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Bassett v. Credit Management Services, Inc.

United States District Court, D. Nebraska

June 28, 2018

KELLY M. BASSETT, individually and as heir and Personal Representative of the Estate of James M. Bassett, on behalf of herself and all other similarly situated; Plaintiff,
v.
CREDIT MANAGEMENT SERVICES, INC., and JASON MORLEDGE, Defendants.

          MEMORANDUM AND ORDER

          Joseph F. Bataillon Senior United States District Judge.

         This matter is before the court on the plaintiff's motion for partial summary judgment on liability, Filing No. 71 and on the defendants' motion for summary judgment, Filing No. 74.[1] This is a putative class action for violations of the Fair Debt Collection Practices Act, (hereinafter referred to as the “FDCPA”) 15 U.S.C. § 1692 et seq., and the Nebraska Consumer Protection Act, Neb. Rev. Stat. § 59-1601 et seq. (hereinafter referred to as the “NCPA”).

         The plaintiff challenges defendant CMS's routine practice of filing collection complaints in Nebraska County Courts that seek prejudgment interest and attorney fees under Neb. Rev. Stat. § 25-1801, et seq. Bassett contends that CMS misrepresents the nature of the debt as one for “goods or services” rendered, within the purview of Neb. Rev. Stat. § 25-1801, rather than as an action on an “account, ” and also improperly seeks attorney fees for in-house counsel, and then retains the fees and interest as an undisclosed collection fee. She asserts that defendant CMS's standard collection complaint falsely states the requirements of Nebraska County Court, misleads an unsophisticated consumer in violation of 15 U.S.C. § 1692e and is unconscionable in violation of 15 U.S.C. § 1692f.

         I. BACKGROUND

         The facts are set out in this court's order on the defendants' motion to certify questions to the Nebraska Supreme Court and for partial judgment on the pleadings and need not be repeated here. Briefly, the plaintiff alleges that the defendants' violated the FDCPA and NCPA in their standard complaints by characterizing their cause of action as one for providing goods and/or services in order to claim prejudgment interest and attorney fees under Neb. Rev. Stat. § 25-1801, rather than as a cause of action on an account, which does not allow for the collection of prejudgment interest or attorney fees. She contends the defendants choose to ignore the fact that when these “accounts” are assigned to a collection agency, the claim is no longer based on goods or services provided, but is an ordinary account in default.

         The plaintiff seeks summary judgment on the issue of liability-she seeks a determination that the defendants' collection complaints are false and misleading as a matter of law.[2] The dispositive question is whether the standard form complaint at issue contains false or misleading representations and whether collection of additional sums for prejudgment interest and attorney fees in a state court action is permitted by law. She relies on this court's decision in Powers v. Credit Mgmt. Servs., Inc., No. 8:11-CV-436, 2016 WL 612251 (D. Neb. Feb. 2, 2012), an action against defendant CMS, for the proposition that misrepresenting the nature of a debtor's account as a debt for materials or services rendered, rather than an action on an account, in order to deceive state courts and debtors and collect impermissible fees and prejudgment interest is a violation of the FDCPA. Id., 2016 WL 612251, at *10 (citing Jenkins v. Gen. Collection Co., 538 F.Supp.2d 1165, 1174 (D. Neb. 2008)). The defendant CMS was party to the Powers litigation and did not appeal the court's finding.[3]

         In Powers, the court examined a collection complaint identical in most respects to the collection complaint at issue in this action[4] and found

The collection complaint indicates only that the defendant “is indebted to Plaintiff [CMS] for the following assigned account(s), ” followed by the name of a doctor, that “a demand for payment was made” on a certain date, and that “[m]ore than 90 days have elapsed since the presentation of this claim.” . . . . The court finds the least sophisticated consumer would be reasonably confused by the interchangeable use of the terms “demand for payment” and “claim” in connection with the “presentment, ” as well as by the cursory reference to “assigned account(s), ” without any mention of the nature of the goods or services provided or the dates on which they were provided. Without any special knowledge of the law, a layperson could not figure out, on the face of the collection complaint, what the claim was for or to whom he or she was indebted, much less comprehend his or her alleged liability for prejudgment interest, costs, or attorney's fees.

Powers, 2016 WL 612251 at *14. (Emphasis added). Further, this court stated in Powers that “[m]isrepresenting the nature of a debtor's debts as debts for materials or services rendered, rather than actions on accounts, in order to deceive state courts and debtors and collect impermissible fees and prejudgment interest is a violation of the FDCPA.” Id. (also stating that “[t]he plaintiffs have shown they are entitled to judgment as a matter of law on the issue of liability for FDCPA and NCPA violations in connection with allegations of entitlement to attorney's fees and prejudgment interest in CMS's standard-form complaints.”)

         Defendants oppose the plaintiff's motion and move for summary judgment in their favor. They contend the Nebraska Legislature enacted a clarifying amendment to Neb. Rev. Stat. § 25-1801 in February of 2018 that undermines the plaintiff's theories in this action. They argue the amended statute is retroactive, is applicable to this case and dispositive of the issues. They question the plaintiff's reliance on “the prior nonbinding (and distinguishable decision in Powers.” Based on recent Eighth Circuit and District Court caselaw[5] and the amendments to Neb. Rev. Stat. § 25-1801, they argue that the plaintiff's FDCPA/NCPA claims fail as a matter of law and seek a summary judgment of dismissal of this action.

         II. FACTS

         The record shows Mrs. Bassett is a “consumer” as that term is contemplated in § 1692a(3) of the FDCPA. Credit Management Services, Inc., (hereafter “CMS”) is a collection agency located in Grand Island, Nebraska. CMS is a “debt collector” within the meaning of 15 U.S.C. § 1692a(6). Defendant Jason Morledge is president of CMS. Defendant Jason Morledge operates and manages the day-to-day business of CMS.

         On or about April 8, 2016, CMS sued James M. Bassett (now deceased) and plaintiff Kelly M. Bassett in the County Court of Dodge County, Nebraska for alleged medical debts. See Credit Management Services, Inc. v. James Bassett & Kelly Bassett, No. CI 16-534. At the time CMS sued the Bassetts, its policy and practice was to file collection lawsuits in Nebraska County Courts and to serve alleged debtors with county court collection complaints in the form of Exhibit A attached to the plaintiff's complaint. See Filing No. 1-1, Ex. A, Complaint at 1-2. Exhibit A is a standard template with only the consumer specific information on names and amounts changed in each case. Defendant CMS used this standard form template complaint when suing Nebraska residents in Nebraska County Courts from March of 2016 through June/July of 2016.

         Kelly Bassett's alleged debts were incurred for personal, family, or household purposes, i.e., medical bills. In Dodge County Court, CMS sought and obtained an award of attorney fees and prejudgment interest under Neb. Rev. Stat. § 25-1801. CMS was represented by in-house counsel in the action. The Bassetts were not represented by counsel. County Court collection pleadings are attached as Exhibit A to Plaintiff's Complaint herein.

         During the period of time at issue in this action, CMS's standard form county court complaints stated the alleged debt arose from goods, services and/or labor provided. The CMS collection complaint sets forth a monetary amount as the “the reasonable value or agreed amount of [the] services.” Filing No. 1-1, Ex. A, Complaint at 1. The defendants use Neb. Rev. Stat. § 25-1801 to demand payment of attorney fees and prejudgment interest in collecting these county court cases. Defendant CMS's routine practice was not to include any account number for the alleged services in the complaints. Also, it was CMS's routine practice not to identify the person who received the services or the date the alleged services were provided. Further, the subject complaints do not state a specific date when the demand required under the statute was sent to consumers, but states only “on or before” a date ninety days prior to the filing of the complaint in County Court.

         CMS used this standard form complaint in 3, 800 Nebraska law suits against between 4, 000 and 6, 000 Nebraska residents because during the time frame at issue. In each of those cases, the defendants' cause of action or theory of recovery was quantum meruit. CMS no longer uses the complaint in the form of Exhibit A to file lawsuits in Nebraska.

         The debts on which CMS collects are assigned to it. Only claims on the alleged past due accounts are assigned. CMS is the named plaintiff in the Dodge County Court collection case filed against the plaintiff and her decedent. The record contains assignments from both creditor healthcare providers for the Bassetts' debts to CMS. See Filing Nos. 54-4, and 54-6. On January 5, 2016, Fremont Area Medical Center executed an assignment as follows:

ASSIGNMENT OF CLAIM
The undersigned executes this assignment on behalf of FREMONT AREA MEDICAL CENTER, (hereinafter "Creditor").
The undersigned hereby states that she/he is authorized to execute this Assignment on behalf of the creditor and does hereby, on behalf of such Creditor, for valuable consideration, assign all of the Creditor's right, title, and interest in and to the following claim, to Credit Management Services, Inc., (Assignee) and vests in the Assignee the entire legal title of said claim.
1. The goods and/or services which are the basis of the assigned claim were delivered at the request of the following person(s) or business(es), (hereinafter whether joint or single "Debtor'');
JAMES BASSETT
KELLY ...

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