United States District Court, D. Minnesota
M. Murray, Friedman Iverson, PLLC, Minneapolis, MN, for
Plaintiff Wanda Micks.
D. Parker, Parker Daniels Kibort LLC, Minneapolis, MN, for
Defendant Gurstel Law Firm, P.C.
MEMORANDUM OPINION AND ORDER
C. Tostrud United States Judge.
Wanda Micks (“Micks”) co-signed a student loan
(the “Loan”) for a friend in 2006, and she filed
for Chapter 7 bankruptcy the following year. The parties
dispute whether Micks's obligation under the Loan might
have been among those debts discharged through her
bankruptcy. Her friend later stopped making payments on the
Loan, and in 2015, Defendant Gurstel Law Firm, P.C.
(“Gurstel”), as counsel for the owner of the
Loan, obtained a judgment against Micks and her friend in
Hennepin County District Court for the unpaid balance. Soon
after, Gurstel began garnishing Micks's wages to collect
on that judgment. Micks, seeking relief from the garnishment,
applied with the Hennepin County District Court to have the
judgment against her vacated. Micks properly served Gurstel
with her application to vacate the judgment. Gurstel received
Micks's application but mistakenly failed to timely
object to it. Having received no response from Gurstel, the
state court vacated the judgment against Micks in July 2017.
Gurstel was informed of the state-court order vacating the
judgment, but nonetheless continued garnishing Micks's
wages to collect on the (now-vacated) judgment.
filed this lawsuit. Her Amended Complaint alleges that
Gurstel's actions violated the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692
et seq., and constituted the common-law tort of
conversion. ECF No. 10. The parties have filed cross-motions
for summary judgment. ECF Nos. 31, 36. Micks confirmed at the
hearing that she was moving for summary judgment only as to
liability on her FDCPA claim and not as to damages on that
claim or on any aspect of her conversion claim. Gurstel
represented at the hearing that it seeks summary judgment on
all aspects of both of Micks's claims. Gurstel also has
moved for sanctions against Micks and her counsel stemming
from Micks's alleged abuse of the related state-court
proceedings. ECF No. 55. Micks's summary-judgment motion
will be granted because the law and the facts establish
beyond reasonable dispute that Gurstel violated the FDCPA and
that Gurstel's FDCPA violations did not result from a
“bona fide error, ” as the FDCPA uses those
terms. Gurstel's motions for summary judgment and
sanctions will be denied.
facts giving rise to this dispute begin long before the
alleged FDCPA violations occurred. Micks met Reginald
Birts in 1998. Edwards Aff. Ex. B (“Micks Dep.”)
at 124 [ECF No. 34-1 at 16-175]. They met through Micks's
work, and their children attended the same school.
Id. at 125. The two were friends and would watch one
another's children. Id. 124. Birts was the
person who told her about Habitat for Humanity, the program
through which Micks later acquired her home, and Birts even
put “sweat equity” into the home to assist her in
that process. Id. at 128-30. At some point Birts
became interested in Micks romantically, but she did not
reciprocate, so she ended the friendship. Id. at
126. They lost touch around 2000 or 2001. Id. at
did not hear from Birts again until 2006, when he told Micks
he wanted to go into politics and needed to seek more
education to do that, and he asked her to co-sign a private
student loan for $20, 000. Id. at 126-27, 152-53.
Micks agreed. Id. at 153-54. Birts used the money
exclusively for his education and did not use any of the loan
proceeds for a business or other commercial purpose. Birts
Decl. ¶¶ 2-3 [ECF No. 44]. Micks received no part
of the Loan proceeds herself. Micks Dep. at 158-59. She
testified that she co-signed the Loan so that “we would
have somebody else in politics” and that she “was
co[-]signing for somebody that [she] wanted to see do better
in his life.” Id. at 159. Birts signed a
“promissory note” agreeing to pay all principle
and interest on the Loan, and not to “mess up”
Micks's credit. Id. at 153.
August 2007, Micks filed for Chapter 7 bankruptcy. See
generally In re Harris, No. 07-42680 (NCD) (Bankr. D.
Minn. 2007). Her bankruptcy petition listed the Loan, which
had been originated by Charter One Bank. Decl. of Todd Murray
(“Murray Decl.”) Ex. 3 [ECF No. 40-1 at 22-56] at
16. Micks told her bankruptcy attorney that receiving a
discharge of the Loan was particularly important to her.
Murray Decl. Ex. 4 [ECF No. 40- 1 at 58]. The bankruptcy
court granted her a discharge on November 14, 2007. Edwards
Aff. Ex. E, Order Discharging Debtor, No. 07-42680 (NCD)
(Bankr. D. Minn. Nov. 14, 2007) [ECF No. 34-1 at 112].
point, Micks understood that the Loan had been included in
her discharge. Micks Dep. at 175. She cites a number of facts
on which she based that understanding. First, the Loan was
listed in her July 2007 bankruptcy petition, see
Murray Decl. Ex. 3 at 16, and as her bankruptcy case
proceeded she specifically expressed to her attorney the
importance of having that specific Loan discharged, see
Id. Ex. 4 (“I wanted to know if you can make sure
if they can release me on the attached student loan
that I co-signed for? I won't be able to pay for this
especially since I haven't even started paying for my own
student loan.” (emphasis in original)). Second, she
received updates from her bankruptcy attorney as that
proceeding unfolded, and she understood from her lawyer that,
although other creditors had appeared in court, no one had
appeared for the Loan creditors. Micks Dep. at 172. Third,
she also understood from her bankruptcy attorney that in a
“discussion with the legal team from the bankruptcy
court . . . [t]hey were talking about the dismissal of the
[L]oan.” Id. at 173-74. As a result of those
discussions, Micks understood, her bankruptcy attorney wrote
a letter to the Loan creditor “saying that he was
including it in the bankruptcy.” Id. at 174.
Fourth, correspondence from her bankruptcy attorney to the
Loan creditor represented that because Micks was a
“co-maker” on the loan and did not receive the
loan funds herself, the debt was included in her discharge
and further collection efforts on the Loan would be
prohibited following discharge. See Murray Decl.
Exs. 6 [ECF No. 40-1 at 63] and 7 [ECF No. 40-1 at 65-69].
those facts, however, Micks's bankruptcy attorney,
Gregory Wald, testified that at no point did he advise Micks
that the Loan would be discharged through her bankruptcy
filing. Edwards Aff. Ex. D (“Wald Interrog.
Dep.”) [ECF No. 34-1 at 109- 11] at Ans. to Interrog.
No. 1. Specifically, Wald believes he advised Micks that
“generally it is necessary to bring a lawsuit known as
an ‘adversary proceeding' in bankruptcy court to
prove ‘undue hardship' to discharge a student
loan.” Id. at Ans. to Interrog. No. 3. No
evidence in the record before the Court suggests that Micks
ever pursued an adversary proceeding with respect to her Loan
debt. See, e.g., Edwards Aff. Ex. C (“Wald
Dep.”) at 18 [ECF No. 34-1 at 87-08]. Wald further
recalls advising her as follows:
Before the bankruptcy petition was filed with the court, I
believe that I told Wanda Micks that student loans are not
ordinarily discharged in bankruptcy, but that a minority of
courts had ruled that co-signed debts could be discharged
without a finding of “undue hardship”, and we
could at least make an argument to the student loan lender
that the debt should be considered discharged based on her
co-debtor status. She could then make further decisions about
the student loan after the student loan lender replied to our
assertion of dischargeability.
Interrog. Dep. at Ans. to Interrog. No. 2. He further advised
her that only a minority of bankruptcy cases had ruled that
co-signed student loans could be discharged in bankruptcy
without a showing of undue hardship. Id. at Ans. to
Interrog. No. 3. Wald did send a letter to the Loan creditor
making that argument on Micks's behalf, but the Loan
creditor did not respond. Id. Wald “did not
tell her it was guaranteed or even likely that her student
[loan] would be discharged based on her co-debtor
stopped making payments on the Loan in April 2009, and in
November 2009, the Loan was charged off. See Edwards
Aff. Ex. R [ECF No. 34-1 at 173]. At that time, the Loan
carried a balance of $31, 195.53. Id.
April 2013, the National Collegiate Student Loan Trust 2006-2
(“NCSLT”), which owned the debt on the Loan,
filed suit against both Micks and Birts in Hennepin County
District Court. See Edwards Aff. Ex. F, National
Collegiate Student Loan Trust 2006-2 v. Birts et al.,
No. 27-CV-14-9994 (Henn. Cty. Dist. Ct.) [ECF No. 34-1 at
113- 18]. Gurstel represented NCSLT in that action.
Id. at 115. Micks disputed the allegations in
NCSLT's complaint by sending a letter to Gurstel in which
she explained that she understood her obligation under the
student loan to have been discharged in bankruptcy, but
neither she nor Birts filed an answer in state court. Edwards
Aff. Ex. G [ECF No. 34-1 at 119]; id. Ex. H ¶ 4
[ECF No. 34-1 at 120-23]. In July 2015, after neither Micks
nor Birts appeared at trial, the state court entered judgment
against both, in the amount of $36, 921.37, including unpaid
principal, interest, costs, and disbursements. Edwards Aff.
Ex. H at 3 [ECF No. 34-1 at 122].
obtaining the state-court judgment for its client, Gurstel
began the process of attempting to collect on the judgment
through garnishment. On three occasions-first in October
2015, then in July 2016, and again in May 2017-Gurstel sent
Micks a “Garnishment Exemption Notice And Notice Of
Intent To Garnish Earnings.” Edwards Aff. Ex. I [ECF
No. 34-1 at 124-32].
Gurstel pursued its garnishment of Micks's wages, Micks
again sought counsel from her bankruptcy attorney, Gregory
Wald. On September 9, 2016, Micks told him that Gurstel was
garnishing her wages in connection with “the Student
Loan that I co-signed on and that was eliminated in the 2007
Bankruptcy.” Edwards Aff. Ex. J at 4 [ECF No. 34-1 at
133-38]. Wald initially did not recognize Micks, whom he
apparently had not advised in almost nine years, and advised
her to “contact the attorney that represented you in
the bankruptcy.” Id. Micks told him that
he was the attorney who had represented her in the
bankruptcy, and that she had “emphasize[d] the
importance of this loan being discharged too.”
Id. at 3. Wald explained over the course of several
emails that “[s]tudent loan debt is not automatically
discharged in a bankruptcy case” and that although at
the time Micks received her discharge courts had split on
whether co-signer liability on a student loan could be
eliminated without having to show undue hardship, the more
recent trend within the case law was that co-signers do need
to show undue hardship. Id. at 3-4. Therefore, Wald
advised, “[w]hat we really need to talk about is
whether it would be an ‘undue hardship' for you to
repay this debt.” Id. at 3. Micks continued to
express confusion about whether the Loan had been discharged.
Id. at 2. Wald responded that to have obtained a
court's determination on the issue back in 2007, Micks
would have had to initiate an adversary proceeding against
the lender and show either that repayment would present an
undue hardship or obtain a ruling that the loan was
discharged on the basis of her co-debtor status. Id.
at 1. He further informed her that because the time period
for an adversary proceeding does not expire, she could still
initiate one. Id. The final email on that string,
from Micks on September 12, 2016, again expresses her
confusion about how, after receiving her discharge, she
“still did not know if it was discharged or not. And we
still did not get an answer as to yeah or neah from the
judge.” Id. She closed that email by telling
Wald, “I really needed this break that it seems . . .
nobody knows if I really got in 2007.” Id.
emails from Micks to Wald demonstrate her ongoing confusion:
On September 27, 2016, she wrote, “The wording in the
paperwork the courts sent to me said some student loans are
not discharged. Therefore some are indeed discharged. It
doesn't make sense that they are not specific.”
Edwards Aff. Ex. K at 8 [ECF No. 34-1 at 139- 47]. She told
Wald she had talked with three different lawyers, all of whom
advised her that Wald “should be able to help [her]
reopen the discharged bankruptcy and have the judge rule on
whether [her] student loans are discharged or not.”
Id. She told him, “I really did not understand
if you explained [back in 2007] Greg, ” id. at
6, and that “I just want the Chapter 7 Bankruptcy you
did for me enforced, ” Edwards Aff. Ex. L at 2 [ECF No.
34-1 at 148-54].
Wald discussed several possibilities for giving Micks some
measure of protection from Gurstel's ongoing wage
garnishment, including filing Chapter 13 bankruptcy or
initiating an adversary proceeding. Edwards Aff. Ex. K at
1-4. In late January 2017, she told him she wanted to
initiate an adversary proceeding and would try to come up
with the $7, 000 retainer Wald required. Id. at 1-3.
2017, Gurstel was still garnishing Micks's wages, and
Micks had still not come up with the retainer for the
adversary proceeding, so she asked Wald what she could do in
the meantime. Edwards Aff. Ex. L at 1. Wald suggested calling
Gurstel and making payment arrangements. Id. With
respect to the adversary proceeding, he told her, “I
don't know enough about your financial situation to know
whether it makes sense to pay $7, 000 and file a complaint
for a hardship discharge” and suggested a meeting to
assess the viability of that course of action. Id.
On May 10, Micks suggested meeting sometime that week.
Id. It is not clear whether they ever met for the
repeatedly implied or expressly stated that she was unhappy
with Wald's representation of her back in 2007, believing
that he should have taken further steps at that time to
ensure that no doubt remained about whether the Loan had been
discharged. E.g., Edwards Aff. Ex. L at 2, 8.
Following her email exchanges with Wald, she “lost all
faith” in him and “believed that [she]
couldn't trust him anymore.” Micks Decl. ¶ 4
[ECF No. 43]. She explained, “Based on what Mr. Wald
told me during my 2007 bankruptcy, as well as the letters he
wrote for me, I believed that the NCSLT student loan was
discharged. Now, years later, he was telling me something
completely different and suggesting that I pay him more money
for more legal proceedings. . . . I couldn't understand
why I had to pay him more money for something that I thought
was already done.” Id. ¶¶ 5-6.
[she] was so frustrated” with Wald, Micks sought a
second opinion at the Hennepin County Self-Help Center about
what she needed to do to “stop the garnishment and
uphold [her] bankruptcy discharge.” Id. ¶
7. There, she met with two unidentified volunteer attorneys
who, evidently based entirely on Micks's explanation of
the situation, advised her that “Gurstel's
garnishment was illegal” and that she needed to file an
application in Hennepin County District Court to discharge
the judgment Gurstel had obtained against her on behalf of
NCSLT. Id. ¶ 8.
30, 2017, Micks filed an application for discharge of
judgment pursuant to Minn. Stat. § 548.181, seeking to
discharge the judgment NCSLT had obtained against her.
Edwards Aff. Ex. M [ECF No. 34-1 at 155-58]. It is in the
months after Micks filed her application to ...