Rankin v. Direct Recovery Services, LLC

Background

Bruce Rankin brought a putative class action under the Telephone Consumer Protection Act and an individual claim under the Fair Debt Collection Practices Act. He alleges that Direct Recovery Services, LLC made automated calls to his cellphone while attempting to collect a debt incurred by his brother. Rankin alleges that he was not responsible for that debt and that several calls occurred without his consent, including calls after he asked Direct Recovery to stop calling.

The amended complaint asserts a proposed No Consent Class and a proposed “Stop Calling” Subclass under the Telephone Consumer Protection Act. It seeks statutory and injunctive relief for the telephone calls. Rankin also seeks statutory and actual damages, attorney fees, costs, and other relief under the Fair Debt Collection Practices Act. DNF Associates, LLC, which hired Direct Recovery to collect the debt, is also a defendant. The amended complaint alleges that DNF and Direct Recovery are jointly and severally liable, although DNF denies that allegation.

Procedural history

The Clerk of Court entered default against Direct Recovery after it failed to participate as required. Rankin later moved for default judgment. The court previously denied that motion without prejudice and ordered the parties to work toward settlement. It later appointed James M. Rosenbaum as special master and ordered the parties to arrange mediation.

Magistrate Judge Leo I. Brisbois recommended finding Direct Recovery in contempt for failing to obtain counsel to negotiate settlement and, if necessary, file a response to the amended complaint. He also recommended entering default judgment against Direct Recovery as a sanction. Direct Recovery did not object. DNF agreed that Direct Recovery should be found in contempt and that default judgment was an appropriate sanction, but asked the court to delay entry of judgment until the case against DNF was resolved. Rankin did not respond to DNF’s objections.

Court’s analysis

The court explained that default judgment is discretionary and that courts generally avoid entering a judgment against one of several similarly situated defendants when doing so could produce inconsistent results. Because the amended complaint ties DNF’s alleged liability to Direct Recovery’s conduct, a judgment against Direct Recovery could affect the claims against DNF. The court therefore concluded that entry of default judgment should be deferred until the merits of the case are resolved.

The court also stated that delaying default judgment would be supported if Rankin asserted that DNF was vicariously liable for Direct Recovery’s conduct, although the court noted that Rankin had not made that allegation. The court did not decide whether DNF is jointly and severally liable or otherwise liable for Direct Recovery’s conduct.

Order

Judge Michael J. Davis adopted the report and recommendation with a modification. The court adopted the recommendation finding Direct Recovery in contempt and finding that default judgment would be an appropriate sanction. But the court modified the recommendation by holding entry of default judgment against Direct Recovery in abeyance until resolution of the case on the merits.

The court also ordered the parties to contact Special Master Rosenbaum within one week to schedule a private mediation. Within two weeks, the parties had to submit a joint report under Federal Rule of Civil Procedure 26(f) and contact Judge Brisbois’s chambers to schedule a scheduling conference. The order did not enter default judgment against Direct Recovery at that time.