April 12, 2016 from Plaintiff to Midland regarding “correspondence purporting to allege a debt claimed by” Credit One Bank, N.A., in the amount of $778.35 (“Midland Letter”). [Complaint, Exh. A at 1.] The letter gave Midland notice that Plaintiff was disputing the debt and she demanded that Midland cease and desist collection until it provided validation and verification of the debt. Plaintiff demanded the following information to verify the debt:

1) The name and address of the person or persons of Credit One bank, [sic] N.A. alleging a claim of a debt.
2) The ORIGIN of the funds used to create this alleged claim of a debt.
3) The name of the actual creditor even if that is I.
4) The actual records of the organization or other government unit showing the time and place of the DEPOSIT and distribution of the funds used to create this alleged claim of debt.
5) The actual records of the organization or other governmental unit showing that an actual loan was made from the organization or other governmental unit's own funds that resulted in the enclosed alleged claim of a debt.
6) The actual FINANCIAL records of the organization or other governmental unit with a live signature on any and all document/instrument(s) used to allege the existence of a REAL LOAN of funds or debt from the organization or other governmental unit, to myself.
7) The actual records (or affidavit) of the organization or other governmental unit showing that any and all document/instrument(s) containing my signature or the likeness of my signature were not negotiated or pledged by the organization or other governmental unit against my credit to create the funds used for the appearance of a debt and resulting in this alleged claim of debt.

[Id. at 2-3 (some emphases omitted).] Plaintiff also demanded information showing that the person preparing the validation of the debt had the authority and the personal knowledge to do so. [Id. at 3-4.] She asserted that she was entitled to this information pursuant to “the truth in lending laws of the United States Code, Title 15 § 1601 et seq. and Regulation Z” and the FDCPA. [Id. at 2.]

         Exhibit B is a letter dated October 22, 2015 from Plaintiff to AFNI Inc. regarding its “report of a collection on [her] credit” on behalf of AT&T in the amount of $2, 456 (“AFNI Letter”). [Complaint, Exh. B at 1.] The AFNI Letter is similar to the Midland Letter. Exhibit C is a letter dated May 20, 2016 from Plaintiff to Neste regarding “correspondence around May 10th alleging a debt from” House's Homes LLC for an “[a]lleged pending judgment” (“Neste Letter”). [Id., Exh. C at 1.] The Neste Letter is similar to the Midland Letter.

         The Complaint alleges the following claims: failure to report to consumer credit bureaus that a debt is disputed, in violation of 15 U.S.C. § 1692e(8) (“Count I”); reporting an unverified/invalid debt to third parties and/or credit bureaus, in violation of 15 U.S.C. § 1692g(b) (“Count II”); a common law defamation claim (“Count III”); and a UCC claim based upon the alleged failure to provide an authentic statement of account upon request, in violation of Haw. Rev. Stat. § 490:9-210, 625(f). Plaintiff prays for the following relief from an unspecified defendant: an order requiring the defendant “to delete this unverified debt from its accounting books”; [id. at ¶ 15.A;] an injunction requiring the defendant to comply with the FDCPA and the UCC in all future debt collections; court supervision, or supervision of a special master to ensure compliance; fees and costs pursuant to 5 U.S.C. § 552(a)(4)(E) or any other applicable law; damages and penalties for the FDCPA and UCC violations; and any other appropriate relief.

         The ERC Motion argues that this Court must dismiss Plaintiff's claims against it because the Complaint does not contain any factual allegations against it. Further, the allegations of the Complaint and the exhibits thereto foreclose Plaintiff's state law claims, which must be dismissed with prejudice.

         The Midland Motion argues that: Plaintiff fails to state a FDCPA claim against Midland; Plaintiff fails to state a defamation claim; and Plaintiff's debts do not fall within the scope of the UCC.

         The Court turns first to the merits of the Midland Motion.

         DISCUSSION

         I. Midland Motion

         Midland filed its answer to the Complaint on October 7, 2016. [Dkt. no. 12.] Midland brings its motion pursuant to Fed.R.Civ.P. 12(c), which states: “After the pleadings are closed - but early enough not to delay trial - a party may move for judgment on the pleadings.”

         “Analysis under Rule 12(c) is substantially identical to analysis under Rule 12(b)(6)[1] because, under both rules, a court must determine whether the facts alleged in the complaint, taken as true, entitle the plaintiff to a legal remedy.” Pit River Tribe v. Bureau of Land Mgmt., 793 F.3d 1147, 1155 (9th Cir. 2015) (citation and quotation marks omitted). However, this Court is not required to accept as true “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955 (2007) (Although for the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true, we “are not bound to accept as true a legal conclusion couched as a factual allegation” (internal quotation marks omitted))).

         A. FDCPA Claims

         This district court has stated:

To state a claim under the FDCPA, a plaintiff must show: (1) that he or she is a consumer; (2) that the debt arises out of a transaction entered into for personal purposes; (3) that the defendant is a debt collector; and (4) that the defendant violated one of the provisions of the FDCPA.

Minichino v. Piilani Homeowners Ass'n, CIVIL NO. 16-00461 DKW-RLP, 2016 WL 7093431, at *3 (D. Hawai`i Dec. 2, 2016) (citing Freeman v. ABC Legal Servs. Inc., 827 F.Supp.2d 1065, 1071 (N.D. Cal. 2011)).

         The FDCPA defines a consumer as “any natural person obligated or allegedly obligated to pay any debt.” 15 U.S.C. § 1692a(3). The Complaint quotes this definition, [Complaint at ¶ 7, ] and alleges that Plaintiff “is established as a secured party creditor of the defendants alleged claim of a debt” [id. at ¶ 5]. In considering Midland's Motion, this Court is not required to accept Plaintiff's recitation of the statutory definition and her conclusory statement. However, because Plaintiff is proceeding pro se, this Court must liberally construe the Complaint. See, e.g., Eldridge v. Block, 832 F.2d 1132, 1137 (9th Cir. 1987) (“The Supreme Court has instructed the federal courts to liberally construe the ‘inartful pleading' of pro se litigants.” (citing Boag v. MacDougall, 454 U.S. 364, 365, 102 S.Ct. 700, 701, 70 L.Ed.2d 551 (1982) (per curiam))). Liberally construing the Midland Letter together with allegations in the Complaint, Plaintiff sufficiently alleges that she is a consumer for purposes of the FDCPA.

         However, even liberally construing the Complaint together with the Midland Letter, Plaintiff's allegations do not satisfy the second element of a FDCPA claim - that “the debt ar[ose] out of a transaction entered into for ...


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