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Engelby v. I.C. System, Inc.

United States District Court, D. Minnesota

March 27, 2018

CHAD D. ENGELBY, Plaintiff,
v.
I.C. SYSTEM, INC., a Minnesota corporation, Defendant.

          Michael J. Sheridan, ATLAS LAW FIRM, LLC, for plaintiff.

          Sean P. Flynn, GORDON & REES LLP, for defendant.

          ORDER

          Patrick J. Schiltz, United States District Judge

         Plaintiff Chad D. Engelby filed a petition for relief under Chapter 7 of the United States Bankruptcy Code. Among the debts that he sought to have discharged was a debt to Molldrem Family Dentistry (“Molldrem”). After Engelby filed his petition, Molldrem hired defendant I.C. System, Inc. (“ICS”) to collect Engelby's debt. ICS sent three letters to Engelby-two while his bankruptcy proceedings were pending and one after his debt to Molldrem had been discharged by the bankruptcy court.

         Engelby brings this action against ICS, alleging that each of ICS's letters violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. This matter is before the Court on ICS's motion to dismiss Engelby's amended complaint. ECF No. 24. ICS argues that it cannot be held liable under the FDCPA because it did not know that Engelby had filed for bankruptcy or that his debt had been discharged. ICS further argues that Engelby is judicially estopped from pursuing his FDCPA claims because he did not disclose those claims during the bankruptcy proceedings. For the reasons that follow, the Court finds that both of ICS's arguments are meritless, and therefore denies ICS's motion to dismiss.

         I. BACKGROUND

         Engelby became indebted to Molldrem in the amount of $825.60. ECF No. 16, Am. Compl. (“Compl.”) ¶ 6. On April 21, 2016, Engelby filed a Chapter 7 petition in the United States Bankruptcy Court for the District of Minnesota. Id. ¶ 8. Engelby identified Molldrem as one of his creditors. Id. ¶ 9; see also ECF No. 26, Flynn Decl. Ex. 1, Bankr. Pet., Sched. F (listing a debt of $826.00 to Molldrem on account 4500). Three days later, the clerk of the bankruptcy court mailed a Notice of Chapter 7 Bankruptcy Case to Molldrem (and Engelby's other creditors). Compl. Ex. A. That notice informed Molldrem that “[t]he filing of the case imposed an automatic stay against most collection activities.” Id. The notice specifically warned Molldrem that it could not “try to collect from [Engelby]” or “demand repayment from [him] by mail, phone, or otherwise.” Id.

         In July 2016, Molldrem hired ICS to collect the debt from Engelby. Id. ¶ 7; see also ECF No. 25 at 2. Molldrem apparently did not inform ICS that Engelby had filed for bankruptcy or that the automatic stay barred collection activities against him. ICS sent letters to Engelby on July 9, 2016, and July 29, 2016, both demanding that he repay his debt to Molldrem. Compl. ¶ 12; see also Id. Ex. B. Engelby did not respond.

         The bankruptcy court issued an Order for Discharge on August 11, 2016. Id. ¶ 14; see also Flynn Decl. Ex. 3. On August 12, 2016, ICS sent Engelby yet another letter demanding that he repay his debt to Molldrem. Compl. ¶ 15; see also Id. Ex. C. Of course, that debt no longer existed, as it had been discharged the previous day by the bankruptcy court. But ICS was apparently unaware of that fact.

         Engelby brings this action against ICS, alleging that ICS violated multiple provisions of the FDCPA when it sent demand letters to him on July 9, July 29, and August 12, 2016. ICS now moves to dismiss Engelby's amended complaint for failure to state a claim.

         II. ANALYSIS

         A. Standard of Review

         To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although the factual allegations in the complaint need not be detailed, they must be sufficient to “raise a right to relief above the speculative level.” Id. at 555. In assessing the sufficiency of the complaint, the Court may disregard legal conclusions that are couched as factual allegations. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). The Court must, however, accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. See Id. at 678.

         Ordinarily, if the parties present, and the Court considers, matters outside of the pleadings, the motion must be treated as a motion for summary judgment. Fed.R.Civ.P. 12(d). But the Court may consider materials that are necessarily embraced by the complaint, as well as any exhibits attached to the complaint, without converting the motion into one for summary judgment. Mattes v. ABC Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003); see also Kushner v. Beverly Enters., Inc., 317 F.3d 820, 831 (8th Cir. 2003) (“‘When deciding a motion to dismiss, a court may consider the complaint and documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading.'”) (citation omitted).

         B. FDCPA Claims

         Engelby alleges that ICS violated the FDCPA when it sent collection letters to him on July 9, July 29, and August 12, 2016. Engelby relies on multiple provisions of the FDCPA, but only one of those provisions needs to be discussed, because the Court must deny ICS's motion if Engelby has pleaded a plausible claim under any provision of the FDCPA.

         Under the FDCPA, a “debt collector” may not “use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e.[1] The FDCPA sets forth a non-exclusive list of acts that violate this provision, including the making of a “false representation of the character, amount, or legal status of any debt.” 15 U.S.C. § 1692e(2)(A).

         Each of the three letters sent to Engelby by ICS asserted that Engelby's debt to Molldrem was due, and each of the letters demanded that Engelby repay that debt. But at the time of the July 9 and July 29 letters, Engelby's debt to Molldrem was not due because of the automatic stay. And at the time of the August 12 letter, Engelby's debt to Molldrem was not due because that debt had been discharged by the bankruptcy court. It seems clear, then, that the three letters misrepresented the legal status of Engelby's debt to Molldrem in violation of § 1692e(2)(A). See Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (“[A] demand for immediate payment while a debtor is in bankruptcy (or after the debt's discharge) is ‘false' in the sense that it asserts that money is due, although, because of the . . . discharge injunction, it is not.” (internal citations omitted)); Eide v. Colltech, Inc., 987 F.Supp.2d 951, 962-63 (D. Minn. 2013) (‚ÄúSending a collection ...


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