Melnarowicz v. Pierce & Assocs., P.C.
| Decision Date | 17 August 2015 |
| Docket Number | No. 14 C 07814,14 C 07814 |
| Parties | DARIUSZ MELNAROWICZ and BARBARA MELNAROWICZ, Plaintiffs, v. PIERCE & ASSOCIATES, P.C., Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Dariusz and Barbara Melnarowicz, a married couple, took out a mortgage loan, bought a home, fell behind on their payments, and were sued by their lender. Pierce & Associates represent the lender in that action, which is a foreclosure case. After the foreclosure action was filed, Dariusz filed for bankruptcy. One aspect of bankruptcy is that it stays all litigation against the debtor. Thus, the foreclosure case should have come to a halt. It did not. Pierce, despite knowing about the bankruptcy case, served the Melnarowiczes with a notice in the foreclosure case. After receiving the notice, the Melnarowiczes sued Pierce here in federal court.
They contend that by sending the notice in spite of the bankruptcy stay, Pierce violated the Fair Debt Collections Practices Act.1 The notice, they say, was misleading because it implied that the foreclosure case would continue when,because of the bankruptcy stay, it could not legally do so. After limited discovery, the parties filed cross-motions for summary judgment. The Melnarowiczes's will be granted, and correspondingly, Pierce's denied.
Dariusz and Barbara Melnarowicz took out two mortgage loans from PNC Bank to buy a house. R. 32, Pierce's Rule 56.1 Statement ¶¶ 7-9.2 Years later, the Melnarowiczes apparently fell behind on their payments because Pierce & Associates, P.C., a law firm in the business of debt collection, filed a foreclosure action on PNC's behalf against the Melnarowiczes. Id. ¶ 10. About a month later, Dariusz Melnarowicz filed a Chapter 13 bankruptcy petition. Id. ¶ 12. As soon as Dariusz filed his petition, a bankruptcy stay went automatically into effect. 11 U.S.C. § 362(a)(1). The stay was and is "applicable to all entities" and "operates as a stay ... of ... the ... continuation, including the issuance or employment of process, of a judicial, ... proceeding against the debtor that was ... commenced before the commencement of the" bankruptcy case. Id. The stay also applies to proceedings against Barbara. 11 U.S.C. § 1301(a).
Pierce was aware of the bankruptcy petition. Pierce's Rule 56.1 Statement ¶¶ 14-17. After it became aware of the Melnarowicz bankruptcy, Pierce served on the Melnarowiczes a "Notice of Initial Case Management Conference" in connection with the foreclosure case. Id. ¶ 24. Based on that notice, the Melnarowiczes filed this case. R. 1, Compl. At a status hearing, the parties asked the Court to "suspenddiscovery" and proceed to cross-motions for summary judgment on liability. R. 39, Hrg. Trans. at 2:9-18.
At the status hearing, it was understood that Pierce's bona fide error defense would not be part of these summary judgment motions. Id. at 2:19-4:20. Nonetheless, the Melnarowiczes attacked Pierce's bona fide error defense in their motion for summary judgment. R. 27, Melnarowicz Br. at 9. The Court has already denied that part of the Melnarowicz's motion. R. 42, July 23, 2015 Minute Entry. Now the Court turns to the parties' remaining arguments.
Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011), and must consider only evidence that can "be presented in a form that would be admissible in evidence" at trial, Fed. R. Civ. P. 56(c)(2). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village ofPalatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008). If this burden is met, the adverse party must then "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256.
Before turning to the liability arguments, the Court must address the Melnarowiczes' standing to sue. Pierce argues that the Melnarowiczes lack standing because they have suffered no injury in fact. R. 31, Pierce's Resp. Br. at 8-10. But under current Circuit law, this argument must be rejected. "Congress does have the power to 'enact statutes creating legal rights, the invasion of which creates standing, even though no injury would exist without the statute.'" Sterk v. Redbox Automated Retail, LLC, 770 F.3d 618, 623 (7th Cir. 2014) (). This rule applies to Fair Debt Collection Practices Act cases like this one. See Matmanivong v. Nat'l Creditors Connection, Inc., 2015 WL 536635, at *3 (N.D. Ill. Feb. 9, 2015) (citing Sterk) ("[T]he FDCPA creates legally protected interests, the violation of which constitutes an injury in fact."). That defeats Pierce's argument, for now.
It is worth noting that Pierce's argument is now before the Supreme Court. Spokeo, Inc., v. Robins, 135 S. Ct. 1892 (2015) (). The question presented in Spokeo is "[w]hether Congress may confer Article III standingupon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute." Pet. for Cert., Spokeo, Inc. v. Robins, No. 13-1339, at i, available at http://sblog.s3.amazonaws.com/wp-content/uploads/2014/05/13-1339-Spokeo-v-Robins-Cert-Petition-for-filing.pdf. If the Supreme Court answers this question in Spokeo's favor, then the opinion might well overrule Sterk. But, if and until that day, this Court must follow the current rule in this Circuit. Assuming an outcome favorable to Pierce in Spokeo, the parties will need to address the issue again to determine whether, without Sterk, the Melnarowiczes alleged "actual injuries" that count as injuries-in-fact sufficient to confer standing. See R. 36, Melnarowiczes' Reply Br. at 6 ().
Moving on to the merits, the Fair Debt Collections Practices Act makes liable "any debt collector who fails to comply with any [of its] provision[s]." 15 U.S.C. § 1692k(a). Pierce concedes that it is a debt collector, Pierce's Rule 56.1 Statement ¶ 4, so the question becomes whether it failed to comply with any of the Act's provisions when, despite the bankruptcy stay, it mailed to the Melnarowiczes the case-management conference notice. The sending of the notice did violate the Act. Section 1692e, relied on by the Melnarowiczes, Melnarowicz Br. at 2, 4-5, provides that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt," 15 U.S.C.§ 1692e. "This is a broad prohibition." Lox v. CDA, Ltd., 689 F.3d 818, 822 (7th Cir. 2012). And it makes it "improper under the [Act] to imply that certain outcomes might befall a delinquent debtor when, legally, those outcomes cannot come to pass." Id. at 825. That is exactly what happened here. The notice is "improper" because it "implies" that the foreclosure suit would continue "when, legally," that "cannot come to pass" because of the bankruptcy stay.3
Lox illustrates this principle. There, a debt collector sent a letter to a debtor. The letter "warn[ed]" the debtor "that failure to pay his debt could lead to a lawsuit [and] that if [the creditor] was successful in his lawsuit, [the debtor] could be ordered by the court to pay ... attorney fees." Id. at 820. But under Illinois law and the governing contract, there was no way to make the debtor pay fees. Id. at 823-24. So the letter implied that the debtor might have to pay attorneys' fees when, as a matter of law, it was impossible. Lox, 689 F.3d at 825-26. Relying on the above principle—that implying legally impossible things could happen is a violation of the Act—Lox reversed the district court's grant of summary judgment to the debt collector. Id. at 824-26.
This principle also appears in debt-collection cases that, like this one, involve bankruptcy. The Seventh Circuit recognizes that the Act is violated when debt collectors' actions imply that certain things are possible when, because of a bankruptcy stay or discharge, they are not. See Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (); Hyman v. Tate, 362 F.3d 965, 968 (7th Cir. 2004) (); Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991, 993-94 (7th Cir. 2003).
So Pierce violated the Act by sending the notice. And its remaining arguments, of which there are two, do not convince the Court otherwise.
First, Pierce argues that even if the notice implies that the foreclosure action will continue in spite of the bankruptcy...
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