Brunett v. Convergent Outsourcing, Inc.
| Decision Date | 15 December 2020 |
| Docket Number | No. 19-3256,19-3256 |
| Citation | 982 F.3d 1067 |
| Parties | Darlene BRUNETT, Plaintiff-Appellant, v. CONVERGENT OUTSOURCING, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
James C. Vlahakis, Attorney, Sulaiman Law Group, Ltd., Lombard, IL, for Plaintiff-Appellant.
Nabil G. Foster, Attorney, Barron & Newburger PC, Evanston, IL, Louis Joseph Manetti, Jr., Attorney, Hinshaw & Culbertson LLP, Chicago, IL, for Defendant-Appellee.
Before Easterbrook, Manion, and Scudder, Circuit Judges.
Convergent Outsourcing sent Darlene Brunett a letter demanding repayment of a debt that slightly exceeded $1,000. The letter also offered to accept 50% of the balance in satisfaction of the debt, and it added that, if Brunett could not afford this much, she could contact Convergent to discuss other options. The letter told Brunett that, if the creditor ended up forgiving more than $600, it would be required to report the release of indebtedness to the Internal Revenue Service on Schedule 1099-C, because federal law treats as taxable income a loan that is not repaid.
Brunett contends in this suit that the statement about reporting to the IRS violates the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692e(5), (10), because it threatens action that cannot legally be taken and amounts to a false representation. We have held that such a statement indeed violates the Act if the creditor could not be required to notify the IRS—if, for example, the total debt is below $600. See Heredia v. Capital Management Services, L.P ., 942 F.3d 811 (7th Cir. 2019). But Brunett's debt of $1,012 exceeds $600, so a report would be required if Convergent accepted as full payment $412 or less. Brunett offered to pay Convergent $5 a month, and as that is less than the interest on the debt it amounted to a request that the whole debt be forgiven. Because reporting a forgiven debt to the IRS was a distinct possibility, and Brunett did not proffer evidence showing that she had been misled to her detriment, the district judge held on summary judgment that the Act had not been violated. 2019 WL 5577959, 2019 U.S. Dist. LEXIS 187090 (E.D. Wis. Oct. 29, 2019).
The first question in this case, as in every other federal suit, is whether there is a case or controversy within the meaning of Article III. During her deposition Brunett conceded that the letter had not injured her. She did not pay something she does not owe (or, indeed, anything at all). The statement about the possibility of a report to the IRS did not affect her credit rating or discourage anyone from doing business with her. Cf. Northeastern Florida Chapter, Associated General Contractors of America v. Jacksonville , 508 U.S. 656, 113 S.Ct. 2297, 124 L.Ed.2d 586 (1993). Although Brunett asserted that she was confused by the letter's language, she did not tie that confusion to an injury. This led us to direct the parties to file supplemental memoranda addressing subject-matter jurisdiction.
Several decisions hold that a plaintiff who lacks a concrete injury cannot sue under the Fair Debt Collection Practices Act or a similar statute just because a statement in a letter is incorrect or misleading. See, e.g., Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 194 L.Ed.2d 635 (2016) ; Casillas v. Madison Avenue Associates, Inc ., 926 F.3d 329 (7th Cir. 2019). Brunett contends that these decisions are not controlling because they concern "procedural" rights rather than "substantive" rights—which is how she characterizes § 1692e. Yet the need for injury in fact is a constitutional rule that does not depend on how one characterizes the statute involved. It is therefore unsurprising that Thole v. U.S. Bank N.A. , ––– U.S. ––––, 140 S. Ct. 1615, 207 L.Ed.2d 85 (2020), a case in which the plaintiff asserted the violation of a substantive right, found no standing using the approach of Spokeo . And this court has recently held that the asserted violation of a substantive right conferred by the Fair Debt Collection Practices Act does not guarantee the plaintiff's standing. There must still be a concrete injury. See Larkin v. Finance System of Green Bay, Inc. , No. 18-3582, 982 F.3d 1060 (7th Cir. Dec. 14, 2020).
This returns us to the question whether Brunett has alleged injury. A debtor confused by a dunning letter may be injured if she acts, to her detriment, on that confusion—if, for example, the confusion leads her to pay something she does not owe, or to pay a debt with interest running at a low rate when the money could have been used to pay a debt with interest running at a higher rate. But the state of confusion is not itself an injury. See, e.g., ...
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