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7th Cir. Holds Debt Collector Did Not Violate FDCPA by Complying With State Procedural Rule

The U.S. Court of Appeals for the Seventh Circuit recently held that service of a motion for default judgment directly upon a plaintiff consumer known to be represented by counsel did not violate the federal Fair Debt Collection Practices Act, where the plaintiff’s attorney had yet to file a formal appearance.

In so ruling, the Seventh Circuit reversed the trial court’s judgment in favor of the consumer because the state procedural rule at issue required the motion to be served directly upon the consumer, thus triggering the safe harbor provision of subsection 1692c(a)(2) of the FDCPA, which prohibits direct contact with a represented debtor “[w]ithout … the express permission of a court of competent jurisdiction.”

A copy of the opinion in Holcomb v. Freedman Anselmo Lindberg, LLC is available at:  Link to Opinion.

After a consumer failed to pay her credit card bill, the creditor retained counsel (“creditor law firm”) to collect the debt.

The creditor law firm filed suit in Illinois state court against the consumer (the “collection suit”), who initially appeared pro se, but later retained counsel (“consumer’s attorney”).  The consumer’s attorney sent a letter to the creditor law firm advising of his representation and appeared at two hearings on the consumer’s behalf, wherein trial call orders identified that the consumer’s attorney was present before the court, but did not identify him or his firm by name.

The creditor law firm eventually moved for default judgment against the consumer, and served the motion upon both the consumer and the consumer’s attorney, who had yet to file a formal written appearance in the collection suit.

The consumer filed the instant, underlying suit against the creditor law firm in the Northern District of Illinois alleging that its service of the motion for default judgment upon the consumer violated subsection 1692c(a)(2) of the FDCPA, which prohibits “communicat[ions] with a consumer in connection with the collection of any debt … if the debt collector knows the consumer is represented by an attorney with respect to such debt.”  15 U.S.C. §1692c(a)(2).

The parties filed cross-motions for summary judgment, wherein the creditor law firm invoked the safe harbor provision within the relevant subsection of the FDCPA, which prohibits direct contact with a represented debtor “[w]ithout … the express permission of a court of competent jurisdiction.”  15 U.S.C. § 1692c(a)(2).

The creditor law firm pointed to Rule 11 of the Illinois Supreme Court Rules, which requires service of court papers subsequent to the summons and complaint, upon the “attorney of record,” if there is one, but “[o]therwise” requires service on the party directly.  Because the consumer’s attorney had not yet filed a written appearance at the time of service of the default motion, the creditor law firm argued that on its understanding of Rule 11, it had no choice but to send the default motion to the consumer, and that the rule provided “express permission” to do so.

The trial court rejected this reading of Rule 11, calling it “hyper-technical,” concluding that Illinois trial judges have discretion to recognize a lawyer as a party’s attorney of record in absence of a written appearance, and that the presiding judge in the collection suit did so by checking the boxes on the call orders showing that “defendant’s counsel” was “present before the court.”  Accordingly, summary judgment was entered in the consumer’s favor and against the creditor law firm.  The instant appeal followed.

On appeal, the Seventh Circuit noted that in Thomas v. Law Firm of Simpson & Cybak, 392 F.3d 914, 920 (7th Cir. 2004), it suggested, in dicta, that “[c]ourt rules permitting service could be interpreted as granting … express permission” under 1692c(a).  Here, Illinois Supreme Court Rule 11(a) governed service of the default judgment motion, which provides that “[i]f a party is represented by an attorney of record, service shall be made upon the attorney. Otherwise service shall be made upon the party.” Ill. Sup. Ct. R. 11(a).

The Court reasoned that a court expressly requiring a certain action obviously permits that action, and therefore a rule requiring service directly on a party expressly permits such service.

Accordingly, at issue was whether the consumer’s attorney was the consumer’s “attorney of record” when the default motion was filed.

The consumer argued that the consumer’s attorney became her “attorney of record” when he appeared at two hearings in the collection suit, and the state court entered orders indicating his presence.  However, the Seventh Circuit found that this “sliding-scale approach” in which the status of an attorney of record for Rule 11 purposes depends on the attorney’s degree of participation cannot be reconciled with Illinois’ bright-line rule — established in a number of cases cited by the Seventh Circuit — that a lawyer can become an attorney of record within the meaning of Rule 11 only by filing a written appearance or other pleading with the court and does not become an attorney of record simply by representing a party.

While the consumer cited a string of Illinois appellate court rulings to support her argument that trial courts have the discretion to recognize a lawyer as the attorney of record without a written appearance or pleading, the Seventh Circuit rejected these and other cited cases because they all dealt with circumstances outside the Rule 11 context.

Additional arguments of Rule 11’s preemption by the FDCPA and that service on the party as required by Rule 11 can be accomplished by serving the attorney as the party’s “agent” were respectively rejected by the appellate court as “verg[ing] on frivolous” and an “unsound reading of the rule.”

Because Illinois courts have consistently established a bright-line approach which establishes an attorney of record for Rule 11 purposes only upon the filing of a written appearance or other pleading with the court, the Seventh Circuit concluded that “acquir[ing] the status as attorney of record for purposes of Rule 11 requires a written appearance or other pleading filed in court.  Period.”

Accordingly, the Seventh Circuit held, the creditor law firm’s compliance with that rule did not violate section 1692c(a)(2) of the FDCPA, and the trial court’s judgment in the consumer’s favor was reversed and remanded for entry of judgment in the creditor law firm’s favor.

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Christopher P. Hahn practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Insurance Recovery and Advisory groups. Prior to joining Maurice Wutscher LLP, he served under the General Counsel at the Florida Office of Financial Regulation. He also obtained extensive experience litigating property insurance claims through all phases of discovery, motion practice and other pre-trial activities. Christopher obtained his Bachelor of Science degree in Business Administration from the University of Southern California, followed by his Juris Doctorate degree from the University of Miami School of Law. He is also a graduate of the University of Miami’s Masters of Business Administration program, completing his degree with an emphasis on finance and mergers and acquisitions.

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