Fuller v. Midland Credit Mgmt. Inc.
| Decision Date | 06 March 2014 |
| Docket Number | Case No. 11 C 5111 |
| Parties | ANGELA FULLER f/k/a ANGELA GRUBBS, on behalf of plaintiff and a class, Plaintiff, v. MIDLAND CREDIT MANAGEMENT INC., MIDLAND FUNDING, LLC, and ENCORE CAPITAL GROUP, INC., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
OPINION AND ORDER
Plaintiff Angela Fuller (formerly known as Angela Grubbs) filed a second amended complaint ("SAC") on behalf of herself and a class against defendants Midland Credit Management, Inc. ("MCM"), Midland Funding, LLC ("Midland"), and Encore Capital Group, Inc. ("Encore") (collectively "defendants"). (Dkt. 111.) Fuller alleges defendants violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq. Before the court is defendants' motion to dismiss the SAC under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 113). For the reasons that follow, defendants' motion is denied.1
Fuller brings this suit on behalf of herself and others from whom, they allege, defendants have improperly attempted to collect credit card debt. Although Fuller disputes incurring any debt, defendants pursued her for an alleged debt, sending her various notices and filing suit against her to recover amounts due. Fuller proposes a class consisting of (1) all natural persons with Illinois addresses sued by any of the defendants; (2) to whom any of the defendants have sent "pre-legal notifications" seeking an amount greater than that for which they ultimately sued the putative plaintiffs; (3) on or after a date one year prior to the original filing of the action; and (4) on or before a date 20 days after the original filing of this action.
Encore is the parent company of both Midland and MCM. It is a Delaware corporation and maintains offices at 8875 Aero Drive, Suite 200, San Diego, California.3 Encore purchases consumer debt portfolios through Midland, MCM, and other subsidiaries, and devises the collection strategies for these subsidiaries. Encore's subsidiaries purchase these portfolios from major banks, credit unions, and utility providers.
Midland is a Delaware corporation with its principal place of business at 8875 Aero Drive, Suite 200, San Diego, California. Midland, which has no employees, seeks to enforce the purchased debts against consumers by filing lawsuits. The debts it seeks to enforce are mostlybalances due on credit cards issued by banks. Accordingly, Midland is a "debt collector" under the FDCPA.
MCM is a Kansas corporation whose principal place of business is also 8875 Aero Drive, Suite 200, San Diego, California. MCM is a collection agency that collects bad debts purchased by a third party, MRC, which is a subsidiary of Encore. MCM holds a collection agency license from the state of Illinois and is also a "debt collector" as defined by the FDCPA.
On or about July 17, 2011, MCM sent Fuller a "discount offer" letter on behalf of Midland informing her that she owed a $7,201.63 debt. The letter offered Fuller three options for repaying this debt and did not contain any threat of suit. Thereafter, MCM sent Fuller a "pre-legal notification" letter on behalf of Midland demanding payment of the $7,201.63 debt and threatening to forward Fuller's account to an attorney if she failed to respond. Fuller does not have a copy of this letter and does not state when she received it. (See SAC Ex. B (copy of pre-legal notification sent to another person).) On or about January 19, 2012, Midland filed suit against Fuller in the Circuit Court of McLean County to collect on this debt. The complaint sought to recover $4,905.47 plus costs, representing the amount Fuller allegedly owed. (Id. Exs. E, F.) On June 23, 2012, Midland nonsuited the state court lawsuit.
Fuller alleges that it is the policy and practice of defendants to send correspondence such as "pre-legal notifications" and "discount offer" letters threatening legal action and falsely stating that consumers will save money by responding. The communications inflate the amount of the claimed debt and then offer to negotiate from the inflated amount. Fuller asserts that defendants engage in this behavior to collect amounts greater than those that defendants intend to or could seek when they take legal action. Fuller alleges that this policy and practice constitutesa deceptive collection practice in violation of § 1692e and an unfair collection practice in violation of § 1692f of the FDCPA.
The original named plaintiff in this suit was Bonnie Webb, who filed her complaint on July 28, 2011. (Dkt. 1.) Webb alleged in her complaint that defendants violated the FDCPA by engaging in deceptive collection practices and unfair collection practices by sending consumers "pre-legal notifications." (Id. ¶¶ 33-34.) Webb alleged that she received one of these pre-legal notifications on September 21, 2010, and asserted claims on behalf of a class defined as "(a) all natural persons with Illinois addresses who were sued by any of the defendants (b) to whom any of the defendants previously sent a notice in the form represented by [the "pre-legal notification" letter] seeking an amount greater than that sued for (c) on or after a date one year prior to the filing of this action, and (d) on or before a date 20 days after the filing of this action." (Id. ¶ 50.)
Webb was granted leave to file a first amended complaint ("the FAC") (dkt. 60), which she did on May 8, 2012 (dkt. 71). The FAC added Fuller as a named plaintiff based on the facts relating to Fuller as described above. The court dismissed the FAC without prejudice on March 27, 2013. See Webb v. Midland Credit Mgmt., Inc., No. 11 C 5111, 2013 WL 1285570 (N.D. Ill. Mar. 27, 2013) ("Webb"). In doing so, the court found that (1) the FAC did not state a claim against Encore directly or demonstrate why it would be appropriate to "pierce the corporate veil" to hold Encore liable; and (2) the FAC did not state a claim against Midland and MCM because it did not allege how the correspondence received by plaintiffs from Midland or MCM inflated the amount of the claimed debt or why it was false to say consumers would save money by acting in accordance with the correspondences. See id.
The court granted leave to file the SAC, which Fuller did on April 17, 2013. The SAC does not name Webb as a plaintiff (but still relies on the pre-legal notification sent to Webb, as Fuller no longer has hers (see SAC Ex. B)). Defendants filed a motion to dismiss the SAC under Federal Rule of Civil Procedure 12(b)(6). They argue that the SAC fails to state a claim against MCM and Midland because the FDCPA does not prohibit the collection of inflated debt amounts and there was nothing false or misleading about the "pre-legal notification" letter. They also argue that the SAC adds no allegations showing that Encore should be held liable for the conduct of Midland or MCM. Finally, they assert that the SAC is time-barred by the FDCPA's one-year statute of limitations and does not relate back to the original complaint.
In ruling on a Rule 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also establish that the requested relief is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). The allegations in the complaint must be "enough to raise a right of relief above the speculative level." Twombly, 550 U.S. at 555. At the same time, the plaintiff need not plead legal theories. Hatmaker v. Mem'l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010). Rather, it is the facts that count.
The FDCPA prohibits "any false, deceptive, or misleading representation . . . in connection with the collection of any debt," 15 U.S.C. § 1692e, including the false representation of "the character, amount, or legal status of any debt," id. § 1692e(2)(A), a "threat to take any action that cannot legally be taken or that is not intended to be taken," id. § 1692e(5), and "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." Id. § 1692e(10). Additionally, the FDCPA prohibits the use of "unfair or unconscionable means to collect or attempt to collect any debt," id. § 1692f, including "[t]he collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law." Id. § 1692f(1). In deciding whether a collection letter violates the FDCPA, the court examines the letter from the standpoint of an unsophisticated consumer. See Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 564 (7th Cir. 2004); Wahl v. Midland Credit Mgmt., Inc., 556 F.3d 643, 645-46 (7th Cir. 2009) (). This standard assumes the debtor is "uninformed, naive, or trusting," but at the same time acknowledges that even an unsophisticated debtor "possesses rudimentary knowledge about the financial world" and is "capable of making basic logical deductions and inferences." Fields, 383 F.3d at 564 (internal citations omitted). Because the "claims for violations of §§ 1692e and 1692f seem to go hand in hand," the court will address them together. Nance v. Ulferts, 282 F. Supp. 2d 912, 917 (S.D....
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