Gregory Leeb v. Nationwide Credit Corporation

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-1329
GREGORY LEEB,
Plaintiff-Appellee,
v.
NATIONWIDE CREDIT CORPORATION,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:12-cv-913 — Elaine E. Bucklo, Judge.
____________________
ARGUED JANUARY 22, 2015 — DECIDED NOVEMBER 20, 2015
____________________
Before EASTERBROOK, MANION, and WILLIAMS, Circuit
Judges.
WILLIAMS, Circuit Judge. Nationwide Credit Corpora-
tion—a debt-collection agency—telephoned Gregory Leeb
about an unpaid medical bill. Leeb disputed the debt, saying
that his insurance company should have paid. Because Leeb
disputed his debt, the Fair Debt Collection Practices Act re-
2 No. 14-1329
quired Nationwide to “cease collection” until it verified the
debt. 15 U.S.C. § 1692g(b). But, without verifying the debt,
Nationwide sent Leeb a letter that: (1) showed a “balance” of
$327; (2) instructed Leeb to “detach the upper portion and
return with payment”; (3) asked Leeb to provide additional
information; and (4) stated that the letter was “from a debt
collector attempting to collect a debt and any information
obtained will be used for that purpose.” Leeb sued Nation-
wide under the FDCPA.
On summary judgment, the district court held that Na-
tionwide violated the FDCPA because it did not “cease col-
lection.” We agree because Nationwide’s January 5 letter, ob-
jectively viewed, was an attempt to collect the debt. The dis-
trict court also held that Nationwide was not excused by the
FDCPA’s “bona fide error” provision. See 15 U.S.C.
§ 1692k(c). We agree because Nationwide failed to show
each of the three required elements: that its violation was
unintentional; that its violation resulted from a clerical or
factual mistake; and that it maintained procedures reasona-
bly adapted to avoid such mistakes. So we affirm the judg-
ment against Nationwide.
I. BACKGROUND
In May 2011, Leeb received emergency medical care. The
medical provider submitted a claim to Leeb’s insurance
company, Cigna. Cigna asked for additional information but
the medical provider never responded, so Cigna closed its
file without paying the claim. Later, Nationwide was hired
to collect payment.
On December 28, 2011, Nationwide telephoned Leeb
about his bill, and Leeb said that Cigna should have paid it.
No. 14-1329 3
Leeb then mailed and faxed a letter to Nationwide, disput-
ing the debt. Two days later, he received a letter from Na-
tionwide, dated December 26. Nationwide wrote that it was
“extremely important” that the debt be paid “in full,” oth-
erwise “collection activity [would] continue,” and Nation-
wide would “report the account to Equifax, Experian, and
Trans[U]nion credit reporting agencies.” Leeb replied (by fax
and mail), demanding that Nationwide acknowledge that
his debt was disputed and refrain from making any negative
credit reports.
The next day, December 31, Leeb copied Nationwide on a
letter he sent to the medical provider, informing the provider
that Cigna was responsible for payment. The provider called
Leeb and said that it would seek payment from Cigna and
would take Leeb’s account out of collections. On January 4,
2012, Leeb informed Nationwide (by fax and mail) that the
provider was stopping collection efforts.
On January 5, Nationwide sent the letter at the heart of
this suit. The letter was generated from a “form letter,” and
was divided into two portions. The top portion indicated a
“balance” of $327. Separating the top and bottom portions
was the instruction to “Detach Upper Portion And Return
With Payment.” In the bottom portion, Nationwide
acknowledged Leeb’s dispute, but asked him to provide ad-
ditional information. The bottom portion also included the
statement that “[t]his communication is from a debt collector
attempting to collect a debt and any information obtained
will be used for that purpose.” Leeb sued, contending that
4 No. 14-1329
by sending the January 5 letter, Nationwide violated the
FDCPA. 1
II. ANALYSIS
We review the grant of Leeb’s motion for summary
judgment de novo, and Nationwide is entitled to a favorable
view of the facts and reasonable inferences. In re Dairy Farm-
ers of Am., Inc. Cheese Antitrust Litig., 801 F.3d 758, 762 (7th
Cir. 2015). Nationwide concedes that Leeb disputed his debt,
and that Nationwide did not verify the debt. So the only
questions are: (1) did Nationwide “cease collection” as re-
quired by § 1692g(b); and if not, (2) was Nationwide’s viola-
tion a “bona fide error,” excused by § 1692k(c)?
A. Nationwide Did Not “Cease Collection” After Leeb
Lodged Dispute.
On the first question, Nationwide asks us to consider two
facts: first, that it sent the January 5 letter because Leeb de-
manded that Nationwide acknowledge that the debt was
disputed; and second, that Leeb believed he did not owe the
debt. From those facts, Nationwide asks us to infer that Leeb
did not subjectively view the January 5 letter as an attempt
to collect a debt. And from that inference, Nationwide asks
us to conclude that the letter was not an attempt to collect a
debt (so Nationwide “cease[d] collection” as it was required
to do).
But our task under § 1692g(b) is to determine whether
Nationwide “cease[d] collection,” not whether Leeb subjec-
Leeb disputed his debt before he received Nationwide’s December 26
1
letter. But that letter was sent before the debt was disputed, so Leeb does
not contend that sending the December 26 letter violated the FDCPA.
No. 14-1329 5
tively believed that to be so. We have held that an objective
standard is used to determine whether a letter was sent “in
connection with an attempt to collect a debt.” Gburek v. Litton
Loan Servicing LP, 614 F.3d 380, 385–86 (7th Cir. 2010); Ruth v.
Triumph P’ships, 577 F.3d 790, 798 (7th Cir. 2009). An objective
standard is likewise appropriate for the similar inquiry of
whether, by sending a particular letter, a debt collector failed
to “cease collection.” Our objective analysis considers the
content of the January 5 letter and the context in which it
was sent; that context includes the nature and scope of the
parties’ relationship, Leeb’s demand for an acknowledge-
ment of the dispute, and Leeb’s prior expressed belief that he
did not owe the debt. See Ruth, 577 F.3d at 799 (considering
the content of the letter, the other contents of the envelope,
and the nature and scope of the parties’ relationship).
Nationwide’s letter quoted a “balance” and instructed
Leeb to detach the top portion and return it with payment.
The letter also asked Leeb for information and stated, “This
communication is from a debt collector attempting to collect
a debt and any information obtained will be used for that
purpose.” See McLaughlin v. Phelan Hallinan & Schmieg, LLP,
756 F.3d 240, 245–46 (3d Cir. 2014) (holding that sending a
letter was an attempt to collect a debt where the letter stated
the amount due and that the sender was a “debt collector
attempting to collect a debt”). Further, Nationwide’s only
relationship with Leeb concerned his allegedly defaulted
debt. See Ruth, 577 F.3d at 799 (finding it relevant that “[t]he
only relationship the defendants had with the plaintiffs
arose out of [the] ownership of the plaintiffs’ defaulted
debt”); cf. Bailey v. Sec. Nat’l Servicing Corp., 154 F.3d 384,
387–89 (7th Cir. 1998) (where parties’ relationship concerned
both a defaulted debt and payments owed in the future on a
6 No. 14-1329
non-defaulted loan, sending a letter concerning only the lat-
ter was not an attempt to collect a debt under the FDCPA).
To be sure, Leeb did not believe that he owed the debt.
But that does not strip him of § 1692g(b)’s protection. To the
contrary, § 1692g(b) specifically protects debtors like Leeb,
who could be pressured by persistent collection efforts to
pay debts that are not actually owed. It is also true that Na-
tionwide sent its letter in response to Leeb’s demand for an
acknowledgement of his dispute. But Leeb did not demand a
letter “from a debt collector attempting to collect a debt,”
stating his “balance” and instructing him to send payment.
We conclude that, when the content and context are ana-
lyzed objectively, Nationwide’s January 5 letter was an at-
tempt to collect a debt, so Nationwide failed to “cease collec-
tion,” thereby violating § 1692g(b).
B. Nationwide’s Violation Is Not Excused Under
FDCPA’s “Bona Fide Error” Provision.
Nationwide argues that even if it violated § 1692g(b), its
violation is excused under the FDCPA’s “bona fide error”
provision. That provision precludes liability if “the debt col-
lector shows by a preponderance of evidence that the viola-
tion was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably
adapted to avoid any such error.” 15 U.S.C. § 1692k(c).
Section 1692k(c) was the subject of the Supreme Court’s
opinion in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich,
L.P.A., 559 U.S. 573 (2010). In Jerman, a debt collector in-
formed a debtor that she could only dispute her debt if she
did so in writing. Id. at 578–79. The district court held that
that was a misstatement of law, in violation of the FDCPA—a
No. 14-1329 7
holding that the Supreme Court assumed was correct. The
debt collector argued that § 1692k(c) precluded liability be-
cause the violation was unintentional and was the result of
its honest belief, informed by thorough legal research, that
the FDCPA required disputes to be in writing. Id. at 579. The
Supreme Court rejected the argument, holding that FDCPA
violations excusable under § 1692k(c) must result from “cler-
ical or factual mistakes,” not mistakes of law. Id. at 587, 604–
05. The Court drew support for its conclusion from the statu-
tory requirement that a debt collector maintain “procedures
reasonably adapted to avoid” errors. The Court wrote that
“procedures” are “processes that have mechanical or other
such regular orderly steps” designed to “avoid errors like
clerical or factual mistakes,” and that legal analysis did not
lend itself to such mechanical procedures. Id. at 587 (internal
quotation marks omitted). Finally, the Court noted that al-
though the debt collector did not intend to violate the
FDCPA, its violation resulted from intentional conduct, and
liability was not limited to willful violations. Id. at 581, 584.
In view of Jerman, we reject Nationwide’s argument that
its violation should be excused. To show that its violation
was not intentional, Nationwide relies on an affidavit from
the employee who sent the January 5 letter. The employee
swears that she sent the letter intentionally but that she did
not intend to violate the FDCPA. At this stage, that entitles
Nationwide to the conclusion that its violation was not will-
ful—but liability is not confined to willful violations. Jerman,
559 U.S. at 584. 2 Notably, Nationwide did not argue that its
2 Citing Kort v. Diversified Collection Services, Inc., 394 F.3d 530, 536–37
(7th Cir. 2005), Nationwide argues that liability is limited to willful viola-
tions. But that was not Kort’s holding and, after Jerman, any dicta to that
8 No. 14-1329
employee was unaware of all of the contents of the January 5
letter (which, remember, was generated from a form letter).
So Nationwide’s violation was just as intentional as the vio-
lation in Jerman.
Moreover, Nationwide has not shown that its violation
resulted from a “bona fide error,” which the Supreme Court
instructs are “clerical or factual mistakes.” Jerman, 559 U.S. at
587. Nationwide argues that its “policy is to never send the
January 5th letter in response to … disputes… .” But wheth-
er sending the letter violated company policy is not the ques-
tion. Nationwide does not explain how intentionally sending
a letter can be considered a “clerical or factual mistake[].”
Finally, Nationwide failed to show that it maintained
“procedures reasonably adapted to avoid” errors that could
result in this type of violation. Nationwide first argues that it
maintained adequate procedures because its employees were
trained on the FDCPA. But Jerman held that mistakes of law
are not excused and so rejected the debt collector’s legal
training as an adequate “procedure.” See id. at 628 (Kennedy,
J., dissenting) (noting that the debt collector had “designated
a lead FDCPA compliance attorney, who regularly attended
conferences and seminars; subscribed to relevant periodicals;
distributed leading FDCPA cases to all attorneys; trained
new attorneys on their statutory obligations; and held regu-
lar firm-wide meetings on FDCPA issues”).
effect misstates the law. Kort’s holding was limited: where a separate
federal law requires debt-collection letters to include specific text, and
that text is later held to be misleading, a debt collector that used the re-
quired text is covered by the “bona fide error” provision. Id. at 539.
Those are not our facts, so we do not revisit Kort.
No. 14-1329 9
Nationwide next argues that it maintained adequate pro-
cedures because sending the January 5 letter was against its
“policy.” But Jerman instructs that “procedures” are “pro-
cesses that have mechanical or other such regular orderly
steps… .” Id. at 587 (internal quotation marks omitted). Na-
tionwide does not argue that its “policy” told its employee
what she should have done, much less that the policy gave her
any “mechanical” or “regular orderly” steps to follow. Fol-
lowing Jerman’s instruction, we reject the argument that a
thinly specified “policy,” allegedly barring some action but
saying nothing about what action to take, is an adequate
“procedure” under § 1692k(c). 3 Nationwide has failed to
show that its FDCPA violation should be excused under
§ 1692k(c).
III. CONCLUSION
We AFFIRM the judgment of the district court.
3 Determining whether a debt collector’s “procedures” are “reasona-
bly adapted” to avoid errors is “is a uniquely fact-bound inquiry suscep-
tible of few broad, generally applicable rules of law.” Owen v. I. C. Sys.,
Inc., 629 F.3d 1263, 1277 (11th Cir. 2011). So “in concluding that [Nation-
wide] is not entitled to § 1692k(c)’s bona fide error defense under the
particular factual circumstances in this case, we refrain from volunteer-
ing sweeping generalizations about what procedures would be enough
for a debt collector to effectively assert that defense. Such matters are
better resolved on a case-by-case basis.” Id.