Washington v. Stewart, Zlimen, & Jungers, LTD.

Background

JaRonda Washington and Nicole Smith filed separate federal cases against Stewart, Zlimen & Jungers, Ltd. (SZJ), a debt collector. SZJ had filed separate debt-collection lawsuits against them in Ramsey County Conciliation Court on behalf of LVNV Funding, LLC. The lawsuits sought the alleged principal debts, an $85 filing fee, and “disbursements.”

Washington and Smith alleged that SZJ violated the Fair Debt Collection Practices Act (FDCPA), a federal law regulating debt collection, in two ways. First, they claimed that the request for disbursements was false because SZJ was unlikely to incur any additional recoverable expenses and did not intend to seek them. Second, they claimed that SZJ violated a Ramsey County standing order requiring a party seeking judgment in a consumer-credit case to possess and present evidence of the original debt and a complete chain of assignment to the party seeking payment.

The conciliation court entered judgments in favor of Washington and Smith after finding that LVNV had not shown that the particular debts were included in the assignments. Washington and Smith then filed these federal cases. SZJ moved to dismiss both complaints under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Disbursement Requests

The court analyzed the disbursement allegations under 15 U.S.C. § 1692e, which prohibits false, deceptive, or misleading representations in debt collection. It explained that the statements appeared in the equivalent of a request for relief in a court filing. Under controlling Eighth Circuit precedent, a debt collector’s good-faith request to a court for relief generally does not violate the FDCPA.

The court found that Washington and Smith’s allegations that SZJ had no intention of seeking disbursements were conclusory, meaning they stated the conclusion without enough supporting facts. The complaints did not allege that SZJ routinely used false disbursement requests to pressure unrepresented consumers, abandoned those requests when consumers defended themselves, or engaged in other conduct showing bad faith. The court also noted that Minnesota law permits a prevailing party in a conciliation-court case to recover some disbursements, and that the possibility that SZJ would not ultimately recover them did not establish bad faith.

Standing-Order Allegations

The court treated the allegations concerning the standing order as claims under 15 U.S.C. § 1692f(1), which prohibits collecting amounts not authorized by the debt agreement or permitted by law. The court emphasized that Washington and Smith were not arguing that they did not owe the debts or that LVNV was not lawfully assigned them. They also disclaimed relying on the state court’s conclusion that LVNV had failed to prove its standing.

The court held that the failure to possess or present adequate assignment documentation, and the resulting loss in conciliation court, did not by itself establish an FDCPA violation. The FDCPA does not turn every violation of state debt-collection procedure into a federal claim. The court concluded that the alleged violation of the Ramsey County standing order therefore did not state a plausible claim under the FDCPA.

Ruling

Judge Eric C. Tostrud granted SZJ’s motion to dismiss in Washington’s case, No. 19-cv-0717, and granted SZJ’s motion to dismiss in Smith’s case, No. 19-cv-0761. The order directed that judgment be entered accordingly.