Rosales v. Weltman Weinberg & Reis Co, L.P.A. et al
Filing
148
MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 11/12/2020. Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MICHAEL ROSALES,
Plaintiff,
v.
WELTMAN, WEINBERG &
REIS CO., L.P.A.,
Defendant.
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No. 15-cv-06943
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
This lawsuit stems from a 2014 attempt by defendant, the law firm Weltman, Weinberg &
Reis, to collect a debt from the plaintiff, Michael Rosales. Weltman sued Rosales in Cook County
Circuit Court, but its action was dismissed with prejudice because it named the wrong creditor in
its complaint. Rosales then sued Weltman in federal court, charging that Weltman violated the Fair
Debt Collection Practices Act by filing the flawed state court lawsuit against him. Before the Court
now are both parties’ motions for summary judgment. The Court considers whether Weltman’s
action was indeed an FDCPA violation, and whether Weltman can escape liability pursuant to 15
U.S.C. § 1692k(c) because it made an unintentional, good faith error despite having procedures
reasonably adapted to prevent the error. For the reasons discussed below, the Court grants both
motions in part and denies them in part.
BACKGROUND
Plaintiff Michael Rosales, formerly an active duty service member, obtained a residential
loan from lender IMPAC Funding, secured by his condo, on which he defaulted in 2009. Agreed
Statement of Material Facts (ASMF) ¶¶ 3-5 (ECF No. 118-2). The debt was charged off in 2010.
ASMF ¶ 6. Enter Deutsche Bank, an alleged assignee of Rosales’ mortgage, and Green Tree
Servicing LLC, the loan servicer, which retained defendant Weltman to collect the defaulted debt.
ASMF ¶¶ 9-10. Weltman’s agreement with Green Tree provided that Green Tree would provide
accurate information regarding the debt, and pursuant to that agreement, in November 2013, Green
Tree directed Weltman to sue Rosales on behalf of a trust creditor, “Deutsche Bank National Trust
Company, as Trustee for Home Equity Loan Asset-Backed Trust, Series INDS 2006-3.” ASMF ¶¶
11-13 (emphasis added). Over the next several months, Weltman mailed letters to Rosales seeking
the amount of $49,730 on behalf of a creditor named “INDYMAC,” apparently another entity in
the chain of assignment. PSMF ¶¶ 22-24.1
In February 2014, Kirsten Pepper, a Weltman lawyer, set to work on the complaint.
Pepper’s practice was to mass produce complaints using mail-merge, a tool within Microsoft Word
that enables one to use data in a spreadsheet to populate information throughout Word documents.2
ASMF ¶ 49. The first version of the complaint Pepper generated stated that Rosales owed
$95,453.84 to Deutsche Bank National Trust Company, as Trustee and Supplemental Interest
Trustee for IndyMac MBS, Inc., Series INDS 2006-2B Assignee of IndyMac Bank, F.S.B.,
misstating the amount of the debt by roughly 100% and identifying the wrong creditor.
Notwithstanding these errors, the complaint was sent to Green Tree for verification and Green
1
Weltman disputes that this letter was sent on behalf of the wrong creditor, saying that
“the full name of the trust entity is IndyMac ABS Inc., Home Equity Mortgage Loan Asset-Backed
Trust, Series INDS 2006-3.” Def.’s Respon. to Pl.’s Rule 56.1 Statement ¶ 23-24 (ECF No. 131).
This does little to clear up the confusion as to the true creditor, as Weltman ultimately claims that
the correct creditor is Deutsche Bank National Trust Company, as Trustee for Home Equity Loan
Asset-Backed Trust, Series INDS 2006-3. Def.’s Statement of Material Facts (DSMF) ¶ 15 (ECF
No. 115). In any event, Rosales does not argue that Weltman’s pre-complaint correspondence
violated the FDCPA.
2
See Microsoft Support, “Use mail merge for bulk email, letters, labels, and envelopes”
available at https://support.microsoft.com/en-us/office/use-mail-merge-for-bulk-email-letterslabels-and-envelopes-f488ed5b-b849-4c11-9cff-932c49474705
2
Tree approved the draft. PSMF ¶ 26-27, Pl.’s Ex. E WWR004 (ECF No. 115-7). Pepper apparently
caught the error in the amount of the debt, however, and drafted another complaint for the amount
of $49,730 on behalf of the same 2006-2B trust. She again sent the complaint to Green Tree for
verification, and Green Tree again approved the complaint—despite the fact that Weltman had still
named the wrong creditor. DSMF ¶ 27-28. Defendants acknowledge that they do not know how
Pepper entered the wrong trust name when she created the complaint. ASMF ¶ 42. Weltman filed
the erroneous complaint against Rosales in the Circuit Court of Cook County on October 17, 2014.
ASMF ¶ 23.
When Rosales was served with the complaint, he recognized that the lawsuit had something
to do with the condo loan he had defaulted on years earlier. DSMF ¶ 38. He hired a lawyer who
recognized that Trust 2006-2B, an entity that actually exists and has sued other debtors, was
incorrectly named as the creditor in the “verified complaint” filed by Weltman. PSMF ¶¶ 3-4, 20.
On January 15, 2015, Rosales filed a motion to dismiss the state court action. PSMF ¶ 5. Two
months later, Weltman had still not determined the identity of the correct creditor. ASMF ¶ 40.
The firm never sought to withdraw the complaint, nor did it file an amended complaint to correct
the erroneous identification of the trust creditor. ASMF ¶ 57. Therefore, on April 16, 2015, the
Cook County Circuit Court granted Rosales’ motion and dismissed the action with prejudice,
finding that “Deutsche Bank is not the purported holder of the disputed note.” ASMF ¶ 36.
Rosales then filed this action bringing FDCPA and state law claims against the 2006-3
trust, the 2006-2B trust, and Weltman. The Court dismissed the claims against the trusts and
dismissed the state law claims against Weltman while allowing the FDCPA claims to proceed.
Mem. Opinion and Order 1 (ECF No. 48). The operative complaint alleges that Weltman violated
15 U.S.C. §1692e (prohibiting “false, deceptive, or misleading” representations in connection with
3
the collection of any debt), § 1692f (barring “unfair or unconscionable” collection practices), and
the Servicemember’s Civil Relief Act. Weltman asserts the bona-fide error defense available under
§ 1692k(c).
DISCUSSION
The FDCPA governs the conduct of debt collectors such as Weltman. ASMF ¶ 8. Its
purpose is to protect debtors “from unscrupulous collectors, regardless of the validity of the debt.”
Mace v. Van Ru Credit Corp., 109 F.3d 338, 341 (7th Cir. 1997). It is “a strict liability statute, and
debt collectors whose conduct falls short of its requirements are liable irrespective of their
intentions.” Ruth v. Triumph Partnerships, 577 F.3d 790, 805 (7th Cir. 2009). The FDCPA
relegates questions of a defendant’s intent to the “bona-fide error” defense, wherein the defendant
bears the burden to show that it committed an unintentional, good faith error despite having
procedures reasonably adapted to prevent that error. 15 U.S.C. § 1692k(c).
When ruling on a motion for summary judgment, the Court examines whether there is any
genuine dispute as to any material fact such that the movant is entitled to judgment as a matter of
law. Fed. R. Civ. Proc. 56(a). This standard remains unchanged when the parties both file motions
for summary judgment; the Court “construes all inferences in favor of the party against whom the
motion under consideration is made.” Cremation Soc’y of Illinois, Inc. v. Int’l Brotherhood of
Teamsters Local 727, 869 F.3d 610, 616 (7th Cir. 2016).
The Court first examines whether Rosales has met his burden on summary judgment to
show that Weltman violated the FDCPA, and finds that plaintiff has established, through
undisputed evidence, a violation of § 1692e (barring any misrepresentation in communications
with a debtor). Further, Weltman is not entitled to a bona fide error defense, because it cannot
4
establish that the error was unintentional, nor that its procedures were reasonably adapted to
prevent the error.
I.
Weltman violated 15 U.S.C. § 1692e when it sued on behalf of an entity to
which Rosales owed nothing.
The FDCPA proscribes “any false, deceptive, or misleading representation or means in
connection with the collection of any debt. 15 U.S.C. § 1692e. The conduct covered by § 1692e
includes litigation activity in lawsuits against debtors. See Marquez v. Weinstein, Pinson, & Riley,
P.S., 836 F.3d 808, 811-812 (7th Cir. 2016). Mr. Rosales argues that Weltman violated three
provisions of this section. He contends that Weltman violated § 1692e(2)(A) by falsely
representing “the character, amount, or legal status” of Mr. Rosales’ debt when it sued him on
behalf of a creditor who had no right to collect, and § 1692e(2)(B) because Weltman falsely
represented that the 2006-2B trust was entitled to compensation such as attorneys’ fees and costs.
Further, he claims that Weltman violated § 1692e(5) by “threaten[ing]… action that cannot legally
be taken,” because the 2006-2B trust had no right to sue Mr. Rosales.
To determine whether a statement is false or misleading under the FDCPA,3 the Court
applies an objective standard that asks “how an unsophisticated consumer would perceive the
statement.” Marquez, 836 F.3d at 812. “The unsophisticated consumer may be uninformed, naïve,
and trusting, but is not a dimwit, has rudimentary knowledge about the financial world and is
capable of making logical deductions and inferences.” Lox v. CDA, Ltd., 689 F.3d 818, 822 (7th
3
The Seventh Circuit has held that a statement, even if incorrect, is not “false” under
§ 1692e unless it would confuse an unsophisticated consumer. Wahl v. Midland Credit
Management, Inc., 556 F.3d 643, 646 (7th Cir. 2009) (rejecting argument that a false statement
need not be misleading to support liability under § 1692e). Under this holding, it appears that there
is no material distinction between a statement that is “false” under § 1962e and one that is
“misleading,” despite the statute’s use of the terms in the alternative.
5
Cir. 2012). To apply this standard, the Seventh Circuit has “categorized § 1692e cases into three
groups. The first category consists of cases where the challenged language is obviously not
misleading and no extrinsic evidence is required to demonstrate that a reasonable unsophisticated
consumer would not be misled. The second category includes those cases where the debt collection
language is not deceptive or misleading on its face, but could be construed so as to be confusing
or misleading to the unsophisticated consumer. . . The final category of cases involves language
that is plainly false, deceptive, or misleading, and therefore requires no additional evidence for the
plaintiff to succeed on her claim.” Johnson v. Enhanced Recovery Co., LLC, 961 F.3d 975, 98283 (7th Cir. 2020) (internal citations omitted).
Rosales contends that, since the Court denied Weltman’s motion to dismiss and held
Rosales had sufficiently alleged a §1692e violation, the outcome is now foreordained at the
summary judgment stage under “the law of the case.” Pl.’s Mot. for Sum. J. 11-12 (ECF No. 1181). But that is not necessarily so. On a motion to dismiss, the Court assumes the truth of the facts
alleged in the complaint; the Court’s evaluation of the same issue on summary judgment depends
on what evidence the parties adduce to prove what happened and whether that evidence creates
any material fact disputes that must be resolved by a jury. See, e.g., Johnson, 961 F.3d at 981-82
& n.1 (7th Cir. 2020) (affirming both the denial of a motion to dismiss a § 1692e claim and the
grant of summary judgment for the defendant collector where debtor failed to adduce evidence to
support claim). Given the procedural posture when the Court made that statement, where the task
was to weigh the plausibility of the claim based on assumed facts rather than whether a genuine
dispute of material fact exists, it remains necessary to examine whether the facts demonstrate a
§ 1692e violation such that no reasonable jury could find otherwise.
6
The parties do not dispute that Weltman named the wrong creditor in its lawsuit against
Rosales. ASMF ¶ 25. In the state court case, Weltman filed a complaint seeking a judgment of
$49,730 for a plaintiff to whom Rosales owed nothing. Id. Plaintiff contends that “there can be no
question that the unsophisticated consumer would find this misleading and deceptive” and thus no
extrinsic evidence, such as consumer surveys, is necessary to demonstrate that the errant lawsuit
is an FDCPA violation. Pl.’s Mot. for Sum. J. 14. He further argues that the violation is material,
since an unsophisticated consumer faced with a lawsuit from the wrong creditor could have paid
the wrong creditor or been subject to a judgment to the same, meaning that he would be out almost
$50,000 dollars while still owing the entire debt to the actual creditor. Id. at 14-15.
Defendant responds that Rosales was not misled: he could not have been confused about
the state court pleadings because it is undisputed that he recognized the lawsuit had something to
do with his defaulted condo loan. Def.’s Mot. Sum. J. 6-7 (ECF No. 114). Weltman also maintains
that a two-character error in a 95-character trust name is trifling and immaterial. Def.’s Response
at 1 (ECF No. 130). Finally, Weltman argues that Rosales has not met his burden on summary
judgment because he has not produced extrinsic evidence that this two-character error would
materially mislead the prototypical unsophisticated consumer.
The Court agrees with Rosales that Weltman’s complaint on behalf of a wrongly-named
but extant creditor falls into the class of statements that are “plainly false, deceptive, or
misleading,” Johnson, 961 F.3d at 983, and “could well confuse a substantial number” of
unsophisticated consumers. Williams v. OSI Educ. Servs., Inc., 505 F.3d 675, 678 (7th Cir. 2007).
The most likely conclusion an unsophisticated consumer could reach upon receiving a complaint
brought by “Deutsche Bank National Trust Company, as Trustee and Supplemental Interest
Trustee for IndyMac MBS, Inc., Series INDS 2006-2B Assignee of IndyMac Bank, F.S.B. Trust”
7
was that that entity—the named plaintiff—was asserting that the unsophisticated consumer owed
a debt to it. Nothing on the face of the complaint would suggest to an unsophisticated consumer
that the plaintiff had been named in error or that the debt specified was actually owed to a different
trust.
Weltman argues that the allonge4 attached to the complaint—listing the 2006-3 trust as
owner of the note—resolves this confusion for the unsophisticated consumer. The Court disagrees.
Even the Weltman lawyer handling the account, seeing the 2006-3 trust named on the allonge, did
not think the allonge resolved the identity of the true creditor. The first sign that identifying the
creditor was not simply a matter of flipping to the documents attached to the complaint was Kirsten
Pepper’s statement to her colleagues in January 2015, after the suit had been filed, that the loan
had “a tenuous chain of title that will most certainly be challenged.” Pl.’s Resp. to Def.’s Mot. for
Sum. J 3-4 (ECF No. 132). Then in March 2015, when faced with Rosales’ motion to dismiss
based on the 2006-2B trust’s lack of standing, Weltman did not just check the allonge, realize its
error, and amend its complaint to name the 2006-3 trust as plaintiff. Instead, Pepper sought
clarification from Green Tree, noting that the blank endorsement to the 2006-3 trust made
ownership “nebulous” and “messy;” that her effort to amend the complaint was frustrated by her
inability to “determine who you are servicing the contract for.” ASMF ¶ 47. If the allonge naming
the 2006-3 trust did not make the 2006-3 trust’s ownership obvious to the debt collector’s own
lawyer, there seems little reason to believe that it would have done so for an unsophisticated
4
An “allonge” is an attachment to a negotiable instrument used for subsequent
endorsements of the instrument. See generally Black’s Law Dictionary (9th ed. 2009). The allonge
includes two pages with three undated indorsements. : (1) an indorsement from IMPAC Lending
Group, Rosales’ originating lender, to IndyMac Bank, F.S.B.; (2) an indorsement from IndyMac
Bank, F.S.B., to the 2006-3 Trust; and (3) a blank indorsement executed by the 2006-3 Trust.
8
consumer. An unsophisticated consumer may have “rudimentary knowledge of the financial
world,” Lox, 689 F.3d at 822, but he is not expected to have more knowledge than the lawyer
litigating a collection suit against him. Thus, even if the unsophisticated consumer were to realize
something was amiss with the identity of the creditor suing him, the record demonstrates it is
highly unlikely that consumer would have been able to identify the correct creditor by examining
the allonge or other documents attached to the pleadings.
Weltman also emphasizes that the trust names are long and complex, and the error was one
of a mere two characters,5 but instead of absolving the firm, this argument serves to highlight why
this error was the sort that is materially misleading to the unsophisticated consumer. Those two
characters are more consequential than Weltman would have the Court believe—the erroneous
trust designation refers to another actual, existing trust entity.6 The error is not one that is easily
discernable on its face, and there is a substantial risk that an unsophisticated consumer would have
proceeded with the lawsuit and unwittingly exposed himself to a judgment of almost $50,000 to a
trust to whom he owed nothing. See, e.g., Green v. Monarch Recovery Management, Inc., No. 13
CV 418, 2015 WL 4599480, *5 (S.D. Ind. July 29, 2015) (misidentification of creditor was
5
The parties agree that the only difference between the erroneous and correct entity names
is the numeric designation of the trusts: “2006-2B” (the incorrect designation) and “2006-3” (the
correct designation). Agreed Rule 56.1 Statement, ECF No. 118-2, at ¶ 26.
6
Weltman appears to dispute the existence of the 2006-2B trust by claiming the record
does not establish it. Def.’s Resp. to Pl.’s Rule 56.1 Statement 11 (ECF No. 131). Weltman’s
“dispute” is startling. The 2006-2B trust appeared as a defendant in this lawsuit and successfully
moved to dismiss the action against it. One would think that non-existence would have been an
excellent argument for a motion to dismiss, but the 2006-2B trust did not assert its non-existence,
nor did the Court dismiss the suit against it on that basis. See The Trusts’ Mot. to Dismiss 15 (ECF
No. 37) and Mem. Op., ECF No. 48, at 3-4. This Court can certainly take judicial notice of the
appearance of parties in this case as a source “whose accuracy cannot reasonably be questioned.”
Fed. R. Evid. 201(b).
9
misleading on its face and no extrinsic evidence was required to establish “what is already plainly
obvious[.]”). Cf. Steffek v. Client Services, Inc., 948 F.3d 761, 765-66 (7th Cir. 2020) (holding
failure to identify current creditor to create a facial lack of clarity as a matter of law in context of
a claim under § 1692g(a)(2)).
Weltman’s argument that Rosales was not confused because he recognized that this debt
had something to do with his loan is off-the-mark. Whether Rosales was actually confused by the
misidentification of the creditor is largely irrelevant to whether the complaint was misleading. The
unsophisticated consumer standard is objective, not subjective; violations of the FDCPA are
measured not by the degree of actual confusion but by the risk of confusion on the part of
unsophisticated consumers. Wahl v. Midland Credit Mgmt., Inc., 243 F.R.D. 291, 298 (N.D. Ill.
2007) (“The test, however, is not whether the individual who received the letter was misled, but
whether an unsophisticated consumer would be misled by the representations made by the debt
collector. . . . As such, a subjective inquiry into [the debtor’s] confusion or clarity is irrelevant.”).7
See also, e.g., Frank v. Autovest, LLC 961 F.3d 1185, 1189 (D.C. Cir. 2020) (under FDCPA, a
plaintiff need not prove that she was actually confused, only that an unsophisticated consumer
would be).8
7
“Evidence of actual confusion on the part of a plaintiff may provide some extrinsic
evidence to support the proposition that the hypothetical unsophisticated consumer would be
confused. However, evidence that an individual plaintiff was or was not confused by the letter is
not determinative as to whether an unsophisticated consumer would be confused.” Blarek v.
Encore Receivable Mgmt., Inc., 244 F.R.D. 525, 531 (E.D. Wis. 2007).
8
By contrast, the standing inquiry for an FDCPA claim is based on the debtor’s subjective
understanding of an allegedly misleading communication. Autovest, 961 F.3d at 1189. Here,
however, there is no challenge to Rosales’s standing because even assuming that he was never
deceived by the erroneous complaint, he incurred concrete damages as a result of having to hire
an attorney to litigate the case to dismissal.
10
What is more, Rosales’ suspicion that the lawsuit had something to do with his condo loan
actually confirms the risk Weltman’s lawsuit posed to the unsophisticated consumer. An
unsophisticated consumer is unlikely to recognize the precise designation of the trust to whom his
debt has been assigned. A consumer, sued about a debt he recognizes, and not thinking to question
whether the right creditor is suing (as an unsophisticated consumer likely would not), might not
feel confusion about the debt upon being served the complaint. That is exactly the problem. The
relevant confusion would occur later, if after paying a judgment to the wrong creditor, the actual
creditor came seeking payment. Far from absolving Weltman, Rosales’ recognition of the debt
demonstrates the danger to the unsophisticated consumer: they would not think to inquire into
which of various entities in a chain of assignment (at least one of which has a 95-character name)
he actually owes the debt. Instead, it is likely that the unsophisticated consumer would end up
“paying or acknowledging his debt” to the wrong creditor instead of hiring a lawyer, as Weltman
says Rosales should have done here. Def.’s Mot. Sum. J. at 9.
This danger of paying the wrong creditor also makes the misrepresentation material in that
“it had the ability to influence a consumer’s decision.” Lox, 689 at 826. Weltman asserts that had
Rosales paid the 2006-2B trust, the money would have eventually found its way to the right
creditor. Def.’s Reply at 4-5 (ECF No. 136). But the Court has no basis on which to infer that what
Weltman dismisses as a “doomsday scenario” would not come to pass, because Weltman’s
argument for dismissing such a scenario rests on no evidence whatsoever. Id. Plaintiff has carried
his burden to show that Weltman sought judgment on behalf of the wrong creditor. He need not
go further and prove a negative: that the wrong creditor wouldn’t have paid the funds to the correct
one.
11
Defendant leans heavily on Markette v. HSBC Bank, USA, N.A., 2018 WL 1695368 (N.D.
Ill. 2018). That case dealt with, among other things, a law firm’s alleged misrepresentation of a
creditor’s name that is similarly as long and complex as the trust name in this case. The foreclosure
lawsuit in that case named “HSBC Bank USA, National Association, as Trustee for SG Mortgage
Securities Trust… Trust 2006-FRE1” instead of the longer form of the trust name, which included
“Trust 2006-FRE1, Asset-Backed Certificates, Series 2006-FRE1[.]” Id. at *6. The Court in that
case held that this misnomer, “at best a hyper-technical violation,” did not violate § 1692e. Id. That
decision hinged on the fact that the plaintiff did not “make clear what they would have done
differently if the complaint … had contained the correct name of the trust.” Id. The alleged
violation in that case was not that the debt collectors had named the wrong creditor, it was that
they had used a technically imprecise designation for the correct one. As such, the error did not
pose a substantial risk that the debtor would pay the wrong entity; there was only one entity to pay.
Mr. Rosales presses an altogether different claim here: Weltman’s error resulted in a lawsuit on
behalf of an incorrect, yet existing and distinct entity.
The court thus finds that no genuine dispute of material fact exists as to whether Weltman’s
suit on behalf of the wrong creditor violated § 1692e(2)(A) (misrepresenting “the character,
amount, or legal status”) of a debt, § 1692e(2)(B) (falsely representing “compensation which may
be lawfully received by any debt collector”) and § 1692e(5) (taking action “that cannot be legally
be taken”).9 It remains, however, to address whether Weltman’s violation should be excused as a
“bona fide” error.
9
Having found that Weltman violated § 1692e, the Court declines to reach the issue of
Weltman’s liability under § 1692f. No additional damages would flow from a finding that Weltman
also violated § 1692f of the FDCPA; it is merely an alternative legal theory offered in support of
12
II. Weltman is not entitled to the bona-fide error defense.
A debt collector may avoid liability under the bona fide error defense by proving10 by a
preponderance of the evidence that (1) the violation was unintentional, resulting from a “bona fide
error,” and (2) that error occurred “not-withstanding the maintenance of procedures reasonably
adapted to avoid any such error.” Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995–96 (7th
Cir. 2003) (internal quotation omitted).11 Only mistakes of fact, not law, are subject to the bona
fide error defense. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587
(2010).
As for the first element, Defendant maintains that its naming of the wrong trust as plaintiff
was simply a typo. Def.’s Mot. Sum. J. 16-18 (ECF. No. 114). But defendant has produced no
evidence that shows this was simply an errant keystroke, and indeed they admit that they are
“uncertain” as to how the wrong entity came to be named as plaintiff. ASMF ¶ 15. Weltman’s
Rosales’ claim that he was sued by a creditor to whom he owed nothing. While it is difficult to
posit that a claim that is “false, deceptive, or misleading” under § 1692e would not also qualify as
“unfair or unconscionable” under § 1692f, the Court sees little profit in exploring an alternate route
to FDCPA liability, especially one the Seventh Circuit has described as “as vague as they come.”
Beler v. Blatt, Hasenmiller, Leibsker & Moore LLC, 480 F.3d 470, 474 (7th Cir. 2007).
10
Because bona fide error is an affirmative defense, the debt collector bears the burden of
proving the elements of the defense.
11
As Judge Bucklo noted in Novak v. Monarch Recovery Mgmt., 235 F. Supp. 3d 1039,
1041 n.3 (N.D. Ill. 2016), “[i]n some cases, the Seventh Circuit has further broken down the two
prongs articulated in Turner into three prongs, severing the question of the defendant's intent from
the question of whether the violation resulted from a bona fide error. See, e.g., Kort v. Diversified
Collection Services, Inc., 394 F.3d 530, 537 (7th Cir. 2005) (citing Jenkins v. Heintz, 124 F.3d
824, 834 (7th Cir. 1997)).” In Kort, the panel indicated that a bona fide error is one made in good
faith. 394 F.3d at 538. If there is a distinction between unintentional errors and good faith errors,
however, it is too subtle to matter in this case.
13
contention that the lawyer working on Rosales’ account did, in fact, just make some unfortunate
keystrokes, or perhaps a copy-and-paste error when it mail-merged its mass-produced complaints
is sheer speculation, devoid of evidentiary support.
Weltman’s speculation, moreover, is undermined by the evidence that, even after Rosales
filed his motion to dismiss, Weltman spent months trying to figure out the identity of the correct
creditor and never did (had it done so, presumably it would have sought to amend its complaint).
ASMF ¶ 47-48. The evidence adduced shows that Weltman attorney Kirsten Pepper was confused
about the status of the debt—she did not resolve the ownership issue simply by reviewing the file
and noticing a typo. Rather, she examined the documents in the file and found them “nebulous”
and “messy.” ASMF ¶ 47. Pepper’s confusion—which Weltman never addresses—militates
against the notion that Weltman’s naming of the wrong plaintiff was a mere scrivener’s error.
That doesn’t necessarily mean that the error was intentional, of course; given Pepper’s
communications seeking more information from Green Tree, one might reasonably infer that she
simply made a good faith mistake in identifying the proper creditor. On the other hand, one might
infer that Pepper thought that it was unlikely to matter if the wrong trust was named or that the
chain of assignment was tenuous, since debtor defendants are typically unrepresented by counsel
and often lose on default judgments.12 This is little more than speculation—but the point is that
Weltman has not shown by a preponderance of the evidence that its error was a mere innocent
clerical mistake. And while it may seem a sensible inference that the mistake was unintentional
12
See Comment, Improving Relief from Abusive Debt Collection Practices, 127 Harv. L.
Rev. 1447, 1449 (2014) (“Empirical evidence shows that many debt buyers using a high volume
of lawsuits as a component of their recovery strategy rely heavily on the assumption that
consumers often fail to show up to contest the case; this assumption is largely valid.”).
14
and bona fide, the court draws inferences in favor of the non-movant in adjudicating Defendant’s
motion for summary judgment. On the evidence adduced, a reasonable jury could find that the
error was not merely an innocent clerical error. As such, the Court denies Weltman’s motion for
summary judgment as to its bona fide error defense because it cannot show that the error was
unintentional or bona fide.
The Court finds, however, that Plaintiff’s motion should be granted. Even if Weltman’s
account of a mail-merge gone wrong were credited, no reasonable jury could find that Weltman’s
procedures were reasonably adapted to prevent it from suing on behalf of the wrong plaintiff. Such
procedures must “have mechanical or other such regular orderly steps to avoid mistakes.” Jerman,
559 U.S. at 587 (internal quotation marks omitted). “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).
Weltman developed a procedure for auditing complaints before filing, but that procedure
was not developed until several months after Weltman sued Rosales. PSMF ¶ 14. Weltman’s
corporate deponent likewise testified that its audit procedure was developed after the filing of the
complaint, and states that it would not have applied to the lawyer who prepared the complaint in
any event. Pl.’s Reply at 16 (ECF No. 137). Thus, while Weltman developed procedures to prevent
this type of error, it did so only after it had violated the FDCPA with respect to Rosales, and thus
those procedures cannot provide the basis for Weltman’s § 1692k(c) defense.
Weltman does not dispute that the audit policy post-dates the FDCPA violation, but instead
points to “standard operating procedures” it had in place before the events in question. Def.’s Resp.
to Pl.’s Mot. for Sum. J. 14 (ECF No. 134). Weltman’s invocation of those policies vaguely states
that “Weltman has standard operating procedures which govern complaint preparation and filing
15
of lawsuits in Illinois.” Id. Further, Weltman asserts, without supplying a citation to the record,
that “complaints are reviewed multiple times by Weltman attorneys or legal staff[.]” Def.’s Resp.
at 17 (ECF No. 130). This is the sort of “thinly specified ‘policy,’ allegedly barring some action
but saying nothing about what action to take” that the Seventh Circuit has rejected. Leeb, 806 F.3d
at 900 (holding that debt collector’s policy against sending letters to consumers who had lodged a
dispute was not enough to invoke the bona fide error defense for sending such unlawful letters).
That leaves Weltman’s argument that it reasonably relied on its client to provide accurate
information and verify the state complaint before filing. Weltman sent the complaint to its client
twice before filing the state lawsuit against Rosales. PSMF ¶¶ 26-28. They contend that this
practice is a policy or procedure sufficient to invoke the bona-fide error defense. There are at leaset
two problems with this argument. First, Weltman admits that it had everything it needed to
correctly file suit against Rosales when its client first sent the placement file, and before the
complaint was drafted. ASMF ¶ 39. Thus, the error was Weltman’s, not the creditor’s; it occurred
independently of Weltman’s reliance on its client to provide accurate information. Based on the
record, and even assuming that Pepper’s identification of the creditor as the 2006-2B trust was a
typo, Weltman had no procedures at all in place to catch that sort of human error.
Second, Weltman had notice that its client’s verification process was unreliable. Weltman
twice sent the complaint to Green Tree for verification, and both times the client returned a
“verified complaint” despite major errors. The first time, Green Tree verified a complaint seeking
nearly twice the amount that Rosales is alleged to have owed. PSMF ¶ 26-27. The second
complaint was verified despite naming a creditor who appears nowhere in the loan documents.
While the fact that an error occurred does not, standing alone, establish that Weltman’s procedures
were inadequate (if that were the standard, there would be no point to a bona fide error defense),
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the fact that it missed errors on separate occasions suggests that Green Tree’s verification does not
constitute a process reasonably adapted to prevent an error in identifying the wrong creditor.
Reliance on a creditor’s information can support a bona fide error defense, but that reliance must
be reasonable. See Hyman v. Tate, 362 F.3d 965, 967-69 (finding that reliance on creditor was
reasonable where creditor had a demonstrated history of reliably preventing the forwarding of
accounts in bankruptcy). And given Weltman’s confusion about the owner of the debt, when it
concedes it had all the information it needed from its client, it is also unreasonable for a lawyer to
rely on a client’s verification of errors for which the lawyer is responsible for creating.
Finally, though Rosales appears to abandon the issue in his motion for summary judgment,
he also alleged that Weltman violated the Servicemembers’ Civil Relief Act because Rosales was
an active duty military member, and Weltman failed to recognize that status and apply a lower
interest rate. The Court grants Weltman’s motion as to its bona-fide error defense to this violation.
Checking a debtor’s military status against a Department of Defense database, as Weltman did
here, ASMF ¶ 53-55, is a procedure reasonably adapted to guard against SCRA violations.
*
*
*
For the foregoing reasons, the Court grants Rosales’ motion as to his § 1692e claims, grants
it as to Weltman’s § 1692k(c) defense to the FDCPA claims, but denies the motion as to the defense
to the Servicemember’s Civil Relief Act (SCRA) claims. The Court denies Weltman’s motion for
summary judgement except as to its § 1692k(c) defense to the Servicemember’s Civil Relief Act
claims.
Date: November 12, 2020
John J. Tharp, Jr.
United States District Judge
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