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Gorden v. Discover Bank

United States District Court, E.D. Pennsylvania

April 8, 2015




This is an action against Defendant Discover Bank brought under a variety of consumer protection statutes after it attempted unsuccessfully to collect from Plaintiff Elizabeth Gorden on a credit card debt past the statute of limitations. The Complaint was served at an Ohio address from which Discover initiates most, if not all, of its collection actions nationwide, including the underlying suit that was brought against Plaintiff here. Although the record unambiguously confirms delivery to that address, Discover maintains that it never received the Complaint, and further contends that, although it operates its credit card and other lending businesses nationwide, it only "does business" from a single branch location in Greenville, Delaware. It now seeks to vacate a default that was entered against it in state court.

I am satisfied that service here met the requirements of Ohio law, and the requirements of due process, and see no purpose to be served in requiring a consumer to navigate a labyrinth of complex corporate agreements as a prerequisite to filing a countersuit alleging improper debt collection practices. Accordingly, the Motion to Vacate will be denied.

I. Factual Background

Defendant Discover Bank sued Plaintiff Elizabeth Gorden in the Municipal Court of Philadelphia seeking to recover a credit card debt. The Municipal Court found for the Plaintiff because Defendant's claim was barred by the statute of limitations. Plaintiff then brought this action in the Philadelphia Court of Common Pleas alleging claims under Pennsylvania's Fair Credit Extension Uniformity Act, Unfair Trade Practices and Consumer Protection Law, and the Dragonetti Act.[1]

In initiating her claim, Plaintiff attempted to serve process upon Defendant via U.S. Postal Service Certified Mail sent to Discover Bank c/o DB Servicing Corporation, 6500 New Albany Rd., New Albany, OH 43054. Pl. Brief Ex. 1. The certified mail return receipt shows that delivery was made on March 11, 2013. Id . The signature block contains the word "Dynamex 70" and the received-by field contains the name "M. Rorig, " who checked the box denoting agent of the recipient. Id . No answer was filed or served by Defendant. On June 5, 2013, Plaintiff filed an Affidavit of Service with the Court of Common Pleas certifying that service had been completed on March 11, 2013, at the aforementioned address. Def. Brief Ex. B. On June 5, 2013, a "Ten Day Notice" of intent to take a default was sent to Defendant via first class mail at the same address.[2] Pl. Brief Ex. 2.

A default judgment was entered on December 3, 2013, and a trial for damages was scheduled for April 21, 2014. A court-mandated settlement conference was held, after which Defendant removed this action to federal court. Discover then moved to vacate the default judgment entered by the Court of Common Pleas, and I permitted discovery on the issues presented by its Motion.

On the basis of the evidence presented after discovery, I conclude as follows. Discover Bank, DB Servicing Corporation, DFS Corporate Services LLC, and Discover Properties LLC are all subsidiaries of Discover Financial Services. Pl. Brief Ex. 6(a). Discover Financial Services is the "parent holding company in the Company's organizational structure and the direct parent of Discover Bank." Pl. Brief Ex. 15. In filings with the Federal Deposit Insurance Corporation, the New Albany facility was identified as housing support for Discover Bank's "core business lines." Pl. Brief Ex. 15. The New Albany facility in question is owned by Discover Properties LLC. Id . Dynamex Inc. is contracted by DFS Corporate Services LLC to "provide additional scheduled daily pick up of mail from the New Albany post office and delivery to the DFS data center at... 6500 New Albany Road." Def. Reply Brief Ex. 1 at 01201.

Dynamex had a contract with DFS Corporate Services, LLC on behalf of itself and its affiliates, "collectively, DFS.'" Pl. Brief Ex. 6. In filings made with the Securities Exchange Commission, both Discover Bank and DFS Corporate Services are identified as Discover Financial Services subsidiaries. Pl. Brief Ex. 6(a). I am persuaded that this relationship between the various Discover entities renders them "affiliates" as that term is used in the Dynamex contract.

DB Servicing Corporation is the servicing entity for Discover Bank. Pl. Brief Ex. 5; Suess Dep. at 15, 23. As such, it engages in recovery and collection operations on behalf of Discover Bank, and only Discover Bank. Suess Dep. at 19-20, 23. Discover Bank and DB Servicing use the same account management system, and when an account falls behind in payments, it automatically falls into collections. Id. at 26-28. When a delinquent account goes to litigation, DB Servicing places those accounts with local counsel to pursue that litigation. Id. at 42. All of DB Servicing's recovery operations are based out of the New Albany facility. Id. at 43. The representative of DB Servicing who was designated by Defendant to give deposition testimony, Michael Suess, stated that he had seen collection counsel use the New Albany address in litigation without including "Care of DB Servicing Corporation" as well as with the phrase included. Id. at 52.

Discover Bank is the plaintiff in these collection actions, and does not assign its claims. Id. at 38. Thus, while DB Servicing is authorized to bring suits on behalf of Discover Bank, absent an assignment, it can only do so as an agent of Discover Bank, because Discover Bank would be the only party with standing. Discover concedes that funds generated through the activities of DB Servicing at New Albany Road do in fact find their way to Discover Bank. Id. at 11.

Defendant disputes that DB Servicing ever received the complaint at the New Albany address, but cannot dispute that DB Servicing's agent picked up and signed for the Complaint.

II. Legal Standard

Because this case has now been removed from state court, the Federal Rules of Civil Procedure will govern the motion to vacate. Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda Cnty., 415 U.S. 423, 438 (1974); Fed.R.Civ.P. 81(c). Rules 55(c) and 60(b) specify when a default judgment should be vacated. Rule 55(c) states that "[t]he court may set aside an entry of default for good cause, and it may set aside a default judgment under Rule ...

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