District Court (Mo.) Says Auto Lender’s Counter-claim against TCPA Plaintiff Should Be Dismissed As Permissive Rather than Compulsory

Further, permitting the collection of an underlying debt by way of a counterclaim in a plaintiff’s federal TCPA action creates “the risk of a chilling effect” on the plaintiff’s bringing a TCPA action. Graf, 2015 WL 632180, at *6 (“Given the remedial nature of the FDCPA and the broad public policy which it serves, federal courts should be loath to become immersed in the debt collection suits of…the target of the very legislation under which a FDPCA plaintiff states a cause of action.”) (citation omitted).  Indeed, the amount of Riazi’s underlying debt may be small ($16,052.43, plus finance charges, interest, costs, and fees), compared to the amount of damages she seeks under the TCPA ($1,500 for willful violations of the TCPA, with over 200 alleged unlawful telephone calls, plus text messages), but, as stated by the court in Graf, 2015 WL 632180, at *6: “[W]hether the amount owed on an underlying debt is significant enough to deter a potential FDCPA plaintiff if [her] debt collector is permitted to assert a claim for the debt, or so “small” that a plaintiff will move forward with his FDCPA action regardless of whether it will provide a federal forum for his debt collector is entirely subjective. Exercising jurisdiction over [the defendant’s] counterclaims on the ground that the amount of the alleged underlying debt is minimal in the eyes of [the defendant], or the Court for that matter, plainly undermines the remedial purpose of the FDCPA and its goal of “protect[ing] individuals from unfair debt collection practices regardless of whether the individual actually owes a debt.” Sparrow, 385 F.Supp.2d at 1071 (citing Baker, 677 F.2d at 777); see also Taylor, 2012 WL 4092508 at *3 (declining to exercise jurisdiction over claim for underlying debt under § 1367(c)(4) where amount of debt was alleged to be $960.82)”.    The Court finds Graf‘s reasoning compelling, and that the Court’s asserting supplemental jurisdiction over Ally’s breach of contract counterclaim would clearly undermine the remedial purpose of the TCPA and its goal of protecting consumers from unwanted automated telephone calls and of “curbing calls that are a nuisance and invasion of privacy.” Gager v. Dell Fin. Servs., LLC, 727 F.3d 265, 271 (3^rd Cir. 2013) (citing S. Rep. 102–178, at 5 (1991); Lesher v. Law Offices of Mitchell N. Kay, PC, 650 F.3d 993, 997 (3d Cir. 2011) (other citations omitted). The Court finds, therefore, that, even if Ally’s counterclaim for collection of Riazi’s alleged underlying debt is a permissive counterclaim within the court’s supplemental jurisdiction under § 1667(a), the facts of this matter present “exceptional circumstances” where “there are compelling reasons for declining jurisdiction” over the counterclaim, as described in 28 U.S.C. § 1367(c)(4). See Graf, 2015 WL 632180, at *6-8.  Finally, Ally argues that its breach of contract counterclaim comes under the “ ‘defensive set-off’ exception to Fed. R. Civ. P. 13(b).” (ECF 13 at 9). “[A] defensive set-off does provide an exception to Rule 13(b) of the Federal Rules of Civil Procedure and may be asserted in the federal forum, despite the absence of an independent jurisdictional basis.” Binnick v. Avco Fin. Servs. of Neb., Inc., 435 F. Supp. 359 (D. Neb. 1977). A valid set-off, however, is “not enough to overcome the public policy reasons behind declining jurisdiction,” including protecting consumers “regardless of the validity of the underlying debt.” Campos v. Western Dental Services, Inc., 404 F. Supp.2d 1164, 1170 (N.D. Cal. 2005). As such, the Court finds Ally’s “defensive set-off” argument is without merit.  As such, the Court finds that the compelling reasons articulated above establish exceptional circumstances sufficient for the Court’s declining jurisdiction over Ally’s counterclaim pursuant to 28 U.S.C. § 1367(c)(4). The Court will, therefore, grant Plaintiff’s Motion to Dismiss Defendant’s Counterclaim.