A federal court in Minnesota dismissed all claims against a seller of consumer debt accounts after the purchaser failed to establish that the seller knew the accounts had, contrary to the representations in the seller’s advertising, been turned over to collection agencies.
Summit Recovery, LLC purchased 40,828 debt accounts from Credit Card Reseller, LLC (CCR), after CCR informed Summit that the accounts, which CCR had purchased from another entity, had not been turned over to collection companies. The contract memorializing the deal expressly stated that the buyer had not relied on any representation made by the seller. The portfolio underperformed, however, and when it discovered that the accounts had been turned over to collection companies, Summit sued CCR asserting claims of, among other things, fraudulent and negligent misrepresentation.
Summit argued that CCR was liable for fraudulently misrepresenting the nature of the accounts because it consciously ignored the fact that the information it had concerning the accounts was unreliable. The district court rejected this argument, holding that Summit had not demonstrated that CCR should have known the accounts had been turned over to collection agencies and that CCR had no duty to investigate the true condition of the accounts before selling them to Summit. The court also dismissed Summit’s claims for negligent misrepresentation, rejecting Summit’s argument that CCR had a special relationship with it based upon the fact that CCR provided it with information concerning the accounts. (Summit Recovery, LLC v. Credit Card Reseller, LLC, No. 08-5273, 2010 WL 1427322 (D. Minn. Apr. 9, 2010))