Dunbar v. Kohn Law Firm, S.C.

Dist. Ct. did not err in dismissing for failure to state cause of action plaintiffs’ claims under Fair Debt Collection Practices Act, alleging that defendants’ dunning letters, which offered to settle plaintiffs’ debts at substantial discount, but also told plaintiffs that any resulting settlement “may have tax consequences,” were misleading because plaintiffs were insolvent at time they received said letters, and thus would not have incurred tax liability for any discharged debts. Challenged statement regarding potential tax consequence was not false or misleading, since defendants’ use of term “may” did not mean that plaintiffs would incur tax liability, and instant insolvent plaintiffs might become solvent prior to settling their debt, which would have triggered possibility of tax consequence for said settlement. Ct. rejected plaintiffs’ contention that instant tax consequence warning gave false impression that plaintiffs should pay entire debt to avoid tax liability, since rational debtor would have known that income taxes are calculated as percentage of income, such that debtor would be better off in taking offer to pay discounted debt, since benefit of discount would still outweigh any tax consequence of receiving discount.