Nelson v. Repossessors, Inc.

U.S. District Court, District of Minnesota April 20, 2018

Trial Court Opinion

             UNITED STATES DISTRICT COURT                            
                 DISTRICT OF MINNESOTA                               
______________________________________________________________________________ 
Kurk Matthew Nelson,                                                      

            Plaintiff,                                               
                                Case No. 17-cv-3727 (WMW/SER)        
v.                                                                        



Repossessors, Inc.; Consumer Portfolio

ORDER

Services, Inc.; and Chase Towing &                                        

Transport, Inc.,                                                          

     Defendants.                                                     

Katelyn Rae Cartier and Thomas J. Lyons, Jr., Esq., Consumer Justice Center, P.A., 
Vadnais Heights, Minnesota, for Plaintiff.                                

Chad A. Snyder, Esq., Rubric Legal LLC, Minneapolis, Minnesota, for Defendants. 
Jeffrey D. Pilgrim, Esq., Pilgrim Christakis LLP, Chicago, Illinois, for Defendants. 

STEVEN E. RAU, United States Magistrate Judge                             
The above-captioned case comes before the undersigned on Defendants Repossessors, 
Inc.; Chase Towing & Transport, Inc.; and Consumer Portfolio Services, Inc.’s (collectively, 
“Defendants”) Motion to Amend Pleadings and Add a Party (the “Motion”) [Doc. No. 29]. This 
matter was referred for the resolution of pretrial matters pursuant to

28 U.S.C. § 636

(b)(1)(A) 
and District of Minnesota Local Rule 72.1. For the reasons stated below, the Court grants the 
Motion.                                                                   
I.   BACKGROUND                                                           
Jeremy Floyd (“Floyd”) purchased a Jeep Patriot (the “vehicle”) using financing from 
Defendant Consumer Portfolio Services, Inc. (“CPS”) in October 2014. (Compl.) [Doc. No. 1 
¶¶ 9–10]. On January 11, 2017, Professional Recovery Services (“PRS”) towed and stored the 
vehicle because it was parked illegally. (Id. ¶ 11). PRS sent CPS and Floyd a legal notice 
informing them that the vehicle “was being stored and that failure to redeem would result in sale 
or salvage of the Vehicle.” (Id. ¶ 12). CPS received the notice on February 6, 2017, but did not 
respond. (Id. ¶¶ 13–14). On February 28, 2017, Plaintiff Kurk Matthew Nelson (“Nelson”) 
purchased  the  vehicle  from  PRS  for  $1,000.  (Id.  ¶¶ 15–16).  Defendant  Chase  Towing  & 

Transport, Inc. (“Chase”) repossessed the vehicle from Nelson on June 17, 2017, between 2:00 
and 3:00 a.m. (Id. ¶ 17). Nelson called Chase that morning, and its agent confirmed that it 
repossessed  the  vehicle  on  CPS’s  instruction.  (Id.  ¶¶ 18,  20).  Specifically,  Chase’s  agent 
explained that Floyd owed CPS money for the vehicle, and CPS had a lien on the vehicle. (Id. 
¶ 20). Nelson, who believed he “owned the car and possessed title ‘clear and free,’” attempted to 
report the vehicle stolen; attempted to obtain CPS’s information regarding Floyd from Defendant 
Repossessors, Inc.; and called CPS two more times (Id. ¶¶ 19, 21, 23–30). The vehicle was 
returned to Nelson at 12:30 p.m. on the same day. (Id. ¶ 31). It had approximately $781 worth of 
damage when it was returned. (Id. ¶¶ 32–33).                              
Nelson alleges the following claims: Count 1—violations of the Fair Debt Collection 
Practices Act (“FDCPA”), 15 U.S.C. § 1692f(6);1 Count 2—common law trespass to chattels; 

Count 3—wrongful repossession in violation of Minnesota Statute section 336.9-609; Count 4—
conversion; and Count 5—intrusion upon seclusion. (Compl. at 6–9).        
Through discovery, Defendants learned that PRS did not meet the statutory requirements 
necessary to sell the so-called abandoned vehicle to Nelson, who is an agent and/or employee of 
PRS. (Defs.’ Mem. of Law in Supp. of Mot., “Mem. in Supp.”) [Doc. No. 32 at 2–3] (citing 
Minn. Stat. § 168B.01, et seq.). Defendants seek the Court’s permission to file: (1) an amended 
answer on behalf of Repossessors, Inc. and Chase to assert an additional affirmative defense; (2) 

1    This count is only alleged against Repossessors, Inc. and Chase. (Compl. at 6). The 
remaining claims are alleged against all Defendants. See (id. at 7–9).    
an amended answer on behalf of CPS to add an affirmative defense, add counterclaims against 
Nelson  and  PRS,  and  add  PRS  as  a  party;  and  (3)  a  third-party  complaint  on  behalf  of 
Defendants against PRS. (Id. at 3).                                       
Nelson only opposes the Motion to the extent it seeks leave to file a counterclaim against 

him. See (Pl.’s Resp. in Opp’n to Mot., “Mem. in Opp’n”) [Doc. No. 38]. Thus, the Court’s 
analysis is confined to this issue and the remainder of the Motion is granted without discussion. 
At the hearing, the Court asked for supplemental briefing regarding whether CPS’s proposed 
counterclaim was a  compulsory counterclaim  under Rule 13 of the  Federal Rules of Civil 
Procedure that was required to be brought at the time of its answer. (Minute Entry Dated Apr. 3, 
2018) [Doc. No. 45]. If so, the Court asked the parties to address whether the compulsory 
counterclaim was waived if not asserted in the original answer. (Id.). The parties submitted 
supplemental briefing on April 10, 2018, and the matter is now ripe for adjudication. 
II.  DISCUSSION                                                           
The  Court  first  addresses  the  subject  of  the  parties’  supplemental  briefing:  whether 

Defendants’ counterclaim is compulsory and whether it is waived because it was not asserted in 
their original answer. See (id.). A counterclaim is compulsory if the claim “arises out of the 
transaction or occurrence that is the subject matter of the opposing party’s claim; and . . . does 
not require adding another party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. 
P. 13(a)(1). The parties agree that Defendants’ claim against Nelson is compulsory. (Nelson’s 
Letter to Mag. J.) [Doc. No. 46 at 2]; (Defs.’ Letter to Mag. J.) [Doc. No. 47 at 2–3]. The Court 
agrees.  The  central  issue  raised  in  the  Complaint  is  whether  Defendants  had  authority  to 
repossess the vehicle. Defendants’ proposed counterclaim against Nelson and PRS alleges that 
their sale of the vehicle to Nelson failed to satisfy the statutory requirements for abandoned 
vehicles. (CPS’s Proposed (1) Am. Answer & Aff. Defenses to Compl. & (2) Countercl. Against 
Nelson & PRS, Ex. B., Attached to Ex. Index) [Doc. No. 33-2 at 24–29]. Thus, the Complaint 
and proposed counterclaim both require resolution of who or what entity owned the vehicle at 
the time of its repossession from Nelson.                                 

Additionally, Defendants’ counterclaim is not waived. A compulsory counterclaim that is 
not brought is waived in subsequent litigation. Schinzing v. Mid-States Stainless, Inc.,

415 F.3d 807, 813

 (8th Cir. 2005). A party’s amendment that seeks the court’s permission to assert a 
compulsory counterclaim in the same litigation as the common “transaction or occurrence,” 
however, is analyzed under Rule 15(a). See Costello, Porter, Hill, Heisterkamp & Bushnell v. 
Providers Fidelity Life Ins. Co.,

958 F.2d 836

, 839–40 (8th Cir. 1992); Wayzata Bank & Tr. Co. 
v. A & B Farms,

855 F.2d 590

, 594 (8th Cir. 1988); Fed. R. Civ. P. 13, advisory committee note 
to 2009 amendment (“An amendment to add a counterclaim will be governed by Rule 15.”). The 
transaction or occurrence at issue in this case is (1) the removal of the vehicle from Nelson’s 
possession; and (2) who or what entity owned the vehicle at that time. See generally (Compl.). 

Defendants’ counterclaim addresses the ownership issue and is therefore the same transaction or 
occurrence. Thus, the Defendants’ counterclaim is not waived and the Motion must be analyzed 
under Rule 15(a).                                                         
A.   Legal Standard                                                  
Leave to amend must be freely given “when justice so requires.” Fed. R. Civ. P. 15(a)(2); 
see also Becker v. Univ. of Neb. at Omaha,

191 F.3d 904, 907

 (8th Cir. 1999). In interpreting 
Rule 15, the United States Supreme Court stated:                          
If the underlying facts or circumstances relied upon by a plaintiff may be a proper 
subject of relief, he ought to be afforded an opportunity to test his claim on the 
merits. In the absence of any apparent or declared reason—such as undue delay, 
bad faith or dilatory motive on the part of the movant, repeated failure to cure 
deficiencies by amendments previously allowed, undue prejudice to the opposing 
party by virtue of allowance of the amendment, futility of amendment, etc.—the 
leave sought should, as the rules require, be “freely given.”        

Foman v. Davis,

371 U.S. 178, 182

 (1962); see Fed. R. Civ. P. 15(a)(2).   
B.   Analysis                                                        
Nelson objects to the proposed counterclaims against him for three reasons, each of them 
unavailing.                                                               
First, Nelson argues that the Court lacks jurisdiction because the circumstances of his 
purchase of the vehicle are not the same set of facts as the circumstances of the repossession. 
(Mem. in Opp’n at 4–5). The Court has original jurisdiction over this case because of Nelson’s 
claim for violations of  the FDCPA.

28 U.S.C. § 1331

; (Compl. ¶ 6).  Thus, this Court has 
supplemental jurisdiction over state law claims that arise from the same case or controversy.

28 U.S.C. § 1367

(a). As stated above, a central issue in this case is the ownership of the vehicle at 
the time of repossession, and facts related to the counterclaim against Nelson are part of “the 
same case or controversy” as required to exercise supplemental jurisdiction under § 1367(a). 
Additionally,  there  is  no  reason  that  the  court  should  decline  to  exercise  supplemental 
jurisdiction. See § 1367(c) (stating that a district court may decline to exercise supplemental 
jurisdiction when “(1) the [state law] claim raises a novel or complex issue of State law, (2) the 
claim substantially predominates over the claim or claims over which the district court has 
original jurisdiction, (3) the district court has dismissed all claims over which it has original 
jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for declining 
jurisdiction”).                                                           
Second, Nelson argues that the counterclaim is brought in retaliation because Defendants 
did not initiate litigation against him first. See (Mem. in Opp’n at 5). There is no legal authority 
supporting Nelson’s assertion that the party who loses the proverbial “race to the courthouse” 
cannot assert a counterclaim, and Defendants have explained that the basis of their counterclaim 
against Nelson and PRS was not known until December 2017. (Mem. in Supp. at 3–4). 
Finally, Nelson argues the proposed counterclaim is futile. (Mem. in Opp’n at 6). “Denial 

of a motion for leave to amend on the basis of futility means the district court has reached the 
legal conclusion that the amended complaint could not withstand a motion to dismiss under Rule 
12(b)(6) of the Federal Rules of Civil Procedure.” Zutz v. Nelson,

601 F.3d 842, 850

 (8th Cir. 
2010) (internal quotation marks omitted). In other words, a proposed pleading “must contain 
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 
Ashcroft v. Iqbal,

556 U.S. 662, 678

 (2009) (quoting Bell Atl. Corp. v. Twombly,

550 U.S. 544, 570

 (2007)); see also Zutz,

601 F.3d at 850

(stating that a proposed amended pleading is
reviewed “under the Twombly pleading standard”).
Nelson argues the counterclaim is futile for two reasons. Nelson first argues that he is not
an “impound lot operator” within the meaning of Minnesota Statue section 168B.06, the basis of

the counterclaim. (Id.). But Defendants allege that Nelson, as an employee of PRS, was obligated
to follow the statute, and the definition of an impound lot operator is broad. See Minn. Stat.
§ 168B.011, subdiv. 8 (defining an “impound lot operator” as “a person who engages in
impounding or storing, usually temporarily, unauthorized or abandoned vehicles”). Thus, the
Court cannot conclude that the counterclaim is futile for this reason. Nelson also argues that the
counterclaim is futile because “a third party’s technical violation of these . . . statutory notice
provisions does not covert [Nelson’s] purchase of the Vehicle . . . into tortious conduct.” (Mem.
in Opp’n at 6). In other words, Nelson’s argument does not address the plausibility of
Defendants’ claim; he merely disagrees with it. This argument establishes a disagreement
between the parties, but does not establish futility.
The Court concludes that Nelson’s objections to the proposed counterclaim are
unavailing, and grants Defendants’ motion.

III. CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Defendants Repossessors, Inc.; Chase Towing & Transport, Inc.;
and Consumer Portfolio Services, Inc.’s Motion to Amend Pleadings and Add a Party [Doc. No.
29] is GRANTED.

Dated: April 20, 2018

s/Steven E. Rau
STEVEN E. RAU
United States Magistrate Judge