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Pounds v. Portfolio Recovery Associates, LLC

United States District Court, M.D. North Carolina

March 28, 2018

IRIS POUNDS, CARLTON MILLER, VILAYUAN SAYAPHET-TYLER, RHONDA HALL, and PIA TOWNES, on behalf of themselves and all others similarly situated, Plaintiffs,



         This matter comes before the court on Plaintiffs' Motion to Remand. (Doc. 11.) Defendant Portfolio Recovery Associates, LLC (“PRA”) responded, (Doc. 17), and Plaintiffs replied, (Doc. 21). An oral argument was held October 5, 2017, and the parties submitted supplemental briefing. (Docs. 32-33, 35-36.) This matter is now ripe for resolution, and, for the reasons stated fully below, the court will grant in part and deny in part Plaintiffs' Motion to Remand.

         Also before the court are Plaintiffs' Motion for Expedited Determination of Motion to Remand, (Doc. 22), and Motion to Defer Time to File Federal Motion for Class Certification, (Doc. 27). These motions have been briefed and are also ripe for resolution. (Docs. 23, 28, 29.) This court will deny Plaintiffs' Motion to Expedite as moot and, having considered the parties' arguments, will grant in part and deny as moot in part the Motion to Defer Time to File Federal Motion for Class Certification.


         Plaintiffs commenced the present putative class action in Durham County in the Superior Court Division of the General Court of Justice of the State of North Carolina on November 21, 2016, against Defendant PRA. (Class Action Complaint (“Compl.”) (Doc. 3) at 1.)[1] Defendant was served on November 21, 2016. (Notice of Removal (“NOR”) (Doc. 1) at 2; Civil Summons (Doc. 4).)

         Defendant filed its NOR in this court on December 9, 2016, (NOR (Doc. 1) at 3), on the basis of diversity jurisdiction pursuant to the Class Action Fairness Act of 2005 (“CAFA”). 28 U.S.C. §§ 1332(d), 1453.[2] In the NOR, Defendant, relying on Plaintiffs' allegations and its own assertions, alleged complete diversity of citizenship, an aggregate amount in controversy exceeding $5 million, and a proposed class size greater than 100 persons. (NOR (Doc. 1) at 3-4.) Plaintiffs move this court under 28 U.S.C. § 1447(c) to remand the case on the grounds that the court lacks jurisdiction over the claims pursuant to the Rooker-Feldman doctrine. (Mot. to Remand (Doc. 11) at 1-2.)


         Plaintiffs' Complaint seeks to set aside certain default judgments obtained by PRA in North Carolina state courts, and seeks to recover actual damages and civil penalties for alleged violations of N.C. Gen. Stat. §§ 58-70-115(7), 58-70-130, and 58-70-155. (Compl. (Doc. 3) at 1-2, 6-7, 12-17.)

         PRA is a debt buyer and collection agency under North Carolina law. See N.C. Gen. Stat. §§ 58-70-15(b)(4), 58-70-155. As a debt buyer, PRA is required to file certain “properly authenticated” evidence with a court “[p]rior to entry of a default judgment” against a debtor. See Id. § 58-70-155. Rule 55(b) of the North Carolina Rules of Civil Procedure also governs the entry of default judgments. Id. § 1A-1, Rule 55(b). When a plaintiff's claim is for a “sum certain or for a sum which can by computation be made certain, ” then the clerk has the authority to enter a default judgment. Id. § 1A-1, Rule 55(b)(1). Absent a sum certain, the default judgment must be entered by a judge. Id. § 1A-1, Rule 55(b)(2).

         Since § 58-70-155 became effective in October 2009, PRA has filed thousands of lawsuits in North Carolina state courts in which it subsequently obtained default judgments. (Compl. (Doc. 3) ¶¶ 32-35.) PRA obtained default judgments against each of the named plaintiffs in this action. (Id. ¶¶ 26-31.) Plaintiffs claim that “PRA failed to satisfy the [§] 58-70-155 prerequisites that required it to file properly authenticated business records providing an itemization of the amount claimed to be owed.” (Id. ¶ 26.) Plaintiff Pia Townes has additionally filed and been granted a motion pursuant to Rule 60(b) of the North Carolina Rules of Civil Procedure to set aside her default judgment. (Id. ¶¶ 31, 39.)

         Plaintiffs filed this action seeking relief on behalf of “[a]ll persons against whom PRA obtained a default judgment entered by a North Carolina court in a case filed on or after October 1, 2009.” (See Id. ¶ 15.) On behalf of all proposed class members whose default judgments have not yet been vacated, Plaintiffs' first claim (“Claim I”) seeks a declaratory judgment that the default judgments violate § 58-70-155 (and, in some cases, Rule 55(b)(1)) and are void, and seeks an associated injunction requiring PRA to cease collection activity and file notices of vacatur. (Id. ¶¶ 50-57.)

         On behalf of all class members, Plaintiffs' second claim for relief (“Claim II” or “statutory penalties claim”) seeks statutory penalties authorized by N.C. Gen. Stat. § 58-70-130(b). (Id. ¶¶ 58-63.) Section 58-70-130 imposes civil liability in the form of actual damages and statutory penalties on collection agencies that engage in prohibited practices, including specific “unfair practices.” § 58-70-115. One such unfair practice is “[f]ailing to comply with Part 5 of this Article.” Id. § 58-70-115(7). Part 5 includes § 58-70-155, entitled “Prerequisites to entering a default or summary judgment against a debtor under this Part.” Id. § 58-70-155. Plaintiffs thus claim that PRA violated § 58-70-115(7) by “requesting and obtaining default judgments” that do not conform to § 58-70-155's prerequisites, entitling them to statutory penalties under § 58-70-130(b). (Compl. (Doc. 3) ¶¶ 59-61.)

         Similarly, Plaintiffs' third claim for relief (“Claim III” or “actual damages claim”) seeks actual damages authorized by § 58-70-130(a) in the amount PRA has collected from the Plaintiffs' default judgments, on behalf of any proposed class members who made post-default-judgment payments to PRA. (Compl. (Doc. 3) ¶¶ 64-66.)

         III. ANALYSIS

         Plaintiffs argue that this court lacks subject matter jurisdiction over this action under the Rooker-Feldman[3] doctrine. (Plaintiffs' Brief in Support of Motion to Remand (“Pls.' Br.”) (Doc. 12); Plaintiffs' Reply Brief in Support of Motion to Remand (Doc. 21).) The Rooker-Feldman doctrine is a jurisdictional doctrine that prohibits federal district courts from “‘exercising appellate jurisdiction over final state-court judgments.'” See Thana v. Bd. of License Comm'rs, 827 F.3d 314, 319 (4th Cir. 2016) (quoting Lance v. Dennis, 546 U.S. 459, 463 (2006) (per curiam)). The presence or absence of subject matter jurisdiction under Rooker-Feldman is a threshold issue that this court must determine before considering the merits of the case. Friedman's, Inc. v. Dunlap, 290 F.3d 191, 196 (4th Cir. 2002).

         Although Rooker-Feldman originally limited federal-question jurisdiction, the Supreme Court has recognized the applicability of the doctrine to cases brought under diversity jurisdiction:

Rooker and Feldman exhibit the limited circumstances in which this Court's appellate jurisdiction over state-court judgments, 28 U.S.C. § 1257, precludes a United States district court from exercising subject-matter jurisdiction in an action it would otherwise be empowered to adjudicate under a congressional grant of authority, e.g., § 1330 (suits against foreign states), § 1331 (federal question), and § 1332 (diversity).

         See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 291-92 (2005). Diversity proceedings removed to federal court under CAFA, likewise, are within the doctrine's purview. See, e.g., Dell Webb Cmtys., Inc. v. Carlson,817 F.3d 867, 872 (4th Cir.), cert. Denied, ___ U.S.____, 137 S.Ct. 567 (2016); Bergquist v. Mann Bracken, LLP,592 F.3d 816, 818 (7th Cir. 2010); Murr ...

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