SPIEGEL v. ASHWOOD FINANCIAL, INC.

Filing 100

ORDER - on Cross Motions for Summary Judgment; We DENY Spiegel's Motion for Summary Judgment, Dkt. No. 87 , and GRANT Ashwood's Cross Motion for Summary Judgment. Dkt. No. 89 . Judgment will be entered accordingly. Signed by Judge Sarah Evans Barker on 1/30/2018. *** SEE ORDER *** (CKM)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
MIKE SPIEGEL, individually and on behalf
of all others similarly situated,
Plaintiff,
v.
ASHWOOD FINANCIAL, INC.,
Defendant.

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No. 1:16-cv-01998-SEB-DML

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Court on cross motions for summary judgment filed by
Plaintiff Mike Spiegel, individually and on behalf of all others similarly situated
(“Spiegel”), Dkt. No. 87, and Defendant Ashwood Financial, Inc. (“Ashwood”). Dkt. No.
89. For the reasons detailed below, we DENY Spiegel’s Motion for Summary Judgment
and GRANT Ashwood’s Cross Motion for Summary Judgment.
Factual Background
On March 16, 2016, Spiegel received an initial form letter from Ashwood,
demanding payment of a delinquent consumer debt (the “Letter”). Dkt. No. 88, Ex. A.
The Letter stated, in part,
Unless within (30) days after receipt of the first communication from this
office you dispute the validity of the debt or any portion thereof, it will be
assumed to be valid. If you notify this office information [sic] within the
thirty (30) day period after receipt of the first communication from this office
that you dispute the debt or any portion thereof, this office will obtain
verification of the debt and a copy of such verification, along with the
creditor’s name and address, will be mailed to you by this office. If you
request information [sic], within the thirty (30) day period, the name and
address of the original creditor, if different from the current creditor, this
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office will provide you with the requested information. This is required
under the Fair Debt Collection Practices Act.
Id. (emphasis added) (the “Verification Notice”).
Spiegel filed his Complaint-Class Action (the “Complaint”) on July 26, 2016, 1
alleging that the Letter violated the Fair Debt Collection Practices Act (“FDCPA”), 15
U.S.C. §§ 1692g(a)(4) & (5), because the Verification Notice failed to state that any dispute
of a debt or any request for the name and address of the original creditor must be made in
writing for a debtor to obtain a verification of the debt or the name and address of the
original creditor, if different than the current creditor. Dkt. No. 1, ¶¶ 12-13. Spiegel further
argues that Ashwood’s failure to notify debtors that such disputes or requests must be in
writing constituted unfair and unconscionable collection actions in violation of the FDCPA
because whether a dispute could be made orally or in writing could determine whether a
consumer wishes to dispute the debt. Id. at ¶¶ 8, 17.
Ashwood filed its Amended Answer on March 30, 2017, in which it asserts that it
cannot be held liable for violating the FDCPA because any potential violation would have
been caused by typographical errors in the Letter and would be subject the bona fide error
affirmative defense under § 1692k(c). Dkt. No. 72 at 5, 18. Specifically, Ashwood claims
that the word “information” was inadvertently substituted for the words “in writing” within
the Letter’s Verification Notice. Id. In support of its bona fide error defense, Ashwood

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On February 2, 2017, we certified Spiegel’s proposed class, which was defined as “[a]ll
persons similarly situated in the State of Indiana from whom Ashwood attempted to collect
a delinquent consumer debt, via the same form collection letter that Ashwood sent to
Spiegel from one year before the date of the Complaint to the present.” Dkt. No. 52 at 8.
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attached an affidavit signed by Ashwood President, Dan Bailey (“Bailey”), which
explained that the use of the word “information” instead of “in writing” within the
Verification Notice “was an unintentional typographical error” that Bailey had missed
when reviewing and approving the Letter. Dkt. No. 72, Ex. A; Dkt. No. 88, Ex. B (“Bailey
Aff.”).
On June 21, 2017, Bailey was deposed regarding the errors within the Letter’s
Verification Notice. Dkt. No. 88, Ex. C (“Bailey Dep.”). Bailey admitted that the Letter
as written did not conform to the standard text of the FDCPA but testified that the errors in
the Verification Notice were typographical mistakes he failed to catch and correct before
the Letter was sent to debtors. Id. at 8:18-10:4, 22:4-26:8, 43:23-44:3. Specifically, Bailey
stated that Ashwood asked the third-party mailing service in charge of delivering
Ashwood’s form collection letters, SourceHOV, to make a change to the Letter that was
unrelated to “FDCPA boilerplate” language in the Verification Notice. Id. at 14:7-16:14.
When SourceHOV sent the Letter back to Bailey for approval, Bailey proofread the Letter
and inadvertently approved it without noticing that the words “in writing” had been
replaced by the word “information” in the Verification Notice. Id. at 15:9-16:20. Bailey,
who is one of only five employees of Ashwood, further testified that he was the sole person
at Ashwood responsible for reviewing, drafting, and approving the Letter. Id. at 12:2413:20, 18:11-16. Once Bailey became aware of the mistakes within the Verification
Notice, he had the Letter revised to change the word “information” to “in writing” for
future uses. Id. at 10:5-11.

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Although Bailey indicated that changes are routinely made to Ashwood’s form
collection letters, he acknowledged that Ashwood does not maintain any written log to
record the changes that are made. Id. at 9:14-12:20. Bailey also stated that Ashwood
sought to comply with the FDCPA and to prevent errors like the ones found in the Letter
by tracking the language of the FDCPA and by having Bailey review and approve the
Letter’s language. Id. at 15:7-16:20, 18:11-16; Bailey Aff., ¶ 5. Additionally, Ashwood is
a member of the American Collectors Association (“ACA”) for debt collectors, participates
in FDCPA compliance seminars, and receives online updates on FDCPA law and court
rulings in an effort to ensure its compliance with the FDCPA. Bailey Aff., ¶ 6.
On July 24, 2017, Spiegel filed his Motion for Summary Judgment. Dkt. No. 87.
Spiegel argues that the undisputed evidence demonstrates that Ashwood violated the
requirements of §§ 1692g(a)(4) & (5) of the FDCPA and that Ashwood failed to adequately
show an entitlement to the bona fide error defense by a preponderance of the evidence. See
generally, Dkt. No. 88. Specifically, Spiegel contends that Ashwood is not entitled to
assert the bona fide error defense because it has not maintained procedures that were
reasonably designed to prevent the kind of errors found in the Letter’s Verification Notice.
Dkt. No. 88 at 12-14. In addition to filing its response to Spiegel’s Motion, Ashwood filed
its Cross Motion for Summary Judgment on July 26, 2017, in which it asserts that the
evidence of record sufficiently establishes that it is excused from liability under the FDCPA
because the mistakes in the Letter were the result of bona fide error. Dkt. No. 89; Dkt. No.
90.

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Legal Analysis
I.

Standard of Review
Summary judgment is appropriate where there are no genuine disputes of material

fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex
Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). A court must grant a motion for summary
judgment if it appears that no reasonable trier of fact could find in favor of the non-movant
on the basis of the designated, admissible evidence. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247–48 (1986). We neither weigh the evidence nor evaluate the credibility of
witnesses, id. at 255, but view the facts and the reasonable inferences flowing from them
in the light most favorable to the non-movant. McConnell v. McKillip, 573 F. Supp. 2d
1090, 1097 (S.D. Ind. 2008).
The moving party “bears the initial responsibility of informing the district court of
the basis for its motion, and identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323.
The party seeking summary judgment on a claim on which the non-moving party bears the
burden of proof at trial may discharge its burden by showing an absence of evidence to
support the non-moving party's case. Id. at 325.
Summary judgment is not a substitute for a trial on the merits, nor is it a vehicle for
resolving factual disputes. Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 920 (7th Cir.
1994). Thus, after drawing all reasonable inferences from the facts in favor of the nonmovant, if genuine doubts remain and a reasonable fact finder could find for the party
opposing the motion, summary judgment is inappropriate. See Shields Enter., Inc. v. First
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Chicago Corp., 975 F.2d 1290, 1294 (7th Cir. 1992); Wolf v. City of Fitchburg, 870 F.2d
1327, 1330 (7th Cir. 1989). But if it is clear that a plaintiff will be unable to satisfy the
legal requirements necessary to establish her case, summary judgment is not only
appropriate, but mandated. See Celotex, 477 U.S. at 322; Ziliak v. AstraZeneca LP, 324
F.3d 518, 520 (7th Cir. 2003). Further, a failure to prove one essential element necessarily
renders all other facts immaterial. Celotex, 477 U.S. at 323.
Courts often confront cross motions for summary judgment because Rules 56(a) and
(b) of the Federal Rules of Civil Procedure allow both plaintiffs and defendants to move
for such relief. In such situations, courts must consider each party’s motion individually
to determine if that party has satisfied the summary judgment standard. Ind. Civil Liberties
Union Found., Inc. v. Ind. Sec’y of State, 229 F. Supp. 3d 817, 821 (S.D. Ind. 2017). Thus,
in determining whether genuine and material factual disputes exist in this case, we have
considered the parties’ respective memoranda and the exhibits attached thereto, and have
construed all facts and drawn all reasonable inferences therefrom in the light most
favorable to the respective non-movant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574 (1986).
II.

Discussion
In accordance with the FDCPA, a consumer debt collector must send to each debtor

a written notice containing certain information, including “a statement that if the consumer
notices the debt collector in writing within the thirty-day period that the debt, or any portion
thereof, is disputed, the debt collector will obtain verification of the debt or a judgment
against the consumer…” and “a statement that, upon the consumer’s written request within
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the thirty-day period, the debt collector will provide the consumer with the name and
address of the original creditor, if different from the current creditor.” 15 U.S.C. §§
1692g(a)(4) & (5). However, a bona fide error can serve as an absolute defense to an
alleged violation of the FDCPA. 15 U.S.C. § 1692k(c) (“A debt collector may not be held
liable in any action brought under this subchapter if the debt collector shows by a
preponderance of evidence that the violation was not intentional and resulted from a bona
fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any
such error”).
To establish a bona fide error defense, a defendant must demonstrate three elements
by a preponderance of evidence: “(1) it must show that the presumed FDCPA violation
was not intentional; (2) it must show that the presumed FDCPA violation resulted from a
bona fide error …; and (3) it must show that it maintained procedures reasonably adapted
to avoid any such error.” Kort v. Diversified Collection Serv., Inc., 394 F.3d 530, 537 (7th
Cir. 2005).

“[A] debt collector ‘need only show that its FDCPA violation was

unintentional, not that its actions were unintentional’” in order to satisfy the first prong of
the bona fide error defense. VanHuss v. Rausch, Sturm, Israel, Enerson & Hornik, No. 16cv-372-slc, 2017 WL 1379402, at *5 (W.D. Wis. Apr. 14, 2017) (quoting Nielsen v.
Dickerson, 307 F.3d 623, 641 (7th Cir. 2002)). For an error to be considered “bona fide,”
it must be “made in good faith; a genuine mistake, as opposed to a contrived mistake.”
Kort, 394 F.3d at 538.
The parties’ cross motions for summary judgment focus on the third prong of the
bona fide error defense, whether Ashwood maintained “procedures reasonably adapted” to
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prevent the kind of errors found in the Letter. The Supreme Court defined “procedures” as
“processes that have mechanical or other such regular orderly steps to avoid mistakes.”
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587 (2010)
(internal quotation marks omitted); see also, Leeb v. Nationwide Credit Corp., 806 F.3d
895, 899 (7th Cir. 2015). In light of the requirement for reasonable procedures, the bona
fide error defense is meant to apply only to clerical or factual mistakes and not to mistakes
of law. See Jerman, 559 U.S. at 587 (“[T]he broad statutory requirements of procedures
reasonably designed to avoid ‘any’ bona fide error indicates that the relevant procedures
are ones that help to avoid errors like clerical or factual mistakes. Such procedures are
more likely to avoid error than those applicable to legal reasoning…”). The bona fide error
defense “does not require debt collectors to take every conceivable precaution to avoid
errors; rather, it only requires reasonable precaution.” Kort, 394 F.3d at 539 (citing Hyman
v. Tate, 362 F.3d 965, 968 (7th Cir. 2004)).
We conclude that Ashwood cannot be held liable under the FDCPA in this instance
because no reasonable jury could determine that the typographical errors in the Letter’s
Verification Notice were the result of anything other than a bona fide error. Despite
Ashwood’s intention that the Letter track the language of the FDCPA, Bailey Aff., ¶ 5, the
errors found in the Letter’s Verification Notice were clearly genuine mistakes because the
use of the word “information” instead of “in writing” renders the Verification Notice
nonsensical. No one would have intentionally written the sentence that way.
Furthermore, Ashwood made clear that he takes—and did take here—reasonable
measures to prevent the kind of typographical, clerical errors found in the Verification
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Notice including having Bailey review the Letter before it went out. Although Bailey
proofread the Letter after asking SourceHOV to make changes to it that were unrelated to
the Verification Notice, he inadvertently failed to catch and correct the typographical errors
within the Verification Notice before the Letter was sent to debtors. Id. at 14:7-16:20.
Moreover, Bailey made efforts to correct the errors in the Verification Notice as soon as
he became aware of them. Id. at 10:5-11. As stated above, the FDCPA does not require
debt collectors’ written notifications to be perfect or that debt collectors must take every
possible precaution to avoid clerical or factual errors. See 15 U.S.C § 1692k(c); see also,
Kort, 394 F.3d at 539.

As such, the undisputed evidence demonstrates that the

typographical errors found in the Letter’s Verification Notice were unintentional, bona fide
errors, and Ashwood is therefore entitled to summary judgment.
Conclusion
For the reasons detailed above, we DENY Spiegel’s Motion for Summary
Judgment, Dkt. No. 87, and GRANT Ashwood’s Cross Motion for Summary Judgment.
Dkt. No. 89. Judgment will be entered accordingly.
IT IS SO ORDERED.

Date:

1/30/2018

_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

Distribution: To counsel of record via CM/ECF.

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