Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Med‐1 buys delinquent debts and purchased Suesz’s debt from Community Hospital. In 2012 it filed a collection suit in small claims court and received a judgment against Suesz for $1,280. Suesz lives one county over from Marion. Though he incurred the debt in Marion County, he did so in Lawrence Township, where Community is located, and not in Pike Township, the location of the small claims court. Suesz says that it is Med‐1’s practice to file claims in Pike Township regardless of the origins of the dispute and filed a purported class action under the Fair Debt Collection Practices Act venue provision requiring debt collectors to bring suit in the “judicial district” where the contract was signed or where the consumer resides, 15 U.S.C. 1692i(a)(2). The district court dismissed after finding Marion County Small Claims Courts were not judicial districts for the purposes of the FDCPA. The Seventh Circuit affirmed.View "Suesz v. Med-1 Solutions, LLC" on Justia Law

Mead Johnson, purchased a primary Commercial General Liability policy from National Union, with a limit of $2 million for liability for “personal and advertising injury” and an excess liability policy from Lexington, with a limit of $25 million. Mead’s main product, Enfamil infant formula, is sold worldwide. Mead’s competitor, PBM, sued Mead for false advertising and consumer fraud and Mead sued PBM for trade dress infringement. PBM claimed that Mead had falsely asserted that PBM’s generic formula lacked key fats that promote brain and eye development. The suit sought $500 million in damages for product disparagement, a tort that the policies cover as a form of “advertising injury.” Mead did not notify the insurers of the suit until December 2009, after the suit ended in the $13.5 million verdict against Mead. Mead wanted its insurers to pay that judgment, plus a $15 million settlement that it made to resolve the class action suit. The insurers obtained declaratory judgments that they were not required to pay. The Seventh Circuit reversed the summary judgment in favor of the insurers in the suit relating to the PBM litigation, but affirmed the judgment in favor of National Union in the suit arising from the class action against Mead. View "Nat'l Union Fire Ins. Co. v. Mead Johnson & Co., LLC" on Justia Law

Todd alleges that in 2012 he received a recorded telephone message from Collecto asking him to call and help the company locate his mother, Terry. He called; a Collecto representative told him that Terry owed AT&T money for cell phone service. Todd stated that he is not Terry, but the representative continued to discuss the alleged debt without asking how to reach Terry or asking Todd to pay the bill. Todd claimed that this interaction harmed him emotionally and violated the Fair Debt Collection Practices Act, 15 U.S.C. 1692b, which permits a debt collector to call a third party for help in locating a “consumer” but prohibits revealing the existence of the consumer’s debt to the third party. Section 1692f prohibits “unfair or unconscionable means to collect or attempt to collect any debt.” The district court concluded that Todd lacked standing under the Act. The Seventh Circuit affirmed, finding that Todd lacked standing under 1692b and failed to state a claim under 1692f. View "Todd v. Collecto, Inc." on Justia Law

The defendants, affiliated companies, owned ATMs in Indianapolis bars that were popular with college students. Plaintiffs filed a purported class action, based on violation of the Electronic Funds Transfer Act, 15 U.S.C. 1693b(d)(3). At the time, the Act required a sticker notice on the ATM and an onscreen notification during transactions. Defendants provided onscreen notice but not, according to the complaint, a sticker. The Act has been amended to remove the sticker notice requirement. The district court decertified the class. The Seventh Circuit reversed, finding that the district judge did not provide adequate explanation. While the compensatory function of the class action has no significance in this case, the damages sought by the class, and, more importantly, the attorney’s fee that the court will award if the class prevails, will likely make the suit a wake‐up call and have a deterrent effect on future violations of the Electronic Funds Transfer Act. View "Hughes v. Kore of IN Enters., Inc." on Justia Law

Green sued under the Truth in Lending Act, 15 U.S.C. 1606, claiming that U.S. Cash Advance misstated her loan’s annual percentage rate. The lender requested arbitration under the loan agreement, which referred to “binding arbitration by one arbitrator by and under the Code of Procedure of the National Arbitration Forum.” The agreement was signed in 2012; the Forum has not accepted new consumer cases for arbitration since 2009, when it settled a suit alleging bias in merchants’ favor. The lender asked the court to appoint a substitute arbitrator under 9 U.S.C. 5. The judge declined, stating that identification of the Forum as arbitrator was “integral.” The Seventh Circuit reversed, reasoning that the agreement calls for use of the Forum’s Code of Procedure, not for the Forum itself to conduct proceedings. The court noted that the lender will have to “live with” the judge’s broad discretion in choosing an arbitrator, who might be familiar with practices in the payday loan industry or open to use of claimant classes in arbitrations, perhaps on a theory “that a consumer who would not voluntarily waive her rights under the Truth in Lending Act probably should not be deemed to have implicitly waived her right to the only procedure that could effectively enforce those rights.” View "Green v. U.S. Cash Advance IL, LLC" on Justia Law

Ferraro suffered serious burns after falling asleep next to the power adapter of her newly purchased laptop computer. She filed a product liability suit, alleging a design defect that allowed the power adapter to overheat, that HP failed to include adequate warnings about the power adapter’s propensity to overheat, and that HP breached an implied warranty of merchantability. The district court granted HP summary judgment, reasoning that Ferraro would be unable to show that the adapter was “unreasonably dangerous,” as required for her design defect claim. The Seventh Circuit affirmed. Illinois law provides two alternative methods of establishing unreasonable danger: the “consumer-expectations test” and the “risk-utility test.” Ferraro appealed with respect to the consumer expectations test, but, under Illinois law, the risk-utility test “trumps” in design defect cases if the two methods of establishing unreasonable dangerousness have conflicting results. The district court’s finding that Ferraro could not succeed under the risk-utility test furnished an independent, unchallenged ground for its decision. View "Ferraro v. Best Buy Stores, L.P." on Justia Law

Plaintiffs had a Home Depot credit card issued by Citibank. In 2005, Krahenbuhl, who also had a Citibank-Home Depot credit card, contracted with plaintiffs to build a log cabin for speculative resale. A log cabin package was purchased over the phone from Home Depot for $9,761.64 and charged to Krahenbuhl’s account. The materials were approved by, delivered to, and signed for by plaintiffs, who eventually built and sold the log cabin. The relationship between Krahenbuhl and plaintiffs deteriorated, and Krahenbuhl disputed the charge. Citibank transferred the charge from Krahenbuhl’s credit card to plaintiffs’ card. Krahenbuhl and plaintiffs reached a settlement through mediation, which plaintiffs thought included payment of the credit card charge. About one year later, they claim, they became aware that the $9,761.64 charge had been transferred to their account. Neither Citibank nor Home Depot would remove the charge; accrued interest has resulted in a total sum of approximately $21,000. Plaintiffs sued under the Wisconsin Consumer Act, Wis. Stat. 427.104(1)(j). Citibank was dismissed and the district court granted Home Depot summary judgment, finding that Home Depot had not acted either directly or indirectly in an attempt to collect a debt. The Seventh Circuit affirmed. View "Parent v. Home Depot U.S.A., Inc." on Justia Law

Todd attempted to purchase claims against a collection agency (Franklin) from Fletcher. He then sued Franklin. The district court dismissed the complaint, ruling that the assignment was void because Todd was using it merely to attempt to practice law without a license and that Todd failed to state a claim for relief. The Seventh Circuit affirmed. The assignment was void as against public policy. Illinois public policy forbids the assignment of legal claims to non-attorneys in order to litigate without a license. Undisputed evidence showed that Todd created a business providing legal advice and repeatedly agreed to purchase claims in order to litigate. Even if the assignment was not void, Todd failed to state a claim. The Fair Debt Collection Practices Act preempts state-law claims, 15 U.S.C. 1681t(b)(1)(F). Todd did not attempt could not bring a claim directly under the FCRA because the section Franklin allegedly violated does not create a private right of action. View "Todd v. Franklin Collection Serv., Inc." on Justia Law

In 2005, Lox received medical treatment from Dr. Baylor and incurred a debt. Lox failed to pay. His debt was referred to CDA, a debt collection agency. CDA attempted to collect Lox’s debt was through dunning letters, and one of those letters included a warning that failure to pay his debt could lead to a lawsuit brought against Lox. The letter further stated that if Dr. Baylor was successful in his lawsuit, Lox could be ordered by the court to pay Dr. Baylor’s attorney fees. Lox claimed violation of the Fair Debt Collection Practices Act, 15 U.S.C. 1692, claiming that Dr. Baylor could not, under any circumstances, have recovered attorney fees from Lox. The district court granted CDA summary judgment. The Seventh Circuit reversed. The attorney fees statements found in CDA’s dunning letters were materially false and misleading on their face. View "Lox v. CDA, Ltd." on Justia Law

While vacationing in Arizona, plaintiffs contracted to purchase a condominium in a planned development in Mexico. The project was managed by defendant, an Arizona resident. After making the first of three installment payments, plaintiffs became concerned and sought reassurance. Defendant sent several communications to plaintiffs (in Wisconsin) assuring them the project was properly financed and would be completed on time. They made additional payments. The unit was not completed on time and investigation revealed that the project did not have financing; advance sales were funding the development. Plaintiffs sued in Wisconsin state court, alleging intentional misrepresentation and seeking rescission and damages. Following removal to federal district court, the case was dismissed for lack of personal jurisdiction. The Seventh Circuit reversed. The complaint alleges that repeated communications to plaintiffs’ Wisconsin home were part of a deliberate attempt to create a false sense of security and to induce plaintiffs to make payments. The communications are critical to the claim of intentional misrepresentation. Defendant was aware that the harm would be felt in Wisconsin. The allegations are sufficient to establish minimum contacts necessary to satisfy due-process requirements for jurisdiction in Wisconsin. The communications satisfy the “local act or omission” provision of the Wisconsin long-arm statute.