Articles Posted in US Court of Appeals for the Seventh Circuit

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The definition of "consumer" under the Fair Debt Collection Practices Act includes consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe. The Seventh Circuit reversed the district court's dismissal of plaintiff's action against Main Street, alleging violations of the FDCPA and the Illinois Collection Agency Act. The court held that, based on the text of the FDCPA, plaintiff was a qualifying consumer under 15 U.S.C. 1692 where Main Street alleged that plaintiff owed debt and tried its case to the bench in small claims court, even if it failed to prove the claim. View "Loja v. Main Street Acquisition Corp." on Justia Law

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Allied offered Robertson a job, but ran a background check before she reported to work. Under the Fair Credit Reporting Act (FCRA) 15 U.S.C. 1681a(d)(1), Robertson claims that Allied violated a requirement to notify her “clear[ly] and conspicuous[ly],” in writing, unadorned by additional information, of its intent to obtain the report and to secure her consent (notice claim). Non‐conviction information appeared in Robertson’s background check. Allied revoked its offer. An employer that relies on a background check for an adverse employment decision must provide the applicant with a copy of the report and a written description of her rights under FCRA before acting. Allied provided neither (adverse action claim). After mediation, the parties reached a tentative settlement. Months later, the Supreme Court held that federal jurisdiction exists only if the plaintiff has alleged an injury that is concrete and particular. Months later, Robertson moved under Federal Rule of Civil Procedure 23(e) for preliminary approval of the settlement and for certification of two settlement classes. The court rejected, as “simply wrong,” Robertson’s assertion that it could approve the settlement without jurisdiction over the underlying case and dismissed the case for lack of standing. The Seventh Circuit reversed as to the adverse action claim. Allied’s alleged violations of the Act caused Robertson concrete injury. Dismissal of the notice claim was proper because authority to adjudicate must exist before a court can resolve the case, even if that resolution is only a Rule 23(e) fairness hearing, followed by approval of a settlement. View "Robertson v. Allied Solutions, LLC" on Justia Law

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Holcomb did not pay her credit-card bill. The creditor hired the Freedman law firm, which sued Holcomb on the creditor’s behalf in state court. Holcomb initially appeared pro se but later retained Attorney Finko. When Freedman moved for default judgment, Finko had not yet filed a written appearance. Freedman served the motion on both Holcomb and Finko. Holcomb alleges that Freedman violated the Fair Debt Collection Practices Act, which prohibits a debt collector from directly contacting a debtor who is represented by counsel absent “express permission” from “a court of competent jurisdiction,” 15 U.S.C. 1692c(a)(2). Freedman argued that it had “express permission” because Illinois Supreme Court Rule 11 requires service of court papers on a party’s “attorney of record,” if there is one, but “[o]therwise service shall be made upon the party.” Freedman argued that Finko was not yet Holcomb’s “attorney of record” for purposes of Rule 11, requiring service on Holcomb directly. The district judge rejected this argument as “hyper-technical.” The Seventh Circuit reversed. An attorney becomes a party’s “attorney of record” for Rule 11 purposes only by filing a written appearance or another pleading with the court. Finko had done neither, so Rule 11 required Freedman to serve the default motion on Holcomb directly. View "Holcomb v. Freedman Anselmo Lindberg, LLC" on Justia Law

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Portalatin allegedly owed $1,330.75 in consumer debt. The Blatt law firm, on behalf of Midland, filed a debt‐collection suit against Portalatin in the Circuit Court of Cook County’s First Municipal District (Chicago). Seventh Circuit precedent under the Fair Debt Collection Practices Act (FDCPA) then allowed Blatt to sue Portalatin in that forum even though she lived in the Fourth Municipal District (15 U.S.C. 1692i(a)(2)). The Seventh Circuit subsequently overruled that precedent and held the FDCPA requires debt collectors to file suits in the smallest venue‐relevant geographic unit where the debtor signed the contract or resides. Blatt complied, but the ruling was retroactive. Portalatin sued Blatt and Midland for violating the FDCPA. Portalatin settled with Midland and expressly abandoned all claims against Blatt except her claim for FDCPA statutory damages. Blatt argued that Portalatin’s settlement with Midland mooted her claim for FDCPA statutory damages against Blatt. The district court denied Blatt's motions. The jury awarded Portalatin $200 in statutory damages against Blatt; the court awarded Portalatin $69,393.75 in attorney’s fees and $772.95 in costs against Blatt. The Seventh Circuit reversed. The settlement with Midland mooted Portalatin’s claim for FDCPA statutory damages against Blatt. Portalatin is not entitled to attorney’s fees or costs from Blatt. View "Portalatin v. Blatt, Hasenmiller, Leibsker & Moore, LLC" on Justia Law

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The FHA-insured mortgage on the Schlafs’ property is serviced by Green Tree. The Schlafs defaulted. Green Tree was unable to contact them. Green Tree contracts with Safeguard, a “mortgage field servicing company,” to perform services on properties with defaulted mortgages, including maintenance, winterizing, lock changes, and utility management. Safeguard assists Green Tree in complying with HUD regulations: When a mortgage is in default and efforts to reach the mortgagor have proven unsuccessful, the mortgagee must make an inspection to determine if the property is vacant or abandoned. During these inspections, Safeguard representatives place hangers on an outside doorknob, with instructions for the property owner: PLEASE CALL … GREEN TREE 800‐666‐1143. The door hanger does not identify Safeguard. Safeguard representatives leave the notice even if they encounter the homeowner; they do not identify themselves as Safeguard representatives and avoid talking about why they are there. Safeguard acknowledges that the door hanger is an effort to have the mortgagor contact the client. At least once, Schlaf encountered a Safeguard representative. Schlaf, unable to identify or speak with the Safeguard representative, called the number on the door hanger, which “took [him] right to Green Tree.” He testified that he did not know if Safeguard collected debt. Schlaf sued Safeguard under the Fair Debt Collection Practices Act. The court granted Safeguard summary judgment The Seventh Circuit affirmed. Safeguard’s actions were too attenuated from Green Tree’s debt‐collection efforts; Safeguard is not a debt collector. View "Schlaf v. Safeguard Property, LLC" on Justia Law

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The Kohn collection law firm sent Dunbar a letter seeking to collect a debt originally owed to a bank. The letter stated that the full balance due was $4,049.08 and offered to settle the debt for $2,631.90, but warned: “NOTICE: This settlement may have tax consequences.” Dunbar was insolvent and filed for bankruptcy six months later. The Weltman collection law firm sent Smith a collection letter seeking to collect a consumer credit-card debt. The letter stated that the balance due was $4,319.69 and invited Smith to contact the law firm to discuss satisfying her debt obligation for a reduced amount but warned: “This settlement may have tax consequences.” Smith too was insolvent and filed for bankruptcy two months later. The debtors filed actions under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e, alleging that the letters were misleading because they were insolvent and would not have had to pay taxes on any discharged debt. A magistrate and district judge each dismissed the cases, reasoning that alerting debtors that a settlement “may” have tax consequences is neither false nor misleading. The Seventh Circuit affirmed, reasoning that “may” does not mean “will” and insolvent debtors might become solvent before settling their debt, triggering the possibility of tax consequences. View "Smith v. Weltman, Weinberg & Reis Co." on Justia Law

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Knopick purchased a Jayco recreational vehicle from an independent Iowa dealer for $414,583, taking title through an LLC he alone controlled. Jayco’s two-year limited manufacturer’s warranty disclaims all implied warranties and “does not cover … any RV used for rental or other commercial purposes,” explains that an RV is “used for commercial and/or business purposes if the RV owner or user files a tax form claiming any business or commercial tax benefit related to the RV, or if the RV is purchased, registered or titled in a business name,” and states that performance of repairs excluded from coverage are "goodwill" repairs and do not alter the warranty. Almost immediately, Knopick claims, the RV leaked, smelled of sewage, had paint issues, and contained poorly installed features, including bedspreads screwed into furniture and staples protruding from the carpet. Knopick drove it to Jayco’s Indiana factory for repairs. He later picked up the RV to drive to his Texas home. Concerned about continuing problems, Knopick left it at a Missouri repair facility, from which a Jayco driver took it to Indiana for further repairs. Jayco later had a driver deliver the coach to Knopick in Arkansas. Knopick remained unsatisfied and sued for breach of warranty under state law and the Magnuson-Moss Warranty Act, 15 U.S.C. 2301. The Seventh Circuit affirmed summary judgment for Jayco, finding that Knopick had no rights under the warranty because the RV was purchased by a business entity. View "Knopick v. Jayco, Inc." on Justia Law

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Arla, a Denmark-based global dairy conglomerate, launched a $30 million advertising campaign aimed at expanding its U.S. cheese sales, branded “Live Unprocessed.” The ads assure consumers that Arla cheese contains no “weird stuff” or “ingredients that you can’t pronounce,” particularly, no milk from cows treated with recombinant bovine somatotropin (“rbST”), an artificial growth hormone. The flagship ad implies that milk from rbST-treated cows is unwholesome. Narrated by a seven-year-old girl, the ad depicts rbST as a cartoon monster with razor-sharp horns. Elanco makes the only FDA-approved rbST supplement. Elanco sued, alleging that the ads contain false and misleading statements in violation of the Lanham Act. Elanco provided scientific literature documenting rbST’s safety, and evidence that a major cheese producer had decreased its demand for rbST in response to the ads. The Seventh Circuit affirmed the issuance of a preliminary injunction, rejecting arguments that Elanco failed to produce consumer surveys or other reliable evidence of actual consumer confusion and did not submit adequate evidence linking the ad campaign to decreased demand for its rbST. Consumer surveys or other “hard” evidence of actual consumer confusion are unnecessary at the preliminary-injunction stage. The evidence of causation is sufficient at this stage: the harm is easily traced because Elanco manufactures the only FDA-approved rbST. The injunction is sufficiently definite and adequately supported by the record and the judge’s findings. View "Eli Lilly and Co. v. Arla Foods USA, Inc." on Justia Law

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Plaintiffs defaulted on credit cards. PRA, an Illinois debt collection agency, bought the accounts for collection. Debtors Legal Clinic sent separate letters on behalf of each plaintiff to PRA, stating “the amount reported is not accurate.” PRA later reported each debt to credit reporting agencies without noting that the debt was “disputed.” Plaintiffs each filed a suit under the Fair Debt Collection Practices Act, 15 U.S.C. 1692e(8), alleging that PRA communicated their debts to credit reporting agencies without indicating they had disputed the debt. The Seventh Circuit affirmed summary judgment in favor of plaintiffs. PRA’s alleged violation of section 1692e(8) is sufficient to show an injury‐in‐fact; the plaintiffs suffered “a real risk of financial harm caused by an inaccurate credit rating.” The court rejected PRA’s argument that the phrase “the amount reported is not accurate” was ambiguous. Section 1692e(8) does not require the use of the word “dispute.” The “knows or should know” standard of section 1692e(8) “requires no notification by the consumer … and instead, depends solely on the debt collector’s knowledge that a debt is disputed, regardless of how that knowledge is acquired.” The court concluded that PRA’s error was material. View "Bowse v. Portfolio Recovery Associates, LLC" on Justia Law

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Plaintiffs visited different Massage Envy locations and had massages that lasted about 50 minutes. The company advertises, on its website, an “Introductory 1‐hour Massage Session*” at the price of $50. Clicking through two links leads to a disclaimer explaining that a “[s]ession includes massage or facial and time for consultation and dressing.” Their putative class action complaint alleged that the multiple asterisks confused the average consumer and that Massage Envy deceptively hid the disclosures where they were “nearly impossible” to find. The Seventh Circuit affirmed the dismissal of their claims under the Illinois Consumer Fraud and Deceptive Business Practices Act and the Missouri Merchandising Practices Act. Massage Envy’s representations regarding the one‐hour massage session were not the but‐for cause of any alleged injury as required by the Illinois law. There is no allegation that plaintiff’s belief about the length of the massage caused her to make the appointment; only the receipt of a gift card caused her to book a massage. With respect to Missouri law, the complaint failed to allege that a deceptive representation from Massage Envy caused plaintiff to suffer an ascertainable loss of money. View "Haywood v. Massage Envy Franchising, LLC" on Justia Law