The opinion of the court was delivered by: (judge Caputo)
Presently before the Court are Motions to Dismiss Plaintiffs' ("Shouse") Amended Complaint brought by Defendant National Corrective Group ("NCG"), Defendant Jarbola ("Jarbola") and Defendants Levine Leichtman Capital Partners, Inc., ("LLCP") and Levine Leichtman Capital Partners III, L.P. ("LLCP III"). For the reasons discussed below, Defendant NCG's Motion to Dismiss will be granted in part and denied in part, Defendant Jarbola's Motion to Dismiss will be granted, and the Court will allow Plaintiffs jurisdictional discovery of Defendants LLCP and LLCP III's before deciding their Motion to Dismiss.
The instant suit arises out of a "bad check restitution program" operated by NCG under the auspices of local district attorneys' offices. Shouse and the other plaintiffs are residents of various counties in Pennsylvania who have been targeted by this program and allege to have been subject to abusive and unlawful practices as a result. Shouse' Complaint alleges as follows.
NCG is the latest iteration of a business enterprise that was originally begun by Donald Mealing. Mealing founded American Corrective Counseling Services ("ACCS") in 1987. His original business model was to establish a bad check collection agency that would operate under the auspices of county district attorneys, a model designed to increase the likelihood of recovery of the debts. (Am. Compl. ¶ 18.) In 2004, Equity Pacific Advisors ("EPA"), with financing from LLCP III, bought Mealing's business. (Am. Compl. ¶ 19.) In exchange for providing financing, LLCP II was granted securities in the new company. When the business began to suffer after facing several class action lawsuits regarding its business practices, ACCS was unable to meet its payment obligations to LLCP III. As a result, LLCP began exerting greater control over the day to day operations. Facing more lawsuits, LLCP took ACCS into bankruptcy. (Am. Compl ¶ 26.) Several months after the bankruptcy filing, LLCP III bought ACCS's assets and formed a new wholly owned subsidiary, NCG. LLCP continues to own, operate, and control NCG. (Am. Compl. ¶ 31.)
NCG is a private debt-collection company that specializes in collecting dishonored checks. (Am. Compl. ¶ 2.) As stated above, what is unique about NCG's business model is that it operates under the purview of local district attorney's offices. Under the agreements that NCG has with these district attorneys, including Jarabola, NCG is allowed to use the district attorney's office, official letterhead, and signature in communicating with individuals who have issued checks that have been dishonored. (Am. Compl. ¶ 3.) Shouse contends that these communications are designed to intentionally mislead the recipient into believing that they are dealing with the district attorney's office when in fact they are dealing with a private debt collection agency, and that they are then essentially coerced into paying for an expensive "diversion" program under the implicit threat that unless they do so they will be criminally prosecuted. (Am. Compl. ¶ 5.)
Shouse also alleges that after establishing these bad check diversion programs with local district attorneys, NCG would receive bad checks directly from retailers, rather than through the district attorney's office, in contravention to Pennsylvania law and the terms of their agreements with the district attorneys. (Am. Compl. ¶ 41.)
Shouse filed the instant suit as a purported class action on January 25, 2010, (Doc. 1) and amended her Complaint on April 19, 2010 (Doc. 25). In her Amended Complaint, Shouse brought claims for violations of the RICO statute (Count I), the Fair Debt Collection Practices Act ("FDCPA") (Count II), the Fair Credit Extension Uniformity Act (Count III); the Unfair Trade Practices and Consumer Protection Law (Count IV); 42 U.S.C. § 1983 (Counts V and VI), the Pennsylvania Constitution (Count VII), Negligent Misrepresentation (Count VIII), and Unjust Enrichment (Count IX). Defendants then filed Motions to Dismiss. NCG, in their Brief in Support of their Motion to Dismiss, (Doc. 36), argues that they are immune from suit under an exception to the Fair Debt Collection Practices Act that shields them from liability. They also argue that Shouse has not pled enough facts to make out a legally cogent claim for a violation of her rights under federal law. D.A. Jarbola, in his Brief in Support of his Motion to Dismiss, (Doc. 31) argues that he is immune from suit on absolute and qualified immunity grounds. In their Brief in Support of their Motion to Dismiss, (Doc. 72) LLCP and LLCP III argue that the Court cannot validly exercise person jurisdiction over them.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if, accepting as true all the facts alleged in the complaint, a plaintiff has not pleaded "enough facts to state a claim to relief that is plausible on its face," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007), meaning enough factual allegations "'to raise a reasonable expectation that discovery will reveal evidence of'" each necessary element, Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556); see also Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993) (requiring a complaint to set forth information from which each element of a claim may be inferred). In light of Federal Rule of Civil Procedure 8(a)(2), the statement need only "'give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'" Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam) (quoting Twombly, 550 U.S. at 555). "[T]he factual detail in a complaint [must not be] so undeveloped that it does not provide a defendant [with] the type of notice of claim which is contemplated by Rule 8." Phillips, 515 F.3d at 232; see also Airborne Beepers & Video, Inc. v. AT&T Mobility LLC, 499 F.3d 663, 667 (7th Cir. 2007).
In deciding a motion to dismiss, the Court should consider the allegations in the complaint, exhibits attached to the complaint, and matters of public record. See Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993). The Court may also consider "undisputedly authentic" documents when the plaintiff's claims are based on the documents and the defendant has attached copies of the documents to the motion to dismiss. Id. The Court need not assume the plaintiff can prove facts that were not alleged in the complaint, see City of Pittsburgh v. W. Penn Power Co., 147 F.3d 256, 263 & n.13 (3d Cir. 1998), or credit a complaint's "'bald assertions'" or "'legal conclusions,'" Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997)). "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009). When considering a Rule 12(b)(6) motion, the Court's role is limited to determining whether a plaintiff is entitled to offer evidence in support of her claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court does not consider whether a plaintiff will ultimately prevail. See id. A defendant bears the burden of establishing that a plaintiff's complaint fails to state a claim. See Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).
I. NCG's Motion to Dismiss
A. The FDCPA Exception for Pretrial Diversion Programs for Bad Check Offenders
Defendant NCG's Motion to Dismiss will be denied because Shouse has pled sufficient facts to make a claim that 15 U.S.C. § 1692p does not apply to NCG.
Shouse alleges that NCG has violated the FDCPA with its collection tactics and business strategy.
The Fair Debt Collection Practices Act prohibits the use of abusive, deceptive, and unfair debt collection practices by persons engaged in the business of collecting debts owned by consumers to third parties.
H.R. Rep. No. 99-405 (1985).
NCG, in its Reply, does not defend their practices specifically but instead points to a 2006 amendment to the FDCPA. As NCG rightly points out, 15 U.S.C. § 1692p was added to the FDCPA and created an explicit exception for district attorney-sanctioned pretrial diversion programs for alleged bad check offenders. The exception states that:
[A] private entity shall be excluded from the definition of a debt collector. . . if a State or district attorney establishes, within the jurisdiction of such State or district attorney and with respect to alleged bad check violations. . . a pretrial diversion program for alleged bad check offenders who agree to participate ...