IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON. Case No.:

Transcription

1 Kirk D. Miller, WSBA #00 Kirk D. Miller, P.S. 1 W. Riverside Ave., Ste 0 Spokane, WA 1 (0) - Telephone (0) - Facsimile IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON KRISTINE ORLOB-RADFORD, and all others similarly situated, vs. Plaintiff, ) ) ) ) ) ) ) ) ) MIDLAND FUNDING LLC, ENCORE) CAPITAL GROUP, INC, and ) ) MACHOL & JOHANNES, PLLC, ) ) Defendants. ) Case No.: COMPLAINT CLASS ACTION (JURY DEMANDED) Plaintiff Kristine Orlob-Radford (hereinafter Radford ), by and through her attorney Kirk D. Miller of Kirk D. Miller, P.S., pleads the allegations and claims against Defendants Midland Funding LLC (hereinafter Midland ), Encore Capital Group, Inc. (hereinafter Encore ), and Machol & Johannes, PLLC (hereinafter Machol ) as follows: 1 COMPLAINT - 1

2 1 I. INTRODUCTION RCW..00 requires that an application for writ of garnishment contain a sworn statement that the judgment creditor has reason to believe, and does believe, that the money or property the plaintiff is seeking to garnish is not exempt under state or federal law. This requirement acts as a safeguard against collection of exempt funds from economically vulnerable judgment debtors in Washington. While this prerequisite to acquiring a valid writ of garnishment is simple and explicit, it is apparently problematic for high-volume collection agency litigators who know nothing about the owners of the assets they are attempting to garnish. In this case, Defendant Machol issued a writ of garnishment that was based on an application for writ that technically complied with RCW..00. Machol s agent who signed the sworn statement, however, did not have any reason to believe that the money in Plaintiff s bank account was not exempt. The agent s sworn statement was false. All of the money in Plaintiff Radford s bank account was, in fact, exempt and it was immediately frozen pursuant to Machol s writ of garnishment. After issuing the writ that wiped out Plaintiff s bank account, Machol then compounded its illegal activity by sending a notice to Plaintiff of her exemption rights that was not in the form required by RCW..0. The form states that the maximum cash exemption in a consumer claim is only two hundred dollars COMPLAINT -

3 1 ($0.00), when in fact the law allows for a five hundred dollar ($00.00) exemption. The notice sent by Machol to Ms. Radford misrepresented the law by understating by three hundred dollars ($00) the amount of cash that she would be entitled to claim as exempt. This deceptive form notice could deceive even sophisticated consumers who rely on the law office s inaccurate explanation of exemption rights. The false and misleading statement regarding the cash exemption would likely dissuade people from filing a claim of exemption with the court to get back their wrongfully garnished, exempt money. Because garnishment can be so devastating on the people subjected to it, absolute compliance with the statutory process is essential. Since garnishment is an extraordinarily harsh remedy, with specific procedures relating to filing, notice, and enforcement, the party seeking the remedy must follow those exclusive methods provided in the statute. Watkins v. Peterson Enterprises, Inc., Wn. d,, P.d, (1). The extraordinary advantage afforded a creditor by the garnishment statutes is a harsh remedy. Huzzy v. Culbert Const. Co., Wn. App. 1,, P.d, (1). The garnishment statute should be strictly construed against the party seeking the remedy. Watkins, supra. Enforcement of the garnishment statute requires strict adherence to its statutory procedures. Id. COMPLAINT -

4 1 Ms. Radford s situation is not unique. Defendants are prolific collection agencies in the state of Washington. Machol utilizes uniform procedures on behalf of its client, Midland Funding, to collect debts. Its policies and procedures with respect to signing affidavits for garnishment do not vary. Neither Midland nor Machol have reason to believe that any garnishee defendant is holding non-exempt funds. It is simply a scatter-shot approach to garnishment that prays on the poorest and least sophisticated defendants. Defendants policies and practices used to obtain writs of garnishment have impacted the rights of thousands of Washington State residents. This case seeks statutory damages under the FDCPA on behalf of the named Plaintiff and all others similarly situated, who have been subjected to the Defendants unfair, deceptive, and illegal garnishment tactics. II. JURISDICTION.1 Jurisdiction of this court arises under U.S.C. k(d), U.S.C., and U.S.C. 1. Supplemental jurisdiction exists for state law claims pursuant to U.S.C.. Declaratory relief is available pursuant to U.S.C. 1 and.. Venue is proper in this District under U.S.C. 1(b) because the Defendants conduct affairs and transact business in this District, the COMPLAINT -

5 1 unlawful acts giving rise to this claim occurred in this District, and the Plaintiff resides within the territorial jurisdiction of the court. III. PARTIES.1 Plaintiff Radford is a resident of the state of Washington.. At all times relevant to this lawsuit, Plaintiff Radford was a resident of Spokane County, Washington.. Midland Funding LLC is a wholly owned subsidiary of Encore Capital Group, Inc.. Encore Capital Group, Inc. is a Delaware corporation that does business in Washington State through its subsidiary Midland Credit Management, Inc.. Midland Credit Management, Inc. is the only Encore subsidiary in the United States that has any employees.. Midland Funding LLC is a wholly owned subsidiary of Midland Credit Management, Inc.. Midland Funding LLC has no employees.. Midland Funding LLC is a purchasing and holding company for portfolios of charged-off receivables that Midland Credit Management, Inc. attempts to collect. COMPLAINT -

6 1. Defendant Midland Funding LLC regularly solicits claims for collection.. Defendant Midland Funding LLC is licensed by the state of Washington as a collection agency.. Defendant Midland is a collection agency as defined by RCW 1..0().. Defendant Midland is a debt collector as defined by the FDCPA U.S.C. a().. Defendant Machol was retained by Midland Funding to collect on the Plaintiff s Bank of America account that had been assigned to Midland Funding LLC.. Defendant Machol is a Washington corporation engaged in the business of collecting debts in the state of Washington.. Defendant Machol regularly solicits claims for collection.. Defendant Machol regularly collects or attempts to collect claims owed or due or asserted to be owed or due to another person, firm, partnership, trust, joint venture, association, or corporation.. Defendant Machol is licensed by the state of Washington as a collection agency. COMPLAINT -

7 . Defendant Machol is a collection agency as defined by RCW 1..0()..1 At all times relevant to this action, Defendant Machol was acting as an agent for its client Defendant Midland Funding LLC.. Defendants are jointly and severally liable for the acts complained of herein..1 Defendants alleged that Plaintiff owed money to Bank of America.. The debt that Defendants alleged Plaintiff owed was for personal, family, or household purposes.. Defendants attempted to collect a debt from Plaintiff, as that term is defined by the FDCPA, U.S.C. (a)().. Defendant Machol regularly uses the telephone in its attempts to collect debts.. Defendant Machol uses instrumentalities of interstate commerce or the mail to collect debts.. Defendant Machol is a debt collector as defined by the FDCPA U.S.C. a(). IV. FACTS 1.1 Defendants alleged that Plaintiff Radford defaulted on a Bank of COMPLAINT - America/FIA account sometime in 0.

8 1. Sometime in or after 0, Ms. Radford s Bank of America/FIA account was assigned to Midland Funding LLC, a debt buyer.. Midland Credit Management, Inc. retained Defendant Machol on behalf of Midland Funding, LLC to collect money on the Bank of America/FIA account from Plaintiff.. In, Defendants agreed to settle the account with Plaintiff.. Plaintiff entered into a stipulated judgment and settlement agreement with Defendants.. Plaintiff Radford paid approximately seven hundred fifty dollars ($0) on the agreement before she became unable to make additional payments.. On August,, Defendants filed a lawsuit against Plaintiff in the Spokane County Superior Court (case # --0-) to collect the Bank of America account that was the subject of the prior settlement agreement.. On September,, a judgment was entered in favor of defendant Midland Funding against the Plaintiff.. On March,, and August,, Defendant filed affidavits for writs of garnishment, naming Spokane Teacher s Credit Union ( STCU ) as the garnishee defendant. COMPLAINT -

9 1. At all relevant times, STCU is the financial institution where Plaintiff kept her money.. On April,, Defendants filed an Answer to the March, garnishment.. The April, Answer shows that the March, writ of garnishment captured sixty-four dollars and forty-two cents ($.) from the Plaintiff s bank account.. All of the money captured from Plaintiff s bank account with the March, writ of garnishment was exempt under Washington law.. In addition to the sixty-four dollars and forty-two cents ($.) garnished by the Defendants, STCU also charged the Plaintiff a seventy-five dollar ($.00) fee for the garnishment.. The combination of the sixty-four dollars and forty-two cents ($.) garnishment and the STCU fee left Plaintiff with a negative balance in her STCU account.. To date, the sixty-four dollars and forty-two cents ($.) in exempt money garnished with the March, writ of garnishment has not been returned to the Plaintiff. COMPLAINT -

10 1. To date, the seventy-five dollar ($.00) STCU fee that resulted from STCU processing the March, writ of garnishment has not been returned to the Plaintiff.. On September,, defendants filed an Answer to the August, writ of garnishmen..1 The August, writ of garnishment captured all of the funds in Plaintiff Radford s bank account, in the amount of four hundred eighty dollars and five cents ($0.0).. On or about September,, in addition to the four hundred eighty dollars and five cents ($0.0) garnished by the Defendants, STCU also charged the Plaintiff a seventy-five dollar ($.00) fee for the garnishment..1 The combination of the four hundred eighty dollars and five cents ($0.0) garnishment and the STCU garnishment fee left Plaintiff with a negative balance in her bank account.. On September,, after learning that all of her money had been garnished from her bank account, Plaintiff advised her bank that all of the money garnished was exempt and requested that it be returned.. Plaintiff s bank refused to return Plaintiff s money, or any portion of it, without a court order. COMPLAINT -

11 1. The STCU bank account that Defendant garnished contained the only money Plaintiff owned in any bank accounts, savings and loan accounts, stocks, bonds, or other security.. On September,, the date she learned that her bank account had been garnished, Plaintiff was in possession of a total of six dollars and seventy four cents ($.), all in loose change that she searched for and found in her purse, couch, chair, and dresser.. All of the writs of garnishment filed in the Plaintiff s case are signed by Randall Johannes, a partner at Machol & Johannes, PLLC law firm and collection agency.. Mr. Johannes, on behalf of Midland Funding LLC, swears in each of the affidavits for writ of garnishment that the Plaintiff, has reason to believe, and does believe, that the garnishee defendant has possession or control of personal property or effects belonging to the Defendant which are not exempt from garnishment by any state or federal law.. Defendant Midland Funding, a corporation, does not believe anything.. Defendant Midland Funding, a corporation, does not have reason to believe anything. COMPLAINT -

12 .0 Corporations, in general, cannot believe or have reason to believe anything..1 Defendant Midland Funding has no employees.. Corporations can only act through their agents.. No agent of defendant Midland Funding believed that the money garnished from Plaintiff s STCU account was not exempt.. No agent of defendant Midland Funding had reason to believe that the money garnished from Plaintiff s STCU account was not exempt.. Defendant Machol & Johannes, PLLC is Midland Funding s agent for purposes of issuing writs of garnishment in Washington State.. In order to obtain a valid writ of garnishment, the judgment creditor or someone on the judgment creditor s behalf must swear they have reason to believe that the garnishee is holding funds or property of the defendant in amounts exceeding those exempt from garnishment by any state or federal law. RCW..00 (emphasis added). 1 COMPLAINT -

13 1. The form of affidavit for garnishment used by defendant Machol in Ms. Radford s case is the same form that Machol regularly uses to garnish judgment debtors.. In the one year preceding the filing of this lawsuit, Defendant Machol has filed more than forty (0) applications for writ of garnishment in Washington State on behalf of defendant Midland Funding that are in substantially the same form as the applications for writ of garnishment filed in Ms. Radford s court case.. In the one year preceding the filing of this lawsuit, Defendant Machol has filed more than one hundred (0) applications for writ of garnishment in Washington State on behalf of defendant Midland Funding that are in substantially the same form as the applications for writ of garnishment filed in Ms. Radford s case..0 Each application for writ states, under penalty of perjury, that its contents are true and correct..1 All applications for writ of garnishment filed by Machol on behalf of Midland Funding, LLC are signed by an attorney at Machol without any inquiry by the attorney into whether the garnishee defendant is holding property that is not exempt. COMPLAINT -

14 1. No agent of defendant Midland Funding advises Machol whether Midland Funding, LLC believes a garnishee defendant is holding nonexempt property of a judgment debtor.. No agent of defendant Midland Funding advises Machol whether Midland Funding, LLC has reason(s) to believe that a garnishee defendant is holding non-exempt property of a judgment debtor.. In every case where Machol obtains a writ of garnishment of behalf of defendant Midland Funding, the decision to apply for the writ of garnishment is made solely by the attorneys at Machol.. Once exempt funds are garnished, judgment debtors usually are forced to take legal action to recover the exempt funds that Defendants obtained with writs based upon their false statements.. At no time did Randall Johannes have reason to believe that the money in Plaintiff Radford s STCU account was not exempt from garnishment.. At no time did Randall Johannes believe that the money in Plaintiff s STCU account was not exempt from garnishment.. The fact that only $. was available in the Plaintiff s STCU account when the first writ of garnishment directed at STCU was COMPLAINT -

15 1 served was a reason to believe that the money in plaintiff s account was exempt.. The Machol attorneys who sign applications for writ of garnishment on behalf of Defendant Midland Funding have no knowledge whatsoever regarding whether Midland Funding believes, or has reason to believe, that the funds, or any portion of the funds, it is attempting to garnish are not exempt under Washington State or Federal Law..0 Machol receives no information from any source, regarding whether the garnishee defendant is in possession of the judgment debtor s nonexempt property, before its attorneys sign writs of garnishment..1 In addition to the amount of the underlying judgment plus interest, the writ of garnishment filed in Ms. Radford s case asserts that she owes costs that stem from the presumption of a valid garnishment.. Defendants profit by adding fees and costs to the illegal garnishments.. All of the writs of garnishment sent by Defendants to STCU, in an attempt to garnish Ms. Radford s money, directed STCU to withhold the full amount of the judgment, plus garnishment costs.. Defendant Machol uses the same forms, policies, and procedures to generate all of its applications for writs of garnishment. COMPLAINT -

16 1. RCW..0 allows employers to discharge employees for COMPLAINT - receiving too many writs of garnishment on different debts in any twelve month period.. Machol s practice of serving unlawful wage garnishments has the coercive effect of forcing payment from people fearful of losing their employment, even when the money is exempt from garnishment.. When Machol garnishes exempt property from judgment debtors, the judgment debtor is normally required to attend a court hearing to recover the property.. Machol s form affidavit for garnishment, policies, and procedures unfairly shifts the burden to the judgment debtor to prove that the garnished property is exempt before anyone on the judgment creditor s behalf has truthfully asserted that it has a reason to believe the property is not exempt.. Proper application for the writ of garnishment, as required by RCW..00, is a jurisdictional prerequisite to the issuance of a valid writ of garnishment..0 RCW..0 requires in part: (1)When a writ is issued under a judgment, on or before the date of service of the writ on the garnishee, the judgment creditor shall mail or cause to be mailed to the judgment

17 1 COMPLAINT - debtor, by certified mail, addressed to the last known post office address of the judgment debtor (b) if the judgment debtor is an individual, the notice and claim form prescribed in RCW..0.1 The notice and claim form prescribed in RCW..0 states in part: YOU HAVE THE FOLLOWING EXEMPTION RIGHTS: OTHER EXEMPTIONS. If the garnishee holds other property of yours, some or all of it may be exempt under RCW..0, a Washington statute that exempts certain property of your choice (including money in a bank account up to $0.00 for debts owed to state agencies, or up to $00.00 for all other debts) and certain other property such as household furnishings, tools of trade, and a motor vehicle (all limited by differing dollar values).. Defendants sent a notice and claim form to the Plaintiff that was not in the form prescribed by RCW..0.. The notice and claim form sent by the Defendants to the plaintiff states in relevant part: OTHER EXEMPTIONS: If the garnishee holds other property of yours, some or all of it may be exempt under RCW..0, a Washington statute that exempts up to five hundred dollars ($00) of property of your choice (including up to two hundred dollars ($0.00) in cash or in a bank account) and certain other property such as household furnishings, tools of trade, and a motor vehicle (all limited by differing dollar values). (emphasis added)

18 1. Pursuant to RCW..0(1)(c)(ii)(A)(II) and contrary to the notice and claim form sent by Defendants, Plaintiff was and is entitled to a five hundred dollar ($00) exemption in cash or in her bank account.. The notice and claim form sent to Plaintiff is deceptive and misleading.. All of the funds garnished from Plaintiff s bank account were exempt funds.. The notice and claim form sent by Machol to the Plaintiff is the same form Machol sends on behalf of Midland to all judgment debtors in the state of Washington, where a garnishment is issued.. Defendants have profited, and continue to profit, from Machol s practice of issuing improper garnishments against defendants employers and financial institutions.. The form of notice and claim form used by Defendants is likely to mislead consumers by misrepresenting the amount of money that the consumer may claim as exempt from garnishment..0 Consumers receiving the incorrect notice and claim form used by the Defendants are less likely to seek recovery of their exempt assets in the courts. COMPLAINT -

19 1.1 To the extent that the incorrect notice and claim form used by the COMPLAINT - 1 Defendants reflects the Defendants understanding of Washington law, the Defendants factual basis supporting a reason to believe that the assets are not exempt is undermined.. Defendants have profited, and continue to profit, by garnishing money from judgment debtors that may be exempt under Washington State or Federal Law.. Defendants have profited, and continue to profit, by misrepresenting Washington judgment debtors exemption rights, following a garnishment.. Machol garnishment practices have caused substantial harm to the people of Washington State. V. Fair Debt Collection Practices Act Violation (Unfair and Deceptive Acts).1 Congress enacted the Fair Debt Collection Practices Act in response to abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors [which] contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy. U.S.C. (a);

20 1 Evon v. Law Offices of Sidney Mickell, F.d, (th Cir. ).. The Fair Debt Collection Practices Act is a strict liability statute, and prohibits deceptive or misleading debt collection from the perspective of the least sophisticated consumer. Swanson v. Southern Oregon Credit Service, Inc., F.d (th Cir. ).. The FDCPA also states: A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. U.S.C. e.. Sending judgment debtors a notice and claim form that fails to accurately reflect the statutory requirements is a false, deceptive, and misleading representation in violation of the FDCPA.. Sending judgment debtors a notice and claim form that understates the amount of money that is exempt is a false, deceptive, misleading means to collect a debt, in violation of the FDCPA.. Falsely claiming that a judgment creditor believes, and has reason to believe, that a garnishee defendant is in possession of non-exempt property belonging to the judgment debtor is a false, deceptive and misleading representation and means to collect a debt. COMPLAINT -

21 1. The FDCPA prohibits falsely representing the legal status or character of a debt. U.S.C. e().. A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. U.S.C. d.. Obtaining and serving writs of garnishment based on false assertions has the natural consequence of harassing, oppressing, and abusing the people of Washington that were subjected to the practice.. Sending writs of garnishment that were obtained through false, deceptive and misleading statements, to judgment debtors, the judgment debtors employers, and/or the judgment debtors financial institutions is an unfair and deceptive practice that violates the FDCPA, U.S.C. d, e and f.. Plaintiff was injured by Defendant s actions because her exempt money was garnished from her financial institution following a materially false representation by the judgment creditor s agent.. Defendants practice of materially misrepresenting to judgment debtors their rights with respect to cash exemptions following a garnishment violates the FDCPA, including but not limited to: U.S.C. e and f. COMPLAINT - 1

22 VI. CLASS ALLEGATIONS 1.1 This action is brought on behalf of a class consisting of:.1.1 Sub-Class 1: All persons, businesses, and corporations;.1.1. who are judgment debtors;.1.1. in a case filed by Defendant Machol on behalf of defendant Midland Funding;.1.1. in a court in the state of Washington;.1.1. where a writ of garnishment was filed in the case;.1.1. where the writ of garnishment was supported by an application signed by a representative of Defendant Machol;.1.1. where the Machol representative stated in the application for writ that defendant Midland Funding believed and had reason to believe that the garnishee defendant was in possession of the judgment debtor s property that was not exempt from garnishment; and.1.1. Defendant Midland Funding did not believe and have reason to believe that the garnishee defendant was in COMPLAINT - possession of the judgment debtor s non-exempt

23 property; or the Machol representative did not know whether Midland believed or had reason to believe that the garnishee defendant was in possession of the judgment debtor s non-exempt property Sub-Class :.1..1 All individuals;.1.. who are judgment debtors;.1.. in a court in the state of Washington;.1.. Where Machol sent the individual a notice and claim form on behalf of defendant Midland Funding;.1.. That contains substantially the same content set forth in paragraph., above.. For purposes of the FDCPA claims, the class is limited to consumers who were sued for a debt, as those terms are defined U.S.C. a() and ().. The class period for the FDCPA claims is the one (1) year preceding the filing of this lawsuit.. Plaintiff has the same claims as the members of the class. All of the claims are based on the same factual and legal theories. COMPLAINT -

24 . Plaintiff will fairly and adequately represent the interests of the class members. She is committed to vigorously litigating this matter.. Neither the Plaintiff nor her counsel have any interests which might cause them not to vigorously pursue this claim.. A class action is a superior method for the fair and efficient adjudication of this controversy.. The interest of the class members in individually controlling the presentation of separate claims against the Defendants is small because of the complexity of the litigation and the relatively small amount of relief available to each member of the class.. Certification of a class pursuant to Fed.R.Civ.P. (b)() is appropriate. A class action is the only appropriate means of resolving this controversy because the class members are not aware of their rights, and the class is comprised of a largely vulnerable population. In the absence of a class action, a failure of justice will result. VII. RELIEF REQUESTED 1 WHEREFORE, Plaintiffs pray for judgment to be entered against the Defendants as follows:.1 Certification of the above-defined class; COMPLAINT -

25 . For judgment holding that defendants violated the Fair Debt Collection Practices Act;. For Statutory damages in the amount of one thousand dollars ($1,000) or one percent (1%) of the Defendants combined net worth, pursuant to U.S.C. et seq.;. For costs and reasonable attorney s fees in an amount to be proven at trial pursuant to U.S.C. et seq.. For interest on the above amounts as authorized by law; and. For other relief as the Court deems just and equitable. DATED this th day of November,. Kirk D. Miller P.S. /s Kirk D. Miller Kirk D. Miller, WSBA #00 Attorney for Plaintiffs 1 COMPLAINT -