Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing plaintiff’s complaint seeking to enforce guarantee contract based on third-party’s underlying agreement to pay plaintiff $2 million plus interest on defined schedule. While language in contract allowed plaintiff to enforce guarantee obligation without first trying to collect from third-party, contract required plaintiff to show that third-party had breached underlying contract by failing to keep its promise to pay. Thus, Dist. Ct. could properly dismiss instant case because plaintiff failed to allege that third-party owed anything to plaintiff. Ct. further noted that because instant guarantee contract, as well as underlying contract between plaintiff and third-party were executed at same time, both contracts had to be construed together.

Dist. Ct. did not err in granting defendants-debt collectors’ motion for summary judgment in Fair Debt Collection Practices Act (FDCPA) action, alleging that defendants used false representations or deceptive means to collect on plaintiff’s alleged debt. Record showed that: (1) plaintiff was victim of identity theft when unknown third-party used plaintiff’s identity to obtain credit card; (2) third-party used credit card to obtain airplane ticket; and (3) defendants attempted to collect on unpaid credit card bill. While airline eventually agreed with plaintiff that he had not purchased airplane ticket, it initially told plaintiff that its investigation revealed that he had indeed purchased said ticket. Also, plaintiff failed to establish that defendants’ statements made in its collection letter were “false” for purposes of FDCPA, where plaintiff knew he had not purchased ticket, and thus knew that defendants’ letters were only sent in “error.” As such, because defendants’ letters to plaintiff would not have influenced plaintiff to pay debt, they were not “false” for purposes of FDCPA. Ct. also found that defendants did not violate Fair Credit Reporting Act, based on plaintiff’s claim that defendants should have performed more thorough investigation on his identity theft claim, where: (1) defendants were aware that airline had initially found that plaintiff had actually purchased ticket with credit card; and (2) defendants’ subsequent and repeated requests for more information about identity theft claim were appropriate, where vendor had already resolved identify theft claim against plaintiff.

Dist. Ct. did not err in reversing Bankruptcy Ct.’s order that found that defendant-former husband’s $435,000 debt to plaintiff-former wife that arose from arbitrator’s award in favor of plaintiff regarding plaintiff’s entitlement to portion of increase in defendant’s retirement savings that occurred after divorce was not dischargeable in defendant’s bankruptcy proceedings. Record supported defendant’s claim that said debt was dischargeable, since language of arbitrator’s award indicated that it was money judgment, as opposed to award of interest in specific property that would not be dischargeable. This is so, Ct. of Appeals reasoned, where: (1) arbitrator found that plaintiff was entitled to $435,000, plus post-judgment interest; (2) under Indiana law, any order requiring payment of sum of money and stating specific amount due is money judgment; and (3) under Indiana law, award of post-judgment interest applies only to money judgments and not judgments partitioning property. Ct. further noted that arbitrator’s award allowed defendant to choose how to satisfy award, which is consistent with finding that instant debt was money judgment. Fact that amount awarded was based on defendant’s retirement account, or that arbitrator stated that award was not dischargeable in bankruptcy did not require different result.

Dist. Ct. did not err in upholding Bankruptcy Ct.’s order, finding that plaintiff-lawyer/debtor in Chapter 7 bankruptcy proceeding could not discharge $12,500.04 in costs of his attorney disciplinary proceedings imposed by Wisconsin Supreme Ct., where such costs could properly be viewed as “penalty” under section 523(a)(7) of Bankruptcy Code. Ct. of Appeals rejected plaintiff’s contention that his disciplinary costs could not be viewed as either fine, penalty or forfeiture for purposes of section 523(a)(7) because said costs served only to compensate defendant for expenses it incurred in underlying disciplinary proceedings against him. Ct. found that instant prosecution expenses are part of expense of governing and are not undertaken with expectation of creating debtor-creditor relationship between party sanctioned and state, where said expenses are paid out of state’s regular expenditures.

Dist. Ct. did not err in granting defendant-debt collector’s motion for summary judgment as to one plaintiff’s claim, alleging that defendant violated Fair Debt Collection Practices Act, where defendant failed to report plaintiff’s dispute over debt to credit reporting agency. While plaintiff had standing to bring such claim, where plaintiff suffered intangible, reputation injury that was sufficiently concrete for purposes of Article III standing, Dist. Ct. could properly find that defendant was entitled to bona fide error affirmative defense, where error was caused by clerk sending plaintiff’s dispute letter to wrong department (which prevented dispute letter being sent to credit reporting agency), and where defendant otherwise had procedures to avoid such mistake. Dist. Ct. erred, though, in granting second defendant’s motion for summary judgment raising bona fide error affirmative defense, where record showed that: (1) failure to report plaintiff’s dispute to credit reporting agency was caused by defendant’s failure to check fax inbox for said dispute; (2) plaintiff sent fax containing dispute to fax number provided by defendant; and (3) defendant failed to inform public that it stopped checking fax inbox, yet sent plaintiff confirmation that it had received plaintiff’s fax.