Koval v. Harris & Harris, Ltd.
MEMORANDUM Opinion and Order: For the reasons stated in the accompanying Memorandum Opinion and Order, Defendant's motion to dismiss 17 is denied. This case is referred to Magistrate Judge Weisman for discovery scheduling and supervision, as well as any settlement conference the parties may desire. Signed by the Honorable John J. Tharp, Jr on 4/5/2017.Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
HARRIS & HARRIS, LTD.,
Judge John J. Tharp, Jr.
MEMORANDUM OPINION AND ORDER
Plaintiff Kate Koval alleges that Defendant Harris & Harris, Ltd. (“Harris”) made several
misrepresentations in a debt collection letter. Harris moved to dismiss on the grounds that Koval
lacked standing and that her complaint failed to state a claim under the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692e. For the reasons that follow, the motion to dismiss
For the purposes of this motion, the Court accepts as true all well-pleaded facts in the
complaint. Kate Koval is the legal guardian of her disabled father, Michael Koval. Compl. ¶ 6.
She alleges that she incurred a debt for consumer medical services at the MSRIC Rehab Institute
of Chicago (“MSRIC”), which she could not afford to pay. Id. at ¶ 12-13. Although Koval
alleges Harris sent the relevant letter “directly to” her, the December 28, 2015 letter is addressed
to Michael Koval. Compare Compl. ¶ 26, Compl. Ex. F. Koval clarifies in her response that she
has the authority to “open and read” her father’s letters as well as “the responsibility to make
decisions on his behalf based on what is in the letters.” Pl.’s Resp. at 5, EC No. 21.
Regardless, Harris’s letter contained several statements to which Koval objects. First, the
letter stated that “[i]f this debt is not paid, our client may exercise various options to enforce
collections.” Compl. ¶ 18. Based on this statement, Koval believed Harris’s client was
considering a lawsuit. Id. at ¶ 20. Harris and MSRIC, however, did not intend to sue her and had
never sued a consumer in Cook County (where MSRIC is located). Id. at ¶ 21-22.
Second, the letter provided instructions on how to authorize an electronic payment and
further provided that the consumer “may cancel this Authorization by calling us at (866)8504915 at least three business days before you wish the cancellation to be effective.” Id. at ¶¶ 28,
33. Koval further alleges that a consumer can in fact cancel a payment authorization in writing or
by phone and that Harris accepts written cancellations. Id. at ¶¶ 38, 50. Koval filed this lawsuit
on August 30, 2016, alleging that both statements in the letter represented that Harris would take
actions that neither Harris nor its client intended to take and were therefore misleading. Harris
has moved to dismiss.
Harris maintains that Koval lacks standing to sue in her individual capacity and that none
of the statements in the letter violate the FDCPA.
Harris first alleges that Koval lacks standing to sue in her individual capacity and must
sue in her representative capacity as guardian of her father. Koval has been required to amend
her complaints to state she is suing in her representative capacity in two FDCPA suits brought
under § 1692g. See Def.’s Mem. at 1, ECF No. 18; Koval v. Hodges & Davis, P.C., No. 16-CV05659, Dkt. 20 at 4 (granting motion to dismiss and granting leave to amend to allege suit in a
representative capacity). That provision is expressly limited to communications with consumers,
however. This case, by contrast, is brought under § 1692e, which contains no similar limitation.
Courts have “taken a section-by-section approach to standing under the FDCPA.” Barasch v.
Estate Info. Servs., LLC, No. 07-CV-1693 NGG/MDG, 2009 WL 2900261, at *2 (E.D.N.Y.
Sept. 3, 2009). See Todd v. Collecto, Inc., 731 F.3d 734, 738 (7th Cir. 2013) (“each provision of
the FDCPA must be analyzed individually to determine who falls within the scope of its
protection and thus to decide ‘with respect to’ whom the provision can be violated”). A plaintiff
who lacks standing under one provision of the FDCPA may well have standing under another.
Generally, “only a person within a statutory provision's ‘zone of interest’ has standing to
sue under it.” Todd, 731 F.3d at 736. The protections of the FDCPA generally do not extend to
third parties, unless that person “can be said to stand in the consumer's shoes.” O'Rourke v.
Palisades Acquisition XVI, LLC, 635 F.3d 938, 943 (7th Cir. 2011). The Seventh Circuit has
cautioned against reading O’Rourke’s limitation too broadly, noting that the FDCPA protects the
“family, employer and neighbors of the consumer.” Todd, 731 F.3d at 737. Protecting close
associates, moreover, is consistent with the statute’s own definition of “consumer,” which
includes “the consumer's spouse, parent (if the consumer is a minor), guardian, executor, or
administrator.” 15 U.S.C. § 1692c(d). Formal guardian or not, a daughter who provides daily
care for a disabled parent fits comfortably within the same zone.
The relevant section here states that “[a] debt collector may not use any false, deceptive,
or misleading representation or means in connection with the collection of any debt.” 15 U.S.C.
§ 1692e. This section does not explicitly limit itself to consumers. Like § 1692d, which prohibits
harassment, there is no reason to think that a guardian child is beyond the zone of interest for this
provision. See Todd, 731 F.3d at 738 (noting that any person is protected from harassment under
§ 1692d). A person who is not the consumer could similar be tricked by a deceptive letter into
paying (or convincing the consumer to pay) a debt. Other courts have similarly held that family
members have standing under § 1692e. See Montgomery v. Huntington Bank, 346 F.3d 693, 697
(6th Cir. 2003).
Thus, while it is doubtless true that Koval could sue in her representative capacity as a
guardian (and thus invoking standing as a “consumer” under §1692c(d)), she does not have to do
so. A close family member who receives a misleading communication attempting to collect a
debt may sue in her individual capacity under § 1692e.
II. Failure to State a Claim
In another case in which Harris is the defendant, decided after the briefing of this motion
had been completed, this Court found that the statement that a client “may exercise various
options to enforce collections” could state a claim under the FDCPA. Cuenca v. Harris &
Harris, Ltd., No. 16-CV-05385, 2017 WL 1196922, at *2 (N.D. Ill. Mar. 31, 2017). In that case,
Harris sent a letter containing identical language to a consumer even though its client did not sue
to collect medical debts. Koval has similarly alleged that MSRIC did not intend to sue her and
has never sued a consumer. The Court therefore finds, for the reasons stated in Cuenca, that
Koval has similarly stated a claim and denies the motion to dismiss.
Because Koval’s FDCPA claim can move forward, the Court need not extensively
address Harris’s second argument that its electronic payment authorization language was not
misleading or deceptive. Harris initially argued that Koval was attempting to subject it to
Regulation E of the Electronic Funds Transfer Act (“EFTA”), 12 C.F.R. § 205.10. See Def.’s
Mem. at 9. Koval clarified that she was not seeking to subject Harris to any law other than the
FDCPA and merely meant to allege that Harris has misstated her right to cancel an electronic
payment authorization and “inaccurately limited its instructions” on how she could do so. Pl.’s
Resp. at 11. Obviously Koval cannot seek to hold Harris accountable under the EFTA through
her FDCPA suit, and Harris was not required to inform Koval of her rights with regard to her
bank under a statute to which Harris is not subject. See Estep v. Reliable Credit Ass'n, Inc., No.
3:15-CV-05142-RJB, 2015 WL 3797243, at *2-3 (W.D. Wash. June 18, 2015). On the other
hand, the Seventh Circuit has found that refusing to provide required information except through
a toll-free number violates the FDCPA. Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, &
Clark, L.L.C., 214 F.3d 872, 875 (7th Cir. 2000). Complaints need not plead legal theories and
the Court declines to attempt lay out exactly what legal theories may or not may be effective
regarding the electronic payment authorization, particularly on an undeveloped factual record.
For now it suffices that the Seventh Circuit treats the question of “whether an unsophisticated
consumer would find certain debt collection language misleading as a question of fact.” Lox v.
CDA, Ltd., 689 F.3d 818, 822 (7th Cir. 2012). Whether Harris’s statement concerning
termination of electronic payment authorization was misleading depends as much, if not more,
on the factual question of whether an unsophisticated consumer would understand it to preclude
other options for canceling than it does on the legal question of its technical accuracy. Therefore,
any claim Koval may have regarding the electronic payment authorization language may go
forward into discovery.
For the reasons stated above, Koval has standing to sue over the letter she received from
Harris regarding her debt, even though it was addressed to her disabled father (for whom she
serves as legal guardian). The complaint also states a claim that the letter was misleading under
the FDCPA. Therefore, the motion to dismiss is denied.
Dated: April 5, 2017
John J. Tharp, Jr.
United States District Judge
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