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Hamilton v. Loancare, LLC

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

August 22, 2019

LOANCARE, LLC, Defendant.



         Plaintiff, Derrick Hamilton (“Hamilton”), individually, and on behalf of all others similarly situated, filed a complaint against Defendant, LoanCare, LLC (“LoanCare”), pertaining to a letter Hamilton received concerning a debt from a real estate mortgage. Hamilton brings the claim for violation of the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692 et seq. (Dkt.15). This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and venue is proper under 28 U.S.C. § 1391(b)(2). Loancare moves to dismiss the First Amended Class Action Complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, the Motion to Dismiss [16] is DENIED.


         On January 10, 2013, Hamilton executed a mortgage (“the Mortgage”) for the purchase of real estate located at 148 North Bertram Drive, Yorkville, Illinois (“the Property”). (Amend. Compl., Dkt. 15 at ¶¶ 16, 27). The Mortgage secured the repayment of $124, 343.00 of debt (“subject debt”). (Id. at ¶ 8). On January 28, 2015, Hamilton initiated a bankruptcy case for relief under Chapter 13 of the Bankruptcy Code, and the Bankruptcy Court confirmed the Chapter 13 Plan on March 27, 2015. (Id. at ¶¶ 11, 13). On September 8, 2015, Hamilton's liability on the subject debt was extinguished through the Chapter 13 Plan. (Id. at ¶15). On April 1, 2016, LenderLive transferred the servicing rights to the subject debt to RoundPoint Mortgage Servicing Corporation (“RoundPoint”). On May 2, 2017, the servicing rights to the subject debt were transferred from RoundPoint to Loancare, and Loancare received notice of Hamilton's bankruptcy discharge. (Id. at ¶¶ 18, 19). At the time Loancare acquired servicing rights, the subject debt was in default. The Property was then sold at a public sale on July 10, 2017. (Id. at ¶ 21). On December 13, 2018, Loancare sent a letter entitled Deficiency Waiver Notice (“Waiver Notice”) to Hamilton at the address of the office suite of Hamilton's lawyers. (Dkt. 15-1, Dkt. 1-1).

         The Waiver Notice stated: “After the application of proceeds from the sale of the above listed property to your mortgage loan balance, there remains a deficiency of $49, 867.54.” (Dkt. 15-1). The Waiver Notice then went on to state that “the holder of the deficiency waives its right to collect the unpaid deficiency balance from you, and neither the [Department of Veterans Affairs (“VA”)] nor the deficiency holder will pursue you for any portion of the deficiency balance.” (Id.). Further, the Waiver Notice indicated: “To the extent the Fair Debt Collection Practices Act (FDCPA) is applicable, please be advised that this communication is from a debt collector and any information obtained will be used for that purpose.” (Id.) (emphasis removed from original). The Waiver Notice also provided a bankruptcy disclaimer that stated if Hamilton “previously received a discharge in a bankruptcy proceeding, please notify [Loancare] immediately and be advised that this notice is for informational purposes only.” (Id.) (emphasis removed from original). Moreover, the Waiver Notice stated: “This notice is not intended to collect, recover, or offset the debt against you personally and should not be considered a demand for payment or indicate that you are personally liable for this debt.” (Id.) (emphasis removed from original).

         Hamilton alleges that the Waiver Notice was “false and misleading because it strongly implies that prior to receiving [LoanCare's] letter, [Hamilton] was liable for the deficiency balance that arose after the sale of the Property.” (Amend. Compl. Dkt. 15 at ¶ 31). Hamilton also alleges he was “highly confused and misled by [Loancare's] letter because he was led to believe that his bankruptcy discharge had no legal effect and that he was liable for the deficiency balance up to the date he received [Loancare's] letter.” (Id. at ¶24).


         Under Rule 8(a)(2), a plaintiff must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8. A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint; the purpose is not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). A determination of the sufficiency of a claim must be made “on the assumption that all allegations in the complaint are true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “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.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

         To survive a motion to dismiss, a plaintiff “must satisfy two conditions: first, the complaint must describe the claim in sufficient detail to give the defendant fair notice of what the claim is and the grounds upon which it rests; and second, its allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level.” Horning v. Lab. Corp. of Am., No. 09 C 3421, 2009 U.S. Dist. LEXIS 80866, at *4 (N.D. Ill. Sep. 3, 2009) (internal citations omitted).


         Hamilton's claim is for a violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. LoanCare moves to dismiss the claim, arguing that the Complaint fails to state a cause of action for three reasons: (1) the Waiver Notice is not “collection activity” under the FDCPA; (2) the Waiver Notice was sent to Hamilton's attorney's rather than Hamilton and no “competent attorney” would have been deceived by the notice; and (3) if the “competent attorney” standard is not applied, the “unsophisticated consumer” would still not have been misled by the Waiver Notice. The Court will address the first two of these arguments.

         A. Whether the Waiver Notice is “collection activity” under the FDCPA

         The FDCPA generally prohibits “debt collectors” from engaging in abusive, deceptive, or unfair debt-collection practices. Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 384 (7th Cir. 2010). Pursuant to Section 1692e of the FDCPA, “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692(e)(2). Two threshold criteria must be met for the FDCPA to apply: 1) “the defendant must qualify as a ‘debt collector''”; and 2) “the communication by the debt collector that forms the basis of the suit must have been made ‘in connection with the collection of any debt.'” Gburek, 614 F.3d at 384 (quoting 15 U.S.C. § 1692a(6), §§ 1692c(a)-(b), § 1692e, § 1692g).

         Loancare does not dispute that it qualifies as a “debt collector, ” but argues that the Waiver Notice was not sent “in connection with the collection of a debt” because the Waiver Notice did not make an express demand for payment, list a payment due date, or threaten consequences should the debtor fail to pay. (Dkt. 17 at 8-9). Further Loancare asserts that the Waiver ...

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