Opinion
NO:01-585 C/W
July 27, 2001
Minute Entry
Before the Court is a Motion for Judgment on the Pleadings and/or for Summary Judgment (Rec. Doc. 51), filed by defendant Healthcare Recoveries, Inc., in Civil Action 01-650. Plaintiff, Kyle Hamilton, opposes the motion. The motion was set for hearing, with oral argument, on June 20, 2001. Following oral argument, the Court took the matter under advisement.
Plaintiff filed a Motion for Judgment (Rec. Doc. 49) which was also set for hearing on June 20, 2001. The Court denied that motion in open court that same date. See Rec. Doc. 60.
Having considered the applicable law arguments presented by counsel, the Court now concludes, for the reasons that follow, that the motion should be GRANTED IN PART AND DENIED IN PART. The motion is GRANTED with respect to the federal Fair Debt Collection Practices Act claims because the Court concludes that Plaintiff does not state a claim under the Act. The motion is DENIED WITHOUT PREJUDICE as to the state law claims pending a determination as to the Court's subject matter jurisdiction over those claims.
Background
The Court previously recounted this case's factual and procedural background when remanding Civil Action 01-585, which had been consolidated with the instant suit. See Hamilton v. United Healthcare Inc., 2001 WL 536300 (E.D. La. May 17, 2001). To the extent necessary to comprehend the legal issues currently before the Court, a brief recitation of the relevant background information follows.
In October 1999, Plaintiff was seriously injured in a motor vehicle accident. Plaintiff "a group health insurer, United Healthcare of Louisiana, Inc. ("United"), an entity not a party to the instant suit, paid for various medical and other services necessitated by the accident. Plaintiff also collected the proceeds from his uninsured and/or underinsured motorist' ("UM") policy. Shortly thereafter, defendant Healthcare Recoveries, Inc. ("HRI"), acting pursuant to a contractual arrangement with United, contacted Plaintiff in an attempt to enforce subrogation rights that United claimed to have against the proceeds from Plaintiff's UM policy. Plaintiff, through his counsel, forfeited $57,757.06 of the UM proceeds to HRI for disbursement to United.
Plaintiff filed Civil Action 01-585 in state court seeking to recoup those funds and enjoin further attempts by United and HRI to seek reimbursement from any future proceeds under the 1314 policy. After United removed the case to this Court, Plaintiff filed the instant suit, Civil Action 01-650, against IIRI claiming that HRI's efforts to enforce United's subrogation rights violated the Fair Debt Collection Practices Act ("FDCPA" or "the Act"), 15 U.S.C. § 1692, et sea., as well as the Louisiana Unfair Trade Practices Act ("LUTPA"), La. R.S. 51:1401, et seq. The cases were consolidated in this Court. On May 17, 2001, the Court remanded Civil Action 01-585 to state court after ." concluding that United had failed to establish subject matter jurisdiction. Rec. Doc. 48; Hamilton v. United Healthcare Inc., 2001 WL 536300 (E.D. La. May 17, 2001). ERI then filed the instant Motion for Judgment on the Pleadings and/or for Summary Judgment (Rec. Doc. 51).
Plaintiff's FDCPA claims against HRI are premised in part upon his argument that La. R.S. 22:663 precludes United from seeking reimbursement from the UM policy proceeds. This contention is the crux of Civil Action 01-585, which is now proceeding in state court.
Discussion
In support of its motion, HRI argues that Plaintiff does not state a claim under the FDCPA because HRI is not a "debt collector" within the meaning of the Act, and because the subrogation claim that HRI sought to enforce on behalf of United was not a "debt" within the meaning of the Act. HRI also argues that as a disclosed agent for United, it is not independently liable for alleged violations of Louisiana law committed while acting within the scope of its agency.
For purposes of determining whether Plaintiff states a claim under the FDCPA, the Court need not assume that United had a valid subrogation claim against the proceeds of Plaintiff's UM policy. See McCartney v. First City Bank, 970 F.2d 45, 47 (5th Cir. 1992) (holding that the Act applies regardless of whether a valid debt actually exists). The validity vel non of United's subrogation claim is currently before the state court in Civil Action 01-585. Accordingly, this Court makes no determination on that issue, and nothing contained in this ruling should be construed or interpreted otherwise.
1. Applicable Legal Standards
In considering a motion to dismiss, the complaint should be construed in favor of the plaintiff, and all facts pleaded should be taken as true. Southern Christian Leadership Conf. v. Supreme Court of the State of Louisiana, F.3d 2001 WL 575601, at *4 (5th Cir. 2001) (citing Brown v. Nationsbank Corp., 188 F.3d 579, 585-86 (5th Cir. 1999)). A Rule 12(b)(6) dismissal is appropriate only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (quoting Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 101, 2 L. Ed.2d 80 (1957)). "The question therefore is whether in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief." Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000) (citing 5 Charles A. Wright Arthur R. Miller, Federal Practice Procedure § 1357, at 601 (1969)).
To the extent HRI asserts that the subrogation claim was not a "debt" within the meaning of the FDCPA, HRI is in effect urging a Rule 12(b)(6) motion to dismiss. HRI styled its motion as one for judgment on the pleadings or in the alternative for summary judgment likely because the Court had denied a previous pre-answer motion to dismiss filed by HRI. That motion was denied on May 16, 2001, yet HRI to date has filed no answer to the original complaint and Plaintiff has not sought a default judgment. A Rule 12(c) motion is only proper where defendant has filed an answer to the complaint, see Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999), which means that HRI's motion, as it pertains to the "debt" issue, will be treated as one under Rule 12(b)(6). Rule 12(b)(6) defenses are not waived by failure to timely assert them, see Rule 12(h)(2), notwithstanding that failure to comply with the deadlines set forth in Rule 12(a) can leave defendant vulnerable to default, see Rule 55(a).
2. FDCPA Claims
The FDCPA was enacted in part to protect consumers from "abusive debt collection practices by debt collectors." 15 U.S.C.A. § 1692(e) (West 1998); McKenzie v. E.A. Uffman Assocs. Inc., 119 F.3d 358, 360 (5th Cir. 1997) (citing § 1692(e); Taylor v. Perrin, Landry, DeLaunay Durand, 103 F.3d 1232 (5th Cir. 1997)). The Act enumerates several abusive and unfair practices considered contrary to that goal, and forbids debt collectors from taking such action. Poirer v. Alco Collections, Inc., 107 F.3d 347, 349 (5th Cir. 1997).
A threshold requirement for application of the FDCPA is that the obligation at issue qualify as a "debt" as that term is defined in the Act. Hawthorne v. Mac Adjustment. Inc., 140 F.3d 1367, 1371 (11th Cir. 1998) (citing Mabe v. G.C. Servs. Ltd. Part., 32 F.3d 86 (4th Cir. 1994); Zimmerman v. UBO Affiliate Group, 834 F.2d 1163 (3d Cir . 1987));Riebe v. Juergensmeyer Assocs., 979 F. Supp. 1218, 1220 n. 3 (N.D. Ill. Oct. 31, 1997).
The FDCPA defines a "debt" as
[An]y obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.15 U.S.C.A. § 1692a(5) (West 1998)
As the definition makes clear, the term "debt" is not used in the broadest possible sense because "not all obligations to pay are considered "debts' under the act." Bass v. Stolper, Koritzinsky, Brester Neider, 111 F.3d 1322, 1324 (7th Cir. 1997); Garner v. Augustine, Kern Levins, Ltd., 1994 WL 48589 (N.D. Ill. Feb. 16, 1994). Rather, the term "debt," as defined in the Act, serves to limit the scope of the FDCPA to specific types of obligations, i.e., "those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services." Bass 111 F.3d at 1326 (citing Shorts v. Palmer, 155 F.R.D. 172 S.D. Ohio 1994); Mabe, 32 F.3d at 88). Accordingly, an insurer's claim for reimbursement against a tortfeasor is not a "debt" under the FDCPA because the obligation to pay arises from a tort rather than a consumer transaction. Hawthorne, 140 F.3d at 1371. And a personal loan used for venture capital in a software company is not a "debt" because its use is business-related or commercial in nature rather than personal' or household. Bloom v. I.C. System, Inc., 972 F.2d 1067, 1069 (9th Cir. 1992).
The scope of the Act is similarly limited by the terms "debt collector" and "consumer," Bass 111 F.3d at 1324 n. 3, two terms defined in the Act, as well as the term "transaction," a term not defined in the Act, Riebe, 979 F. Supp. at 1220-21.
Turning now to whether United's subrogation claim constitutes a "debt" so as to bring this case within the ambit of the FDCPA, the Court begins by noting that several key elements of the term "debt" appear to be present in this case. By contracting with United for health coverage, Plaintiff entered a consensual transaction for insurance, a good specifically enumerated in the definition. Unarguably, Plaintiff purchased that insurance for personal or family use. And to the extent that United has a valid subrogation claim, Plaintiff is obligated to pay money to United. Having clearly met all these requirements, the more problematic question, however, is' whether the obligation to pay that Plaintiff now faces "arises out of" his transaction with United. Surely, but for his health insurance contract with United, Plaintiff's recovery on the UM policy proceeds would create no obligation with respect to United. The issue then is how broadly the term "arises out of" should be interpreted under the Act, i.e., does an obligation to reimburse one's insurer on a contractual subrogation claim arise out of the policy of insurance for purposes of applying the FDCPA.
To the Court's knowledge, only one federal court has addressed the issue presented here. In Garner v. Augustine, Kern. Levens. Ltd., the district court held that an employee benefit plan's reimbursement claim against its insured was not a "debt" for purposes of the FDCPA. 1994 WL 48589, at *2 (N.D. Ill. Feb. 16, 1994). In reaching that conclusion, the Court reasoned that where insurance is the consumer good at issue, the Act was meant to cover the situation where an consumer contracts for insurance coverage but then fails to pay the premium. Id. The court expressly found that the Act was not intended to apply to any potential reimbursement claim owed by a plan beneficiary after benefits are paid on his behalf. Id. To hold otherwise, the court concluded, "would unduly strain the normal meaning of the language that has been used by Congress" in the Act. Id.
Although the Garner decision is not binding on this Court, the Court nevertheless agrees with the district judge's conclusion that a contractual subrogation claim, while in fact "arising out of" the contract of insurance, is not the kind of payment obligation that Congress intended when it created the FDCPA for the protection of consumers. All of the cases cited by Plaintiff involve an obligation to pay as a quid pro quo for the consumer goods received. See e.g., Brown v. Budget Rent-A-Car Systems. Inc., 119 F.3d 922 (11th Cir. 1997). None involved an obligation as attenuated from the original purchase or transaction as the one involved here. Further, had Plaintiff not engaged in another transaction wholly unrelated to his contract with United, i.e., obtaining his own UM policy through another insurer, no obligation would exist.
In his opposition, Plaintiff argues that Garner was incorrectly decided because the district judge engrafted a credit extension requirement into the definition of "debt." Rec. Doc. 53, at 4. Even a cursory review of the decision belies that assertion so the Court can only assume that counsel mistakenly confused the Garner case with another. Plaintiff made no other arguments to call Garner into doubt.
Furthermore, other parts of the statute suggest that the reimbursement claim at issue here is not the type of obligation contemplated by the Act. For example, another threshold requirement for the Act's applicability is that the defendant qualify as a "debt collector" for purposes of the Act. See 15 U.S.C.A. § 1692(e). That term has a comprehensive definition which expressly excludes any person collecting a debt that was "not in default at the timer it was obtained." 15 U.S.C.A. § 1692a(6)(F)(iii) (emphasis added). Accordingly, the applicability vel non of the Act can at times turn on the default status of the debt. However, as was evident at oral argument, trying to apply the otherwise simple debtor concept of "default" to the obligation here is problematic because it is unclear when, if ever, this subrogation claim went into default. Any obligation could not have arisen before Plaintiff received the UM policy proceeds and surely the obligation was not in default at its inception. Thus, the point in time at which this type of obligation goes into default is wholly unclear, rendering a potentially key element of the Act, i.e., whether the defendant is in fact a "debt collector," unworkable.
In sum, the Court concludes that the subrogation claim at issue here is not a "debt" for purposes of the FDCPA. Consequently, Plaintiff does not state a claim for relief under the Act. Given that the "debt" issue is dispositive of HRI's motion, the Court need not "address the parties' arguments on the "debt collector" issue. Accordingly, Plaintiff's claims under the FDCPA are dismissed with prejudice.
Nevertheless, the Court recognizes that Plaintiff's arguments with respect to the "debt" issue are not wholly without merit. Given the paucity of decisions addressing a factual scenario like the one in this case, and the absence of controlling authority in this circuit, the Court would consider certifying this decision, as it pertains to the FDCPA claims, for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Accordingly, the parties are to file memoranda on the propriety vel non of such a certification by July 27, 2001.
3. State law claims
If Plaintiff's FDCPA claim had been the sole basis/for federal subject matter jurisdiction, the Court would have declined to exercise supplemental jurisdiction over Plaintiff's state law claims. See 28 U.S.C. § 1367(c)(3) (West 1993) Nevertheless, Plaintiff also pled jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) (diversity jurisdiction). Although the parties appear to be of diverse citizenship, on the current record, it is unclear whether the amount in controversy exceeds $75,000. Accordingly, the parties are to file memoranda on the issue of diversity jurisdiction by July 27, 2001 . Assuming that the Court determines that it has an independent basis for subject matter jurisdiction over the remaining state law claims, HRI can reurge its motion for summary judgment at a later date.
Accordingly;
IT IS ORDERED that the Motion for Judgment on the Pleadings and/or for Summary Judgment (Rec. Dcc. 51) filed by defendant Healthcare Recoveries, Inc. should be and is hereby GRANTED IN PART AND DENIED IN PART. The motion is GRANTED insofar as Plaintiff's claims under the Fair Debt Collection Practices Act are DISMISSED WITH PREJUDICE. The motion is DENIED WITHOUT PREJUDICE as to the state law claims pending a determination by the Court on the issue of subject matter jurisdiction; IT IS FURTHER ORDERED that the parties are to file memoranda addressing the issue of diversity jurisdiction over Plaintiff's state law claims and propriety of certification pursuant to 28 U.S.C. § 1292(b) by July 27, 2001 .