Opinion
8:01CV367
August 5, 2002
MEMORANDUM AND ORDER
This matter is before the court on defendant's objection, Filing No. 36, to the magistrate's report and recommendation of March 26, 2002, Filing No. 33, and on defendant's motion to dismiss, Filing No. 13. This case involves numerous related cases wherein the plaintiffs have sought class certification. The amended complaint alleges violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the Nebraska Consumer Protection Act (NCPA), Neb. Rev Stat. § 59-1602 and Neb. Rev. Stat. §§ 25-1708 and 25-1801. Plaintiffs are five Omaha consumers who were sued by the defendant in Douglas County District Court to collect on medical bills that had not been paid. The defendant is a collection agency. The plaintiffs have now sued the defendant.
Class Certification
Plaintiffs requested class certification. The magistrate held a hearing on this request on or about February 13, 2002. He also received evidence and briefs in support of and in opposition to the request to certify the class. The magistrate issued his report on March 26, 2002, and recommended that I certify the case as set forth in his memorandum. Thereafter, the defendant filed an objection to the magistrate's recommendation. Filing No. 36. I have carefully reviewed the transcript of proceedings, the magistrate's report and recommendation, and the evidence and briefs submitted in support of and in opposition to the request for class certification. I find that the magistrate has done an excellent job analyzing the facts and applying the appropriate law on this issue. Consequently, I adopt the report and recommendation of the magistrate as to class certification.
Motion to Dismiss
Defendant has filed a motion to dismiss in this case alleging that plaintiffs have failed to set forth a claim upon which relief can be granted under either the Fair Debt Collection Practices Act or under the Nebraska Consumer Protection Act. I shall deny the motion as hereinafter set forth.
Standard of Review
The burden is on the moving party to show that plaintiffs cannot prove any set of facts that would entitle them to relief. Hishon v. King Spalding, 467 U.S. 69, 73 (1984). The complaint must be liberally construed in the light that is most favorable to the plaintiff. Carpenter Outdoor Advertising Co. v. City of Fenton, 251 F.3d 686, 688 (8th Cir. 2001).
Preemption
Defendant argues that Count II of the amended complaint should be dismissed, as it alleges a Nebraska Consumer Protection Act cause of action which defendant argues is preempted by FDCPA.
The FDCPA states:
This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.15 U.S.C. § 1692(n). Defendant argues that the NCPA does not satisfy preemption principles. The NCPA, argues defendant, does not specifically address debt collection activities. Defendant relies on Thrasher v. Cardholders Services, 74 F. Supp.2d 691 (S.D.Miss. 1999) (overruled on other grounds), wherein the court concluded that causes of action for intentional or negligent infliction of emotional distress for abusive debt collection practices was an "obstacle to the accomplishment and execution of the full purposes and objectives of Congress in the FDCPA." Id. at 695. However, at least one other district court in Mississippi has held otherwise. See Virgil v. Reorganized M.W. Co., Inc, 156 F. Supp.2d 624 (S.D.Miss. 2001) (distinguishing Thrasher and holding that plaintiff's state law tort claims not completely preempted by the FDCPA). Also, defendant contends that plaintiffs are requesting separate damages, and thus the claims conflict with the liability limitation found in FDCPA, 15 U.S.C. § 1692k(a)(2). Defendant further argues that the NCPA does "not apply to actions or transactions otherwise permitted, prohibited, or regulated under laws administered by . . . any . . . regulatory body or officer acting under statutory authority of this state or the United States. Neb. Rev. Stat. § 59-1617. The Federal Trade Commission governs the FDCPA, and therefore, argues defendant, the actions of the defendant are regulated by that body.
Plaintiffs argue that the state law does provide greater protection than the federal law in the areas of enjoining the defendant, allowing the court to increase actual damages, and costs and attorney's fees. See Neb. Rev. Stat. § 59-1609. The FDCPA is quiet as to injunctive relief. Further, the state law has a four-year statute of limitations as compared to the one-year statute of limitations under FDCPA. In addition, plaintiffs argue that the Federal Trade Commission is not a regulatory body but rather is an enforcement agency. See State v. Reader's Digest Ass'n, Inc., 81 Wn.2d 259, 501 P.2d 290 (1972); State v. Sterling Theatres Co., 64 Wn.2d 761, 394 P.2d 226 (1964). As plaintiffs point out, the defendant does not cite to any authority which shows that the FTC or its rules govern this kind of behavior. Plaintiffs contend that it can prove facts that entitle them to relief.
I agree with plaintiffs' arguments. In general, there is a presumption against complete preemption. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 518 (1992). As argued by the plaintifffs, the NCPA expands plaintiffs' consumer rights, and there has been no showing that the NCPA is inconsistent with the FDCPA. However, at the time of trial, if the evidence and legal arguments presented show inconsistencies between the state law and federal law, I shall address those individual issues at that time.
The possibility that a provision of the Nebraska statute might conflict with a provision of the federal statute will not invalidate the Nebraska statute. I conclude that the NCPA is not preempted by the FDCPA.
Attorney Fees and Costs
Plaintiffs argue that the defendant violated the FDCPA, because it "demanded in the Collection Suit(s) and collected from the consumer debtors" before any kind of judgment was entered in favor of the defendant. Amended Complaint, ¶ 24. Defendant argues that Nebraska state law permits it to ask for fees, costs and interest in its petition.
Plaintiffs contend that defendant violated § 1692f the FDCPA when it required them to pay costs and attorney fees to settle their accounts. Defendant argues that the FDCPA permits it to recover interest, fees and costs pursuant to Nebraska law. The court notes, however, that the issue in this case has nothing to do with whether defendant asks for these costs in its petition. The issue is whether defendant can collect these monies absent a court judgment. Section 1692f states:
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
(1) The collection of any amount (including interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.15 U.S.C. § 1692f. There is no showing from either party, nor does my review of the documents indicate, that the agreements between the plaintiffs and the creditors allowed for collection of attorney fees and costs. Thus, the issue is whether Nebraska law permits the recovery of costs and fees. Nebraska law allows the recovery of interest, costs and fees in certain circumstances:
Any . . . corporation in this state having a claim which amounts to two thousand dollars or less against any person . . . for (1) services rendered, . . . or (8) charges covering articles and service affecting the life and well-being of the debtor which are adjudged by the court to be necessaries of life may present the same to such person, . . . for payment in any county where suit may be instituted for the collection of the same. If, at the expiration of ninety days after the presentation of such claim, the same has not been paid or satisfied, . . . it may institute suit thereon in the proper court. If . . . it establishes the claim and secures judgment thereon, . . . it shall be entitled to recover the full amount of such judgment and all costs of suit thereon, and, in addition thereto, interest on the amount of the claim at the rate of six percent per annum from the date of presentation thereof, and, if . . . it has an attorney employed in the case, an amount for attorney's fees as provided in this section.
Section 25-1801 further provides:
Attorney's fees shall be assessed by the court in a reasonable amount but shall in no event be less than ten dollars when the judgment is fifty dollars or less and when the judgment is over fifty dollars up to two thousand dollars the attorney's fee shall be ten dollars plus ten percent of the judgment in excess of fifty dollars.
Defendant relies heavily on Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767 (8th Cir. 2001). In Freyermuth, the court was asked to determine if a collector's attempt to collect service fees was permissible under § 1692f. The Eighth Circuit determined that although there existed no provision in the agreement allowing service fees, Nebraska law specifically allowed recovery of incidental damages. See Neb. Rev. Stat. § 2-710.
That section does not mention a requirement that judgment be entered prior to an award of incidental damages. Freyermuth, however, did not deal specifically with § 25-1801 which is at issue in the case before me. Likewise, the case of Duffy v. Landberg, 215 F.3d 871 (8th Cir. 2000) relied on by the defendant is not helpful. In that case, a Minnesota statute existed that specifically allowed collection of service charges. Again, there was no issue as to whether the case had to proceed to judgment.
The statute in the case before me provides for fees, costs and interests upon judgment in a case. Defendant argues that it has only sought attorney fees in the amount set by law. Further, defendant contends that there is nothing in the law to prohibit it from collecting attorney fees from the plaintiffs. Defendant fails to address the distinction between filing a petition and asking for fees, which is perfectly permissible, and sending collection notices demanding attorney fees and collecting fees prior to securing a judgment in the case. This creates a factual question not subject to a motion to dismiss.
Further, when defendant dismissed the county court cases, plaintiffs contend that the dismissal indicated that defendant would pay the court costs. In fact, the court costs were paid by the plaintiffs to the defendant. This, plaintiffs argue, is also an unfair and deceptive trade practice. Further, plaintiffs allege that defendant never hired an attorney as required before fees are available under Neb. Rev. Stat. § 25-1801. Instead, they argue, the defendant hired a collection agency who has in-house counsel. As such, plaintiffs contend that the collection agency would not be entitled to collect funds.
I conclude that defendant's motion to dismiss should be denied. Parties must plead and prove all conditions precedent to be entitled to allowance of attorney fees. Guaranteed Foods of Nebraska, Inc. v. Rison, 299 N.W.2d 507, 513-14 (Neb. 1980). No finding that these debts were for necessaries or services has been made, and no judgment was secured as required by statute prior to collecting attorney fees. Neb. Rev. Stat. § 25-1801. I find that plaintiffs have alleged facts sufficient to state a claim against the defendants.
THEREFORE, IT IS ORDERED:
1. The defendant's motion to dismiss, Filing No. 13, is hereby denied;
2. The defendant's objection to the magistrate's report and recommendation, Filing No. 36, is hereby overruled;
3. The magistrate's report and recommendation, Filing No. 33, is hereby adopted.