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Harrer v. Bayview Loan Servicing, LLC

United States District Court, N.D. Illinois, Eastern Division

November 30, 2016

Robert Harrer, Plaintiff,
v.
Bayview Loan Servicing, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin United States District Judge.

         Robert Harrer alleges that Bayview Loan Servicing LLC violated the Fair Debt Collection Practices Act by sending him certain communications. Bayview has moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). R. 98. For the following reasons, that motion is denied.

         Legal Standard

         A Rule 12(b)(6) motion challenges the sufficiency of the complaint. See, e.g., Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Mann v. Vogel, 707 F.3d 872, 877 (7th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Mann, 707 F.3d at 877.

         Background

         Harrer went into default on his mortgage and declared bankruptcy. His debt related to his mortgage was discharged in bankruptcy. Bayview contends that even after Harrer's bankruptcy discharge, Bayview has a “surviving security interest in [Harrer's] property.” R. 99 at 1. The parties do not explain the nature of this security interest, but it does not appear to be relevant to deciding this motion.

         After Harrer's bankruptcy discharge, Bayview contacted him six times in 2014 about his mortgage and a potential foreclosure: a voicemail on May 7; letters on May 7 and 8, see R. 79-1 at 8 and 25; and two letters each on May 22 and December 11, see R. 79-1 at 29, 31, 33-40. Harrer alleges that the content of these communications violated the FDCPA.

         Analysis

         I. Communications In Connection with the Collection of Debt

         Bayview argues that its communications with Harrer were not sent “in connection with the collection of debt, ” as is required to constitute a violation of the FDCPA, but were sent to “enforce[] . . . the surviving security interest in [Harrer's] property.” R. 99 at 3-5. Bayview contends that a “creditor's communications related to enforcing a security interest, or providing loss mitigation alternatives, following a debtor's bankruptcy discharge are not subject to the FDCPA.” R. 99 at 4. In support of this contention Bayview cites the First Circuit's holding that “it is plain that the sine qua non of a debt is the existence of an obligation (actual or alleged), ” and the FDCPA's definition of debt “requires at least the existence or alleged existence of an obligation to pay money.” Arruda v. Sears, Roebuck & Co., 310 F.3d 13, 23 (1st Cir. 2002); see also 15 U.S.C. § 1692a(5) (defining “debt” as “any obligation or alleged obligation of a consumer to pay money”). Several district courts have applied this language to dismiss FDCPA claims by plaintiffs who, like Harrer, had their obligations on promissory notes secured by a mortgage discharged in bankruptcy. See Kenney v. CitiMortgage, Inc., 2015 WL 1957880, at *5 (D. Kan. Apr. 29, 2015) (“Here, pursuant to Plaintiffs' Chapter 7 bankruptcy discharge, they are not liable for any deficiency between the price secured at foreclosure and the amount owed on the CitiMortgage Mortgage or Citibank Mortgage. [The defendant] argues that its actions could not have been for the collection of a debt, but rather, only for enforcement of a security interest. The Court agrees.”); Shaw v. Bank of Am., NA, 2015 WL 224666, at *6 (D. Mass. Jan. 15, 2015); Redjai v. Nationstar Mortg. LLC, 2014 WL 7238355, at *3 n. 1 (C.D. Cal. Dec. 15, 2014); Payne v. Reiter & Schiller, P.A., 2012 WL 1054873, at *3 (D. Minn. Mar. 8, 2012).

         However, the First Circuit qualified its holding regarding the necessity of the “existence” of a debt, by “recogniz[ing] that a plaintiff may bring a claim under the FDCPA by pleading that a debt collector falsely alleged an obligation to pay money.” Arruda, 310 F.3d at 23. This qualification comports with the Seventh Circuit's holding that “the FDCPA is designed to protect consumers from the unscrupulous antics of debt collectors, irrespective of whether a valid debt actually exists.” Keele v. Wexler, 149 F.3d 589, 594 (7th Cir. 1998). “That is because bringing or even threatening to bring a lawsuit ‘which the debt collector knows or should know is unavailable or unwinnable by reason of a legal bar such as the statute of limitations is the kind of abusive practice the FDCPA was intended to eliminate.'” Harris v. Total Card, Inc., 2013 WL 5221631, at *4 (N.D. Ill. Sept. 16, 2013) (quoting Ramirez v. Palisades Collection LLC, 2008 WL 2512679, at *5 (N.D. Ill. June 23, 2008)) (and citing cases from this district holding that “the FDCPA may be violated where the collection letters imply there is a legally enforceable obligation to pay the debt”)). This reasoning applies here because Harrer claims that his bankruptcy created a legal bar to collection on his mortgage, which he alleges Bayview ignored in communicating with him. Thus, the fact that Harrer is no longer obligated by the promissory note associated with his mortgage is not a basis to dismiss his claim that Bayview sought to collect on that note.

         Bayview also contends that “the plain language of each letter directly contradicts [Harrer's] conclusory statement that the letters were related to the collection of debt, ” R. 99 at 5, because the letters contain one of the two following disclaimers:

If you are in Bankruptcy or received a bankruptcy discharge of this debt, this communication is not an attempt to collect the debt against you personally, but is notice of a possible ...

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