United States District Court, N.D. Illinois, Eastern Division
ANNA WELNOWSKA and JERZY SENDOREK, individually and on behalf of others similarly situated, Plaintiffs,
WESTWARD MANAGEMENT, INC. d/b/a Westward Property Management, Defendant.
MEMORANDUM OPINION AND ORDER
EDMOND E. CHANG, District Judge.
Plaintiffs Anna Welnowska and Jerzy Sendorek filed this amended complaint [R. 49] against Defendant Westward Management, Inc., doing business as Westward Property Management, alleging that Westward violated provisions of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., while attempting to collect a debt from Plaintiffs. Westward now moves to dismiss [R. 52] the amended complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. For the reasons stated below, the motion to dismiss is denied, although only one of Plaintiffs' theories of liability remains in the case.
In evaluating a motion to dismiss, the Court must accept as true the complaint's factual allegations and draw reasonable inferences in Plaintiffs' favor. Ashcroft v. al-Kidd, ___ U.S. ___, 131 S.Ct. 2074, 2079 (2011). Plaintiffs are Chicago residents who own a condominium in the Madison Manor 2 complex. Am. Compl. ¶ 4. The Madison Manor 2 Condominium Association hired Westward as its property manager on July 1, 2012. Id. ¶¶ 4, 7. Part of Westward's duties as property manager was to collect monthly assessments and other charges due to the Association and to prepare notices of delinquency for unpaid debts. R. 49-1, Management Agreement at 9. According to Westward's records, Plaintiffs were already in arrears on Association assessments when Westward assumed its position. Am. Compl. ¶ 8.
On August 30, 2012, Westward sent its first collection letter to Plaintiffs, attempting to collect on a debt allegedly owed to the Association. Id. ¶ 18. Plaintiffs disputed, in writing to Westward, that they owed any debt to the Association. R. 49-6, Pl.'s Exh. 6; R. 49-7, Pl.'s Exh. 7. On February 6, 2013, Westward sent Plaintiffs a second letter, notifying Plaintiffs that failure to pay the alleged debt within thirty days would lead to seizure of their home (by termination of possession). R. 49-5, Pl.'s Exh. 5, February 6 Letter. At some point, the Association filed a lawsuit against Plaintiffs in an Illinois state court, seeking collection of assessments, fees, and costs, as well as termination of possession. R. 52-1, Def.'s Br. at 2.
Plaintiffs filed this lawsuit in August 2013, alleging five FDCPA violations by Westward. R. 1, Compl.; Am. Compl. Westward now moves to dismiss each count under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on the grounds that it is not a debt collector under the FDCPA. R. 52, Mot. Dismiss.
II. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation marks and citation omitted). The Seventh Circuit has explained that this rule "reflects a liberal notice pleading regime, which is intended to focus litigation on the merits of a claim' rather than on technicalities that might keep plaintiffs out of court." Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002)).
"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon which relief may be granted." Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). "[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94 (2007) (citing Twombly, 550 U.S. at 555-56); McGowan v. Hulick, 612 F.3d 636, 638 (7th Cir. 2010) (courts accept factual allegations as true and draw all reasonable inferences in plaintiff's favor). "[A] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). These allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.
Westward asserts a single argument in support of its motion to dismiss Plaintiffs' amended complaint: that Westward is not a "debt collector" under the FDCPA. Def.'s Br. at 4-12. The FDCPA defines a "debt collector" as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). It also clarifies that not every entity involved in collecting a debt owed to another is a "debt collector" for purposes of the Act. In particular, the following are not debt collectors:
[A]ny person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
15 U.S.C. § 1692a(6)(F).
Westward contends that, as a full-service property manager for the Association, its attempts to collect Plaintiffs' debt were "incidental to a bona fide fiduciary obligation" and thus fall under exception (i). Def.'s Br. at 4, 7. In support, Westward argues that federal district courts have consistently recognized the distinction between a debt collector that is hired for the sole purpose of debt collection and a property manager that is responsible for performing a variety of property management services, including collecting debts from unit owners or lessees. Id. at 7-8 (citing Kirby v. Prof'l Ass'n Mgmt., Inc., No. 3:12-cv-697-J20-MCR, 2012 WL 5497951, at *4 (M.D. Fla. Nov. 9, 2012) (granting summary judgment to property manager on FDCPA claim under § 1692a(6)(F)(i) fiduciary duty exception); Reynolds v. Gables Residential Servs., Inc., 428 F.Supp.2d 1260, 1264 (M.D. Fla. 2006) ("[Property manager] not only had a right but indeed a fiduciary obligation to collect rent and corresponding fees from tenants."); Berendt v. Fairfield Resorts, Inc., 339 F.Supp.2d 1064 (W.D. Wis. 2004) ("Because the [Management Agreement] designates the [property] manager... as the Association's agent and because agency creates a fiduciary relationship between the agent and the Association... defendant was acting incidentally to a bona fide fiduciary ...