Schmitz et al v. Valentine & Kebartas LLC et al

Filing 48

DECISION AND ORDER signed by Magistrate Judge Nancy Joseph on 12/5/2019 granting in part and denying in part 37 Motion for Judgment on the Pleadings. The plaintiffs may pursue their FDCPA and WCA claims in their individual capacities. However, their FDCPA and WCA claims made in their capacities as representatives of Joanne Schmitz's estate are dismissed. (cc: all counsel) (llc)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
SHEILA SCHMITZ and ROBERT SCHMITZ, Individually,
as Representatives of the Estate of JOANNE SCHMITZ, and
on Behalf of All Other Similarly Situated,
Plaintiffs,
v.

Case No. 18-CV-15

VALENTINE & KEBARTAS, LLC and
LVNV FUNDING, LLC,
Defendants.
DECISION AND ORDER ON DEFENDANTS’ MOTION FOR JUDGMENT ON
THE PLEADINGS
Sheila and Robert Schmitz (collectively the “Schmitzes”) filed this putative class
action against Valentine & Kebartas, LLC and LVNV Funding, LLC (“Valentine” and
“LVNV”), alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et
seq. (the “FDCPA”) and the Wisconsin Consumer Act, Wis. Stat. §§ 421–427 (the “WCA”).
The Schmitzes sue both in their individual capacities and as representatives of their mother’s
estate. For the reasons explained below, the defendants’ motion is granted in part and denied
in part.
BACKGROUND
The Schmitzes are brother and sister and the adult children of Joanne Schmitz, who
died on April 30, 2017. (Am. Compl. ¶¶ 3–6, Docket # 33.) They allege that prior to their
mother’s death, they resided at the same address as Joanne Schmitz and were appointed as
her powers of attorney. (Id. ¶ 7.) The Schmitzes allege that they are the representatives of

Joanne Schmitz’s estate; specifically, Sheila Schmitz was appointed Special Administrator of
the probate estate and Robert Schmitz was authorized to review bills, invoices, and other
financial correspondence on behalf of the estate. (Id. ¶ 8.)
On or about November 11, 2017, Valentine sent a debt collection letter to Joanne
Schmitz at the address at which Joanne Schmitz resided with the Schmitzes. (Id. ¶ 33, Ex. A.)
The alleged debt referenced in the letter is a Citibank credit card account, used only for
personal, family, or household purposes, including but not limited to purchases of household
goods and services. (Id. ¶ 34.) The Schmitzes allege that as Joanne Schmitz’s caregivers, they
received and read the debt collection letter addressed to Joanne Schmitz from Valentine. (Id.
¶ 36.) The debt collection letter contained the following:
WISCONSIN RESIDENTS:
This collection agency is licensed by the Division of Banking in the
Wisconsin Department of Financial Institutions, www.wdfi.org.
(Id. ¶ 37.) The Schmitzes allege that this language is a representation that the debt collector
holds a Wisconsin Collection Agency License pursuant to Wis. Stat. § 218.04 and Wis.
Admin. Code § DFI-Bkg. 74. (Id. ¶ 38.) However, the Schmitzes allege that Valentine does
not, in fact, hold a Wisconsin Collection Agency License and is not licensed by the Division
of Banking or any other Wisconsin government agency. (Id. ¶¶ 39–43.) The Schmitzes allege
that this representation constitutes a materially false statement in violation of the FDCPA.
(Id. ¶ 44.) The Schmitzes further allege that they were confused by the collection letter, they
had to spend time and money investigating the collection letter, and an unsophisticated
consumer would be confused by the collection letter. (Id. ¶¶ 46–49.) The Schmitzes allege that
LVNV is either directly or vicariously liable for Valentine’s alleged violations. (Id. ¶ 45.) As

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such, the Schmitzes sue Valentine and LVNV under 15 U.S.C. §§ 1692e, 1692(e)(1), and
1692(9) and Wis. Stat. § 427.104(1)(k). (Id. ¶¶ 52–62.)
APPLICABLE RULE
The defendants move for judgment on the pleadings under Federal Rule of Civil
Procedure 12(c). Rule 12(c) provides that “After the pleadings are closed--but early enough
not to delay trial--a party may move for judgment on the pleadings.” Valentine and LVNV
allege that the Schmitzes lack standing to bring their FDCPA and WCA claims. The
defendants’ challenge to the Schmitzes’ standing attacks the court’s subject-matter jurisdiction
and thus arises under Fed. R. Civ. P. 12(b)(1). See Apex Digital, Inc. v. Sears, Roebuck & Co., 572
F.3d 440, 443–45 (7th Cir. 2009). In evaluating a challenge to subject matter jurisdiction, the
court must first determine whether a factual or facial challenge has been raised. Silha v. ACT,
Inc., 807 F.3d 169, 173 (7th Cir. 2015). A factual challenge contends that even if the pleadings
are formally sufficient there is in fact no subject matter jurisdiction. Id. A facial challenge
argues that the plaintiff has not sufficiently alleged a basis of subject matter jurisdiction. Id.
When addressing a factual challenge, the court may look beyond the pleadings; whereas when
addressing a facial challenge, the court must accept all well-pleaded factual allegations as true
and draw all reasonable inferences in favor of the plaintiffs.
Valentine and LVNV argue a facial challenge to the court’s jurisdiction. (Defs.’ Br. at
3–4, Docket # 38.) Thus, I evaluate the amended complaint pursuant to the standard
articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). Silha, 807 F.3d at 173. Factual
allegations in the complaint must be sufficient to raise the possibility of relief above a
speculative level. Twombly, 550 U.S. at 555. Although detailed allegations are not required,
the Schmitzes must allege facts that state a claim to relief that is plausible on its face. Ashcroft

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v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). That said, “threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id. I must view all of the facts in a
light most favorable to the Schmitzes (as the non-moving party) and only grant the motion if
it is beyond doubt that the Schmitzes can plead no facts that would support their claims for
relief. United States v. Wood, 925 F.2d 1580, 1581 (7th Cir. 1991).
DISCUSSION
The Schmitzes allege that the debt collection letter addressed to their deceased mother,
but received and opened by them, contained a false statement in violation of the FDCPA and
the WCA. Valentine and LVNV argue that the Schmitzes’ amended complaint must be
dismissed because the Schmitzes lack standing to prosecute their claims both individually and
as representatives of their mother’s estate.
1.

Individual Capacity Claims

As an initial matter, although Valentine and LVNV argue for judgment on the
pleadings as to both the Schmitzes’ FDCPA and WCA claims, they do not separately argue
standing or cite to any legal authority as to the WCA claims. However, given the fact that
Wisconsin courts follow the policies underlying the FDCPA when interpreting the WCA, see
Brunton v. Nuvell Credit Corp., 2010 WI 50, ¶ 45, 325 Wis. 2d 135, 161, 785 N.W.2d 302, 314
(“Our construction is also in accordance with the policies underlying a federal consumer
credit protection act, policies with which we are instructed to coordinate our interpretations

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of the Wisconsin Consumer Act.”), and the defendants have cited no contrary authority, I
will address both claims together.
Valentine and LVNV argue that the Schmitzes lack standing to bring a claim under §
1692e. Specifically, they argue that Valentine’s debt collection letter was addressed and
directed to Joanne Schmitz. While Sheila and Robert were her powers of attorney during her
lifetime, this position ceased upon Joanne’s death and the Schmitzes fail to allege sufficient
facts to demonstrate they fall within § 1692e’s “zone of interest,” whether in their individual
or representative capacities. The Schmitzes counter that they fall within the statute’s “zone of
interest” because they were close family members of Joanne, they had authority to open and
review Joanne’s mail, and they resided at the same address as Joanne and are the primary
beneficiaries of her estate.
1.1

Seventh Circuit Law

The stated purpose of the FDCPA is “to eliminate abusive debt collection practices by
debt collectors.” 15 U.S.C. § 1692. Standing under the FDCPA depends on the specific
statutory provision allegedly violated. See Todd v. Collecto, Inc., 731 F.3d 734, 738 (7th Cir.
2013) (“[E]ach provision of the FDCPA must be analyzed individually to determine who falls
within the scope of its protection and thus to decide ‘with respect to’ whom the provision can
be violated.”); see also Koval v. Harris & Harris, Ltd., No. 16-CV-8449, 2017 WL 1321152, at *1
(N.D. Ill. Apr. 5, 2017) (“A plaintiff who lacks standing under one provision of the FDCPA
may well have standing under another.”). Some provisions explicitly define their scope—for
example, § 1692c states that it is limited to communications with “consumers,” as defined in
§ 1692c(d). The Schmitzes sue Valentine and LVNV under 15 U.S.C. § 1692e, which obliges
debt collectors to refrain from “any false, deceptive, or misleading representation or means in

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connection with the collection of any debt.” Unlike § 1692c, § 1692e does not specifically
limit its scope to statements directed at “consumers.” See O’Rourke v. Palisades Acquisition XVI,
LLC, 635 F.3d 938, 941 (7th Cir. 2011).1 Absent specific statutory instruction defining its
scope, the Seventh Circuit has held that “only a person within a statutory provision’s ‘zone
of interest’ has standing to sue under it.” Todd, 731 F.3d at 736; see also See Gable v. Universal
Acceptance Corp. (WI), 338 F. Supp. 3d 943, 956 (E.D. Wis. 2018) (quoting Zehetner v. Chrysler
Fin. Co., LLC, 2004 WI App 80, ¶ 12, 272 Wis. 2d 628, 679 N.W.2d 919) (“Whether a person
has standing to assert a claim under the WCA depends on ‘whether the party seeking standing
was injured in fact, and whether the interest allegedly injured is arguably within the zone of
interests to be protected or regulated by the statute or constitutional guarantee in question.’”).
The principal case addressing the “zone of interest” in the context of a § 1692e claim
is O’Rourke v. Palisades Acquisition XVI, LLC. In O’Rourke, a debtor collector sued O’Rourke in
state court over an unpaid credit card debt. 635 F.3d at 939. The debt collector attached an
exhibit to its complaint that O’Rourke alleged contained materially false and misleading
information. Id. O’Rourke then sued the debt collector in federal court alleging that the exhibit
violated § 1692e because it was meant to mislead the state court judge. Id.
The Seventh Circuit concluded that a potentially misleading communication to a judge
was not actionable under § 1692e. In so finding, the court considered the fact that § 1692e
does not specifically state to whom the representation has to be made for it to be actionable.
Id. at 942. However, the court found that “[a]lthough the section’s language has no specific
limits, it cannot be so open-ended as to include, for example, a misleading letter sent to the

Wis. Stat. § 427.104(1)(k), the provision of the WCA under which the Schmitzes sue, similarly does not limit
recovery to “customers.”
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wrong address. There must be a limiting principle.” Id. (internal citation omitted). The court
further noted that as a general matter, the FDCPA’s protections do not extend to third parties.
Id. at 943. The court stated that “the Act is limited to protecting consumers and those who
have a special relationship with the consumer—such that the Act is still protecting the
consumer—from statements that would mislead these consumers.” Id. Thus, the court found
§ 1692e limited to consumers and “those who stand in their shoes.” Id.
While O’Rourke gave some shape to § 1692e’s “zone of interest,” explaining that it is
limited to those who have a “special relationship” with the consumer and/or can be said to
“stand in their shoes,” it left the boundaries unclear. The Schmitzes rely heavily on the
Seventh Circuit’s subsequent decision in Todd, where the court clarified O’Rourke’s seemingly
broad language. (Pl.’s Resp. Br. at 20–22, Docket # 39.) In Todd, the plaintiff alleged that a
debt collector violated § 1692b and § 1692f of the FDCPA when it called him and told him
that his mother owed money to a creditor. 731 F.3d at 736. The district court, relying on
language from O’Rourke—“‘[W]e read the Act’s protections as extending to consumers and
those who stand in the consumer’s shoes and no others’”— concluded that Todd did not have
standing to sue under any provision of the FDCPA because he was not the person alleged to
owe the debt in question. Id. at 736–37. The Seventh Circuit agreed, but emphasized that this
outcome hinged on the fact that Todd alleged violations of § 1692b and § 1692f, not § 1692e
as in O’Rourke and this case, and cautioned against reading O’Rourke so broadly as to foreclose
all FDCPA claims by persons other than consumers and their proxies. Id.; see also Jordan v. BP
Peterman Law Group, LLC, No. 18-CV-1621, 2019 WL 698459, at *3 (E.D. Wis. Feb. 20, 2019)
(noting the Todd court, in dicta, left open the possibility that non-consumers could have

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standing to sue under § 1692e). Thus, after Todd, the boundaries of § 1692e’s “zone of interest”
remain unclear.
1.2

Application to This Case

Since Todd, several district court cases have opined on whether particular plaintiffs fell
within § 1692e’s “zone of interest.” However, each case has materially distinguishable facts
that make analogy to this case difficult.
The Schmitzes offer Koval to support the position that standing under § 1692e extends
to those with informal authority to assist and provide care for a consumer. In Koval, the
plaintiff was the legal guardian of her disabled father. Koval alleged that she had the authority
to open her father’s mail and make decisions on his behalf. Koval sued the debt collector
under § 1692e and the debt collector challenged her standing to bring the claim in her
individual capacity (i.e., as opposed to as her father’s legal guardian). The court found that
protecting “close associates” fulfills the FDCPA’s purpose and “[f]ormal guardian or not, a
daughter who provides daily care for a disabled parent fits comfortably within the same zone
[of interest].” 2017 WL 1321152, at *2. The court further concluded that while Koval could
have sued in her representative capacity as guardian, she need not. “A close family member
who receives a misleading communication attempting to collect a debt may sue in her
individual capacity under § 1692e.” Id.
However, as Valentine and LVNV point out, Koval is distinguishable on one key fact—
the parent was alive at the relevant time. (Defs.’ Reply Br. at 5, Docket # 41.) The Koval court
emphasized that one giving daily care to a disabled parent fits “comfortably” in the zone of
interest the FDCPA protects. The Schmitzes were not giving daily care to a disabled parent

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when they opened the letter. Instead, their parent was deceased, and it is not clear whether
this fits so comfortably in the zone of interest the FDCPA is intended to protect.
For their part, the defendants point to cases in which the third party’s formal
appointment, or lack thereof, was a key factor. They cite Hill v. Bayside Woods, Hoa Inc., No.
16-CV-916, 2017 WL 529601 (S.D. Ind. Feb. 9, 2017), which found that an adult daughter of
a debtor did not have standing under § 1692e because her brother was their father’s power of
attorney. Like Koval, however, the distinguishing facts of Hill give it questionable value in this
case. The debtor in Hill was alive and had a power of attorney, who clearly had the authority
to “step into the shoes” of the debtor. The other case the defendants rely on, Srachta v. Ditech
Fin. LLC, No. 17-CV-01370, 2017 WL 5903836 (N.D. Ill. Nov. 30, 2017), contains a sparse
standing analysis that can add little to the development of a meaningful rule or standard on
this issue. And in the end, whether there was a formal appointment may not matter: the
defendants clarify that “they are not requesting a sweeping rule that only those who are
appointed as executrix or personal representatives have standing to assert claims under the
FDCPA.” (Defs.’ Reply Br. at 6.)
Thus, I am left with no rule or even any clear guidance on defining § 1692e’s “zone of
interest.” At best, a few principles stand out. Given that the plain language of § 1692e does
not limit its protections to consumers, its “zone of interest” is clearly broader than other
provisions of the FDCPA. But as the O’Rourke court stated, § 1692e’s protections must have
a “limiting principle,” and that “limiting principle” is some sort of “special relationship”
between the consumer and the third party. Id. Based on the Seventh Circuit’s cautionary
language in Todd, I am not convinced that that “special relationship” must be a formal
appointment, and as noted, the defendants appear to agree.

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Looking outside this circuit, I find the Sixth Circuit’s analysis in Wright v. Fin. Serv. of
Norwalk, Inc., 22 F.3d 647 (6th Cir. 1994) persuasive. In Wright, the defendant debt collector
sent fourteen letters addressed to Wright’s mother after her death. Id. at 648. Wright, acting
as executrix of her mother’s estate, opened the letters. Id. Wright sued the debt collector under
§ 1692e. Id. at 649. In finding that Wright had standing, the court considered the fact that the
FDCPA’s enforcement provision, § 1692k(a), provides that “‘any debt collector who fails to
comply with any provision of this subchapter with respect to any person is liable to such
person.’” Id. (emphasis in original). The court found that absent a limitation in the substantive
provision, “the ordinary and common understanding of § 1692k is that any aggrieved party
may bring an action under § 1692e.” Id. at 649–50. The court concluded that given the
FDCPA’s broad language, the statute’s purpose of eliminating abusive debt collection
practices, and Congress’ intent to make the statute self-enforcing, “the phrase ‘with respect to
any person’ includes more than just the addressee of the offending letters.” Id. at 650. The
court concluded that “the phrase, at a minimum, includes those persons, such as Wright, who
‘stand in the shoes’ of the debtor or have the same authority as the debtor to open and read
the letters of the debtor.” Id.
Allowing a person who has the authority to open and read the debtor’s letters to pursue
a § 1692e claim fulfills the purpose of the FDCPA to protect “consumers and those who have
a special relationship with the consumer—such that the Act is still protecting the consumer—
from statements that would mislead these consumers.” O’Rourke, 635 F.3d at 943. While the
plaintiff in Wright also happened to be the executrix of the debtor’s estate, see 22 F.3d at 650,
one may be authorized to open and read the letters of the debtor without a formal designation,
see, e.g., Koval, 2017 WL 1321152, at *2 (“Formal guardian or not, a daughter who provides
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daily care for a disabled parent fits comfortably within the same zone [of interest].”). But see
Srachta, 2017 WL 5903836, at *3 (“[N]one of the Plaintiffs were formally appointed as
administrator when the letter was sent, so they did not have legal authority to receive the
correspondence nor any obligation to repay the mortgage debt.”). In this case, the Schmitzes
allege that they were authorized to open their mother’s mail. (Am. Compl. ¶¶ 8, 36.) While
the defendants may challenge the validity of this authorization, at this juncture, the amended
complaint alleges sufficient facts to show standing on the Schmitzes’ individual claims under
the FDCPA and the WCA.
2.

Representative Capacity Claims

Valentine and LVNV also challenge the Schmitzes’ standing to bring the FDCPA and
WCA claims on behalf of their mother’s estate. As an initial matter, the law the Schmitzes
cite in support of standing to pursue a claim on behalf of the estate is inapposite. They argue
that because the FDCPA is remedial in nature, a cause of action under the FDCPA survives
the death of a party. (Pls.’ Resp. Br. at 25.) While this may be true, see, e.g., Cuoco v. Palisades
Collection, LLC, No. CIV.A. 13-6592 JLL, 2014 WL 956229, at *4 (D.N.J. Mar. 11, 2014)
(“[C]laims under the FDCPA survive the death of a party.”); Jewett v. Bishop, White Marshall
& Weibel, P.S., No. CV 12-10142 PSG MRWX, 2013 WL 6818245, at *3 (C.D. Cal. Feb. 25,
2013) (same), these cases address substitution under Fed. R. Civ. P. 25 after a party dies
during litigation. That is not what happened here. No FDCPA action was filed until after
Joanne’s death. In fact, the letter was not sent until after Joanne’s death. Because there was
no lawsuit prior to Joanne’s death, there was no claim to survive her death.
To invoke standing, the Schmitzes cite to a Sixth Circuit case for the proposition that
the FDCPA’s protections extend to entities as well as to natural persons. (Pls.’ Resp. Br. at

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26 n.4, citing Anarion Investments LLC v. Carrington Mortg. Servs., LLC, 794 F.3d 568, 570 (6th
Cir. 2015).) Again, this may be true as a general proposition, but it is unclear how the
Schmitzes allege the estate was harmed in this case. In their brief, they argue that even if
Joanne was not herself misled by the defendants’ representations, “there was certainly a risk
that her estate may have been, in which case the claim would have accrued to her estate such
that Plaintiffs would also have standing to bring the claim in a representative capacity.” (Id.)
But there are no allegations in the complaint that plausibly claim the estate was harmed. In
fact, the Schmitzes specifically allege that they received and read the debt collection letter as
the caregivers of Joanne Schmitz (Am. Compl. ¶ 36); they do not allege that the letter was read
or received in their capacities as representatives (whether formal or informal) of the estate.
While the Schmitzes’ allegations sufficiently plead claims in their individual capacities, by
alleging that the letter was read as Joanne’s caregivers, they have pled themselves out of court
as to their representative capacity claims. For these reasons, the Schmitzes may pursue their
FDCPA and WCA claims in their individual capacities, but not as representatives of Joanne’s
estate.
ORDER
NOW, THEREFORE, IT IS ORDERED that defendant’s motion for judgment on
the pleadings (Docket # 37) is GRANTED IN PART and DENIED IN PART. The plaintiffs
may pursue their FDCPA and WCA claims in their individual capacities. However, their
FDCPA and WCA claims made in their capacities as representatives of Joanne Schmitz’s
estate are dismissed.

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Dated at Milwaukee, Wisconsin this 5th day of December, 2019.
BY THE COURT
s/Nancy Joseph_____________
NANCY JOSEPH
United States Magistrate Judge

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