11th Cir. Adopts ‘Claim Splitting’ Doctrine, Upholds Dismissal of Duplicative Litigation

The U.S. Court of Appeals for the Eleventh Circuit recently affirmed the dismissal of a complaint alleging violations of the federal Telephone Consumer Protection Act, the federal Fair Debt Collection Practices Act (FDCPA) and its analogue under Florida state law, because the plaintiff previously filed a separate lawsuit against the same defendant alleging violations of the TCPA based on the same conduct.

Because the Eleventh Circuit concluded that the claims asserted in the second action were based on the same nucleus of operative facts, the plaintiff was barred from splitting her claims among the lawsuits.

A copy of the opinion in Vanover v. NCO Financial Services, Inc. is available at:  Link to Opinion.

In April 2014, the plaintiff filed a complaint alleging that the defendant violated the TCPA, 47 U.S.C. § 227, et seq., when it used an automatic telephone dialing system to call her cell phone, without her prior express consent, in an attempt to collect medical debts (“first TCPA action”).

Nearly one year after the first TCPA action was filed, the plaintiff sued the defendant again in Florida state court alleging violations of the TCPA, FDCPA, 15 U.S.C. § 1692, et seq., and the Florida Consumer Collection Practices Act (FCCPA), Fla. Stat. § 595.55, et seq., (“second TCPA action”).  The complaint in the second TCPA action named the same plaintiff and defendant named in the first TCPA action, and alleged that the defendant was attempting to collect medical debts from the plaintiff.

Notably, the complaint in the second TCPA action did not allege that the debts at issue were different from the debts at issue in the first TCPA action.

The defendant removed the second TCPA action to federal court and filed a motion to dismiss for improper claim splitting.  The federal trial court granted the defendant’s motion to dismiss and denied the plaintiff’s motion to join additional parties.  The plaintiff appealed.

The appeal involved two issues.  First, the plaintiff argued that the trial court erred by denying her motion to join additional parties.  Second, the plaintiff argued that the trial court erred in dismissing the second TCPA action for improper claim splitting.

In an attempt to defeat the defendant’s motion to dismiss for improper claim splitting, the plaintiff moved to join the defendant’s vendors in a proposed amended complaint in the second TCPA action.  The plaintiff alleged that these vendors violated state and federal law when they attempted to collect medical debts after the defendant advised them she did not owe the alleged debts.  The proposed amended complaint alleged the same attempted collection of debts that were subject of the alleged unlawful collection efforts in the first TCPA action.  The plaintiff sought to join the vendors on the basis that the court could not accord complete relief without them.

As you may recall, Federal Rule of Civil Procedure 19 governs the mandatory joinder of parties.  First, the court must determine whether the absent party is a required party under Rule 19(a).  See, e.g., Molino Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330, 1344 (11th Cir. 2011).  Second, if the absent party is a required party, but joinder is not feasible (i.e., joinder would deprive the court of subject matter jurisdiction), the court must consider “a list of factors to ‘determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed.’”  Id. (quoting Fed. R. Civ. P. 19(b)).

Here, the Eleventh Circuit noted that the plaintiff’s proposed amended complaint failed to allege anything about the relationship between the defendant and the vendors that would prevent the plaintiff from obtaining full relief for any allegedly unlawful communications from the defendant.

Because the plaintiff failed to demonstrate that she could not obtain full relief from the defendant without joining the vendors, the Eleventh Circuit held that joining the vendors would not have defeated subject matter jurisdiction and the trial court did not err in denying the joinder of the vendors pursuant to Rule 19(a).

The plaintiff alternatively sought to join the vendors pursuant to Rule 20(a), which governs permissive joinder of parties.

As you may recall, Rule 20(a) requires a plaintiff to demonstrate two prerequisites in order to permissibly join a party:  first, the claims against the party to be joined must “aris[e] out of the same transaction or occurrence, or series of transactions or occurrences,” and second, there must be some question of law or fact common to all parties to be joined.  See, e.g., Alexander v. Fulton Cty., 207 F.3d 1303, 1323 (11th Cir. 2000).

The trial court concluded that the defendant faced duplicative litigation in the first TCPA action and the second TCPA action – specifically finding that both lawsuits arose out of the same underlying conduct, i.e., the collection of medical debts allegedly owed by the plaintiff.  The trial court also rejected the plaintiff’s argument that she had just become aware that the vendors should be joined because by her own admission, the vendors’ alleged involvement in attempting to collect the medical debts was confirmed from her cell phone before she filed the first TCPA action.

Because the plaintiff had nine months to amend her complaint in the first TCPA action, but failed to do so, the Eleventh Circuit held that the trial court did not abuse its discretion in denying the permissive joinder of the vendors.

Next, the Eleventh Circuit turned to the defendant’s motion to dismiss in the second TCPA action for improper claim splitting.  This was an issue of first impression in the Eleventh Circuit.  But, other federal circuit courts have comprehensively analyzed the claim splitting doctrine.

For example, the U.S. Court of Appeals for the Tenth Circuit confronted the issue of “whether a plaintiff can split potential legal claims against a defendant by bringing them in two different lawsuits” and held that “related claims must be brought in a single cause of action.”  Katz v. Gerardi, 655 F.3d 1212, 1214 (10th Cir. 2011).

The Eleventh Circuit determined that the district court in this case properly applied a two-factor test whereby the court “analyzes (1) whether the case involves the same parties and their privies, and (2) whether separate causes arise from the same transaction or series of transactions.”  Khan v. H & R Block E. Enters., Inc., 2011 WL 3269440, at *6 (S.D. Fla. July 29, 2011).

The plaintiff argued that the operative or transactional nucleus of fact related to her TCPA claims in the first TCPA action were limited to whether the defendant placed calls to her cell phone in violation of the TCPA.  The plaintiff also argued that the claims asserted in the second TCPA action were distinct and related to abusive and harassing communications in the collection of consumer debts prohibited by the FDCPA and FCCPA.

Additionally, the plaintiff averred that the calls in the second TCPA action allegedly began earlier than the date alleged in the first TCPA action, and unlike the first TCPA action where the defendant was alleged to have called only the plaintiff’s cell phone, the second TCPA action involved calls the defendant made to her residential phone and to third parties.

Notwithstanding the plaintiff’s attempt to distinguish the two cases, the Appellate Court concluded that the claims in the second TCPA action were still based upon the same collection efforts set forth in the first TCPA action.  Specifically, the Court noted that the factual basis for both lawsuits were “related in time, origin, and motivation, and they form[ed] a convenient trial unit, thereby precluding [the plaintiff] from splitting her claims among the lawsuits.”

Moreover, the Eleventh Circuit held that claim splitting was not defeated by the plaintiff’s additional causes of action.  The two additional causes of action for violations of the FDCPA and FCCPA arose out of the same transactional nucleus of facts and would involve substantially the same evidence.  Thus, the Appellate Court concluded that the trial court did not err in dismissing the second TCPA action for improper claim splitting.

Accordingly, the Eleventh Circuit affirmed the trial court’s dismissal of the second TCPA action.

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Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.