Benson v. LDC Collection Systems, Inc. et al

I N THE U NITED STATES B ANKRUPTCY C OURT
FOR THE E ASTERN DISTRICT OF PENNSYLVANIA
I N RE : 	: CHAPTER 13
:
JAMES E. B ENSON 	:
:
D EBTOR( S) 	: B ANKRUPTCY NO. 07-16972 	SR
JAMES E. B ENSON 	:
:
PLAINTIFF ( S) 	:
VS. 	:
:
LDC COLLECTION SYSTEMS, I NC. 	:
L OCKHEED MARTIN UMS CORPORATION 	:
JOHN AND JANE D OES 1-50 	:
:
D EFENDANT( S) 	: ADVS. NO. 09-0151
OPINION
B Y: STEPHEN RASLAVICH, CHIEF UNITED STATES B ANKRUPTCY JUDGE .
Introduction
Before the Court is the Motion of ACS State & Local Solutions, Inc. (ACS)
to Dismiss for Failure to State a Claim or for More Definite Statement. The Motion is
opposed by Plaintiffs. After a hearing held on August 13, 2009, the Court took the
matter under advisement.
The Complaint
The Plaintiff has filed a two-count Complaint against LDC Collection Systems,
Lockheed Martin UMS Corp., and other, unnamed defendants. 1 Count I alleges
1In its Motion, ACS identified itself as ACS State & Local Solutions, Inc., d/b/s LDC
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violations of the Pennsylvania Fair Credit Extension Uniformity Act2 and the Unfair
Trade Practices and Consumer Protection Law. 3 Count II alleges violations of federal
civil rights law. In response, LDC has filed the instant motion.4
Applicable Rule
of Procedure
ACS’s Motion argues that the Complaint “fails to state a claim upon which relief
may by granted.” B.R. 7012(b).5 In considering a Rule 12(b)(6) motion, a court is
required to “accept all factual allegations as true, construe the complaint in the light
most favorable to the plaintiff, and determine whether, under any reasonable reading of
the complaint, the plaintiff may be entitled to relief.” Phillips v. County of Allegheny, 515
F.3d 224, 233 (3d Cir. 2008) (quoting Pinker v. Roche Holdings, Ltd., 292 F.3d 361, 374
n. 7 (3d Cir.2007)). If a plaintiffs' assertions fail to state a legally cognizable claim, then
the defendant's motion to dismiss will be granted. Negron v. Oxford Airport Technical
Services, 2009 WL 50158 *2 (E.D.Pa.,2009). The movant has the burden of proof as to
1 (...continued)
Collections Systems f/k/a Lockheed Martin UMS Corp. Thus, there is but one named defendant
and the John and Jane Does.
273 P.S. § 2270.1 et seq.
373 P.S. § 201-1. Plaintiff never explains whether the UTPCPL count is for an
independent violation of that statute or a derivative violation of the FCEUA. See 73 P.S. §
2270.5(a) (stating that if a debt collector or creditor engages in an unfair or deceptive debt
collection act or practice under the FCEUA, it shall constitute a violation of the UTPCPL).
4LDC pressed for dismissal of the response based on untimeliness. Because LDC could
offer no proof of prejudice as a result of Plaintiff’s counsel’s tardiness and because the Motion
will be granted in LDC’s favor, the timeliness issue is moot.
5This rule make F.R.C.P. 12(b) applicable to adversary proceedings. F.R.C.P. 12(b)(6)
provides for dismissal of a complaint for failure to state a claim upon which relief can be
granted.
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dismissal under this rule. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409
(3d Cir.1991) As to Count I, ASC does not challenge the factual sufficiency of what is
alleged; rather, it argues that the facts, taken as true, fail as a matter of law.
Conversely, as to Count II ACS argues that the factual allegations are insufficient to
support a § 1983 claim.
FCEUA Claim
Count I alleges violations of the Pennsylvania Fair Credit Extension Uniformity
Act (FCEUA) and the Uniform Trade Practices and Consumer Protection Law
(UTPCPL). In its capacity as a “bill collector,” ACS is alleged to have sent Plaintiff two
dunning notices. ¶ 14. These notices are alleged to have contained gross mis-
statements of the law and misrepresentations concerning proper collection procedures
and Plaintiff’s due process rights. ¶ 16. Specifically, it is alleged that ACS represented
that it could have Plaintiff’s driving privileges revoked when it had no such right. ¶¶ 17-
18. It is further alleged that the notices threatened to take action which ACS had no
intention of taking. ¶¶ 19-20.
ACS offers a threshold argument to this count. It argues that the type of
obligation involved here is not a “debt” as recognized under either statute. As a result,
Plaintiff is not a “consumer” entitled to the protection of either statute. In this context, it
explains, “debt” is understood to mean an obligation arising out of a consumer
transaction. That involves some pro tanto exchange of goods and services. A parking
fine, it says, is not the result of such a transaction. See Motion, 3-4.
Plaintiff disagrees and refers to the definition of “debt” provided in the FCEUA.
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Among the examples of debt is included a “tax and the interest, penalties and fines”
which might accrue from that tax. As to what constitutes a “consumer,” Plaintiff refers to
the definition found in the UTPCPL in support of his position. Plaintiff’s Answer, 1-2.
Debt and Consumer
ACS’s challenge to Count I goes to the very heart of the claim. Would a parking
fine constitute a “debt” under the FCEUA? The statute defines the terms as:
[a]n actual or alleged past due obligation, claim, demand,
note or other similar liability of a consumer to pay money,
arising out of a single account as a result of a purchase,
lease or loan of goods, services or real or personal property
for personal, family or household purposes or as a result of a
loan of money or extension of credit which is obtained
primarily for personal, family or household purposes,
provided, however, that money which is owed or alleged to
be owed as a result of a loan secured by a purchase money
mortgage on real estate shall not be included within the
definition of debt. The term also includes any amount owed
as a tax to any political subdivision of this Commonwealth.
Tax includes an assessment, any interest, penalty, fee or
other amount permitted by law to be collected. Debt does not
include any such amount owed to the United States or the
Commonwealth.
73 P.S. § 2270.3. And it is on this definition upon which the Plaintiff seizes when
arguing that the parking fine is a debt. Plaintiff believes that the fine should be
construed as tax. See Answer, ¶ 1a. Thus, he concludes, the parking fine is a debt as
defined under the FCEUA. There is, however, no case law interpreting the term as
defined in that statute. ACS thus adverts to the federal Fair Debt Collection Practices
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Act 6 (FDCPA), and its definition of the term “debt.”7 ACS points out that the case law
interpreting “debt” under the FDCPA considers it to arise out of a pro tanto transaction
or a service rendered. See Motion, 4.
The Court concurs with ACS’ position that it must look to the interpretations of
“debt” under the FDCPA to determine what it means under the state law. There are a
number of reasons which support this conclusion. 	Both the state and federal statute
have the same purposes: to regulate consumer collection practices. Both statutes also
define the term “debt” similarly. Finally, there is a degree of integration between the two
statutes. For example, the FCEUA makes “debt collector” liable for having violated the
FDCPA. 73 P.S. § 2270.4(a)8 Thus, the federal law necessarily informs this Court’s
determination of what a “debt” is under the state law as well.
Parking Violations,
Debt and the FDCPA
The Third Circuit has held that in order for a debt to arise from a transaction
within the meaning of the FDCPA, the obligation must be the result of a pro tanto
exchange. Staub v. Harris, 626 F.2d 275, 278 (3d Cir. 1980) “At a minimum, the statute
contemplates that the debt has arisen as a result of the rendition of a service or
purchase of property or other item of value.” Pollice v. National Tax Funding, LLP, 225
615 U.S.C. § 1692 et seq.
7The term debt is defined as “ 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.” 15 U.S.C. § 1692a(5)
8It is “creditors” who may be liable for any one of the specified infractions set forth in the
next subsection. 73 P.S. § 2270.4(b)
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F.3d 379, 401 (3d Cir. 2000) citing Staub, supra 625 F.2d at 278. That Court has
explained that:
the legislative history indicates clearly that it is exactly such a
person, i.e., one who has contracted for goods or services
and is unable to pay for them, that Congress intended to
protect. Congress' presumption in enacting the FDCPA was
that the vast majority of those who would enjoy the
protection of the Act would not be “deadbeats”. Congress
found that in most cases consumers undertake these
obligations fully intending to repay them. The legislative
history attests to Congress' recognition of universal
agreement among scholars, law enforcement officials and
debt collectors alike that the number of persons who willfully
refuse to pay just debts is minuscule, and that when default
occurs, it is nearly always due to an unforseen event such as
unemployment, overextension, serious illness or marital
difficulties or divorce. S.Rep. No. 382, 95th Cong., 1st Sess.
3, reprinted in 1977 U.S.Code Cong. & Admin.News 1695,
1697.
Zimmerman v. HBO Affiliate Group, ACS, 834 F.2d 1163, 1168 (3d Cir.1987) (holding
that FDCPA definition of debt did not include claims against persons who pirated cable
tv signal)
Within this Circuit, there are no reported decisions on the question of whether a
parking fine is a “debt” as defined under the FDCPA. Elsewhere, there is. In Graham v.
ACS State & Local Solutions, Inc., 2006 WL 2911780 (D.Minn.), the District Court held
that parking fines were not debts under the FDCPA. The District Court explained that
the FDCPA applies to a consumer transaction. Id., *1 At a minimum, the District Court
continued, such a transaction must involve a business dealing or other consensual
consumer obligation. Id. A parking violation, it concluded, was not part of a consumer
transaction, and thus the parking violations would not give rise to debts under the
statute. Id., *2; cf. Betts v. Equifax Credit Information Services, Inc., 245 F.Supp.2d
6
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1130, 1133 (W.D.Wash.2003) (finding that motor vehicle impoundment and towing fees
did not constitute a “debt,” within the meaning of the FDCPA.); accord Corridean v.
Restore Financial Services, 2007 WL 1114221 *6 (D.Or.). The Court finds this
reasoning to be persuasive and will apply it to the question of whether a violation of the
FCEUA has been stated. 9 Accordingly, the FCEUA claim in Count I will be dismissed.
UTPCPL
There is a corollary to that ruling which addresses the second cause of action in
Count I, the UTPCPL claim. As noted above, a violation of the FCEUA constitutes a
violation of the UTPCPL. But this Court has found that Plaintiff failed to state a FCEUA
claim. That means that any UTPCPL claim must state an independent basis for such
claim in order to avoid dismissal. It is to that question which the Court now turns.
“To bring a private cause of action under the UTPCPL, a plaintiff must show that
he justifiably relied on the defendant's wrongful conduct or representation and that he
suffered harm as a result of that reliance.” Pearson v. LaSalle Bank, 2009 WL 1636037
*4 (E.D.Pa.) quoting Yocca v. Pittsburgh Steelers Sports, Inc., 578 Pa. 479, 854 A.2d
425, 438 (Pa.2004) (citing Weinberg v. Sun Co., 565 Pa. 612, 777 A.2d 442, 446
(Pa.2001)); see also Hunt v. United States Tobacco Co., 538 F.3d 217, 225 (3d
Cir.2008) (holding that a plaintiff must allege justifiable reliance for all substantive
subsections of the UTPCPL). Here, the FDCPA Complaint fails to allege that Plaintiff
relied upon and then suffered harm as a result of any misrepresentations by the
9Similarly persuasive is an FTC Staff Opinion offered by ACS. Under the letter opinion
dated September 16, 1997, the Commission staff opined that parking fines do not constitute
debts under the FDCPA. Available at http://ftc.gov/os/statutes/fdcpa/letters/cheswort.htm
7
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Defendant. Therefore, Plaintiff's claim under the UTPCPL will be dismissed.
Civil Rights Count
Count II alleges violations under federal civil rights law. Section 1983 of the Civil
Rights Act of provides:
Every person who, under color of any statute, ordinance,
regulation, custom, or usage, of any State or Territory or the
District of Columbia, subjects, or causes to be subjected,
any citizen of the United States or other person within the
jurisdiction thereof to the deprivation of any rights, privileges,
or immunities secured by the Constitution and laws, shall be
liable to the party injured in an action at law, suit in equity, or
other proper proceeding for redress.
42 U.S.C. § 1983. The statute is based on the Fourteenth Amendment to the United
States Constitution which provides that “no State shall ... deprive any person of life,
liberty, or property, without due process of law ....” U.S. Const. amend. XIV, § 1. This
particular Amendment governs only state action, not the actions of private citizens or
organizations. Rendell-Baker v. Kohn, 457 U.S. 830, 837-38, 102 S.Ct. 2764, 2769, 73
L.Ed.2d 418 (1982). Section 1983 subjects to liability those who deprive persons of
federal constitutional or statutory rights “under color of any statute, ordinance,
regulation, custom, or usage” of a state. See Leshko v. Servis, 423 F.3d 337, 339 (3d
Cir.2005). Actions relating to “under color of law” are the equivalent of “state action”
under the Fourteenth Amendment. Rendell-Baker, 457 U.S. at 838, 102 S.Ct. at 2769-
2770; Benn v. Universal Health Sys., Inc., 371 F.3d 165, 169 n. 1 (3d Cir.2004).
Accordingly, to state a claim of liability under § 1983, Plaintiff must allege that he was
deprived of a federal constitutional or statutory right by a state actor. Leshko, 423 F.3d
at 339.
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LDC’s objection goes to the sufficiency of what is alleged here. It insists that
Plaintiff has not alleged any of the required elements of a civil rights claim. As the
Supreme Court recently held, a complaint must be dismissed pursuant to Fed.R.Civ.P.
12(b)(6) if it does not allege “enough facts to state a claim to relief that is plausible on its
face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167
L.Ed.2d 929 (2007) (rejecting the traditional 12(b)(6) standard set forth in Conley v.
Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The Court must accept
as true all allegations of the Complaint and all reasonable factual inferences must be
viewed in the light most favorable to plaintiff. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d
651, 653 (3d Cir.2003). The Court, however, need not accept inferences drawn by
plaintiff if they are unsupported by the facts as set forth in the complaint. See California
Pub. Employee Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir.2004) (citing
Morse v. Lower Merion School Dist., 132 F.3d 902, 906 (3d Cir.1997)). Nor must the
court accept legal conclusions set forth as factual allegations. Bell Atlantic Corp., 550
U.S. at 555, 127 S.Ct. at 1965 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct.
2932, 92 L.Ed.2d 209 (1986)). “Factual allegations must be enough to raise a right to
relief above the speculative level.” Bell Atlantic Corp., id. Although the pleading
standard in Bell Atlantic applies equally to civil rights claim, no heightened fact pleading
is required. See Leatherman v. Tarrant County Narcotics Intelligence & Coordination
Unit, 507 U.S. 163, 168, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993).
Plaintiffs’ Allegations
and ACS’s Challenge
It is alleged that ACS violated Plaintiff’s federal civil rights by misrepresenting
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that (1) Plaintiff faced threat of impending legal action by Defendant (¶¶ 25-26) and that
(2) ACS could suspend Plaintiff’s vehicle registration. ¶ 27 To that allegation, Plaintiff
adds that the Defendants were parties to a conspiracy to deprive Plaintiff of his civil
rights. ¶ 29
ACS raises four objections to this count. First, there is no allegation to support
the claim that ACS was acting under color of law. Second, there is no allegation that he
was somehow deprived of a federally protected right. Third, assuming that such a right
is plead, there is no allegation as to how ACS deprived Plaintiff of that right. Fourth,
Plaintiff failed to allege that he availed himself of any non-judicial remedies afforded
him. ACS Motion, 6-9.
Color of Law
For purposes of alleging state action, the Supreme Court has “insisted that the
conduct allegedly causing the deprivation of a federal right be fairly attributable to the
State.” Lugar v. Edmundson Oil Co., Inc., 457 U.S. 922, 936, 102 S.Ct. 2744, 2753
(1982) Determining “fair attribution” entails a two-part analysis. Id. “First, the
deprivation must be caused by the exercise of some right or privilege created by the
State or by a rule of conduct imposed by the state or by a person for whom the State is
responsible.” Id. “Second, the party charged with the deprivation must be a person
who may fairly be said to be a state actor. This may be because he is a state official,
because he has acted together with or has obtained significant aid from state officials,
or because his conduct is otherwise chargeable to the State.” Id
There is nothing remotely resembling a nexus as between ACS’s conduct and
any governmental authority. It is alleged that ACS operated under the “auspices” of that
10
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entity, but there are no allegations offered to support that. All that is alleged is that ACS
was collecting debts “for the local government” (¶ 24) and that ACS “made threats of
legal action by the government.” (¶ 25) Such allegations are either scant or so vague
as to be meaningless. They certainly do not allege “state action.”
Deprivation of Right
Next, the Court turns to the precise harm which has been alleged. A plaintiff
must assert the violation of a federal right-not merely a violation of a federal law-to seek
redress. See Blessing v. Freestone, 520 U.S. 329, 340, 117 S.Ct. 1353, 1359 (1997).
The Court must therefore determine “whether the asserted individual interest ... is
encompassed within the Fourteenth Amendment's protection of life, liberty, or property.”
Elmore v. Cleary, 399 F.3d 279, 282 (3d Cir.2005) (quoting Alvin v. Suzuki, 227 F.3d
107, 116 (3d Cir.2000)). Plaintiff alleges that ACS “worked a denial of her due process
rights” by misrepresenting that Plaintiff faced threats of impending legal action and that
his vehicle registration would be suspended. ¶¶ 26-27.
Plaintiff’s due process claims are unsupported. All that ACS is alleged to have
done is to send him dunning notices which, it is further alleged, have made threats of
illegal conduct. Yet from the Complaint, that is all that has happened to Plaintiff. The
letters may threaten illegal conduct but there is no indication that such conduct has
occurred. As a result, there is no allegation of any denial of right or other harm suffered
by the Plaintiff here. Accordingly, the Court finds that the Complaint fails to state a
deprivation of right.
Failure to Follow Processes
To this ACS adds that the Complaints fails to state whether Plaintiff sought any
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extra-judicial redress before filing suit. The United States Court of Appeals for the Third
Circuit has made clear that “[i]n order to state a claim for failure to provide due process,
a plaintiff must have taken advantage of the processes that are available to him or her,
unless those processes are unavailable or patently inadequate.” Alvin, 227 F.3d at 116.
“[A] state cannot be held to have violated due process requirements when it has made
procedural protection available and the plaintiff has simply refused to avail himself of
them.” Id. (quoting Dusanek v. Hannon, 677 F.2d 538, 543 (7th Cir.1982)(internal
quotations omitted) and citing Bohn v. County of Dakota, 772 F.2d 1433, 1441 (8th
Cir.1985)). “A due process violation ‘is not complete when the deprivation occurs; it is
not complete unless and until the State fails to provide due process.’ “ Id. (quoting
Zinermon v. Burch, 494 U.S. 113, 126 (1990)). “If there is a process on the books that
appears to provide due process, the plaintiff cannot skip that process and use the
federal courts as a means to get back what he wants.” Id.
There is no mention in the pleading whether Plaintiff sought some redress from
within the parking authority. 10 Neither is there an allegation that what procedures are
available are insufficient or non-existent. The Court finds, therefore, that this Complaint
is also deficient in that respect.
Civil Rights Conspiracy
Aside from the substantive civil rights violation, Plaintiff charges the “Defendants
both individually and/or jointly” with conspiring to deny Plaintiff’s his right to due
process. ¶ 29. Section 1985(3) of the Civil Rights Act permits an action to be brought
10ACS insists that the parking authority’s website provides the public with such
information but this Court makes no finding on that claim at this time.
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by one injured by a conspiracy formed “for the purpose of depriving, either directly or
indirectly, any person or class of persons of the equal protection of the laws, or of equal
privileges and immunities under the laws.” 42 U.S.C. § 1985(3). The Supreme Court
has made clear what a plaintiff must allege to state a claim under § 1985(3): “(1) a
conspiracy; (2) for the purpose of depriving, either directly or indirectly, any person or
class of persons of the equal protection of the laws, or of equal privileges and
immunities under the laws; and (3) an act in furtherance of the conspiracy; (4) whereby
a person is injured in his person or property or deprived of any right or privilege of a
citizen of the United States.” United Bhd. of Carpenters & Joiners v. Scott, 463 U.S.
825, 828-29, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983); accord Oras v. City of Jersey
City, 2009 WL 840604 *2 (3d Cir.)
This conspiracy claim fails for two reasons. There is nowhere alleged any act in
furtherance of the conspiracy. For that matter, the Complaint never informs ACS as to
who the co-conspirators might be. Neither is there any allegation of a resulting injury.
So to the extent that Count II asserts a conspiracy to violate civil rights, it is equally
insufficient.
Summary
The Court finds that the Complaint fails to state a claim upon which relief may be
granted under either the state or federal law claims asserted in Counts I and II. This
effectively moots the alternative request for a more definite statement under F.R.C.P.
12(e). 11
11A motion for more definite statement may succeed if a pleading is “so vague or
(continued...)
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An appropriate Order follows.
By the Court:
Stephen Raslavich
Chief U.S. Bankruptcy Judge
Dated: September 10, 2009
11 (...continued)
ambiguous that the party cannot reasonably prepare a response.” Fed.R.Civ.P. 12(e), made
applicable by B.R. 7012(b). The notice pleading standard imposed by the Federal Rules,
merely “requires a plaintiff to provide the opponent with fair notice of a claim and the grounds on
which that claim is based.” Kanter v. Barella, 489 F.3d 170, 175 (3d Cir.2007). Accordingly,
“[m]otions for more definite statement are generally disfavored, and should [be granted only] if a
pleading is unintelligible, making it virtually impossible for the opposing party to craft a
responsive pleading.” Synagro-WWT v. Rush Twp., Pa., 204 F.Supp.2d 827, 849
(M.D.Pa.2002).
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