A District Court judge in Michigan has denied a defendant’s motion to dismiss and stayed a case in which the defendant is accused of violating the Fair Debt Collection Practices Act and state law in Michigan while a state court determines whether or not the underlying debt is for personal or business reasons.
The background: Back in 2021, the plaintiff attempted to purchase an automobile. She made a down payment on the car, but the financing for the remainder of the purchase fell through. Rather than be offered alternative financing options, the dealership retained the defendant to collect on the debt.
- A representative of the defendant contacted the plaintiff and the plaintiff said the representative made “several” false representations in those communications.
- The defendant filed a suit in state court to repossess the vehicle, which was denied. The plaintiff filed a counter-complaint, alleging the defendant violated Michigan state law. That suit was dismissed because the laws that were allegedly violated dealt only with consumer debts and the court found that the plaintiff purchased the vehicle for business purposes.
- The plaintiff has appealed that ruling to the Michigan Court of Appeals, arguing that the vehicle is being used for personal reasons, even though the contract between the plaintiff and the dealership stated the vehicle was being purchased for business use, that the plaintiff purchased the vehicle with a business loan, that she purchased it jointly with her law firm, obtained business auto insurance, and claimed 100% business use on her tax returns.
- Separately, the plaintiff filed this lawsuit, accusing the defendant of violating state law in Michigan and the FDCPA by misrepresenting the facts related to her debt and using oppressive and abusive methods to collect on it.
The ruling: In denying the motion to dismiss, Judge Laurie J. Michelson of the District Court for the Eastern District of Michigan found that the current record did not conclusively establish whether the debt was for personal or business purposes. The judge noted that this fundamental question needs to be resolved before the federal case can proceed.
- Rather than dismiss the case outright, Judge Michelson opted to stay the federal proceedings pending the resolution of this issue in state court.
- She emphasized that staying the case, rather than dismissing it, better serves judicial efficiency and protects the plaintiff’s interests. This approach ensures that if the state court determines the debt was for personal purposes, the plaintiff can proceed with their FDCPA claims without having to refile the case.
