Wheeler v. Midland Funding LLC et al

Filing 209

MEMORANDUM Opinion and Order signed by the Honorable Virginia M. Kendall on 3/26/2020. The Court grants in part and denies in part Wheeler's Motion for Summary Judgment 165 . The Court denies Defendants' Cross-Motion for Summary Judgment [ 163] and dismisses Defendants' Motion to bar Goldsmith 160 as moot. The Court concludes that Wheeler has standing and that he has established that MCM violated the FDCPA. Consistent with this Opinion, the case will proceed to trial on damages and on whether Midland Funding and Encore may be held liable. See Opinion for further details. Mailed notice(lk, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
)
KEVIN WHEELER, on behalf of )
Plaintiff and the class members )
described herein,
)
)
Plaintiff,
)
)
v.
)
)
MIDLAND FUNDING LLC,
)
MIDLAND CREDIT
)
MANAGEMENT, INC., ENCORE
CAPITAL GROUP, INC.,
)
)
Defendants.
)

No. 15 C 11152
Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER
Plaintiff Kevin Wheeler, on behalf of a class, has sued Midland Funding LLC,
Midland Credit Management, Inc., and Encore Capital Group, Inc. (collectively,
“Defendants”), for a purported violation of the Fair Debt Collection Practices Act
(“FDCPA”). He claims that, in violation of the FDCPA, Defendants enticed him and
others to make online payments for time-barred debts without notifying debtors that
the debts were not legally enforceable.
The parties have filed cross-motions for summary judgment. (Dkt. 145, 163).
Defendants have also moved to bar the expert opinion of Timothy Goldsmith. (Dkt.
160). For the following reasons, Wheeler’s motion for summary judgment is granted

Page 1 of 25

in part and denied in part, and Defendants’ cross-motion is denied. Defendants’
motion to bar Goldsmith is dismissed as moot.
BACKGROUND
Plaintiff Kevin Wheeler sued three related entities: Midland Funding LLC
(“Midland Funding”), Midland Credit Management, Inc. (“MCM”), and Encore
Capital Group, Inc. (“Encore”).

MCM and Midland Funding are subsidiaries of

Encore. (Dkt 170 ¶ 13). Midland Funding purchases debts, which MCM services.
(Dkt. 148-1 at 261–62; Dkt. 170 ¶ 17).
At issue here is a debt that Wheeler incurred on a Bank of America credit card.
(Dkt. 192 at ¶¶ 7–9). The last payment on the debt was made on September 18, 2009,
and the debt was charged off on April 30, 2010. (Dkt. 170 ¶¶ 35–36). In 2012, Asset
Acceptance purchased the debt, and in 2013, Asset Acceptance was acquired by
Encore. (Id. at ¶ 37; Dkt. 192 ¶ 3, 9).

In November 2014, Asset Acceptance sent

Wheeler a letter that stated, among other things: “The law limits how long you can
be sued on a debt. Because of the age of your debt, we will not sue you for it.” (Dkt.
192 ¶ 11). In January and March 2015, Asset Acceptance sent Wheeler two more
letters, again including the same language. (Id. at ¶ 12). In April 2015, Wheeler
posted on www.creditinfocenter.com that he had received a letter from Asset
Acceptance with this language and declared “Happy Statute of limitations birthday
to me.” 1 (Id. at ¶¶ 14–15). In May 2015, Wheeler wrote to Asset Acceptance and told

The statute of limitations is relevant here because a debt collector violates the FDCPA if it sues or
threatens to sue to collect a time-barred debt. See Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d
679, 683 (7th Cir. 2017).
1

Page 2 of 25

them that he refused to pay the debt. (Id. at ¶ 17). He received a letter in response
stating that Asset Acceptance had closed the account. (Id. at ¶ 17).
In August 2015, Midland Funding purchased Wheeler’s debt, and MCM
became the servicer. (Dkt. 170 ¶¶ 37–38; Dkt. 192 ¶ 18). MCM then pulled Wheeler’s
credit three times, on August 6, 2015, September 25, 2015, and November 11, 2015.
(Dkt. 170 ¶ 38). After seeing that his credit had been pulled the first time, Wheeler
called MCM on September 14, 2015. (Id. at ¶ 39). An MCM representative told
Wheeler the account balance and offered Wheeler a 40% discount to resolve his debt.
(Id. at ¶ 39). That same day, Wheeler again posted on www.creditinfocenter.com, this
time stating: “Now Midland is pulling my credit regarding this. I bit and called them.
Its SOL and they offered me a 40% settlement over the phone.”

(Dkt. 192 ¶ 19).

Wheeler called back again at some point over the next few days and was given his
MCM account number. (Dkt. 148-1 at 20, 112:13-112:19). On another call, on October
15, 2015, an MCM representative again made Wheeler a “settlement offer.” (Dkt. 170
¶ 40). Although MCM’s notes on Wheeler’s account indicated that the statute of
limitations for the debt was November 16, 2014, there is no record that he was
informed of this during his calls with MCM. (Id. at ¶¶ 46–47).
After Wheeler obtained his account number from MCM, he created an account
on MCM’s website using the account number. (Id. at ¶ 41). On or around October 6,
2015, Wheeler logged onto MCM’s website, and he was able to see several pieces of
information, “including the creditor, what the past due amount was, and the last
payment received.” (Id. at ¶ 41; Dkt. 192 ¶ 22). The website also had a link that

Page 3 of 25

stated “VIEW OFFERS” and another link that stated “Make a Payment.” (Dkt. 1482 at 84).
On October 13, 2015, MCM sent Wheeler a letter stating that Midland Funding
had purchased his debt and that MCM would be servicing the account. (Dkt. 192 ¶
24; Dkt. 172-2 at 4). The letter also stated what the balance was, and that Wheeler
could resolve the debt for a discount. (Dkt. 192 ¶ 24; Dkt. 172-2 at 4). The letter
included language similar to what Wheeler had previously received from Asset
Acceptance: “The Law limits how long you can be sued on a debt. Because of the age
of your debt, we will not sue you for it.” (Dkt. 192 ¶ 24; Dkt. 172-1 at 4). Wheeler
never made a payment on the account. (Dkt. 192 ¶ 25).
Wheeler brought suit on behalf of himself and a class, alleging that Defendants’
actions violated FDCPA provisions 15 U.S.C. §§ 1692e and 1692f. Specifically, he
argues that it was a violation of the FDCPA for MCM to offer, via its website, to settle
debts without informing debtors that the debts were time-barred.
LEGAL STANDARD
Summary judgment is proper when “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); see, e.g., Reed v. Columbia St. Mary’s Hosp., 915 F.3d 473,
485 (7th Cir. 2019). The parties genuinely dispute a material fact when “the evidence
is such that a reasonable jury could return a verdict for the nonmoving party.”
Daugherty v. Page, 906 F.3d 606, 609–10 (7th Cir. 2018) (quoting Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986)). In determining whether a genuine issue of

Page 4 of 25

fact exists, the Court must take the evidence and draw all reasonable inferences in
favor of the party opposing the motion. Anderson, 477 U.S. at 255; see also Zander v.
Orlich, 907 F.3d 956, 959 (7th Cir. 2018).
DISCUSSION
Wheeler argues that Defendants sought to deceive and mislead by enticing him
and others to pay debts that were not legally enforceable. Defendants argue that
Wheeler is a serial plaintiff who was not led astray—he knew all along that his debt
was time-barred, he had no intention of paying it, and he is bringing a suit seeking
to recover for a harm he knew he would never incur. The Court puts aside both of
these impassioned arguments and looks solely to the facts and the law.
A. Standing
The Court turns first to Defendants’ argument that Wheeler’s suit must be
dismissed for lack of standing. Defendants have previously made this argument, and
this Court has rejected it each time. Wheeler v. Midland Funding LLC, No. 15 C
11152, 2018 WL 1920254, at *2–3 (N.D. Ill. Apr. 24, 2018); Wheeler v. Midland
Funding, LLC, No. 15 C 11152, 2017 WL 3235683, at *2–5 (N.D. Ill. July 31, 2017).
Defendants are no more successful on this attempt.
“The elements of standing are well settled: the plaintiff must allege an injury
in fact that is traceable to the defendant’s conduct and redressable by a favorable
judicial decision.” Casillas v. Madison Ave. Assocs., Inc., 926 F.3d 329, 333 (7th Cir.
2019). “An ‘injury in fact’ is ‘an invasion of a legally protected interest which is (a)

Page 5 of 25

concrete and particularized and (b) actual or imminent, not conjectural or
hypothetical.’” Id. (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)).
Recently, the Seventh Circuit has reiterated that a “bare procedural violation
of the Fair Debt Collection Practices Act” is insufficient to confer standing. Id. at 339.
In Casillas, a debtor sued after she received a notice from a debt collector that
neglected to state that if the debtor wanted to dispute the debt, she must do so in
writing. Id. at 332. The debtor, however, “did not allege that she tried—or even
planned to try—to dispute the debt or verify that Harvester Financial Credit Union
was actually her creditor.” Id. at 332. The Seventh Circuit concluded that because
the error did not put the debtor “in harm’s way, it was nothing more than a bare
procedural violation.” Id. at 334 (internal quotation marks omitted). The Seventh
Circuit distinguished this procedural violation from an informational injury—the
latter is sufficient to confer standing. It noted that for an informational injury to
occur, the defendant must have failed to comply with its “obligation to provide
substantive information” whereas for a procedural violation the defendant only fails
to comply with its “its obligation to give notice of statutory rights.” Id. at 335.
Defendants argue that this case is just like Casillas because Wheeler knew his
account was beyond the statute of limitations, and he had no intention of paying his
debt. Therefore, even if MCM had provided additional information, “it would not
have changed anything for Wheeler.” (Dkt. 164 at 8). Defendants argue that because
nothing they did put Wheeler in harm’s way, he suffered “nothing more than, as in
Casillas, a ‘bare procedural violation.’” (Id.).

Page 6 of 25

Defendants have previously raised this “bare procedural violation” argument
and this Court has previously rejected it.

Casillas changes nothing here.

The

standing issue in previous procedural violation cases has been that the alleged harm
did not align with the purpose of the statute. See Casillas, 926 F.3d at 334 (noting
that “the provisions of the Fair Debt Collection Practices Act that Madison violated
do not protect a consumer’s interest in having an opportunity to review and respond
to substantive information”); Groshek v. Time Warner Cable, Inc., 865 F.3d 884, 888
(7th Cir. 2017) (noting that “the statute here does not seek to protect Groshek from
the kind of harm he claims he has suffered, i.e., receipt of a non-compliant
disclosure”).
Here, however, “the violation that Wheeler asserts. . . is precisely related to
the underlying purpose of the FDCPA. . . and he further identifies actual harm in
that he was misled and confused by the Defendants’ website.” Wheeler, No. 15 C
11152, 2018 WL 1920254, at *2. “The purposes of the FDCPA are ‘to eliminate
abusive debt collection practices by debt collectors, to insure that those debt collectors
who refrain from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers against
debt collection abuses.’” Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679, 683
(7th Cir. 2017) (quoting 15 U.S.C. § 1692(e)). 15 U.S.C. § 1692e, the provision under
which Wheeler sues, specifically addresses the premise that “[a] debt collector may
not use any false, deceptive, or misleading representation or means in connection
with the collection of any debt.” Similarly, 15 U.S.C. § 1692f addresses the premise

Page 7 of 25

that “[a] debt collector may not use unfair or unconscionable means to collect or
attempt to collect any debt.”
The violation at issue here, therefore, is not merely a procedural one. Instead,
the allegation is that Defendants failed to inform Wheeler and the class that their
debts were time-barred and of the risk of paying those debts, an act that the Seventh
Circuit has stated is “misleading and deceptive as a matter of law.” Pantoja, 852 F.3d
at 685. In other words, Wheeler alleges that Defendants failed to comply with their
“obligation to provide substantive information,” distinguishing this case from
Casillas and in fact alleging the kind of injury that Casillas described as sufficient to
confer standing. Casillas, 926 F.3d at 335. Other courts in this district have held
similarly. Pierre v. Midland Credit Mgmt., Inc., No. 16 C 2895, 2019 WL 4059154, at
*4 (N.D. Ill. Aug. 28, 2019) (“The FDCPA violation at issue here was not a mere failure
to inform the recipients of the letter of required statutory disclosures. Rather, it was
substantive, as it deceptively sought to entice action by the recipients.”); Navarroli v.
Midland Funding LLC, No. 18 C 2047, 2019 WL 1044801, at *3 (N.D. Ill. Mar. 5,
2019) (“This Court adds its voice to the growing chorus within this district that has
found standing in exactly this type of case.”).
As they have previously done, Defendants confuse a lack of actual damages
with a lack of injury. Wheeler received a misleading communication, despite the fact
that Defendants have a statutory duty not to mislead or deceive debtors. Even if
Wheeler never had any intention of challenging his debt, that he was the subject of a
“false, deceptive, or misleading representation or means in connection with the

Page 8 of 25

collection of any debt” is enough to confer standing. 15 U.S.C. § 1692e. Even if he
were a “tester” seeking to be lied to, that he was subject to an unlawful
misrepresentation would be injury enough. See Havens Realty Corp. v. Coleman, 455
U.S. 363, 373–74 (1982) (“A tester who has been the object of a misrepresentation
made unlawful under § 804(d) has suffered injury in precisely the form the statute
was intended to guard against, and therefore has standing to maintain a claim for
damages under the Act’s provisions. That the tester may have approached the real
estate agent fully expecting that he would receive false information, and without any
intention of buying or renting a home, does not negate the simple fact of injury within
the meaning of § 804(d).”); see also Wheeler, No. 15 C 11152, 2017 WL 3235683, at *3
(“Similar to the FHA, the FDCPA, confers a right to truthful information and is aimed
at preventing unlawful misrepresentations. And similar to the testers in Havens
Realty, Wheeler personally suffered a cognizable injury—the deprivation of truthful
information—even without suffering a pecuniary loss.”).
Further still, there is evidence here that Wheeler was not just seeking to “test”
Defendants. Although he may have had a prior understanding that the account was
past the statute of limitations and he never intended to pay MCM (Dkt. 184 ¶¶ 18–
20, 22, 48), that does not mean that he was not confused by the communication from
MCM. In fact, he testified as much, noting that even though he thought the account
was beyond the statute of limitations, he thought Defendants might still try to sue
him, he “had a lot of questions about it,” and he “was pretty confused about the whole
thing.” (Dkt. 148-1 at 34, 128:6-129:17). He didn’t know if MCM calculated the

Page 9 of 25

statute of limitations in a different way than his previous debtholders. (Id. at 46,
174:5-177:20).

And even if he knew that the account was past the statute of

limitations, he did not know the consequences of making a payment. (Id. at 34,
127:14-128:4). See, e.g., Pierre, No. 16 C 2895, 2019 WL 4059154, at *4–5 (discussing
that the plaintiff’s deposition testimony reflected that she had been confused by the
defendant’s actions).
That Wheeler did not act on MCM’s communications or that he did not intend
to is irrelevant to standing in this context—it is enough that the Defendants were
obligated not to mislead Wheeler and that their actions presented a risk of so doing.
Wheeler has shown “that the violation harmed or presented an appreciable risk of
harm to the underlying concrete interest that Congress sought to protect by enacting
the statute.” Lavallee v. Med-1 Sols., LLC, 932 F.3d 1049, 1053 (7th Cir. 2019)
(internal quotation marks omitted). He has therefore asserted an injury sufficient
for Article III standing.
B. FDCPA Violation
Having resolved the issue of standing, the Court turns to whether, as a matter
of law, MCM’s communications were materially misleading, a subject addressed in
both the motion and cross-motion for summary judgment.
When assessing FDCPA claims, courts “use the legal concept of the
unsophisticated consumer to gauge the actions of debt collectors.” Pantoja, 852 F.3d
at 686.

“The unsophisticated consumer is uninformed, naïve, and trusting, but

possesses rudimentary knowledge about the financial world, is wise enough to read

Page 10 of 25

collection notices with added care, possesses reasonable intelligence, and is capable
of making basic logical deductions and inferences.” Id. (internal quotation marks
omitted). In applying this standard, courts ask whether the debt collector’s language
“could well confuse a substantial number of recipients.” Id. (internal quotation marks
omitted).
The Seventh Circuit has held that “a debt collector violates the FDCPA when
it misleads an unsophisticated consumer to believe a time-barred debt is legally
enforceable, regardless of whether litigation is threatened.” McMahon v. LVNV
Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014). “Matters may be even worse if
the debt collector adds a threat of litigation, . . . but such a threat is not a necessary
element of a claim.” Id. In McMahon, debt collectors had offered to “settle” debts
without giving any “hint that the debts that they were trying to collect were
vulnerable to an ironclad limitations defense.” Id. at 1021.
The Seventh Circuit later addressed a similar issue in Pantoja v. Portfolio
Recovery Assocs., LLC, 852 F.3d 679 (7th Cir. 2017). In Pantoja, a debt collector sent
a dunning letter to a debtor, offering to settle a debt for a discount. Id. at 682–83. In
the letter, the debt collector wrote: “Because of the age of your debt, we will not sue
you for it and we will not report it to any credit reporting agency.” Id. at 682. Even
though the letter in Pantoja gave more of a “hint” that the debt was time-barred than
in McMahon, the Seventh Circuit still concluded that the letter was deceptive. It did
so for two independent reasons: (1) “the letter does not even hint, let alone make clear
to the recipient, that if he makes a partial payment or even just a promise to make a

Page 11 of 25

partial payment, he risks loss of the otherwise ironclad protection of the statute of
limitations”; and (2) “the letter did not make clear to the recipient that the law
prohibits the collector from suing to collect this old debt.” Id. at 684.
As to the first ground, the Seventh Circuit noted that, in Illinois, there is a tenyear statute of limitations “for written contracts and debts,” or five years “which
seems to apply if the plaintiff-debt collector does not have written proof of the debt.”
Id. at 684 (citing 735 ILCS 5/13-205, 735 ILCS 5/13-206). Illinois law appears to hold
that a payment or new promise to pay will restart the statute of limitations, although
“case law allows some room for disagreement about the precise scope of Illinois law.”
Id. at 685. Regardless of the precise workings of the law, the debtor is worse off if he
pays—at worst he restarts the clock and at best he will have to defend a collection
suit. Id. at 685. Therefore, the Seventh Circuit held, “[s]ilence about that significant
risk of losing the protection of the statute of limitations renders” such a letter
“misleading and deceptive as a matter of law.” Id. at 685. As to the second ground,
the Seventh Circuit concluded that the debt collector had chosen to use “carefully
ambiguous language,” and that the only reason to do so would be to mislead
unsophisticated debtors. Id. at 687. As such, the use of the language violated the
FDCPA’s mandate not to mislead. Id. at 687.
It is hard to distinguish this case from the holdings in McMahon and Pantoja.
MCM’s website clearly makes “offers” to debtors, including an offer to pay in full,
make a minimum payment, or to “SAVE 40.0%” by paying up front. (Dkt. 148-2 at
84–87). Yet it fails to include any indication that the debts it makes such offers for

Page 12 of 25

are time-barred or that a payment on the debts could revive the statute of
limitations. 2 Seventh Circuit precedent would suggest that, as a matter of law,
MCM’s communications via its website were misleading.
attempt to distinguish the case at hand.

Defendants, however,

These distinguishing arguments,

Defendants say, not only require that Wheeler’s motion for summary judgment be
denied, but that summary judgment be granted in Defendants’ favor. This Court
addresses each of Defendants’ arguments in turn.
The Court starts by rejecting Defendants’ arguments regarding materiality.
Defendants argue that they are only liable for “material” misrepresentations, which
is true. See Hahn v. Triumph Partnerships LLC, 557 F.3d 755, 757 (7th Cir. 2009)
(noting that an example of an immaterial statement under the FDCPA might be if a
debt collector said that a debtor received a tan-colored letter but in fact he received a
gray one). Defendants, however, return to the same arguments they made about
standing, that the misrepresentation at issue here could not have been material
because Wheeler was never going to pay the debt under any circumstances. This
argument is misguided. That Wheeler already knew that the debt was time-barred
and was not influenced by the misrepresentation (which is disputed) is irrelevant to

Defendants argue that Wheeler claimed only generally that Defendants misled him and others by
not revealing that the debts were time-barred. Wheeler did not, they say, specifically claim that the
lack of disclosure was misleading because it did not inform him that any payment could revive the
statute of limitations, and therefore he is now barred from making that argument. But Defendants
ask too much, we do not require plaintiffs to spell out every possible theory for their claims. See, e.g.,
McCullah v. Gadert, 344 F.3d 655, 659 (7th Cir. 2003)(stating that “it is well established that plaintiffs
are under no obligation to plead legal theories”). Wheeler argued that the omission was misleading—
the argument that it was misleading because it failed to explain the risk of revival is encompassed
within that. See Pantoja, 852 F.3d at 685 (“. . . the FDCPA prohibits a debt collector from luring
debtors away from the shelter of the statute of limitations without providing an unambiguous warning
that an unsophisticated consumer would understand.”).
2

Page 13 of 25

whether the misrepresentation was material.

There is no question that it was

material—the Seventh Circuit has plainly stated that “[w]hether a debt is legally
enforceable is a central fact about the character and legal status of that debt. A
misrepresentation about that fact thus violates the FDCPA.” See McMahon, 744 F.3d
at 1020; see also McMahon v. LVNV Funding, LLC, 301 F. Supp. 3d 866, 879 (N.D.
Ill. 2018) (noting that to find a communication materially misleading it need only
have “the ability, i.e., the potential, to influence a consumer’s payment decision,” the
plaintiff need not show that the misrepresentation actually caused him harm).
Next, Defendants argue that this case is unlike McMahon or Pantoja because
MCM did not reference “settling” debts or reference litigation. This Court finds that
argument unavailing. That the website does not reference litigation is irrelevant, as
“such a threat is not a necessary element of a claim.” McMahon, 744 F.3d at 1020.
Moreover, the website states that it is making “an attempt to collect debt” and
provides “offers” for payment, including an offer for a lump-sum, discounted payment
rather than paying in full. That Defendants may have dropped the word “settlement”
does not change the character of the representation, if anything, it suggests only that
Defendants have read McMahon and Pantoja and attempted to find a loophole. The
relevant question is whether the unsophisticated debtor would “believe that the debt
is legally enforceable at all,” and if yes, “they have been misled, and the debt collector
has violated the FDCPA.”

McMahon, 744 F.3d at 1022.

Given this Circuit’s

precedent, the Court sees no reason why omission of the word “settlement” would
change the unsophisticated debtor’s understanding of whether the debt was legally

Page 14 of 25

enforceable. See id. at 1021 (noting that the FTC and CFPB have found “that most
consumers do not understand their legal rights with respect to time-barred debts”);
see also Pantoja, 852 F.3d at 684 (observing that “the opportunities for mischief and
deception, particularly when sophisticated parties aim carefully crafted messages at
unsophisticated consumers, may well be so great that the better approach is simply
to find that any such efforts violate the FDCPA’s prohibitions on deceptive or
misleading means to collect debts, § 1692e, and on “unfair or unconscionable means”
to attempt to collect debts, § 1692f”).
Defendants also argue that it is significant that Wheeler was the one who
initiated contact with MCM. This Court disagrees. For one, the FDCPA applies
generally to efforts to collect consumer debts. See 15 U.S.C. § 1692e (“A debt collector
may not use any false, deceptive, or misleading representation or means in connection
with the collection of any debt.”). The website itself notes that it is “a communication
from a debt collector” and “an attempt to collect debt.” (See Dkt. 148-2 at 84–87). For
another, it is disingenuous for Defendants to argue that Wheeler independently
initiated contact; the undisputed facts show that MCM anticipated that debtors
might reach out in response to a credit inquiry and encouraged them to do so. (See
Dkt. 148-2 at 82).
Finally, Defendants argue that many class members were notified by letter
that: “The Law limits how long you can be sued on a debt. Because of the age of your
debt, we will not sue you for it. If you do not pay the debt, we may report it to the
credit reporting agencies.” (Dkt. 184 ¶¶ 30–34). Defendants refer to this as their

Page 15 of 25

“SOL Disclosure” and their arguments suggest that it is magic language that notifies
all debtors that their debts are not legally enforceable. The problem, however, is that
even if every class member had received a letter from MCM with this disclosure in
advance of accessing the website, that would not be enough. The Seventh Circuit
held in Pantoja, in no uncertain terms, that a disclosure that does not make the
debtor aware “that if he makes a partial payment or even just a promise to make a
partial payment, he risks loss of the otherwise ironclad protection of the statute of
limitations” is “misleading and deceptive as a matter of law.” 852 F.3d at 684–85.
Similarly, Defendants argue that, even if they violated the FDCPA by allowing
debtors to access the website without being provided an SOL Disclosure, “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. They argue that MCM has processes in place to ensure that a debtor receives
a validation letter prior to being able to access the website, and that letter contains
the SOL Disclosure. For whatever reason, that process failed for Wheeler, and
Wheeler was able to access the website and view his offers online before receiving a
letter with the disclosure. The Court is skeptical of this argument—as noted above,
MCM encourages debtors to call if they see an MCM inquiry on their credit report,
and when Wheeler did just that he was advised of the offer to settle his account
without any mention of the debt being time-barred. (Dkt. 148-2 at 82; Dkt. 170 ¶ 47).
Regardless, Defendants’ bona fide error defense is unsuccessful for the reasons
already stated. Even if Wheeler and others had received the disclosure in advance of

Page 16 of 25

being able to access the website, or even if the SOL Disclosure was displayed on the
website, per Pantoja, that disclosure was insufficient, as a matter of law, to apprise
debtors of the time-barred nature of their debt and the resulting risk of paying.
Therefore, it cannot be said that Defendants had in place a procedure that was
“reasonably designed” to inform debtors of the risk of reviving the statute of
limitations if they paid or promised to pay a time-barred debt. Cf. Abdollahzadeh v.
Mandarich Law Grp., LLP, 922 F.3d 810, 815 (7th Cir. 2019) (noting that the bona
fide error defense “does not apply to a violation of the FDCPA resulting from a debt
collector’s incorrect interpretation of the requirements of that statute” (internal
quotation marks omitted)).
For the foregoing reasons, the Court is bound by the holdings in McMahon and
Pantoja to grant summary judgment for Wheeler and the class on the issue of
liability. In violation of McMahon, the website failed to indicate that the debts at
issue were not legally enforceable and were subject to “an ironclad limitations
defense.” McMahon, 744 F.3d at 1021. And in violation of Pantoja, any disclosure
that may or should have been provided to debtors in advance of them accessing the
website was misleading and deceptive as a matter of law because it was silent about
the “significant risk of losing the protection of the statute of limitations.” Pantoja,
852 F.3d at 685. Defendants, as a matter of law, violated the FDCPA, 15 U.S.C.
§§ 1692e and 1692f.
Additionally, the Court does not believe that Wheeler must present extrinsic
evidence to support his claim, as is required in some FDCPA cases. “The Seventh

Page 17 of 25

Circuit has established three categories of FDCPA cases: (1) ‘cases involving
statements that plainly, on their face, are not misleading or deceptive’; (2) cases
‘involv[ing] statements that are not plainly misleading or deceptive but might
possibly mislead or deceive the unsophisticated consumer’; and (3) cases ‘involving
plainly deceptive communications.’” Slick v. Portfolio Recovery Assocs., LLC, 111 F.
Supp. 3d 900, 906 (N.D. Ill. 2015) (quoting Ruth v. Triumph Partnerships, 577 F.3d
790, 800–01 (7th Cir. 2009)).

“FDCPA claims in the second category must be

supported by ‘extrinsic evidence, such as consumer surveys, to prove that
unsophisticated consumers do in fact find the challenged statements misleading or
deceptive,’” whereas claims in the third category “need not produce extrinsic evidence
‘to prove what is already clear.’” Id. (quoting Ruth, 577 F.3d at 800–01). Pantoja
states that a communication that is silent about the “significant risk of losing the
protection of the statute of limitations” is “misleading and deceptive as a matter of
law.” 852 F.3d at 685. Such a communication thus falls into the third category, and
extrinsic evidence is not required. Because the SOL Disclosure did not note the risks
that came with paying or promising to pay a time-barred debt, and because the
website did not include any discussion at all about the statute of limitations,
Defendants plainly violated the FDCPA and extrinsic evidence is not required. See
also McMahon, 301 F. Supp. 3d at 877 (concluding under similar circumstances that
extrinsic evidence was not required); Magee v. Portfolio Recovery Assocs., LLC, No.
12 CV 1624, 2016 WL 2644763, at *4 (N.D. Ill. May 9, 2016) (same); Rawson v. Source
Receivables Mgmt., LLC, 215 F. Supp. 3d 684, 688–89 (N.D. Ill. 2016) (same).

Page 18 of 25

Defendants’ motion to bar the expert opinion of Timothy Goldsmith is therefore
dismissed as moot because Wheeler is entitled to summary judgment without
providing any extrinsic evidence.
C. Liability of Each Defendant
Wheeler is entitled to summary judgment, but the question that follows is:
against whom? Wheeler argues that all three Defendants qualify as debt collectors
under the FDCPA, and all three are responsible here. Defendants respond that only
MCM may be held liable. Genuine disputes of material fact prevent this Court from
concluding that either Midland Funding or Encore are liable as a matter of law.
A debt collector is “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.” 15 U.S.C. § 1692a(6). The
Supreme Court has recently clarified that the latter half of this definition
encompasses “third party collection agents working for a debt owner—not. . . a debt
owner seeking to collect debts for itself.” Henson v. Santander Consumer USA Inc.,
137 S. Ct. 1718, 1721 (2017).
The Court first addresses Midland Funding. Wheeler alleges that Midland
Funding purchases, and then collects, debts. (See Dkt. 149 at 7, Dkt. 170 ¶¶ 7–10).
He does not allege that Midland Funding collects or services debts owned by others.
Midland Funding cannot then, under Henson, be considered a debt collector based on
its collection activities—it collects its own debts, not debts owed to another.

Page 19 of 25

If

Midland Funding is a debt collector, it would have to be based upon the first part of
the definition—that the principal purpose of its business is debt collection. To make
this argument, Wheeler relies on Barbato v. Greystone All., LLC, 916 F.3d 260 (3d
Cir.), cert. denied sub nom. Crown Asset Mgmt. LLC v. Barbato, 140 S. Ct. 245 (2019).
In Barbato, the Third Circuit held that “an entity that has the ‘collection of any debts’
as its ‘most important’ ‘aim’ is a debt collector” under the FDCPA. Id. at 267. The
Third Circuit further stated: “As long as a business’s raison d’être is obtaining
payment on the debts that it acquires, it is a debt collector. Who actually obtains the
payment or how they do so is of no moment.” 3 Id. at 267.
Defendants have presented no evidence that Midland Funding has any
business purpose other than to purchase and collect debts. For that reason alone,
they are not entitled to summary judgment on the issue.

Defendants’ other

arguments also fail. That Midland Funding (and Encore, for that matter) does not
have employees is not conclusive—that does not mean that these companies cannot
engage in collection activities. For example, it cannot be said that Midland Funding

The Third Circuit engaged in comprehensive statutory interpretation and concluded that the
“principal purpose” definition did not require that a business actively or directly collect debts to qualify
as a debt collector. It stated:

3

“Collection” by its very definition may be indirect, and that is the type of collection in
which Crown engages: it buys consumer debt and hires debt collectors to collect on it.
The existence of a middleman does not change the essential nature—the “principal
purpose”—of Crown’s business. . . . Indeed, the record reflects that Crown’s only
business is the purchasing of debts for the purpose of collecting on those debts, and, as
Crown candidly acknowledged at oral argument, without the collection of those debts,
Crown would cease to exist.
Barbato, 916 F.3d at 268 (footnotes omitted).

Page 20 of 25

has no collection interaction with consumers—it sues them, and that is interaction.
See, e.g., McMahon, 301 F. Supp. 3d at 884 (noting that a debt collector “interacts
with consumers by filing collection lawsuits against them”). And even if Midland
Funding has no direct interaction with consumers, it is not clear that is required for
the “primary purpose” definition of a debt collector, so long as the collection is done
on its behalf. See Barbato, 916 F.3d at 267; Janetos v. Fulton Friedman & Gullace,
LLP, 825 F.3d 317, 325 (7th Cir. 2016) (holding that a company that is itself a debt
collector may be held liable for FDCPA violations committed by another entity on its
behalf); see also, e.g., McMahon, 301 F. Supp. 3d at 884 (“The Court fails to see why
it should matter if the debt buyer hires a third party to actually collect its debt, i.e.,
to be the one who interacts with the debtor to obtain payment.”). Moreover, this Court
flatly rejects the premise, on this record, that “Midland Funding does not use the
mails and telephones to collect consumer debts.” (Dkt. 192 ¶ 4). Midland Funding
has admitted that it “has been the plaintiff in more than 3,000 collection actions
against Illinois residents” (Dkt. 148-1 at 90) and that “the mails and telephone
systems” are used in connection with these lawsuits. (Dkt. 148-1 at 89–90). This
certainly supports the inference that Midland Funding uses the mail or telephones to
collect debts—the Court is hard-pressed to think of any way a business might engage
in litigation in today’s world without these tools.
Wheeler is likewise not entitled to summary judgment on Midland Funding’s
liability, although he is closer to the mark. At this point, he has presented evidence
that only supports the inference that Midland Funding’s principal purpose is

Page 21 of 25

collecting debts; his evidence does not go so far as to conclusively establish this. (See
Dkt. 170 ¶¶ 7–9; Dkt. 192 ¶¶ 1–5). See, e.g., McMahon, 301 F. Supp. 3d at 884 (“The
evidence does not conclusively establish that the principal purpose of LVNV’s
business is debt collection—and unlike a jury, this Court may not sift through the
evidence and decide whom to believe at the summary judgment stage.” (internal
quotation marks omitted)). Summary judgment is therefore not appropriate.
Next is Encore. The Court concludes that a genuine dispute of material fact
prevents it from determining that Encore may be held liable. Wheeler points to
several facts that he argues show that Encore is a debt collector, including that “it
specifically studies the behavior and decision making process of economically
distressed consumers,” it has described itself as “a leader in consumer debt buying
and recovery,” and it derives substantial income from debt collection. (Dkt. 170
¶¶ 18–32). While this information supports the inference that Encore’s primary
purpose may be collection of debts, it does not conclusively establish as much.
Wheeler also argues that Encore can be held liable in this case because MCM is its
subsidiary and because Encore “created the collection policies and procedures at
issue.” (Dkt. 189 at 17). Unlike with Midland Funding, however, Wheeler points to
no specific debt collection action taken in Encore’s name or on its behalf. Again, while
the evidence Wheeler points to could support this inference, for example, that Encore
uses proprietary tools to maximize its collections, the evidence does not conclusively
establish that MCM uses those tools at the behest of Encore or that those tools were
used in connection with collection of time-barred debts at all. (Dkt. 170 ¶¶ 18–32).

Page 22 of 25

Defendants are likewise not entitled to summary judgment because the evidence cited
by Wheeler could support the inference that Encore is a debt collector and is
responsible for the violation here. It will be for the factfinder to weigh the evidence
and determine whether Encore may be held liable.
D. Actual Damages
Finally, there is the issue of actual damages. The FDCPA allows for recovery
of actual damages. 15 U.S.C. § 1692k(a)(1). “But a plaintiff must prove causation to
establish actual damages.” McMahon v. LVNV Funding, LLC, 807 F.3d 872, 876 (7th
Cir. 2015). Defendants argue that Wheeler has failed to show that he or any class
member incurred actual damages because of the failure to provide a proper statute of
limitations disclosure on MCM’s website. Therefore, they say, they are entitled to
summary judgment on actual damages.
It is undisputed that Wheeler did not suffer any actual damages. (Dkt. 184
¶¶ 50–52).

It is also undisputed that the class members collectively paid over

$120,000 to MCM during the relevant period. 4 (Dkt. 192 ¶ 38). As a preliminary
matter, it is irrelevant that Wheeler did not suffer actual damages—as long as he and
the class suffered the same injury, it is permissible for his damages to differ from
those of the class. See Keele v. Wexler, 149 F.3d 589, 593 (7th Cir. 1998) (“The
damages recoverable for the class members’ injuries may differ—some may be eligible
for both actual and statutory damages, others actual damages only, and still others
just statutory relief—but the fact remains that their injuries are the same.”).
Wheeler initially came up with a different calculation, but later admitted as undisputed Defendants’
calculation. (Dkt. 170 ¶ 59; Dkt. 192 ¶ 38).
4

Page 23 of 25

Defendants argue that because Wheeler has not presented any evidence as to
causation for the class members, Defendants are entitled to summary judgment on
actual damages. The class members, they say, could have paid their debts for any
number of reasons other than lack of knowledge of the statute of limitations, for
example, they “may have paid out of a sense of moral obligation” or to “improve their
credit score.” (Dkt. 164 at 16). That may be true. But it is also reasonable to infer,
on this record, that the class members paid because they were unaware that their
debts were time-barred and of the resulting consequences of payment. While for
Wheeler, there is evidence that he would not have paid the debt regardless of the
disclosure and suffered no actual damages, the same has not been established for the
class members. Summary judgment is therefore inappropriate. Wheeler and the
class are entitled to proceed to trial, where the factfinder will weigh the evidence and
determine whether to award actual damages.

Page 24 of 25

CONCLUSION
The Court grants in part and denies in part Wheeler’s motion for summary
judgment. The Court denies Defendants’ cross-motion for summary judgment and
dismisses Defendants’ motion to bar Goldsmith as moot. The Court concludes that
Wheeler has standing and that he has established that MCM violated the FDCPA.
Consistent with this Opinion, the case will proceed to trial on damages and on
whether Midland Funding and Encore may be held liable.

Date: March 26, 2020

____________________________________
Virginia M. Kendall
United States District Judge

Page 25 of 25