McCarter vs. Kovitz Shifrin Nesbit
Filing
38
MEMORANDUM OPINION Signed by the Honorable John F. Grady on December 18, 2013. Mailed notice(cdh, )
13-3909.131-JCD
December 18, 2013
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JANICE McCARTER, on behalf of
herself and all others similarly
situated,
)
)
)
)
Plaintiff,
)
)
v.
)
)
KOVITZ SHIFRIN NESBIT, an Illinois )
professional corporation,
)
)
Defendant.
)
No. 13 C 3909
MEMORANDUM OPINION
Before the court are defendant’s motions to dismiss the
complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) and
for summary judgment on Count II of the complaint pursuant to
Federal Rule of Civil Procedure 56.
For the reasons explained
below, the motion to dismiss is granted in part and denied in part,
and the motion for partial summary judgment is denied as moot.
BACKGROUND
This is a class action suit against a law firm, Kovitz Shifrin
Nesbit (“Kovitz”), for violations of the Fair Debt Collection
Practices Act (the “FDCPA”), 15 U.S.C. § 1692 et seq.
The
complaint arises out of a December 3, 2012 collection letter that
Kovitz sent to plaintiff, Janice McCarter, for past-due condominium
assessments owed to the Malibu East Condominium Association (the
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“Association”).
discussion
The letter, which we will quote from in our
below,
demanded
full
payment
in
the
amount
of
$14,881.83, which included a charge of $231.90 “in legal fees and
costs in attempting to collect this account.”
(Compl., Ex. A, at
1.)
Count I of the complaint alleges that Kovitz violated § 1692g
of the FDCPA, the section that requires debt collectors to provide
certain debt-validation information to debtors.
In Count II,
plaintiff alleges that Kovitz violated § 1692f of the FDCPA, the
section that prohibits debt collectors from using unfair means to
collect or attempt to collect any debt.
Kovitz moves to dismiss the complaint for failure to state a
claim.
It also moves for summary judgment on Count II.
DISCUSSION
A.
Defendant’s Motion to Dismiss the Complaint
The purpose of a 12(b)(6) motion to dismiss is to test the
sufficiency of the complaint, not to resolve the case on the
merits.
5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356, at 354 (3d ed. 2004).
To survive
such a motion, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’
A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570, 556 (2007)).
Although we must
accept as true all factual allegations in the complaint, we need
not accept as true its legal conclusions.
“Threadbare
recitals
of
the
elements
Iqbal, 556 U.S. at 678.
of
a
cause
of
action,
supported by mere conclusory statements, do not suffice.”
Id.
(citing Twombly, 550 U.S. at 555).
1.
Count I
Section 1692g of the FDCPA requires a debt collector to send,
within five days after an initial communication with a consumer in
connection with the collection of any debt, a written notice to
that consumer that contains certain information about the debt and
the consumer’s rights.
15 U.S.C. § 1692g(a).
The notice, which is
often referred to as a “validation notice,” must contain, among
other things, a statement that “unless the consumer, within thirty
days after receipt of the notice, disputes the validity of the
debt, or any portion thereof, the debt will be assumed to be valid
by the debt collector,” as well as a statement that “if the
consumer
notifies
thirty-day
period
the
debt
that
the
collector
debt,
in
or any
writing
portion
within
thereof,
the
is
disputed, the debt collector will obtain verification of the debt
or a copy of a judgment against the consumer and a copy of such
verification or judgment will be mailed to the consumer by the debt
collector.”
15 U.S.C. § 1692g(a)(3), (4).
The statute also
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provides that collection activities and communication during the
thirty-day period “may not overshadow or be inconsistent with the
disclosure of the consumer’s right to dispute the debt or request
the name and address of the original creditor.”
15 U.S.C. §
1692g(b); see also Chauncey v. JDR Recovery Corp., 118 F.3d 516,
518 (7th Cir. 1997).
When evaluating a debt-collection letter for compliance with
the FDCPA, we apply the “unsophisticated consumer” standard, under
which the letter must be “clear and comprehensible to an individual
who
is
uninformed,
naive,
and
trusting,
but
not
without
a
rudimentary knowledge about the financial world or incapable of
making basic deductions and inferences.” Zemeckis v. Global Credit
& Collection Corp., 679 F.3d 632, 635 (7th Cir. 2012) (citations
and internal quotation marks omitted).
Courts generally view the
confusing nature of a dunning letter as a question of fact that, if
well pleaded, avoids dismissal on a Rule 12(b)(6) motion.
636.
Id. at
A plaintiff fails to state a claim, however, when it is
“apparent from a reading of the letter that not even a significant
fraction of the population would be misled by it.”
Id. (citing
Taylor v. Cavalry Inv., L.L.C., 365 F.3d 572, 574 (7th Cir. 2004)).
Plaintiff
claims
that
that
Kovitz
violated
§ 1692g by
demanding full payment “on or before the expiration of thirty (30)
days after the date of mailing of [the] notice,” Compl. ¶ 28 & Ex.
A, and, in so doing, by “overshadowing” the FDCPA’s required notice
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that a consumer has thirty days to request verification of the
debt, Compl. ¶ 29.
Kovitz’s letter to plaintiff, titled “Thirty
Day Notice and Demand,” stated in pertinent part:
THIS IS YOUR NOTICE THAT AS OF December 1, 2012 you are
in default of your obligation due to the Malibu East
Condominium the sum of $14,649.93 for your proportionate
share of the expenses of administration, maintenance and
repair of the common elements/areas and other expenses
lawfully agreed upon due and owing for the period June 1,
2011 to December 1, 2012 as well as the sum of $231.90 in
legal fees and costs in attempting to collect this
account, for a total sum of $14,881.83.
. . .
In order to bring your account current, you must submit
the amount of $14,881.83 in certified funds (cashier’s
check or money order). This amount may increase after
today with the levy of future assessments, late fees,
attorneys’ fees and costs of collection, all of which
must be satisfied in addition to the foregoing. Should
you not choose to pay any of these charges, including the
legal fees, they must be adjudicated in a court of law in
accordance with 765 ILCS 605/9(g)(1) and/or 735 ILCS 5/9111[.]
THIS IS YOUR NOTICE THAT PAYMENT IN FULL OF THE AMOUNT
STATED ABOVE IS DEMANDED OF YOU, AND THAT UNLESS YOUR
PAYMENT OF THE FULL AMOUNT IS MADE IN CERTIFIED FUNDS
(CASHIER’S CHECK OR MONEY ORDER) ON OR BEFORE THE
EXPIRATION OF THIRTY (30) DAYS AFTER THE DATE OF MAILING
OF THIS NOTICE, THE ASSOCIATION MAY COMMENCE AN ACTION
AGAINST YOU UNDER ARTICLE IX OF THE ILLINOIS CODE OF
CIVIL PROCEDURE GOVERNING FORCIBLE ENTRY AND DETAINER
SEEKING AN ORDER OF POSSESSION OF THE PREMISES AND WHICH
MAY RESULT IN A MONETARY JUDGMENT BEING ENTERED AGAINST
YOU. . . . ONLY FULL PAYMENT OF ALL AMOUNTS DEMANDED IN
THIS NOTICE WILL INVALIDATE THE DEMAND, UNLESS THE PERSON
CLAIMING POSSESSION, OR HIS OR HER AGENT OR ATTORNEY,
AGREES IN WRITING TO WITHDRAW THE DEMAND IN EXCHANGE FOR
RECEIVING PARTIAL PAYMENT.
FEDERAL LAW GIVES YOU THIRTY DAYS AFTER YOU RECEIVE THIS
LETTER TO DISPUTE THE VALIDITY OF THE DEBT OR ANY PART OF
IT. IF YOU DON’T DISPUTE IT WITHIN THAT PERIOD, I’LL
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ASSUME THAT IT’S VALID.
IF YOU DO DISPUTE IT BY
NOTIFYING ME IN WRITING TO THAT EFFECT I WILL, AS
REQUIRED BY LAW, OBTAIN AND MAIL TO YOU PROOF OF THE
DEBT. AND IF, WITHIN THE SAME PERIOD, YOU REQUEST IN
WRITING THE NAME AND ADDRESS OF YOUR ORIGINAL CREDITOR,
IF THE ORIGINAL CREDITOR IS DIFFERENT FROM THE CURRENT
CREDITOR, I WILL FURNISH YOU WITH THAT INFORMATION TOO.
IF YOU REQUEST PROOF OF THE DEBT OR THE NAME AND ADDRESS
OF THE ORIGINAL CREDITOR WITHIN THE THIRTY-DAY PERIOD
THAT BEGINS WITH YOUR RECEIPT OF THIS DEMAND, THE LAW
REQUIRES ME TO SUSPEND MY EFFORTS (THROUGH LITIGATION OR
OTHERWISE) TO COLLECT THE DEBT UNTIL I MAIL THE REQUESTED
INFORMATION TO YOU.
THIS IS AN ATTEMPT TO COLLECT A
DEBT. ANY INFORMATION OBTAINED WILL BE USED FOR THAT
PURPOSE.
(Compl., Ex. A, at 1.)
Kovitz first contends that plaintiff’s claim of confusion is
“without merit as a matter of law” because the collection letter
“effectively parrots the mandatory statutory language” of the
Illinois Forcible Entry and Detainer Act (the “Forcible Entry
Act”),
735
ILCS
5/9-101
et
seq.,
which
applies
to
suits
by
condominium associations to evict unit owners who fail to pay
assessments and requires that a written demand first be served.
(Def.’s Mem. in Supp. of Mot. to Dismiss at 4.)
The statutory
provision cited by Kovitz states: “In the case of a condominium
unit, the demand is not invalidated by partial payment of amounts
due if the payments do not, at the end of the notice period, total
the amounts demanded in the notice for common expenses, unpaid
fines, interest, late charges, reasonable attorney fees incurred
prior
to
the
collection.”
initiation
of
any
735 ILCS 5/9-104.1(b).
court
action
and
costs
of
Kovitz points out that “the
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final sentence of paragraph three of the collection letter,” which
states that “ONLY FULL PAYMENT OF ALL AMOUNTS DEMANDED IN THIS
NOTICE WILL INVALIDATE THE DEMAND, UNLESS THE PERSON CLAIMING
POSSESSION, OR HIS OR HER AGENT OR ATTORNEY, AGREES IN WRITING TO
WITHDRAW THE DEMAND IN EXCHANGE FOR RECEIVING PARTIAL PAYMENT,” is
taken verbatim from the” same subsection of the Forcible Entry Act.
(Def.’s Mem. in Supp. of Mot. to Dismiss at 4.)
The Forcible Entry Act’s provision concerning full payment
does not render plaintiff’s claim “meritless.”
It has nothing to
do with the confusion alleged by plaintiff, which is that payment
is demanded “on or before the expiration of thirty (30) days after
the date of mailing” of the notice (emphasis added), when the
thirty-day federal validation period runs from receipt of the
notice, and there is no explanation of how those periods of time
fit together.
Kovitz argues that “the simple act of demanding
payment in a collection [letter] during the validation period does
not automatically” create confusion, citing Durkin v. Equifax Check
Services, Inc., 406 F.3d 410, 417 (7th Cir. 2005), but that
argument also fails to address the alleged confusion, which stems
from something other than the mere act of demanding payment during
the validation period.
In its reply brief, Kovitz contends that Count I should be
dismissed because its collection letter “uses the exact proposed
language . . . save for deletion of the word ‘however,’” of
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Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997), the decision in
which
the
Court
of
collection letter.
Appeals
fashioned
a
model
“safe
We reject this argument also.
harbor”
The section of
Kovitz’s letter that demanded payment within thirty days after the
date of mailing is not the Bartlett language, and it is that
language that is alleged to overshadow the Bartlett language.
Moreover,
Kovitz’s
letter
omitted
an
important
sentence
of
Bartlett’s model letter: “The law does not require me to wait until
the end of the thirty-day period before suing you to collect this
debt.”
128 F.3d at 502.
Kovitz’s motion to dismiss the complaint will be denied as to
Count I.
2.
Count II
In Count II, plaintiff claims that that Kovitz violated §
1692f
of
the
FDCPA
by
attempting
to
collect
collection costs in the amount of $231.90.
legal
fees
and
That section prohibits
“[t]he collection of any amount (including any interest, fee,
charge, or expense incidental to the principal obligation) unless
such amount is expressly authorized by the agreement creating the
debt or permitted by law.”
15 U.S.C. § 1692f(1).
Kovitz asserts that Count II should be dismissed because the
Association’s
legal
fees
and
costs
were
both
authorized
by
agreement and permitted by law; we will address the “permitted by
law” prong first.
In order to determine whether the collection of
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these amounts was permitted by law, we look to Illinois law.
See,
e.g., Day v. Check Brokerage Corp., 511 F. Supp. 2d 950, 955 (N.D.
Ill. 2007).
The Illinois Condominium Property Act provides in
relevant part:
(a) In the event of any default by any unit owner, his
tenant, invitee or guest in the performance of his
obligations under this Act or under the declaration,
bylaws, or the rules and regulations of the board of
managers, the board of managers or its agents shall have
such rights and remedies as provided in the Act or
condominium instruments including the right to maintain
an action for possession against such defaulting unit
owner or his tenant for the benefit of all the other unit
owners in the manner prescribed by Article IX of the Code
of Civil Procedure [the Forcible Entry Act].
(b) Any attorneys’ fees incurred by the Association
arising out of a default by any unit owner, his tenant,
invitee or guest in the performance of any of the
provisions of the condominium instruments, rules and
regulations or any applicable statute or ordinance shall
be added to, and deemed a part of, his respective share
of the common expense.
765 ILCS 605/9.2.
Illinois law, therefore, not only permits, but
requires that attorneys’ fees incurred by the Association that
arise out of a default be added to a unit owner’s share of the
common expense.
(Each unit owner has the duty to pay his or her
share of the common expenses, pursuant to 765 ILCS 605/9(a).)
Moreover, the Forcible Entry Act requires that a demand for pastdue condominium assessments include “attorneys’ fees claimed for
services incurred prior to the demand,” if those fees are sought.
735 ILCS 5/9-104.1(a).
Although the claimed attorneys’ fees are
subject to review by a court if a forcible-entry proceeding ensues,
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Kovitz was required to include the Association’s claim for those
fees in the collection letter.
Accordingly, with respect to the
attempted collection of legal fees, plaintiff fails to state a
claim for violation of § 1692f.
Next, we examine whether the collection of legal fees and
collection costs was authorized by the agreement creating the debt.
The parties devote considerable attention to this prong of §
1692f(1).
On this issue, the allegations of the complaint are as
follows:
19. Article VI(g) of the Declarations of Malibu East
Condominium Association of 1971 provides, in pertinent
part, that
(g) If an Owner is in default in the monthly
payment
of
the
aforesaid
charges
or
assessments for thirty (30) days, the members
of the Board may bring suit for and on behalf
of themselves and as representatives of all
Owners, to enforce collection thereof or to
foreclose the lien therefore as hereinafter
provided; and there shall be added to the
amount due the costs of said suit, and other
fees and expenses together with legal interest
and reasonable attorneys’ fees to be fixed by
the Court[. T]o the extent permitted by any
decision or any statute or law now or
hereafter effective, the amount of any
delinquent and unpaid charges or assessments,
and interest, costs and fees as above provided
shall be and become a lien or charge against
the Unit Ownership of the Owner involved when
payable and may be foreclosed by an action
brought in the names of the Board as in the
case of foreclosure of liens against real
estate.
(Emphasis Added)
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20.
On
information
and
reasonable
belief,
[the
Association] amended its rules and regulations in 2008.
21.
On reasonable information and belief, [the
Association’s] declarations, Rules and Regulations, as
amended, were never properly recorded and filed at the
Cook County’s [sic] Recorder Office.
. . .
32.
As stated in paragraphs 19-21 . . . [the
Association’s] Declarations, Rules and Regulations, as
amended, provide that late fees, attorney’s fee [sic] and
other charges may be collected in the case the
assessments and other charges are delinquent.
33. However, [the Association’s] Declarations, Rules and
Regulations, as amended, were never properly recorded
and, therefore, had no contractual or legal effect.
34.
In the Collection Letter, Defendant attempted to
collect legal fees and costs in the amount of $231.90
when in fact Defendant was not so entitled by agreement
or contract, or by an order of court.
(Compl. ¶¶ 19-21, 32-34.) These allegations are somewhat difficult
to
decipher,
but
plaintiff’s
response
to
defendant’s
motion
clarifies her theory: any amendments to the Association’s governing
documents that were made in 2008 had no legal effect because they
were
not
recorded,
and
because
the
1971
Declaration
of
the
Association permits only “reasonable attorneys’ fees to be fixed by
the Court,” Kovitz was not authorized by agreement to attempt to
collect a fixed amount of attorneys’ fees and costs.
A condominium declaration is a contract, Streams Sports Club,
Ltd. v. Richmond, 457 N.E.2d 1226, 1230-32 (Ill. 1983), and it
appears to be undisputed that the 1971 Declaration is the governing
contract.
Kovitz
has
submitted
a
copy
of
the
entire
1971
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Declaration, which we can consider without converting its motion to
dismiss into a summary-judgment motion because the agreement is
referred to in the complaint and is central to the claim.
See
Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429,
431–32 (7th Cir. 1993). In addition to the provision quoted in the
complaint, the Declaration also contains the following provision in
Article XI, which is titled “Remedies for Breach of Covenants,
Restrictions and Regulations”:
The violation of any restriction or condition or
regulation adopted by the Board, or the breach of any
covenant or provision herein contained, shall give the
Board the right . . . (b) to enjoin, abate or remedy by
appropriate legal proceedings, either at law or in
equity, the continuance of any breach. All expenses of
the Board in connection with such actions or proceedings,
including court costs and attorneys’ fees and other fees
expenses, and all damages, liquidated or otherwise,
together with interest thereon . . . shall be charged to
and assessed against such defaulting Owner, and shall be
added to and deemed part of his respective share of the
common expenses . . . .
(Def.’s Mot. for Partial Summ. J., Ex. A, at 46-47 (emphasis
added).)
Thus, the Declaration, in two places--Article VI(g) and
Article XI--permits the Association to collect attorneys’ fees and
costs of collection in connection with proceedings to recover pastdue assessments.
Plaintiff’s
argument
that
Kovitz
violated
§
1692f
by
attempting to collect a specific amount of attorneys’ fees and
costs absent a court order contradicts the law in two respects.
First, as discussed above, Illinois law requires that a demand for
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past-due assessments be made prior to the filing of any action and
requires that attorneys’ fees be included in the demand letter.
735 ILCS 5/9-104.1(a).
Second, the Court of Appeals rejected a
similar argument in Fields v. Wilber Law Firm, P.C., 383 F.3d 562,
565 (7th Cir. 2004).
In Fields, the defendant, Wilber, tried to
collect an undisputed contractual debt and an additional amount in
attorneys’ fees.
The plaintiff asserted that the defendant had
violated the FDCPA by “unilaterally determining $250 to be the
amount of attorneys’ fees charged,” thereby “misstat[ing] the
actual amount of the debt.”
383 F.3d at 564.
The Court disagreed,
explaining:
Here, based on a written, signed contract, Wilber
attempted to collect an undisputed debt amount, an
undisputed amount in interest, and an amount in
attorneys’ fees (incurred in the initiation of Wilber’s
collection attempts) . . . . To collect attorneys’ fees
from Fields, Wilber necessarily had to specify an amount
that it intended to charge (or had already charged) for
its services. Fields, of course, could negotiate this
payment or contest the reasonableness of the fees through
a lawsuit. But when a debtor has contractually agreed to
pay attorneys’ fees and collection costs, a debt
collector may, without a court’s permission, state those
fees and costs and include that amount in the dunning
letter. Doing so does not violate the FDCPA. Indeed,
refusing to quantify an amount that the debt collector is
trying to collect could be construed as falsely stating
the amount of debt.
383 F.3d at 565.
The fact that the 1971 Declaration provides that reasonable
attorneys’ fees are to be “fixed” by a court in the event of a suit
to collect delinquent assessments or to foreclose on a lien did not
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prevent the Association from seeking to collect a specific amount
of attorneys’ fees and costs before filing suit.
no authority to the contrary.
Plaintiff cites
Because Kovitz was expressly
authorized to collect the attorneys’ fees and costs that it sought
from plaintiff, plaintiff fails to state a claim for violation of
§ 1692f, and Count II will be dismissed.
Because we see no
likelihood of successful amendment of Count II, the dismissal will
be with prejudice.
B.
Defendant’s Motion for Summary Judgment on Count II
Because of the confusing nature of the allegations of Count
II, which may have led Kovitz to conclude that plaintiff’s theory
of the case was that there was no valid, recorded Declaration of
the
Association
that
permitted
the
collection
of
past-due
assessments and associated costs, Kovitz filed a motion for summary
judgment on Count II on the ground that the 1971 Declaration was
indeed recorded. As discussed above, the briefing on the motion to
dismiss revealed that plaintiff’s theory of Count II was actually
that the 1971 Declaration was recorded and operative. Furthermore,
we have concluded that Count II fails to state a claim on which
relief can be granted.
Accordingly, Kovitz’s motion for summary
judgment on Count II will be denied as moot.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss the
complaint [14] is granted as to Count II and denied as to Count I,
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and defendant’s motion for summary judgment on Count II of the
complaint [16] is denied as moot.
dismissed with prejudice.
Count II of the complaint is
A status hearing is set for January 29,
2013 at 11:00 a.m.
DATE:
December 18, 2013
ENTER:
_______________________________________________
John F. Grady, United States District Judge
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