Johnson v. Landlord Resource Network, LLC

Background

The three plaintiffs alleged that their landlords hired Landlord Resource Network, LLC (LRN), which described itself as a “law firm for landlords,” to pursue eviction proceedings. Each plaintiff alleged that LRN sought to collect amounts that were not contractually or legally owed and thereby violated several provisions of the Fair Debt Collection Practices Act (FDCPA), including 15 U.S.C. §§ 1692e, 1692e(2), 1692e(3), 1692e(10), and 1692f(1).

Joyce Johnson alleged that her landlord improperly assessed a second $796 charge related to a United States Department of Housing and Urban Development rent overpayment. She also alleged that the landlord refused her rent payments for the correct amount and then treated her account as delinquent. In the resulting eviction case, LRN allegedly sought the $796 charge and unpaid rent.

Benjamin Prigge alleged that LRN pursued an eviction action claiming he owed almost $3,000, overstating the amount by $374. Kimberly Heins alleged that LRN pursued an eviction action seeking more than $4,000, including several hundred dollars in fees that her landlord could not legally collect. She also alleged that an earlier court-negotiated resolution eliminated her responsibility for those fees.

The plaintiffs filed these FDCPA lawsuits in Minnesota state court. LRN removed them to federal court, answered the complaints, and then filed motions for judgment on the pleadings in each case.

Legal standard

A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) is evaluated under the same standard as a motion to dismiss for failure to state a claim under Rule 12(b)(6). At this stage, the court accepts well-pleaded factual allegations as true and asks whether they plausibly show a right to relief. The court does not accept wholly conclusory allegations or legal arguments as facts.

LRN’s argument

LRN argued that its conduct in the eviction proceedings involved only enforcement of a security interest. The FDCPA has a primary definition of “debt collector” that covers a person who regularly collects or attempts to collect debts owed to another. It also has a narrower definition covering businesses whose principal purpose is enforcing security interests, but only for purposes of 15 U.S.C. § 1692f(6).

LRN relied on the Supreme Court’s decision in Obduskey v. McCarthy & Holthus LLP, which held that a business engaged in nothing more than enforcing a security interest falls under the narrower definition and is subject to the FDCPA only for a claim under § 1692f(6). Because the plaintiffs did not bring claims under § 1692f(6), LRN argued that they had not adequately alleged that it was a debt collector for purposes of their claims.

Court’s analysis

The court rejected LRN’s attempt to apply Obduskey as a matter of law to Minnesota eviction actions. First, the court explained that Obduskey did not establish a test for deciding whether particular conduct has the primary purpose of enforcing a security interest. The Supreme Court had addressed a case in which it was undisputed that the defendant was pursuing nonjudicial foreclosure of property protected by a mortgage, a classic security interest. The Supreme Court did not decide whether eviction proceedings constitute security-interest enforcement.

Second, the court stated that LRN cited no authority equating a Minnesota eviction action with enforcement of a security interest. The court noted that Minnesota eviction proceedings are summary proceedings to remove a tenant and restore the landlord’s possessory interest, while a separate action is required to recover unpaid rent. It also noted decisions from the District of Minnesota describing an eviction action as equivalent to a demand for rent and therefore as debt-collection activity under the FDCPA.

Because LRN did not establish that pursuing an eviction action has the primary purpose of enforcing a security interest, the court concluded that the plaintiffs had sufficiently alleged that LRN was a “debt collector” under the FDCPA’s primary definition. The court therefore did not dismiss the FDCPA claims at the pleadings stage.

Ruling

Judge Katherine Menendez denied LRN’s motions for judgment on the pleadings in all three cases: No. 24-cv-2602, Dkt. 25; No. 24-cv-3328, Dkt. 21; and No. 24-cv-4105, Dkt. 13. The court also denied without prejudice the plaintiffs’ motions for partial summary judgment concerning discovery relevant to their claims and LRN’s defenses.