Eide v. Colltech, Inc.

• Decision Date: 11 December 2013
• Docket Number: Civil No. 12–812 (JRT/JJG).
• Citation: 987 F.Supp.2d 951
• Parties: Richard O. EIDE, Plaintiff, v. COLLTECH, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

987 F.Supp.2d 951

Richard O. EIDE, Plaintiff,

v.COLLTECH, INC., Defendant.

Civil No. 12–812 (JRT/JJG).

United States District Court, D. Minnesota.

Dec. 11, 2013.

Michael J. Sheridan, Atlas Law Firm, LLC, Minnetonka, MN, for plaintiff.

Ryan J. Trucke and Matthew R. Doherty, Brutlag, Hartmann & Trucke, PA, Plymouth, MN, for defendant.

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

JOHN R. TUNHEIM, District Judge.

This case arises out of a collection letter sent by Defendant Colltech, Inc. (“Colltech”) to Plaintiff Richard Eide after Eide had filed for bankruptcy. Eide failed to pay a $1,216.75 hospital bill that was the subject of Colltech's collection efforts. Sometime after he incurred the hospital bill, but before Colltech sent the letter in question, the hospital bill was discharged in Eide's bankruptcy proceedings. Eide brings claims for violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq., arguing that the letter was false and misleading in representing that Eide owed a debt that had previously been discharged in bankruptcy. Colltech brings a motion for summary judgment. Because a material issue of fact remains regarding whether Colltech is entitled to the protection of the FDCPA's bona fide error defense, 15 U.S.C. § 1692k(c), the Court will deny the motion. ¹

BACKGROUND

I. THE UNDERLYING DEBT

On March 29, 2010, Eide received medical care at North County Regional Hospital (the “Hospital”) ² located at 1300 Anne Street Northwest in Bemidji, Minnesota. (Aff. of Jon Bergquist, Ex. B, Apr. 25, 2013, Docket No. 11.) ³ On April 15, 2010, the Hospital sent Eide a bill for $1,216.75 (the “hospital debt”), reflecting the cost of Eide's hospital stay that was not covered by health insurance. ( Id. ¶ 7, Ex. B at 1, 5.) Eide did not pay this bill. ( Id. ¶ 8.)

After the Hospital was unsuccessful in attempting to collect Eide's debt, it referred Eide's account to Pinnacle Financial Group for collection on September 15, 2010. ( Id. ¶ 8, Ex. B at 7.) Pinnacle Financial Group was also unsuccessful in collecting the debt, and returned Eide's account to the Hospital on September 30, 2011. ( Id. ¶ 8, Ex. B at 7.)

II. COLLTECH'S COLLECTION EFFORTS

In February 2012, the Hospital transferred Eide's account to Colltech for collection. ( Id. ¶ 9, Ex. B at 7; Aff. of Ray Costello ¶ 4, Ex. B, Apr. 25, 2013, Docket No. 12.) Colltech sent Eide an initial collection letter on February 15, 2012, regarding the $1,216.75 debt. (Costello Aff. ¶ 5, Ex. C.) The letter listed a “Balance Due” of $1,216.75 and explained that Eide's account “has been referred to [Colltech] for collection and at this time [Colltech is] willing to work with you to resolve this outstanding balance.” ( Id., Ex. C.) The letter also warned Eide “[u]nless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid.” ( Id.) If Eide notified Colltech within 30 days from receiving this notice of any dispute with the validity of the debt, the letter explained that Colltech would “obtain verification of the debt or obtain a copy of a judgment and mail [Eide] a copy of such judgment or verification.” ( Id.)

When Eide did not dispute the validity of his debt within the thirty-day period, Colltech requested a credit bureau report on March 22, 2012. ( Id. ¶ 6.) Pursuant to this credit report, on April 3, 2012, Colltech “uncovered” the fact that Eide had filed for bankruptcy on November 7, 2011—before his account was assigned to Colltech. ( Id. ¶ 7.) Colltech ceased all collection activity on Eide's account, and informed the Hospital that Eide had filed for bankruptcy. ( Id. ¶ 7; Bergquist Aff. ¶ 10.)

III. EIDE'S BANKRUPTCY PROCEEDINGS

On November 7, 2011, Eide and his wife filed a Chapter 7 bankruptcy petition in United States Bankruptcy Court for the District of Minnesota. (Aff. of Richard O. Eide ¶ 4, May 16, 2013, Docket No. 15; Aff. of Michael J. Sheridan ¶ 2, Ex. A at 1, May 16, 2013, Docket No. 16.)

On his bankruptcy schedule for creditors holding unsecured, nonpriority claims, Eide listed a $1,217 debt owed to creditor North County Regional Hospital. (Costello Aff., Ex. D at 3.) The schedule also listed a $263 debt owed to “Sanford Health.” ( Id., Ex. D at 4.) At the time his bankruptcy attorney was completing the schedules, Eide did not have the address for North County Regional Hospital or Sanford Health. (Sheridan Aff. ¶ 3.) Eide did, however, have collection letters regarding the two debts from Pinnacle Financial Group and AR Audit Services. ( Id.) Because the collection letters “were relatively recent to the date of the bankruptcy filing” Eide's attorney used the addresses of the collection agencies on the bankruptcy schedules in lieu of the addresses of the creditors. ( Id. ¶ 4.) Therefore the bankruptcy schedule listed the Hospital's address as “c/o Pinnacle Financial Group, 7825 Washington Ave S, Ste 310 Minneapolis, MN 55439.” (Costello Aff., Ex. D at 3.) The schedule listed Sanford Health's address as “c/o AR Audit Services, PO Box 6177, Bismarck, ND 58506.” ( Id., Ex. D at 4.)

Notice of Eide's bankruptcy proceedings was never mailed directly to Colltech or the Hospital, but was instead mailed to Pinnacle Financial Group and AR Audit Services at the addresses provided on Eide's bankruptcy schedules. (Bergquist Aff. ¶ 11; Costello Aff. ¶ 9.) Neither Pinnacle Financial Group nor AR Audit Services informed Colltech or the Hospital that they had received notices of Eide's bankruptcy petition. (Bergquist Aff. ¶ 11; Costello Aff. ¶ 9.)

On December 7, 2011, the trustee of Eide's bankruptcy filed a Report of No Distribution in the bankruptcy case, indicating that Eide's bankruptcy was a no-asset case. (Sheridan Aff. ¶¶ 5–6, Ex. A at 3–4.) On February 1, 2012, the bankruptcy court issued an order discharging Eide from bankruptcy under 11 U.S.C. § 727. (Bankr. No. 11–47265, Feb. 1, 2012, Docket No. 26.)

IV. COLLTECH'S COLLECTION PROCEDURES

Colltech contends that it provides “detailed training and testing” to its new employees regarding compliance with state and federal debt collection statutes, including the FDCPA. (Costello Aff. ¶ 2.) In particular, Colltech requires two weeks of classroom training on these laws. ( Id.) Colltech also periodically updates education for current employees, and conducts a random review of collectors and files to ensure compliance with debt collection laws. ( Id.) Colltech maintains an electronic recording system which documents all of its collection activities, including the timing and content of collections communications made or attempted. ( Id. ¶ 3.) In response to Eide's discovery requests, Colltech refused to provide these training materials, citing the possibility that the materials may contain trade secrets. (Sheridan Aff. ¶¶ 11–14, Ex. B at 18–20.) In objecting to the discovery requests, Colltech indicated it would produce the documents only if a protective order was in place. ( Id., Ex. B at 18.) To date, neither a protective order nor a motion to compel this discovery has been filed.

With respect to consumers that have filed for bankruptcy in particular, Colltech “relies upon Sanford Bemidji Medical Center not to forward accounts in bankruptcy, and assures that any accounts mistakenly referred for collection are promptly removed from actively collected accounts.” (Costello Aff. ¶ 10.) The collection agreement between Colltech and the Hospital provides that if the “hospital knows that the debtor disputes the account, is represented by an attorney, or has filed bankruptcy, hospital shall notify agent at the time of referral of the account or promptly upon receipt of that information if the account was previously referred.” ( Id., Ex. E at 1.) The Hospital, in turn “maintainsan electronic record keeping system that allows it to mark an account where notice has been received that the debtor has filed for bankruptcy.” (Bergquist Aff. ¶ 6.) When the Hospital “receives notice that an individual has filed for bankruptcy, the account is marked as being a bankrupt account to prevent additional statements from being sent and after receipt of the bankruptcy discharge notice the account balance is adjusted to zero.” ( Id.)

V. COLLTECH'S COMPLAINT

Eide brought this action against Colltech, alleging numerous violations of the FDCPA. (Compl., Mar. 30, 2012, Docket No. 1.) The complaint alleges that Colltech's February 15 letter was “an illegal communication in an attempt to collect a debt.” ( Id. ¶ 13.) Specifically the complaint alleges that the letter violated provisions of the FDCPA that prohibit a debt collector from (1) engaging in conduct that harasses, oppresses, or abuses “any person in connection with the collection of a debt,” 15 U.S.C. § 1692d; (2) using “false, deceptive, or misleading representation or means in connection with the collection of any debt,” § 1692e, including false representations of “the character, amount, or legal status of any debt,” § 1692e(2)(A); and using “unfair or unconscionable means to collect or attempt to collect any debt,” § 1692f, including attempting to collect an amount not permitted by law, § 1692f(1). (Compl.¶¶ 14, 18.)

ANALYSIS

I. MOTION FOR SUMMARY JUDGMENT

A. Standard of Review

Summary judgment is appropriate where there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all...