Duffy v. Landberg

Decision Date26 February 1998
Docket NumberNo. 97-1560,97-1560
Citation133 F.3d 1120
PartiesWilliam E. DUFFY, Plaintiff-Appellant, v. Kevin W. LANDBERG, Attorney at Law; New Concepts Business Services, sued as New Concepts Business Services, Inc., a Minnesota Corporation, Defendants-Appellees. Susan M. QUADERER, Plaintiff-Appellant, v. Kevin W. LANDBERG, Attorney at Law; New Concepts Business Services, sued as New Concepts Business Services, Inc., a Minnesota Corporation, Defendants-Appellees. Dennis G. HACKEN, Plaintiff-Appellant, v. Kevin W. LANDBERG, Attorney at Law; New Concepts Business Services, Inc., a Minnesota Corporation, Defendants-Appellees. Federal Trade Commission, Amicus on Behalf of Appellant.
CourtU.S. Court of Appeals — Eighth Circuit

Richard J. Rubin, Santa Fe, NM, argued (Eric L. Crandall, on the brief), for Plaintiff-Appellant.

Kevin William Landberg, Apple Valley, MN, argued, for Defendants-Appellees.

Before BOWMAN, MURPHY, Circuit Judges, and CONMY, 1 District Judge.

MURPHY, Circuit Judge.

William E. Duffy, Susan M. Quaderer, and Dennis G. Hacken sued Kevin W. Landberg and New Concepts Business Services, Inc. ("New Concepts") for abusive practices in seeking to collect payment for dishonored checks in violation of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692 et seq., and the Minnesota Prevention of Consumer Fraud Act (Consumer Fraud Act), Minn.Stat. § 325F.68-69. The district court granted defendants' motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), holding that plaintiffs' complaints failed to state a claim under either statute. Plaintiffs appeal from that part of the judgment dismissing their claim under the FDCPA. We reverse and remand.

After Duffy and Quaderer wrote checks to Snyder Drug Stores for $25 and $24.40, respectively, and Hacken wrote a check to MGM Liquor for $11.38, all three checks were returned for insufficient funds. New Concepts then sent letters to the check issuers on behalf of the merchants seeking to collect the face amount of each check and a $20 service charge. Plaintiffs later received unsigned letters on the letterhead of "Kevin W. Landberg, Attorney at Law," which were mailed by New Concepts but not reviewed in advance by Landberg. These letters stated Landberg had been retained by the merchants concerning the dishonored checks and demanded payment of the amount of the check plus a service charge, collection fee, interest, and civil penalty. The letters indicated that each of the additional charges was assessed under "Minnesota state law" but offered to settle for a lower total still well in excess of the dishonored checks. They threatened "further legal action" in the event of nonpayment to recover all sums demanded, plus all court and service of process costs, attorney fees, and "such other remedy as the court may grant."

Plaintiffs each filed suit against Landberg and New Concepts for abusive debt collection practices in violation of the FDCPA. They alleged that defendants falsely represented the amount due, see 15 U.S.C. § 1692e(2)(A), unlawfully attempted to collect an inflated interest payment, civil penalty, and collection fee, see 15 U.S.C. § 1692f(1), falsely represented that the source of the second collection letter was an attorney when Landberg had not seen it, see 15 U.S.C. § 1692e(3), (9), and falsely threatened legal action, see 15 U.S.C. § 1692e(5). Plaintiffs also claimed that defendants engaged in deceptive practices in violation of the Minnesota Consumer Fraud Act. Since all three actions alleged similar conduct by Landberg and New Concepts and raised identical legal issues, they were consolidated for consideration of dispositive motions.

Landberg filed a motion to dismiss the complaints on behalf of the defendants who argued that their efforts to collect on dishonored checks were not governed by either the FDCPA or the Consumer Fraud Act. The district court noted that the FDCPA does not specify the type of transaction that may give rise to a consumer debt, and it went on to hold that the transaction must involve an offer or extension of credit to a consumer in order to be covered by the statute, citing Zimmerman v. HBO Affiliate Group, 834 F.2d 1163, 1168 (3d Cir.1987). Since the court determined that payment by check for consumer goods is not a credit transaction, it concluded that the obligation resulting from the subsequent dishonor of the check was not a debt within the meaning of the FDCPA. It dismissed the complaints because the challenged debt collection practices were not covered by the consumer protections in the FDCPA and the Consumer Fraud Act did not apply since no fraud in the sale of merchandise was alleged.

Dismissals under Rule 12(b)(6) are reviewed de novo. See First Commercial Trust Co. v. Colt's Mfg. Co., 77 F.3d 1081, 1083 (8th Cir.1996). The allegations in the complaint must be treated as true and must be construed in a plaintiff's favor. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); United States v. Mississippi, 380 U.S. 128, 143, 85 S.Ct. 808, 816, 13 L.Ed.2d 717 (1965). Dismissal is proper only when the complaint on its face reveals "some insuperable bar to relief." Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir.1995).

The FDCPA permits consumers who have been subjected to unfair practices by third-party debt collectors to recover damages, attorney fees, and costs. See 15 U.S.C. § 1692k(a). The purpose of the statute is "to eliminate abusive debt collection practices" and "to insure that those debt collectors who refrain from using [such] practices are not competitively disadvantaged." 15 U.S.C. § 1692(e). The statute defines "debt" as any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

15 U.S.C. § 1692a(5).

Appellants argue that a dishonored check fits within the plain language of this definition, that the legislative history supports this conclusion, and that the district court erred in concluding that the statute does not cover third-party collection of a dishonored check. 2 Landberg and New Concepts assert that the district court and the Third Circuit in Zimmerman were correct in determining that the type of transaction meant in the definition of debt in the FDCPA is an offer or extension of credit and that the statute therefore does not apply to their collection activities.

The FDCPA is clearly worded and broadly defines debt as "any obligation" to pay arising out of a consumer transaction. It therefore can be applied to appellants' dishonored checks. 3 Their payment obligations arose from transactions for personal or household goods at a drug and a liquor store. Nothing in the statutory definition suggests that the only consumer transaction giving rise to a debt under the statute is one involving an offer or extension of credit. Rules of statutory construction mandate that the unambiguous term "transaction" be given its ordinary meaning and not that it be read restrictively to mean "credit transaction" as appellees suggest. See Bass v. Stolper, Koritzinsky, Brewster & Neider, 111 F.3d 1322, 1325-26 (7th Cir.1997) (citing Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979)).

Two other courts of appeals have recently held that a dishonored check creates a payment obligation fitting within the plain meaning of the FDCPA definition of "debt." See Bass, 111 F.3d at 1325-26; Charles v. Lundgren & Associates, P.C., 119 F.3d 739, 742 (9th Cir.), cert. denied, --- U.S. ----, 118 S.Ct. 627, 139 L.Ed.2d 607 (1997); see also Ryan v. Wexler & Wexler, 113 F.3d 91, 93 (7th Cir.), cert. denied, --- U.S. ----, 118 S.Ct. 298, 139 L.Ed.2d 229 (1997) (following Bass ). The reasoning in these cases is persuasive. Since a check written by a consumer in a transaction for goods or services "evidences the drawer's obligation to pay" and this obligation remains even if the check is dishonored, abusive collection practices related to the dishonored check are prohibited by the FDCPA. Bass, 111 F.3d at 1324-26; Charles, 119 F.3d at 742.

Since the statutory language is clear, it is not necessary to consult the legislative history, but that history reflects Congress' intent not to limit the FDCPA's protections to debts arising from credit transactions. See Bass, 111 F.3d at 1326-27. The definition of "debt" in early versions of the statute included a requirement that credit be offered and extended, see H.R. 13720, 94th Cong. (1976), but Congress deleted this language from subsequent drafts, thus refusing to limit the statute's coverage in the manner sought by appellees. See Bass, 111 F.3d at 1327....

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