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“Breaching the Peace” During Car Repo Can Violate FDCPA

Link: Gable v. UNIVERSAL ACCEPTANCE CORPORATION, Case No. 17-c-463 (E.D. Wisc., Sept. 17, 2018).

Plaintiff sued a towing company and debt collector alleging that they breached the peace in attempting to repossess his car and thus violated the FDCPA. Wisconsin law allows nonjudicial repossession of motor vehicles if the customer has failed to demand a hearing . . . as long as the merchant does not “commit a breach of the peace.” Wis. Stat. § 425.206(1)(d), (2)(a). In this case, the police showed up and told the plaintiff that he had to let them repossess the car. This was wrong, and didn’t let defendants off the hook for FDCPA liability:

The fact that [Plaintiffs] acquiesced in the repossession after the police arrived and informed them the repossession was lawful, however, does not mean that they withdrew their objections to RPI and Chase’s conduct. The police officers were simply wrong in their conclusion that Johnson and Brunette were legally entitled to take the car over the debtor’s objection. See Marcus v. McCollum, 394 F.3d 813, 819 (10th Cir. 2004).

As a result, the court denied the defendants’ motion for summary judgment.

Litigation Expenses From Wrongful Garnishment Actionable Under Spokeo

Link: CIESNIEWSKI v. ARIES CAPITAL PARTNERS, INC., Case No. 16-cv-817-WTL-TAB (S.D. Ind., Sept. 19, 2018).

Plaintiff, represented by Edelman Combs Latturner & Goodwin LLC, successfully defended a wage garnishment on the basis that the debt collector hadn’t showed it was assigned the debt (and thus owned it). After the court agreed, plaintiff filed FDCPA, Indiana Deceptive Consumer Sales Act, and abuse of process claims. Defendants moved to dismiss based on lack of Article III standing.

The court agreed with Plaintiff, finding that unlike the Seventh Circuit’s ruling in Harold v. Steel, 773 F.3d 884 (7th Cir. 2014), plaintiff actually defeated the attempted garnishment:

 Here, like the hypothetical plaintiff who defends garnishment proceedings in an improper judicial district, there is no injury caused by a state court judgment, because Ciesniewski successfully defended the garnishment proceeding. Furthermore, both Ciesniewski and the plaintiff in the hypothetical were forced to defend improper garnishment actions. In Harold, on the other hand, the costs of litigation were associated with a permissible garnishment claim— there was no injury independent of that state court action. Because Ciesniewski alleges that the Defendants’ violation of the FDCPA required expenses he would not have otherwise incurred, Ciesniewski has asserted an injury sufficient to confer standing.

Claims for Botched Servicing of Student Loans May Move Forward

Link: Fleischer v. ACCESSLEX INSTITUTE, Case No. 17-cv-08295 (N.D. Ill., Sept. 19, 2018).

Plaintiff filed suit against the servicer, owner, and collector of his consolidated student loans (Accesslex Institute D/B/A Access Group, Conduent Education Services, LLC F/K/A Acs Education Services, Massachusetts Higher Education Assistance Corporation D/B/A American Student Assistance, Delta Management Associates, Inc., and F.H. Cann & Associates, Inc.). Plaintiff is represented by Kruger & Gruber, LLP.

He alleged that after consolidating his loans in 2011, he entered into a forbearance with his then-servicer Access Group where he would pay only 2.5% interest for three years on his $38,000 balance. 23 months later, Delta Management (whom Plaintiff had never heard of) sent him a letter saying his balance was over $50,000. After years of disputes with the Consumer Financial Protection bureau and the Defendants, the account was sent to debt collectors who went after Plaintiff for the inflated amount.

Plaintiff filed action under the Illinois Consumer Fraud and Deceptive Practices Act against F.H. Cann, Delta, and Conduent; claims under the Fair Debt Collection Practices Act against F.H. Cann and Delta; breach-of-contract and promissory-estoppel claims against Conduent; fraudulent and negligent-misrepresentation claims against Delta; and a fraudulent-concealment claim against Conduent. Defendants filed a motion to dismiss and for judgment on the pleadings.

Judge Manish S. Shah allowed his ICFA claim of unfairness to proceed against Conduent, and found that the ICFA claim against Conduent and Delta would normally be time-barred—but it falls within the “continuing violation” tolling doctrine, which delays accrual of the statute of limitations until (1) the date of the last injury or (2) when the tortious acts cease. Gredell v. Wyeth Laboratories, Inc., 346 Ill.App.3d 51, 59 (1st Dist. 2004).

The court allowed the FDCPA claims against F.H. Cann and Delta to survive, alleging that they failed to give him the required notice under 15 U.S.C. § 1692g and that its statements regarding removing his default status from his credit report was potentially false or misleading.

The court allowed the breach of contract claim to survive, but dismissed the negligent and intentional misrepresentation claims and fraudulent concealment claim.

FDCPA G-Notice Class is Certified; Judgment on Pleadings Denied

Link 1: Taylor v. ALLTRAN FINANCIAL, LP, Case No. 18-cv-00306-JMS-MJD (S.D. Ind., Sept. 17, 2018).

Link 2: Taylor v. ALLTRAN FINANCIAL, LP, Case No. 18-cv-00306-JMS-MJD (S.D. Ind., Sept. 19, 2018).

Plaintiffs, represented by Philipps and Philipps Ltd., brought an action against Alltran and LVNV Funding, LLC, alleging that their debt collection letters were unclear as to whether Alltran was collecting on behalf of Defendant LVNV or nonparty Springleaf Financial Services. This confusion allegedly violated 15 U.S.C. § 1692g(a), which requires, among other things, that a debt collector “send the consumer a written notice containing . . . the name of the creditor to whom the debt is owed.”

The letter listed as the “Original Creditor” nonparty Springleaf Financial Services Inc.,  from whom Mr. Taylor had previously borrowed money. Next, the letter stated that the “Current Creditor” was Defendant LVNV Funding, LLC (“LVNV”). Finally, below this information, the letter explained that “Alltran Financial, LP has been contracted to lead and represent in the collection of the judgment awarded on your Springleaf Financial Services Inc. account.”

In the first opinion on Sept. 17, judge Jane Magnus-Stinson analyzed whether the action meets the the requirements of Rule 23. The court rejected defendants arguments regarding the notion some of the debts may have been non-consumer in nature, and certified the following class:

All persons similarly situated in the State of Indiana from whom Defendants attempted to collect a defaulted consumer debt allegedly owed for a Springleaf Financial Services account, via the same form collection letter that Defendants sent to Plaintiff, from February 1, 2017 to the present.

In the second opinion issued on Sept. 19, the court rejected defendants’ motion for judgment on the pleadings. In so holding, the court noted that:

Several problems are manifest. First, the letter says that Alltran has “been contracted to lead and represent in the collection of the judgment.” Contracted by whom?, an unsophisticated (or perhaps even a sophisticated) consumer might ask. The ostensible answer comes at the end of the sentence: “the judgment awarded on your Springleaf Financial Services Inc. account.” [Filing No. 1-3 at 1.] Of course, based upon the facts of this lawsuit it is now clear that LVNV acquired the debt at some point from Springleaf, but for all intents and purposes the letter makes it sound like Springleaf is the one who contracted Alltran and that Mr. Taylor still has a “Springleaf Financial Services Inc. account” on which Alltran is attempting to collect.

This not-so-subtle wrinkle sets this case far apart from Zuniga v. Asset Recovery Solutions, 2018 WL 1519162 (N.D. Ill. 2018), the case heavily relied upon by Defendants.

Defendants are represented by Ballard Spahr LLP and Kroger Gardis & Regas, LLP.

No Standing for Claims Not Disclosed on Bankruptcy Petition

Link: Kitchner v. FIERGOLA, Case No. 18-CV-133-JPS (E.D. Wisc., Sept. 18, 2018).

Judge J.P. Stadtmueller found that because the Plaintiff did not disclose her Fair Credit Reporting Act and Fair Debt Collection Practices Act claims on her Chapter 7 Bankruptcy petition, and because they arose prior to the filing of her bankruptcy, they were still property of the estate and the bankrtupcy trustee is the true party in interest for standing purposes. The court allowed the claim to be stayed under Rule 17:

Rule 17 instructs that “[t]he court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action. After ratification, joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in interest.” Fed. R. Civ. P. 17(a)(3). Thus, Defendants having put Kitchner on notice of the standing issue, the Court is obliged to give Kitchner a reasonable period of time in which to ratify her commencement of the action by convincing the trustee to abandon these claims, or to substitute the trustee as the sole party plaintiff.

The court also rejected the defendant’s judicial estoppel defense, stating that the only person who could take inconsistent positions that would jeopardize the claims for purposes of judicial estoppel would be the trustee.

Debt Collector Wins Summary Judgment on False Threat to Sue

Link: Bandas v. United Recovery Service, LLC, Case No. 17-cv-01323 (N.D. Ill., Sept. 7, 2018).

Plaintiff, represented by Michael Jacob Wood of Community Lawyers Group, Ltd., filed an action under Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and the Illinois Collection Agency Act (“ICAA”), 225 ILCS 425/1 et seq. Both parties moved for summary judgment and the court ruled in favor of the defendant debt collector.

After incurring a medical debt, URS sent the Plaintiff a letter as follows:

Dear FRANK,
Please receive and accept this letter in the spirit in which it is intended. We do not seek to create a climate of argument and threat but merely to state our position in as factual a manner as possible. Our client claims a debt is due and owing from you; they have attempted to resolve this between them and you with no success. Our office has been brought into the picture and we have done everything we can think of to convince you to pay this claim; our file indicates that you have the means to pay but that you will not pay.
We wish to make this appeal to you as one reasonable party to another. Send us your full payment today or contact this office at once to make suitable payment arrangements so that no further procedures need to be taken in this matter.
This is our third attempt to have you voluntarily resolve this claim. We seek your cooperation now! . . .

Plaintiff  alleged that URS’s letter deceptively threatened him with litigation when it had no intention of actually suing him for the debt, in violation of § 1692e of the FDCPA.  Judge Virginia M. Kendall pointed out that in order to defeat summary judgment a plaintiff must show not only that statement is false but also that it would mislead an “unsophisticated consumer.” See Lox v. CDA, Ltd.,689 F.3d 818, 822 (7th Cir. 2012) (citing Wahl v. Midland Credit Mgmt., 556 F.3d 643, 645-46 (7th Cir.2009)), and that that the representation would be confusing to a “significant fraction of the population.” Gruber v. Creditors’ Prot. Serv., Inc., 742 F.3d 271, 274 (7th Cir. 2014).

Section 1692e cases fall into three categories: (1) “cases involving statements that plainly, on their face, are not misleading or deceptive,” in which courts grant summary judgment in favor of defendants, (2) “cases involve[ing] statements that are not plainly misleading or deceptive but might possibly mislead or deceive the unsophisticated consumer,” in which “plaintiffs may prevail only by producing extrinsic evidence, such as consumer surveys, to prove that unsophisticated consumers do in fact find the challenged statements misleading or deceptive,” and (3) “[c]ases involving plainly deceptive communications” that are “clearly misleading on their face,” in which plaintiff need not present any extrinsic evidence to prevail.

Given that Plaintiff alleges that the statement is deceptive (i.e. in the third category above), he needed to put extrinsic evidence into the record because judges “are not experts in the knowledge and understanding of unsophisticated consumers facing demands by debt collectors” and “are no more entitled to rely on [their] intuitions in this context than [they] are in deciding issues of consumer confusion in trademark cases.” Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 776 (7th Cir. 2007). He did not. As such the court looked to whether the thread of litigation was plain on the face of the letter.

Interestingly, the court discussed how some judges looked to Google and Wikipedia for insight bceause it is reasonable to interpret the plain meaning of language in the same way an unsophisticated consumer would. (Citing McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1021 (7th Cir. 2014) and Holt v. LVNV Funding, LLC, 147 F. Supp. 3d 756, 761 (S.D. Ind. 2015).

Because Plaintiff offered no support for his conclusion that an unsophisticated consumer would automatically assume litigation is the only “further procedure” available to URS, the court granted summary judgment in favor of debt collector URS.

 

Class Cert Denied on Pet Treat Claims

Link: BIETSCH v. SERGEANT’S PET CARE PRODUCTS, INC., Case No. 15-cv-5432 (N.D. Ill., Sept. 19, 2018).

Plaintiff, represented by Siprut PC, brought a class action alleging that Defendant’s pet treats caused their dogd to fall ill under the Magnuson-Moss Warranty Act, the Illinois Consumer Fraud Act, and 10 other states’ consumer fraud laws as a nation-wide class. The allegations are basically that the dog treats failed to break down within dogs’ digestive tracts and as a result caused digestive issues.

The court denied Plaintiff’s motion for class certification under 23(b)(2) for injunctive relief and 23(b)(3) seeking monetary damages in the form of a full refund. The court also ruled on evidentiary issues related to expert witnesses brought under FRE 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993).

Judge Sara L. Ellis ruled that Plaintiff could not meet their burden of showing that the treats were defective and unsafe, because their own expert wouldn’t say they were categorically unsafe and thus the court had no basis upon which to conclude that the treats are so unsafe that no reasonable consumer would purchase them. The court also rejected the 23(b)(2) injunction as untenable from a judicial enforcement standpoint and would require the court to create a standard for evaluating the safety of the reformulated treats.

The court noted the Plaintiff is up against a rough burden as to damages (apologies for the pun; I had to):

Plaintiffs likely wonder what evidence would be sufficient to meet this burden. The Court does not have an answer for that hypothetical question, but merely notes that on the facts of this case sufficient common proof is likely hard to come by. As other courts have noted, “Proving a class-wide defect where the majority of class members have not experienced any problems with the alleged defective product, if possible at all, would be extremely difficult.” Mahtani v. Wyeth, No. CIV.A. 08-6255 KSH, 2011 WL 2609857, at *8 (D.N.J. June 30, 2011) (citation omitted) (internal quotation marks omitted) In trying to argue that a product is categorically unfit for dogs to eat, when very few dogs have experienced ill effects eating it, Plaintiffs are attempting to cross a wide gap, and as such, need a strong bridge.

 

Consumer Fraud and Automotive Repair Act Judgment Upheld

Link: Bell v. Ring, 2018 IL App (3d) 170649.

In this Illinois state court appeal, the court discusses the applicability of the “knowing” standard required to support a violation of the Automotive Repair Act, 815 ILCS 306/15, (and the resultant claim allowed under the Illinois Consumer Fraud Act). It’s a good discussion of the requirements of the ARA. The court upheld the small court claims finding that the Defendant knowingly violated the ARA when he:

knowingly and intentionally elected not to provide an estimate because he was “too busy” and never sought to obtain a written waiver from Lloyd for the estimate requirement. Instead, defendant chose to rely on his erroneous belief that the work was not covered by the Repair Act and did over $9000 worth of work on Lloyd’s truck without giving Lloyd an estimate and without obtaining prior authorization from Lloyd.

Summary Judgment Awarded Against Comcast for Impermissible Pull Claim

Link: Santangelo v. Comcast Corporation, Case No. 15-cv-0293 (N.D. Ill., Sept. 17, 2018).

Plaintiff, represented by Keith Keogh of Keogh Law, Ltd., sued Comcast under the Fair Credit Reporting Act and the Illinois Consumer Fraud Act alleging they impermissibly pulled a credit check on him despite the fact he paid a $50 deposit to forgo a credit check when applying for internet services. As a result, his credit score dropped by six points. Comcast refunded Plaintiff the money he paid with interest and caused the hard pull to be masked. The parties filed cross motions for summary judgment which were both granted and denied in part.

FCRA Claim

Comcast argued that Plaintiff’s lowered credit score could not satisfy Article III’s injury-in-fact requirement with respect to his FCRA claim, because he has not shown that he was denied a loan, a purchase, or a credit application. Judge John Z. Lee disagreed, citing Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337, 344-46 (7th Cir. 2018) for the proposition that “it is ‘very easy’ to envision a lowered credit score creating a real risk of financial or other harm that satisfies the injury-in-fact requirement.” The court also rejected the challenge to causation since the score dropped the same day as Comcast’s pull and that the case was not moot due to the refund or subsequent masking.

As to the merits, the parties disputed whether Comcast had a “legitimate business need” under § 1681b(a)(3)(F)(i), and the court found in favor of Plaintff:

There is no dispute that Comcast offered to provide Santangelo internet service without obtaining his TELCO information, if he paid a $50 deposit. And no reasonable jury could conclude that Comcast needed Santangelo’s credit score to determine his eligibility for service when Comcast’s own policies and representations to Santangelo indicated otherwise.

The court also ruled in favor of Plaintiff in regards to Comcast’s argument that Plaintiff agreed to the credit pull under § 1681b(a)(2), finding that it’s a strained argument and that Comcast failed to develop the record to support it. So liability as to the the FCRA claim was decided in favor of Plaintiff.

Whether Comcast violated the FCRA willingly or negligently (and thus whether Plaintiff may be awarded punitive damages or not) under § 1681n will be a fact for the jury:

There is evidence in the record from which a jury could reasonably conclude that the Comcast representative who initiated the credit check did so in error. But, there is other evidence from which a reasonable jury could conclude that Comcast knew or should have known that it would likely happen based upon prior experiences with similar incidents.

State Law Claims

The court found that as to the state law claims under the Illinois Consumer Fraud Act, breach of contract, and unjust enrichment, Plaintiff failed to adduce sufficient evidence of actual damages. As a result Comcast was awarded summary judgment on those counts. The court noted, however, that for purposes of Article III standing analysis, “actual damages and injury in fact ‘are not the same thing.’ Abbott v. Lockheed Martin Corp., 725 F.3d 803, 808 (7th Cir. 2013).”

Judge Dismisses RESPA Claim Under Rooker-Feldman

Link: Adler v. Bayview Loan Servicing, LLC, Case No. 17-c-6735 (N.D. Ill., Sept. 18, 2018).

Plaintiffs Ronald and Lisa Adler, represented by attorney Daniel Brown of Main Street Attorney, LLC, brought claims under the Real Estate Settlement Procedures Act (“RESPA”) and the Illinois Consumer Fraud Act (“ICFA”) against their mortgage servicing company Bayview (and against the investor Bank of New York Mellon based on vicarious liability) relating to their attempts to modify the mortgage loan on their primary residence. They alleged that after successfully completing two trial period plans under the Home Affordable Modification Program in 2013 and 2014, the Plaintiffs received a proposed loan modification that did not account for the fact they discharged the debt in bankruptcy and should not be personally liable for it. After sending in qualified written requests under RESPA seeking clarification, Bayview sent them false, confusing and vexatious responses then told them they were going to sell their home at a foreclosure sale.

The Plaintiffs sought to file counterclaims in the state court proceeding and stay the sale, but the state court judge denied that relief. The home was sold at auction and Plaintiffs were subsequently evicted.

Defendants sought to dismiss the amended complaint under 12(b)(6) for failure to state a claim, and the judge granted the motion based on the Rooker-Feldman doctrine. The Rooker-Feldman doctrine, derived from Rooker v. Fidelity Trust Company, 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983), “precludes lower federal court jurisdiction over claims seeking review of state court judgments . . . [because] no matter how erroneous or unconstitutional the state court judgment may be, the Supreme Court of the United States is the only federal court that could have jurisdiction to review a state court judgment.”

The court, judge Charles P. Kocoras, explained:

The state court entered an order of foreclosure and sale on February 27, 2012, and an order of possession on November 2, 2015. Now, the Adlers are attempting to collaterally attack the state court’s judgment by arguing that the foreclosure sale was improper under RESPA and ICFA violations. The Adlers’ request for relief is inextricably intertwined with the Defendants’ prior foreclosure proceedings … In the foreclosure proceeding on September 16, 2015, the Adlers argued that the sale of the subject property should be stayed because of the Defendants’ breach of contract in the loan modification process. In this Amended Complaint, the Adlers outright assert that “[a]s a direct and proximate result of Defendant’s misconduct, Plaintiffs lost their family home.” However, a district court cannot vacate the foreclosure judgment, and the Adlers’ request for relief is putting this Court in a position of appellate review, which Rooker-Feldman prohibits.

The court dismissed the ICFA claim finding that 28 U.S.C. § 1367 of the allows a federal district court to exercise supplemental jurisdiction over state law claims only if the court has original jurisdiction.