United States District Court, D. Alaska
Arthur R. Thorpe, Plaintiff,
v.
Ralph V. Ertz, Jr. d/b/a Ralph Ertz Attorney at Law, and Michael Rose Defendants.
ORDER AND OPINION [Re: Motion at Docket 9]
JOHN
W. SEDWICK SENIOR JUDGE, UNITED STATES DISTRICT COURT
I.
MOTION PRESENTED
At
docket 9 defendants Ralph V. Ertz, Jr. d/b/a Ralph Ertz
Attorney at Law and Michael Rose (collectively,
“Ertz”) move to dismiss the complaint of
plaintiff Arthur R. Thorpe (“Thorpe”) pursuant to
Federal Rules of Civil Procedure 12(b)(1) and (6). Ertz
supports his motion with a memorandum of points and
authorities at docket 10. Thorpe opposes the motion at docket
16; Ertz replies at docket 17. Oral argument was not
requested and would not assist the court.
II.
BACKGROUND
Ertz is
the lawyer who represented Valli Vue Estates Property Owners
Association (“Valli Vue”) in the state small
claims action it filed against Thorpe in 2014 for unpaid
homeowner's association dues, late fees, and
attorney's fees (“Valli Vue
I”).[1]Ertz sought and obtained a $2, 533.61
default judgment, including an award of full attorney's
fees ($911.50).[2] The problem with this, according to
Thorpe, is that Alaska's small claims court rules
prohibit default judgment recipients from recovering
attorney's fees that exceed “10% of the judgment or
reasonable actual fees, whichever is
less.”[3]This 10% rule would cap Ertz's
attorney's fees at $152.71. In a motion for relief from
judgment filed in 2015, Thorpe asked the small claims court
to retroactively apply the 10% cap. The court granted
Thorpe's motion and reduced Ertz's attorney's fee
award to 10% of the judgment.[4]
In this
action, Thorpe asserts two causes of action under the federal
Fair Debt Collection Practices Act (“FDCPA”) and
two causes of action under Alaska's Unfair Trade
Practices and Consumer Protection Act (“UTPCPA”).
Specifically, Thorpe alleges that Ertz's pursuit of
excessive attorney's fees violated 15 U.S.C. §§
1962f (unfair or unconscionable means of attempting to
collect a debt) and 1962e (false, deceptive, or misleading
representations in connection with the collection of a debt)
and AS 45.50.471 (unfair or deceptive acts or practices).
III.
STANDARDS OF REVIEW
A.
Rule 12(b)(1)
Under
Federal Rule of Civil Procedure 12(b)(1), a party may seek
dismissal of an action for lack of subject matter
jurisdiction. In order to survive a defendant's motion to
dismiss, the plaintiff has the burden of proving
jurisdiction.[5]
“Rule
12(b)(1) jurisdictional attacks can be either facial or
factual.”[6] Where the defendant brings a facial attack
on the subject matter of the district court, the court
assumes the factual allegations in the plaintiff's
complaint are true and draws all reasonable inferences in the
plaintiff's favor.[7] The court does not, however, accept the
truth of legal conclusions cast in the form of factual
allegations.[8]
“With
a factual Rule 12(b)(1) attack, however, a court may look
beyond the complaint to matters of public record without
having to convert the motion into one for summary judgment.
It also need not presume the truthfulness of the
plaintiffs' allegations.”[9]
B.
Rule 12(b)(6)
Rule
12(b)(6) tests the legal sufficiency of a plaintiff's
claims. In reviewing such a motion, “[a]ll allegations
of material fact in the complaint are taken as true and
construed in the light most favorable to the nonmoving
party.”[10] To be assumed true, the allegations
“may not simply recite the elements of a cause of
action, but must contain sufficient allegations of underlying
facts to give fair notice and to enable the opposing party to
defend itself effectively.”[11] Dismissal for failure to
state a claim can be based on either “the lack of a
cognizable legal theory or the absence of sufficient facts
alleged under a cognizable legal theory.”[12]
“Conclusory allegations of law . . . are insufficient
to defeat a motion to dismiss.”[13]
To
avoid dismissal, a plaintiff must plead facts sufficient to
“‘state a claim to relief that is plausible on
its face.'”[14] “A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct
alleged.”[15] “The plausibility standard is not
akin to a ‘probability requirement, ' but it asks
for more than a sheer possibility that a defendant has acted
unlawfully.”[16] “Where a complaint pleads facts
that are ‘merely consistent with' a defendant's
liability, it ‘stops short of the line between
possibility and plausibility of entitlement to
relief.'”[17] “In sum, for a complaint to
survive a motion to dismiss, the non-conclusory
‘factual content, ' and reasonable inferences from
that content, must be plausibly suggestive of a claim
entitling the plaintiff to relief.”[18]
Ordinarily,
if “matters out side the pleadings are ‘presented
to and not excluded by the court, '” a Rule
12(b)(6) motion “must be treated as one for summary
judgment under Rule 56” and the parties “must be
given a reasonable opportunity to present all the material
that is pertinent to the motion.”[19] There are two
exceptions to this rule, however. “First, a court may
consider material which is properly submitted as part of the
complaint on a motion to dismiss without converting the
motion to dismiss into a motion for summary
judgment.”[20] Second, “a court may take judicial
notice of ‘matters of public
record.'”[21]
IV.
DISCUSSION
A.
Rooker-Feldman
Congress
has vested the United States Supreme Court with exclusive
federal jurisdiction over appeals from state-court
judgments.[22] “Accordingly, under what has come
to be known as the Rooker-Feldman doctrine, lower
federal courts are precluded from exercising appellate
jurisdiction over final state-court
judgments.”[23] The Rooker-Feldman doctrine is
narrow; it applies only to “cases brought by
state-court losers complaining of injuries caused by
state-court judgments rendered before the district court
proceedings commenced and inviting district court review and
rejection of those judgments.”[24]
“The
doctrine bars a district court from exercising jurisdiction
not only over an action explicitly styled as a direct appeal,
but also over the ‘de facto equivalent' of such an
appeal.”[25] To determine whether an action contains
a de facto appeal, courts ascertain the allegedly wrongful
actor: If the asserted legal wrong was committed by a state
court, a de facto appeal exists; if the asserted legal wrong
was “an allegedly illegal act or omission by an adverse
party, Rooker-Feldman does not bar
jurisdiction.”[26]“Thus, even if a plaintiff seeks
relief from a state court judgment, such a suit is a
forbidden de facto appeal only if the plaintiff also
alleges a legal error by the state
court.”[27]
Ertz
argues that this court lacks jurisdiction under
Rooker-Feldman because Thorpe is asking this court
to review a state court judgment. But neither of his two
arguments in support of this jurisdictional attack are
persuasive. First, citing Feldman, Ertz argues that
jurisdiction does not lie because Thorpe's claims in this
action are “inextricably intertwined” with
determinations made by the small claims court.[28] This argument
fails because, as the Ninth Circuit has explained,
“[t]he ‘inextricably intertwined' language
from Feldman is not a test to determine whether a
claim is a de facto appeal, but is rather a second and
distinct step in the Rooker-Feldman
analysis.[29]If “a federal plaintiff seeks to
bring a forbidden de facto appeal, . . . that federal
plaintiff may not seek to litigate an issue that is
‘inextricably intertwined' with the state court
judicial decision from which the forbidden de facto appeal is
brought.”[30] But this step is not triggered unless
the court first finds that a de facto appeal
exists.[31]
Second,
Ertz cites case law from the Seventh Circuit holding that
FDCPA claims are barred by Rooker-Feldman if the
allegedly illegal relief sought by the debt collector was
awarded by the state court.[32] Ertz's reliance on Seventh
Circuit case law is unavailing because this court is bound by
contrary Ninth Circuit precedent.[33] Under Ninth Circuit case
law, Thorpe's complaint must challenge an error committed
by the state court for his action to be barred by
Rooker-Feldman. Thorpe is not alleging a legal error
by the state court. As Thorpe notes, he already challenged
the state court judgment “by filing a motion for relief
of judgment and prevailed.”[34] Instead, Thorpe's
complaint alleges that Ertz violated the FDCPA and the UTPCPA
by attempting to collect an excessive amount of
attorney's fees in Valli Vue I. Because the
allegedly illegal act was committed by Ertz, not the small
claims court, the Rooker-Feldman doctrine is not a
bar to this court's jurisdiction.
B.
Res Judicata
The
doctrine of res judicata, which defines the
preclusive effect of a judgment, is comprised of two separate
doctrines known as claim preclusion and issue
preclusion.[35]Claim preclusion bars “successive
litigation of the very same claim, whether or not
relitigation of the claim raises the same issues as the
earlier suit.”[36] Issue preclusion (otherwise known as
collateral estoppel) “bars ‘successive litigation
of an issue of fact or law actually litigated and resolved in
a valid court determination essential to the prior judgment,
' even if the issue recurs in the context of a different
claim.”[37] To determine the res judicata effect of
a state-court judgment, federal courts apply the law of the
state in which the judgment was rendered.[38]
Ertz
argues that Thorpe's action is barred by claim
preclusion. Under Alaska law, claim preclusion bars a
subsequent action if an earlier action resulted in “(1)
a final judgment on the merits, (2) from a court of competent
jurisdiction, (3) in a dispute between the same parties (or
their privies) about the same cause of
action.”[39] The parties do not dispute that
Valli Vue I resulted in a final judgment on the
merits from a court of competent jurisdiction in a dispute
between the same parties or their privies. Thus, the
preclusive effect of the Valli Vue I judgment
depends on whether that case was “about the same cause
of action” as this case.
To
determine whether a plaintiff's claims are about the same
cause of action as a previous case in which he was a
defendant, Alaska courts apply the approach set out in the
Restatement (Second) of Judgments § 22(2), which
provides that a defendant will only be barred from bringing a
foregone counterclaim as a claim in a subsequent proceeding
if:
“(a) The counterclaim is required to be interposed by a
compulsory counterclaim statute or rule of court, or
(b) The relationship between the counterclaim and the
plaintiff's claim is such that successful prosecution of
the second action would nullify the initial judgment or would
impair rights established in the initial
action.”[40]
Although
preclusion may be found under either § 22(2)(a) or (b),
“[u]nder ordinary circumstances, Restatement §
22(2) adds little to the preclusive effect of [Alaska] Civil
Rule 13(a)'s compulsory counterclaim
provision.”[41]
1.
Under Alaska Civil Rule 13(a), Thorpe's current claims
were not compulsory counterclaims in
Valli Vue I
With
exceptions that do not apply here, Alaska Rule of Civil
Procedure 13(a) defines a compulsory counterclaim as any
claim the defendant has against any opposing party “at
the time of serving the pleading” that “arises
out of the transaction or occurrence that is the subject
matter of the opposing party's claim and does not require
for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction.”[42] Ertz asserts
that Thorpe's UTPCPA claims were compulsory counterclaims
in Valli Vue I, but he never applies Rule 13(a) to
the facts. Instead, he merely cites the Alaska Superior
Court's decision in Mooradian v. Bishop, Marshall
& Weibel, P.S.[43]
Mooradian
is unavailing, however, for two reasons. First,
Mooradian did not find that the plaintiff's
claims were barred because they were compulsory counterclaims
in the initial action (the court specifically declined to
rule on that issue).[44] Second, this court is bound by the
Alaska Supreme Court's application[45] of Rule 13(a)
in Andrews v. Wade & De Young, Inc.,
P.C.[46] The plaintiff in Andrews was a
defendant in a previous action filed by its lawyers to
collect unpaid attorney's fees. The former client then
sued its lawyers for malpractice in a subsequent action. The
Alaska Supreme Court held that the malpractice claims were
not compulsory counterclaims in the first action because they
had not matured until after the client filed its
answer.[47] This holding is fatal to Ertz's Rule
13(a) argument.
If a
party does not serve a responsive pleading, the party's
compulsory counterclaims are determined as of the date of the
default.[48] Here, the allegedly wrongful act
occurred when Ertz applied for full attorney's fees,
which happened after Thorpe's default. Because
Thorpe's claims in this case had not matured as of the
date of his default, these after-acquired claims were not
compulsory counterclaims.[49]
2.
Thorpe's current claims will neither nullify the
Valli Vue I judgment nor impair any
rights established in that action
Ertz
next asserts that Thorpe's claims are barred under
Restatement § 22(2)(b) because they “may only
succeed if they attack the judgment of the Alaska District
Court as to the issues of the attorney fee award, prevailing
party status, the legal basis for the award[, ] and the
quantum awarded.”[50] This argument is essentially the same
as Ertz's Rooker-Feldman arguments that the
court rejected above. Thorpe is attacking Ertz's ...