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Winters v. Jones

United States District Court, D. New Jersey

January 8, 2018

JEFFREY A. WINTERS, et al, Plaintiffs,
v.
JOSEPH K. JONES, et al, Defendants.

          OPINION

          JOHN MICHAEL VAZQUEZ. U.S.D.J.

         This class action comes before the Court on three motions to dismiss Plaintiffs' Amended Complaint. The three groups of Defendants who have filed the motions are (1) Defendants Joseph Jones, Benjamin Wolf, and Jones, Wolf & Kapasi LLC, D.E. 39; (2) Defendants Laura Mann and the Law Offices of Laura S. Mann, D.E. 49; and (3) Defendants Ari Marcus, Yitzchak Zelman, and Marcus & Zelman LLC, D.E. 50. Plaintiffs Jeffrey Winters and Collection Solutions, Inc. ("Plaintiffs") filed a single brief in opposition, D.E. 56, to which all Defendants replied, D.E. 58, 59, 60.[1] The Court reviewed all the submissions in support and in opposition, and considered the motion without oral argument pursuant to Fed.R.Civ.P. 78(b) and L. Civ. R. 78.1(b). For the reasons stated below, Defendants' motions to dismiss are GRANTED. The Amended Complaint suffers from defective legal theories, both substantively and as pled. Moreover, Plaintiffs' factual allegations are severely lacking in light of the federal pleading requirements.

         L BACKGROUND

         A. Factual Background

         Plaintiff Collection Solutions, Inc. is a New Jersey corporation that primarily provides debt collection services. First Amended Complaint ("FAC") ¶ 1. Plaintiff Jeffrey Winters is the sole shareholder of Collection Solutions, Inc. Id. Defendants Joseph Jones and Benjamin Wolf are attorneys who practice at the firm of Jones, Wolf & Kapasi, LLC. Id. ¶ 2. Defendant Laura Mann is an attorney and the principal at the firm of Laura S. Mann, LLC. Id. ¶ 3. Defendants Ari Marcus and Yitzchak Zelman are attorneys and the principals of the firm of Marcus & Zelman, LLC. Id. ¶ 4.

         Plaintiffs claim that "the particular actionable conduct perpetrated by Defendants against Plaintiffs . . . was the class action litigation . . . Juliette Chapa, et al[.J v[.J Charles I. Turner Esq., and United Credit Specialists et al., [2]in the Federal District Court of New Jersey, Case No. 2:15-cv-03125." ("Chapa Case") Id. ¶ l.[3] Plaintiffs settled the Chapa Case for $12, 000 in September 2016. Id. Plaintiffs allege that the Chapa Case is illustrative of Defendants' enterprise pursuant to The Racketeer Influenced and Corrupt Organizations Act ("RICO") of joining together to bring sham class action lawsuits against debt collection agencies. Id. ¶ 9.

         Specifically, Plaintiffs allege that at some point prior to 2013, Defendants formed a RICO enterprise that:

avoided Small Claims Courts or unprofitable immediate payment of nominal claims without attorney's fees, by filing sham putative class actions in Federal court en masse on theory that the vast majority of the relatively deep-pocket defendants (mostly debt collection companies) would view a quick settlement for under $100, 000 as basically a nuisance claim; with the rare contested case only confirming to victim defendants the practical advisability of settling early on a class basis.

         FAC ¶ 8(A).

         To perpetuate the alleged sham class actions, Defendants "search out, solicit, and develop professional [p]laintiffs retained to pose as theoretical 'least sophisticated consumers.'" Id. ¶ 8(B). Defendants then, according to Plaintiffs, falsely impute "imaginary" false damages to those professional plaintiffs. Id. To support these allegations, Plaintiffs point to five cases filed on behalf of the same plaintiff (Marni Truglio), where Ari Marcus on behalf of Marcus & Zelman LLC was co-counsel. Three of those cases were allegedly opened and then settled within months of each other. Id. ¶ 26(D).

         Plaintiffs further allege that Defendants knowingly bring the sham class actions in full awareness that actual damages and typicality do not exist. Plaintiffs support this allegation by pointing to a lecture at a Federal Fair Debt Collection Practices Act ("FDCPA") seminar on October 8, 2013, where both Mann and Jones spoke. FAC ¶ 8(C). At the seminar, according to Plaintiffs, Mann admitted that actual damages rarely occur and Jones stated that "you've got to prove actual damages." Id. Thus, Plaintiffs assert that Defendants know that courts would not certify these preliminary classes of plaintiffs if the litigation reached the certification stage. Id. Plaintiffs continue that Defendants are unconcerned over class deficiencies because Defendants file these lawsuits only for the attorney's fees. Id. ¶ 8(D). To that end, Defendants allegedly maximize the number of cases they bring by not consolidating litigation efforts. Id. ¶¶ 8(E)-(F).[4]

         Other relevant allegations from the FAC are discussed further below.

         B. Procedural History

         On December 5, 2016, Plaintiffs filed their initial Complaint. D.E. 1. Marcus, Zelman, and Marcus & Zelman LLC filed a motion to dismiss. D.E. 19. Mann and the Law Offices of Laura S. Mann also filed a motion to dismiss. D.E. 21. Plaintiffs, in response, filed the FAC on February 6, 2017. D.E. 29. In their FAC, Plaintiffs allege seven counts: a federal RICO violation (Count I); a federal RICO conspiracy (Count II); a New Jersey RICO violation (Count III); a New Jersey RICO conspiracy (Count IV); fraud (Count V); negligence (Count VI); and legal malpractice (Count VII). In alleging a federal RICO violation, Plaintiffs claim that Defendants committed several predicate acts, including wire fraud, obstruction of justice, witness tampering, and extortion. As to the New Jersey RICO violation, Plaintiffs assert that Defendants committed several other predicate acts, including theft by extortion, theft by deception, and deceptive business practices.

         The current motions followed. Plaintiffs also later submitted a letter asking the Court to consider the case of Main St. at Woolwich, LLC v. Ammons Supermarket, Inc., 451 N.J.Super. 135 (App. Div. 2017). Defendants Jones, Wolf, and Jones, Wolf & Kapasi LLC submitted a letter refuting the relevance of Main St. at Woolwich, LLC and asking the Court to consider Grubb v. Green Tree Servicing, LLC, No. Civ. No. 13-07421 (D.N.J. July 24, 2014).

         IL LEGAL STANDARD

          Rule 12(b)(6) governs motions to dismiss for "failure to state a claim upon which relief can be granted." For a complaint to survive dismissal under the rule, it must contain sufficient factual matter to state a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Although the plausibility standard "does not impose a probability requirement, it does require a pleading to show more than a sheer possibility that a defendant has acted unlawfully." Connelly v. Lane Const. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (internal quotation marks and citations omitted). As a result, a plaintiff must "allege sufficient facts to raise a reasonable expectation that discovery will uncover proof of [his] claims." Id. at 789.

         In evaluating the sufficiency of a complaint, district courts must separate the factual and legal elements. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-211 (3d Cir. 2009). Restatements of the elements of a claim are legal conclusions, and therefore, not entitled to a presumption of truth. Burtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011). The Court, however, "must accept all of the complaint's well-pleaded facts as true." Fowler, 578 F.3d at 210. In deciding a motion to dismiss the Court may also consider any "document integral to or explicitly relied upon in the complaint." Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quotation & emphasis omitted)). Even if plausibly pled, however, a complaint will not withstand a motion to dismiss if the facts alleged do not state "a legally cognizable cause of action." Turner v. J.P. Morgan Chase & Co., 2015 WL 12826480, at *2 (D.N.J. Jan. 23, 2015).

         III. LEGAL ANALYSIS

         As noted, Plaintiffs allege that Defendants violated the federal RICO statute, 18 U.S.C. § 1961 et seq., and the New Jersey RICO statute, N.J.S.A. 2C:41-1 etseq. FAC ¶ 5.[5] Additionally, Plaintiffs assert that Defendants committed fraud, negligence, and legal malpractice through their participation in the RICO scheme. Thus, the Court has federal question jurisdiction over the federal RICO claim and supplemental jurisdiction over the New Jersey RICO, fraud, negligence, and legal malpractice claims.[6]

         Plaintiffs claim that Defendants' RICO liability stems from their filing of class actions pursuant to the FDCPA. In 1977, Congress enacted the FDCPA to "eliminate abusive debt collection practices by debt collectors." Kaymark v. Bank of Am., N.A., 783 F.3d 168, 174 (3d Cir. 2015), cert, denied sub nom. Udren Law Offices, EC. v. Kaymark, 136 S.Ct. 794 (2016)(quoting 15 U.S.C. § 1962(e)). Pursuant to the FDCPA, a successful plaintiff is entitled to actual damages, costs, attorney's fees, and statutory damages. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 578, 584 (2010). The Jerman Court noted that the FDCPA is one of several federal laws "that Congress has enacted to protect consumers" and that:

[a] collateral effect of these statutes may be to create incentives to file lawsuits even where no actual harm has occurred. This happens when the plaintiff can recover statutory damages for the violation and his or her attorney will receive fees if the suit is successful, no matter how slight the injury. A favorable verdict after trial is not necessarily the goal; often the plaintiff will be just as happy with a settlement, as will his or her attorney (who will receive fees regardless). The defendant, meanwhile, may conclude a quick settlement is preferable to the costs of discovery and a protracted trial. And if the suit attains class-action status, the financial stakes rise in magnitude.

Id. at 616 (emphases added).

         Courts have observed that in FDCPA cases, class action litigation is preferable because "in light of the limited quantum of damages available on any class member's claim, individualized prosecution by the class members would be inefficient and is therefore unlikely." Stair ex rel. Smith v. Thomas & Cook, 254 F.R.D. 191, 201 (D.N.J. 2008) (citation omitted); Little-King v. Hayt Hayt & Landau, 2013 WL 4874349 *7 (D.N.J. Sept. 10, 2013) (noting that "the expense of individual actions in this FDCPA action, weighed against the potential recovery, would likely be inefficient and cost prohibitive").

         Factual ...


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