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Micks v. Gurstel Law Firm, P.C.

United States District Court, D. Minnesota

February 1, 2019

Wanda Micks, Plaintiff,
v.
Gurstel Law Firm, P.C., Defendant.

          Todd M. Murray, Friedman Iverson, PLLC, Minneapolis, MN, for Plaintiff Wanda Micks.

          Andrew D. Parker, Parker Daniels Kibort LLC, Minneapolis, MN, for Defendant Gurstel Law Firm, P.C.

          MEMORANDUM OPINION AND ORDER

          Eric C. Tostrud United States Judge.

         Plaintiff 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.

         Micks 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.

         I

         A

         The facts giving rise to this dispute begin long before the alleged FDCPA violations occurred. Micks[1] 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 125, 128-30.

         Micks 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.

         B

         In 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].

         At that 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].

         Notwithstanding those facts, however, Micks's bankruptcy attorney, Gregory Wald, testified[2] 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.

         Wald 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 status.” Id.

         C

         Birts 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.

         In 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].

         After 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].

         D

         As 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.

         Subsequent 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].

         She and 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.

         By May 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 consultation.

         Micks 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.

         “Because [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.[3] Id. ¶ 8.

         E

         On June 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 ...


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