Nelson v. Santander Consumer USA, Inc.

Citations: 931 F. Supp. 2d 919; 2013 WL 1141009; 2013 U.S. Dist. LEXIS 40799Docket: No. 11-cv-307-bbc

Court: District Court, W.D. Wisconsin; March 7, 2013; Federal District Court

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Defendant Santander Consumer USA, Inc. made over 1,000 calls to plaintiff Heather Nelson's cellular phone in an effort to collect a debt related to two financed vehicles. Following the repossession of one vehicle in May 2010, Nelson alleged that defendants American Recovery Service and AssetsBiz Corp. aided Santander in the repossession. She filed a lawsuit claiming violations of the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), the Wisconsin Consumer Act, and Wisconsin common law, with jurisdiction established under 28 U.S.C. §§ 1331 and 1367. Both parties filed motions for partial summary judgment, with Nelson seeking judgment on her TCPA and Wisconsin Consumer Act claims, while Santander sought judgment on Nelson's FDCPA claim. Additionally, both parties filed motions to strike certain documents, and Santander requested to amend its answer to include a new affirmative defense.

The court granted in part and denied in part Nelson's motion for partial summary judgment, awarding her $571,000 in statutory damages under the TCPA and $1,000 under the Wisconsin Consumer Act. Remaining motions were mostly denied, including Santander's motion to strike, as the court did not consider the new proposed findings of fact submitted by Nelson, which breached summary judgment procedures. Undisputed facts established that in 2007, Nelson refinanced two automobile loans with HSBC Auto Credit, with a monthly payment of $491.15 for the truck loan, and that both loan agreements contained provisions regarding payment application and security interests in the financed vehicles.

Default occurs under several conditions: failure to pay installments, non-compliance with agreement provisions, loss or damage to the vehicle, initiation of bankruptcy proceedings, false statements made during the loan process, or the death or incapacity of the borrower or guarantor. Acceptance of late payments does not waive the right to address other defaults. Upon default, the lender can accelerate the loan, making the total amount due immediately, and may repossess the vehicle without prior notice, except where legally required. The lender is entitled to recover reasonable enforcement expenses, including attorney fees up to 15% of the owed amount, and may seek damages if the sale of the vehicle does not cover the loan balance. Interest will accrue on any judgment at the lesser of the contract rate or the maximum legal rate.

The lender may receive credit information about the borrower and can report negative information to credit agencies if obligations are unmet. The borrower consents to the release of their address by the DMV and agrees that calls between them and the lender may be monitored. If in the military, the borrower allows communication with their superiors regarding the loan. 

Beginning in early 2010, Santander Consumer USA, Inc. initiated calls to the plaintiff to collect on loans, having acquired these from HSBC Auto Credit. The plaintiff disputes whether she defaulted and that her husband’s name was the only one on the phone bill, despite her paying the bill. Calls included demands for payment and utilized the Aspect telephony system, which can store numbers and employ predictive dialing to optimize call routing.

Defendant created customer telephone number lists for preview dialing, where employees selected numbers on a computer to initiate calls, without using a keypad. Plaintiff explicitly instructed defendant in a letter on April 13, 2010, not to contact her at any work number, including a specific number (608-512-xxxx), and requested written communication only. Despite this, defendant continued to call her at that number. The parties dispute whether plaintiff verbally requested not to be contacted on her cell phone. Defendant repossessed plaintiff's truck on May 29, 2010, and there is disagreement over whether a "Notice of Right to Cure" dated April 29, 2010, was sent and received by plaintiff. From March 2010 to April 2011, defendant called the number 1,026 times and left 116 prerecorded messages.

Defendant's motion for partial summary judgment centers on plaintiff's Fair Debt Collection Practices Act (FDCPA) claim, arguing it is a creditor and not a debt collector since it was collecting on its own behalf. In opposition, plaintiff filed a lengthy brief and a motion to strike evidence submitted by defendant, which the court denied, emphasizing that motions to strike are not appropriate for challenging evidence. The court noted that if disputed, the facts should be contested directly. Ultimately, the court agreed with plaintiff's alternative argument that defendant could be classified as a debt collector since it acquired the loan after plaintiff defaulted, citing precedent that assignees of debts in default are considered debt collectors under the FDCPA, regardless of the ownership status of the debt. Defendant's interpretation of the statute was rejected, as it would require disregarding established case law.

Defendant did not provide language from relevant cases to indicate that the distinction regarding debt purchase was significant. The court's interpretation from McKinney is clear: purchasing a debt in default categorizes the buyer as a debt collector. Both parties assume that the loans were in default when purchased, but there is conflicting deposition testimony regarding this matter. Defendant's motion for partial summary judgment is denied due to evidence suggesting the loans might have been in default at the time of purchase, aligning with Federal Rule of Civil Procedure 56(a) stipulating that summary judgment is granted only when there is no genuine dispute over material facts.

Regarding the Telephone Consumer Protection Act (TCPA), plaintiff alleges that defendant unlawfully called her cellular phone without prior consent, as prohibited by 47 U.S.C. § 227(b)(1)(A)(iii). Defendant contests plaintiff's entitlement to summary judgment, citing three factual disputes: the definition of 'called party,' whether plaintiff consented to the calls, and whether an automatic dialing system was used. 

Defendant argues that 'called party' refers to the individual on the phone bill, claiming plaintiff lacks standing since her husband is the listed subscriber. However, the court clarifies that standing pertains to whether the plaintiff suffered an injury due to the defendant's actions, which plaintiff asserts through the receipt of over 1,000 calls. The primary issue is whether plaintiff has the right to sue under the TCPA. Defendant's citation of Soppet v. Enhanced Recovery Co. LLC to support their argument about 'called party' is deemed irrelevant, as that case addressed consent rather than the ability to sue for violations of § 227.

The court was tasked with interpreting the provision allowing calls made with the "prior express consent of the called party" under 47 U.S.C. 227(b)(1). The defendant had obtained consent from a customer to call a specific cell phone number but continued to make calls to that number even after it was reassigned to a non-customer who had not given consent. The defendant contended that "called party" should mean "intended recipient," arguing that consent remained valid until explicitly withdrawn. The court rejected this interpretation, asserting that consent must originate from the current subscriber of the number. Consequently, this ruling did not limit liability but restricted the defendant's potential defense. The statute prohibits automatic dialing to any number assigned to a cellular service, irrespective of who answers the call. 

Furthermore, 47 U.S.C. 227(b)(3) allows any person or entity to bring a private right of action for violations, not just subscribers or called parties. Therefore, it was deemed irrelevant whether the plaintiff or her husband was listed on the phone bill. The defendant challenged the plaintiff's motion for partial summary judgment by questioning whether she had consented to the calls. Consent is recognized as an affirmative defense that must be pleaded and proven by the defendant. While the Seventh Circuit has not addressed this matter, district courts have consistently upheld this view. The Federal Communications Commission has also indicated that creditors are responsible for proving that prior express consent was provided, as they are best positioned to maintain such records. The defendant had not previously asserted a consent defense but sought to amend its answer to include this defense after the plaintiff's motion was filed.

The Court of Appeals for the Seventh Circuit generally upholds denials of requests to amend pleadings in response to summary judgment motions. In this case, the defendant claims a late amendment is justified due to 'significant evidence' discovered during the plaintiff's deposition on February 2, 2013, and cites cases where amendments were allowed based on new information from discovery. However, the defendant misidentified the jurisdiction of some cited cases, which all involved timely motions or situations where the necessary information could not have been obtained earlier. The magistrate judge found that the defendant caused delays in deposing the plaintiff and did not appeal that order.

The defendant's claim of having uncovered significant evidence during the deposition is misleading, as the plaintiff had previously instructed the defendant in writing to cease calling her. Most evidence cited by the defendant for its consent defense derives from its ambiguous records and employee testimony that could have been accessed before the deposition. Therefore, the defendant failed to demonstrate good cause for the delay in asserting the defense. 

While undue delay alone does not warrant denial of an affirmative defense, it becomes a factor if the other party suffers prejudice. In this instance, the plaintiff would be unfairly prejudiced, as the late assertion of the defense would hinder her ability to pursue summary judgment and necessitate additional discovery. Consequently, the motion for leave to file an amended answer is denied, preventing consideration of the defendant's consent argument.

Additionally, the definition of 'automatic telephone dialing system' under Section 227 includes equipment capable of storing or producing telephone numbers using a random or sequential number generator. The defendant contends that the plaintiff has not demonstrated that it used such a generator when calling her, referencing a case that defines 'random number generation' and 'sequential number generation' in specific terms. The defendant argues that the plaintiff has not provided evidence to classify the calls within these definitions.

Defendant acknowledges the Federal Communications Commission's (FCC) broad definition of 'automatic telephone dialing system,' which includes 'predictive dialers'—devices that, with specific software, can store or produce numbers and dial them in various sequences. Despite this, the defendant contends that the FCC's interpretation should be disregarded, arguing that Congress did not authorize the agency to implement the statute in question and that the interpretation contradicts the statute's language. This stance risks violating Fed. R. Civ. P. 11, as the Seventh Circuit has clarified that the Hobbs Act gives appellate courts the authority to review FCC orders. In CE Design, a similar challenge to FCC's interpretation was rejected, with the court stating that a litigant cannot circumvent the Hobbs Act's jurisdictional bar by claiming an agency overstepped its authority. The defendant fails to address or differentiate this precedent. Additionally, the defendant's counsel is reminded of their obligations under Rule 11 and SCR 20:3.3 regarding legal arguments and disclosure of adverse authority. The defendant raises two alternative arguments: first, disputing the admissibility of evidence from Wayne Nightengale, the senior vice president of servicing, claiming he lacks the qualifications to testify about the telephone system. They argue that his testimony is inadmissible due to lack of foundational questioning and label another piece of evidence, an Aspect manual, as hearsay. However, the objection to Nightengale’s testimony could be considered waived since it was not raised earlier, and the defendant fails to demonstrate any lack of personal knowledge on Nightengale’s part regarding his testimony.

Plaintiff conducted a deposition of Nightengale in his capacity as a representative of the defendant corporation under Federal Rule of Civil Procedure 30(b)(6), which aims to prevent corporate representatives from disavowing knowledge of relevant facts. The rule requires the corporation to present a witness who can testify about topics identified in the deposition notice, regardless of personal knowledge. The notice included inquiries about the use and capabilities of Aspect software in debt collection. Since Nightengale was chosen by the defendant to testify on this subject, the defendant cannot claim his testimony lacks foundation. The testimony establishes that the defendant used predictive dialers to call the plaintiff, a fact that the defendant does not contest. The court finds that the method of dialing—whether predictive or preview—does not impact the determination of liability, as the focus is on whether the dialing system has the capacity to make automated calls. Consequently, the plaintiff is granted summary judgment on this claim. Regarding damages under 47 U.S.C. 227(b)(3)(B), the plaintiff may recover actual monetary losses or $500 per violation, with the possibility of tripling the award if the violation is found to be willful or knowing.

Plaintiff seeks statutory damages of $500 for each of the 1,026 calls and 116 prerecorded messages made by the defendant, totaling $513,000 for the calls and $58,000 for the messages. The defendant does not dispute the evidence of these communications and has waived the argument on recovering separately for each instance due to failure to respond. However, the plaintiff's request for treble damages for willful violations is denied, as she has not sufficiently argued or defined willfulness, and any new arguments presented in her reply brief are considered forfeited.

Regarding the Wisconsin Consumer Act, the plaintiff claims multiple violations related to loan agreements and the repossession of her truck. The plaintiff asserts that she did not surrender the truck, did not abandon it, and that the defendant did not obtain a judgment prior to repossession, thus fulfilling three of the four conditions outlined in Wis. Stat. 425.206(1). The dispute centers on whether the defendant provided proper notice under Wis. Stat. 425.205(1g), which must include specific information per Wis. Stat. 425.104. Although the plaintiff accepts that the defendant sent a notice, she argues it fails to comply with the required specifics, citing inaccuracies in the notice that preclude it from being valid.

The plaintiff contests the accuracy of a notice indicating a late payment of $738.05, asserting that her monthly payment was $491.15. She also disputes a delinquency charge of $10.00, claiming it should total $30 due to multiple late payments. The court agrees with the plaintiff regarding the first point, thus not addressing the second. In her reply, the plaintiff raises additional concerns about the letter, but these cannot be considered. The defendant argues that the $738.05 reflects the total past due amount, not the monthly payment due for February 2010. However, the court finds the plaintiff's interpretation more logical, as cumulative entries for subsequent months would be expected if the notice referred to the total owed. Regardless of the interpretation, both scenarios indicate a violation of Wis. Stat. 425.104(2), either by overstating the amount owed or by failing to provide an itemized list of charges. The defendant presents an unclear alternative argument suggesting that violations are unenforceable unless they pertain to the timing of notices sent before default. The court finds this reasoning flawed, emphasizing that the lack of case law does not limit the statute's scope. The defendant's citation of Rosendale State Bank v. Schultz is deemed misguided, as the case does not restrict 425.104(2) to only nontechnical violations, and the failure to accurately inform the plaintiff of the amount due impedes her opportunity to remedy the alleged default.

In Indianhead, the court rejected the notion that "technical" failures in compliance with statutory notice requirements are unenforceable, emphasizing that all defects could be deemed technical and that excluding them would render specific statutory requirements optional. The court determined that the defendant violated Wis. Stat. 425.206(1) by failing to satisfy any requirements before taking possession of the plaintiff's truck. Under Wis. Stat. 425.206(3) and 425.305, the plaintiff is entitled to retain the goods without payment obligations and to recover any sums paid, although these damages will be resolved at trial since the plaintiff did not seek summary judgment on them.

Regarding loan agreements, the plaintiff alleged that the defendant violated various sections of the Wisconsin Consumer Act through provisions in the loan agreements, specifically concerning unilateral payment deferral, security interests, default definitions, attorney fees, and information exchange. The defendant acknowledged liability for the inclusion of these provisions after acquiring the loans from HSBC but claimed it had not enforced them. The court agreed with the defendant that the plaintiff is not entitled to summary judgment on claims under Wis. Stat. 425.103 and 427.104. The court clarified that 425.103 does not grant consumers the right to enforce provisions in loan agreements but instead limits when a creditor can sue for default. Since the plaintiff did not allege that the defendant attempted to sue her for default prior to meeting the conditions set forth in 425.103, she is not entitled to summary judgment on that claim. The claim under Wis. Stat. 427.104 remains more complex.

Plaintiff alleges that the defendant violated specific provisions of the Wisconsin Consumer Act by including a clause in the loan agreements that permits communication with a service member's superior officer regarding loan payments, which she argues contravenes Wis. Stat. 427.104(1)(d) that restricts debt collectors from contacting an employer without a final judgment. Plaintiff also cites Wis. Stat. 427.104(1)(j), which prohibits a debt collector from claiming rights they do not possess. Although not claiming military status, plaintiff contends that the defendant improperly asserted a right to contact her superior officer.

The court finds that the statute pertains specifically to actions taken by a debt collector in the process of attempting to collect a debt. Since plaintiff did not demonstrate how entering into a loan agreement constitutes an attempt to collect a debt, her motion for summary judgment is denied. The court also interprets other statutes cited by the plaintiff as creating causes of action when illegal clauses are included in loan agreements, including limitations on unilateral deferrals and restrictions on attorney fees and security interests.

Defendant failed to respond to the plaintiff's arguments regarding these statutory violations, resulting in a waiver of that issue. On damages, the statutes allow recovery of either twice the finance charge (not less than $100 nor exceeding $1,000) or actual damages. Plaintiff claims no actual damages but asserts entitlement to $1,000 for each illegal provision based on significant finance charges. The defendant, in its response, does not contest the finance charges being over $500, thus accepting $1,000 as the appropriate damages amount.

If the plaintiff prevails on her claims, the court does not need to assess how the plaintiff calculated her damages. The primary issue is whether the plaintiff is limited to a single recovery of $1,000 for all illegal provisions, as the defendant contends, or entitled to $1,000 for each violation, as the plaintiff claims. The defendant references **Associates Financial Services Co. of Wisconsin v. Hornik**, which ruled that under Wis. Stat. 425.304, a consumer can collect a maximum penalty of $1,000 in addition to actual damages for any violation of the statute. The court in Hornik rejected the notion that multiple penalties could be awarded for separate violations. The plaintiff does not argue against the Hornik decision, asserting instead that it is not applicable outside claims under chapter 427 of the Wisconsin Statutes. However, the court notes that the Hornik ruling applies broadly to any violations under section 425.304.

The court decides to award the plaintiff $1,000 based on section 425.304. Regarding attorney fees, under Wis. Stat. 425.308, the court may award reasonable attorney fees to a prevailing customer. The plaintiff claims entitlement to these fees but the defendant argues that she must demonstrate both a violation of the act and a significant benefit from the litigation to qualify as a prevailing party, citing **Credit Acceptance Corp. v. Woodard**. The defendant contends that the plaintiff has not demonstrated this because there were no actual damages and the violations were minor. The plaintiff's response to the defendant's argument is unclear; while she acknowledges the need to prove a significant benefit, she critiques the timing of the defendant's argument, despite having initiated the discussion by requesting fees in her motion for summary judgment.

Plaintiff Heather Nelson requests attorney fees contingent upon prevailing in her claims at summary judgment but fails to substantiate her assertion of having proven a significant benefit, leading to the conclusion that she has waived this issue for summary judgment purposes. If she believes she is entitled to fees, she must renew her request post-trial. The court's order includes several key rulings: 

1. Nelson's motion to strike and request for sanctions is denied.
2. Defendant Santander Consumer USA, Inc.'s motion to strike is granted.
3. Santander's motion for leave to file an amended answer is denied.
4. Santander's motion for partial summary judgment is denied.
5. Nelson's motion for partial summary judgment is denied regarding her claims of violations of specific Wisconsin statutes and her entitlement to enhanced damages and attorney fees.
6. Conversely, Nelson's motion for partial summary judgment is granted on claims that Santander violated federal and state statutes through excessive calls, improper repossession, and inclusion of unlawful provisions in loan agreements. 

As a result, Nelson is awarded $571,000 in statutory damages under federal law and $1,000 under Wisconsin law.