Commercial Banking, Collections, and Bankruptcy

Dist. Ct. erred in granting defendant-debt collector’s motion to dismiss instant Fair Debt Collection Practices Act (FDCPA) action, alleging that defendant’s dunning letter that told plaintiff-debtor that debtor could satisfy debt by paying lesser amount than what was owed, and that creditor “may file 1099C form” with IRS because of the lesser payment was misleading under FDCPA. IRS requires creditor to file 1099C form if it has forgiven $600 or more in principal, and amounts stated in instant letter indicated that creditor was willing to forgive less than $600 if plaintiff paid requested amount. As such, plaintiff could plausibly allege that it was misleading to unsophisticated debtor to state that creditor may file 1099C form where creditor never would file such a form with IRS. Moreover, defendant’s reference to 1099C form might instill angst to debtor to extent that said reference pertained to threat to involve IRS with collection of instant debt, and that said threat was designed to intimidate debtor into paying debt.

Bankruptcy Ct. erred in finding under Illinois’s version of Article 9 of U.C.C. that creditor’s financing statement failed to perfect security interest since it failed to contain separate and additional description of debtor’s collateral that was subject to said security interest. Record showed that debtor obtained commercial loan from creditor, and that parties executed security agreement that listed debtor’s asserts as collateral. Creditor thereafter filed financing statement with Ill. Secretary of State that purported to cover “all collateral” described in parties’ security agreement. While trustee argued that creditor’s security interest was not properly perfected because its financing statement did not independently describe underlying collateral, Ct. of Appeals found that Illinois’s version of Article 9 of U.C.C. allows party to “indicate” collateral in financing statement by pointing to or directing attention to description of that collateral in parties’ security agreement. As such, instant financing statement was sufficient to perfect creditor’s security interest in debtor’s assets, where security agreement contained detailed list of collateral, and where creditor may incorporate by reference its security agreement in financing statement under section 9-108.

Dist. Ct. erred in granting defendant’s motion for summary judgment in plaintiff’s action alleging that defendant breached contract requiring plaintiff to supply certain goods by failing to timely pay for goods that had been delivered to defendant. Record showed that plaintiff halted delivery of goods after defendant owed approximately $185,000 to plaintiff, and Dist. Ct. found that plaintiff had breached contract first by failing to timely ship goods to defendant under circumstances where contract called for prompt shipment of goods, while contract failed to contain provision requiring prompt payment for said goods. Ct. of Appeals, though, found that defendant’s summary judgment motion should not have been granted, since there was material question as to whether defendant's delay in payment to plaintiff was reasonable. Ct. also noted that there was issue regarding when defendant informed plaintiff that it would not be retaining portion of its business that required plaintiff to supply certain goods.

Record contained sufficient evidence to support Dist. Ct.’s entry of permanent injunction against defendant in action under section 13(b) of Federal Trade Commission Act, alleging that defendant’s websites and referral system that automatically enrolled customers in unspecified $29.94 monthly membership in defendant’s credit-monitoring service without their prior knowledge violated Restore Online Shopper Confidence Act and other consumer protection statutes. Ct. rejected defendants’ argument that permanent injunction violated 8^th Amendment’s Excessive Fine Clause, since instant injunction was not “fine.” However, Dist. Ct. erred in imposing $5 million restitution award, since: (1) section 13(b) authorizes only restraining orders and injunctions; and (2) section 13(b)’s grant of authority does not implicitly authorize restitution awards. As such, Ct. overruled its prior decision in Amy Travels, 875 F.2d 564, that allowed restitution awards in section 13(b) actions. (Dissent filed from denial of rehearing en banc.)

Bankruptcy Ct. erred in denying debtor’s request to hold creditor in contempt of court for seeking to collect on debt in state court proceeding one year after Bankruptcy Ct. had previously discharged said debt. Record showed that debtor had failed to notify either state court or creditor’s law firm that debt had been discharged, although creditor had been notified of said discharge through notice given by Bankruptcy Ct. As such, creditor was guilty of contempt under agency principles for actions taken by its law firm in seeking continued collection efforts, since creditor was aware of discharge order. However, Bankruptcy Ct. could properly deny instant request to hold law firm in contempt of court, since: (1) said law firm lacked knowledge of discharge order; and (2) court could not impute client-creditor’s knowledge of discharge order to law firm. Ct. further observed that Dist. Ct. could take into consideration debtor’s failure to notify either state court or creditor’s law firm of discharge order when determining any damages for debtor.

Dist. Ct. did not err in granting defendant-debt collector’s motion for summary judgment in action by plaintiff-alleged debtor alleging that defendant violated Fair Debt Collection Practices Act (FDCPA) by filing state-court collection action on credit card account without first giving him notice of his right to cure default on said account. Record showed that plaintiff, in state-court action, had denied knowledge of, or any association with, subject credit card account at issue in state-court and instant FDCPA action. As such, Dist. Ct. could properly find that plaintiff could not proceed on his FDCPA action, since he lacked evidence that debt incurred on credit card account was for personal, family or household purposes, and therefore was “consumer debt.” Fact that billing statements showed that most charges were for purchases of less than $50 at places such as gas stations and convenience stores does not require different result, since plaintiff could not explain (due to his alleged lack of knowledge about said account) whether said purchases were for consumer as opposed to business purposes.

Dist. Ct. did not err in granting plaintiff-debtor’s motion for summary judgment in action under Fair Debt Collection Practices Act (FDCPA) against defendant-debt collector, alleging that defendant failed to provide statutorily required disclosures about plaintiff’s debt under section 1692g(a) of FDCPA in defendant’s initial communication with plaintiff or within five days thereafter. While defendant asserted that it had complied with section 1692g(a) when it sent two emails to plaintiff that contained hyperlinks that contained said disclosures, record showed that plaintiff had never opened said emails, and language in said emails did not imply existence of any debt or contained words such as “debt” or “collector,” which was required to meet FDCPA’s definition of “communication.” Moreover, fact that email contained hyperlinks did not require different result, since said emails only provided means to access mandated disclosures.