United States District Court, D. Nebraska
RYAN MCCOY, on behalf of himself and all others similarly situated; Plaintiff,
RICHARD L. JOHNSON, and TISHA M. DEMING, Defendants.
M. Bazis, United States Magistrate Judge.
matter is before the Court on Plaintiff's Motion for
Leave to File a Second Amended Complaint (Filing No.
32). The motion will be granted.
February 2, 2019, Plaintiff filed this putative class-action
asserting claims under the Fair Debt Collection Practices Act
(“FDCPA”) and Nebraska Consumer Protection Act
(“NCPA”) against attorney Richard Johnson
(“Johnson”), doing business as “Johnson
Law, ” and his paralegal, Tisha Deming
(“Deming”). In this suit, Plaintiff alleges that
Johnson and Deming sent collection letters with captioned,
signed, and unfiled collection complaints in violation of the
FDCPA and NCPA. Plaintiff maintains that a collection letter
on Johnson Law letterhead and a collection complaint were
sent to Plaintiff to collect a medical debt Plaintiff
allegedly owed to Midwest Minor Medical, P.C.
filed a Motion for Partial Judgment on the Pleadings
(Filing No. 19) on May 29, 2019. That motion is
pending before the Court.
seeks leave to file a Second Amended Complaint to add Midwest
and Corporate Billing Solutions (“CBS”) as
defendants. CBS, of which Johnson is the only member,
performs payroll, human resources, and payable/receivable
services for Midwest, the underlying creditor. Through
amendment, Plaintiff also wants to add a claim under 15
U.S.C. §1692j of the FDCPA. The proposed Second Amended
Complaint alleges that Johnson provided collection letters to
Midwest so that Midwest could collect its own accounts.
(Filing No. 32-1.) The proposed Second Amended
Complaint further alleges that CBS serves as the conduit for
receiving payments from consumers on accounts held by
Midwest, including accounts collected by Johnson Law and
Johnson. (Filing No. 32-1.)
Rule of Civil Procedure 15 provides that courts should
“freely give leave” to amend a pleading
“when justice so requires.” Fed. R. Civ. P.
15. Nevertheless, a party does not have an absolute
right to amend and “denial of leave to amend may be
justified by undue delay, bad faith on the part of the moving
party, futility of the amendment or unfair prejudice to the
opposing party.” Amrine v. Brooks, 522 F.3d
823, 833 (8th Cir. 2008) (quotation omitted). Whether to
grant a motion for leave to amend is within the sound
discretion of the district court. Popoalii v. Corr. Med.
Servs., 512 F.3d 488, 497 (8th Cir. 2008).
argue that amendment is futile because the proposed Second
Amended Complaint does not state plausible claims against
Midwest and CBS and that Plaintiff's claim under 15
U.S.C. §1692j is invalid. Section 1692j provides:
It is unlawful to design, compile, and furnish any form
knowing that such form would be used to create the false
belief in a consumer that a person other than the creditor of
such consumer is participating in the collection of or in an
attempt to collect a debt such consumer allegedly owes such
creditor, when in fact such person is not so participating.
15 U.S.C. §1692j. This practice, referred to as
“flat-rating, ” occurs when an individual
“masquerades as a debt collector by writing and mailing
dunning letters to the debtors to intimidate them into paying
the creditor.” Wells v. McDonough, No. 97 C
3288, 1999 WL 966431, at *5 (N.D. Ill. Sept. 29, 1999).
asserts that facts learned during discovery support a
flat-rating scheme between Midwest and Johnson Law, with
Johnson Law using CBS as a flow-through intermediary for
payments received. Plaintiff contends the following facts
support amendment: (1) Johnson Law represents few clients
other than Midwest; (2) Midwest's owner/operator had
knowledge of the letters at issue; (3) Johnson is the only
member of CBS; (4) CBS pays Deming's wages; (5) CBS
provides payroll and human resources work for Midwest; (6)
Johnson and CBS operate from the same office space occupied
by Midwest; (7) when patients do not pay after receiving
Johnson Law's letter, Midwest sends the accounts to
another entity for collection; (8) Johnson Law only filed
eleven collection lawsuits for Midwest in 2014 and there is
no record of Johnson Law filing a collection lawsuit for
Midwest after 2014; (9) Defendants sent 512 Nebraska
residents the letter and complaint at issue in the year
before this lawsuit was filed; (10) over the last four years,
Defendants sent 1, 381 such letters and complaints to
Nebraskans; and (11) Johnson Law and Midwest do not file
collection actions after sending the letters and complaints.
contend there is nothing in the Second Amended Complaint that
plausibly supports a flat-rating scheme. Defendants argue
that Plaintiff's claim that Midwest is really collecting
on its own debt using forms provided by Johnson Law does not
have a factual basis and is only a conclusory allegation of
wrongdoing. Defendants contend that the letters at issue do
not suggest any involvement by Midwest or CBS. Defendants
further maintain that Midwest, as the underlying creditor,
cannot be held liable as a flat-rater under §1692j.
Defendants assert that only individuals who furnish forms to
be used by creditors can be held liable under §1692j.
According to Defendants, Midwest is, at best, the alleged
beneficiary of the letters, and CBS did not have any
involvement or contact with Plaintiff whatsoever.
reviewed the matter, it is not readily apparent that
amendment would be futile or that the proposed Second Amended
Complaint asserts clearly frivolous claims. SeeBecker v. Univ. of Neb.,191 F.3d 904, 908 (8th Cir.
1999) (“Likelihood of success on the new claim or
defenses is not a consideration for denying leave to amend
unless the claim is clearly frivolous”); Gamma-10
Plastics, Inc. v. Am. President Lines,32 F.3d 1244,
1255 (8th Cir. 1994) (stating that a motion to amend should
only be dismissed on the merits if it asserts clearly
frivolous claims or defenses). Some courts have concluded
that creditors can violate the FDCPA by engaging in
flat-rating schemes. See Hartley v. Suburban Radiologic
Consultants,295 F.R.D. 357 (D. Minn. 2013); Nielsen
v. Dickerson,307 F.3d 623 (7th Cir. 2002). Also, it
appears that Plaintiff is alleging that Johnson Law and CBS
are essentially the same ...