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Krawczyk v. Centurion Capital Corp.

February 18, 2009

DAVID KRAWCZYK, PLAINTIFF,
v.
CENTURION CAPITAL CORPORATION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff David Krawczyk has brought this lawsuit against Defendants Centurion Capital Corporation, Blatt, Hasenmiller, Leibsker & Moore, LLC, and Palisades Acquisition XVI, LLC, for alleged violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et seq., and malicious prosecution. Defendants have moved for summary judgment on all six counts of Plaintiffs' second amended complaint [69], and Plaintiff has moved for summary judgment as to Counts I, II, III, and V [72]. Plaintiff also has moved to strike the declarations of Cheryl Kavanagh, Peter Fish, and Kenneth Wake [81], which Defendants submitted in support of their motion for summary judgment. For the following reasons, the Court grants Defendants' motion for summary judgment [69] as to Counts I, II, III, V, and VI and dismisses Count IV without prejudice. The Court denies Plaintiff's motion for summary judgment [72] in its entirety, and also denies Plaintiff's motion to strike the declarations of Cheryl Kavanagh, Peter Fish, and Kenneth Wake [81].

I. Factual Background

On July 25, 2006, Defendant Centurion Capital Corporation ("Centurion"), through its attorneys at Defendant Blatt, Hasenmiller, Leibsker & Moore, LLC ("Blatt"),*fn1 filed a collection lawsuit against Plaintiff David Krawczyk in the Circuit Court of Cook County, Illinois, captioned Centurion Capital Corp. v. Krawczyk and bearing the case number 06 M1 158141. The lawsuit alleged that Centurion was the assignee of Providian Bank, the financial institution with which Plaintiff allegedly opened a charge account. According to the state court complaint, Plaintiff charged purchases to his Providian account but failed to make the required monthly payments, resulting in a debt of $1,261.98. The affidavit listed the account holder as David Krawczyk and the account number as 4479 4505 2330 8592.

According to Plaintiff's deposition, the last payment that he made on his account with Providian Bank was in 1999, before he moved from California to Illinois. He claims that he closed his account with Providian before he moved to Chicago and that the closing of his account was the last contact that he had with Providian. He also testified that prior to being served with the state court lawsuit, he never had any contact or communication with Centurion or Blatt.

The picture painted by Defendants, through the affidavits of Cheryl Kavanagh, vice president of Centurion, and Kenneth Wake, a partner at Blatt, is quite different. Kavanagh claims that Centurion purchased a portfolio of defaulted debt from Capital One on December 8, 2005, which contained Plaintiff's debt for his Providian National Bank credit card account. Defendants contend that upon purchasing Plaintiff's debt, Centurion received information from Capital One regarding the debt, including the credit card number, the amount of the debt, the date Providian National Bank "charged off" the debt,*fn2 the date of the last payment made by Plaintiff on the debt, and Plaintiff's last known address and social security number. Defendants claim that this information showed that Plaintiff owed $1,261.98 on his account, that Providian charged off the debt on June 28, 1999, and that Plaintiff's last payment on that account was made on March 5, 2004, in the amount of $484.00.

Centurion retained Blatt to collect on Plaintiff's debt and to represent Centurion in the event that litigation was necessary to collect the alleged debt. Blatt, through the affidavit of Wake, claims that it sent an initial demand letter to Plaintiff on June 2, 2006, and that the letter contained the validation notice required pursuant to 15 U.S.C. § 1692g(a) along with the amount of the debt and the creditor's name. According to the declaration of Wake, once an account is loaded onto Blatt's computer system, the system automatically generates an initial demand letter by inserting the account specific information into what otherwise is a standardized form letter. Blatt's computerized account notes show that the initial demand letter was sent to Plaintiff on June 2, 2006, and that the letter was addressed to 5 N. Wabash Ave., Chicago, Illinois, 60602-4703.*fn3

The state court collection lawsuit was set for trial on November 14, 2006. On November 2, 2006, Plaintiff (defendant in the state court action) filed a motion to dismiss the collection lawsuit pursuant to § 2-619 of the Illinois Code of Civil Procedure, asserting that the collection lawsuit was based upon an account that did not exist and, even if the account did exist, the suit was filed outside the applicable limitations period. On November 14, 2006, Centurion and Blatt agreed to voluntarily dismiss the collection lawsuit against Plaintiff. On November 16, 2006, Plaintiff filed suit in this Court against Centurion and Blatt.

On February 3, 2007, Defendant Palisades Acquisition XVI, LLC ("Palisades") purchased a portfolio of defaulted debt from Centurion, which included Plaintiff's debt at issue in the present lawsuit. On March 26, 2007, Blatt and Palisades sent Plaintiff's counsel a letter regarding the same credit card account that had been the subject of the state court action. The letter, composed on Blatt stationary, stated that Palisades had purchased Plaintiff's account (4479 4505 2330 8592) from Centurion and contended that Plaintiff owed $1,419.38 on the account. The letter stated that it was an "attempt to collect a debt" and that the firm was acting pursuant to the Fair Debt Collection Practices Act, 15 U.S.C.A. § 1692, et seq. The letter also included the following provision:

If you do not dispute the validity of this debt, or any portion thereof, within 30 days of receipt of this letter, we will assume it is valid. If you do dispute the validity of this debt, or any portion thereof, please notify us in writing, within 30 days of receipt of this letter and we will mail verification of the debt, or a copy of a judgment, if applicable, to you. We will also provide you with the name and address of the original creditor, if different from the current Creditor, if you request the same from us, in writing, within 30 days of receipt of this letter.

Plaintiff stated in his deposition that he did not receive this letter and had never seen it prior to his deposition.

On May 2, 2007, Plaintiff amended his complaint in this case, adding Palisades as a defendant. Plaintiff's six-count second amended complaint alleges the following causes of action: Count I alleges a violation of § 1692e(2)(A) of the FDCPA against Centurion and Blatt; Count II alleges a violation of § 1692f(1) against Centurion and Blatt; Count III alleges a violation of § 1692g against Centurion and Blatt; Count IV alleges malicious prosecution against Centurion and Blatt; Count V alleges a violation of § 1692e(2)(A) against Palisades and Blatt; and Count VI alleges a violation of § 1692f(1) against Palisades and Blatt. Defendants' second amended answer includes the following affirmative defense: "Any violation of the FDCPA was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such error." See 15 U.S.C § 1692k(c). Defendants have moved for summary judgment on all counts of Plaintiff's second amended complaint, while Plaintiff has moved for summary judgment on Counts I, II, III, and V.

II. Motion to Strike Declarations

Before moving to the merits of the parties' motions for summary judgment, Plaintiff asks the Court to strike, in whole or in part, the declarations of Cheryl Kavanagh (a vice president of Defendant Centurion), Peter Fish (director of litigation for Defendant Palisades), and Kenneth Wake (a partner with Defendant Blatt), which were submitted by Defendants in their Local Rule 56.1 Statement of Material Facts and in their Response to Plaintiff's Local Rule 56.1 Statement of Facts and Statement of Additional Facts. Plaintiff argues that the declarations of Kavanagh and Fish should be excluded because they are based on hearsay, fail to comply with Rule 56(e), and were made by declarants whom Defendants failed to disclose in their Rule 26(a) disclosures. Plaintiff contends that the declaration of Wake should be excluded because it is hearsay and fails to comply with Rule 56(e).

Federal Rule of Evidence 801(c) defines hearsay as "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed. R. Evid. 801(c). "[H]earsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial." Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir. 1997). Plaintiff contends that declarations should not be admitted under the business records exception to the hearsay rule because the records that form the basis for the statements in the declarations are based on the records of another entity, Capital One, and Capital One's records are based on the records of yet another entity, Providian National Bank. Defendants first respond that the information in the affidavits regarding Plaintiff's account is not offered to prove that Plaintiff actually owed a debt in the amount of $1,261.98 or that his last payment on the account was on March 5, 2004, in the amount of $484.00. Rather, Defendants argue that this information is offered to establish that Centurion and Palisades had a good faith reason for pursuing collection actions against Plaintiff. Defendants also argue that the records fit within the business record exception to the hearsay rule.

If information is not offered for its truth, it cannot qualify as hearsay. With respect to the information in the affidavits, Defendants argue that it is being offered to explain why both Centurion and Palisades believed they had the right to initiate collection proceedings. In other words, it is being offered to show the effect that the information had on Centurion and Palisades. See Woods v. City of Chicago, 234 F.3d 979, 986 (7th Cir. 2000) (finding that district court did not run "afoul" of the prohibition on hearsay by considering statement strictly to determine the "effect" that they would have upon arresting officers). To the extent that the states of mind of both Centurion and Palisades in instituting debt collection proceedings are at issue in this case, the affidavits of Kavanagh and Fish may be used to show the effect the information had on Defendants.

The Court also is persuaded by Defendants' argument that the records of Centurion and Palisades fall under the business records exception to the hearsay rule. Rule 803(6) provides that regularly kept business records may be admitted to prove the truth of the matters asserted therein because they are presumed to be exceptionally reliable. Fed. R. Evid. 803(6); U.S. v. Emenogha, 1 F.3d 473, 483-484 (7th Cir. 1993). To qualify as business records under Rule 803(6), "1) the document must be prepared in the normal course of business; 2) it must be made at or near the time of the events it records; and 3) it must be based on the personal knowledge of the entrant or on the personal knowledge of an informant having a business duty to transmit the information to the entrant." Datamatic Servs., Inc. v. United States, 909 F.2d ...


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