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Green v. Specialized Loan Services, LLC

United States District Court, W.D. Wisconsin

July 21, 2016


          OPINION & ORDER

          JAMES D. PETERSON District Judge.

         Plaintiffs 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.


         The 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.

         The 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.

         The 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 listed address.

         The 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.

         In 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.

         The 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.[1] Dkt. 19. The Greens have also moved for sanctions under Rule 11. Dkt. 34.


         To 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).

         The 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).

         A. The motion to dismiss the first amended complaint

         The 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 ...

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