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Cascade Capital, LLC v. DRS Processing LLC

United States District Court, W.D. North Carolina, Charlotte Division

January 5, 2018



          Robert J. Conrad, Jr., United States District Judge

         THIS MATTER comes before the Court on Cascade Capital, LLC's and Cascade Capital, LLC-Series A's (“Plaintiffs'”) Motion for Default Judgment, (Doc. No. 13), and their Memorandum in Support, (Doc. No. 14). Plaintiffs' Motion is now ripe and ready for adjudication.

         I. BACKGROUND

         a. Procedural Background

          Plaintiffs filed their complaint on August 8, 2017, (Doc. No. 1), and Defendant was served on August 18, 2017 by Certified Mail, Return Receipt Requested, (Doc. No. 5). On August 24, 2017, Plaintiffs filed a Motion for Temporary Restraining Order, (Doc. No. 6), and a Memorandum in Support, (Doc. No. 7). On September 18, 2017, Plaintiffs filed a Motion for Entry of Default, (Doc. No. 11), which was granted by the Clerk's office on September 20, 2017, (Doc. No. 12). On November 1, 2017, Plaintiffs Motioned for Default Judgment. (Doc. No. 13). Defendants have yet to appear or submit a document before the Court.

         A hearing regarding this matter was held on November 8, 2017, where the Court heard Plaintiffs' arguments in support of their Motion of Default Judgment and their requested injunctive relief. The Court notes that Plaintiffs did not give Defendant notice of this hearing, nor were they required to. Defendant has not appeared personally in front of this Court since they were served by Plaintiffs. Fed.R.Civ.P. 55(b)(2) (“If the party against whom a default judgment is sought has appeared personally or by a representative, that party or its representative must be served with written notice of the application at least 7 days before the hearing.”) (emphasis added).

         b. Factual Background

         Plaintiffs' business involves the purchase of consumer accounts. (Doc. No. 14 at 1). Once Plaintiffs purchases an account, they either place it with third party agencies for collection or sell portions of the account to third party purchasers. (Id.). Among others, Plaintiffs have developed a purchase relationship with Santander Consumer USA (“Santander”). (Id.). Santander's practice involves selling accounts by transmitting portfolios to potential buyers who then evaluate the portfolio prior to purchasing the account. (Id. at 2). Plaintiffs believe that Santander requires all potential buyers to sign a non-disclosure agreement in order to receive these portfolios. (Id.).

         Around July 25, 2014 and June 9, 2015, Plaintiffs purchased automobile portfolios and accounts from Santander. (Id.). These portfolios contain more than 200, 000 consumer accounts. (Id. at 16). Plaintiffs have documentation of each account's full chain of title. (Id. at 2). Other parties expressed interest in these automobile accounts and viewed their portfolios after signing a non-disclosure agreement. Ultimately, however, Plaintiff Cascade Capital, LLC was the sole buyer who received title. (Id. at 2). Cascade Capital, LLC thereafter transferred the legal title of some of these automobile accounts to its series limited liability companies, such as Cascade Capital-Series A. (Id.). Neither Plaintiffs nor Santander transferred title to the automobile accounts to Defendant. (Id.).

         Plaintiffs allege that “Defendant either: (1) directly obtained information related to accounts within the Santander Portfolios; or (2) accounts within the Santander Portfolios were placed with Defendant for collection by a third party other than Cascade.” (Id.). Through either means, Plaintiffs became aware that Defendant began to collect on these automobile accounts in February of 2017. (Id. at 3). Defendant's communications to consumers stated that Defendant- not Plaintiffs-had the legal title and the right to collect on the account's balance. One such communication stated:

Miller Stark Klein and Associates purchased this account with the legal right to collect, settle or close for the amount noted above . . . Once the settlement is completed and final payment posts the balance is considered paid in full and no further legal obligation is owed. You will have a paid account with a (-0-) zero balance. This letter will serve notice to all parties directly or indirectly involved that any attempts to contact this consumer or to collect on this arrangement after receipt of this letter is considered illegal and harassment under the guidelines set forth by the F.D.C.P.A.

(Doc. No. 14 at 4).

         Affected customers notified both Plaintiffs and Santander about Defendant's collections. (Id.). While Plaintiffs remain unaware of the total number of consumers contacted by Defendant, they found that at least 72 accounts were contacted and that this number has grown since the filing of this action. (Id.). Those 72 known accounts have an aggregate balance of $511, 210.88 and Plaintiffs believe approximately $27, 000.00 has been paid to Defendant. (Id. at 6).

         Prior to filing their complaint, Plaintiffs made efforts to reach out to Defendant in the hopes of ending their collection on the Santander accounts. (Id.). Those efforts, however, were in vain. Defendant continues to contact Plaintiffs' automobile accounts and assert false representations, such as telling consumers that: “(1) the accounts were rightfully assigned to Defendant and/or that Defendant has been engaged to resolve the delinquent debt; (2) Defendant has the right to collect upon the account; and (3) payment to Defendant would operate as cease and desist to any other agency as well as the original creditor that the matter was paid in full as agreed and act as a cease and desist in the action.” (Id. at 4).


         Upon the entry of default, the defaulted party is deemed to have admitted all well-pleaded allegations of fact contained in the complaint. Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780 (4th Cir. 2001); Weft, Inc. v. GC Inv. Assocs., 630 F.Supp. 1138, 1141 (E.D. N.C. 1986) (citations omitted); see also Fed.R.Civ.P. 8(b)(6) (“An allegation - other than one relating to the amount of damages - is admitted if a responsive pleading is required and the allegation is not denied.”). However, the defendant is not deemed to have admitted conclusions of law and the entry of “default is not treated as an absolute confession by the defendant of his liability and of the plaintiff's right to recover.” Ryan, 253 F.3d at 780 (citations omitted); see also E.E.O.C. v. Carter Behavior Health Servs., Inc., No. 4:09-cv-122-F, 2011 WL 5325485, at *3 (E.D. N.C. Oct. 7, 2011). Rather, in determining whether to enter judgment on the default, the court must determine whether the well-pleaded allegations in the complaint support the relief sought. See Ryan, 253 F.3d at 780 (citing Weft, 630 F.Supp. at 1141); DIRECTV, Inc. v. Pernites, 200 F. App'x 257, 258 (4th Cir. 2006) (a “defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law“) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)); Arista Records, LLC v. Gaines, 635 F.Supp.2d 414, 416 (E.D. N.C. 2009); 10A Wright, Miller & Kane, Federal Practice and Procedure § 2688 (3d ed. Supp. 2010) (“[L]iability is not deemed established simply because of the default . . . and the court, in its discretion, may require some proof of the facts that must be established in order to determine liability.”).

         To that end, the Fourth Circuit has “repeatedly expressed a strong preference that, as a general matter, defaults be avoided and that claims and defenses be disposed of on their merits.” Colleton Preparatory Acad., Inc. v. Hoover Univ., Inc., 616 F.3d 413, 417 (4th Cir. 2010) (citations omitted). Nonetheless, default judgment “may be appropriate when the adversary process has been halted because of an essentially unresponsive party.” SEC v. Lawbaugh, 359 F.Supp.2d 418, 421 (D. Md. 2005).

         If the court finds that liability is established, it must then determine damages. Carter Behavior Health, 2011 WL 5325485, at *4 (citing Ryan, 253 F.3d at 780-81; Gaines, 635 F.Supp.2d at 416-17). The court must make an independent determination regarding damages, and cannot accept as true factual allegations of damages. Id. (citing Lawbaugh, 359 F.Supp.2d at 422). While the court may conduct an evidentiary hearing to determine damages, it is not required to do so, but may rely instead on affidavits or documentary evidence in the record to determine the appropriate sum. See EEOC v. CDG Mgmt., LLC, No. RDB-08-2562, 2010 WL 4904440, at *2 (D. Md. Nov. 24, 2010) (citations omitted); EEOC v. North Am. Land Corp., No. 1:08-cv-501, 2010 WL 2723727, at *2 (W.D. N.C. Jul. 8, 2010).

         III. ...

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