Opinion
IP 00-1328-C-T/K
October 9, 2002
ENTRY ON PLAINTIFF'S MOTION TO STRIKE AND BONA FIDE ERROR DEFENSE
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
Plaintiff, Jamie M. Wehrheim, sued Defendant, James M. Secrest, P.C. ("Secrest"), alleging violations of the Fair Debt Collection Practices Act (the "FDCPA" or "Act"), 15 U.S.C. § 1691-1692o, and Indiana's criminal deception statute. Defendant moved for summary judgment. Plaintiff moved to strike the affidavit of James M. Secrest submitted in support of Defendant's summary judgment motion. The court granted the motion for summary judgment in part, denied the motion to strike, and allowed Plaintiff to file a surreply addressing the Defendant's supplemental statement of material facts. The issue now before the court is whether the bona fide error defense shields Secrest from liability on the remaining FDCPA claims.
I. Background Facts
Secrest was hired by Trustcorp Mortgage Company ("Trustcorp") to foreclose a mortgage on real estate owned by Ms. Wehrheim which mortgage secured a note on which Ms. Wehrheim had been indebted to Trustcorp. On August 23, 1999, while acting on behalf of Trustcorp, Secrest filed a complaint against Ms. Wehrheim in the Marion County Superior Court, Civil Division, Cause Number 49D01-9908-CP-01182 ("state court action"). The complaint in the state court action states in relevant part:
5. That the defendant, JAMIE M. WEHRHEIM, had made default in the monthly payments of principal and interest due and payable upon said note and mortgage, beginning with and since the date of October 1, 1998, and has made default in the monthly payments for real estate taxes and insurance beginning with and since said date and have wholly failed and refused to pay the same, by reason of which default, failure and refusal to pay, the said note and mortgage have been in default since November 1, 1998; that there is now due and owing from the defendant, JAMIE M. WEHRHEIM, upon said note and mortgage the following:
Principal $41,575.56
Interest thereon to date 2,972.65
Foreclosure abstract 295.00
Aggregate amount of late charges for defaulted payments 190.08
Deficit in Deposit Account for taxes and insurance premiums 847.33
Total $45,880.62 together with interest thereon at the rate of 12 per cent per annum.
(Am. Compl., ¶¶ 22, 27 Ex. F.) The note attached to the state court complaint states that it is payable with an annual interest rate of 7.15 percent. (Id., Ex. F, Ex. A at 1.)
II. Summary Judgment
Summary judgment is appropriate only where "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). When a defendant asserts an affirmative defense in response to a summary judgment motion, the defendant must present evidence to "support each element of its defense and demonstrate the lack of any genuine issue of material fact with regard thereto." Rushing v. Kan. City S. Ry. Co., 185 F.3d 496, 505 (5th Cir. 1999), cert. denied, 528 U.S. 1160 (2000).
III. Plaintiff's Motion To Strike
Because the court must consider the affidavit of James M. Secrest (the "affidavit") in deciding whether the bona fide error defense shields Secrest from liability, the court now takes up the motion to strike. The court also considers Plaintiff's claims that certain paragraphs of the supplemental affidavit of James M. Secrest (the "supplemental affidavit") should be stricken.
Plaintiff first contends that the court should strike the assertion in paragraph 1 of both the affidavit and supplemental affidavit that "the following testimony would be admissible in evidence" as conclusory and an impermissible legal conclusion. This court decides whether evidence is admissible. Fed.R.Evid. 104. Rather than striking this language from the affidavits, however, the court simply disregards it.
Next, Plaintiff moves to strike paragraph 7 of the affidavit, contending that it relates only to the "general" situation and is thus not relevant to what did or did not occur in the instant case as there is no evidence that what "generally" occurs actually occurred in the instant case. Though Plaintiff's argument has some surface appeal, the undisputed fact is that a copy of the mortgage and note were attached to the complaint filed by Defendant in the state court action. (See Pl.'s Compl., Ex. F, Exs. A B.) Thus, it is apparent that Defendant received from Trustcorp a copy of the mortgage and note at issue in this case.
Plaintiff objects to paragraph 12 of the affidavit, objecting to the language preceding the assertion "I filed the State Court Action on August 23, 1999." (Secrest Aff. ¶ 12.) The court can simply disregard the challenged language as it is not relevant to whether Defendant has shown that the bona fide error defense shields it from liability on the remaining claims. Plaintiff also objects to paragraphs 8, 10, 11, 14, 15, 16, 17 and 19 of the affidavit, but these paragraphs, too, are irrelevant to the issue at hand.
Plaintiff objects to paragraphs 7 and 8 of the supplemental affidavit in part because of their reliance on the inference of what "generally" happens when Trustcorp refers a foreclosure file to Mr. Secrest as stated in paragraph 7 of the affidavit. As explained, because the undisputed facts show that the mortgage and note were attached to the complaint filed in the state court action, this objection is unavailing. Plaintiff also complains that the second sentence in paragraph 7 ("The clerical error occurred notwithstanding the maintenance of procedures designed and used by the Defendant to avoid such errors.") is self-serving and conclusory. It is. But the real question in this case is whether such procedures were reasonably adapted to avoid such errors. Plaintiff argues that Defendant offers no evidence that it actually reviews the note or mortgage to avoid the errors about which she complains; however, the assertion in paragraph 8(iv) of the supplemental affidavit that "[t]he draft foreclosure complaint is then reviewed and proofread for accuracy on all information placed in the draft complaint and derived from the foreclosure file information" makes such an inference reasonable.
Plaintiff argues that paragraphs 5 through 9 of the supplemental affidavit contradict previous admissions and documents which were authenticated by Defendant. The court fails to perceive any contradiction between these challenged paragraphs and the Defendant's authentication of the following filed in the state court action: the complaint, the plaintiff's motion for summary judgment and the answer.
For all these reasons, Plaintiff's motion to strike is DENIED. Thus, the affidavit and supplemental affidavit of James M. Secrest establish the following relevant facts, which are uncontradicted by Plaintiff:
Defendant James M. Secrest, P.C., is an Indiana professional corporation. (Affidavit of James M. Secrest of 10/29/01 ("Secrest Aff.") ¶ 3.) James M. Secrest is an attorney licensed to practice law by the Supreme Court of Indiana and is the sole officer and shareholder of James M. Secrest, P.C. (Id. ¶¶ 2, 3.) Mr. Secrest represented Trustcorp Mortgage Company in mortgage foreclosure actions and state court proceedings, including the case of Trustcorp Mortgage Co. v. Jamie M. Wehrheim and Indiana Housing Finance Authority, Cause No. 49D01-9908-CP-001182 filed in the Marion County Superior Court (the "state court action"). (Secrest Aff. ¶¶ 5, 7.) When a foreclosure file is referred to Mr. Secrest by Trustcorp, it generally consists of, inter alia, copies of the note and mortgage instruments (id. ¶ 7), and these items apparently were included in the file sent to Mr. Secrest in the instant case.
Trustcorp sent Mr. Secrest the foreclosure file regarding a mortgage loan on real estate located at 3471 Vermont Street in Indianapolis, Indiana. At that time, the real estate was titled to the Plaintiff, Jamie M. Wehrheim. (Id. ¶ 9.) Thereafter, Mr. Secrest filed the state court action on August 23, 1999. (Id. ¶ 12.) The complaint in the state court action contains an error in the first rhetorical paragraph numbered 5 as to the per annum interest rate being sued upon. The correct interest rate is 7.15% per annum rather than the 12% per annum stated in the complaint. (Secrest Suppl. Aff. of 5/27/02 ("Secrest Suppl. Aff.") ¶ 5.) Mr. Secrest avers that this error in the interest rate was neither made with the intent to deliberately misstate the interest rate, nor with the intent to deceive Ms. Wehrheim or misrepresent the mortgage note interest rate, nor with the intent to infringe upon Ms. Wehrheim's rights or violate the FDCPA. (Id. ¶ 6.)
Mr. Secrest avers that it was a clerical error, presumably meaning that it was merely a writing or copying error. See Black's Law Dictionary 252 (6th ed. 1990). Such errors are often referred to in law as "scrivener's errors." However, whether this error was of that character or not is a conclusion, and Mr. Secrest's affidavit does not demonstrate that he has a foundation for drawing such a conclusion. At best, he has established that it is an error. Without more, it could be inferred that it was clerical, or perhaps motivated by something more sinister than negligence.
Defendant James M. Secrest, P.C. maintained and used certain procedures, including those which follow: (1) upon receipt of a foreclosure file from Trustcorp, the file information was reviewed to determine that it is complete and sufficient for preparation of, inter alia, a foreclosure complaint; (2) if a foreclosure complaint was to be prepared, a complaint form was selected from the forms maintained on Defendant's word processing program; (3) a draft of the foreclosure complaint was prepared using the foreclosure file provided by Trustcorp; (4) the draft was reviewed and proofread for accuracy on all information in the draft and derived from the foreclosure file information; and (5) if an error was found, correction was made and the revised draft complaint was reviewed and proofread a second time. (Secrest Suppl. Aff. ¶ 8.) These procedures were used in the preparation of the complaint in the state court action. Nonetheless, the state court complaint filed with the court contained an error in stating the mortgage note interest rate in the first rhetorical paragraph numbered 5. (Id. ¶ 9.)
IV. Discussion
Defendant in its brief in reply to Plaintiff's brief in response to Defendant's motion for summary judgment for the first time argued that it was entitled to the bona fide error defense of 15 U.S.C. § 1692k(c) as to the misstatement of the interest rate on the note. The court allowed Plaintiff to file a surreply addressing the bona fide error defense. At issue now are Plaintiff's claims that the misstatement of the interest rate violated § 1692e(2)(A) and (B) and § 1692e(10).
The court was of the understanding based on numerous documents filed in this case, for example, the Plaintiff's Amended Complaint, the Plaintiff's Tender of Proposed Findings of Fact and Conclusions of Law Following Trial, and Plaintiff's Statement of Additional Material Facts In Opposition to Defendant's Motion for Summary Judgment, that Plaintiff's claim of the misstatement of the interest rate was based solely on the misstatement in the complaint filed in the state court action. Apparently, Defendant Secrest held this same understanding as it did not address any claim that Trustcorp's summary judgment motion essentially misstated the interest rate. (See Def.'s Am. Br. Supp. Def.'s Mot. Summ. J. at 6, 9, 10 and 12 (indicating what Defendant Secrest believed Plaintiff Werheim's claims to be).) And, Plaintiff Wehrheim amended her complaint on the brink of trial — actually after trial had commenced — surely counsel was on notice at that time, if not before, that he should clearly assert all of Plaintiff's claims. Without question, as to the misstated interest rate, the focus of Plaintiff's claim and papers has been on the misstatement in the state court complaint. (See, e.g., Pl.'s Resp. Opp'n Def.'s Mot. Summ. J. at 20, 21 and 25.) Nonetheless, broadly read, Plaintiff's Amended Complaint arguably also encompasses a claim that the Defendant violated the FDCPA by essentially requesting 12% interest in the motion for summary judgment filed in state court, which motion relied upon the complaint seeking 12% interest. Thus, the court will allow such a claim to proceed.
The court, however, has its doubts as to whether the alleged misstatement of the interest rate in the state court summary judgment motion is actionable under the FDCPA. When Defendant filed that motion, Ms. Wehrheim was represented by counsel. The motion, designation of record and supporting affidavit were not directly handed or mailed to Ms. Wehrheim, but rather were served on her counsel of record, her same counsel in this case. In Kropelnicki v. Siegel, 290 F.3d 118 (2nd Cir. 2002), the court expressed its "grave reservations" about concluding that misrepresentations to attorneys for a debtor constitute violations of the FDCPA. Id. at 127-28. (The defendants in that case had allegedly advised the plaintiff's attorney that they would not advance a state court action which they had filed against the plaintiff without first contacting the attorney, but allegedly did so without first contacting him. Id. at 127.) The court did not directly address this matter and the factual circumstances at issue are not on all fours with that in the instant case, but nonetheless, given the FDCPA's purpose, the same doubts arise here. Id. at 127-28.
The FDCPA was enacted "to eliminate abusive debt collection practices by debt collectors . . . and . . . to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). Because Plaintiff was represented by counsel at the time Defendant filed the summary judgment motion in the state court action, it is safe to assume that her attorney, who holds himself out as an experienced attorney when it comes to FDCPA matters, would protect her from a debt collector's fraudulent or abusive conduct. The parties neither raised nor addressed whether the FDCPA claim based on Defendant's essential request for 12% interest in the summary judgment motion served on counsel is actionable under the FDCPA, so the court is not in a position to decide the issue. It remains to be seen whether the Plaintiff will actually assert such a legally dubious claim at trial.
Now the court proceeds to consider the evidence offered to support Defendant's assertion of the bona fide error defense. The FDCPA contains an affirmative defense which provides that: "A debt collector may not be held liable . . . if the debt collector shows by a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." 15 U.S.C. § 1692k(c); Jenkins v. Heintz, 124 F.3d 824, 832-34 (7th Cir. 1997). A defendant bears the burden of proving this bona fide error defense by a preponderance of the evidence. Jenkins v. Heintz, 124 F.3d at 834.
Having considered the evidence submitted by Defendant (Plaintiff has offered none of her own evidence on this issue), the court finds that it has not demonstrated the absence of any genuine issue of material fact with regard to the bona fide error defense. The affidavit and supplemental affidavit establish that Defendant had certain procedures in place to avoid clerical errors in complaints, but the court cannot find that it has shown as a matter of law that its procedures were reasonably adapted to avoid such errors. Whether certain procedures were reasonably adapted to avoid the error at issue seems to be a factual matter requiring a determination by the trier of fact in all but the rarest of cases. This is not such a case.
Though it seems implicit from the Defendant's procedures that the draft foreclosure complaint was compared to the mortgage and note (see Secrest Suppl. Aff. ¶ 8(iv)), the Defendant's evidence does not establish what person or persons reviewed and proofread the draft foreclosure complaint. The affidavits do not reveal whether Mr. Secrest undertook the drafting, reviewing and proofreading process all by himself, either as a general rule, or in this particular case, or whether he relied on others to perform all or some of these tasks. If he did rely on others, their identities are unknown, as are the kind of education or training they may have had relevant to the error at issue and whether and to what extent they were supervised by Mr. Secrest.
Defendant argues that the original affidavit of James M. Secrest is clear that Mr. Secrest was the sole person responsible for reviewing all documents used to prepare the state court foreclosure complaint and for preparing that complaint. The court's review of the original affidavit, however, reveals something less than clarity on this matter. The affidavit states that Trustcorp provides foreclosure files to "me," that the foreclosure file regarding the real estate titled to Plaintiff was sent to "me," and Mr. Secrest took certain actions in representing Trustcorp, including filing the state court action. (Secrest Aff. ¶¶ 7-13.) But these statements do not indicate that only Mr. Secrest had a role in preparing the state court complaint. Defendant argues that the state court complaint was clearly signed by Mr. Secrest. But the lawyer who signs a complaint may not always, or even usually, draft, review, and/or proofread that complaint. Common sense suggests that at least some of the review and proofreading may have been done by other staff, and the court must draw all reasonable inferences in favor of Plaintiff. The affidavit establishes that Mr. Secrest is the sole officer and shareholder in Defendant, but there is nothing to suggest that Defendant is a one man operation. Defendant may be able to prove that, but its summary judgment submissions give rise to a contrary inference.
Though Defendant has produced evidence of certain procedures arguably designed and used to avoid errors in foreclosure complaints, it has not shown as a matter of law that such procedures are reasonably adapted to avoid such errors. In addition, Defendant has offered no evidence to establish that it has any procedures reasonably adapted to avoid unintentional, bona fide errors in summary judgment motions. Therefore, summary judgment would be inappropriate on the FDCPA claims based on the misstatement of the interest rate.
V. Conclusion
For the foregoing reasons, Plaintiff's motion to strike is DENIED and the court finds a triable issue as to whether the bona fide error defense shields Defendant from liability under the FDCPA for the misstatement of the interest rate.
A conference will be held to set a trial date in this case.