Buckley, Wendy v. Bass & Associates ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-3054
Wendy Buckley,
Plaintiff-Appellant,
v.
Bass & Associates and Patti H. Bass,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 4044--Wayne R. Andersen, Judge.
Argued January 8, 2001--Decided May 7, 2001
Before Posner, Manion, and Kanne, Circuit
Judges.
Posner, Circuit Judge. Buckley appeals
from the dismissal, for failure to state
a claim, of her class-action suit under
the Fair Debt Collection Practices Act,
15 U.S.C. sec.sec. 1692 et seq., against
a law firm, Bass, and its principal
partner (whom we’ll ignore to keep things
simple). The record contains little
besides a letter addressed to Buckley on
Bass’s letterhead, which reads in its
entirety as follows:
Wendy Buckley,
8639 S. 87th Ave Apt. 113
Justice, IL 60458
Client: Beneficial National Bank USA
Dealer: Kmart Corp.
Acct # : 7101593000064995
Dear Wendy Buckley
This office has been notified that a
possible bankruptcy has been filed. We
have not yet received the bankruptcy
information. Please provide this
information in the spaces below and
return it as soon as possible.
Thank you for your assistance.
Attorney’s Name: __
Attorney’s Address:
Attorney’s Phone: (___)_________
Case Number: _____
Chapter: __________
Intention: _________
Date Filed: ________
Sincerely,
Ronald Key
Bankruptcy Paralegal
Bass specializes in representing
creditors in consumer bankruptcies and
did not send Buckley the follow-up letter
to which section 1692e(11) (see next
paragraph) refers. Buckley had not in
fact filed for bankruptcy when the letter
was mailed, though she did so a month
later.
The Fair Debt Collection Practices Act,
so far as bears on this appeal, forbids a
debt collector to "use any false,
deceptive, or misleading representation
or means in connection with the
collection of any debt," 15 U.S.C. sec.
1692e; and such use includes a "failure
to disclose in the initial written
communication with the consumer [the
debtor] . . . that the debt collector is
attempting to collect a debt and that any
information obtained will be used for
that purpose." sec. 1692e(11). Buckley
argues that Bass’s letter violated this
provision because it failed to disclose
that the firm was trying to collect the
debt she allegedly owed Beneficial. She
argues that it violated another provision
of the Act as well, sec. 1692g(a), which
requires the debt collector, "within five
days after the initial communication with
a consumer in connection with the
collection of any debt, . . . [to] send
the consumer [unless the information was
contained in the initial communication or
the debt has been paid in full] a written
notice containing (1) the amount of the
debt; (2) the name of the creditor to
whom the debt is owed; (3) a statement
that unless the consumer, within thirty
days after receipt of the notice,
disputes the validity of the debt, or any
portion thereof, the debt will be assumed
to be valid by the debt collector," and
two other types of information as well.
The letter we have quoted was missing all
but (2), the name of the creditor, and
there was, as we mentioned, no follow-up
notice within five days containing the
missing information.
The letter is not on its face a demand
for payment. It does not ask for payment
or even indicate how much is owing.
Obviously, though, it seeks information
that might later be used in an attempt to
collect the debt. If Buckley had replied
to the letter by saying that she had
filed for bankruptcy, and had given Bass
the information requested, Bass would
have known that its next step should be
either to seek reaffirmation of the debt
if it was secured, Cox v. Zale Delaware,
Inc., 239 F.3d 910, 912-13 (7th Cir.
2001); Aiello v. Providian Financial
Corp., 239 F.3d 876, 878-79 (7th Cir.
2001); In re Turner, 156 F.3d 713, 715
(7th Cir. 1998); In re Kinion, 207 F.3d
751 (5th Cir. 2000), or to file a claim
in bankruptcy if it was not. Bass is,
remember, a specialist in consumer
bankruptcies, and presumably would have
taken action to collect Buckley’s debt in
bankruptcy (unless the amount of the debt
is trivial, something we don’t know) had
Buckley replied that she had indeed filed
for bankruptcy. If she replied that she
had not filed for bankruptcy, Bass might
then have sent her a demand, something it
could not lawfully do if she had filed
for bankruptcy, for in that event a
demand for payment (as distinct from a
nonthreatening offer of a debt-
reaffirmation agreement, In re Duke, 79
F.3d 43 (7th Cir. 1996); Pertuso v. Ford
Motor Credit Co., 233 F.3d 417, 423 (6th
Cir. 2000); cf. United States v. Nelson,
969 F.2d 626, 630 (8th Cir. 1992)) made
by the creditor or the creditor’s agent
would violate the automatic stay (a
statutory injunction) of efforts to
collect a debt from a debtor in
bankruptcy outside the bankruptcy
proceeding itself. 11 U.S.C. sec. 362(a);
Aiello v. Providian Financial Corp.,
supra, 239 F.3d at 879; In re Vitreous
Steel Products Co., 911 F.2d 1223, 1231
(7th Cir. 1990); In re Del Mission Ltd.,
998 F.2d 756 (9th Cir. 1993). Although
Bass claims not to have been hired to
collect Buckley’s debt to its client,
that claim is in some tension with its
failure to deny that it is a debt
collector, since if it were not a debt
collector the Act would not be applicable
to it at all. But maybe Bass simply chose
not to include that ground in its motion
to dismiss. There is no duty to include
all possible grounds for dismissal in
such a motion.
We must decide whether the letter should
be deemed "the initial communication with
a consumer in connection with the
collection of" the debt that the
plaintiff is believed to owe Bass’s
client, thus triggering the duty to
inform the debtor that it is indeed an
effort at debt collection and to furnish
her in the letter itself or in a separate
letter sent within five days the warnings
and other information required by the
statute. Such a reading would be
consistent with the statutory language,
indeed is supported by it, but would have
the surprising effect of outlawing such
letters, however bona fide. The reason is
the automatic-stay provision of the
Bankruptcy Code. Should the recipient of
the letter turn out to have filed for
bankruptcy, the addition to the letter of
language demanding payment would, as the
cases we cited earlier make clear, place
the sender in violation of the automatic
stay. "Demands" that consist simply of
noncoercive offers to enter into debt-
reaffirmation agreements are an
exception, as we noted earlier; and it is
conceivable that if Bass had learned that
the plaintiff was filing for bankruptcy,
the next step would have been for its
principal, the actual creditor, to make
such an offer to the plaintiff. But if
she was not in bankruptcy, more direct
methods of collection would doubtless be
used. Given the menace of the automatic
stay, simple prudence should thus impel a
debt collector who thinks the debtor may
have filed for bankruptcy to try to
verify this before sending her a dunning
letter. To make such an inquiry a per se
violation of the Fair Debt Collection
Practices Act unless the debt collector
revises the letter to make it an explicit
demand for payment in unarguable
violation of the automatic stay would
place the two statutes on a collision
course.
Against this the plaintiff argues that
the debt collector can find out whether
the debtor has filed for bankruptcy just
by dialing up a database. This may be
true, but the question of statutory
interpretation is whether Congress when
it passed the Fair Debt Collection
Practices Act meant to preclude inquiries
directed at the debtor concerning the
debtor’s bankruptcy status. We find this
hard to believe. Given that a debt
collector or other creditor’s agent has a
legitimate interest in finding out the
debtor’s bankruptcy status, we do not
think the Act makes such inquiries
illegal per se.
Conceivably a letter ostensibly of
inquiry might be reasonably interpreted
as a demand for payment. Bass’s letter
refers to the creditor and to the
transaction that gave rise to the alleged
debt and inquires about the debtor’s
"intention" in the bankruptcy (if she has
already filed for bankruptcy). A
bankruptcy lawyer might interpret the
reference to "intention" to be asking
whether, if it is a secured debt, the
debtor intends to reaffirm the debt,
surrender the collateral, or redeem the
collateral. See 11 U.S.C. sec. 521(2); In
re Edwards, 901 F.2d 1383, 1385 (7th Cir.
1990); In re Kinion, supra, 207 F.3d at
756; In re Johnson, 89 F.3d 249, 251 (5th
Cir. 1996) (per curiam). But maybe an
unsophisticated debtor would read the
inquiry about his intentions as an
indirect demand for payment. ("What do
you intend to do about this debt, Mr.
Debtor?") And suppose Bass has a practice
of sending the letter to every debtor
whom it is hired to dun, regardless of
whether it has any reason to believe that
the debtor has filed for bankruptcy. Then
debtors might read the letter as a threat
to force them into bankruptcy if they
don’t indicate an "intention" to pay up.
That is one set of possibilities but
another is that Bass is, as it claims to
be, in the business of handling
creditors’ claims in bankruptcy
proceedings, rather than being a
collection agency in the usual sense.
Then the letter would be a prelude not to
a dunning letter but to the filing of a
claim in bankruptcy by Bass’s principal,
represented by Bass as lawyer, and such
claims are outside the scope of the Fair
Debt Collection Practices Act. Bass
wouldn’t be a debt collector after all.
Despite the existence of these competing
possibilities, we need not decide whether
there is a state of facts consistent with
the complaint that would show that Bass
had violated the Act, in which event the
complaint would ordinarily survive a
motion to dismiss. E.g., Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974); Walker
v. National Recovery, Inc., 200 F.3d 500,
503 (7th Cir. 1999); McMath v. City of
Gary, 976 F.2d 1026, 1031 (7th Cir.
1992); Casino Resource Corp. v. Harrah’s
Entertainment, Inc., 243 F.3d 435, 437
(8th Cir. 2001). For the plaintiff’s
lawyer made clear at argument that he was
not seeking an opportunity to prove that
Bass was in fact engaged in a scheme to
collect debts. He does not want
discovery. He wants a per se rule. He has
staked his all on trying to persuade us
that the letter on its face is the
initial communication with the debtor to
which the statute refers. Compare Walker
v. National Recovery, Inc., supra, 200
F.3d at 504. It is not.
Affirmed.