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Boerner v. LVNV Funding LLC

United States District Court, E.D. Wisconsin

July 25, 2018



          J. P. Stadtmueller U.S. District Judge

         In this case, Plaintiff, George Boerner (“Boerner”), alleges that Defendants, LVNV Funding LLC (“LVNV”) and Messerli & Kramer PA (“Messerli & Kramer”), violated his rights under federal and state law when they sued him in Washington County Circuit Court on a defaulted credit card debt. Messerli & Kramer filed a motion to dismiss the complaint on April 23, 2018, (Docket #15), in which LVNV joined, (Docket #18). The motion is fully briefed and, for the reasons stated below, it will be granted in part and denied in part.

         1. LEGAL STANDARD

         Federal Rule of Civil Procedure 12(b) provides for dismissal of complaints which, among other things, fail to state a viable claim for relief. Fed.R.Civ.P. 12(b)(6). To state a claim, 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). In other words, the complaint must give “fair notice of what the. . .claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The allegations must “plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level[.]” Kubiak v. City of Chi., 810 F.3d 476, 480 (7th Cir. 2016) (citation omitted). In reviewing the complaint, the Court is required to “accept as true all of the well-pleaded facts in the complaint and draw all reasonable inferences in favor of the plaintiff.” Id. at 480-81.

         In addition to their allegation that Boerner has not stated viable claims, Defendants also challenge the Court's subject-matter jurisdiction under Rule 12(b)(1). When faced with a jurisdictional challenge, the court accepts as true the well-pleaded factual allegations found in the complaint, drawing all reasonable inferences in favor of the plaintiff. Ctr. for Dermatology & Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th Cir. 2014). In this context, the court may also consider extrinsic evidence adduced by the parties. Lee v. City of Chi., 330 F.3d 456, 468 (7th Cir. 2003).

         2. RELEVANT FACTS

         Boerner is a resident of West Bend, Wisconsin. LVNV is a debt buyer and debt collector, and Messerli & Kramer is a law firm that regularly works with LVNV to collect consumer debts. In Boerner's case, LVNV purchased a consumer credit card debt Boerner originally owed to Capital One.

         On October 20, 2017, Boerner was served with a summons and complaint issued by the Washington County Circuit Court in a small claims action brought by LVNV to collect this debt, Case No. 17SC2061. Boerner did not recognize LVNV as one of his creditors. Prior to being served, Boerner had received no notice of assignment of any of his debts to LVNV. Further, he had not received any notice that any of his accounts were in default, nor was he afforded an opportunity to cure any such default.

         James Kachelski (“Kachelski”) is a lawyer who works for Messerli & Kramer. He represented LVNV in the Boerner suit. Boerner's claims are premised in large part on the idea that Kachelski was too overworked to devote any meaningful consideration to Boerner's case. Consequently, Boerner includes several allegations concerning Kachelski's case load.

         As of December 14, 2017, Boerner reports that Kachelski was an attorney of record in 590 cases in Dane County, 116 of which were “open, ” meaning there was no judgment yet entered. Additionally, he was entered in 383 cases in Brown County, 45 of which were open; 449 cases in Waukesha County, 71 which were open; 329 cases in Racine County, 67 of which were open; and 2, 909 cases in Milwaukee County, 607 of which were open. Boerner alleges that upon information and belief, Kachelski's case load is similar throughout all of Wisconsin's counties.

         Boerner contends that even the closed cases must be considered as part of Kachelski's workload, as being “closed” only means that a judgment has been entered. For debt collection cases like those handled by Kachelski, much of the legal work occurs only after a judgment is entered, since at that time the lawyer has post-judgment collection avenues available to him, including garnishment, attachment, and other remedies.

         Further, Wisconsin court records reveal that Kachelski had 31 return dates and hearings scheduled in three different counties on Friday, December 15, 2017; 72 court events scheduled for Monday, December 18, 2017, including two trials in one county and a motion hearing in a different county; 15 events on Tuesday, December 19, 2017, including a scheduling conference; 84 events on Wednesday, December 20, 2017, including two hearings in different counties; 6 events on Thursday, December 21, 2017; and 21 events on Friday, December 22, 2017. That amounts to 249 hearings in only six days.[1]

         Boerner acknowledges that many of these hearings were mere “return dates, ” meaning that personal appearance might not have been required, but he maintains that Kachelski, as counsel of record, would nevertheless have been obligated to monitor the outcome of the hearing, including whether an appearance or answer had been filed by the opposing party or, if not, whether service was properly made and a motion for default judgment should therefore be filed.

         Boerner asserts that most debtors sued by Messerli & Kramer reasonably assume that a lawyer reviewed the matter and made a considered legal judgment about the validity of the debt and the legality of bringing a collection action. Based on Kachelski's case load and the amount of work he would reasonably need to do for each of his cases, Boerner concludes that Kachelski did not meet this expectation in his case. Indeed, according to Boerner, Kachelski did not meaningfully review any document sent to Boerner on behalf of LVNV in the Washington County suit before it was sent.

         Boerner brings three claims based on Defendants' conduct with respect to the Washington County action. First, Boerner alleges that Defendants did not comply with Wis.Stat. § 425.105(1) because they accelerated the maturity of his debt and filed suit without first giving notice of his right to cure the default as provided in that statute. Boerner claims that by suing him, LVNV falsely represented that it had a right to file suit against him when it knew that the right did not yet exist, in violation of the Wisconsin Consumer Act (“WCA”), Wis.Stat. § 427.104(1)(j). Second, based on precisely the same allegations, Boerner claims that the filing of the Washington County action violated the federal Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e(2)(A), because in so doing, LVNV falsely represented the legal status of his debt-i.e., that the debt was ready to be sued upon. Finally, based on the allegations with respect to Kachelski, Boerner raises a separate claim under the FDCPA, 15 U.S.C. § 1692e(3), that Messerli & Kramer falsely represented or implied that an attorney was meaningfully involved in the collection suit when this was not true.

         Boerner alleges that he suffered damages as a result of this misconduct. First, he suffered substantial emotional distress and anxiety at being sued on a debt he did not believe was in default and without notice that a suit would be forthcoming. Additionally, he suffered worry about the need to find and pay for a lawyer to defend him.

         3. ANALYSIS

         Defendants have thrown the proverbial kitchen sink at Boerner's complaint. They contend that this suit violates the Rooker-Feldman doctrine, that Boerner lacks constitutional standing, that his claims are barred by principles of preclusion, and that his claims lack plausible merit. The only claim to fail under the weight of these attacks is Boerner's state-law claim, as the Court shall explain below.

         3.1 Rooker-Feldman

         First, Defendants cite the Rooker-Feldman doctrine, which says that a plaintiff may not sue in federal court for injuries inflicted on him by a state-court judgment. See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415-16 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482-86 (1983). To allow such a claim would impermissibly force federal district courts to sit in review of the decisions of state courts. See Garry v. Geils, 82 F.3d 1362, 1365 (7th Cir. 1996); Homola v. McNamara, 59 F.3d 647, 650 (7th Cir. 1995).

         Defendants point out that in the Washington County suit, Boerner raised as a counterclaim the very same WCA right-to-cure claim he alleges in this case. (Docket #17-4 at 2-3). The state court granted Defendants' motion to dismiss that counterclaim. (Docket #17-5 at 3-7). Defendants accuse Boerner of trying to relitigate the claim here to escape the state court's adverse ruling.

         The problem with that argument is that Boerner alleges no injury arising from a state-court judgment itself. The conduct Boerner challenges in this action arose prior to any order of any state court. Applying Rooker- Feldman necessitates a distinction between “a federal claim alleging injury caused by a state court judgment, ” which is barred, and “a federal claim alleging a prior injury that a state court failed to remedy, ” which is not. Centres, Inc. v. Town of Brookfield, Wis., 148 F.3d 699, 702 (7th Cir. 1998); Kamilewicz v. Bank of Boston Corp., 92 F.3d 506, 510 (7th Cir. 1996) (Rooker- Feldman does not bar a claim that is “independent” of the state-court judgment). Boerner's case falls within the latter category. For that reason, the relevant framework to assess the potential effect of the state court's dismissal order is preclusion, not Rooker-Feldman. Milchtein v. Chisholm, 880 F.3d 895, 898 (7th Cir. 2018).

         Similarly unavailing is Defendants' contention that the present suit and the state court's order are “inextricably intertwined, ” giving rise to the Rooker-Feldman bar despite the fact that there is no injurious state-court judgment. (Docket #16 at 6-8). Just this year, the Court of Appeals in Milchtein emphasized that courts should not bandy about the phrase “inextricably intertwined” to forestall all federal litigation that touches upon matters in state courts. Id.; Richardson v. Koch Law Firm, P.C., 768 F.3d 732, 734 (7th Cir. 2014). The key consideration is instead “whether the federal plaintiff seeks the alteration of a state court's judgment.” Milchtein, 880 F.3d at 898. That is not what Boerner is trying to do here, so Rooker- Feldman does not apply.

         3.2 Standing

         Next, Defendants claim that Boerner lacks standing to pursue this action. Article III of the Constitution limits the judicial power to the resolution of “cases” and “controversies, ” which in turn requires a federal plaintiff to demonstrate that he has “standing, ” or a viable legal wrong committed by the defendant and redressable by a court. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016). To establish his standing, Boerner must show (1) that he suffered an injury in fact, (2) that there is a causal connection between his injury and Defendants' alleged misconduct, and (3) that a favorable decision from this Court will redress that injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). At the pleading stage, “the plaintiff must ‘clearly. . .allege facts demonstrating' each element.” Spokeo, 136 S.Ct. at 1547 (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)).

         Boerner's allegations satisfy each element of standing. First, he has suffered an injury in fact, which arises from “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560. Defendants, citing Spokeo, say that Boerner alleges injury only to a “procedural right, ” which is not sufficiently concrete to support standing. True, Spokeo teaches that violation of a procedural right conferred by statute is not automatically sufficient to confer standing, Spokeo, 136 S.Ct. at 1549, but here Boerner has alleged that Defendants' statutory violations gave rise to real harm. First, with respect to the right-to-cure claims, Boerner alleges he suffered a lawsuit that had not properly been brought, with its attendant legal costs, anxiety, and worry. Similarly, on the meaningful-involvement claim, Boerner asserts that he experienced amplified anxiety and fear based on the false representation that an attorney had made a considered legal judgment that the Washington County suit against him had merit. See Avila v. Rubin, 84 F.3d 222, 229 (7th Cir. 1996) (“An ...

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