Court: District Court, E.D. Wisconsin; July 6, 2016; Federal District Court
The court denied the motions to dismiss filed by defendants Americollect Inc. and Aurora Health Care Inc., which were based on allegations that they violated the Fair Debt Collection Practices Act (FDCPA) and the Wisconsin Consumer Act (WCA). Plaintiff Jennifer Myers, on behalf of her minor child K.M., claimed that Aurora sent a bill incorrectly addressed to the minor and that Americollect subsequently sent a collection letter to K.M., causing distress to both the plaintiff and the child. The complaint asserts that Americollect's actions violated the FDCPA by attempting to collect a debt from a minor who was not liable and that both defendants violated the WCA by asserting a right to payment they knew did not exist. Aurora's motion to dismiss targeted the WCA claim, while Americollect joined this motion and sought to dismiss the FDCPA claim. The court found that the complaint met the standard for plausibility required to survive a motion to dismiss, thus allowing the case to proceed. The procedural history included the filing of the complaint in August 2015, motions to dismiss by both defendants, and subsequent briefs and oral arguments leading up to the court's decision.
Facial plausibility requires the plaintiff to provide factual content enabling the court to reasonably infer the defendant's liability for the alleged misconduct. Courts favor the nonmovant by drawing all reasonable inferences, but legal assertions need not be accepted as true. A plaintiff is not obligated to present detailed facts to establish a plausible claim, as a complaint can proceed even if actual proof seems improbable. In this case, the plaintiff has sufficiently alleged a claim against Americollect under the Fair Debt Collection Practices Act (FDCPA) for sending a collection letter to K.M. The FDCPA aims to prevent abusive debt collection and protects unsophisticated consumers. For the FDCPA to apply, the defendant must be classified as a “debt collector,” and the communication must relate to debt collection. The letter from Americollect explicitly identified itself as a communication from a debt collector, meeting the necessary criteria. The FDCPA prohibits false or misleading representations and unfair means of debt collection. The plaintiff contends that Americollect falsely represented the debt's legal status by implying that K.M., a minor, was responsible for the medical debt. During oral arguments on a motion to dismiss, Americollect's counsel asserted that the account was indeed in K.M.’s name.
Key arguments made by the defendant included: a lack of case law holding collection agencies liable for sending notices to minors at their parents' homes; skepticism that minors would be distressed by receiving a medical bill, as they would likely pass it to a parent; the plaintiff's standing in suing on her own behalf rather than on behalf of her minor child; and the assertion that there is no legal obligation for collection agencies to verify the identity of the debtor. The defendant contended that Americollect merely sent a collection letter based on information provided by Aurora.
In response, the plaintiff's counsel argued that these points were irrelevant to a motion to dismiss under Rule 12(b)(6), asserting that the Fair Debt Collection Practices Act (FDCPA) imposes strict liability for false representations. The plaintiff's arguments were characterized as factual disputes, more appropriate for resolution at summary judgment rather than dismissal. The court expressed concern over the implications of allowing a federal case based on a single collection letter but acknowledged the plaintiff's correct application of the legal standard at the pleadings stage.
The court emphasized that Section 1692e of the FDCPA applies regardless of intent and that debt collectors are prohibited from making false claims. The determination of how an unsophisticated consumer would perceive a collection letter is fact-intensive, and dismissal under 12(b)(6) is generally not warranted. Although there are rare instances where a court may find no reasonable interpretation of a communication violates the statute, typically, plaintiffs should be allowed to substantiate their allegations.
The plaintiff has sufficiently claimed a violation under the FDCPA, and the court will deny Americollect's motion to dismiss Count I. Additionally, the plaintiff has plausibly stated a claim for relief under the Wisconsin Consumer Act (WCA), which protects consumers from unfair and deceptive practices in consumer credit transactions.
Under Wisconsin law, debt collectors are prohibited from engaging in conduct that may reasonably be expected to threaten or harass customers, and from claiming or threatening to enforce rights they know do not exist (Wis. Stat. 427.104(1)(h), (j)). Individuals injured by violations of the Wisconsin Consumer Act (WCA) can recover actual damages, including emotional distress, with or without physical injury (Wis. Stat. 427.105(1)). Debt collection encompasses actions related to soliciting or collecting claims owed by a customer to a merchant, defined as an entity that regularly deals in consumer transactions (Wis. Stat. 427.103(2), 421.301(25)). A "debt collector" includes anyone involved in debt collection practices (Wis. Stat. 427.103(3)), while a "claim" refers to obligations arising from consumer transactions (Wis. Stat. 427.103(1)).
In this case, Aurora is identified as a debt collector due to its role in providing services leading to a consumer transaction, attempting to enforce a debt obligation, and collecting a debt that was not initially paid. A communication from Americollect explicitly states its role as a debt collector and attempts to collect a debt from K.M., who has alleged sufficient facts to establish a prima facie case under the WCA. The plaintiff claimed that Americollect sent a notice on August 16, 2014, regarding a past-due balance of $1,410.20 owed to Aurora Health Care, dating back to February 19, 2014. The plaintiff was informed of their right to dispute the debt within 30 days.
The court evaluates the plaintiff's claims under the WCA alongside the Fair Debt Collection Practices Act (FDCPA), concluding that the plaintiff states a viable claim against Americollect, thus allowing the case to proceed despite Americollect's lack of knowledge about the debtor's minor status. Additionally, the plaintiff alleges that Aurora sent two bills: one on May 15, 2014, for $20,652.63 for services rendered to K.M., and another on August 7, 2014, for $1,195.65 for different services, directed to the plaintiff. These allegations suggest distinct claims and services from those pursued by Americollect.
The plaintiff claims that a bill dated May 15, 2014, issued by Aurora, attempted to enforce a non-existent payment obligation since the patient was a minor. The plaintiff contends that Aurora should have anticipated that the bill would cause distress to both her and her minor child. The plaintiff experienced emotional upset and took time off work to consult an attorney due to the bill, which also confused and distressed her child, who feared future responsibility for the debt upon turning 18. While the plaintiff's allegations are minimally stated, they are deemed plausible enough to suggest a violation of the Wisconsin Consumer Act (WCA), particularly regarding the bill's attempt to recover a debt from someone potentially not liable. Aurora argued during the motion to dismiss that medical service providers may collect debts for services rendered to minors and that the account was in the minor's name, implying the plaintiff's intent in this setup. Furthermore, Aurora contended that the plaintiff lacked standing to bring the claim since the bill was addressed to the minor. However, the court found that despite the conclusory nature of the claims, they were adequate to state a claim under the Fair Debt Collection Practices Act (FDCPA) and the WCA, leading to the denial of Aurora’s motion to dismiss Count II.
Regarding jurisdiction, Aurora challenged the court's supplemental jurisdiction over the WCA claim, highlighting that the federal question claim was only against Americollect. The court has original jurisdiction over Americollect due to the federal law basis of the initial claim, and 28 U.S.C. 1367 allows for supplemental jurisdiction over related state law claims. Aurora argued against this, stating that the legal question concerning a minor's liability for such a debt was a novel issue of state law, suggesting that the court should decline to exercise supplemental jurisdiction. The court acknowledged that it will likely need to address the issue of a minor's potential liability for the disputed debt.
The court indicates that even if the case against Aurora is dismissed, Americollect would likely assert a similar defense, and the legal questions raised remain novel under Wisconsin law. In this context, a "minor" is defined as anyone under 18, and Wisconsin law recognizes that minors can be liable for certain expenses under the "doctrine of necessaries," which allows creditors to hold minors accountable for medical expenses under specific circumstances. A minor cannot disaffirm contracts for necessaries, and emergency medical services typically fall under this category. For liability to attach to a minor, there must be an express or implied contract for the medical services, and a minor is not liable if services were provided on someone else's credit.
The doctrine also implies a parent's obligation to pay when they knowingly allow their child to receive necessaries. Additionally, a minor could be liable for medical expenses if their parent neglects or is unable to pay, provided this is adequately demonstrated. The court notes that the application of these principles to the facts presented is unclear at this stage but does not find the legal questions so complex as to decline supplemental jurisdiction.
Aurora contends that it should not be compelled to participate in a class action related to the FDCPA when it is not a defendant in that claim. Aurora also expresses concerns about potential prejudice if it must face a WCA claim concurrently with Americollect's FDCPA defense. The court disagrees, stating that there is currently no class certification motion pending, and even if one is filed, it is uncertain whether Aurora would need to engage in all class discovery. The court concludes that differing claims among co-defendants do not warrant declining supplemental jurisdiction.
The court denies both Aurora Health Care Inc.'s and Americollect Inc.'s motions to dismiss, affirming that the plaintiff is pursuing claims for emotional distress and damages resulting from alleged violations of the FDCPA and WCA.
The plaintiff is not acting on behalf of her minor child and has raised class allegations against the defendants. On August 13, 2015, the plaintiff filed a motion to certify the class along with a supporting brief and a motion to stay the class certification pending the Rule 16(b) scheduling conference. The court granted the stay on August 14, 2015. Subsequently, on February 24, 2016, the plaintiff requested to withdraw the class certification motion, stating that the defendants did not oppose this request, which the court granted without prejudice on March 1, 2016, allowing for a potential re-filing in the future. Americollect's motion to dismiss argues that the plaintiff has not been injured and lacks standing to bring claims under the WCA and FDCPA. Aurora did not file any motion or brief related to dismissing Count I, the FDCPA claim, and the court interprets Americollect's motion to include a dismissal request for Count I as well.
