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Abdollahzadeh v. Mandarich Law Group, LLP

United States Court of Appeals, Seventh Circuit

April 29, 2019

Mehdi Abdollahzadeh, Plaintiff-Appellant,
Mandarich Law Group, LLP, Defendant-Appellee.

          Argued October 30, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 16 CV 8682 - Manish S. Shah, Judge.

          Before Wood, Chief Judge, and Sykes and Barrett, Circuit Judges.


         Mehdi Abdollahzadeh opened a credit-card account with MBNA America Bank in 1998 and used it to make various personal, family, and household purchases. Twelve years later he defaulted on his debt, making his last payment in August 2010. In June 2011 he attempted another payment, but it never cleared. In April 2013 the bank sold the delinquent account to CACH, LLC, a debt buyer.

         CACH referred Abdollahzadeh's debt to the Mandarich Law Group, LLP ("Mandarich"), a debt-collection firm. CACH identified the later, unsuccessful payment attempt as the last payment on the account. Relying on this date, Mandarich sent a collection letter to Abdollahzadeh on December 3, 2015, and then sued him in state court when it received no response. The state court dismissed the suit because the last payment to clear occurred outside of Illinois's five-year statute of limitations.

         Abdollahzadeh sued Mandarich for attempting to collect a time-barred debt in violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq. ("FDCPA" or "the Act"). His claims centered on the collection letter and the state-court collection action. Mandarich moved for summary judgment citing the bona fide error defense. Id. § l692k(c). The district court granted the motion, concluding that the violations were unintentional and occurred despite reasonable procedures aimed at avoiding untimely collection attempts.

         Abdollahzadeh challenges that ruling on several grounds. First, he argues that Mandarich's continuation of the collection action after it learned the true last-payment date creates a factual dispute on the issue of intent. He also contends that the law firm's reliance on CACH's representations about the last-payment date was an abdication of its duty to engage in meaningful review and thus was unreasonable as a matter of law. Finally, he characterizes the firm's procedures for weeding out time-barred debts as "thinly specified policies" insufficient to support the affirmative defense.

         We reject these arguments and affirm. The bona fide error defense doesn't require the independent verification and procedural perfection Abdollahzadeh seems to think necessary. The undisputed evidence shows that any FDCPA violations were the unintentional result of a bona fide mistake. And Mandarich had procedures in place that, while simple, were reasonably adapted to avoid late collection efforts.

         I. Background

         Abdollahzadeh opened an MBNA credit-card account in 1998 and used it to pay for personal, family, and household expenses. In 2010 MBNA, later renamed FIA Card Services ("FIA"), declared Abdollahzadeh's debt to be in default. The last payment to clear on the account-one for $300-was made on or around August 3, 2010. FIA charged off Abdollahzadeh's account on March 31, 2011. He tendered a payment toward the account on June 30, 2011, in the amount of $1, 670.96, but it never cleared.

         FIA sold Abdollahzadeh's delinquent debt to CACH in April 2013 pursuant to a Loan Sale Agreement. SquareTwo Financial Corp. ("SquareTwo"), CACH's parent company, retained Mandarich for collection services. Under its retainer agreement, SquareTwo stated that it "does not warrant the completeness, correctness or accuracy of Account Data" and has no "liability for any incomplete, incorrect, or inaccurate Account Data." The agreement also required Mandarich to follow SquareTwo's operating procedures in its efforts to collect on CACH-owned credit accounts. Accordingly, the firm adopted SquareTwo's "Out of Statute Account Policy" for addressing statute-of-limitations issues.

         As a matter of policy, both Mandarich and CACH prohibit untimely collection efforts. They refer to debts falling outside of the applicable limitations period as "out-of-statute" debts. When the statute of limitations expires for any account not in active litigation, Mandarich's policy is to immediately cancel the account and return it to the creditor. To check for out-of-statute accounts, Mandarich attorneys analyze account data-specifically the date of last payment-and the relevant state's statute of limitations. While the firm has no written policy defining the date of last payment, in practice it uses the last payment to clear as the last payment on the account. To ascertain the last-payment date, Mandarich relies on account reports provided by CACH and its parent company. For its part, SquareTwo subjects the data used to generate these reports to a nightly computerized "scrub." SquareTwo uses its scrubbing software to identify last-payment dates that place an account beyond the relevant statute of limitations. Any out-of-statute account identified by the scrub, including those owned by CACH, is immediately recalled.

         On or around December 1, 2015, CACH placed Abdollahzadeh's account with Mandarich for collection. Following its usual practice, CACH provided Mandarich with the bill of sale memorializing its purchase, a document called "Schedule 1" containing FIA's electronic-transfer file for the account, and an Account Information Report generated by CACH itself. Schedule 1 includes the date the account was opened, the date of last payment, and the charge-off date. It also displays Abdollahzadeh's current balance and his balance at the charge-off date. The Account Information Report, created using proprietary software, contains similar data. As we've noted, Mandarich and CACH normally identified the last payment to clear as the last payment for statute-of-limitations purposes. In this case, however, the Schedule 1 and Account Information Report identified ...

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