Griffith v. Educap Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

NATASHA GRIFFITH,

Plaintiff,
v.
No. 16-cv-1541 (DLF)
EDUCAP, INC.,

Defendant.

MEMORANDUM OPINION

Before the Court are the parties’ cross-motions for summary judgment, see Griffith’s

Mot., Dkt. 38; EduCap’s Cross-Mot., Dkt. 41, and their supplemental briefing on the basis for

this Court’s jurisdiction, see EduCap’s Suppl. Br., Dkt. 47; Griffith’s Suppl. Br., Dkt. 48. For

the reasons that follow, the Court will dismiss the case without prejudice for lack of jurisdiction

and deny the cross-motions for summary judgment as moot.

I. BACKGROUND

According to plaintiff Natasha Griffith, HSBC Bank extended a student loan to Robert

Blocker on February 13, 2007, and Griffith co-signed the loan so that Blocker could attend

Bowie State University. Third Am. Compl. ¶¶ 5, 25–26, Dkt. 23. When Blocker eventually

defaulted, defendant EduCap, Inc., a student loan servicer, filed a debt collection action against

Griffith in D.C. Superior Court. Id. ¶¶ 28–29, 31. The complaint in that action identified the

plaintiff as “EDUCAP Inc. on behalf of HSBC Bank USA, National Association.” Id. ¶ 29; see

also Griffith’s Mot. Attach. 3 (Verified Compl.) at 1, Dkt. 38-3.

On May 26, 2015, the D.C. Superior Court granted EduCap’s motion for summary

judgment and entered judgment against Griffith in the amount of $24,855.80, plus interest and
certain attorney fees. May 26, 2015 Order & J. at 9–10, Dkt. 41-7. In the course of that ruling,

the Superior Court rejected one of Griffith’s several arguments: that “Edu[C]ap [was] not the real

party in interest and only HSBC ha[d] the right to file suit against her.” Id. at 4.

In February 2016, however, the D.C. Court of Appeals reversed the grant of summary

judgment on EduCap’s monetary claims because EduCap was not the real party in interest, and

only the real party in interest—here, HSBC—may sue to enforce a substantive right. Griffith’s

Mot. Attach. 3 (Feb. 24, 2016 Mem. Op. & J.) at 96–97. It then remanded “for the trial court to

exercise the responsibility entrusted to it by [Federal Rule of Civil Procedure] 17(a), namely to

allow ‘a reasonable time for ratification of commencement of the action by, or joinder or

substitution of, the real party in interest,’ HSBC.” Id. at 97 (quoting Fed. R. Civ. P. 17(a)(3)).

On remand, the trial court accepted the invitation to substitute HSBC, reasoning that

there was no evidence of bad faith or “willful waiver of a fair opportunity to join” HSBC and

that Griffith had “not made compelling arguments as to whether HSBC’s substitution would

prejudice her case.” July 11, 2016 Order at 5, Dkt. 41-8. It explained that “the underlying facts,

law, and loan instruments w[ould] remain the same, whether Edu[C]ap or HSBC prosecute[d]

the claim.” Id. But it refused to grant summary judgment in favor of HSBC, on the ground that

Griffith would be prejudiced if she were denied an opportunity to obtain discovery against the

bank. Id. at 5–6. HSBC then continued to prosecute its claims for nine months before it

dismissed the action with Griffith’s consent. See Griffith’s Mot. Attach. 3 (Apr. 20, 2017 Order)

at 100.

Meanwhile, Griffith sued EduCap, Weinstock, Friedman & Friedman, and HSBC in this

Court for violations of the federal Fair Debt Collection Practices Act, violations of the D.C. Debt

Collection Law (DCDCL), abuse of process, and malicious prosecution. Third Am.

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Compl. ¶¶ 50–87. Among other things, she alleged that “EduCap ha[d] been filing thousands of

debt collection lawsuits across the country falsely claiming to be the real party in interest by

suing ‘on behalf of HSBC Bank USA, N.A.,’” id. ¶ 23, and that it “willfully engag[ed] in unfair

or unconscionable conduct to collect [Griffith’s] debt in filing suit falsely claiming Griffith

‘entered into a written promissory note with EduCap.’” id. ¶ 70. In support of this Court’s

jurisdiction, she alleged that the federal claim provided federal question jurisdiction and that the

Court also had diversity jurisdiction because there was complete diversity of citizenship and the

amount in controversy exceeded $75,000. Id. ¶¶ 1–2.

The parties have submitted several rounds of briefing since Griffith filed her third

amended complaint. 1 In response to a motion to dismiss, this Court dismissed all but the

DCDCL claim against EduCap. See Sept. 10, 2018 Order, Dkt. 36. Within a week, Griffith

moved for summary judgment without seeking discovery. See Griffith’s Mot.; see also Joint

Case Mgmt. Report at 2, Dkt. 42 (“The parties agree that discovery should not commence until

the Court issues its ruling on the parties’ cross-motions for summary judgment.”). EduCap then

timely filed an opposition and cross-motion for summary judgment. See EduCap’s Cross-Mot.

And after reviewing the parties’ submissions, the Court sua sponte ordered supplemental briefing

“addressing whether the Court has jurisdiction over the sole remaining claim in this action” and,

to the extent the parties maintain that the Court has diversity jurisdiction, explaining “with

specificity how the amount in controversy exceeds $75,000.” Sept. 6, 2019 Minute Order. The

parties have since provided that supplemental briefing. See EduCap’s Suppl. Br.; Griffith’s

Suppl. Br.

1
On December 5, 2017, this case was transferred to the undersigned.
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II. LEGAL STANDARD

Federal district courts are courts of limited jurisdiction, and it is “presumed that a cause

lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375,

377 (1994). The plaintiff therefore bears the burden of establishing jurisdiction. Id.; see also

Spokeo v. Robins, 136 S. Ct. 1540, 1547 (2016). Moreover, “because it involves a court’s power

to hear a case,” subject matter jurisdiction “can never be forfeited or waived.” Arbaugh v. Y&H

Corp., 546 U.S. 500, 514 (2006) (internal quotation marks omitted). To the contrary, courts have

“an independent obligation to determine whether subject-matter jurisdiction exists, even in the

absence of a challenge from any party.” Id.; see also Gonzalez v. Thaler, 565 U.S. 134, 141

(2012) (“When a requirement goes to subject-matter jurisdiction, courts are obligated to consider

sua sponte issues that the parties have disclaimed or have not presented.” (italics omitted)). And

if a court “determines at any time that it lacks subject-matter jurisdiction, the court must dismiss

the action” under Federal Rule of Civil Procedure 12(h)(3).

III. ANALYSIS

Both parties maintain that the Court may exercise jurisdiction over this case, but they

disagree on the basis of that jurisdiction. Griffith argues that the Court has diversity jurisdiction.

See Griffith’s Suppl. Br. at 2–5. EduCap argues that the amount in controversy does not permit

diversity jurisdiction, but it contends that the Court should nevertheless exercise supplemental

jurisdiction based on the now-dismissed federal claim. See EduCap’s Suppl. Br. at 2–3. The

Court concludes that it does not have diversity jurisdiction, and it declines to exercise

supplemental jurisdiction.

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 A. Diversity Jurisdiction

Under 28 U.S.C. § 1332(a), district courts “have original jurisdiction of all civil actions

where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and

costs, and is between . . . citizens of different States.” With respect to the amount-in-controversy

requirement, “the sum claimed by the plaintiff controls if the claim is apparently made in good

faith.” St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (footnote

omitted). “But if, from the face of the pleadings, it is apparent, to a legal certainty, that the

plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like

certainty that the plaintiff never was entitled to recover that amount,” the court must dismiss the

suit. Id. at 289. The D.C. Circuit has explained that, although the “legal certainty” standard is

forgiving, “the burden of establishing the amount in controversy . . . rests squarely with the

litigant asserting jurisdiction.” Martin v. Gibson, 723 F.2d 989, 991 (D.C. Cir. 1983); see also

King v. Morton, 520 F.2d 1140, 1145 (D.C. Cir. 1975) (“The burden of establishing the amount

in controversy is on the person claiming jurisdiction, and the district court may question at any

time whether the jurisdictional amount has been shown.”). And if the plaintiff’s claimed sum is

“disputed by his opponent or by the court sua sponte,” it is the plaintiff’s burden to establish with

evidence “that it does not appear to a legal certainty that the claim is for less than the

jurisdictional amount.” Payne v. Gov’t of D.C., 559 F.2d 809, 820 & n.59 (D.C. Cir. 1977)

(opinion of Robinson, J.) (footnote omitted); see also Rosenboro v. Kim, 994 F.2d 13, 18 (D.C.

Cir. 1993) (the plaintiff must “produce evidence supporting a legal uncertainty about whether she

could prove [the claimed damages]”); McQueen v. Woodstream Corp., 672 F. Supp. 2d 84, 91

(D.D.C. 2009) (“The court lacks subject matter jurisdiction if it is highly improbable that the

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amount in controversy could exceed the jurisdictional threshold, and when the plaintiff submits

no evidence to the contrary.” (internal quotation marks omitted)).

Griffith argues that she is entitled to more than $75,000 in (1) compensatory damages

based on the attorney fees expended to defend the D.C. debt collection lawsuit and (2) punitive

damages. Griffith’s Suppl. Br. at 2–4. These damages, both separately and cumulatively, fail to

satisfy the $75,000 amount-in-controversy requirement.

First, Griffith has not shown that she can recover the attorney fees as damages for the

alleged DCDCL violations. Griffith alleges violations of several DCDCL provisions, all of

which derive from a single misdeed: EduCap’s improper assertion that it was the real party in

interest to collect on a defaulted loan owed to HSBC. See Third Am. Compl. ¶¶ 64–70. Each of

the provisions that EduCap allegedly violated also share a common damages provision. Under

D.C. Code § 28-3814(j)(1), “[p]roof, by substantial evidence, that a creditor or debt collector has

wilfully [sic] violated any provision of the [statute] shall subject such creditor or debt collector to

liability to any person affected by such violation for all damages proximately caused by the

violation.”

Although the D.C. courts do not appear to have interpreted “proximately caused” in this

context, they have previously defined proximate causation in tort actions as “that cause which, in

natural and continual sequence, unbroken by any efficient intervening cause, produces the injury,

and without which the result would not have occurred.” Convit v. Wilson, 980 A.2d 1104, 1125

(D.C. 2009) (internal quotation marks omitted). And nothing in the text of the DCDCL suggests

a different definition. Cf. United States v. Monzel, 641 F.3d 528, 536 (D.C. Cir. 2011)

(“[N]othing in the text or structure of [18 U.S.C.] § 2259 leads us to conclude that Congress

intended to negate the ordinary requirement of proximate cause.”).

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 To establish proximate causation, Griffith argues that the $91,417.50 in fees she incurred

to defend the underlying debt collection action was “the direct result of Edu[C]ap’s lawsuit

falsely claiming to be the lender and creditor,” and she provides an affidavit and invoice

detailing the fees incurred until HSBC was substituted for EduCap as the real party in interest.

Griffith’s Suppl. Br. at 4; see also id. Ex. A, Dkt. 48-1. The problem is that those fees resulted

from Griffith’s status as a defaulting debtor, not EduCap’s error in pursuing the debt collection

action in its own name. Put differently, Griffith has not shown that, even in the absence of

EduCap’s DCDCL violation, HSBC would not have pursued the debt collection action in its own

name and Griffith would not have incurred the same attorney fees regardless. As the D.C.

Superior Court explained, “the underlying facts, law, and loan instruments [were] the same,” no

matter whether HSBC or EduCap (on behalf of HSBC) prosecuted the action. July 11, 2016

Order at 5. That is why the court permitted the substitution of HSBC for EduCap and allowed

the action to “proceed[] as if it had been originally commenced by the real party in interest.”

Fed. R. Civ. P. 17(a)(3). And that is why HSBC continued to prosecute the action in its own

name for nine months after the Rule 17 substitution. The Court therefore concludes to a legal

certainty that Griffith could not obtain the claimed attorney fees as damages for the alleged

DCDCL violations. Cf. Baylor v. Mitchell Rubenstein & Assocs., 174 F. Supp. 3d 146, 161

(D.D.C. 2016) (“question[ing]” whether a jury could determine that certain emotional damages

were “proximately caused” by various DCDCL violations where the “plaintiff’s own statements

indicate that it was the existence of the debts themselves, combined with the fact that a law firm

had gotten involved, that was causing [her] to suffer emotional distress” (internal quotation

marks omitted)), aff’d in part, rev’d in part, and remanded on other grounds, 857 F.3d 939 (D.C.

Cir. 2017); O’Connor v. Sand Canyon Corp., No. 14-cv-00024, 2015 WL 225423, at *4 (W.D.

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Va. Jan. 16, 2015) (dismissing a fraud claim where it was “speculative at best” that the plaintiff

would have kept her property absent the alleged fraud).

The Court also notes that, even if EduCap’s error could be understood to have

proximately caused Griffith to incur fees litigating the Rule 17 issue, Griffith does not provide

any argument to that effect. In addition, her invoice does not indicate which fees were incurred

for that purpose alone, and it is wholly implausible to suggest that even a majority—let alone

more than $75,000—of the $91,417.50 in fees Griffith claims she incurred in the debt collection

action were attributable to the Rule 17 issue.

Second, Griffith has failed to establish that she may recover punitive damages. “In

applying the legal certainty test where the availability of punitive damages is the sine qua non of

federal jurisdiction[,] the District Court should scrutinize the punitive damage claim to ensure

that it has at least a colorable basis in law and fact.” Kahal v. J. W. Wilson & Assocs., 673 F.2d

547, 549 (D.C. Cir. 1982). “Liberal pleading rules are not a license for plaintiffs to shoehorn

essentially local actions into federal court through extravagant or invalid punitive damage

claims.” Id.; see also Hardaway v. Cross State Moving, 729 F. App’x 8, 8 (D.C. Cir. 2018)

(same).

To be sure, the DCDCL authorizes punitive damages for those “affected by a wilful [sic]

violation of the [statute.]” D.C. Code § 28-3814(j)(2). But punitive damages may be awarded

only if there is “a basis in the record for an award of actual damages.” Maxwell v. Gallagher,

709 A.2d 100, 103 (D.C. 1998). And as discussed, Griffith has not established that EduCap’s

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error caused any damages. 2 Thus, the Court concludes to a legal certainty that the amount in

controversy does not exceed $75,000 and diversity jurisdiction does not exist.

B. Supplemental Jurisdiction

When a court lacks diversity jurisdiction, it may still exercise supplemental jurisdiction

over certain state-law claims “that are so related to claims in the action within [a court’s] original

jurisdiction that they form part of the same case or controversy.” 28 U.S.C. § 1367(a). But

“[w]hether to retain jurisdiction over pendent state and common law claims after the dismissal of

the federal claims is a matter left to the sound discretion of the district court.” Shekoyan v. Sibley

Int’l, 409 F.3d 414, 423 (D.C. Cir. 2005) (internal quotation marks omitted); see also id.

(“Pendent jurisdiction is a doctrine of discretion, not a plaintiff’s right.” (alteration adopted and

internal quotation marks omitted)). And “[i]n the usual case in which all federal-law claims are

dismissed before trial, the balance of factors to be considered under the pendent jurisdiction

doctrine—judicial economy, convenience, fairness, and comity—will point toward declining to

exercise jurisdiction over the remaining state-law claims.” Id. at 424 (internal quotation marks

omitted).

2
Indeed, Griffith’s failure to establish any entitlement to compensatory damages is why
Pietrangelo v. Refresh Club, Inc., No. 18-cv-1943, 2019 WL 2357379, at *7–8 (D.D.C. June 4,
2019), and Portfolio Recovery Assocs. v. Mejia, No. 1216-cv-34184, at 8 (Mo. Cir. Ct. Nov. 4,
2015)—the cases on which Griffith relies, see Griffith’s Suppl. Br. at 4—are inapposite. In both
cases, the plaintiff, unlike Griffith, had established his or her entitlement to substantial
compensatory damages. The Court also notes that, even if Griffith had established her
entitlement to some small amount of compensatory damages, it is highly improbable that the
Court could constitutionally award sufficient punitive damages to clear the $75,000 threshold.
See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (explaining that,
although there is no “bright-line ratio which a punitive damages award cannot exceed,” “an
award of more than four times the amount of compensatory damages might be close to the line of
constitutional impropriety”); see also Ham v. TJX Cos., No. 17-cv-01463, 2018 WL 1143156, at
*3 (D.D.C. Mar. 2, 2018) (citing State Farm and concluding that “even the inclusion of a
generous punitive damages [award] does not get Plaintiff to the amount-in-controversy
requirement”).

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 This case is not so exceptional that supplemental jurisdiction remains appropriate after

the dismissal of the only federal claim. The case is still in its early stages, and the parties have

yet to engage in any discovery. See Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988)

(dismissal appropriate “when the federal-law claims have dropped out of the lawsuit in its early

stages and only state-law claims remain”); Shekoyan, 409 F.3d at 424 (same even though “the

litigation proceeded for four years in the district court prior to the dismissal of the last of [the

plaintiff’s] federal claims”). Moreover, the D.C. courts, which have resolved the Rule 17 issue

and presided over the underlying debt collection action, have familiarity with this case and are

well-equipped to decide the novel questions of local law at issue here—including the definition

of willful in the DCDCL. See EduCap’s Br. at 14, Dkt. 41-1. In these circumstances, exercising

supplemental jurisdiction would be inappropriate. See Araya v. JPMorgan Chase Bank, N.A.,

775 F.3d 409, 417 (D.C. Cir. 2014) (“[W]e have repeatedly held that a district court abuses its

discretion when it maintains jurisdiction over a removed case presenting unsettled issues of state

law after the federal claims have been dismissed.”).

CONCLUSION

For these reasons, the Court dismisses this case without prejudice for lack of jurisdiction

and denies the parties’ cross-motions for summary judgment as moot.

________________________
DABNEY L. FRIEDRICH
United States District Judge
September 27, 2019

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