Harrer v. Bayview Loan Servicing, LLC
Filing
113
MEMORANDUM Opinion and Order: For the foregoing reasons, Bayview's motion to dismiss, 98 , is denied. Signed by the Honorable Thomas M. Durkin on 11/30/2016:Mailed notice(srn, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ROBERT HARRER,
Plaintiff,
No. 15 C 4075
v.
Judge Thomas M. Durkin
BAYVIEW LOAN SERVICING, LLC,
Defendant.
MEMORANDUM OPINION AND ORDER
Robert Harrer alleges that Bayview Loan Servicing LLC violated the Fair
Debt Collection Practices Act by sending him certain communications. Bayview has
moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil
Procedure 12(b)(6). R. 98. For the following reasons, that motion is denied.
Legal Standard
A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g.,
Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th
Cir. 2009). A complaint must provide “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2), sufficient to
provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels
and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.’”
Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In
applying this standard, the Court accepts all well-pleaded facts as true and draws
all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.
Background
Harrer went into default on his mortgage and declared bankruptcy. His debt
related to his mortgage was discharged in bankruptcy. Bayview contends that even
after Harrer’s bankruptcy discharge, Bayview has a “surviving security interest in
[Harrer’s] property.” R. 99 at 1. The parties do not explain the nature of this
security interest, but it does not appear to be relevant to deciding this motion.
After Harrer’s bankruptcy discharge, Bayview contacted him six times in
2014 about his mortgage and a potential foreclosure: a voicemail on May 7; letters
on May 7 and 8, see R. 79-1 at 8 and 25; and two letters each on May 22 and
December 11, see R. 79-1 at 29, 31, 33-40. Harrer alleges that the content of these
communications violated the FDCPA.
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Analysis
I.
Communications In Connection with the Collection of Debt
Bayview argues that its communications with Harrer were not sent “in
connection with the collection of debt,” as is required to constitute a violation of the
FDCPA, but were sent to “enforce[] . . . the surviving security interest in [Harrer’s]
property.” R. 99 at 3-5. Bayview contends that a “creditor’s communications related
to enforcing a security interest, or providing loss mitigation alternatives, following a
debtor’s bankruptcy discharge are not subject to the FDCPA.” R. 99 at 4. In support
of this contention Bayview cites the First Circuit’s holding that “it is plain that the
sine qua non of a debt is the existence of an obligation (actual or alleged),” and the
FDCPA’s definition of debt “requires at least the existence or alleged existence of an
obligation to pay money.” Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 23 (1st Cir.
2002); see also 15 U.S.C. § 1692a(5) (defining “debt” as “any obligation or alleged
obligation of a consumer to pay money”). Several district courts have applied this
language to dismiss FDCPA claims by plaintiffs who, like Harrer, had their
obligations on promissory notes secured by a mortgage discharged in bankruptcy.
See Kenney v. CitiMortgage, Inc., 2015 WL 1957880, at *5 (D. Kan. Apr. 29, 2015)
(“Here, pursuant to Plaintiffs’ Chapter 7 bankruptcy discharge, they are not liable
for any deficiency between the price secured at foreclosure and the amount owed on
the CitiMortgage Mortgage or Citibank Mortgage. [The defendant] argues that its
actions could not have been for the collection of a debt, but rather, only for
enforcement of a security interest. The Court agrees.”); Shaw v. Bank of Am., NA,
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2015 WL 224666, at *6 (D. Mass. Jan. 15, 2015); Redjai v. Nationstar Mortg. LLC,
2014 WL 7238355, at *3 n. 1 (C.D. Cal. Dec. 15, 2014); Payne v. Reiter & Schiller,
P.A., 2012 WL 1054873, at *3 (D. Minn. Mar. 8, 2012).
However, the First Circuit qualified its holding regarding the necessity of the
“existence” of a debt, by “recogniz[ing] that a plaintiff may bring a claim under the
FDCPA by pleading that a debt collector falsely alleged an obligation to pay money.”
Arruda, 310 F.3d at 23. This qualification comports with the Seventh Circuit’s
holding that “the FDCPA is designed to protect consumers from the unscrupulous
antics of debt collectors, irrespective of whether a valid debt actually exists.” Keele
v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998). “That is because bringing or even
threatening to bring a lawsuit ‘which the debt collector knows or should know is
unavailable or unwinnable by reason of a legal bar such as the statute of limitations
is the kind of abusive practice the FDCPA was intended to eliminate.’” Harris v.
Total Card, Inc., 2013 WL 5221631, at *4 (N.D. Ill. Sept. 16, 2013) (quoting Ramirez
v. Palisades Collection LLC, 2008 WL 2512679, at *5 (N.D. Ill. June 23, 2008)) (and
citing cases from this district holding that “the FDCPA may be violated where the
collection letters imply there is a legally enforceable obligation to pay the debt”)).
This reasoning applies here because Harrer claims that his bankruptcy created a
legal bar to collection on his mortgage, which he alleges Bayview ignored in
communicating with him. Thus, the fact that Harrer is no longer obligated by the
promissory note associated with his mortgage is not a basis to dismiss his claim
that Bayview sought to collect on that note.
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Bayview also contends that “the plain language of each letter directly
contradicts [Harrer’s] conclusory statement that the letters were related to the
collection of debt,” R. 99 at 5, because the letters contain one of the two following
disclaimers:
If you are in Bankruptcy or received a bankruptcy
discharge of this debt, this communication is not an
attempt to collect the debt against you personally, but is
notice of a possible enforcement of the lien against the
property.
or
To the extent that your obligation has been discharged or
is subject to an automatic stay of bankruptcy this notice is
for compliance and informational purposes only and does
not constitute a demand for payment or any attempt to
collect such obligation.
Whether Bayview’s disclaimers are sufficient to demonstrate that Byaview was not
attempting to collect a “debt” from Harrer is evaluated under the “unsophisticated
consumer” standard. Wahl v. Midland Credit Mgmt., 556 F.3d 643, 645 (7th Cir.
2009). District courts in this circuit applying this standard have found that
disclaimers like these are insufficient to demonstrate that the communications were
not connected to the collection of a debt as a matter of law. See Radney v. Bayview
Loan Servicing, LLC, 2016 WL 3551677, at *3 (N.D. Ill. June 30, 2016) (denying
motion to dismiss by Bayview based on the same disclaimers included in the letters
sent to Harrer); see also Azari v. Seterus, Inc., 2016 WL 6070361, at *2-3 (N.D. Ill.
Oct. 17, 2016); Price v. Seterus, Inc., 2016 WL 1392331, at *4 (N.D. Ill. Apr. 8, 2016);
Whalen v. Specialized Loan Servicing, LLC, 155 F. Supp. 3d 905, 911 (W.D. Wis.
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2016) (“[D]efendant’s representation in the disclaimer that the letter was not a
demand for payment means little when at the same time defendant was telling
plaintiff that she risked foreclosure if she did not pay up.”). Other district courts
have also held that “[j]ust because a disclaimer says that the communication ‘is not
an attempt to collect a debt,’ does not make that true, especially in view of
indications on the face of the document that the communication is intended to
obtain money and is connected to a present or former obligation to pay an
indebtedness.” Roth v. Nationstar Mortg., LLC, 2016 WL 3570991, at *4 (M.D. Fla.
July 1, 2016) (quoting Donnelly-Tovar v. Selected Portfolio Servicing, 945 F. Supp.
2d 1037, 1048 (N.D. Neb. 2013)). This is because, as a case cited by Bayview put it,
“communications can simultaneously seek to enforce a security interest and collect
upon the underlying debt that gave rise to the security interest.” Helman v. Udren
Law Offices, P.C., 85 F. Supp. 3d 1319, 1325 (S.D. Fla. 2014). Similarly, and more
important for this Court, the Seventh Circuit—in a case also cited by Bayview—has
held that “several factors . . . come into play in the commonsense inquiry of whether
a communication from a debt collector is made in connection with the collection of
any debt.” Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 385 (7th Cir. 2010). In
addition to the disclaimers, the communications in this case all stated that they
were contacting Harrer about his monetary obligations. See R. 79-1 at 8 (“additional
fees and charges may be accruing. Your credit standing could also suffer . . . .”); R.
79-1 at 25 (“we are in hopes of possibly offering you a fresh start by possibly
lowering your mortgage payment”); R. 79-1 at 29 (“additional fees and charges may
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be accruing. Your credit standing could also suffer . . . .”); R. 79-1 at 31 (“additional
fees and charges may be accruing. Your credit standing could also suffer . . . .”); R.
79-1 at 33 (“you’re approved for a Trial Period Plan to modify your mortgage
payment . . . . [Y]ou will be required to make three monthly payments in the
amount of $1488.1 each.”). “Commonsense” says that despite the disclaimers, the
language in the letters is more than a sufficient basis to state a claim that Bayview
was contacting Harrer “in connection with” an “obligation of a consumer to pay
money.”
II.
Statute of Limitations
In Bayview’s first brief on this motion, it argues that Harrer’s claim violates
the FDCPA’s one-year statute of limitations. Specifically, Bayview argues that
Harrer’s allegation that Bayview threatened his credit score is time-barred because
his third amended complaint of March 3, 2016 was filed more than one year after
the letters at issue were sent in 2014. But under Federal Rule of Civil Procedure
15(c), “an amendment to a pleading relates back to the date of the original pleading
when . . . the amendment asserts a claim or defense that arose out of the conduct,
transaction, or occurrence set out—or attempted to be set out—in the original
pleading.” Bayview cannot argue that Harrer’s credit score claim does not arise “out
of the conduct, transaction, or occurrence set out . . . in the original pleading,”
because Harrer expressly included the same credit score claim in his original
complaint filed on May 7, 2105, exactly one year after the first communication at
issue was sent. See R. 1 ¶¶ 43d, 43l. Moreover, Harrer continued to include the
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factual allegations relevant to his credit score claim in his first and second amended
complaints (filed on June 23, 2015 and August 24, 2015, respecticaly), see R. 14 ¶
26; R. 37 ¶ 25, even though he omitted an express claim for such relief from those
iterations of his complaint for some reason. Thus, relation back is clearly
appropriate here and Harrer’s allegations do not demonstrate that his claims
violate the statute of limitations.
In its reply brief, Bayview changes tact and argues that Harrer’s omission of
a claim for relief based on Bayview’s threat to his credit score operates as a waiver
of that claim. Since the Court granted Harrer leave to file a third amended
complaint, waiver is not relevant. Furthermore, the cases Bayview cites in support
of its argument concern plaintiffs’ attempts to add claims on appeal or after briefing
was complete on summary judgment. See R. 112 at 3 (citing Anderson v. Donahoe,
699 F.3d 989, 997 (7th Cir. 2012); Jones v. Marriott Hotel Servs., Inc., 2008 WL
2940791, at *5 (N.D. Ill. July 25, 2008)). Those circumstances are not remotely
analogous to the stage of the proceedings in this case. And it is ironic that Bayview
asks the Court to consider its waiver argument only in its reply brief, which is
generally a basis for waiver of an argument. In any case, Harrer has not waived his
claim for relief based on Bayview’s alleged threat to his credit score.1
Bayview also seeks dismissal of Harrer’s claim for violation of FDCPA § 1692e
arguing that the FDCPA does not require inclusion of the name of a “natural
person” on a communication. See R. 99 at 10. Neither party develops this issue with
reference to case authority, so the Court declines to address it at this time since it is
not case dispositive. Bayview may raise the argument again at a later stage in the
proceedings if appropriate.
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Conclusion
For the foregoing reasons, Bayview’s motion to dismiss, R. 98, is denied.
ENTERED:
______________________________
Honorable Thomas M. Durkin
United States District Judge
Dated: November 30, 2016
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