Leroy Epps and Robert Venable, III v. Creditnet, Inc.

Citations: 320 F.3d 756; 2003 U.S. App. LEXIS 3663; 2003 WL 554509Docket: 02-2225

Court: Court of Appeals for the Seventh Circuit; February 28, 2003; Federal Appellate Court

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Leroy Epps and Robert Venable, III, plaintiffs, appealed a summary judgment from the U.S. Court of Appeals for the Seventh Circuit against Creditnet, Inc., defendants. The plaintiffs alleged that Creditnet's prior action in Indiana Small Claims Court for check deception violated the Indiana Uniform Consumer Credit Code (IUCCC) regarding charge limits on consumer loans. The appellate court determined that the Small Claims Court's judgment for civil damages constituted a valid state court judgment, invoking the Rooker-Feldman doctrine, which prohibits federal courts from reviewing state court decisions. Consequently, the appellate court remanded the case to the district court with instructions to dismiss.

Epps and Venable had financed automobile purchases through retail installment contracts with Auto Advantage, which assigned the contracts to Creditnet. Both plaintiffs issued checks to Creditnet that were returned unpaid due to insufficient funds or lack of a bank account. Creditnet subsequently filed suits against them in Indiana Small Claims Court for amounts related to the returned checks, obtaining judgments for treble damages under Indiana's check deception statutes.

A year later, Epps and Venable initiated a federal lawsuit, alleging violations of the Fair Debt Collection Practices Act (FDCPA) and the IUCCC. Specifically, they contended that the IUCCC limited penalties for bad checks to $20 and that any attempt to collect more than this amount rendered Creditnet liable for excessive charges. The district court granted Creditnet's summary judgment motion, concluding that the IUCCC did not conflict with Indiana's check deception laws and that the IUCCC was focused on consumer loan contract charges, not criminal liability for check deception. The final judgment against Creditnet was entered in April 2002, prompting the appeal.

A district court's summary judgment is reviewed de novo, considering all facts and reasonable inferences in favor of the non-moving party. In this case, the parties have agreed on all facts, leaving only state law interpretation issues, which are also reviewed de novo. The primary issue for review is subject matter jurisdiction, specifically whether the district court had jurisdiction under the Rooker-Feldman doctrine, which bars federal court actions that seek to overturn state court decisions. Creditnet contends that Epps and Venable's lawsuit, which challenges the validity of a state court's treble damages judgment, is precluded by this doctrine.

Epps and Venable's claim stems from Indiana's Uniform Consumer Credit Code (IUCCC), which permits specific charges for dishonored checks. They argue that the treble damages imposed under the bad check statutes are unauthorized by the IUCCC and that they cannot be charged for these excess amounts. Their relief request includes setting aside the Marion County Small Claims Court judgment and refunding the assessed damages. They assert that the application of the bad check statutes by the Small Claims Court was erroneous, claiming IUCCC preemption.

However, the court finds their argument flawed, stating that liability under the bad check statutes only arose after the state court judgment was entered. The court refutes Epps and Venable's attempt to recast the Small Claims action as an enforcement action, clarifying that it was primarily about determining liability and damages. Thus, their current suit, aimed at invalidating the state court judgment, is indeed inextricably linked to that judgment, confirming that the district court lacked subject matter jurisdiction.

Epps and Venable reference an unpublished district court opinion and order to bolster their argument, but these cases are deemed unhelpful. In Witt v. Westfield Acceptance Corp., which involved state law claims under the Indiana Uniform Consumer Credit Code (IUCCC), the plaintiff sought to overturn a treble damages award. The district court dismissed her challenge based on statute of limitations, while a co-plaintiff's similar claims survived dismissal, leading Epps and Venable to suggest that this indicates their claims under the IUCCC should also proceed. However, this inference is characterized as speculative. 

The refusal to dismiss an FDCPA claim in Brooks v. Auto Sales, Services, Inc. is also considered unpersuasive. The Brooks court found Rooker-Feldman inapplicable since the federal claim arose before the state judgment, dealing with alleged violations of debt collection practices. In contrast, the current case involves a money judgment against Epps and Venable, not an FDCPA claim.

The plaintiffs argue that the Small Claims Court’s decision lacks preclusive effect under Indiana law and therefore should not impede their federal claims. However, the court maintains that the Small Claims Court's judgment is final regarding its amount, which is central to Epps and Venable's challenge concerning the treble damages deemed an 'excess charge' under the IUCCC. The plaintiffs still retain the right to appeal the Small Claims Court's judgment in state court, reinforcing that the Rooker-Feldman doctrine prevents them from using federal courts as an appellate forum for state court decisions.

Epps and Venable's claim under the Indiana Uniform Consumer Credit Code (IUCCC) fails because they cannot demonstrate a legally binding obligation to pay the treble damages awarded, which is enforceable solely through a state judgment. Consequently, the court lacks subject matter jurisdiction to review or reverse the state court's judgment, as established by the Rooker-Feldman doctrine. The district court's judgment is vacated, and the case is remanded with instructions to dismiss. 

Relevant Indiana statutes are cited: IC 35-43-5-5 defines check deception as a Class A misdemeanor, while IC 34-24-3-1 allows a person suffering pecuniary loss from certain violations to bring a civil action for treble damages, costs, attorney’s fees, and collection costs. Additionally, 28 U.S.C. 1367(a) outlines the scope of supplemental jurisdiction for related claims in federal courts. The district court's decision on motions for summary judgment regarding other counts is not part of the current appeal. 

Although the Rooker-Feldman doctrine was not raised by Creditnet in the district court, the court found it applicable to the IUCCC claim against Creditnet. Epps and Venable's request to certify state law questions to the Indiana Supreme Court was deemed disingenuous since they had initially pursued their claim in federal court and sought to maintain supplemental jurisdiction. Dismissing the federal case would allow them to pursue their claims in the appropriate state court.