Navarroli v. Midland Funding, LLC et al
Filing
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OPINION AND ORDER. The Court denies Defendants' motion to dismiss 23 . Status set for 3/6/19 to stand. Signed by the Honorable Sara L. Ellis on 3/5/2019. Mailed notice(rj, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NICHOLAS NAVARROLI,
on behalf of himself and the class
members described below,
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Plaintiff,
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v.
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MIDLAND FUNDING LLC;
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MIDLAND CREDIT MANAGEMENT, INC.; )
and ENCORE CAPITAL GROUP, INC.,
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Defendants.
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No. 18 C 2047
Judge Sara L. Ellis
OPINION AND ORDER
After Plaintiff Nicholas Navarroli received a letter from Defendants Midland Funding
LLC, Midland Credit Management, Inc. (“MCM”), and Encore Capital Group, Inc. informing
him of an offer to settle an alleged consumer debt that failed to mention that any settlement
payment would restart the statute of limitations for the collection of a legally unenforceable debt,
Navarroli sued Defendants bringing class action claims under the Fair Debt Collection Practices
Act (“FDCPA”), 15 U.S.C. § 1692 et seq., alleging that MCM’s form letter fails to provide
necessary disclosures and contains false, deceptive, or misleading representations in violation of
15 U.S.C. §§ 1692e, 1692e(2), and 1692e(10). Defendants move to dismiss Plaintiff’s complaint
for lack of standing. The Court finds that the informational injury alleged in Plaintiff’s
complaint suffices to confer standing in this case and denies Defendants’ motion to dismiss.
BACKGROUND 1
In late February 2018, Navarroli received a letter from Defendants, sent by MCM, that
offered settlement of an alleged consumer debt. The letter read “Congratulations! You have
been pre-approved for a discount program designed to save you money. Act now to maximize
your savings and put this debt behind you. . . .” Doc. 1, Ex. A. The letter offered three payment
options. The first option invited a one-time payment of 60% of the alleged debt, with a due date
of March 30, 2018. The second option directed Navarroli to make a monthly payment for six
months in an amount that would total 80% of the alleged debt, with a due date of March 30, 2018
for the first monthly payment. The final option detailed a monthly payment plan as low as $50 a
month. Separate from the payment options, the letter also listed its offer expiration date of
March 30, 2018. The post-script of the letter reads, in its entirety: “The law limits how long you
can be sued on a debt and how long a debt can appear on your credit report. Due to the age of
this debt, we will not sue you for it or report payment or non-payment of it to a credit bureau.”
Id. The letter did not disclose that making a payment could restart the statute of limitations and
revive an otherwise legally unenforceable debt.
Navarroli claims that this failure to disclose is a concrete informational injury, which
violates the FDCPA and suffices to confer Article III standing. Defendants disagree and filed the
present motion to dismiss.
The facts in the background section are taken from Navarroli’s complaint and are presumed true for the
purpose of resolving Defendants’ motion to dismiss [23]. See Virnich v. Vorwald, 664 F.3d 206, 212 (7th
Cir. 2011); Local 15, Int’l Bhd. of Elec. Workers, AFL-CIO v. Exelon Corp., 495 F.3d 779, 782 (7th Cir.
2007). This section additionally includes other facts submitted by Navarroli in his response to the motion
to dismiss to the extent they are consistent with the allegations of the complaint. Help at Home, Inc. v.
Med. Capital, LLC, 260 F.3d 748, 752–53 (7th Cir. 2001). Finally, the Court also considers the facts
contained in the exhibit filed with the complaint. Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d
440, 443–44 (7th Cir. 2009).
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LEGAL STANDARD
A motion to dismiss under Rule 12(b)(1) challenges the Court’s subject matter
jurisdiction. Fed. R. Civ. P. 12(b)(1). The party asserting jurisdiction has the burden of proof.
United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003), overruled on
other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012). The standard
of review for a Rule 12(b)(1) motion to dismiss depends on the purpose of the motion. Apex
Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443–44 (7th Cir. 2009). If a defendant
challenges the sufficiency of the allegations regarding subject matter jurisdiction (a facial
challenge), the Court must accept all well-pleaded factual allegations as true and draw all
reasonable inferences in the plaintiff’s favor. See id.; United Phosphorus, 322 F.3d at 946. If,
however, the defendant denies or controverts the truth of the jurisdictional allegations (a factual
challenge), the Court may look beyond the pleadings and view any competent proof submitted
by the parties to determine if the plaintiff has established jurisdiction by a preponderance of the
evidence. See Apex Digital, 572 F.3d at 443–44; Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d
536, 543 (7th Cir. 2006).
ANALYSIS
“No principle is more fundamental to the judiciary’s proper role in our system of
government than the constitutional limitation of federal court jurisdiction to actual cases or
controversies.” Spokeo, Inc. v. Robins, --- U.S. ----, 136 S. Ct. 1540, 1547, 194 L. Ed. 2d 635
(2016) (quoting Raines v. Byrd, 521 U.S. 811, 818, 117 S. Ct. 2312, 138 L. Ed. 2d 849 (1997)).
“Standing to sue is an important component of that limitation.” Meyers v. Nicolet Rest. of
DePere, LLC, 843 F.3d 724, 726 (7th Cir. 2016) (citing Lujan v. Defenders of Wildlife, 504 U.S.
555, 560, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)). As a prerequisite, standing “ensures that
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courts do not decide abstract principles of law but rather concrete cases or controversies.” Id.
(quoting Sierra Club v. Marita, 46 F.3d 606, 613 (7th Cir. 1995)). Thus, “[s]tanding is a
threshold question in every federal case because if the litigants do not have standing to raise their
claims the court is without authority to consider the merits of the action.” Id. (quoting Freedom
From Religion Found., Inc. v. Zielke, 845 F.2d 1463, 1467 (7th Cir. 1988)). Standing consists of
three elements: “[t]he plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable
to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable
judicial decision.” Spokeo, 136 S. Ct. at 1547 (citing Lujan, 504 U.S. at 560–61). The motion
before the Court focuses solely on the injury in fact requirement.
The injury in fact need not be tangible. Spokeo, 136 S. Ct. at 1549. Courts look to both
legislative history and congressional judgment when determining whether an intangible injury
can confer standing. Id. (“[B]ecause Congress is well positioned to identify intangible harms
that meet minimum Article III requirements, its judgment is also instructive and important”).
“Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff
automatically satisfies the injury in fact requirement whenever a statute grants a person a
statutory right and purports to authorize that person to sue to vindicate that right.” Id. In other
words, a bare violation of a statute in which Congress included a private right of action does not
necessarily create an injury in fact; the plaintiff must still allege a particularized injury. See
Meyers, 843 F.3d at 727. The Supreme Court has recognized an “informational injury” as a
particularized injury in fact sufficient to confer standing. See Havens Realty Corp. v. Coleman,
455 U.S. 363, 374, 102 S. Ct. 1114, 71 L. Ed. 2d 214 (1982) (holding that individuals acting as
“testers” who posed as renters or purchasers but never intended to rent or buy had standing to sue
under the Fair Housing Act after their right to truthful information was violated).
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Navarroli alleges that MCM engaged in misconduct in violation of the FDCPA when
MCM sent him a dunning letter on an expired consumer debt that contained incomplete and
therefore misleading information. This Court adds its voice to the growing chorus within this
district that has found standing in exactly this type of case. See, e.g., Pierre v. Midland Credit
Management, Inc., No. 16 C 2895, 2017 WL 1427070, at *3–4 (N.D. Ill. Apr. 21, 2017) (finding
plaintiff suffered injury in fact after MCM sent her “a misleading dunning letter that sought
payment on a time-barred debt and lacked disclosures to which she was legally entitled” because
“[s]uch an injury falls squarely within the ambit of what Congress gave consumers in the
FDCPA: ‘a legally protected interest in certain information about debts,’ with ‘deprivations of
information about one’s debt (in a communication directed to the plaintiff consumer) a
cognizable injury’”) (quoting Saenz v. Buckeye Check Cashing of Ill., 2016 WL 5080747, at *1–
2 (N.D. Ill. Sept. 20, 2016)); Haddad v. Midland Funding, LLC, 255 F. Supp. 3d 735, 743 (N.D.
Ill. 2017) (finding plaintiff suffered injury in fact after Midland sent plaintiff dunning letter on
expired debt); Wheeler v. Midland Funding, LLC, No. 15 C 11152, 2017 WL 3235683, at *5
(N.D. Ill. July 31, 2017) (finding plaintiff suffered injury in fact after Midland directed plaintiff
to website that contained half-information about plaintiff’s expired debt and failed to disclose
that statute of limitations could be renewed if plaintiff began making payments); Francisco v.
Midland Funding, LLC, No. 17 C 6872, 2019 WL 498936, at *3–4 (N.D. Ill. Feb. 8, 2019)
(finding Midland’s failure to report status of debt as disputed gave plaintiff standing); Bernal v.
NRA Grp., LLC, 318 F.R.D. 64, 72 (N.D. Ill. 2016) (finding that receiving debt collection letter
that wrongly assesses percentage-based collection fee on delinquent consumer debt constitutes
concrete injury). These cases have found consistently and repeatedly that informational injuries
like—and in some cases exactly the same as—the injury Navarroli alleges arising under the
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FDCPA are sufficient to confer standing. Furthermore, these cases are “consistent with
established Seventh Circuit precedent regarding the FDCPA, which does not require proof of
actual damages as a precursor to the recovery of statutory damages and when looking at standing
focuses on the debt collector’s misconduct, not whether the debt is valid or, as here, whether the
consumer has paid an invalid debt.” Wheeler, 2017 WL 3235683, at *4 (quoting Keele v.
Wexler, 149 F.3d 589, 593 (7th Cir. 1998)) (internal quotation marks omitted).
The very nature and purpose of MCM’s letter seems to be to bait the consumer into
paying money on a time-barred debt, either by settling for sixty cents on the dollar—a percentage
that is orders of magnitude higher than what Defendants allegedly paid to obtain the outdated
debt—or by unwittingly renewing the statute of limitations by making a new payment on the
debt. The Seventh Circuit has found that such dunning letters pose a serious danger: “We begin
with the danger that a debtor who accepts the offered terms of settlement will, by doing so,
waive his otherwise absolute defense under the statute of limitations. Only the rarest consumerdebtor will recognize this danger.” Pantoja v. Portfolio Recovery Assocs., LLC, 852 F.3d 679,
684 (7th Cir. 2017). The alleged injury is clear: Navarroli received a letter encouraging him to
“put [his] debt behind [him]”—a debt for which he already had a complete defense under the
statute of limitations—by selecting one of MCM’s proposed payment options, while omitting the
crucial information that payment would renew the statute of limitations period and eschew this
complete defense. Doc. 1, Ex. A. This is certainly within the realm of conduct Congress
intended to deter with the FDCPA. McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1021 (7th
Cir. 2014) (finding that dunning letters offering settlement of expired debt could lead consumers
to believe that debt was legally enforceable violated FDCPA); see also Wheeler, 2017 WL
3235683, at *4; Pierre, 2017 WL 1427070, at *4; Bernal, 318 F.R.D. at 72. That Navarroli did
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not actually pay is not relevant for standing under the FDCPA; MCM’s alleged misconduct
suffices to create a concrete injury in fact with regard to Navarroli. Keele, 149 F.3d at 593.
Defendants insist, however, that Navarroli has alleged only a bare statutory violation,
without identifying a particularized injury in fact. They compare the case to a bevy of recent
Seventh Circuit cases denying standing for lack of concrete injury. Doc. 23 at 5 (citing Meyers,
843 F.3d at 724; Gubala v. Time Warner Cable, Inc., 846 F.3d 909 (7th Cir. 2017); Groshek v.
Time Warner Cable, 865 F.3d 884 (7th Cir. 2017); Collier v. SP Plus Corp., 889 F.3d 894 (7th
Cir. 2018)). Each case, however, is clearly distinguishable.
The plaintiff in Meyers brought his case against Nicolet Restaurant under the Fair and
Accurate Credit Transactions Act (“FACTA”) claiming that the restaurant’s failure to truncate
the expiration date of his credit card on his receipt was a statutory violation. Meyers, 843 F.3d at
725. The Seventh Circuit found that Meyers had not suffered any harm, and that his alleged
injury was not caused by the type of conduct Congress sought to deter with FACTA, which was
aimed primarily at identity theft. In fact, Congress “specifically declared that failure to truncate
a card’s expiration date, without more, does not heighten the risk of identity theft.” Id. at 727.
By contrast, MCM’s dunning letter significantly heightens the risk of financial injury to
recipients of the letter who could unwittingly pay on a time-barred debt and renew the statute of
limitations period.
In Gubala, the plaintiff brought his case against Time Warner after they failed to destroy
his personal information, which the plaintiff alleged was a violation of the Cable
Communications Policy Act. Gubala, 846 F.3d at 909. The Seventh Circuit affirmed that
Gubala had “not alleged any plausible (even if attenuated) risk of harm to himself from such a
violation [or] any risk substantial enough to be deemed ‘concrete.’” Id. Additionally, the
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Seventh Circuit found that Gubala had “neglect[ed] to mention that the duty of a cable provider
to destroy a subscriber’s personal information is qualified by [subsections of the Act], which
authorized disclosure of such information” in certain circumstances. Id. at 913. Thus, like
Meyers, and unlike Navarroli’s case, not only did Gubala not allege a personal injury, the alleged
statutory violation was not the type of conduct that Congress sought to deter.
In Groshek and Collier, the same pattern repeats. Groshek, 865 F.3d at 884 (finding that
defendant’s disclosure form that contained extraneous information did not cause a particular
injury to Groshek); Collier, 889 F.3d at 894 (finding that receipts containing a debit or credit
card’s expiration date did not cause particularized injury and merely alleging “actual injuries”
did not suffice to confer standing either). Although all of these cases stand for the proposition
that a court cannot find standing where the plaintiff does not allege more than a bare statutory
violation, they are inapposite. In contrast, Pantoja, Keele, and McMahon directly address the
issue before the court and indicate that Navarroli’s allegations are sufficient to confer standing.
Defendants have not distinguished them.
CONCLUSION
For the foregoing reasons, the Court denies Defendants’ motion to dismiss [23].
Dated: March 5, 2019
______________________
SARA L. ELLIS
United States District Judge
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