Carter v. AMC, LLC

Citations: 645 F.3d 840; 2011 U.S. App. LEXIS 9753; 2011 WL 1812524Docket: 10-3184

Court: Court of Appeals for the Seventh Circuit; May 13, 2011; Federal Appellate Court

Original Court Document: View Document

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Geaniece Carter, the plaintiff, rented an apartment managed by AMC, LLC, which filed for her eviction in state court. The eviction order was initially granted but later reversed on appeal due to AMC's failure to provide legally required notice, referencing 735 ILCS 5/9-211. A judge noted potential violations of the Fair Debt Collection Practices Act (FDCPA) by AMC, which prompted Carter to initiate a federal lawsuit for damages under the FDCPA, alleging two violations: notifying a credit bureau of her debt without indicating her dispute and misrepresenting the debt status during the eviction proceedings. AMC did not argue that these claims should have been raised in state court or that they were barred by res judicata. Carter aimed to uphold her state court victory, avoiding issues under the Rooker–Feldman doctrine, which pertains to federal jurisdiction. She claimed the state court had resolved her FDCPA issues, but the court clarified that a single judge's opinion does not constitute an authoritative ruling, as a majority is needed for decisive outcomes. Furthermore, the court emphasized that the FDCPA-related opinions were not necessary to the appellate decision, impacting the applicability of issue preclusion. The federal district court recognized AMC as the owner of the apartment complex and Carter’s creditor.

Justice McDade's assumption that lessors qualify as 'debt collectors' under the Fair Debt Collection Practices Act (FDCPA) was contested by the district judge, who clarified that a 'debt collector' refers to someone who collects debts owed to another, based on 15 U.S.C. § 1692a(6). The district judge dismissed Carter’s complaint, noting that AMC, as an agent of Jackson Square Properties (the actual creditor and owner of Riverstone Apartments), is not a debt collector since it attempts to collect debts owed to itself. The district court's legal reasoning was sound, but it incorrectly assumed AMC owned the property. The lease confirms Jackson Square as the landlord and AMC merely as its agent.

Carter's complaint incorrectly named AMC as the defendant, leading to confusion in the court. The corporate disclosure statement filed by AMC's counsel inaccurately identified 'AMC, LLC/Riverstone Apartments' as a client, despite 'Riverstone Apartments' being a building, not a legal entity that can be sued. The determination of whether AMC is a debt collector hinges on the definition of 'obtaining' a debt, which may apply to agents collecting debts as well. The FDCPA excludes original creditors and those collecting debts not in default when obtained. Courts have found that servicing agents for mortgages can 'obtain' debts, but the applicability of this to lessor servicing agents is less clear and has not been definitively resolved in appellate courts, although district courts have generally agreed that such agents obtain debts at the lease's inception.

The Federal Trade Commission (FTC) possesses interpretive and enforcement authority regarding the Fair Debt Collection Practices Act (FDCPA), as outlined in 15 U.S.C. §§ 1692k(e), 1692l, and 1692o. Although the FTC has not issued specific regulations or advisory opinions on this matter or initiated administrative adjudications, its Division of Credit Practices has determined that a managing and servicing agent for a lessor or condominium association 'obtains' a debt upon becoming the creditor's agent. Such an agent is not classified as a 'debt collector' unless the debt was in arrears at the time they assumed that role. The letters dated August 31, 1992, and November 6, 1995, clarify this understanding but do not receive Chevron deference. However, they warrant respectful consideration and demonstrate alignment between district judges and the FTC.

The conclusion is that while debts are typically 'obtained' through purchase, a servicing agent can also 'obtain' a debt by acquiring collection authority on behalf of another party. AMC 'obtained' interest in Carter’s debt to Jackson Square Properties when it became Jackson Square's agent, prior to any alleged default in rent payments by Carter. Consequently, under § 1692a(6)(F)(iii), AMC is not classified as a debt collector and has no obligations to Carter under the FDCPA. Justice McDade's contrary ruling did not reference § 1692a(6) or the FTC’s opinion letters and therefore lacks persuasive authority. Carter's arguments regarding potential violations by AMC's attorneys are noted, but since the attorneys are not parties to the suit, this issue is not further addressed. The ruling is affirmed as of May 13, 2011.