EWING v. MED-1 SOLUTIONS, LLC

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

LAURA EWING, )

)

Plaintiff, )

)

v. ) No. 1:18-cv-01743-JRS-DML

)

MED-1 SOLUTIONS, LLC, )

)

Defendant. )

Order on Motions for Summary Judgment (ECF Nos. 47, 49)

Plaintiff Laura Ewing alleges that Defendant Med-1 Solutions, LLC, ("Med-1")

violated the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq.,

by continuing to report her debt to a credit reporting agency when Med-1 knew the

debt was disputed by Ewing. Ewing and Med-1 each move for summary judgment.

(ECF Nos. 47, 49.) For the following reasons, Ewing's motion is denied and Med-1's

motion is granted.

I. Background

In 2015, Med-1 sent Ewing collection letters to collect debts related to medical

services. (Ewing Decl. ¶ 2, ECF No. 48-1.) On February 24, 2016, Ewing's attorney

sent, on her behalf, a letter via facsimile to Med-1 disputing the debt Med-1 was at-

tempting to collect. (Id. ¶ 4; Answer ¶ 28, ECF No. 14.) The next day, Victoria

Thompson, Med-1 receptionist, received Ewing's letter and forwarded it to Med-1's

Client Care Department, instead of its Legal Department. (Answer ¶¶ 28–29; Def.'s

Resp. Interrog. ¶ 5, ECF No. 48-4; Thompson Dep. 27:3–27:8, ECF No. 49-5; ECF No.

49-6.) On April 17, 2018, Ewing's TransUnion credit report showed that Med-1 had

continued reporting Ewing's debt to TransUnion without indicating that the debt was

disputed. (ECF No. 48-3 at 3; see also Answer ¶ 34.)

II. Legal Standard

Rule 56(a) provides that "[t]he court shall grant summary judgment 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). In considering a motion

for summary judgment, the district court "must construe all the facts and reasonable

inferences in the light most favorable to the nonmoving party," Monroe v. Ind. Dep't

of Transp., 871 F.3d 495, 503 (7th Cir. 2017), but the district court must also view the

evidence "through the prism of the substantive evidentiary burden," Anderson v. Lib-

erty Lobby, Inc., 477 U.S. 242, 254 (1986). Where, as here, the parties file cross-mo-

tions for summary judgment, courts "construe all inferences in favor of the party

against whom the motion under consideration is made." Metro. Life Ins. Co. v. John-

son, 297 F.3d 558, 561–62 (7th Cir. 2002). Where the record taken as a whole could

not lead a rational trier of fact to find for the non-moving party," summary judgment

should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986).

III. Discussion

Ewing alleges that Med-1 violated § 1692e(8) of the FDCPA, which she alleges

also resulted in violations of §§ 1692d, 1692f, and 1692e, by continuing to report her

debt to a credit reporting agency when Med-1 knew the debt was disputed by her. In

response, Med-1 raises a statutory affirmative defense.1 (Answer ¶¶ 2–6, ECF No.

14 at 6; ECF No. 50 at 6.) Specifically, Med-1 asserts that if it violated the FDCPA,

such violation was the result of a bona fide error. (Answer ¶¶ 2–6, ECF No. 14.) For

the sake of efficiency, the Court will first address Med-1's bona fide error defense

before considering whether Ewing has sufficient evidence to show any alleged viola-

tion of the FDCPA.

The Bona Fide Error Affirmative Defense

The FDCPA imposes civil liability on debt collectors for certain prohibited debt

collection practices. 15 U.S.C. § 1692k(a). The FDCPA, however, "provides a safe

harbor, a defense that bars liability." Oliva v. Blatt, Hasenmiller, Leibsker & Moore

LLC, 864 F.3d 492, 498 (7th Cir. 2017); see also § 1692k(c). "A debt collector is not

liable in any action brought under the FDCPA . . . if it "shows by a preponderance of

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." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573,

578 (2010) (quoting § 1692k(c)).

To qualify for the bona fide error defense, "the burden is on the defendant to show

(1) that the presumed FDCPA violation was not intentional; (2) that the presumed

1 Med-1, originally, also raised the statute of limitations affirmative defense under 15 U.S.C.

§ 1692(d). (Answer ¶ 2, ECF No. 14 at 7.) Because the viability of the statute of limitations

affirmative defense was possibly at issue in a matter then pending before the Unite States

Supreme Court, Rotkiske v. Klemm, 140 S. Ct. 355 (2019), the parties agreed to stay this

matter, (ECF No. 34), pending the decision of Rotkiske. Rotkiske, however, did not address

the issue. Now, Med-1 appears to abandon its claim to the statute of limitations affirmative

defense, relying solely on its claim to the bona fide error affirmative defense.

FDCPA violation resulted from a bona fide error; and (3) that it maintained proce-

dures reasonably adapted to avoid any such error." Evans v. Portfolio Recovery As-

socs., LLC, 889 F.3d 337, 349 (7th Cir. 2018) (quoting Kort v. Diversified Collection

Servs., Inc., 394 F.3d 530, 537 (7th Cir. 2005)) (internal quotations omitted). Fur-

thermore, the defense is confined to factual and clerical mistakes. Oliva, 864 F.3d at

499. Because the Court may presume, without deciding, that a defendant has vio-

lated the FDCPA for the purpose of determining whether the bona fide error defense

applies, see Kort, 394 F.3d at 537, the Court considers each prong in turn.

1. Was the Presumed Violation Intentional?

Med-1's presumed violation was unintentional. On February 25, 2016, Ewing's

dispute letter was sent to Med-1 by her attorney, John Steinkamp, via facsimile. (An-

swer ¶ 28, ECF No. 14.) Victoria Thompson, a Med-1 receptionist of thirteen years,

received Ewing's dispute letter, (Answer ¶ 28, ECF No. 14; Thompson Dep. 27:3–

27:12, ECF No. 49-5), and forwarded the letter to Med-1's Client Care Department,

(ECF No. 49-6), which does not handle credit reporting.

As part of her duties, Ms. Thompson understood that any correspondence sent to

Med-1 from an attorney should be forwarded to Med-1's legal department. (Thomp-

son Dep. 13:15–13:17.) Indeed, from February 24 to February 25, 2016, Mr. Stein-

kamp sent Med-1 six dispute letters, each on behalf of different clients—including

Ewing. (ECF No. 49-7.) Five of the letters were forwarded to the legal department;

Ewing's letter was not. (See id.; see also ECF No. 49-6.) The evidence shows that Ms.

Thompson, the person in charge of forwarding incoming correspondences to the cor-

rect departments, unintentionally forwarded Ewing's dispute letter to the wrong de-

partment.

Yet, even if she deliberately forwarded the letter to the wrong department, that

fact would not negate Med-1's bona fide error defense. This is so because "[a] debt

collector need only show that its FDCPA violation was unintentional, not that its

actions were unintentional. Kort, 394 F.3d at 537. Here, the presumed violation is

that Med-1 continued reporting Ewing's debt to a credit reporting agency when Med-

1 knew the debt was disputed by Ewing. The fact that Ms. Thompson sent five out of

six dispute letters to the appropriate Med-1 department shows that Med-1 did not

intend to violate the FDCPA. Med-1's failure to report Ewing's debt to TransUnion

was clearly an unintentional result of Ms. Thompson mistakenly forwarding Ewing's

dispute letter to the incorrect Med-1 department. The evidence shows that Med-1

has, therefore, satisfied the first prong of the defense.

2. Was the Presumed Violation a Result of Bona Fide Error?

Med-1's presumed violation was the result of a bona fide error. A bona fide error

is one "made in good faith; a genuine mistake, as opposed to a contrived mistake."

Kort, 394 F.3d at 538. The evidence shows that Ms. Thompson made a genuine mis-

take by forwarding Ewing's dispute letter to Med-1's Client Care Department. As

previously highlighted, from February 24 to February 25, 2016, Ms. Thompson re-

ceived six dispute letters from Mr. Steinkamp. Ms. Thompson was familiar with Mr.

Steinkamp and knew he was an attorney. (Thompson Dep. 11:22–11:24.) Accord-

ingly, she forwarded five of the six dispute letters to the legal department, and she

mistakenly forwarded Ewing's dispute letter to a department that did not handle

credit reporting. Also, Ms. Thompson was unaware of her mistake until this litiga-

tion. (Thompson Dep. 12:21–13:7.) Med-1's presumed violation of the FDCPA oc-

curred because of a good faith mistake—a bona fide error. Thus, Med-1 has satisfied

the second prong of the defense.

3. Does Med-1 Maintain Reasonably Adapted Procedures?

Med-1 has shown that it maintained procedures reasonably adapted to avoid the

type of error made in this case. The bona fide error defense "does not require debt

collectors to take every conceivable precaution to avoid errors; rather, it only requires

reasonable precautions." Kort, 394 F.3d at 539. Under the FDCPA, "[p]rocedures

reasonably adapted to avoid" errors are "'processes that have mechanical or other

such regular orderly steps' designed to 'avoid errors like clerical or factual mistakes.'"

Leeb v. Nationwide Credit Corp., 806 F.3d 895, 900 n.3 (7th Cir. 2015) (quoting Jer-

man, 559 U.S. at 587). "Determining whether a debt collector's 'procedures' are 'rea-

sonably adapted' to avoid errors 'is a uniquely fact-bound inquiry' susceptible of few

broad, generally applicable rules of law." Id. (internal quotations omitted).

Although Ewing made no argument regarding the first two prongs of the bona fide

error defense and thus waives any such argument, regarding the third prong, she

argues that Med-1 has not demonstrated by a preponderance of the evidence that it

maintained processes or procedures that were reasonably designed to prevent the

error it made. Med-1 responds that it has procedures in place reasonably adapted to

avoid the specific FDCPA violations alleged in this case. Med-1 first points to its

Med-1 Solutions FACS & Procedures Manual ("Procedure Manual"), (ECF No. 49-8),

to argue that it "maintains a comprehensive and extensive procedure for marking a

debt as disputed and reporting it to the credit reporting agencies," (ECF No. 50 at 9).

The Procedure Manual contains a Section titled "Window 68—Dispute Documenta-

tion (Credit Reporting Flags)," which states in relevant part:

Equlac NF Experian N= Trans Union: NF Deputies :

When an RP ["Responsible Party"|] informs us that they are disputing

an account that is reporting to the credit bureaus (which means there

would be “Y” and dates showing in Window 12), we must document this

in Window 68. This is done by selecting “D” in the field labeled “Dis-

puted”. If an account is not reporting to the credit bureaus, then we

would need to make sure “N” is selected in the Equifax, Experian, and

Trans Union Fields. For accounts that are not reporting to credit, do not

select the “D” in the Disputed drop-down, as this would make the ac-

count start reporting to credit as a dispute. This procedure must be fol-

lowed for all accounts that are being disputed. This is for both verbal

and written disputes. There are also drop-down selections at the bot-

tom of Window 705 for disputes and requesting credit deletion letters

that will send notification to management that you must select. All dis-

putes need to be reviewed by a manager.

Ifa dispute is made after the 30 day validation period, you should inform

the RP to send in a written dispute letter along with any documentation

that supports their dispute (the dispute itself doesn’t need to be in writ-

ing, but a written request is more for verifying account accuracy as well

as for the RP’s and our protection). Once a dispute is made, collection

efforts must stop until at least the dispute process has been completed

by a manager. If a dispute is made within the 30 day validation period,

you should still inform the RP to send in a written dispute letter along

with their documentation (again, the verbal dispute is all that is needed

to mark the account as disputed, but the written request is encouraged).

If the dispute occurs within that Validation Period, collection efforts

must stop in order to review the dispute. In addition to this, we are re-

quired by the FDCPA to obtain and send verification of the debt to the

RP.

. . .

If the account is past the 30 day Validation period, and if no dispute

letter is received, we will notate the account as disputed, but our efforts

may continue. If we receive any “Refusal to Pay” letter, per the FDCPA

that is considered to be the same as a Cease Communication letter and

the account will be handled as such, whether or not the words “cease

communication” are included in the letter. The dispute doesn’t have to

be written for us to mark the account as disputed. However, it is always

in the best interest of the RP to send this in writing.

. . .

Always notify your manager of any disputes or if you have any

questions!

(ECF No. 49-8 at 53) (emphasis in original).

Next, Med-1 points to two procedures it has for handling and distributing incom-

ing faxes to support its argument. Med-1's Distributing Incoming Faxes, (ECF No.

49-9), states in relevant part:

To access the incoming faxes folder in Batches and distribute accord-

ingly.

. . .

3. Open FAXES folder

4. Look for PDF files with current date

5. Open PDF file, look for intended recipient

6. If no recipient is listed, determine the appropriate recipient based on

the following: Employment Verifications and Request for Earnings go

to HR Manager; Medical Records and Applications for Financial Assis-

tance go to Client Care email group; Request for account information

or proof of payment go to Collection Manager email group; Court corre-

spondence goes to Legal Manager.

7. Send email with PDF attached

8. Move PDF to appropriate folder, unless for HR then delete file

9. Check folder several times throughout the day

(Id. at 2) (emphasis added). And, Med-1's Instruction – How to Distribute Faxes, (ECF

No. 49-10), states in relevant part:

The process is to making [sic] sure all incoming faxes are distributed

correctly and promptly. Collection administrative assistant and the Re-

ceptionist are responsible for the distribution of all the incoming faxes

from the main Med 1 fax machine. To be pulled daily at 8am and 3pm.

. . .

To determine the appropriate recipient you will need to look at the

sender, the subject line or read the content of the fax. Distributor will

need to right click on the message and choose "Forward."

a. Legal – All Legal faxes are sent to the Legal Manager (CJS)

. . .

e. Client Care – All incoming faxes from a client need to be sent to

the Client Care team member they are addressed to.

(ECF No. 49-10.)

Given Med-1's procedures, Ewing argues that Med-1's procedures are not reason-

ably designed to avoid Med-1's presumed violation of the FDCPA in this case. In

support of her argument, Ewing relies on several cases. First, Ewing cites Leeb v.

Nationwide Credit Corporation, 806 F.3d at 895. In Leeb, the defendant failed to

show that its violation of the FDCPA was a bona fide error. Id. at 899. With respect

to the reasonable procedures prong, the defendant argued that it maintained ade-

quate procedures because its employees were trained in the FDCPA and because its

employee acted against company policy by improperly sending the dispute letter. Id.

at 900. The Seventh Circuit rejected both arguments because the defendant's "pro-

cedures" were not "processes that have a mechanical or other such regular orderly

steps . . . ." Id. (citing Jerman, 599 U.S. at 587).

Ewing also cites Hammock v. Landmark, No. 1:18-cv-03340, 2020 WL 4558666,

at *1 (S.D. Ind. Aug. 7, 2020). In Hammock, the defendant failed to show that it had

reasonable procedures in place because it provided, as evidence of its procedures, only

a portion of its employee's deposition and her affidavit. Id. at *2. Moreover, Ewing

cites Lanteri v. Credit Protection Association, L.P., No. 1:13-cv-01501, 2020 WL

3200076, at *1 (S.D. Ind. June 15, 2020). In Lanteri, the defendants were not entitled

to the bona fide error defense because they "failed to introduce sufficient evidence to

satisfy all three prongs," including not identifying the person who made the error. Id.

at *13.

Ewing's reliance on Leeb, Hammock, and Lanteri is unavailing. Each case is dis-

tinguishable. In Leeb and Hammock, the defendants only produced evidence of em-

ployee trainings, depositions, or affidavits to assert that they had adequate proce-

dures in place. Here, Med-1 has specifically pointed to three of its procedures, in

addition to its employee training, see infra. And, in Lanteri, the defendant could not

identify which employee made the error, failing the first prong, and did not provide

evidence of any of its procedures. Here, again, Med-1 has provided evidence of proce-

dures and has identified that Ms. Thompson made the error. Furthermore, the Court

has already found that Med-1 met the first two prongs of the bona fide error defense.

The heart of the issue remains, however. Does Med-1 have adequate procedures

reasonably adapted to avoid reporting already disputed debts? Med-1's procedures

do contain "processes that have mechanical . . . steps designed to avoid errors like

clerical or factual mistakes." Leeb, 806 F.3d at 900 n.3 (quoting Jerman, 559 U.S. at

587) (internal quotations omitted). Indeed, Med-1's procedures indicate a step by step

process for receiving a dispute letter by fax and forwarding that dispute letter to the

legal department. Moreover, its procedures outline the process for documenting, once

a dispute letter has been forwarded to Med-1's Legal Department, that a debt has

been disputed.

Ewing, however, argues that Med-1 has no policy or procedure for redirecting im-

properly forwarded communications. In response, Med-1 relies on Webster v. Receiv-

ables Performance Management, LLC, No. 1:18-cv-03940, 2020 WL 4192896, *1 (S.D.

Ind. July 21, 2020). In Webster, the defendant decided to discontinue using a fax

number it previously used to receive communications regarding debt disputes. Id. at

*2. The plaintiff, not knowing that the defendant discontinued use of the fax number,

used the fax number to send the defendant a dispute letter. Id. The defendant pre-

vailed in raising the bona fide error defense. Id. at *10. Relevant here, the defendant

in Webster had procedures in place to prevent violating the FDCPA, including "pro-

cedures established for its employees designating how to handle disputed debts," re-

quiring its employees to "pass written and practical tests," and providing annual up-

dates on procedure to its employees." Id. at *9. In finding that the defendant met

the third prong of the bona fide error defense, the court highlighted that "the ques-

tion, therefore, is not whether [the defendant] had reasonable procedures to avoid

missing any fax sent to an unused fax number, but rather whether [the defendant]

had reasonable procedures in place to avoid incorrectly reporting debts that were dis-

puted." Id. Such is the case here.

However, in another case factually similar to this case, which Ewing cites in her

Complaint, a district court held that the defendant did not meet its burden of estab-

lishing the bona fide error defense. Smith v. Nat'l Credit Sys., Inc., 807 F. Supp. 2d

836, 842 (D. Ariz. 2011). In Smith, the plaintiff contacted the defendant by telephone

and orally disputed the debt, but the defendant failed to mark the file as disputed.

Id. at 839. The defendant then sent the plaintiff multiple letters regarding his debt

and eventually reported the plaintiff's debt to all three national credit bureaus. Id.

at 840. The defendant's assertion of the bona fide error defense did not succeed. Id.

at 842. Regarding the reasonable procedures prong, the Smith court found that, alt-

hough the defendant had "policies and procedures for training collectors on the re-

quirements of the Act and for marking accounts disputed," the defendant did not meet

its burden of establishing the bona fide error defense. Id. The Smith court high-

lighted that the "defendant ha[d] not identified any procedure to ensure that it [did]

not erroneously report a disputed debt as undisputed." Id. Such is not the case here.

The Court finds the facts of Webster more analogous to this case than those in

Smith. In fact, Smith is distinguishable. In Smith, the defendant merely trained its

employees on the requirements on the FDCPA. Here, as in Webster, instead of only

training its employees on the requirements of the FDCPA, Med-1 also trains its em-

ployees on how to handle disputed debts. Cf. Leeb, 806 F.3d at 900 (stating that the

defendant "failed to show that it maintained 'procedures reasonably adapted to avoid'

errors that could result in this type of violation," because the defendant only trained

employees on the FDCPA). Indeed, Med-1 new hires go through compliance training

and testing, including training on the FDCPA. (Def.'s Resp. Interrog. ¶ 1, ECF No.

52-2.) Employees must achieve a score of 85% or higher on compliance testing, and

all employees undergo annual compliance refresher trainings. (Id.) Furthermore, all

collection department employees undergo a two-week training program, including

training on the Procedure Manual. (Id.)

Additionally, the Webster court stated that, regarding the reasonable procedures

prong, the question was whether the defendant had reasonable procedures in place

to avoid incorrectly reporting debts that were disputed. Along the same line of rea-

soning, because the defendant in Smith failed to identify any such procedures, the

Smith court found that the defendant failed to meet its required burden. Here, Med-

1 does identify reasonable procedures in place to avoid incorrectly reporting debts

that were disputed. The Procedure Manual contains not only the procedure an em-

ployee is to follow for inputting into Med-1's system that a debt is disputed, but it also

contains the procedure for disputes made within or after the 30-day validation period,

and the procedure for an account with no reported dispute that is past the 30-day

validation period, (see ECF No. 49-8 at 53). Importantly, Med-1's procedure requires

that all disputes must be reviewed by a manager, which provides an additional fail-

safe. Cf. Webster v. ABC Receivables Mgmt., Inc., 15 F. Supp. 3d 619, 629 (D. Md.

2014) (finding that the defendant failed to meet its burden on the third prong of the

bona fide error defense because it failed to present any evidence of redundancy or

safeguards in its procedures to prevent the mistaken violation of the FDCPA by its

employees). Med-1's fail-safe is in place to "help avoid errors like clerical or factual

mistakes." Jerman, 559 U.S. at 587. Therefore, like the defendant in Webster, and

unlike the defendants in Smith (and Leeb), Med-1's procedures are reasonable.

Ewing's remaining arguments do not change the result here, because Med-1 is not

required "to take every conceivable precaution to avoid errors." Kort, 394 F.3d at 539.

Med-1's bona fide error defense is not destroyed because it does not have procedures

in place to redirect improperly forwarded faxes. Even though Med-1 "could have done

more . . , § 1692k(c) only requires collectors to adopt reasonable procedures." Hyman

v. Tate, 362 F.3d 965, 968 (7th Cir. 2004). The evidence shows that Med-1 has rea-

sonable procedures in place to avoid continuing to report a debt that was previously

disputed.

The Court finds that Med-1 has established by a preponderance of the evidence

all three prongs of the bona fide error defense. Thus, Med-1's motion is granted. Be-

cause Med-1 is entitled to the bona fide error defense under § 1692k(c), Ewing cannot

prevail on her claims and her motion for summary judgment is denied.

IV. Conclusion

For the reasons mentioned above, Plaintiff Laura Ewing's Motion for Summary

Judgment, (ECF No. 47), is denied, and Defendant Med-1 Solutions, LLC's Motion

for Summary Judgment, (ECF No. 49), is granted. Final judgment will issue under

separate order.

SO ORDERED.

Date: 1/25/2021

JAMES R. SWEENEY I, JUDGE

United States District Court

Distribution: Southern District of Indiana

Nicholas Moline

MED-1 SOLUTIONS, LLC

nicholas.moline@med1solutions.com

David J. Philipps

PHILIPPS AND PHILIPPS, LTD.

davephilipps@aol.com

Mary E. Philipps

PHILIPPS AND PHILIPPS, LTD.

mephilipps@aol.com

Angie K. Robertson

PHILIPPS AND PHILIPPS, LTD.

angie@philippslegal.com

John Thomas Steinkamp

JOHN STEINKAMP & ASSOCIATES

John@johnsteinkampandassociates.com

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