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VanHuss v. Rausch

United States District Court, W.D. Wisconsin

April 14, 2017



          STEPHEN L. CROCKER Magistrate Judge.

         This is a civil action for damages and injunctive relief brought pursuant to the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, and the Wisconsin Consumer Act (“WCA”), Wis.Stat. §§ 425-427. Plaintiffs Patricia and Michael VanHuss contend that defendants Rausch, Sturm, Israel, Enerson & Hornik and Absolute Resolutions Corporation violated §§ 1692(e)(5) and 1692g(b) of the FDCPA and similar provisions of the Wisconsin Consumer Act by commencing a small claims collection action before complying with a request sent by Patricia VanHuss for validation of the debt, and then maintaining that lawsuit for 53 days after VanHuss filed a motion to dismiss in which she asserted that defendants had failed to respond to her request for validation of the debt.

         Before the court is defendants' motion for summary judgment on all of plaintiffs' claims. Dkt. 29. I am granting this motion for every claim but one: Patricia VanHuss's claim under § 1692g(b) of the FDCPA survives. Although defendants have shown that their failure to provide her with validation of her debt before suing her in small claims court was the result of an unintentional, bona fide error, reasonable factfinders could disagree whether defendants had procedures in place that were reasonably adapted to avoid any such error. Accordingly, I must deny defendants' motion for summary judgment on their bona fide error defense under § 1692k. I further reject defendants' argument that Patricia VanHuss must show that the alleged violation of § 1692g(b) was material. However, I agree with defendants that Michael VanHuss cannot proceed on this claim because he has not shown that he suffered any plausible injury as a result of defendants' actions.

         Plaintiffs' remaining claims will be dismissed. Wis.Stat. § 425.107 does not confer a private cause of action on consumers, and plaintiffs have failed to show that defendants' maintenance of the collection action for 53 days after Patricia VanHuss filed a motion to dismiss constitutes prohibited action under either the FDCPA or WCA.

         From the parties' submissions, I find the following facts to be undisputed and material to the motion for summary judgment.


         I. The Parties

         Plaintiffs Patricia VanHuss and Michael VanHuss reside in Reedsburg, Wisconsin. Defendant Rausch, Sturm, Israel, Enerson & Hornik LLC (“RSIEH”) is a law firm with an office in Brookfield, Wisconsin. Defendant Absolute Resolutions Corporation (“ARC”) is a debt buyer with an office in San Diego, California.

         II. RSIEH Attempts to Collect a Debt from Patricia VanHuss

         Patricia VanHuss incurred a debt to Citibank Retail Card for an AT&T Universal Rewards Card on which she defaulted. VanHuss received and retained billing statements sent in connection with her account. Citibank sold its interest in the debt to ARC, which in turn retained RSIEH as counsel for the purpose of collecting the debt.

         On January 2, 2015, Citibank sent a letter to Patricia VanHuss informing her that her account with a number ending in 7310 and with a balance of $8, 564.12 had been sold to ARC. In the letter, Citibank told VanHuss that she should send future payments or correspondence regarding her debt to ARC. It provided ARC's mailing address as PO Box 880306, San Diego, CA 92168-0306. Patricia VanHuss received this letter.

         On or about September 18, 2015, Patricia VanHuss received from RSIEH a letter advising her that ARC had referred the debt to RSIEH for collection of the balance owed. Among other things, RSIEH advised VanHuss that the original creditor was Citibank Retail Card, the account balance was $8, 565.12 and she had a right to dispute the validity of the debt. The September 18, 2015 letter identified ARC's contact information as 6602 El Cajon Blvd. Ste. 200, San Diego, CA 92115.

         Patricia VanHuss testified that on October 15, 2015, she printed a “validation” letter from the internet, by which she intended to dispute the debt and request validation as allowed by § 1692g(b).[1] According to VanHuss, she mailed this letter via certified mail to RSIEH on October 17, 2015. She received a certified mail receipt showing that RSIEH received her mailing on October 19, 2015.

         RSIEH's mailroom log confirms that the firm received a piece of certified mail from Patricia VanHuss on October 19, 2015. However, neither the certified mail receipt nor the mailroom log describes what was in the envelope. According to the mailroom log, the envelope was marked for distribution to attorney Shane Gale, who is RSIEH's Managing Attorney for its Wisconsin office. However, Gale never received any debt validation request from Patricia VanHuss, and defendants do not know what happened to it.

         Consequently, unaware that VanHuss had sent a validation request or otherwise disputed the debt, RSIEH began collection proceedings. On November 24, 2015, in its capacity as counsel for ARC, RSIEH filed a small claims action on ARC's behalf against Patricia VanHuss in Sauk County Circuit Court. Michael VanHuss was not named as a defendant.

         On December 14, 2015, Patricia VanHuss filed a motion to dismiss the collection case, asserting that service of process was ineffective and ARC lacked the capacity to sue her because it had not responded to her October 15, 2015 validation request. The court ordered briefing on the motion and VanHuss filed a letter brief in support on January 28, 2016. Eight days later, RSIEH responded to the motion by advising the court that it did not object to dismissal of the action without prejudice. The state court dismissed the collection case on February 5, 2016, 53 days after Patricia VanHuss filed her motion to dismiss. Since that time, defendants have taken no further steps to collect VanHuss's debt.

         III. RSIEH's Policies Concerning Debt Disputes

         Attorney Gale was deposed as RSIEH's representative pursuant to Rule 30(b)(6). Gale explained RSIEH's policies and procedures for complying with federal and state debt collection laws. Gale has been RSIEH's State Managing Attorney for Wisconsin since June 2015; before that, he worked at RSIEH as an associate since 2009.

         RSIEH utilizes a bonded mail courier to transport mail to and from its office. Its bonded courier is required to enter RSIEH's office through a secured entrance, and a log is maintained that records the details of each person's passage through security. When mail is received, RSIEH's receptionist immediately notifies the mailroom, at which point a certain employee is expected to transport the delivered mail from reception to the secured mailroom. Upon arrival in the mailroom, each piece of certified mail is logged and saved to create a record of the tracking number, the identity of the RSIEH employee who opened it, and the identity of the individual to whom it would be routed. Once the mail is sorted, it is placed in folders organized to reflect the path of delivery. The mail is then distributed by folder along the expected path.

         All consumer disputes and requests for validation related to Wisconsin consumers are directed to Attorney Gale. It is RSIEH's policy to honor disputes and debt validation requests regardless of whether they are received within the 30 days following a consumer's receipt of the notice required by § 1692g(a).

         According to Gale, RSIEH trains mailroom employees to identify types of correspondence RSIEH receives to ensure mail is properly sorted and routed. This training includes instructing mailroom staff to recognize words such as “validation” and “verification.” Gale, however, could not say what the qualifications RSIEH required for employment in its mailroom, he did not know whether any mailroom training policies were documented in writing or available on video, he did not know who provided the training to the mailroom employees, and he could not say when the mailroom employees had been hired who were working in October 2015 .

         The following categories of mail are routed to Gale: (1) mail addressed directly to him; (2) all debt verification requests related to Wisconsin consumers; (3) all mail related to Wisconsin litigation in which RSIEH is counsel of record that is not otherwise addressed to a specific attorney. According to print-outs submitted by plaintiffs that were obtained by searching Wisconsin's online database of court records, RSIEH is the law firm of record in nearly 3, 500 active Wisconsin cases; Gale himself is listed as the attorney of record on 309 of these Wisconsin cases. Gale also appears as the attorney of record on thousands of Wisconsin small claims cases, but plaintiffs' submissions do not show how many of these cases are open or how old they are.[2]

         Attorney Gale personally reviews and sorts his mail and distributes it to others, as necessary. Gale testified that he ordinarily processes his mail in this order: first, he reviews pleadings and processes them or routes them to another attorney (if related to a case that was assigned to another attorney; second, he reads through debt verifications and other consumer mail; and third, he goes through court notices and give those to his legal assistant to enter into calendars and the electronic file database for scheduling. Gale depo., at 61, at 12-18. When asked at his deposition whether he could estimate with any level of accuracy the number of pieces of mail that are routed to him on a given day, he could not, stating, “It varies.” Dkt. 33, at 54, lines 1-3.

         RSIEH maintains written procedures concerning the handling of consumer disputes and requests for validation once they are received. These are set forth in a document entitled “Consumer Dispute & Debt Validation Standard.” Aff. of Shane Gale, Dkt. 32, Exh. A. These procedures document various steps that RSIEH employees must take once a validation letter has been received to ensure that debt collection activities cease. Upon receipt of a verbal or written dispute or request for validation, a certain code must be entered into the corresponding electronic file. Consumer cease-and-desist requests are coded in a similar fashion. Upon entering the specified codes, RSIEH clients, such as ARC, are notified electronically of the facts giving rise to the codes. Copies of written disputes and validation requests must be scanned into the electronic file. Entry of the specified codes into RSIEH's electronic file after receipt of a dispute or validation requests causes RSIEH's electronic file to block further collection efforts on the file, although an attorney can “override” the “cease-and-desist” code if he or she needs to do work on the file.

         RSIEH's Director of Compliance monitors all files with the specified codes to ensure proper coding and handling. Once RSIEH compiles the documentation or information necessary to respond to the dispute or validation request, such information and documentation is scanned to the corresponding electronic file and reviewed by a RSIEH attorney. With the approval of RSIEH's attorney, relevant information or documentation is sent to the consumer by mail. After the information or documentation is sent to the consumer, the attorney enters another code into the corresponding electronic file. Entry of that code causes the removal of the “dispute” code. Removal of the “dispute” code from the electronic file results in the ability to engage in further collection efforts.

         To safeguard against the possibility of incorrect code entry during the course of receiving and responding to a consumer's dispute or request for validation, RSIEH attorneys are required to review a consumer's file for outstanding validation requests. If a RSIEH attorney sees an outstanding validation request when reviewing a file for suit, then the attorney must reject the suit and add any code required to complete the validation response process. In the event that a ...

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