7th Cir. Says FDCPA Plaintiff Need Not Show Materiality; Says Debt Collector Law Firm Subjects Client to Vicarious FDCPA Liability Where Client Also Was a Debt Collector Under FDCPA

In Janetos v. Fulton Friedman & Gullace, LLP, 2016 WL 1382174, at *4-5 (7th Cir. 2016), the Court of Appeals for the Seventh Circuit held that a debt collection law firm failed to clearly identify the creditor in its debt collection validation letter and, accordingly, the Plaintiff need not demonstrate materiality by extrinsic evidence.

It is true that for claims under § 1692e claims, or at least those based on its general prohibitions against false, deceptive, or misleading statements and practices, we have sorted cases into three categories. Ruth v. Triumph Partnerships, 577 F.3d 790, 800 (7th Cir.2009). The first category includes cases in which the challenged language is “plainly and clearly not misleading.” No extrinsic evidence is needed to show that the debt collector ought to prevail in such cases. Lox v. CDA, Ltd., 689 F.3d 818, 822 (7th Cir.2012). The second Lox category “includes debt collection language that is not misleading or confusing on its face, but has the potential to be misleading to the unsophisticated consumer.” Id. In such cases, “plaintiffs may prevail only by producing extrinsic evidence, such as consumer surveys, to prove that unsophisticated consumers do in fact find the challenged statements misleading or deceptive.” Id., quoting Ruth, 577 F.3d at 800. The third category is cases in which the challenged language is “plainly deceptive or misleading,” such that no extrinsic evidence is required for the plaintiff to prevail. Id. . . .. For present purposes, the critical point is that we also held in Chuway that under those circumstances, the plaintiff did not need to present extrinsic evidence of confusion. Her affidavit attesting to her own confusion, coupled with the fact that it was “apparent just from reading the letter that it is unclear,” was sufficient to create a triable issue. Id. at 948.  The violation here was even clearer than the one in Chuway. Here, the letters Fulton sent did not actually identify Asset Acceptance as the current creditor at all, and in fact leave the impression that Asset Acceptance may well have transferred ownership of the debts to Fulton. Plaintiffs Janetos, King, and Fujioka, as in Chuway, also provided evidence in the form of affidavits that after reading the letters, they were unable to determine who currently owned the debts. No further evidence of consumer confusion is necessary under these circumstances.

The Court of Appeals also held that the law firm’s client was liable for the law firm’s FDCPA violation — where the client also was a debt collector under the FDCPA.

We agree with the Third Circuit’s approach in Pollice. A debt collector should not be able to avoid liability for unlawful debt collection practices simply by contracting with another company to do what the law does not allow it to do itself. Like the Third Circuit, we think it is fair and consistent with the Act to require a debt collector who is independently obliged to comply with the Act to monitor the actions of those it enlists to collect debts on its behalf. On the other hand, a company that is not a debt collector would not ordinarily be subject to liability under the Act at all. See 15 U.S.C. § 1692a(6) (defining “debt collector”); Pettit v. Retrieval Masters Creditor Bureau, Inc., 211 F.3d 1057, 1059 (7th Cir.2000) (provisions of the Act “generally apply only to debt collectors”). As the Sixth Circuit explained in Wadlington, it makes less sense to impose vicarious liability on such a company for its attorney’s violations simply because the attorney happens to be a debt collector. 76 F.3d at 108; accord, Pollice, 225 F.3d at 404–05. Asset Acceptance is itself a debt collector, so under the logic of Pollice and Fox, it may be held liable for Fulton’s violations of the Act in the course of activities undertaken on its behalf.  Asset Acceptance argues that Fox is no longer good law in the Ninth Circuit in light of Clark v. Capital Credit & Collection Services, Inc., 460 F.3d 1162 (9th Cir.2006). But Clark did not overrule Fox; it addressed instead whether an attorney could be held vicariously liable for the acts of his client. Clark, 460 F.3d at 1173. That’s the converse of the question before us, so Clark did not undermine the reasoning of Fox and Pollice and is not applicable here. Asset Acceptance also relies on two district court decisions holding that actual control over the specific challenged conduct was required. See Tilmon v. LVNV Funding, LLC, 2014 WL 335234 (S.D.Ill. Jan.30, 2014) (with pro se plaintiff); Clark v. Main Street Acquisition Corp., 2013 WL 2295879 (S.D.Ohio May 24, 2013), aff’d on other grounds, 553 Fed.Appx. 510 (6th Cir.2014). We do not find those cases persuasive as applied to principals that are themselves debt collectors. Additionally, neither Fox nor Pollice based vicarious liability on a showing of actual control over the specific activity alleged to violate the Act. See Pollice, 225 F.3d at 404–05; Fox, 15 F.3d at 1516 (rejecting argument that debt collector could not be vicariously liable “for a venue decision made solely by” its attorney) (emphasis added).