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SCOTT v. UNIVERSAL FIDELITY CORPORATION

March 19, 1999

NATHANIEL SCOTT, PLAINTIFF,
v.
UNIVERSAL FIDELITY CORPORATION, AND TERRY W. SIMONDS, DEFENDANTS.



The opinion of the court was delivered by: Keys, United States Magistrate Judge.

MEMORANDUM OPINION AND ORDER

This matter comes before the Court on Plaintiff's Motion to Compel Defendants to produce responses to written discovery requests. Whether to grant the motion turns on the meaning of "net worth" under the Fair Debt Collection Practices Act ("the FDCPA"), 15 U.S.C. § 1692 et seq.*fn1 For the reasons set forth below, Plaintiff's motion is granted.

BACKGROUND

This action arises out of a claim under the FDCPA. Plaintiff Nathaniel Scott is a debtor from whom Defendants sought to collect a balance of $194.66 owed on his Sears credit card. (Complaint at 1.) Defendants are Universal Fidelity Corporation ("Universal"), a Texas-based debt collector, and Terry W. Simonds, president and director of Universal. (Id. at 2.)

On January 15, 1999, Plaintiff moved to compel Defendants to answer the requests for admission and interrogatories, as well as to produce documents, related to the net worth of Universal and Mr. Simonds. (Id.) These include requests for admission 32, 33, 34, 35, and 36 (concerning Mr. Simonds' net worth),*fn2 interrogatories 8 and 9 (net worth of Defendants, identification of assets, liabilities and asset transfers), and document requests 9, 12, 13, 19, 21, 22, 25, 26, and 27 (net worth of Defendants and Universal's minute book). (Id. at 3-4.)

DISCUSSION

I. THE MEANING OF NET WORTH UNDER THE FDCPA

The FDCPA provides that debt collectors who fail to comply with the act are, in the case of class actions,*fn3 liable to all class members for the lesser of $500,000 or 1% of the net worth of the debt collector. 15 U.S.C. § 1692k(a)(2)(B) Yet, nowhere does the FDCPA define the meaning of net worth, a term for which there is more than one possible definition. Plaintiff contends that the proper measure of the Defendant Universal's net worth under the FDCPA is its fair market value. (Pl's Mot. Compel at 1.) Defendants contend that the appropriate measure of Universal's net worth is its hook value. (Defendants' Response to Plaintiff's Motion to Compel [Defs.' Resp.] at 2.) In support of their argument, Defendants cite Sanders v. Jackson, in which the term net worth, as used in the FDCPA, was held to mean "the difference between assets and liabilities as determined in accordance with generally accepted accounting principles (GAAP). . . ." 33 F. Supp.2d 693 (N.D.Ill. 1998).

Universal's net worth varies greatly depending on the formula used to calculate it. Universal's fair market value is approximately $1,800,000, while its book value is $101,353. Under the FDCPA, plaintiffs may not recover more than 1% of a defendant's net worth. 15 U.S.C. § 1692K(a)(2)(B)(ii). Thus, the maximum recovery is $18,000 if Universal's net worth is its fair market value and $1,013 if its net worth is its hook value.

A. Standards for Statutory Interpretation

When construing the meaning of a statute enacted by Congress, a court must first look to the language of that statute. Newsom v. Friedman, 76 F.3d 813, 816 (7th Cir. 1996) (citing United States v. Hudspeth, 42 F.3d 1015, 1022 (7th Cir. 1994), cert. denied, 515 U.S. 1105, 115 S.Ct. 2252, 132 L.Ed.2d 260 (1995), "we may turn to the legislative history to interpret a statute only when the statute is ambiguous."). If a term is not defined by statute, a court construes the word in accord with its plain or ordinary meaning. Smith v. United States, 508 U.S. 223, 228, 113 S.Ct. 2050, 124 L.Ed.2d 138 (1993); see Mace v. Van Ru Credit Corp., 109 F.3d 338, 342 (7th Cir. 1997) ("divining congressional intent from an absence of expression is a quagmire that we must try to avoid."). However, if the plain language of a statute is ambiguous, a court must turn to the statute's legislative history in order to determine the intent of the drafters. Crandon v. United States, 494 U.S. 152, 153, 110 S.Ct. 997, 108 L.Ed.2d 132 (1990) (court will look not only to the statutory language but to the design of the statute as a whole and to its object and policy.).

Since the FDCPA does not define net worth, the Court will first examine the plain meaning of the term. The Court will ...


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