Judge: Plaintiffs' lawyers could face sanction for ignoring key precedent in debt collection case

By Dan Churney | Sep 19, 2018

Saying a plaintiff’s attorneys' actions stood as an “egregious violation” of conduct rules, potentially punishable by sanction, a Chicago federal judge has dismissed a lawsuit against a collection agency, which alleged the agency tried to mislead a debtor with an allegedly bogus offer to settle their debt by a certain date.

The judge noted the collection agency’s approach was approved years ago by a federal appeals court in a decision the plaintiff’s attorney failed to bring to the attention of the judge.

The ruling was laid down Sept. 12 by U.S. District Judge John Tharp Jr., favoring Client Services Inc., a Missouri-based collection agency, which does business in Illinois, in a suit brought by Illinois resident Kathleen Taylor.

Taylor filed suit Aug. 4, 2017, against Client Services, alleging Client Services violated the U.S. Fair Debt Collection Practices Act. 

Taylor said she owed money on a Department Stores National Bank credit card, which Department Stores turned over to Client Services for collection. Client Services sent a letter dated June 20, 2017, to Taylor, offering to settle the debt for $993, if she paid this amount by July 10, 2017. The letter also said, “We are not obligated to renew this offer,” if Taylor did not pay.

Client Services ended up sending another letter July 18, 2017, making the same offer with an Aug. 7 expiration date.

Taylor alleged the first expiration date was a “false or misleading representation,” barred by federal law, because Client Services suggested the offer was one-time only, but then renewed the offer in the second letter.

Client Services asked Judge Tharp to toss the suit, saying the letter did not say the offer would not be renewed, but that Client Services was not “obligated” to renew. Tharp agreed, pointing to the 2007 decision by the U.S. Court of Appeals for the Seventh Circuit, in Evory v. RJM Acquisitions Funding.

Tharp noted Client Services used the same words the Seventh Circuit recommended in the Evory case that debt collectors use in written communications to avoid misleading debtors — “We are not obligated to renew this offer.”

The Evory ruling settled the question of such language in such letters, according to Tharp.

In addition to dismissing the suit, Tharp took to task Taylor’s attorneys for not citing Evory, as demanded by Illinois Rules of Professional Conduct for lawyers.

“Counsel have an ethical obligation to cite controlling authority that is directly on point, even (and especially) when that authority is adverse to their client’s position and opposing counsel fails to cite it,” Tharp wrote.

The judge said their failure to cite Evory “appears to be an egregious violation.”

Taylor’s attorneys since the suit was filed are Michael J.Wood and Celetha Chatman, of Community Lawyers Group, of Chicago. Another lawyer with the group, Sarah M. Barnes, also represented Taylor October to July. Tharp ordered them to show why they should not be penalized for omitting Evory.

Client Services has been defended by Daniel E. Tranan, of the firm of Wilson Elser Moskowitz Edelman & Dicker, of Edwardsville.

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Organizations in this Story

Client Services Inc. Community Lawyers Group U.S. District Court for the Northern District of Illinois Wilson Elser Moskowitz Edelman and Dicker LLP

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