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Murphy v. Stupar, Schuster & Bartell, SC

United States District Court, W.D. Wisconsin

February 21, 2018


          OPINION & ORDER

          JAMES D. PETERSON, District Judge.

         This case arises out of a debt that plaintiff Patricia Murphy owed to Associated Bank. Murphy filed for bankruptcy and received a discharge, In re Murphy, No. 09-17656 (Bankr. W.D. Wis.), but in 2016, defendant Stupar, Schuster & Bartell, SC, filed an action in state court on Associated's behalf in which it sought to enforce a reaffirmation agreement between Murphy and Associated.[1] Murphy's position in the state court lawsuit is that the affirmation agreement is not enforceable because it does not meet all the requirements for such agreements in 11 U.S.C. § 524. In her complaint in this court, Murphy contends that Stupar violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692e, because Stupar “falsely represented the character and legal status of the debt by filing, and maintaining, a legal action against Patricia Murphy” for an invalid debt. Dkt. 1, ¶ 20.

         Stupar has filed a motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, or, in the alternative, to abstain from hearing the case until the state court lawsuit is resolved. Dkt. 5. Because Stupar has not shown that it is entitled to either form of relief, the court will deny the motion.


         A. Abstention

         Although Stupar raises abstention as an “alternative” to its motion to dismiss, Dkt. 6, at 6, abstention generally is considered a “threshold” question that is decided before the merits. Tenet v. Doe, 544 U.S. 1, 6 n.4 (2005); Local Union No. 12004, United Steelworkers of Am. v. Massachusetts, 377 F.3d 64, 76 (1st Cir. 2004). Regardless, the issue appears to be moot. Stupar asks the court to abstain from hearing this case under Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), while the state court action is pending, but the electronic docket for the Wisconsin state courts shows that the Circuit Court for Dane County dismissed Associated's claim against Murphy and entered judgment in her favor. Associated Bank, NA v. Gaffney, No. 2016cv2048 (Dane Cty. Cir. Ct. Dec. 20, 2017).[2]

         The state court docket does not show the reason for the dismissal of the claim against Murphy (and the parties haven't provided any information), but the state court found in favor of Associated on the claim against Gaffney, suggesting that the court dismissed the claim against Murphy for a reason unique to her, which could be her bankruptcy discharge. Whatever the reason, the state court litigation appears to be concluded.[3] And even if it weren't, Stupar's own view is that the state court litigation is not dispositive of Murphy's claim in this court, Dkt. 6, at 6 n. 2, so Stupar has not shown that this is one of the “rare” cases, Growe v. Emison, 507 U.S. 25, 32 (1993), in which it would be appropriate to make an exception to the “virtually unflagging obligation of the federal courts to exercise the jurisdiction given them.” Colorado River, 424 U.S. at 817.

         Because neither side has filed a supplemental brief about the effect, if any, of the state court's decision on this case, the court will not consider that issue now. If any party believes that the state court's decision is preclusive, that party may raise the issue in a motion for summary judgment.

         B. Merits

         Murphy is bringing her claim under 15 U.S.C. § 1692e, which states that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” The statute lists 16 nonexhaustive examples of prohibited conduct, including “[t]he false representation of . . . the character, amount, or legal status of any debt.” § 1692e(2). The question raised by Stupar's motion is what qualifies as a “false, deceptive, or misleading representation or means” in the context of state court litigation.

         Two basic points appear to be undisputed. First, § 1692e applies to a lawyer's conduct that occurs in the context of litigation. Heintz v. Jenkins, 514 U.S. 291 (1995). Second, the complaint itself may qualify as a false representation under § 1692e. Marquez v. Weinstein, Pinson & Riley, P.S., 836 F.3d 808, 810 (7th Cir. 2016). For example, in Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1079 (7th Cir. 2013), the court held that filing a time-barred debt collection action is itself a violation of § 1692e “because such a suit falsely implies that the debt collector has legal recourse to collect the debt.” Eul v. Transworld Sys., No. 15 C 7755, 2017 WL 1178537, at *8 (N.D.Ill. Mar. 30, 2017) (citing Phillips, 736 F.3d at 1079). See also Rehman v. Pierce & Assocs., P.C., No. 16 C 5178, 2017 WL 131560, at *4 (N.D.Ill. Jan. 13, 2017) (“The filing of a legally defective debt collection suit can violate § 1692e where the filing falsely implies that the debt collector has legal recourse to collect the debt.”).

         In this case, Murphy's view is that the state court complaint falsely implies that Associated has a legal right to collect a discharged debt. Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (“A demand for immediate payment . . . after the debt's discharge . . . is ‘false' in the sense that it asserts that money is due, although, because of the . . . discharge injunction (11 U.S.C. § 524), it is not.”). See also McMahon v. LVNV Funding, LLC, 744 F.3d 1010, 1020 (7th Cir. 2014) (“Whether a debt is legally enforceable is a central fact about the character and legal status of that debt. A misrepresentation about that fact thus violates the FDCPA.”). Although Stupar says that it has a reaffirmation agreement with Murphy, she says that the agreement is unenforceable under § 524 because it is missing certain required information.

         Stupar acknowledges that Murphy is disputing the validity of the debt, but its position is that a complaint seeking to collect a debt is not “false, deceptive, or misleading” if it is filed in “good faith.” Dkt. 17, at 3. Stupar suggests that a complaint does not violate § 1692e unless: (1) the debt is “on its face, patently invalid”; or (2) a court has already determined the debt to be invalid. Id. at 4.

         In the abstract, Stupar's position has some force. If acting in good faith does not defeat a claim under § 1692e, then a debt collector subjects itself to potential liability under the FDCPA any time it seeks to enforce a disputed debt. But at least at this ...

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