Klein v. Affiliated Group, Inc., The

Background

Dina Klein alleged that The Affiliated Group, Inc. and Credit Management, L.P., both debt collectors, violated the Fair Debt Collections Practices Act (FDCPA) while attempting to collect $1,084.35 in medical-account debt associated with North Memorial Health Care. Among other allegations, Klein claimed that Credit Management falsely represented that North Memorial had transferred the account to it after first giving the account to The Affiliated Group.

Klein’s proposed second amended complaint added allegations concerning an agreement between North Memorial and the Minnesota Attorney General, later placed into an order entered by the Ramsey County District Court. Klein alleged that the agreement required North Memorial to have written contracts with collection agencies and that Credit Management lacked such a written contract when it attempted to collect the debt. She claimed that this conduct violated FDCPA provisions prohibiting threats to take actions that cannot legally be taken, false or misleading collection information, and collection of amounts not authorized by agreement or law.

Klein also moved to compel further testimony from The Affiliated Group under Federal Rule of Civil Procedure 30(b)(6), which allows an organization to designate a witness to testify about information known or reasonably available to the organization. The company had designated Eric Gopinski, but his testimony showed that he had not reviewed documents or consulted people outside counsel on several topics. He could not explain what written agreements governed the reassignment of North Memorial accounts from The Affiliated Group to Credit Management.

Motion to Amend

The court applied Federal Rules of Civil Procedure 15 and 16. Because the deadline in the scheduling order had passed, Klein had to show good cause for the late amendment. The court found good cause because Klein’s counsel represented that Klein received relevant agreement documents only two days before filing the motion and moved quickly afterward.

The court also rejected the defendants’ argument that amendment would be futile. In evaluating futility, the court considered whether the proposed complaint could survive a motion to dismiss. The court concluded that an alleged misrepresentation about the identity of the legally authorized collector could create a concrete risk of harm because a confused debtor might make payments to the wrong entity. The court did not consider Klein’s deposition testimony on that issue because it was outside the pleadings; the court stated that the defendants could rely on that testimony later in a summary-judgment motion.

The court further concluded that Klein could state an FDCPA claim based on the alleged violation of the North Memorial agreement, even though Klein and the defendants were not parties to that agreement. The court reasoned that Klein was not suing to enforce the agreement directly; she was alleging that conduct violating the agreement also violated the FDCPA’s prohibition on collecting amounts not permitted by law. The court found no undue prejudice from allowing the amendment.

The court therefore granted Klein’s Motion to Amend in its entirety. The order required Klein to file and serve a second amended complaint substantially in the form of the proposed complaint, without redline markings, by February 1, 2019. The defendants were required to respond consistently with the Federal Rules of Civil Procedure.

Motion to Compel and Sanctions

The court found that Gopinski was generally adequately prepared to testify about the broad deposition topics, and that his inability to answer some questions did not by itself show that he was entirely unprepared. However, the court found him unprepared concerning agreements involving the reassignment of North Memorial-related accounts from The Affiliated Group to Credit Management and agreements between North Memorial and Credit Management concerning Klein’s account.

The court granted the Motion to Compel in part. It allowed Klein to reconvene The Affiliated Group’s Rule 30(b)(6) deposition for the limited purpose of asking about relevant agreements, the reassignment of accounts, the people involved, the terms of any reassignment agreement, whether written agreements existed, and reasonable follow-up questions. Klein could also ask about The Affiliated Group’s knowledge of the agreement between North Memorial and Credit Management as it related to the specified deposition topics. The Affiliated Group was required to fully prepare its witness, including by reviewing relevant documents and obtaining information from other people as necessary.

The court denied the remainder of the Motion to Compel and denied Klein’s request for an advisory opinion about the scope of future discovery questions. It also denied monetary sanctions. The court explained that Federal Rule of Civil Procedure 37(d) generally applies when a party fails to appear for a deposition, not when a party appears but does not adequately answer questions. The court stated that it could consider sanctions under Rule 37(b) if The Affiliated Group later failed to properly prepare its witness on the topics identified in the order.

Disposition

The Motion to Amend was granted. The Motion to Compel and for Sanctions was granted in part and denied in part. The request for monetary sanctions was denied. This order addressed amendment and discovery; it did not decide whether the defendants ultimately violated the FDCPA.