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Scott Mcmahon, On Behalf of Plaintiff and Classes v. Lvnv Funding

July 5, 2012


The opinion of the court was delivered by: Charles P. Kocoras, District Judge:


This matter comes before the Court on Defendants LVNV Funding, LLC, Resurgent Capital Services, L.P. ("Resurgent"), Alegis Group, LLC, and Tate & Kirlin Associates, Inc.'s ("Tate & Kirlin") (collectively, "Defendants") motion to dismiss Plaintiff Scott McMahon's ("McMahon") complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, Defendants' motion is granted in part and denied in part.


In 1997, McMahon incurred a debt to an Illinois gas utility company. Sometime thereafter, Defendant LVNV purchased McMahon's debt. LVNV and Resurgent are under common ownership and management, and Alegis Group is Resurgent's sole general partner. Resurgent retained Tate & Kirlin to collect McMahon's debt.

On December 19, 2011, Tate & Kirlin sent McMahon a letter seeking to collect the debt. McMahon requested verification of the debt, to which Resurgent responded with a letter dated January 13, 2012. Resurgent's response indicated that McMahon's account "was previously sold by Nicor Gas on or about 09-23-2011 and at that time the balance on this account was $584.98." The letter did not disclose that the debt was approximately fifteen years old. Because the debt was incurred in 1997, the four year statute of limitations on collecting gas bills had lapsed. See 810 ILCS 5/2-725.

On February 28, 2012, McMahon filed a class-action complaint against Defendants alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692e, 1692f. McMahon alleges that Defendants violated the FDCPA by sending dunning letters that failed to disclose that the debts were time-barred. Defendants seek dismissal of both McMahon's individual and class-wide claims pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1


A Rule 12(b)(6) motion to dismiss is used to test the legal sufficiency of a complaint. To state a claim, the allegations in the complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). While detailed factual allegations are not required, a plaintiff must provide enough factual support to raise his right to relief above a speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice;" rather, a claim must provide sufficient factual matter "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 570). In ruling on a motion to dismiss, a court accepts all well-pleaded facts and allegations as true and draws all reasonable inferences in the plaintiff's favor. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009). DISCUSSION

I. Class Allegations

The FDCPA prohibits a debt collector from using any "false, deceptive, or misleading representation" to collect a debt. 15 U.S.C. § 1692e. Specifically, a debt collector may not: (1) falsely represent "the character, amount, or legal status of any debt," 15 U.S.C. § 1692e(2)(A); (2) threaten "any action that cannot legally be taken or that is not intended to be taken," 15 U.S.C. § 1692e(5); (3) "use any false representation or deceptive means to . . . attempt to collect any debt," 15 U.S.C. § 1692e(10); or (4) use unfair or unconscionable means to collect" on a debt, 15 U.S.C. § 1692f.

Notably, the FDCPA does not explicitly require a debt collector attempting to recover on a time-barred debt to disclose that the debt is time-barred. Moreover, several courts in this district and two federal circuit courts have concluded that such attempts are not actionable under the FDCPA unless accompanied by a threat of litigation. See e.g., Murray v. CCB Credit Servs., Inc., 2004 WL 2943656 at *2 (N.D. Ill. Dec. 15, 2004); Walker v. Cash Flow Consultants, Inc., 200 F.R.D. 613, 616 (N.D. Ill. 2001); accord Huertas v. Galaxy Asset Mgmt., 641 F.3d 28, 33 (3rd Cir. 2011); Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir. 2001). The courts reasoned that because the statute of limitations merely limits the judicial remedies available to the creditor and does not eliminate the underlying debt, attempting to collect on a time-barred debt without disclosing as much is not deceptive under the FDCPA unless a dunning letter threatens litigation. As McMahon does not allege that Defendants' letters implicitly or explicitly threaten litigation,*fn2 the Court is inclined to accept the sound reasoning of its sister courts and dismiss McMahon's complaint.

McMahon invites us to stray from existing judicial precedent in light of a recent lawsuit filed by the Federal Trade Commission ("FTC") in the Middle District of Florida. On January 30, 2012, the FTC filed suit against a debt collection agency, Asset Acceptance, LLC ("Asset Acceptance"), alleging several violations of the FDCPA and Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). United States of America v. Asset Acceptance, LLC, No. 8:12-cv-182-T-27EAJ (M.D. Fla. 2012). The FTC, charged with enforcing the FDCPA,*fn3 alleged that Asset Acceptance's failure to disclose that a debt was time-barred was deceptive under the FDCPA. The same day that the complaint was filed, Asset Acceptance and the FTC entered into a Consent Decree pursuant to which Asset Acceptance was required to pay $2.5 million and include the following language in all subsequent collection letters in which Asset Acceptance knew that the statute of limitations on the debt had expired: "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."

At the time that the FTC filed suit against Asset Acceptance, it held "some interpretive and enforcement authority with respect to the FDCPA." Carter v. AMC, LLC, 645 F.3d 840, 843 (7th Cir. 2011); see 15 U.S.C. ยง 1692l(d) (2011). We must therefore determine what weight, if any, to afford the FTC's position. McMahon contends that the ...

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