Joseph Bernal v. NRA Group, LLC , 930 F.3d 891 ( 2019 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17-3629
JOSEPH BERNAL, individually and on
behalf of others similarly situated,
Plaintiff-Appellant,
v.
NRA GROUP, LLC,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 1904 — Gary Feinerman, Judge.
____________________
ARGUED MARCH 28, 2019 — DECIDED JULY 19, 2019
____________________
Before RIPPLE, MANION, and SYKES, Circuit Judges.
SYKES, Circuit Judge. Joseph Bernal bought a monthly pass
to Six Flags amusement parks. The contract said that if he
fell behind on his payments, he would “be billed for any
amounts that are due and owing plus any costs (including
reasonable attorney’s fees) incurred by [Six Flags] in attempt-
ing to collect amounts due.” This case asks whether a debt
collector’s fee counts as a collection cost under that lan-
2 No. 17-3629
guage. We hold that it does. The contract unambiguously
permits Six Flags to recover any cost it incurs in collecting
past-due payments, and that includes a standard collection
fee.
I. Background
After Bernal missed several monthly payments, Six Flags
hired AR Assist, a debt collector, to help recover the balance.
Under their contract, AR Assist could charge Six Flags a 5%
management fee plus an additional amount based on the
number of days the debt was delinquent (in this case, an
additional 20%). No one disputes that this was a reasonable
fee, nor that arrangements like this are common in the
market. In turn, AR Assist hired the NRA Group as a sub-
contractor.
NRA then sent Bernal a collection letter asking for the
$267.31 he owed, plus $43.28 in costs—which is technically
even less than the 25% fee NRA was authorized by contract
to charge. The letter gave Bernal two options: He could pay
the sum directly to NRA, which would then remit the collec-
tion fee to AR Assist, minus its own fee. Or he could pay the
sum to Six Flags, in which case Six Flags would have to pay
AR Assist separately.
Bernal did neither. He reasoned that it couldn’t possibly
have cost NRA $43.28 to mail a single collection letter. So
rather than pay, he filed this class-action lawsuit under the
Fair Debt Collection Practices Act (“FDCPA”), alleging that
NRA charged a fee not “expressly authorized by the agree-
ment creating the debt.” 15 U.S.C. § 1692f(1). Each class
member had entered into a contract with essentially the
same language.
No. 17-3629 3
After rejecting the parties’ motions for summary judg-
ment, the district judge held a bench trial. As part of his legal
conclusions, he held that the percentage-based collection fee
was expressly authorized by the following language in the
initial agreement:
If your account is in arrears for more than
30 days (after you miss two payments) and …
the Minimum Term has expired, then your ac-
count will be permanently cancelled and you
will be billed for any amounts that are due and
owing plus any costs (including reasonable at-
torney’s fees) incurred by us in attempting to
collect amounts due or otherwise enforcing
this agreement.
The judge reached this conclusion even though two other
circuits have said otherwise when interpreting almost
identical language. Because no class member was charged
more than what was authorized by the contracts, the judge
entered judgment for NRA.
II. Discussion
The parties agree that NRA is allowed to collect this fee if
it was “expressly authorized by the agreement creating the
debt.” § 1692f(1). That, in turn, depends on whether the
collection fee was a “cost[] … incurred by [Six Flags] in
attempting to collect amounts due.” The judge said it was,
and we review that legal conclusion de novo. Metavante
Corp. v. Emigrant Sav. Bank, 619 F.3d 748, 758–59 (7th Cir.
2010).
We’ll analyze the contractual language by breaking it
down into two relevant pieces: (1) whether this was a “cost”
4 No. 17-3629
and (2) whether this was a cost “incurred … in attempting to
collect.”
A. The fee was a “cost.”
According to Bernal, the contract authorizes only “actual
costs,” which he says include things like letterhead and
postage but not collection fees. Yet the contract never uses
the term “actual costs,” nor does anything in the text suggest
it should be read so restrictively.
To the contrary, the contract explicitly allows for “any
costs.” As the Supreme Court recently reiterated, the word
“any” signifies breadth. See Smith v. Berryhill, 139 S. Ct. 1765,
1774 (2019) (explaining that “Congress’ use of the word ‘any’
suggests an intent to use that term expansively”) (quotation
marks and alteration omitted); Home Depot U.S.A., Inc. v.
Jackson, 139 S. Ct 1743, 1750 (2019) (noting that “‘any’ ordi-
narily carries an expansive meaning,” at least as a general
rule) (quotation marks omitted).
Dictionary definitions confirm that the phrase “any
costs” is broad enough to include this fee. A “cost” is simply
an “amount paid or charged for something.” Cost, BLACK’S
LAW DICTIONARY (10th ed. 2014). More specifically, “costs of
collection” are “[e]xpenses incurred in receiving payment of
a note; esp., attorney’s fees incurred in the effort to collect a
note.” Costs of Collection, id.; see also Cost, MERRIAM-
WEBSTER’S COLLEGIATE DICTIONARY (11th ed. 2014) (“[T]he
amount or equivalent paid or charged for something.”); Cost,
THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH
LANGUAGE (5th Ed. 2018) (“The expenditure of something,
such as time or labor, necessary for the attainment of a
goal.”). Six Flags outsourced its debt collection, which no
No. 17-3629 5
one disputes it was entitled to do. The $43.28 at issue is the
amount Six Flags will be charged for that service. Based on
standard dictionary definitions, this fee is literally the sole
“cost” of Six Flags’ “attempt[] to collect” the debt.
To be sure, Bernal is correct that the word “costs” has a
narrower meaning in at least one other context. When a
court awards costs to a winning litigant, it generally limits
the award to a small category of specific expenses. See, e.g.,
Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2163–64,
(2015) (explaining that under the “American Rule,” winning
litigants generally do not recover additional expenses like
attorney’s fees). While true, nothing in this contract suggests
that the word “costs” bears that narrow meaning here.
To start, observe that Black’s Law Dictionary includes two
different specialized definitions for the term “cost” that are
relevant here. One is tailored specifically to litigation, while
the other—quoted above—is tailored to debt collection.
Compare Cost (pl.), BLACK’S LAW DICTIONARY, supra, at 423
(“The expenses of litigation, prosecution, or other legal
transaction, esp. those allowed in favor of one party against
the other.”), with Costs of Collection, id. at 424 (“Expenses
incurred in receiving payment of a note; esp., attorney’s fees
incurred in the effort to collect a note.”). Bernal asks us to
apply the litigation-centered definition, but the word’s
meaning is so different in the debt-collection context that it
warrants a separate dictionary entry.
Also note that according to Black’s separate definition for
“costs of collection,” the term generally includes attorney’s
fees. And recall that Bernal’s contract makes that point
explicitly, authorizing the collection of “any costs including
reasonable attorney’s fees.” (Emphasis added.) That phrase has
6 No. 17-3629
a significant impact on the contract’s breadth because the
word “including” generally “introduces examples, not an
exhaustive list.” See ANTONIN SCALIA & BRYAN A. GARNER,
READING LAW: THE INTERPRETATION OF LEGAL TEXTS 132
(2012). That the contract includes at least some fees reinforc-
es our conclusion that the word has a broader meaning here
than when used elsewhere.
There’s one more reason Bernal’s interpretation is hard to
square with the contract’s inclusion of attorney’s fees. Had
Six Flags paid its attorneys the exact same amount to send
the exact same collection letter, then that fee would unques-
tionably be a “cost” within the meaning of this contract.
Bernal says the result should be different when a nonattor-
ney sends the letter, but that distinction says almost nothing
about whether a fee falls within the definition of “cost.” If
attorney’s fees are one nonexhaustive example of what’s
included, we fail to see the basis to exclude analogous
collection fees.
We therefore conclude that a percentage-based collection
fee is a “cost” within the meaning of this language. In doing
so, we acknowledge that we depart from two of our sister
circuits. In Kojetin v. C.U. Recovery, Inc., the Eighth Circuit
held that a debt collector “violated the Act by adding the
collection fee based on a percentage fee rather than on actual
costs when [the debtor’s] agreement with the credit union
provided she was liable only for actual costs.” 212 F.3d 1318,
1318 (8th Cir. 2000) (mem.). The contract at issue provided
that the debtor would “pay reasonable attorney’s fees and
costs incident to collection.” Kojetin v. C.U. Recovery, Inc.,
No. 97-2273, 1999 WL 33916416, at *5 (D. Minn. Feb. 17,
1999). In Bradley v. Franklin Collection Service, Inc., the Elev-
No. 17-3629 7
enth Circuit said the same of a contract that allowed for
“costs of collection, including a reasonable attorney’s fee.”
739 F.3d 606, 609–11 (11th Cir. 2014).
For our purposes, the language at issue in those cases
was materially indistinguishable from the contract at issue
here. We nonetheless disagree with those holdings. First,
those decisions relied on a pair of assumptions we find
questionable: that the contracts at issue authorized only
“actual costs,” and that “actual costs” necessarily do not
include collection fees. As we’ve seen, the contractual lan-
guage never mentions “actual costs,” and even if it did, it’s
not obvious why that limitation excludes the fee at issue.
The contract allows for “any costs,” and the most reasonable
reading of that term is to include fees paid in attempting to
collect.
Second, the contract at issue in Bradley, like the one at is-
sue here, explicitly provided that the term “costs” includes
attorney’s fees. And attorney’s fees are not “actual” costs as
the Eleventh Circuit used that term. We decline to hold that
the term “costs” bears such a narrow meaning when the
contract explicitly tells us that the term is broad enough to
include more. 1
B. The fee is a cost “incurred in attempting to collect.”
Regardless of the definition of “cost,” Bernal argues that
the collection fee wasn’t authorized because it hasn’t been
1 Because this opinion creates a conflict in the circuits, we circulated it to
all judges in active service under Circuit Rule 40(e). No judge voted to
hear the case en banc.
8 No. 17-3629
“incurred” yet. As he correctly observes, Six Flags has no
obligation to pay anything until after NRA collects the debt:
If Bernal were to pay his debt immediately, Six Flags would
owe $43.28 to AR Assist. If he were to flee the country, Six
Flags would owe nothing. And if he were to wait a few years
and then pay, Six Flags would owe a fee calculated at a
different contingency rate. In other words, Six Flags has
incurred only a contingent liability—contingent both on
whether Bernal pays and when.
The problem with Bernal’s argument is its premise: he
assumes that because the contract uses the word “incurred,”
it applies only to obligations that already exist prior to
billing. But the contract never says that.
Let’s start with the sentence’s basic grammar. The word
“incurred” is a past participle, which we generally use to
form one of two things: perfect tenses or the passive voice.
See RODNEY HUDDLESTON & GEOFFREY K. PULLUM, THE
CAMBRIDGE GRAMMAR OF THE ENGLISH LANGUAGE 1429
(2002). We form the perfect tenses by pairing “have,” “has,”
or “had” with a past participle. We often do so to show the
relative timing of two events. Take, for example, “John had
thrown the ball,” which tells us that John threw the ball
before a particular point in time. See Past-Perfect Tense,
GARNER’S MODERN ENGLISH USAGE 1032 (4th Ed. 2016) (“The
tense denoting an act, state, or condition was completed
before another specified past time or past action.”); see also
id. (explaining the related present-perfect and future-perfect
tenses). Bernal thinks the word “incurred” plays a similar
role here—that it means Six Flags is authorized to collect a
cost only if it was incurred before the bill was sent. But as
mentioned, past participles have a second use. We also use
No. 17-3629 9
them to form the passive voice, where the speaker flips the
order of a sentence so that a passive noun becomes the
subject—“the ball is thrown by John” as opposed to “John
throws the ball.” Unlike the perfect tenses, the passive voice
doesn’t necessarily say anything about timing: sometimes it
does (“the ball was thrown just before sunset”) and some-
times it doesn’t (“a football is usually thrown by a quarter-
back”).
The language at issue—“incurred by us in attempting to
collect”—is used in this contract to modify the noun “costs.”
And “[p]ast-participial modifiers are bare passives.”
HUDDLESTON & PULLUM, supra, at 1265. That is, they play the
second of the two roles we described. They are “tenseless”
because “the verb itself gives no indication of” the relative
timing of events. Id. at 162. The modifier describes the noun,
but the actual timing is “determined by other elements in the
sentence or by context.” Id. To give an example, contrast two
phrases: “those arrested yesterday” and “proposals submit-
ted after today.” Id. The modifier in the first phrase (“arrest-
ed yesterday”) refers solely to events that occurred in the
past, while the modifier in the second phrase (“submitted
after today”) refers solely to events occurring in the future.
Everything depends on the context.
A quick survey of judicial opinions confirms that the past
participle is an uncommonly flexible device. Sometimes
courts have, as Bernal insists we should, found that a past
participle refers to a completed event. See Fla. Dep’t of Reve-
nue v. Piccadilly Cafeterias, Inc., 554 U.S. 33, 41 (2008) (finding
that the more natural reading of “plan confirmed under
[Chapter 11]” is that it refers to plans confirmed in the past,
albeit acknowledging that the alternative reading is “credi-
10 No. 17-3629
ble”). In other situations, courts have said that past partici-
ples “describe the present state of a thing,” just as any other
adjective “describe[s] the present state of the nouns they
modify.” Henson v. Santander Consumer USA Inc., 137 S. Ct.
1718, 1722 (2017). In still others, courts have found that past
participles can refer to future events. For example, we once
said that the past participle “begun” in the phrase “prosecu-
tion … begun under any existing act” does not “express[]
that verb in its past tense.” Lang v. United States, 133 F. 201,
204 (7th Cir. 1904). To the contrary, we said that it “per-
form[s] solely the function of a … verbal adjective, qualify-
ing any prosecutions in mind, pending or future.” Id.(emphasis added). The adjective’s sole function was “to
show that such prosecution is one under the act.” Id.So we have to ask: What role does the modifier play in
this language? There are two possibilities:
NRA’s Interpretation Bernal’s Interpretation
“[Y]ou will be billed for … “[Y]ou will be billed for …
any costs … incurred by us any costs … [that by that
[at any point] in attempting time have already been]
to collect.” incurred by us in attempt-
ing to collect.”
In other words, NRA is arguing that the sentence has a
broad temporal range; Bernal is arguing that it says some-
thing very specific. But nothing in the contract’s actual
language says much about timing at all. That silence strong-
ly supports NRA’s argument: absent limiting language,
“any” should mean “any.” It should include costs incurred at
No. 17-3629 11
any time, including those that will necessarily be incurred at
the time of payment.
After all, the contract doesn’t use “costs incurred” in iso-
lation. Rather, “incurred” is part of a larger adjectival
phrase: “incurred by us in attempting to collect.” Taken as a
whole, the point of that phrase is simply to explain what the
costs are for and who is paying them. In other words, it’s a
longer way of saying “Six Flags’ collection costs.” And had
Six Flags used those words, there would be no dispute here.
The district judge gave one more reason to think that the
word “incurred” lacks a specific temporal restriction. Let’s
imagine Bernal is correct. In that scenario NRA must first
send the debtor a letter demanding payment of the debt.
Then, after the debtor writes a check, Six Flags can pay NRA
the collection fee. At that point NRA can finally send the
debtor a second letter demanding collection costs. But in this
scenario, the first letter would mislead the debtor about how
much he needs to pay in total, so this could itself violate the
FDCPA. Cf. Fields v. Wilber Law Firm, P.C., 383 F.3d 562, 565
(7th Cir. 2004) (“[W]hen a debtor has contractually agreed to
pay attorneys’ fees and collection costs, a debt collector
may … state those fees and costs and include that amount in
the dunning letter. … Indeed, refusing to quantify an
amount that the debt collector is trying to collect could be
construed as falsely stating the amount of debt.”). Bernal
claims that NRA violated the statute, but his alternative
could be just as problematic.
In response to these arguments, Bernal leans heavily on
Seeger v. ANFI, Inc., 548 F.3d 1107 (7th Cir. 2008). There, we
approvingly quoted the district court’s holding that “a
collection fee which is never paid is not a cost that [the
12 No. 17-3629
original creditor] would incur.” Id. at 1113. That much is
true, but it’s not relevant here. In Seeger the debt collector
purchased the debt from the original creditor. Because the
collector owned the debt outright, it was no longer perform-
ing a service for the original creditor, nor would it ever
receive a fee. And a cost that will never be charged is not a
“cost incurred in collecting a debt.” This case is different.
The fee arrangement is still in place, and Six Flags will
unquestionably be responsible for the amount at issue if
Bernal pays.
As a final note, we express no opinion on whether the
result would be different if the bill had included purely
speculative expenses. See Veach v. Sheeks, 316 F.3d 690, 693
(7th Cir. 2003) (holding that a debt collector may not repre-
sent that treble damages are part of the “‘remaining princi-
pal balance’ of a claimed debt” until a court actually grants a
judgment and authorizes those damages); Kaymark v. Bank of
Am., N.A., 783 F.3d 168, 175 (3d Cir. 2015) (holding that a
debt collector cannot include mere estimates of future legal
fees in a bill). Whatever relevance that concern might have, it
isn’t at issue here. The contested $43.28 is not an estimate. It
is the precise amount that would have been due had Bernal
paid his debt at that time.
* * *
In sum, this standard collection fee falls within the con-
tract’s broad language authorizing “any costs” of collection.
As a result, NRA’s collection letter did not violate the
FDCPA.
AFFIRMED