Moorer v. Always Towing and Recovery Inc et al
Filing
65
ORDER signed by Judge Pamela Pepper on 9/5/2018 DENYING 56 Motion for Extension of Time to Answer, DENYING 45 Motion for Summary Judgment, DENYING 25 Motion to Dismiss. (cc: all counsel) (cb)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
MONIQUE L. MOORER,
Plaintiff,
v.
Case No. 16-cv-1504-pp
ALWAYS TOWING AND RECOVERY INC.,
ALL CITY RECOVERY, INC., and
GLOBAL LENDING SERVICES LLC,
Defendants.
ORDER DENYING JOINT MOTION FOR EXTENSION OF TIME
TO FILE ANSWER BY ALL CITY RECOVERY, INC. AND ALWAYS
TOWING AND RECOVERY, INC. (DKT. NO. 56), DENYING MOTION FOR
SUMMARY JUDGMENT BY ALL CITY RECOVERY, INC. AND ALWAYS
TOWING AND RECOVERY, INC. (DKT. NO. 45) AND DENYING MOTION TO
DISMISS BY GLOBAL LENDING SERVICES, LLC (DKT. NO. 25)
The defendants took steps to repossess the plaintiff’s car after she failed
to make payments under a contract. Dkt. No. 1. The plaintiff sued the two
towing companies, Always Towing and Recovery Inc. (Always Towing) and All
City Recovery, Inc. (All City), as well as the financer for the car loan, Global
Lending Services LLC (GLS); she alleged violations of the Fair Debt Collection
Practices Act and state law. Id. After the plaintiff filed an amended complaint,
dkt. no. 23, GLS filed a timely motion to dismiss, dkt. no. 24. Always Towing
and All City failed to timely file an answer or other response to the amended
complaint. Instead, they waited four months, then filed a motion for summary
judgment. Dkt. No. 45. Some forty-five days later, Always Towing and All City
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filed a motion asking the court to extend the time for them to answer or
otherwise respond to the amended complaint. Dkt. No. 56.
Because Always Towing and All City have not shown excusable neglect to
support their motion for extension of time, and because they did not support
their summary judgment motion with admissible evidence, the court will deny
both motions. The court also will deny GLS’s Rule 12(b)(6) motion to dismiss,
because the plaintiff has sufficiently alleged four claims against GLS.
I.
Procedural History
When the plaintiff filed the original complaint, the named parties
consented to the magistrate judge hearing and deciding the case. Magistrate
Judge William Duffin conducted a Rule 16 scheduling conference on January
10, 2017. Dkt. No. 17. He ordered the parties to amend their pleadings no later
than February 10, 2017; to file summary judgment motions no later than June
23, 2017; and to conclude discovery by December 18, 2017. Id.
On February 10, 2017, All City and Always Towing filed a third-party
complaint against A1 Nationwide (A1), and a cross complaint against GLS. Dkt.
No. 21. The plaintiff amended her complaint that same day. Dkt. No. 23. On
February 24, 2017, GLS filed a motion to dismiss the amended complaint, dkt.
no. 25, and an answer with a counterclaim against Always Towing and All City,
dkt. no. 27. Although Always Towing and All City did not answer the plaintiff’s
amended complaint, they filed an answer to GLS’s counterclaim on March 3,
2017. Dkt. No. 27.
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Always Towing and All City waited just fourteen days before moving for
default against A1, the third-party defendant. Dkt. No. 36. At that point, the
clerk’s office reassigned the case to Judge Pepper.
On June 23, 2017, All City and Always Towing filed their motion for
summary judgment. Dkt. No. 45. The plaintiff responded to the motion on July
22, 2017, raising the issue of the defendants’ default. Dkt. No. 48. All City and
Always Towing waited six weeks, then—in response to the plaintiff’s summary
judgment arguments—moved for an extension of time to file their answer. Dkt.
No. 56. The plaintiff opposed the motion for extension of time. Dkt. No. 58.
II.
Joint Motion for Extension of Time to File Answer by All City and
Always Towing (Dkt. No. 56)
All City and Always Towing cite Federal Rule of Civil Procedure 6(b) in
support of their request that the court extend their deadline to answer or
otherwise respond. That rule says that a court may extend deadlines “for good
cause,” “on motion made after the time has expired if a party failed to act
because of excusable neglect.” Rule 6(b)(1)(B). The moving party has to show
that its neglect was excusable. Simstad v. Scheub, 816 F.3d 893, 899 (7th Cir.
2016). A court’s decision about excusable neglect is “‘at bottom an equitable
one, taking into account all relevant circumstances . . . includ[ing] . . . the
danger of prejudice . . . the length of the delay . . . the reason for the delay,
including whether it was within the reasonable control of the movant, and
whether the movant acted in good faith.’” Id. (quoting Pioneer Investment
Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 394 (1993)). In at least
one case, the Seventh Circuit has found an attorney error to constitute
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excusable neglect where the attorney acted in good faith and the error did not
prejudice the opposing party. See Crue v. Aiken, 370 F.3d 668, 680–81 (7th
Cir. 2004).
Always Towing and All City assert that counsel, Attorney Michael S.
Maistelman, failed to answer the amended complaint because he did not
receive notification that the plaintiff had filed it. Dkt. No. 56 at ¶10. The
defendants explain that, on February 10, 2017, Attorney Maistelman was
trying to electronically file the third-party complaint against A1 and the crosscomplaint against GLS. Id. at ¶6. They indicate that Maistelman “encountered
difficulties and/or malfunctions with the electronic case filing system,” which
required him to seek assistance from one of the case administrators in the
clerk’s office. Id. at ¶8. The defendants assert that the plaintiff filed her
amended complaint while Maistelman was involved in this process. Id. at ¶9.
Maistelman submitted an affidavit, attesting that while he was working with
the clerk’s office, he received “many emails from ECF and the Eastern District,”
but that he did not receive one telling him that the plaintiff had filed the
amended complaint. Dkt. No. 56 at ¶6. He stated that he searched both his
official firm email box and his back-up email box. Id. at ¶¶5, 9.
The docket indicates that the amended complaint was served
electronically at 2:30 p.m. CST on February 10, 2017 on Michael Rud
(michaelrud86@gmail.com) and Michael S. Maistelman
(msm@maistelmanlaw.com, mmaistelman@gmail.com). Maistelman avers that
Attorney Rud left the firm the month before the plaintiff filed the amended
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complaint, dkt. no. 57 at ¶4; the defendants stated as much in their motion to
substitute counsel, filed on February 23, 2018, dkt. no. 63 at 2.
Based on these facts, the court will accept the defendants’ assertion that
Maistelman may not have received notice on February 10, 2017 that the
plaintiff had amended her complaint. But that does not explain why the
defendants did not file an answer within the following twenty-one days. On
February 24, 2017—fourteen days after the plaintiff filed the amended
complaint, and a week before answers were due—GLS filed a motion to dismiss
the amended complaint, dkt. no. 25, along with a supporting brief, dkt. no. 26.
The docket shows that this motion was electronically served on Maistelman at
both of his email address at 4:55 p.m. on February 24, 2017. Id. This should
have given defense counsel a heads-up that the plaintiff had amended the
complaint, and the defendants do not address this in their motion or their
reply.
It was another five months and two weeks before the defendants filed
their motion for an extension of time to answer. During that time, the plaintiff
responded to GLS’s motion to dismiss the amended complaint, dkt. no. 32; the
docket shows electronic service of that document on Maistelman at 10:02 p.m.
on March 17, 2017, id. Again, this should have given the defendants a headsup that there was something they ought to check into. On March 20, 2017,
Attorney Elizabeth Shimek filed a notice of appearance for the defendants. Dkt.
No. 34. According to her affidavit, however, she had begun reviewing “the file”
on March 3, 2017; she indicates that “the file” “did not include a copy of the
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Amended Complaint.” Dkt. No. 60 at ¶4. She concedes that she “briefly
reviewed Global Lending Services, LLC’s Motion to Dismiss the Amended
Complaint” and noted that she needed to print out a copy, but “trusted that the
case was up to date and no new filings were otherwise due, as I had been told
by Atty. Maistelman.” Id. On the date she filed her appearance, she obtained
access to CM/ECF, but “did not check to see whether an Answer was ever filed
for the Amended Complaint, as I was under the impression that the case was
up to date when I was introduced to it in late February 2017.” Id. at ¶5.
Somewhat ironically, on March 24, 2017, the defendants filed a motion
to hold the third-party defendant A1 in default because A1 missed the March 6,
2017 deadline for filing an answer. Dkt. No. 36. In the motion, the defendants
referred to A1’s failure to file an answer—eighteen days after the deadline—as
“blatant disregard for the deadlines set by Rule 12(a) . . . .” Dkt. No. 36 at 3. In
their supporting brief, the defendants argued that
A1’s failure to promptly tender the defense of its suit to its insurer
and appoint counsel moves beyond the simple “inadvertence,
mistake, or carelessness” or “intervening circumstances beyond
the party’s control”. Chorosevic v. MetLife Choices, 600 F.3d 934,
946 (8th Cir. 2010) (quoting Pioneer Inv. Services Co. v. Brunswick
Associates Ltd. Partnership, 507 U.S. 380, 392 (1993)). Instead, A1
blatantly disregarded the Federal Rules of Civil Procedure, and
therefore its answer should be struck and default judgment should
be entered in Always’ favor.
Dkt. No. 37 at 3.
Finally, in late June 2017, Attorney Shimek began drafting the
defendants’ summary judgment motion. Dkt. No. 60 at ¶6. She says that she
focused on, and printed out, a copy of the amended complaint, but “did not
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notice that Always and All City never answered the Amended Complaint, as so
many things had happened in the intervening months in the case.” Id. The
defendants filed the motion for summary judgment on June 23, 2017; on the
very first page, they stated that they were seeking summary judgment “in all
claims asserted against them by Plaintiff, Monique L. Moorer, in the Amended
Complaint.” Dkt. No. 45 at 1 (emphasis added). Despite this, Shimek says that
it was not until she reviewed the plaintiff’s response to the summary judgment
brief in July 2017 that she checked the docket and realized that the defendants
had failed to answer. Id. at ¶7. This prompted Maistelman’s investigation into
his email boxes. Id.
The plaintiff filed her opposition to the defendants’ motion for summary
judgment on July 22, 2017. Dkt. No. 48. Although Shimek says this document
finally alerted the defendants to the fact that they had not answered the
amended complaint, they did not file their motion for an extension of time to
answer until August 7, 2017—over two weeks later. Dkt. No. 56.
So—even with the assumption that Maistelman did not get notice of the
amended complaint on the day the plaintiff filed it, there were at least three
events that should have alerted the defendants that it had been filed: GLS’s
motion to dismiss the amended complaint, the plaintiff’s response to that
motion and the defendants’ review of the docket while preparing the summary
judgment motion. And while the defendants argue strenuously that their sixmonth delay was not a big deal, they were quick to pounce on A1’s eighteenday delay in filing their own motion for default.
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The defendants argue that mistakes in pleading should not be used as
a game of “gotcha,” and they cite Edelman v. Belco Title & Escrow, LLC, where
the Seventh Circuit Court of Appeals rejected a plaintiff’s argument that failure
to answer a fourth amended complaint meant that the defendant admitted all
allegations. Edelman, 754 F.3d 389, 393 (7th Cir. 2014). Edelman does not
help the defendants.
In Edelman, the defendant had answered a second amended complaint
before the magistrate judge granted the defendant’s motion to dismiss (while
giving the plaintiff leave to file another amended complaint). Edelman, 754 F.3d
at 394. In quick succession, the plaintiff filed third and fourth amended
complaints. Id. Without responding to the fourth amended complaint, the
defendant moved for summary judgment. Id. The defendant moved for an
extension of time once the plaintiff pointed out the default, and the magistrate
judge granted the extension of time. Id. The magistrate judge, however, granted
the defendant’s summary judgment motion without waiting for the defendant
to file the answer. Id. On appeal, the plaintiff argued that the judge should
have found that the defendant had admitted all allegations at the summary
judgment stage. Id. The Seventh Circuit noted that the defendant had
answered the very same allegations in the second amended complaint—the
fourth amended complaint simply added allegations against other defendants
who had since dropped out. Id. The court reasoned that under those
circumstances, the fourth amended complaint essentially reverted to the one
that already had been answered. The court determined that if the purpose of a
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responsive pleading was to put the plaintiff on notice of what the defendant
admitted or contested, then the previous answers accomplished that purpose.
Id. at 395.
Unlike the fourth amended complaint in Edelman, which asserted the
same claims as the prior complaints, the amended complaint in this case
added a new claim (conversion) against these two defendants. The defendants
did not respond to the amended complaint—specifically, to that new claim—
until they filed a summary judgment motion six months later, and a motion for
summary judgment is not a “responsive pleading.” See Edelman, 754 F.3d at
394–95.
The defendants also cite Pepper v. Vill. of Oak Park, 430 F.3d 805 (7th
Cir. 2005), for their proposition that the Seventh Circuit has found situations
like this one to constitute excusable neglect. Pepper is even less persuasive
than Edelman. In Pepper, the district court allowed the plaintiff to file an
amended complaint after the defendants had filed for summary judgment and
the plaintiff had responded. Pepper, 430 F.3d at 812 n.3. The plaintiff appealed
the district court’s grant of the defendant’s motion for summary judgment,
then argued in the Seventh Circuit that because the defendant had not
answered the amended complaint, her allegations should be deemed admitted.
Id. at 812. The plaintiff also argued that if the appeals court decided to remand
the case to the district court, she would not oppose the defendant’s request to
file an answer. Id. The Seventh Circuit concluded that the plaintiff’s argument
was an attempt to “prolong a losing case beyond its natural life.” Id. Nowhere in
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this decision did the Seventh Circuit discuss excusable neglect, or even allow
the defendant to file an answer. It didn’t need to—it affirmed the summary
judgment ruling in favor of the defendant. For the defendants in this case to
argue that Pepper supports a finding of excusable neglect borders on
disingenuous.
The defendants have not shown excusable neglect. Attorney Maistelman
knew of the deadline for filing pleadings (because he filed his own third-party
complaint on that same day), had several hints that an amended complaint
had been filed (such as GLS’s motion to dismiss that very amended complaint),
and he filed his own motion for default against A1 (calling A1’s much shorter,
eighteen-day delay “inexcusable”). Attorney Maistelman and co-counsel filed
their summary judgment motion with respect to the amended complaint, and
failed to take immediate action once the plaintiff pointed out the default in
opposition to summary judgment. The length of the delay and the reasons cited
simply don’t add up to excusable neglect, and the court cannot find prejudice
where the dispositive motion deadline has already passed. The court will deny
the motion for extension of time.
III.
Motion for Summary Judgment by All City and Always Towing
(Dkt. No. 45)
Because these two defendants did not answer the amended complaint,
the court deems the allegations in that complaint admitted, and must deny the
defendants’ summary judgment motion. But even if they had filed an answer,
the defendants have not properly supported their motion.
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In their motion for summary judgment, the defendants did not claim that
the plaintiff was not able to produce admissible evidence to support particular
facts. Fed. R. Civ. P. 56(c)(1)(B). Rather, the defendants asserted that
affirmative evidence negated the plaintiff’s claims. They filed exhibits A (“Motor
Vehicle Consumer Simple Interest Installment Sale and Security Agreement”),
B (“Notice of Right to Cure”), C (“Collateral Recovery Agreement”), D (“A1
Nationwide, LLC Repossession Agent Agreement”), E (“Order to Repossess), and
F (“Vehicle Release Form”). Dkt. Nos. 47 through 47-5. But they did not file an
affidavit or other declaration to authenticate those documents. Under Rule
56(c)(4), an affidavit or declaration used to support a motion must be made on
personal knowledge, set out facts that would be admissible in evidence, and
show that the affiant or declarant is competent to testify on the materials
stated.
When the plaintiff pointed out this deficiency, the defendants argued that
they had filed the summary judgment motion “to preserve” their rights,
because the court’s scheduling order set the summary judgment deadline
almost six months prior to the close of discovery, and “nearly seven months
prior to the default close of summary judgment motions, set at thirty days after
the close of discovery (January 17, 2018).” Dkt. No. 52 at 2. The implication is
that the court (Judge Duffin), with no input from the parties, set an artificially
and unreasonably early summary judgment deadline. In their Rule 26(f) plan,
however, the parties did not propose a deadline for filing summary judgment
motions. Dkt. No. 15. While they told Judge Duffin that they expected to
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complete discovery by September 18, 2018, id. at 2, 4, and that they
anticipated filing cross-motions for summary judgment, id. at 4, they did not
ask the court to set a dispositive motions deadline. The minutes from the
January 10, 2017 Rule 16 conference show that the parties discussed the
timing for filing summary judgment motions—counsel for GLS proposed filing
dispositive motions “early, before the close of discovery.” Dkt. No. 16 at 3.
Judge Duffin proposed a June 1, 2017 deadline; counsel for the plaintiff asked
for a deadline toward the end of June, and Attorney Maistelman, on behalf of
Always Towing and All City, indicated that that “work[ed] for him.” Id. That is
when Judge Duffin set the June 23, 2016 summary judgment deadline. Id.
Further, although Judge Duffin gave the parties (at the defendants’
suggestion and agreement) five and a half months to file summary judgment
motions, Always Towing and All City never asked him to extend the summary
judgment deadline—not after they filed their third-party complaint against A1,
not after A1 asked for an extension of time to answer, not after they filed their
motion for default against A1. If, as the defendants imply, they did not have
enough time to prepare a properly-supported motion for summary judgment,
they could have asked Judge Duffin to extend the deadline. For the defendants
to now argue that they could not properly support the motion because the
court did not give them enough time to do so is, again, borderline
disingenuous.
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The court denies the defendants’ motion for summary judgment, because
it deems the facts in the amended complaint admitted and because the
defendants did not properly support the motion.
IV.
Motion to Dismiss by GLS (Dkt. No. 25)
GLS timely filed a motion to dismiss the amended complaint under Rule
12(b)(6). Dkt. No. 25. The plaintiff alleged the following four state law claims
against GLS in the amended complaint: (1) illegal repossession in violation of
chapter 425 (Second Claim), illegal debt collection in violation of chapter 427
(Third Claim), civil theft (Fourth Claim) and conversion (Fifth Claim).
A.
Motion to Dismiss Standard
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint,
not the merits of the suit. Autry v. Nw. Premium Servs., Inc., 144 F.3d 1037,
1039 (7th Cir. 1998). The complaint must comply with Rule 8(a) by providing “a
short and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). A court will grant a motion to dismiss only if a
complaint lacks enough facts to “state a claim for relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The court accepts
as true the allegations raised by the plaintiff unless the allegations are
“supported by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662,
663 (2009). “A claim has facial plausibility when the pleaded factual content
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id., 556 U.S. at 678 (citing Twombly, 550 U.S. at
556).
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B.
The Amended Complaint
1.
Jurisdiction
The court has federal question jurisdiction over the case under 15 U.S.C.
§1692k(d) and 28 U.S.C. §1331, because the plaintiff alleged a violation of the
Fair Debt Collection Practices Act against Always Towing and All City, and
alleged that GLS was responsible for those violations. The plaintiff seeks
declaratory relief under 28 U.S.C. §§2201 and 2201. The court may exercise
supplemental jurisdiction over the state law claims under 28 U.S.C. §1367.
2.
Facts
The plaintiff purchased a 2012 Ford Fusion car from Van Horn Motors of
Milwaukee for $23,074.88 on June 7, 2014. Dkt. No. 23 at ¶9. She paid $2,000
down on the car and financed the balance via a Retail Installment Sales
Contract (RISC). Id. GLS, the assignee of the RISC, provided financing for the
purchase of the car. Id. at ¶10. The financing included the following terms:
Amount Financed: $14,661.40
Finance Charge: $6,413.48
Amount of Monthly Payments: $439.06, monthly beginning July
22, 2014
Number of Monthly Payments: 48
Annual Percentage Fee: 18.65%
Id.
The plaintiff made timely payments from July 2014 through April 2015,
often paying early. Id. at ¶13. She fell behind on her payments after she lost
her job at the end of December 2014. Id. at ¶14. The plaintiff informed GLS
that she had lost her job and made periodic payments for some months after
that (as much as she could, when she could). Id. at ¶15.
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The plaintiff missed her first payment on May 22, 2015 in the amount of
$439.06. Id. at ¶16. On June 26, 2015, GLS sent the plaintiff a notice of right
to cure and notice of repossession of motor vehicle, alleging that she was in
default for non-payment of amounts due and notifying her that the last day for
payment was July 12, 2015. Id. at ¶17. According to the plaintiff, the notice of
right to cure default did not meet the requirements of §§425.104 and 425.105,
because (1) she was not in default at that point and (2) the notice did not
itemize the delinquency charge. Id. at ¶18.
The plaintiff made two more payments to GLS: one on June 27, 2015 in
the amount of $160, and another on June 30, 2015 in the amount of $150. Id.
at ¶22. In early August 2015, the plaintiff told GLS that she would begin new
employment on September 27, 2015 and could rely on regular pay to get
caught up. Id. at ¶23. She promised to make a payment of $150 as soon as
possible and another payment of $175 shortly thereafter. Id. The plaintiff
understood from her phone call with “Brian” from GLS that it agreed with her
plan to make those payments in August. Id. at ¶24. She made a $150 payment
on August 4, 2015 and a $175 payment on August 19, 2015.
GLS claims it sent the plaintiff a notice of right to cure and notice of
repossession on August 6, 2015; the plaintiff alleges that she did not receive
the notice. Id. at ¶27. Again, the plaintiff alleges that the notice of right to cure
and the notice of repossession were defective under Wisconsin law because
they did not itemize the delinquency charges under Wis. Stat. §425.104 and
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because GLS had no present right to repossess the car at any time. Id. at ¶¶28,
29.
The plaintiff made a $250 payment on or about September 14, 2015. Id.
at ¶30. When the plaintiff called GLS around October 5, 2015, it gave her the
wrong information about how much was owed on the account. Id. at ¶31. GLS
said the plaintiff needed to pay $432.18 and that she was only two payments
behind. Id. The plaintiff explained that she did not have that much money in
her account, and that she would have to move money to make an online
payment. Id. Later that day, she made a $300 payment to GLS. Id. at ¶33.
On or about October 13, 2015, a representative of one of the defendants,
acting on behalf of GLS, called the plaintiff’s son and told him that they needed
a call from the plaintiff and they were looking for her car. Id. at ¶34. That same
day, one of the defendants, acting on behalf of GLS, called the plaintiff’s sister
about the plaintiff’s car. Id. at ¶35.
On November 10, 2015, while the plaintiff was trying to make an online
payment, GLS told the plaintiff that it would no longer accept payment online,
or by credit or debit card, or by bank transfer; because the car was “up for
repossession,” and GLS said it needed certified funds via Western Union or
Moneygram. Id. at ¶36. The plaintiff alleged that either of these methods would
cost her more money. Id. In response to the GLS representative’s inquiry about
how quickly the plaintiff could make the next payment, the plaintiff responded
that she would pay another $500 on Friday, November 13, 2015; GLS agreed to
that plan. Id. at ¶38. When she hung up the call with GLS, the plaintiff drove
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directly to Western Union and made a payment of $525. Id. at ¶39. She made
that payment at 11:32 a.m. Id. at ¶40.
The plaintiff returned to work on November 10, 2015, and called GLS to
tell it about the payment and to provide the Western Union confirmation
number. Id. at ¶41. She told GLS that she was worried about the repossession;
GLS assured the plaintiff that it had put the repossession on “hold” and that
she did not “need to worry about them picking it up.” Id. at ¶42. After the
plaintiff made the payment, however, and before she had finished her shift at
work, Always Towing and All City repossessed her car from the parking lot of
her job. Id. at ¶43. They took the plaintiff’s car to All City and Always Towing’s
principal business address at 3700 W. Wells, Milwaukee, Wisconsin. Id. at ¶44.
At the end of the work day, the plaintiff discovered her car was missing. Id. at
¶47. She panicked, thinking that her car had been stolen (because she had
made the payment and GLS had told her that the repossession had been
canceled). Id. at ¶48. The plaintiff became extremely upset and started crying;
she also experienced humiliation because she had just started a new job, and
she had to explain to new co-workers why her car had been towed. Id. at ¶49.
When she got home from work on November 10, 2015, the plaintiff
immediately called GLS. Id. at ¶50. She was told that she would need to make
the July and August payments and would have to talk to “Tara” at GLS the
next day. Id. at ¶50. On November 11, 2015, the plaintiff called GLS and spoke
to Tara, who told her that the car had been repossessed at 11:43 a.m. Id. at
¶51. The plaintiff explained it was impossible, because she had driven the car
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to Western Union at that time. Id. The plaintiff alleges that Tara was rude, and
told the plaintiff that the repossession was legal and that the car was ready for
auction. Id. Tara told the plaintiff to speak with Jason at GLS about the “legal”
repossession. Id.
Although the plaintiff tried called Jason several times on November 11
and 12, 2015, she was told that Jason was not available. Id. at ¶52. On
November 11, 2015, Tara from GLS told the plaintiff she would need to pay an
additional $1,010 via Western Union to get the car back. Id. at ¶53. The
plaintiff borrowed the money to redeem the car. Id. at ¶54. On the morning of
November 11, 2015, at 11:44 a.m., she made the payment to GLS in the
amount of $1,010. Id. at ¶55. Tara then told the plaintiff that despite the
payment of $1,010, the plaintiff could not get her car back because it was
going to be auctioned; Tara said the plaintiff’s option was to get her money
refunded. Id. at ¶57. The plaintiff asked why she could not have an opportunity
to remedy the situation; Tara responded she had given the plaintiff the wrong
payment amount. Id. at ¶58. Tara told the plaintiff she would have to pay an
additional $165. Id. at ¶59. The plaintiff said she was willing to make that
payment. Id.
The plaintiff made her third payment in three days on November 12,
2005. Id. at ¶60. Tara told the plaintiff the car was at All City at 3700 W. Wells.
Id. at ¶61. GLS never sent a notice of right to redeem her car or anything
telling the plaintiff about the right and/or process to redeem or provide a
statement of fees and costs associated with the repossession. Id. at ¶62. On
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November 12, 2015, the plaintiff went to 3700 W. Wells, which had signs that
said Always Towing. Id. at ¶63. The car was in the back of the lot, id. at ¶64,
and the person at All City or Always Towing demanded an additional $135 for
her to get the car back, id. at ¶65. The plaintiff paid the $135 and the
representative handed her a document from All City stamped “paid” dated
November 11, 2015. Id. at ¶65.
On or about November 12, 2015, GLS sent the plaintiff a notice of plan to
sell property and stated the car would be sold on “11-30-15 or after.” Id. at
¶66. On December 1, 2015, GLS sent the plaintiff a notice of right to cure and
notice of repossession, telling the plaintiff that she was in default and
threatening to repossess her car if the amount due was not paid by December
19, 2015. Id. at ¶71. At that time, the plaintiff was not in default. Id. at ¶72.
The plaintiff alleges that the notice of right to cure did not meet the statutory
requirements because the plaintiff was not in default, and because it did not
itemize the delinquency charge. Id. at ¶73. It also misstated the amount due to
GLS and threatened action that could not be taken. Id. at ¶¶73, 74.
C.
Grounds for Dismissal
1.
Whether the notice of right to cure was valid, such that GLS
had a right to repossess the plaintiff’s car
GLS asserts that all four of the plaintiff’s claims against it—illegal
repossession, illegal debt collection, civil theft and conversion—turn to some
degree on the plaintiff’s argument that the notice of right to cure was invalid,
and thus that GLS had no legal right to repossess the plaintiff’s car. GLS
asserts that because the notice of right to cure complied with the requirements
19
of the Wisconsin Consumer Act (WCA), the court must dismiss all four claims.
Dkt. No. 25 at 2.
In Wisconsin, no merchant may take possession of collateral unless the
merchant believes the plaintiff is in default (Wis. Stat. §425.103), provides
notice of the right to cure (Wis. Stat. §425.104), and waits to repossess until
the expiration of fifteen days after it has given notice of the right to cure (Wis.
Stat. §425.105(1)). The purpose of the notice of right to cure “is to give the
customer an opportunity, before the merchant accelerates the obligation, to
restore his or her loan to a current status and thus preserve the customermerchant relationship.” Rosendale State Bank v. Schultz, 123 Wis. 2d 195, 199
(Ct. App. 1985).
The plaintiff first argues that she was not in default on the loan, as
default is defined by Wisconsin law. The WCA defines default under Wis. Stat.
§425.103(2)(a) as follows:
(2) “Default,” with respect to a consumer credit transaction,
means without justification under any law:
(a)
With respect to a transaction other than one pursuant to
an open-end plan; if the interval between scheduled
payments is two months or less, to have outstanding the
amount exceeding one full payment which has remained
unpaid for more than 10 days after the scheduled or
deferred due date
....
Wis. Stat. §425.103(2)(a).
The exhibits to the motion to dismiss show that the plaintiff’s scheduled
payments were due on the 22nd of each month. Dkt. No. 26-1 at 1. The
plaintiff paid every month from July 2014 through April 2015. Dkt. No. 23 at
20
¶13. She missed her first payment on May 22, 2015. Id. at ¶16. The statute
provided she was not in default until ten days after she had amount
outstanding that exceeded one full payment. She had one full payment
outstanding from May 22, 2015 through June 22, 2015; once the June 2015
payment became due, she had an amount outstanding that exceeded one full
payment. She had that amount outstanding for ten days as of July 2, 2015.
The date on GLS’s notice of right to cure, however, is June 26, 2015. Dkt. No.
13-1.
The Wisconsin Court of Appeals has held that a creditor had no right to
repossess the car when the creditor prematurely sent the notice of default.
Indianhead Motors v. Brooks, 297 Wis. 2d 821, 827 (Ct. App. 2006). Finding
the statute “clear and unambiguous,” the Court of Appeals ruled that where
payments are scheduled less than two months apart, a consumer is in default
when an amount greater than one full payment remains unpaid for over ten
days. Id. at 825. Because the plaintiff in Brooks missed her first payment on
September 10, the amount became greater than one full payment on October
10. Id. Accordingly, she was in default when the larger balance remained
unpaid for more than a ten-day period (beginning on October 10). Id. The court
of appeals concluded that a creditor failed to give notice pursuant to Wis. Stat.
§425.104 where it did not meet the timing requirements of Wis. Stat.
§525.104(1) because it had sent the notice of right to cure the default prior to
the expiration of the ten-day period. Id.
21
Under the reasoning of Indianhead, the plaintiff in this case has stated a
claim that she was not in default when GLS sent the June 26, 2015 notice of
right to cure. See also Credit Acceptance Corp. v. Kong, 344 Wis. 2d 259, 265
(Ct. App. 2012) (holding that notice was invalid when sent after two missed
payments but before the ten-day period expired).
GLS argues that the June 26, 2015 notice isn’t really relevant, however,
because it took possession of the vehicle under the August 6, 2015 notice, by
which time the plaintiff was in default. Dkt. No. 40 at 10. The plaintiff responds
that the August 6, 2015 notice was invalid, because it violated Wis. Stat.
§425.104. That statute requires that any merchant who believes a customer is
in default provide must written notice of the alleged default with the following
information:
Any notice given under this section shall contain the name,
address and telephone number of the creditor, a brief identification
of the consumer credit transaction, a statement of the nature of
the alleged default and a clear statement of the total payment,
including an itemization of any delinquency charges or other
performance necessary to cure the alleged default, the exact date
by which the amount must be paid or performance tendered and
the name, address and telephone number of the person to whom
any payment must be made, if other than the creditor.
Wis. Stat. §425.104(2) (emphasis added).
The plaintiff argues that the August 6, 2015 notice did not separately
itemize the delinquency charges. On the line next to “Delinquency Charges:,”
someone handwrote, “late charges.” In the field for the amount, someone wrote,
“30.00.” Dkt. No. 13-2. GLS responds the statute does not state that a notice
must separately list each delinquency charge; it simply requires the creditor to
22
itemize delinquency charges, plural. Dkt. No. 40 at 2. According to GLS, the
legislature’s failure to require “itemization of each delinquency charge” means
that it did not intend to require an individual itemization for each charge.
The court does not find the statute’s language as “plain” as GLS does.
The fact that the legislature used the word “itemization” suggests that it
expected something more than a lump sum amount. The Oxford Dictionary
defines “itemize” as presenting a list of individual items or the process of
breaking down a whole into its constituent parts.
https://en.oxforddictionaries.com/definition/itemize. On the other hand,
perhaps the legislature used the word “itemize” because it meant the creditor to
list delinquency charges separately from late fees or other kinds of charges. The
point is that there is an issue to be decided here.
GLS also argues that the form notice provided by the Wisconsin
Department of Financial Institutions (DFI) supports its interpretation, because
it provides only one line for delinquency charges. Dkt. No. 40 at 5. The form,
which appears on the DFI website at https://www.wdfi.org/wca/forms.htm,
and which GLS attached to its motion, dkt. no. 26-3, states as follows:
You may cure the default on or before {insert date that is 15
calendar days from the date of mailing} by:
□Paying:
Late Payment {insert due date} $_____________________
Late Payment {insert due date} $_____________________
Late Payment {insert due date} $_____________________
Delinquency Charge
$_____________________
$_____________________
Total
$_____________________
Dkt. No. 26-3.
23
The court again disagrees that the DFI form is dispositive.1 The form
seems to assume that there will be only one delinquency charge, and ignores
the reality that in many cases, by the time the borrower is in default, more
than one delinquency charge has accrued. Perhaps the drafters of the form
interpreted the statute the way GLS urges this court to do, and assumed that
the legislature wanted the creditor to list the sum of all delinquency charges.
But the fact that the form drafters made that assumption (and we don’t know
that they did) does not mean that that is what the legislature meant. Again, the
complaint raises an issue for decision.
GLS also argues that the only thing that really matters is that the August
6, 2015 notice “fulfilled the purpose of Wis. Stat. § 425.104(2), which is for the
customer to have ‘knowledge’ of her default.” Dkt. No. 40 at 5. In fact, neither
notice provided the plaintiff with clear information about how much she owed
in delinquency charges. The car purchase contract provided for a $10 fee for
GLS argues that because it “acted in conformity” with the DFI form, “Wis.
Stat. §426.104(4) provides the creditor with a safe harbor from any penalties.”
Dkt. No. 26 at 2. First of all, GLS neglects to mention that it used a form
similar to, but not identical to, the DFI’s sample form. Compare Dkt. Nos. 26-2,
26-3—the GLS form has only two lines for late payments, has a field for
“Delinquency Charges,” plural; has a category entitled “Other Charges,” and
lists “AMOUNT NOW DUE,” rather than “Total.” Second, §426.104(4) “creates a
safe harbor for people who act in ways approved by the Administrator of the
Department of Financial Institutions . . . .”
https://docs.legis.wisconsin.gov/statutes/statutes/426/I/104. The fact that a
creditor uses the DFI form does not mean that the DFI administrator approved
the way the creditor used it, nor does it trump the creditor’s obligation to
comply with the statute.
1
24
each late payment.2 Dkt. 26-1 at 1. The June 26, 2015 notice lists two late
payments (May 22, 2015 and June 22, 2015), but lists delinquency charges of
only $10.00. Dkt. No. 13-1 at 1. The August 6, 2015 notice lists two late
payments (June 22, 2015 and July 22, 2015), but lists delinquency charges of
$30.00. Dkt. No. 13-2 at 1. It appears that one notice informed the plaintiff
that she owed a month’s worth of late fees for two late payments, and the other
told her that she owed three months’ worth of late fees for two late payments,
one of which had been listed on the first notice. So there is a question as to
whether the August 6, 2015 notice did, as GLS argues, give the plaintiff
“knowledge” of her default.
There are questions, then, about whether the August 6, 2015 notice was
valid. If it was not, GLS was not legally entitled to repossess the car. If it was
not entitled to repossess the car, the plaintiff’s claims have legs
When the court views all of this in the light of the Rule 12(b)(6) standard,
the court does not find that the plaintiff has failed to state the second, fourth
and fifth claims. Will the claims survive summary judgment? If so, will the
plaintiff prevail on the claims before a jury? The answers to those questions are
irrelevant at the Rule 12(b)(6) stage. All that is relevant is that the plaintiff has
stated cognizable claims.
The Truth in Lending Disclosures box on p.1 of the Motor Vehicle Sale and
Security Agreement states “Late Charge. If a payment is not paid on or before
the 10th day after its due date, I will be charged $10.00 or 5% of the unpaid
amount, whichever is less.” Dkt. No. 26-1 at 1.
2
25
2.
Whether the fact that GLS had a valid security interest gave it
an independent right to repossess the plaintiff’s car.
Next, GLS argues that it had a valid security interest in the car, so it
doesn’t matter whether the notice of right to cure was ineffective; it had an
independent legal right to repossess. Dkt. No. 25 at 2. Specifically, GLS argues
that the plaintiff has no claim for civil theft if GLS had a valid security interest
in the car, and that even if the notice of right to cure was invalid, that did not
deprive GLS of its security interest, which defeats the plaintiff’s illegal debt
collection and conversion claims. Dkt. No. 26 at 13.
GLS does not state any case law in support of this argument. Rather, it
looks at the elements of the civil theft, conversion and illegal debt collection
causes of action. To state a claim for civil theft under Wis. Stat. §895.446, the
plaintiff must show that the defendant (1) “intentionally used, transferred or
retained possession of movable property of another,” (2) without the owner’s
consent to taking and carrying away the property, (3) knowing that the owner
did not consent, and (4) intending to deprive the owner permanently of the
property. Estate of Miller v. Storey, 378 Wis. 2d 358, 378 (2017). GLS argues
that because it had a valid security interest in the car, it had a lawful right to
take and carry away the car. Dkt. No. 26 at 14. This argument assumes away
Wisconsin’s laws on repossession. GLS points to no case that says that if a
creditor has a valid security interest, it can repossess without complying with
Wisconsin’s laws governing the repossession process.
GLS makes a similar argument with regard to the plaintiff’s conversion
claim. To state a claim for conversion, the plaintiff must show that the
26
defendant (1) exercised intentional control or taking of property belonging to
another, (2) without the owner's consent, (3) resulting in serious interference
with the rights of the owner to possess the property. Storey, 378 Wis. 2d at
379. GLS argues that because it had a security interest, it could not have
taken the car “without lawful authority.” Dkt. No. 26 at 14. This argument
ignores the fact that the security interest alone doesn’t make the repossession
lawful; GLS still had to comply with the laws governing the process of
repossession.
With regard to illegal debt collection, Wis. Stat. §§427.104(1)(h) and (j)
provide that a debt collector may not:
(h)
Engage in other conduct which can reasonably be expected
to threaten or harass the customer or a person related to the
customer;
(j)
Claim, or attempt to threaten to enforce a right with
knowledge or reason to know that the right does not exist.
Wis. Stat. §427.104(h),(j). GLS says that because it had a valid security interest
in the car, its repossession of the car was not an attempt to “enforce a right
with knowledge or reason to know that the right does not exist.” Dkt. No. 26 at
14. It argues that the repossession was its effort to enforce a right that did
exist, due to the valid security interest. This argument ignores the plaintiff’s
allegations that GLS engaged in conduct that was threatening or harassing.
The fact that GLS had a valid security interest in the car does not come
close to providing a basis for granting its motion to dismiss for failure to state a
claim.
27
3.
Whether the fact that Wis. Stat. §425.302 provides a remedy
for invalid notices of right to cure means that the plaintiff has
not stated a claim for illegal debt collection
Next, GLS makes the rather mystifying argument that the court must
dismiss the plaintiff’s third claim—the illegal debt collection claim—because,
even if the August 6, 2015 notice of intent was invalid, “the exclusive remedy
for a violation of Wis. Stat. § 425.105 is set forth in Wis. Stat. § 425.302,” and
that remedy is actual damages and a $25 penalty. Dkt. No. 26 at 15. GLS says
that the plaintiff can’t use the “general debt collection statute”—§427.104—to
collect for what is really a violation of a specific statute, §425.105 (the first
subsection of which requires the creditor to wait fifteen days after the notice of
right to cure to repossess). Id. GLS appears to argue that the plaintiff cannot
make a general claim that GLS violated the Wisconsin repossession scheme,
but instead must pursue one claim for an invalid notice, and another for failure
to wait fifteen days after the notice, etc. It argues that by pursuing a general
repossession claim, the plaintiff is trying to recover twice.
This argument, frankly, baffles the court. The illegal debt collection claim
is not based solely on the plaintiff’s allegation that the August 6, 2015 notice
was defective. Regardless of whether the August 6, 2015 notice was defective,
the plaintiff alleges that GLS engaged in conducted expected to threaten or
harass her by (1) making her “pay” to make a payment, (2) repossessing her car
even though the plaintiff’s money was sitting in GLS’s back account, (3) failing
to honor the agreed upon payment plan, (4) telling her that repossession was
put on hold and then towing the car after she made the payment, (5) changing
28
the amounts due, and (6) calling her son and sister looking for the car. GLS’s
argument—that because one of the reasons the plaintiff alleges GLS’s debt
collection was illegal was the allegedly invalid notice, she cannot pursue an
illegal debt collection claim for all the other conduct—makes no sense.
4.
Whether the plaintiff has failed to state, as a matter of law,
that GLS engaged in threatening or harassing conduct
GLS also argues that the plaintiff cannot prove, as a matter of law, that
GLS engaged in threatening or harassing conduct, and so the court must
dismiss the illegal debt collection claim. Dkt. No. 26 at 17. GLS says that Wis.
Stat. §427.104(1)(g)—which immediately proceeds the illegal debt collection
statute—prohibits a creditor from communicating with customers, or their
relatives, with such frequency, or at such hours, that the communications
could be expected to threaten or harass the customer. Id. GLS says the plaintiff
hasn’t sued under that statute. Rather, she’s sued under the next provision,
which prohibits the creditor from engaging in “other” threatening or harassing
conduct. Id. GLS reasons that it can’t be liable under Wis. Stat. §427.104(1)(h)
unless the plaintiff alleges that it did something other than communicate with
the plaintiff or her family in a threatening or harassing way, and that she has
not alleged that.
In fact, the plaintiff has alleged more than just threatening or harassing
communications. She’s alleged that she was forced to make a payment, that
GLS agreed not to repossess her car and then did it anyway, and that it
changed the amounts it claimed she had to pay to avoid repossession. The
29
plaintiff has, at this stage, stated a claim for a violation of Wis. Stat.
§427.104(1)(h).
5.
Whether the plaintiff has failed to state, as a matter of law,
that GLS took more money from her than required for her to
get her car back
Finally, GLS claims that the court must dismiss the plaintiff’s conversion
claim, because it did not take more money from her than she was required to
pay to get the car back. Dkt. No. 26 at 18. In support of this argument, GLS
walks through various Wisconsin statutes that permit creditors to include
certain costs in redemption fees, does its own math, and argues that by its
calculations, it required the plaintiff to pay less than what it could have
required in redemption fees. Id. at 18-19. This argument is nothing more than
GLS telegraphing its defense to the conversion claim. To prevail on a motion to
dismiss, a defendant must show that the plaintiff has not stated a claim that is
plausible on its face, not that the defendant believes it eventually will be able to
defend against a plausible claim. That GLS believes it can ultimately show that
it did not collect more than it was entitled to has no relevance to whether the
plaintiff has stated a plausible conversion claim—she has.
V.
Conclusion
The court DENIES the joint motion for extension of time to file answer by
defendants All City Recovery, Inc. and Always Towing and Recovery, Inc. Dkt.
No. 56.
The court DENIES defendants All City Recovery, Inc. and Always Towing
and Recovery, Inc.’s motion for summary judgment. Dkt. No. 45.
30
The court DENIES defendant Global Lending Services LLC’s motion to
dismiss. Dkt. No. 25.
The court’s staff will send out a separate notice for a Rule 16 scheduling
conference.
Dated in Milwaukee, Wisconsin this 5th day of September, 2018.
BY THE COURT:
_____________________________________
HON. PAMELA PEPPER
United States District Judge
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