Illinois district court holds that filing an unsuccessful foreclosure action is not a violation of the FDCPA

In Skibbe v. U.S. Bank, et al. No. 16 C 192 (N.D. Ill. Feb. 15, 2018), the United State District Court for the Northern District of Illinois District granted summary judgment to a mortgagee and the firm retained to handle a state court foreclosure on an FDCPA claim which asserted that the filing of the foreclosure was illegal under state law.

The genesis of this case was several foreclosure filings in state court, the first two of which were voluntarily dismissed. It was the propriety of the third foreclosure that generated the federal suit. The debtors argued successfully in state court that the third foreclosure was procedurally barred under Illinois’ single refiling rule, 735 ILCS 5/13-217, which allows a plaintiff to voluntarily dismiss and refile its case only once, even if the applicable statute of limitations has not expired. The defendants argued that the first foreclosure was a different case from the first two because the debtors had made payments on the loan after the first foreclosure was dismissed. The state court dismissed the case anyway because the mortgagee’s attorney had erroneously stipulated that the payment default dates in the three cases were the same even though no one disputed that the debtors had made the additional payments.

Following defendants’ unsuccessful appeal of the state court ruling, debtors brought suit in federal court against the mortgagee and its foreclosure counsel under the FDCPA alleging it was an unfair debt collection practice to bring the third foreclosure.

The court granted defendants’ motions for summary judgment and denied the debtors. The court found that the mortgagee was not a debt collector under the FDCPA because it was collecting debts on its own account relying on Henson v. Santander, 137 S.Ct. 1718, 1721 (2017). Debtors tried to get around Henson by arguing that the mortgagee was a debt collector under the provision which defines “debt collector” as one whose business is to “regularly collect[ ] or attempt[ ] to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” However, the court found that the debtors never alleged that the primary purpose of the mortgagee’s business was debt collection.

Summary judgment was also granted to the mortgagee’s attorney. Resting largely on the principal that the FDCPA is not a mechanism to remedy violations of state pleading requirements, the court agreed that the state court filings contained factually accurate statements. When the facts based on violating Illinois’ single-refiling rule (and the litigation that followed) are removed from the case, the debtors were left with no other evidence of an FDCPA violation. “[T]he fact that a lawsuit turns out ultimately to be unsuccessful” is not itself sufficient to constitute an “action that cannot legally be taken.” Heintz v. Jenkins, 514 U.S. 291, 295-96 (1995).

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