757 F.3d 636 (7th Cir. 2014), 13-1821, Suesz v. Med-1 Solutions, LLC
|Citation:||757 F.3d 636|
|Opinion Judge:||Hamilton and Posner, Circuit Judges.|
|Party Name:||MARK SUESZ, Plaintiff-Appellant, v. MED-1 SOLUTIONS, LLC, Defendant-Appellee|
|Attorney:||For MARK SUESZ, on behalf of plaintiff and a class, Plaintiff - Appellant: Cathleen M. Combs, Attorney, Daniel A. Edelman, Attorney, Edelman Combs Latturner & Goodwin, Chicago, IL. For Med-1 Solutions, Llc, Defendant - Appellee: Peter A. Velde, Attorney, Mark D. Gerth, Attorney, Nicholas W. Levi,...|
|Judge Panel:||Before WOOD, Chief Judge, and POSNER, FLAUM, EASTERBROOK, KANNE, ROVNER, WILLIAMS, SYKES, TINDER, and HAMILTON, Circuit Judges. SYKES, Circuit Judge, concurring. FLAUM, Circuit Judge, with whom KANNE, Circuit Judge, joins, dissenting. CONCUR BY: SYKES Sykes, Circuit Judge, concurring. Flaum, Circ...|
|Case Date:||July 02, 2014|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued April 16, 2014
Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:12-cv-1517-WTL-MJD -- William T. Lawrence, Judge.
The federal Fair Debt Collection Practices Act (" FDCPA" ) requires a collector of consumer debts to file its debt-collection suit in the " judicial district or similar legal entity" where the contract was signed or where the debtor resides. 15 U.S.C. § 1692i. This appeal requires us to apply this statutory language to the nine small claims courts in Marion County, Indiana, which together hear some 70,000 civil cases each year. This interpretive issue has significant consequences not only for consumer debtors and debt collectors in Marion County but also for parties to debt-collection suits in other court systems that, depending on the answer to the interpretive question, may be vulnerable to abusive forum-shopping by debt collectors.
Defendant Med-1 Solutions, LLC filed suit in the Pike Township of Marion County Small Claims Court to collect a consumer debt from plaintiff Mark Suesz. The plaintiff alleges that the defendant violated § 1692i by filing in that court because the
contract was not signed in Pike Township and the plaintiff does not live there.
In Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996), a panel of this court held that the intra-county districts used to delineate the venue of small claims cases in Illinois's Cook County Circuit Court were not separate judicial districts for purposes of § 1692i. In this case, the district court and a split panel of this court followed the reasoning of Newsom to hold that the township small claims courts in Marion County are likewise not separate judicial districts; rather, the entire county is the relevant district, giving the debt collector a wide choice of venue. Suesz v. Med-1 Solutions, LLC, 734 F.3d 684 (7th Cir. 2013). We granted the plaintiff's petition for rehearing en banc.
We conclude that the correct interpretation of " judicial district or similar legal entity" in § 1692i is the smallest geographic area that is relevant for determining venue in the court system in which the case is filed. See Hess v. Cohen & Slamowitz LLP, 637 F.3d 117, 123-24 (2d Cir. 2011). For the small claims courts in Marion County, that smallest area is a township. We therefore reverse the judgment of the district court. We also overrule Newsom, which adopted a test based on details of court administration rather than on the applicable venue rules.
I. The Factual Allegations
Because the district court dismissed this action under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, we review its decision de novo and treat as true the factual allegations of the complaint, giving the plaintiff the benefit of favorable inferences from those allegations. E.g., Marshall-Mosby v. Corporate Receivables, Inc., 205 F.3d 323, 326 (7th Cir. 2000) (reversing dismissal of FDCPA complaint).
Mark Suesz, who resides in Hancock County, which is immediately east of Marion County, owed money to Community North Hospital. The hospital, which is located in Lawrence Township in the northeast corner of Marion County, turned the debt over to Med-1 Solutions for collection. Med-1 sued Suesz in the Pike Township Small Claims Court. Pike Township is in the northwest corner of Marion County. The court issued a judgment against Suesz for $1,280. The validity of that judgment is not questioned in this federal lawsuit.
Suesz then filed this action under the Fair Debt Collection Practices Act, asserting that Med-1 has a practice of filing collection lawsuits in Marion County in small claims courts located in townships where the debtor defendants neither live nor signed the contracts on which they are being sued. Suesz moved to certify a plaintiff class, but the district court dismissed the case without acting on the motion. On the basis of our decision in Newsom, the district court concluded that the townships of Marion County are not " judicial districts" for purposes of § 1692i and so dismissed Suesz's suit. Suesz v. Med-1 Solutions, LLC, No. 1:12-cv-1517-WTL-MJD, 2013 WL 1183292 (S.D. Ind. March 21, 2013).
II. The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act seeks " to eliminate abusive debt collection practices by debt collectors." 15 U.S.C. § 1692(e); see Muha v. Encore Receivable Mgmt., Inc., 558 F.3d 623, 629 (7th Cir. 2009); Jacobson v. Healthcare Financial Services, Inc., 516 F.3d 85, 89 (2d Cir. 2008). Consumer debts covered by the Act are usually too small to justify a lawsuit unless the suit is promptly defaulted, thereby enabling the debt collector to obtain--without incurring significant litigation
cost--a judgment that it can use to garnish the debtor's wages. Given " the costs of litigation and the difficulties establishing the debt, when a debt collector cannot get payment through phone calls and letters and it has to go to court, the debt collector will often rely on default judgments as the last resort." O'Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 940 (7th Cir. 2011).
As this case illustrates, one common tactic for debt collectors is to sue in a court that is not convenient to the debtor, as this makes default more likely; or in a court perceived to be friendly to such claims; or, ideally, in a court having both of these characteristics. In short, debt collectors shop for the most advantageous forum. By imposing an inconvenient forum on a debtor who may be impecunious, unfamiliar with law and legal processes, and in no position to retain a lawyer (and even if he can afford one, the lawyer's fee is bound to exceed the debt itself), the debt collector may be able to obtain through default a remedy for a debt that the defendant doesn't actually owe.
The FDCPA is designed to protect consumer debtors against unscrupulous methods of consumer debt collection. Thus in Phillips v. Asset Acceptance, LLC, 736 F.3d 1076 (7th Cir. 2013), we held that the Act was violated by the disreputable tactic of suing a debtor after the statute of limitations has expired; the debt collector hopes that the debtor will be unaware that he has a complete defense to the suit and so will default, which will enable the debt collector to garnish the debtor's wages. Abusive forum-shopping is another improper method of collecting consumer debts. Accordingly, the Act provides that unless the debt sued on is secured by real estate, a debt collector can sue to collect it " only in the judicial district or similar legal entity--(A) in which such consumer signed the contract sued upon; or (B) in which such consumer resides at the commencement of the action." 15 U.S.C. § 1692i(a)(2). (If real estate is security for the loan, the suit must be brought where the property is located, § 1692i(a)(1); that will usually be an advantageous venue from the debtor's standpoint.) A violation makes the debt collector liable to the debtor for statutory and actual damages, as well as attorney fees. § 1692k.
Unfortunately the key statutory term--" judicial district" --is vague. The FDCPA does not define it, and as we explain below the phrase has no general definition or meaning that can resolve this dispute. In Indiana, Illinois, and most other states, state trial courts usually are organized by county for purposes of both court administration and venue. When that is so, it may seem natural to interpret the statutory term as referring to the county in which the debtor lives or the contract giving rise to the debt was signed. But terms that seem plain and easy to apply to some situations can become ambiguous in other situations. This statutory term was drafted broadly--indicated by the phrase " or similar legal entity" --presumably so that it could be applied with appropriate flexibility to court systems around the country, which vary in structure and nomenclature. We believe that the term describes the township small claims courts in Marion County, which we examine next with a particular eye to the relevance of venue rules for interpreting and applying the statutory term " judicial district or similar legal entity."
The alternative approach, favored by the panel majority, would be for the court in an FDCPA case to defer to each state's definition of " judicial district." One problem with that approach is that " judicial district" is not a defined term in state law. A deeper problem is that, had Congress been content to adopt the states' rules governing jurisdiction and venue, there
would have been no reason to impose venue limitations on debt collectors, as the federal Act does; the debt collector could have sued wherever state law permitted him to sue. The presence of the venue provision in the Act shows congressional dissatisfaction with allowing state law to determine where suits to collect consumer debts can be filed.
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