Terri L. BASS, Plaintiff-Appellee, v. STOLPER, KORITZINSKY, BREWSTER & NEIDER, S.C. and Kathy Leschensky, Defendants-Appellants.
No. 96-2113.
United States Court of Appeals, Seventh Circuit.
Decided April 18, 1997.
111 F.3d 1322
Argued Oct. 22, 1996.
CONCLUSION
For the foregoing reasons, the district court‘s grant of Hyman‘s Rule 12(b)(6) motions to dismiss was appropriate. The decision of the district court is therefore affirmed.
AFFIRMED.
Carla Andres, Vele & Andres, Evansville, WI, Richard J. Rubin, Santa Fe, NM (argued), for Plaintiff-Appellee.
Joseph R. Long, II (argued), Relles, Meeker & Borns, Madison, WI, for Defendants-Appellants.
Ernest J. Isenstadt, Stephen Calkins, Federal Trade Commission, Washington, DC, Joanne Faulkner, New Haven, CT, for Amici Curiae.
Before BAUER, ESCHBACH, and COFFEY, Circuit Judges.
ESCHBACH, Circuit Judge.
I.
To pay for groceries, Joe Arsenault wrote a check in the amount of $156.94 to “Copps,” a local supermarket. The check, which was subsequently dishonored by his bank due to insufficient funds, was drawn on an account that Arsenault held jointly with plaintiff-appellee, Terri Bass. To collect on the check, Copps employed defendant law firm, Stolper, Koritzinsky, Brewster & Neider, S.C. (“SKBN“), who instituted collection activities against Arsenault under Wisconsin‘s civil recovery statute.1
SKBN‘s first three collection attempts were in the form of collection letters addressed solely to Arsenault. Arsenault did not respond. Its fourth collection letter, however, was addressed jointly to Arsenault and Bass. This letter, written and signed by defendant Kathy Leschensky, a non-attorney employee of SKBN, advised that she “draft[ed] and file[d] lawsuits” in collections matters, and that she would “hold off taking any action for 7 days” if Bass or Arsenault would make arrangements to pay. In response, Bass brought an action for statutory damages for defendants’ failure to comply with the FDCPA in its collection letter. Among other complaints, Bass alleged that in the letter Leschensky misrepresented herself as an attorney and violated
Both parties moved for partial summary judgment, and on March 4, 1996, the district court granted Bass‘s motion, finding that 1) the Act applies to collectors of dishonored checks, and 2) the letter sent to Bass violated
We review a district court‘s entry of partial summary judgment de novo, drawing all reasonable inferences in the light most favorable to the nonmovant. Daill v. Sheet Metal Workers’ Local 73 Pension Fund, 100 F.3d 62, 65 (7th Cir.1996);
II.
On September 20, 1977, premised on Congressional concern that state protections against questionable debt collection practices were insufficient, President Carter signed into law the Fair Debt Collection Practices Act as an amendment to the Consumer Credit Protection Act (“CCPA“).
In the most general terms, the FDCPA prohibits a debt collector from using certain enumerated collection methods in its effort to collect a “debt” from a consumer. Because not all obligations to pay are considered “debts” under the Act, the definition of “debt” thus serves to limit the scope of the FDCPA. SKBN has conceded that the collection letter sent to Arsenault and Bass used one of the collection methods prohibited by the Act. Therefore, we face only the task of resolving the parties’ dispute over the scope of the FDCPA, specifically whether the payment obligation that arises from a dishonored check constitutes a “debt” as defined in the FDCPA. Appellants’ argument, that the FDCPA does not control the collection activities arising from worthless checks, rises and falls on its assertion that the only type of “debt” triggering application of the FDCPA is debt arising from an offer or extension of credit to the consumer. Appellee counters that neither the Act‘s language, nor the Act‘s legislative history, limits “debt” in this fashion. As support, each party relies on the appropriate side of a small, yet conflicting body of case law on this issue which has grown up in the district courts.4
As with all issues of statutory interpretation, the appropriate place to begin our analysis is with the text itself, see Hughey v. United States, 495 U.S. 411, 415, 110 S.Ct. 1979, 1982, 109 L.Ed.2d 408 (1990), which is the most reliable indicator of congressional
A “debt,” the collection of which is governed by the FDCPA,5 is defined in the Act as
any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
On the contrary, the plain language of the Act defines “debt” quite broadly as “any obligation to pay arising out of a [consumer] transaction.” In examining this definition, we first focus on the clear and absolute language in the phrase, “any obligation to pay.” Such absolute language may not be alternatively read to reference only a limited set of obligations as appellants suggest. See, e.g., United States v. On Leong Chinese Merchants Assoc. Building, 918 F.2d 1289, 1296-97 (7th Cir.1990) (holding that federal forfeiture statute at
Nor can we accept appellants’ suggestion that “transaction,” a term undefined by the Act, should be read restrictively in the definition of “debt” as “credit transaction.” A word is not ambiguous merely because it is not defined in the statute. A fundamental canon of statutory construction instructs that in the absence of statutory definition, we give terms their ordinary meaning. See Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 314, 62 L.Ed.2d 199 (1979); United States v. Wyatt, 102 F.3d 241, 247 (7th Cir.1996). The ordinary meaning of the term “transaction” is a broad reference to many different types of business dealings between parties, and does not connote any specific form of payment. See Webster‘s New World Dictionary 1509 (2d ed. 1986) (defining “transaction” simply as “a business deal or agreement“). Although appellants would have us delve into legislative history to cast a different light on the term “transaction,” we must give meaning to the plain language actually used by
In sum, the fact that appellants would prefer a less broad definition of the term “debt” does not make the existing clear and unrestricted definition ambiguous. As the Supreme Court recently reminded us in Hubbard v. United States, 514 U.S. 695, 115 S.Ct. 1754, 131 L.Ed.2d 779 (1995), we are prohibited from reading into clear statutory language a restriction that Congress itself did not include. We must therefore hold that an offer or extension of credit is not required for a payment obligation to constitute a “debt” under the FDCPA.6
No circuit court has had occasion to pass on whether a dishonored check creates a “debt” under the FDCPA. However, appellants point us to Zimmerman v. HBO Affiliate Group, 834 F.2d 1163 (3d Cir.1987), which based its holding that the FDCPA did not apply to the conduct at issue in part on the proposition that an extension of credit was required under the Act. In Zimmerman, the issue was whether the defendant cable television companies, in demanding that plaintiff pay for allegedly pirated microwave television signals, were seeking to collect a “debt” within the meaning of the FDCPA. The court first concluded that the term “transaction” in the definition of debt is not broad enough to include asserted tort liability. It then added, without discussion, that the type of transaction resulting in “debt” under the FDCPA “is the same type of transaction as is dealt with in all other subchapters of the Consumer Credit Protection Act, i.e., one involving the offer or extension of credit to a consumer.” Id. at 1168.
We can agree that the conduct in Zimmerman falls outside the reach of the FDCPA for the reason that pirating television signals did not amount to a “transaction” at all, arguably the true basis for decision in Zimmerman. Instead of being a consensual transaction for the purchase of consumer goods or services, the alleged conduct in Zimmerman was theft. And although a thief undoubtedly has an obligation to pay for the goods or services he steals, the FDCPA limits its reach to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services. See, e.g., Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D.Ohio 1994) (obligation to pay for shoplifted merchandise not a “debt” under the FDCPA because “plaintiff has never had a contractual arrangement of any kind with any of the defendants.“); Mabe v. G.C. Services Ltd. Partnership, 32 F.3d 86, 88 (4th Cir.1994) (obligation to pay child support not a “debt” under the FDCPA because it was not incurred in exchange for consumer goods or services).
However, to the extent that the Zimmerman court creates a requirement that only credit-based transactions constitute “debt” under the FDCPA, we must respectfully part ways. In reaching this conclusion, the court neither considered the plain language of the definition of “debt,” nor examined the legislative history, but rather relied solely on the Act‘s codification as an amendment to the CCPA.7 As we discuss infra, Congress’ choice of statutory structure as evidence of intent is unnecessary given the Act‘s clear textual definition of the term “debt,” and is also outweighed by the more persuasive forms of intent evidenced in the Act‘s legislative history.
III.
Even if the language in the Act‘s definition of “debt” was so unclear as to require our
First, legislative history reveals that Congress contemplated this very issue yet refused to require that “debt” covered by the Act arise only from a credit transaction. Early versions of the Act clearly included a credit extension requirement in defining “debt” as “any obligation arising out of a transaction in which credit is offered or extended to an individual, and the money, property, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” H.R. 13720, 94th Cong., 2d Sess. (1976) (emphasis added). We find persuasive the fact that this restrictive language was deleted from later drafts, and no reference to “credit” was ever reinserted in the definition. See Securities and Exchange Comm‘n v. Van Horn, 371 F.2d 181, 185 (7th Cir.1966).
Second, although we do not deny that the inclusion or exclusion of certain statutory language is occasionally due to mere legislative oversight, legislative history belies that possibility here. A review of the debates during the House and Senate hearings on the FDCPA reveals acknowledgements by several debaters that the Act would include dishonored checks as “debt.” See, e.g., Hearings Before the Subcommittee on Consumer Affairs of the House Comm. on Banking, Finance and Urban Affairs on H.R. 29, 95th Cong., 1st Sess. at 257-61 (1977) (statement of John W. Johnson, Executive Vice-president, American Collectors Association, Inc.) (warning that if passed, the Act would make it more difficult for financial collection services to collect dishonored checks). In light of the apparent congressional consideration of this issue during the drafting and revising stages, we are hard-pressed to believe that Congress’ ultimate decision to exclude references to “credit extensions” in the Act‘s definition of “debt” was accidental. In short, Congress was aware of discord on whether “debt” should be defined restrictively to include only credit transactions, but rejected this restriction in the text it adopted.
Finally, the legislative history provides an unequivocal statement of the drafters’ intent on this issue: “[T]he committee intends that the term ‘debt’ include consumer obligations paid by check or other non-credit consumer obligations.” H.R.Rep. No. 95-131, 95th Cong., 1st Sess. 4 (March 29, 1977).8
In stark contrast to these indications of legislative intent, the portions of legislative history relied on by appellants do not prove their point, and in fact do little more than point out that Congress often discussed the Act using credit-based examples. As noted above, Congress also considered examples of non-credit transactions creating “debt.” We have no quarrel with an argument that consumer default on installment debt was a principal focus at congressional hearings on the Act. However, appellants cannot direct us to any portion of the legislative history indicating that installment debt was the only focus.
Appellants then claim that Congress “obviously” intended that the FDCPA cover only debts arising from credit extensions merely by virtue of the fact that the FDCPA was passed as an amendment to the Consumer Credit Protection Act. We disagree. As a threshold matter, we reiterate that in light of the Act‘s plain language, our reliance on this interpretive argument is unnecessary. While it may be appropriate to derive some meaning from a statute‘s location in the United States Code when the statute itself is ambiguous, we are not faced with statutory ambiguity here.
Even were we to consider this extrinsic evidence, however, the Act‘s codification as an amendment to the CCPA is at best a weak tool in the search for Congressional intent. Although some courts have found the Act‘s placement in the CCPA suggestive, see, e.g., Zimmerman, 834 F.2d at 1168, the inference appellants would like us to glean from this structural relationship is insufficient to outweigh the contrary intent evidenced in the Act‘s legislative history, see supra. We also find the connection appellants suggest unpersuasive in light of the continuing expansion of the CCPA‘s protective landscape. Although the CCPA as originally enacted may have focused on consumer protection in credit-based financial transactions, amendments to the Act suggest an enlargement of the CCPA to include consumer protections in other financial arenas.9 For example, the Electronic Funds Transfer Act (“EFTA“),
In making their argument, appellants quote the stated Congressional purpose of the Truth in Lending Act (one of the six subchapters of the CCPA) which is to “assure a meaningful disclosure of credit terms ... and to protect the consumer against inaccurate and unfair credit billing and credit card practices.”
We find appellants’ suggestion that we graft a credit requirement, either from the location of the FDCPA in the United States Code or from the independent codified purpose of the Truth in Lending Act, untenable.
V.
In their final attempt to excuse their prohibited collection practices, appellants argue that dishonored checks do not constitute “debts” under the FDCPA because “the tender of a worthless check is a criminal and tortious act, not a consumer credit transactions [sic].” Br. at 13. We take issue with this statement‘s accuracy as well as its implication that any dishonored check should fall outside the act pursuant to a judicially created fraud exception.
Appellants misstate the law when they categorize all dishonored checks as criminal and tortious. Both under the common law of fraud, a specific intent crime, and under most state criminal statutes which specifically address dishonored checks, liability attaches only if the drawer either knew or intended that the check be dishonored at the time the check was drawn. A bank may refuse payment on a check for a variety of reasons lacking in the necessary fraudulent intent: administrative holds on the account of which the drawer is unaware, bank error, and the drawer‘s reliance on deposited checks that themselves are dishonored, to name a few. Even when the drawer is at fault for the dishonor, the requisite intent may be absent—for example, when the drawer makes a simple miscalculation or has a subsequent emergency need for funds.
We recognize that by the time a dishonored check has been turned over to a third party collector, the issuer has typically received notice of dishonor yet has still failed to pay. Nevertheless, an issuer whose intention not to pay the check arises only at some point after it is issued has still not, in most jurisdictions, committed a fraudulent or criminal act. The requisite knowledge or intent that the check be dishonored must arise at the time the check is written.11 We therefore must reject appellants’ argument that all dishonored checks are fraudulent and thus not covered by the Act.
Almost as a second thought, appellants state their (unsupported) belief that the specific check at issue was passed with fraudulent intent, on the grounds that “Argenault‘s [sic] tender of the worthless check violated ... Wisconsin‘s criminal statute.” However, they present no evidence that Bass specifically intended Arsenault to pass a check that she knew would be dishonored. Arsenault‘s intent to pass a worthless check, even if proven, is not proof of Bass‘s knowledge or intent. Appellants have thus failed to conclusively establish that Bass intended to pass a worthless check.
Because we reject appellants’ fraud-based arguments here, we are not faced with the need to determine whether fraudulent intent, even if proven, should make a difference—that is, whether a fraud exception to the Act is appropriate. Nevertheless, we note our discomfort with the proposition that the
VI.
The district court is AFFIRMED.14
BAUER, Circuit Judge, dissenting.
I respectfully dissent. Judge Eschbach has written a powerful opinion that I find myself unable to join. The notion that Congress, in passing the FDCPA, had in mind the protection of those who give bad checks for goods and services is one I cannot in conscience join.
In this position I am comforted by several things, not the least is the knowledge that the act itself does not mandate such a result; indeed, if it did, the opinion could have consisted of a paragraph or two pointing out the mandate. A second and, it seems to me, significant point also appears in the majority opinion: “No Circuit Court has had occasion to pass on whether a dishonored check creates a ‘debt’ under the FDCPA.” Indeed they have not, and I believe for good reason—it doesn‘t apply.
Checks are, in the majority of cases, used to pay for bills already outstanding; that is to say, in response to bills sent asking for payment for goods and services delivered some time in the past; a transaction that did not contemplate simultaneous delivery and payment. In short, to pay a bill where credit has already, explicitly or implicitly, been extended. A case can be made for the position that, if the check so used is drawn on an account with insufficient funds—or no funds at all—the payee is in no worse position than before the dishonored instrument was delivered.1
In fact, a great number of retail establishments (and deliverers of services as opposed to goods) will not honor personal checks. And those that do are relying on the warrant of the maker that the money will be found forthwith on presentation. (Many, if not most, general retail transactions presently involve commercial credit cards; Visa, Mastercard or the like. And in those transactions, the credit relationship is between the issuer of the card—generally a bank—and the card holder. The purveyor of goods and services gets paid without question from the bank because the validity of the card can be verified before acceptance.)
When accepting a check, the payee is peculiarly at the mercy of the maker; only the maker and the bank know whether money is available to pay the amount of the note and the banker is forbidden to disclose the condition of the account unless called upon to honor the draft (or certify it, which amounts to the same thing). So the recipient must rely on the maker‘s trustworthiness. If anyone needs protection, it is the provider of goods and services who accepts a check in exchange.
Moreover, unlike the extender of credit, the payee of a bad check incurs an absolute loss because his banker will charge a penalty for processing a dishonored check and the payee has lost the use of the money he was entitled to receive. And, of course, if he was relying on the uncollected funds for his own cash-flow purposes, he may very well do serious harm to his own credit rating.
Apart from all of that, I believe that the majority opinion gives too little weight to the reasoning of Zimmerman v. HBO Affiliate, 834 F.2d 1163 (3rd Cir.1987). It is not sufficient to point out that Zimmerman involved a theft. The majority says “and although a thief undoubtedly has an obligation to pay for the goods or services he steals, the FDCPA limits its reach to those obligations to pay arising from consensual transactions, where parties negotiate or contract for consumer related goods or services. See, e.g., Shorts v. Palmer, 155 F.R.D. 172, 175-76 (S.D.Ohio 1994) (obligation to pay for shoplifted merchandise not a ‘debt’ under the FDCPA because ‘plaintiff has never had a contractual arrangement of any kind with any of the defendants.‘).” Where a contract of sale is goods-for-money, the acceptance of a check is not a consent to receive something less than money; it is a convenience to the maker not to require legal tender. The giving of a bad check for goods or services differs from shoplifting only in degree, not in kind; in either event, it is a theft.
Nor is it an answer to say that the fraud involving dishonored checks is not always “criminal or tortious” because “fraud is a specific intent crime“.2 What this says is that when the defense of lack of bad intent is raised, the government (not the payee of the
I do not think that one can observe a “to let” sign, move into an empty apartment and then demand a thirty-day notice before an eviction can proceed. One cannot create a landlord-tenant relationship unless both parties agree. Nor, it seems to me, can one create a debtor-creditor relationship without the agreement of both parties. If I choose not to be a creditor, you cannot force me into that position.4
Absent a creditor-debtor relationship voluntarily assumed there is no “debtor” protected by the FDCPA. The victim is not the deliverer of the bad check; it is the recipient and, if protection is to be provided, it should be to him. The FDCPA, I believe, does not cover bad checks given for goods and services. It is not necessary in this case to decide whether bad checks given for an existing debt come under the protection of the act. That is not the issue.
I would reverse the judgment.