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Abdollahzadeh v. Mandarich Law Group, LLP

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

March 26, 2018

Mehdi Abdollahzadeh, Plaintiff,
v.
Mandarich Law Group, LLP, Defendant.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah, United States District Judge.

         Plaintiff Mehdi Abdollahzadeh brings this action against the Mandarich Law Group for mailing a collection letter that did not inform him that the expiration of the statute of limitations prevented MLG from suing to collect the debt and for filing a state-court action against him on a time-barred debt, in violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. The parties filed cross-motions for summary judgment. See [59], [64]. For the following reasons, plaintiff's motion for summary judgment is denied, and defendant's motion for summary judgment is granted.

         I. Legal Standards

         Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A court must view all facts and reasonable inferences in the light most favorable to the non-moving party. Roh v. Starbucks Corp., 881 F.3d 969, 973 (7th Cir. 2018). On cross-motions for summary judgment, a court must draw inferences “in favor of the party against whom the motion under consideration [was] made.” Hess v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 658 (7th Cir. 2005) (citation omitted). Cross-motions must be evaluated together; the court may not grant summary judgment for either side unless the admissible evidence as a whole-from both motions-establishes that no material facts are in dispute. Davis v. Time Warner Cable of Southeastern Wis., L.P., 651 F.3d 664, 671 (7th Cir. 2011).

         II. Background

         Abdollahzadeh opened a credit account in 1998 and he incurred charges for personal, family, and household purposes. [69] ¶ 7.[1] Almost twelve years later, Abdollahzadeh defaulted on that debt. Id. ¶ 8. Several years after the charge-off date, a debt-buying entity named CACH, LLC purchased Abdollahzadeh's debt from the seller pursuant to a Loan Sale Agreement. Id. ¶¶ 10, 13; [74-1] ¶ 7. Since CACH's parent corporation had retained MLG for debt collection, [74-1] ¶ 13, CACH placed the debt with MLG for collection.[2] [69] ¶ 17. At the time of placement, CACH provided MLG a copy of the Bill of Sale, the seller's electronic transfer file for the account called “Schedule 1, ” and CACH's document called the Account Information Report. [74-1] ¶¶ 9-10. Schedule 1 included information about the account, such as the account holder's name, the account number, the open date, the balance, the date and amount of the last payment, the interest rate, the charge-off date, and the balance at the charge-off date. Id. ¶ 11. The Account Information Report, which CACH created using its proprietary software, contained similar information as Schedule 1 about the account, including the date of last payment, but it also had information such as notes and comments about the account and any related litigation. Id. ¶ 9; [58-1] ¶ 12.

         On December 3, 2015, MLG mailed a letter to Abdollahzadeh stating that he owed CACH a balance due of $16, 709.62 in connection with the debt. [69] ¶ 23; [64-2] at 16. The letter also explained that MLG was “acting solely as a debt collector, ” and included two additional cautionary messages: “this communication is from a debt collector, ” and “this is a demand for payment of your outstanding obligation.”[3][69] ¶ 23. The letter did not warn Abdollahzadeh that the debt was too old for MLG to sue upon or that making a payment toward the alleged debt after the statute of limitations had passed would restart the statute of limitations clock on the alleged debt. Id. ¶ 25. MLG did not receive a response from Abdollahzadeh regarding the December 3, 2015 letter. [77-1] ¶ 16.

         A few months after MLG sent the letter, the firm filed a complaint for breach of unwritten contract on behalf of CACH in the Circuit Court of Cook County, alleging that Abdollahzadeh owed $16, 709.62 on the account. [74-1] ¶ 34. Abdollahzadeh moved to dismiss the state-court action because MLG filed the complaint after the expiration of the five-year statute of limitations. [69] ¶ 29. MLG opposed the motion, arguing that the accrual date was July 8, 2011, when Abdollahzadeh's payment of the alleged debt was returned for insufficient funds, and therefore, the complaint was timely. Id. ¶¶ 31-32. Ultimately, the state court found that MLG filed the complaint more than five years after Abdollahzadeh's last payment, so the state court dismissed the complaint with prejudice on September 6, 2016, id. ¶ 30; [74-1] ¶ 50.

         During the pendency of the state-court action, MLG never alleged that it made a mistake in connection with filing that complaint. [69] ¶ 33. MLG acknowledges that when it filed the state-court complaint, it knew that the charge-off date was March 31, 2011, the last payment date was June 30, 2011, and that the Account Information Report and Schedule 1 listed $16, 709.62 as both the charge-off balance and the current balance. But, MLG did not know the manner in which the last payment was presented, nor did it know the banking institution from which it originated. Id. ¶ 21. Only after Abdollahzadeh moved to dismiss the state-court action, did MLG seek clarification from CACH about the date of the last payment, and only at that time did CACH inform MLG that CACH had conferred with the seller and had learned that Abdollahzadeh's June 30, 2011 payment never cleared, which meant the last payment without such a reversal was tendered on August 3, 2010. [77-1] ¶¶ 25-26.

         This mistake conflicted with CACH's and MLG's policies prohibiting the collection of a debt for which the statute of limitations had expired.[4] Id. ¶ 11; [58-1] ¶ 21. Specifically, if the statute of limitations for any account that was placed with MLG expired, it was MLG's policy to immediately cancel the account and to return it to the creditor, so long as that account was not in active litigation. [77-1] ¶ 10. As such, before it filed the state-court complaint, MLG had analyzed Abdollahzadeh's account to determine whether a suit would be outside of the statute of limitations. Id. ¶ 17. MLG had considered the last payment date provided in Schedule 1, as well as in the Account Information Report, which had the benefit of CACH's software that scrubbed all open and active accounts nightly to identify accounts in which the statute of limitations had expired. Id. ¶¶ 4-5; [58-1] ¶ 22. Additionally, CACH had sent MLG an affidavit certifying that the information contained in the draft complaint was accurate and supported by CACH's business records. [64-4] at 100:1- 11. It was MLG's policy that before filing suit, its attorneys must review the relevant affidavit from a CACH custodian of records to ensure that the information in CACH's business records matched the information contained in the proposed complaint. Id.

         These circumstances led MLG to attempt to collect an out-of-statute debt from Abdollahzadeh. As a result of MLG's actions, Abdollahzadeh says that he experienced emotional distress, including panic, fear, anxiety, and sleeplessness. [64-2] at 3, ¶¶ 10, 13-14. This was due in part to the fact that MLG's letter made Abdollahzadeh believe that the firm could file a lawsuit against him to collect the debt. Id. at 3, ¶¶ 10, 15. Abdollahzadeh did not seek any medical treatment for these symptoms, though. [77-1] ¶ 30. Abdollahzadeh also says that he experienced financial harm from MLG's actions because he had to pay attorneys' fees and costs in the state-court action. [64-2] at 3, ¶¶ 11-12. Accordingly, Abdollahzadeh brought this FDCPA claim against the firm.

         MLG moves for summary judgment, arguing that it is entitled to the bona fide error defense, that 15 U.S.C. § 1692f is not implicated, and that Abdollahzadeh is not entitled to emotional distress or punitive damages. See [59], [60]. Abdollahzadeh moves for summary judgment, arguing that MLG violated § 1692e and § 1692f, that MLG is not entitled the bona fide error defense, and that he is entitled to emotional distress damages. See [64], [64-1].

         III. Analysis

         The FDCPA regulates when and where a debt collector may communicate with a debtor, 15 U.S.C. § 1692c; it prohibits the use of harassing, oppressive, or abusive measures to collect a debt, id. § 1692d; and it bans the use of false, deceptive, misleading, unfair, or unconscionable means of collecting a debt, id. §§ 1692e, 1692f. See Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 384 (7th Cir. 2010). Two threshold criteria must be met to state an FDCPA claim: (1) the defendant must qualify as a “debt collector, ” and (2) the communication by the debt collector must have been made “in connection with the collection of any debt.” Id. (citing 15 U.S.C. ยงยง 1692a(6), 1692c(a)-(b), 1692e, 1692g). Even assuming that MLG is a debt collector and that both MLG's letter and ...


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