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Bahena v. Jefferson Capital Systems, LLC

United States District Court, W.D. Wisconsin

January 29, 2019

TRACI BAHENA, Plaintiff,



         Plaintiff Traci Bahena is suing defendants Jefferson Capital Systems, LLC and Messerli & Kramer, PA under the Wisconsin Consumer Act (WCA) and the Fair Debt Collection Practices Act (FDCPA). Bahena alleges that defendants brought a state-court debt collection action against her when they did not have a legal right to do so, because defendants did not provide the required notice of the right to cure before filing the suit. She also alleges that Messerli violated the FDCPA by falsely implying that lawyers had independently reviewed her case.

         Jefferson Capital and Messerli have filed separate motions for summary judgment on all of Bahena's claims. Dkt. 68 and Dkt. 77. They assert essentially legal defenses, which the court rejects for reasons explained in this opinion. On the notice-of-right-to-cure claims, the material facts are undisputed: Bahena did not receive the notice to which she was entitled, and defendants had reason to know this. Based on those facts, a reasonable jury would find that defendants violated Bahena's rights. So the court will deny both motions for summary judgment. Because it appears that a trial is needed only on damages, the court is inclined to grant summary judgment to Bahena on liability. But it will give the parties an opportunity to explain why doing so would not be appropriate.

         The remaining FDCPA claim concerns whether Messerli falsely represented that a lawyer made a reasoned, professional judgment that it had the right to sue Bahena. The parties dispute how much time and attention Messerli attorneys devoted to Bahena's case. A reasonable jury could credit Bahena's version of the facts and find that Messerli's attorneys were not meaningfully involved in preparing the debt collection action. The court will deny Messerli's motion for summary judgment on that claim.


         The following facts are undisputed except where noted.

         In 2010, Bahena opened a consumer credit card account with Fingerhut. In 2015, Bahena fell behind on payments. Her January 2015 billing statement indicated that the account was past due, that she had been charged a $26.00 late fee, and that she needed to pay $148.88 by February 11, 2015 to “keep [her] account in good standing.” Dkt. 98, ¶ 6. Fingerhut sent Bahena letters on January 15, January 23, and January 30, 2015, alerting her that her account was past due and requesting payment. Dkt. 71, at 8-10.

         In February 2015, Bahena paid Fingerhut $148.88 which eliminated her past-due minimum payment balance, although she still owed almost $1400 on the account. She made additional payments in April, May, and June, but she ceased making payments in July because she had “[n]o funds, no money, no job.” Dkt. 73 (Bahena Dep. 33:8). At that point, she stopped reviewing her online account statements and began ignoring mail and email communications about her account. Fingerhut continued to send monthly email notifications advising that her account was past due. It also sent letters on July 15, August 4, August 14, and August 25, 2015, notifying Bahena that the account was delinquent and urging her to make a payment immediately. Dkt. 71, 12-15.

         Fingerhut charged off the balance of Bahena's account in December 2015. By that time, she owed $1, 775.06. That same month, Jefferson Capital Systems, a debt buyer and debt collector, purchased the charged-off account. Dkt. 75-3, at 2. Jefferson Capital received Bahena's last 11 account statements and some basic information about Bahena and her Fingerhut debt, including her name and location, how much she owed, the date the account was opened and charged off, and the date of last payment. Jefferson Capital then referred Bahena's account to a series of agencies that attempted to recoup the debt without success. Eventually, the account was placed with Messerli & Kramer, a law firm that focuses on consumer debt collection. Messerli received the same information that Jefferson Capital received.

         In September 2016, Messerli sent Bahena a dunning letter demanding payment on Jefferson Capital's behalf, which Bahena ignored. In January 2017, Bahena received a summons and small claims complaint notifying her that she was being sued in Lafayette County Circuit Court by “Jefferson Capital Systems, LLC . . . c/o Messerli & Kramer PA” for $1, 870.72 in credit card debt. Dkt. 70-3, at 1. See Jefferson Capital Sys., LLC v. Bahena, No. 17-sc-11 (Lafayette Cty. Cir. Ct. filed Jan. 18, 2017). The small claims complaint was signed by Jillian Walker, a Messerli lawyer representing Jefferson Capital.

         Bahena retained her own lawyer, Briane Pagel. On April 26, 2017, Messerli mailed to the state court a proposed order voluntarily dismissing the state-court collection action with prejudice. Jefferson Capital says that it did so “due to the heavy cost anticipated in litigating the small claims case.” Dkt. 70, at 6. Pagel sent Messerli a notice of counterclaim on April 30, but the state court dismissed the case on May 3, apparently without docketing any counterclaim. Bahena filed this federal lawsuit a few months later. Bahena alleges that the stress and humiliation of being sued caused her to lose sleep, drink alcohol excessively, and feel suicidal, among other things.

         The court will provide additional material facts in the analysis section.


         Summary judgment is appropriate if the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In reviewing defendants' motions for summary judgment, the court construes all facts and draws all reasonable inferences in Bahena's favor. Id. at 255. “To survive summary judgment, the nonmovant must produce sufficient admissible evidence, taken in the light most favorable to it, to return a jury verdict in its favor.” Fleischman v. Cont'l Cas. Co., 698 F.3d 598, 603 (7th Cir. 2012). Under Rule 56(f), the court can grant summary judgment for a nonmovant when appropriate, so long as it provides the moving party notice and a reasonable time to respond.

         A. Overview of claims

         Bahena asserts three causes of action, all of which arise out of the debt collection action that defendants filed against Bahena in Wisconsin state court. The first claim relies on 15 U.S.C. § 1692(e), which prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” Bahena says that by filing a debt collection lawsuit, both defendants represented that they had the right to sue her. This was false, Bahena says, because a prerequisite to filing a debt collection lawsuit in Wisconsin is complying with the requirement in Wis.Stat. § 425.105 to provide the debtor notice of her right to cure the default, something that defendants did not do.

         The second claim relies on the same alleged conduct but arises under Wis.Stat. § 427.104(1)(j), which prohibits debt collectors from claiming, attempting, or threatening to enforce a right with knowledge or reason to know that the right does not exist. Bahena says that defendants knew or had reason to know that they did not have the right to file the debt collection lawsuit because Bahena had not received the notice required under § 425.105.

         Bahena's third claim is against Messerli only and arises under 15 U.S.C. § 1692e(3), which prohibits “[t]he false representation or implication that any individual is an attorney or that any communication is from an attorney.” Bahena says Messerli violated § 1692e(3) by filing the debt collection lawsuit without “meaningful attorney involvement.” Dkt. 25, ¶ 58.

         Defendants seek summary judgment on each of these claims.

         B. Notice-of-right-to-cure claims

         Bahena's first two claims are predicated on her contention that she was not provided a notice of right to cure that complied with the requirements of the WCA. Under the WCA, debt collectors must provide a consumer with notice of her right to cure her default (i.e., pay the debt) before they can sue on the debt. See Wis. Stat. § 425.105. The statute specifies the information that the notice must contain. See Wis. Stat. § 425.104. Bahena says she never received a WCA-compliant notice, which means that defendants had no right to file a debt collection action. So by filing that action, Bahena says, defendants falsely implied that they had the right to sue her (violating the FDCPA) and asserted a right that they knew or had reason to know they didn't have (violating the WCA).

         In response, defendants raise three main arguments. First, they argue that Bahena was not entitled to notice under the WCA in the first place. Second, they argue in the alternative that Bahena did in fact receive notice that complied with the WCA. Third, they argue that, even assuming notice was not provided, Bahena has failed to adduce evidence that defendants had knowledge or reason to know this under the WCA, or that it constituted a materially false representation under the FDCPA.

         The court will consider each of defendants' arguments in turn.

         1. Whether Bahena had a right to notice

         Defendants assert five reasons why Bahena was not entitled to any WCA-compliant notice of her right to cure: (1) Bahena did not have a right to cure under the statute, so she was not entitled to notice of that right; (2) Bahena could not have cured her default by the time Jefferson Capital acquired her debt, so defendants could not provide notice of that right; (3) the WCA does not require a creditor to send a notice of right to cure default prior to commencing a suit; (4) Bahena had actual notice of her rights; and (5) compliance with § 425.104 would not have influenced Bahena's behavior, so any error was immaterial.

         a. Right to cure under the statute

          Section 425.105 of the WCA states that “if the customer has the right to cure under this section, ” a merchant may commence an action only after that customer has been provided with notice of her right to cure. Wis.Stat. § 425.105(1). A customer does not have a right to cure, or, by extension, a right to notice of her right to cure, if the following criteria are met:

A right to cure shall not exist if the following occurred twice during the preceding 12 months:
(a) The customer was in default on the same transaction or open-end credit plan;
(b) The creditor gave the customer notice of the right to cure such previous default . . .; and
(c) The customer cured the previous default.

Wis. Stat. § 425.105(3).

         Defendants say that Bahena met these statutory criteria at the time she defaulted in July of 2015 because “she was in default on the open-end credit plan twice during the preceding 12 months, . . . she was provided notice of the right to cure such previous default, and . . . she did in fact cure the previous default.” Dkt. 70, at 9. But § 425.105(3) requires that all three criteria occur twice within the preceding twelve months. It is undisputed that Bahena missed at least two payments in 2015-one in January, which she rectified on February 11, and again starting in July, when she ceased making ...

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