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Collection Calls to Wrong Person Basis for Valid FDCPA, TCPA claims—Not ICFA

Link: Hayes v. RECEIVABLES PERFORMANCE MANAGEMENT, LLC, Case No. 17-cv-1239 (N.D. Ill. Sept. 26, 2018).

This suit, filed by Sulaiman Law Group, Ltd., alleges that employees from RPM called plaintiff numerous times looking to speak with and collect a debt from someone named “Lesha Wayne.” The plaintiff told RPM numerous times they had the wrong number and told them to stop calling. They didn’t. Plaintiff filed suit under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. (Count I); Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq. (Count II); and the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. (Count III). Defendant filed a motion to dismiss, which the court, judge Robert M. Dow, granted in part and dismissed in part.

The court found Plaintiff did not sufficiently allege facts to show that he qualifies as a consumer under § 1692a(3) of the FDCPA, and dismissed his claim under Section 1692b(3) which requires that:

Any debt collector communicating with any person other than the consumer for the purpose of acquiring information about the consumer shall * * * not communicate with any such person more than once unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information.

The court also dismissed his claim under section 1692c(a)(1) which provides:

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt (1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.

The court dismissed his claim under 1692e finding that Plaintiff didnot allege that he believed he owed the debt, or that Defendant or its agents ever said anything to him that even implicitly suggested he owed the debt. Instead, Plaintiff argued the calls were an attempt to mislead him into paying the debt.

The court also dismissed his f claim:

A Plaintiff who uses the same factual allegations underlying another § 1692 claim for his § 1692f claim, however, fails to state an independent basis on which relief can be granted.

The court did allow the section 1692d(5) claim to stand:

While Defendant asserts these allegations are not enough to state claim, the court in Wright v. Enhanced Recovery Company denied a motion for summary judgment where the parties agreed that the defendant had only been called 21 times but disagreed at what point and how many times the plaintiff had asked for the calls to stop. 227 F. Supp. 3d at 1214-15. In light of Wright, and the fact that Plaintiff alleges he demanded the calls to stop on numerous occasions, Plaintiff has alleged facts to show a plausible violation of the FDCPA with regard to § 1692d(5).

The TCPA claim survived despite Defendant’s argument regarding whether plaintiff alleged they used an autodialer:

Here, Plaintiff alleges both that he has experienced the distinctive “click and pause” after answering calls from Defendant [1, ¶ 18], and that on other occasions he experienced “dead air” and received no response whatsoever when he answered Defendant’s calls, [1, ¶ 19]. Given these experiences, Plaintiff infers that Defendant used an ATDS to make these calls. [1, ¶ 47.] Considering the precedent above, the Court agrees that Plaintiff has pled sufficient facts to support the reasonable inference that Defendant used a ATDS to place the relevant calls.

The Court also dismissed the ICFA claim:

As explained above, Plaintiff has not pled facts sufficient to show that Defendant engaged in a deceptive act or practice under 15 U.S.C. § 1692e. Thus, he has not pled facts to support his claim under the ICFA. While Defendant’s calls may have been annoying, and possibly abusive, nothing in Plaintiff’s complaint suggests that Defendant sought to deceive Plaintiff.

FDCPA Class Certified in E.D. Wisc. Based on Ambiguous Settlement Offer

Link: Al V. Van Ru Credit Corporation, Case No. 17-CV-1738-JPS-JPS (E.D. Wisc. Sept. 25, 2018).

Plaintiff, represented by Ademi & O’Reilly LLP, filed a class action under the Fair Debt Collection Practices Act based on the following language in a dunning letter:

You can settle your account with the above client for lees than the full amount you owe. The balance you owe as of the date of this letter is $462.31. Presently, we are willing to accept $277.39 to settle your account provided that you act promptly. We are not obligated to renew this offer.

The Letter does not define “promptly” and does not state a firm expiration date for the settlement offer. Id. Plaintiff’s overarching theory of liability is that failing to include a better description of the parameters of the settlement offer misleads the recipient into believing that the offer may shortly expire, when this is not true.

Judge J.P. Stadtmueller found that Plaintiffs met their burden under Rule 23 to certify the following class:

“(a) all natural persons in the State of Wisconsin (b) who were sent a collection letter in the form represented by Exhibit A to the complaint in this action, (c) seeking to collect a debt allegedly owed for personal, family or household purposes, (d) between December 13, 2016 and December 13, 2017, (e) that was not returned by the postal service.”

The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually an attorney’s) labor.

True, the FDCPA allows for individual recoveries of up to $1000 [(which is more than is usually obtained for individual class members)]. But this assumes that the plaintiff will be aware of her rights, willing to subject herself to all the burdens of suing and able to find an attorney willing to take her case. These are considerations that cannot be dismissed lightly in assessing whether a class action or a series of individual lawsuits would be more appropriate for pursuing the FDCPA’s objectives. Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997).

Third Circuit Allows FDCPA Claim Based on Misleading IRS Language

Link: Schultz v. Midland Credit Management, Inc., Case No. 17-2244 (3d. Cir. 2018).

In Schultz, a debt collector sent letters to collect debts less than $600 to consumers that contained the following letter:

“We are not obligated to renew this offer. We will report forgiveness of debt as required by IRS regulations. Reporting is not required every time a debt is canceled or settled, and might not be required in your case.”

The district court found that as a matter of law this could not be misleading or deceptive to a consumer under See 15 U.S.C. § 1692e, and dismissed the putative class action.

The Third Circuit reversed, finding that:

Midland argues that, in order to conclude that a consumer would be misled by this statement, one would have to read the first sentence in isolation while paying no attention to the second qualifying statement—i.e., that “[r]eporting is not required every time a debt is canceled or settled, and might not be required in your case.” (App. 17). However, even with this qualifying statement, the least sophisticated debtor could be left with the impression that reporting could occur. Indeed, this is precisely what happened in the Schultzes’ case—there was no possibility of IRS reporting in light of the fact that the debt was less than $600, but use of the conditional “might” suggested that reporting was a possibility.

The Third Circuit gave a hat-tip to the Seventh in discussing what might qualify as deceptive or misleading to state a claim under 1692e:

The Seventh Circuit has held that “a dunning letter is false and misleading if it `impl[ies] that certain outcomes might befall a delinquent debtor, when legally, those outcomes cannot come to pass.'” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 367 (7th Cir. 2018) (quoting Lox v. CDA Ltd., 689 F.3d 818, 825 (7th Cir. 2012)). Thus, it is not merely the inclusion of a lie but also incomplete or inapplicable language in a collection letter that may form the basis for a potential FDCPA violation.

“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.