Styrczula v. Pierce & Assocs., P.C.

JOHN J. STYRCZULA, Plaintiff, v. PIERCE & ASSOCIATES, P.C., JYOTHI R. MARTIN, Defendants.

No. 14 C 2642

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

October 22, 2014

MEMORANDUM OPINION

Before the court is defendant Pierce & Associates, P.C.'s motion to dismiss. For the following reasons, the court denies the motion in part, and grants it in part.

BACKGROUND

Plaintiff John J. Styrczula has filed a one-count complaint against Pierce & Associates, P.C. ("Pierce"), a law firm, and Jyothi R. Martin, one of its attorneys, alleging that they violated the Fair Debt Collection Practices Act ("FDCPA").¹ Styrczula filed for Chapter 7 bankruptcy on November 15, 2013. (See Pl.'s Compl. ¶ 10.) On February 13, 2014, Martin filed a motion on behalf of Nationstar Mortgage, LLC ("Nationstar") to lift the automatic stayin order to foreclose on Styrczula's home. (Id. at ¶ 11.) Nationstar stated in the motion that Styrczula had stopped making mortgage payments in December 2013. (See Mot. to Modify, attached as part of Group Ex. A to Pl.'s Compl., ¶ 5.) Martin attached a statement to the motion indicating that Styrczula's account was $4,481.38 in arrears. (See Req. Stmt. to Accompany Mot. for Relief from Stay, attached as Ex. C to Pl.'s Compl., ¶ 5 (representing that Styrczula had been in "contractual default" for two months).) The notice attached to the motion contained the following disclaimer:

**THIS DOCUMENT IS AN ATTEMPT TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.**

(See Notice of Mot., attached as part of Group Ex. A to Compl., at 1-2.) Martin certified that he sent copies of the notice and motion to Styrczula, among others. (Id.) The day before the scheduled hearing on Nationstar's motion, Styrczula's attorney, Thomas Toolis, filed a response claiming that Styrczula had paid Nationwide $1,876.03 in each of November 2013, December 2013, and January 2014. (See Resp. to Mot. for Relief from the Auto. Stay, attached as Ex. B to Pierce's Mot., ¶ 4.) The bankruptcy court then continued the motion hearing to February 28, 2014. (See Docket Report, In re John J. Styrczula, Case No. 13-44473, attached as Ex. B to Pierce's Mot. to Dismiss, Dkt. 20.)

On February 27, 2014, Toolis emailed Martin and Yanick Polycarpe, another Pierce attorney, about obtaining a "payment history." (See Email from Y. Polycarpe to T. Toolis, dated Feb. 27, 2014, attached as Ex. B to Pl.'s Compl.) Polycarpe responded as follows:

I don't have a complete history but was able to verify payment applied. He [Styrczula] is roughly $2 short of making January unless more money is in the mail. Since it is going to discharge any day now I will likely withdraw.

(See Email form Y. Polycarpe to T. Toolis, dated Feb. 27, 2014, attached as Ex. B to Pl.'s Compl.) Nationstar withdrew its motion the following day. (See Docket Report, In re John J. Styrczula, Case No. 13-44473, Dkt. 22.) On March 3, 2014, the bankruptcy court entered an order discharging Styrczula's pre-petition debts. (Id. at Dkt. 21.) Styrczula had indicated that he intended to reaffirm his mortgage debt, (see Voluntary Petition, In re John J. Styrczula, Case No. 13-44473, Dkt. 1, "Chapter 7 Individual Debtor's Statement of Intention.").) but it is unclear whether he ever did so. Three days later, on March 6, 2014, Polycarpe sent an email to Toolis purporting to attach a "proposed repay default order." (See Email from Y. Polycarpe to T. Toolis, dated Mar. 6, 2014, attached as Ex. D to Pl.'s Compl.)² Toolis responded byasking Polycarpe to send him "a copy of the accounting." (Email from T. Toolis to Y. Polycarpe, dated Mar. 6, 2014, attached as Ex. D to Pl.'s Compl.) Polycarpe responded that he had "requested the info be sent to" Toolis. (Email from Y. Polycarpe to T. Toolis, dated Mar. 6, 2014, attached as Ex. D to Pl.'s Compl.) Styrczula alleges that the defendants never provided the accounting that his attorney had requested. (Pl.'s Compl. ¶ 17.)

DISCUSSION

Styrczula claims that the defendants violated FDCPA by: (1) misstating the amount of the default in a document attached to Nationstar's motion to lift the bankruptcy stay (see 15 U.S.C. § 1692e); and (2) failing to provide the accounting that his attorney requested (see id. at § 1692g). Pierce has moved to dismiss Styrczula's claim as barred by collateral estoppel and/or res judicata. Alternatively, it argues that Styrczula's allegations do not state a claim for relief under the FDCPA.

I. Legal Standard

When evaluating a motion to dismiss, the court construes the complaint's allegations in the light most favorable to the plaintiff, "accepting as true all well-pleaded facts alleged and drawing all permissible inferences in [the plaintiff's] favor." Fortres Grand Corp. v. Warner Bros. Entm't Inc., 763 F.3d 696, 700 (7th Cir. 2014) (citation and internal quotation marks omitted). The plaintiff must allege "sufficient factual matter, accepted astrue, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Vesely v. Armslist LLC, — F.3d —, 2014 WL 3907114, *2 (7th Cir. Aug. 12, 2014) (slip op.). The plaintiff is not required to anticipate affirmative defenses, like collateral estoppel and res judicata. See Levin v. Miller, 763 F.3d 667, 671 (7th Cir. 2014) ("[C]omplaints need not anticipate affirmative defenses; neither Iqbal nor Twombly suggests otherwise."); Northeastern Rural Elec. Membership Corp. v. Wabash Valley Power Ass'n, Inc., 707 F.3d 883, 889 n.3 (7th Cir. 2013) ("[C]ollateral estoppel and res judicata are affirmative defenses . . . ."). A court may, however, grant a motion to dismiss based upon a valid affirmative defense that is "sufficiently obvious 'from the face of the complaint.'" Syler v. Will County, Ill., 564 Fed.Appx. 848, 849 (7th Cir. 2014) (quoting Walker v. Thompson, 288 F.3d 1005, 1009-10 (7th Cir. 2002)).

In general, the court only considers the complaint's allegations when ruling on a Rule 12(b)(6) motion. See Cohen v. American Sec. Ins. Co., 735 F.3d 601, 604 n.2 (7th Cir. 2013). The court may also consider, however, "documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice." Id. (citation and internal quotation marks omitted). Thus, the court may consider the email correspondencethat Styrczula has attached to his complaint. It may also consider the public filings in his bankruptcy case. See, e.g., Young-Smith v. Holt, 575 Fed.Appx. 680, 682 (7th Cir. 2014) ("[A] court may take judicial notice of matters of public record such as a court order.").

II. Collateral Estoppel

Collateral Estoppel, or issue preclusion, "applies to prevent relitigation of issues resolved in an earlier suit." Adams v. City of Indianapolis, 742 F.3d 720, 736 (7th Cir. 2014). "Issue preclusion has the following elements: (1) the issue sought to be precluded is the same as an issue in the prior litigation; (2) the issue must have been actually litigated in the prior litigation; (3) the determination of the issue must have been essential to the final judgment; and (4) the party against whom estoppel is invoked must have been fully represented in the prior action." Id. Pierce primarily relies on Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000) to support its argument that issue preclusion bars Styrczula's claim. In Adair, the defendant filed a proof of claim on behalf of First Midwest Bank ("FMB") in the plaintiff's Chapter 13 bankruptcy case. Id. at 893. "According to the bankruptcy code, any proof of claim filed by a creditor is deemed allowed, unless a party in interest objects." Id. at 894 (citing 11 U.S.C. § 502(a); In re Greenig, 152 F.3d 631, 633 (7th Cir. 1998)). The plaintiff in Adair did not object to FMB's proof of claim, and the Chapter 13trustee allowed the claim as fully secured when it confirmed the debtor's bankruptcy plan. Id. at 893. The debtor later filed an FDCPA claim against the debt collector alleging that it had fraudulently obtained secured status for its client by overvaluing the collateral securing the debt. Id.; see also 11 U.S.C. § 506(a) ("Determination of secured status"). The Adair Court held that the bankruptcy court had actually and necessarily established the value of the collateral when it confirmed the plaintiff's bankruptcy plan. See id. at 894-95. Thus, issue preclusion barred the plaintiff's FDCPA claim. Id. The Court, however, "express[ed] no opinion as to whether a FDCPA claim can ever be predicated on a previous filing in a bankruptcy proceeding." Id. at 896, n.10.

Adair is distinguishable. Pierce filed a motion to lift the automatic stay and then withdrew the motion. The bankruptcy court did not decide the motion, and thus did not establish the amount of the debt. Cf. id. at 894-95. Also, Adair dealt with a Chapter 13 confirmation order, not a Chapter 7 discharge order. Pierce has not attempted to explain how the bankruptcy court's discharge order established whether, or by how much, Styrczula's account was in arrears. By its terms, it simply discharged Styrczula's pre-petition debts. Pierce has not established that issue preclusion bars Styrczula's claim.

III. Res Judicata

Alternatively, Pierce argues that res judicata, or claim preclusion, bars Styrczula's FDCPA claim. "A party asserting res judicata or claim preclusion must establish: '(1) identity of the claim, (2) identity of parties, which includes those in 'privity' with the original parties, and (3) a final judgment on the merits.'" Cannon v. Burge, 752 F.3d 1079, 1101 (7th Cir. 2014) (quoting Ross ex rel. Ross v. Board of Educ. of Twp. High Sch. Dist. 211, 486 F.3d 279, 283 (7th Cir. 2007)). To satisfy the first element, the defendant must show that the claims are "based on the same, or nearly the same, factual allegations arising from the same transaction or occurrence."...