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Dalley v. Mitchell Rubenstein & Associates, P.C.

United States District Court, District of Columbia

March 18, 2016

NATASHA DALLEY, Plaintiff,
v.
MITCHELL RUBENSTEIN & ASSOCIATES, P.C. Defendant.

MEMORANDUM OPINION

KETANJI BROWN JACKSON United States District Judge

On June 9, 2014, Defendant Mitchell Rubenstein & Associates, P.C. (“MRA”) filed a lawsuit against Plaintiff Natasha Dalley in the Superior Court of the District of Columbia, seeking to recover the amount that Dalley owed on a defaulted 2002 student loan. MRA’s lawsuit was stayed on November 6, 2014, after Dalley filed for Chapter 7 bankruptcy. Dalley then turned the tables on MRA: she brought the instant lawsuit, arguing that MRA’s prosecution of the aforementioned civil action violated the Fair Debt Collecting Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–1692p, and the District of Columbia Debt Collection Law (“DCDCL”), D.C. Code § 28-3814, and also that it amounted to common law abuse of process. (See generally 2d Am. Compl., ECF No. 7.)

Before this Court at present is MRA’s motion to dismiss Dalley’s second amended complaint under Federal Rule of Civil Procedure 12(b)(1). (See Def.’s Mot. to Dismiss 2d Am. Compl. (“Def.’s Mot.”), ECF No. 11.) MRA alleges, among other things, that Dalley lacks standing to sue because the right to bring this lawsuit to recover damages for alleged violations of federal and state collections practice laws was transferred to the trustee of the bankruptcy estate when Dalley voluntarily petitioned for Chapter 7 bankruptcy, and this property right has not been abandoned by that trustee to date. (See id. at 17.)[1] In response, Dalley contends that she has standing to bring her FDCPA claims notwithstanding the bankruptcy, because her claims were exempted from her bankruptcy estate under the “wild card” exemption in the bankruptcy code and also because her FDCPA claims qualify as “payment[s] . . . on account of personal bodily injury[.]” (See Pl.’s Opp’n to Def.’s Mot. (“Pl.’s Opp’n”), ECF No. 12, at 5–6.)

For the reasons explained below, this Court concludes that Dalley lacks standing to file the instant action in federal court, and as a result, MRA’s motion to dismiss under Rule 12(b)(1) for lack of standing will be GRANTED. A separate order consistent with this Memorandum Opinion will follow.

I. BACKGROUND

A. Facts

On behalf of the National Collegiate Student Loan Trust (“NCSLT”), MRA filed a lawsuit against Dalley in Superior Court on June 9, 2014. (See 2d Am. Compl. ¶¶ 9, 11.) MRA’s Superior Court complaint claimed that Dalley had defaulted on a private student loan in 2002, and it sought to recover the principal and accrued interest with respect to that loan. (See Id. ¶ 9; Aff. of Natasha Dalley (“Dalley Aff.”), ECF No. 13, ¶ 6.) Dalley alleges that, because of MRA’s lawsuit, she was forced to “file[] for Chapter 7 bankruptcy protection in the United States Bankruptcy Court for the District of Columbia.” (See 2d Am. Compl. ¶ 14.) Dalley’s voluntary bankruptcy petition, which was filed on October 18, 2014, did not list any outstanding lawsuits or other causes of action in the Schedule B itemization of assets or in the Schedule C claims of exempt property. (See Voluntary Bankr. Pet., Ex. B to Pl.’s Opp’n, ECF No. 12-2, at 2– 4, 10–15.)

On November 6, 2014, “the [Superior] court stayed NCSLT’s lawsuit” in light of Dalley’s Chapter 7 voluntary petition (see Bankr. Mot. for Sanctions, Ex. E to Pl.’s Opp’n, ECF No. 12-5, at 2–3), which halted the loan-recovery proceedings by operation of law. See In re McGuirl, 349 B.R. 759, 760 (D.D.C. 2006) (“The filing of a petition for bankruptcy relief triggers an automatic stay that prohibits unilateral actions against the debtor or property of the debtor’s estate.” (citing 11 U.S.C. § 362)). Then, on January 27, 2015, the bankruptcy court discharged Dalley’s debts in the context of the Chapter 7 proceedings, thereby closing her bankruptcy case. (See Bankr. Ct. Discharge of Debtor Order, Ex. B to Def.’s Mot., ECF No. 11-4, at 1.)

B. Procedural History

Approximately five months later, on June 9, 2015, Dalley filed the instant lawsuit against MRA. Dalley’s second amended complaint alleges that MRA’s debt-collection lawsuit was time-barred because it was filed “three days after the three-year statute of limitations [had] expired” (2d Am. Compl. ¶ 11), and that NCSLT “never had the legal capacity” to sue Dalley-or to authorize MRA to sue Dalley-to recover the loan amount. (Id. ¶ 22.) Furthermore, according to Dalley, the filing of this purportedly untimely and unauthorized civil action was tantamount to an unlawful debt collection practice. Accordingly, Dalley alleges that MRA intentionally, willfully, and maliciously violated several subsections of the FDCPA (Count One) and the DCDCL (Count Two), and that the filing of MRA’s lawsuit also amounted to abuse of process (Count Three). (See id. ¶¶ 25–47.)

On July 20, 2015, MRA filed a motion to dismiss Dalley’s second amended complaint for lack of jurisdiction under Rule 12(b)(1), alleging that Dalley does not have standing to sue because, “even though this pre-petition claim was not specifically listed on Dalley’s bankruptcy schedules, ” it nonetheless and necessarily became the property of the bankruptcy estate when she petitioned for Chapter 7 bankruptcy, and having not abandoned that claim, the bankruptcy trustee remains the only one with standing to pursue it. (Def.’s Mot. at 17.) In addition, MRA’s motion to dismiss argues that the doctrine of judicial estoppel bars Dalley from bringing this lawsuit because she excluded the cause of action from her list of assets in the bankruptcy proceeding in bad faith, and the intentional omission is inconsistent with the position she has taken before this Court. (See id. at 17–21.) See also Frese v. Empire Fin. Servs., 725 F.Supp.2d 130, 140 (D.D.C. 2010) (explaining that “judicial estoppel is appropriate when a debtor fails to identify a claim in a bankruptcy proceeding” thereby taking the position that she holds no actionable claim, “and then proceeds to assert that claim in a separate judicial action” in direct contravention to her bankruptcy position). Dalley has responded to MRA’s motion to dismiss-focusing solely on the FDCPA count, she asserts that she has standing to sue because her “FDCPA claims” are “personal bodily injury claims” that are “exempted from estate property under [section] 522(d)(11)” of the bankruptcy code and under section 522(d)(5)’s “wild card” exemption. (Pl.’s Opp’n at 5–6.).[2]MRA’s motion to dismiss for lack of standing is now ripe for this Court’s review.

II. LEGAL STANDARD

A motion to dismiss for lack of standing alleges a defect in the court’s subject matter jurisdiction and is properly addressed under Rule 12(b)(1). See Fed. R. Civ. P. 12(b)(1); Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987). To defeat a motion to dismiss brought under Rule 12(b)(1), a plaintiff bears the burden of “set[ting] forth allegations sufficient to establish the court’s jurisdiction over the subject matter of the claims presented.” Evans v. First Mount Vernon, ILA, 786 F.Supp.2d 347, 351 (D.D.C. 2011). In deciding such a motion, the court “must accept as true all of the factual allegations contained in the complaint and draw all reasonable inferences in favor of the plaintiff”; however, it need not “accept inferences unsupported by the facts alleged or legal conclusions that are cast as factual allegations.” Id. (internal quotation marks and citations omitted). Furthermore, “[i]n ...


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