Rice v. Midland Credit Mgmt., Inc.

• Decision Date: 20 March 2013
• Docket Number: Case No. 12–cv–1395.
• Citation: 933 F.Supp.2d 1040
• Parties: Linda RICE, Plaintiff, v. MIDLAND CREDIT MANAGEMENT, INC., Midland Funding, LLC, and Encore Capital Group, Inc. formerly known as MCM Capital Group, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

933 F.Supp.2d 1040

Linda RICE, Plaintiff,

v.MIDLAND CREDIT MANAGEMENT, INC., Midland Funding, LLC, and Encore Capital Group, Inc. formerly known as MCM Capital Group, Inc., Defendants.

Case No. 12–cv–1395.

United States District Court,

N.D. Illinois,

Eastern Division.

March 20, 2013.

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

David M. Schultz, Jennifer W. Weller, Hinshaw & Culbertson LLC, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT M. DOW, JR., District Judge.

For the reasons stated below, Defendants' motion to dismiss [20] is granted. Plaintiff's motion for class certification [41] is denied as moot. Additionally, Plaintiff's motion for leave to file a sur-reply [26] is granted; the Court considered Plaintiff's sur-reply [26] and Defendants' objection to Plaintiff's sur-reply [29] in deciding Defendants' motion to dismiss. Finally, in view of the granting of Defendants' motion to dismiss, Plaintiff's motion for leave to conduct deposition of expert witness [56] is denied. This case is set for status hearing on April 3, 2013, at 10:00 a.m.

I. Background

Plaintiff Linda Rice alleges that beginning in April 2011 Defendants sent her a series of letters to collect on a debt. The letters offer Plaintiff a way to “resolve this obligation with a plan that fits your particular situation” and an opportunity to “settle your account” with monthly payment plans that discount the alleged debt. The last payment on the alleged debt was on January 19, 2006. The statute of limitations on a credit card bill in Illinois, where Plaintiff resides, is five years. Nothing in the letters sent to Plaintiff disclosed that the debt was barred by the statute of limitations in Illinois or disclosed the date of the transactions that gave rise to the alleged debt.

Plaintiff alleges that Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692e, 1692e(2), 1692e(10), and 1692f by sending her letters claiming a right to collect a time-barred debt. Defendants have moved to dismiss [20].

II. Legal Standard

The purpose of a Rule 12(b)(6) motion to dismiss is not to decide the merits of the case; a Rule 12(b)(6) motion tests the sufficiency of the complaint. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir.1990). In reviewing a motion to dismiss under Rule 12(b)(6), the Court takes as true all factual allegations in Plaintiff's complaint and draws all reasonable inferences in his favor. Killingsworth v. HSBC Bank Nevada, NA, 507 F.3d 614, 618 (7th Cir.2007). To survive a Rule 12(b)(6) motion to dismiss, the claim first must comply with Rule 8(a) by providing “a short and plain statement of the claim showing that the pleader is entitled to relief” (Fed.R.Civ.P. 8(a)(2)), such that the defendant is given “fair notice of what the * * * claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Second, the factual allegations in the claim must be sufficient to raise the possibility of relief above the “speculative level,” assuming that all of the allegations in the complaint are true. E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir.2007) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements of a cause of action will not do.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). However, “[s]pecific facts are not necessary; the statement need only give the defendant fair notice of what the * * * claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citing Twombly, 550 U.S. at 555, 127 S.Ct. 1955) (ellipsis in original). The Court reads the complaint and assesses its plausibility as a whole. See Atkins v. City of Chi., 631 F.3d 823, 832 (7th Cir.2011); cf. Scott v. City of Chi., 195 F.3d 950, 952 (7th Cir.1999) (“Whether a complaint provides notice, however, is determined by looking at the complaint as a whole.”).

III. Analysis

The FDCPA provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in collection of any debt.” 15 U.S.C. § 1692e. In its (nonexclusive) list of violations, § 1692e prohibits the false representation of “the character, amount, or legal status of any debt.” 15 U.S.C. § 1692e(2)(A). Moreover, “[a] debt collector may not use unfair or unconscionable means to collect any debt,” including “[t]he collection of any amount * * * unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” 15 U.S.C. §§ 1692f, 1692f(1).

Plaintiff alleges that “Defendants engaged in unfair and deceptive acts and practices * * * by dunning consumers on time-barred debts without disclosure of that fact.” Compl. ¶ 46. “The nondisclosure is exacerbated by the offer of a ‘settlement’ * * *. The offer of a settlement implies a colorable obligation to pay.” Compl. ¶ 46.

To begin, the Court agrees with Plaintiff that the offer in Defendants' letters to “settle your account” implies a “colorable obligation to pay.” Indeed it does, and not improperly, for in Illinois “[s]tatutes of limitations are procedural, merely fixing the time in which the remedy for a wrong may be sought, and do not alter substantive rights.” See Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A, 199 Ill.2d 325, 264 Ill.Dec. 283, 770 N.E.2d 177, 194 (2002). In other words, under Illinois law, “the statute of limitations bars a specific remedy; it does not extinguish indebtedness.” Walker v. Cash Flow Consultants, Inc., 200 F.R.D. 613, 616 (N.D.Ill.2001). If the indebtedness is not extinguished, there is an obligation to pay, even if that obligation could not be enforced in court because the defendant would have a winning limitations defense. See Crawford v. Vision Financial Corp., 2012 WL 5383280, at *2 (N.D.Ill. Nov. 1, 2012). In this case, Plaintiff is not challenging her obligation to repay the alleged debt, but only whether the FDCPA requires Defendants to disclose the nature of her obligation, and specifically that it is not an obligation that Defendants could enforce through a lawsuit.

Numerous courts in this district have concluded that an attempt to collect a valid but time-barred debt—even in the absence of a disclosure that the debt is time-barred—does not violate the FDCPA unless there is also an express or implied threat of litigation. See Crawford, 2012 WL 5383280, at *2;Magee v. Portfolio Recovery Associations, LLC, 2012 WL 3560996, at *3 (N.D.Ill. Aug. 15, 2012); McMahon v. LVNV Funding, LLC, 2012 WL 2597933, at *2 (N.D.Ill. July 5, 2012); Murray v. CCB Credit Servs., Inc., 2004 WL 2943656, at *2 (N.D.Ill. Dec. 15, 2004); Walker, 200 F.R.D. at 616. The two federal appellate courts that have considered this issue have reached the same conclusion. See Huertas v. Galaxy Asset Management, 641 F.3d 28, 33–34 (3rd Cir.2011) (agreeing with the “majority of courts [that have] held that when the expiration of the statute of limitations does not invalidate a debt, but merely renders it unenforceable [through a lawsuit], the FDCPA permits a debt collector to seek voluntary repayment of the time-barred debt so long as the debt collector does not initiate or threaten legal action in connection with its collection efforts”); Freyermuth v. Credit Bureau Services, Inc., 248 F.3d 767, 771 (8th Cir.2001) (“in the absence of a threat of litigation or actual litigation, no violation of the FDCPA has occurred when a debt collector attempts to collect on a potentially time-barred debt that is otherwise valid”).

So although the Seventh Circuit has not yet considered whether attempting to collect on a valid but time-barred debt without disclosing that the debt is time-barred violates the FDCPA, courts in this district (and outside it) are in broad agreement that it does not. Plaintiff does not dispute that most courts have taken that view, but she believes that the Court should reach a different conclusion in this case in light of the Federal Trade Commission's complaint and the parties' consent decree in Federal Trade Commission v. Asset Acceptance, LLC, Case No. 12–cv–182 (M.D.Fla. Jan. 31, 2012). In that case, the FTC sued Asset Acceptance alleging a variety violations of the FTC Act, Fair Credit Reporting Act, and the FDCPA. In Count VIII of FTC's complaint, the FTC alleged that Asset Acceptance's failure to disclose that a debt was time-barred was deceptive under the FDCPA and was an unfair or deceptive under § 5(a) of the FTC Act. The same day as the FTC filed its complaint, the parties entered a consent decree. By its terms, the decree was not an “adjudication of any issue of fact or law” and Asset Acceptance did not admit any of the complaint's allegations other than the jurisdictional facts. Nevertheless, Plaintiff focuses on two details of the parties' settlement: Asset Acceptance agreed to pay $2.5 million and include the following language in collection letters attempting to collect a time-barred debt: “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”

In further support of her position that failing to make a disclosure similar to the one now required of Asset Acceptance violates the FDCPA, Plaintiff refers the Court to an FTC press release about the settlement with Asset Acceptance and a 2010 FTC report titled “Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration.” Available at http:// ftc. gov/ os/ 2010/ 07/ debt collection report. pdf. The report is based on the FTC's assessment of the debt collection system, 2009 roundtable...