Thursday, September 6, 2018

FYI: 7th Cir Holds Pl's Settlement of Parallel Claim Against Another Defendant Mooted FDCPA Claim

The U.S. Court of Appeals for the Seventh Circuit recently reversed a judgment against a debt collector, finding that the plaintiff's settlement with the creditor for the same indivisible injury mooted the plaintiff's federal Fair Debt Collection Practices Act (FDCPA) claims for statutory damages, attorneys' fees, and costs against the debt collector. 

 

A copy of the decision is available at:  Link to Opinion

 

As you may recall, the FDCPA requires a debt collector in the circumstances relevant to this appeal to file a complaint "only in the judicial district or similar legal entity" where the debtor signed the contract or resides when the debt collector files suit. 15 U.S.C. § 1692i(a)(2). 

 

Before Suesz v. Med-1 Solutions, 757 F.3d 636 (7th Cir. 2014), the Seventh Circuit interpreted "judicial district" in Illinois to mean a circuit trial court, and not its municipal subdivisions.  Newsom v. Friedman, 76 F.3d 813, 818-19 (7th Cir. 1996), overruled by Suesz, 757 F.3d 636.  The Circuit Court of Cook County as a whole, and not its suburban municipal subdivisions, was a "judicial district."  Thus, if the debtor resided in Cook County when the debt collector filed suit, then a debt collector could file suit in downtown Chicago.

 

In October 2013, the creditor (Creditor), through its law firm (Law Firm), filed an action to recover a credit card debt against the Plaintiff in the Circuit Court of Cook County's First Municipal District located in downtown Chicago.  At the time, Plaintiff resided in the suburban Fourth Municipal District. In April 2014, the state trial court entered default judgment in favor of the Creditor and against the Plaintiff.

 

In July 2014, the Seventh Circuit overruled Newsom holding that "judicial district or similar legal entity" in section 1692i means "the smallest geographic area that is relevant for determining venue in the court system in which the case is filed."  Suesz, 757 F.3d at 638, 64950.  The Seventh Circuit made its holding retroactive.

 

In October 2014, Plaintiff filed this suit against the Creditor and the Law Firm alleging that they violated section1692i(a)(2) of the FDCPA because they sued her in the wrong judicial district.  She sought to recover actual damages, statutory damages, attorneys' fees and costs.

 

Plaintiff also alleged that the Creditor violated the Illinois Consumer Fraud and Deceptive Business Practice Act and sought actual damages, punitive damages, attorneys' fees, and costs.

 

Plaintiff settled with the Creditor for $5,000 and a release of the underlying debt.  The settlement agreement failed to apportion the settlement funds to any claims, but provided that each party bears its own attorney's fees and costs.

 

In September 2015, Plaintiff abandoned her remaining actual damage claim against the Law Firm and instead only sought FDCPA statutory damages. The Law Firm then moved to dismiss Plaintiff's FDCPA claim under the single-satisfaction rule arguing that the settlement with the Creditor mooted Plaintiff's claims, but the trial court denied the motion.

 

At trial, the jury awarded Plaintiff $200 in statutory damages.  Then, the trial court awarded Plaintiff $69,393.75 in attorneys' fees and $772.95 in costs against Law Firm. 

 

The trial court denied the Law Firm's post-trial motions and this appeal followed.

 

Relevant to this appeal, whether a settlement mooted a case is a question of law that the Seventh Circuit reviews de novo.

 

Initially, the Seventh Circuit reiterated that federal courts only have "limited jurisdiction." U.S. Const. art. III, § 2, cl. 1.  "Jurisdiction requires 'an actual controversy' at all stages of review, not merely at the time the complaint is filed."  Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 669 (2016).

 

"If an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the lawsuit, at any point during the litigation, the action can no longer proceed and must be dismissed as moot." Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 72 (2013).  A settlement may moot a plaintiff's case. See Wegscheid v. Local Union 2911, 117 F.3d 986, 991 (7th Cir. 1997).

 

Relevant here, the prospect of an attorneys' fees award "does not create a justiciable controversy if nothing else is at stake in the litigation." Crabill v. Trans Union, LLC, 259 F.3d 662, 666 (7th Cir. 2001). The moving party bears the burden to prove mootness.

 

The Seventh Circuit also reiterated that "a plaintiff is only entitled to a single recovery for a single injury, regardless of how many defendants could be liable for that single injury, or how many different theories of recovery could apply to that single injury."  Thus, if a plaintiff's settlement with a defendant provides a plaintiff with all the relief available for a single, indivisible injury, then the plaintiff generally cannot prosecute a claim for the same injury against another defendant because the settlement moots the claim. 

 

Here, the plaintiff admitted that her "claims stem from the same conduct and arise from a single, indivisible act."  For $5,000 Plaintiff dismissed her claims against the Creditor and the Creditor agreed to release the underlying debt. 

 

A plaintiff may settle with a defendant and still pursue a claim against a different defendant by allocating the funds in good faith to maximize recovery against the non-settling defendant, but besides indicating each party bears its own attorneys' fees and costs, the Plaintiff here did not allocate the settlement funds. 

 

Instead, the Court held, the settlement "encompasses and resolves all claims arising out of the facts alleged in or capable of being alleged in this federal action."  This relieved the Law Firm from "proving which funds satisfy which claims" because the settling plaintiff is "in a better position than a non-settling defendant to ensure a settlement agreement properly allocates funds." The Seventh Circuit held that the $5,000 settlement therefore covers Plaintiff's FDCPA statutory damages claim.

 

The Seventh Circuit next examined whether the settlement mooted Plaintiff s statutory damages claim.  The Seventh Circuit noted that this was an issue of first impression in this Circuit. 

 

The Seventh Circuit began its analysis with the relevant language of the FDCPA:

 

(a) Amount of damages

Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of:

(1) any actual damage sustained by such person as a result of such failure;

(2)(A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000.

 

15 U.S.C. § 1692k(a).

 

The Seventh Circuit observed that the FDCPA limits the amount of statutory damages, capping them at $1,000 per action, not per violation and not per defendant.  See Harper v. Better Bus. Servs., Inc., 961 F.2d 1561, 1563 (11th Cir. 1992).

 

Further, "the actual-damages provision mirrors the statutory damages provision." As such, "actual damages for the same single, indivisible injury are not multiplied by the number of defendants."  This, the Court held, demonstrates that the number of defendants does not multiply the statutory damages "provided in the parallel clause."

 

Courts generally are required to strictly and narrowly construe statutes in derogation of the common law.  The FDCPA, "construed strictly and narrowly, provides no clear, express basis to extend statutory damages beyond the common-law single-recovery rule."  Although Congress could have provided that a plaintiff may recover statutory damages on a "per defendant" basis, it did not.

 

Therefore, the Seventh Circuit concluded that the number of defendants does not multiply the available FDCPA statutory damages "where the plaintiff suffered an indivisible harm caused by defendants who did not violate the FDCPA independently of each other."

 

The Seventh Circuit recognized that its decision is in line with its sister circuits that examined this issue. See Goodmann v. People s Bank, 209 Fed.Appx. 111, 114 (3d Cir. 2006) ("We agree with Appellees that 15 U.S.C. § 1692k(a)(2)(A) is best read as limiting statutory damages to $1,000 per successful court action."); Peter v. GC Servs., L.P., 310 F.3d 344, 352 n.5 (5th Cir. 2002) ("[D]amages for violation of the FDCPA in § 1692k are limited to actual damages, plus maximum statutory damages of $1000 per action, not per violation'."); Wright v. Fin. Serv. of Norwalk, Inc., 22 F.3d 647, 651 (6th Cir. 1994) ("Congress intended to limit "other damages" to $1,000 per proceeding, not to $1,000 per violation."; Harper, 961 F.2d at 1563 ("[T]he plain language of section 1692k(a)(2)(A) provides for maximum statutory damages of $1,000.").

 

The Seventh Circuit accordingly held that Plaintiff was only entitled to recover FDCPA statutory damages capped at $1,000 for her indivisible injury once.  Thus, Plaintiff's settlement with the Creditor mooted her FDCPA statutory damages claim against the Law Firm, and Plaintiff was not entitled to attorney' fees or costs from the Law Firm. 

 

The Seventh Circuit therefore vacated the judgment against the Law Firm. and remanded for additional proceedings consistent with its opinion.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
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Email: rwutscher@MauriceWutscher.com

 

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