ORDER ON MOTION TO DISMISS
PRATT, Chief Judge.
Before the Court is Defendants, Palisades Collection, LLC ("Palisades") and Brumbaugh & Quandahl, P.C.'s ("Brumbaugh") (collectively "Defendants") Motion to Dismiss, filed on May 9, 2007. Clerk's No. 9. Plaintiff, Nancy Hogue ("Hogue") filed a Resistance on May 31, 2007. Clerk's No. 13. Hogue requested oral argument, however, the Court finds that such argument would' not materially aid the resolution of this motion. Accordingly, the matter is fully submitted.
The facts of this case are not in dispute. Hogue, a low income, elderly woman, had a credit card account with Chase Manhattan Bank with an outstanding balance of $8,443.28. See Compl. ¶¶ 7, 8; Defs.' Br. at 1; Pl.'s Resistance at 4. Chase Manhattan Bank assigned Hogue's account to Palisades, a collections agency. See Compl. ¶¶ 5, 7. After failed attempts to collect the outstanding balance from Hogue, Palisades employed the legal services of Brumbaugh, a law firm regularly engaged in the business of collecting debts on behalf of their clients. See id. ¶ 4; Defs.' Br. at 1. On or about October 16, 2006, Brumbaugh, on behalf of Palisades, filed a petition in Union County District Court seeking judgment in the amount of $8,443.28. Compl. ¶ 8. On or about October 24, 2006, Bill Nassif ("Mr.Nassif'), Iowa Legal Aid attorney, affiliated with the Legal Hotline for Older Iowans, wrote a letter to Brumbaugh and Palisades stating that he represented Hogue in this matter, and informed Defendants that Hogue's "income was exempt from collections." Defs.' Br. at 2; Compl. ¶ 9; see Pl.'s Resistance at 2-3. Along with the letter, Mr. Nassif included Hogue's sworn affidavit which stated that "her sole source of income was Social Security
Regardless, after Hogue failed to Answer the Petition, a default judgment was entered against Hogue for the amount of $8,443.28, plus costs and interest, on or about January 23, 2007. Compl. ¶ 10; Defs.' Br. at 2.
II. STANDARD OF REVIEW
In addressing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), this Court must follow the new standard of review articulated by the United States Supreme Court in Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court determined that the standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), "that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief[,]" has "earned its retirement." Twombly, 127 S.Ct. at 1968, 1969. The Supreme Court held that a viable complaint must now include "enough facts to state a claim to relief that is plausible on its face." Id. at 1974. That is, "[f]actual allegations must be enough to raise a right to relief above the speculative level. . . ." Id. at 1965. The new standard is not a "heightened fact pleading" requirement, but "simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [the claim]." Id. at 1965, 1974.
Under Twombly, as was the case under Conley, the complaint must be liberally construed in the light most favorable to the plaintiff and should not be dismissed simply because the court is doubtful that the plaintiff will be able to prove all of the necessary factual allegations. See id. at 1964-65; Parnes v. Gateway 2000, Inc.,
III. LAW AND ANALYSIS
In her four count Complaint, Hogue alleges that Defendants' actions constituted a violation of the federal Fair Debt Collection Practices Act, the Iowa Debt Collection Practices Act, the Iowa Consumer Credit Code, and the common law tort of abuse of process. The Court will address each in turn.
A. Fair Debt Collection Practices Act
Congress enacted the Fair Debt Collection Practices Act ("FDCPA") "in order to stop the use of abusive, deceptive and unfair debt collection practices by many debt collectors.'" Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir.2001) (quoting 15 U.S.C. § 1692(a)). The purpose of the FDCPA is to "eliminate abusive debt collection practices by debt collectors . . . and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). Commentators have noted the need to rigorously enforce consumer protections laws, such as the FDCPA, to protect elderly consumers as "[a]verage credit card debt for Americans between the ages of sixty-five and sixty-nine rose a staggering 217% between 1991 and 2001. . . ." Deanne Loonin & Elizabeth Renuart, The Middle-Class Crunch: The Life & Debt Cycle: The Growing Debt Burdens of Older Consumers and Related Policy Recommendations, 44 Harv. J. on Legis. 167, 168, 193 (2007). Here, Hogue argues that Defendants' garnishment of her bank account, which Defendants knew only contained exempt Social Security funds, amounted to unfair or unconscionable collection practices in violation of the FDCPA. See 15 U.S.C. § 1692f (stating that the use of unfair or unconscionable collection methods is prohibited by the FDCPA). Defendants, however, contend that their garnishment action was not unfair or unconscionable because they followed Iowa's execution
While garnishment in aid of execution is provided for in Iowa Code § 626.26, the garnishment of Social Security payments is prohibited by federal law. Specifically, the Social Security Act provides:
42 U.S.C. § 407(a) (emphasis added). Iowa law also provides that, "[a] debtor . . . may hold exempt from execution . . . [t]he debtor's rights in . . . social security benefit[s]. . . ." Iowa Code § 627.6(8)(a). Even with these safeguards, however, Brumbaugh managed to garnish Hogue's bank account comprised entirely of Social
First, Iowa law does not prohibit judgment creditors from "ascertain[ing] what a judgment debtor's assets are unless [the judgment creditor] attempt[s] to execute or garnish a judgment debtor." Id. at 5. There are numerous other options available to judgment creditors in Iowa seeking to "ascertain" a judgment debtor' assets. For example, there is nothing in Iowa law which prohibits Brumbaugh from contacting Mr. Nassif to inquire further into Rogue's source(s) ` of income. Indeed, the "independent verification" that ultimately prompted Brumbaugh to relinquish the garnishment came not from Hogue's bank, but rather from Mr. Nassif. After discovering that Hogue's bank account had been garnished, Mr. Nassif wrote a second letter to Brumbaugh and enclosed Hogue's bank account statements to demonstrate that the only source of deposits was from Social Security. Here, Mr. Nassif, as a source of information, was just as effective, if not more so, than any information the bank may have provided. Thus, Defendants' argument that the garnishment proceeding was the only method to ascertain Hogue's assets seems disingenuous at best, given that Defendants obtained the necessary verification from Mr. Nassif, not from Hogue's bank.
Second, Defendants' contend that Iowa law required them to institute a garnishment proceeding prior to seeking a debtor's examination to determine the exempt status of Hogue's funds. Defendants cite to Wilson v. Business and Professional Credit Management of Kearney, Inc., No. CV85-L-709, 1986 U.S. Dist. LEXIS 31002, at *1 (D.Ne. Aug. 26, 1986) (applying Nebraska law), for support. In Wilson, plaintiffs (judgment debtors), alleged violation of the FDCPA after Business and Professional Credit Management of Kearney, Inc. ("BPCM"), the judgment creditor, twice garnished the plaintiffs' bank account, even though the account only contained exempt Social Security funds. See 1986 U.S. Dist. LEXIS 31002, at *8. In Wilson, plaintiffs argued that BPCM should have initiated a debtor's exam rather than garnish the exempt funds to verify the exempt status of the funds. See id. at *6-7. Although the Wilson court disapproved of BPCM's actions, the court held that BPCM's garnishment of exempt funds did not violate the FDCPA. Id. at *17. The Wilson court explained that the first garnishment did not violate the FDCPA because BPCM "could not be certain that there were no exempt funds in the joint checking account prior to a resolution of the garnishment action. . . ." Id. at *14. The Wilson court noted that, under the Nebraska statute, the debtor's exam did not become available until after the first garnishment was quashed. Id. (citing Neb.Rev.Stat. § 25-1565).
Wilson, however, is factually and procedurally distinguishable from this case. In Wilson, plaintiffs did not provide BPCM with a sworn affidavit stating that the bank account only contained exempt funds. Rather, plaintiffs argued that BPCM had ample notice that the funds were exempt because plaintiffs informed BPCM that Mr. Wilson was disabled, that Social Security was their only income, and provided hospital outpatient summary forms from 1982 and 1983 which indicated that Mr. Wilson was disabled. Id. at *6. These types of assertions are more akin to the unsubstantiated contentions that Defendants fear would "remove the need for litigation altogether because anytime opposing counsel or the defendant claimed the defendant `didn't do it,' or in this case `judgment proof,' would simply resolve any dispute, because the defendant has stated it to be true." Defs.' Br. at 8. That is, in Wilson, BPCM had nothing other than plaintiffs' say so that the funds were exempt. Here, however, Hogue who was represented by counsel, provided a sworn affidavit to Defendants, swearing that Social Security was the only source of her income.
Additionally, Wilson was tried before the court, and the court found that BPCM could not be certain that no exempt funds were in the bank account prior to the first garnishment, and also that BPCM had a basis for believing that nonexempt funds were deposited in the account before issuing the second garnishment. See 1986 U.S. Dist. LEXIS 31002, at *1, 14-15. However, on a motion to dismiss, the Court must take the allegations in Hogue's Complaint as true and draw all reasonable inferences in favor of Hogue. Here, Hogue alleges that "Defendants knew [her] bank account held only exempt funds and that she was claiming that exemption," yet Defendants proceeded to garnish her account. Compl. ¶ 11. Thus, the Court finds Wilson unpersuasive in this procedural context.
Furthermore, there is no indication that Brumbaugh garnished Hogue's account in an effort to seek a debtor's exam. In any event, the Court looks to Iowa law to determine if Defendants' contention that a judgment creditor in Iowa must first garnish an account before it can seek a debtor's exam has merit. The Iowa statute concerning debtor's exam provides:
Iowa Code § 630.1 (emphasis added). Although the Court was unable to find Iowa case law directly on point, it appears that, as a general procedural matter, judgment creditors typically seek a debtor's exam after an execution against the property of a judgment debtor is returned unsatisfied. See generally Mason City Prod. Credit Ass'n v. Van Duzer, 376 N.W.2d 882, 887 (Iowa 1985); Farmers Coop. Elevator Co. v. Knapp, 259 N.W.2d 762, 765 (Iowa 1977); Eikenbury v. Edwards, 67 Iowa 619, 25 N.W. 832, 832 (1885).
However, the Court finds it difficult to believe that Iowa Code § 630.1 necessarily prevents a judgment creditor from filing a petition to seek a debtor's exam prior to an unsatisfied return on the garnishment,
The information provided to Defendants prior to the garnishment were not merely "claims" by Hogue or Mr. Nassif, as Defendants suggest. See Defs.' Br. at 8. Rather, it was a sworn affidavit, signed under oath (and possibly under penalty of perjury)
Dealing in an adversarial system, Defendants must engage in due diligence, however, they must also take time to stop and think. Given the specific facts of this case, Defendants were not only left with the garnishment proceeding to verify Hogue's statements. It is difficult to believe, as Defendants suggest, that the Iowa Legislature tied the hands of judgment creditors, forcing them to garnish bank accounts containing only exempt Social Security funds to ascertain hypothetical possibilities that the judgment debtor "could have recently received [non-exempt] money through gifts, winnings or another windfall." See Defs.' Br. at 7. Accordingly, taking Hogue's factual allegations as true, Hogue has stated a claim upon which relief can be granted. Therefore Defendants' motion to dismiss Hogue's FDCPA claim is denied.
B. Iowa Fair Debt Collection Practices Act
The Iowa Debt Collection Practices Act ("IDCPA") was modeled after the Model Consumer Credit Act as a "significant attempt to remedy debt collection abuses." William A. Reilly II, Debt Collection Practices: Iowa Remedies for Abuse of Debtors' Rights, 68 Iowa L.Rev. 753, 772 (1983). The IDCPA provides:
Iowa Code § 537.7103(1)(f). Defendants state that because Hogue's IDCPA claim is premised on the violation of the FDCPA, the FDCPA claim is outcome determinative of the IDCPA claim. See Defs.' Br. at 4. However, Hogue states that Defendants violated the IDCPA by taking action prohibited by the Social Security Act, 15 U.S.C. § 407(a). See Pl.'s Resistance at 18. Regardless of whether Hogue's IDCPA claim is based upon a violation of the FDCPA or the Social Security Act, Hogue has stated a claim upon which relief can be granted. Iowa cases provide some guidance as to whether Defendants' actions would constitute a violation of the IDCPA. In Monahan Loan Serv., Inc. v. Janssen, 349 N.W.2d 752 (Iowa 1984), the Supreme Court of Iowa held that filing a consumer credit action in the wrong county constituted an unfair debt collection practice under the IDCPA. See 349 N.W.2d at 754. The Monahan court explained that, because § 537.5113 required suits to be brought in the county where the debtor resides, the debt collector violated § 537.7103(1)(f) when it filed suit in the wrong county. See id. The Supreme Court of Iowa rejected the debt collector's contention that "this was not . . . the type [of violation] for which penalties and attorney fees [could] be awarded[,]"
C. Iowa Consumer Credit Code
The Iowa Consumer Credit Code (the "ICCC") governs all consumer transactions in Iowa, including collection or enforcement of transactions, without regard to where a transaction is entered or modified. See Midwest Check Cashing, Inc. v. Richey, 728 N.W.2d 396, 399 (Iowa 2007) (quoting Iowa Code § 537.1201(1)(c)). The ICCC, patterned on the Uniform Consumer Credit Code, was enacted to "broadly  protect consumers in relatively small credit transactions." Equilease Corp. v. Smith, 405 N.W.2d 803, 805 (Iowa 1987). Thus, the ICCC "shall be liberally construed and applied" to "[p]rotect consumers against unfair practices by . . . collectors of consumer credit. . . ." Iowa Code § 537.1102(1), (2)(d). Hogue alleges that Defendants' actions were unconscionable, in violation of the ICCC § 537.5108(2). Section 537.5108(2) provides:
Moreover, subsection 5 notes, "[i]n applying subsection 2, violations of section 537.7103 [the IDCPA] shall be Considered, among other factors, as applicable." Iowa Code § 537.5108(5). In addition to § 537.7103 violations, "Iowa courts have considered as factors unfair surprise, lack of notice, disparity of bargaining power and substantive unfairness." Besta v. Beneficial Loan Co. of Iowa, 855 F.2d 532, 535 (8th Cir.1988) (citing Home Fed. Says. & Loan Ass'n of Algona, Iowa v. Campney, 357 N.W.2d 613, 618 (Iowa 1984)). Here, taking all of Hogue's allegations as true and drawing all inferences in favor of Hogue, she has stated a claim upon which relief can be granted. Defendants' action in knowingly garnishing Hogue's exempt Social Security funds can be considered unconscionable under the ICCC. Moreover, the fact that Defendants' actions may have also violated the IDCPA lends further support to the contention that Defendants could have violated § 537.5108(2). See Iowa Code § 537.5108(5). Accordingly, Defendants' motion to dismiss Hogue's ICCC claim is denied.
D. Abuse of Process
The Iowa Supreme Court has explained that "[a]buse of process is the use of the legal process, whether criminal or civil, against another primarily to accomplish a purpose for which it was not designed.'" Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 398 (Iowa 2001) (quoting Fuller v. Local Union No. 106 of United Bhd. of Carpenters & Joiners of Am., 567 N.W.2d 419, 421 (Iowa 1997)). Thus, "Mlle essence of this tort is an improper purpose for using the legal process." Fuller, 567 N.W.2d at 421. "Normally the improper purpose sought is an attempt to secure from another some collateral advantage not properly includable in the process itself. This amounts to a form of extortion in which a lawfully used process is perverted
The elements of an abuse of process claim are: (1) the use of a legal process; (2) its use in an improper or unauthorized manner; and (3) resulting damages. Thomas v. Marion County, 652 N.W.2d 183, 186 (Iowa 2002) (citing Fuller, 567 N.W.2d at 421-22). "The first element can generally be shown by the use of a legal process against the plaintiff." Gibson, 621 N.W.2d at 398 (quoting Wilson v. Hayes, 464 N.W.2d 250, 266 (Iowa 1990)). Here, Defendants' garnishment proceeding is use of a legal proceeding sufficient to meet the first element. The second element, however, is a high burden that requires the showing of an "improper motive in using the legal process." Wilson, 464 N.W.2d at 266; see Thomas, 652 N.W.2d at 183. The plaintiff, then, must show that the defendant "used the legal process primarily for an impermissible or illegal motive." Wilson, 464 N.W.2d at 266. Thus, there is no action for abuse of process when the process "is used for the purpose for which it is intended, but there is an incidental motive of spite or an ulterior purpose of benefit to the defendant." Id. at 267.
In her Complaint, Hogue alleges that "[t]he legal process was used in an improper manner and for the impermissible purpose of attempting to obtain exempt funds." Compl. ¶ 27. Hogue contends that Defendants "knew [her] account held only exempt funds" but nonetheless garnished the account, and that Defendants have "demonstrated a pattern and practice of garnishing funds that it knows, or should know, are exempt." Id. ¶ 11. That is, Defendants used a legal process (garnishment) in an impermissible manner to reach exempt funds prohibited by law, and or impermissibly used a garnishment proceeding as a form of discovery device. See Pl.'s Resistance at 19. The Court cannot conclude that this is not an improper purpose as a matter of Iowa law. Cf. Reis v. Walker, No. 06-2825, 2007 WL 1804391, ¶ 1-2, 2007 U.S.App. LEXIS, at *3-4 (8th Cir. June 25, 2007) (stating that dismissal of abuse of process claim was proper because "coercing a settlement" is not an improper purpose as a matter of Iowa law). Thus, viewing the Complaint in the light most favorable to Hogue, as this Court must on a Rule 12(b)(6) motion, the pleadings contain allegations and supporting facts sufficient to satisfy the second element of the abuse of process. The third and final element for a claim of abuse of process is resulting damages from the improper or unauthorized use of the legal process. Here, as a result of Defendants' garnishment, Hogue was effectively cut off from money essential to her health and well-being. See id. at 4 (noting that "the consequences of [garnishments of Social Security funds] to recipients . . . can be devastating," and adding that "[e]ven recipients who get their funds released are subjected to a myriad of fees such as bank charges, bad check fees, overdraft fees, etc."). Although Hogue refers to the damages caused by garnishment of Social Security funds generally, it is reasonable to infer that the hardships she referred to were experienced by her personally, at least to some degree. As such, Hogue has sufficiently pled damages. Accordingly, Defendants' motion to dismiss Hogue's abuse of process claim is denied.
For the reasons discussed above, Defendants' Motion to Dismiss (Clerk's No. 9) is DENIED.
IT IS SO ORDERED.
In 2004, the statute was amended as follows:
Neb.Rev.Stat. § 25-1565; 2004 Neb. Laws 1207.