JOHN J. THARP, Jr., District Judge.
The Complaint in this case alleges that the defendant, Law Office of Ira T. Nevel, LLC ("Nevel"), violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., during the pursuit of a state-court mortgage foreclosure action involving a property owned by the plaintiff, Alberta Webb. Nevel moves to dismiss all claims. Mot. Dismiss, ECF No. 16. For the reasons set forth below, the motion is granted in part and denied in part.
On September 11, 2002, Joe Grant, Jr. (the plaintiff's brother) obtained a $21,900 mortgage from GSF Mortgage Corporation, secured by a single-family home located at 5421 W. Crystal Street in Chicago (the "property"). Compl. ¶¶ 9-10, ECF No. 1. On September 13, 2002, Grant quitclaimed the property to himself and Webb as joint tenants with a right of survivorship. Id. ¶ 12. Grant lived in the home with his immediate family. Id. ¶ 10. On October 16, 2013, Grant died, leaving Webb as the sole owner of the property; Grant's immediate family, not including Webb, continued to reside in the home. Id. ¶ 14.
On May 14, 2014, Nevel filed a mortgage foreclosure action in the Circuit Court of Cook County on behalf of CitiMortgage, Inc., alleging default of payment as of November 1, 2013. The foreclosure action named as defendants Grant, Webb, and other unknown tenants/owners and non-record claimants. Id. ¶ 21. The summons and complaint include a page entitled, "Notice Required by the Fair Debt Collection Practices Act." Id. Ex. A 9 (capitalization altered). In reference to the amount of the debt, the FDCPA notice page refers to the amount included in the attached mortgage foreclosure complaint. Id. The attached complaint lists the principal amount of the debt as $6,031.64, with a per diem interest of $0.97. Id. 12 ¶ (j); Compl. ¶ 20.
On May 30, 2014, Nevel filed returns of service stating that Grant (who had died eight months earlier) had been served by leaving a copy of the summons and complaint with his "Co-Occupant" Webb at the property on May 27, 2014, and that Webb had been served personally at the property as well.
Webb acknowledges that she was not personally liable on the note, but asserts that because the value of the property exceeded the amount of the loan, she was likely to suffer "substantial pecuniary loss" if the mortgage were foreclosed (presumably because foreclosure sales often occur at below-market prices). Id. ¶ 28. Instead, Webb listed the property for sale, sold it for $40,000, and paid off the loan. Id. ¶ 40. Webb asserts that, in order to consummate the sale, she "was forced" to pay the attorney's fees and costs that Nevel demanded (totaling $5,038), which included the costs of responding to the motion to quash service. Id. ¶¶ 41-42. The foreclosure action was dismissed with prejudice on December 18, 2014. Id. ¶ 43; Ex. L. Webb filed this action on February 3, 2015, alleging that Nevel violated §§ 1692e, 1692f, and 1692g of the FDCPA by failing to state accurately the amount of the debt. The complaint also alleges that Nevel violated §§ 1692e and 1692f by falsely representing that Webb had been served and by charging improper fees and costs. Nevel moves to dismiss the Complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).
To survive a motion to dismiss, a complaint must state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014). The plaintiff must plead sufficient factual content from which the Court can "draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The Court must construe all allegations in the light most favorable to the plaintiff, accept all well-pleaded facts set forth in the complaint as true, and draw all inferences in favor of the non-moving party. Fednav Int'l Ltd. v. Continental Ins. Co., 624 F.3d 834, 837 (7th Cir. 2010). Allegations in the form of legal conclusions, as well as threadbare recitals of the elements of a cause of action, supported by conclusory statements, do not suffice. Adams, 742 F.3d at 728.
Webb contends that the FDCPA notice included with the summons and complaint failed to state accurately the full amount of the debt and therefore violated § 1692g of the FDCPA. Alternatively, she argues that the notice violated § 1692e's proscription of "false, deceptive, or misleading" statements in connection with debt collection activities. Although the Court agrees with Nevel's contention that Webb cannot state a claim under § 1692g because she is not a "consumer" as defined by the FDCPA, his invocation of state court pleading rules does not immunize the contents of his FDCPA notice from liability under § 1692e.
Section 1692g of the FDCPA specifies the timing and contents of the required written notice to a consumer by a debt collector: "Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing" a variety of information, including the amount of the debt. 15 U.S.C. § 1692g(a).
The requirements of this section, however, only apply to communications with "consumers," whereas various other provisions of the FDCPA apply more broadly. Compare, e.g., § 1692g(a) ("Within five days after the initial communication
The FDCPA defines consumer as "any natural person obligated or allegedly obligated to pay any debt." 15 U.S.C. § 1692a. The Seventh Circuit has stated that "each 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." Todd v. Collecto, Inc., 731 F.3d 734, 738 (7th Cir. 2013). In Todd, the Seventh Circuit compared § 1692b, which protects "only [ ] the consumer who supposedly owes the debt," with § 1692f, which "includes a general prohibition on unfair and unconscionable debt collection practices." 731 F.3d at 738. The court held that the debtor's son did not have standing to sue under § 1692b because the provision was not designed to protect non-consumers, whereas § 1692f was designed to protect any person who experienced unconscionable acts associated with debt collection. Id. at 738-39.
As noted, § 1692g, like § 1692b, applies only to "consumers" and, therefore, protects only those who supposedly owe the debt. See Evory v. RJM Acquisitions Funding L.L.C., 505 F.3d 769, 773 (7th Cir. 2007) (defining "consumer" as "the person claimed to owe a debt"). Webb admits in the Complaint that she "was not personally liable on the note." Compl. ¶ 28. She argues, however, that "obligated" as included in the FDCPA definition of consumer does not mean "personally obligated," and compares her situation to nonrecourse transactions under other titles of the Consumer Credit Protection Act. See Resp. 7-8, ECF No. 22; Mot. Add'l Auth. 1-3, ECF No. 27. Webb asserts, without authority other than her ipse dixit, that when the value of collateral exceeds the debt, "there is a very real `obligation' to pay it." Resp. 8. Webb's contention, however, conflates a legal obligation—a "formal, binding agreement or acknowledgment of a liability to pay a certain amount," Black's Law Dictionary, Obligation (10th ed. 2014), with the practical realities of her situation—namely, that she needed to pay off the debt in order to preserve her equity in the property.
Webb's frustration is understandable; the property she owned was worth significantly more than the amount of the debt. But rather than fight the foreclosure action, she chose to sell the property, and as part of that sale, she paid the entirety of the outstanding balance of the debt (presumably because she could not have found a buyer without a clear title). To pay off the lien to close the sale was a choice Webb made; she was not legally required to pay the lien and admits as much. She cannot now seek the protections of § 1692g when she had no legal obligation to pay the debt and did so because she concluded that payment of the lien and closure of the sale was in her financial best interest. Webb's position is akin to that of the plaintiff in Arruda v. Sears, Roebuck & Co., 310 F.3d 13 (1st Cir. 2002), who opted to pay a secured party rather than surrendering designated collateral. Noting that "none of the facts set forth in the complaint support an inference that the [plaintiffs] were obligated to pay any money to Sears," id. at 23, so the Court concluded that their claim did not involve a "debt" as defined by the Act. The most that could be said, the court explained, is that the plaintiffs "faced an unhappy choice in these transactions, not an obligation to pay money." Id. at 24. The court therefore affirmed the dismissal of their FDCPA claim under § 1692g. Id. at 23 ("to allow these allegations to trigger the FDCPA would require us to read the word `obligation' out of the statute"). See also, e.g., Christy v. EOS CCA, 905 F.Supp.2d 648, 653 (E.D. Pa. 2012) (concluding that plaintiff was not a consumer under the FDCPA because he was not personally obligated to pay his adult son's debt).
In short: because Webb did not owe a debt, she is not a "consumer" under the FDCPA, and she has failed to state a claim under § 1692g. The motion to dismiss is granted with prejudice as to the claims under § 1692g.
Webb also alleges that the notice of debt included in the mortgage foreclosure complaint violated § 1692e because it inaccurately stated the amount of the debt. Compl. ¶ 46. Section 1692e prohibits the use of any "false, deceptive, or misleading representation or means in connection with the collection of any debt," including the false representation of "the character, amount, or legal status of any debt." 15 U.S.C. § 1692e(2). It is important to understand, however, that Webb does not assert that the complaint falsely stated the amount of the principal owed, or included any other false statement; rather, she maintains that the foreclosure complaint's statement of the debt was not "accurate" because, in addition to the principal owed and the per diem interest accruing, it did not also set forth the total amount of the debt, including accrued interest and escrow advances. See Resp. 2-3; Compl. ¶¶ 19, 46.
Nevel counters that the mortgage foreclosure complaint complied with the form complaint proposed in the Illinois Mortgage Foreclosure Law ("IMFL"), 735 ILCS 5/15-101 et seq., and, thus, does not violate § 1692e.
Unquestionably, there can be tension between state court procedural rules and the requirements of the FDCPA. Although the Seventh Circuit has not directly addressed inconsistencies between state-law pleading requirements and the FDCPA, it has strongly suggested that "the state's rules of procedure, not federal law" govern the contents of state court pleadings and the litigation process. Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 473 (7th Cir. 2007) (discussing applicability of § 1692e). Indeed, in the context of a claim that following an authorized state procedure was "unfair" or "unconscionable" under § 1692f, Beler expressly rejected the proposition that the similarly "ambulatory language" of another FDCPA section, § 1692f, gives federal judges license "to displace decisions consciously made by state legislatures and courts about how judgment creditors collect judgments entered under state law." Id. at 475. It is difficult to see why § 1692e's similarly broad proscription of the use of any "misleading" language in connection with the collection of a debt should authorize federal courts to review and rewrite state pleading rules in foreclosure actions.
In this case, however, the conflict that Nevel raises is illusory. Webb's claim is not based on the content of the foreclosure complaint but rather on the content of the putative "Notice Required by the Fair Debt Collection Practices Act" that Nevel chose to provide
Nevel offers no other argument to support dismissal of the § 1692e theory as it relates to the allegedly inaccurate statement of the amount of the debt.
Webb also claims that Nevel violated §§ 1692e and 1692f by falsely representing that she had been served in the mortgage foreclosure action. Nevel argues that, assuming the returns of service are false, they cannot form the basis of a claim under § 1692e because the returns did not mislead her in any way and that they cannot form the basis of a claim under § 1692f because that section is not an enforcement mechanism for state rules. The Court agrees with Nevel.
With respect to the allegedly false returns of service, Webb acknowledges the Seventh Circuit holding that representations made solely to a state court are not covered by the FDCPA. Resp. 10 (citing O'Rourke, 635 F.3d at 944 ("[T]he Fair Debt Collection Practices Act does not extend to communications that would confuse or mislead a state court judge.")). She cites an amicus brief that the Consumer Financial Protection Bureau and the Federal Trade Commission filed in a recent Second Circuit case as support for this Court to reconsider the Seventh Circuit's ruling. Resp. 10 (citing http://files.consumerfinance.gov/f/201311_cfpb_amicus-brief_sykes.pdf (arguing that fraudulent affidavits of service—i.e., "sewer service"—violate the FDCPA)). Unless and until the Seventh Circuit reconsiders its holding in O'Rourke that representations made to a state court judge are not actionable under the FDCPA, that is the controlling law in this Circuit.
Moreover, Webb does not argue that the returns of service were intended to deceive her or actually did so; plainly they didn't, as she contested their authenticity in the state court proceeding by filing the motion to quash service. See Compl. Ex. I. She does, however, claim that she was charged for the cost of the allegedly false returns of service. The propriety of charges associated with service is a separate issue from whether the allegedly fraudulent service, itself, violates § 1692e. Because false representations made to a state court are not actionable under the FDCPA and because Webb does not claim that the returns deceived or were intended to deceive her, she has failed to state a claim under § 1692e based upon the allegedly false representations of service.
Webb's further contention that the returns of service also violated § 1692f, which provides that "a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt," is foreclosed by circuit precedent. "Section 1692f creates its own rules (or authorizes the FTC to do so); it does not so much as hint at being an enforcement mechanism for other rules of state and federal law." Beler, 480 F.3d at 474. In Beler, the Seventh Circuit stated that, based on the language and structure of § 1692f, "the implication is that state judicial proceedings are outside the scope of § 1692f." Beler, 480 F.3d at 475; see also Bentrud v. Bowman, Heintz, Boscia & Vician, P.C., 794 F.3d 871, 875 (7th Cir. 2015) (agreeing with Beler that "[t]he FDCPA is not an enforcement mechanism for matters governed elsewhere by state and federal law."). Webb's claim that the allegedly fraudulent returns of service violated § 1692f is an attempt to use the FDCPA to enforce state-court rules governing service of process. Beler, however, warns against attempts to "piggyback" a claim under § 1692f onto existing state rules of procedure: "Section 1692f does not take a state-law dispute and move it to federal court, even though the amount in controversy is well under $75,000 and the parties are not of diverse citizenship." 480 F.3d at 474. Thus, Webb has failed to state a claim under § 1692f with respect to the returns of service, and the motion to dismiss is granted with prejudice as to this claim.
Webb's final claims are that Nevel charged her improper fees and costs, in violation of §§ 1692e and 1692f. She alleges that the $5,038 she paid in costs and fees includes unnecessary amounts to name a special representative, amounts related to the allegedly falsified service, and excessive amounts for minutes of foreclosure. Nevel states that the mortgage and note authorize court costs and reasonable attorney's fees;
The parties dispute the propriety of Nevel's motion to appoint a special representative and the costs associated with such action. Nevel asserts that Illinois Supreme Court Rule 113(i) requires the appointment of a special representative if the mortgagor is deceased: "In all mortgage foreclosure cases where the mortgagor or mortgagors is or are deceased, and no estate has been opened for the deceased mortgagor(s), the court shall, on motion of a party, appoint a special representative to stand in the place of the deceased mortgagor." ILCS S. Ct. R. 113(i). Webb points out that the comments to this subsection note that it was enacted in response to ABN Amro Mortgage Group, Inc. v. McGahan, 931 N.E.2d 1190 (Ill. 2010), which held that "a mortgagee must name a personal representative for a deceased mortgagor in a mortgage foreclosure proceeding in order for the circuit court to acquire subject matter jurisdiction." Id. at 1192. The comments to Rule 113(i) note that this issue "ha[s] not been specifically addressed by remedial legislation." ILCS S. Ct. R. 113 cmt. The Illinois legislature responded to the Illinois Supreme Court's comment, however, by enacting 735 ILCS 5/15-1501(h):
Based on the statutory language, the appointment of a special representative was not necessary and, therefore, it cannot be said that charging Webb for related work was authorized under the mortgage and note. Sections 1692e and 1692f prohibit an attempt to collect for services not authorized or lawfully rendered. See 15 U.S.C. §§ 1692e (unlawful to falsely represent "any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt"), 1692f (unlawful to collect "any amount . . . unless such amount is expressly authorized by the agreement creating the debt").
Because Webb has alleged that Nevel charged her for unnecessary and, thus, unauthorized legal work, Webb has stated a claim under §§ 1692e and 1692f for the charge of improper fees and costs. See Seeger v. AFNI, Inc., 548 F.3d 1107, 1113 (7th Cir. 2008) (FDCPA violation to charge collection fees not specifically authorized under contract); Day v. Check Brokerage Corp., 511 F.Supp.2d 950, 955 n.2 (N.D. Ill. 2007) (violation of § 1692e to charge legally unauthorized filing and service fees and attorney's fees); see also White v. Fein, Such & Crane, LLP, No. 15-CV-438-JTC, 2015 WL 6455142, at *5 (W.D.N.Y. Oct. 26, 2015) ("[T]o the extent that the fees sought are unreasonable, exceed the customary cost for such work, or represent amounts for work not actually performed, they are not `permitted by law' and the attempt to collect such fees would constitute the violation of section 1692f(1) of the FDCPA."). The Court need not address the arguments related to the additional challenged fees and costs, as that merely goes to the amount of damages rather than the validity of the claim. The motion to dismiss is denied as to these claims.
The motion to dismiss is granted with prejudice as to the claim under § 1692g and as to the claims under §§ 1692e and 1692f based upon the allegedly false representations of service. The motion to dismiss is denied as to the accuracy of the statement of the amount of the debt under § 1692e and as to the allegedly improper charges under §§ 1692e and 1692f.
Wahl v. Midland Credit Management, Inc., 556 F.3d 643 (7th Cir. 2009). Thus, whether or not Nevel made any false statements to Webb (as opposed to statements to the state court judge) concerning service, Webb "ha[s] to prove that an unsophisticated consumer would be deceived or misled by them." Ruth v. Triumph Partnerships, 577 F.3d 790, 800 (7th Cir. 2009). Because she has not done so, her claim cannot survive on this basis, either.
