Conroy v. Blatt, Hasenmiller, Leibsker & Moore, LLC
Filing
47
Opinion and Order: Defendant's motion for summary judgment 23 is denied and plaintiff's motion for summary judgment 20 is granted in part and denied in part. Status hearing is set for October 8, 2015 at 2:00 p.m. Signed by the Honorable William T. Hart on 10/1/2015:Mailed notice(clw, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
WANDA CONROY,
)
)
Plaintiff,
)
)
v.
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)
BLATT, HASENMILLER, LEIBSKER & )
MOORE, LLC,
)
)
Defendant.
)
No. 14 C 6725
OPINION AND ORDER
Wanda Conroy ("Conroy") brings this action against attorneys Blatt,
Hasenmiller, Leibsker & Moore, LLC ("Blatt") alleging violation of the Fair Debt
Collection Practices Act ("FDCPA"), specifically, 15 U.S.C. § 1692i(a)(2). The
court has jurisdiction of the subject matter and the parties. See 28 U.S.C. §§ 1331,
1391.
This case arises out of the location of a debt collection lawsuit filed
against Conroy on January 31, 2014 by Blatt on behalf of Unifund CCR, LLC in
the Circuit Court of Cook County, Illinois, No. 14-MI-105430 ("the collection
case") seeking to recover a $15,921.22 debt incurred on a credit card issued by
Citibank. The debt was acquired by Unifund. On August 30, 2014, Convoy filed
this lawsuit alleging that Blatt violated the venue provision of the FDCPA,
15 U.S.C. § 1692i(a)(2), by filing the collection case in the First Municipal
District of the Cook County Circuit Court, the Daley Center, rather than in the
Fifth Municipal District, the Bridgeview courthouse, in an area where plaintiff
resides.
The case is now before the court on cross-motions for summary
judgment. A party is entitled to summary judgment if it is shown that there is no
genuine issue of material fact and it is entitled to judgement as a matter of law.
Fed. R. Civ. P 56(a). The court views the record in a light most favorable to the
non-moving party and draws all reasonable inferences in that party's favor.
Crawford v. Metro. Gov't of Nashville & Davidson Cnty., Tenn., 555 U.S. 271,
274 n.1 (2009); Laskin v. Siegel, 728 F. 3d 731, 734 (7th Cir. 2013). Here, the
parties agree that the material facts are undisputed as to a key legal issue and that
aspect of their dispute can be resolved as a matter of law.
When Blatt filed the collection case in January 2014, the term "judicial
district" in the FDCPA's venue provision, § 1692i(a)(2), as construed and applied
in Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996), was held to mean the Cook
County Circuit Court as established by the Illinois legislature and not the
municipal subdivisions established by the Circuit Court. As long as the debtor
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resided anywhere within Cook County, it was proper to file a collection case in the
First Municipal District, at the Daley Center. Id. at 819-20.
On July 2, 2014, a divided en banc court, reviewing an Indiana court
system, overruled Newsom (which had been followed in an earlier divided panel
decision) and held that "judicial district" meant instead the smallest existing
geographical unit within a state court system. Suesz v. Med-1 Solutions, LLC,
757 F.3d 636 (7th Cir.) (en banc), cert. denied, 135 S. Ct. 756 (2014). As applied
to the Cook County Circuit Court, the ruling means a Municipal District.
The pending collection case was transferred to the Fifth District
Bridgeview courthouse on July 15, 2014, less than two weeks after Suesz was
decided.
The primary legal issues presented in the cross-motions are whether
(1) the filing of the collection case in the First Municipal District was a bona fide
error within the meaning of the FDCPA provision precluding liability for bona
fide errors by parties who maintain reasonable procedures to avoid errors; or
(2) Blatt's reliance on controlling judicial precedent brings it within the FDCPA's
"Safe Harbor" for acts done in good faith compliance with FTC advisory opinions;
or (3) Suesz should not be applied retroactively to Blatt.
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A factual issue exists concerning whether plaintiff's proof establishes
that the collection case is based on consumer debt. The FDCPA defines debt as
"any obligation or alleged obligation of a consumer to pay money arising out of a
transaction in which the money, property, insurance, or services which are the
subject of the transaction are primarily for personal, family, or household
purposes, whether or not such obligation has been reduced to judgment."
15 U.S.C. § 1692a(5).
The resolution of the legal issues presented has divided judges of this
court concerning the conduct of Blatt. In Oliva v. Blatt, Hasenmiller, Leibsker &
Moore, LLC, 2015 WL 4253795 (N.D. Ill. July 14, 2015), Judge Bucklo held that
the bona fide error defense was available because the defendant was following a
controlling authority, and that, if the Seventh Circuit had overruled Newsom in a
case involving the Circuit Court of Cook County, it likely would have applied its
ruling on a prospective basis only. However, in Portalatin v. Platt, Hasenmiller,
Leibsker & Moore, LLC, 2015 WL 5117077 (N.D. Ill. Aug. 28, 2015), Judge
Kennelly held that the bona fide error affirmative defense is not available in
connection with a legal interpretation of the FDCPA and that the Suesz ruling was
retroactive.
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The FDCPA provides a statutory defense for bona fide errors: "A debt
collector may not be held liable in any action brought under this subchapter if the
debt collector shows by a preponderance of evidence that the violation was not
intentional and resulted from a bona fide error notwithstanding the maintenance of
procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c).
The FDCPA also provides a safe harbor for a defendant's reliance upon
FTC advisory opinions, providing: "No provision of this section imposing any
liability shall apply to any act done or omitted in good faith in conformity with any
advisory opinion of the Bureau, notwithstanding that after such act or omission
has occurred, such opinion is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason." 15 U.S.C. § 1692k(e).
Blatt's bona fide error defense must be considered in the light of the
Supreme Court's holdings in Jerman v. Carlisle, McNellie, Rini, Kramer &
Ulrich LPA, 559 U.S. 573 (2010). Section 1692g(a) of the FDCPA, requires debt
collectors to advise debtors of their right to dispute a debt. The debt collector in
Jerman sent the plaintiff the required notice but added that any dispute of the debt
must be in writing. At the time there was a division of case authority on whether it
was permissible to state that the debtor's dispute must be in writing. Later it was
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resolved that the dispute need not be in writing. When sued for violation of the
FDCPA, the debt collector asserted the bona fide error defense. The district court,
acknowledging the split of authority and granted summary judgement in favor of
the debt collector, finding that the bona fide error defense is not limited to clerical
or factual errors, but extends to mistakes of law. The Sixth Circuit Court of
Appeals affirmed and the plaintiff appealed to the Supreme Court. The Supreme
Court held that the bona fide error defense does not apply to a violation of he
FDCPA resulting from a debt collector's incorrect interpretation of the
requirements of the statute. The Court declined to adopt a reading of the statute
which would be in conflict with the maxim that ignorance of the law will not
excuse any person, either civilly or criminally. Id. at 574. The court stated:
[W]hen Congress has intended to provide a
mistake-of-law defense to civil liability, it has often done so
more explicitly than here. In particular, the FTC Act's
administrative-penalty provisions--which, as noted above,
Congress expressly incorporated into the FDCPA--apply only
when a debt collector acts with "actual knowledge or
knowledge fairly implied on the basis of objective
circumstances" that its action was "prohibited by [the
FDCPA]." 15 U.S.C. §§ 45(m)(1)(A), (C). Given the absence
of similar language in § 1692k(c), it is a fair inference that
Congress chose to permit injured consumers to recover actual
damages, costs, fees, and modest statutory damages for
"intentional" conduct, including violations resulting from
mistaken interpretation of the FDCPA, while reserving the
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more onerous penalties of the FTC Act for debt collectors
whose intentional actions also reflected "knowledge fairly
implied on the basis of objective circumstances" that the
conduct was prohibited.
Id. at 583-584.
The Supreme Court held that "the bona fide error defense in § 1692k(c)
does not apply to a violation of the FDCPA resulting from a debt collector's
incorrect interpretation of the requirements of the statute." Id. at 604-05. That
holding applies to this case.
Blatt relies on Kort v. Diversified Collection Servs., Inc., 394 F.3d 530,
533 (7th Cir. 2005), in support of its theory that reliance on a judicial
interpretation of the FDCPA entitles it to a bona fide error defense. However, in
Kort, the debt collector used a mandatory form based on the Department of
Education's interpretation of the Higher Education Act. Later the form was found
to be in conflict with law. The Court concluded that the debt collector's error was
not intentional and made in good faith. That is not this case. Blatt relied on
Circuit authority, but it is also true that it made an intentional decision to file the
collection case in the First rather than the Fifth District. It was not compelled by
Newsom to file in the First District. A filing in the Fifth District would have been
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in keeping with the intent of the FDCPA venue provision. Based on the holdings
in the Jerman case, neither the bona fide error nor the safe harbor defense is
available in this case.
As to the particular circumstances of this case, Blatt makes an
appealing, but unpersuasive, argument for prospective rather than retrospective
application of the Suesz case. Chevron Oil Co. v. Huson, 404 U. S. 97, 107
(1971), and Velasquez-Garcia v. Holder, 760 F.3d 571, 580 (7th Cir. 2014), are
cited in support of this position. However, in Suesz the court rejected a request to
make its ruling prospective. The court stated: "Prospective overruling on reliance
grounds is impermissible unless the law had been so well settled before the
overruling that it had been unquestionably prudent for the community to rely on
the previous legal understanding." 757 F.3d at 650. The case was found not to
meet that test.
The Supreme Court has made clear that a decision as to whether a new
rule should be given prospective or retroactive effect should be made at the time of
the decision. Teague v. Lane, 489 U.S. 288, 316 (1989) That is what happened in
Suesz. The court considered and declined the request to make its ruling
prospective. A district court has no authority to alter such a ruling.
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It is doubtful that the Chevron standard for prospective application of
judicial decisions cited by Blatt is good law in this circuit. In Felzen v. Andreas,
134 F.3d 873, 877 (7th Cir. 1998), aff'd sub nom., Cal. Pub. Emps.' Ret. Sys. v.
Felzen, 525 U.S. 315 (1999) (cited in Suesz, 757 F.3d at 649), the court stated that
Chevron had been overruled.
Velasquez-Garcia involved the application of a new agency rule which
the court decided should have only prospective application. Different standards
apply to agency rules and court decisions as was made clear in Velasquez-Garcia.
Agency rules, similar to legislative acts, are presumably prospective. The reverse
is true of court decisions. 760 F.3d at 580. See also The Retroactive &
Prospective Application of Judicial Decisions, 26 Harv. J.L. & Pub. Pol'y. 811
(2003). Velasquez-Garcia is not authority for a prospective application of Suesz
in this case.
Neither the bona fide error defense nor safe harbor defense is available
in this case. However, there remains a fact question as to the nature of the debt
which precludes granting summary judgement as to liability in favor of plaintiff.
Prior to the next status hearing the parties shall discuss the possibility of
settlement.
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IT IS THEREFORE ORDERED that defendant's motion for summary
judgment [23] is denied and plaintiff's motion for summary judgment [20] is
granted in part and denied in part. Status hearing is set for October 8, 2015 at 2:00
p.m.
ENTER:
UNITED STATES DISTRICT JUDGE
DATED: OCTOBER 1, 2015
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