United States District Court, N.D. Illinois, Eastern Division
October 19, 2004.
CHERYL ALEXANDER, Plaintiff,
UNLIMITED PROGRESS CORP., an Illinois corporation, doing business as CREDITORS DISCOUNT & AUDIT CO., Defendant.
The opinion of the court was delivered by: SIDNEY SCHENKIER, Magistrate Judge
MEMORANDUM OPINION AND ORDER
In Randolph v. IMBS, Inc., 368 F.3d 726 (7th Cir. 2004),
the Seventh Circuit vacated this Court's entry of summary
judgment for Unlimited Progress Corporation ("CDA" or
"defendant") on Count I of the Complaint, the entry of summary
judgment and an award of damages to the plaintiff on Count II,
and remanded the case to this Court for further proceedings as to
Count I alone. In light of those rulings, the plaintiff has
renewed her motion for summary judgment on Count I of the
complaint, which alleges a violation of the Fair Debt Collection
Practices Act, 15 U.S.C. § 1692e ("FDCPA"). Based on the rule of
law announced in Randolph and the factual record submitted on
summary judgment, the Court grants the plaintiff's motion for
summary judgment (doc. # 36).*fn1 I.
The legal standards governing a motion for summary judgment are
well-established. Summary judgment is proper if the record shows
that there is no genuine issue as to any material fact, and that
the moving parties are entitled to judgment as a matter of law.
Fed.R. Civ. P. 56(c).
With regard to factual issues, a genuine issue for trial exists
only when "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). If the evidence is merely
colorable, or is not significantly probative, summary judgment
may be granted. Id. at 249-50; see also Flip Side Productions,
Inc. v. Jam Productions, Ltd., 843 F.2d 1024, 1032 (7th
Cir.), cert. denied, 488 U.S. 909 (1988). In deciding a motion
for summary judgment, the Court must view all evidence in the
light most favorable to the nonmoving party, Valley Liquors,
Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th
Cir.), cert. denied, 484 U.S. 977 (1987), and must draw all
reasonable inferences in the non-movant's favor. Santiago v.
Lane, 894 F.2d 218, 221 (7th Cir. 1990).
When a material fact or a set of facts yields competing, but
reasonable, inferences, then there is a genuine issue that
precludes summary judgment. The non-moving party's burden is to
identify facts that are both material and genuinely disputed.
Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) To bele 56.1
Statement of Undisputed Facts ¶¶ 3 ("Pl.'s 56.1 St. ¶ ___"). The
defendant in this case is Unlimited Progress Corporation, doing
business as Creditor Discount & Audit Company ("CDA"). CDA is a
debt collector, as defined by the FDCPA, 15 U.S.C. § 1692a,
because it regularly uses the mails to collect, or attempt to
collect, consumer debts (Id. ¶ 4). Plaintiff filed a voluntary
Chapter 13 petition in bankruptcy on December 9, 1997 (Id. ¶
5). A debt in the amount of $1,125.00, allegedly owed to Joseph
V. Kannankeril, M.D. ("Dr. Kannankeril"), was listed on "Schedule
F-Creditors Holding Unsecured Nonpriority Claims" of Alexander's
bankruptcy petition" (Id. ¶ 6). On February 11, 1998, Dr.
Kannankeril filed a claim in plaintiff's chapter 13 bankruptcy
(Id. ¶ 8).
On March 22, 2001 and then again on May 7, 2001, defendant sent
plaintiff letters seeking to collect on the debt allegedly owed
to Dr. Kannankeril (Id. ¶ 9). At the time that defendant sent
its two form debt collection letters to plaintiff to collect on
the debt allegedly owed to Dr. Kannankeril, plaintiff's debt was
subject to her pending Chapter 13 bankruptcy (Id. ¶ 10).
Defendant did not know about the bankruptcy until May 22, 2001, when
plaintiff's attorney notified CDC of this fact (Pl.'s Ex. 6,
Armstrong Aff., ¶ 24-26). Defendant's procedure is to cease
collecting on a file once it learns the alleged debtor is in
bankruptcy (Pl.'s 56.1 St., Ex. 6, ¶ 23). Pursuant to that
procedure, defendant ceased all collection activity on
plaintiff's alleged debt once it learned of plaintiff's
bankruptcy (Id., ¶ 26).
In Count I plaintiff alleges that defendant violated the FDCPA
by sending collection letters to plaintiff claiming that she owed
a debt to Dr. Kannankeril, even though this debt was subject to a
pending Chapter 13 bankruptcy (Compl. ¶¶ 7-9). There are two
issues raised by the parties on summary judgment. First,
defendant claims that summary judgment should be denied because
there is a genuine dispute of material fact on the issue of
whether the statements made in the two collection letters were
false, in violation of 15 U.S.C. § 1692e(2)(A). Second,
defendant claims that even assuming there were false statements
in the collection letters, there is a triable issue as to whether
liability is foreclosed by the "bona fide error" affirmative
defense that defendant has raised.
For the reasons explained below, the defendant has not offered
facts sufficient to create a triable issue on either issue.
The Court will address the false statement issue first, since
without a false statement there is no need to address the bona
fide error issue. The defendant argues that there remains a fact
dispute over whether the statements made in the collection
letters to plaintiff were "false," in violation of the FDCPA. In
our view, the Seventh Circuit has already resolved this issue in
the earlier appeal in this case. In Randolph, the Seventh Circuit held that Section
1692e(2)(A) of the FDCPA "creates a strict liability rule. Debt
collectors may not make false claims, period." 368 F.3d at 730. A
"false claim," stated that appeals court, does not depend upon
knowledge of falsity. Rather,
[a] demand for immediate payment while a debtor is in
bankruptcy (or after the debt's discharge) is "false"
in the sense that it asserts that money is due,
although, because of the automatic stay
(11 U.S.C. § 362) of the discharge injunction (11 U.S.C. § 524),
it is not. A debt collector's false statement is
presumptively wrongful under the Fair Debt Collection
Practices Act, see 15 U.S.C. § 1692e(2)(A), even if
the speaker is ignorant of the truth; but a debt
collector that exercises care to avoid making false
statements has a defense under § 1692k(c).
Randolph, 368 F.3d at 728 (emphasis added).
It is undisputed that the two collection letters in this case
demanded immediate payment from plaintiff while the plaintiff was
in bankruptcy. Under Randolph, the claim for immediate payment
was false, in violation of 15 U.S.C. § 1692e(2)(A), because the
debtor had no obligation to make such a payment in light of the
bankruptcy stay. As the Seventh Circuit made clear in Randolph,
that is true even though it is undisputed that defendant was
unaware of the bankruptcy. Consequently, the Court finds, as a
matter of law, that the debt collection letters in this case made
false statements in violation of Section 1692e(2)(A).
We are unpersuaded by the defendant's argument that the holding
in the case of Turner v. J.V.D.B., & Assocs., Inc.,
330 F.3d 991 (7th Cir. 2003), on remand to the district court,
330 F.Supp.2d 998, supports the view that the falsity of the
statements in the defendant's collection letters is a question of
fact for the jury. On remand in Turner, the court found that
Randolph did not control the mandate issued to that court in
that case, namely, to conduct a trial to determine whether, "as a
matter of fact a misleading implication (that Turner had to pay
the $97.80 debt) arises from an objectively reasonable reading of
J.V.D.B.'s collection letter of March 29, 2001." Turner, 330 F.Supp.2d at 1002. Turner turns (no pun intended) on the facts
of that case. Here, however, the falsity of the statements in the
defendant's letters was directly analyzed by the Seventh Circuit
in Randolph, and we believe that analysis leaves open on remand
in this case only the issue of the bona fide error defense.
Randolph, 368 F.3d at 733. That said, we now move to the issue
of whether there is a triable issue concerning CDA's defense to
liability under 15 U.S.C. § 1692k(c).
In Randolph, the Court of Appeals held that the FDCPA
provides a "bona fide error" defense to a false statement if the
debt collector shows "by a preponderance of the evidence that the
violation was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted
to avoid any such error." 368 F.3d at 730 (quoting
15 U.S.C. § 1692k(c)). A "bona fide" error is a "good faith" error; according
to Randolph, an error is bona fide if it results despite an
active effort to "exercise care to avoid making [the] false
statement." 368 F.3d at 728.
Defendant's threshold and, indeed, sole argument on the
bona fide error issue is that summary judgment on that
affirmative defense cannot be considered, because summary
judgment can be granted on an affirmative defense only if the
defendant moves for it (Def.'s Resp. at 5). That is an incorrect
statement of the law. The defendant asserted the bona fide error
defense as an affirmative defense in its answer to the complaint.
The plaintiff has now moved for summary judgment on Count I of
that complaint, to which the bona fide error defense applies. The
plaintiff is entitled to move for summary judgment on this
affirmative defense, even though defendant bears the burden of
proving it. If this were not so, by parity of reasoning, a
defendant could never move for summary judgment on a plaintiff's
claims for liability and this is simply not how Federal Rule of Civil Procedure 56 works. "A summary judgment on the issue of
liability encompasses all affirmative defenses and implicitly
challenges the non-movant to establish a basis for finding that
the defenses are both applicable and supported by sufficient
facts. See The Pantry, Inc. v. Stop-N-Go Foods, Inc.,
796 F.Supp. 1164, 1167-68 (S.D. Ind. 1992) (citing Fed.R.Civ.P.
56(c); 10 A Charles A. Wright, Arthur A. Miller & Mary K. Kane,
FEDERAL PRACTICE AND PROCEDURE § 2736 (1983)).
The fact that defendant has relied on this procedural argument,
without making any substantive argument in its brief to show why
there is a triable issue on the bona fide error affirmative
defense, is tantamount to a waiver on this issue. Berry v. Delta
Airlines, Inc., 260 F.3d 803, 810 (7th Cir. 2001)
(non-moving party's failure to raise issue in response resulted
in waiver). See also Blakely v. Brach & Brock Confections,
181 F.Supp.2d 943, 951 (N.D. Ill. 2002) (same); Warren v.
Hotel-Inter Cont'l Chicago, No. 01 C 4370, 2003 WL 41984, at * 6
(N.D. Ill. Jan. 6, 2003) (same). Cf. Nabozny v. Podlesny,
92 F.3d 446, 457 n. 9 (7th Cir. 1996) (holding that there was no
waiver for failure to respond to argument on summary judgment).
The Court will not rely on the waiver, however, but will address
whether there are material disputed factual issues that require a
trial on this defense.
But, that does not mean that defendant's exclusive reliance on
the procedural argument has no consequences. As the Seventh
Circuit recently has reiterated, a summary judgment motion "is
the `put up or shut up' moment in a lawsuit, when a party must
show what evidence it has that would convince a trier of fact to
accept its version of events." Koszola v. Bd. of Educ. of City
of Chicago, ___ F.3d ___, 2004 WL 2260492, *6 (7th Cir. Oct.
8, 2004) (quoting Johnson v. Cambridge Indus., Inc.,
325 F.3d 892, 901 (7th Cir. 2003). Thus, when faced with a motion for
summary judgment, a non-movant must "wheel out all its artillery
to defeat it." Employers Ins. of Wausau v. Bodi-Wachs Aviation Ins. Agency, 846 F.Supp. 677, 685 (N.D. Ill. 1994)
(quoted by Caisse Nationale de Credit Agricole v. CBI Indus.,
Inc., 90 F.3d 1264, 1269-70 (7th Cir. 1996)). The defendant
in this case has ignored this mandate, preferring instead to make
an ill-fated procedural argument. In choosing that path, the
defendant has abdicated its responsibility to "wheel out all its
artillery to defeat" plaintiff's motion.
The only evidence that appears in the summary judgment record
in support of the bona fide error defense is contained in one
conclusory sentence from an interrogatory response, which
defendant does not cite in its brief but which instead is
referenced in defendant's response to plaintiff's Rule 56.1
Statement of Undisputed Facts. In that response, defendant states
that it "notifies creditors that it does not handle bankruptcy
accounts for collection." See Pl.'s 56.1 St. ¶ 11 (citing Ex.
5, ¶ 11 (CDC's Interrogatory Responses)).
That statement is far too conclusory to create a triable issue
that would defeat summary judgment. Although CDA claims that it
gave "notice to creditors," it offers no evidence to show whether
that notice was given before or after collection efforts began
(if after, it would not be reasonably adapted to "avoid" false
statements), or how that notice was disseminated to ensure it
reached the audience of creditors. Nor is there any evidence
offered to show the effectiveness of the notice both in terms
of reaching creditors, and in ensuring that creditors do not
refer files in bankruptcy to defendant for collection.
Defendant cannot establish the bona fide error defense merely
by asserting, as it has, that (1) defendant "notifies" creditors
that it did not collect on bankruptcy accounts; and (2) defendant
did not know plaintiff (and her debt) was in bankruptcy when it
sent out collection letters to the plaintiff, demanding payment
(a presumptively false statement under 15 U.S.C. § 1692e(2)(A)).
Although ignorance and lack of intent may go hand in hand, ignorance is
not sufficient to establish the bona fide error defense.
Randolph establishes that an exercise of care "to avoid" making
the mistake, and thus an act before the false statement is
made, is necessary to satisfy that requirement. Thus, the bare
fact that defendant stopped sending the letters after it was
notified by plaintiff's counsel of the bankruptcy does not help
The record in this case stands in stark contrast to the
evidentiary record in Hyman v. Tate, 362 F.3d 965 (7th Cir.
2004). In that case the Seventh Circuit affirmed a bench trial
finding by the district court where the trial record showed that
the defendant debt collector "had an understanding" with the bank
that referred the plaintiff's debts to it. The "understanding"
there was that the bank would not refer accounts for collection
if those accounts were in bankruptcy. To support the
"reasonableness" and thus effectiveness of this understanding, as
a procedure designed to satisfy the bona fide error defense, "the
defendants presented evidence that of the accounts referred to it
for collection, only .01% of those accounts were later found to
have been in bankruptcy." Hyman, 362 F.3d at 968. This latter
piece of evidence, in conjunction with the evidence of an
"understanding," persuaded the district court and the court of
appeals that, even though defendant "could have done more to
assure that bankruptcy proceedings had not been initiated, §
1692k(c) only requires collectors to adopt reasonable
procedures." 362 F.3d at 968. Thus, defendant did not need to
"independently research each account for bankruptcy filings
before sending collection letters" because the bank, in that
case, "limited the accounts forwarded to those not in
bankruptcy." Id. Accordingly, the defendant in Hyman was
entitled to the bona fide error defense. Id.
CDA has offered nothing on summary judgment to show that it has
evidence like that offered in Hyman, or other evidence to show
that its approach was reasonably adapted to avoid collection efforts on accounts in bankruptcy. And, as explained above, to
the extent that CDA thought it did not need to offer such
evidence on summary judgment, but could withhold that evidence
until trial, CDA was mistaken. Accordingly, the Court concludes
that defendant has offered no evidence on summary judgment that
would allow a reasonable jury to find in its favor on the bona
fide error defense.
For these reasons, the Court grants the plaintiff's motion for
summary judgment on liability Count I (doc. # 36). The matter is
set for a status conference on November 10, 2004, for the parties
to discuss further proceedings to establish damages and other