United States District Court, District of Columbia
JAMES E. BOASBERG, District Judge.
The Landlord and Tenant Branch of the Civil Division in the District of Columbia's Superior Court is a unique animal. Housed in a building separate from the main courthouse, the Branch has its own rules and procedures. It is, first and foremost, a place landlords go to seek possession of their property - typically on the ground that their tenants have violated lease provisions, such as by failing to pay rent. In this case, a number of tenants are attempting to turn the tables, claiming that their landlord's law firm has played fast and loose with the L&T Branch rules.
More specifically, Plaintiffs Natasha Lipscomb, Kimberly McLaughlin, Margaret O'Brien, and Felicia Pate bring this class-action suit against The Raddatz Law Firm, P.L.L.C., and its principals, Mark R. Raddatz and Edward L. Pugh II, for allegedly improper debt-collection practices. They contend that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et. seq., by making false statements in eviction suits that the firm filed in the L&T Branch. Defendants now move to dismiss. They argue, inter alia, that the FDCPA is not meant to govern the filing of eviction complaints in state court and that, in any event, their misrepresentations could not have misled consumers. Because the Court ultimately concludes that such actions can trigger the Act's protections and that Plaintiffs have adequately stated a claim, it will deny the Motion.
When a tenant residing in the District fails to abide by certain lease provisions, such as the requirement to pay rent, a landlord may file an action for possession - i.e., an eviction complaint - in the L&T Branch of Superior Court. Prior to filing such a suit, the landlord must serve the tenant with a notice to quit, unless the tenant has waived her right to such notice. See Grimes v. Newsome, 780 A.2d 1119, 1121 (D.C. 2001). If, after receiving notice, the tenant fails to remedy the problem, the landlord may initiate an eviction proceeding by "delivering to the Clerk [of the L&T Branch] a verified Complaint for Possession of Real Property." See SCR-LT R.3(a). The complaint may, in addition to seeking a judgment for possession, also include "a claim for a money judgment based on rent in arrears." SCR-LT R. 3(b); see also D.C. Code § 42-3211. Any such complaint must "be made under oath verified by the person aggrieved by the detention, or by his agent or attorney having knowledge of the facts.'" Comment, SCR-LT R. 3 (quoting D.C. Code § 16-1501).
According to Plaintiffs' Complaint, which is presumed true at this stage, Defendants primarily focus their legal practice on representing commercial and residential landlords in landlord/tenant disputes. See Compl., ¶ 12. In this vein, in November 2013, they filed eviction complaints against each of the named Plaintiffs in the L&T Branch on behalf of their landlord, Capitol Gateway. See id., ¶¶ 23-26. The Verified Complaints for Possession of Real Property indicated that Capitol Gateway was seeking to both repossess the rental properties and recover back rent allegedly owed. See Compl., Exh. 1 (Lipscomb Summons and Complaint); Exh. 2 (McLaughlin Summons and Complaint); Exh. 3 (O'Brien Summons and Complaint); Exh. 4 (Pate Summons and Complaint). In support, Defendants swore in each of the complaints that Plaintiffs had failed to pay certain fees for water, defined as "rent" under their leases. See Lipscomb Compl.; McLaughlin Compl.; O'Brien Compl.; Pate Compl.
Although each Plaintiff "plainly reside[d]" in a unit that was subsidized by the U.S. Department of Housing and Urban Development and the D.C. Housing Authority, the complaints averred that Plaintiffs' rents were not subsidized by the federal or local government. See Compl., ¶¶ 23-26. For example, the complaint filed against Lipscomb stated that "[Capitol Gateway] seeks other fees of $2, 593.00 for water..., defined as rent under paragraph no. 7 of the lease... for this property, which is not subsidized and is exempt from rent control." Lipscomb Compl. (emphasis added). In response to Question 4 of the complaint, which requires a landlord (or its counsel) to check off whether a tenant's rent is subsidized by the federal or local government, Defendants again indicated that Lipscomb's was not. See id. The complaints filed against McLaughlin, O'Brien, and Pate contained similar averments and incorrect check-offs. See McLaughlin Compl.; O'Brien Compl.; Pate Compl.
According to Plaintiffs, the manner in which landlords (or their counsel) represent the subsidized status of rental properties "may be of critical importance." Compl., ¶ 20. "[T]enants residing in subsidized rental properties are entitled to assert certain statutory and/or regulatory defenses to repossession that are not available to tenants residing in non-subsidized rental housing." Id. Where a tenant is unrepresented by counsel, properly indicating the subsidized status of a rental property may thus alert the presiding judge "to the need to assure that the pro se tenant is appropriately advised of his/her rights." Id. Even "where the tenant does have legal representation, an affirmative answer to Question No. 4 alerts counsel to the availability of special defenses relating to subsidized tenants that are simply inapplicable in non-subsidized rental housing." Id., ¶ 21. It is Plaintiffs' belief that Defendants incorrectly stated that their rents were not subsidized in order to "mislead the tenants for the unilateral benefit of the Defendants' landlord clients, and to avoid alerting the tribunal to the existence of special defenses...." Id., ¶ 2.
Plaintiffs, however, "each had the good fortune to obtain legal representation" from attorneys employed by the Legal Aid Society of the District of Columbia, and their "cases were resolved without either an adverse judgment or loss of the residence." Id., ¶ 27. Yet few may be so lucky. Tenants are represented by counsel in only about 5-10% of the cases filed in the L&T Branch, id., ¶ 18, and Defendants' conduct appears to be widespread. According to "[a]n extensive pre-suit factual investigation, " they have filed hundreds, if not thousands, of similar complaints in the L&T Branch that "falsely characterize... rental properties... as not subsidized and... exempt from rent control[.]'" Id., ¶¶ 1-2. The investigation found, for instance, that from November 2013 through October 2014, they filed "roughly 100 actions" on behalf of three of the firm's landlord clients that appear to have misrepresented the subsidy status of the subject properties. See id., ¶ 32. Specifically, although the vast majority of those landlords' units are subsidized by HUD and DCHA and although the complaints listed vastly below-market rents, "only four (4) of the Complaints indicated that the rental property at issue was subsidized." Id., ¶¶ 29-33. In the eleven months preceding that period, the firm filed 118 eviction complaints on behalf of the same landlords, and not a single one indicated that the rental unit at issue was subsidized. See id., ¶ 34.
The named Plaintiffs ultimately filed this putative class-action suit on November 19, 2014, alleging that Defendants' conduct has violated, and continues to violate, the FDCPA. More particularly, Plaintiffs contend that Defendants have violated 15 U.S.C. § 1692e, by using "false, deceptive or misleading representation[s] or means in connection with the collection of" a debt, and 15 U.S.C. § 1692f, by using "unfair or unconscionable means to collect or attempt to collect" a debt. In pursuing these claims, they seek to represent a class comprised of "all individuals residing in federally and/or locally subsidized rental housing units within the District of Columbia which are owned by landlords represented by the Raddatz Firm and who have been, are now, or will in the future be subject to legal proceedings filed in the L/T Branch of the D.C. Superior Court in which the Raddatz Firm misrepresents the subsidy status of their rental properties." Id., ¶ 36. On behalf of the class, they seek to obtain declaratory and injunctive relief, as well as statutory damages. Defendants now move to dismiss.
II. Legal Standard
Under Federal Rule of Civil Procedure 12(b)(6), the Court must dismiss a claim for relief when the complaint "fail[s] to state a claim upon which relief can be granted." In evaluating a motion to dismiss, the Court must "treat the complaint's factual allegations as true and must grant plaintiff the benefit of all inferences that can be derived from the facts alleged." Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (citation and internal quotation marks omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court need not accept as true, however, "a legal conclusion couched as a factual allegation, " nor an inference unsupported by the facts set forth in the complaint. Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), "a complaint must contain sufficient factual matter, [if] accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678 (internal quotation omitted). A plaintiff may survive a Rule 12(b)(6) motion even if "recovery is very remote and unlikely, " but the facts alleged in the complaint "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555-56 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
Congress enacted the FDCPA in 1977 "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). To that end, "[t]he Act regulates interactions between consumer debtors and debt collectors." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010) (alterations, quotation marks, and citation omitted). Among other things, it prohibits the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt, " 15 U.S.C. § 1692e, and the use of "unfair or unconscionable means to collect or attempt to collect any debt." Id. § 1692f. Those who violate these proscriptions may be subject to administrative-enforcement actions, see id. § 1692l(a), as well as private suits to recover actual and statutory damages. See id. § 1692k.
A private plaintiff seeking to hold a person liable under Section 1692e or Section 1692f must establish that: (1) the defendant is a "debt collector"; (2) who took an action "in connection with the collection of a debt"; and (3) the action violated the substantive proscriptions in those provisions. See, e.g., Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 384 (7th Cir. 2010); Muldrow v. EMC Mortg. Corp., 657 F.Supp.2d 171, 174-75 (D.D.C. 2009). In the present case, Defendants do not appear to dispute that they are "debt collectors" within the meaning of the statute. Rather, they argue that their filing of eviction complaints is not an action taken in connection with the collection of a debt. They also contend that even if such activities fall within the Act's purview, the false statements in the complaints are not actionable under either Section 1692e or Section 1692f because they could not have misled consumers. Finally, they suggest that even if Plaintiffs have stated a viable FDCPA claim, the Court should nonetheless dismiss their claims for injunctive relief because such relief is not authorized in private causes of action. The Court will address each of these issues in turn, bearing in mind that the FDCPA's provisions are to be broadly construed. See, e.g., Johnson v. Riddle, 305 F.3d 1107, 1117 (10th Cir. 2002) ("Because the FDCPA... is a remedial statute, it should be construed liberally in favor of the consumer.") (citations omitted); Kaymark v. Bank of America, N.A., 783 F.3d 168, 174 (3d Cir. 2015) (same).
A. Applicability of the FDCPA
Defendants' primary argument in support of dismissal is that the FDCPA does not cover the activities at issue here. In their view, "[a]n eviction proceeding is an action filed by the owner of a rental property for the purpose of retaking possession of that property" - "[i]t is not a collection of a consumer debt." Mot. at 4. They argue, additionally, that even if certain acts related to pursuing security or property interests are covered by the Act, it should not apply to formal legal pleadings, especially where a "strict, regulated, and inherently localized process, " such as D.C.'s eviction procedure, is already in place to protect consumers. See id. at 6-7.
These are both matters of first impression in this circuit. The Court will consider each separately, relying on the statutory text and caselaw from other circuits to inform its decision.
1. Application to Eviction Proceedings
In assessing whether the L&T filings were submitted in connection with debt collection, the Court must determine (1) if there were "debts" and (2) if the eviction complaints were filed in order to collect on those debts. Although the parties ignore the text of the statute, that is where the ...