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Skenandore v. FIP, LLC

United States District Court, D. New Mexico

March 5, 2019

OLIVIA SKENANDORE, Plaintiff,
v.
FIP, LLC, Defendant.

          PROPOSED FINDINGS AND RECOMMENDED DISPOSITION ON MOTION FOR DEFAULT JUDGMENT

          Laura Fashing United States Magistrate Judge

         THIS MATTER comes before the Court on plaintiff Olivia Skenandore's Motion for Default Judgment, filed on July 31, 2018. Doc. 7. Pursuant to 28 U.S.C. § 636 and Rule 72(b) of the Federal Rules of Civil Procedure, the Honorable District Judge Martha Vázquez referred this matter to me for a recommended disposition. Doc. 12. Having reviewed the briefing and relevant case law, I find that Ms. Skenandore's motion is well-taken and recommend that the Court GRANT it, and that the Court enter a default judgment in favor of Ms. Skenandore as outlined below.

         I. Background

         Plaintiff Olivia Skenandore is a 70-year-old retired special education teacher who lives in Albuquerque, New Mexico. In April 2017, Ms. Skenandore searched for an internet loan to help her make her car payment and buy groceries. She secured a loan in the amount of $2100 from FIP, LLC (“FIP”), a Nevada limited liability company. FIP did not provide her with any documents when she entered into the loan. She thought the loan would be paid off after six months of $350 payments. FIP did not provide her with any documents pertaining to her loan until she requested them in early 2018. It was only then that she learned that the terms of the loan required her to repay $21, 000 over the course of five years.

         On April 25, 2018, Ms. Skenandore filed her complaint in this Court, seeking the following relief: (1) a declaratory judgment that her loan with FIP is void and uncollectable; (2) injunctive relief preventing FIP from attempting to collect on the loan and from reporting negative information about her to any credit reporting agency; (3) actual, statutory, and/or punitive damages; and (4) reasonable attorney's fees and costs. Doc. 1 at 8. Ms. Skenandore served FIP on May 15, 2018. Doc. 3 at 2. FIP's answer was therefore due by June 5, 2018. Fed.R.Civ.P. 12(a)(1)(A)(i) (answer due 21 days after being served with the summons and complaint). The time to plead or otherwise respond to the complaint has not been extended by agreement of the parties or by order of the Court. To date, FIP has failed to appear, plead, or otherwise defend in this suit.

         On June 13, 2018, Ms. Skenandore filed a Praecipe Requesting Clerk to Enter Default. Doc. 5. On June 14, this Court entered a Clerk's Entry of Default as to FIP. Doc. 6. On July 31, 2018, Ms. Skenandore filed this Motion for Default Judgment. Doc. 7.

         II. Default Judgment

         “When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must enter the party's default.” Fed.R.Civ.P. 55(a). After the clerk has entered default, and a plaintiff applies to a court for default judgment, a district court may enter a default judgment. See Fed. R. Civ. P. 55(b).

         “[W]hen entry of a default judgment is sought against a party who has failed to plead or otherwise defend, the district court has an affirmative duty to look into its jurisdiction both over the subject matter and the parties.” Williams v. Life Sav. & Loan, 802 F.2d 1200, 1203 (10th Cir. 1986). This allows the Court “to determine that it has the power to enter the default judgment.” Id.; see also Venable v. Haislip, 721 F.2d 297, 300 (10th Cir. 1983) (holding that a default judgment is not appropriate if the court does not have jurisdiction over the subject matter and the defendant).

         After determining it has jurisdiction over the subject matter and the defendant, a court must decide “whether the unchallenged facts create a legitimate basis for the entry of a judgment.” Greenwich Ins. Co. v. Daniel Law Firm, No. 07-CV-02445-LTB-MJW, 2008 WL 793606, *1 (D. Colo. Mar. 22, 2008); see also Bixler v. Foster, 596 F.3d 751, 762 (10th Cir. 2010) (“Once default is entered, it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.”) (internal quotation marks and citation omitted). Upon a motion for default judgment, a district court accepts as true all well-pled allegations in a complaint, except those related to proving damages. See U.S. v. Craighead, 176 Fed.Appx. 922, 925 (10th Cir. 2006) (unpublished). The Court must determine whether the allegations contained in plaintiff's complaint are sufficient to state a claim for relief. To state a claim for relief, the complaint must contain sufficient factual matter, accepted as true, to show that the claim is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). A claim is facially plausible when the plaintiff pleads facts that allow the court to reasonably infer that the defendant is liable for the alleged conduct. Id. A pleading that offers mere legal conclusions, or a recitation of the elements of a cause of action, is insufficient. Id. A trial court is vested with broad discretion in deciding whether to enter a default judgment. See Grandbouche v. Clancy, 825 F.2d 1463, 1468 (10th Cir. 1987).

         A. Jurisdiction

         The Court finds that it has the subject matter and personal jurisdiction required to enter a default judgment against FIP. Ms. Skenandore's complaint brings claims under the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), the federal Electronic Funds Transfer Act, 15 U.S.C. § 1693 et seq. (“EFTA”), the New Mexico Unfair Practices Act, N.M. Stat. Ann. § 57-12-1 et seq. (“UPA”), and for fraud. Thus, the Court has federal question subject matter jurisdiction under 28 U.S.C. § 1331. The Court has supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367.

         A district court does not have personal jurisdiction over a defendant if the defendant was not served. See Venable, 721 F.2d at 300. A plaintiff must serve a defendant within 90 days after the complaint is filed. See Fed. R. Civ. P. 4(m). Ms. Skenandore timely served FIP: she filed her complaint on April 25, 2018 and served defendant on May 15, 2018. Docs. 1, 3. In addition, Ms. Skenandore properly served FIP under the federal rules, which allow service of a corporation “by delivering a copy of the summons and of the complaint to any agent authorized by law to receive service of process.” Fed.R.Civ.P. 4(h)(1)(B). Ms. Skenandore had a process server deliver the summons and complaint to Amber Rose Aparicio, the administrative assistant for FIP's registered agent ISI, Inc. at 321 W. Winnie Lane Ste. 104, Carson City, NV, 89703. Doc. 3 at 2.[1] Thus, Ms. Skenandore properly served FIP under Rule 4.

         The Court may only exercise personal jurisdiction over a non-resident defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located, ” Fed.R.Civ.P. 4(k)(1)(A), and if the exercise of personal jurisdiction comports with the due process clause of the Fourteenth Amendment. United States v. Botefuhr, 309 F.3d 1263, 1271 (10th Cir. 2002). New Mexico's long-arm “statute extends the jurisdictional reach of New Mexico courts as far as constitutionally permissible.” Tercero v. Roman Catholic Diocese, 2002-NMSC-018, ¶ 6, 132 N.M. 312, 316, 48 P.3d 50, 54 (2002). Consequently, the Court “need not conduct a statutory analysis apart from the due process analysis.” Marcus Food Co. v. DiPanfilo, 671 F.3d 1159, 1166 (10th Cir. 2011) (internal citation and quotation omitted).

         The Due Process Clause requires the Court to conduct a two-step analysis of personal jurisdiction. First, the Court must examine whether the non-resident defendant has “minimum contacts” with the forum state. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Second, if the defendant has sufficient contacts, the Court asks whether exercising personal jurisdiction over the defendant is consistent with “traditional notions of fair play and substantial justice.” Id.

         The “minimum contacts” requirement of due process may be met by showing the existence of either general or specific jurisdiction. Trierweiler v. Croxton & Trench Holding Corp., 90 F.3d 1523, 1532 (10th Cir. 1996); see also Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984).

General jurisdiction is based on an out-of-state defendant's “continuous and systematic” contacts with the forum state, . . . and does not require that the claim be related to those contacts. Specific jurisdiction, on the other hand, is premised on something of a quid pro quo: in exchange for “benefitting” from some purposive conduct directed at the forum state, a party is deemed to consent to the exercise of jurisdiction for claims related to those contacts.

Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1078 (10th Cir. 2008) (internal citations omitted). Thus, “[s]uch contacts may give rise to personal jurisdiction over a nonresident defendant either generally, for any lawsuit, or specifically, solely for lawsuits arising out of particular forum-related activities.” Shrader v. Biddinger, 633 F.3d 1235, 1239 (10th Cir. 2011).

         A court may assert specific jurisdiction “if the defendant has purposefully directed its activities at residents of the forum, and the litigation results from alleged injuries that arise out of or relate to those activities.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (internal citations and quotations omitted). In contract cases, the Tenth Circuit has framed this inquiry as “whether the defendant ‘purposefully availed' itself of the privilege of conducting activities or consummating a transaction in the forum state.” Dudnikov, 514 F.3d at 1071. Regardless of how the question is framed, the defendant must have purposely established minimum contacts with the forum state such that it “should reasonably anticipate being haled into court” there. Burger King, 471 U.S. at 474.

         a. Minimum Contacts/Specific Jurisdiction

         Here, FIP “purposefully availed” itself of the privilege of conducting activities and consummating a transaction in New Mexico, such that it is subject to specific jurisdiction in New Mexico.[2] Ms. Skenandore is a resident of New Mexico who searched the internet for “loans” and found FIP's website. Doc. 1 ¶¶ 6, 18, 19.[3] She completed an online application for a $1000 loan. Id. ¶ 20. FIP asked Ms. Skenandore for information about her pension with the New Mexico Educational Retirement Board and for the account and routing numbers for her New Mexico bank account. Id. ¶¶ 16, 21, 22, 24. As a condition for the loan, FIP required Ms. Skenandore to preauthorize electronic funds transfer payments from her New Mexico bank account. Id. ¶¶ 23, 24. FIP's website instructed Ms. Skenandore to call FIP, which she did. Id. ¶¶ 25, 26. She also faxed FIP a copy of her driver's license and provided an electronic signature. Id. ¶ 30. FIP did not provide Ms. Skenandore with any documents when the transaction was consummated. Id. ¶ 31. FIP deposited the loan into Ms. Skenandore's New Mexico bank account, and withdrew payments from the same. Id. ¶¶ 32, 33. Through these activities, FIP purposefully directed its activities toward a resident of New Mexico, and it reasonably could have anticipated being haled into court here.

Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are “purposefully directed” toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.

Burger King, 471 U.S. at 476.

         In Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1124 (W.D. Pa. 1997), the court explained its approach as follows:

[T]he likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet. This sliding scale is consistent with well developed personal jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper.

         The Tenth Circuit has not taken a definitive position on the Zippo sliding-scale approach.[4]Shrader, 633 F.3d at 1242 n.5. It has, however, cited it with approval. See Quik Payday, Inc. v. Stork, 549 F.3d 1302, 1312 (10th Cir. 2008) (discussing one-to-one commercial exchanges via the Internet and citing with approval Zippo, 952 F.Supp. at 1124) (“Traditionally, when an entity intentionally reaches beyond its boundaries to conduct business with foreign residents, the exercise of specific jurisdiction [by the foreign jurisdiction over that entity] is proper. Different results should not be reached simply because business is conducted over the Internet.”); Soma Med. Int'l v. Standard Chartered Bank, 196 F.3d 1292, 1296 (10th Cir. 1999) (citing Zippo for the “the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet”); see also Villanueva v. Account Discovery Systems, LLC, 77 F.Supp.3d 1058, 1069 (D. Colo. 2015) (finding that an out-of-state third-party debt collector's withdrawal of debt payments from a Colorado bank account over a period of nine months established general-not just specific-jurisdiction in Colorado).

         b. Traditional Notions of Fair Play and Substantial Justice

         The Court also finds that exercising jurisdiction over FIP does not offend “traditional notions of fair play and substantial justice.” Int'l Shoe, 326 U.S. at 316. In considering these notions, courts evaluate the following factors:

(1) the burden on the defendant, (2) the forum state's interests in resolving the dispute, (3) the plaintiff's interest in receiving convenient and effectual relief, (4) the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and (5) the shared interest of the several states [or foreign nations] in furthering fundamental social policies.

Dudnikov, 514 F.3d at 1080 (internal citation and quotation omitted). The Court addresses each of these factors in turn. First, the Court's exercise of jurisdiction over FIP would not create an undue burden on FIP. “[I]t is only in highly unusual cases that inconvenience will rise to a level of constitutional concern. . . . [I]n this age of instant communication, . . . and modern transportation, the burdens of litigating in a distant forum have lessened.” Peay v. BellSouth Med. Assistance Plan, 205 F.3d 1206, 1212-13 (10th Cir. 2000) (internal citations and quotations omitted). Requiring FIP to travel from Nevada to defend this action in New Mexico would not create an undue burden.

         Second, “[s]tates have an important interest in providing a forum in which their residents can seek redress for injuries caused by out-of-state actors.” OMI Holdings, Inc. v. Royal Ins. Co. of Canada, 149 F.3d 1086, 1096 (10th Cir. 1998). Here, Ms. Skenandore lives in New Mexico, she entered into the contract in New Mexico, her bank account is in New Mexico, and FIP electronically withdrew funds from her bank account located in New Mexico. Accordingly, New Mexico has an interest in providing a forum for Ms. Skenandore to seek redress for her alleged injuries.

         The third factor “hinges on whether the [p]laintiff may receive convenient and effective relief in another forum, ” Benton v. Cameco Corp., 375 F.3d 1070, 1079 (10th Cir. 2004), and the fourth factor asks “whether the forum state is the most efficient place to litigate the dispute, ” id. at 1080 (internal quotations and citation omitted). In this case, Ms. Skenandore could receive effective, albeit less convenient, relief in Nevada. However, New Mexico is the most efficient forum to litigate this dispute because Ms. Skenandore resides in New Mexico, she entered into the contract in New Mexico, and FIP is out of state and has not responded to Ms. Skenandore's complaint or to her motion for default judgment. Therefore, the third and fourth factors weigh in favor of exercising personal jurisdiction over FIP in New Mexico.

         The fifth factor “focuses on whether the exercise of personal jurisdiction by [the forum] affects the substantive social policy interests of other states.” Id. As discussed further below, the TILA, the EFTA, and the UPA are all designed to protect individual consumers. Exercising personal jurisdiction over FIP where the individual consumer was injured furthers the policy interests of all states. Thus, after considering all the relevant factors, the Court finds that exercising jurisdiction over FIP does not offend “traditional notions of fair play and substantial justice, ” and the Court may exercise personal jurisdiction over FIP as a non-resident defendant. The Court has both subject matter and personal jurisdiction to enter default judgment against FIP.

         B. Allegations in the Complaint

         Having concluded that it has the power to enter a default judgment, the Court next must determine whether the well-pled allegations of the Complaint, if true, state a claim for relief. See 10A Alan C. Wright & Arthur R. Miller, Federal Practice and Procedure Civil, Rule 55 § 2688.1 (4th ed. 2018); Dallas Buyers Club, LLC v. Cordova, 81 F.Supp.3d 1025, 1032 (D. Colo. 2015). The Court accepts as true all well-pled allegations in the complaint. See Craighead, 176 Fed.Appx. at 924 (“The defendant by his default, admits the plaintiff's well-pleaded allegations of fact, is concluded on those facts by the judgment, and is barred from contesting on appeal the facts thus established.”). The Court also accepts as undisputed any facts set forth by the moving party in affidavits and exhibits. Dallas Buyers Club, 81 F.Supp.3d at 1032.

         a. Violations of the TILA

         One of the purposes of the TILA is to “assure a meaningful disclosure of credit terms . . . to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601(a). Congress enacted the TILA “to aid unsophisticated consumers and to prevent creditors from misleading consumers as to the actual costs of financing.” In re Ramirez, 329 B.R. 727, 731 (D. Kan. 2005). The TILA sets forth rules for disclosure of uniform terms in credit transactions between “creditors” and “consumers.” The TILA defines a “creditor” as

a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of ...

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