Preuher et al v. Seterus, LLC
Filing
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Enter MEMORANDUM OPINION AND ORDER: For the reasons stated, the motion to dismiss is granted and the Complaint is dismissed. Civil case terminated. Signed by the Honorable Virginia M. Kendall on 12/11/2014.Mailed notice(tsa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ANDREW PREUHER et al.,
Plaintiffs,
v.
SETERUS, LLC,
Defendants.
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14 C 6140
Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
Defendant Seterus, Inc. (sued as Seterus, LLC) moves to dismiss Andrew Preuher and
Margaret Browning’s Complaint under Federal Rule of Civil Procedure 12(b)(6). The Complaint
(Dkt. No. 1) contains two counts alleging violations of the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq., and the Illinois Collection Agency Act, 225 ILCS 425/1 et seq. Plaintiffs
do not oppose the motion to dismiss their ICAA claim. (Dkt. No. 15 pp. 7-8). The FDCPA
allegations stem from a single letter (the “Hazard Letter”) that Seterus, a debt servicing firm, sent
to Plaintiffs advising them of their obligation to purchase hazard insurance for a property
securing a mortgage that Seterus held. Plaintiffs argue that the Hazard Letter violated the
FDCPA because it failed to include the information required under § 1692g, was sent at a time
that Seterus had actual knowledge that Plaintiffs were represented by counsel in violation of
§ 1692c, and attempted to collect a debt that Seterus had no legal right to collect in violation of
§ 1692e. Seterus counters that it did not send the Hazard Letter to Plaintiffs in connection with
an effort to collect a debt and thus it is not subject to the restrictions of the FDCPA. For the
reasons stated below, the motion to dismiss is granted and the Complaint is dismissed.
BACKGROUND
The Court treats the following allegations from the Complaint as true for the purposes of
this motion. See Golden v. State Farm Mut. Auto. Ins. Co., 745 F.3d 252, 255 (7th Cir. 2014).
At some point prior to June 2012, Plaintiffs incurred a debt, apparently a mortgage loan.
(Compl. ¶¶ 7, 16). Plaintiffs subsequently defaulted on the mortgage and the note was transferred
to Seterus for servicing. (Id. ¶ 16). On June 21, 2012 Plaintiffs filed for Chapter 13 Bankruptcy
Protection and a Bankruptcy Plan was confirmed on October 4, 2012. (Id. ¶ 14-15). On July 24,
2014 Seterus sent the Hazard Letter to Plaintiffs advising them that they were obligated to carry
hazard insurance coverage on the property securing the mortgage. (Id. ¶ 17). The letter stated:
“Your loan agreement requires that you maintain adequate hazard insurance at all times. . . You
will be charged for the cost of this insurance if we do not receive adequate proof of coverage
within 15 days from the date of this letter.” (Id. Ex. A). The letter also contained a statement
qualifying that assertion: “IF YOU ARE IN BANKRUPTCY OR RECEIVED A
BANKRUPTCY DISCHARGE OF THIS DEBT, THIS LETTER IS NOT AN ATTEMPT TO
COLLECT THE DEBT, BUT NOTICE OF POSSIBLE ENFORCEMENT OF OUR LIEN
AGAINST THE COLLATERAL OR FOR INFORMATIONAL PURPOSES ONLY.” (Id.). The
Hazard Letter was the only communication that Plaintiffs received from Seterus. (Id. ¶ 18).
LEGAL STANDARD
When considering a motion to dismiss under Rule 12(b)(6), the Court accepts as true all
facts alleged in the complaint and construes all reasonable inferences in favor of the plaintiff.
Yeftich v. Navistar, 722 F.3d 911, 915 (7th Cir. 2014). In addition to the complaint itself, the
Court may consider “documents that are attached to the complaint, documents that are central to
the complaint and are referred to in it, and information that is properly subject to judicial notice.”
Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). To the extent that these additional
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documents contradict allegations stated in the complaint, the documents take precedence. See
Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013). A complaint must state a claim to relief
that is plausible on its face in order to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6).
Yeftich, 722 F.3d at 915. A claim is plausible on its face when the allegations in the complaint
support a reasonable inference that the defendant is liable for the alleged misconduct. Id. Claims
that do not raise a right to relief above the speculative level are subject to dismissal under Rule
12(b)(6). Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).
DISCUSSION
Plaintiffs allege that Seterus’s conduct violated three subsections of the FDCPA, namely
15 U.S.C. §§ 1692g, 1692c, and 1692e. (Compl. ¶¶ 25-27). As a threshold matter, the FDCPA
regulates a communication from a debt collector only if the communication is made “in
connection with the collection of any debt.” See 15 U.S.C. 1692; Gburek v. Litton Loan
Servicing LP, 614 F.3d 380, 385 (7th Cir. 2010). There is no bright line test to determine whether
a communication is made in connection with the collection of a debt. See id. at 384. Rather,
courts weigh several factors to determine whether a communication is made in connection with
the collection of a debt. Specifically, the Court must weigh the presence or absence of a demand
for payment, the nature of the parties’ relationship, and the purpose and context of the
communications. Id. at 385 (citing Ruth v. Triumph P’ships, 577 F.3d 790, 799 (7th Cir. 2009)).
A communication may be in connection with the collection of a debt even if it does not directly
demand payment. Gburek, 614 F.3d at 385. That a communication includes payment dates that
are prospective and warns about the consequences of missing such dates suggests that the
communication is not made in connection with the collection of a debt. Bailey v. Security Nat’l
Servicing Corp., 154 F.3d 384, 389 (7th Cir. 1998); see also McCready v. Jacobsen, No. 062443, 2007 WL 1224616 (7th Cir. Apr. 25, 2007) (unpublished)). In the context of a motion to
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dismiss, the Court must decide whether the Complaint and the contents of the Hazard Letter
sufficiently allege that the communication was made in connection with the collection of a debt.
Gburek, 614 F.3d at 386 (“we need only determine whether [the plaintiff’s] allegations –
including the contents of the letters she attached to her complaint – are sufficient to survive [the
defendant’s] motion to dismiss”).
Taken together, the Complaint and the Hazard Letter 1 fail to allege facts sufficient to
show that the Hazard Letter was sent in connection with the collection of a debt. While Seterus
does not dispute that it is a debt collector, this characterization does not require the conclusion
that the Hazard Letter was sent in connection with the collection of a debt. See Gburek, 614 F.3d
at 384-85 (The FDCPA “does not apply to every communication between a debt collector and a
debtor”) (citing Bailey, 154 F.3d at 388). Instead, it is necessary to balance the factors described
above to determine whether the Hazard Letter was sent in connection with the collection of a
debt.
The relevant factors weigh decisively in favor of the conclusion that the communication
was not made in connection with the collection of a debt. First, the Letter does not contain a
demand for payment. While not dispositive, the absence of a demand for payment is relevant to
the Court’s determination. Gburek, 614 F.3d at 385 (absence of demand for payment was one of
several relevant factors). The Hazard Letter stated that the mortgage agreement required the
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In addition to the Complaint, it is appropriate to consider the entirety of the four-page
Hazard Letter in spite of the fact that Plaintiffs attached only page three to the Complaint. The
Court may consider the entire letter in ruling on the current motion to dismiss because the letter
was “central to the complaint and [was] referred to in it.” Williamson, 714 F.3d at 436. Plaintiffs
not only attached a portion of the Hazard Letter to the Complaint, but have relied on the entirety
of its contents in order to support their claims. Plaintiffs attached the entire Hazard Letter to their
response in opposition to the motion to dismiss. (See Dkt. No. 12 Ex. A). Moreover, there is no
allegation from either party that the entire four page letter attached to Plaintiffs’ response is not
authentic. Cf. id. (citing Hecker v. Deere & Co., 556 F.3d 575, 582 (7th Cir. 2009)).
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property securing the loan to be insured. (See Dkt. No. 12 Ex. A). It further advised that if
Plaintiffs did not purchase insurance for the property, Seterus would insure the property and the
cost of that insurance would be added to the balance on their loan. The Hazard Letter did not
demand payment, but instead advised that Plaintiffs “will be charged” if Seterus did not receive
confirmation of insurance coverage on the property. (Id.) (emphasis in original). The Hazard
Letter “simply warned the debtor of the consequences of missing a future” payment. Gburek, 614
F.3d 380 at 384 (citing Bailey, 154 F.3d at 389) (“A warning that something bad might happen if
payment is not kept current is not a dun, nor does it seek to collect any debt, but rather the
opposite because it tries to prevent the circumstance wherein payments are missed and a real dun
must be mailed.”).
Second, the purpose and context of the communication suggests that it was not an effort
to collect a debt. Seterus sent the Hazard Letter not to collect a debt, but to order to comply with
12 C.F.R. § 1024.37(e), which required it to provide notice to the Plaintiffs before purchasing
hazard insurance and billing it to Plaintiffs. The content of the Hazard Letter bolsters the
conclusion that it was sent for a purpose other than debt collection. The Hazard Letter does not
discuss a balance due on the underlying mortgage loan or discuss ways to settle that balance. Cf.
Gburek, 614 F.3d at 386 (letter discussing “foreclosure alternatives” but not demanding
immediate payment was in connection with collection of debt). Indeed, the Hazard Letter did not
specify whether a balance existed on the mortgage loan at all. No other documents accompanied
the Hazard Letter that might have provided suggestive context or changed the apparent purpose
for which the Hazard Letter was sent. Cf. Ruth, 577 F.3d at 799 (document otherwise
unconnected to debt was sent in connection with collection of debt when it accompanied a
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collection letter). The purpose and context of the Hazard Letter demonstrate that it was not sent
in connection with the collection of any debt.
Because the Letter was not sent in connection with the collection of a debt, it is not
subject to the FDCPA. Plaintiffs have therefore not stated a claim for relief under the FDCPA.
CONCLUSION
For the reasons stated herein, the motion to dismiss is granted.
________________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: December 11, 2014
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