Lauren Lloyd v. Midland Funding, LLC, et al

Filing

AMENDED OPINION filed : we REVERSE the district court's grant of summary judgment to Midland on Lloyd's breach-of-contract claim and AFFIRM on all other counts, decision not for publication. Danny J. Boggs, Jeffrey S. Sutton (Authoring), and Jane Branstetter Stranch, Circuit Judges.

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0043n.06
Case No. 15-5132
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

FILED
LAUREN LLOYD,
Plaintiff-Appellant,
v.
MIDLAND FUNDING, LLC, MIDLAND
CREDIT MANAGEMENT, INC., and
ENCORE CAPITAL GROUP, INC.,
Defendants-Appellees.

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Jan 22, 2016
DEBORAH S. HUNT, Clerk
ON APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR
THE EASTERN DISTRICT OF
TENNESSEE

AMENDED OPINION

BEFORE: BOGGS, SUTTON, and STRANCH, Circuit Judges.
SUTTON, Circuit Judge. Lauren Lloyd and her creditor settled a debt. Yet no one
dismissed the then-pending collection action, prompting the state court to enter a default
judgment against her. At first, no one noticed. But then the default judgment showed up on
Lloyd’s credit report. In response, Lloyd sued her creditor, alleging that the judgment had hurt
her credit score which in turn had raised the interest rate she paid on a loan. The district court
granted the creditor summary judgment on all of Lloyd’s federal and state-law claims. We
affirm in part and reverse in part.
In 2010, Lauren Lloyd owed $7,288.72 on her credit card, which Midland Credit
Management serviced. After the loan went into default, Midland filed an action in state court,
which set a court date for October 6, 2010. Shortly before that date, Midland and Lloyd settled

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the debt for $4,000. Midland’s counsel sent a letter to Lloyd on October 5, confirming the
settlement and stating that it would “cease all legal actions” against her because payment had
been “received . . . in full.” R. 31-1 at 15.
In one sense, Midland lived up to this obligation. It did not take any additional legal
action against Lloyd. In another sense, Midland failed to follow through on its promise, Lloyd
claims, because it never affirmatively dismissed the state court action. In the apparent absence
of any further filings from Lloyd or Midland, the state court entered a default judgment against
her on October 6, 2010. So far as the record shows, Midland was just as unaware of this
development as Lloyd. Even after the court entered judgment, Midland’s records listed the
account as settled and, when asked by a credit agency, Midland reported the account as paid.
Lloyd learned about the default judgment when she applied for a loan and noticed the
judgment on her credit report. She contacted Midland about the problem in July 2012, and
Midland moved to set aside the judgment on August 1. The court removed the judgment on
October 5. Lloyd notified the pertinent credit agencies (Experian, Equifax, and TransUnion),
which removed the judgment from all of her credit reports within six months of the court’s
corrective action.
Frustrated by what had happened, Lloyd filed this lawsuit in state court against Midland
(and two affiliates, Midland Funding and Encore Capital Group). She sought relief under the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and an assortment of state
laws. Midland removed the case to federal court based on federal question jurisdiction. See
28 U.S.C. § 1441(a). Lloyd’s complaint featured two contentions. She complained that a default
judgment was entered against her even though she had a valid settlement agreement with
Midland. And she complained that Midland reported the judgment to credit agencies. Midland

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conceded the first point but denied the second. As for damages, Lloyd claimed that her credit
took a negative hit from the default judgment and that she had to pay a higher interest rate on a
loan and extra fees as a result. Following discovery, the district court granted Midland summary
judgment on all of Lloyd’s claims. Lloyd v. Midland Funding, LLC, No. 3:12-CV-566-TAVHBG, 2014 WL 3507363, at *14 (E.D. Tenn. July 14, 2014); Lloyd v. Midland Funding, LLC,
No. 3:12-CV-566-TAV-HBG, 2015 WL 106264, at *4 (E.D. Tenn. Jan. 7, 2015).

Lloyd

appealed.
We give fresh review to a district court’s grant of summary judgment, asking whether
Midland is entitled to judgment as a matter of law because there is “no genuine dispute as to any
material fact”—even after giving Lloyd the benefit of reasonable inferences from the record.
Fed. R. Civ. P. 56(a); see Int’l Union v. Cummins, Inc., 434 F.3d 478, 483 (6th Cir. 2006).
Summary judgment record. We must first determine what is (and is not) part of the
summary judgment record.

Lloyd claims that the district court erred when deciding what

affidavits to include in that record. A few principles guide us. Civil Rule 56(c)(4) requires
affidavits filed to support or oppose a motion to “set out facts that would be admissible in
evidence.” Fed. R. Civ. P. 56(c)(4). Documents that fail to do so may be disregarded on
summary judgment.

See id. 56(e).

And any such affidavits “must be made on personal

knowledge.” Id. 56(c)(4).
Lloyd argues that the district court improperly refused to consider a declaration she
submitted in opposition to Midland’s motion for summary judgment. The declaration includes a
printed copy of her online credit report from 2012, which lists the default judgment. The district
court refused to consider the document (and Lloyd’s discussion of it in her affidavit) on the
ground that Lloyd failed to “lay any foundation for the admissibility” of the credit report. 2014

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WL 3507363, at *6. Because Lloyd never explained the credit report in her declaration and
failed to clearly identify the report in her deposition testimony, we agree that Lloyd did not
satisfy her burden.
Lloyd also argues that the district court improperly relied on three affidavits from
Midland’s authorized representative, John Moreno, in ruling on the summary judgment motion.
Midland designated Moreno to testify on its behalf under Civil Rule 30(b)(6). In Lloyd’s view,
Moreno’s affidavits amounted to inadmissible hearsay and were not based on personal
knowledge. We disagree.
In the first place, there is no hearsay problem.

Although Moreno’s affidavits by

themselves might not be admissible at trial, he based those affidavits on “records kept in the
regular course of [Midland’s] business.” R. 8-2 at 2. Those records would be admissible under
the business records exception to the hearsay rule. See Fed. R. Evid. 803(6). Because evidence
at the summary judgment stage does not have to be in “a form that would be admissible at trial,”
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986); see Shazor v. Prof’l Transit Mgmt., Ltd., 744
F.3d 948, 960 (6th Cir. 2014), the district court permissibly considered the affidavits.
In the second place, Moreno had the requisite personal knowledge required by Civil Rule
56(c)(4). The personal knowledge requirement works differently in this setting, where a human
being (Moreno) speaks for a corporation (Midland). See Fed. R. Civ. P. 30(b)(6). It is not easy
to take a deposition of a corporation or for that matter obtain an affidavit from one. In one sense,
indeed, it is not even possible to do so, as inanimate objects are not known for their facility with
language. That means, whenever a corporation is involved in litigation, “the information sought
must be obtained from natural persons who can speak for the corporation.” 8A Charles Alan
Wright et al., Federal Practice and Procedure § 2103 (3d ed. 2015). And that means “[t]here is

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no obligation to select a person with personal knowledge of the events in question,” so long as
the corporation “proffer[s] a person who can answer regarding information known or reasonably
available to the organization.” Id. (emphasis added) (quotation omitted); see Brazos River Auth.
v. GE Ionics, Inc., 469 F.3d 416, 433 (5th Cir. 2006) (explaining that a Rule 30(b)(6) witness
“does not give his personal opinions, but presents the corporation’s ‘position’ on the topic”);
PPM Fin., Inc. v. Norandal USA, Inc., 392 F.3d 889, 895 (7th Cir. 2004) (holding that a Rule
30(b)(6) witness “was free to testify to matters outside his personal knowledge as long as they
were within the corporate rubric”). In this instance, Moreno presented facts known to Midland
based on his review of the company’s records.

That does not run afoul of the personal

knowledge requirement in Civil Rule 56(c)(4). No error occurred.
Fair Credit Reporting Act. In challenging the district court’s rejection of this claim,
Lloyd argues that Midland failed to comply with its duty to investigate, invoking a section of the
Act that imposes a “[d]ut[y on] furnishers of information upon notice of [a] dispute” to “conduct
an investigation.” 15 U.S.C. § 1681s-2(b). The problem is, this duty applies only to information
furnishers, and Midland is not a furnisher of relevant information. It thus never had any such
duty. The same goes for its affiliates.
Consistent with this assessment and with the uncontested record, Midland never reported
a judgment against Lloyd to a credit agency. As a matter of practice, Midland does not report
information on judgments to credit agencies. Even when Midland responded to an inquiry from
a credit agency about the status of Lloyd’s account a few months after the judgment was entered,
Midland said that Lloyd’s account “was satisfied and paid in full.” R. 8-2 at 2.
That leaves Lloyd to object that Midland indeed reported the judgment to a credit agency.
In the course of discovery, however, she never identified any evidence to support the point and

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ultimately had to acknowledge that she does not know who reported the judgment. A “bare
allegation[]” in a complaint will not suffice to rebut a motion to dismiss under Rule 12(b)(6)—
and it makes even less headway against a motion for summary judgment under Rule 56. See
Mitchell v. Toledo Hosp., 964 F.2d 577, 582 (6th Cir. 1992).
Fair Debt Collection Practices Act. In challenging the district court’s disposition of her
claims under this Act, Lloyd argues that Midland is a debt collector covered by the Act and that
it made “false, deceptive, or misleading representation[s]” to her and used “unfair or
unconscionable means to collect or attempt to collect a[] debt.” 15 U.S.C. §§ 1692e, 1692f.
These claims also face a problem but one of a different sort. Claims under the Act must be
brought “within one year from the date on which the violation occurs.” Id. § 1692k(d). Lloyd
claims that Midland violated the Act when the court entered the default judgment. Yet the
default judgment was entered on October 6, 2010, and Lloyd did not file this lawsuit until
September 27, 2012. That was almost two years after the default judgment was entered and
nearly one year late.
Lloyd responds that the discovery rule should preserve her claim—that the one-year
statute of limitations did not begin to run until she knew or had reason to know of the violation.
She adds that she did not learn about the default judgment until February 2012, and that she filed
the lawsuit within a year of discovering her claim. This argument faces two hurdles: It assumes
that the Act’s statute of limitations includes a discovery rule and that she would satisfy it if it did.
We have never decided whether this statute of limitations includes a discovery rule, and we need
not resolve the point today.
Even if the Fair Debt Collection Practices Act contains a discovery rule, Lloyd had
“reason to know” that a default judgment had been entered against her more than a year before

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she filed this complaint. See Sevier v. Turner, 742 F.2d 262, 273 (6th Cir. 1984). The discovery
rule requires “reasonable diligence” by the individual, id., and Lloyd did not exercise it here.
Midland served her with the complaint to recover on the credit card debt. She knew that the
lawsuit was still pending and that a court date had been set when she spoke to Midland about
settling the suit. She never received any confirmation that Midland had moved to dismiss the
case. And she of course never checked the court’s public docket to see if the action had been
dismissed. Although “[w]e might toll a statute of limitations if a plaintiff diligently searches
publicly available information but fails to discover a hidden defect,” we will not do so when a
plaintiff fails to discover the claim because of such a “lack of diligence.” Ruth v. Unifund CCR
Partners, 604 F.3d 908, 913 (6th Cir. 2010). We thus agree with the district court that, even if
the discovery rule applied, Lloyd did not exercise the requisite reasonable diligence to benefit
from it.
Lloyd protests on the ground that Midland committed to “cease all legal actions” against
her following the settlement. R. 31-1 at 15. But if Lloyd took that to mean Midland assumed
responsibility to dismiss the action, she still was free to check with the court (or to look at the
docket) to see if the action had been dismissed. When Lloyd failed to receive any notice from
Midland or the court about her case, “reasonable diligence” required her to investigate. That
would have revealed the default judgment, allowing her to correct the error or file a lawsuit
within the limitations period.
State-law claims. Lloyd filed three pertinent state-law claims—abuse of process, fraud,
and breach of contract—and the district court rightly granted summary judgment to Midland on
two of them. The district court properly held that Lloyd’s state-law claim for abuse of process is
time barred under Tennessee’s applicable one-year statute of limitations.

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See 2014 WL

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3507363, at *12; see Blalock v. Preston Law Grp., P.C., No. M2011-00351-COA-R3-CV, 2012
WL 4503187, at *7 (Tenn. Ct. App. Sept. 28, 2012) (holding that, under Tenn. Code Ann. § 283-104, a one-year statute of limitations applies to abuse-of-process claims). Lloyd again urges us
to apply the discovery rule. But because Tennessee’s requirements mirror the federal ones,
Lloyd does no better in this setting. See Warwick v. Warwick, No. E2011-01969-COA-R3-CV,
2012 WL 5960850, at *16–17 (Tenn. Ct. App. Nov. 29, 2012). “[T]he discovery rule,” the
Tennessee Supreme Court has explained, “tolls the running of the statute of limitations until the
plaintiff knows, or in the exercise of reasonable care and diligence, should know that an injury
has been sustained.” Pero’s Steak & Spaghetti House v. Lee, 90 S.W.3d 614, 621 (Tenn. 2002).
As we have just explained, Lloyd failed to exercise reasonable care and diligence when she
failed to ensure that the state court had dismissed the collection case against her. So it is here.
Lloyd’s fraud and breach-of-contract claims—and the district court’s analysis of them—
are more complicated. As the district court correctly noted, both of these claims stem from
Lloyd’s allegation that Midland violated the settlement agreement by obtaining a default
judgment against her. 2014 WL 3507363, at *11. The district court also correctly recognized
that, in order to succeed, Lloyd would have to prove that Midland’s fraud or breach of contract
caused damages. Id. But then the district court misstepped. It held that, because the alleged
damages “are directly related to [Midland’s] alleged reporting of [Lloyd’s] default judgment,”
the Fair Credit Reporting Act preempted both claims. Id.
Giving Lloyd the benefit of all reasonable inferences, we do not think that her purported
damages were “directly related” to Midland’s alleged judgment reporting. Lloyd’s breach-ofcontract claim relied on the fact that Midland obtained the default judgment, not that it reported

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the judgment to others. Lloyd’s fraud theory also primarily relied on the fact that Midland
obtained the default judgment.
Lloyd could establish either fraud or breach of contract without proving that Midland
reported the judgment. Assume for a moment that someone other than Midland reported the
judgment to the credit agencies (as apparently was the case here), that the judgment ended up on
Lloyd’s credit report, and that, because the judgment was on her credit report, Lloyd suffered
quantifiable damages. Midland’s alleged fraud or breach of contract would be a cause of Lloyd’s
damages, and Midland could still be held liable. It is not the case that any damages would be
related only “to the duties and responsibilities of furnishers of information to a consumer
reporting agency.” See 2014 WL 3507363, at *11. Because the two claims do not rely on the
proposition that Midland was a furnisher of information related to the judgment, they are not
preempted by the Fair Credit Reporting Act’s preemption provisions.

See 15 U.S.C.

§ 1681t(b)(1)(F) (preempting state-law claims “relating to the responsibilities of persons who
furnish information to consumer reporting agencies” (emphasis added)). And because the claims
are not covered by the other preemption provisions, they are not preempted on other grounds
either.

See id. § 1681h(e) (also preempting state-law claims for “defamation, invasion of

privacy, [and] negligence”).
Because these claims are not preempted, we must consider them on the merits. The fraud
claim fails anyway because Lloyd did not show that Midland acted fraudulently. The theory of
this claim is that Midland committed fraud when it purported to settle with her and then allowed
a default judgment to be entered against her. A claim for fraud under Tennessee law must
establish (among other things) that the defendant’s “representation of a present or past fact . . .
was false when it was made” and that “the defendant either knew that the representation was

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false or did not believe it to be true or . . . made the representation recklessly without knowing
whether it was true or false.” Hodge v. Craig, 382 S.W.3d 325, 343 (Tenn. 2012); see Thompson
v. Bank of Am., N.A., 773 F.3d 741, 751 (6th Cir. 2014). Nothing in the record shows that
Midland knowingly made a false statement when it said that it would “cease all legal actions”
against Lloyd. R. 31-1 at 15. The record at most shows an accident or negligence. After the
settlement, Midland treated the account as paid in full until Lloyd brought the mistake to its
attention. At that point, Midland corrected the mistake. No fraud occurred on this record.
The breach-of-contract claim is a different story. To establish a breach of contract under
Tennessee law, as elsewhere, Lloyd must show a contract, breach, and damages caused by the
breach. Life Care Ctrs. of Am., Inc. v. Charles Town Assocs. Ltd. P’ship, LPIMC, 79 F.3d 496,
514 (6th Cir. 1996). A reasonable jury could find all three elements. It could find that Midland
entered a contract with Lloyd (by agreeing with her to settle the lawsuit). It could find that
Midland breached the contract (by failing to cease all legal action against Lloyd when it did not
dismiss the action). And it could find that Midland caused at least two types of damages (by
requiring Lloyd to pay $239.40 for a credit monitoring service because of the judgment and to
spend $12.00 for certified mail to communicate with Midland about the judgment). See 2014
WL 3507363, at *13. As to damages, by the way, that is not all. On remand, Lloyd should be
given the opportunity to produce other cognizable (and admissible) evidence of damages caused
by the breach: that she had to pay a higher interest rate on a loan and was denied a loan because
of the judgment’s impact on her credit score.
For these reasons, we reverse the district court’s grant of summary judgment to Midland
on Lloyd’s breach-of-contract claim and affirm on all other counts.

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