Mehling v. Fullett Rosenlund Anderson, P.C.
Filing
27
MEMORANDUM Opinion and Order signed by the Honorable Ruben Castillo on 12/12/2016. Mailed notice(jh, )
NA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
JULIE LYNN MEHLING
and SHERI JANE MEHLING,
Plaintiffs,
v
FULLETT ROSENLUND
ANDERSON PC,
Defendant.
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No. 16 C 5921
Chief Judge Rub6n Castillo
MEMORANDUM OPINION AND ORDER
Julie Lynn Mehling ("Julie") and Sheri Jane Mehling ("Sheri") (collectively "Plaintiffs")
bring this action against Fullett Rosenlund Anderson PC ("Defendant"), alleging that Defendant
violated the Fair Debt Collection Practices Act ("FDCPA"), l5 U.S.C. $ 1692 et seq., by falsely
representing the character, amount, or legal status of a debt. (R. 17, Am. Compl.) Defendant
moves to dismiss Plaintiffs' claim pursuant to Federal Rule of Civil Procedure l2(b)(6). (R. 18,
Def.'s Mot. to Dismiss.) For the reasons stated below, the motion is granted in part and denied in
part.
BACKGROUND
In the fall of 2015, Plaintiffs separately filed bankruptcy under Chapter l3 of the United
States Bankruptcy Code. (R. 17, Am. Compl.fl 6; see also In re Julie Lynn Mehling,15-33524
(Bankr. N.D. Ill.); In re Sheri Jane Mehling,l5-29902 (Bankr. N.D. Ill.).) Defendant is a law
firm located in Illinois and represents Mayfair Station Condominium Association ("Mayfair").
(R. 17, Am. Compl.fll|5, 7.) On behalf of Mayfair, Defendant filed a motion to modify the
automatic stay in each bankruptcy proceeding on March 24,2016. (ld.fln 7-8; R. l7-2, Mots. to
Modify.) The motions are virtually identical. In the motions, Defendant stated that Mayfair was
the holder of a secured interest in the debtors' real property. (R. l7-2, Mots. to Modify at 2, 4.)
Defendant claimed that Mayfair was entitled to relief from the bankruptcy automatic stay
because Plaintiffs "made no post-petition assessment payments since the
filing of the petition[s]
for relief under Chapter 13" on August 31,2015, and September 30, 2015, respectively. (ld. at3,
5.) Both motions stated that the debtor was in "default of [her] post-petition assessment
payments in the amount of $l,396.53," comprised of $783.03 post-petition default and $658.50
for post-petition attorneys' fees and costs. (ld.)The motions attached a "Required Statement to
Accompany Motions for Relief From Stay" form. (R. l7-3, Req. Statements at2,3.) The forms
reflect that each debtor was l2 months in post-petition default to Mayfair and that the amount
due was $1,396.53. (ld.)
Plaintiffs claim that the motions to modify contained misrepresentations regarding the
status and amount of their debt. First, Plaintiffs allege that on March
which the motions to modify were
filed-it
24,2016-the
date on
was "categorically impossible for Plaintifls to be
twelve (12) months in post-petition default" because Plaintiffs had filed their bankruptcy
petitions fewer than six months earlier.r (R. 17, Am. Compl.
t.[ I
S.) Second, Plaintiffs allege that
Defendant incorrectly stated that Plaintiffs were in post-petition default in the amount
of
$738.03, when they actually owed $547.43. (R. 17, Am. Compl. fl l9; R. l7-5, Ex. E; see also R.
24, Resp. at 7 ("Plaintiffs were in post-petition default in the amount of $547.43.").)
On June 6,2016, Julie filed this FDCPA action. (R.
l, Compl.)
Subsequently, Sheri filed
a separate FDCPA lawsuit premised on the same underlying facts. Sheri Jane Mehling v. Fullett
I
Plaintiffs repeatedly state that they both filed their bankruptcy petitions on Septemb er 30,201 5. (R. I 7,
Am. Compl. flfl 6, 17, 18.) However, court records indicate that Julie's bankruptcy petition was filed on
September 30, 201 5, while Sheri's bankruptcy petition was filed on August 3 l, 201 5. (See In re Julie
Lynn Mehling, 15-33524 (Bankr. N.D. Ill.); In re Sheri Jane Mehling, 15-29902 (Bankr. N.D. Ill.).) This
discrepancy is not materialto the outcome of the present motion.
2
Rosenlund Anderson PC, Case No. l6-05922 (N.D. Ill. filed June 6, 2016). Defendant sought to
consolidate the two cases, (R. 12, Mot. to Consolidate), and, on August 3,2016, this Court
granted Defendant's motion, (R. 16, Min. Order). Plaintiffs filed their amended complaint on
August 10, 2016. (R. 17, Am. Compl.) The amended complaint alleges that Defendant violated
l5 U.S.C. $ 1692e by making false representations "of the character, amount or legal
status
of
the debt" in the motions to modify. (R. 17, Am. Compl. fl!| l6-19.) Defendant now moves to
dismiss the complaint under Rule 12(b)(6). (R. 18, Mot. to Dismiss.) On October I
l, 2016,
Plaintiffs responded, and Defendant replied on November 1,2016. (R.24, Resp.; R. 25, Reply.)
LEGAL STANDARI)
To survive a motion to dismiss, a complaint must provide "enough facts to state a claim
to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544,570 (2007). A
Rule 12(bX6) motion "challenges the viability of a complaint by arguing that it fails to state a
claim upon which relief may be granted." Firestone Fin. Corp. v. Meyer,796 F .3d 822, 825 (7th
Cir.2015) (citation omitted). In deciding a Rule l2(bX6) motion, the Court mLrst ''construc it in
thc light tnost {avorable to the nonnroving party, accept lvcll-plcaded tzrcts as tnrc. anci drau' all
irtl'erertccsinIthe paft1,'sl lavor." Bell v.Cit1,611;1r;..835 Ir.jd736.73tt(7thCir.20l6;(citarion
ornitted).
"l'o survive a motion
to dismiss under Rule 12(bX6). plaintilf s complaint rnust allege
fzrcts vr'hich. rvhcn taken as true. plausibl5,'suggest that the
tlrat possibilitr abovc a speculatir.e level." Oochran v.
plaintiff
has a
lll. State't'oll
right to reliel. raising
Itighv,u.v, ..1uth.. tl28 It.3d
597.59t) (7th Cir. 2016) (internal quotation marks and citation ornitted). "A claim has Iircial
plausibilitv whctr the plaintiflpleacls factual content that allou,s the court to drarv the reasonable
infcrence lhat the delendant is liable lbr the nrisconduct alleged."' .4.yhcrdi v. lqhul.55(r t I.S.
662.678 (2009) (citing Tv,ontbl),- 550 U.S. at 556). The Court can consider "allegations set forth
J
in the complaint itself, documents that are attached to the complaint, documents that are central
to the complaint and are referred to in it, and information that is properly subject to judicial
notice." Williamson v. Curuon,714
F
.3d 432, 436 (7th Cir. 2OB).2
ANALYSIS
Plaintiffs allege that the motions to modifu falsely stated the duration of their postpetition detault and the amount owed. (R. 17, Am. Compl.flfl l8-19.) Defendant argues that
"although Fullett mistakenly asserted Plaintiffs were twelve months in post-petition [default]
instead of six months in default, the Motions to Lift the Automatic Stay were not deceptive or
misleading to create a material violation of the FDCPA." (R. 19, Mem. at 2.) Plaintiffs respond
that the motions to modifu incorrectly represented the amount due and that this false
representation was material because "[t]o the bankrupt debtor, there can be no question that a
dollar due is material." (R.24, Resp. at 5, 7-8.)
The FDCPA prohibits "debt collectors" from engaging in abusive, deceptive, or unfair
debt-collection practices. l5 U.S.C. $ 1692. Plaintiffs allege that both misrepresentations
violated Section 1692e of the FDCPA. (R. 17, Am. Compl. flfl l6-19.) Section 1692e prohibits a
debt collector from "us[ing] any false, deceptive, or misleading representation or means in
2
Plaintiffs attach correspondence from Defendant and numerous filings from their bankruptcy cases to
their amended complaint. (R. l7-2 through R. l7-5.) Defendant also attaches court filings from the
bankruptcy cases to its memorandum in support of its motion to dismiss. (R. I9- I through R. l9-2.)
Because these documents are either public records or are referenced in the amended complaint and central
to Plaintiffs'claims, they willbe considered in connection with the motion. See Williamson,'l l4 F.3d at
436; see also Seidel v. Byron,405 B.R. 277,284-85 (N.D. Ill. 2009) (considering bankruptcy court
records in connection with a motion to dismiss).
4
connection with the collection of any debt" including "[t]he false representation of . . . the
character, amount, or legal status of any debt."3
Consumers "don't need protection against false statements that are immaterial in the
sense that they would not influence a consumer's decision." Muha v. Encore Receivable Mgmt.,
Inc., 558 F.3d 623,628 (7th Cir. 2009). "If a statement would not mislead the unsophisticated
consumer, it does not violate the FDCPA--even if it is false in some technical sense. For
purposes
of $ I 692e, then,
a statement
isn't 'false' unless it would confuse the unsophisticated
consumer." I|/ahl v. Midland Credit Mgmt., Inc., 556 F.3d 643, 645-46 (7th Cir. 2009). In
addition, "a false or misleading statement is only actionable under the FDCPA if it is material,
. . . meaning that
it
has the
ability to influence a consumer s decision." Lox v. CDA, Ltd., 689
F.3d 8l 8,826 (7th Cir. 2012) (citation and internal quotation marks omitted); see also Hahn
v.
Triumph P'ships, LLC,557 F.3d 755, 758 (7th Cir. 2009) ("A statement cannot mislead unless it
is material, so a false but non-material statement is not actionable."); Ruth v. Triumph
P'ships, 577 F.3d 790, 800 (7th Cir. 2009) ("[Plaintiff] could not prevail in the district court
simply by proving that statements in the notice were false. Whether they were false or not, she
had to prove that an unsophisticated consumer would be deceived or misled by them.").
As an initial matter, the parties dispute which standard the Court should apply when
determining whether Plaintiffs have adequately alleged that the motions to modity violated
Section 1692e. The applicable standard when determining whether a collection communication
violates Section 1692e depends on whether the communication was directed to the consumer or
to a lawyer, and whether the communication was allegedly false, misleading, or deceptive.
Where the debt collector communicates directly to the debtor, and the communication is
3
For the purpose of this motion, Defendant does not dispute that it is a debt collector within the meaning
of the statute or that the communication at issue was made in connection with the collection of debt. (See
R. 17, Am. Compl.fl 12.)
5
allegedly misleading or deceptive under Section 1692e, the "unsophisticated consumer" standard
governs. Evory v. RJM Acquisitions Funding, L.L.C.,505 F.3d 769,774 (7th Cir. 2007). lJnder
this standard. a communication violates Section 1692e if "a person of modest education and
limited commercial savvy would be likely to be deceived." Id. The unsophisticated consumer is
not a "dimwit," but may be "uninformed, naiVe, and trusting." Wahl,556 F.3d at 645 (citation
and internal alterations omitted).
In contrast, when a debtor collector makes an allegeclll' rnisleacling or dcccptive
represenltttion to the clebtor's law-ver. the "competent attomey" standard applies. Evory,505 F.3d
at774-75; Washington v. Portfolio Recovery Assocs., LLC, --- F. Supp. 3d ---, 2016 WL
5477519,at*4 (N.D. Ill. Sept. 29,2016) ("An allegedly dec'eptive ctr mi.yleutling conrnrunication
nrade to a lawver is not actiontrble
if it is unlikely to deceive a competent
lali,1,er[.1" (citation
zrncl
internal cluotation rnarks oniitted)1. This standard asks "whether a competent attorney would be
deceived, even if he is not a specialist in consumer debt law." Bravo v. Midland Credit Mgmt.,
Inc.,812 F.3d 599,603 (7th Cir. 2016).
However, "[w]here a debtor alleges instead that the communication was false, as opposed
to misleading or deceptive, the 'unsophisticated consumer' standard governs-no matter the
targeted recipient." Caprel v. Specialized Loan Servicing,lrc., No. l5 C 09145,2016 WL
4678313, at *6 (N.D.
Ill.
Sept. 7,2016) (citing Evory,505 F.3d at775). This is so because
"[a]
false claim of fact in a dunning letter may be as difficult for a lawyer to see through as a
consumer." Evory, 505 F.3d at 77 5. For instarnce.
if "the letter n:isrepresents the unpaicl
balance
o1'the consumer s clct'rt." the "lau'verrnight be unableto discoverthe talsit,v of'the reprcsentation
u'ithout art investigation thait he nright be unable. depending
or-r
his client's resourccs. to
utrdertake." Id.; see also Bravo v. Midland Credit Mgmt., lnc.,2014 WL 6980438, at *5 (N.D.
6
Ill. Dec. 9,2014) ("[F]alse claims of fact may, not must,
be as difficult for a lawyer to see
through as for a debtor."). Under either standard, the communication at issue must "conflse a
significant fraction of the persons to whom it is directed" in order for a defendant to be liable
under Section 1692e. Chuway v. Nat'l Action Fin. Servs., lnc.,362F.3d944,948 (7th Cir. 2004).
Defendant argues that the Court should apply the competent attorney standard because
Plaintiffs'owere represented by counsel in the underlying bankruptcy proceedings" and that "the
motions to lift the automatic stays . . . were communications sent to Plaintiffs' bankruptcy
attorney because they were court filings in the respective bankruptcies." (R. 19, Mem. at 3.)
Plaintiffs argue that the unsophisticated consumer standard applies because copies of the motions
were sent to them. (R.24, Resp. at 5.) The Court concludes that the unsophisticated consumer
standard applies, but not for the reason that Plaintiffs urge.
Plaintiffs' argument that the unsophisticated consumer standard applies merely because
they received a copy of a court filing misses the mark. It is undisputed that Plaintiffs were
represented by counsel in their bankruptcy proceedings, and that they received a copy
ofthe
motions to modify only by operation of the Bankruptcy rules after the motions were
electronically filed. (R. 25, Reply at2 n.l.) The motions were not targeted or sent directly to
Plaintiffs by Defendant, and it is plausible to infer that when each motion was filed, Defendant
intended for Plaintiffs' counsel to review the motion, explain it to Plaintiffs, and come to an
agreement with them as to how to respond. But regardless, Plaintiffs' amended complaint alleges
that the statements made in the motions to modify were false-not that they were deceptive or
misleading. (R. I 7 , Am. Compl. flfl I 7- 19.) Because the representations were allegedly false, the
7
appropriate standard to apply is that of the unsophisticated consumer.o See Caprel,20l6 WL
4678313, at *6; Bravo,2014 WL 6980438, at *5.
Applying that standard here, the statements that Defendant included in the motions to
modify reflected that Plaintiffs were l2 months in post-petition default. (R. 17, Am. Compl.
fl 18; R. l7-3, Req. Statements at 1,2.) The parties
agree that these statements were f'alse.
However, the error was readily apparent on the face of the filings themselves, as the motions also
included the date on which each Plaintiff had filed for bankruptcy. (R. l7-2, Mots. to Modity at
3, 5.) Sheri filed tbr bankruptcy on August 31,2015, and Julie filed for bankruptcy on September
30,2015, and the motions to modify were filed on March 24,2016. Thus, it was categorically
impossible for Plaintiffs to be 12 months in post-petition default at the time the motions to
modify were filed. While this statement was technically false, an unsophisticated consumer could
not be deceived or confused by it. It is assumed that the unsophisticated consumer possesses
"ruclinrentar-v knowledge iibout the f inar-rcial world and is capable ol'nrerking
basic logical
c{edr:ctitrrrs ancl inlerertces.'^ Wahl,556 F.3d
at645 (citation and intenral cluotalion rnarks
ornittecl). An unsophisticated consumer would only need to make a simple mathematical
calculation to determine the number of months that had passed since the bankruptcy petition
I The Court recognizes
that there is some ambiguity in the case law on this issue. In some instances the
U.S. Court of Appeals for the Seventh Circuit has applied the competent attorney standard when
evaluating allegedly false representations made to a debtor's attorney. See, e.g., Bravo,8l2 F.3d at 603
("'l'lris case ittvttlves alleged false representatior.rs tcl a clebtor's attorne-v. -l'herefirre. the stanclard is
uhetltcr a colttpeterlt attornev. er,ert il'Ite is nol a specialist ilr coltstrnrer debt lar.r. r.vould be dcceivccl hv
trvtt letters requestittg pavrt'tc'nt fbr debts resolved in a settlement.''). However, in other cases the Seventh
Circuit and district courts within the Circuit have applied the unsophisticated consumer standard to false
representations made to a debtor's attorney. See Evory,505 F.3d at 775 (observing the unsophisticatccl
cottsttttter stattclard ll'ould appl1.'to an allegedly'false cornmunicatiou sent to the debtor's lau,ver il".lt]he
lanver{islunuhlclotli.ycotertha./hl,sitl,oftlrerepresentation"(ertrphasisadc.lecl)): ll,cuhingtorr.20l6Wl_
5477519^at*6 ("'l'his statetnent is ttot false on its face.. . . At urost. the statelnent is potentialh . .
cleceptive ot' rttisleaclittg. ancl therefbre the stricter 'conlpetetrt attonle),' starrdard applicsl.l"). Out ot'an
ahttttdattce ol'cauliott. tlre Cburt applies the standard urged by the nonmoving party-Plaintiffs. But as is
discussed herein, even if the Couft were to apply the competent attorney standard, the outcome of this
motion would be the same.
.
8
filings. It is simply not plausible that an unsophisticated consumer could have been deceived
when she saw this clear and basic error. "Dismissal is appropriate only when it is apparent from a
reading of the letter that not even a significant fraction of the population would be misled by it."
McMahon v. LVNV Funding, LLC,744 F.3d 1010, 1020 (7thCir.2014) (citation and internal
quotation marks omitted). Because Defendant's false representation would not be misleading to
an unsophisticated consumer,
it does not violate Section 1692e. Thus, Defendant's request to
dismiss this allegation is granted.
Unlike the first misrepresentation, the Court finds the second misrepresentation made by
Defendant actionable.
s
Specifically, Defendant stated in the motions to modify that Plaintiffs
were in default on their post-petition assessment payments in the amount of $738.03.(R. 17, Am.
Compl. fl 19.) Plaintiff attaches to the amended complaint a letter sent by Defendant showing
that Plaintiffs were actually in default in the amount of $547.43 at that time. (R. l7-5, Ex. E at
2.) Inaccurately reporting the amount of a debt is material and actionable under the FDCPA. See
Evory,505 F.3d at775. As the Seventh Circuit has explained, even a lawyer might not be able to
find out the falsity of such statement without an investigation, which is not always possible to
undertake depending on the situation.
/d
Thus, such misrepresentations are actionable "whether
made to the consumer directly, or indirectly through his lawyer."
ld
Defendant here overstated the amount of the debt by nearly $200, or approximately 25
percent. The Court cannot conclude as a matter of law that this overstatement was immaterial.
See. e.g., Powell v. Palisades Acquisition
WI, LLC,782 F.3d I 19,127 (4th Cir. 2014\
(concluding that overstatement in the filing of an assignment ofjudgment of "more than 50
5
The Court notes that there is a third alleged misrepresentation mentioned in the complaint, namely, that
Plaintiffs had made no post-petition payments to Mayfair, when in fact Plaintiffs had tendered multiple
payments to Mayfair between the filing of their bankruptcy petitions and the filing of the motions to
modif,. (R. 17, Am. Compl. flfl 9, 17.) Neither parfy addresses this alleged misrepresentation in their
filings and so the Court does not address it either.
9
percent-was material under any standard" and that "when that assignment contained
an
overstatement in excess of 50 percent, the least sophisticated consumer could be led to decide to
pay far more than she otherwise would have paid"); Crafton v. Law Firm of Jonathan B. Levine,
957
F
. Srpp. 2d 992, 997
(8.D. Wis.
201 3)
("[I]t is undisputed that the amount of the debt
included in the letter . . . was inaccurate. . . . Here, the inaccurate amount of the debt owed was
material. . . . Consequently, it is likely to mislead an unsophisticated consumer, even one familiar
with her account history.").
In reply, Defendant argues that listing an "incorrect default" amount was not material
here because
it is undisputed that Plaintiffs were in post-petition default, Plaintiffs "were not
deceived by the motions," and regardless of the error, "the process for lifting the automatic stays
would have still occurred." (R. 25, Reply at2,4; see also R. 19, Mem. at 5.) Arguments about
whether Plaintiffs were actual/y misled by the false statement ignores the applicable standard:
Because the standard is an objective one,
it is irrelevant under the objective unsophisticated
consumer standard whether Plaintiffs were truly misled or deceived . Lox,689 F.3d at 826
("[T]he unsophisticated consumer test is an objective one, meaning that it is unimportant whether
the individual that actually received a violative letter was misled or deceived." (internal
quotation marks and citation omitted)). Thus, Defendant's argument is unavailing. Construing
the complaint in the light most favorable to Plaintiffs and drawing all inferences in their favor,
the Court determines that Plaintiffs have adequately stated a claim regarding the overstatement
of their debt.
10
CONCLUSION
Defendant's motion to dismiss (R. 18) is GRANTED in part and DENIED in part as
stated herein. The parties shall appear for a status hearing on January 10, 201 7 , at 9:45 a.m. The
parties are DIRECTED to reevaluate their settlement positions in light of this opinion and to
exhaust all settlement possibilities prior to the status hearing.
ENTERED:
J
6n Castillo
United States District Court
Dated: December 12, 2016
t1
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