Ness v. Gurstel Chargo, P.A.
933 F. Supp. 2d 1156
D. Minnesota2013Background
- Plaintiffs Ness, Xiong, and Peters sue Gurstel Chargo, TEM, Gurstel, Chargo, and Does alleging FDCPA and Minnesota-law claims; Defendants move to dismiss the Second Amended Complaint.
- TEM bought a pool of debts from Absolute, originating with Wells Fargo; exhibits referenced in the bills of sale purportedly identify the accounts, including Ness’s debt.
- TEM sued Ness in state court in 2010; a default judgment was entered; Ness later moved to vacate and succeeded in April 2011.
- TEM also acquired Xiong’s and Peters’s debts from Absolute and U.S. Bank; default judgments were entered against them in 2011.
- Ness filed a federal class-action complaint in November 2011; the SAC adds eight claims, including FDCPA, champerty, fraud, unjust enrichment, conspiracy, abuse of process, malicious prosecution, and treble damages.
- The court applies Rooker-Feldman to distinguish claims challenging state judgments from those challenging debt-collection practices and proceeds to assess the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does Rooker-Feldman bar any FDCPA claims? | FDCPA claims attack debt-collection practices, not the state judgments, so not barred. | Rooker-Feldman bars recovery for injuries stemming from state-court judgments. | Rooker-Feldman does not bar FDCPA claims challenging debt-collection conduct. |
| Are the fraud and unjust enrichment claims barred by Rooker-Feldman? | Injuries are caused by judgments; relief seeks reversal via void judgments. | Claims amount to indirect reversal of judgments. | Yes; fraud and unjust enrichment claims are barred by Rooker-Feldman. |
| Did the complaint state an FDCPA claim based on filing suits without proof of ownership or legal right to collect? | Debt ownership and assignability documents are required to sue; defendants lacked them. | Minnesota law does not require attaching proof of ownership to the complaint or motion for default judgment. | Plaintiffs failed to state an FDCPA claim on this theory. |
| Is TEM the alter ego of Gurstel Chargo/related entities sufficient to make TEM the real party in interest? | TEM is owned by Gurstel and Chargo; similar address and profits show alter ego. | Alleged factors do not meet Minnesota’s alter-ego standards; no veil-piercing showing. | Alter-ego claim insufficient; TEM not shown as the real party in interest. |
| Is champerty a standalone claim and viable under Minnesota law? | TEM’s alleged alteration of client status constitutes champerty and public policy violation. | Champerty is not an independent cause of action under Minnesota law. | Count II dismissed; champerty not cognizable as a separate claim. |
Key Cases Cited
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (Rooker-Feldman; limits federal jurisdiction over state-court judgment reviews)
- MSK EyEs Ltd. v. Wells Fargo Bank, N.A., 546 F.3d 533 (8th Cir. 2008) (Rooker-Feldman and FDCPA scope)
- Fielder v. Credit Acceptance Corp., 188 F.3d 1031 (8th Cir. 1999) (Rooker-Feldman bar on attempts to reverse state judgments)
- Moon v. Chicot Cnty. Ark. Legal Assocs., 170 F. App’x 988 (8th Cir. 2006) (fraud claims barred where seeking reversal of state judgments)
- Sykes v. Mel Harris & Assocs., LLC, 757 F. Supp. 2d 413 (S.D.N.Y. 2010) (FDCPA claims and documentation issues; pleading standards)
- Peters v. Gen. Serv. Bureau, Inc., 277 F.3d 1051 (8th Cir. 2002) (unsophisticated consumer test under FDCPA)