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Novak v. Monarch Recovery Management

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

December 13, 2016

Christine Novak Plaintiff,
v.
Monarch Recovery Management, Defendant.

          MEMORANDUM OPINION AND ORDER

          Elaine E. Bucklo United States District Judge.

         In this action, plaintiff asserts that defendant violated the Fair Debt Collection Practices Act (“FDCPA”) by sending her a dunning letter after she had filed for Chapter 13 bankruptcy. Before me are cross-motions for summary judgment. For the reasons that follow, defendant's motion is granted and plaintiff's motion is denied.

         I.

         The facts giving rise to the alleged violation are undisputed except where noted. In or around January of 2013, plaintiff opened a credit card with Credit One Bank and incurred a consumer debt. MSW Capital, LLC later acquired that debt. In early August of 2014, MSW placed the account with defendant, Monarch Recovery Management, Inc., for collection. Shortly thereafter, Monarch submitted the account to the credit reporting agency Experian for a “bankruptcy scrub, ” which was completed on August 12, 2014.

         Monarch sent plaintiff collection letters on August 13, 2014, and October 8, 2014, and it also attempted to reach plaintiff by phone but was unsuccessful. Then, on November 20, 2014, plaintiff filed a Chapter 13 voluntary petition for bankruptcy. Neither Monarch nor MSW was included on the bankruptcy service list, nor did either receive notice of the creditors meeting in plaintiff's bankruptcy case.[1]

         Monarch sent plaintiff a third collection letter on January 5, 2015. As of that date, Monarch had not received notice of petitioner's bankruptcy petition.[2] On January 12, 2015, Monarch closed plaintiff's collection account at MSW's direction. Defendant received notice of plaintiff's bankruptcy for the first time in a letter from plaintiff's counsel dated January 26, 2015.

         This lawsuit followed.

         I.

         Summary judgment is appropriate when the “pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). I must construe all facts in favor of the nonmoving party, and may grant summary judgment only “if, on the record as a whole, a rational trier of fact could not find for the non-moving party.” Turner v. J.V.D.B. & Associates, 330 F.3d 991, 995 (7th Cir. 2003)

         Plaintiff's four-count complaint alleges violations of 15 U.S.C. §§1692e(2), 1692e(10), 1692f, and 1692c(a)(2) of the FDCPA. Section 1692(e), which plaintiff asserts in Counts I and II, makes it unlawful for debt collectors to use false representations or means in connection with the collection of a debt. “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) or the discharge injunction (11 U.S.C. § 524), it is not.” Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004). This section creates a strict liability rule, meaning that there is no scienter requirement. (“Debt collectors may not make false claims, period.”). Id. at 730. Nevertheless, a debt collector who violates § 1692e, or any other substantive portion of the FDCPA, can escape liability if it establishes “by a preponderance of the evidence that (1) the violation was unintentional, resulting from a ‘bona fide error, ' and (2) that error occurred not-withstanding the maintenance of procedures reasonably adapted to avoid any such error.” Turner, 330 F.3d at 995-96 (7th Cir. 2003) (internal quotation marks and citation omitted); 15 U.S.C. § 1692k(c).[3]

         The central issue in the parties' cross-motions is whether the undisputed facts establish Monarch's bona fide error defense. For the purposes of examining this issue, I assume that Monarch's conduct violates the asserted provisions of the FDCPA.

         As noted above, the first prong of the bona fide error defense asks whether defendant's violation of the FDCPA was unintentional. Plaintiff does not dispute that Monarch had no knowledge of plaintiff's bankruptcy prior to sending the January 5, 2015, letter, and she articulates no theory under which Monarch's presumed violation of § 1692e can be deemed intentional under those circumstances. Cf. Turner, 330 F.3d at 996 (“proof that [the debt collector] was unaware of the bankruptcy would be a logical first step” to establishing that its violation was unintentional). Indeed, plaintiff's response to Monarch's bona fide error defense focuses exclusively on the second prong: whether the procedures Monarch had in place to avoid sending collection letters to consumers in bankruptcy were reasonably adapted to avoiding the error that led to the violation.

         Monarch's President, Diane Mazzacano, testified in an affidavit and at her subsequent deposition about Monarch's procedures for ensuring compliance with the FDCPA's ban on collecting from consumers involved in a bankruptcy. In her affidavit, Mazzacano explains that generally, “it is not advantageous” for debt owners to place accounts that are in bankruptcy with debt collectors, and that “as a result, the practice for all clients, including MSW, is not to place accounts with Monarch for collection where the consumer has filed bankruptcy.” Mazzacano Aff. at ¶ 4, Exh. 1 to Def.'s L.R. 56.1 Stmt. Mazzacano also testified that as part of its regular business practices, Monarch runs all new accounts through an outside bankruptcy “scrub” service, where the new placements are checked for bankruptcy, before it begins any collection activity. Id. at ¶ 5; Mazzacano Dep. at 17:15-18, Exh. 2 to Def.'s L.R. 56.1 Stmt. In addition, Monarch employees “are trained, and there is a procedure in place, when a consumer indicates that she has filed bankruptcy, for the collector to notate the account, and the account is closed to the collection floor.” Mazzacano Aff. at ¶ 8. Mazzacano also testified that Monarch's collectors are monitored and supervised daily by assistant managers, managers, the vice president of collections, the quality assurance department, and the compliance department to ensure compliance with the FDCPA. Mazzacano Dep. at 9:8-10:9.

         In addition to Mazzacano's testimony, Monarch produced two versions of its written bankruptcy policy. Both documents outline the three general ways in which Monarch may become aware of a bankruptcy-through a verbal notification from the consumer, a written notification from any source, or a “scrub” notification from Experian-and define the specific steps collectors are to take in each instance. See Exh. F to Pl.'s L.R. 56.1 Stmt. (DN 30-2). Plaintiff's argument that Monarch's procedures are not reasonably adapted to avoid violating the FDCPA's ban on collecting from bankrupt ...


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