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Vanz, LLC v. PMD Financial Group, LLC

United States District Court, D. New Hampshire

March 28, 2019

Vanz, LLC
v.
PMD Financial Group, LLC, et al.

          ORDER

          Landya McCafferty United States District Judge

         This suit arises out of the purchase by Vanz, LLC (“Vanz”) of a portfolio of nonperforming debt from a third party that acquired the portfolio from defendant, PMD Financial Group, LLC (“PMD”). Vanz claims that PMD, through several of its managers (individually named defendants David Arsenault, Philip Whitney, and Marc Gigante), misrepresented the value of the portfolio Vanz purchased, thereby fraudulently inducing Vanz to pay an inflated price. Defendants move for summary judgment on all of Vanz's claims. Doc. no. 21. They also move to strike portions of the affidavit of Thomas Mesce, Vanz's operating member and manager, and portions of Vanz's memorandum in opposition to their motion for summary judgment. Doc. no. 31. Vanz objects to both motions. For the following reasons, defendants' motion for summary judgment and motion to strike are granted in part and denied in part.

         STANDARD OF REVIEW

         A movant is entitled to summary judgment if it “shows that there is no genuine dispute as to any material fact and [that it] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In reviewing the record, the court construes all facts and reasonable inferences in the light most favorable to the nonmovant. Kelley v. Corr. Med. Servs., Inc., 707 F.3d 108, 115 (1st Cir. 2013).

         BACKGROUND

         The following facts are drawn from the summary judgment record and are not in dispute unless otherwise noted. This suit arises out of a series of transactions among companies in the debt-buying industry. That industry involves a variety of players. Original creditors, such as banks or credit card companies, bundle delinquent accounts into “portfolios” and sell them to companies that buy nonperforming debt. The original creditors have already written off, or “charged-off, ” those delinquent accounts after exhausting collection efforts, so the sale of the portfolios allows the original creditors to mitigate losses. The debt buyers, in turn, either sell the portfolios to another company or attempt to collect on the debts to make a profit. The debt-buying companies pay pennies on the dollar for a given portfolio, knowing that a substantial portion of the accounts in the portfolio will be uncollectible. Vanz and PMD are limited liability companies participating in this market: PMD buys and sells portfolios of nonperforming debt and Vanz buys portfolios of nonperforming debt and collects on the accounts.

         On October 4, 2011, PMD purchased a portfolio of charged-off Chase Bank credit card debt (“the Chase portfolio”) from National Credit Adjusters, LLC (“NCA”), another company in the business of buying and selling debt. The Chase portfolio consisted of 3, 932 credit card accounts with delinquent balances. At the time PMD purchased the Chase portfolio from NCA, the face value of that portfolio was approximately $15.8 million. The “face value” of a portfolio of nonperforming debt is “the sum total of all of the individual accounts making up that portfolio.” Doc. no. 28-2 at 10. PMD paid 2.5% of that face value ($395, 806.78) to NCA for the portfolio.

         On October 13, 2011, PMD sold the Chase portfolio to another company in the business of buying and selling nonperforming debt, Mattia and Associates (“Mattia”). Although the portfolio PMD transferred to Mattia was identical to the one PMD received from NCA, the purchase and sale agreement and closing documents for the PMD-to-Mattia transaction represented that the face value of the Chase portfolio was approximately $21.4 million, not $15.8 million.[1] Mattia paid PMD a purchase price of $471, 744.84, or 2.2% of the $21.4 million face value.

         That same day, Mattia sold the Chase portfolio to Vanz. Vanz paid Mattia $568, 238.10 for the portfolio, or 2.65% of the $21.4 million face value. At the closing of that transaction, Vanz received a spreadsheet with information regarding the accounts in the portfolio, including each individual account's balance.

         Approximately three or four months later, Vanz received additional supporting documentation for the Chase portfolio. That documentation included the individual credit card charge-off statements generated by Chase Bank, which stated the date the bank had written off the accounts as bad debt and the account balance at that time. Vanz then compared the bank's underlying charge-off statements with the data appearing on the spreadsheet it was given at the closing. Vanz contends that, through this comparison, it determined that the face value of the Chase portfolio was actually approximately $15.8 million, not $21.4 million.

         In May 2012, Vanz sent a demand letter to PMD and Mattia threatening legal action based upon its allegation that the value of the Chase portfolio had been fraudulently inflated. PMD responded, denying that it engaged in any wrongdoing regarding the Chase portfolio.

         In March 2013, Vanz filed suit against Mattia, its president, its chief operating officer, “ABC, INC.” and “XYZ, LLC” in the United States District Court for the District of New Jersey. Doc. no. 21-18. That complaint alleged claims arising out of Mattia's sale of several portfolios of nonperforming debt to Vanz, including the Chase portfolio. Over two years later, in December 2015, Vanz amended that complaint to add PMD as a defendant. Soon thereafter, PMD filed a motion to dismiss for lack of personal jurisdiction, which the New Jersey District Court granted in June 2016.

         In April 2017, Vanz commenced this suit against PMD, Arsenault, Whitney, and Gigante, alleging claims arising out of the Chase portfolio transaction. The crux of the complaint is that Arsenault fraudulently inflated the face value of the Chase portfolio from approximately $15.8 million to $21.4 million and that Arsenault then communicated this misrepresentation to Vanz through Mattia. Doc. nos. 1 at ¶¶ 27-32, 28-1 at 12. Vanz alleges that Arsenault improperly inflated the face value of the portfolio by including post-charge-off interest (i.e., interest added to the individual account balances after the bank had written off the debt). Doc. no. 1 at ¶ 31. Based on these and other allegations, Vanz asserts seven claims against defendants: fraud (Count I); negligent misrepresentation (Count II); breach of contract (Count III) (against PMD only); breach of implied covenant of good faith and fair dealing (Count IV); violation of the Racketeer Influenced and Corrupt Organizations (“RICO”) Act (Count V); violation of the New Hampshire Consumer Protection Act (Count VI); and piercing the corporate veil (Count VII) (against the individual defendants only).

         DISCUSSION

         Defendants move for summary judgment on all seven of Vanz's claims. They also move to strike portions of Thomas Mesce's affidavit (“Mesce affidavit”) and portions of Vanz's memorandum in opposition to their motion for summary judgment (“opposition memo”). The court addresses defendants' motion to strike first.

         I. Motion to Strike

         Defendants move to strike two groups of assertions from the Mesce affidavit and the opposition memo: (1) identified assertions that contradict Mesce's deposition testimony; and (2) identified assertions that are based on inadmissible evidence, are purely speculative, or that are unsupported by citations to the record. See doc. no. 31-1 at 1, 3-4.

         Defendants first argue that certain assertions in the Mesce affidavit and opposition memo should be stricken under the rule established in Colantuoni v. Alfred Calcagni & Sons, Inc., 44 F.3d 1 (1st Cir. 1994). In Colantuoni, the First Circuit held that “[w]hen an interested witness has given clear answers to unambiguous questions, he cannot create a conflict and resist summary judgment with an affidavit that is clearly contradictory, but does not give a satisfactory explanation of why the testimony is changed.” Id. at 4-5. The court's inquiry focuses on whether the responding party is “attempt[ing] to manufacture an issue of fact in order to survive summary judgment.” Orta-Castro v. Merck, Sharp & Dohme Quimica P.R., Inc., 447 F.3d 105, 110 (1st Cir. 2006). Having considered Mesce's affidavit, the opposition memo, and Mesce's deposition testimony, the court cannot conclude that Mesce's affidavit and the assertions in the opposition memo supported by that affidavit clearly contradict his deposition testimony such that it appears he was attempting to manufacture an issue of fact for the purpose of preventing summary judgment. Defendants' motion to strike on this basis is denied.

         Second, defendants argue that the court should strike ten specific assertions in Mesce's affidavit, six specific assertions in the opposition memo, and all references to Craig Geisler's deposition in support of the opposition memo. Doc. no. 31-1 at 4-6. They argue that the identified assertions in Mesce's affidavit must be stricken because they do not constitute admissible evidence in that they include hearsay or are not based on personal knowledge. See Fed.R.Civ.P. 56(c)(4). They further contend that the identified assertions in the opposition memo should be stricken because they are not supported by citations to the record.

         Defendants' motion to strike is granted to the extent that it seeks to strike references to Craig Geisler's deposition. A court may consider only admissible evidence when ruling on a summary judgment motion. See Fed.R.Civ.P. 56(c)(2); Quiles v. Sikorsky Aircraft, 84 F.Supp.2d 154, 161 (D. Mass. 1999). As the court held in a prior order, Geisler's deposition testimony is not admissible at trial. Doc. no. 17. Therefore, the court will not consider it when ruling on the summary judgment motion. Further, to the extent that any factual assertions in the opposition memo are not supported by citations to the record or any assertions in the affidavit are purely speculative, the court will disregard them. See Fed.R.Civ.P. 56(c), (e); Cochran v. Quest Software, Inc., 328 F.3d 1, 6 (1st Cir. 2003) (observing that, on summary judgment, court “may ignore conclusory allegations, improbable inferences, and unsupported speculation” (internal quotation marks omitted)).

         Defendants' motion to strike is otherwise denied. Although it appears that some of the assertions in the Mesce affidavit may be inadmissible hearsay if relied upon for the truth of the matters asserted, they may be admissible for other purposes, such as the effect on the listener. See United States v. Colon-Diaz, 521 F.3d 29, 33 (1st Cir. 2008) (“While an out-of-court statement may be hearsay if offered to prove the truth of the matter asserted, it is nonhearsay if offered for some other purpose, including when offered only for context.” (internal quotation marks omitted)); United States v. Cruz-Diaz, 550 F.3d 169, 176-77 (1st Cir. 2008) (observing that out-of-court statements offered for the limited purpose of showing what effect the statement had on the listener are not hearsay). The court bears these rules in mind and limits its review of the record to admissible evidence in deciding defendants' motion for summary judgment.

         II. Motion for Summary Judgment

         The court now turns to defendants' motion for summary judgment. Defendants raise two primary arguments: (1) all Vanz's claims are time-barred by the applicable statutes of limitations; and (2) alternatively, there is insufficient evidence in the record to support any of Vanz's claims.

         A. Statutes of Limitations

         Defendants argue that they are entitled to summary judgment because Vanz failed to timely file its claims in this court, and the claims are therefore barred by the applicable statutes of limitations. Doc. no. 21-1 at 4. Defendants contend that New Hampshire's three-year statute of limitations for personal actions applies to all Vanz's claims except the RICO claim, which is subject to a four-year limitations period. Id. at 8 n.3.

         Vanz does not appear to dispute that New Hampshire's statute of limitations applies to determine whether Vanz timely filed its claims here (other than its RICO claim). See doc. no. 28-1 at 19-25. Vanz also does not appear to dispute that, applying New Hampshire's statute of limitations and the federal RICO statute of limitations, Vanz did not timely file its claims in this court. See Id. Instead, Vanz relies on the New Hampshire savings statute, New Hampshire Revised Statutes Annotated (“RSA”) § 508:10, to argue that its claims survive their respective limitation periods. See Id. at 19.

         Before turning to Vanz's argument that RSA 508:10 saves its claims, the court considers whether, without the benefit of the savings statute, Vanz's claims would be time-barred. The statute of limitations for personal actions as well as New Hampshire Consumer Protection Act claims is three years, see RSA 508:4, I, and the statute of limitations for RICO actions is four years, see Rotella v. Wood, 528 U.S. 549, 553 (2000). Vanz purchased the Chase portfolio in October 2011 and discovered the alleged fraudulent inflation of the portfolio's value in January or February 2012. See Black Bear Lodge v. Trillium Corp., 136 N.H. 635, 637-38 (1993) (discussing application of “discovery rule” to toll running of statute of limitations until plaintiff, in exercise of reasonable diligence, “should have discovered the injury and its causal relationship to the act or omission complained of”). Consequently, the statute of limitations ran on Vanz's state law claims (Counts I-IV, VI-VII)-at the latest- in January or February 2015. The limitations period for the RICO claim (Count V) extended, at most, until January or February 2016. This action was not filed until April 2017, well outside of the limitation periods for all Vanz's claims.

         Because Vanz's claims are otherwise time-barred, the court turns to Vanz's argument that its claims are saved by RSA 508:10. RSA 508:10, ...


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