Crandall v. Miller & Stevens, P.A.

Background

Lynda Crandall alleged that she incurred a debt to Bear Roofing & Exteriors, Inc. for roofing, siding, and deck repairs. Miller & Stevens, P.A., which represented Bear Roofing, sent Crandall an October 9, 2019 letter stating that she was in default and had 10 days to make full payment. The letter threatened a lawsuit, recording a judgment as a lien against her property, statutory interest and legal fees, wage garnishment, bank levies, and property repossession.

Crandall filed for Chapter 13 bankruptcy on November 13, 2019, and Bear Roofing received notice of the filing that day. On December 17, 2019, Miller & Stevens sued Crandall in Ramsey County Conciliation Court to collect the debt. The case was dismissed on January 10, 2020, after Crandall’s bankruptcy counsel insisted that it be dismissed.

Crandall claimed that the collection letter violated the Fair Debt Collection Practices Act (FDCPA) because it lacked the required notice explaining certain debt-dispute rights and because its 10-day demand conflicted with or overshadowed those rights. She also claimed that filing the state-court case violated the FDCPA because the lawsuit was prohibited by the bankruptcy laws. Her Minnesota malicious-prosecution and abuse-of-process claims were based on the same alleged improper lawsuit.

Motions and analysis

Miller & Stevens moved to dismiss the original complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim. While that motion was pending, Crandall filed an amended complaint within the 21-day period in which a party may amend once without the court’s permission. The amended complaint added allegations addressing Miller & Stevens’s arguments that it was not a covered FDCPA debt collector and lacked knowledge of Crandall’s bankruptcy filing.

The court held that the amended complaint rendered the motion to dismiss the original complaint moot. The court noted that the amendments materially addressed the issues raised in the motion, so it would not decide the motion based on the original complaint.

Miller & Stevens also moved for sanctions and attorneys’ fees under Rule 11. Rule 11 requires an attorney to make a reasonable inquiry before filing a pleading and certifies that the legal claims have a valid legal basis and that factual allegations have evidentiary support or are likely to obtain such support through investigation or discovery.

The court rejected Miller & Stevens’s argument that Crandall’s lawyer lacked a reasonable basis to allege that the firm was a “debt collector” under the FDCPA. The original complaint alleged that Miller & Stevens had filed numerous debt-collection cases, based on records available through Minnesota Trial Court Public Access. The court found that allegation sufficient for notice pleading and observed that whether a party regularly collects debts is a fact-intensive question that can reasonably be disputed.

The court also rejected the argument that Crandall was required to allege that Miller & Stevens knew about her bankruptcy or intentionally violated the bankruptcy stay. The court explained that the FDCPA’s bona fide-error defense is an affirmative defense: if Miller & Stevens invokes it, the firm must prove that any violation was unintentional, resulted from a reasonable error, and occurred despite procedures designed to prevent that error. Crandall was not required to plead facts anticipating that defense. The court further stated that the amended complaint and counsel’s declaration suggested that the allegation that Miller & Stevens had notice of the bankruptcy filing had evidentiary support when the original complaint was filed.

Disposition

The court ordered:

Judge Eric C. Tostrud did not decide the ultimate merits of Crandall’s FDCPA, malicious-prosecution, or abuse-of-process claims in this order.