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Bushberger v. Midland Credit Management Inc.

United States District Court, E.D. Wisconsin

May 28, 2019



          William E. Duffin, U.S. Magistrate Judge.

         Plaintiff Teresa Bushberger brought this proposed class action against defendant Midland Credit Management, Inc. for an alleged violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (the “FDCPA”). Midland Credit moves to dismiss the complaint on the ground that, at the time she filed the complaint, Bushberger lacked standing to bring it. (ECF No. 34.) All parties have consented to the full jurisdiction of a magistrate judge. (ECF Nos. 4, 10.) The motion has been fully briefed and is ready for resolution.


         On or about October 28, 2016, Midland Credit sent Bushberger the collection letter that is the subject of this action. (ECF No. 1-1.) Four months later, on February 27, 2017, Bushberger filed a voluntary Chapter 7 bankruptcy petition. In re Bushberger, No. 17-21474 (Bankr. E.D. Wis.). In her bankruptcy petition, Bushberger did not schedule an FDCPA claim against Midland Credit “because, although the debt collection letter [Midland Credit] mailed to her was ambiguous and confusing on its face, [Bushberger's] attorneys did not believe it violated the FDCPA at the time [Bushberger] filed her bankruptcy.” In re Bushberger, ECF No. 24 at 2. On June 6, 2017, Bushberger received a discharge from the bankruptcy court and the bankruptcy case was closed. In re Bushberger, ECF No. 10.

         On October 26, 2017, a little over four months after the bankruptcy case was closed and just inside the one-year statute of limitations set forth in the FDCPA, Bushberger filed the class-action complaint in this action. (ECF No. 1.) In her complaint Bushberger alleges that the letter she received from Midland Credit contained language that “misleads the consumer as to the probability of legal action to collect the debt.” (Id., ¶ 13.) She also alleges that the letter ambiguously states that for a payment of $500 Bushberger could “stop this process from continuing[.]” (Id., ¶¶ 18-21.) The complaint alleges that Bushberger was confused by the letter (id., ¶ 25) and that the letter violates the FDCPA.

         On February 14, 2018, Midland Credit moved to dismiss the complaint on the ground that Bushberger did not have standing to prosecute the FDCPA claim and because she was judicially estopped from pursuing it as a result of not disclosing it during the bankruptcy proceedings. (ECF No. 11.) The next day, February 15, 2018, Bushberger filed in the bankruptcy court a Motion to Reopen Case to Permit Amendment of the Schedules in which she sought to exempt the FDCPA claim against Midland Credit. In re Bushberger, ECF No. 12. While that motion was pending, Bushberger filed in this court a motion to stay the resolution of Midland Credit's motion to dismiss pending resolution of the proceedings in the bankruptcy court. (ECF No. 15.) Midland Credit opposed the motion to stay. (ECF No. 18.) Over Midland Credit's objection, this court granted Bushberger's motion to stay. (ECF No. 20.)

         Meanwhile, back in the bankruptcy court, over Midland Credit's objection the court reopened the case for the purpose of determining whether the FDCPA claim was property of the bankruptcy estate. In re Bushberger, ECF No. 21. After briefing, the court on June 27, 2018, issued a decision determining that “the FDCPA action is property of the bankruptcy estate that [Bushberger] may schedule and claim exempt, subject to the rights of the creditors and trustee to object to the exemption.” In re Bushberger, ECF No. No. 27 at 8. Bushberger then scheduled the FDCPA claim against Midland Credit with a value of $1, 000 and exempted $1, 000 of that asset. In re Bushberger, ECF No. 28 at 5. Midland Credit objected to Bushberger's claim of exemption, arguing that it became time-barred under the FDCPA in October 2017. In re Bushberger, ECF No. 29. On September 27, 2018, Midland Credit's objection to Bushberger's claim of exemption was overruled by the bankruptcy court. In re Bushberger, ECF No. 35.

         On or about February 12, 2019, counsel for Bushberger informed this court that, in correspondence with the Chapter 7 trustee in Bushberger's bankruptcy case, the trustee “indicated that the closing of Ms. Bushberger's bankruptcy case acts as an abandonment of any assets and that the trustee will not be taking any further action in Ms. Bushberger's bankruptcy case.” (ECF No. 30.) As a result, on February 14, 2019, this court issued an order vacating the stay. (ECF No. 31.)

         On March 21, 2019, Midland Credit filed the present motion to dismiss. (ECF No. 34.)


         Midland Credit contends that Bushberger lacked standing to bring this case when she filed her complaint because the trustee of the bankruptcy estate had the exclusive right to prosecute the alleged claims. (ECF No. 35 at 5.) As a result, the complaint was a nullity when filed, and no future filings can relate back to a nullity. (Id.) And, it argues, there is no such thing as “retroactive standing” that would permit the court to retroactively confer standing on Bushberger. (Id. at 6-8.) As a result, it seeks dismissal pursuant to Rules 12(b)(1) and 12(h)(3) of the Federal Rules of Civil Procedure.

         Bushberger's FDCPA claim against Midland Credit accrued before she filed for bankruptcy. Thus, when Bushberger filed her bankruptcy petition, her claim became part of the bankruptcy estate and was prosecutable only by the trustee. See Biesek v. Soo Line R.R. Co., 440 F.3d 410, 413 (7th Cir. 2006) (citing 11 U.S.C. § 541(a)(1); Pease v. Prod. Workers Union, 386 F.3d 819, 821-22 (7th Cir. 2004)); Polis v. Getaways, Inc. (In re Polis), 217 F.3d 899, 902 (7th Cir. 2000); Cable v. Ivy Tech State Coll., 200 F.3d 467, 472 (7th Cir. 1999); Chatman v. Weltman, 325 F.Supp.3d 875, 880 (N.D. Ill. 2018) (quoting Nehmelman v. Penn Nat. Gaming, Inc., 790 F.Supp.2d 787, 791 (N.D. Ill. 2011)); see also 11 U.S.C. § 323(b); Kleven v. Walgreen Co., 373 Fed.Appx. 608, 610 (7th Cir. 2010) (unpublished). Because she did not schedule the claim, it remained part of the estate even after the bankruptcy case closed. Matthews v. Potter, 316 Fed.Appx. 518, 521 (7th Cir. 2009) (unpublished); Phillips v. United States EEOC, No. 3:15cv565, 2016 U.S. Dist. LEXIS 122797, at *18 (N.D. Ind. Sep. 9, 2016); Muhammad v. Aurora Loan Servs., LLC, No. 13-cv-01915, 2015 U.S. Dist. LEXIS 41342, at *10 (N.D. Ill. Mar. 31, 2015); Williams v. United Techs. Carrier Corp., 310 F.Supp.2d 1002, 1010 (S.D. Ind. 2004) (quoting 11 U.S.C. § 554(d)). Therefore, when she filed her complaint in this case, she was not the proper party to prosecute it.

         Several courts have spoken of the debtor lacking “standing” to prosecute a claim that belongs to the bankruptcy estate. See, e.g., Cable, 200 F.3d at 472; Polis, 217 F.3d at 904; Chatman, 325 F.Supp.3d at 880; see also Gunartt v. Fifth Third Bank (In re Gunartt), 355 Fed.Appx. 66, 68 (7th Cir. 2009) (unpublished); Matthews, 316 Fed.Appx. at 521 (unpublished); Flerlage v. Vill. of Oswego, No. 13-cv-6024, 2017 U.S. Dist. LEXIS 196692, at *11-13 (N.D. Ill. Nov. 30, 2017); Muhammad, 2015 U.S. Dist. LEXIS 41342, at *10; Balik v. Blitt & Gaines, P.C., No. 14 C 8702, 2015 U.S. Dist. LEXIS 20869, at *5 (N.D. Ill. Feb. 21, 2015); Brucker v. Quirk, Inc., No. 13 C 5903, 2014 U.S. Dist. LEXIS 31595, at *7 (N.D. Ill. Mar. 12, 2014); Spaine v. Cmty. Contacts, Inc., No. 12 C 5304, 2013 U.S. Dist. LEXIS 127262, at *9 (N.D. Ill. Sep. 6, 2013); Viette v. Hosp. Staffing, Inc., No. 12 C 2327, 2013 U.S. Dist. LEXIS 78838, at *6 (N.D. Ill. June 5, 2013); Esparza v. Costco Wholesale Corp., No. 10 CV 5406, 2011 U.S. Dist. LEXIS 148622, at *10 (N.D. Ill.Dec. 28, 2011).

         “Standing” in this context may be an appropriate shorthand for “prudential standing, ” which is “a more complex, judge-made concept of standing, ” Mainstreet Org. of Realtors v. Calumet City, 505 F.3d 742, 744 (7th Cir. 2007); see also Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11 (2004), encompassing a variety of legal doctrines, Mainstreet Org. of Realtors, 505 F.3d at 745; Fmc Corp. v. Boesky, 852 F.2d 981, 988 (7th Cir. 1988), including the requirement in Federal Rule of Civil Procedure 17 that the plaintiff be the “real party in interest, ” Rawoof v. Texor Petroleum Co., 521 F.3d 750, 757 (7th Cir. 2008); see also G&S Holdings LLC v. Cont'l Cas. Co., 697 F.3d 534, 540-41 (7th Cir. 2012). It is this principle-“real party in interest”-that is implicated when a debtor attempts to prosecute a claim that belongs to the bankruptcy estate and thus may be prosecuted only by the trustee. See Biesek, 440 F.3d at 413 (“So the threshold issue is … whether Biesek is the real party in interest. He appears to be an interloper, trying to prosecute a claim that belongs to his estate in bankruptcy.”); Kleven, 373 Fed.Appx. at 611; Wendelken v. James Hardie Bldg. Prods., No. 17 CV 2797, 2018 U.S. Dist. LEXIS 101062, at *4-6 (N.D. Ill. June 18, 2018); Sparks v. Norfolk ...

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