Lox v. CDA, Ltd.

• Decision Date: 02 August 2012
• Docket Number: No. 11–2729.,11–2729.
• Citation: 689 F.3d 818
• Parties: Jeffrey LOX, Plaintiff–Appellant, v. CDA, LIMITED, doing business as Creditors Discount & Audit Company, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

689 F.3d 818

Jeffrey LOX, Plaintiff–Appellant,

v.CDA, LIMITED, doing business as Creditors Discount & Audit Company, Defendant–Appellee.

No. 11–2729.

United States Court of Appeals,Seventh Circuit.

Argued May 25, 2012.

Decided Aug. 2, 2012.

Craig M. Shapiro (argued), Attorney, Keogh Law, Ltd., Chicago, IL, for Plaintiff–Appellant.

Christine Olson McTigue, David M. Schultz (argued), Attorneys, Hinshaw & Culbertson, Chicago, IL, for Defendant–Appellee.

Before POSNER, FLAUM, and WOOD, Circuit Judges.

FLAUM, Circuit Judge.

In 2005, Jeffrey Lox received medical treatment from Dr. Mark Baylor, and as a result, he incurred a debt. Lox failed to pay, and so his debt was referred by Dr. Baylor to Creditors Discount & Audit Company (“CDA”), a debt collection agency. One of the ways by which CDA attempted to collect Lox's debt was through dunning letters, and one of those dunning letters included a warning that failure to pay his debt could lead to a lawsuit brought against Lox. The letter further stated that if Dr. Baylor was successful in his lawsuit, Lox could be ordered by the court to pay Dr. Baylor's attorney fees. Lox contends that Dr. Baylor could not, under any circumstances, have recovered attorney fees from Lox, and thus believes that the several dunning letters sent to him by CDA violated the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692, et seq. Lox advanced this theory in a suit against CDA brought in the Central District of Illinois. The district court disagreed with Lox's assessment of the dunning letters and granted CDA's summary judgment motion. Lox now appeals the district court's decision. For the following reasons, we reverse the ruling of the district court.

I. Background

Jeffrey Lox is a resident of Glasford, Illinois, and at some point in 2005, he suffered an injury, the nature and cause of which are irrelevant to the disposition of this appeal. He went to Dr. Baylor to be treated for his injury, and before receiving medical care, he signed a Patient Registration Form. The form stated, inter alia:

All professional services rendered are charged to the patient. The patient is responsible for all fees, regardless of insurance coverage. It is customary to pay for services when rendered unless other arrangements have been made in advance with our office bookkeeper.

After being treated by Dr. Baylor, Lox owed $235.07. He lost his job around this time, and thus was unable (or unwilling) to pay his bill.

The debt was eventually referred by Dr. Baylor to CDA, and over the course of nine months or so, CDA sent Lox numerous debt collection letters and made several debt collection phone calls. Two of the debt collection letters included the following warnings:

You have the right to pay this claim now. To avoid further steps, respond within 48 hours. Consider our clients [sic] lawful alternatives closely. Our client may take legal steps against you and if the courts award judgement, the court could allow court costs and attorney fees.

On February 19, 2010, Lox filed a complaint in the Central District of Illinois, alleging that CDA violated the FDCPA by way of several improper statements found in the various collection letters sent to Lox. One of Lox's claims was that the language concerning attorney fees, quoted above, was false and misleading, and thus ran afoul of 15 U.S.C. § 1692e, which states, “A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.” At his deposition, Lox had this to say about the relevant attorney fees language:

Q. Do you think that it's deceptive or deceiving?

...

A. Yes.

Q. Why?

A. Because I wouldn't have to pay for the attorney fees.

Q. Okay. What do you mean by that? Can you explain that further?

A. I wouldn't have to pay for the attorney's fees.

Q. It's deceptive because you personally wouldn't have to pay for attorney's fees?

...

A. [No audible response.]

Q. Okay. And why—why would you not have to pay for attorney's fees?

...

A. Why would I have to pay for attorney's fees? Why would I pay for the opposing side's attorney fees?

Q. All right. So that's—you just don't believe that you would?

A. No.

After discovery, both parties filed summary judgment motions. Lox's motion claimed, among other things, that the pertinent debt-collection language quoted above falsely threatened that a court could award attorney fees. He did not present any extrinsic evidence to support the misleading nature of the language, but rather relied on his own assertions. The magistrate judge handling the suit denied Lox's motion and granted CDA's summary judgment motion, finding that the letters in question made no specific demand for attorney fees and did not state a specific amount of attorney fees that would be owed. The magistrate judge also found the use of conditional language (i.e., “our client may take legal steps” and “the court could allow ... attorney fees” (emphasis added)) to be relevant, and ruled that no reasonable consumer could have believed that he owed more than the debt due upon receipt of the letter. On these bases, the magistrate judge ruled that the attorney fees language was not violative of the FDCPA.

Despite the fact that the magistrate judge granted CDA summary judgment on all of Lox's FDCPA claims, Lox only appeals the court's dismissal of his challenge to the attorney fees language.

II. Discussion

When a district court grants a party's summary judgment motion, we review that decision de novo. Mercatus Group, LLC v. Lake Forest Hosp., 641 F.3d 834, 839 (7th Cir.2011). “We construe facts favorably to the nonmoving party and grant the nonmoving party ‘all reasonable inferences' in its favor.” Bagley v. Blagojevich, 646 F.3d 378, 388 (7th Cir.2011) (quoting Ogden v. Atterholt, 606 F.3d 355, 358 (7th Cir.2010)).

As stated above, the FDCPA prohibits the use of “false, deceptive, or misleading representation or means in connection with the collection of any debt.” 15 U.S.C. § 1692e. This is a broad prohibition, and while § 1692e has 16 subsections describing ways by which a debt collector could violate the FDCPA, that list is nonexhaustive, Nielsen v. Dickerson, 307 F.3d 623, 634 (7th Cir.2002), and a plaintiff need not allege a violation of a specific subsection in order to succeed in a § 1692e case, Ruth v. Triumph P'ships, 577 F.3d 790, 794 n. 2 (7th Cir.2009). Despite the breadth of § 1692e's coverage, however, there are limits to its reach. As we made clear in Wahl v. Midland Credit Mgmt., a statement made by a debt collector that is technically false but in no way misleading does not run afoul of § 1692e. 556 F.3d 643, 645–46 (7th Cir.2009). Instead, we use the “unsophisticated consumer” standard, as we do with all claims under § 1692e, and “[f]or purposes of § 1692e ... a statement isn't ‘false’ unless it would confuse the unsophisticated consumer.” Id. at 646. The unsophisticated consumer may be “uninformed, naïve, [and] trusting,” Veach v. Sheeks, 316 F.3d 690, 693 (7th Cir.2003), but is not a dimwit, has “rudimentary knowledge about the financial world,” and is “capable of making basic logical deductions and inferences,” Wahl, 556 F.3d at 645 (quoting Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir.2000)). Furthermore, because we have rejected the “least sophisticated consumer” standard, a letter must be confusing to “a significant fraction of the population.” Taylor v. Cavalry Inv., L.L.C., 365 F.3d 572, 574 (7th Cir.2004).

Contrary to some other circuits, see, e.g., Gonzales v. Arrow Fin. Servs., LLC, 660 F.3d 1055, 1061 n. 3 (9th Cir.2011), we treat the question of whether an unsophisticated consumer would find certain debt collection language misleading as a question of fact. See Walker v. Nat'l Recovery, Inc., 200 F.3d 500, 503 (7th Cir.1999). As an outgrowth of this practice, we have determined that there are three categories of § 1692e cases. Ruth, 577 F.3d at 800. The first category includes cases in which the allegedly offensive language is plainly and clearly not misleading. Id. In cases of this nature, no extrinsic evidence is needed to show that the reasonable unsophisticated consumer would not be confused by the pertinent language. Id. The second category of cases includes debt collection language that is not misleading or confusing on its face, but has the potential to be misleading to the unsophisticated consumer. Id. If a case falls into this category, “we have held that plaintiffs may prevail only by producing extrinsic evidence, such as consumer surveys, to prove that unsophisticated consumers do in fact find the challenged statements misleading or deceptive.” Id. The final category includes cases involving letters that are plainly deceptive or misleading, and therefore do not require any extrinsic evidence in order for the plaintiff to be successful. Id. at 801.

Thus, to succeed on this appeal, Lox must convince us that CDA's statement regarding attorney fees is not only false, but would mislead the unsophisticated consumer. Further, since Lox did not present any extrinsic evidence at the summary judgment stage, he must show that the statement is plainly and clearly misleading on its face, thus eliminating any need for evidence of its deceptive nature. There is one more hurdle that Lox must clear to succeed as well. In Hahn v. Triumph P'ships, we observed that “[m]ateriality is an ordinary element of any federal claim based on a false or misleading statement,” and we determined that § 1692e claims are no exception to this requirement. 557 F.3d 755, 757–58 (7th Cir.2009). Therefore Lox must also demonstrate that CDA's attorney fees language constituted a materially false statement.

Lox argues that he has cleared all of these hurdles. He believes that the clear language in CDA's letters intimated that if Lox did not pay his debt, CDA could have filed suit, and a court would have had the legal authority to...