MANISH S. SHAH, District Judge.
Plaintiff Josef Bozek brings this action against eleven defendants for their debt-collection tactics and for their refusal to validate, remove, or correct inaccuracies regarding that debt in violation of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq., the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq., the Illinois Collection Agency Act, 225 ILCS §§ 425/1 et seq., and the Illinois Consumer Fraud Act, 815 ILCS §§ 505/1 et seq. He also includes a claim against all defendants for intentional infliction of emotional distress. Defendants filed four separate motions to dismiss. See [16]; [47]; [49]; and [51].
A Rule 12(b)(1) motion challenges jurisdiction in federal court; on such a motion, the plaintiff bears the burden of establishing the elements necessary for jurisdiction. Scanlan v. Eisenberg, 669 F.3d 838, 841-42 (7th Cir. 2012). With a Rule 12(b)(1) motion, a court may look beyond the complaint's allegations and consider any evidence that has been submitted on the issue of jurisdiction. Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). By contrast, a Rule 12(b)(6) motion "tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). The complaint must contain factual allegations that plausibly suggest a right to relief. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). A court may consider allegations in the complaint, documents that are referenced by and central to the complaint, and information that is properly subject to judicial notice.
When analyzing a motion under Rule 12(b)(1) or Rule 12(b)(6), the court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Scanlan, 669 F.3d at 841. The court need not accept legal conclusions or conclusory allegations, however. Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011).
Bozek refinanced his home loan with National City Bank in 2007. [45] ¶ 17. Almost four years later, Pierce & Associates filed a foreclosure action on behalf of Bank of America against Bozek in the Circuit Court of Cook County. Id. ¶ 20. A few months into the foreclosure action, Pierce & Associates recorded the assignment of the mortgage and transferred the interest in Bozek's property from PNC Bank to Bank of America. Id. ¶ 21. Several years later, Bozek emailed an attorney at Pierce & Associates named Eliazer Calero, to request an accurate payoff statement before the scheduled sale of Bozek's property. Id. ¶¶ 13, 25. Pierce & Associates responded with a $747,237.40 payoff demand. Id. ¶ 26. On August 11, 2016, Pierce & Associates completed the sale of Bozek's property. Id. ¶ 39. Bank of America purchased the property for $499,500 and a deficiency judgment of $357,053.66 was entered on November 15, 2016. Id. ¶¶ 47-48.
Despite Bozek's requests, Pierce & Associates failed to provide an accurate payoff statement; and Pierce & Associates, along with Calero and Phil Schroeder,
Before this action began, Bozek litigated at least four other state-court actions: (1) a 2010 foreclosure action in the Circuit Court of Cook County; (2) a 2014 suit for declaratory relief, which was consolidated with the 2010 foreclosure action; (3) a petition to the Illinois Supreme Court seeking a supervisory order, and (4) a 2016 suit to quiet title, which was dismissed with prejudice.
Bozek filed a motion to vacate the entry of summary judgment, which the court treated as a motion to reconsider. Id. That motion also challenged the loss mitigation affidavit and the affidavit of amounts due and owing; and it contained similar merits-based arguments about the failure to send the notice of acceleration, violations of the Truth in Lending Act, lack of notices concerning a change in loan service, improper notarization of the mortgage, lack of notarization on the assignments of mortgage, fraud in the reformation of mortgage, unclean hands, rescission, and a request for a stay. Id. The court held that "even if the arguments had been raised during briefing on the Motion for Summary Judgment, they lacked merit and would not have prevented entry of judgment"; thus, the court denied Bozek's motion with prejudice. Id. Bozek attempted to appeal this order, but it was not a final judgment. Id. At around this time, the declaratory judgment action was consolidated with the foreclosure action.
There was a judicial sale of the property after "significant back-and-forth concerning loss mitigation and emergency motions to stay."
When the stay of eviction was set to expire in a few weeks, Bozek filed a petition to vacate the order granting summary judgment and the order confirming foreclosure sale and entry of deficiency judgment, which the court treated as a motion to reconsider. Id. at 5, 8. That motion raised a number of issues, almost all of which, the court noted, "have been addressed before, some on multiple occasions." Id. at 9. The court noted that none of the arguments had merit, but that the court would explain "one last time" why the arguments were "moot, meritless, improper, waived, or some combination thereof." Id.
In relevant part, the court explained that the original note had been exhibited; that Bozek had failed to present evidence of fraud or forgery concerning the note; no fraud existed in the assignment of mortgage from PNC Bank to Bank of America because counsel can sign an assignment as an agent on behalf of the entity making the assignment. Id. at 11-12. The court dismissed Bozek's arguments that the recordation was invalid; the court explained that none of the requirements Bozek identified were relevant, and even if the recordings were improper, the mortgage and assignments would still be binding on the parties, such that the foreclosure plaintiffs could foreclose upon them. Id. at 12-13. Since the relevant statute was no longer in effect, Bozek's argument that the foreclosure plaintiffs violated that state statute by failing to send a Grace Period Notice prior to initiating foreclosure proceedings was meritless. Id. at 13-14. Additionally, Bozek's argument that the foreclosure plaintiffs violated the terms of the mortgage by failing to send a Notice of Acceleration prior to initiating foreclosure proceedings was untimely, and therefore, was waived. Id. at 14.
Finally, Bozek's argument that the foreclosure plaintiffs and their counsel were unlicensed debt collectors who violated the FDCPA was improperly raised in a motion to reconsider because it was novel to the case. Id. at 11. Even if an FDCPA violation had occurred, the court explained that "at most" it would have been grounds for a counterclaim for damages, and that it would not have provided "a complete defense to foreclosure" as Bozek implied. Id. at 12. Although Bozek argued that he sought debt validation in May, August, and October of 2016, the court reminded him that the debt did not exist at that point since the mortgage and note merged into the judgment of foreclosure with the summary judgment ruling in October 2015. Id. at 11. The judgment of foreclosure fixed the amount by court order at $711,313.46, plus interest accruing, the court explained. Id. The debt validation also would not have barred entry of judgment. Id. at 12. The court advised Bozek that the issues he raised in the second motion to reconsider "have already been addressed, and ruled upon, multiple times"; accordingly, he was prohibited from filing additional motions, pleadings, or documents with the court. Id. at 17. Specifically, on January 13, 2017, the court stated: "This case is over. To the extent [Bozek] disagrees with the Court's rulings, [his] remedy lies on appeal. Further attempts to litigate this case before this Court may result in sanctions." Id.
While the foreclosure action was pending, Bozek also filed two other federal cases, not including this action: (1) a 2015 case seeking to remove the foreclosure case, which was dismissed
In this action, Bozek's first amended complaint contains six counts. See [45]. In Count I, he asserts a violation of the FDCPA against all defendants. In Count II, he asserts a violation of the Illinois Collection Agency Act against Pierce & Associates and McCalla. In Count III, he asserts a violation of the Illinois Consumer Fraud Act against Bank of America, PNC Bank, PNC Mortgage, Pierce & Associates, and McCalla. In Counts IV and V, he asserts violations of the Fair Credit Reporting Act against PNC Mortgage and Bank of America, respectively. In Count VI, he asserts an intentional infliction of emotional distress claim against all defendants. Pierce & Associates, along with McCalla, Calero, Schroeder, and Gruca move to dismiss Bozek's complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). See [15]-[16]. The motion to dismiss filed by PNC Bank, PNC Mortgage, and Gail Klein
Pierce & Associates and PNC move to dismiss this action for lack of subject-matter jurisdiction under the Rooker-Feldman doctrine. [16] at 3; [52] at 4. Federal district courts do not have jurisdiction over cases brought by parties who lost in state court and who seek relief from injuries caused by that prior state-court judgment. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283-84 (2005) (citing D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983); Rooker v. Fidelity Tr. Co., 263 U.S. 413 (1923)). The Supreme Court is the only federal court that has jurisdiction to review such claims. Brown v. Bowman, 668 F.3d 437, 442 (7th Cir. 2012).
There are two circumstances in which the Rooker-Feldman doctrine bars federal cases. In addition to barring a case that seeks to overturn an adverse state-court judgment, the doctrine also bars claims that are "inextricably intertwined" with a state-court judgment—even if the claims were not raised in state court and even if they do not demand review of the state-court judgment on their face. Id. A claim is inextricably intertwined with a state-court decision if it alleges that the state-court judgment caused the injury, or if "[it] alleges an independent prior injury that the state court failed to remedy." Id. (citing Long v. Shorebank Dev. Corp., 182 F.3d 548, 555 (7th Cir. 1999)). If a claim is inextricably intertwined with the state-court judgment, the federal district court must then determine if the plaintiff had a reasonable opportunity to raise the issue in the state-court proceeding; if not, the Rooker-Feldman doctrine does not apply and the federal district court has subject-matter jurisdiction over that claim.
Pierce & Associates argue that Bozek's claims are inherently intertwined with the foreclosure action because in this action, Bozek attacks the sufficiency of the evidence in state court, the propriety of the state-court proceedings, and the foreclosure plaintiffs' standing in state court. [16] at 3-4. Bozek could have brought those claims in state court, Pierce argues. Id. at 4. Relatedly, PNC argues that Bozek's alleged injuries stem from the validity of the debt, which is inextricably intertwined with the issues presented in the state-court proceedings, because, in order to permit a judgment of foreclosure, sale of the property, and a confirmation of the sale of the property, the state court had to find that there was sufficient proof that Bozek owed a debt related to the property. [52] at 5-6. Since the state court has already determined that the debt is valid, the Rooker-Feldman doctrine bars Bozek's claims.
Bozek argues that he did not file this action with the intention of reversing the state-court's order in the foreclosure action. [59] at 2. Instead, he seeks relief from defendants' actions prior to and during the foreclosure action, whereby defendants violated federal rules that govern how to interact with consumers like Bozek. Id. at 2, 4. Bozek also argues that the doctrine cannot apply because, (1) he did not have a reasonable opportunity to raise federal proceedings in state court, id. at 4 (citing Reyes v. Kenosian & Miele, LLP, 619 F.Supp.2d 796 (N.D. Cal. 2008)), and (2) the state-court judgment is not final because the case is on appeal.
Both of those arguments fail. As Pierce notes, Bozek's intentions for filing this action are irrelevant. See [60] at 4. Instead, the relevant inquiry is whether Bozek "contends that out-of-court events have caused injury that the state judiciary failed to detect and repair." Iqbal v. Patel, 780 F.3d 728, 730 (7th Cir. 2015). Here, Bozek's allegations concern defendants' conduct during the foreclosure action—Pierce & Associates proceeded with the sale of his property without verifying the accuracy of the amount owed on the debt; McCalla also never validated the debt Bozek owed; PNC Mortgage reported "derogatory information" about Bozek to three credit bureaus while the debt was in dispute; and all defendants, in a conspiracy to damage his reputation for credit worthiness, attempted to collect a debt from Bozek that they knew was false or ineligible for collection. These claims are inextricably intertwined with the foreclosure action and Bozek had a reasonable opportunity to raise these claims in the foreclosure action because state and federal courts have concurrent jurisdiction over FCRA and FDCPA claims.
Under Illinois law, "a judgment ordering the foreclosure of mortgage is not final . . . until the trial court enters an order approving the sale and directing the distribution." EMC Mortg. Corp. v. Kemp, 367 Ill.Dec. 474, 476 (2012). Here, the state court entered a judgment for foreclosure and sale on October 28, 2015, [60-1] at 3; subsequently, the court entered an order approving the sale on November 15, 2016, id. at 5. Several months later, Bozek filed this action. See [1]. Due to the timing and substance of these actions, the Rooker-Feldman doctrine applies. Bozek's claims against these defendants are dismissed without prejudice. Mains v. Citibank, N.A., 852 F.3d 669, 678 (7th Cir. 2017). Indeed, all of Bozek's federal claims— whether arising under the FCRA or the FDCPA—relate to harms caused by the foreclosure action. They are all about misconduct surrounding the debt litigated within the foreclosure action and they are intertwined with the injury Bozek suffered within the state-court system. There is no subject-matter jurisdiction over any of those claims. But even if some claims allege injuries independent of the state-court order, the complaint fails on the merits under Rule 12(b)(6).
Res judicata bars an action when the following elements are present: (1) a court of competent jurisdiction rendered a final judgment; (2) there is an identity of parties or their privies; and (3) there is an identity of causes of action. Nowak v. St. Rita High Sch., 197 Ill.2d 381, 389 (2001). The first element is satisfied because the state court reached a final judgment on the merits when it entered an order approving the sale of Bozek's property. See EMC Mortg. Corp., 367 Ill.Dec. at 476. Bozek does not dispute that there is an identity of parties or their privies; Pierce & Associates, on behalf of Bank of America, brought the foreclosure action against Bozek. He only disputes that the third element is met. [59] at 5.
In order to determine if there is an identity of claims, Illinois uses a transactional test, which provides: "the assertion of different kinds or theories of relief still constitutes a single cause of action for purposes of res judicata if a single group of operative facts gives rise to the assertion of relief." Id. at 391-92. This element is satisfied here because Bozek's claims arise out of the same set of operative facts—the validation of the debt—in both actions. I disagree with Bozek's argument that the claims in the foreclosure action were "based on enforcing security interest secured by Plaintiff's property to debt collector BOA's," which was distinct from the claims in this action, which were based on compliance with the federal statutes and requirements as they apply to a mortgage lender, financial entities, credit reporting institutions, its successors and representatives. [59] at 5. Those characterizations do not overcome defendants' showing that the two cases arise from the same set of operative facts.
Res judicata is an affirmative defense, which defendants should raise in a motion for judgment on the pleadings under Rule 12(c), but Bozek does not complain about the procedural error. The complaint and the state-court litigation documents present all the information I need to rule on the defense. See Carr v. Tillery, 591 F.3d 909, 913 (7th Cir. 2010); see also Mains, 852 F.3d at 678. If the Rooker-Feldman doctrine did not divest this court of jurisdiction, the claims against Pierce & Associates, PNC, and Bank of America would be barred by res judicata.
The statute of limitations for an FDCPA claim is one year from the date on which the violation occurred. See 15 U.S.C. § 1692k(d). Pierce & Associates and Bank of America argue that Bozek's FDCPA claim is time-barred because he filed this action several years after his first request for validation, [16] at 8; [50] at 3. Bozek argues that his claim relates to a payoff letter to Pierce and McCalla, dated June 21, 2016, and that his claim does not include the 2013 letters that Pierce & Associates referenced in its brief. [59] at 7-8. As such, he concludes that his FDCPA claim is timely. Id. at 8. The statutory language does not permit a plaintiff to select his date of violation, though. Since Bozek's complaint references letters he sent in 2013, he cannot ignore those allegations now that he is faced with running afoul of the statute of limitations.
The Seventh Circuit has not decided on which date the violation occurs for FDCPA violations that arise out of a foreclosure action. Stone v. Wash. Mut. Bank, 2011 WL 3678838, at *7 (N.D. Ill. 2011) (collecting cases). Several courts in this district have held that the statute of limitations begins to run in such FDCPA cases when the allegedly wrongful litigation began. Id. Regardless of whether I chose the defendants' proposed date of violation or the method used by other courts in this district, Bozek's FDCPA claim would be time-barred because he did not file this complaint until several years after both of those dates.
The expiration of a statute of limitations is also an affirmative defense; dismissal on such grounds is appropriate only if "the plaintiff pleads himself out of court by alleging facts sufficient to establish the complaint's tardiness." Cancer Found., Inc. v. Cerberus Capital Mgmt., LP, 559 F.3d 671, 674-75 (7th Cir. 2009). Given the allegations in the complaint and the litigation documents from state court, the FDCPA claims are time-barred.
Pierce & Associates, Winston & Strawn, and PNC argue that Bozek fails to state an FDCPA claim because they are not "debt collectors" under the statute. [16] at 8; [48] at 3-4; [52] at 8. "The FDCPA regulates only the conduct of `debt collectors.'" Ruth v. Triumph P'ships, 577 F.3d 790, 796 (7th Cir. 2009). Under the FDCPA, a debt collector is defined as:
15 U.S.C. § 1692a(6). The complaint states that each of the defendants is a debt collector under the FDCPA. [45] ¶¶ 62-71. These allegations are conclusory. With respect to Calero, Schroeder, and Gruca, the complaint merely states that Bozek sent those individuals and their firms debt validation letters, that they failed to reply, and that they proceeded with the sale of his property (or, in Gruca's and McCalla's case, threatened to file a forcible entry complaint against Bozek) without validating the debt amount. Similarly, the complaint states that Bozek sent debt validation letters to Winston & Strawn and Cocanig, and that they failed to respond.
Bozek argues that attorneys and law firms can be held liable under the FDCPA, and that these attorneys and their firms violated the FDCPA by failing to respond to his debt validation letters, proceeding in their respective actions without validating the debt amount, and participating in the foreclosure litigation. [59] at 8. His initial statement of the law is correct; the Supreme Court has held that the FDCPA applies to lawyers who regularly try to collect debts through litigation. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 593 (2010) (citing Heintz v. Jenkins, 514 U.S. 291, 292 (1995)). Yet, the complaint does not suggest that these defendants were regularly involved in debt collection. Drawing reasonable inferences in Bozek's favor, though, there is some support for the assertion that Pierce & Associates attempted to collect a debt from Bozek—that firm initiated the foreclosure action against Bozek after he defaulted on a debt he owed to the firm's client, Bank of America. Winston & Strawn, on the other hand, only defended Bank of America against lawsuits that Bozek pursued, see [48] at 2; their defense does not constitute an attempt at debt collection here. By the terms of the statute, Winston & Strawn and Cocanig are not debt collectors and cannot be held liable under the FDCPA.
Klein was not a debt collector because the FDCPA's definition of a debt collector "does not include . . . any officer or employee of a creditor while, in the name of the creditor, [she] collect[s] debts for such creditor." 15 U.S.C. § 1692a(6)(A). Even assuming that Klein sent a dunning letter to Bozek, the statute exempts Klein from liability for the actions she took in furtherance of collecting for her employer, the creditor. Bozek fails to state an FDCPA claim against Klein.
PNC, the originator of the debt, could be considered a debt collector if it used an alias or assumed a name to collect its debts. See id. § 1692a(6). Since the complaint alleges that PNC used different aliases in reporting Bozek's credit to three credit reporting agencies, there is support for Bozek's assertion that PNC is a debt collector. The complaint also alleges that PNC sent Bozek dunning letters demanding payment and threatening a foreclosure action. [45] at ¶ 34. This is also enough to support his assertion that PNC is a debt collector, but the complaint is deficient in its allegations concerning PNC's FDCPA liability. Bozek does not identify PNC's initial communication, nor does he establish that his debt validation letters to PNC were timely, such that PNC was statutorily obligated to respond to Bozek's letters. As a result, Bozek's FDCPA claims against PNC fail on the merits.
Pierce & Associates and Bank of America argue that Bozek fails to state an FDCPA claim because he cannot establish that they owed him any obligation under the statute. With respect to debt validation letters, § 1692g(a) requires a debt collector to provide required information, either in its initial debt collection communication or in another written notice sent within five days of the initial communication. If the consumer requests validation of the debt, § 1692g(b) requires a debt collector to either provide the requested validation or to cease its debt-collecting activities. Jang v. A.M. Miller & Assocs., 122 F.3d 480, 483 (7th Cir. 1997).
As Pierce & Associates and Bank of America note, Bozek does not identify defendants' initial communications, nor does he allege that his requests for debt validation were made within thirty days of any initial communication by defendants.
In Count IV, Bozek alleges that PNC violated 15 U.S.C. §§ 1681i(a)(2), and 1681s-2(b)(1), [45] ¶¶ 105-08; and in Count V, Bozek alleges that Bank of America violated §§ 1681b(f), 1681e, and 1681q, [45] ¶¶ 111-12. PNC and Bank of America each move to dismiss the FCRA claims that Bozek brings against them.
PNC argues that Bozek's FCRA claim must be dismissed because he fails to assert the requisite information to trigger PNC's liability under the statute. [52] at 10 (citing 15 U.S.C. § 1681s-2(b)(1)). Upon receipt of a notice disputing the completeness or accuracy of any information that a person provided to a consumer reporting agency, the FCRA obligates that person to conduct an investigation, to review relevant information, and to report the results of the investigation to the reporting agency. Id. § 1681s-2(b)(1). As PNC notes, Bozek does not allege that he sent PNC a letter disputing information that PNC sent to a credit reporting agency. Although Bozek does refer to debt validation letters in the complaint, there is no allegation that those letters discussed or concerned PNC's reporting to credit reporting agencies. Bozek's response brief does not rebut these arguments. Given that no inference can be made that PNC had a duty to investigate or to correct information that it sent to the credit reporting agencies, I conclude that Bozek cannot state an FCRA claim against PNC.
Bank of America argues that Bozek's allegations are "cryptic, vague, and conclusory, such that it is impossible to decipher the legal or factual basis of [the FCRA] claim." [50] at 8. Alternatively, Bank of America argues that Bozek does not have Article III standing to bring this claim because he does not and cannot allege that the alleged violation proximately caused him actual and specific damages as is required under Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1548 (2016). [50] at 8-9. Bozek does not address these arguments. Instead, Bozek limits his response to reasserting his allegations and confirming that he "will prove at the trial that [Bank of America] violated [the FCRA] by knowingly and willfully obtain[ing] information on [him] from CRA's." [59] at 12.
Bozek failed to allege sufficient facts to state a claim under §§ 1681b(f), 1681e, and 1681q. There is nothing from which one could infer Bank of America's purpose in using or obtaining the relevant information, and the allegation that Bank of America made an unauthorized credit pull, on its own, is not enough to survive a Rule 12(b)(6) motion. See Diedrich v. Ocwen Loan Servicing, LLC, 839 F.3d 583, 589 (7th Cir. 2016) ("Legal conclusions or bare and conclusory allegations, however, are insufficient to state a claim."). Additionally, the complaint does not plausibly allege a concrete harm caused by Bank of America's credit report activity or an "appreciable risk of harm" to the underlying interest that Congress sought to protect by enacting the FCRA. See Groshek v. Time Warner Cable, Inc., 865 F.3d 884, 887 (7th Cir. 2017).
As there are no remaining federal claims in this action, I decline to exercise supplemental jurisdiction over Bozek's state-law claims. See 28 U.S.C. § 1367; Mains, 852 F.3d at 679. Those claims are dismissed without prejudice. Typically, leave to amend should be freely given. See Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 518 (7th Cir. 2015). In this instance, however, amendment would be futile because there are no plausible federal theories of liability against defendants.
Defendants' motions are granted in part. The complaint is dismissed in its entirety, and the Clerk shall enter judgment terminating the case.
