W. KEITH WATKINS, Chief Judge.
Plaintiff Allie Stewart claims that she was the victim of unlawful debt collection
Before the court are Defendants' motion to dismiss certain defendants for lack of subject-matter jurisdiction (Doc. # 140) and Ms. Stewart's motion for leave to amend the complaint and add parties (Doc. # 142). Each motion has been fully briefed. (See Docs. # 140, 150, 151 (motion to dismiss); 142, 144, 147, 152 (motion to amend).) Upon consideration of the parties' arguments, the evidence, and relevant law, the court concludes that both motions are due to be denied.
The court has subject-matter jurisdiction over Ms. Stewart's claims pursuant to 28 U.S.C. §§ 1331 and 1367. Personal jurisdiction and venue are uncontested.
Defendants assert that Plaintiff lacks standing to sue all but one of them, and the court "must dismiss the action" if it determines "at any time that it lacks subject-matter jurisdiction." Fed.R.Civ.P. 12(h)(3). A challenge to subject-matter jurisdiction takes two forms: a "facial attack" or a "factual attack." Gilmore v. Day, 125 F.Supp.2d 468, 471 (M.D.Ala. 2000). A "facial attack" requires assessment of the allegations in the complaint, while a "factual attack" challenges the existence of subject-matter jurisdiction based on matters outside the pleadings. Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir.1990). No presumption of truth exists in a factual attack, so the court may hear conflicting evidence, weigh it, and ultimately decide the existence of subject-matter jurisdiction. Gilmore, 125 F.Supp.2d at 470-71 (citing Colonial Pipeline Co. v. Collins, 921 F.2d 1237, 1243 (11th Cir. 1991)).
Rule 15 of the Federal Rules of Civil Procedure governs the allowance of amendments to the pleadings. As a matter of course, a party may amend a pleading to which a responsive pleading is required once within "21 days after service of a responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f), whichever is earlier." Fed.R.Civ.P. 15(a)(1). Otherwise, a party wishing to amend its pleadings before trial must seek the opposing party's written consent or leave of court. Fed.R.Civ.P. 15(a)(2). Though "[t]he court should freely give leave when justice so requires," id., the court may deny a motion to amend "on numerous grounds such as undue delay, undue prejudice to the defendants, and futility of the amendment," Fla. Evergreen Foliage v. E.I. DuPont De Nemours & Co., 470 F.3d 1036, 1041 (11th Cir.2006); see also Foman v. Davis, 371 U.S. 178,
An amendment is futile "when the complaint as amended is still subject to dismissal." Hall v. United Ins. Co. of Am., 367 F.3d 1255, 1263 (11th Cir.2004). "[D]ismissal on statute of limitations grounds is appropriate only if it is apparent from the face of the complaint that the claim is time-barred" and "if it appears beyond a doubt that Plaintiffs can prove no set of facts that toll the statute." Lindley v. City of Birmingham, Ala., 515 Fed. Appx. 813, 815 (11th Cir.2013) (internal quotation marks omitted). To survive a motion to dismiss for failure to state a claim, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "[F]acial plausibility" exists "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. (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955).
This case involves claims arising under the federal Fair Debt Collection Practices Act ("FDCPA") and state law. In May 2008, Bureaus Investment Group # 1, LLC sued Plaintiff Allie Stewart in Macon County Circuit Court to collect a sum that accounted for an unpaid principal balance that she owed on a credit card, plus pre-judgment interest and attorney's fees. Attorney Mark N. Chambless of Chambless Math & Carr, P.C., represented Bureaus Investment Group # 1, LLC. The parties entered into a consent judgment in the amount of $19,496.09 on November 19, 2008. When Ms. Stewart entered the agreement, she was representing herself. In November 2009, however, Attorney Charles Lorant appeared in her case and moved to vacate the consent judgment on grounds that Bureaus Investment Group # 1, LLC was not licensed or registered to do business in Alabama at the time that it filed its complaint or entered the consent judgment with Ms. Stewart. The Macon County Circuit Court granted the requested relief pursuant to Alabama Rule of Civil Procedure 60(b)(6).
Ms. Stewart then answered the complaint and filed a counterclaim against Bureaus Investment Group # 1, LLC for violation of the FDCPA and various state law torts. Bureaus Investment Group # 1, LLC voluntarily dismissed its original complaint and moved for realignment of the parties. (See Doc. # 1-2, at 46.) The state court allowed realignment and designated Ms. Stewart as plaintiff and Bureaus Investment Group # 1, LLC as defendant. In its new capacity as defendant, Bureaus Investment Group # 1, LLC (through new counsel) removed the case to this district in December 2010. As it turns out, not only was Bureaus Investment Group # 1, LLC not a registered entity in Alabama, but it does not legally exist. But that is a factual leap too far this early in the opinion.
Realigned as a plaintiff, Ms. Stewart has amended her complaint twice since removal, and the second amended complaint is presently the operative pleading. (See
A previous order has accounted for one reason (but there are many) that this case is nearly four years old yet still in the discovery and amended pleadings phase of litigation. (See Doc. # 125.) Numerous Defendants who were not timely served pursuant to Rule 4(m) were dismissed without prejudice after Ms. Stewart failed to show good cause. (See Doc. # 125, at n. 3.)
But since September 2013, this case has resumed the normal course of progress under a uniform scheduling order, and the parties have engaged in discovery. (See Doc. # 128.)
To Ms. Stewart's credit, the proposed Third Amended Complaint is more clearly organized than her prior amended complaints. It categorizes the Bureaus entities into three classes: (1) those entities which have never been organized or incorporated by law, and therefore, have never existed, but which have appeared in Alabama state courts as plaintiff-creditors in debt collection actions; (2) those entities which actually exist and which have appeared in Alabama state courts, but which have not registered to do business in Alabama; and (3) those entities which are named "registered portfolios" that actually exist, are registered to do business in Alabama, and which own the consumer debts like Ms. Stewart's, but which proceeded to use Alabama courts to collect those debts prior to registering with the State. The registered portfolios are all owned solely by Bureaus Investment Group, LLC; Bureaus Investment Group, LLC is owned in part by Michael and Burton Slotky. Behind all the Bureaus entities, which total 39 in the proposed Third Amended Complaint, is the Bureaus, Inc., the alleged "master servicer" of the debts and the only business entity that actually has employees. It is owned by the Slotkys. Thus, Ms. Stewart has shed more light upon the way the Bureaus entities are owned and allegedly operated.
Positioning for obscurity over clarity, Defendants oppose entirely Plaintiffs' request to amend her complaint and argue that any amendment is untimely, prejudicial, and futile. (Doc. # 144.) Two days prior to the filing of the motion to amend the complaint, Defendants moved to dismiss all but one of themselves — Bureaus Investment Group Portfolio No. 1, LLC — arguing that Ms. Stewart lacks standing to sue them because only Bureaus Investment Group Portfolio No. 1, LLC sued her in state court. Plaintiff opposes the motion to dismiss.
Ms. Stewart has more information than she previously had to support her claims and to tie real persons and business entities to the acts of faceless Bureaus entities like the one that sued her and other debtors in state court. Because clarity about who did what to whom is essential to the expeditious resolution of this case, a third amended complaint would be helpful. The discussion proceeds under the assumption that many of the facts alleged in the proposed Third Amended Complaint will become part of an operative pleading. However, for various reasons to be discussed, the Third Amended Complaint as proposed (Doc. # 142-1) will not be allowed as drafted, and it must be redrafted and resubmitted for approval.
Defendants' motion to dismiss for lack of standing critiques the currently operative Second Amended Complaint, (see Doc. # 140), but Defendants' arguments nonetheless bear upon what Ms. Stewart should be allowed to plead in a second draft of the proposed Third Amended Complaint.
The discussion begins with Defendants' objection that Ms. Stewart lacks standing to sue any Defendant other than Bureaus Investment Group Portfolio No. 1, LLC. It then proceeds to address the substantial
This is not the first motion to dismiss for lack of standing. In April 2012, Bureaus Investment Group Portfolio No. 1, LLC similarly argued that it alone had dealings with Ms. Stewart in the debt collection suit. (See Doc. # 50.) Relying on certain allegations in the second amended complaint, the court denied the motion to dismiss because it was, at that time, unclear which Defendants contacted Ms. Stewart and sued her in state court. (See Doc. # 102.)
According to Defendants, discovery has eliminated any confusion about who harmed Ms. Stewart. Defendants point to her deposition testimony and discovery responses to support their contention that Bureaus Investment Group Portfolio No. 1, LLC alone pursued Ms. Stewart's debt collection action. She received a collection letter from The Bureaus, Inc., which was the debt collector for Bureaus Investment Group Portfolio No. 1, LLC, but The Bureaus, Inc. was dismissed in September 2013, for Ms. Stewart's failure to serve it with process.
Ms. Stewart emphasizes that "Bureaus Investment Group # 1, LLC" is not a simple misspelling of "Bureaus Investment Group Portfolio No. 1, LLC."
Ms. Stewart's stated position — particularly with respect to the "d/b/a" nature of the non-existing Bureaus entities — begs two questions that have gone unaddressed in the briefing. First: why must the nonexisting Bureaus entities be joined as defendants in this action if they are mere d/b/a's of real persons or business entities like Michael Slotky or Bureaus Investment Group Portfolio No. 1, LLC? Earlier in this litigation, it was unclear to Ms. Stewart whether certain Bureaus entities legally existed or not. (See, e.g., 2d Am. Compl. at ¶ 3 (alleging that Bureaus Investment Group # 1, LLC "is believed to be a foreign limited liability corporation"); ¶ 21 (alleging that Bureaus Investment Group # 2, LLC's "corporate structure is unknown to Plaintiff").) But Ms. Stewart's proposed Third Amended Complaint has clearly delineated which entities have been incorporated or organized legally, and which have not. Michael Slotky appears to agree that entities like "Bureaus Investment Group # 1, LLC" never existed. (Dep. Michael Slotky, at 154 (Doc. # 150-25, at 15).) And Ms. Stewart cites numerous cases that explain that a "d/b/a" entity is not a separate legal entity. (See Doc. # 150, at 11-12.)
Accordingly, it would appear that a future amended complaint, if submitted and allowed, should identify as defendants only business entities and persons actually in existence. Plaintiff may, however, also identify those entities or persons which are "doing business as" Bureaus Investment Group # 1, LLC, Bureaus Investment Group # 2, LLC, and the like, but not as Defendants.
The second unanswered question is: If Bureaus Investment Group # 1, LLC is not and never has been an actual legal entity, why did defense counsel invoke this court's jurisdiction on behalf of a nonexistent entity, "Bureaus Investment Group #1"? (See Notice of Removal (Doc. # 1, at 1, 6).) Defendants did not clarify upon removal of the case that Bureaus Investment Group Portfolio No. 1, LLC was the correct defendant here and the original plaintiff in the state court proceedings. This is obviously not a case where another party was responsible for the misidentification.
But at the time of removal, based on Ms. Stewart's success in vacating the consent judgment entered against her in state court, and based on her counterclaims, defense counsel knew, at a minimum, that Bureaus Investment Group # 1, LLC did not have authority to do business in Alabama. It is unclear when defense counsel learned that Bureaus Investment Group # 1, LLC did not exist, but they certainly knew by April 13, 2012, when they began to refer, perhaps disingenuously, to "the
Returning to the issue presented by the motion to dismiss and by Ms. Stewart's acknowledgement that certain Bureaus entities never existed, the non-existent Bureaus entities are not appropriate parties in this suit and should be omitted as defendants in any future proposed Third Amended Complaint. However, Ms. Stewart may identify existing persons or entities as defendants that do business as any or all of the non-existent Bureaus entities.
With respect to the Bureaus entities that actually exist,
Defendants reply that Ms. Stewart dealt only with Bureaus Investment Group Portfolio No. 1, LLC. Defendants contend that the initiation of lawsuits by the various Portfolio entities against "other putative class members ... may confer [standing] on those class members" but not upon Ms. Stewart. (Doc. # 151, at 2.) Defendants assert that Ms. Stewart improperly conflates all of the Bureaus entities as one, when in fact "each [Portfolio] ha[s] different stakeholders pursuing different investment objectives with different risk profiles," "debt portfolios," "assets," and "liabilities." (Doc. # 151, at 11.) Defendants deny that Michael Slotky participated in the action to collect Ms. Stewart's debt and assert that there is scant evidence to support an alter ego theory of liability. Even if the alter ego theory is operative, Defendants assert that it does not sufficiently connect Ms. Stewart to every existing Bureaus entity that Ms. Stewart has joined or wishes to join as a defendant in the suit.
The Second Amended Complaint lacks allegations that the form of any LLC was used for an illegitimate purpose, but the proposed Third Amended Complaint includes allegations that Bureaus Investment Group, LLC and the Portfolio entities "are the alter egos of The Bureaus, Inc., Michael Slotky, Aristotle Sangalang, and/or Burton Slotky, rendering [those four Defendants] personally liable for all actions, omissions, and tortious misconduct of the Existing Bureaus and Registered Portfolios." (Doc. # 142-1, at ¶ 165.)
Hence it is clear that Ms. Stewart may plead and proceed under a theory that officers, directors, shareholders, managers,
Ms. Stewart has ample evidence that the other existing Bureaus entities acted wrongfully by collecting the debts of others who could potentially become members of the putative class. It would seem that Ms. Stewart should be permitted to sue even the Bureaus entities with whom she did not deal personally because she intends to represent other Alabama debtors who did. But as the Supreme Court explained in Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976),
Id. at 40 n. 20, 96 S.Ct. 1917 (quoting Warth v. Seldin, 422 U.S. 490, 502, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975)); see also 1 W. Rubenstein, Newberg on Class Actions § 2:3, p. 63 (5th ed.2012) ("Class representatives do not gain standing through injuries to class members."). Thus, the general rule is that the class representative herself must have Article III standing to sue each named defendant in a multi-defendant case. Alternatively, if there are several class representative-plaintiffs, they corporately "must show that each defendant has harmed at least one of them." 1 W. Rubenstein, Newberg on Class Actions § 2:5, p. 73 (5th ed.2012). At the moment, this case fits neither of those circumstances.
There are potential exceptions to this rule that no party has briefed and which could put weight behind Ms. Stewart's standing. They arise from La Mar v. H & B Novelty & Loan Co., 489 F.2d 461 (9th Cir.1973), where, in the context of class certification pursuant to Rule 23, the court observed that
Id. at 466. Even though the La Mar court did not engage in substantial analysis about the exceptions it identified, a "juridical
The Eleventh Circuit has discussed the juridical link doctrine only once, in a case it decided over two decades ago. In Moore v. Comfed Savings Bank, 908 F.2d 834 (11th Cir.1990), the court discussed the doctrine after a party raised it, but the court decided the issue of the propriety of joinder on other grounds.
In federal courts, "[j]uridical links are most often found in cases involving a defendant class whose members are officials of a single state who are charged with enforcing or uniformly acting in accordance with a state statute, or common rule or practice of a state-wide application, which is alleged to be unconstitutional." Turpeau, 936 F.Supp. at 978 (internal quotation marks and alteration omitted); see also 7AA Charles Alan Wright, et al. Federal Practice and Procedure § 1785.1 (3d ed.2005) (associating "juridical link" doctrine with cases involving joinder of multiple government official-defendants). But some courts have found the juridical link doctrine applicable to class action commercial and business cases. See, e.g., Barker v. FSC Sec. Corp., 133 F.R.D. 548, 553 (W.D.Ark.1989) (finding "[p]artnership, joint enterprise, control, conspiracy, and aiding and abetting all may serve as such a [juridical] link, since [those legal relationships] denote some form of activity or association on the part of the defendants that warrants imposition of joint liability against the group even though the plaintiff may have dealt primarily with a single member"); Alves, 204 F.Supp.2d at 205 (applying doctrine in ERISA case where two health benefit plan-defendants asserted that the class representatives lacked standing because they were not members of those defendants' plans); Bromley v. Mich. Educ. Ass'n-NEA, 178 F.R.D. 148, 163 (E.D.Mich.1998) (finding standing even though there was no named plaintiff to
Looking to the two exceptions identified by La Mar, the undisputed seminal case cited by all others, Ms. Stewart and any putative class member's "injuries are [arguably] the result of a ... concerted scheme[ ] between the defendants" named in the proposed Third Amended Complaint. 489 F.2d at 466. That is, according to Ms. Stewart, all of the various Bureaus Portfolios, owned by Bureaus Investment Group, LLC but under the control of Bureaus, Inc. as master servicer and/or the individual Defendants, engaged in the same allegedly intentional and deceptive scheme of suing debtors in Alabama state courts without authority to do so and under the name of non-existing Bureaus entities. Moreover, even if there were no "concerted scheme," all of the Bureaus Portfolios "are juridically related in a manner that suggests a single resolution of the dispute would be expeditious." Id. That is, the Portfolio entities are legally related to one another by virtue of their common single-member owner, Bureaus Investment Group, LLC. Further, neither the Portfolio entities nor Bureaus Investment Group, LLC has employees, and all are likely under the control of the Bureaus, Inc. and the Individual Defendants. Because the facts in the instant case fit within the general though admittedly sparse law on the subject, the juridical link theory supplies standing for Ms. Stewart at this stage in the litigation.
Accordingly, the court concludes that Ms. Stewart has standing to join the existing Bureaus Portfolio entities as defendants in this suit, and Defendants' motion to dismiss the existing Bureaus entities with whom Ms. Stewart did not interact is due to be denied.
Based on the allegations in the proposed Third Amended Complaint, Plaintiff has standing to sue Michael Slotky, irrespective of the success of a future motion for class certification and regardless of his deposition testimony denying responsibility for the debt collection activity of the business entities he owns and allegedly controls. Defendants' motion to dismiss Michael Slotky as a defendant is due to be denied.
Defendants oppose amendment of the complaint in any form and claim that Ms. Stewart's motion is due to be denied as unduly delayed, unduly prejudicial, futile, and brought in bad faith. (Docs. # 144, 152.) As for the most recent argument of bad faith in the surreply brief, Defendants condemn Plaintiff for "breach[ing] [her] duty" to disclose every one of her proposed amendments in her motion, "shirk[ing] [her] responsibility" to justify the relief she seeks in her motion, "wast[ing] the Court's and the Parties' time," and putting forward "a horde of ill-considered amendments." (Doc. # 152, at 4-5.) These generalized "badfaith" objections to Plaintiffs' motion for leave to amend are overruled.
Defendants request that the court "uphold" its order dismissing defendants for Ms. Stewart's failure to timely serve them. (Doc. # 144, at 4.) Defendants cite the court's conclusion that Mr. Lorant failed to show good cause for the failure to serve parties and complain that Ms. Stewart asks for leave to rejoin the defendants "with nary a word as to how good cause has suddenly accrued." (Doc. # 144, at 5.) Defendants assert that rejoinder should be denied because the request is untimely, prejudicial, and futile.
The majority of the Bureaus defendants which were dismissed pursuant to Rule 4(m) are identified in the Third Amended Complaint as non-existent entities. (Compare Doc. # 125 at n. 3 with Doc. # 142-1.) As previously discussed in Part IV.A., these entities should not be joined as parties in the next operative pleading. The only actually existing but previously dismissed Bureaus entity which Ms. Stewart wishes to rejoin in the Third Amended Complaint is The Bureaus, Inc. If Ms. Stewart's most recent theory of her case is correct, The Bureaus, Inc. is an essential party.
Although Defendants make much of Ms. Stewart's lack of good cause for failing to serve The Bureaus, Inc. with the Second Amended Complaint, Defendants neglect Rule 4(m)'s provision that the court's dismissal be "without prejudice." See Fed. R.Civ.P. 4(m). Neither Rule 4(m) nor the court's order bars Ms. Stewart from moving to rejoin The Bureaus, Inc. Defendants contend that they will be prejudiced if Ms. Stewart is permitted to rejoin any party because Defendants would need to "substantially redo or supplement completed discovery." (Doc. # 144, at 5.) Assuming such a burden exists, it is doubtful that the burden outweighs the prejudice that Ms. Stewart and a potential class would suffer if Ms. Stewart is denied leave to rejoin the alleged master servicer of the debts and the only Bureaus entity with any employees.
The proposed Third Amended Complaint adds three new plaintiffs: Earnest Eaton, Becky Borden, and Lisa McCall (collectively "New Plaintiffs"). Nonexistent Bureaus Investment Group # 2, LLC retained Mark Chambless to sue Ms. Borden in February 2003 and Mr. Eaton in March 2003. Non-existent Bureaus Investment Group # 1, LLC retained Mark Chambless to sue Ms. McCall
(Doc. # 142-1, at ¶ 85.) Hence, Plaintiffs claim that any applicable statutes of limitations must be equitably tolled. (Doc. # 142-1, at ¶ 86.)
Defendants assert that the addition of new Plaintiffs is untimely, prejudicial, and futile because of the relevant statutes of limitations. Defendants argue that there is no reason that New Plaintiffs could not have filed their own lawsuits or joined this one long before now. Defendants claim that their authority to sue New Plaintiffs in state court was "readily searchable" through the State of Alabama's public records, which is how Mr. Lorant discovered the impropriety of the consent judgment Ms. Stewart entered with Bureaus Investment Group # 1, LLC. (Doc. # 144, at 7.) Defendants claim that adding New Plaintiffs would unduly delay class certification and dispositive motion briefing and would force them to start from scratch in discovery with new parties.
Ms. Stewart replies that although Mr. Lorant knew of New Plaintiffs' claims long ago, neither she nor Mr. Lorant had a duty to contact them to seek their participation in this case. She claims that she contacted them when searching for evidence of pre-litigation collections communication from Defendants, and at that time, New Plaintiffs themselves became aware of their potential causes of action. (Doc. # 147, at 10.)
In support of her request for equitable tolling, Ms. Stewart points to the "self-concealing nature of Defendants' pleadings," the commission of "affirmative acts" to falsify bills of sale, assignments of debt, and authorization and verification forms filed in Alabama courts, and Defendants' continued wrongful collection efforts in Alabama courts after Ms. Stewart sued Bureaus Investment Group # 1, LLC.
Ms. Stewart offers little law in support of her equitable tolling argument. (See Doc. # 147, at 17 (citing Thompson v. Metro. Life Ins. Co., 149 F.Supp.2d 38, 40 (S.D.N.Y.2001); Coble v. Cohen & Slamowitz, LLP, 824 F.Supp.2d 568, 571-72 (S.D.N.Y.2011)).) Defendants' provision of legal argument is also scant; they only remind the court of the applicable statutes of limitations for FDCPA claims and state law torts. (Doc. # 144, at 8 (citing 15
Ordinarily, the limitation period on an FDCPA violation begins to run from the date of the violation — not the date when it is discovered by the plaintiff. "[Section] 1692k(d) does not contain a general discovery rule, that is, an exception providing that the one year limitation period begins to run when a debtor `knows or has reason to know' of a violation of the [FDCPA]." Cooper v. F.A. Mgmt. Solutions, Inc., 8:06-CV-751-T-27MAP, 2007 WL 4326800, at *4 (M.D.Fla. Dec. 7, 2007) (internal citation and footnote omitted). "In the absence of an express general discovery rule, a judicial implication of a general discovery rule is precluded." Id. (citing TRW Inc. v. Andrews, 534 U.S. 19, 27-28, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001)).
Yet equitable tolling is possible. See Mangum v. Action Collection Serv., Inc., 575 F.3d 935, 939 n. 5 (9th Cir.2009) ("The discovery rule is not the same as equitable tolling."). Equitable tolling "differs from the [discovery rule] in that the plaintiff is assumed to know that he has been injured, so that the statute of limitations has begun to run; but he cannot obtain information necessary to decide whether the injury is due to wrongdoing and, if so, wrongdoing by the defendant." Cada v. Baxter Healthcare Corp., 920 F.2d 446, 451 (7th Cir.1990). The Eleventh Circuit has not expressly dealt with the application of equitable tolling in the context of FDCPA claims, but the Supreme Court has counseled that "limitations periods are customarily subject to equitable tolling unless tolling would be inconsistent with the text of the relevant statute." Young v. United States, 535 U.S. 43, 49, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002) (internal citation and quotation marks omitted).
In federal courts, "[e]quitable tolling is appropriate when a [plaintiff] untimely files because of extraordinary circumstances that are both beyond his control and unavoidable even with diligence." Sandvik v. United States, 177 F.3d 1269, 1271 (11th Cir.1999). The plaintiff carries the burden of establishing that tolling is warranted. Bost v. Fed. Express Corp., 372 F.3d 1233, 1242 (11th Cir.2004). Because tolling is an "extraordinary" remedy, it must be used "sparingly." Arce v. Garcia, 434 F.3d 1254, 1261 (11th Cir.2006).
"[I]t is well established that [e]quitable tolling is not warranted merely because the plaintiff was unaware of his cause of action." Derisme v. Hunt Leibert Jacobson P.C., 880 F.Supp.2d 339, 356 (D.Conn.2012) (internal quotation marks omitted). "The fact that [a plaintiff] was unaware that she had a potential cause of action against [a defendant] is not the type of extraordinary circumstances that would warrant the application of equitable tolling." Id. Instead, there must be some sort of concealment of wrongdoing by the defendant or some effort to trick the plaintiff into not exercising his rights. Turner v. Lerner, Sampson & Rothfuss, 776 F.Supp.2d 498, 504 (N.D.Ohio 2011). A plaintiff may demonstrate concealment "by showing either that the defendant took affirmative steps to prevent the plaintiff[`s] discovery of his claim or injury or that the wrong itself was of such a nature as to be self-concealing." Derisme, 880 F.Supp.2d at 355 (quoting State of N.Y. v. Hendrickson Bros., Inc., 840 F.2d 1065, 1083 (2d Cir.1988)). Concealment is what Ms.
The court is doubtful, however, that Defendants' misrepresentations in state court pleadings and other consumer debt-related documents prevented potential FDCPA plaintiffs from timely filing their claims. In a very similar case, Zigdon v. LVNV Funding, LLC, 1:09CV0050, 2010 WL 1838637 (N.D.Ohio Apr. 23, 2010), report and recommendation adopted, 1:09CV0050, 2010 WL 2332692 (N.D.Ohio June 9, 2010), the plaintiffs attempted to bring a class action suit against defendants who violated the FDCPA by, among other things, commencing debt collection lawsuits in state court "even though [the defendants] did not have the legal capacity to do so." Id. at *2, *5. Much like this case, a debt collector-defendant that sued the plaintiffs was not registered to do business in Ohio. The plaintiffs did not dispute that their FDCPA complaint was not filed within the one-year limitations period, but they contended that equitable tolling saved the claims. The court's ruling turned on whether the complaint plausibly alleged that the defendants had fraudulently concealed from the plaintiffs the defendants' lack of right to sue, thereby preventing the plaintiffs from discovering their FDCPA causes of action.
The Zigdon court concluded that equitable tolling was not warranted because the plaintiffs had failed to plead that: (1) the defendants "took active steps, beyond the mere filing of the state court suit," to conceal their non-registration status in Ohio; (2) the defendants made efforts to prevent plaintiffs from learning the true nature of their non-registration status or to cause them to miss the FDCPA filing deadline; or (3) the plaintiffs had exercised due diligence in trying to learn about their cause of action. Id. at *10-12 (emphasis added). With respect to the "active steps" element, the court noted the "critical distinction" between "failure to reveal" and "fraudulent concealment." Id. at *10. The court reasoned that "silence" and "unwillingness to divulge one's allegedly wrongful activities," in the absence of a fiduciary relationship, was not the sort of active concealment for which the equitable tolling remedy was created. Id. Here, of course, New Plaintiffs were not much different than the Zigdon plaintiffs. They knew that they had been sued by entities purporting to have authority to sue them who identified themselves as Bureaus Investment Group # 1, LCC and Bureaus Investment Group # 2, LLC.
There is a distinction, however, in that the defendants in Zigdon do not appear to have pleaded their legal capacity to sue in their state court complaints, whereas as the non-existent Bureaus in this case allegedly represented that they were "corporation[s] licensed to do business in the [S]tate of Alabama." (Doc. # 142-2, at ¶ 44.) While it is a close call on whether Defendants took active steps to conceal
The Zigdon court also found it somewhat significant that a business's registration with the State of Ohio was a matter of public record. See id. at *11. Defendants have made much of the accessibility of the same information in Alabama, and Ms. Stewart does not rebut their contention that Ms. Stewart's timely claim is proof that Defendants' alleged FDCPA violations could have been ascertained within the one-year statutory period by verifying Defendants' registration with the Alabama Secretary of State and by searching for Defendants' corporate or organizational existence on other states' databases. Thus, this does not appear to be the sort of case where a plaintiff's tardiness was "unavoidable even with diligence." Sandvik, 177 F.3d at 1271. Ms. Stewart asserts that New Plaintiffs recently became aware of their causes of action against Defendants. But lack of awareness or ignorance "does not constitute a rare and extraordinary circumstance that would merit equitable tolling." Ruiz v. Poole, 566 F.Supp.2d 336, 341 (S.D.N.Y.2008).
While misrepresentation and concealment are closely related concepts, the court cannot say that the misrepresentations, when viewed in the context of the passage of many years beyond the FDCPA statute of limitations, amounted to active concealment over those many years. Because it appears that Defendants did not actively conceal their FDCPA violations or state-law torts and that New Plaintiffs were not diligent to discover their claims, this is not the rare case that lends itself to equitable tolling under either federal law or state law.
Ms. Stewart seeks to join four new parties as defendants: Aristotle Sangalang, Burton Slotky, Mark Chambless, and Chambless Math & Carr P.C. (collectively the "New Defendants"). Ms. Stewart also seeks to add B.I.G. No. 2, LLC as a defendant, but B.I.G. No. 2, LLC is nonexistent and should not be joined for reasons stated supra in Part IV.A.
Generally, Defendants oppose the joinder of New Defendants because the amendment has been unduly delayed, is prejudicial to Defendants' prior efforts to defend this suit and to conduct discovery, and is futile because the claims are time-barred. The following paragraphs summarize what the parties argue with respect to the timeliness of Ms. Stewart's request to join each New Defendant and the prejudice that Defendants might suffer if joinder is allowed.
Defendants argue that the "sole allegation against Mr. Sangalang," aside from any of the "believed to have participated" allegations, is that he "personally swore to Authorization and Verification forms on behalf of" non-existent Bureaus entities. (Doc. # 144, at 10 (citing proposed Third Amended Complaint, at ¶ 43).) Defendants
Defendants argue that the sole allegation against Burton Slotky is that Ms. Stewart "believes" that he "participated in the conduct" described in the proposed Third Amended Complaint. (Doc. # 144, at 9 (citing proposed Third Amended Compl. at ¶ 20).)
Defendants assert that Ms. Stewart has been familiar with Mr. Chambless and his law firm for several years, and thus, she has no excuse for seeking to join them as parties in 2014. Ms. Stewart replies that she was unaware until recently that "[a]ny decision to falsely [plead in state courts] that the collection plaintiff[s] w[ere] `licensed to do business in Alabama'" was Mr. Chambless's decision. (Doc. # 147, at 9.) Defendants dispute neither this deflection of blame away from themselves and onto Mr. Chambless nor the substance of the allegations against him and his firm, (see Doc. # 142-1, at ¶¶ 144-47), but they argue that Ms. Stewart should not be allowed to later abandon her present allegation that Mr. Chambless and his firm are responsible for pleading Defendants' status as licensed to do business in Alabama.
Altogether, Defendants argue that Ms. Stewart has had actual or constructive knowledge of Mr. Sangalang, Burton Slotky, Mr. Chambless, and Chambless Math & Carr, P.C. for years, rendering her motion untimely.
Defendants assert that joinder of these Defendants will set back the progress that they have made in defending against Ms. Stewart's claims. Ms. Stewart reminds the court that although this case has been pending for some time and was slow to get going, only four and half months of substantive discovery under a uniform scheduling order transpired before she sought leave to join New Defendants.
The briefing focuses almost entirely on undue delay and whether Defendants will
If Ms. Stewart's claims against New Defendants are in fact futile because they are time-barred by relevant statutes of limitations, application of Rule 15(c)'s relation back doctrine is in order. See Krupski v. Costa Crociere S.p.A., 560 U.S. 538, 541, 130 S.Ct. 2485, 177 L.Ed.2d 48 (2010) ("Rule 15(c) of the Federal Rules of Civil Procedure governs when an amended pleading `relates back' to the date of a timely filed original pleading and is thus itself timely even though it was filed outside an applicable statute of limitations.").
As for what little has been argued about the futility of joining New Defendants, the court concludes that Ms. Stewart may add Aristotle Sangalang and Burton Slotky as Defendants, notwithstanding Ms. Stewart's allegations of belief, as opposed to knowledge, of alleged wrongdoing. Someone — a human being, for that is the only way organized business entities transact business — is responsible for the alleged misconduct of the numerous Bureaus entities. It is plausible that responsibility rests ultimately with the officers, directors, shareholders, managers, or members of the Bureaus, Inc., Bureaus Investment Group, LLC, or both.
Next, the court concludes that undue delay is not a reason to deny Ms. Stewart's motion to amend. In Bryant v. Dupree, 252 F.3d 1161 (11th Cir.2001), the Eleventh Circuit reversed a district court's order dismissing an action without granting
Here, there is no question that these proceedings have moved slowly. Ms. Stewart first raised her FDCPA claims in state court on March 9, 2010, a little more than four years ago. Many months of the four year delay inevitably resulted from the several motions to dismiss and to amend the complaint. But this is not the sort of case where the pleading is on life support. The scope of this opinion shows that there are and have been substantial allegations. The allegations keep multiplying, possibly in direct proportion to the complexity of the business entities conceived and birthed solely through the intentions of one or more of the Defendants.
Defendants linger on Mr. Lorant's absence from the litigation for roughly nine months following the filing of the Second Amended Complaint. They complain repeatedly about the delay he caused, but in truth, they may have preferred his absence, and they have not suffered much prejudice by it. Further, there is no evidence that Mr. Lorant's disappearance was for a dilatory purpose, and his prosecution of Ms. Stewart's case since September 2013 indicates a desire, shared by the court, to expeditiously resolve this case. Finally, it appears that Ms. Stewart filed the instant motion to amend within a month of confirming, through discovery, that she may have actionable FDCPA and tort claims against New Defendants. See 6 Charles Alan Wright, et al., Federal Practice and Procedure § 1488 (3d ed. 2005) ("[A] motion to amend should be made as soon as the necessity for altering the pleading becomes apparent."). For these reasons, there is no support for Defendants' contention that leave to amend should be denied for undue delay.
Finally, any prejudice that Defendants may suffer as a result of allowing Ms. Stewart to join New Defendants in a third amended complaint is outweighed by Ms. Stewart's and any potential class member's interests in justice. Fed.R.Civ.P. 15(a)(2). Moreover, the prejudice that may occur is likely the product of prodigious planning of endless entities of limited liability, birthed by some of the Defendants.
For the foregoing reasons, Ms. Stewart will be permitted to add New Defendants, if she seeks leave to amend her complaint in accordance with this opinion and order.
Defendants oppose Plaintiffs' amendment of her claims to assert new claims and new theories of liability. The proposed Third Amended Complaint differs from the Second Amended Complaint in its introduction of theories of "promoter liability" against Defendants for the acts of non-existing Bureaus entities (Counts VI and VII), central figure liability (Count IX), and alter ego liability (Count X). (Compare Doc. # 103 with Doc # 142-1.) The proposed Third Amended Complaint
With respect to futility, Defendants contend that the new claims "cannot withstand a motion to dismiss for failure to state a claim and/or for lack of subject-matter jurisdiction." (Doc. # 144.) Defendants' objection to subject-matter jurisdiction has been addressed supra in Part IV.A., but arguments related to Rule 12(b)(6) have not. Defendants focus those arguments solely upon the newly added central figure and alter ego theories of liability.
Defendants posit that Ms. Stewart "seeks to extrapolate a [central figure] theory of liability under federal law into a cause of action under Alabama law." (Doc. # 144, at 12.)
It is plausible that, in view of the allegations in the proposed Third Amended Complaint, Michael Slotky, Aristotle Sangalang, Burton Slotky, and The Bureaus, Inc. could be held liable as participants or
Although the viability of alter ego liability has been addressed supra in Part IV.A. in the context of Ms. Stewart's standing to sue, the viability of the theory will be readdressed briefly here in the context of the futility of an amendment.
Defendants contend that Ms. Stewart must show either that a Bureaus entity was created and exists for a fraudulent purpose, or alternatively, that an injustice will result from recognition of a fraudulent Bureaus entity's existence. (Doc. # 144, at 13 (citing Simmons v. Clark Equip. Credit Corp., 554 So.2d 398, 400 (Ala. 1989)).) Defendants deny that Ms. Stewart alleges any facts to support her allegations of fraud or injustice.
Paragraph 168 of the proposed Third Amended Complaint reads:
(Doc. # 142-1, at ¶ 168.) Defendants call this paragraph "quixotic." (Doc. # 144, at 13.) In view of the facts alleged in the proposed Third Amended Complaint, the court calls the allegations plausible. Whether the corporate or other limited liability form has been abused may ultimately be a question for a jury. For now, the allegations are adequate to allow the new theories of liability, assuming the Third Amended Complaint is revised and allowed.
In accordance with the foregoing analysis, it is ORDERED that:
Because the court's consideration of these motions has impacted the existing
In response to the defendants' appeal, the Moore plaintiffs cited the juridical link doctrine. But the Eleventh Circuit relied on an alternative argument instead, finding that the district court had authority pursuant to Rule 20(a) to permissively join the defendants.
The court has considered Moore's reliance on Rule 20(a) and permissive joinder but concludes that Rule 20(a) would not confer standing upon Ms. Stewart to join and sue Bureaus entities with whom she has no connection. Rule 20(a) requires that the plaintiff have a "right to relief ... against" persons joined as defendants, see Fed.R.Civ.P. 20(a)(2)(A), and Ms. Stewart lacks a right to relief against any person or entity that has not committed an FDCPA violation or tort against her.
Further, it is acknowledged that Ms. Stewart does not rebut every argument raised by Defendants in their opposition brief. At this stage of the litigation, the court will not deem any claim abandoned for Ms. Stewart's unresponsiveness to an argument lodged by Defendants. Cf. Boyd v. Peet, 249 Fed.Appx. 155, 157 (11th Cir.2007) ("[A]t the motion to dismiss stage, the scope of a court's review must be limited to the four corners of the complaint.") The focus here, like the focus during review of a motion to dismiss, belongs on the adequacy of the proposed pleading.
Fed.R.Civ.P. 15(c)(1). Rule 15 "incorporates state law relation-back rules when state law provides the statute of limitations for the claims." Saxton v. ACF Indus., Inc., 254 F.3d 959, 960 (11th Cir.2001). Alabama's relation-back rule is very similar to the federal rule and differs only with respect to its provisions for fictitious party practice. See Ala. R. Civ. P. 15(c).
