A federal court on Tuesday gave no quarter to a New Jersey debt-collection law firm defending against claims that it flouted debtor-protection law.
The firm, Lyons Doughty & Veldhuis of Mount Laurel, had sought removal of the debtor's third-party complaint from state court, as some judges have allowed for claims that are "separate and independent" from the main part of a case.
But U.S. District Judge Noel Hillman held that standard was not met in Target National Bank v. Campanella.
The case began as a Gloucester County Special Civil Part suit over $10,603 in alleged credit-card debt, with Lyons Doughty representing the creditor.
Pro se defendant Nicole Campanella filed a third-party complaint alleging that before suing her, the firm sent a payment demand falsely stating that the balance could increase due to interest and other charges and falsely told her over the phone it had a judgment against her. She also alleged the firm failed to properly validate the debt when asked.
Her Jan. 22 complaint included counts under the federal Fair Debt Collection Practices Act and New Jersey Consumer Fraud Act.
On March 7, the firm removed her claims, asserting federal question jurisdiction based on the FDCPA claims.
By then, Campanella had obtained a default judgment against the firm and had moved for summary judgment dismissing Target's claim.
She asked for a remand four days later, calling the removal an attempt to get out from under the default and obtain a second bite at the apple.
In urging denial of remand, Lyons Doughty acknowledged that most jurisdictions do not allow third-party complaints to be removed apart from the rest of the litigation. But the firm argued that judges in the district have adopted the minority view that allows it.
Hillman agreed that federal appeals courts have split on the issue and that even within the Third Circuit there is no uniformity. But he said the case law was overwhelming against such partial removal, citing holdings by U.S. District Judges Susan Wigenton and Joseph Greenaway Jr. remanding counterclaims.
Hillman recognized there is a minority view that a third-party complaint can serve as the basis for federal jurisdiction if the claims in it are separate and distinct from those in the original state court complaint. He cited a case in which U.S. District Judge Dennis Cavanaugh found no absolute bar to removal but refused to allow it in a suit where a patient sued by a hospital filed third-party indemnification and ERISA claims against his insurer because those claims interlocked with those of the original complaint.
Similarly, "Target National Bank's claim against Campanella that she owes it over $10,000 is not separate and independent from Campanella's claim that the law firm enlisted by the bank to collect that debt from Campanella committed violations of the federal and state statutes that regulate debt collection practices," Hillman held.
One of the majority rule cases cited by Hillman was Weingram & Associates v. Grayzel, in which a doctor, sued for fees by a lawyer who did patent work for him, counterclaimed for malpractice. There was case law allowing removal in that situation because federal courts have exclusive jurisdiction over patent claims.
On Feb. 20, however, the U.S. Supreme Court unanimously ruled in Gunn v. Minton that removal was improper because there was no reason to suppose Congress meant to bar state courts from hearing a legal malpractice claim simply because it requires resolution of a hypothetical patent question.
Five days later, Wigenton granted a remand in Weingram.
In contrast to patents, state and federal courts have concurrent jurisdiction over FDCPA claims.
Campanella's case now returns to state court, where her efforts to enforce the default judgment and Lyons Doughty's attempt to set it aside because of allegedly improper service of the third-party complaint have been on hold.
Campanella did not return a call. Neither did the lawyers for Lyons Doughty: Hillary Breitbart Veldhuis of the firm and Gregg Kahn of Wilson, Elser, Moskowitz, Edelman & Dicker in Florham Park.
Lyons Doughty also has offices in Wilmington, Del., and Owings Mills, Md.