Boerner v. LVNV Funding LLC et al
Filing
32
ORDER signed by Judge J.P. Stadtmueller on 7/25/2018. 26 Plaintiff's Motion to Supplement the Record is DENIED as moot. 18 Defendant LVNV Funding LLC's Motion to Join Defendant Messerli & Kramer PA's Motion to Dismiss is GRANT ED. 15 Defendant Messerli & Kramer PA's Motion to Dismiss Plaintiff's Complaint is GRANTED in part and DENIED in part; Plaintiff's state-law claim is BARRED by issue preclusion; the motion to dismiss Plaintiff's federal law claims is DENIED. See Order for further details. (cc: all counsel) (jm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
GEORGE BOERNER,
Plaintiff,
Case No. 17-CV-1786-JPS
v.
LVNV FUNDING LLC and
MESSERLI & KRAMER PA,
ORDER
Defendants.
In this case, Plaintiff, George Boerner (“Boerner”), alleges that
Defendants, LVNV Funding LLC (“LVNV”) and Messerli & Kramer PA
(“Messerli & Kramer”), violated his rights under federal and state law
when they sued him in Washington County Circuit Court on a defaulted
credit card debt. Messerli & Kramer filed a motion to dismiss the
complaint on April 23, 2018, (Docket #15), in which LVNV joined, (Docket
#18). The motion is fully briefed and, for the reasons stated below, it will
be granted in part and denied in part.
1.
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b) provides for dismissal of
complaints which, among other things, fail to state a viable claim for relief.
Fed. R. Civ. P. 12(b)(6). To state a claim, a complaint must provide “a short
and plain statement of the claim showing that the pleader is entitled to
relief.” Fed. R. Civ. P. 8(a)(2). In other words, the complaint must give
“fair notice of what the. . .claim is and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations must
“plausibly suggest that the plaintiff has a right to relief, raising that
possibility above a speculative level[.]” Kubiak v. City of Chi., 810 F.3d 476,
480 (7th Cir. 2016) (citation omitted). In reviewing the complaint, the
Court is required to “accept as true all of the well-pleaded facts in the
complaint and draw all reasonable inferences in favor of the plaintiff.” Id.
at 480–81.
In addition to their allegation that Boerner has not stated viable
claims, Defendants also challenge the Court’s subject-matter jurisdiction
under Rule 12(b)(1). When faced with a jurisdictional challenge, the court
accepts as true the well-pleaded factual allegations found in the
complaint, drawing all reasonable inferences in favor of the plaintiff. Ctr.
for Dermatology & Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th Cir.
2014). In this context, the court may also consider extrinsic evidence
adduced by the parties. Lee v. City of Chi., 330 F.3d 456, 468 (7th Cir. 2003).
2.
RELEVANT FACTS
Boerner is a resident of West Bend, Wisconsin. LVNV is a debt
buyer and debt collector, and Messerli & Kramer is a law firm that
regularly works with LVNV to collect consumer debts. In Boerner’s case,
LVNV purchased a consumer credit card debt Boerner originally owed to
Capital One.
On October 20, 2017, Boerner was served with a summons and
complaint issued by the Washington County Circuit Court in a small
claims action brought by LVNV to collect this debt, Case No. 17SC2061.
Boerner did not recognize LVNV as one of his creditors. Prior to being
served, Boerner had received no notice of assignment of any of his debts
to LVNV. Further, he had not received any notice that any of his accounts
were in default, nor was he afforded an opportunity to cure any such
default.
Page 2 of 26
James Kachelski (“Kachelski”) is a lawyer who works for Messerli
& Kramer. He represented LVNV in the Boerner suit. Boerner’s claims are
premised in large part on the idea that Kachelski was too overworked to
devote any meaningful consideration to Boerner’s case. Consequently,
Boerner includes several allegations concerning Kachelski’s case load.
As of December 14, 2017, Boerner reports that Kachelski was an
attorney of record in 590 cases in Dane County, 116 of which were “open,”
meaning there was no judgment yet entered. Additionally, he was entered
in 383 cases in Brown County, 45 of which were open; 449 cases in
Waukesha County, 71 which were open; 329 cases in Racine County, 67 of
which were open; and 2,909 cases in Milwaukee County, 607 of which
were open. Boerner alleges that upon information and belief, Kachelski’s
case load is similar throughout all of Wisconsin’s counties.
Boerner contends that even the closed cases must be considered as
part of Kachelski’s workload, as being “closed” only means that a
judgment has been entered. For debt collection cases like those handled by
Kachelski, much of the legal work occurs only after a judgment is entered,
since at that time the lawyer has post-judgment collection avenues
available to him, including garnishment, attachment, and other remedies.
Further, Wisconsin court records reveal that Kachelski had 31
return dates and hearings scheduled in three different counties on Friday,
December 15, 2017; 72 court events scheduled for Monday, December 18,
2017, including two trials in one county and a motion hearing in a
different county; 15 events on Tuesday, December 19, 2017, including a
scheduling conference; 84 events on Wednesday, December 20, 2017,
including two hearings in different counties; 6 events on Thursday,
Page 3 of 26
December 21, 2017; and 21 events on Friday, December 22, 2017. That
amounts to 249 hearings in only six days.1
Boerner acknowledges that many of these hearings were mere
“return dates,” meaning that personal appearance might not have been
required, but he maintains that Kachelski, as counsel of record, would
nevertheless have been obligated to monitor the outcome of the hearing,
including whether an appearance or answer had been filed by the
opposing party or, if not, whether service was properly made and a
motion for default judgment should therefore be filed.
Boerner asserts that most debtors sued by Messerli & Kramer
reasonably assume that a lawyer reviewed the matter and made a
considered legal judgment about the validity of the debt and the legality
of bringing a collection action. Based on Kachelski’s case load and the
amount of work he would reasonably need to do for each of his cases,
Boerner concludes that Kachelski did not meet this expectation in his case.
Indeed, according to Boerner, Kachelski did not meaningfully review any
document sent to Boerner on behalf of LVNV in the Washington County
suit before it was sent.
Boerner brings three claims based on Defendants’ conduct with
respect to the Washington County action. First, Boerner alleges that
Defendants did not comply with Wis. Stat. § 425.105(1) because they
accelerated the maturity of his debt and filed suit without first giving
notice of his right to cure the default as provided in that statute. Boerner
The complaint in this action was filed on December 22, 2017. This
appears to be the reason Boerner examined Kachelski’s December 2017 workload
rather than his schedule in October 2017, when the Washington County
complaint was filed.
1
Page 4 of 26
claims that by suing him, LVNV falsely represented that it had a right to
file suit against him when it knew that the right did not yet exist, in
violation of the Wisconsin Consumer Act (“WCA”), Wis. Stat. §
427.104(1)(j). Second, based on precisely the same allegations, Boerner
claims that the filing of the Washington County action violated the federal
Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e(2)(A),
because in so doing, LVNV falsely represented the legal status of his
debt—i.e., that the debt was ready to be sued upon. Finally, based on the
allegations with respect to Kachelski, Boerner raises a separate claim
under the FDCPA, 15 U.S.C. § 1692e(3), that Messerli & Kramer falsely
represented or implied that an attorney was meaningfully involved in the
collection suit when this was not true.
Boerner alleges that he suffered damages as a result of this
misconduct. First, he suffered substantial emotional distress and anxiety
at being sued on a debt he did not believe was in default and without
notice that a suit would be forthcoming. Additionally, he suffered worry
about the need to find and pay for a lawyer to defend him.
3.
ANALYSIS
Defendants have thrown the proverbial kitchen sink at Boerner’s
complaint. They contend that this suit violates the Rooker–Feldman
doctrine, that Boerner lacks constitutional standing, that his claims are
barred by principles of preclusion, and that his claims lack plausible merit.
The only claim to fail under the weight of these attacks is Boerner’s statelaw claim, as the Court shall explain below.
3.1
Rooker–Feldman
First, Defendants cite the Rooker–Feldman doctrine, which says that
a plaintiff may not sue in federal court for injuries inflicted on him by a
Page 5 of 26
state-court judgment. See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415–16
(1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482–86
(1983). To allow such a claim would impermissibly force federal district
courts to sit in review of the decisions of state courts. See Garry v. Geils, 82
F.3d 1362, 1365 (7th Cir. 1996); Homola v. McNamara, 59 F.3d 647, 650 (7th
Cir. 1995).
Defendants point out that in the Washington County suit, Boerner
raised as a counterclaim the very same WCA right-to-cure claim he alleges
in this case. (Docket #17-4 at 2–3). The state court granted Defendants’
motion to dismiss that counterclaim. (Docket #17-5 at 3–7). Defendants
accuse Boerner of trying to relitigate the claim here to escape the state
court’s adverse ruling.
The problem with that argument is that Boerner alleges no injury
arising from a state-court judgment itself. The conduct Boerner challenges
in this action arose prior to any order of any state court. Applying Rooker–
Feldman necessitates a distinction between “a federal claim alleging injury
caused by a state court judgment,” which is barred, and “a federal claim
alleging a prior injury that a state court failed to remedy,” which is not.
Centres, Inc. v. Town of Brookfield, Wis., 148 F.3d 699, 702 (7th Cir. 1998);
Kamilewicz v. Bank of Boston Corp., 92 F.3d 506, 510 (7th Cir. 1996) (Rooker–
Feldman does not bar a claim that is “independent” of the state-court
judgment). Boerner’s case falls within the latter category. For that reason,
the relevant framework to assess the potential effect of the state court’s
dismissal order is preclusion, not Rooker–Feldman. Milchtein v. Chisholm,
880 F.3d 895, 898 (7th Cir. 2018).
Similarly unavailing is Defendants’ contention that the present suit
and the state court’s order are “inextricably intertwined,” giving rise to
Page 6 of 26
the Rooker–Feldman bar despite the fact that there is no injurious statecourt judgment. (Docket #16 at 6–8). Just this year, the Court of Appeals in
Milchtein emphasized that courts should not bandy about the phrase
“inextricably intertwined” to forestall all federal litigation that touches
upon matters in state courts. Id.; Richardson v. Koch Law Firm, P.C., 768 F.3d
732, 734 (7th Cir. 2014). The key consideration is instead “whether the
federal plaintiff seeks the alteration of a state court’s judgment.” Milchtein,
880 F.3d at 898. That is not what Boerner is trying to do here, so Rooker–
Feldman does not apply.
3.2
Standing
Next, Defendants claim that Boerner lacks standing to pursue this
action. Article III of the Constitution limits the judicial power to the
resolution of “cases” and “controversies,” which in turn requires a federal
plaintiff to demonstrate that he has “standing,” or a viable legal wrong
committed by the defendant and redressable by a court. Spokeo, Inc. v.
Robins, 136 S. Ct. 1540, 1547 (2016). To establish his standing, Boerner must
show (1) that he suffered an injury in fact, (2) that there is a causal
connection between his injury and Defendants’ alleged misconduct, and
(3) that a favorable decision from this Court will redress that injury. Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). At the pleading stage,
“the plaintiff must ‘clearly. . .allege facts demonstrating’ each element.”
Spokeo, 136 S. Ct. at 1547 (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)).
Boerner’s allegations satisfy each element of standing. First, he has
suffered an injury in fact, which arises from “an invasion of a legally
protected interest” that is “concrete and particularized” and “actual or
imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560.
Defendants, citing Spokeo, say that Boerner alleges injury only to a
Page 7 of 26
“procedural right,” which is not sufficiently concrete to support standing.
True, Spokeo teaches that violation of a procedural right conferred by
statute is not automatically sufficient to confer standing, Spokeo, 136 S. Ct.
at 1549, but here Boerner has alleged that Defendants’ statutory violations
gave rise to real harm. First, with respect to the right-to-cure claims,
Boerner alleges he suffered a lawsuit that had not properly been brought,
with its attendant legal costs, anxiety, and worry. Similarly, on the
meaningful-involvement claim, Boerner asserts that he experienced
amplified anxiety and fear based on the false representation that an
attorney had made a considered legal judgment that the Washington
County suit against him had merit. See Avila v. Rubin, 84 F.3d 222, 229 (7th
Cir. 1996) (“An unsophisticated consumer, getting a letter from an
‘attorney,’ knows the price of poker has just gone up.”). Thus, unlike
Spokeo, here the purported procedural violations are only the premise, not
the sum total, of the harm to Boerner. See Evans v. Portfolio Recovery
Assocs., LLC, 889 F.3d 337, 344 (7th Cir. 2018).
Second, Boerner’s allegations establish that his injury is fairly
traceable to Defendants’ wrongdoing. Lujan, 504 U.S. at 560. In this
connection, Boerner alleges that he
has suffered actual damages, including but not limited to
emotional distress at being sued on a debt he did not believe
could be the subject of a lawsuit at that time, and without
notice that any such suit might be forthcoming. Boerner has
suffered
substantial
distress
including
difficulty
concentrating, anxiety over the lawsuit, worries about
whether he could find and afford a lawyer, and other
substantial distress and harm.
(Docket #1 at 6–7). Defendants are correct that Boerner could have been
more specific about whether Kachelski’s lack of meaningful involvement
Page 8 of 26
caused him injury. Yet the Court, construing his allegations generously as
it is required to do at this stage, finds that he has sufficiently alleged harm
from both the allegedly improper filing of the Washington County suit
and Kachelski’s lack of involvement therein. Both contributed to cause his
anxiety, his concentration difficulties, and his need to find and pay for a
lawyer to defend him. Moreover, receiving false or misleading
information from debt collectors is the very type of harm which Congress
designed the FDCPA to prevent. Pogorzelski v. Patenaude & Felix APC, Case
No. 16–C–1330, 2017 WL 2539782, at *3 (E.D. Wis. June 12, 2017).
These allegations make Boerner’s case distinguishable from Cheslek
v. Asset Acceptance Capital Corp., Case No. 1:16-cv-1183, 2017 WL 7370983,
at *3 (W.D. Mich. Dec. 22, 2017), cited by Defendants, where the plaintiff
premised his FDCPA claim on procedural errors in connection with filing
state debt collection suits but failed to mention how he was personally
affected by that conduct. In this case, Boerner alleges tangible personal
and pecuniary harm, making it unnecessary to consider whether
violations of procedural rights alone give him standing. See Satran v.
LVNV Funding, LLC, 17-cv-896-jdp, 2018 WL 2464486, at *2 (W.D. Wis.
June 1, 2018).2
Finally, Boerner has shown that this Court may redress his injury.
Lujan, 504 U.S. at 561. Defendants contend that redressability is lacking
because Boerner will have to defend the Washington County suit anyway,
regardless of whether Kachelski was meaningfully involved. (Docket #16
at 12–13). This misses the point. Boerner’s federal action seeks monetary
Plaintiff filed a copy of the Satran decision in a motion to supplement the
record. (Docket #26). The Court located the case during its own research and will
therefore deny the motion as moot.
2
Page 9 of 26
redress for Defendants’ unlawful debt collection practices. Even if
Defendants succeed in proving to the Wisconsin court that they are
entitled to recover on Boerner’s credit card debt, this Court could find that
the lack of attorney involvement constituted a violation of Boerner’s
FDCPA rights. The two are entirely distinct.
3.3
Preclusion
The Court noted above that Boerner raised his WCA claim in this
case as a counterclaim in the Washington County action.3 That
counterclaim was dismissed by the trial court on Defendants’ motion in a
decision dated March 29, 2018. In its ruling, the state court held that
Boerner’s right-to-cure theory lacked merit for two reasons. First, giving
notice of the right to cure is a mere procedural prerequisite to filing a
collection action and is not inherent in the right to collect the debt. (Docket
#17-5 at 4). Thus, LVNV did not violate the WCA by trying to enforce a
right that did not exist; the right to collect the debt did exist, but there may
have been a procedural misstep in LVNV’s effort to pursue a judicial
remedy. See id. Second, the state court found that under the WCA, the
remedy for such a technical foible was not an affirmative claim for
damages. Id. at 7. Rather, “the appropriate remedy for the alleged failure
In the state court, Boerner alleged that LVNV violated Wis. Stat.
§ 427.104 by failing to provide a notice of assignment of his credit card debt and
by failing to provide notice of and an opportunity to cure the default. (Docket
#17-4 at 2–3). In this Court, he advances only the latter theory as part of his legal
claims, although he mentions in his factual allegations that he was not provided
a notice of assignment. (Docket #1 at 5–6). Curiously, at the end of his brief on
Defendants’ motion, Boerner defends a claim for lack of notice of assignment
despite the fact that he omitted such a claim from his complaint. See (Docket #22
at 39–40). If Boerner wishes to allege such a claim, he must do so with leave of
the Court in an amended complaint. For now, poor draftsmanship means that
there is no such claim presently pending.
3
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of LVNV to give proper notice of default and a right to cure is a dismissal
of LVNV’s claim.” Id.
Defendants assert that this ruling precludes Boerner’s right-to-cure
claims under both the WCA and FDCPA. Boerner disagrees, arguing that
the state court’s decision is not final and is presently the subject of a
motion for reconsideration. Additionally, suggests Boerner, even if the
WCA claim is barred by the state court’s decision, the FDCPA claim does
not fall with it despite being premised on the same underlying conduct.
(Docket #22 at 11).
There are two types of preclusion.4 Claim preclusion, traditionally
called res judicata, arises when the earlier case involved the same parties or
their privies and the same causes of action, and the case was resolved by a
final judgment on the merits. Jensen v. Milwaukee Mut. Ins. Co., 554 N.W.2d
232, 234 (Wis. Ct. App. 1996). When these elements are satisfied, claim
preclusion operates to bar not only the claims actually decided in the
earlier case but also any other claim which could have been brought
therein. Id. The purpose of the doctrine is to discourage claim splitting and
conserve judicial resources. See N. States Power Co. v. Bugher, 525 N.W.2d
723, 727 (Wis. 1995).
Issue preclusion is narrower. It arises when an issue was actually
litigated and finally determined in the earlier case, and the interests of the
party against whom preclusion is sought were sufficiently represented in
that prior case. Paige K.B. ex rel. Peterson v. Steven G.B., 594 N.W.2d 370,
Because the Court is assessing the preclusive effect of a ruling of a
Wisconsin state court, it looks to the law of Wisconsin to determine the nature
and scope of preclusion. 28 U.S.C. § 1738; Marrese v. Am. Academy of Orthopaedic
Surgeons, 470 U.S. 373, 380 (1985).
4
Page 11 of 26
374 (Wis. 1999); Lindas v. Cady, 515 N.W.2d 458, 464 (Wis. 1994). Thus,
issue preclusion does not bar other claims that might have been brought
in the prior proceeding, but in some instances it can apply even when the
parties in the prior suit are not identical to those in the instant suit.
Montana v. United States, 440 U.S. 147, 153 (1979). To determine whether
issue preclusion bars a litigant’s claim, Wisconsin courts apply a two-step
analysis: (1) they ask whether issue preclusion can, as a matter of law, be
applied and, if so, (2) whether the application of issue preclusion would
be fundamentally fair. Rille v. Physicians Ins. Co., 728 N.W.2d 693, 702–03
(Wis. 2007).
Defendants advance both claim and issue preclusion in an effort to
forestall Boerner’s right-to-cure claims. Their reliance on claim preclusion
is misplaced, however, as it requires the entry of a final judgment in the
first action. There has been no final judgment in the Washington County
case, either in whole or in part. See Wis. Stat. § 806.01; Menomonie Farmers
Credit Union v. Bettendorf, 438 N.W.2d 597, 1989 WL 26498, at *1 (Wis. Ct.
App. 1989).
Nevertheless, the finality requirement is often relaxed when
considering issue preclusion. Such relaxation often arises in instances like
these, where it is obvious that a state-court loser has fled to federal court
hoping for a different result. Several leading authorities, including Wright
& Miller and the Restatement, espouse this view. Wright & Miller, 18A
Fed. Prac. & Proc. Juris. § 4434 (2d ed.); Restatement (Second) of
Judgments §§ 13, 27 (1982). The Seventh Circuit has also adopted it. Miller
Page 12 of 26
Brewing Co. v. Joseph Schlitz Brewing Co., 605 F.2d 990, 996 (7th Cir. 1979);
Amcast Indus. Corp. v. Detrex Corp., 45 F.3d 155, 158 (7th Cir. 1995).5
Under this approach, the key inquiry is whether the prior decision
is sufficiently procedurally firm that the issue in question will not be
litigated again in that court. Id. As the Restatement commentary explains,
the court should determine that the decision to be carried
over was adequately deliberated and firm even if not final in
the sense of forming a basis for a judgment already entered.
Thus preclusion should be refused if the decision was
avowedly tentative. On the other hand, that the parties were
fully heard, that the court supported its decision with a
reasoned opinion, that the decision was subject to appeal or
was in fact reviewed on appeal, are factors supporting the
conclusion that the decision is final for the purpose of
preclusion. The test of finality, however, is whether the
conclusion in question is procedurally definite and not
whether the court might have had doubts in reaching the
decision.
Restatement (Second) of Judgments § 13 cmt. g.
The Washington County court’s dismissal of Boerner’s WCA rightto-cure counterclaim bears many hallmarks of finality. First, it was
reached after the parties were fully heard on the matter. Second, the court
offered a reasoned basis for its decision, finding the lack of a damages
The parties and the Court have located no decision of the Wisconsin
Supreme Court on this issue. Nevertheless, given the widespread acceptance of
this approach to issue preclusion in recognized treatises and federal appellate
decisions, the Court concludes that the Wisconsin Supreme Court would be most
likely to adopt it as well. Indeed, that court noted in Rille, 728 N.W.2d at 704 n.24,
that “Wisconsin courts have consistently relied on the Restatement (Second)
Judgments for guidance when deciding questions related to issue preclusion.”
Likewise, in Michelle T. v. Crozier, 495 N.W.2d 327, 330 (Wis. 1993), the court
observed that “[f]ormalistic requirements” in the application of issue preclusion
“have gradually been abandoned in favor of a looser, equities-based
interpretation of the doctrine.” Thus, there is no reason to think that Wisconsin
courts would not take a flexible approach to finality.
5
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remedy under the WCA for a right-to-cure violation was an “insuperable
obstacle” to the claim. Miller Brewing Co., 605 F.2d at 996.
Finally, although the decision was not immediately appealable, it
was procedurally definite, as it effected immediate dismissal with
prejudice of the counterclaim. This is so despite Boerner’s pending motion
for reconsideration. Such motions do not represent a second bite at the
apple for losing litigants. Instead, this highly discretionary procedure
exists to remedy excusable neglect, previously undiscovered evidence, or
egregious legal errors. See Wis. Stat. § 806.07(1); Werner v. Hendree, 795
N.W.2d 423, 434 (Wis. 2010). This Court detects no such problems in the
Washington County decision. Indeed, while Boerner suggests that he and
others like him will take the right-to-cure issue all the way to the
Wisconsin Supreme Court, at present the trial court in Washington
County is likely to follow the decision of the Wisconsin Court of Appeals
in Security Finance v. Kirsch, Appeal No. 2017AP1408, 2018 WL 1756126, at
*2 (Wis. Ct. App. Apr. 11, 2018), which adopted the same view of the
WCA’s remedial structure. Thus, the motion for reconsideration is all but
doomed, and does not defeat preclusion in this case.
In the end, all the circumstances present in this case indicate that
the state court’s dismissal is sufficiently “firm and stable” that it can be
considered “the ‘last word’ of the rendering court.” Restatement (Second)
of Judgments § 13, cmt. a. Certainly the ruling was not “avowedly
tentative.” Id. The Court finds that the Washington County dismissal
order is sufficiently “final” to support the application of issue preclusion.6
There is a suggestion in some preclusion cases that orders giving rise to
preclusion must dispose of all litigation as to one or more parties. See In re Lisse,
565 B.R. 903, 911 (Bankr. W.D. Wis. 2017) (citing Anchor Sav. & Loan Ass’n v.
6
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With the issue of finality settled, the Court finds that the other legal
elements of issue preclusion are easily satisfied in this case. First, the
parties are identical.7 Second, the pertinent issues of law were actually
litigated and determined by the state court and were essential to its
dismissal. Two such issues were decided: (1) notice of the right to cure is
not integral to the right to collect the debt but only a condition precedent
to accelerating the debt’s maturity or filing suit thereon; and (2) failure to
give notice of the right to cure does not give rise to an affirmative
damages claim but only exists as a defense to a collection suit.
Having found that issue preclusion as to these two issues is proper
as a matter of law, the Court next considers how the resolution of those
two issues affects the claims in this action and, relatedly, whether the
application of preclusion is equitable in this case. Disposition of the
second issue identified above precludes Boerner’s instant claim under the
WCA, as this Court is bound by the state court’s conclusion that his
remedy under state law is a dismissal defense, not a claim for damages.
Thus, his WCA claim must be rejected notwithstanding the disagreement
Coyle, 435 N.W.2d 727, 729–30 (Wis. 1989)). That requirement is met here in spirit,
for although Boerner remains a party defendant in the Washington County
action, all of his counterclaims—including the right-to-cure claim, the notice-ofassignment claim, and a more generalized claim that LVNV engaged in
unconscionable debt collection practices—were dismissed in the trial court’s
recent decision. See (Docket #17-5 at 11).
Boerner notes that Messerli & Kramer is not a party to the Washington
County suit but is acting only as counsel to LVNV. (Docket #22 at 12). This is true
but irrelevant; Messerli & Kramer raises no objection to its being bound by the
determination of the Washington County trial court. Moreover, identity of
parties is not strictly required for the application of issue preclusion. Lindas, 515
N.W.2d at 463. The identity-of-parties requirement exists to protect parties from
being bound by a decision in the first action when their interests were not
sufficiently represented in that action. Michelle T., 495 N.W.2d at 332.
7
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percolating in the courts about its viability. Compare Beal v. Wyndham
Vacation Resorts, Inc., 956 F. Supp. 2d 962, 969 (W.D. Wis. 2013), with
Satran, 2018 WL 2464486, at *5–6. The decisions on both sides are
informative on the theory Boerner advances in this case, but the matter
having been decided against Boerner himself once, he cannot relitigate it
in a different action.
The application of issue preclusion to Boerner’s WCA claim is also
fundamentally fair. This analysis relies on several factors, including:
(1) could the party against whom preclusion is sought, as a
matter of law, have obtained review of the judgment; (2) is
the question one of law that involves two distinct claims or
intervening contextual shifts in the law; (3) do significant
differences in the quality or extensiveness of proceedings
between the two courts warrant relitigation of the issue; (4)
have the burdens of persuasion shifted such that the party
seeking preclusion had a lower burden of persuasion in the
first trial than in the second; or (5) are matters of public
policy and individual circumstances involved that would
render the application of collateral estoppel to be
fundamentally unfair, including inadequate opportunity or
incentive to obtain a full and fair adjudication in the initial
action?
Michelle T., 495 N.W.2d at 330–31. The evaluation of these factors is
committed to the court’s discretion, remembering that the fairness
determination is a case-by-case assessment. Rille, 728 N.W.2d at 707.
On the whole, these factors militate in favor of preclusion. Only the
first weighs against that result, as Boerner has not yet had the ability to
obtain review of the adverse ruling in Washington County. However, the
pertinent issue of law decided in state court—whether a damages claim
arises under the WCA for failure to give notice of the right to cure—is
identical to that presented here, and other than a few lower-court
Page 16 of 26
decisions taking sides on the matter, there have been no sea changes in the
law. Further, Boerner and Defendants had a full and fair opportunity for
argument before the Washington County court, and there is no reason to
doubt the quality of the state court’s careful consideration of the issues.
Additionally, the parties’ burdens at this stage of this case are identical to
those at which Boerner’s right-to-cure counterclaim was dismissed, so
Defendants’ victory in state court was not the result of a lowered burden
of persuasion. Finally, notwithstanding the technicalities of preclusion
doctrine that have been explored herein, at its core the application of
preclusion in this case is equitable, as it appears Boerner has come
running to federal court after suffering a defeat in state court on an
identical issue. This cannot be tolerated. Consequently, the Court finds
that issue preclusion should be applied to bar Boerner’s WCA claim.
The result is different with respect to the analogous FDCPA rightto-cure claim, however. Defendants submit that the state court order
precludes Boerner’s federal claim as well as his WCA claim because the
core issue is the same: whether a damages action can be maintained based
on a failure to give notice of the right to cure. See (Docket #16 at 15). But
Boerner is correct that the ruling on remedies under the WCA is of no
consequence for purposes of the FDCPA. The federal statute clearly
affords a damages remedy for conduct that violates its proscriptions. 15
U.S.C. § 1692k(a). The FDCPA thus functions as a sword for aggrieved
plaintiffs, whereas the Washington County court and Kirsch showed that
the WCA’s right-to-cure requirement is intended only as a shield. See
Kirsch, 2018 WL 1756126, at *4. The Court is bound by the state court’s
view of the remedies available under the WCA, but it is not bound to
follow the same path with respect to its federal counterpart, which has a
Page 17 of 26
different structure and focus. In the parlance of Wisconsin’s fundamental
fairness analysis, the differences between the WCA and FDCPA make the
application of preclusion to the FDCPA claim less equitable than as
applied to the WCA claim. Michelle T., 495 N.W.2d at 330.
Moreover, the state court’s ruling that notice of the right to cure is
not integral to the right to collect the debt is not dispositive. It may be that
for purposes of the WCA, the state court was correct in finding that LVNV
was not trying to enforce a right that did not exist. But the FDCPA broadly
prohibits falsehoods or misrepresentations concerning the legal status of a
debt. See 15 U.S.C. § 1692e(2)(A). In this action, Boerner’s claim is not that
the right to collect the underlying debt did not exist, but that the right to
sue on the debt had not been perfected because notice of the right to cure
had not been given. See (Docket #1 ¶ 28). Defendants misrepresented the
legal status of the debt inasmuch as filing the action falsely represented
that all of the prerequisite conditions had been satisfied. On that
understanding, the FDCPA right-to-cure claim is not precluded by any
ruling of the state court, as the legal theory here is meaningfully different
and Boerner did not have the opportunity to argue the nuances of his
FDCPA theory to the state court. Michelle T., 495 N.W.2d at 331; see also
Johnson v. LVNV Funding, LLC, No. 13–C–1191, 2014 WL 4852027, at *3
(E.D. Wis. Sept. 29, 2014) (finding that filing a suit without first giving
notice of right to cure could be considered unfair or unconscionable, in
violation of Section 1692f).
For these reasons, the Court finds that the Washington County
Circuit Court’s order dismissing Boerner’s WCA counterclaim precludes
Page 18 of 26
the state-law claim asserted in this case but has no preclusive effect on his
analogous FDCPA claim.8
3.4
Failure to State a Claim
Boerner’s WCA right-to-cure claim is barred by principles of
preclusion. His analogous claim under the FDCPA is not, nor is his
FDCPA claim concerning Kachelski’s lack of meaningful involvement in
the state court action. As a result, the Court must consider Defendants’
arguments that these two claims lack plausible legal merit.
3.4.1 Materiality
Defendants’ opening salvo is that the purported FDCPA violations
were not material to any of Boerner’s rights or decision-making and
therefore are not actionable. In the Seventh Circuit, a plaintiff asserting a
claim under Section 1692e must allege facts showing that the false or
misleading representation or omission was material, meaning it had the
ability to influence an unsophisticated consumer’s decision-making. Lox v.
CDA, Ltd., 689 F.3d 818, 826 (7th Cir. 2012); Janetos v. Fulton Friedman &
Gullace, LLP, 825 F.3d 317, 324 (7th Cir. 2016). For both of Boerner’s federal
claims, this requirement is easily satisfied. An unsophisticated consumer
might be influenced to hire counsel or take more aggressive defensive
action when he is sued on a debt which he thinks cannot be sued upon
because of a failure to give notice of the right to cure, or when he is sued
by a corporation with the assistance of counsel whom he believes has an
The state court’s ruling on various legal issues surrounding the right to
cure has no bearing on Boerner’s meaningful involvement claim, so the Court
will not discuss it in this context. The only avenue by which preclusion could bar
the meaningful involvement claim would be claim preclusion, but as noted
above, there has been no final judgment in the Washington County case
sufficient to support the application of claim preclusion.
8
Page 19 of 26
active, meaningful role in the case. The question is not, as Defendants put
it, whether Boerner’s actual response to the state-court complaint would
have been different, nor whether some egregiously awful thing had
happened to him, such as being tricked into paying a debt he did not owe.
See (Docket #16 at 20). Instead, it is enough for present purposes that
without these additional layers of deception, Boerner might have seen fit
to defend the relatively small claim on his own behalf or with lessened
vigor. Lox, 689 F.3d at 827 (finding materiality where debt collector falsely
threatened recovery of attorney’s fees in state collection action, which
could have affected the debtor’s decision to pay or contest the debt); Hahn
v. Triumph P’ships LLC, 557 F.3d 755, 757 (7th Cir. 2009) (noting that
material violations of the statute affect the consumer’s right to “choose
intelligently” between alternatives).
3.4.2 Right-to-Cure Claim
The Court next evaluates the merit of the right-to-cure FDCPA
claim. This has been touched upon above, but a few remaining arguments
must be addressed. To assess this claim, one must begin with Wis. Stat. §
425.105, which creates a debtor’s right to cure. That statute provides, in
relevant part, that “[a] merchant may not accelerate the maturity of a
consumer credit transaction” or “commence any action” on a debt unless
the debtor is first given notice of his right to cure the default and he fails
to do so within fifteen days. Wis. Stat. § 425.105(1). This Section further
provides that the right to cure does not exist “if the following occurred
twice during the preceding 12 months: (a) [t]he customer was in default
on the same transaction or open-end credit plan; (b) [t]he creditor gave the
customer notice of the right to cure such previous default in accordance
Page 20 of 26
with [§] 425.104; and (c) [t]he customer cured the previous default.” Id. §
425.105(3).
As
has
been
explained,
Boerner’s
claim
is
that
LVNV
misrepresented that it could file a suit—or that it could win the suit—
because it had not first given notice of the right to cure or an opportunity
to do so. According to Boerner, this violated Section 1692e(2)(A) of the
FDCPA, which prohibits any false representation of the legal status of any
debt. 15 U.S.C. § 1692e(2)(A). More broadly, Section 1692e proscribes “any
false, deceptive, or misleading representation or means in connection with
the collection of any debt.” Id. § 1692e.
Defendants attack Boerner’s right-to-cure claim in a number of
ways, but none have merit. First, Defendants say that there can be no
damages action that arises from failure to give notice of the right to cure.
The Court has evaluated this argument already, finding that the remedial
structures of the WCA and FDCPA are distinct in this regard. See supra
Part 3.3.9
Defendants’ other arguments fare no better. They claim that even if
Boerner’s right-to-cure theory has legal merit, he was not entitled to cure
because he had missed two payments in the twelve months preceding the
filing of the Washington County suit. (Docket #16 at 24–26). Alternatively,
Many of Defendants’ cited cases take the view that the FDCPA does not
exist to remedy violations of state procedural rules. See Skibbe v. U.S. Bank Trust,
N.A., Case No. 16 C 192, 2018 WL 905522, at *6 (N.D. Ill. Feb. 15, 2018).
Defendants do not squarely raise such an argument against Boerner’s right-tocure claim, but it is worth noting that the statutory violation here is a critical
condition precedent to filing suit, not merely the violation of some technical
pleading rule, such as the absence of an attorney’s signature or the misstatement
of a party’s name. See Kabir v. Freedman Anselmo Lindberg LLC, No. 14 C 1131,
2015 WL 4730053,at *4 (N.D. Ill. Aug. 10, 2015) (allowing FDCPA claim based on
misrepresentations about the legal status of the debt in a state-court complaint).
9
Page 21 of 26
Defendants assert that they did in fact provide him notice of his right to
cure. Id. at 26–27. Additionally, Defendants contest Boerner’s assertion
that they accelerated the maturity of the debt as opposed to simply
aggregating missed minimum payments. Id. at 28.
All of these contentions rely on extraneous documents which the
Court cannot consider in the present context, including billing notices
from the original creditor. See Jacobs v. City of Chi., 215 F.3d 758, 766 (7th
Cir. 2000). Those documents cannot be thrown into the mix at this stage
because they are not referenced in the complaint, they are not central to
the claims in the narrow sense envisioned by the Seventh Circuit, and
their authenticity has been challenged. Hecker v. Deere & Co., 556 F.3d 575,
582 (7th Cir. 2009). What is properly before the Court is Boerner’s
affirmative allegation that he was not in default, he had received no notice
of any default from anyone, and he was therefore entitled to an
opportunity to cure but received no statutorily required notice of the
same. See (Docket #1 ¶ 28). If Defendants wish to contest the factual basis
for those allegations, they may do so at summary judgment. For now, the
motion to dismiss the FDCPA right-to-cure claim must be denied.
3.4.3 Meaningful Involvement Claim
Boerner’s other FDCPA claim has received little treatment thus far.
As explained above, Boerner alleges that Kachelski could not devote
meaningful attention to the Washington County suit given the press of
matters in which he is counsel of record. Consequently, one can infer that
he did not, in fact, meaningfully participate in the preparation or filing of
the lawsuit, and that Defendants thereby violated Section 1692e(3), which
prohibits “[t]he false representation or implication that any individual is
Page 22 of 26
an attorney or that any communication is from an attorney.” 15 U.S.C. §
1692e(3).
Defendants first counter that Boerner cannot premise a meaningful
involvement claim on the filing of a state court complaint. (Docket #16 at
20–21). The Seventh Circuit held two years ago that Section 1692e applies
to representations and omissions in state court complaints and other
filings in state court proceedings. Marquez v. Weinstein, Pinson & Riley,
P.S., 836 F.3d 808, 810–11 (7th Cir. 2016). So much for that argument.
Defendants persist, arguing that FDCPA regulation of state-court
complaints would limit their access to the courts because they cannot
communicate with a third party—such as the state court—about the
consumer’s debt without his consent. See 15 U.S.C. § 1692c(b). But this
argument also fails, as the rules governing action in Wisconsin courts
expressly authorize the filing of civil lawsuits like the Washington County
action. See id. (providing that a communication with a third party can be
authorized with “the express permission of a court of competent
jurisdiction”). Notably, Boerner does not argue that the filing of the state
collection case itself violated Section 1692c(b).
Next,
Defendants
suggest—though
their
winding,
circular
argument is hard to follow—that Boerner could only sue for an
affirmative false statement in a state-court complaint, rather than a false
implication of attorney involvement or false implication of satisfaction of
the right-to-cure requirement. (Docket #29 at 8–11). They maintain that
Boerner should have sought redress for violations of state procedural
rules from the state court, including seeking relief under Wis. Stat. §
802.05(2), the state’s version of Federal Rule of Civil Procedure 11. (Docket
#16 at 21).
Page 23 of 26
But the FDCPA can and does offer relief for violations of certain
kinds of state laws, particularly when, as here, violations of those laws
make it appear to the unsophisticated consumer that he is rightly being
sued when he was denied an essential opportunity to cure his default, or
when an attorney is prosecuting the case against him (having made a legal
judgment about the case’s prospects) when that attorney is not involved.
See Gearing v. Check Brokerage Corp., 233 F.3d 469, 472 (7th Cir. 2000) (false
allegations in state court complaint were actionable as misrepresentations
of the legal status of the debt). In other words, here the underlying statelaw violations are material to the viability of the debt collection efforts
themselves and are not mere attacks on the form or clarity of the state
pleadings as governed by state procedural rules. See Beler v. Blatt,
Hasenmiller, Leibker & Moore, LLC, 480 F.3d 470, 473 (7th Cir. 2007). To the
extent some district courts believe that only affirmative falsehoods make a
Section 1692e claim when lodged against a state-court complaint, this
Court declines to follow them. See Washington v. N. Star Capital Acquisition,
LLC, No. 08 C 2823, 2008 WL 4280139, at *2 (N.D. Ill. Sept. 15, 2008).10
Finally, Defendants argue that Boerner’s allegations regarding
Kachelski’s caseload are too conclusory to support a meaningful
involvement claim. Again, they are incorrect. A debt collector violates
Defendants also argue that Boerner has not stated a claim for use of
“deceptive means” to collect a debt, in violation of Section 1692e(10). (Docket #16
at 21); 15 U.S.C. § 1692e(10). Boerner does not purport to make such a claim, so
the argument goes nowhere. To the extent Defendants believe that Kachelski was
within his rights to file the Washington County action because no notice of right
to cure was required, they miss the point of Boerner’s meaningful involvement
claim. For that claim, it matters not how the right-to-cure issue is resolved,
because Boerner’s allegation is that no matter how meritorious the state
collection action might be, Kachelski impermissibly represented that he had
some meaningful involvement in preparing and prosecuting it.
10
Page 24 of 26
Section 1692e(3) when a communication purports to come from an
attorney who in reality was not involved in or supervising the process of
creating and sending the communication. See Nielsen v. Dickerson, 307 F.3d
623, 635 (7th Cir. 2002); Avila, 84 F.3d at 229. In this instance, it can be
inferred from Boerner’s allegations regarding Kachelski’s workload that
he did not have sufficient time to render a professional legal judgment
about the merit of the Washington County suit prior to its being filed. This
is a widely accepted approach for challenging mass-produced dunning
letters purportedly signed by attorneys, Nielsen, 307 F.3d at 638, and
nothing in the recent Marquez decision suggests that the theory cannot be
extended to state-court complaints.
Boerner’s
detailed
allegations
concerning
how
overworked
Kachelski appeared to be at the time the Washington County suit was
filed stands in sharp contrast to the one-line assertion in Morales v. Pressler
& Pressler, LLP, Civil Action No. 15–236(JLL), 2015 WL 1736350, at *3
(D.N.J. Apr. 16, 2015), cited by Defendants, that the attorney filed a
collection action without first exercising professional judgment concerning
the merits of the suit. That assertion is present in Boerner’s complaint, but
it is corroborated by meticulous allegations as to why this failure of
diligence arose. Moreover, the Court is not persuaded by the reasoning in
Richardson v. Midland Funding, LLC, Civil No. CCB–13–1356, 2013 WL
6719110, at *8 (D. Md. Dec. 18, 2013), also cited by Defendants, where the
court found that allegations of extreme attorney workload were
insufficient to support a meaningful involvement claim. This Court finds
that a reasonable inference to be drawn from Boerner’s allegations is that
Kachelski’s time and personal resources were too thinly spread for him to
devote adequate attention to the Washington County lawsuit prior to its
Page 25 of 26
being filed. Further, unlike Richardson, there were no other lawyers on the
case with Kachelski, suggesting that no attorney in fact devoted
meaningful thought to the matter. Id. Asking Boerner to allege more
would be inconsistent with the lenient standard of review applied at this
stage. The Court will, therefore, deny the motion to dismiss this claim.
4.
CONCLUSION
For the reasons stated above, the Court finds that Boerner’s state-
law claim is barred under the doctrine of issue preclusion. His two federal
claims are not, and both survive Defendants’ other legal challenges. Thus,
Defendants’ motion to dismiss must be granted in part and denied in part.
Accordingly,
IT IS ORDERED that Plaintiff’s motion to supplement the record
(Docket #26) be and the same is hereby DENIED as moot;
IT IS FURTHER ORDERED that Defendant LVNV Funding LLC’s
motion to join in the motion to dismiss filed by Defendant Messerli &
Kramer, PA (Docket #18) be and the same is hereby GRANTED; and
IT IS FURTHER ORDERED that Defendant Messerli & Kramer,
PA’s motion to dismiss Plaintiff’s complaint (Docket #15) be and the same
is hereby GRANTED in part and DENIED in part as stated herein.
Dated at Milwaukee, Wisconsin, this 25th day of July, 2018.
BY THE COURT:
__________________
J. P. Stadtmueller
U.S. District Judge
Page 26 of 26
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