Marshall Spiegel v. Michael Kim ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-2449
MARSHALL SPIEGEL,
Plaintiff-Appellant,
v.
MICHAEL C. KIM,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:16-cv-04809 — Sara L. Ellis, Judge.
____________________
ARGUED JANUARY 23, 2020 — DECIDED MARCH 6, 2020
____________________
Before ROVNER, HAMILTON, and SCUDDER, Circuit Judges.
SCUDDER, Circuit Judge. For over four years, Marshall Spie-
gel and Michael Kim have been embroiled in a blazing and
bitter dispute in the Circuit Court of Cook County, Illinois.
Before us is one piece of this angry and protracted wrangle—
one that arose when Kim requested attorneys’ fees in the state
court litigation. Spiegel took to federal court to allege that this
run-of-the-mill request violated the Fair Debt Collection Prac-
tices Act, a federal statute that prohibits misleading and
2 No. 18-2449
unfair practices in the collection of consumer debts. The dis-
trict court dismissed Spiegel’s complaint, and we affirm.
I
A
Marshall Spiegel served as a director on the board of the
1618 Sheridan Road Condominium Association, a homeown-
ers’ association in Wilmette, Illinois, until the association’s
members voted to remove him in December 2015. The associ-
ation then sued Spiegel in the Circuit Court of Cook County,
alleging that he took several unauthorized actions leading to
and following his removal, including falsely holding himself
out as president, attempting to unilaterally terminate another
board member, freezing the association’s bank accounts,
sending unapproved budgets to unit owners, and filing un-
warranted lawsuits on behalf of the association. The associa-
tion sought to enjoin Spiegel from interfering with board de-
cisions or holding himself out as a director, and to recover
damages, costs, and attorneys’ fees for his misconduct. The
complaint invoked a condominium association agreement
called the “Restated Declaration,” which Spiegel signed when
he bought his unit. The Restated Declaration provided that
condominium owners who violated the board’s rules or obli-
gations would pay any damages, costs, and attorneys’ fees
that the association incurred as a result.
Spiegel denied wrongdoing but did not stop there. He
went on the offensive by filing a slew of his own complaints
and motions against the association, its lawyers, and nearly
every condominium resident at 1618 Sheridan—racking up
385 separate filings in the Cook County court. Spiegel did not
prevail in these proceedings. Indeed, the Cook County court
No. 18-2449 3
dismissed his claims with prejudice and enjoined him from
interfering with the board’s activities. The court found that
Spiegel’s filings had “no basis in law or fact,” were riddled
with “blatant lies,” and amounted to “a pattern of abuse, com-
mitted for an improper purpose to harass, delay and increase
the cost of litigation.” Against these findings, the court or-
dered Spiegel to pay over $700,000 in fees and sanctions.
A more complete recounting of the Cook County litigation
is not necessary. Suffice it to say that the parties were at each
other’s throats well before this appeal.
B
While the state court litigation was ongoing, Spiegel filed
this federal suit against the association’s counsel, Michael
Kim. Spiegel viewed Kim’s lawsuit requesting attorneys’ fees
in Cook County as a further declaration of war and took the
battle to federal court to fire the next shot. Spiegel invoked
sections 1692e and 1692f of the Fair Debt Collection Practices
Act, alleging that Kim’s application in state court for attor-
neys’ fees constituted an unfair debt collection practice.
Kim answered and moved for judgment on the pleadings
under Federal Rule of Civil Procedure 12(c). After initially
staying proceedings under Colorado River Water Conservation
District v. United States, 424 U.S. 800 (1976), the district court
determined it could decide Kim’s motion without creating
conflict with the state court litigation. It then granted Kim’s
motion, concluding that Spiegel failed to state a claim because
the attorneys’ fees Kim requested were not a “debt” within
the meaning of the FDCPA. Spiegel moved to vacate the judg-
ment and sought leave to amend his complaint, but the dis-
trict court denied both motions. Spiegel now appeals.
4 No. 18-2449
II
The FDCPA is a consumer protection statute that “prohib-
its ‘debt collector[s]’ from making false or misleading repre-
sentations and from engaging in various abusive and unfair
practices” in connection with the collection of a “debt.” Heintz
v. Jenkins, 514 U.S. 291, 292 (1995); see also Jerman v. Carlisle,
McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 577 (2010)
(describing the FDCPA’s consumer protection objectives).
Congress limited the definition of “debt” to consumer debt—
specifically, to an obligation “arising out of a transaction in
which the money, property, insurance, or services which are
the subject of the transaction are primarily for personal, fam-
ily, or household purposes.” 15 U.S.C. § 1692a(5); see also
Heintz, 514 U.S. at 293 (emphasizing that Congress restricted
the statutory definition of “debt” to consumer debt).
The FDCPA applies to Spiegel’s claim only if what Kim
sought to recover through his state court complaint consti-
tutes a “debt” within the meaning of the statute. See Gburek v.
Litton Loan Servicing LP, 614 F.3d 380, 384 (7th Cir. 2010) (in-
terpreting 15 U.S.C. §§ 1692a(6), 1692c(a)–(b), 1692e, 1692g).
The fit is not there on any fair reading of Kim’s complaint.
The attorneys’ fees that Kim sought did not “aris[e] out of”
a consumer transaction as Congress employed that require-
ment in defining “debt.” See 15 U.S.C. § 1692a(5). To be sure,
Kim’s complaint asked the state court to impose a financial
obligation on Spiegel by requiring him to pay fees. But in de-
termining whether Kim’s demand qualifies as a “debt,” “[t]he
crucial question is the legal source of the obligation.” Franklin
v. Parking Revenue Recovery Servs., Inc., 832 F.3d 741, 744–45
(7th Cir. 2016). By its terms, “the FDCPA limits its reach to
those obligations to pay arising from consensual transactions,
No. 18-2449 5
where parties negotiate or contract for consumer-related goods
or services.” Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C.,
111 F.3d 1322, 1326 (7th Cir. 1997) (emphases added). That
limitation explains why a thief’s obligation to pay for stolen
goods is not a debt under the FDCPA, see id., nor is a munici-
pal fine levied on a property owner, see Gulley v. Markoff &
Krasny, 664 F.3d 1073, 1075 (7th Cir. 2011) (per curiam).
No doubt the attorneys’ fees Kim demanded in state court
fall outside the statute as well. Spiegel’s obligation to pay at-
torneys’ fees arose out of his alleged wrongdoings as a board
member, not from a consensual consumer transaction within
the meaning of the FDCPA. Kim’s invocation of the Restated
Declaration in his state court lawsuit does not change the
analysis. Nobody disputes that Spiegel signed that agreement
as part of a consensual transaction—the purchase of his con-
dominium. But the state court complaint sought to impose a
financial obligation on Spiegel for one and only one reason—
the way he conducted himself while serving on the associa-
tion’s board. There is no way to read Kim’s state court com-
plaint as seeking attorneys’ fees for any reason connected to
Spiegel’s purchase of a condominium. Put most simply, any
nexus between the financial demand lodged in the state court
litigation and a consumer transaction is way too remote to sat-
isfy what Congress required in the FDCPA for an obligation
to qualify as “debt.”
Spiegel sees things differently and urges a less exacting
statutory analysis. His reasoning has several links but is not
difficult to follow: he contends that but for his condominium
purchase, he never would have served on the association
board; but for his board service, he never would have become
ensnared in state court litigation with the association; and but
6 No. 18-2449
for that litigation, he never would have found himself on the
receiving end of Kim’s legal demand to pay attorneys’ fees.
Spiegel anchors his position in our decision in Newman v.
Boehm, Pearlstein & Bright, Ltd., where we held that assess-
ments imposed by a homeowners’ association on its members
could create a debt under the statute. See 119 F.3d 477, 481
(7th Cir. 1997).
We read Newman in a very different way. The members in
Newman came under obligations to pay assessments that
arose directly from the association’s declaration and bylaws,
to which the members consented upon purchasing their con-
dominiums. See id. Here, however, Spiegel’s obligation to pay
attorneys’ fees arose from his actions as a board member. The
mere fact that Spiegel can tell a story that starts with his con-
dominium purchase (and thus the Restated Declaration), and
many steps later ends with the Cook County litigation, does
not bring the financial demand Kim pursued in state court
within the FDCPA’s reach. To show that Kim sought to collect
a debt, Spiegel needed to more directly establish that the liti-
gation demand for attorneys’ fees “ar[ose] out of” a consumer
transaction. See 15 U.S.C. § 1692a(5). Spiegel failed to do so.
Any other conclusion would rid the FDCPA’s limitations of
what qualifies as a “debt” of their fair import. The district
court was right to enter judgment for Kim.
Nor do we see any error in denying Spiegel’s request to
amend his complaint. Leave to amend need not be granted
where the proposed amendment would not result in the
plaintiff succeeding in stating a viable legal claim. See Heng v.
Heavner, Beyers & Mihlar, LLC, 849 F.3d 348, 354 (7th Cir. 2017).
The district court was right to see Spiegel’s proposed amend-
ment as futile. He does no more in his proposed amendment
No. 18-2449 7
than repeat his contention that Kim improperly demanded at-
torneys’ fees. Nowhere, however, does Spiegel explain how
those fees constitute a “debt” under the FDCPA’s limited and
consumer-protection-focused definition of that term.
III
A final issue deserves comment. This case came to our
court at a red-hot temperature, only to climb to a boil during
briefing. After the district court dismissed Spiegel’s com-
plaint, but before oral argument in our court, the state court
issued several decisions pertinent to the parties’ ongoing liti-
gation. Kim attached those decisions to his brief. Among them
were an entry of final judgment against Spiegel and three or-
ders requiring him to pay fees and sanctions to the association
and related parties, including Kim. Spiegel moved to strike
these documents and to sanction Kim for even attaching them,
contending that Kim improperly included information that
the district court never considered.
We deny Spiegel’s motions. A court may take judicial no-
tice of public records such as the state court documents Kim
attached. See Tobey v. Chibucos, 890 F.3d 634, 647–48 (7th Cir.
2018) (collecting cases). Nor did Kim need to request leave to
attach them, as “[t]he right place to propose judicial notice,
once a case is in a court of appeals, is in a brief.” Matter of Lisse,
905 F.3d 495, 497 (7th Cir. 2018) (Easterbrook, J., in chambers).
Having taken judicial notice of the orders, it is not lost on us
that the state court rejected all of Spiegel’s claims and repri-
manded him for frivolous filings.
Spiegel’s claim falls outside the ambit of the FDCPA, so we
AFFIRM.