United States District Court, D. Maryland
MITCHELL RUBENSTEIN & ASSOCIATES, P.C. Plaintiff,
SUNRISE CREDIT SERVICES, INC. and ARROWOOD INDEMNITY COMPANY, Defendants.
Xinis United States District Judge
in this declaratory judgment action is a motion to dismiss
(ECF No. 18) filed by Defendants Sunrise Credit Services,
Inc. and Arrowood Indemnity Company. The issues have been
fully briefed and a hearing was held on Tuesday, December 20,
2016. For the following reasons, Defendants' motion to
dismiss is granted.
present indemnity action arises from a separate lawsuit filed
by debtor, Demetra Baylor, against the debt collector and
plaintiff in this case, Mitchell Rubenstein & Associates,
P.C. (“MRA”), in the United States District Court
for the District of Columbia (“D.C. case”). The
following facts are taken from MRA's amended complaint
(ECF No. 17) and the published opinions of the D.C. district
court in the underlying litigation. See Baylor v. Mitchell
Rubenstein & Assocs., P.C., 174 F.Supp.3d 146
(D.D.C. 2016) (granting MRA's motion for summary
judgment); Baylor v. Mitchell Rubenstein & Assocs.,
P.C., 77 F.Supp.3d 113 (D.D.C. 2015) (adopting
magistrate judge's report and recommendation regarding
attorney's fees); Baylor v. Mitchell Rubenstein &
Assocs., P.C., 55 F.Supp.3d 43 (D.D.C. 2014) (granting
motion to dismiss in part). All facts are construed in the
light most favorable to MRA as the nonmoving party.
The D.C. Case
Baylor is a 2004 graduate of the Pratt Art Institute in
Brooklyn, New York. To finance her education, Ms. Baylor took
out six separate student loans but failed to pay those loans
back in full. Baylor, 174 F.Supp.3d at 149-50. On or
before December 17, 2013, Arrowood Indemnity Company
(“AIC”), through its agent, Sunrise Credit
Services (“SCS”), referred Ms. Baylor's loans
to Mitchell Rubenstein & Associates, P.C.
(“MRA”) for collection. Amended Complaint, ECF
No. 17 at 2. AIC and SCS were not involved in the underlying
D.C. litigation but are the defendants in the present
indemnity action. They will be referred to collectively as
the “Defendants” throughout this Memorandum
February 21, 2013, Ms. Baylor received a letter from MRA
notifying her that she owed an alleged debt of $26, 471.07 to
a creditor, Arrowood Indemnity Company, under the file number
R80465. Baylor, 174 F.Supp.3d at 150. Ms. Baylor
disputed the amount of the debt and sent MRA a letter to that
effect on March 21, 2013. Id. MRA responded in
another letter dated March 26, 2013. Id. This letter
itemized Ms. Baylor's debt obligation and advised her
that, through July 28, 2011, she owed her creditor $31, 268.
By May 2013, Ms. Baylor had retained counsel regarding the
debt described in the February 21 and March 25 letters. Her
attorney requested information associated with the debt
collection and requested that MRA not contact her client
Baylor's attorney then entered into settlement
negotiations with MRA. On August 22, 2013, MRA sent another
letter to Ms. Baylor concerning additional amounts due under
a different file number, R83798, and listed the creditor as
Tuitionguard Arrowood Indemnity. The letter was addressed to
“Radi Dennis Consumer Justice ESQ, 1014 Florida Avenue,
NE Apartment 1, Washington DC 20002, ” naming Ms.
Baylor's attorney as the addressee but sending the
correspondence to Ms. Baylor's address. This letter
stated that Ms. Baylor owed a debt of $27, 459.48. Ms.
Baylor's attorney responded to the August 22 letter on
September 12, 2013, reminding MRA that Ms. Baylor disputed
the debt and that Ms. Baylor was represented by counsel and
thus should not be contacted directly. Id. at
150-51. MRA responded to Ms. Baylor's attorney's
September 12 letter on September 26, 2013. That letter stated
that the amount due for the debt under file number R83798 was
“$27, 459.48 plus interest from 10/21/11 at the rate of
3.75% until paid.” Id. at 151.
December 17, 2013, Ms. Baylor filed a three count complaint
in the United States District Court for the District of
Columbia against MRA. The complaint alleged that MRA engaged
in unfair and deceptive trade practices in violation of the
Fair Debt Collection Practices Act (“FDCPA”), the
District of Columbia Debt Collection Law, and the District of
Columbia Consumer Protection and Procedures Act. At base, Ms.
Baylor alleged that MRA violated both state and federal law
when it misstated the amount of debt Ms. Baylor owed, as well
as the name of the creditor, and her account number. Baylor
also complained of being contacted directly despite MRA
knowing she was represented by counsel.
conceded that its communications with Baylor created
confusion concerning the amount of her debt because certain
letters included interest and others did not. MRA further
conceded that it sent the August 22 letter to Baylor directly
after MRA knew that she had retained counsel. MRA, therefore,
extended an Offer of Judgment pursuant to Rule 68 of the
Federal Rules of Civil Procedure to Ms. Baylor on January 17,
2014, which Ms. Baylor ultimately accepted. The Offer of
Judgment only addressed and settled Ms. Baylor's FDCPA
claims because, unlike Ms. Baylor's D.C. law claims, the
FDCPA does not require proof that the violation was willful.
See Pl.'s Opp. to Def.'s Motion to Dismiss,
ECF No. 19 at 8 n.4. The Offer of Judgment required MRA to
pay Ms. Baylor $1, 001.00 plus costs and reasonable
attorney's fees as to all claims under the FDPCA. See
Baylor, 174 F.Supp. at 151.
Baylor then filed a motion pursuant to 15 U.S.C. §
1692k(a)(3) seeking $442.95 in costs and $155, 700.00 in
attorney's fees for 346 hours of work on Ms. Baylor's
successful FDCPA claim at the “prevailing market
rate” of $450.00 per hour. See Baylor v. Mitchell
Rubenstein & Assocs., P.C., 77 F.Supp.3d 113, 115
(D.D.C. 2015). The D.C. District Court referred the matter to
a magistrate judge for preparation of a report and
recommendation. MRA opposed Ms. Baylor's fee motion,
arguing that Ms. Baylor's fees were “grossly and
intolerably exaggerated, ” and requested that the Court
deny Ms. Baylor's request in its entirety.
Baylor, 77 F.Supp. at 115. Ms. Baylor subsequently
requested additional fees for drafting and filing her reply
to MRA's opposition, bringing her fee request to $195,
332.01 for work expended on the complaint, the opposition to
MRA's motion to dismiss, and the fee petition and reply.
Id. at 115- 16.
October 24, 2014, the magistrate judge issued a report and
recommendation recommending that Ms. Baylor's initial fee
request of $195, 332.00 be reduced by 85% to $41, 989.80.
Both parties challenged the magistrate judge's report and
recommendation. On January 6, 2015, the D.C. District Court
adopted the report and recommendation in its entirety.
See Id. at 124.
the course of the D.C. case, all of Ms. Baylor's state
law claims were dismissed except two. See Baylor v.
Mitchell Rubenstein & Assocs., P.C., 55 F.Supp.3d 43
(D.D.C. 2014). Ms. Baylor was permitted to proceed on her
claim under § 28-3814(f)(5) of the D.C. Debt Collection
Law, which prohibits a debt collector from willfully making
“any false representation or implication of the
character, extent, or amount of a claim against a consumer,
or of its status in any legal proceeding.” D.C. Code
§ 28-3814(f)(5). Ms. Baylor was also allowed to proceed
with her claim under § 28-3814(g)(5), which provides
that a debt collector cannot engage in “any
communication with a consumer wherever it appears that the
consumer has notified the creditor that he is represented by
an attorney and the attorney's name and address are
known.” D.C. Code § 28-3814(g)(5). MRA moved for
summary judgment on these two claims. The D.C. District Court
granted MRA's motion because there was no evidence that
MRA's conduct was willful, which is a required element
under the D.C. Debt Collection Law. See generally Baylor
v. Mitchell Rubenstein & Assocs., P.C., 174
F.Supp.3d 146, 160 (D.D.C. 2016).
26, 2016, Ms. Baylor appealed both the decision to grant
MRA's motion for summary judgment on the two state law
claims and its decision to adopt the magistrate judge's
report and recommendation regarding her FDCPA-related
attorney's fees. That same day, MRA filed its own appeal
also challenging the decision to award Ms. Baylor $41, 989.80
in attorneys' fees. Both appeals remain pending in the
District of Columbia Circuit Court of Appeals. See
Case Nos. 16-7070 & 16-7071.
The Present Action for Indemnification
25, 2016, MRA filed a complaint for declaratory judgment in
the Circuit Court for Montgomery County, Maryland against AIC
and SCS for the damages and expenditures MRA incurred in the
underlying D.C. litigation. ECF No. 2. Defendants removed the
complaint to this Court based on federal question
jurisdiction or, in the ...