Thorpe v. Ertz et al

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UNITED STATES DISTRICT COURT
DISTRICT OF ALASKA
Arthur R. Thorpe, )
)
Plaintiff, ) 3:16-cv-00160 JWS
)
vs. )
) ORDER AND OPINION
Ralph V. Ertz, Jr. d/b/a Ralph Ertz )
Attorney at Law, and Michael Rose ) [Re: Motion at Docket 9]
)
Defendants. )
)
I. MOTION PRESENTED
At docket 9 defendants Ralph V. Ertz, Jr. d/b/a Ralph Ertz Attorney at Law and
Michael Rose (collectively, “Ertz”) move to dismiss the complaint of plaintiff Arthur R.
Thorpe (“Thorpe”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6). Ertz
supports his motion with a memorandum of points and authorities at docket 10. Thorpe
opposes the motion at docket 16; Ertz replies at docket 17. Oral argument was not
requested and would not assist the court.
II. BACKGROUND
Ertz is the lawyer who represented Valli Vue Estates Property Owners
Association (“Valli Vue”) in the state small claims action it filed against Thorpe in 2014
for unpaid homeowner’s association dues, late fees, and attorney’s fees (“Valli Vue I”).1
Ertz sought and obtained a $2,533.61 def ault judgment, including an award of full
attorney’s fees ($911.50).2 The problem with this, according to Thorpe, is that Alaska’s
1Doc. 1 at 3 ¶ 10.
2Because the Alaska District Court’s records (e.g., docket 9-2 at 1) are matters of public
record, the court takes judicial notice of them. See Lee v. City of Los Angeles, 250 F.3d 668,
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small claims court rules prohibit default judgment recipients from recovering attorney’s
fees that exceed “10% of the judgment or reasonable actual fees, whichever is less.”3
This 10% rule would cap Ertz’s attorney’s fees at $152.71. In a motion for relief from
judgment filed in 2015, Thorpe asked the small claims court to retroactively apply the
10% cap. The court granted Thorpe’s motion and reduced Ertz’s attorney’s fee award
to 10% of the judgment.4
In this action, Thorpe asserts two causes of action under the federal Fair Debt
Collection Practices Act (“FDCPA”) and two causes of action under Alaska’s Unfair
Trade Practices and Consumer Protection Act (“UTPCPA”). Specifically, Thorpe
alleges that Ertz’s pursuit of excessive attorney’s fees violated 15 U.S.C. §§ 1962f
(unfair or unconscionable means of attempting to collect a debt) and 1962e (false,
deceptive, or misleading representations in connection with the collection of a debt) and
AS 45.50.471 (unfair or deceptive acts or practices).
III. STANDARDS OF REVIEW
A. Rule 12(b)(1)
Under Federal Rule of Civil Procedure 12(b)(1), a party may seek dismissal of an
action for lack of subject matter jurisdiction. In order to survive a defendant’s motion to
dismiss, the plaintiff has the burden of proving jurisdiction.5
“Rule 12(b)(1) jurisdictional attacks can be either facial or factual.”6 Where the
defendant brings a facial attack on the subject matter of the district court, the court
assumes the factual allegations in the plaintiff’s complaint are true and draws all
688–89 (9th Cir. 2001) (quoting Fed. R. Evid. 201).
3Ak. Dist. Ct. R. Civ. Pro. 20(c).
4Doc. 1 at 3 p.17; doc. 16 at 22.
5Tosco v. Cmtys. for a Better Env’t, 236 F.3d 495, 499 (9th Cir. 2000).
6White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000).
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reasonable inferences in the plaintiff’s favor.7 The court does not, however, accept the
truth of legal conclusions cast in the form of factual allegations.8
“With a factual Rule 12(b)(1) attack, however, a court may look beyond the
complaint to matters of public record without having to convert the motion into one for
summary judgment. It also need not presume the truthfulness of the plaintiffs’
allegations.”9
B. Rule 12(b)(6)
Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s claims. In reviewing such
a motion, “[a]ll allegations of material fact in the complaint are taken as true and
construed in the light most favorable to the nonmoving party.”10 To be assumed true,
the allegations “may not simply recite the elements of a cause of action, but must
contain sufficient allegations of underlying facts to give fair notice and to enable the
opposing party to defend itself effectively.”11 Dismissal for failure to state a claim can
be based on either “the lack of a cognizable legal theory or the absence of sufficient
facts alleged under a cognizable legal theory.”12 “Conclusory allegations of law . . . are
insufficient to defeat a motion to dismiss.”13
To avoid dismissal, a plaintiff must plead facts sufficient to “‘state a claim to relief
that is plausible on its face.’”14 “A claim has facial plausibility when the plaintiff pleads
7Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009).
8Id.
9White, 227 F.3d at 1242 (9th Cir. 2000) (citations omitted).
10Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).
11Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
12Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).
13Lee, 250 F.3d at 679 (9th Cir. 2001).
14Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)).
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factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”15 “The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for more than a sheer possibility that a
defendant has acted unlawfully.”16 “Where a complaint pleads facts that are ‘merely
consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and
plausibility of entitlement to relief.’”17 “In sum, for a complaint to survive a motion to
dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that
content, must be plausibly suggestive of a claim entitling the plaintiff to relief.”18
Ordinarily, if “matters out side the pleadings are ‘presented to and not excluded
by the court,’” a Rule 12(b)(6) motion “must be treated as one for summary judgment
under Rule 56” and the parties “must be given a reasonable opportunity to present all
the material that is pertinent to the motion.”19 There are two exceptions to this rule,
however. “First, a court may consider material which is properly submitted as part of
the complaint on a motion to dismiss without converting the motion to dismiss into a
motion for summary judgment.”20 Second, “a court may take judicial notice of ‘matters
of public record.’”21
15Id.
16Id. (citing Twombly, 550 U.S. at 556).
17Id. (quoting Twombly, 550 U.S. at 557).
18Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009); see also Starr, 652 F.3d
at 1216.
19Fed. R. Civ. P. 12(d).
20Lee, 250 F.3d at 688 (internal quotation omitted).
21Id. at 688–89 (quoting Fed. R. Evid. 201).
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IV. DISCUSSION
A. Rooker-Feldman
Congress has vested the United States Supreme Court with exclusive federal
jurisdiction over appeals from state-court judgments.22 “Accordingly, under what has
come to be known as the Rooker–Feldman doctrine, lower federal courts are precluded
from exercising appellate jurisdiction over final state-court judgments.”23 The
Rooker-Feldman doctrine is narrow; it applies only to “cases brought by state-court
losers complaining of injuries caused by state-court judgments rendered before the
district court proceedings commenced and inviting district court review and rejection of
those judgments.”24
“The doctrine bars a district court from exercising jurisdiction not only over an
action explicitly styled as a direct appeal, but also over the ‘de facto equivalent’ of such
an appeal.”25 To determine whether an action contains a de facto appeal, courts
ascertain the allegedly wrongful actor: If the asserted legal wrong was committed by a
state court, a de facto appeal exists; if the asserted legal wrong was “an allegedly illegal
act or omission by an adverse party, Rooker–Feldman does not bar jurisdiction.”26
“Thus, even if a plaintiff seeks relief from a state court judgment, such a suit is a
22See Lance v. Dennis, 546 U.S. 459, 463 (2006) (citing 28 U.S.C. § 1257).
23Id.
24Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005). See also
Lance, 546 U.S. at 466 (The doctrine applies only “where a party in effect seeks to take an
appeal of an unfavorable state-court decision to a lower federal court.”).
25Cooper v. Ramos, 704 F.3d 772, 777 (9th Cir. 2012) (quoting Noel v. Hall, 341 F.3d
1148, 1155 (9th Cir.2003)).
26Bell v. City of Boise, 709 F.3d 890, 897 (9th Cir. 2013) (citing Noel, 341 F.3d at 1164).
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forbidden de facto appeal only if the plaintiff also alleges a legal error by the state
court.”27
Ertz argues that this court lacks jurisdiction under Rooker-Feldman because
Thorpe is asking this court to review a state court judgment. But neither of his two
arguments in support of this jurisdictional attack are persuasive. First, citing Feldman,
Ertz argues that jurisdiction does not lie because Thorpe’s claims in this action are
“inextricably intertwined” with determinations made by the small claims court.28 This
argument fails because, as the Ninth Circuit has explained, “[t]he ‘inextricably
intertwined’ language from Feldman is not a test to determine whether a claim is a de
facto appeal, but is rather a second and distinct step in the Rooker–Feldman analysis.29
If “a federal plaintiff seeks to bring a forbidden de facto appeal, . . . that federal plaintiff
may not seek to litigate an issue that is ‘inextricably intertwined’ with the state court
judicial decision from which the forbidden de facto appeal is brought.”30 But this step is
not triggered unless the court first finds that a de facto appeal exists.31
Second, Ertz cites case law from the Seventh Circuit holding that FDCPA claims
are barred by Rooker-Feldman if the allegedly illegal relief sought by the debt collector
was awarded by the state court.32 Ertz’s reliance on Seventh Circuit case law is
27Id. (emphasis in original) (citing Maldonado v. Harris, 370 F.3d 945, 950 (9th Cir.
2004); Kougasian v. TMSL, Inc., 359 F.3d 1136, 1140 (9th Cir.2004)).
28Doc. 10 at 5 (citing D.C. Court of Appeals v. Feldman, 460 U.S. 462, 483 n.16 (1983)).
29Bell, 709 F.3d at 897.
30Noel, 341 F.3d at 1158.
31Bell, 709 F.3d at 897 (“Should the action not contain a forbidden de facto appeal, the
Rooker–Feldman inquiry ends.”).
32See, e.g., Kelley v. Med-1 Sols., LLC, 548 F.3d 600, 605 (7th Cir. 2008) (“]W]e
conclude we are . . . barred from evaluating claims, such as this one, where all of the allegedly
improper relief was granted by state courts.”). But see Johnson v. Pushpin Holdings, LLC, 748
F.3d 769, 773 (7th Cir. 2014) (Rooker-Feldman “does not bar a federal suit that seeks damages
for a fraud that resulted in a judgment adverse to the plaintiff. Such a suit does not seek to
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unavailing because this court is bound by contrary Ninth Circuit precedent.33 Under
Ninth Circuit case law, Thorpe’s complaint must challenge an error committed by the
state court for his action to be barred by Rooker-Feldman. Thorpe is not alleging a
legal error by the state court. As Thorpe notes, he already challenged the state court
judgment “by filing a motion for relief of judgment and prevailed.”34 Instead, Thorpe’s
complaint alleges that Ertz violated the FDCPA and the UTPCPA by attempting to
collect an excessive amount of attorney’s fees in Valli Vue I. Because the allegedly
illegal act was committed by Ertz, not the small claims court, the Rooker-Feldman
doctrine is not a bar to this court’s jurisdiction.
B. Res Judicata
The doctrine of res judicata, which defines the preclusive effect of a judgment, is
comprised of two separate doctrines known as claim preclusion and issue preclusion.35
Claim preclusion bars “successive litigation of the very same claim, whether or not
relitigation of the claim raises the same issues as the earlier suit.”36 Issue preclusion
(otherwise known as collateral estoppel) “bars ‘successive litigation of an issue of fact
or law actually litigated and resolved in a valid court determination essential to the prior
disturb the judgment of the state court, but to obtain damages for the unlawful conduct that
misled the court into issuing the judgment.”).
33Compare Kelley, 548 F.3d at 605 with Kougasian, 359 F.3d at 1140 (“[F]or Rooker-
Feldman to apply, a plaintiff must seek not only to set aside a state court judgment; he or she
must also allege a legal error by the state court as the basis for that relief.”); Maldonado, 370
F.3d at 950 (“The legal wrong that [the plaintiff] asserts in this action is not an erroneous
decision by the state court . . . . [The plaintiff] asserts as a legal wrong ‘an allegedly illegal act
. . . by an adverse party.’”) (quoting Noel, 341 F.3d at 1164). See also Iqbal v. Patel, 780 F.3d
728, 729 (7th Cir. 2015) (recognizing that the Seventh Circuit and Ninth Circuit disagree or at
least are in tension on this topic).
34Doc. 16 at 15.
35White v. City of Pasadena, 671 F.3d 918, 926 (9th Cir. 2012).
36Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New Hampshire v. Maine, 532
U.S. 742, 748 (2001)).
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judgment,’ even if the issue recurs in the context of a different claim.”37 To determine
the res judicata effect of a state-court judgment, federal courts apply the law of the
state in which the judgment was rendered.38
Ertz argues that Thorpe’s action is barred by claim preclusion. Under Alaska
law, claim preclusion bars a subsequent action if an earlier action resulted in “(1) a final
judgment on the merits, (2) from a court of competent jurisdiction, (3) in a dispute
between the same parties (or their privies) about the same cause of action.”39 The
parties do not dispute that Valli Vue I resulted in a final judgment on the merits from a
court of competent jurisdiction in a dispute between the same parties or their privies.
Thus, the preclusive effect of the Valli Vue I judgment depends on whether that case
was “about the same cause of action” as this case.
To determine whether a plaintiff’s claims are about the same cause of action as
a previous case in which he was a defendant, Alaska courts apply the approach set out
in the Restatement (Second) of Judgments § 22(2), which
provides that a defendant will only be barred from bringing a foregone
counterclaim as a claim in a subsequent proceeding if:
“(a) The counterclaim is required to be interposed by a compulsory
counterclaim statute or rule of court, or
(b) The relationship between the counterclaim and the plaintiff’s claim is
such that successful prosecution of the second action would nullify the
initial judgment or would impair rights established in the initial action.”40
37Id.
38See Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (“[A]
federal court should determine the preclusive effect of a state court judgment [by reference] to
the law of the State in which judgment was rendered.”).
39Plumber v. Univ. of Alaska Anchorage, 936 P.2d 163, 166 (Alaska 1997).
40Sengupta v. Univ. of Alaska, 21 P.3d 1240, 1251 (Alaska 2001) (quoting Restatement
(Second) of Judgments § 22(2) (1987)).
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Although preclusion may be found under either § 22(2)(a) or (b), “[u]nder ordinary
circumstances, Restatement § 22(2) adds little to the preclusive effect of [Alaska] Civil
Rule 13(a)’s compulsory counterclaim provision.”41
1. Under Alaska Civil Rule 13(a), Thorpe’s current claims were not
compulsory counterclaims in Valli Vue I
With exceptions that do not apply here, Alaska Rule of Civil Procedure 13(a)
defines a compulsory counterclaim as any claim the defendant has against any
opposing party “at the time of serving the pleading” that “arises out of the transaction or
occurrence that is the subject matter of the opposing party’s claim and does not require
for its adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.”42 Ertz asserts that Thorpe’s UTPCPA claims were compulsory
counterclaims in Valli Vue I, but he never applies Rule 13(a) to the facts. Instead, he
merely cites the Alaska Superior Court’s decision in Mooradian v. Bishop, Marshall &
Weibel, P.S.43
Mooradian is unavailing, however, for two reasons. First, Mooradian did not find
that the plaintiff’s claims were barred because they were compulsory counterclaims in
the initial action (the court specifically declined to rule on that issue).44 Second, this
court is bound by the Alaska Supreme Court’s application45 of Rule 13(a) in Andrews v.
Wade & De Young, Inc., P.C.46 The plaintiff in Andrews was a defendant in a previous
action filed by its lawyers to collect unpaid attorney’s fees. The former client then sued
41Id.
42Ak. R. Civ. P. 13(a).
43No. 3AN-15-05111CI, 2016 WL 3405169 (Ak. Sup. Ct. Feb. 16, 2016).
44Id. at *5–6.
45Fid. Union Trust Co. v. Field, 311 U.S. 169, 177 (1940) (“The highest state court is the
final authority on state law.”).
46950 P.2d 574 (Alaska 1997).
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its lawyers for malpractice in a subsequent action. The Alaska Supreme Court held that
the malpractice claims were not compulsory counterclaims in the first action because
they had not matured until after the client filed its answer.47 This holding is fatal to
Ertz’s Rule 13(a) argument.
If a party does not serve a responsive pleading, the party’s compulsory
counterclaims are determined as of the date of the default.48 Here, the allegedly
wrongful act occurred when Ertz applied for full attorney’s fees, which happened after
Thorpe’s default. Because Thorpe’s claims in this case had not matured as of the date
of his default, these after-acquired claims were not compulsory counterclaims.49
2. Thorpe’s current claims will neither nullify the Valli Vue I judgment
nor impair any rights established in that action
Ertz next asserts that Thorpe’s claims are barred under Restatement § 22(2)(b)
because they “may only succeed if they attack the judgment of the Alaska District Court
as to the issues of the attorney fee award, prevailing party status, the legal basis for the
award[,] and the quantum awarded.”50 This argument is essentially the same as Ertz’s
Rooker-Feldman arguments that the court rejected above. Thorpe is attacking Ertz’s
pursuit of allegedly excessive attorney’s fees, not the state court’s decisions regarding
the attorney’s fee award.
47Id. at 577.
48See Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 160 (2d Cir.
1992) (“By failing to assert it in a timely responsive pleading, ELUL is now foreclosed from
raising it in any subsequent proceeding—including the post-default damages inquest presently
under review.”); Carteret Sav. & Loan Ass’n v. Jackson, 812 F.2d 36, 38 (1st Cir. 1987)
(“[W]hen a defendant is defaulted for failure to file a pleading, the default applies to whatever
the party should have pleaded.”). The court could not find any Alaska authority on point. But
because Alaska Civil Rule 13(a) is substantially identical to Federal Civil Rule 13(a), federal
case law interpreting the Federal Civil Rules is persuasive. See Drickersen v. Drickersen, 546
P.2d 162, 167 n.9 (Alaska 1976).
49Andrews, 950 P.2d at 576.
50Doc. 10 at 7.
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Thorpe’s claims will neither nullify the Valli Vue I judgment nor impair any rights
established in that action. Much like the effect of a judgment in the plaintiff’s favor in
Andrews,51 a judgment in Thorpe’s favor would merely entitle him to damages that
would offset Valli Vue’s recovery in Valli Vue I.
C. The Colorado River Abstention Doctrine
Under what has become known as the Colorado River abstention doctrine,
“federal courts have discretion in ‘exceptional’ circumstances to stay federal court
proceedings pending the resolution of a parallel state court proceeding.”52 “The
‘Colorado River test’ refers to the list of factors courts consider in determining whether
to invoke this exceptional prudential abstention doctrine.”53 These factors include:
(a) the extent to which the federal legislation pursuant to which the federal
suit is brought favors the state versus federal forum;
(b) which forum offers the “greatest experience and expertise” in the
particular subject-matter;
(c) the “absence of any substantial progress in the federal-court litigation;”
(d) the extent to which the suit involves questions or “rights governed by
state law;”
(e) “the geographical inconvenience of the federal forum;”
(f) “the desirability of avoiding piecemeal litigation;”
(g) “the order in which jurisdiction was obtained by the concurrent forums;”
and
(h) “the Government’s previous willingness to litigate similar suits in state
court.”54
51“A subsequent successfully prosecuted malpractice action would not alter rights to
damages awarded in an attorney’s fee litigation dispute, and would not necessarily entitle the
client to restitution. It is conceivable that the attorney’s malpractice caused less injury to the
client than the cost of the services rendered. In such a situation, the attorney would be able to
offset the award by any amount still owed under the original judgment, but the subsequent
judgment would not nullify the first judgment.” Andrews, 950 P.2d at 579. See also id. at
579–80 (“[The plaintiff], if successful, would be entitled to damages caused by [the defendant’s]
malpractice, but would not be entitled to restitution of the attorney’s fees awarded in the earlier
suit.”).
52United States v. Davis, 825 F.3d 1014, 1041 n.11 (9th Cir. 2016) (citing Colorado River
Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976)).
53Id.
54Id. (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16
(1983)).
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Ertz notes that a case between Valli Vue and Thorpe is currently pending in state
court (“Valli Vue II”), has already advanced to trial, and involves “the issues of prevailing
party status, right to attorney’s fees[,] and the quantum of fees to be awarded.”55 Ertz
argues that these are the same legal issues that Thorpe is asking the court to resolve
here, and therefore, the court should abstain from accepting jurisdiction over Thorpe’s
claims under the Colorado River abstention doctrine. Thorpe responds by asserting
that the debt collection issues in Valli Vue II are “separate and independent” to the
issues here, which relate to whether Ertz acted illegally in Valli Vue I.56 Ertz does not
respond in reply.
Ertz does not submit a copy of the Valli Vue II complaint or any other court
documents showing the issues under consideration in that case.57 Based on the
current record, the court is unable to apply the Colorado River test to the facts of the
two Valli Vue cases. Further, even accepting Ertz’s description of the issues in Valli
Vue II, that court is not considering whether Ertz’s actions in Valli Vue I violated the
FDCPA or the UTPCPA. Thus, the state court’s eventual decision in that case will not
lead to a “‘comprehensive disposition of litigation,’” which is required to justify
abstention.58 In sum, Ertz has not met his heavy burden of showing that a stay or
dismissal is appropriate.59
55Doc. 10 at 6. See also doc. 10-1 at 2–3, ¶¶ 5–6, 8.
56Doc. 16 at 17.
57The only evidence Ertz submitted was a declaration of counsel stating that Valli Vue II
is an action to recover “an unpaid balance” on Thorpe’s ledger. Doc. 10-1 at 2 ¶ 5.
58R.R. St. & Co. Inc. v. Transp. Ins. Co., 656 F.3d 966, 982 (9th Cir. 2011) (quoting
Colorado River, 424 U.S. at 817).
59See Ally Bank v. Castle, No. 11-CV-896 YGR, 2012 WL 3627631, at *3 (N.D. Cal.
Aug. 20, 2012) (“[T]he party moving for a stay under Colorado River bears a heavy burden in
justifying such an order.”); Jenkins v. City of Richmond, No. C 08-03401 MHP, 2009 WL 35224,
at *3 (N.D. Cal. Jan. 6, 2009) (same); Oglesby v. Cty. of Kern, No. CVF0500873RECTAG, 2005
WL 3031466, at *9 (E.D. Cal. Nov. 4, 2005) (same).
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D. Ertz’s Remaining Arguments Are Waived
In passing, Ertz asserts that (1) “[i]f a category of damages is properly before the
court, no action lies under the FDCPA for either the category or the amount sought;”60
(2) the FDCPA requires a debtor to allege “that the claim for fees was not meritorious;”61
and (3) this action is not ripe because “the matters still rests [sic] with the Alaska District
Court that heard the trial in this case.”62 Ertz cites no authority in support to any of
these arguments. They are waived.63
V. CONCLUSION
Based on the preceding discussion, the motion at docket 9 is DENIED.
DATED this 22nd day of December 2016.
/s/ JOHN W. SEDWICK
SENIOR JUDGE, UNITED STATES DISTRICT COURT
60Doc. 10 at 5.
61Id. at 6.
62Id.
63See United States v. Graf, 610 F.3d 1148, 1166 (9th Cir. 2010) (“Arguments made in
passing and not supported by citations to the record or to case authority are generally deemed
waived.”).
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