Czerniak et al v. Servis One, Inc.
MEMORANDUM Opinion and Order: For the reasons stated in the accompanying Memorandum Opinion and Order, Defendants' motion to dismiss 11 is denied. This case is referred to Magistrate Judge Rowland for discovery scheduling and supervision, as well as any settlement conference the parties may desire. Signed by the Honorable John J. Tharp, Jr on 3/31/2017.Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
THOMAS CZERNIAK and CAROL J.
SERVIS ONE, INC., d/b/a BSI
FINANCIAL SERVICES and
VENTURES TRUST 2013-I-HR by
MCM CAPITAL PARTNERS LLC,
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
Defendants BSI Financial Services and Ventures Trust have moved to dismiss Plaintiff
Thomas and Carol Czerniaks’ complaint for failure to state a claim under Fed. R. Civ. P.
12(b)(6). They object that the Fair Debt Collection Practices Act does not apply to them, that an
element of a Telephone Consumer Protection Act claim has not been adequately pled, and that
other causes of action have not been alleged with sufficient specificity. Because the Czerniaks’
allegations are sufficient as to all counts, the motion to dismiss is denied.
Thomas and Carol Czerniak are a married couple living in Chicago, Illinois. Compl. ¶ 4.
On April 3, 2006, they obtained a mortgage from Mortgage Electronic Systems, Inc. (“MERS”)
on their home in Chicago. Id. at ¶ 8. At some point later, they defaulted on the mortgage (exactly
when is unclear) and on September 26, 2013, they filed for bankruptcy. Id. at ¶ 10. On October
For the purposes of this motion to dismiss, all facts in the complaint are taken as true
and all inferences are drawn in favor of the plaintiff. See Tamayo v. Blagojevich, 526 F.3d 1074,
1078 (7th Cir. 2008).
15, 2013, MERS assigned the Czerniaks’ mortgage to CitiMortgage, Inc., and the Czerniaks
listed CitiMortgage as a secured creditor on their Schedule D bankruptcy forms. Id. at ¶ 11-12.
CitiMortgage was provided with notice of the Czerniak’s bankruptcy but chose not to attend the
November 12, 2013 creditor meeting. Id. at ¶ 15-16. The Czerniaks submitted a modified
Chapter 13 plan on November 13, 2013, in which they agreed to surrender their home in full
satisfaction of their mortgage. Id. at ¶ 17-18. CitiMortgage did not object, and the Czerniak’s
plan was approved on December 9, 2013. Id. at ¶ 19.
CitiMortgage moved to be relieved of the automatic bankruptcy stay on February 24,
2014, which was granted the same day. Compl. ¶ 21-22. The motion acknowledged the intent to
surrender the property and appears to have been understood as an effort to pursue a quick
foreclosure. See id. at ¶ 21. The order allowed CitiMortgage, “its principals, agents, successors
and/or assigns” to “pursue all non bankruptcy [sic] remedies and work out options as to the
property commonly known as 6236 W. 64th Street, Chicago, IL.” See In re Czerniak, No. 1337976, Dkt. 26 (N.D. Ill. Bnkr. Feb. 25, 2014). The Czerniaks “fully performed their duties as set
forth in their Confirmed Chapter 13 Plan” and the bankruptcy court entered a discharge order on
April 14, 2014. Compl. ¶ 23-24.
The problems began the following year, when on January 8, 2015, defendant BSI
Financial Services sent the Czerniaks a letter informing them that their (former) mortgage loan
had been sold to defendant Ventures Trusts on December 18, 2014. Id. at ¶ 32-33. BSI’s letter
did not identify who the prior creditor had been on the loan. Id. at ¶ 34. On January 28, 2015, the
Czerniaks received a statement stating that $14,096.57 was due in four days, that they owed over
$224,000 in principal, and that they were 484 days delinquent on their home, which could result
in foreclosure. Id. at ¶ 35. Two days later, Thomas received at least four calls regarding the
mortgage on his cell phone while Carol received at least one on her cell phone. Id. at ¶ 36-37. On
February 2, 2015, they received a letter from BSI stating “the servicing of your mortgage loan is
being transferred, effective January 20, 2015” and that the new servicer would begin collecting
from them. Id. at ¶ 39. The same day, Thomas received at least three calls on his cell phone from
BSI regarding the debt. Id. at ¶ 42. Two days later (on February 4), the Czerniaks received
another letter, indicating they owed over $252,000 and that they had thirty days to dispute the
validity of their debt. Id. at ¶ 45-46.
On February 11, Thomas Czerniak did just that, sending a letter disputing the debt and
explaining that the mortgage had been discharged in bankruptcy (even going so far as to include
a copy of the discharge order from the bankruptcy court). Compl. ¶ 47-48. BSI received the
dispute letter, but called Thomas on his cell phone twice on February 19 regarding the debt. Id. at
¶ 49. Without obtaining any debt verification, BSI sent the Czerniaks another letter on February
24, which identified itself as an attempt to collect a debt regarding home insurance. Id. at ¶ 5051. On February 27, BSI sent a mortgage statement stating the Czerniaks owed $20,126.98 in
two days and had outstanding principal of over $224,000 which could lead to foreclosure. Id. at
¶ 52. They received a similar statement on March 18. Id. at ¶ 55. BSI also continued to call
Thomas, three times on February 27 and once on March 11, April 13, and June 11. Id. at ¶ 53,
54, 56, 57. The Czerniaks, after six months of “emotional distress and mental anguish” and being
“led to believe that their bankruptcy had no legal effect and that they were still obligated on the
subject debt,” filed this lawsuit on July 24, 2015 alleging violations of the Fair Debt Collection
Practices Act (“FDCPA,” 15 U.S.C. § 1692), the Telephone Consumer Protection Act (“TCPA,”
47 U.S.C. § 227), the bankruptcy discharge injunction (11 U.S.C. § 524), and the Illinois
Consumer Fraud Act (“ICFA,” 815 ILCS 505/1(e)). Compl. ¶ 62-63.
On a motion to dismiss, a plaintiff need only allege the facts that provide “the grounds of
his entitlement to relief,” and does not need “detailed factual allegations.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). The defendants raise a number of arguments as to why this
case should be dismissed under Fed. R. Civ. P. 12(b)(6). First, they argue that the FDCPA does
not apply to BSI because it is not a debt collector. Second, they argue that the TCPA claims fail
because the use of an automatic telephone dialing system (“ATDS”) was not adequately alleged.
Third, they argue the claims that the bankruptcy discharge injunction was violated do not provide
BSI “fair notice of the grounds upon which the claims against it are based.” Def.’s Mem. at 1213, ECF No. 12. Similarly, they allege the ICFA claim must be dismissed because it “leaves the
Defendant and the court unable to ascertain the nature of Plaintiffs’ claims.” Id. at 14. As
discussed below, none of these arguments are meritorious, and therefore the motion to dismiss is
I. The FDCPA Applies to BSI
Initially, BSI argues that the Czerniak’s FDCPA claim must fail because BSI is not a
“debt collector” and therefore not subject to the statute at all. A “debt collector” is defined in the
statute as “any person who uses any instrumentality of interstate commerce or the mails in any
business the principal purpose of which is the collection of any debts, or who regularly collects
or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due
another” but does not include “any person collecting or attempting to collect any debt owed or
due or asserted to be owed or due another to the extent such activity. . . concerns a debt which
was not in default at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F). BSI
asserts that the loan was not “in default” because the bankruptcy court had already discharged
personal liability on the debt. See Def.’s Mot. at 8.
However, the Seventh Circuit has created an exception for the “in default” rule where the
“parties to the assignment are mistaken about the true status” of the loan. Schlosser v. Fairbanks
Capital Corp., 323 F.3d 534, 539. In that case, a mortgage holder’s records indicated that the
loan was in default although the debtors were in fact current. See id. at 535-36. The holder
committed various FDCPA violations, but later claimed it could not be held liable for them
because the debt was not in fact in default. The Seventh Circuit held such an escape hatch made
“little sense” and would create “little incentive to acquire accurate information about the true
status of the loan because, in the context of the mistake in this case, its ignorance leaves it free
form the statute’s requirements.” Id. at 538.
The situation is the same here. BSI incorrectly treated the Czerniaks’ mortgage as in
default, even though they no longer owed anything because the debt had been discharged in
bankruptcy. To exempt BSI from liability for the actions it took while trying to collect a debt it
believed it was owed would encourage unscrupulous behavior such as attempts to collect on
discharged mortgages. Not only are these tactics as oppressive and distressing as when they are
used on actual debtors, they are perhaps even more so when the alleged debtor has already gone
through the crucible of bankruptcy. Another court of this district has already ruled on this same
argument by BSI on substantially similar facts and found that BSI is still subject to the FDCPA.
See Ananthapadmanabhan v. BSI Fin. Servs., Inc., No. 15 C 5412, 2015 WL 8780579, at *3
(N.D. Ill. Dec. 15, 2015). This Court agrees and finds BSI, by asserting to the Czerniaks that the
debt was in default and attempting to collect it, is still subject to the FDCPA as a debt collector
despite the actual discharge of the debt in bankruptcy.
II. Use of an Autodialer or ATDS Has Been Adequately Alleged
Next, BSI argues that the Czerniaks have failed to state a claim under the TCPA for the
use of an automatic telephone dialing system (“autodialer” or “ATDS”). The Czerniaks allege in
the complaint that “BSI violated the TCPA by placing a minimum of fifteen calls to Thomas’s
cell phone using an ATDS without his consent.” Compl. ¶ 82. The Complaint uses the phrase
“using an ATDS” several times. See id. at ¶ 86, 90, 94. The TCPA prohibits the making of calls
“using any automatic telephone dialing system” except under certain conditions not relevant
here. 47 U.S.C. § 227(b)(1)(A).
The courts of this district have divided on how use of an autodialer must be alleged in
order to survive a 12(b)(6) motion. See Izsak v. Draftkings, Inc., No. 14-CV-07952, 2016 WL
3227299, at *3 (N.D. Ill. June 13, 2016) (collecting cases). This Court sides with those finding
that allegations of the use of an autodialer are sufficient at the motion to dismiss stage. See, e.g.,
Torres v. Nat'l Enter. Sys., Inc., No. 12 C 2267, 2012 WL 3245520, at *3 (N.D. Ill. Aug. 7,
2012). As the Torres court noted, discovery is typically necessary for the plaintiff to obtain the
facts necessary to demonstrate an autodialer was used. Furthermore, there are often factual
predicates of claims that need not be alleged in great detail. For example, BSI does not object to
the Czerniaks’ allegations that they were called on their cell phones, even though they do not
further explain why they believe they meet that statutory requirement. Sometimes a few simple
words are enough to state a part of a claim, and here the use of an autodialer is one of those
simple facts that will suffice at the motion to dismiss stage. “The Court does not find it necessary
for [Plaintiff] to describe the calls in minute detail in his complaint (how long was the pause?
Did he hear a click? Just how generic were these “prerecorded robocalls?”) to allege plausibly
that an autodialer was used.” Stamer v. Seas & Assocs., LLC, No. 15-CV-08277, 2017 WL
279674, at *3 (N.D. Ill. Jan. 13, 2017).
III. The Bankruptcy Discharge Injunction Claim is Sufficient
The Czerniaks further allege that BSI violated the bankruptcy discharge order, which
“operates as an injunction against the commencement or continuation of an action, the
employment of process, or an act, to collect, recover or offset any such debt as a personal
liability of the debtor, whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)(2).
The Czerniaks allege BSI, “[n]otwithstanding having actual notice of Plaintiffs’ bankruptcy,”
continued to attempt to collect on the debt in violation of the order. Compl. ¶ 99. BSI attempts to
argue a confusing array of reasons why “Plaintiff’s Complaint fails to describe the claim in
sufficient detail to give BSI fair notice of what the claim is and the grounds on which it rests.”
Def.’s Mem. at 12. As an initial matter, the Complaint clearly gives sufficient notice of the claim
– it alleges that BSI engaged in a variety of calls and letter to collect a debt which had been
discharged in bankruptcy in violation of the stated law. Those calls and letters are identified by
date and contents, as is the statute under which they bring their claim. BSI has plenty of notice as
to the basis of the Czerniaks’ claim and argument to the contrary is blatantly frivolous.
The Court takes BSI’s substantive argument to have several parts: first, that it did not
violate the injunction because the bankruptcy court had granted CitiMortgage’s request for relief
from the stay. Second, it provided boilerplate bankruptcy disclaimers explaining that it did not
intend to violate any bankruptcy stay that might be in effect. Third, that the plaintiffs failed to
sufficiently allege the content of the various calls and letters. None of these arguments holds
First, the bankruptcy court granted CitiMortgage relief from the stay “as to the property”
subject to the mortgage. See In re Czerniak, No. 13-37976, Dkt. 26 (N.D. Ill. Bnkr. Feb. 25,
2014). As at least one decision against BSI has previously noted, the bankruptcy injunction
protects plaintiffs from claims regarding “personal liability of the debtor” and a relief order as to
a property does not allow a debt collector to go after a debtor personally. See 11 U.S.C.
§ 524(a)(2); Ananthapadmanabhan, 2015 WL 8780579, at *4. The Complaint clearly indicates
that BSI attempted to collect the discharged debt from the Czerniaks personally rather than
taking an action against the property, which states a plausible violation of the bankruptcy
Second, BSI concedes that not all of the material sent to the plaintiff contained the
bankruptcy disclaimers, so even if those disclaimers did prevent liability based on some of BSI’s
communications, the plaintiffs would still have stated a claim. See Def.’s Mem. at 12 (“nearly all
of the written correspondence” contained disclaimers). Furthermore, it is not clear that BSI made
any disclosures during its phone conversations with the Czerniaks. See Freeman v. Ocwen Loan
Servicing, Inc., No. 15 C 11888, 2016 WL 3476681, at *6 (N.D. Ill. June 27, 2016) (declining to
dismiss bankruptcy injunction claim where court could not determine whether disclaimers were
given during calls). Most importantly, BSI has cited no law suggesting that bankruptcy
disclaimers eliminate liability under a bankruptcy injunction when the collection efforts are made
against individuals in their personal capacity. Even if such disclaimers were effective, the
disclaimers were not made during every interaction with the Czerniaks, so BSI could plausibly
be liable regardless for at least some of the relevant interactions.
Finally, BSI alleges that the Czerniaks have not alleged the content of the
communications in sufficient detail. This argument also falls well short of the mark. First, to
require a plaintiff who has received dozens of calls from a defendant regarding a debt to describe
them in detail demands more of a plaintiff than do the federal rules that govern pleading
standards. The Supreme Court has said that a plaintiff “does not need detailed factual
allegations,” and a statement of when the calls took place and a general description of what they
were about is sufficient. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Discovery is
the proper time for the parties to determine the exact contents of the phone calls. See Freeman,
2016 WL 3476681, at *6 (“the contents of the written communications sent to Freeman and the
purpose and content of the telephone calls must be explored in discovery”). Second, the
Czerniaks provided copies of several of the letters as attachments to their complaint, so the
suggestion that the contents of the letters have not been sufficiently revealed is meritless.
IV. The ICFA Claim is Sufficient
Finally, BSI argues that the Czerniaks have failed to sufficiently allege unfairness under
the ICFA. Au contraire. The Complaint states that BSI’s attempts to collect from the Czerniaks
were “continuous and misleading,” that BSI attempted “to induce the Czerniaks into making
payments on a uncollectible debt,” and that BSI “bullied Plaintiffs into submission with
perpetual unfair and deceptive conduct through lies, harassment, and deception regarding the
collectability of the subject debt, and by ignoring their requests for the communications to stop.”
Compl ¶ 113-117. The complaint’s description of BSI’s conduct is more than sufficient to
convey the nature of what is alleged to have been “unfair” conduct.
In its reply, BSI retreats from its hyperbole-laden assertion that “[t]he staggering height
of the overstatements in Plaintiffs’ Complaint leave Defendant without fair notice of what the
claim is and the grounds on which it rests,” Def.’s Mem. at 14 (internal quotation marks
omitted), and instead argues that an elevated fraud pleading standard is required and that the
Czerniaks failed to allege that BSI “intended that Plaintiffs rely on the deceptive practice or act.”
Def.’s Reply at 9, ECF No. 19.
But “intent to deceive is not a required element of a claim under the ICFA.” Wigod v.
Wells Fargo Bank, N.A., 673 F.3d 547, 574 (7th Cir. 2012). The Complaint clearly states that it
is seeking to establish unfairness rather than fraud, and is therefore not subject to heightened
pleading standards. See Freeman, 2016 WL 3476681, at *7. In fact, the Freeman court found a
claim was stated under the ICFA with almost identical facts. See id. at * 9. As in Freeman, the
facts alleged in the complaint detail a series of acts by BSI that are unethical, oppressive, and
unscrupulous (exactly what the IFCA prohibits). See Sadowski v. Med1 Online, LLC, No. 07 C
2973, 2008 WL 2224892, at *6 (N.D. Ill. May 27, 2008) (listing components of IFCA claim).
The Complaint alleges that BSI sent numerous letters and made several phone calls attempting to
collect on a debt that had long since been discharged, even after the Czerniaks informed BSI that
their debt had been discharged in bankruptcy. See Compl. ¶ 52. BSI’s efforts led them to believe
that “their bankruptcy had no legal effect and that they were still obligated” to pay BSI. See id. at
¶ 63. If BSI did in fact know it was trying to collect on a nonexistent debt but still wrote letters
describing sums due and making phone calls to induce the Czerniaks to pay money, those actions
are sufficiently unfair to state a claim under the ICFA. See Blanton v. Roundpoint Mortg.
Servicing Corp., No. 15 C 3156, 2016 WL 3653577, at *9 (N.D. Ill. July 7, 2016) (ICFA claim
stated where “the second amended complaint alleges that [Defendant] misrepresented the status
of her debt and previous payments in an attempt to force her to dismiss her state court action”).
The Czerniaks have sufficiently alleged their FDCPA, TCPA, bankruptcy discharge
injunction, and ICFA claims. Therefore, the motion to dismiss is denied.
Dated: March 31, 2017
John J. Tharp, Jr.
United States District Judge
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