Kara Ross v. Financial Asset Management Systems ( 2023 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-1272
KARA ROSS,
Plaintiff-Appellant,
v.
FINANCIAL ASSET MANAGEMENT SYSTEMS, INC.,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:21-cv-00647 — Thomas M. Durkin, Judge.
____________________
ARGUED NOVEMBER 28, 2022 — DECIDED JULY 14, 2023
____________________
Before ROVNER, ST. EVE, and KIRSCH, Circuit Judges.
KIRSCH, Circuit Judge. Kara Ross sued a debt collector, Fi-
nancial Asset Management Systems, Inc. (FAMS), alleging
that phone calls she had received in connection with her hus-
band’s debt violated the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq. The district court granted summary judg-
ment to FAMS, concluding that Ross was not a “consumer”
authorized to sue under § 1692g(b). The district court also
concluded that no reasonable jury could infer that FAMS
2 No. 22-1272
violated § 1692d and 1692d(5); and even if it could, FAMS
would be entitled to the bona fide error defense under
§ 1692k(c). Because we find the bona fide error defense shields
FAMS from liability under all relevant provisions, we affirm.
I
Paul Camarena defaulted on a debt, then married Kara
Ross. Because his default predates their marriage, Ross is in
no way responsible for the underlying debt. Like many mar-
ried couples, Ross and Camarena share a phone plan. They
also share an office. And Camarena represents Ross in this
case.
Financial Asset Management Systems mailed Camarena a
letter to collect his debt on October 15, 2020. The letter in-
formed Camarena of his right to dispute the debt within thirty
days. The letter also identified FAMS’s postal mailing address
and website so that consumers seeking to dispute the debt
could direct their dispute to those addresses. But Camarena
never followed the letter’s instructions, and FAMS never re-
ceived any correspondence from Camarena through postal
mail or its website.
Rather than follow FAMS’s instructions, Camarena got
creative. Although the notice included FAMS’s website, it
contained no employee email addresses—FAMS does not dis-
close employee email addresses on its website, nor does it
provide its corporate officers’ email addresses in correspond-
ence to debtors. Undeterred, Camarena tracked down a doc-
ument FAMS filed with a Massachusetts state agency, used
that document to divine FAMS’s employee email address for-
mat, and then sent emails disputing his debt to FAMS’s CEO
and Vice President of Operations on October 27 and 28.
No. 22-1272 3
Unsurprisingly, neither executive was a typical recipient of
consumer disputes. Nevertheless, FAMS trains corporate of-
ficers to forward such emails to its client services department,
which processes disputes. The CEO had no recollection of
ever receiving or seeing Camarena’s email and could not lo-
cate it in his inbox, while the VP of Operations found it in his
deleted folder but could not recall ever seeing or deleting it.
He testified that it was not his policy or practice to delete such
emails without forwarding them to client services, yet he
could not find a record of having forwarded Camarena’s
email. As such, client services never received notice of Cama-
rena’s dispute.
Had Camarena properly submitted his dispute, FAMS
could have followed its policy and practice of stopping all col-
lection activity until the account was validated. FAMS pro-
vides classroom-style training for collectors and client ser-
vices employees on this policy, as well as specific training on
how to code an account as disputed. This designation places
the account in a dispute status, prompting the collection soft-
ware to block collectors from calling the person associated
with the account until validation is provided.
Around the same time, Ross began to receive calls from
FAMS related to Camarena’s debt. The day that FAMS mailed
its letter, FAMS called Ross and asked to speak with Cama-
rena. Ross informed FAMS that it had called her personal cell
phone, which was not an appropriate number for Camarena.
Still, Ross agreed to pass along a message to Camarena.
FAMS’s policy requires its collectors to carry out certain steps
in the collection software after tagging a phone number as one
that belongs to a third party. But the FAMS collector failed to
properly code Ross’s telephone number to prevent her from
4 No. 22-1272
receiving future calls, despite the collector’s training and for
reasons unknown to FAMS. FAMS called Ross again on Octo-
ber 16, 20, 22, 23, and 24, but Ross did not answer any of those
calls. On October 28, Ross answered FAMS’s call, and when
the collector asked to speak with Camarena, Ross responded
that Camarena was unavailable at her number and that she
would not give out his personal number. FAMS called Ross
again on October 29 and 30, as well as on November 2 and 3,
but Ross did not speak with anyone from FAMS on those
days. On November 2, FAMS called twice.
Ross testified that FAMS hung up on her during two of
these calls, but she also suggested that she may have acci-
dentally hung up on FAMS while trying to silence calls. To
support her assertion that FAMS hung up on her, Ross
pointed to her phone records and FAMS’s own call log re-
garding the October 29 call; however, the phone records
show only that she received the call from FAMS, and FAMS’s
call log indicates that Ross disconnected the call.
Ross sued FAMS, alleging that the calls violated the Fair
Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. Ross as-
serted that FAMS had violated § 1692g(b) by continuing debt
collection activities after Camarena disputed the debt and
without first providing verification of the debt. Ross also al-
leged that FAMS violated § 1692d and 1692d(5) because
(1) FAMS continued to call Ross after Camarena disputed the
debt, (2) FAMS continued to call Ross after she notified FAMS
that Camarena does not use her phone, and (3) FAMS discon-
nected calls with Ross after she answered. As a result, Ross
alleged that the 12 unwanted phone calls were pestiferous
and caused her to experience stress, which physically mani-
fested in crying and difficulty sleeping.
No. 22-1272 5
Ross and FAMS each moved for summary judgment, and
the district court granted FAMS’s motion. The district court
concluded that Ross could not bring a claim under § 1692g(b)
because she is not a “consumer” for the purposes of that pro-
vision. The district court also concluded that a reasonable jury
could not infer that FAMS had violated § 1692d and 1692d(5);
even if it could, the district court found that FAMS would be
entitled to the affirmative defense of bona fide error under
§ 1692k(c). Ross now appeals.
II
We review de novo a district court’s decision on cross mo-
tions for summary judgment. Holcomb v. Freedman Anselmo
Lindberg, LLC, 900 F.3d 990, 992 (7th Cir. 2018). “[W]e construe
all inferences in favor of the party against whom the motion
under consideration is made.” O'Regan v. Arbitration Forums,
Inc., 246 F.3d 975, 983 (7th Cir. 2001). We may affirm summary
judgment on any ground that is supported in the record and
adequately presented in the trial court. Yeatts v. Zimmer Bi-
omet Holdings, Inc., 940 F.3d 354, 359 (7th Cir. 2019).
A
To begin, Ross argues the district court erred by finding
that she was not a “consumer” under 15 U.S.C. § 1692g(b),
which provides that if the consumer notifies the debt collector
in writing that the debt is disputed within thirty days after
receipt of the notice, the debt collector must cease collection
of the debt until the debt collector mails verification to the
consumer. The district court did not go on to consider
whether FAMS was entitled to the bona fide error defense un-
der § 1692k(c) for this particular claim. But even assuming
that Ross is a “consumer” under § 1692g(b) and that FAMS
6 No. 22-1272
violated the provision, no reasonable jury could return a ver-
dict for Ross due to the bona fide error defense. Thus, in the
interest of efficiency and considering the plaintiff loses on the
merits anyway, we assume, without deciding, that a private
right of action exists here. See Knopick v. Jayco, Inc., 895 F.3d
525, 529–30 (7th Cir. 2018); Dunnet Bay Constr. Co. v. Borggren,
799 F.3d 676, 689 (7th Cir. 2015).
The bona fide error defense requires a debt collector to
show that (1) the violation was not intentional, (2) the viola-
tion resulted from a bona fide error, and (3) the debt collector
maintained procedures reasonably adapted to avoid any such
error. Kort v. Diversified Collection Servs., Inc., 394 F.3d 530, 537
(7th Cir. 2005). We review the bona fide error defense de
novo, construing all facts and reasonable inferences in favor
of the non-prevailing party. Ewing v. MED-1 Sols., LLC, 24
F.4th 1146, 1154 (7th Cir. 2022).
Ross did not challenge the first and second elements of the
bona fide error defense in its response to FAMS’s motion for
summary judgment. Ross again does not dispute the first ele-
ment of the defense on appeal, but argues that FAMS is not
entitled to the defense because FAMS never addressed the
second element before the district court. Thus, in Ross’s view,
FAMS never showed by a preponderance of the evidence that
the violation resulted from a bona fide error, and the burden
never shifted to Ross to challenge that element. But FAMS did
address all three elements of the defense in its motion for
summary judgment and in its response to Ross’s motion for
summary judgment. Ross’s failure to challenge the first and
second elements before the district court constitutes waiver.
“When a party fails to develop an argument in the district
court, the argument is waived, and we cannot consider it on
No. 22-1272 7
appeal.” Frey Corp. v. City of Peoria., 735 F.3d 505, 509 (7th Cir.
2013).
That leaves only the third element for our review: whether
FAMS maintained procedures reasonably adapted to avoid
the error. We conclude that it did. Procedures that are “rea-
sonably adapted” to avoid errors are “mechanical or other
such regular orderly steps to avoid mistakes.” Jerman v. Car-
lisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 587
(2010) (cleaned up). The defense does “not require debt col-
lectors to take every conceivable precaution to avoid errors;
rather, it only requires reasonable precaution.” Kort, 394 F.3d
at 539; see also Hyman v. Tate, 362 F.3d 965, 968 (7th Cir. 2004)
(“Although [the debt collector] could have done more …
§ 1692k(c) only requires collectors to adopt reasonable proce-
dures[.]”). This inquiry is “fact intensive,” Ewing, 24 F.4th at
1155, and “susceptible of few broad, generally applicable
rules of law,” Abdollahzadeh v. Mandarich L. Grp., LLP, 922 F.3d
810, 817 (7th Cir. 2019). Compare id. at 817–18 (finding the
debt collector’s “unquestionably simple” procedures were
“reasonably adapted”), with Leeb v. Nationwide Credit Corp.,
806 F.3d 895, 900 (7th Cir. 2015) (finding that “barring some
action but saying nothing about what action to take” was not
a “reasonably adapted” procedure) and Ewing, 24 F.4th at
1155 (finding that “to stop monitoring its fax inbox while al-
lowing the system to continue sending confirmations that
faxes had been received” was not a “reasonably adapted” pro-
cedure).
Ross contends that the email that the VP of Operations
found in his deleted mail folder shows that FAMS did not
maintain procedures reasonably adapted to avoid the error
and did not have procedures to detect deviations from the
8 No. 22-1272
prescribed dispute procedures. Relying on a non-binding
case, see Morris v. Choice Recovery, Inc., No. 18-cv-05548, 2020
WL 6381926 (N.D. Ill. Oct. 30, 2020), Ross asserts that training
employees is not enough.
But the record shows that training was not the only proce-
dure that FAMS had in place, and the type of error here was
different than in Morris. FAMS set up specific procedures to
dispute a debt: FAMS mails a letter with instructions to dis-
pute a debt that directs consumers to its website or standard
mailing address, thereby seeking to avoid communications
with corporate officers whose day-to-day duties seldom in-
clude consumer communications. Indeed, FAMS does not
make those email addresses public. In the rare event that a
corporate officer does receive such an email, FAMS trains cor-
porate officers to forward this correspondence to its client ser-
vices department. Client services, for its part, is trained to
code the account as disputed. Once the account is coded as
disputed, FAMS’s collection software prevents collectors
from contacting that account holder until validation is pro-
vided.
Despite his legal training and knowing better, Camarena
deliberately circumvented FAMS’s clear instructions for how
to dispute his debt. Camarena pulled a Massachusetts regis-
tration document to unearth the email-naming conventions
for FAMS’s employees. He pieced together the emails for the
company’s most senior leaders, who are unrelated to the day-
to-day responsibilities of consumer dispute communications.
The CEO and VP of Operations have no recollection of receiv-
ing Camarena’s email, and client services never received no-
tice of Camarena’s dispute.
No. 22-1272 9
The error here is distinguishable from the one in Morris,
where the plaintiff faxed a dispute to the administrative team
in charge of forwarding all disputes to a particular individual
who logged the disputes in an internal database. 2020 WL
6381926, at *3. The error in Morris arose when an administra-
tive team member forwarded the dispute to the wrong per-
son, and the dispute was never logged in the internal data-
base. Id. Unlike Morris where the plaintiff properly disputed
the debt and the error occurred while executing a routine pro-
cedure, Camarena conjured an alternative channel to dispute
the debt and thus no one at FAMS noticed the dispute, which
would have kickstarted FAMS’s procedures.
Ross contends that FAMS needed additional procedures
to ensure that all disputes sent to officers were properly for-
warded. But the absence of procedures designed to guard
against malign conduct like Camarena’s does not mean that
FAMS failed to maintain “reasonably adapted” procedures.
Nothing in the record suggests that FAMS would have vio-
lated § 1692g(b) had Camarena followed the instructions
FAMS provided. See Ewing, 24 F.4th at 1155 (finding proce-
dures were reasonably adapted where “[i]f [the debt collec-
tor’s] step-by-step fax procedures had been followed, then the
error that gave rise to this case would have been avoided”).
FAMS’s policies, procedures, and trainings were reasonably
adapted to avoid the error occasioned by Camarena’s self-
help, and FAMS thus satisfies the third element of the bona
fide error defense.
Construing all of the evidence in the light most favorable
to Ross, FAMS took reasonable steps to avoid the bona fide
errors caused by Camarena’s behavior. See Kort, 394 F.3d at
539. So, even assuming Ross is a “consumer” under § 1692g(b)
10 No. 22-1272
and FAMS violated that provision, the bona fide error defense
shields FAMS from liability under § 1692g(b).
B
Next, Ross argues the district court erred by finding that a
reasonable jury could not infer that FAMS intended to annoy
Ross, in contravention of 15 U.S.C. § 1692d and 1692d(5). Sec-
tion 1692d provides: “A debt collector may not engage in any
conduct the natural consequence of which is to harass, op-
press, or abuse any person in connection with the collection
of a debt.” Section 1692d(5) specifies that a violation includes
“[c]ausing a telephone to ring or engaging any person in tele-
phone conversation repeatedly or continuously with intent to
annoy, abuse, or harass any person at the called number.”
Ross argues a jury could infer that FAMS intended to annoy
her by (1) continuing to call her after learning that Camarena
(the debtor) did not use her phone, and (2) calling and then
hanging up on her.
But, as with the § 1692g(b) violation, we can pretermit con-
sideration of whether FAMS violated § 1692d and 1692d(5)
because even if it did, the bona fide error defense precludes
liability. Once more, Ross does not challenge the first element
of the bona fide error defense—that FAMS’s violation was un-
intentional. And Ross’s failure to challenge the second ele-
ment before the district court precludes our consideration of
that element. Frey Corp., 735 F.3d at 509. It is undisputed there
was a bona fide error: FAMS failed to place Ross’s number on
a do-not-call list after tagging her number as the incorrect con-
tact for Camarena. For the first time on appeal, Ross says that
the second occurrence of the same error precludes a finding
that the error was bona fide. Ross points out that FAMS failed
to properly code Ross’s phone number twice, following both
No. 22-1272 11
phone conversations, first on October 15 and again on Octo-
ber 28. Although Ross never argued this before the district
court, she contends that the burden never shifted to her to
challenge the second element because FAMS did not raise the
second element before the district court. But FAMS did raise
the second element before the district court. And once FAMS
did so, the burden shifted to Ross to challenge each of the af-
firmative defense’s elements. Her failure to do so then means
she cannot do so now.
And just as with Ross’s § 1692g(b) claim, FAMS satisfies
the third element of the defense. Ross argues that the bona
fide error defense does not preclude liability because FAMS
failed to maintain procedures reasonably adapted to avoid
calling a wrong number. Ross says that FAMS merely trained
its agents on procedures but failed to maintain procedures
reasonably adapted to avoid error. The record, however,
shows that FAMS did both. FAMS had well-established and
articulated procedures in place to tag incorrect phone num-
bers and place them on a do-not-call list. FAMS thus did more
than merely explain what constitutes a violation of the
FDCPA or bar some action—it provided specific “mechani-
cal” and “regular orderly steps” to code a call, and thus block
a number—once a caller explained that the number was in-
correct. Leeb, 806 F.3d at 900. A human error in effectuating
that process does not mean that the process did not exist.
Once Ross informed FAMS that Camarena was not avail-
able at her number during the October 15 call, the FAMS em-
ployee should have carried out these steps to code her tele-
phone number. Despite the employee’s training, the em-
ployee did not do so, and FAMS does not know why. In Ewing
v. MED-1 Sols., LLC, we found the third element of the bona
12 No. 22-1272
fide error defense was satisfied where “the error that gave rise
to this case would have been avoided” if the debt collector’s
“step-by-step” procedures had been followed. 24 F.4th at
1155. The same logic applies here: if FAMS’s procedures had
been followed, Ross’s number would have been immediately
placed on a do-not-call list, and Ross would not have contin-
ued to receive calls. That is all the third element requires of
debt collectors.
Ross also argues that, although FAMS had audit proce-
dures in place to review whether employees properly coded
the phone numbers, FAMS did not specify the frequency of
those audits. But because FAMS already established that it
had provided reasonably adapted first-order procedures, the
sufficiency of any audit procedures to verify compliance is
immaterial to FAMS’s bona fide error defense.
Finally, Ross asserts that FAMS intended to annoy her by
calling and then hanging up on her twice, in violation of
§ 1692d(5). Ross relies on another non-binding case, Pruden v.
CitiMortgage, Inc., No. 12-cv-452, 2014 WL 2142155, (D.N.H.
May 23, 2014), concluding that a reasonable factfinder could
infer an intent to harass where the plaintiff produced undis-
puted evidence that she received at least 30 deliberate hang-
up calls from the debt collector. Even assuming, without de-
ciding, that the two hangups violated § 1692d(5), the calls un-
derlying each hangup are still subject to the bona fide error
defense—as detailed above, FAMS had policies and proce-
dures that should have prevented these calls from going out
to Ross in the first place. Because FAMS’s bona fide error de-
fense precludes liability on Ross’s §§ 1692g(b), 1692d, and
1692d(5) claims, we affirm.
AFFIRMED