Captain v. ARS National Services, Inc.

Citations: 636 F. Supp. 2d 791; 2009 U.S. Dist. LEXIS 58672; 2009 WL 2003384Docket: 1:05-cv-1515-DFH-TAB

Court: District Court, S.D. Indiana; July 9, 2009; Federal District Court

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Kevin I. Captain filed a lawsuit against ARS National Services, Inc. for violating the Fair Debt Collection Practices Act (FDCPA) in relation to a delinquent credit card debt owed to Citibank. The case has progressed through multiple motions, with the Seventh Circuit reversing a prior dismissal of the case. The current motions for summary judgment focus on a specific claim where an ARS employee allegedly informed Captain's bankruptcy lawyer that failure to pay the debt immediately would result in an additional charge of $15 per day.

The court emphasizes the summary judgment standard, stating it serves to assess whether there are genuine issues of material fact that necessitate a trial. Summary judgment is appropriate when no genuine issues exist, allowing the moving party to be granted judgment as a matter of law. The non-moving party must provide evidence showing a genuine issue remains if they bear the burden of proof at trial.

The court finds that most material facts are undisputed. Captain became delinquent on his Citibank credit card account in 2004, with a balance due of $734.41 communicated to him in February 2005. Citibank ceased charging interest on the account by that time. The account was subsequently referred to ARS for collection, which sent Captain a letter on June 14, 2005, restating the balance and offering a settlement, while also warning that collection efforts and interest would continue despite the balance remaining unchanged. Captain forwarded this information to his bankruptcy attorney, who noted the inconsistency regarding interest charges. Ultimately, the court granted Captain's motion for summary judgment and denied ARS's motion.

Halbert believed that a statement made regarding the accrual of interest on Captain's account was false, as account statements indicated no change in balance. On July 5, 2005, Halbert spoke with an ARS employee named Lucia, who allegedly informed him that the account balance was $734.41 and that a $15 per day charge would be added if the balance was not paid within two weeks. ARS contested this claim, with their only evidence being a declaration from Timothy Collins, ARS's vice president, stating that employees are trained to avoid making false statements and that no notes were found in Captain's file indicating a discussion of the fee. Halbert later followed up with a fax reiterating Lucia's statements, to which ARS did not respond. Halbert expressed uncertainty about ARS's legal right to impose the fee, and Captain never agreed to pay it.

Captain filed a three-count complaint on October 12, 2005, alleging violations of the Fair Debt Collection Practices Act (FDCPA). Count I claimed that ARS violated 15 U.S.C. § 1692e by stating the $15 fee would be added. Count II alleged a violation of 15 U.S.C. § 1692g for failing to provide a validation notice. Count III claimed that ARS's initial collection letter was misleading under § 1692e. The court initially dismissed the complaint, finding ARS's statements non-actionable under the FDCPA. However, the Seventh Circuit reversed the dismissal in a subsequent case, leading to Captain's agreement to dismiss Count II. The court denied ARS's motion to dismiss Count I, while Captain later sought to remove Count III without successfully adding a new claim regarding interest accrual.

Both parties moved for summary judgment on Count I, with Captain also seeking a ruling that ARS could not claim the “bona fide error” defense. The court granted Captain's motion for summary judgment on these issues and denied ARS's motion, raising the question of whether a genuine issue of material fact existed regarding the alleged threat of the $15 fee.

Halbert's testimony is the sole evidence supporting the claim that a statement was made, while ARS's general counsel declared no record exists of the statement, asserting it would violate ARS policy. Under Rule 56(e)(2), the opposing party must provide specific facts to demonstrate a genuine issue for trial. The Seventh Circuit emphasizes that mere speculation about jury disbelief in the opposing party's testimony does not suffice to establish a factual dispute. The court must assume Halbert's credibility in the absence of evidence to the contrary from ARS. The general counsel's declaration lacks personal knowledge to challenge Halbert's account, thus failing to create a genuine dispute. Consequently, it is deemed undisputed that an ARS employee informed Halbert of a $15 per day fee if payment was not made within two weeks.

Regarding potential liability under 15 U.S.C. § 1692e, which prohibits misleading representations by debt collectors, the statute applies to communications with consumer-debtors and extends to lawyers if the communication could confuse a "competent lawyer." The Seventh Circuit has indicated that deceptive statements are actionable whether directed at consumers or their counsel, particularly if they misrepresent factual matters in a way that is not immediately discernible without further investigation.

False statements made to a lawyer are likely to create liability under the "competent lawyer" standard rather than the "unsophisticated consumer" standard. This is due to the similar limitations both parties face in assessing the truth of factual statements. The court examines a specific statement regarding ARS's intentions to impose a $15 per day charge, which could imply legality, and considers this as a potential violation of 15 U.S.C. § 1692e(5), concerning threats of illegal actions. The Seventh Circuit highlighted that making a threat known to be unlawful aligns with violations under sections 1692d and e. The court finds that ARS did not intend to impose the fee, as confirmed by their policy declaration, yet the threat was material enough to influence a debtor's decision-making.

Halbert, the attorney involved, expressed uncertainty about ARS's intent to charge the fee despite doubting its legality. The FDCPA targets tactics that exploit power imbalances in debt collection, and threats of illegal actions can have significant psychological impacts on individuals facing debt. The statement regarding the potential charge could mislead a competent lawyer about ARS's real intentions.

Regarding ARS's bona fide error defense under 15 U.S.C. § 1692k(c), Captain argues that ARS lacks sufficient evidence to support this claim, as ARS has not contested Captain's arguments on the issue. Consequently, Captain is entitled to summary judgment on the bona fide error defense, as ARS effectively conceded this point by not addressing it.

Captain's motion for summary judgment is partially granted and partially denied. It is granted regarding Count I of the complaint and the bona fide error defense, but denied concerning the claim related to the ARS letter stating that interest was accruing on the account. ARS's motion for summary judgment is denied. The court will coordinate with counsel to schedule a trial for damages or determine another resolution. 

Key notes include: 
1. Halbert's fax is considered hearsay if used to prove Lucia threatened a daily charge.
2. Captain's request for dismissal of Count III followed a successful appeal against its dismissal, with his claim hinging on the inability to afford a required survey related to ARS's allegedly deceptive letter.
3. Captain sought summary judgment for an alleged FDCPA violation by ARS concerning the interest statement but was denied the motion to add this claim to his complaint. He did not object to Judge Baker's ruling as permitted under Federal Rule of Civil Procedure 72(a).
4. A reference to a Seventh Circuit ruling indicates a general refusal to accept appeals from summary judgments based on speculative claims.