Bielawski v. Midland Funding, LLC

          MEMORANDUM OPINION AND ORDER

          JOHN Z. LEE, UNITED STATES DISTRICT JUDGE

         Plaintiff Nancy Bielawski brought this suit pursuant to the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e(8), alleging that Defendants Midland Funding LLC (“Midland”) and Midland Credit Management, Inc. (“MCM”) are debt collectors who failed to report her dispute of a delinquent debt to TransUnion, a credit reporting agency. Both sides have filed cross-motions for summary judgment. For the reasons stated herein, Bielawski's motion [31] is granted in part and denied in part, and Defendants' motion [38] is denied.

         I. Background^[1]

         Before we begin, the Court notes that both parties fall short of complying with the dictates of N.D.Ill. Local Rule 56.1. The rule requires the parties to file statements of fact and responses supported by reference to evidence in the record. In numerous places in their Local Rule 56.1 statements, the parties take inconsistent positions with respect to their own facts and cite evidence unsupportive of their positions. See, e.g., infra Section I.A at 4 n.3, 4 n.5, 4-5 n.6, 5 n.7; Section I.B at 7-8 & n.10. The Court requires strict compliance with Local Rule 56.1, see Raymond v. Ameritech Corp., 442 F.3d 600, 604 (7th Cir. 2006), and will note when certain material factual statements are stricken or deemed admitted due to noncompliance with the rule. The ramifications of the parties' actions are significant, as we shall see, and provide a cautionary lesson to the litigants that appear in this district.

         Turning to the facts here, Bielawski incurred credit-card debt with Citibank N.A. (“Citibank”) that she later became unable to pay. Pl.'s LR 56.1(a) Stmt. Facts (“Pl.'s SOF”) ¶¶ 9-10, ECF No. 32. After the account went into default, Midland purchased it. Pl.'s SOF ¶ 11. Midland is a debt purchaser that does not have any employees of its own; instead, it hires MCM to service and collect debt. Defs.' LR 56.1(a) Stmt. Facts (“Defs.' SOF”) ¶¶ 2, 5-6, ECF No. 40. In this case, Midland assigned Bielawski's debt to MCM for collection. Pl.'s SOF ¶ 11.

         A. Bielawski's Dispute Letter and Defendants' Communications with TransUnion

         After MCM began attempting to collect the debt from Bielawski, she retained counsel. Defs.' SOF ¶ 14. Bielawski's counsel sent a letter addressed to Midland on March 8, 2018, containing the following statement about Bielawski's case:

This client regrets not being able to pay, however, at this time they are insolvent, as their monthly expenses exceed the amount of income they receive, and the debt reported on the credit report is not accurate. If their circumstances should change, we will be in touch.

Pl.'s SOF ¶ 12; Pl.'s Ex. D (“Dispute Letter”), ECF No. 32-4. Defendants received the letter the same day. Pl.'s SOF ¶ 13. This letter marked the first time Bielawski communicated her dispute to Defendants. Defs.' SOF ¶¶ 35-36. Prior to this time, Bielawski had not contacted her original creditor or any credit bureau to dispute the amount of the debt.^[2] Id. ¶ 19.

         MCM follows certain policies with respect to processing and reporting disputes. Its Consumer Support Services department reports approximately 6.7 million accounts to various credit bureaus and processes approximately 152, 000 disputes each month related to these accounts. Id. ¶ 28. Its policies require disputes to be addressed internally within 48 to 72 hours, and to be reported to third parties such as credit bureaus within 30 days. Id. ¶ 30. Furthermore, on the Monday morning following the first and third Sunday of each month, MCM finalizes a list of data from consumer-debt accounts, including any disputes on the accounts, to be furnished to credit bureaus. Id. ¶ 22. After the list is finalized on Monday morning, it is furnished to credit bureaus the following Friday. Pl.'s SOF ¶ 20. During the intervening week after finalizing the list, but before furnishing it to credit bureaus, MCM “engages in quality control checks to ensure that the data is accurate.” Defs.' SOF ¶ 29.

         This set of policies impacted the way MCM addressed Bielawski's dispute. MCM furnished data from Bielawski's debt account to TransUnion on March 9, 2018, the day after receiving Bielawski's Dispute Letter.^[3] See Defs.' SOF ¶ 23; Consumer Reporting Data at 2. But MCM did not mark Bielawski's account as disputed until March 13; furthermore, based on MCM's policies, the March 9 report was finalized on Monday, March 5, 2018-three days before Defendants received the Dispute Letter.^[4] Defs.' SOF ¶¶ 21-22.

         On March 14, 2018, an MCM representative “took further steps” to process Bielawski's dispute, but “inadvertently removed” the dispute code from the system.^[5]Id. ¶ 24. By March 21, MCM placed the dispute code back on Bielawski's account. Id. ¶ 26. But Defendants furnished Bielawski's debt information to TransUnion again on Friday, March 23, Pl.'s SOF ¶ 15, in a report that would have been finalized the prior Monday, March 19, see Defs.' SOF ¶ 22. Not surprisingly, the March 23 report did not contain Bielawski's dispute.^[6] See Pl.'s SOF ¶¶ 15-17. The dispute was reflected, however, in Defendants' next report to TransUnion on April 6, 2018. Defs.' SOF ¶ 27.

         On April 2, 2018, Bielawski purchased her TransUnion credit report and discovered that her debt to Midland was being displayed as undisputed. Pl.'s SOF ¶¶ 16-17. Bielawski contends that the fifteen-day delay between Defendants' receipt of her dispute and their conveying it to TransUnion has caused her “annoyance, aggravation, humiliation[, ] and emotional distress.”^[7] Id. ¶ 19.

         B. Defendants' Status as Debt Collectors

         MCM does not dispute that, “in certain circumstances and in certain instances, ” including in Bielawski's case, it “acts as a debt collector as defined by the FDCPA.” Defs.' LR 56.1(b) Resp. Pl.'s SOF ¶ 6. But the parties dispute whether Midland is a “debt collector.” Pl.' SOF ¶ 3; Defs.' LR 56.1(b) Resp. Pl.'s SOF ¶ 3.

         It is undisputed that Midland holds a collection-agency license from the State of Illinois. Pl.'s SOF ¶ 3; Defs.' LR 56.1(b) Resp. Pl.'s SOF ¶ 3. But according to Midland, it does not have any direct contact with consumers regarding debt-collection efforts. Defs.' SOF ¶ 6. Rather, it says, “[a]ny actions taken on accounts owned by Midland Funding are taken by MCM, ” which devises its own collection strategies without Midland's input. Id. ¶¶ 7-8. Bielawski rejects these assertions. Pl.'s LR 56.1(b) Resp. Defs.' SOF ¶¶ 6-8.

         Bielawski first points out that Midland regularly files collections lawsuits in the Circuit Court of Cook County. See Docket Search, Clerk of the Circuit Court of Cook County, http://www.cookcountyclerkofcourt.org/CourtCaseSearch/Docket Search.aspx (select “Civil Division, ” search by name, type “Midland Funding, ” and select “Plaintiff”).^[8] Midland does not dispute this assertion.

         Bielawski next contends, and Midland disputes, that Midland “derives all of its revenue from purchasing and recovering portfolios of defaulted receivables from consumers.” Pl.'s SOF ¶ 22; Defs.' LR 56.1(b) Resp. Pl.'s SOF ¶ 23. To support this assertion, Bielawski relies upon SEC filings from Encore Capitol Group, Inc. (“Encore”). Pl.'s SOF ¶ 22; see Pl.'s Ex. M, SEC filings excerpt, Encore Capital Group, Inc., Annual Report (Form 10-K) (Dec. 31, 2016) (“Encore SEC Filings”), ECF No. 32-13. But neither Bielawski nor the SEC filings explain Encore's relationship to Midland.^[9] Not only that, even if the SEC filings showed that all of Encore's revenues come from defaulted receivables-a dubious proposition, see Encore SEC Filings at 30 (“Selected Financial Data”)-they say nothing about Midland's revenue stream. Accordingly, Bielawski has failed to support her SOF ¶ 23 with admissible evidence, and it is stricken. See N.D.Ill. Local Rule 56.1(a)(3).

         Finally, Bielawski also asserts that Midland attempted to collect her debt by reporting it to TransUnion. Pl.'s SOF ¶ 15. This factual dispute is particularly vexing, because Defendants agree that Bielawski's statement of fact is “undisputed, ” Defs.' LR 56.1(b) Resp. Pl.'s SOF ¶ 15, but simultaneously assert that it was actually MCM that reported the debt to TransUnion, Defs.' SOF ¶¶ 22-23, 33. Normally, based on Defendants' failure to contest Bielawski's version, the Court would deem it undisputed. But here, Bielawski's version is not supported by the evidence she cites. Bielawski points to (1) Defendants' Answer, which states that it was MCM that furnished her data to TransUnion, and (2) her TransUnion credit report, which lists the Midland debt but does not indicate where the information came from.^[10] See Pl.'s SOF ¶ 15 (citing Defs.' Answer ¶ 22; 4/2/18 TransUnion Credit Report). The Court cannot deem admitted facts which are unsupported by the record. Accordingly, Bielawski's SOF ¶ 15 is stricken as unsupported, as are her responses to Defendants' statements of fact based on the same evidence. See Pl.'s LR 56.1(b) Resp. Defs.' SOF ¶ 8. The Court deems it undisputed that MCM, not Midland, furnished Bielawski's debt information to TransUnion. See N.D.Ill. Local Rule 56.1(a)(3), (b)(3)(B).

         II. Legal Standard

         “The court shall grant summary judgment 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); see also Shell v. Smith, 789 F.3d 715, 717 (7th Cir. 2015). To survive summary judgment, the nonmoving party must “do more than simply show that there is some metaphysical doubt as to the material facts, ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986), and instead must “establish some genuine issue for trial such that a reasonable jury could return a verdict in her favor.” Gordon v. FedEx Freight, Inc., 674 F.3d 769, 772-73 (7th Cir. 2012). In reviewing a motion for summary judgment, the Court gives the nonmoving party “the benefit of conflicts in the evidence and reasonable inferences that could be drawn from it.” Grochocinski v. Mayer Brown Rowe & Maw, LLP, 719 F.3d 785, 794 (7th Cir. 2013). The Court must not make credibility determinations or weigh conflicting evidence. McCann v. Iroquois Mem'l Hosp., 622 F.3d 745, 752 (7th Cir. 2010).

         Moreover, Rule 56 requires the district court to grant a motion for summary judgment after discovery “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party has the initial burden of establishing that there is no genuine issue of material fact. See Id. Once the moving party has sufficiently demonstrated the absence of a genuine issue of material fact, the nonmoving party must then set forth specific facts showing that there are disputed material facts that must be decided at trial. See Id. at 321-22.

         III. Analysis

         The FDCPA prohibits any “debt collector” from “communicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a debt is disputed.” 15 U.S.C. § 1692e(8). To establish Defendants' liability under this section, Bielawski must show that they are both “debt collectors” and that they knew or should have known that Bielawski's debt was disputed, but failed to communicate the dispute when reporting the debt to TransUnion. See id.; Evans v. Portfolio Recovery Assocs., LLC, 889 F.3d 337, 346 (7th Cir. 2018). Additionally, Defendants may defeat Bielawski's claim by showing that their error was “not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” 15 U.S.C. § 1692k(c).

         Defendants have moved for summary judgment, arguing that Bielawski has failed to set forth sufficient evidence that Midland is a “debt collector” or that Defendants failed to communicate a known dispute to TransUnion; they further argue that they are entitled to a bona fide error defense based on their policies and procedures. Bielawski has cross-moved for summary judgment, arguing that Defendants ...