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Burton v. Kohn Law Firm, SC

United States Court of Appeals, Seventh Circuit

August 9, 2019

John H. Burton, Plaintiff-Appellant,
v.
Kohn Law Firm, S.C., et al., Defendants-Appellees.

          Argued November 29, 2018

          Appeal from the United States District Court for the Eastern District of Wisconsin. No. 2:16-cv-00594-NJ - Nancy Joseph, Magistrate Judge.

          Before Flaum, Ripple, and Manion, Circuit Judges.

          Ripple, Circuit Judge.

         The history of this litigation began in the circuit court for Brown County, Wisconsin. Kohn Law Firm, SC ("Kohn"), acting on behalf of Unifund CCR, LLC ("Unifund"), a debt collection agency, brought an action against John H. Burton. Unifund sought to collect from Mr. Burton a debt incurred on a Citibank, N.A. ("Citibank"), credit card account. Mr. Burton denied knowledge of, or any association with, that account.

         While that action was pending in state court, Mr. Burton filed the present lawsuit against Kohn in the United States District Court for the Eastern District of Wisconsin. He alleged that, with respect to the same debt, Kohn had violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, and the Wisconsin Consumer Act ("WCA"), Wis.Stat. §§ 421-427, by filing the Wisconsin action against Mr. Burton without first providing him notice of his right to cure the default.

         The Wisconsin state court later dismissed Kohn's action against Mr. Burton on the basis of Mr. Burton's denial that he was the individual who had incurred the underlying debt. Mr. Burton then amended his complaint in this federal action to add Unifund as a defendant. Following cross-motions for summary judgment by the parties, the magistrate judge, sitting as the district court, entered judgment in favor of Kohn and Unifund.[1] The district court held that Mr. Burton could not proceed on his FDCPA or WCA claims because he had failed to present sufficient evidence that the debt incurred on the Citibank account was for personal, family, or household purposes and therefore a "consumer debt." Mr. Burton now challenges that determination.

         We agree with the district court. On the record before us, Mr. Burton has not come forth with sufficient evidence that the debt in question is a consumer debt. Accordingly, we affirm the judgment of the district court.[2]

         I

         BACKGROUND

         On February 17, 2015, Kohn, on behalf of Unifund, brought a lawsuit against Mr. Burton in the Circuit Court of Brown County, Wisconsin. Kohn claimed that Mr. Burton had failed to make payments on a credit agreement with Citibank. In his answer, Mr. Burton stated, "I have never had any association with Unifund CCR, LLC in the past and do not know who you are or what you are talking about, so I strongly dispute this debt, with emphasis."[3] He also asserted counterclaims against Unifund, alleging that he had been "'ambushed' by [Unifund's] Summons and Complaint" and that he "did not have any association with Unifund CCR, LLC in the past, prior to this legal action."[4] Mr. Burton further contended that his "personal information has also been compromised by the State of WI and 3rd party fraud may have occurred" on the account in question.[5] He asserted as affirmative defenses that Unifund had failed to provide him notice of his right to cure the default prior to filing suit, in violation of Wisconsin Statutes §§425.104 and 425.105, and that there was a "Lack of Privity" because he "ha[d] never entered into any contractual or debtor/creditor arrangements" with Unifund.[6] Furthermore, at an evidentiary hearing on July 6, 2015, Mr. Burton testified that he never had received statements, made payments, or made purchases on the Citibank account.

         On May 19, 2016, while the Wisconsin action was still pending, Mr. Burton began this litigation in the district court. He alleged that, "[t]o the extent that Burton entered into a credit agreement with Citibank, NA, such agreement was entered into for personal, family or household purposes."[7] He claimed that, by failing to provide written notice of his right to cure the default on the Citibank agreement before bringing the state court action, Kohn had violated the FDCPA, 15 U.S.C. §§ 1692d and 1692e, and the WCA, Wis.Stat. § 427.104(1)(h) and (1)(j).

         On September 8, 2016, the state court conducted a hearing on a motion by Unifund to dismiss Mr. Burton's counterclaims. In response to a question from the court, Mr. Burton's counsel confirmed that his "client ha[d] testified under oath that he's not the John H. Burton that they are claiming had this account."[8] Based on this information, the state court immediately dismissed Unifund's claims and Mr. Burton's counterclaims without prejudice. Mr. Burton then amended his federal complaint, adding Unifund as a defendant in this action. Kohn, Unifund, and Mr. Burton then filed cross-motions for summary judgment.

         On April 13, 2018, the district court decided the parties' cross-motions. First, the court denied Mr. Burton's motion for summary judgment. Noting that "the FDCPA does not protect all obligations, but only those involving 'consumer' debt/' the court held that Mr. Burton had not established that the underlying debt was a consumer debt.[9] The court observed that, under the FDCPA, a consumer debt arises out of a transaction that is "primarily for personal, family, or household purposes."[10] Similarly, the WCA only protects "customers," defined as persons "who seek[] or acquire[] real or personal property, services, money or credit for personal, family, or household purposes."[11]

         While continuing to maintain that he did not know anything about the debt in question, Mr. Burton attempted to demonstrate that the Citibank debt was incurred for "personal, family, or household purposes." In this respect, he submitted evidence that: (1) Kohn and Unifund described themselves as debt collectors; (2) the billing statements showed that the charges on the credit card were for personal, family, and household use; (3) the billing statements were addressed to Mr. Burton personally at his residence; and (4) in an email, a Citibank employee described the underlying account as a "consumer account."[12] The district court nevertheless determined that this evidence was insufficient to establish that the underlying debt was a consumer debt. The court observed that the defendants' status as debt collectors did not establish that the particular debt in question here necessarily was consumer debt. Nor did the fact that the de- fendants sued Mr. Burton personally or that they repeatedly included FDCPA disclaimers in their communications to him establish that the debt was a consumer debt. The billing statements sent to Mr. Burton's residence also did not establish that the debts were consumer debts because individuals often conduct business transactions at their home. Finally, the court noted that Mr. Burton admitted that he had testified that he had not applied for and had no knowledge of the transactions on the Citibank account. Viewing the evidence in the light most favorable to the nonmoving party, the court held that Mr. Burton was not entitled to judgment as a matter of law.

         The district court then granted Kohn and Unifund's motions for summary judgment. At the outset of its analysis, the court made clear that Mr. Burton had the burden of establishing that the underlying transactions were consumer transactions. The court noted again that Mr. Burton had disavowed, in sworn testimony, any knowledge of the underlying credit card transactions. Turning to the email from the Citibank employee describing the account as a "consumer account, "[13] the court ruled that the email statement was inadmissible hearsay and that none of the exceptions to the rule against hearsay applied. The court also determined that the billing statements did "not facially show that the charges were made for personal use."[14] Finally, the court considered Mr. Burton's repeated assertions that he had no knowledge of, or association with, the Citibank account. Acknowledging that evidence of identity theft can be relevant to establishing the existence of consumer debt, the court nevertheless concluded that Mr. Burton had presented no such evidence in this case. Therefore, the court held that Mr. Burton had "not put forth any admissible evidence that show[ed] a genuine factual dispute regarding whether the debt incurred was for personal, family, or household use."[15] The court accordingly entered judgment for the defendants. Mr. Burton filed a timely notice of appeal.

         II

         DISCUSSION

         In this appeal, Mr. Burton focuses only on the district court's grant of summary judgment for the defendants. We review de novo a district court's decision to grant summary judgment. Lewis v. CITGO Petroleum Corp., 561 F.3d 698, 702 (7th Cir. 2009). Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "Thus, to survive summary judgment, the nonmoving party must present evidence sufficient to establish a triable issue of fact on all essential elements of [his] case." Lewis, 561 F.3d at 702. "If there is no triable issue of fact on even one essential element of the nonmoving party's case, summary judgment is appropriate." Id.

         Here, we examine the record in the light most favorable to Mr. Burton and grant him the benefit of all reasonable inferences that may be drawn from the evidence. We will re- verse the judgment only if we find a genuine issue concerning any fact that might affect the outcome of the case. We must remember, however, that "[o]nce a party has made a properly-supported motion for summary judgment, the nonmoving party may not simply rest upon the pleadings but must instead submit evidentiary materials that set forth specific facts showing that there is a genuine issue for trial." Siegel v. Shell Oil Co., 612 F.3d 932, 937 (7th Cir. 2010) (internal quotation marks omitted). "The nonmoving party must do more than simply show that there is some metaphysical doubt as to the material facts." Id. Further, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient to show a genuine issue of material fact." Liu v. T & H Mach., Inc., 191 F.3d 790, 796 (7th Cir. 1999). "Rather, a genuine issue of material fact does not exist unless there is sufficient evidence favoring the non-moving party for a jury to return a verdict for that party." Id.

         We have clarified that "[t]he burden on the non-movant is not onerous." Id. "The nonmovant need not depose h[is] own witnesses or produce evidence in a form that would be admissible at trial, but []he must go beyond the pleadings (e.g., produce affidavits, depositions, answers to interrogatories, or admissions on file) to demonstrate that there is evidence upon which a jury could properly proceed to find a verdict in h[is] favor." Modrowski v. Pigatto, 712 F.3d 1166, 1168-69 (7th Cir. 2013) (citation omitted) (internal quotation marks omitted). "Moreover, the non-movant need not match the movant witness for witness, nor persuade the court that his case is convincing; he need only come forward with appropriate evidence demonstrating that there is a pending dispute of material fact." Liu, 191 F.3d at 796-97. "[A] party will be successful in opposing summary judgment only when they present definite, competent evidence to rebut the motion." EEOC. v. Sears, Roebuck & Co., 233 F.3d 432, 437 (7th Cir. 2000) (quoting Smith v. Severn, 129 F.3d 419, 427 (7th Cir. 1997)).

         Both the FDCPA and the WCA were enacted to protect personal borrowers from abusive debt collection practices.[16]It follows that, to state a claim under either statute, a plaintiff, who has the burden of proof on each element of the cause of action, must demonstrate that the debt in question arises out of a transaction incurred for personal, family, or household purposes. The FDCPA defines a "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 personal, family, or household purposes." 15 U.S.C. § 1692a(5) (emphasis added). Similarly, the WCA protects transactions involving a "customer," Wis.Stat. §421.301(13), and defines a "customer" as "a person ... who seeks or acquires real or personal property, services, money or credit for personal, family or household purposes," id. § 421.301(17) (emphasis added). Expenses incurred for a business purpose, by contrast, are outside the scope of both statutes. See, e.g., Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872, 875 (7th Cir. 2000) (interpreting the FDCPA); Seeger v. AFNI, Inc., No. 05-C-714, 2007 WL 1598618, at *7 (E.D. Wis. June 1, 2007) (unpublished) (interpreting the WCA).

         We also recognized recently that where, as here, a plaintiff maintains that the underlying debt was not his, he can nonetheless claim FDCPA protection by showing that the debt collector treated him as a "consumer" allegedly owing a consumer debt. Loja v. Main St. Acquisition Corp., 906 F.3d 680, 684 (7th Cir. 2018) (holding "that the definition of 'consumer' under the FDCPA includes consumers who have been alleged by debt collectors to owe debts that the consumers themselves contend they do not owe"). However, a plaintiff proceeding under this theory still must offer evidence to establish that the debt was a consumer debt: in other words, that the debt was incurred for personal, family, or household purposes.

         This appeal therefore turns on the question whether Mr. Burton submitted sufficient evidence to create a triable issue of fact that the debt incurred on the Citibank account was for personal, family, or household purposes.[17] Determining the purposes for which a debt was incurred is necessarily a fact-based, case-specific inquiry. Mr. Burton submits there are five pieces of evidence establishing that the debt incurred on the Citibank account was consumer debt: (1) his statements that, to the extent he was liable for the debt, it was a consumer debt; (2) the defendants' treatment of the debt as a consumer debt by including FDCPA disclaimers on the collection letters, suing Mr. Burton in his personal capacity, and sending communications to his personal address; (3) Kohn and Unifund's description of their consumer debt collection services on their websites; (4) a Citibank employee's ...


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