Fricke v. Healthcare Revenue Recovery Group, LLC
Filing
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Memorandum Opinion and Order signed by the Honorable Robert W. Gettleman on 8/12/2015: Motion 10 to dismiss is denied. Defendant's answer is due by 9/3/2015. A joint status report is due by 9/8/2015. Status hearing date of 8/27/2015 is reset to 9/15/2015 at 9:00 a.m. Signed by the Honorable Robert W. Gettleman on 8/12/2015: Mailed notice (gds)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
REBECCA FRICKE,
Plaintiff,
v.
HEALTHCARE REVENUE RECOVERY
GROUP, LLC d/b/a ARS Account Resolution
Services,
Defendant.
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No. 15 C 3364
Judge Robert W. Gettleman
MEMORANDUM OPINION AND ORDER
Plaintiff Rebecca Fricke brought this action against defendant Healthcare Revenue
Recovery Group, LLC d/b/a ARS Account Resolution Services, alleging violations of the Fair
Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq. Defendant filed the instant
motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that plaintiff
should be judicially estopped from pursuing her FDCPA claims. For the reasons discussed
below, defendant’s motion is denied.
BACKGROUND1
On January 13, 2015, plaintiff filed a Chapter 13 bankruptcy petition in the United States
Bankruptcy Court for the Northern District of Illinois. At the time of filing, plaintiff certified
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The following facts are taken primarily from plaintiff’s complaint and are accepted as
true for purposes of the instant motion. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir.
2008). As defendant notes, however, this court may also take judicial notice of matters of public
record when considering a 12(b)(6) motion. GE Capital Corp. v. Lease Resolution Corp., 128
F.3d 1074, 1080-81 (7th Cir. 1997). Accordingly, the court has looked to pleadings and orders
filed in plaintiff’s related bankruptcy case. See, e.g., id. at 1081 (“The most frequent use of
judicial notice of ascertainable facts is in noticing the contents of court records.”) (internal
quotations omitted).
that she did not have any “contingent and unliquidated claims.” Despite her pending bankruptcy
action, plaintiff alleges that in February 2015, defendant telephoned her in an attempt to collect a
debt that defendant knew or should have known was included in her bankruptcy petition. Based
on this call, plaintiff filed the instant action on April 16, 2015, alleging that defendant violated
the FDCPA by attempting to collect a debt after she had filed for bankruptcy. Plaintiff seeks
actual damages, statutory damages in the amount of $1,000, attorney’s fees, and costs.
On April 29, 2015, following the commencement of this case, the bankruptcy judge
approved plaintiff’s Chapter 13 payment plan. On May 28, 2015, defendant moved to dismiss
this case, arguing that plaintiff’s failure to amend her bankruptcy property schedule to include
the instant action prevents her from pursuing her claims against it in accordance with the
doctrine of judicial estoppel. Days later on, June 1, 2015, plaintiff filed an amended property
schedule in her bankruptcy case, identifying this action as part of her personal property. No
further action has been taken in the bankruptcy proceeding at this time, and the bankruptcy case
is still pending.
DISCUSSION
A.
Legal Standards
Defendant asserts that plaintiff’s complaint should be dismissed because it fails to state a
claim upon which relief can be granted. Under Fed. R. Civ. P. 12(b)(6), the court accepts all
well-pleaded facts as true and draws all reasonable inferences in the plaintiff’s favor. Tamayo,
526 F.3d at 1081. “To survive a motion to dismiss under Rule 12(b)(6), the complaint must
provide enough factual information to state a claim to relief that is plausible on its face and raise
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a right to relief above the speculative level.” Camasta v. Jos. A. Bank, Clothiers, Inc., 761 F.3d
732, 736 (7th Cir. 2014) (internal quotations omitted).
B.
Analysis
Defendant argues that because plaintiff attempted to conceal the instant action from the
bankruptcy court, she should be barred from pursuing her claims pursuant to the doctrine of
judicial estoppel. According to defendant, plaintiff’s failure to “immediately” notify her
bankruptcy attorney of her FDCPA claim violated her obligation to alert the bankruptcy court
and her creditors of a legal interest. Although plaintiff amended her bankruptcy property
schedule a few days after defendant filed its motion to dismiss (and less than two months after
filing the instant complaint), defendant argues that the amendment was not timely, and thus does
not preclude the application of judicial estoppel. Her willful concealment of this action,
defendant asserts, was an attempt to “game the system” so that she could “enjoy[] the many
protections afforded by Chapter 13.”
Plaintiff argues that, unlike the plaintiffs in the cases cited by defendant, her FDCPA
claim did not accrue until after filing her Chapter 13 bankruptcy petition. According to plaintiff,
her voluntary bankruptcy petition requires that she “timely” notify her bankruptcy attorney only
of a new lawsuit and that under Federal Rule of Bankruptcy Procedure 1009.1(a) a “voluntary
petition, list, schedule, or statement may be amended at any time before the case is closed.”
Because her bankruptcy case is still pending and she amended her petition “a mere 3 months
after the cause of action arose,” plaintiff argues that the amended property schedule was timely
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and appropriate. For these reasons, plaintiff contends that judicially estopping her from
proceeding in the instant case would be inequitable.2 The court agrees.
“Judicial estoppel is an equitable doctrine that ‘prevents a party from adopting a position
in a legal proceeding contrary to a position successfully argued in an earlier legal proceeding.’”
Esparza v. Costco Wholesale Corp., No. 10-CV-5406, 2011 WL 6820022, at *4 (N.D. Ill.
Dec. 28, 2011) (quoting Johnson v. ExxonMobile Corp., 426 F.3d 887, 891 (7th Cir. 2005)). It
ensures “that a party who prevails on one ground in a lawsuit may not in another lawsuit
repudiate that ground.” United States v. Christian, 342 F.3d 744, 747 (7th Cir. 2003).
“Under Section 541 of the Bankruptcy Code, a bankruptcy estate is comprised of
property including ‘all legal or equitable interests of the debtor in property as of the
commencement of the case.’” Mayes v. Walgreen Co., No. 08-CV-5105, 2009 WL 1312957, at
*2 (N.D. Ill. May 11, 2009) (quoting 11 U.S.C. § 541(a)). Although plaintiff’s FDCPA cause of
action had not yet accrued at the time she filed for bankruptcy in January 2015, the bankruptcy
code imposes a continuing duty on her to disclose to the bankruptcy court all property, including
legal claims, acquired after the petition is filed, but before the case is closed. 11 U.S.C.
§ 1306(a)(1); see also 11 U.S.C. § 541(a)(7). A debtor who fails to disclose a pending legal
claim (i.e. an asset) to the bankruptcy court may be estopped from pursuing that claim. CannonStokes v. Potter, 453 F.3d 446 (7th Cir. 2006). This prevents a plaintiff from benefitting from
the discharge or restructuring of her debts while still preserving potentially lucrative claims.
Mayes, 2009 WL 1312957 at *3. Stated another way, judicial estoppel prevents debtors from
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Plaintiff also argues that based on an Illinois “wildcard exemption,” she had no motive
to conceal the present action from the bankruptcy court. The court, however, need not reach this
argument.
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“gam[ing] the bankruptcy system.” Williams v. Hainje, 375 F. App’x 625, 628 (7th Cir. 2010).
Judicial estoppel, however, “is a flexible equitable doctrine.” Grochocinski v. Mayer Brown
Rowe & Maw, LLP, 719 F.3d 785, 795 (7th Cir. 2013); see also Ajaka v. Brooksamerica Mortg.
Corp., 453 F.3d 1339, 1344 (11th Cir. 2006) (“Judicial estoppel is intended to be a flexible rule
in which courts must take into account all of the circumstances of each case in making [a]
determination.”) (internal quotations omitted).
Three factors “typically inform the decision whether to apply the doctrine in a particular
case”: (1) the later position is clearly inconsistent with the earlier position; (2) the party to be
estopped has succeeded in persuading the first court to accept its earlier position, “so that
judicial acceptance of an inconsistent position in a later proceeding would create the perception
that either the first or second court was misled;” and (3) “the party seeking to assert an
inconsistent position would derive an unfair advantage or impose an unfair detriment on the
opposing party if not estopped.” In re Knight-Celotex, LLC, 695 F.3d 714, 721-22 (7th Cir.
2012) (internal quotations omitted). The court concludes that none of these three factors are
present here.
Defendant cites several cases in support of its contention that plaintiff cannot pursue her
FDCPA claim after failing to “immediately” disclose it to the bankruptcy court once it arose.
However, most of these cases are easily distinguished from the present case because they involve
instances in which the plaintiffs failed to disclose claims that had already accrued at the time
they petitioned for bankruptcy. See Esparza, 2011 WL 6820022 (invoking judicial estoppel
where a plaintiff filed an employment claim with the Illinois Department of Human Rights in
2008 and was issued a right-to-sue letter by the Equal Employment Opportunity Commission
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(“EEOC”) in May 2010, but did not disclose the pending claim when she filed for Chapter 13
bankruptcy in June 2010); Viette v. Hospitality Staffing Inc., No. 12-C-2327, 2013 WL 2450101
(N.D. Ill. June 5, 2013) (invoking judicial estoppel where a plaintiff filed a claim for
employment discrimination with the Illinois Department of Human Rights and the EEOC in
December 2010, but did not disclose that claim when filing for Chapter 7 bankruptcy in
May 2011); Cannon-Stokes, 453 F.3d 446 (plaintiff filed for Chapter 7 bankruptcy while
pursuing administrative claim against U.S. Postal Service for violating the Rehabilitation Act);
Williams, 375 Fed. Appx. 625 (plaintiff was attacked by police dog before filing Chapter 13
bankruptcy petition); Bland v. Rahar, No. 06-3072, 2008 WL 109388 (C.D. Ill. Jan. 9, 2008)
(plaintiff’s claim accrued after being injured in an arrest more than a year before filing Chapter 7
bankruptcy petition); Wiggins v. Citizens Gas & Coke Util., No. 1:03-cv-1882, 2008 WL
4530679 (S.D. Ind. Oct. 7, 2008) (plaintiff filed charge with EEOC approximately two months
before filing Chapter 7 bankruptcy petition). Because the plaintiffs in these cases had legal
claims at the time they filed for bankruptcy, their non-disclosure amounted to concealing an
asset. Conversely, plaintiff did not have a legal claim at the time she filed for bankruptcy, and
therefore did not conceal anything in her initial petition for bankruptcy.
Recognizing that the present circumstances are different than those in the cases discussed
above, defendant argues that “it is irrelevant that Plaintiff’s FDCPA cause of action arose after
she filed a Chapter 13 bankruptcy petition.” Defendant, however, again relies on cases that
involve different facts than those before this court. To begin with, Jethroe v. Omnova Solutions,
Inc., 412 F.3d 598 (5th Cir. 2005), is another case in which the plaintiff’s claim arose prior to her
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filing for bankruptcy, and therefore does not support defendant’s position. Jethroe, 412 F.3d at
599 (“While pursuing her title VII claim, Jethroe filed a chapter 13 bankruptcy petition . . . .”).
As is the case here, Davis v. Mitsubishi Motors of N. America, No. 09-1255, 2011 WL
4056072 (C.D. Ill. Sept. 8, 2011), and Davis v. Village of Caseyville, No. 05-CV-0455-DRH,
2007 WL 551584 (S.D. Ill. Feb. 20, 2007), involve instances where the plaintiffs’ claims accrued
after they had filed for bankruptcy. Nonetheless, these two cases are distinguishable from the
instant case because both courts relied on the holding in Cannon-Stokes that “a debtor in
bankruptcy who denies owning an asset, including a chose in action or other legal claim, cannot
realize on that concealed asset after the bankruptcy ends,” to find that judicial estoppel was
appropriate. Cannon-Stokes, 453 F.3d at 448 (emphasis added). Unlike here, the Caseyville and
Mitsubishi plaintiffs acquired legal claims during the pendency of their bankruptcies but failed to
amend their property schedules to include those assets prior to the end of their bankruptcy
proceedings. Caseyville, 2007 WL 551584 at *2-3; Mitsubishi, 2011 WL 4056072 at *3 (“Davis
made no effort to cure the failure by filing an amended schedule with the bankruptcy court or
seek reopening of his Chapter 13 proceedings in order to disclose the potential asset.”). By not
disclosing their legal claims until after the bankruptcy proceedings had concluded, these
plaintiffs took a position in bankruptcy court that was inconsistent with their later claims, were
successful at convincing the bankruptcy courts to adopt that position, and tried to derive an
unfair advantage by later pursuing the inconsistent positions.
Similarly, the cases defendant relies on to argue that it is inapposite that plaintiff has now
amended her bankruptcy payment schedule all involve cases in which the plaintiffs sought to
amend their financial statements to include legal claims only after their bankruptcy proceedings
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had closed. For example, despite her discrimination claim accruing in 2007, the plaintiff in
Esparza failed to alert the bankruptcy court of her lawsuit until June 2011, more than three
months after bankruptcy proceedings were closed. 2011 WL 6820022 at *1-2 (“judicial estoppel
should be applied despite subsequent attempts to reopen bankruptcy proceedings”). See also
Bland, 2008 WL 109388 at *1-2 (plaintiff attempted to reopen bankruptcy estate to amend his
schedules to include a pre-petition lawsuit); Viette, 2013 WL 2450101 at *2 (plaintiff sought to
reopen bankruptcy case more than a year after it closed in order to amend his schedule to include
a pre-petition lawsuit).
Unlike the cases discussed above, plaintiff did not have a FDCPA claim when she filed
for bankruptcy. She disclosed the claim within four months of it accruing, and her bankruptcy
proceedings remain open. Accordingly, plaintiff has not taken an affirmative position in the
bankruptcy court that is inconsistent with any position she takes here. Nor have plaintiff’s
actions created a perception that either this court or the bankruptcy court has been misled. Since
plaintiff’s bankruptcy remains open, the bankruptcy court is free to alter her payment plan based
on the instant FDCPA claim.
While plaintiff may have received a number of benefits from her bankruptcy, such as an
automatic stay pursuant to 11 U.S.C. § 362, a mere four months lapsed between the time her
claim accrued and when she amended her property schedule. Defendant, however, argues that
the benefits accrued during this short amount of time are sufficient to apply judicial estoppel.
The court disagrees. Because plaintiff did not have a legal claim at the time she petitioned for
bankruptcy, unlike many of the cases defendant relies on, the automatic stay, holding her
creditors at bay and allowing her to keep some of her assets during the bankruptcy proceedings,
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was properly obtained upon the filing of her initial petition. Contra Hainje, 375 Fed. Appx. at
627 (plaintiff enjoyed 20 months of bankruptcy protections after failing to include a pre-petition
legal claim in bankruptcy filings). Moreover, it is unlikely that plaintiff’s FDCPA claim for
$1,000 statutory damages and whatever amount of actual damages she can prove from a single
phone call would have substantially altered the payment plan confirmed by the bankruptcy court
in April 2015. This stands in stark contrast to the cases discussed above in which the plaintiffs
accrued claims potentially worth tens of thousands of dollars during the pendency of their
bankruptcies. Caseyville, 2007 WL 551584 at *1 (plaintiff sought damages in excess of
$75,000); Mitsubishi, 2011 WL 4056072 at *1 (plaintiff received an offer of judgment for
$60,000 prior to dismissal of his bankruptcy proceedings). Consequently, judicial estoppel is not
required to prevent plaintiff from deriving an unfair advantage.
Defendant fails to show that equity requires judicially estopping plaintiff from pursuing
her FDCPA claim. Indeed, dismissing plaintiff’s claims would be inequitable. Accordingly, the
court denies defendant’s motion to dismiss.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss is denied. Defendant is directed
to file an answer to plaintiff’s complaint on or before September 3, 2015. The parties are
directed to prepare and file a Joint Status Report using this court’s form on or before September
8, 2015. In the status report, the parties should address whether the Chapter 13 trustee wishes to
prosecute this case on behalf of the estate or abandon it. The August 27, 2015, status date is
stricken. This case is set for status on September 15, 2015.
ENTER:
August 12, 2015
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__________________________________________
Robert W. Gettleman
United States District Judge
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