Bumpus v. WardBumpus v. Ward
For Plaintiff-Appellant
JEREMIAH HECK
KATHERINE L. KEENAN
580 E. Rich Street
Columbus, OH 43215
For Defendant-Appellee
FREDERICK STRATMANN
ADAMS BABNER, LLC
5003 Horizons Drive, Ste. 200
Columbus, OH 43215
Gwin, J.,
{¶1} Appellant Martha Bumpus [“Bumpus“] appeals the January 23, 2012 Judgment Entry of the Knox County Court of Common Pleas dismissing her case against appellees Lloyd Ward P.C, dba Lloyd Ward & Associates, Lloyd Ward Group, LLC, Lloyd Ward, ABD Debt Relief Ltd., Co., Lloyd Renger and Kevin Devoto [hereinafter collectively “Ward“].
Facts and Procedural History
{¶2} Bumpus alleges that Ward is a “for profit” debt relief or credit repair company that promises consumers resolution of their credit card debt at a substantial discount. Unfortunately, some such companies predatory fee practices can exacerbate the consumer‘s financial problems.
{¶3} Ohio protects its citizens from predatory and potentially harmful debt relief practices by the Ohio Debt Adjustment Act,
{¶4} Bumpus filed a complaint on May 6, 2011 alleging in part that Ward has attempted to circumvent the consumer protection laws by advancing a pretense that the debt relief services are being performed by an attorney, thereby evading the consumer protection laws applicable to debt settlement and credit repair companies. Bumpus alleged in her complaint that an attorney did not in fact perform the services.
{¶5} In response on June 23, 2011, Ward filed a “Motion to Dismiss or in the Alternative to Transfer Venue.” Ward argued that Bumpus’ complaint failed to state a claim upon which relief can be granted pursuant to
{¶6} On January 23, 2012, the trial court filed its Judgment Entry stating,
The Court, after a review of the pleadings, the case file, and the applicable law finds and IT IS ORDERED that Defendants’ Motion is well taken and is herby sustained.
Assignments of Error
{¶7} Bumpus raises two assignments of error,
{¶8} “I. THE TRIAL COURT ERRED IN GRANTING APPELLEES’ MOTION TO DISMISS OR IN THE ALTERNATIVE TRANSFER VENUE.
{¶9} “II. THE TRIAL COURT ERRED IN DECLARING KNOX COUNTY FORUM NON-CONVENIENCE AND FINDING THAT VENUE SHOULD BE TRANSFERRED TO DALLAS COUNTY, TEXAS.”
Analysis
{¶10} At the outset we recognize, as do the parties, that the trial court‘s January 23, 2012 does not specifically state whether the trial court dismissed the case for failure to state a claim upon which relief can be granted pursuant to
I.
{¶11} In her first assignment of error, Bumpus argues that the trial court erred in dismissing her complaint for failure to state a claim on which relief can be granted.
{¶12} When granting a motion to dismiss under
{¶13} “All that the civil rules require is a short, plain statement of the claim that will give the defendant fair notice of the plaintiff‘s claim and the grounds upon which it is based.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102 L.Ed.2d 80(1957). See also
{¶14}
When a motion to dismiss for failure to state a claim upon which relief can be granted presents matters outside the pleading and such matters are not excluded by the court, the motion shall be treated as a motion for summary judgment and disposed of as provided in Rule 56. Provided however, that the court shall consider only such matters outside the pleadings as are specifically enumerated in Rule 56. All parties shall be given reasonable opportunity to present all materials made pertinent to such a motion by Rule 56.
{¶15} “It is the court‘s responsibility either to disregard extraneous material or to convert a motion to dismiss into a motion for summary judgment when additional materials are submitted.” Keller v. Columbus, 100 Ohio St.3d 192, 2003–Ohio–5599, 797 N.E.2d 964, ¶ 18. Moreover, “courts cannot rely on evidence or allegations outside the complaint to determine a
{¶16} An order granting a
A. Ohio Consumer Sales Practices Act and Debt Adjustment Companies Act.
{¶17} In her first cause of action, Bumpus alleged that Ward violated the CSPA and the DACA.
{¶18} Accepting the allegations of the complaint as true, the Court finds that Bumpus has adequately pled “a short and plain statement of the claim” that “give[s] the defendant fair notice” of the claim and plaintiff‘s grounds for relief. Twombly, 550 U.S. at 554-555 (quoting
B. Credit Services Organization Act.
{¶20}
(A) “Buyer” means an individual who is solicited to purchase or who purchases the services of a credit services organization for purposes other than obtaining a business loan as described in division (B)(6) of section 1343.01 of the Revised Code.
{¶21} The act further provides what is and what is not a “credit services organization,”
(C)(1) “Credit services organization” means any person that, in return for the payment of money or other valuable consideration readily convertible into money for the following services, sells, provides, or performs, or represents that the person can or will sell, provide, or perform, one or more of the following services:
(a) Improving a buyer‘s credit record, history, or rating;
(b) Obtaining an extension of credit by others for a buyer;
(c) Providing advice or assistance to a buyer in connection with division (C)(1)(a) or (b) of this section;
(d) Removing adverse credit information that is accurate and not obsolete from the buyer‘s credit record, history, or rating;
(e) Altering the buyer‘s identification to prevent the display of the buyer‘s credit record, history, or rating.
(2) “Credit services organization” does not include any of the following:
(a) A person that makes or collects loans, to the extent these activities are subject to licensure or registration by this state;
(b) A mortgage broker, as defined in section 1322.01 of the Revised Code, that holds a valid certificate of registration under sections 1322.01 to 1322.12 of the Revised Code;
(c) A lender approved by the United States secretary of housing and urban development for participation in a mortgage insurance program under the “National Housing Act,” 48 Stat. 1246 (1934), 12 U.S.C.A. 1701, as amended;
(d) A bank, savings bank, or savings and loan association, or a subsidiary or an affiliate of a bank, savings bank, or savings and loan association. For purposes of division (C)(2)(d) of this section, “affiliate” has the same meaning as in division (A) of section 1101.01 of the Revised Code and “bank,” as used in division (A) of section 1101.01 of the Revised Code, is deemed to include a savings bank or savings and loan association.
(e) A credit union organized and qualified under Chapter 1733. of the Revised Code or the “Federal Credit Union Act,” 84 Stat. 994 (1970), 12 U.S.C.A. 1751, as amended;
(f) A budget and debt counseling service, as defined in division (D) of section 2716.03 of the Revised Code, provided that the service is a nonprofit organization exempt from taxation under section 501(c)(3) of the “Internal Revenue Code of 1986,” 100 Stat. 2085, 26 U.S.C.A. 501, as amended, and that the service is in compliance with Chapter 4710. of the Revised Code;
(g) A consumer reporting agency that is in substantial compliance with the “Fair Credit Reporting Act,” 84 Stat. 1128, 15 U.S.C.A. 1681a, as amended.
(h) A mortgage banker;
(i) Any political subdivision, or any governmental or other public entity, corporation, or agency, in or of the United States or any state of the United States;
(j) A college or university, or controlled entity of a college or university, as defined in section 1713.05 of the Revised Code;
(k) A motor vehicle dealer licensed pursuant to Chapter 4517. of the Revised Code acting within the scope and authority of that license or a motor vehicle auction owner licensed pursuant to Chapters 4517. and 4707. of the Revised Code acting within the scope and authority of that license.
{¶22} Accepting the allegations of the complaint as true, this Court finds that Bumpus has adequately pled “a short and plain statement of the claim” that “give[s] the defendant fair notice” of the claim and plaintiff‘s grounds for relief. Twombly, 550 U.S. at
C. Credit Repair Organizations Act.
{¶23} Bumpus’ third cause of action alleged that Ward violated the CROA. The CROA is intended,
(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and (2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.
any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of (i) improving any consumer‘s credit record, credit history, or credit rating; or
(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i).
{¶24} To establish that Ward operated as a credit repair organization within the meaning of the CROA, it must be shown that they “(1) used any instrumentality of interstate commerce, or the mails, to (2) sell, provide, or perform (or represent that they could do so) (3) in return for valuable consideration (4) services or advice about services (5) for the express or implied purpose of improving a consumer‘s credit record, credit history, or credit rating.” Hillis v. Equifax Consumer Servs., Inc., 237 F.R.D. 491, 511 (N.D.Ga.2006) (citing
{¶25} Further, the CROA prohibits a credit repair organization from charging or receiving “any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.”
{¶26} The CROA requires a credit repair organization to provide prescribed disclosures to consumers. Before executing a contract or agreement with a consumer, a credit repair organization must provide the consumer a separate written statement of “Consumer Credit File Rights Under State and Federal Law” in a statutorily prescribed form.
{¶27} The CROA also prohibits a credit repair organization from providing any services to a consumer until (1) the consumer has signed a written and dated contract for the purchase of such service and (2) three business days have passed since the date the contract was signed.
{¶28} The CROA also prohibits any person from making or using “any untrue or misleading representation of the services of the credit repair organization.”
{¶29} Accepting the allegations of the complaint as true, the Court finds that Bumpus has adequately pled “a short and plain statement of the claim” that “give[s] the defendant fair notice” of the claim and plaintiff‘s grounds for relief. Twombly, 550 U.S. at 554-555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (quoting
D. Fraud.
{¶30} In her fourth cause of action, Bumpus alleged fraud, as well as fraud in the inducement.
{¶31} Fraud requires proof of the following elements: (1) a representation or, where there is a duty to disclose, omission of a fact, (2) which is material to the
“There are usually three reasons cited for the requirement of particularity. First, particularity is required to protect defendants from the potential harm to their reputations which may attend general accusations of acts involving moral turpitude. Second, particularity ensures that the obligations are concrete and specific so as to provide defendants notice of what conduct is being challenged. Finally, the particularity requirement inhibits the filing of complaints as a pretext for discovery of unknown wrongs.” Korodi v. Minot (1987), 40 Ohio App.3d 1, 4, 531 N.E.2d 318. Typically, the requirement of particularity includes “the time, place and content of the false representation, the fact misrepresented, and the nature of what was obtained or given as a consequence of the fraud.” Baker v. Conlan (1990), 66 Ohio App. 3d 454, 458, 585 N.E. 2d 543.” Carter-Jones Lumber Co. v. Denune, 132 Ohio App.3d 430, 433, 725 N.E.2d 330(10th Dist. 1999).
{¶32} A claim of fraud in the inducement arises when a party is induced to enter into an agreement through fraud or misrepresentation. “The fraud relates not to the
{¶33} Construing the pleadings in the light most favorable to Bumpus, it is apparent that these requirements are met by the allegations in the complaint.
{¶34} Bumpus alleged that she was mislead into believing that an attorney would perform the services promised when in fact “non-attorneys” were performing the legal services. Compl. ¶¶11-15. Granting Bumpus the benefit of all favorable inferences, it is possible that proof of such facts at trial could establish Ward‘s liability. Furthermore, while the remaining allegations in Bumpus’ complaint may or may not prove to be relevant in determining whether Ward‘s conduct amounts to a fraudulent or deceptive business practice, that inquiry involves questions of fact that are not properly addressed on a motion to dismiss. Ward‘s argument about what its business actually involves more appropriately belongs in a motion for summary judgment.
E. Piercing the Corporate Veil.
{¶35} Bumpus’ fifth and final cause of action seeks to hold the individual principals liable.
{¶36} Piercing the corporate veil operates an exception to the general rule that shareholders are not personally liable for the debts of a corporation. See Dole Food Co. v. Patrickson, 538 U.S. 468, 475, 123 S.Ct. 1655, 155 L.Ed.2d 643 (2003). Courts in
{¶37} In a somewhat analogous situation, courts have employed a slightly different approach in construing the Federal Trade Commission Act (“FTCA“),
{¶38} An individual may be held liable under the FTCA for corporate practices if the FTC first can prove the corporate practices were misrepresentations or omissions of a kind usually relied on by reasonably prudent persons and that consumer injury resulted. FTC v. Kitco of Nevada, Inc., 612 F.Supp. 1282 (D.Minn.1985). Once
{¶39} In the case at bar, accepting the allegations of the complaint as true, this Court finds that Bumpus has adequately pled “a short and plain statement of the claim” that “give[s] the defendant fair notice” of the claim and plaintiff‘s grounds for relief. Twombly, 550 U.S. at 554-555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (quoting
{¶40} For the foregoing reasons, Bumpus’ first assignment of error is sustained in its entirety.
{¶41} In her second assignment of error, Bumpus argues that the trial court erred in granting Ward‘s Motion to Dismiss or in the Alternative Transfer Venue. In the trial court Ward argued that the Court of Common Pleas Knox County, Ohio was an inconvenient forum to address Bumpus’ Complaint and that the Courts in the State of Texas were a more appropriate forum and proper venue for this case.
{¶42} A review of the trial court‘s January 23, 2012 Judgment Entry dismissing Bumpus’ case does not contain an explicit finding that Knox County, Ohio is an inconvenient forum. However, it is clear from Ward‘s motion and Bumpus’ response filed in the trial court that, to the extent the trial court considered this issue, the trial court relied upon the doctrine of forum non-conveniens. It does not appear that the trial court considered the contract‘s forum selection clause.
{¶43} In Clark v. Consol. Foods Corp., 5th Dist. No. CA-4906, 1978 WL 21757 (Dec. 13, 1978), this Court held,
At the outset, this court determines that the judgment of the trial court is a final appealable order. The judgment entry requires plaintiffs to proceed in a forum outside the State of Ohio or in the alternative the action is to be dismissed without prejudice. The practical effect of this judgment is to preclude plaintiffs, residents of Ohio, from pursuing a legal remedy in the courts of Ohio; consequently, a substantial right of the appellants is adversely affected.
{¶45} When determining whether a state court has personal jurisdiction over a nonresident individual, “the court must determine whether the state‘s ‘long-arm’ statute and applicable civil rule confer personal jurisdiction * * *.” U.S. Sprint Communications Co., L.P. v. Mr. K‘s Foods, Inc., 68 Ohio St.3d 181, 184, 624 N.E.2d 1048, 1051(1994). Therefore, nonresident individuals must have certain “minimum contacts” with the forum state. Universal Coach, Inc. v. New York City Transit Auth., Inc., 90 Ohio App.3d 284, 287, 629 N.E.2d 28, 30(8th Dist. 1993), citing Internatl. Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95(1945). In order to obtain minimum contacts, the plaintiff must prove that the nonresident defendant “purposely avail[ed himself] of the privilege of conducting activities within the forum State.” Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283, 1298(1958).
{¶46}
(A) A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person‘s:
(1) Transacting any business in this state;
(2) Contracting to supply services or goods in this state;
(3) Causing tortious injury by an act or omission in this state;
(4) Causing tortious injury in this state by an act or omission outside this state if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state;
(5) Causing injury in this state to any person by breach of warranty expressly or impliedly made in the sale of goods outside this state when he might reasonably have expected such person to use, consume, or be affected by the goods in this state, provided that he also regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state;
(6) Causing tortious injury in this state to any person by an act outside this state committed with the purpose of injuring persons, when he might have reasonably expected that some person would be injured thereby in this state;
(7) Causing tortious injury to any person by a criminal act, any element of which takes place in this state, which he commits or in the commission of which he is guilty of complicity;
(8) Having an interest in, using, or possessing real property in this state;
(9) Contracting to insure any person, property, or risk located within this state at the time of the contracting.
{¶47} When deciding whether a defendant falls within the reach of the long-arm statute, a court should consider three factors:
First, the defendant must purposely avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant‘s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. Cincinnati Art Galleries v. Fatzie, 70 Ohio App.3d 696, 699, 591 N.E.2d 1336, 1338(1st Dist. 1990), quoting S. Machine Co. v. Mohasco Industries, Inc. 401 F.2d 374, 381(6th Cir. 1968).
{¶48} Based upon the facts pled in the complaint and briefs submitted it is apparent that Ward conducted business with Bumpus in Knox County, Ohio. Ward engaged in business in Ohio, solicited business in Ohio, availed themselves of the marketplace and secured benefits from Ohio‘s residents.
{¶50} In the case at bar, a balancing of the private and public factors weigh heavily in support of maintaining Bumpus’ action in Knox County, Ohio.
{¶51} Thus, the trial court erred in finding Knox County, Ohio to be an inconvenient forum. We express no opinion on the validity or the enforceability of the contracts forum selection or choice of law clauses as the trial court did not consider these clauses in its decision finding Knox County to be a forum non-conveniens.
{¶53} The judgment of the Knox County Court of Common Pleas is reversed and this case is remanded for further proceedings consistent with this opinion.
By Gwin, J.,
Delaney, P.J., and
Farmer, J., concur
HON. W. SCOTT GWIN
HON. PATRICIA A. DELANEY
HON. SHEILA G. FARMER
WSG:clw 0907
For the reasons stated in our accompanying Memorandum-Opinion, the judgment of the Knox County Court of Common Pleas is reversed and this case is remanded for further proceedings consistent with this opinion. Costs to appellee.
HON. W. SCOTT GWIN
HON. PATRICIA A. DELANEY
HON. SHEILA G. FARMER