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Moore v. Koch

United States District Court, D. Maryland

July 21, 2015



WILLIAM M. NICKERSON, Senior District Judge.

Plaintiffs brought this action under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., the Maryland Consumer Debt Collection Act, Md. Code, Com. Law § 14-201 et seq., and the Maryland Consumer Protection Act, Md. Code, Com. Law § 13-101 et seq. Plaintiffs acknowledge that in 2002, William Allen Barwick, Jr., obtained a judgment against them for unpaid rent in the amount of $11, 896.16. Defendant is a debt collector and, on or about May 6, 2014, he sent Plaintiffs a letter for the purpose of collecting on that judgment, with interest. Defendant sent an additional collection letter on June 11, 2014, and filed a request for the garnishment of Plaintiff Sherri Moore's wages on January 8, 2015. Plaintiffs allege that Defendant made false and misleading representations in these collection efforts. Also alleging that these are standard practices of Defendant in dealing with other debtors, Plaintiffs bring this action as a potential class action.

Defendant answered the Complaint and also asserted four counterclaims. Defendant acknowledges that he has attempted to collect this debt which was assigned to him by Mr. Barwick. He also asserts that Plaintiffs have filed numerous frivolous motions and appeals in Maryland courts and filed one or more frivolous complaints against him with various government agencies. He further alleges that Plaintiffs threatened to file a lawsuit against him unless he stopped all collection efforts. Based upon these allegations, Defendant asserts counterclaims for "Tortious Interference with Business Relations" (Count I), "Malicious Interference with the Right to Pursue a Lawful Business, Trade, or Occupation" (Count II), "Abuse of Process" (Count III), and "Set-off and/or Recoupment" (Count IV).

Plaintiffs have moved to dismiss the Counterclaim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, asserting that the facts alleged are insufficient to support these causes of action. ECF No. 8. Plaintiffs also suggest the "[t]he Court may also dismiss the Counterclaim under Fed.R.Civ.P. 12(b)(1) and in exercise of the discretion provided by 28 U.S.C. § 1367 to decline supplemental jurisdiction over the alleged counterclaims because they are permissive, not mandatory, and do not raise federal questions or invoke jurisdiction under 28 U.S.C. § 1331."[1] ECF No. 8-1 at 1 n.1. For the reasons stated below, the Court concludes that Counts I, II, and III are sufficiently related to the Plaintiffs' claims that they were properly asserted as compulsory counterclaims. The Court also concludes, however, that as pled these counterclaims fail to state claims upon which relief could be granted. The Court finds that Count IV of the Counterclaim is a permissive counterclaim over which the Court has no jurisdiction.

In cases such as this, where neither diversity nor federal question jurisdiction exists over the counterclaims, the Court must determine whether the counterclaims are "compulsory" or "permissive." A compulsory counterclaim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim, " while a permissive counterclaim does not. See Fed.R.Civ.P. 13(a)-(b). A compulsory counterclaim is "within the ancillary jurisdiction of the court to entertain and no independent basis of federal jurisdiction is required." Painter v. Harvey, 863 F.2d 329, 331 (4th Cir. 1988). By contrast, a permissive counterclaim that lacks its own independent jurisdictional basis is not within the jurisdiction of the court. Id.

Determining whether counterclaims are compulsory or permissive requires four separate inquiries:

(1) Are the issues of fact and law raised in the claim and counterclaim largely the same?
(2) Would res judicata bar a subsequent suit on the party's counterclaim, absent the compulsory counterclaim rule?
(3) Will substantially the same evidence support or refute the claim as well as the counterclaim? and
(4) Is there any logical relationship between the claim and the counterclaim?

Id. at 331. The Fourth Circuit has instructed that it is not necessary to "answer all these questions in the affirmative for the counterclaim to be compulsory"; rather, the inquiries serve as a "guideline." Id . "Where... the same evidence will support or refute both the claim and counterclaim, the counterclaim will almost always be compulsory." Id. at 332. This "same evidence" test, however, is not "the exclusive determinant of compulsoriness under [Rule 13(a)] because it is too narrow a definition of a single transaction or occurrence." "A counterclaim may still arise from the same transaction or occurrence', as a logically related claim even though the evidence needed to prove the opposing claims may be quite different." Id. at 333.

Plaintiffs' claims and Defendant's first three counterclaims all relate to Defendant's efforts to collect the debt that was assigned to him by Mr. Barwick. Plaintiffs allege that these efforts were deceptive, misleading, and unlawful and Defendant maintains the Plaintiffs' efforts to rebuff his collection activities were frivolous and vexatious. While Plaintiffs' claims focus on the correspondence sent by Defendant and Defendant's counterclaims focus on the court and administrative proceedings initiated by Plaintiffs, the claims and counterclaims all relate to the lawfulness of the collection of the debt. They certainly are logically related, will involve some of the same evidence, raise some of the same legal and factual issues, and at least implicate res judicata concerns. The Court finds that these first three counterclaims are compulsory.

Defendant's "Set-off and/or Recoupment" counterclaim asserted in Count IV, however, does not have quite the same relationship to Plaintiffs' claims. That counterclaim deals not with Defendant's collection efforts but simply with the validity of the underlying judgment obtained by Defendant. The Court concludes that this counterclaim is permissive, not compulsory. See Ayres v. Nat'l Credit Mgmt. Corp., No. 90-5535, 1991 WL 66845, at *1 (E.D. Pa. Apr. 25, 1991) (concluding that counterclaim was permissive where it "centers on evidence regarding the existence of a contract, the failure to perform on a contract, or other circumstances leading to the creation of a valid debt [but t]he [FDCPA claim] centers on evidence regarding the improprieties and transgressions... in the procedures used to collect the debt, regardless of the debt's validity").

Because Count IV is a permissive counterclaim asserting a state law cause of action, the Court must consider whether it properly falls within this Court's supplemental jurisdiction under 28 U.S.C. § 1367.[2] Although appellate courts in several other circuits have held that supplemental jurisdiction under § 1367 may extend to permissive counterclaims in some circumstances, this Court has recently noted that it remains the law of the Fourth Circuit that "federal courts may not exercise supplemental jurisdiction over permissive counterclaims." Ramirez v. Amazing Home Contractors, ...

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