Flores v. Portfolio Recovery Associates, LLC

Filing 91

MEMORANDUM Opinion and Order signed by the Honorable Edmond E. Chang on 11/29/2017: For the reasons stated in the Opinion, Defendant's motion for summary judgment 80 is denied, and Plaintiff's motion for summary judgment 81 is granted. The next step is damages and entering judgment. Based on what the parties did in the four near-identical cases, the Court would expect a stipulated judgment on statutory damages. Perhaps the parties then could agree to postpone briefing on attorneys ' fees and costs, and also file (after PRA files a notice of appeal) an agreed motion to stay the appeal during the pendency of the other four cases (it would be up to the Seventh Circuit, of course, to decide whether to grant the stay). This will be the topic of discussion at tomorrow's status hearing. Emailed notice(Chang, Edmond)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
EDITHA FLORES,
Plaintiff,
v.
PORTFOLIO RECOVERY
ASSOCIATES, LLC,
Defendant.

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No. 15 C 02443
Judge Edmond E. Chang

MEMORANDUM OPINION AND ORDER
Editha Flores claims that Portfolio Recovery Associates, LLC (which does
business under the acronym “PRA”) violated the Fair Debt Collection Practices Act,
15 U.S.C. § 1692 et seq., by communicating information about her consumer debt to
a credit reporting agency without disclosing that the debt was disputed.1 R. 1,
Cmplt. ¶¶ 9-16.2 After discovery, Flores moved for summary judgment, R. 38, Pl.
Mot. Summ. J. PRA cross-moved for summary judgment, arguing that Flores lacked
standing, that she had failed to establish elements of her FDCPA claim, and, in the
alternative, that PRA’s actions were bona fide error. R. 45, Def. Resp. and CrossMot. Summ. J. For the reasons stated below, summary judgment is granted to
Flores. PRA’s cross-motion for summary judgment is denied.

1The

Court has federal-question jurisdiction over Flores’s claims under 28 U.S.C. § 1331.
to the record are noted as “R.” followed by the docket number and the page or
paragraph number.
2Citations

I. Background
PRA is in the business of collecting defaulted consumer debts. R. 38-2, PSOF
¶ 3.3 In July 2012, PRA purchased a credit card obligation owed by Flores. R. 46,
DSOF ¶ 1. Flores used the card in question to buy clothes. PSOF ¶ 6; PSOF Exh. G
at 82:3-16. Sometime after PRA bought the credit card obligation, Flores met with
and retained attorneys at the Debtors Legal Clinic, because she was worried that
PRA would take legal action to collect the obligation. PSOF ¶ 8; PSOF Exh. G at
74:21-75:11. Flores reviewed her credit report with her attorneys, and told them
that she thought the $748 balance claimed by PRA was not accurate. PSOF ¶ 10;
PSOF Exh. G at 60:17-20.4
On July 3, 2014, Debtors Legal Clinic faxed PRA a letter about Flores’s
account. PSOF ¶ 11. The contents of the letter are undisputed. The letter informed
PRA that Debtors Legal Clinic represented Flores, and stated: “This client regrets
not being able to pay, however, at this time they are insolvent, as their monthly
expenses exceed the amount of income they receive, and the amount reported is not

3Citations

to the parties’ Local Rule 56.1 Statements of Fact are identified as follows: “PSOF”
for the Flores’s Statement of Facts [R. 38-2], “DSOF” for PRA’s Statement of Additional Facts [R. 46],
“Pl. Resp. DSOF” for Flores’s response to PRA’s Statement of Facts [R. 60], and “Def. Resp. PSOF”
for PRA’s s response to Flores’s Statement of Additional Facts [R. 46].
4PRA asserts that Flores has no “credible” evidence that she told her attorneys the amount
claimed was inaccurate, R. 46, Def. Resp. PSOF ¶ 10, even though Flores testified in both her
deposition and her declaration that she told the attorney the amount was incorrect. See PSOF Exh. B
¶¶ 4-6; PSOF Exh. G at 60:17-20 (“Q. Okay. So you talked about letting PRA know that the amount
wasn’t accurate. Can you tell me how you did that? A. I talked to my attorneys.”). PRA tries to paint
Flores’s declaration as contradictory to her deposition testimony, Def. Resp. PSOF ¶ 10, but the two
are not actually inconsistent. And of course, the Court cannot make credibility determinations at the
summary judgment stage. Omnicare, Inc. v. United Health Grp., Inc., 629 F.3d 697, 704 (7th Cir.
2011). So PRA does not meaningfully contest that Flores told her attorneys that the amount claimed
was inaccurate.

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accurate.” R. 49-1, DSOF Exh. C. PRA’s records for Flores’s account show that it
received and processed the letter the next day.5
In December 2014 (months after PRA received the letter from Flores’s
lawyers), PRA provided information about Flores’s obligation to Experian, a credit
reporting agency. PSOF ¶ 15. PRA communicated a balance of $748 to Experian,
but did not inform Experian that the amount of the obligation was disputed. PSOF
¶¶ 16-17.
II. Summary Judgment Standard
Summary judgment must be granted “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 genuine issue of material fact exists 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 evaluating
summary judgment motions, courts must view the facts and draw reasonable
inferences in the light most favorable to the non-moving party. Scott v. Harris, 550
U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make
credibility determinations, Omnicare, Inc. v. United Health Grp., Inc., 629 F.3d 697,
704 (7th Cir. 2011), and must consider only evidence that can “be presented in a
form that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2). However,
affidavits, depositions, and other written forms of testimony can substitute for live
5In

its response to Flores’s statement of material facts, PRA attempts to dispute the
contention that it received and processed the letter. See Def. Resp. PSOF ¶ 12. But PRA’s own record
citation demonstrates that it received and read the letter. An entry in PRA’s account records for
Flores’s account dated June 4, 2014 notes receipt of the faxed letter, and that Debtors Legal Clinic
now represented Flores. R. 49, PRA Sealed Exhibits at 00300.

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testimony. Malin v. Hospira, Inc., 762 F.3d 552, 554-55 (7th Cir. 2014). The party
seeking summary judgment has the initial burden of showing that there is no
genuine dispute and that they are entitled to judgment as a matter of law.
Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th
Cir. 2008). If this burden is met, the adverse party must then “set forth specific
facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256.
III. Analysis
A. Standing
As a threshold matter, the Court cannot hear this case unless Flores has
Article III standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–561 (1992). At
minimum, Flores must show that she has (1) an injury in fact, (2) which is fairly
traceable to the defendant’s challenged conduct, and (3) which is likely to be
redressed by a favorable judicial decision. Id. An “injury in fact” is an invasion of a
legally protected interest which is concrete and particularized, and actual or
imminent (as opposed to conjectural or hypothetical). Lujan, 504 U.S. at 560. PRA
argues that Flores has not alleged an injury in fact that is sufficient to establish
Article III standing. Def. Cross-Mot. Summ. J. at 17.
PRA and Flores stake out two extreme positions on standing, and neither is
quite right. On one hand, PRA claims that Flores does not have standing because
she seeks only statutory damages. Def. Cross-Mot. Summ. J. at 18. On the other
hand, Flores argues that an FDCPA violation alone is enough to constitute an

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injury in fact for standing purposes. R. 59, Pl. Resp. at 20. The truth is somewhere
in the middle. In Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court
reiterated that a “bare procedural violation” is not necessarily an injury in fact. Id.
at 1549. Article III requires a concrete injury even in the context of a statutory
violation. Id. But Spokeo also affirmed that Congress has “the power to define
injuries and articulate chains of causation that will give rise to a case or controversy
where none existed before.” Id. (quoting Lujan, 504 U.S. at 580 (Kennedy, J.,
concurring in part)). The Supreme Court noted that Congress’s judgment is
“instructive and important,” because “Congress is well positioned to identify
intangible harms that meet minimum Article III requirements.” Spokeo, 136 S. Ct.
at 1549. Crucially, Spokeo held that “the real risk of harm” from violation of a
procedural right may be enough to establish injury. Id. Spokeo did not hold that a
plaintiff must suffer measurable financial harm in order to establish an injury in
fact. To the contrary, the Supreme Court reiterated that difficult-to-measure
intangible harms may be concrete injuries in fact. Id; see also Lane v. Bayview Loan
Servicing, LLC, 2016 WL 3671467, at *3 (N.D. Ill. July 11, 2016) (discussing the
distinction between actual damages and the concrete-harm requirement).
In this case, PRA disclosed Flores’s debt to a credit reporting agency without
reporting that the debt was disputed. Congress, with its unique fact-finding ability
and sensitivity to the public interest, made the judgment that communicating credit
card information without communicating that the debt is disputed is a “false,
deceptive, or misleading representation” in violation of the FDCPA. 15 U.S.C.

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§ 1692e(8). Reporting a debt on a credit report without noting a dispute poses a real
risk of serious economic and reputation consequences. An incorrectly reported debt
can be a “red flag” to “anyone who runs a background or credit check, including
landlords and employers,” and thus could be used to pressure a debtor to pay a debt
without exploring their legal options. See Phillips v. Asset Acceptance, LLC, 736
F.3d 1076, 1082-83 (7th Cir 2013) (pending legal actions, even if not served,
constituted a sufficient harm for standing); see also Bowse v. Portfolio Recovery
Assocs., LLC, 218 F. Supp. 3d 745, 749 (N.D. Ill. 2016) (“[A]n inaccurate credit
rating creates a substantial risk of harm”). This violation is not a harmless
procedural misstep like disseminating an incorrect zip code; it is an error with
easily appreciable real-world effects. See Spokeo, 136 S. Ct. at 1550. The substantial
risk of harm from an inaccurate credit report is a concrete injury for Article III
standing.
B. FDCPA Violation
The FDCPA prohibits debt collectors from using any false, deceptive, or
misleading representation or means in connection with collection of a debt. 15
U.S.C. § 1692e. “Communicating or threatening to communicate to any person
credit information which is known or which should be known to be false, including
the failure to communicate that a disputed debt is disputed,” is a violation of
§ 1692e. 15 U.S.C. § 1692e(8). On the undisputed facts in the record, a reasonable
jury must find that PRA violated § 1692e by communicating Flores’s debt to
Experian while failing to communicate that the debt was disputed.

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1. Debt/Debt Collector
The FDCPA defines a “debt” as an obligation arising from a transaction
primarily for personal, family, or household purposes. 15 U.S.C. § 1692a(5).
Undisputed evidence shows that Flores’s obligation to PRA was a “debt” under the
meaning of the FDCPA. Flores testified in her deposition that she used the credit
card to buy clothing. She did not buy anything for resale or for business. PSOF Exh.
G at 82:3-16.6 And PRA is clearly a “debt collector” within the meaning of the
FDCPA, because its business is “the collection of [ ] debts.” See 15 U.S.C. § 1692a(6);
PSOF ¶ 3. Indeed, PRA does not seriously argue that it is not a debt collector; its
only objection is that Flores’s obligation was not a “debt,” which is incorrect. Def.
Resp. PSOF ¶ 3.
2. Communication of a Disputed Debt
Turning to the substance of the alleged violation, it is undisputed that PRA
communicated Flores’s debt to Experian without communicating that the debt was
disputed. Def. Resp. PSOF ¶¶ 16-17. PRA tosses out a handful of arguments that
Flores’s debt was not a debt which was “known or which should be known” to be
disputed, but all ultimately fail.
PRA argues in its briefs that it did not notice the language in Flores’s letter
disputing the amount owed. See Def. Reply at 12, 15. But this argument is not
supported by any facts in the record. Flores deposed PRA’s corporate representative,

6PRA’s

assertion that Flores “fail[ed] to cite any portion of the record” to show that the credit
card was used for primarily personal, family, or household purposes is meritless. See Def. Resp.
PSOF ¶ 6. Flores did cite the record, and the cited portion of her deposition clearly supports her
factual claim. See PSOF ¶ 6.

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Nyetta Jackson, but at no point did Jackson claim that the letter was not read or
that the sentence about the disputed amount was somehow missed. Instead,
Jackson insisted over and over that Flores’s letter (and letters with identical
language from other debtors) was processed correctly in accordance with PRA
policy. See, e.g., PSOF Exh. F at 106:10-108:13, 91:2-12, 92:3-6; 96:13-24, 101:5-10.
But even if PRA lacked actual knowledge that Flores’s letter was disputing
the amount of her debt, it would not change the result here. A debt collector violates
the FDCPA by communicating credit information which “is known or which should
be known to be false.” 15 U.S.C. § 1692e(8). In this case, at the very least PRA
should have known that the debt was disputed. The language in the letter is
unambiguous: it states that “the amount reported is not accurate,” clearly asserting
a dispute as to the amount. DSOF Exh. C; see also Gomez v. Portfolio Recovery
Assoc., 2016 WL 3387158, at *3 (N.D. Ill. June 20, 2016) (letter with identical
language made it “clear as day” that debtor was disputing the debt). PRA’s
argument that this language was “buried,” Def. Cross-Mot. Summ. J. at 3, and
“coyly hidden,” id. at 9, is unpersuasive. The letter is only a few paragraphs long,
and the disputed language is in the body of the letter in normal typeface. Anyone
who read the letter would have seen the language stating that the amount is
disputed. Nor does it matter that the letter was faxed to the general counsel’s fax
line rather than PRA’s disputes fax line. See PSOF Exh. F at 127:3-7. Nothing about
§ 1692e(8) requires a dispute to be raised in any particular way. To be sure, there
might be a factual scenario where the method of communicating the dispute is

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unreasonable, such as sending a dispute letter to, say, the human resources
department of a debt collector. But here the letter was sent to PRA’s legal
department. And in any event, it is clear that PRA read and processed the letter,
whatever fax line it was sent to. See PRA Sealed Exhibits at 00300; PSOF Exh. F at
127:10-15.
PRA also argues that the statement in the letter that the “amount reported is
not accurate” is insufficient to convey a dispute. Def. Cross-Mot. Summ. J. at 9. But
this argument also fails. Although the FDCPA does not define what it means to
“dispute” a debt for § 1692e(8) purposes, See Eul v. Transworld Sys., 2017 WL
1178537, at *23 (N.D. Ill. Mar. 20, 2017), a number of cases from this District hold
that a statement saying “the amount reported is not accurate” adequately disputes
a debt. See Emerson v. Fid. Capital Holdings, Inc., 2015 WL 5086458, at *2 (N.D.
Ill. Aug. 14, 2015); Bowse, 218 F. Supp. at 751; Gomez, 2016 WL 3387158, at *3; Paz
v. Portfolio Recovery Assoc., 2016 WL 6833932, at *4-5 (N.D. Ill. Nov. 21, 2016);
Evans v. Portfolio Recovery Assoc., 2016 WL 6833930, at *2. This consensus is
unsurprising: it is common sense that challenging the validity of the amount of a
debt is a “dispute” in the ordinary sense of the word.
PRA seems to argue that a dispute must be valid in order to trigger the
protection of § 1692e(8). See Def. Cross-Mot. Summ. J. at 8. But the language of the
FDCPA does not support this reading. Section 1692e(8) does not specify that the
debt collector must communicate “valid disputes” or “reasonable disputes” when it
shares credit information. The fact that “a disputed debt is disputed” is enough. 15

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U.S.C. § 1692e(8); see also Hoffman v. Partners in Collections, Inc., 1993 WL
358158, at *4 (N.D. Ill. Sept. 14, 1993) (“There is no requirement that any dispute
be “valid” for [§ 1692e(8)] to apply; only that there be a dispute.”). It does not matter
whether the $748 amount reported by PRA was actually accurate; all that matters
for § 1692e(8) purposes is that Flores disputed the amount.7
3. Materiality
PRA argues that, even if it violated the letter of 15 U.S.C. § 1692e(8) by not
alerting Experian of the dispute over the debt, the violation was not “material,” and
therefore PRA should escape liability. See Def. Cross-Mot. Summ. J. at 10-11. PRA’s
materiality argument misses the mark. It is true that there is a line of Seventh
Circuit case law holding that a false or misleading statement must be “material” to
be actionable under the FDCPA. See, e.g., Hahn v. Triumph Partnerships LLC, 557
F.3d 755, 757 (7th Cir. 2009). This line of cases seeks to avoid imposing liability for
minor mistakes or falsehoods which would be unlikely to influence a debtor’s
decisions. Id. at 757-758. But even if this case law somehow supported PRA’s
argument, it would not change the outcome in this case. The FDCPA itself
unequivocally states that failure to communicate that a debt is disputed violates
§ 1692e. There is no mention of “materiality” as a requirement for liability; just a
7PRA

also makes various confusing arguments about what Flores conveyed to her counsel at
Debtors Legal Clinic before they sent the letter. See, e.g., Def. Resp. and Cross-Mot. Summ. J. at 10;
Def. Reply at 2. The idea seems to be that Flores did not actually dispute the debt, because her
attorneys sent the letter without authorization. But Flores testified that she told her counsel she
thought the amount reported by PRA was incorrect, and PRA does not meaningfully dispute this
testimony. See note 3, supra. PRA’s assertions that Flores never “conveyed a dispute to her
attorney,” Def. Reply at 2, are unsupported by fact, so even if PRA’s argument had any legal merit, it
would fail. And it’s worth noting that PRA might have violated the FDCPA even if Flores had not
told her attorneys the debt was disputed: § 1692e(8) does not specify that the debtor must be the one
to dispute the debt instead of one of her agents.

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plain statement that reporting credit information without communicating the
dispute “is a violation.” 15 U.S.C. § 1692e. The Seventh Circuit’s gloss on the
statute’s “false, deceptive, or misleading” language was not meant to override an
explicit statutory directive. The specific provision of the FDCPA itself controls here,
with no need to inquire into materiality. See Evans, 2016 WL 6833930, at *3.
C. Bona Fide Error Defense
PRA has one last argument: the bona fide error defense. See Def. Resp. and
Cross-Mot. Summ. J. at 14. The FDCPA sets up a safe harbor for unintentional
violations. A debt collector cannot be held liable if the collector can show, 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). But this defense is limited to
factual or clerical mistakes, and does not shield mistaken applications of the law.
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010).
At the outset, it is unclear what “error” PRA is claiming took place when it
processed Flores’s letter. In its briefing, PRA vacillates between arguing that the
letter sent by Flores was not a “dispute” as defined by the FDCPA and arguing that
it mistakenly did not read the part of the letter indicating a dispute. See Def. Resp.
and Cross-Mot. Summ. J. at 14-17. Both arguments fail, for different reasons. First,
failing to recognize that the language of the letter qualifies as a “dispute” within the
meaning of the FDCPA is a legal error, not a factual or clerical error, so the bona
fide error defense is not available. See Jerman, 559 U.S. at 577. It would be another

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thing if a PRA employee had skimmed the letter and accidentally missed the
language disputing the amount of the debt; that would be a clerical or factual error,
and could support a bona fide error defense. But no facts on the record support
PRA’s contention that this is what happened. PRA’s briefs assert that it “missed the
message,” see Def. Reply at 12, but at the summary judgment stage a party needs to
back up assertions with actual evidence. As discussed above, the testimony of PRA’s
corporate representative contradicts PRA’s contention that the dispute language
was accidentally missed—she insisted that the letter was processed correctly.
What’s more, PRA received at least six letters with identical language and failed to
mark them as disputed, further undercutting PRA’s late-in-the-game assertion that
PRA employees carelessly misread Flores’s letter. See PSOF Exh F at 90:19-91:12
(Acosta letter), 94:12-95-25 (Paz letter), 98:16-99:7 (Baranowski letter), 100:8-101:4
(Gomez letter), 103:5-104:6 (Bowse letter); 108:15-109:19 (Evans letter). Instead,
this pattern simply confirms that PRA made a legal mistake in thinking that the
letter did not qualify as a “dispute” over the debt. On this record, no reasonable jury
could find that PRA has shown, by a preponderance of evidence (PRA bears the
burden on the affirmative defense), that its mistake was an unintentional factual
error.
But even if PRA had evidence that its treatment of Flores’s letter was due to
careless error rather than mistaken legal interpretation, it still would not succeed
on its bona fide error defense. A defendant asserting the bona fide error defense
must demonstrate that it maintained procedures reasonably calculated to avoid the

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error. Kort v. Diversified Collection Servs., Inc., 394 F.3d 530, 537 (7th Cir. 2005).
“Procedures” have been defined as “processes that have mechanical or other such
‘regular orderly’ steps to avoid mistakes.” See Jerman, 599 U.S. at 587 (quoting
Webster's Third New Int’l Dictionary 1807 (1976)). A “thinly specified policy,
allegedly barring some action but saying nothing about what action to take, is [not]
an adequate procedure under § 1692k(c).” Leeb v. Nationwide Credit Corp., 806 F.3d
895, 900 (7th Cir. 2015) (internal quotation marks omitted).
PRA offers no evidence that it had procedures in place to prevent the factual
error—careless reading—that it says took place in this case. Its “procedures” for
evaluating letters boil down to telling employees to read the letters and evaluate
them sensibly: exactly the kind of “thinly specified policy” that will not support a
bona fide error defense. See Leeb, 806 F.3d at 900; PSOF Exh. F at 55:9-18, 56:157:16, 57:19-58:15 (describing PRA’s method of processing letters). There is no
evidence that PRA has measures in place to prevent careless misreading of letters,
such as having employees periodically check one another’s work, for example. True,
there is at least some evidence that PRA employees are trained to recognize
disputes. See, e.g., DSOF Exh. F (Disputes Department Supplemental Training
Manual). But, as previously discussed, miscategorizing a dispute letter as
undisputed is a legal mistake outside the protection of the bona fide error defense.
The dispute-training evidence is irrelevant to PRA’s supposed factual mistake. PRA
has not met its burden of producing enough factual material for a reasonable jury to
find for PRA on its bona fide error defense.

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IV. Conclusion
For the reasons stated above, Flores is entitled to summary judgment on her
FDCPA claim. The next step is damages and entering judgment. Based on what the
parties did in the four near-identical cases,8 the Court would expect a stipulated
judgment on statutory damages. Perhaps the parties then could agree to postpone
briefing on attorneys’ fees and costs, and also file (after PRA files a notice of appeal)
an agreed motion to stay the appeal during the pendency of the other four cases (it
would be up to the Seventh Circuit, of course, to decide whether to grant the stay).
This will be the topic of discussion at tomorrow’s status hearing.

ENTERED:

s/Edmond E. Chang
Honorable Edmond E. Chang
United States District Judge
DATE: November 29, 2017

Evans v. Portfolio Recovery Assocs., USCA No. 17-1773; Bowse v. Portfolio Recovery Assocs.,
USCA No. 17-1866; Gomez v. Portfolio Recovery Assocs., USCA No. 17-2756; and Paz v. Portfolio
Recovery Assocs., USCA No. 17-1860.
8

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