Waddell v. Transworld Systems, Inc.

          MEMORANDUM OPINION AND ORDER

          TIMOTHYL L. BROOKS, UNITED STATES DISTRICT JUDGE

         Currently before the Court are two related motions. The first motion is Defendants Transworld Systems, Inc.'s ("Transworld") and Finkelstein, Kern, Steinberg & Cunningham, P.C.'s ("FKSC") motion for Summary Judgment (Doc. 22), and the second is Plaintiffs Alisha and James Waddell's ("the Waddells") Motion for Leave to File an Amended Complaint (Doc. 25). For the reasons explained below, Transworld's and FKSC's Motion for Summary Judgment is GRANTED, and the Waddells' Motion for Leave to File an Amended Complaint is DENIED as futile.

         I. BACKGROUND

         This case arises out of alleged violations of the Fair Debt Collection Practices Act ("FDCPA") and the Arkansas Fair Debt Collection Practices Act ("AFDCPA"), with respect to collection actions filed against the Waddells in state court. The collection actions concerned two student loans, both of which were dispersed in July of 2007. Chase Bank ("Chase") loaned the Waddells $8, 500 ("Loan 1"), and Bank of America loaned them $4, 500 ("Loan 2").^[1]

         In September of 2007, Chase sold and assigned Its right to title to Loan 1 to National Collegiate Funding, LLC ("NCF") as part of a bundled sale. The right to title was subsequently sold and assigned to National Collegiate Trust 2007-3 ("NCT 2007-3"). The Waddells failed to make payments toward the loan. Transworld, the agent and service provider for National Collegiate Trusts ("NCT"), placed Loan 1 with FKSC for collection. FKSC sent the Waddells letters identifying NCT 2007-3 as the creditor for Loan 1 and requested payment. The Waddells contacted FKSC and agreed to a payment plan for Loan 1. The Waddells made payments toward the debt, but eventually stopped making payments.

         On March 23, 2017, FKSC filed a collection suit against the Waddells on behalf of NCT 2007-3 in the Circuit Court for Washington County, Arkansas, captioned National Collegiate Student Loan Trust 2007-3 v. Alisha Waddell and James Waddell, No. 72-cv-1006-1 ("Loan 1 Lawsuit"). The complaint in the Loan 1 Lawsuit attached an affidavit from Transworld employee Dudley Turner and various assignment documents. On July 11, 2017, FKSC voluntarily dismissed the Loan 1 Lawsuit. Plaintiffs now speculate that the Loan 1 Lawsuit was dismissed because FKSC never intended to prosecute it; however, Defendants maintain that they nonsuited the case because the state court denied their request for a continuance.

         On October 25, 2016, FKSC filed a second collection suit against the Waddells, this time concerning Loan 2. Bank of America had sold and assigned its right, title, and interest in Loan 2 to NCF in September 2007. NCF subsequently sold and assigned Loan 2 to National Collegiate Trust 2007-4 ("NCT 2007-4"). The Waddells failed to make required loan payments on Loan 2, and Transworld subsequently placed Loan 2 with FKSC for collection. FKSC then sent the Waddells letters Identifying NCT 2007-4 as the creditor for Loan 2 and requested payment. The Waddells made some payments toward the debt, but eventually stopped making payments.

         FKSC's collection lawsuit concerning Loan 2 was also filed in Washington County Circuit Court in a case captioned National Collegiate Student Loan Trust 2007-4 v. Alisha Waddell andJames Waddell, No. 72-cv-16-2251 ("Loan 2 Lawsuit"). The complaint in the Loan 2 Lawsuit attached an affidavit from Transworld employee Bryan Jackson. Ultimately, FKSC dismissed the Loan 2 Lawsuit on November 28, 2017. Plaintiffs contend that this dismissal also occurred because FKSC never intended to prosecute the lawsuit; but Defendants counter that they took a nonsuit only because their request for a continuance was denied by the state court.

         The Waddells filed the instant lawsuit in this Court on May 22, 2018. They allege that Defendants' attempts to collect on Loans 1 and 2 in state court violated the FDCPA and the AFDCPA. They claim that what happened to the Waddells in state court was "part of a nationwide practice and pattern of suing consumers to collect student loan debt accompanied by false and misleading affidavits and testimony and suing without the intent or ability to prove their claims that the consumers sued owed a student loan debt to one of the National Collegiate Student Loan Trusts." (Doc. 1 at 1).

         On October 31, 2018, Defendants jointly moved for summary judgment, arguing that: (1) the Waddells' claims are time-barred, (2) Transworld's employee affidavits attached to the state court complaints were not deceptive, and (3) the Waddells' speculation that FKSC dismissed the state court suits because they never intended to prosecute them is false, as Defendants possessed the documentation to show that the Waddells actually owed the debts on Loans 1 and 2, and those debts were subject to collection.

         On November 13, 2018, after Defendants moved for summary judgment, Plaintiffs timely moved to amend their complaint. (Doc. 25). The proposed amended complaint asserts all the same causes of action that appear in the original complaint, but adds certain facts related to a lawsuit that was filed in Delaware Chancery Court. That case, which appears to be ongoing, is styled The National Collegiate Master Student Loan Trust /, et al. v. U.S. National Bank Association, et al., No. 2018-0167. The Delaware complaint alleges that the National Collegiate Master Student Loan Trust instructed Transworld to stop filing lawsuits in the name of the Trusts in instances where Transworld could not demonstrate standing to collect on defaulted loans. See Doc. 25-1 at 16-19.^[2]Plaintiffs contend that they are the victims of the same pattern and practice of conduct that is set forth in the Delaware complaint, namely, that Transworld lacked standing to file the Loan 1 and Loan 2 Lawsuits and was directed by the NCT not to file those lawsuits.

         II. LEGAL STANDARD

         The legal standard for summary judgment is soundly established. Federal Rule of Civil Procedure 56(a) notes that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." The Court reviews facts in the light most favorable to the non-moving party, and must give that party the benefit of any inferences that can be deduced from those facts. Canada v. Union Bee. Co., 135 F.3d 1211, 1212-13 (8th Cir.1997). The moving party must demonstrate the absence of a genuine dispute of material fact and that it is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Matsushita Bee. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587 (1986); Nat'l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999).

         Federal Rule of Civil Procedure 15(a)(2) instructs the Court to "freely give leave" to amend a pleading "when justice so requires." However, the Court may deny amendment based on the "futility" of the amended complaint. Becker v. Univ. of Neb. at Omaha, 191 F.3d 904, 908 (8th Cir. 1999) (quoting Brown v. Wallace,957 F.2d 564, 566 (8th Cir. 1992)). An amendment is futile if it would not survive a subsequent ...