Booker v. New Penn Financial, LLC et al
MEMORANDUM Opinion and Order written by the Honorable Gary Feinerman on 8/8/2017.Mailed notice.(jlj, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
NEW PENN FINANCIAL, LLC, d/b/a SHELLPOINT
MORTGAGE SERVICING, MTGLQ INVESTORS,
L.P., and McCALLA RAYMER LEIBERT PIERCE,
17 C 1578
Judge Gary Feinerman
MEMORANDUM OPINION AND ORDER
Pamela Booker sued New Penn Financial, LLC, d/b/a Shellpoint Mortgage Servicing,
MTGLQ Investors, L.P., and McCalla Raymer Leibert Pierce, LLC, alleging violations of the
Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., and the Illinois
Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. Doc.
1. Booker settled with McCalla. Doc. 25. Shellpoint and MTGLQ move to dismiss the claims
against them under Federal Rule of Civil Procedure 12(b)(6). Doc. 20. The motion is granted,
but Booker will have a chance to file an amended complaint.
In resolving a Rule 12(b)(6) motion, the court assumes the truth of the complaint’s wellpleaded factual allegations, though not its legal conclusions. See Zahn v. N. Am. Power & Gas,
LLC, 815 F.3d 1082, 1087 (7th Cir. 2016). The court must also consider “documents attached to
the complaint, documents that are critical to the complaint and referred to in it, and information
that is subject to proper judicial notice,” along with additional facts set forth in Booker’s brief
opposing dismissal, so long as those additional facts “are consistent with the pleadings.” Phillips
v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013). The facts are set forth as
favorably to Booker as those materials allow. See Pierce v. Zoetis, 818 F.3d 274, 277 (7th Cir.
2016). In setting forth those facts at this stage, the court does not vouch for their accuracy. See
Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010).
In 2008, Booker executed a Note and Mortgage for real property in Lisle, Illinois. Doc. 1
at ¶¶ 13-14. In 2010, she defaulted and foreclosure proceedings began. Id. at ¶ 18. The Note
and Mortgage changed hands several times, id. at ¶¶ 15-17, 19, and eventually were assigned to
MTGLQ, id. at ¶ 20. The servicing rights went to Shellpoint. Id. at ¶ 21.
Booker filed a Chapter 13 bankruptcy case on May 25, 2016. Id. at ¶ 22; see In re
Booker, No. 16 B 17589 (Bankr. N.D. Ill.). Shellpoint filed a proof of claim on MTGLQ’s
behalf. Doc. 1 at ¶ 28. Shellpoint and MTGLQ were then served with Booker’s Chapter 13
plan, which the bankruptcy court confirmed on September 16, 2016. Id. at ¶¶ 29-30. The plan
provided in relevant part: “[Booker] surrenders her interest in the [Lisle property] to Seterus,
Inc., Fannie Mae, Shellpoint Mortgage Servicing, New Penn Financial, LLC and JPMorgan
Chase Bank, N.A. in full satisfaction of their claims.” Doc. 1-11 at 6. On February 24, 2017,
Booker received from Shellpoint (via a communication from its law firm) a Notice of Sale
setting a foreclosure sale for March 7, 2017. Doc. 1 at ¶ 32; Doc. 1-16; Doc. 21 at 2.
Booker filed this suit four days later, on February 28, 2017. She alleges that Shellpoint’s
sending the Notice of Sale to her violated the automatic stay arising from her bankruptcy case,
see 11 U.S.C. § 362, and that this violation of the automatic stay in turn violated the FDCPA and
the ICFA. Doc. 1 at ¶¶ 37-104. The bankruptcy court formally lifted the automatic stay on
March 23, 2017. Booker, No. 16 B 17589 (Doc. 35).
To be liable under the FDCPA, a defendant must be a “debt collector.” See Ruth v.
Triumph P’ships, 577 F.3d 790, 796 (7th Cir. 2009) (“The FDCPA regulates only the conduct of
‘debt collectors’ … .”). The FDCPA defines “debt collector,” in pertinent part, as:
[A]ny 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) (emphasis added).
MTGLQ contends that it is a creditor, not a debt collector, and therefore that it falls
outside the FDCPA’s ambit. Doc. 21 at 3. In his brief, Booker responded that under McKinney
v. Cadleway Properties, Inc., 548 F.3d 496 (7th Cir. 2008), an entity that acquires a debt already
in default may be considered a debt collector, and is “categorically not a creditor.” Id. at 501.
Until very recently, Booker’s argument was right, at least in the Seventh Circuit. However, the
Supreme Court held earlier this summer in Henson v. Santander Consumer USA Inc., 137 S. Ct.
1718 (2017), that “a debt purchaser … may indeed collect debts for its own account without
triggering the statutory definition [of ‘debt collector’].” Id. at 1721-22. The Court made clear
that this is so regardless of whether the debtor had defaulted prior to the debt holder’s acquisition
of the debt. Id. at 1724 (“So a company collecting purchased defaulted debt for its own account
… would hardly seem to be barred from qualifying as a creditor under the statute’s plain
terms.”). At the hearing on this motion, Booker’s counsel conceded with admirable candor that
Henson is fatal to her FDCPA claim against MTGLQ. The court agrees and therefore dismisses
Shellpoint is a mortgage servicer and does not own Booker’s debt, so it is a “debt
collector” governed by the FDCPA. Shellpoint argues, however, that it is not liable under the
FDCPA because the Notice of Sale did not violate the automatic stay. Doc. 21 at 4-5.
The Bankruptcy Code provides that the filing of a bankruptcy case automatically stays
“the commencement or continuation … of a judicial, administrative, or other action or
proceeding against the debtor.” 11 U.S.C. § 362(a)(1). The Code further stays “the
enforcement, against the debtor or against property of the estate, of a judgment obtained before
the commencement of the case.” Id. § 362(a)(2). The Code adds that “the stay of an act against
property of the estate under subsection (a) of this section continues until such property is no
longer property of the estate.” Id. § 362(c)(1).
The stay arising from Booker’s bankruptcy was in effect at the time Shellpoint sent the
Notice of Sale to Booker. Shellpoint contends, however, that once the bankruptcy plan—which
included the above-quoted provision surrendering Booker’s interest in the Lisle property to
satisfy her mortgage debt—was confirmed on September 16, 2016, that property was no longer
“property of the estate” and therefore was no longer subject to the stay. Doc. 21 at 4. Booker
responds that the foreclosure action was an action not only against the Lisle property, but also
against her. Doc. 29 at 6. Each side’s position finds support in the Bankruptcy Code and Illinois
According to Shellpoint, under a straightforward reading of § 362(c)(1), property that is
no longer “property of the estate” is no longer subject to the bankruptcy stay. It follows,
Shellpoint continues, that once the bankruptcy plan was confirmed on September 16, 2016, the
Lisle property was no longer property of the bankruptcy estate because the plan extinguished
Booker’s interest in the property. Shellpoint concludes, then, that when it served the Notice of
Sale on Booker, any action against the property was no longer subject to the automatic stay.
Booker retorts that the mortgage foreclosure action was an action against her. Under
Illinois law, a foreclosure action is quasi in rem, meaning that although it concerns rights to a
particular piece of property, it is directed at a person. See ABN AMRO Mortg. Grp., Inc. v.
McGahan, 931 N.E.2d 1190, 1196 (Ill. 2010) (“In in rem actions, the property itself is the
defendant, while in quasi in rem actions, a named party is the defendant. In a foreclosure action,
the property is not the defendant. Rather, the mortgagor, the person whose interest in the real
estate is the subject of the mortgage, is a necessary party defendant to the foreclosure
proceedings.”) (citation omitted); Turczak v. First Am. Bank, 997 N.E.2d 996, 1001 (Ill. App.
2013). It follows, Booker concludes, that a foreclosure action is an action “against the debtor,”
11 U.S.C. § 362(a)(1), and thus falls into the category of actions covered by the bankruptcy stay.
Shellpoint has the better of the argument, for in considering the extent (if any) to which a
bankruptcy stay applies to a foreclosure proceeding, the key issue is whether the debtor has
retained any interest in the property. In Matter of Tynan, 773 F.2d 177 (7th Cir. 1985), the
Seventh Circuit held that the mortgagor’s filing a bankruptcy case extended the Illinois
redemption period on a mortgage for sixty days, even if a foreclosure sale had already taken
place, provided that the statutory redemption period was still running. Id. at 179. In reaching
this conclusion, the court noted that while most of the mortgagor’s rights in the property had
been extinguished by the pre-bankruptcy filing foreclosure sale, the right of redemption
remained at the time of the bankruptcy filing and passed to the bankruptcy estate. Ibid. From
these principles, it follows that “[t]he act of carrying out a judicial sale of mortgaged property in
which the debtor has any interest is clearly the type of conduct stayed by … § 362(a).” In re
Jackson, 1993 WL 340926, at *3 (Bankr. N.D. Ill. Aug. 31, 1993) (citing Matter of Tynan)
(emphasis added). By the same token, however, proceeding to a judicial sale of a foreclosedupon property does not violate the automatic stay if the debtor/mortgagor no longer has any
interest in the property. See In re Heiserman, 78 B.R. 899, 902 (Bankr. C.D. Ill. 1987) (citing
Tynan for the proposition that where a debtor has no legal or equitable interest in certain
property, actions taken with respect to that property do not violate the automatic stay); cf. In re
Thompson, 894 F.2d 1227, 1229 (10th Cir. 1990) (holding in a slightly different context that,
“[a]t the very least, a mortgage debtor must have some legal or equitable interest in property …
if he hopes to retain it through the bankruptcy cure provisions. No court has held that debtors
can use the bankruptcy cure provisions to recover property in which they no longer have any
interest”) (citation omitted); In re Omni Graphics, Inc., 119 B.R. 641, 642 (Bankr. E.D. Wis.
1990) (stating, in a case concerning the public sale of certain of the debtor’s assets where the
debtor had signed an agreement providing for “surrender of possession” as distinct from
surrender of title, that whether the sale of those assets violated the automatic stay “depends upon
whether the debtor’s estate retained any property interest in the assets as of the time they were
That is the situation presented here. Booker surrendered her interest in the Lisle property
as part of her confirmed bankruptcy plan. Booker cannot question this fact, as the Bankruptcy
Code makes clear that “[t]he provisions of a confirmed plan bind the debtor and each creditor.”
11 U.S.C. § 1327(a). The Code further provides that, “[e]xcept as otherwise provided in the
plan or the order confirming the plan, the confirmation of a plan vests all of the property of the
estate in the debtor.” 11 U.S.C. § 1327(b) (emphasis added). Booker’s confirmed plan
“otherwise provide[s]” that she surrendered all rights to the Lisle property to satisfy her
mortgage debt. Thus, as of September 16, 2016, when her bankruptcy plan was confirmed,
Booker had no interest in the Lisle property.
Accordingly, Shellpoint’s sending Booker the Notice of Sale and otherwise proceeding to
the judicial sale did not violate the bankruptcy stay. And because Booker’s FDCPA claim
against Shellpoint rests on the premise that the Notice violated the automatic stay, Booker has no
viable FDCPA claim against Shellpoint.
Like Booker’s FDCPA claim, her ICFA claim rests on the premise that sending the
Notice of Sale violated the automatic stay. Doc. 1 at ¶ 87. Because sending the Notice did not
violate the automatic stay, the ICFA claim fails as well.
Although the analysis could stop there, Defendants also argue that even if sending the
Notice of Sale violated the automatic stay, the Bankruptcy Code would preempt any ICFA claim
arising from that violation. Doc. 21 at 5-6. The Seventh Circuit has not directly addressed this
issue, but two circuits have concluded that the Bankruptcy Code preempts state law claims
grounded in conduct connected to the bankruptcy proceedings. See Bessette v. Avco Fin. Servs.,
Inc., 230 F.3d 439, 447-48 (1st Cir. 2000) (holding a state law unjust enrichment claim against a
creditor preempted by the Bankruptcy Code); MSR Exploration, Ltd. v. Meridian Oil, Inc., 74
F.3d 910, 912-16 (9th Cir. 1996) (holding a state law malicious prosecution claim preempted by
the Bankruptcy Code); see also Twomey v. Ocwen Loan Servicing, LLC, 2016 WL 4429895, at
*2 (N.D. Ill. Aug. 22, 2016) (“Time and time again, courts in this district have held that the
Bankruptcy Code preempts the field when it comes to remedying violations of injunctive orders
issued by bankruptcy courts.”) (citing cases). Booker fails to respond to the preemption
argument, thus forfeiting the point and providing an independent ground for dismissing her ICFA
claim. See Firestone Fin. Corp. v. Meyer, 796 F.3d 822, 825 (7th Cir. 2015) (“[A] party
generally forfeits an argument or issue not raised in response to a motion to dismiss.”); G&S
Holdings LLC v. Cont’l Cas. Co., 697 F.3d 534, 538 (7th Cir. 2012) (“We have repeatedly held
that a party waives an argument by failing to make it before the district court.”).
For the foregoing reasons, Defendants’ motion to dismiss is granted. In so holding, the
court also notes that Booker very briefly asserted in her complaint and opposition brief that the
Notice of Sale was misleading because it named the wrong plaintiff. Doc. 1 at ¶ 33; Doc. 29 at
2-3. But because Booker does not connect this alleged flaw to any legal argument, she has
forfeited any claim that it gives rise to liability under the FDCPA or the ICFA. See Firestone
Fin. Corp, 796 F.3d at 825; G&S Holdings LLC, 697 F.3d at 538; Judge v. Quinn, 612 F.3d 537,
557 (7th Cir. 2010) ([P]erfunctory and undeveloped arguments, and arguments that are
unsupported by pertinent authority, are waived.”).
The dismissal of Booker’s complaint is without prejudice to her filing an amended
complaint. See Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 519 (7th Cir.
2015) (“Ordinarily … a plaintiff whose original complaint has been dismissed under Rule
12(b)(6) should be given at least one opportunity to try to amend her complaint before the entire
action is dismissed.”). Booker has until August 29, 2017 to file an amended complaint. If she
does not do so, the dismissal will convert automatically to a dismissal with prejudice, and
judgment will be entered. If Booker files an amended complaint, Defendants shall answer or
otherwise plead to the amended complaint within three weeks of its filing.
August 8, 2017
United States District Judge
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