Bell v. Portfolio Recovery Associates, LLC

Background

Danielle Bell and Marline Blake each defaulted on a Home Depot credit card. Bell also defaulted on two other consumer debts. Portfolio Recovery Associates, LLC bought the debts and hired Rodenburg LLP to collect them. Through Rodenburg, Portfolio Recovery Associates filed Minnesota state-court lawsuits against Bell and Blake.

The plaintiffs alleged that Portfolio Recovery Associates did not file the cost bond required by Minnesota Statutes § 549.18 before serving them with the lawsuits. That statute requires a nonresident plaintiff to file a bond of at least $75 before serving a summons. The state-court lawsuits were later dismissed; Blake alleged that her case was dismissed without prejudice because the bond was not paid.

Bell separately alleged that, after her attorney told the defendants he represented her in matters concerning her debts, the defendants served her directly with the summons and complaint for another debt rather than communicating with her attorney. Bell withdrew one claim under 15 U.S.C. § 1692b(6), but continued pursuing other claims. Both plaintiffs sought actual damages, statutory damages, attorney’s fees, and costs.

Standing

The defendants argued that the plaintiffs lacked standing because they had alleged only a violation of the Fair Debt Collection Practices Act, without a separate legally recognized injury. The plaintiffs argued that they were injured because they had to respond to lawsuits without the protection of the required bond.

The court rejected that theory, explaining that the cost-bond statute did not require defendants in the state-court lawsuits to be notified that a bond had been filed. But the court held that the plaintiffs’ allegations of emotional distress were sufficient, at that stage, to establish standing. The court therefore did not dismiss the cases for lack of standing.

Failure to State a Claim

The court held that violating the Minnesota cost-bond requirement did not, by itself, violate the Fair Debt Collection Practices Act.

Direct service on Bell. Minnesota law permits service of a summons and complaint by delivering it to the individual. Although an individual may appoint an agent to receive service, the court held that Bell did not allege that she appointed her attorney as her service agent. Even if she had, the Minnesota rule did not require the defendants to serve her attorney. The court dismissed Bell’s claim that serving her directly violated the Fair Debt Collection Practices Act.

Harassment, oppression, or abuse. The plaintiffs argued that filing lawsuits without the bond violated 15 U.S.C. § 1692d, which prohibits conduct whose natural consequence is to harass, oppress, or abuse someone in connection with debt collection. The court held that the alleged failure to file the bond did not constitute such conduct and dismissed those claims.

False representations. The plaintiffs relied on 15 U.S.C. §§ 1692e and 1692e(10), which prohibit false representations and deceptive collection methods. The court held that failing to file the bond was a failure to comply with an administrative or procedural requirement, not a false or misleading representation. It also held that beginning a lawsuit without a $75 bond was not a material representation of anything. The court dismissed the claims under §§ 1692e and 1692e(10).

Character, amount, or legal status of the debt. The plaintiffs argued that filing without the bond falsely represented the debt’s legal status. The court held that filing an action without the bond said nothing about the underlying debt and dismissed the claim under § 1692e(2)(A).

Unfair or unconscionable collection methods. The plaintiffs argued that serving a state-court lawsuit without filing the bond violated 15 U.S.C. § 1692f. The court held that failure to post the bond was not an unfair or unconscionable method of collecting a debt and dismissed the § 1692f claims.

Constitutional challenge

The defendants asked the court to declare Minnesota’s cost-bond requirement unconstitutional because it requires only nonresident plaintiffs to post the bond. The court declined to consider that challenge. It noted that the issue had also been presented to the state court, that the state attorney general had not yet received the notice required for a federal constitutional challenge, and that the plaintiffs’ failure to state a claim made these cases inappropriate vehicles for deciding the constitutional question.

Disposition

The court ordered that the defendants’ motions to dismiss in Bell v. Portfolio Recovery Associates, No. 18cv1027, were granted, and that the defendants’ motions to dismiss in Blake v. Portfolio Recovery Associates, No. 18cv1028, were granted. The court further ordered that the matter was dismissed with prejudice and directed that judgment be entered. Judge Paul A. Magnuson signed the order.