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Weldon v. MTAG Services, LLC

United States District Court, D. Connecticut

February 28, 2017

ROGER WELDON, on behalf of himself and all others similarly situated, Plaintiff,
v.
MTAG SERVICES, LLC et al., Defendants.

          RULING RE: DEFENDANTS' MOTIONS TO DISMISS (DOC. NOS. 59 & 61)

          Janet C. Hall United States District Judge

         TABLE OF CONTENTS

         I. INTRODUCTION ...................................................................................................... 2

         II. FACTS ...................................................................................................................... 4

         III. LEGAL STANDARDS ............................................................................................... 6

         IV. DISCUSSION ........................................................................................................... 7

         A. Article III Standing ................................................................................................ 8

1. Count VI: Section 49-8 of the Connecticut General Statutes ..................... 8
2. Other Standing Challenges ...................................................................... 14
a. Counts I, II.A-B, II.E, and IV: Conversion, CUTPA, and CCPA ......... 15
b. Counts II.F-H and III: CUTPA and Abuse of Process Claims against Cazenovia .......................................................................................... 16

         B. Litigation Privilege .............................................................................................. 18

1. Governing Law ......................................................................................... 19
2. Application of the Litigation Privilege to Weldon's Claims ........................ 21

         C. Noerr-Pennington Doctrine ................................................................................. 28

1. Governing Law ......................................................................................... 29
2. Application of Noerr-Pennington to Weldon's Claims .............................. 30

         D. Count II.G: CUTPA Claim Grounded in Purchase of Liens for Purpose of Filing Suit ..................................................................................................................... 35

         E. Count III: Abuse of Process ................................................................................ 38

         F. Count IV: CCPA Violations ................................................................................. 40

         G. Count V: Lien Discharge Claim for Violation of Sections 12-195g, 42a-9-513, and 42a-9-625 of the Connecticut General Statutes .................................................. 42

         H. Count VI: Lien Discharge Claim for Violation of Section 49-8 of the Connecticut General Statutes ................................................................................................. 44

         I. Count VII: Unjust Enrichment ............................................................................. 44

         V. CONCLUSION ........................................................................................................ 47

         I. INTRODUCTION

         Plaintiff Roger Weldon (“Weldon”) began this lawsuit against defendants MTAG Services, LLC (“MTAG”), Caz Creek CT, LLC (“Caz Creek”), and Cazenovia Creek Funding I, LLC (“Cazenovia”) (collectively “defendants”) by way of a class action complaint filed in state court, dated April 15, 2016. See Class Action Compl. (Doc. No. 1-1) at 1. MTAG removed the suit to federal court in May 2016, see generally Notice of Removal (Doc. No. 1), and Weldon subsequently filed an amended class action complaint, see generally First Am. Class Action Compl. (“FAC”) (Doc. No. 51).

         Weldon claims defendants engaged in wide-ranging, unlawful conduct related to their prosecution of municipal tax lien foreclosure actions. See generally FAC ¶¶ 9-28. More specifically, Weldon alleges the following causes of action against various combinations of the defendants: (1) conversion (“Count I”), see FAC ¶¶ 100-07; (2) violations of the Connecticut Unfair Trade Practices Act (“CUTPA”) (“Count II”), see FAC ¶¶ 108-81;[1] (3) abuse of process (“Count III”), see FAC ¶¶ 182-193; (4) violations of the Connecticut Creditor Collection Practices Act (“CCPA”) (“Count IV”), see FAC ¶¶ 194-220[2]; (5) violations of sections 12-195g, 42a-9-513, and 42a-9-625 of the Connecticut General Statutes (“Count V”), see FAC ¶¶ 221-37; (6) violations of section 49-8 of the Connecticut General Statutes (“Count VI”), see FAC ¶¶ 230-37; and (7) unjust enrichment (“Count VII”), see FAC ¶¶ 238-48.

         Caz Creek and Cazenovia (collectively the “Caz Defendants”) filed a Motion to Dismiss the claims against them, see generally Caz Creek & Cazenovia's Mot. to Dismiss Under Rules 12(b)(1) & 12(b)(6) (“Caz Motion”) (Doc. No. 59); Mem. in Supp. of Caz Creek & Cazenovia's Mot. to Dismiss First Am. Compl. Under Rules 12(b)(1) & 12(b)(6) (“Caz Mem. in Supp.”) (Doc. No. 60), as did MTAG, see generally Def. MTAG Svcs., LLC's Mot. to Dismiss Pl.'s First Am. Compl. (“MTAG Motion”) (Doc. No. 61); Def. MTAG Svcs., LLC's Mem. of Law in Supp. of its Mot. to Dismiss Pl.'s First Am. Compl. (“MTAG Mem. in Supp.”) (Doc. No. 62). Weldon opposed the Motions, see generally Pl.'s Opp'n to Defs.' Mots. to Dismiss Pl.'s First Am. Class Action Compl. (“Opposition”) (Doc. No. 70), and defendants replied in a timely manner, see generally Def. MTAG Svcs., LLC's Reply Mem. of Law in Supp. of its Mot. to Dismiss Pl.'s First Am. Compl. (“MTAG Reply”) (Doc. No. 74); Reply Br. in Supp. of Caz Creek & Cazenovia's Mot. to Dismiss First Am. Compl. Under Rules 12(b)(1) & 12(b)(6) (“Caz Reply”) (Doc. No. 75).[3]

         For the reasons set forth below, both Motions to Dismiss are GRANTED IN PART AND DENIED IN PART.

         II. FACTS[4]

         After Weldon did not pay his property taxes for several years, the City of Bridgeport imposed four municipal tax liens on his home. The City assigned those liens to MTAG Caz Creek CT, LLC-which immediately assigned the liens it received to MTAG as its custodian-or directly to MTAG as custodian for MTAG Caz Creek CT, LLC; these assignments took place between 2012 and 2015. See FAC ¶ 65. At some point, MTAG Caz Creek CT, LLC changed its name to Caz Creek CT, LLC (“Caz Creek”). See FAC ¶ 66; FAC, Ex. 1 (Doc. No. 51-1) at 4 (listing Caz Creek's “Old Name” as “MTAG Caz Creek CT, LLC”). In August 2015, MTAG, in its custodial capacity, assigned the four liens to Cazenovia. See FAC ¶ 66; FAC, Ex. 3 (Doc. No. 51-3) at 1-2, Schedule A at 2.

         On October 19, 2015, MTAG, “as custodian for MTAG Caz Creek CT, LLC, ” filed a tax lien foreclosure lawsuit against Weldon in state court to collect on the liens. See FAC ¶ 66; FAC, Ex. 5 (Doc. No. 51-5) at 1. Defendants' standard-form state court foreclosure complaint (“State Complaint”), see FAC ¶¶ 14, 34, did not indicate that the liens had been assigned to Cazenovia, see FAC ¶ 61; see generally FAC, Ex. 5. Rather, materials attached to the filing expressly stated that “plaintiff as named in the [ ] complaint is the creditor to whom the debt is owed, ” FAC, Ex. 5 at 8 ¶ 2, and a Notice of Lis Pendens dated the same day as the State Complaint indicated that “MTAG Services, LLC, as Custodian for MTAG Caz Creek CT, LLC . . . is now the owner and holder of said liens, ” FAC, Ex. 5 at 11. The State Complaint demanded, inter alia, foreclosure of the lien, attorney's fees, interest, and costs. See id. at 6.

         Weldon initially denied some of the allegations in the State Complaint, see Answer to Compl., Tax Lien Foreclosure Pleas of Def., Roger Wilmot Weldon (Doc. No. 71-1) at 1-2, but later asked that Caz Creek and MTAG inform him of the amount necessary to pay off the debts. See FAC ¶ 72. On December 31, 2015, Weldon provided a certified check for $25, 463.23, id. ¶ 75, the amount that MTAG and Caz Creek had demanded by email, see id. ¶ 73. MTAG and Caz Creek withdrew the lawsuit the same day. See Caz Mem. in Supp., Ex. 2 (Doc. No. 60-2) at 1. MTAG and Caz Creek later refunded $375, see FAC ¶ 73, but the remaining $25, 088.23 Weldon paid included charges for $1, 100.00 of attorney's fees and $1, 319.20 of costs, see FAC ¶ 74; FAC, Ex. 6 (Doc. No. 51-6) at 2.

         On December 29, 2015, February 4, 2016, and March 23, 2016, Weldon demanded that defendants discharge the tax liens on his home for tax years 2010, 2011, 2012, and 2013, which were at that point paid in full. See FAC ¶ 82. Cazenovia filed a discharge of the 2011 and 2013 tax liens on February 4, 2016. See id. ¶ 83. For the 2010 and 2012 liens, Cazenovia filed a release dated June 16, 2016, which was notated as received by the City of Bridgeport on July 13, 2016. See City of Bridgeport, CT Certificate of Release of Municipal Tax Liens (Doc. No. 71-2) at 1.

         Neither MTAG nor Cazenovia are licensed Connecticut Consumer Collection Agencies. See FAC ¶ 10-11. Caz Creek is licensed as a consumer collection agency, as of November 18, 2015, under its current name, “Caz Creek CT, LLC.” See FAC, Ex. 2 (Doc. No. 51-2) at 1. However, in the State Complaint it brought against Weldon, Caz Creek appears under its previous name, “MTAG Caz Creek CT, LLC.” See FAC, Ex. 5 at 1. Each of defendants purchase municipal tax liens in order to collect on them by filing tax lien foreclosure lawsuits or by otherwise demanding payment. See FAC ¶ 10- 12.

         III. LEGAL STANDARDS

         When a motion to dismiss pursuant to Rule 12(b)(1) is “facial, i.e., based solely on the allegations of the complaint or the complaint and exhibits attached to it . . ., the plaintiff has no evidentiary burden.” Carter v. Healthport Techs., LLC, 822 F.3d 47, 56 (2d Cir. 2016). Rather, the court must determine whether those allegations and exhibits constitute alleged “facts that affirmatively and plausibly suggest that the plaintiff has standing to sue.” Id. (quoting Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011)). In making this determination, the court accepts as true all material allegations set forth in the Complaint and draws all reasonable inferences in favor of the plaintiff.[5]

         The standard for ruling on a motion to dismiss pursuant to Rule 12(b)(6) is “substantively identical” to the standard for ruling on a motion pursuant to Rule 12(b)(1). See Lerner v. Fleet Bank, N.A., 318 F.3d 113, 128 (2d Cir. 2003), abrogated on other grounds by Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377 (2014). To survive a motion to dismiss for failure to state a claim, a complaint must contain factual allegations that, if accepted as true, state a plausible claim for relief. See, e.g., Absolute Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 65 (2d Cir. 2012) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010) (quoting Iqbal, 556 U.S. at 679)). The court accepts as true the facts alleged in the complaint and draws all reasonable inferences in the plaintiff's favor. See, e.g., Lopez v. Jet Blue Airways, 662 F.3d 593, 596 (2d Cir. 2011) (citing, inter alia, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)).

         Notably, dismissals for lack of standing are without prejudice, Carter, 822 F.3d at 54-55, while dismissals for failure to state a claim are “adjudication[s] on the merits with preclusive effect, ” All. for Envtl. Renewal, Inc., 436 F.3d at 88 n.6.

         IV. DISCUSSION

         The court will address Weldon's overlapping claims against different combinations of defendants in the following manner. First, the court will analyze defendants' assertions that Weldon lacks Article III standing to bring several of the counts in the FAC. Cf. Lujan v. Defs. of Wildlife, 504 U.S. 555, 569 (characterizing “standing inquiry” as “threshold” question). Then, the court will discuss whether Weldon's claims are barred by the litigation privilege or by the Noerr-Pennington doctrine. Last, the court will address the other grounds on which defendants ask for dismissal of those claims that survive the standing, litigation privilege, and Noerr-Pennington analyses.

         A. Article III Standing

         MTAG, Caz Creek, and Cazenovia all contend that Count VI-alleging violations of section 49-8 of the Connecticut General Statutes-should be dismissed because Weldon lacks standing. See MTAG Mem. in Supp. at 30-32; Caz Mem. in Supp. at 31- 32. Caz Creek and Cazenovia, however, also challenge a number of other Counts in Weldon's FAC, on the grounds that he lacks standing to bring them. See, e.g., Caz Mem. in Supp. at 11. Weldon counters that he has standing to bring all of the claims in the FAC. See generally Opposition at 40-45. The court will first consider the standing challenges to Count VI, and then the standing arguments raised by Caz Creek and Cazenovia that do not relate to Count VI.

         1. Count VI: Section 49-8 of the Connecticut General Statutes

         Section 49-8 of the Connecticut General Statutes (“Section 49-8”) provides that lienholders “shall execute and deliver a release within sixty days from the date [of] a written request for a release of such encumbrance.” Conn. Gen. Stat. § 49-8(c). Lienholders who do not release the lien within the requisite time period:

shall be liable for damages . . . at the rate of two hundred dollars for each week after the expiration of such sixty days up to a maximum of five thousand dollars or in an amount equal to the loss sustained . . . as a result of the failure of the [lienholder] to execute and deliver a release, whichever is greater, plus costs and reasonable attorney's fees.

Id. Weldon argues that defendants' failure to release the 2010 and 2012 tax liens within sixty days of his December 31, 2015 payment runs afoul of this provision. See FAC ¶ 235.

         MTAG contends that Weldon lacks a cognizable injury for standing purposes both because the liens had already been released by the time he asserted that it violated Section 49-8, and because this “bare procedural violation” does not qualify as a “concrete harm.” See MTAG Mem. in Supp. at 28-29. Similarly, the Caz Defendants suggest that, even if Section 49-8 applies to the liens at issue, Weldon suffered no injury because the foreclosure case was dismissed the same day he made payment, and thus he never “lack[ed] evidence that the liens were discharged.” See Caz Mem. in Supp. at 31-32. Weldon responds that Section 49-8 creates a statutory “right to a timely filed release of lien, ” the violation of which creates a cognizable injury. See Opposition at 44-45.

         It is well-established that the United States Constitution's “case-or-controversy requirement[ ] consists of three elements: (1) an ‘injury in fact, ' by which is meant ‘an invasion of a legally protected interest'; (2) ‘a causal connection between the injury and the conduct complained of'; and (3) a likelihood that ‘the injury will be redressed by a favorable decision.'” Fulton v. Goord, 591 F.3d 37, 41 (2d Cir. 2009) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). “To demonstrate injury in fact, a plaintiff must show the ‘invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Strubel v. Comenity Bank, 842 F.3d 181, 188 (2d Cir. 2016) (quoting Lujan, 504 U.S. at 560).

         Here, Weldon satisfies the legal-interest requirement of injury in fact: Count VI affirmatively and plausibly alleges a violation of Section 49-8. The Second Circuit and Supreme Court have made clear that Congress may, by statute, create new legal rights, such that violation of the statute would support an individual plaintiff's standing. See Strubel, 842 F.3d at 188 (citing, inter alia, Warth v. Seldin, 422 U.S. 490, 500 (1975)). However, “it is an open question in the Second Circuit whether a state statute can define a concrete injury for the purposes of Article III standing.” Jaffe v. Bank of Am., N.A., 13 CV 4866 (VB), 14 CV 947 (VB), 2016 WL 3944753, at *3 (S.D.N.Y. July 15, 2016) (citing Ross v. AXA Equitable Life Ins. Co., 115 F.Supp.3d 424, 434 (S.D.N.Y. 2015)); see also Bellino v. JPMorgan Chase Bank, N.A., No. 14-cv-3139 (NSR), 2016 WL 5173392, at *6 (S.D.N.Y. Sept. 20, 2016). At least three other circuits have suggested that state statutes can recognize cognizable injuries for Article III standing purposes. See Jaffe, 2016 WL 3944753, at *4 (citing opinions from Seventh, Ninth, and Tenth Circuits). Neither MTAG nor the Caz Defendants argue against standing on the grounds that state, as opposed to federal, statutes cannot create new legal rights. Indeed, as the Ninth Circuit has pointed out, if state law could not create interests that support standing in federal courts, “there would not be Article III standing in most diversity cases.” See Cantrell v. City of Long Beach, 241 F.3d 674, 684 (9th Cir. 2001). The reasoning of the other circuit courts, as well as other district courts within this Circuit, is persuasive. Therefore, this court concludes that violations of state statutes satisfy the legal-interest requirement of injury in fact.

         Next, the court turns to the more difficult question of whether Weldon's purported injury is sufficiently “concrete and particularized” to give rise to standing. In Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016), the Supreme Court clarified the types of harms derived from procedural violations that qualify as “concrete.” See generally 136 S.Ct. at 1549-50. The Second Circuit, just a few months ago, interpreted Spokeo in a context similar to the facts of this case. See generally Strubel, 842 F.3d 181.[6] The Supreme Court made clear in Spokeo that certain intangible harms may qualify as concrete injuries, while also underscoring that the legislature's decision to grant a statutory right and authorize suit to enforce that right does not, without more, give rise to standing. See id. at 188-89 (citing Spokeo, 136 S.Ct. at 1549). In determining whether a procedural violation “manifests injury in fact, a court properly considers whether [the legislature] conferred the procedural right in order to protect an individual's concrete interests.” Id. at 189. Ultimately, the Second Circuit summarized Spokeo's main holding as follows:

[W]e understand Spokeo, and the cases cited therein, to instruct that an alleged procedural violation can by itself manifest concrete injury where [the legislature] conferred the procedural right to protect a plaintiff's concrete interests and where the procedural violation presents a ‘risk of real harm' to that concrete interest. But even where [the legislature] has accorded procedural rights to protect a concrete interest, a plaintiff may fail to demonstrate ...

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