United States District Court, W.D. Wisconsin
CURTIS GREEN and DEBORAH J. GREEN, Plaintiffs,
SPECIALIZED LOAN SERVICING, LLC, Defendant.
OPINION & ORDER
D. PETERSON District Judge.
Curtis and Deborah J. Green purchased a home with a loan
secured by a mortgage. A few years later, they filed for
bankruptcy and the Green’s obligation to pay the loan
was discharged. Defendant Specialized Loan Servicing, LLC
(SLS) eventually acquired the right to service the loan and
SLS sent letters to the Greens. The Greens allege that
SLS’s communications violated several provisions of the
Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §
1692. SLS moves to dismiss the complaint. Dkt. 19. The Greens
not only oppose the motion, they contend that the motion is
frivolous and move for sanctions under Federal Rule of Civil
Procedure 11. Dkt. 34. The court will dismiss one of the
Greens’ claims, but will otherwise deny the motion to
dismiss. The court will grant the Greens’ motion for
leave to file a sur-reply, Dkt. 29, but will deny their
motion for sanctions.
following facts are taken from the second amended complaint,
Dkt. 13, and they are accepted as true. Zahn v. N. Am.
Power & Gas, LLC, 815 F.3d 1082, 1087 (7th Cir.
2016). The SLS letters are incorporated by reference in the
complaint; complete versions are filed with plaintiffs’
brief at Dkt. 26-1 and Dkt. 26-2.
Greens took out a loan to buy a house in 2004. They filed for
bankruptcy in 2009, and they were granted discharge of the
obligation to pay the loan. The lender foreclosed on the
house, and waived any right to a deficiency judgment against
the Greens, leaving the Greens essentially free and clear of
any obligation on the home loan. The house was sold at a
sheriff’s sale on December 3, 2014.
loan was transferred to SLS for servicing, effective December
16, 2014. (The point of any further servicing of the
discharged load is unclear.) Less than a week later, SLS sent
the Greens a “Notice of Servicing Transfer”
letter, dated December 22, 2014. Dkt. 26-1. (The court will
call this the “Notice” for short.) The Notice
identified SLS as the new servicer of their debt and informed
the Greens that any payments “due on or after
12/16/2014” should be sent directly to SLS at its
Notice stated in bolded, capital letters: “This
communication is from a debt collector. This is an attempt to
collect a debt and any information obtained will be used for
that purpose.” Dkt. 26-1, at 2. But below that text,
the Notice included a bankruptcy disclosure that stated in
bolded, capital letters:
if you are . . . a customer who has received a bankruptcy
discharge of this debt: please be advised that this notice is
to advise you of the status of your mortgage loan. This
notice constitutes neither a demand for payment nor a notice
of personal liability to any recipient hereof.
Id. So the Notice both claimed to be an attempt to
collect a debt and disavowed any attempt to collect a debt.
2015, the Greens tried to get another loan from a different
bank. They discovered a tradeline from SLS on their credit
report, noting a past-due amount and a recent late payment
notation. The Greens called SLS to clarify and they learned
that the entry on their credit report might have been caused
by a computer error. SLS then sent a “Verification of
Mortgage” (which the court will call the
“Verification” for short) by fax to Deborah Green
with information about the loan. Dkt. 26-2. Among other
information, the Verification stated that the principal
balance on the loan was $0.00 and confirmed that the Greens
were not delinquent over the previous two years. The
Verification also included information indicating that the
credit reporting agency was the “requesting company,
” suggesting that it had solicited the information to
correct the tradeline.
Greens filed this case on August 19, 2015. They amended their
complaint on December 17, 2015. Dkt. 6. SLS moved to dismiss
the amended complaint, Dkt. 9, but the Greens filed a second
amended complaint a few weeks later, Dkt. 13. SLS now moves
to dismiss the second amended complaint. Dkt. 19. The
Greens have also moved for sanctions under Rule 11. Dkt. 34.
survive a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6), a complaint must contain sufficient facts
to “state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). The Greens’ claim is plausible if
they “plead factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. But legal
conclusions and “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory
statements” are insufficient. Adams v. City of
Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014)
(internal citations and quotation marks omitted).
FDCPA generally prohibits “abusive, deceptive, and
unfair debt collection practices” by debt collectors.
15 U.S.C. § 1692. The Greens allege that SLS violated
multiple sections of the FDCPA by sending them the Notice
that their debt had been transferred to SLS for servicing,
causing a false tradeline on their credit report, and sending
the Verification. They allege that the communications lacked
the requisite disclosures, in violation of 15 U.S.C. §
1692g. They also allege violations of § 1692d
(harassment or abuse), § 1692e (false or misleading
representations), and § 1692f (unfair practices).
The motion to dismiss the first amended complaint
Greens’ second amended complaint superseded SLS’s
first motion to dismiss, Dkt. 9, and dropped the two claims
that SLS had challenged in the motion. Accordingly,
SLS’s first motion to dismiss will be denied as moot.
But SLS asks the court for an order precluding the Greens
from again amending to reintroduce the claims that they
omitted from the second amended complaint. Dkt. 17. There is
no need for such an order because future amendments will