Herkert v. Mrc Receivables Corp.

• Decision Date: 17 September 2009
• Docket Number: No. 08 C 760.,08 C 760.
• Citation: 655 F.Supp.2d 870
• Parties: Nicole HERKERT and Winona Jackson, on behalf of themselves and all others similarly situated, Plaintiffs, v. MRC RECEIVABLES CORP., Midland Funding NCC-2 Corp., Midland Credit Management, Inc., and Encore Capital Group, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

655 F.Supp.2d 870

Nicole HERKERT and Winona Jackson, on behalf of themselves and all others similarly situated, Plaintiffs, v. MRC RECEIVABLES CORP., Midland Funding NCC-2 Corp., Midland Credit Management, Inc., and Encore Capital Group, Inc., Defendants.

No. 08 C 760.

United States District Court, N.D. Illinois, Eastern Division.

September 17, 2009.

COPYRIGHT MATERIAL OMITTED

Cathleen M. Combs, Cassandra P. Miller, Daniel A. Edelman, James O. Latturner, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Plaintiffs.

James William McConkey, Richard Eric Gottlieb, Renee Lynn Zipprich, Dykema Gossett PLLC, Chicago, IL, Theodore Wilson Seitz, Dykema Gossett, PLLC, Lansing, MI, for Defendants.

MEMORANDUM OPINION AND ORDER

RUBEN CASTILLO, District Judge.

Nicole Herkert ("Herkert") and Winona Jackson ("Jackson") (collectively "Plaintiffs") filed this class action suit against MRC Receivables Corp. ("MRC"), Midland Funding NCC-2 Corp. ("NCC-2"), Midland Credit Management, Inc. ("MCM"), and Encore Capital Group, Inc. ("Encore") (collectively "Defendants"), for violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., and the Illinois Collection Agency Act ("ICAA"), 225 ILCS 425/9(a)(20). Presently before the Court are the parties' cross-motions for summary judgment. (R. 143, Pls.' Mot. for Summ. J. ("Pls.' Mot."); R. 146, Defs.' Mot. for Summ. J. ("Defs.' Mot.").) Plaintiffs move for summary judgment in their favor on the FDCPA claims, and Defendants seek summary judgment in their favor on all of Plaintiffs' claims. (R. 143, Pls.' Mot.; R. 146, Defs.' Mot.) For the following reasons, Plaintiffs' motion is granted, and Defendants' motion is denied.

RELEVANT FACTS¹

MCM, NNC-2, and MRC are all subsidiaries of Encore, a publicly traded Delaware corporation with its principal place of business in San Diego, California. (R. 181, Defs.' Resp. to Pls.' Facts ¶¶ 14, 26.) Encore describes itself as "a leading distressed consumer debt management company" and a "purchaser and manager of charged-off consumer receivable portfolios." (Id. ¶ 15.) MCM, NCC-2, and MRC are also Delaware corporations with their principal places of business in San Diego. (Id. ¶¶ 5, 7-8, 15.) MRC is in the business of buying charged-off debts and holding charged-off debts purchased by Encore. (Id. ¶ 5.) MRC either uses its own assets or attains funds from Encore through inter-company transfers to purchase debts. (Id. ¶ 4.) NCC-2 is also in the business of buying charged-off debts and holding charged-off debts purchased by Encore. (Id. ¶¶ 7-8.) MCM is responsible for collecting the charged-off debts held in the names of MRC, NCC-2, and other subsidiaries of Encore. (Id. ¶ 11.) MCM, NCC-2, and MRC all hold collection agency licenses with the State of Illinois. (Id. ¶ 12.)

On November 28, 2007, MRC sued Jackson in the Circuit Court of Cook County seeking to collect a delinquent credit card debt incurred for personal, family, or household purposes. (Id. ¶ 35.) Attached to the complaint was an affidavit from an employee of MCM, the servicer of the account on behalf of MRC, indicating that the date of default on the account was October 4, 2002, more than five years prior to the filing of the action. (Id. ¶ 37.) Also on November 28, 2007, NCC-2 sued Herkert in the Circuit Court of Cook County, seeking to collect a delinquent credit card debt incurred for personal, family, or household purposes. (Id. ¶ 36) Attached to the complaint was an affidavit from an employee of MCM, the servicer of the account on behalf of NCC-2, indicating that the date of default on the account was July 24, 2000, more than five years prior to the filing of the action. (Id. ¶¶ 38-39.)

Approximately 6,168 similar suits were filed by Defendants on defaulted credit card accounts with delinquency dates of more than five years prior to the filing of the action. (Id. ¶ 42.) When filing these actions, Defendants regularly attached a form credit card agreement that was not signed by the debtor. (Id. ¶ 46.) To prove entitlement to the debt at trial, a witness's testimony would be required to establish that the credit card agreement belonged to a particular debtor and that no modifications had been made to the form credit card agreement. (Id. ¶ 48.)

Data Search NY, Inc. d/b/a TrakAmerica ("TrakAmerica") is hired by Defendants as a legal management company which places accounts with law firms to file collection suits against debtors. (Id. ¶ 54.) MCM provides charts to TrakAmerica setting forth the statute of limitations on various debts for Illinois. (Id. ¶ 55.) MCM has an in-house law department with approximately five attorneys. (Id. ¶ 62.) TrakAmerica uses the information provided by MCM to determine if an account should be forwarded for litigation. (Id. ¶ 56.) One of the collection firms regularly used by TrakAmerica is the law firm of Arthur B. Adler & Associates ("Adler"). (Id. ¶ 57.) Adler is the firm that filed the state court suits against the named Plaintiffs in this case. (R. 162, Pls.' Resp. to Defs.' Facts ¶ 35.) When TrakAmerica forwards an account to Adler, it sends certain information, including the debtor's personal information, last known address, phone number, social security number, amount due, date of last payment, charge-off date, and the date Defendants have determined to be the statute of limitations cut-off. (R. 181, Defs.' Resp. to Pls.' Facts ¶ 58.) The statute of limitations cut-off submitted by Defendants is used by the collection law firms as a reference point. (Id. ¶ 59.) The calculation of the statute of limitations is frequently not reviewed by an attorney after it is sent to TrakAmerica. (Id. ¶ 60.)

Until 2008, Defendants and Adler believed that the applicable statute of limitations for collecting delinquent credit card debts was ten years in Illinois. (R. 162, Pls.' Resp. to Defs.' Facts ¶ 44.)

PROCEDURAL HISTORY

Plaintiffs brought this action in February 2008. (R. 1, Compl.) In April 2008, Plaintiffs filed their First Amended Complaint, alleging that Defendants have a policy and practice of filing or causing the filing of time-barred suits to collect on defaulted credit card debts. (R. 31, Pls.' First Am. Compl.) In Count I, Plaintiffs allege that NCC-2 engaged in deceptive and unfair practices in violation of Section 1692e and 1692f of the FDCPA by filing or causing the filing of time-barred lawsuits against Illinois residents.² (Id. ¶¶ 82-87.) In Count II, Plaintiffs allege similar violations of the FDCPA by MRC. (Id. ¶¶ 88-93.) In Count III, Plaintiffs allege that MCM violated the ICAA³ by filing or causing the filing of time-barred lawsuits against Illinois residents. (Id. ¶¶ 94-99.)

In December 2008, this Court granted Plaintiffs' motion for class certification, permitting Plaintiffs to represent the following classes:

Class A: (a) all natural persons (b) sued in the name of NCC-2 (c) in an Illinois court (d) on an alleged credit card debt (e) where the complaint did not attach a signed contract, or attached a purported contract that is subject to change by notice, (f) where the date of the final statement of account as given in the complaint, or the date of last payment if determinable, is more than five years prior to the filing of suit, and (g) the suit was filed on or after a date one year prior to this action, and not more than 20 days after the filing of this action.

Class B: (a) all natural persons (b) sued in the name of MRC (c) in an Illinois court (d) on an alleged credit card debt (e) where the complaint did not attach a signed contract, or attached a purported contract that is subject to change by notice, (f) where the date of the final statement of account as given in the complaint, or the date of last payment if determinable, is more than five years prior to the filing of suit, and (g) the suit was filed on or after a date one year prior to this action, and not more than 20 days after the filing of this action.

Class C: (a) all natural persons (b) sued at the direction of MCM or for which MCM caused the lawsuit to be filed (c) in an Illinois court (d) on an alleged credit card debt (e) where the complaint did not attach a signed contract, or attached a purported contract that is subject to change by notice, (f) where the date of the final statement of account as given in the complaint, or the date of last payment if determinable, is more than five years prior to the filing of suit, and (g) the suit was filed on or after a date one year prior to this action, and not more than 20 days after the filing of this action.

Herkert v. MRC Receiv. Corp., 254 F.R.D. 344, 353-54 (N.D.Ill.2008).

Both sides now move for summary judgment. (R. 143, Pls.' Mot.; R. 146, Defs.' Mot.) Plaintiffs argue that they are entitled to summary judgment on the issue of Defendants' liability under the FDCPA, because there is no dispute that Defendants had a practice of filing suit on debts that were time-barred. (R. 152, Pls.' Mem. in Supp. of Mot. for Summ. J. ("Pls.' Mem.") at 5-12.) Defendants, in turn, argue that the suits were not time-barred, or alternatively, that they have a bona fide error defense barring Plaintiffs claims because they reasonably believed the suits were not time-barred. (R. 148, Defs.' Mem. in Supp. of Mot. for Summ. J. ("Defs.' Mem.") at 11-18.) Defendants also argue that Plaintiffs' ICAA claim fails as a matter of law because Plaintiffs have not established that they suffered any actual damages. (Id. at 19-20.)

LEGAL STANDARDS

Summary judgment is appropriate when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A genuine issue of material fact exists when "the evidence is such that a...