United States District Court, M.D. North Carolina
LISA GAIL THOMPKINS and HARVEY SANFORD BOONE III, individually and on behalf of those similarly situated, Plaintiffs,
KEY HEALTH MEDICAL SOLUTIONS, INC., Defendant.
MEMORANDUM OPINION, ORDER, AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
JOI ELIZABETH PEAKE, Magistrate Judge.
This matter is before the Court on (1) Defendant Key Health Medical Solutions, Inc.'s Motion to Dismiss [Doc. #21]; (2) Plaintiffs' Motion for Class Certification [Doc. #23]; (3) Defendant's Request for Judicial Notice [Doc. #28]; (4) Plaintiffs' Request for Judicial Notice and for Leave to Submit New Evidence in Support of Motion for Class Certification [Doc. #52]; (5) Defendant's Motion to Strike Plaintiffs' "Disclosure of New Matters" [Doc. #54]; and Plaintiffs' Motion for Oral Argument on Class Certification [Doc. #61]. For the reasons that follow, it will be recommended that Defendant's Motion to Dismiss [Doc. #21] be denied. The Motion for Class Certification will be stayed in light of an overlapping nationwide class action proceeding in California. The Requests for Judicial Notice will be granted and the Motion to Strike will be denied, to the extent that the Court has considered all of the information submitted. The Motion for Oral Argument will be denied as moot in light of the stay.
I. Facts, Claims, and Procedural History
Plaintiffs Lisa Gail Thompkins ("Thompkins") and Harvey Sanford Boone III ("Boone") allege that Defendant Key Health Medical Solutions, Inc. ("Defendant"), lends or advances money to or on behalf of individuals injured as a result of a motor vehicle accident or other type of personal injury and agrees to wait for repayment until the individual's personal injury claim is settled. According to the First Amended Complaint, Defendant subsequently charges those individuals a significantly higher amount than if they had paid in cash at the time of service. (First Am. Compl. [Doc. #13] ¶¶ 8-9.) With respect to the individual Plaintiffs named here, the Complaint alleges that, on or about May 4, 2007, Thompkins had two MRIs performed at Triad Imaging in Greensboro, North Carolina (id. ¶ 27); that "Triad Imaging's usual and customary charges for such an MRI to a patient paying cash at the time were approximately $520.00" (id.); that, upon information and belief, Defendant "thereafter advanced to Triad Imaging on plaintiff Thompkins' behalf approximately $520.00 for each of plaintiff Thompkins' MRIs" (id. ¶ 28); and that, subsequently, "Defendant attempted to collect from Thompkins $1, 695.00 per MRI by sending collection letters and bills to her attorney" (id. ¶¶ 28-29). According to the Complaint, Thompkins settled her personal injury claim in or about May 2011, obtained a settlement check for her personal injuries on May 15, 2011, and "refused to pay Defendant's unlawful charges." (Id. ¶ 31.) With respect to Boone, the Complaint alleges that, on or about April 8, 2011, Boone had an MRI performed at Triad Imaging in Greensboro and that "Triad Imaging's usual and customary charges for such an MRI to a patient paying cash at that time were approximately $530.00." (Id. ¶ 35.) According to the Complaint, "Defendant attempted to collect $1, 895.00 for the MRI" and "on or about July 20, 2011, [Boone's attorney] paid $1, 276.51 of Plaintiff Boone's personal injury settlement proceeds to Defendant." (Id. ¶ 39.)
As a result of the foregoing, the Complaint brings the following causes of action: (1) Unfair and Deceptive Trade Practices (id. ¶¶ 55-61); (2) Prohibited Acts by Debt Collectors (id. ¶¶ 62-67); (3) Retail Installment Sales Act (id. ¶¶ 68-76); (4) Usury (id. ¶¶ 77-80); (5) Consumer Finance Act (id. ¶¶ 81-84); (6) Unjust Enrichment (id. ¶¶ 85-86); (7) Rescission/Restitution (id. ¶¶ 87-88); (8) Constructive Trust (id. ¶¶ 89-90); and (9) Declaratory Judgment (id. ¶¶ 91-92). In addition, the Complaint alleges that the action is asserted as a class action "because questions of law and fact common to all members of the proposed class predominate over any questions affecting individual class members." ( Id., ¶ 40.) The Complaint defines the proposed class as "all individuals in North Carolina on whose behalf Defendant made advances for medical services, or who were charged for, or paid Defendant for medical services in the four years prior to the filing of this action and up to and including the date of the class certification." (Id. ¶ 41.)
Defendant has moved to dismiss all claims against it pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. Plaintiffs thereafter moved for "an order under Federal Rule of Civil Procedure 23(b)(3) that this proceeding be maintained as [a] Rule 23(b)(3) class action on behalf of a class comprised of the Plaintiffs and all other North Carolina persons similarly situated." [Doc. #23.] Several procedural motions followed. First, Defendant filed a Request for Judicial Notice asking the Court to take judicial notice of certain regulatory forms as part of the Rule 12(b)(6) determination. For their part, Plaintiffs filed a Motion for Judicial Notice and for Leave to Submit Evidence in connection with the class certification question, raising issues related to a parallel, nationwide proceeding in California against Defendant for which a class settlement has been preliminarily approved. Defendant filed a Motion to Strike that submission. Plaintiffs also recently filed a Motion for Oral Argument on Class Certification. In considering these Motions, the Court will first consider Defendant's Rule 12(b)(6) Motion to Dismiss and Defendant's related Motion for Judicial Notice, and will then consider Plaintiffs' Motion for Class Certification and the related procedural motions and the parallel California proceedings.
II. Motion to Dismiss
A Complaint fails to state a claim on which relief may be granted under Rule 12(b)(6) when it does not "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.
A. Unfair and Deceptive Trade Practices Act ("UDTPA")
Plaintiffs' first cause of action asserts a claim for unfair and deceptive trade practices in violation of North Carolina General Statute § 75-1.1 et seq. "The elements for a claim for unfair and deceptive trade practices are (1) defendants committed an unfair or deceptive act or practice, (2) in or affecting commerce, and (3) plaintiff was injured as a result." Phelps-Dickson Builders, L.L.C. v. Amerimann Partners, 172 N.C.App. 427, 439, 617 S.E.2d 664, 671 (2005). Defendant contends that Plaintiffs have failed to state a UDTPA claim because "Plaintiffs admit... that [Defendant] did not make an advance to them, it bought their account receivable." (Def.'s Br. [Doc. #22] at 8.) With respect to this contention, Defendant argues generally that all of Plaintiffs' claims should be dismissed because Defendant simply bought account receivables at a discount and Plaintiffs have not alleged that Defendant charged illegal interest or finance charges. As to the Unfair and Deceptive Trade Practices claim, Defendant also contends that "the [North Carolina Debt Collection Act ("NCDCA")] - and not the UDTP statute - provides Plaintiffs' exclusive remedy for [Defendant's] allegedly unfair or deceptive acts." (Id. at 16.) Finally, Defendant argues that Plaintiff Thompkins' UDTPA claim is barred by the applicable statute of limitations.
In considering these contentions, the Court notes first that, accepting all allegations in the Complaint as true, as the Court must, Plaintiffs' allegations are sufficient at this stage to state that Defendant made an advance or loan to or on behalf of Plaintiffs and that the circumstances surrounding that transaction were unfair or deceptive. With respect specifically to the allegations of a loan or advance, the Complaint alleges that "Defendant lends money to the injured person" (First Am. Compl. [Doc. #13] ¶ 9), that Defendant "advanced to Triad imaging" $520.00 on Thompkins' behalf (id., ¶ 28), and that Defendant "advanced to Triad Imaging" $530.00 on Boone's behalf (id., ¶ 36). As it relates to whether Defendant's actions were unfair or deceptive, the Complaint alleges that, at the time Thompkins and Boone underwent MRIs at Triad Imaging, the usual rate for an MRI was $520 or $530 if paid in cash at the time of service, respectively, that Defendant advanced to Triad Imaging $520 or $530 for Thompkins and Boone, but that Defendant subsequently sought to collect $1, 695 from Thompkins for each MRI and $1, 895 from Boone. Moreover, according to the Complaint, "[t]he injured person is not apprised, when he or she signs Defendant's agreement, what Defendant's charges will be." ( Id., ¶ 20). These allegations, taken together, are sufficient to state a claim under the North Carolina UDTPA. Although as Defendant points out, the Complaint contains allegations that could be construed as describing an arrangement where Defendant purchased Triad Imaging's account receivables at a significant discount, the Complaint also specifically alleges the funds were loaned or advanced, and sets forth sufficient allegations to at least make plausible Plaintiffs' contention that the substance of the transaction at issue is more in line with that theory. Indeed, Defendant's position is at odds with the allegations in the Complaint, which states that "Defendant should only have the right to charge the medical provider's rate for the service, yet it charges the injured people much more." ( Id., ¶ 17.) Any further consideration of the substance and underlying factual support for Plaintiffs' claims would be beyond the scope of a Motion to Dismiss.
With respect to Defendant's contention that the NCDCA provides Plaintiffs' exclusive remedy for allegations of unfair or deceptive trade practices, the NCDCA "applies only when unfair and deceptive conduct occurs in the specific context of debt collection." DIRECTV, Inc. v. Cephas, 294 F.Supp.2d 760, 765 (M.D. N.C. 2003); see also N.C. Gen. Stat. § 75-56(a) ("The specific and general provisions of this Article shall exclusively constitute the unfair or deceptive acts or practices proscribed by G.S. 75-1.1 in the area of commerce regulated by this Article."). Accordingly, to the extent that the alleged misconduct is outside the NCDCA, the NCDCA does not foreclose a separate UDTPA claim. See id. ("Claims can only be asserted under the [North Carolina] UDTPA if there is some abusive conduct alleged to have occurred outside the realm of debt collection."); see also Johnson v. MBNA Am. Bank, N.A., No. Civ. 1:05CV00150, 2006 WL 618077, at *8 (M.D. N.C. Mar. 9, 2006) (unpublished) (citing same). A plaintiff may plead alternative theories in his complaint, and here Plaintiffs allege violation of the NCDCA and also allege unfair and deceptive trade practices that arguably fall outside the scope of the NCDCA. Accordingly, Plaintiffs' UDTPA claim should not be considered foreclosed by the NCDCA at this time.
Defendant also separately contends that Thompkins' UDTPA claim should be dismissed because it violates the applicable statute of limitations. The statute of limitations for an unfair and deceptive trade practice claim in North Carolina is four years. See N.C. Gen. Stat. § 75-16.2; see also Trantham v. Michael L. Martin, Inc., 745 S.E.2d 327, 334 ( N.C. App. 2013) (citing same). "As a general rule, a motion to dismiss can reach the merits of an affirmative defense, such as the defense that the plaintiff's claim is time-barred, only when all facts necessary to the affirmative defense clearly appear on the face of the complaint.'" Bardes v. Massachusetts Mut. Life Ins. Co., 932 F.Supp.2d 636, 641-42 (M.D. N.C. 2013) (quoting Goodman v. Praxair, 494 F.3d 458, 464 (4th Cir. 2007) (en banc)) (additional quotation marks, citation, and alteration omitted).
Here, the Court cannot determine from the facts alleged that Thompkins' claims are time barred. Plaintiffs filed their original Complaint in state court on May 18, 2012. (Compl. [Doc. #2] at 11.) However, it is not clear from the Complaint when Thompkins first became, or should have become, aware of the facts that form the basis of the UDTPA claim. The oldest invoice attached to the First Amended Complaint displays a printed date of October 5, 2011. (See First Am. Compl., Ex. 2 [Doc. #13-2].) Defendant cites paragraphs 28 and 29 of the First Amendment Complaint as well as Exhibit 2 for its statement that "on July 26, 2007, [Defendant] attempted to collect $1, 695.00 per MRI" from Thompkins. (Def.'s Br. [Doc. #22] at 3.) However, paragraphs 28 and 29 of the First Amended Complaint do not allege any dates (see First Am. Compl. [Doc. #13], ¶¶ 28-29), and, although Exhibit 2 does reflect an "Invoice Date" of July 26, 2007, it shows that particular copy was not available to Plaintiff prior to October 5, 2011, as previously noted (see id., Ex. 2 [Doc. #13-2]). Because the First Amended Complaint and its attachments do not make clear the actual accrual date of Thompkins' claim, the statute of limitations would not foreclose Thompkins' UDTPA claim at the pleading stage. Accordingly, no basis exists at this stage to dismiss Plaintiffs' UDTPA claims.
B. Prohibited Acts by Debt Collectors
Plaintiffs' second cause of action is a claim for violation of the North Carolina Debt Collection Act ("NCDCA"). The NCDCA prohibits debt collectors from "[c]ollecting or attempting to collect any interest or other charge, fee or expense incidental to the principal debt unless legally entitled to such fee or charge." N.C. Gen. Stat. § 75-55(2). Defendant contends that Plaintiffs have failed to adequately allege a violation of the NCDCA because the Complaint "does not allege facts that demonstrate that [Defendant] charged any interest, or charges, let alone improper ones." (Def.'s Br. [Doc. #22] at 9.) That is, according to Defendant, "[t]o the contrary, Plaintiffs allege only that [Defendant] paid Triad Imaging a lower sum for MRI services than what [Defendant] sought to collect, i.e., that [Defendant] bought an account receivable at a discount and assumed the risk of contingent collection in exchange for the potential to make a profit." (Id.) However, Defendant's argument again appears based on its own construction of the transaction. As noted, the Complaint plausibly alleges an alternative theory that Defendant paid Triad Imaging the usual fee that Triad Imaging charged consumers for an MRI, but then charged Plaintiffs significantly more than that amount. Such allegations are not consistent with Defendant's assertion that it simply bought the account receivables at a discount. Defendant's contentions are thus beyond the scope of a Motion to Dismiss and are better reserved for summary judgment or trial, after discovery illuminates the details of the transactions as between Plaintiffs, Triad Imaging, and Defendant.
C. Retail Installment Sales Act
In their fourth cause of action, Plaintiffs allege that Defendant violated the North Carolina Retail Installment Sales Act ("RISA") by charging an excessive finance charge. In seeking dismissal of this claim, Defendant first contends that Plaintiffs cannot state a claim, because, Defendant did not provide any goods or services to Plaintiffs. However, a "seller" under RISA includes "an assignee of the seller's right to payment." N.C. Gen. Stat § 25A-6. Plaintiffs' assert their claim under RISA to the extent Defendant was an assignee of Triangle Imaging. Defendant also contends that "Plaintiffs cannot sufficiently allege that the receivable was payable in installments or a finance charge was imposed." (Def.'s Br. [Doc. #22] at 10.) However, RISA defines a "finance charge" as, among other things, "[i]nterest, time price differential... or other similar charge however denominated." N.C. Gen. Stat. § 25A-8. A time price differential is "[t]he difference between a seller's price for immediate cash payment and a different price when payment is made later or in installments." Black's Law Dictionary (9th ed. 2009); see also Grand Blanc Cement Prod., Inc. v. Ins. ...