Milisavljevic v. Midland Credit Management, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

MILUN MILISAVLJEVIC, on behalf of

himself and all others similarly situated,

Plaintiff, No. 19-cv-08449

v. Judge John F. Kness

MIDLAND CREDIT MANAGEMENT,

LLC, MIDLAND FUNDING, LLC, and

ENCORE CAPITAL GROUP, INC.,

Defendants.

MEMORANDUM OPINION AND ORDER

Seeking to collect unpaid credit card debt, Defendants Midland Credit

Management, Inc., Midland Funding, LLC, and Encore Capital Group, Inc. sued

Plaintiff Milun Milisavljevic in a state court. When Defendants filed a motion for

default judgment in the state-court litigation, they sent copies of the motion and an

unsigned order to Plaintiff. Thinking that the unsigned and undated order meant he

had already lost in the state court, Plaintiff declined to respond; accordingly, the state

court entered a judgment against him. Only then did Plaintiff retain counsel to assist

with his legal woes.

Plaintiff brought this purported class action alleging that Defendants violated

the Fair Debt Collection Practices Act (FDCPA). But the injuries Plaintiff alleges—

that he “experienced severe emotional distress” and “lost sleep”; was duped into not

responding to Defendants’ motion, thus leading to a default state-court judgment;

and “spent time, money, and energy in seeking to vacate the judgment once he

realized it was entered”—are not sufficient under binding precedent of the Court of

Appeals to confer on him standing under Article III of the Constitution. Accordingly,

because the Court lacks subject matter jurisdiction, Defendants’ motion to dismiss

(Dkt. 53) is granted, and Plaintiff’s complaint is dismissed without prejudice.

I. BACKGROUND

Plaintiff held a credit card account with Citibank, N.A.; Plaintiff used this

account “for household purchases such as clothing and groceries.” (Dkt. 50 ¶¶ 6-7.)

Defendants Midland Credit Management, Inc. (“MCM”) and Midland Funding, LLC

(“Midland”) are collection agencies that collect defaulted consumer debts owed to

others. (Id. ¶¶ 9-10, 15-16.) Defendant Encore Capital Group, Inc. (“Encore”) is an

“international specialty finance company providing debt recovery solutions and other

related services for consumers across a broad range of financial assets.” (Id. ¶ 20.)

When Plaintiff could not pay the debt on his credit card and defaulted,

Defendant Midland purchased the debt and, in March 2019, filed a lawsuit against

Plaintiff in the Circuit Court of Cook County, Illinois. (Id. ¶¶ 28-30.) (Defendant

MCM was also involved in the state-court lawsuit (see, e.g., id. at ¶ 39), but it is not

clear from the allegations of the complaint when MCM became involved.)

During the state-court litigation, Defendants MCM and Midland filed a motion

for default judgment and sent the motion along with a judgment “order” to Plaintiff.

(Id. ¶ 39-40, 50.) Plaintiff characterizes the “order” as a “False Order,” alleging that

he believed it “had been originated, drafted and entered by the State Court as opposed

to being a communication from one or more of the Defendants, as the False Order did

not state it was from a debt collector, and instead read that it was from ‘Judge of the

Circuit Court.’ ” (Id. ¶ 53.)1 According to Plaintiff, “MCM and Midland regularly

present draft orders of judgment to the Illinois Courts that are different than those

they send to consumers in connection with the motions of default judgments that they

file in collection cases.” (Id. ¶ 66.)

Thinking he had lost the case, Plaintiff “experienced severe emotional distress”

and “lost sleep.” (Id. ¶¶ 57-58.) Plaintiff—believing he had already lost the state-court

case—“did not respond to the Motion”; accordingly, the state court entered judgment

against Plaintiff. (Id. ¶¶ 61-62.) Only after that judgment was entered did “Plaintiff

hire[] an attorney to seek to vacate the judgment, and spen[d] time, money, and

energy in seeking to vacate the judgment.” (Id. ¶ 73.)

In December 2019, Plaintiff brought this suit against the three Defendants,2

purportedly on behalf of all individuals similarly situated (id. ¶¶ 79-88), alleging the

Defendants’ conduct in the state-court litigation amounted to violations of the Fair

Debt Collection Practices Act (FDCPA) (id. ¶¶ 89-93). Defendants moved to compel

arbitration in June 2020 (Dkt. 23), and Plaintiff filed an amended complaint in

1 Attached to the amended complaint, Exhibit B includes, among other things, (1) a “Notice

of Motion” announcing the filing of Defendants’ motion for default judgment; (2) a motion for

default judgment; and (3) an unsigned and undated “Order” granting the motion for default

judgment. (Dkt. 50 at 34-47.)

2 Plaintiff alleges that Defendant Encore “bears the burden of monitoring the activities of

those it enlists to collect debts on its behalf, including Midlands and MCM.” (Dkt. 1 ¶ 76.)

August 2021 (Dkt. 50). Defendants then filed the present motion to dismiss, arguing,

among other things, that Plaintiff lacks standing. (Dkt. 53.)

II. STANDARD OF REVIEW

A motion under Rule 12(b)(6) “challenges the sufficiency of the complaint to

state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police

of Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Each complaint “must

contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations “must be

enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at

555. Put another way, the complaint must present a “short, plain, and plausible

factual narrative that conveys a story that holds together.” Kaminski v. Elite Staffing,

Inc., — F.4th —, No. 21-1616, 2022 WL 168260 at *3 (7th Cir. Jan. 19, 2022) (cleaned

up). In evaluating a motion to dismiss, the Court must accept as true the complaint’s

factual allegations and draw reasonable inferences in the plaintiff’s favor. Iqbal, 556

U.S. at 678. But even though factual allegations are entitled to the assumption of

truth, mere legal conclusions are not. Id. at 678-79.

III. DISCUSSION

As has been long recognized, the United States Constitution “confers limited

authority on each branch of the Federal Government.” Spokeo, Inc. v. Robins, 578

U.S. 330, 337 (2016). One of the limitations placed on federal courts is that “[t]he

judicial Power” extends only to “Cases” and “Controversies.” U.S. Const. art III, § 2;

see Raines v. Byrd, 521 U.S. 811, 818 (1997) (“No principle is more fundamental to

the judiciary’s proper role in our system of government than the constitutional

limitation of federal-court jurisdiction to actual cases or controversies”) (citation

omitted)).

To satisfy the case-or-controversy requirement, a party seeking to invoke a

federal court’s jurisdiction must establish that it has standing. Lujan v. Defs. of

Wildlife, 504 U.S. 555, 560 (1992). To establish standing, the plaintiff must allege:

“(1) the plaintiff suffered a concrete and particularized injury in fact; (2) the injury is

fairly traceable to the challenged conduct; and (3) the injury is likely to be redressed

by a favorable judicial decision.” Spuhler v. State Collection Serv., Inc., 983 F.3d 282,

285 (7th Cir. 2020) (citing Lujan, 504 U.S. at 560-61).

At an accelerated pace, the Seventh Circuit has addressed standing under the

FDCPA on numerous recent occasions. See, e.g., Wadsworth v. Kross, Lieberman &

Stone, Inc., 12 F.4th 665 (7th Cir. 2021); Nettles v. Midland Funding LLC, 983 F.3d

896 (7th Cir. 2020); Brunett v. Convergent Outsourcing, Inc., 982 F.3d 1067 (7th Cir.

2020); Markakos v. Medicredit, Inc., No. 20-2351, 2021 WL 1937267 (7th Cir. May 14,

2021); Smith v. GC Servs. Ltd. P’ship, 986 F.3d 708 (7th Cir. 2021); Bazile v. Fin. Sys.

of Green Bay, Inc., 983 F.3d 274 (7th Cir. 2020); Larkin v. Fin. Sys. of Green Bay, Inc.,

982 F.3d 1060 (7th Cir. 2020); Spuhler v. State Collection Serv., Inc., 983 F.3d 282

(7th Cir. 2020). In shorthand, the net effect of these rulings has been to narrow the

range of alleged harms that can, at the pleading stage, demonstrate that a plaintiff

has standing to proceed under the FDCPA.

Under the FDCPA, as with every other remedial statutory scheme, Congress

“must remain within the bounds of Article III in creating causes of action for

intangible injuries, and even when it does, not every statutory violation implicates

an interest that Congress sought to protect.” Wadsworth, 12 F.4th at 667. An alleged

procedural violation of the FDCPA “may amount to a concrete injury, but only if it

impairs the plaintiff’s ability to use that information for a substantive purpose that

the statute envisioned.” Bazile, 983 F.3d at 280 (cleaned up).

At the pleading stage, “the standing inquiry asks whether the complaint

clearly alleges facts demonstrating each element in the doctrinal test.” Larkin, 982

F.3d at 1064 (cleaned up).3 To establish injury in fact—one of the elements of

standing—a plaintiff must show that he or she suffered “ ‘an invasion of a legally

protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not

conjectural or hypothetical.’ ” Spokeo, 578 U.S. at 339 (quoting Lujan, 504 U.S., at

560).

A. Plaintiff’s General Standing Allegations

Plaintiff’s alleged injuries are insufficient to confer standing in this case. As an

initial matter, Plaintiff’s recitation of the standing requirements in the “Standing”

section of his complaint is inadequate. Plaintiff alleges that “Plaintiff has suffered an

injury in fact that is traceable to Defendants’ conduct and that is likely to be redressed

by a favorable decision.” (Dkt. 50 ¶ 3.) Then, he alleges “[s]pecifically” that he has

3 Plaintiff “must establish standing at the time [the] suit is filed and cannot manufacture

standing afterwards.” Pollack v. U.S. DOJ, 577 F.3d 736, 742 n.2 (7th Cir. 2009) (citing

Friends of the Earth, Inc. v. Laidlaw Env’t. Servs., Inc., 528 U.S. 167, 180 (2000)).

“suffered a harm from receiving false, misleading, unfair, oppressive, and deceptive

communications from Defendants while they were attempting to collect a debt from

him,” and thus “suffered an injury as a result of Defendants’ conduct, giving rise to

standing before this Court.” (Id. ¶¶ 4-5.)

But a mere recitation of the standing requirements is not enough. Taha v. Int’l

Bhd. of Teamsters, Loc. 781, 947 F.3d 464, 469 (7th Cir. 2020) (explaining that a

complaint is insufficient “if it tenders ‘naked assertions’ devoid of ‘further factual

enhancement’ ” (quoting Iqbal, 556 U.S. at 679). As to what Plaintiff characterizes as

being more “specific[]” (Dkt. 50 ¶ 4), nothing in that paragraph amounts to “an

invasion of a legally protected interest” sufficient to confer standing. Spokeo, 578 U.S.

at 339 (citation omitted).

B. Plaintiff’s Specific Standing Allegations

Later in the complaint, Plaintiff alleges three potential injuries in fact: (1)

because of Defendants’ conduct, Plaintiff “experienced severe emotional distress” and

“lost sleep”; (2) “did not respond to the [state-court] Motion,” which led to the state

court entering default judgment against him; and (3) “hired an attorney to seek to

vacate the judgment, and spent time, money, and energy in seeking to vacate the

judgment once he realized it was entered.” (Dkt. 50 ¶¶ 57-58, 61-62.) For the reasons

that follow, those injuries are insufficient as well to establish standing.

First, emotional injuries—such as a “sense of indignation” or “aggravated

annoyance”—are not enough to confer standing under the FDCPA. Gunn v. Thrasher,

Buschmann & Voelkel, P.C., 982 F.3d 1069, 1071 (7th Cir. 2020). The Seventh Circuit

recently reiterated that

it is hard to imagine that anyone would file any lawsuit without being

annoyed (or worse). Litigation is costly for both the pocketbook and

peace of mind. Few people litigate for fun. Yet the Supreme Court has

never thought that having one’s nose out of joint and one’s dander up

creates a case or controversy.

Id. at 1072; see United States v. All Funds on Deposit with R.J. O’Brien & Assocs.,

783 F.3d 607, 616 (7th Cir. 2015). For the same reasons, “sleep deprivation caused by

worry alone cannot establish standing.” Choice v. Unifund CCR, LLC, No. 19-CV-

5773, 2021 WL 2399984, at *2 (N.D. Ill. June 11, 2021).4 Accordingly, Plaintiff’s first

alleged injury does not confer standing.

Plaintiff’s second alleged injury is more complex in terms of assessing standing

under the evolving precedents of the Court of Appeals. Plaintiff alleges, in effect, that

the materials Defendants sent him—specifically the motion for default judgment and

Order (“False Order”)—led him not to respond to the motion or otherwise engage in

the state-court litigation, which resulted in the default judgment against him. (Dkt.

50 ¶ 62.) Plaintiff explains that he “would have responded to the Motion had he

known that judgment had not already been entered, and [he] only failed to respond

due to his false belief—induced by Defendants’ communications including the False

Order—that judgment had already been entered.” (Id. ¶ 63.) The “injury”—if any—

4 Plaintiff’s citations to out-of-circuit cases finding that “injuries” such as loss of sleep or

stress could confer standing (see Dkt. 64 at 11-12) do not salvage his position. This Court is

bound by the Seventh Circuit, which has rejected such bases for standing under the FDCPA.

therefore is not Plaintiff’s self-described “inaction” (Dkt. 64 at 10); it is the judgment

that was entered against Plaintiff in the state-court case (Dkt. 50 ¶ 62).

The extent of Plaintiff’s second alleged injury (if any) is complicated by

Plaintiff’s own efforts—described in the complaint—to vacate the state-court

judgment. (See Dkt. 50 ¶ 73.)5 Even drawing all reasonable inferences in the

plaintiff’s favor, see Iqbal, 556 U.S. at 678, the complaint does not allege that the

default judgment—as distinct from the efforts taken to vacate that judgment, which

are discussed separately below—is an “actual or imminent, not conjectural or

hypothetical” injury in light of Plaintiff’s (perhaps ongoing) efforts to vacate that

judgment, Spokeo, 578 U.S. at 339 (citation omitted).

Citing to Smith v. GC Servs. Ltd. P’ship., 986 F.3d 708, 710 (7th Cir. 2021),

Plaintiff argues that he has taken a “detrimental step” such that he has standing.

(Dkt. 64 at 11.) In Smith, the Seventh Circuit held that a plaintiff lacked standing

where the plaintiff “sa[id] that she was confused by the letter she received, [but did]

not contend that the letter’s supposed lack of clarity led her to take any detrimental

step, such as paying money she did not owe.” Smith, 986 F.3d at 710. Even assuming

Plaintiff’s inaction—in his words, “that he did not seek to defend against the Motion

5 There is some dispute about the extent of Plaintiff’s efforts. According to Defendants, as

of August 19, 2021 (well after commencement of this lawsuit), “Plaintiff ha[d] not sought to

vacate the [state-court] judgment.” (Dkt. 51 at 9.) In his Response (filed on October 19),

Plaintiff asserts, to the contrary, that he “hired counsel to vacate the judgment soon after the

judgment was entered, but due to the fact that he has been out of the country, in combination

with the effects of the COVID-19 crisis, a motion to vacate was not filed by his attorneys

. . . until recently.” (Dkt. 64 at 4.) Regardless of when, and to what extent, Plaintiff sought to

vacate the judgment, the allegations in Plaintiff’s amended complaint—that he is seeking to

vacate the judgment (Dkt. 50 ¶ 73)—undermine his assertion of standing in this litigation.

since he believed that judgment had already been entered” (Dkt. 64 at 11)—can

constitute an affirmative “step,” Smith does not support Plaintiff’s standing. Plaintiff

nowhere alleges that he has “pa[id] money []he did not owe.” Smith, 986 F.3d at 710.

In fact, Plaintiff’s ongoing efforts to vacate the default judgment (Dkt. 50 ¶ 73)

undermine his contention that his inaction was “detrimental.” See Detrimental,

Oxford English Dictionary (2021) (defining “Detrimental” as “[c]ausing loss or

damage”). Plaintiff thus acknowledges that he is taking steps to avoid the type of

harm the Smith court hinted might confer standing.6

Plaintiff also cites (Dkt. 64 at 11) to Brown v. Weltman, Weignberg & Reis Co.,

in which the court concluded that a plaintiff had standing where she “allege[d] an

actual economic detriment caused by her receipt of [the defendant’s] allegedly

misleading collection letter.” No. 21 C 1120, 2021 WL 3910748, at *2 (N.D. Ill. Sept.

1, 2021). In Brown, the plaintiff alleged “that she had to take time away from her self-

employment work to scour her records to attempt to get to the bottom of the claims

about her debt” and that, “if the letter had said that the debt was too old to sue or

report on, she would have simply discarded it, . . . [and] would not have spent any of

her self-employment work time investigating.” Id. But, again, Plaintiff does not allege

any “economic harm,” id., other than the costs he is now incurring to meliorate his

6 Plaintiff’s allegations raise separate questions about whether his injury is “fairly

traceable to the challenged conduct.” Bazile, 983 F.3d at 278 (citation omitted). Even

assuming that the default judgment entered against him is a cognizable injury, the default

judgment resulted most immediately from Plaintiff’s inaction, not Defendant’s practices.

Plaintiff concedes this point: the complaint alleges that “[j]udgment was entered as a result

of Plaintiff’s inaction.” (Dkt. 50 ¶ 62.) Although he adds that his “inaction” was, in turn, “due

to Defendants’ false, misleading and deceptive communications,” Plaintiff’s role in the causal

chain leading to the default judgment cannot be ignored.

state-court woes. Plaintiff, unlike the plaintiff in Brown, does not allege that he

expended time that would have otherwise gone to gainful employment (let alone “self-

employment”) such that he has suffered any harm independent of that associated

with “seeking to vacate the [default] judgment.” (Dkt. 50 ¶ 73.)

Having failed to demonstrate standing based on his state litigation-related

allegations, Plaintiff’s final asserted injury is that he hired a lawyer and “spent time,

money, and energy in seeking to vacate the judgment.” (Dkt. 50 ¶ 73.) But as with his

first two categories of alleged injuries, these allegations also fail to confer Article III

standing. As the Seventh Circuit recently explained, hiring a lawyer is not a

cognizable injury:

Even innocuous statements about tax law may lead people to consult

counsel. . . . A desire to obtain legal advice is not a reason for universal

standing. . . . The plaintiffs in Thole, Spokeo, Hein, and Richardson all

had counsel. They had been concerned, confused, disturbed, or upset

enough to ask lawyers for help. But the Supreme Court held that only

people who can show personal, concrete injuries may litigate. Many

people think that an advisory opinion will set their minds at ease, but

hiring a lawyer in quest of a judicial answer does not permit a federal

court, operating under Article III, to give that answer.

Brunett v. Convergent Outsourcing, Inc., 982 F.3d 1067, 1069 (7th Cir. 2020). Based

on this precedent, even if Plaintiff’s decision to hire a lawyer is “fairly traceable to

challenged” violation of the FDCPA,7 Spuhler, 983 F.3d at 285, the time, money, and

7 Again, the parties dispute whether Plaintiff would have acted differently “had he known

the default order had not yet been entered when he was served with the Motion for Default.”

(Dkt. 51 at 9.) Defendants argue, in effect, that Plaintiff’s neglect (rather than confusion)

resulted in the default judgment. (See id. (“Plaintiff’s claim is implausible because it was his

failure to act for over 6 months after having been served with the state court complaint and

summons—which he admits he received and read—that led to the default.”).) Plaintiff

suggests that travel and “the COVID-19 crisis” led to the delays in seeking vacatur of the

default judgment. (Dkt. 64 at 4.)

energy he has spent hiring a lawyer and working to vacate the state-court judgment

are not injuries sufficient to confer standing.

Because Plaintiff has not alleged an “injury in fact ... that is fairly traceable

to the challenged conduct of the defendant, and... that is likely to be redressed by a

favorable judicial decision,” Wadsworth, 12 F.4th at 667 (quoting Spokeo, 136 S. Ct.

at 1547), he lacks standing. Accordingly, the Court does not have jurisdiction over

this case.

IV. CONCLUSION

For these reasons, Defendants’ motion to dismiss (Dkt. 53) is granted, and the

case is dismissed without prejudice.? Defendants’ motion to compel arbitration (Dkt.

23) is dismissed as moot.

SO ORDERED in No. 19-cv-08449.

Date: January 24, 2022 _ (Pb) Wane

JOHN 'F. KNESS

United States District Judge

8 The Seventh Circuit has explained that, if a complaint “fails to include enough

allegations to support Article III standing for the plaintiffs, the court has only two options: it

can either dismiss the complaint with leave to amend, or it can dismiss the case for want of

jurisdiction and hence without prejudice.” MAO-MSO Recovery II, LLC v. State Farm Mut.

Auto. Ins. Co., 935 F.3d 573, 581 (7th Cir. 2019). Having ruled that Plaintiff lacks standing,

and because Plaintiff has already amended his complaint (Dkt. 50), dismissal without

prejudice is warranted in this case. See MAO-MSO Recovery, 935 F.3d at 582 (district court

did not abuse its discretion when it dismissed case “on standing grounds and ... refuse[d]

further amendments’).

12