Berg v. McCalla Raymer Leibert Pierce, LLC

         Judge Thomas M. Durkin

          MEMORANDUM OPINION AND ORDER

          HONORABLE THOMAS M. DURKIN, UNITED STATES DISTRICT JUDGE

         Lois I. Berg and Robert D. Berg (the “Bergs”) bring this action against McCalla Raymer Leibert Pierce, LLC (“MRLP”) under the Fair Debt Collection and Practices Act, 15 U.S.C. § 1692, et seq (“FDCPA”). MRLP moved to dismiss for failure to state a claim. R. 7. For the reasons that follow, MRLP's motion is denied.

         Standard

         A Rule 12(b)(6) motion challenges the “sufficiency of the complaint.” Berger v. Nat. Collegiate Athletic Assoc., 843 F.3d 285, 289 (7th Cir. 2016). 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.' ” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 366 (7th Cir. 2018) (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. Tobey v. Chibucos, 890 F.3d 634, 646 (7th Cir. 2018).

         Background

         This case involves a state court foreclosure action filed by MRLP related to a residence in Northbrook, Illinois (the “Property”). According to the complaint, the Property is inhabited by the Bergs and owned by the Bergs and their daughter Lauren Berg (“Lauren”) as joint tenants. R. 1 ¶¶ 3, 4, 13. On April 7, 2004, Lauren- who is not a party to this lawsuit-borrowed money in order to refinance mortgage loan debt on the Property. She executed a promissory note in the amount of $220, 000 that same day (the “Note”). Id. ¶¶ 12-13 and Ex. 1. To secure payment of the Note, Lauren granted a contemporaneous mortgage lien on her interest in the Property (such mortgage lien, the “Mortgage, ” and the Note and Mortgage together, the “Loan”). Id. ¶ 12 and Ex. 2. The Bergs are not parties to the Loan and did not borrow money or execute the Note or Mortgage. Id. ¶ 15; see also id., Exs. 1 and 2. The Loan is now owned by Deutsche Bank National Trust Company, as trustee for Residential Asset Securitization Trust 2004-IP2, Mortgage Pass-Through Certificate Series 2004-IP2 (“Deutsche Bank”). Id. ¶ 14.

         Lauren failed to make payments on the Loan, and on November 5, 2018, MRLP filed a complaint to foreclose mortgage in state court, attempting to collect on the Loan on behalf of and as attorneys for Deutsche Bank (such action, the “Foreclosure Action, ” and such complaint, the “Foreclosure Complaint”). Id. ¶ 17 and Ex. 3. The Foreclosure Complaint names Lauren and the Bergs (among others) as defendants, but lists only Lauren as a person “claimed to be personally liable for deficiency unless personal liability is discharged in a Bankruptcy proceeding or otherwise released.” Id. at Ex. 3 ¶ 3(o). And it seeks to sell the Property at public sale in order to pay the Loan, a judgment of foreclosure and sale of the Property, and a judgment for attorney's fees, costs and expenses. Id. ¶ 18 and Ex. 3. The Foreclosure Complaint also seeks possession of the Property and the option to appoint a receiver. Id. During the foreclosure proceedings, MRLP moved for default and for judgment for foreclosure and sale. Id. ¶ 20 and Exs. 4 and 5. MRLP also moved to appoint a selling officer and for attorneys fees. Id. ¶ 20 and Exs. 6 and 7. In moving for judgment for foreclosure and sale, MRLP represented “[t]hat the rights and interests of all Defendants in the subject property are inferior to the lien of the Plaintiff.” Id. ¶ 26.

         On February 21, 2019, the state court entered a judgment for foreclosure and sale on the Property. Id. ¶ 21 and Ex. 8. The Bergs retained counsel to represent their interests in the Foreclosure Action. Id. ¶ 22. Ultimately, counsel was successful in having the judgment against the Bergs vacated. But the Foreclosure Action remains pending and the Bergs have incurred legal fees and costs of $2, 500 for the work associated with it. Id. ¶¶ 22-23.

         The Bergs allege that MRLP's actions in filing and prosecuting the Foreclosure Action violate the FDCPA because: (1) the Foreclosure Action “falsely implies that [MRLP] has legal recourse to collect the debt” in that none of the judgment of foreclosure and sale, entry of a judgment for attorney's fees, costs and expenses, possession and appointment of a receiver were legally attainable since the Bergs were not obligated on the Note and nor was their interest in the Property subject to any lien (including the Mortgage), id. ¶¶ 28-29; and (2) the Loan does not authorize MRLP to collect or attempt to collect from the Bergs, id. ¶ 29. In other words, the Bergs allege that the filings in the Foreclosure Action violate the FDCPA because only Lauren's interest in the Property is at issue per the Loan.^[1] MRLP moved to dismiss the complaint for failure to state a claim. R. 7.

         Analysis

         The FDCPA prohibits abusive, deceptive, or unfair debt collection practices. 15 U.S.C. § 1692 et seq. To state a claim under the FDCPA, a plaintiff generally must allege that: (1) he is a “consumer” within the meaning of the FDCPA; (2) the “debt” at issue arises out of a transaction entered into primarily for personal, family or household purposes; (3) the defendant collecting or attempting to collect the debt is a “debt collector” within the meaning of the FDCPA; and (4) the defendant violated, by act or omission, one of the FDCPA's provisions. Heintz v. Jenkins, 514 U.S. 291, 293 (1995); Loja v. Main Street Acquisition Corp., 906 F.3d 680, 683 (7th Cir. 2018). Here, the Bergs invoke Sections 1692e and 1692e(2)(A), which together bar debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt” with regard to the debt's “character, amount, or legal status.” 15 U.S.C. § 1692e, e(2)(A). The Bergs also contend that MRLP violated Sections 1692f and 1692f(1), which prohibit the collection of or attempt to collect any amount in connection with a debt that is not “expressly authorized by the agreement creating the debt or permitted by law.” Id. § 1692f, f(1).

         MRLP argues that dismissal is proper because: (1) the Bergs are not “consumers” within the meaning of the FDCPA; and (2) the court filings in the Foreclosure Action are not actionable under the FDCPA.^[2] R. 8; R. 15. The Court addresses each argument in turn.

         I. Whether the Bergs are ...