7th circuit: collection agency entitled to fees after woman defaults on small hospital debt

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Collection agency did not violate the Fair Debt Collection Practices Act when it attempted to collect attorney fees and “fee-for-service” from an Indianapolis woman who defaulted on a small debt to an Indiana hospital system on the 7the The Circuit Court of Appeal has ruled.

In 2013, Ann Robbins owed a medical debt to Community Health Network Inc. for services provided to her children. At the time of service, she signed a written agreement to pay the fees the hospital billed her along with the collection fee if she didn’t.

But Robbins did not pay the fees billed to him, so Community Health returned the account to MED-1 Solutions for collection. With initial collection efforts unsuccessful, in 2014 MED-1 sued Robbins in the Township of Lawrence Small Claims Court, claiming $ 1,499 in unpaid medical bills and $ 375 in attorney fees on behalf of the hospital.

Robbins disputed the debt and obtained a discovery order. After MED-1 provided the documentation, she agreed that she owed the $ 1,499 and paid that amount in full – but refused to pay the attorney’s fees.

MED-1’s lawyer explained that due to his request for discovery, his actual fees were now higher than the $ 375 he originally requested. He offered to accept $ 375 to settle the fee dispute and warned her that her fees would increase if more time was spent on the case, making her liable for the fee-over-fee. But Robbins rejected the settlement offer.

Following a hearing, the Small Claims Court ruled in favor of MED-1 and ordered Robbins to pay $ 1,725, which included the award of legal fees and legal fees. .

Nine days before the small claims court hearing, Robbins sued MED-1 in federal court, alleging several violations of the FDCPA. She amended her complaint twice and a magistrate judge rejected some requests before abstaining and staying the case pending the final resolution of the case in state court.

The state case had been dormant for almost two years and remained so for another 14 months.

In March 2018, Robbins filed for non-prosecution under Rule 41 (E) of the Indiana Rules of Court. The Marion Superior Court allowed the motion and dismissed the case with prejudice, and Robbins reopened his federal action. The matter was remitted to another trial judge and the parties filed counterclaims for summary judgment.

Robbins asked the judge to make the state court judgment res judicata in the FDCPA action and to bar MED-1 from arguing that the agreement with Community Health required it to pay fees on fees. It also alleged that under the interpretation of the contract, the provision on collection costs in the payment agreement did not cover costs over costs. The trial judge rejected these arguments, dismissed his request and pronounced a judgment for MED-1.

Tuesday, the 7the Circuit upheld the United States District Court’s decision for the Southern District of Indiana.

In the opinion, Chief Justice Diane Sykes wrote that the exclusion doctrine does not apply and that Robbins cannot use the superior court dismissal order in an offensive manner to prevent MED-1 from argue that his contract with Community Health required him to pay the fees.

The appeals court concluded that the contract was “straightforward” because it said: “In the event that I do not pay these costs when due, I agree to pay the collection costs, including the lawyer.[’s] fees and interest.

“The provision in the contract requiring defaulting debtors to bear the hospital’s collection costs, including attorneys’ fees, is a standard cost transfer provision,” Skyes wrote for the court, stressing Walton v. Claybridge Homeowners Ass’n, Inc., 825, NE2d 818, 825 (Ind. Ct. App. 2005). “… The expression” collection costs, including legal fees[’s] “Fees” is complete; there is no indication that the costs incurred for the collection of legal fees are excluded.

“The fundamental premise of Robbin’s FDCPA claim – under both § 1692nd and § 1692f – thus collapses ”, continues the opinion. “And even if our interpretation of the contract is wrong, it does not necessarily follow that MED-1 violated the FDCPA. The law is debtor protection law, not a device intended to provide a boon to debtors who prevail against debt collectors who pursue non-frivolous debt collection actions.

The case is Ann Robbins v. MED-1 Solutions, LLC, 20-1343.


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