CHARLES v LUNDGREN, No. 9615995
U.S. 9th Circuit Court of Appeals
CHARLES v LUNDGREN
No. 9615995
SHAROLYN CHARLES, on behalf ofherself and all others similarlysituated,Plaintiff-counter-defendant-Appellant, No. 96-15995v. D.C. No. CV-95-02263-PGRLUNDGREN & ASSOCIATES, P.C.;ALVIN R. LUNDGREN; OPINIONDefendants-Appellees,CHECK RITE LTD.,Defendant-counter-claimant-Appellee.
Appeal from the United States District Courtfor the District of ArizonaPaul G. Rosenblatt, District Judge, PresidingArgued and SubmittedJune 12, 1997--San Francisco, CaliforniaFiled July 8, 1997Before: Alfred T. Goodwin, Dorothy W. Nelson, andStephen S. Trott, Circuit Judges.Opinion by Judge Trott
_____________________________COUNSEL Michael C. Shaw, Bybee & Shaw, Tempe, Arizona, and Dan-iel A. Edelman, Edelman & Combs, Chicago, Illinois, for theplaintiff-appellant.Mark O. Morris, Snell & Wilmer, Salt Lake City, Utah, andAlvin R. Lundgren, Lundgren & Associates, Rancho Cor-dova, California, for the defendants-appellees.Michael B. Bennett, Bennett Law Offices, Salt Lake City,Utah, for amicus curiae ShopKo Stores, Inc. and Mrs. FieldsOriginal Cookies, Inc.Ernest J. Isenstadt, Assistant General Counsel, Federal TradeCommission, Washington, D.C., for amicus curiae FederalTrade Commission.Joanne S. Faulkner, New Haven, Connecticut, for amicuscuriae National Association of Consumer Advocates, Inc. andConsumer Law Center of the South.
_____________________________OPINION TROTT, Circuit Judge:OverviewThis case presents an issue of first impression in this cir-cuit: whether a third-party debt collector's efforts to collect adishonored check are governed by the Fair Debt CollectionPractices Act ("FDCPA" or "the Act"), 15 U.S.C. SS 1692-1692o. The district court ruled that the FDCPA does not applyto efforts to collect a dishonored check, because a dishonoredcheck is not a "debt" under the FDCPA.The only federal court of appeals that has considered thisquestion is the Seventh Circuit. In a well-reasoned and per-suasive opinion, that court recently held that a dishonoredcheck is a "debt" under the FDCPA. Bass v. Stolper, Koritzin-sky, Brewster & Neider, S.C., 111 F.3d 1322 (7th Cir. 1997).We agree with its conclusion that, because "an offer or exten-sion of credit is not required for a payment obligation to con-stitute a `debt' under the FDCPA," id. at 1326, the FDCPAgoverns the collection of dishonored checks. We thereforereverse.BackgroundSharolyn Charles ("Plaintiff") brought suit against CheckRite Ltd., Alvin R. Lundgren, and Lundgren & Associates(collectively, "Defendants"), alleging that Defendants' actionsin attempting to collect a dishonored check violated theFDCPA. Charles wrote a check in the amount of $17.93 to aPoncho's Restaurant as payment for a meal on July 4, 1996.The check was dishonored for insufficient funds. Poncho'sforwarded the returned check to Check Rite for collection. OnJuly 19, Check Rite sent a letter to Charles, stating that "[t]hisis an attempt to collect a debt" and requesting total paymentof $42.93--the amount of the check plus a service charge of$25.00. On August 7, Check Rite sent a second letter, request-ing payment of $42.93 and advising Charles that failure topay the total amount due might result in additional liability fordamages and attorneys' fees, estimated at $242.93.Check Rite subsequently referred the matter to the law firmof Lundgren & Associates for collection. On September 8,Lundgren sent a letter to Charles offering to settle within tendays for a total amount of $127.93--the amount of the checkplus a settlement amount of $110.00. Lundgren furtheradvised that they had made no decision to file suit, that theycould later decide to do so, and that Charles's potential liabil-ity was $317.93. Charles immediately sent to Lundgren amoney order in the amount of $17.93. On September 13,Lundgren sent a second letter, repeating the settlement offermade in the September 8 letter. Lundgren then returnedCharles' payment, on September 14, declining to accept it aspayment in full and repeating the settlement offer. On Sep-tember 19, Lundgren sent a fourth letter to Charles, repeatingthe settlement offer.On October 15, Charles filed a suit against Defendants,seeking certification of her suit as a class action and allegingviolations of the FDCPA, 15 U.S.C. SS 1692e, 1692f, 1692g.The alleged violations included making false representations,seeking to collect more money than required by state law todischarge the debt, and threatening litigation without intend-ing to pursue it. Defendants moved to dismiss for failure tostate a claim, pursuant to Federal Rule of Civil Procedure12(b)(6), on the ground that an attempt to collect a dishonoredcheck is not an attempt to collect a "debt" governed by theFDCPA. The district court granted the Defendants' motion,holding that the FDCPA did not apply to Defendants' actions.The district court concluded that the FDCPA applies only todebts arising out of an offer or extension of credit and thatdishonored checks therefore are not "debts" within the stat-ute's meaning. Plaintiff appeals.1 We review de novo a dis-missal for failure to state a claim pursuant to Federal Rule ofCivil Procedure 12(b)(6). Lewis v. Telephone EmployeesCredit Union, 87 F.3d 1537, 1545 (9th Cir. 1996).DiscussionIn a factually similar situation, our colleagues on the Sev-enth Circuit recently confronted the same question of whethera dishonored check is an FDCPA "debt." See Bass, 111 F.3d1322. Unfortunately, the district court did not have the benefitof Bass before it ruled.[1] In Bass, the Seventh Circuit ably analyzed the scope ofthe FDCPA and responded to the same arguments presentedby the Defendants here. To determine whether a dishonoredcheck constitutes an FDCPA debt, the Seventh Circuit beganwith the text of the FDCPA itself. The FDCPA defines "debt"as: any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for per- sonal, family, or household purposes, whether or not such obligation has been reduced to judgment.15 U.S.C. S 1692a(5) (emphasis added). Noting that "we seeno language in the Act's definition of `debt' (or any other sec-tion of the Act) that mentions, let alone requires, that the debtarise from an extension of credit," Bass, 111 F.3d at 1325, theSeventh Circuit concluded: "We harbor no doubt that a checkevidences the drawer's obligation to pay for the purchasesmade with the check, and should the check be dishonored, thepayment obligation remains." Id. The court also rejected theappellants' invitation to read the undefined term "transaction"restrictively as a "credit transaction." Id. at 1325-26.[2] Although resort to extrinsic sources was unnecessary inview of the clear language of the Act, the Seventh Circuitreviewed the legislative history, concluding that it "serves toreinforce a finding that non-credit transactions are included inthe Act's purview." Id. at 1327. Noting that earlier versionsof the Act included a credit extension requirement and that theapplicability of the Act to dishonored checks was acknowl-edged during the House and Senate hearings, the Seventh Cir-cuit aptly concluded: "In short, Congress was aware ofdiscord on whether `debt' should be defined restrictively toinclude only credit transactions, but rejected this restriction inthe text it adopted." Id. Finally, the court pointed to "anunequivocal statement of the drafters' intent on this issue:`[T]he committee intends that the term "debt" include con-sumer obligations paid by check or other non-credit consumerobligations.' " Id. (quoting H.R. Rep. No. 95-131, 95th Cong.,1st Sess. 4 (1977)).The Seventh Circuit also rejected the appellants' relianceon the Act's codification as an amendment to the ConsumerCredit Protection Act ("CCPA"), 15 U.S.C.S 1601 et seq.Noting that the Act's placement in the CCPA is "at best aweak tool in the search for Congressional intent, " the courtfound the connection "unpersuasive in light of the continuingexpansion of the CCPA's protective landscape." Id. at 1328.Finally, the Bass court rejected the suggestion that "any dis-honored check should fall outside the act pursuant to a judi-cially created fraud exception." Id. at 1329.We find the Seventh Circuit's reasoning to be sound andthus hold that a dishonored check is a "debt" within the mean-ing of the FDCPA. Our decision in Bloom v. I.C. System, Inc.,972 F.2d 1067 (9th Cir. 1992), does not require a differentresult. Although in Bloom we turned to the Truth in LendingAct's ("TILA") definition of "consumer loan " to shed light onthe meaning of that phrase as used in the FDCPA, id. at 1068-69, we did not suggest that TILA definitions should be usedto restrict broader FDCPA definitions. Nor did we suggestthat a term must be interpreted consistently throughout theCCPA when separate subchapters use the term differently.Like the Seventh Circuit, we find the suggestion "that wegraft a credit requirement, either from the location of theFDCPA in the United States Code or from the independentcodified purpose of the Truth in Lending Act, untenable."Bass, 111 F.3d at 1329.[3] Because we have the benefit of the Seventh Circuit'scogent analysis, we will not replow plowed ground. Instead,we adopt the reasoning of the Seventh Circuit and conclude,as it did, that the FDCPA's application is not limited to col-lection of debts arising out of the offer or extension of credit.A dishonored check constitutes an FDCPA "debt, " and there-fore the FDCPA prohibits check collectors from using abusivepractices. We reverse the district court's dismissal of Plain-tiff's complaint for failure to state a claim and remand for fur-ther proceedings.REVERSED AND REMANDED.
___________________________FOOTNOTES 1 We grant the Defendants' Motion to Strike the Plaintiff's Appendix.We also grant the Motion for Leave to File an Amicus Brief submitted bythe National Association of Consumer Advocates, Inc. and the ConsumerLaw Center of the South.