Adkins, et al. v. Midland Credit Management, Inc.
Filing
90
MEMORANDUM OPINION AND ORDER: Granting Plaintiff's 62 MOTION for Summary Judgment on Count Two and Denying Defendant Midland Credit Management Inc.'s 66 MOTION for Summary Judgment; further Directing that Count One of the individual WVCCPA claims be DISMISSED pursuant to the Plaintiff's voluntary dismissal. Signed by Judge Irene C. Berger on 4/10/2019. (cc: attys; any unrepresented party) (msa)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
BECKLEY DIVISION
STEPHANIE ADKINS and
DOUGLAS SHORT,
Plaintiffs,
v.
CIVIL ACTION NO. 5:17-cv-04107
MIDLAND CREDIT MANAGEMENT, INC.,
Defendant.
MEMORANDUM OPINION AND ORDER
The Court has reviewed the Plaintiffs’ Motion for Summary Judgment on Count Two
(Document 62), the Memorandum of Law in Support of Plaintiffs’ Motion for Summary Judgment
on Count Two (Document 63), Defendant Midland Credit Management, Inc.’s Opposition to
Plaintiffs’ Motion for Summary Judgment on Count Two (Document 74), and the Plaintiffs’ Reply
in Further Support of Their Motion for Summary Judgment on Count Two (Document 78), as well
as all attached exhibits.
The Court has also reviewed Defendant Midland Credit Management Inc.’s Motion for
Summary Judgment (Document 66), the Memorandum in Support of Defendant Midland Credit
Management Inc.’s Motion for Summary Judgment (Document 76), the Plaintiffs’ Brief in
Opposition to Defendant’s Motion for Summary Judgment (Document 77), and the Reply
Memorandum in Support of Defendant Midland Credit Management Inc.’s Motion for Summary
Judgment (Document 79). For the reasons stated herein, the Court finds that the Plaintiffs’ motion
should be granted, and the Defendant’s motion should be denied.
FACTS 1
The named Plaintiffs, Stephanie Adkins and Douglas Short, brought this action on behalf
of themselves and a purported class of West Virginia consumers. They named as Defendant
Midland Credit Management (MCM). Although the Class Action Complaint (Document 1)
asserted violations of the Fair Debt Collection Practices Act (FDCPA) and multiple violations of
the West Virginia Consumer Credit and Protection Act (WVCCPA), the Plaintiffs have agreed to
dismiss their individual claims under the FDCPA, as well as all WVCCPA claims related to letters
sent on or before July 3, 2017. (Pl.s’ Resp. to Def.’s Mot. at 1.) The Court recently granted a
motion for class certification related to the sole remaining claims. (Mem. Op.) (Document 89.)
That class is defined as follows:
All persons with West Virginia addresses to whom Midland sent a
debt collection letter on or after July 4, 2017 seeking to collect debt
that Midland’s records indicated had passed its statute of limitations,
which letter failed to provide the following disclosure: “The law
limits how long you can be sued on a debt. Because of the age of
your debt, [Midland] cannot sue you for it.”
Accordingly, the Court will address only the facts and arguments related to the class claim that
remains pending. In addition, the Court hereby incorporates the Memorandum Opinion and
Order (Document 86) denying MCM’s motion to dismiss and the Memorandum Opinion and
Order (Document 89) granting the Plaintiffs’ motion for class certification, as those opinions
resolve some issues presented herein.
1 The facts are largely undisputed. To the extent any factual dispute exists, the Court will view the dispute in the
light most favorable to the non-moving party as to each motion.
2
An amendment to the WVCCPA, effective July 4, 2017, requires that, when debt is beyond
the statute of limitations, the following language must be included in all written communications
with the consumer: “The law limits how long you can be sued on a debt. Because of the age of
your debt, (INSERT OWNER NAME) cannot sue you for it.” W.Va. Code § 46A-2-128(f).
MCM monitored the progress of the bill that contained that amendment, among other changes to
the WVCCPA, in the West Virginia legislature. After the bill was signed into law, MCM legal,
compliance, and marketing personnel exchanged emails on April 27 and 28, 2017, discussing the
content of the bill, including how to implement the change to the statute of limitations disclosure
and the effective date of July 4, 2017.
Between January and April 2017, MCM implemented a new system for requesting changes
in its debt collection correspondence. MCM’s representative explained that the new system was
intended to prevent change requests from falling through the cracks. Previously, the department
or individual suggesting a change would email Marketing, and Marketing held follow-up meetings.
Under the new system, the department or individual suggesting a change emails Marketing with a
uniform request form, and Marketing holds follow up meetings. The April 28, 2017 email
describing the amendments to the WVCCPA and the changes required for MCM’s letter templates
was submitted shortly after implementation of the new system but was not sent on the uniform
request form. Marketing did not implement the change, and no follow up occurred until the
Legal/Compliance Department discovered on or about August 9, 2017, that the change had not
been made. Marketing corrected the letter templates by August 25, 2017.
MCM sent letters to the named Plaintiffs during the period after July 4, 2017, and before it
implemented the changes to the letter templates to comply with the WVCCPA amendment. [MCM
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sent letters to the named Plaintiffs after the July 4, 2017 effective date of the WVCCPA
amendment that did not include the language required by that amendment.] MCM sent a letter
dated July 19, 2017, addressed to Mr. Short but mailed to his attorney’s office.
The letter lists a
current balance of $992.30. It references a dispute, indicates that MCM concluded that its
“information is accurate” and verified the amount of Mr. Short’s outstanding balance. (Short
Letter, att’d as Pl.’s Ex. B) (Document 62-2.) The letter contains the following language: “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 continue to report it to the credit reporting agencies
as unpaid.” (Id.) The same language appears in a letter dated July 12, 2017, that MCM sent to
Ms. Adkins. Ms. Adkins’ letter lists a balance of $849.73 and offers “payment options” with a
40% discount for paying the reduced amount due in full by August 11, 2017, a 20% discount for
paying the reduced amount due in six monthly payments, with the first payment due by August
11, 2017, or “Monthly Payments As Low As: $50 per month.” (Adkins Letter, att’d as Pl.’s Ex.
A) (Document 62-1.)
Both parties have submitted motions for summary judgment, which are fully briefed and
ripe for ruling.
STANDARD OF REVIEW
The well-established standard in consideration of a motion for summary judgment is that
“[t]he court shall grant summary judgment if 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)–(c); see also Hunt v. Cromartie, 526 U.S. 541, 549 (1999); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Hoschar v.
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Appalachian Power Co., 739 F.3d 163, 169 (4th Cir. 2014). A “material fact” is a fact that could
affect the outcome of the case. Anderson, 477 U.S. at 248; News & Observer Publ’g Co. v.
Raleigh-Durham Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). A “genuine issue” concerning
a material fact exists when the evidence is sufficient to allow a reasonable jury to return a verdict
in the nonmoving party’s favor. FDIC v. Cashion, 720 F.3d 169, 180 (4th Cir. 2013); News &
Observer, 597 F.3d at 576.
The moving party bears the burden of showing that there is no genuine issue of material
fact, and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp.,
477 U.S. at 322–23. When determining whether summary judgment is appropriate, a court must
view all of the factual evidence, and any reasonable inferences to be drawn therefrom, in the light
most favorable to the nonmoving party. Hoschar, 739 F.3d at 169. However, the nonmoving
party must offer some “concrete evidence from which a reasonable juror could return a verdict in
his favor.” Anderson, 477 U.S. at 256. “At the summary judgment stage, the non-moving party
must come forward with more than ‘mere speculation or the building of one inference upon
another’ to resist dismissal of the action.” Perry v. Kappos, No.11-1476, 2012 WL 2130908, at
*3 (4th Cir. June 13, 2012) (unpublished decision) (quoting Beale v. Hardy, 769 F.2d 213, 214
(4th Cir. 1985)).
In considering a motion for summary judgment, the court will not “weigh the evidence and
determine the truth of the matter,” Anderson, 477 U.S. at 249, nor will it make determinations of
credibility. N. Am. Precast, Inc. v. Gen. Cas. Co. of Wis., 2008 WL 906334, *3 (S.D. W. Va. Mar.
31, 2008) (Copenhaver, J.) (citing Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986). If
disputes over a material fact exist that “can be resolved only by a finder of fact because they may
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reasonably be resolved in favor of either party,” summary judgment is inappropriate. Anderson,
477 U.S. at 250. If, however, the nonmoving party “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case,” then summary judgment should be
granted because “a complete failure of proof concerning an essential element . . . necessarily
renders all other facts immaterial.” Celotex, 477 U.S. at 322–23.
When presented with motions for summary judgment from both parties, courts apply the
same standard of review. Tastee Treats, Inc. v. U.S. Fid. & Guar. Co., 2008 WL 2836701 (S.D.
W. Va. July 21, 2008) (Johnston, J.) aff'd, 474 F. App’x 101 (4th Cir. 2012). Courts “must review
each motion separately on its own merits to determine whether either of the parties deserves
judgment as a matter of law,” resolving factual disputes and drawing inferences for the nonmoving
party as to each motion. Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (internal
quotation marks and citations omitted); see also Monumental Paving & Excavating, Inc. v.
Pennsylvania Manufacturers’ Ass’n Ins. Co., 176 F.3d 794, 797 (4th Cir. 1999).
DISCUSSION
The Plaintiffs argue that they are entitled to summary judgment because it is undisputed
that MCM violated Section 46A-2-128(f) of the WVCCPA by sending letters to class members
that did not contain the specific language required by that section. MCM argues that any violation
was the result of a bona fide error. 2 It contends that the violation was unintentional and that it
2 MCM also argues that the letters to the named Plaintiffs do not constitute violations because they were mailed to
attorneys’ offices rather than directly to the Plaintiffs, and that Mr. Short’s letter was not a collection attempt. MCM
presented the same arguments as a basis to oppose class certification, contending that the named Plaintiffs were not
typical or representative of the class. The Court rejected those arguments based on the case law, finding that § 128(f)
requires the statute of limitations disclosure in all communications, and that letters sent to an attorney as the debtor’s
agent or representative are not excused from compliance with the WVCCPA. The Court has incorporated the opinion
granting class certification and will not address those arguments herein.
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maintained procedures reasonably adapted to avoid the violation by monitoring changes in the law
and establishing a process for implementing corresponding changes to its collection activities.
The Plaintiffs argue that MCM cannot rely on the bona fide error defense under the facts of this
case, where fourteen employees were aware of the change to West Virginia law, including the
individuals tasked with implementing the change in MCM’s collection letter templates, yet they
neglected to make the changes.
MCM concedes that it mailed letters to class members with debt outside the applicable
statute of limitations without including the language required by Section 128(f) of the WVCCPA.
The only issue for the Court is whether either party is entitled to summary judgment with respect
to MCM’s bona fide error defense.
The WVCCPA provides that “If the…debt collector establishes by a preponderance of
evidence that a violation is unintentional or the result of a bona fide error of fact notwithstanding
the maintenance of procedures reasonably adapted to avoid any such violation or error,” the debt
collector is excused from any liability. W.Va. Code § 46A-5-101(8). The FDCPA contains a
similarly-worded provision, and the Fourth Circuit has enumerated the elements requiring a
defendant to show that “(1) it unintentionally violated the FDCPA; (2) the violation resulted from
a bona fide error; and (3) it maintained procedures reasonably adapted to avoid the violation.”
Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 389 (4th Cir. 2014). “The [FDCPA] is
the federal equivalent of the WVCCPA,” and the West Virginia Supreme Court has found that
decisions interpreting the FDCPA may be instructive in considering similar provisions of the
WVCCPA. Vanderbilt Mortg. & Fin., Inc. v. Cole, 740 S.E.2d 562, 568 (W. Va. 2013); see also
Fleet v. Webber Springs Owners Ass’n, Inc., 772 S.E.2d 369, 378 (W. Va. 2015). The West
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Virginia Supreme Court has also held that, as a remedial statute, “the WVCCPA should be
construed liberally in favor of the consumer.” Vanderbilt Mortg. & Fin., Inc., 740 S.E.2d at 568
(citing Dunlap v. Friedman's, Inc., 582 S.E.2d 841, 846 (W. Va. 2003)).
MCM argues that the WVCCPA’s bona fide error provision is satisfied if a defendant
demonstrates either that the violation was unintentional or that it was the result of a bona fide error
of fact notwithstanding the maintenance of procedures reasonably adapted to avoid the error. The
Court finds that the language of the statute and the interpretations of the similarly-worded FDCPA
provision 3 counsel otherwise, and that a debt collector must demonstrate that it maintained
procedures reasonably adapted to avoid the error or violation. The evidence is unclear as to
whether MCM’s violations were intentional or unintentional. It contends it did not intend to
violate the law and mistakenly failed to timely implement the WVCCPA amendment, but it
undisputedly drafted letters without the required language and mailed them to consumers with debt
outside the statute of limitations.
However, viewing the evidence in the light most favorable to MCM and assuming that the
violation was unintentional, the Court finds that MCM has not produced sufficient evidence that
it maintained procedures reasonably adapted to prevent this type of violation. Viewing the facts
in the light most favorable to MCM, it had knowledge of the change in law, and several employees
in the relevant departments communicated regarding the amendments to the WVCCPA in late
April 2017. Around the same time as the amendments, MCM altered its procedure for submitting
3 The FDCPA provision states that a debt collection is not liable if it “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.” 15 U.S.C. § 1692(k)(c). Although the WVCCPA provision separates
the intentionality element from the bona fide error element with “or” rather than “and,” the Court finds that the
maintenance of procedures element applies to both unintentional violations and bona fide errors of fact.
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change requests to Marketing to update communication templates.
An individual from the
Legal/Compliance department sent an email to Marketing describing the change in West Virginia
law and advising that the templates for letters to consumers with out-of-statute debt would need to
be revised. The email did not include the special form required by MCM’s newly-implemented
procedure. Marketing did not make the change or follow up on the email, and no one from
Legal/Compliance or any other department followed up until discovering the error months later.
The means by which Marketing was to receive requests to revise communications did not
change. The new procedure simply required use of a specific form, still to be submitted via email.
It is unclear how the compliance with that procedure eliminates the apparent error here: the email
recipients failed to take any action as a result of the email. Permitting Marketing to ignore a
change in the law unless it is submitted via a special form is hardly a procedure designed to avoid
violations or errors resulting from failure to implement legal changes.
MCM described its
procedure for communicating change requests, but it did not connect the dots to explain how that
procedure is designed to eliminate the risk of human error.
“It is clear that the quid pro quo in the FDCPA for forgiveness for human errors resulting
in violations of the Act is the maintenance of a system that will make such human errors rare.”
Webster v. ACB Receivables Mgmt., Inc., 15 F. Supp. 3d 619, 629 (D. Md. 2014) (finding that a
debt collector had failed to “demonstrate a robust, effective system designed to minimize the type
of error that occurred here.”) Courts look for redundant or fail-safe systems designed to catch an
error missed during the regular procedures by adding extra layers of review. MCM has presented
no evidence of procedures designed to limit the risk of human error, such as pre-scheduling
meetings at the time of submission of a change request, requiring follow-up by the individual
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submitting a change request, or systems for Legal/Compliance to monitor for compliance prior to
the effective dates of new legislation. Instead, MCM claims it implemented a new system
requiring use of a special form to prevent change requests from falling through the cracks, and
then blames its own failure to follow that system for the change request herein falling through the
cracks. Because this is not the type of error protected by the bona fide error defense, and MCM
has not presented evidence that would permit a reasonable jury to rule in its favor, the Court finds
that the Plaintiffs are entitled to summary judgment as to liability for the Count Two class claims.
CONCLUSION
Wherefore, after thorough review and careful consideration, the Court ORDERS that the
Plaintiffs’ Motion for Summary Judgment on Count Two (Document 62) be GRANTED and that
Defendant Midland Credit Management Inc.’s Motion for Summary Judgment (Document 66) be
DENIED. The Court further ORDERS that Count One and the individual WVCCPA claims be
DISMISSED pursuant to the Plaintiffs’ voluntary dismissal.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and to
any unrepresented party.
ENTER:
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April 10, 2019
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