Frankowski v. Keith M. Nathanson & Keith M. Nathanson, PLLC, Case Number 15-14183

KELLY FRANKOWSKI, Plaintiff, v. KEITH M. NATHANSON and KEITH M. NATHANSON, PLLC, Defendants.

Case Number 15-14183

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

December 19, 2016

Honorable David M. Lawson

OPINION AND ORDER DENYING CROSS MOTIONS FOR SUMMARY JUDGMENT

Plaintiff Kelly Frankowski has filed a complaint alleging that defendant Keith Nathanson and his law firm, Keith Nathanson, PLLC, violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, et seq., and the Michigan Collection Practices Act (MCPA), Mich. Comp. Laws § 445.251, et seq., by making misleading statements in a debt collection letter. The "debt" the defendants were attempting to collect arose from the failure of the plaintiff's boyfriend (now husband) to pay attorney's fees for personal legal services. The law firm had obtained a judgment for its fees and hired the present defendants to collect it. When the defendants presented an e-check drawn on the plaintiff's joint account with her boyfriend, received under a partial payment order on the judgment, the check bounced. It is the defendants' pursuit of remedies to collect on the bounced check that led to the alleged FDCPA violation. Discovery has closed and each side has filed a motion for summary judgment. The defendant's motion presents a pure legal question: whether the NSF check in this case is a "debt" under the FDCPA and the corresponding state law. The Court finds that it is. The plaintiff contends that the undisputed facts establish a statutory violation. The parties agree on the basic facts of the case, but they differ substantially on the inferences that should be drawn from them. Because those inferences are material to the elements of the plaintiff's claims, and because deciding which of the competing inferences is more convincing is for the jury and not the Court, the motions for summary judgment will be denied and the case will proceed to trial.

I.

The story begins with Joseph Manson, who is not a party to the case. Manson was Kelly Frankowski's boyfriend, and now is her husband. In 2006, Manson hired the law firm of Allen Brothers, PLLC to represent him and his former wife in a lawsuit. After several years, Manson's lawsuit ended with a small arbitration award for Manson, and a large bill for attorney's fees. In 2010, Allen Brothers PLLC obtained a judgment against Manson for those fees in the amount of $21,955.54.

In 2012, Allen Brothers retained the defendant Nathanson and his law firm to collect the judgment against Manson. It was in that same year that the plaintiff in this case started a personal relationship with Manson, and later they were engaged to be married. In May of 2013, the plaintiff and Manson opened a joint checking account. The plaintiff contends that in 2015, in order to fulfill an installment payment order entered in Michigan's Thirty-sixth District Court, Manson set up an e-pay plan through the joint bank account to issue a monthly e-check to defendant Keith Nathanson, PLLC. It appears that the e-checks began to issue in February 2015 and continued through August 2015. The name on the e-checks was the plaintiff's, and the checks stated that the drafter's signature was on file. The only reference to Manson on the check was on the memo line where it referenced "Joe Manson balance" and then the current amount owed, although Manson, who set up the arrangement on the joint account, presumable was the drafter. All of the checks were applied to the debt owed by Manson.

The plaintiff alleges that Manson recognized that the joint account would have insufficient funds to cover the July 2015 e-check for $1,500 (NSF check). The plaintiff maintains that Manson called defendant Nathanson in an attempt to advise him of the situation and offer to pay the installment by credit card; however, Nathanson allegedly did not return the call.

Nathanson presented the July 2015 e-check for payment on or about July 9, 2015, and, predictably, it was dishonored because there were insufficient funds in the account. The plaintiff alleges that on July 14, 2015 attorney Gary E. Gardner sent an e-mail to defendant Nathanson on Manson's behalf again advising him of the situation and asking him to refrain from presenting the check for payment, and to accept alternate payment. The plaintiff asserts that Nathanson did not respond to the email and that the check was again presented for payment, and again the bank dishonored the check for non-sufficient funds.

On July 27, 2015, defendant Nathanson sent two letters to the plaintiff. The first was a demand letter that followed the language provided in Michigan's dishonored check statute, Michigan Compiled Laws § 600.2952. The letter stated the following:

Kelly Frankowski

22849 Sherry Drive

Brownstown, MI 48134

RE: Allen Brothers, PLLC v Joseph Manson

Our File Number: 2439K/2012-K3198

A check, draft, or order for payment of money drawn by you for $1,500.00, check number #995108, drawn July 06, 2015, was returned to our client, Allen Brothers, PLLC, dishonored for: NSF.

This notice is a formal demand for payment of the full amount of the dishonored check, draft, or order plus a processing fee of $25.00 for a total amount of $1,525.00. If you pay this total amount within 7 days, excluding weekends and holidays, after the date this notice was mailed, no further civil action will be taken against you. If you do not pay the $1,525.00 as requested above, but within 30 days after the datethis notice was mailed you pay the amount of the dishonored check, draft, or order plus a $35.00 processing fee, for a total amount of $1,535.00, no further civil action will be taken against you.

If you fail to pay either amount indicated above, I/we/our client will be authorized by state law to bring a civil action against you to determine your legal responsibility for payment of the check, draft, or order and civil damages: and costs allowed by law.

If you dispute the dishonoring of this check, draft, or order, you should also contact your bank or financial institution immediately.

The second letter was sent, presumably, in an effort to comply with the FDCPA. It stated:

Kelly Frankowski

22849 Sherry Drive

Brownstown, MI 48134

RE: Allen Brothers, PLLC v Joseph Manson

Our File Number: 2439K/2012-K3198

PLEASE BE ADVISED THAT THIS CORRESPONDENCE IS AN ATTEMPT TO COLLECT A DEBT, AND ANY AND ALL INFORMATION OBTAINED BY THIS OFFICE WILL BE USED FOR THAT PURPOSE.

We are writing with reference to an outstanding balance of $1,500.00 for NSF check number 995108 written to Keith M. Nathanson, PLLC.

Unless you, within thirty (30) days after receipt of this notice, dispute the validity of the debt, or any portion thereof, the debt will be assumed to be valid by this office. If you notify this office in writing within the thirty (30) day period that the debt, or any portion thereof is disputed, this office will obtain a verification of the debt or a copy of a judgment against you, and a copy of such verification or judgment will be mailed to you by this office. In addition, upon your written request within the thirty (30) day period, this office will provide you with the name and address of the original creditor, if different from the current creditor.

We look forward to resolving this matter with you in a timely manner.

After sending the letters, defendant Nathanson drafted a complaint against the plaintiff and on August 18, 2015, generated an accompanying work order. The work order instructed Lisa Ledger, Nathanson's legal assistant, to hold the signed summons and complaint and not file it untilafter August 27, 2015. Nonetheless, Ms. Ledger sent the complaint to the Thirty-third District Court the following day on August 19, 2015. The complaint sought $4,750 in damages under the Michigan dishonored check statute. Nathanson contends that he became aware that the complaint had been filed too soon, but determined that such an action was not fatal to the case and therefore decided not to withdraw the complaint.

Nathanson asserts that Ms. Ledger was terminated shortly thereafter for, among other things, sending in the Frankowski complaint early. Ms. Ledger states that although she was informed about work orders in the office, they were rarely if ever used, and that she has no recollection of seeing the work order mentioned in this case. She contends that she was never informed that any of the work she performed on Manson's case was in violation of office policy, and she was never reprimanded for filing the Frankowski complaint too early.

On August 21, 2015, within the thirty-day window announced in the defendants' letters, the plaintiff sent an e-check for $1,000 to the defendants. There was no memo line on the check indicating that the e-check was to correct the dishonored July 2015 check, and there was no reference to the Manson judgment. Nonetheless, Nathanson considered it to be a regular payment on Manson's debt and applied it accordingly.

The state complaint was served on Kelly Frankowski on September 28, 2015. A default judgment was entered on October 29, 2015, but it was subsequently set aside.

Defendants Nathanson and his law firm admit to being debt collectors, as the term is defined in the FDCPA. The defendants state that a total of seven checks had been sent from the plaintiff's joint account and that all of the funds were applied to Manson's debt.

The plaintiff made a number of representations in the state court case about the e-checks. She asserted that she did not set up the e-pay checks nor did she sign the e-checks that were sent to the defendants up to and including the NSF check. She stated that when she received the July 27 letters, she passed them on to Manson with the expectation that he would communicate with the defendants and that the matter would be resolved without further incident. In her state court affirmative defenses, Frankowski stated that the July 2015 e-check was illegal because the check was issued by Joe Manson without...