Marquez et al v. Weinstein, Pinson & Riley, P.S. et al
Filing
222
MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 4/24/2019: For the reasons set forth in the accompanying Memorandum Opinion and Order, defendant NCO's motion for summary judgment 195 is denied, and the plaintiffs' ; motion for summary judgment on the issue of liability 191 is granted as against defendants WPR and NCO. A status hearing is scheduled for May 15, 2019, at 9:00 a.m. to discuss the remaining issues in the case. Pursuant to Fed. R. Civ. P. 56(f), d efendant Moscov is required to show cause at the status hearing why summary judgment should not be entered against him on the same basis that it is entered as to WPR. The Court also anticipates unsealing all exhibits referred to in this opinion; any objections must be made in writing before this date and with a document-by-document explanation as to why continued sealing of that document is appropriate. Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ERICK MARQUEZ, IRAIDA
GARRIGA, formerly known as Iraida
Ortiz, and DORIS RUSSELL, on behalf
of plaintiffs and a class,
Plaintiffs,
v.
WEINSTEIN, PINSON & RILEY, P.S.,
EVAN L. MOSCOV, and EGS
FINANCIAL CARE, INC.,
Defendants.
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No. 14 CV 739
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
In late 2013, the law firm Weinstein, Pinson & Riley, P.S. (“WPR”) filed debt collection
lawsuits in Illinois state court against Erick Marquez, Iraida Garriga (formerly Iraida Ortiz), and
Doris Russell. These three individuals—the named plaintiffs in this action—subsequently brought
this suit against WPR, as well as its client EGS Financial Care, Inc., which was then known as
NCO Financial Systems, Inc., 1 and Evan L. Moscov, an attorney at the firm. The plaintiffs sued
under the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., claiming that
the state court complaints violated the act’s prohibition on false and misleading representations
made in connection with the collection of a debt. One of the defendants, NCO, has now moved for
summary judgment, while the plaintiffs have moved for summary judgment against both WPR and
NCO on the issue of liability. The plaintiffs’ motion is granted and NCO’s motion is denied.
1
For ease of reference, the Court will refer to this entity as “NCO” throughout.
BACKGROUND
Marquez, Garriga, and Russell all live in Chicago. Marquez and Russell each obtained
loans in order to pay for their college educations; Garriga, who is Marquez’s mother, was a cosigner on his loans. These loans were owed to various trusts known as the National Collegiate
Student Loan Trusts. After the plaintiffs failed to make payments on each of these loans, the loans
went into default.
In 2009, NCO entered into an agreement with First Marblehead Education Resources, Inc.,
an entity described in the contract as the “Special Servicer” to various trusts consisting of student
loans. That contract was titled “Default Prevention and Collection Services Agreement.” Ex. 10 at
1, ECF No. 193-1. In it, NCO represented that it provided “default prevention and collections
services” to financial institutions, and it agreed that it would “use all reasonable and lawful efforts
to collect the full amount due on all accounts placed with it by Special Servicer for collection.” Id.
at 1, 4. Three years later, NCO entered into a second agreement, in the form of an amendment to
the first one, with U.S. Bank National Association, which had replaced First Marblehead as a
“successor Special Servicer” for the trusts. Parties’ Agreed Fact Statement in Supp. of Cross-Mots.
for Summ. J. on Liability (“Agreed Facts”) ¶¶ 23-24, ECF No. 193. In the amended agreement,
NCO agreed to collect student loans held by the National Collegiate trusts that were “pre-default,”
meaning that they had been delinquent for less than 180 days, as well as those that were already in
default. See Local Rule 56.1 Statement of Material Facts in Supp. of Pls.’ Mot. for Summ. J. on
Liability (“Pls.’ Additional Facts”) ¶ 3, ECF No. 194.
The amended agreement provided that, as one method of carrying out this collection, “NCO
shall administer, manage and oversee collection litigation consistent with the terms of this
Agreement.” Ex. 11 at 7, ECF No. 193-1. NCO administered this collection litigation through a
network consisting of more than 150 law firms to which NCO would refer debts for collection.
2
See Agreed Facts ¶ 32; Pls.’ Additional Facts ¶ 5. One of these law firms was WPR. After applying
to and being accepted into the network, WPR entered into an “Attorney Network Services
Agreement” with NCO in March 2013. The contract provided that “NCO, on behalf of the Client,
hereby retains you to collect monies owed Client on unpaid and delinquent accounts referred to
you by NCO during the terms of this Agreement.” Agreed Facts ¶ 44.
In November 2013, WPR filed three lawsuits against Marquez and Garriga, and the
following month, it filed a fourth complaint against Russell. These four complaints, all of which
were signed by Moscov, were all quite similar to each other. All four of these complaints were
filed in the Circuit Court of Cook County, and all four sought to collect the individuals’ unpaid
student loan debts. The nominal plaintiff in each of these cases was one of the National Collegiate
Student Loan Trusts. All of the complaints alleged that the individuals had entered into loan
agreements and failed to make payments on them, thereby breaching the agreements. In addition,
all of them included a paragraph (“Paragraph 12”) that contained the following language:
Pursuant to 11 U.S.C. §1692g(a) [sic], Defendants are informed that
the undersigned law firm is acting on behalf of Plaintiff to collect
the debt and that the debt referenced in this suit will be assumed to
be valid and correct if not disputed in whole or in part within thirty
(30) days from the date hereof.
App. A ¶ 12, ECF No. 67-1; App. B ¶ 12, ECF No. 67-2; App. C ¶ 12, ECF No. 67-3; App. D ¶ 12,
ECF No. 67-4.
Marquez, Garriga, and Russell filed this lawsuit in February 2014, contending that
Paragraph 12 violated § 1692e of the FDCPA, which provides that a “debt collector may not use
any false, deceptive, or misleading representation or means in connection with the collection of
any debt.” This Court dismissed the plaintiffs’ complaint with prejudice in October 2015,
determining that the plaintiffs had failed to state a claim under Rule 12(b)(6) of the Federal Rules
of Civil Procedure. See generally Order and Statement, ECF No. 79. On appeal, the Seventh Circuit
3
reversed. The Seventh Circuit held that the language in Paragraph 12 was “misleading and
deceptive as a matter of law” and remanded the case for further proceedings. Marquez v. Weinstein,
Pinson & Riley, P.S., 836 F.3d 808, 815 (7th Cir. 2016). This Court subsequently granted the
plaintiffs’ motion for class certification and certified a class consisting of all individuals in Illinois
against whom WPR filed a complaint between February 3, 2013, and February 23, 2014, that
contained the contested language in Paragraph 12. See Mem. Op. and Order 20-21, ECF No. 159.
Pointing to the Seventh Circuit’s ruling, the plaintiffs have now moved for summary judgment
against both WPR and NCO on the issue of liability. 2 NCO, however, has also moved for summary
judgment. It argues that it is not a “debt collector” under the meaning of the FDCPA and that it is
not liable for any violation of the statute that may have occurred.
DISCUSSION
A court shall grant summary judgment “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a). A factual dispute is genuine if “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). In reviewing a motion for summary judgment, the Court “construe[s] all facts and
2
For reasons that defy easy discernment, the plaintiffs have not actually sought summary
judgment against defendant Moscov. See Pls.’ Mot. for Summ. J. on Liability 2-3, ECF No. 191
(seeking relief against WPR and NCO only); Mem. in Supp. of Pls.’ Mot. for Summ. J. on Liability
1, ECF No. 192 (memo submitted in support of summary judgment against WPR and NCO).
Equally befuddlingly, Moscov’s counsel nevertheless responded to the summary judgment motion
as if the plaintiffs had moved against him as well. See Weinstein, Pinson & Riley, P.S. and Evan
L. Moscov’s Resp. in Opp’n to Pls.’ Mot. for Summ. J., ECF No. 204 (“WPR Response”). The
joint WPR/Moscov response brief does not, however, offer any arguments peculiar to Moscov.
The Court takes from this curious state of affairs that the parties agree that with respect to the
plaintiffs’ summary judgment motion, as WPR goes, so goes Moscov. And like the briefs, this
opinion will generally not distinguish between WPR and Moscov.
4
inferences in favor of the nonmoving party.” Love v. JP Cullen & Sons, Inc., 779 F.3d 697, 701
(7th Cir. 2015).
I.
Defendant WPR
Section 1692e of the FDCPA states that a “debt collector may not use any false, deceptive,
or misleading representation or means in connection with the collection of any debt.” Without
limiting the application of that general definition, the statute also goes on to provide a nonexhaustive list of conduct that is considered a violation of this provision. This list includes the
“false representation” of “the character, amount, or legal status of any debt,” as well as the “use of
any false representation or deceptive means to collect or attempt to collect any debt or to obtain
information concerning a consumer.” 15 U.S.C. § 1692e(2)(A), (10).
With respect to WPR, the FDCPA analysis is straightforward. WPR does not contest that
it is a “debt collector” under the meaning of the statute. Nor does it contest that the representations
it made in Paragraph 12 of the state court complaints were made “in connection with” the collection
of a debt. They quite clearly were, as the entire purpose of those lawsuits was to collect outstanding
debts. In addition, as noted above, the Seventh Circuit has held that Paragraph 12 was misleading
and deceptive as a matter of law.
WPR makes only two arguments in opposition to summary judgment, both of which are
foreclosed by the law of the case doctrine. 3 First, citing the Supreme Court’s decision in Spokeo,
3
Under this doctrine, a “ruling made in an earlier phase of a litigation controls the later
phases unless a good reason is shown to depart from it.” Tice v. Am. Airlines, Inc., 373 F.3d 851,
853 (7th Cir. 2004); see also United States v. Harris, 531 F.3d 507, 513 (7th Cir. 2008) (“Under
the law of the case doctrine, a court generally should not reopen issues decided in earlier stages of
the same litigation.”). The doctrine, however, is a flexible one; it permits a court “to revisit an
issue if an intervening change in the law, or some other special circumstance, warrants reexamining
the claim.” United States v. Thomas, 11 F.3d 732, 736 (7th Cir. 1993). One other generally
accepted exception applies “if the court is ‘convinced that [its prior decision] is clearly erroneous
and would work a manifest injustice.’” Agostini v. Felton, 521 U.S. 203, 236 (1997) (quoting
Arizona v. California, 460 U.S. 605, 618 n.8 (1983)). The law of the case doctrine is closely related
5
Inc. v. Robins, 136 S. Ct. 1540 (2016), it contends that the plaintiffs have failed to adequately
allege that they suffered an injury in fact and thus lack standing under Article III. Spokeo reiterated
that to establish injury in fact, a plaintiff “must show that he or she suffered ‘an invasion of a
legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not
conjectural or hypothetical.’” Id. at 1548 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560
(1992)). It clarified that concreteness and particularization are two separate and independent
requirements, and that to be concrete, an injury must “actually exist”; it must be “real,” and not
“abstract.” Id. WPR asserts that none of the plaintiffs have suffered any concrete harm as a result
of the language in Paragraph 12, and that they therefore lack standing. See WPR Response 7-9.
The problem, however, is that this Court has already decided this issue. WPR made this
same argument in its brief in opposition to the plaintiffs’ motion for class certification. See Resp.
in Opp’n to Pls.’ Mot. for Class Certification 3-5, ECF No. 143. In its ruling granting the motion,
the Court discussed this argument at some length and rejected it, concluding that the plaintiffs had
suffered a concrete harm and that they had standing to assert their FDCPA claims. See Mem. Op.
and Order 3-9. The Court reached this conclusion in light of both Spokeo and two other, more
recent Seventh Circuit decisions that interpreted and applied it to standing questions, Groshek v.
Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017), and Meyers v. Nicolet Rest. of De Pere,
LLC, 843 F.3d 724 (7th Cir. 2016).
WPR’s most recent brief inexplicably ignores all of this. The firm makes no new arguments
as to why the plaintiffs lack standing that were not present in its earlier filing. WPR has not pointed
to any “special circumstance” that would indicate that the law of the case doctrine should not apply
to the mandate rule, which “requires a lower court to adhere to the commandments of a higher
court on remand.” United States v. Polland, 56 F.3d 776, 777 (7th Cir. 1995).
6
and that this Court should reconsider its prior decision. It has not argued that the Court’s previous
decision was clearly erroneous—indeed, it has ignored that decision entirely, and does not even
cite or mention the Court’s prior ruling. Nor has WPR contended that there has been an intervening
change in the law since then. All of the opinions cited in its section on standing were published
before this Court’s ruling on class certification, and other than Spokeo, none of them are binding
on this Court. 4 The Court concludes, therefore, that its previous ruling is the law of the case, and
it will not reconsider that decision. The plaintiffs have standing to assert their FDCPA claims.
WPR’s second argument against summary judgment is that the plaintiffs have not met
their burden to show that Paragraph 12 contained a materially false or misleading statement. In
this circuit, claims that a defendant has violated 15 U.S.C. § 1692e are evaluated under an objective
“unsophisticated consumer” standard. That is, the question whether a debt collector has violated
§ 1692e turns on whether “the debt collector’s communication would deceive or mislead an
unsophisticated, but reasonable, consumer.” Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995
(7th Cir. 2003). The Seventh Circuit has also interpreted § 1692e as requiring a plaintiff to
demonstrate that a false or misleading statement is material, which means that the statement must
have “the ability to influence a consumer’s decision.” Lox v. CDA, Ltd., 689 F.3d 818, 826 (7th
Cir. 2012) (quoting O’Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 942 (7th Cir.
2011)) (emphasis in original). Whether a statement is “false, deceptive, or misleading” and
whether it is material are distinct issues. See, e.g., id. at 822-27 (separately addressing whether a
4
In addition, in Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337 (7th Cir. 2018),
decided after the briefing in this case was complete, the Seventh Circuit concluded that the
plaintiffs in an FDCPA case alleging violations of § 1692e had Article III standing to pursue their
claims in light of Spokeo. See id. at 344-46.
7
statement was misleading and material); Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362,
366-68 (7th Cir. 2018) (same). 5
In the present case, the Seventh Circuit determined that the statements at issue were plainly
deceptive and misleading to an unsophisticated consumer and that “Paragraph 12 is misleading
and deceptive as a matter of law.” Marquez, 836 F.3d at 815. WPR correctly notes that the Seventh
Circuit did not directly address whether this misrepresentation was material, and it argues that it
was not. The plaintiffs respond, however, that the materiality question is nevertheless controlled
by the Seventh Circuit’s opinion, as the conclusion that the misstatement in Paragraph 12 was
material is implicit in that court’s decision.
The plaintiffs have the better of this argument. The Seventh Circuit concluded that
Paragraph 12 is misleading to an unsophisticated consumer in two distinct ways: both “as to the
proper timing to respond to the complaint and as to the manner of response.” Id. at 813. First, with
respect to timing, the court wrote:
A plain reading of the summons and the complaint would cause a
consumer to believe that he had until the date in the summons to file
an answer and contest the claim, but that beyond the 30-day period
in paragraph 12 he could no longer contest the validity or correctness
of the debt. Because the 30-day period would expire before the date
that the answer had to be filed for each of the litigants, those
provisions in conjunction would lead an unsophisticated consumer
to believe that he had that 30-day period to dispute the debt and
beyond that period he could not dispute that debt in his answer.
5
There is some language in the Seventh Circuit’s case law that, divorced from context,
might be read to suggest that the materiality requirement is subsumed into the analysis dealing
with whether a statement is misleading or deceptive. See, e.g., Hahn v. Triumph P’ships LLC, 557
F.3d 755, 758 (7th Cir. 2009) (“A statement cannot mislead unless it is material.”). In context,
however, it is clear that in Hahn the court used the term “misleading” to define a false statement
that would matter to the unsophisticated consumer—i.e., a materially false statement—and
expressly confirmed that not all false statements are material.
8
Id. For all of the plaintiffs, the time provided to “dispute the debt” was shorter than the time period
provided by law for them to answer the complaint. The result, the Seventh Circuit said, was that
an “unsophisticated consumer” would be led to believe that “beyond that time period in Paragraph
12 for disputing the debt, even if filing an answer, the validity of the debt could no longer be
disputed in that answer.” Id.
Second, regarding the manner of response, the Seventh Circuit observed that the language
in Paragraph 12 concerning the 30-day period to dispute the debt “mirrored the earlier demand
letter to the consumers informing them of their rights to dispute the debt.” Id. at 814. “The inclusion
of that sentence in the complaint,” it said,
would lead an unsophisticated consumer to believe that she must
dispute the debt through the procedures outlined in the earlier letter,
rather than in an answer in court, or she would forfeit her right to
contest the debt. That would place the consumers at risk of losing
their rights in court if they disputed the debt through contact with
the debt collectors rather than in the form of an answer.
Id.
This analysis compels the conclusion that Paragraph 12 must be deemed material. As
already noted, the test for whether a misstatement is material is whether the statement has the
ability to influence a consumer’s decision. Misleading a debtor about his or her ability to contest
a debt and to respond to a lawsuit seeking to collect an unpaid debt plainly could influence a
consumer’s decision. Consider, for example, an unsophisticated consumer who is misled in the
first way that the Seventh Circuit describes, and is led to think that beyond the time period in
Paragraph 12, the validity of the debt cannot be disputed in the answer. Then imagine that this
person does not get around to answering the complaint until after the 30-day period in Paragraph
12 has elapsed. The language in Paragraph 12 could reasonably lead this unsophisticated consumer
to conclude that he or she could no longer contest the validity of the debt, and to not do so in the
9
answer as a result. The issue of whether Paragraph 12 was material, therefore, is controlled by the
Seventh Circuit’s decision, which permits no other conclusion but that the statements included in
Paragraph 12 of the complaints could have prompted an unsophisticated consumer to act in a
manner that compromised his or her ability to contest the collection action. To the extent that WPR
contends that no consumer could have actually been misled in any way that would have had the
ability to influence their decisions, see WPR Response 4-6, the law of the case doctrine and the
mandate rule foreclose this line of argument.
WPR also asserts that there is no evidence that any of the named plaintiffs in this case—or
any of the unnamed class members—were actually misled by Paragraph 12. See id. at 6-7. That is
beside the point. 6 Again, the applicable standard of materiality is whether the statement has the
ability to influence the decisions of an unsophisticated consumer. Lox, 689 F.3d at 826-27
(misleading statement was material whether or not it actually affected plaintiff’s conduct). This is
an objective, not subjective, inquiry. The fact that the plaintiffs in this particular case may not have
been influenced by the language in Paragraph 12 is not relevant to the materiality analysis.
In summary, neither of WPR’s arguments is convincing. The Court concludes that there is
no genuine issue of material fact as to any of the elements of liability under § 1692e and that the
plaintiffs are entitled to judgment as a matter of law. Accordingly, summary judgment is granted
in the plaintiffs’ favor against WPR on the issue of liability.
6
Evidence of lack of confusion is, however, often relevant to the question whether a
statement is misleading (rather than material). Lox, 689 F.3d at 822 (as to statements that are
potentially misleading, “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”). But here, the Seventh Circuit has determined that the
statements in Paragraph 12 were misleading as a matter of law, and this Court is not free to revisit
that question no matter how compelling the defendants’ evidence of lack of confusion.
10
II.
Defendant NCO
As the previous section demonstrates, it is clear that a violation of the FDCPA took place.
It is uncontested that WPR is a debt collector under the FDCPA and that the representations in the
state court complaints were made “in connection with” the collection of a debt. It is also established
that the misstatements in Paragraph 12 were misleading and that they were material. The central
dispute between the plaintiffs and NCO is whether NCO can be held liable for those misstatements.
That question, in turn, primarily depends on whether NCO can be classified as a “debt collector”
under the meaning of the FDCPA.
This can be seen by looking at two key cases: Janetos v. Fulton Friedman & Gullace, LLP,
825 F.3d 317 (7th Cir. 2016), and Wadlington v. Credit Acceptance Corp., 76 F.3d 103 (6th Cir.
1996) (cited with approval in Janetos). In Janetos, the plaintiffs sued both a creditor (Asset
Acceptance, LLC) and a law firm (Fulton Friedman & Gullace). Fulton had sent collection letters
to the plaintiffs on behalf of Asset Acceptance. These letters identified Asset Acceptance as the
“assignee” of the original creditors but said that the plaintiffs’ accounts had been “transferred”
from Asset Acceptance to Fulton, and did not explicitly identify Asset Acceptance as the current
creditor. Janetos, 825 F.3d at 319. The Seventh Circuit determined that Fulton’s letters violated
the FDCPA and granted summary judgment in the plaintiffs’ favor on the issue of liability against
Fulton. See id. at 321-25.
The Janetos court then turned to the question whether Asset Acceptance could be held
vicariously liable for the letters that Fulton had drafted and sent. It determined that the answer was
yes, on the basis that Asset Acceptance was itself a debt collector. It wrote that a “debt collector
should not be able to avoid liability for unlawful debt collection practices simply by contracting
with another company to do what the law does not allow it to do itself,” and that it was fair “to
require a debt collector who is independently obliged to comply with the [FDCPA] to monitor the
11
actions of those it enlists to collect debts on its behalf.” Id. at 325. Had Asset Acceptance not been
a debt collector, however, the outcome would have been different. As the Janetos court noted, “a
company that is not a debt collector would not ordinarily be subject to liability under the [FDCPA]
at all.” Id. Citing Wadlington, it wrote that for companies that are not debt collectors, “it makes
less sense to impose vicarious liability on such a company for its attorney’s violations simply
because the attorney happens to be a debt collector.” Id. (citing Wadlington, 76 F.3d at 108). In
Wadlington, the Sixth Circuit held that companies that were not debt collectors could not be held
liable for filings by their attorneys that violated the FDCPA, largely on the basis that the relevant
statutory provision “imposes liability only on a ‘debt collector who fails to comply with [a]
provision of this subchapter.’” Wadlington, 76 F.3d at 108 (quoting 15 U.S.C. § 1692k) (emphasis
in original).
To synthesize, the rule that emerges from Janetos and Wadlington is that if a company is a
debt collector under the FDCPA, it cannot use a third party such as a law firm to shield itself from
liability under the statute, and it will be vicariously liable for FDCPA violations committed by that
third party on its behalf. 7 But if the company is not itself a debt collector, then it will not be subject
to liability (vicarious or otherwise) for actions taken to collect a debt. The key question, then, is
whether NCO is a debt collector under the FDCPA.
7
Attempting to draw an untenable distinction between debt collection activity and legal
work, NCO mischaracterizes Janetos by asserting that the case “recognizes that vicarious liability
does not attach when the party creating the underlying liability is, like here, a lawyer operating as
an advocate in a lawyerly capacity.” EGS Financial Care Inc.’s Reply in Supp. of Mot. for Summ.
J. 7, ECF No. 208. Nothing in Janetos supports NCO’s premise that a company that is itself a debt
collector—like NCO (see infra at 13-16)—can escape responsibility for misleading material
statements made in connection with litigation activity by a debt collector/attorney it hires to collect
a debt. To the contrary, in Wadlington, with which the Seventh Circuit expressly agreed, the debt
collector/attorney was, like WPR, hired to pursue litigation to collect unpaid debts. See 76 F.3d at
106. Neither Janetos nor Wadlington suggests an exception to the vicarious liability rule when the
primary violator is an attorney trying to collect debts while acting in “a lawyerly capacity.”
12
“Whether a defendant is a ‘debt collector’ as defined by the FDCPA is a question of law
appropriate for resolution on summary judgment.” Schlaf v. Safeguard Props., LLC, No. 15 C
50113, 2017 WL 4856227, at *2 (N.D. Ill. Aug. 29, 2017), aff’d, 899 F.3d 459 (7th Cir. 2018).
The statutory definition provides that the term “debt collector” means “any person who uses any
instrumentality of interstate commerce or the mails in any business the principal purpose of which
is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly,
debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6) (emphasis added).
The statute also lists a series of specific, enumerated exceptions to this general definition. For
example, one of them states that the term “debt collector” does not include a person who is
collecting or attempting to collect a debt when that debt “was not in default at the time it was
obtained by such person.” 15 U.S.C. § 1692a(6)(F).
As the Seventh Circuit has made clear, the general definition for a debt collector is
disjunctive; that is, it “establishes two categories of debt collectors: (1) those whose ‘principal
purpose . . . is the collection of any debts,’ and (2) those who ‘regularly collect[ ] or attempt[ ] to
collect, directly or indirectly, debts owed or due or asserted to be owed or due another.’” Schlaf v.
Safeguard Prop., LLC, 899 F.3d 459, 466 (7th Cir. 2018) (citations omitted). An entity will qualify
as a debt collector if it falls in either of these two categories. In NCO’s briefing, its arguments that
it is not a debt collector rest primarily on the actions it has taken—or not taken—in this particular
case. Rather remarkably, it has all but ignored the actual statutory definition of “debt collector”
throughout its briefing. While it has contended that it did not act as a debt collector in the context
of this case, it has not made any serious effort to argue either that its “principal purpose” is not
debt collection or that it does not “regularly collect” debts under the meaning of the FDCPA. This
omission is all the more striking given that the plaintiffs have explicitly advanced the argument
13
that NCO qualifies as a debt collector under the “regularly collects” prong of the statute. See Mem.
in Supp. of Pls.’ Mot. for Summ. J. on Liability 9.
Taking the record as a whole, the Court concludes that NCO “regularly collects” debts
within the meaning of the FDCPA. The evidence for this proposition consists of several
components. First, there is NCO’s acknowledged history of debt collection activity. In at least one
previous case, Monreal v. NCO Sys., Inc., No. 5:15-cv-00151-XR (W.D. Tex. Feb. 26, 2015), NCO
explicitly admitted in its filings that it is a debt collector under the FDCPA. See Ex. 18 ¶ 8, ECF
No. 194-1 (“Defendant NCO is a debt collector as defined in the FCDPA.”); Ex. 19 ¶ 8, ECF No.
194-1 (“NCO admits the allegations contained in Paragraph 8.”). NCO continues to admit that it
was a debt collector in the context of the Monreal matter, though it denies that it was acting as a
debt collector in the context of this lawsuit. EGS Financial Care, Inc.’s Resp. to Pls.’ Rule 56.1
Statement of Material Facts ¶ 11, ECF No. 203. It further admits that “historically it did engage in
collection activities” and that it “currently holds a collection agency license from the state of
Illinois.” NCO Financial Systems, Inc.’s Answer and Affirmative Defenses to Pls.’ Second Am.
Compl. ¶¶ 14-15, ECF No. 98. At least one other judge in this district has also previously
concluded that NCO “acts as a debt collector, as defined by § 1692a of the FDCPA, because it
regularly uses the mails to collect, or attempt to collect, consumer debts, in the Northern District
of Illinois.” Allen v. NCO Fin. Sys., Inc., No. 01 C 3992, 2002 WL 1291791, at *2 (N.D. Ill. June
11, 2002) (emphasis added).
Second, NCO has filed a large number of collection suits in its own name in the recent
past. The plaintiffs contend that between December 2013 and October 2016, “NCO filed at least
164 collection suits in its own name in state courts around the United States.” Pls.’ Additional
Facts ¶ 12. They further assert that between June 1996 and July 2013, “NCO filed 404 small claims
14
collection cases in various courts in Indiana.” Id. ¶ 13. NCO denies this, on the grounds that the
exhibits that the plaintiffs have provided to support these points show only cases in which NCO
appeared in the case captions, and do not reflect collection suits in NCO’s name. See EGS Financial
Care, Inc.’s Resp. to Pls.’ Rule 56.1 Statement of Material Facts ¶¶ 12-13. With respect to the state
court cases, however, the dockets of a large majority of the cases that the plaintiffs have provided
reflect that the type of suit listed for these cases is something like “collections” or “enforcing
judgments.” See generally Ex. 21, ECF No. 194-1. NCO has offered no reason to doubt that these
descriptions accurately summarize the contents of the cases, nor has it offered any other
explanation for why it was bringing all of these lawsuits if they were not collections cases. 8
Third, NCO’s status as a debt collector is reinforced by the existence of its attorney
network. Around December 2012, NCO maintained a network of more than 150 law firms. Agreed
Facts ¶ 32. Law firms that wished to become members of this network were required to complete
an application. Id. ¶ 33. The application form stated that the attorney network applied “the skills,
resources, and expertise of more than 150 qualified, reputable collection law firms to our clients’
portfolios,” and added that these firms “operate in every jurisdiction of the United States.” Id. ¶ 35.
As NCO itself concedes, once firms were accepted into the network, what NCO ultimately did
with this network was to “refer debts to law firms in its attorney network for collection.” Pls.’
Additional Facts ¶ 5; EGS Financial Care, Inc.’s Resp. to Pls.’ Rule 56.1 Statement of Material
Facts ¶ 5 (emphasis added). This fact provides further evidence for the proposition that NCO
regularly collected debts under the meaning of the FDCPA.
8
NCO makes no claim, for example, that it was engaged in collecting debts that it owned.
See Henson v. Santander Consumer USA Inc., 137 S. Ct. 1718 (2017) (individuals and entities that
regularly purchase debts originated by someone else and then seek to collect those debts for their
own accounts are not “debt collectors” under the FDCPA).
15
Finally, this point is further underscored by the facts of this particular case and the nature
of NCO’s relationship with WPR. NCO and WPR entered into an “Attorney Network Services
Agreement” in March 2013. Agreed Facts ¶ 43. In describing the purpose of that agreement, the
contract stated that “NCO, on behalf of the Client, hereby retains you to collect monies owed Client
on unpaid and delinquent accounts referred to you by NCO during the terms of this Agreement.”
Id. ¶ 44. WPR agreed to “diligently pursue the collection of monies due on the referred accounts
promptly and in accordance with applicable state and federal law as interpreted in your
jurisdiction.” Id. Between March 12, 2013, and February 23, 2014, WPR filed 929 lawsuits in
Illinois containing the Paragraph 12 language at issue in this case. See id. ¶ 14.
Based on all of this information, the Court concludes that NCO is a debt collector under
the “regularly collects” prong of the FDCPA’s definition. Prince v. NCO Fin. Servs., Inc, 346 F.
Supp. 2d 744 (E.D. Pa. 2004), which NCO relies on, is not to the contrary. In Prince, the court
determined that NCO was not a debt collector under the FDCPA, see id. at 751; NCO cites this
case for the proposition that it cannot “always” be considered a debt collector. See EGS Financial
Care Inc.’s Resp. in Opp’n to Pls.’ Mot. for Summ. J. 3-4, ECF No. 205. Prince, however, is
distinguishable from the present case in a critical way. Recall that the FDCPA’s definition of a
debt collector contains a list of specific statutory exceptions, one of which is that it does not apply
when the collection activity “concerns a debt which was not in default at the time it was obtained
by such person.” 15 U.S.C. § 1692a(6)(F). The Prince court granted summary judgment in NCO’s
favor because the plaintiff had not raised a genuine issue of material fact as to whether her account
was in default. See Prince, 346 F. Supp. 2d at 747-50. In other words, the reason that NCO was
not considered to be a debt collector was that a specific statutory exception applied. Here, the loans
were in default, see Agreed Facts ¶¶ 49-50, and NCO has made no attempt to argue that they were
16
not. While NCO is correct that it may not “always” be a debt collector, because the Court has
determined that it falls under the “regularly collects” prong of the statute, it is a debt collector for
the purposes of this case unless a specific exception applies. NCO has not even tried to argue that
any such exception would apply here.
As Janetos makes clear, because NCO is itself a debt collector, it can be held vicariously
liable for the actions taken by the attorneys with whom it contracted. As the Seventh Circuit wrote
in Janetos, it is “fair and consistent with the [FDCPA] to require a debt collector who is
independently obliged to comply with the [FDCPA] to monitor the actions of those it enlists to
collect debts on its behalf.” Janetos, 825 F.3d at 325. That is precisely what NCO enlisted WPR
to do in this case. Here, the state court lawsuits were all filed by WPR and signed by Moscov.
While the nominal plaintiffs in these cases were the National Collegiate trusts, it is clear, as both
this Court and the Seventh Circuit have previously observed, that the lawsuits were filed on behalf
of NCO. See Mem. Op. and Order 2 n.1; Marquez, 836 F.3d at 809. NCO itself writes in its briefing
that it “retained the law firm of WPR to collect money owed to various creditors.” Mem. of Law
in Supp. of EGS Financial Care Inc.’s Mot. for Summ. J. 7, ECF No. 196. WPR was a member of
NCO’s attorney network, and NCO referred debts to the firm, including the plaintiffs’ debts, for
collection. As such, the application of vicarious liability is appropriate.
NCO makes various arguments to the effect that Janetos does not control this case, but its
efforts are unpersuasive. First, it contends, again, that it is not a debt collector and so is not subject
to the FDCPA at all. See id. As outlined above, however, this Court has already rejected that
conclusion. NCO also quotes the following language from Janetos: “As the Sixth Circuit explained
in Wadlington, it makes less sense to impose vicarious liability on such a company for its attorney’s
violations simply because the attorney happens to be a debt collector.” Janetos, 825 F.3d at 325.
17
What NCO ignores is that the previous sentence in Janetos makes crystal clear that the phrase
“such a company” refers to “a company that is not a debt collector.” Id.
NCO also asserts that it is inappropriate for a “lay entity” such as itself to be required “to
control, supervise or monitor the actions of a lawyer in the legal process.” Mem. of Law in Supp.
of EGS Financial Care Inc.’s Mot. for Summ. J. 7. It notes that it did not prepare any of the legal
pleadings at issue in this case and that it did not review or approve the complaints that were filed
by WPR. Id. at 8. NCO further observes that the language in Paragraph 12 was purely “legal,” in
the sense that it was a pure statement of law and did not involve, for example, a case where the
complaint misrepresented facts that NCO had provided to WPR. Id. In this context, it writes,
“Janetos recognizes that vicarious liability does not attach when the party creating the underlying
liability is, like here, a lawyer operating as an advocate in a lawyerly capacity.” Id. at 7.
This reading of Janetos is simply mistaken. In Janetos itself, the party that “creat[ed] the
underlying liability” was a law firm, Fulton Friedman & Gullace, just as in this case. It is true that
the misrepresentation in Janetos came in a collection letter rather than a court filing, and the
misrepresentation was arguably of a somewhat more “factual” than purely “legal” nature. But there
is simply nothing in Janetos that would indicate that either of these distinctions is legally
meaningful. Indeed, the opinion specifically rejected the proposition that “actual control over the
specific challenged conduct” was required in order for vicarious liability to attach. Janetos, 825
F.3d at 326. Moreover, in Wadlington, which Janetos cited with approval, the attorney responsible
for the primary conduct that was potentially violative of the FDCPA was, like WPR, an attorney
engaged in litigation activity. See 76 F.3d at 106. These two cases cannot be read to create the
distinction that NCO suggests. The bottom line is that Janetos controls the outcome in this case.
18
As a result, NCO is vicariously liable for WPR’s violation of the FDCPA, and the plaintiffs are
entitled to summary judgment on the issue of liability against NCO.
*
*
*
For the reasons stated above, NCO’s motion for summary judgment is denied, and
summary judgment is granted in the plaintiffs’ favor on the issue of liability against both WPR
and NCO. A status hearing is scheduled for May 15, 2019, at 9:00 a.m. to discuss the remaining
issues in the case. 9 The Court anticipates unsealing all exhibits referred to in this opinion; any
objections must be made in writing before this date and with a document-by-document explanation
as to why continued sealing of that document is appropriate. 10
Dated: April 24, 2019
John J. Tharp, Jr.
United States District Judge
9
Pursuant to Fed. R. Civ. P. 56(f), defendant Moscov is required to show cause at the status
hearing why summary judgment should not be entered against him on the same basis that it is
entered as to WPR.
10
The Court also declines to address, at this stage, the issue of which defendants’ net worth
should be taken into account for the purpose of determining the damages of the class. The plaintiffs
have urged the Court to conclude that the net worth of both WPR and NCO should be considered.
See Mem. in Supp. of Pls.’ Mot. for Summ. J. on Liability 14. As the plaintiffs have moved for
summary judgment only on the issue of liability, the Court does not decide this question. It will be
addressed along with all of the other issues related to the damages to be assessed at a later date.
19
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