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Hudson v. Velo Legal Services, PLC

United States District Court, E.D. Michigan, Southern Division

April 8, 2019




         On February 3, 2017, Plaintiff Cassandra Lee Hudson filed her complaint alleging that Defendants Velo Legal Services, PLC and Scott Renner violated the Fair Debt Collection Practice Act ("FDCPA"). ECF 1. The alleged violations arose from Defendants' collection efforts in Michigan state court. See generally Id. On August 27, 2018, the parties attempted to mediate the case with the magistrate judge. On November 13, 2018, Plaintiff filed her motion for summary judgment. ECF 50. On December 4, 2018, Defendants responded and suggested the Court "exercise its authority under Rule 56(f)(1) and grant summary judgment in their favor." ECF 52, PgID 844. The Court has reviewed the briefs and finds that a hearing is not necessary. E.D. Mich. LR 7.1(f). For the reasons below, the Court will deny Plaintiff's motion.


         In February 2014, Plaintiff entered into a lease agreement ("Lease") with Sun Home Services, Inc. ("Sun Homes") to rent a mobile home. See ECF 1-4. Plaintiff rented the home for personal, household, and family purposes. The Lease did not contain a term for charging interest. See generally id.

         On August 15, 2016, Defendants filed a collection lawsuit in state court seeking to collect a debt Plaintiff allegedly owed under the Lease. ECF 1-3, PgID 31-36. The complaint that Defendants filed ("Filed Complaint") differed, however, from the complaint that Defendants had previously served on Plaintiff ("Served Complaint").

         The Filed Complaint sought $2, 558.45-a principal amount of $2, 224.41 plus interest of $334.04. See, e.g., ECF 1-3, PgID 31. The Served Complaint sought $3, 101.08-a principal amount of $2, 773.91 plus interest of $327.17. See, e.g., ECF 1-2, PgID 25. Each complaint attached an affidavit of account, which included a disclaimer notifying Plaintiff that she had 30 days to dispute the debt. Compare ECF 1-2, PgID 27 with ECF 1-3, PgID 33.

         Plaintiff hired an attorney and defended against the state court proceeding. The state court judge entered judgment in Defendants' favor (on behalf of Sun Homes) in the amount of $1, 178.10 and did not award interest. See ECF 50-5, PgID 743. Plaintiff's attorney's fees in the state court case equaled $12, 624.00. See ECF 50-8.


         Summary judgment is proper if the movant shows that there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is material for purposes of summary judgment if its resolution would establish or refute an "essential element[] of a cause of action or defense asserted by the parties[.]" Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984) (citing Black's Law Dictionary 881 (6th ed. 1979)).

         In considering a motion for summary judgment, the Court must view the facts and "draw all reasonable inferences in the light most favorable to the non-moving party." Stiles ex rel. D.S. v. Grainger Cty., 819 F.3d 834, 848 (6th Cir. 2016). The Court must then determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). And although the Court may not make credibility judgments or weigh the evidence, Moran v. Al Basit LLC, 788 F.3d 201, 204 (6th Cir. 2015), a mere "scintilla" of evidence is insufficient to survive summary judgment; "there must be evidence on which the jury could reasonably find for the plaintiff," Anderson, 477 U.S. at 252.


         The FDCPA prohibits debt collectors from using "any false, deceptive, or misleading misrepresentation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. To prevail on a § 1692e claim, a plaintiff must prove that (1) she is a "consumer;" (2) the "debt" arose out of a transaction primarily related to personal, family, or household purposes; (3) the defendant is a "debt collector;" and (4) the defendant engaged in violative conduct. See Wallace v. Wash. Mut. Bank, F.A., 683 F.3d 323, 326 (6th Cir. 2012). The parties dispute only the fourth element-whether Defendants' conduct violated the FDCPA. See ECF 50, PgID 457 (Plaintiff's motion citing Defendant's discovery responses); ECF 52, PgID 828 (Defendants' response brief introducing the issue as only whether Defendants made misrepresentations).

         Plaintiff alleges that Defendants violated the FDCPA during the state collection lawsuit in three ways: (1) identifying inconsistent amounts between the Filed Complaint and Served Complaint; (2) adding a claim for interest without contractual or statutory authorization; and (3) providing Plaintiff with a "misleading notice" of her time to dispute the debt. ECF 50, PgID 452. Plaintiff also sought summary judgment on each of Defendants' affirmative defenses. Id. at 465-69. The Court addresses each argument in turn.

         I. The Dueling Complaints

         A debt collector violates the FDCPA if it makes a false representation of "the character, amount, or legal status of any debt." 15 U.S.C. § 1692e(2)(A). The Defendants do not contest that the Filed and Served Complaints represented different debt amounts but assert that the difference resulted from a clerical error. See ECF 52, PgID 828. If the debt amount represented in the Filed Complaint was correct, then the debt amount in the Served Complaint was a false or misleading representation of the amount of the debt-and vice versa. Defendants' conduct therefore violated § 1692e(2)(A).[1] The Court must still determine, however, whether Defendants' affirmative defenses protect them from liability. See infra. Part IV.

         II. Defendants' Claim for Interest

         The FDCPA prohibits the collection of any amount of interest unless a contract or the law permits recovery of interest. 15 U.S.C. § 1692f(1). Plaintiff alleges that Defendants violated that prohibition by seeking interest in the state court proceeding. Plaintiff maintains that, because the state court entered a judgment that "did not include an amount for interest" that the state court "made a finding that the amount of interest sought [by Defendants] . . . could not be recovered as a matter of contract or under Michigan law." ECF 50, PgID 460. Plaintiff then argues that res judicata bars the Court from considering the propriety of the interest. The Court will first address Plaintiff's res judicata argument. Then the Court will consider whether Defendants improperly sought interest.

         A. Res Judicata.

         Res judicata "bars a second, subsequent action when (1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved in the first." Buck v. Thomas M. Cooley Law Sch., 597 F.3d 812, 817 (6th Cir. 2010) (quoting Abbott v. Michigan, 474 F.3d 324, 331 (6th Cir. 2007)). "The burden of proving res judicata is on the party asserting it." Id. Plaintiff does not carry her burden.

         First, Plaintiff simply concludes that res judicata applies. See ECF 50, PgID 460. Second, Plaintiff misrepresents the state court's decision (and her own representations made in state court). The following exchange during the ...

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