The Court of Appeals for the Seventh Circuit has overturned a lower court’s dismissal of a lawsuit and ruled that the same plaintiff filing the exact same lawsuit on two separate debts — the second suit was filed 16 days after the first suit was settled — is not prohibited under federal law.
A copy of the ruling in Horia v. Nationwide Credit & Collection can be accessed by clicking here.
The plaintiff disputed a debt in writing with the defendant, which failed to report the debt as disputed with the credit bureau. That suit was settled. Sixteen days later, the plaintiff filed another suit, involving a separate debt owed to a separate creditor and a separate letter that he received, but made the same allegations — that the debt was disputed, but the defendant failed to report the dispute to the credit bureau. This time, a District Court judge granted the defendant’s motion to dismiss the suit, ruling that the plaintiff was “gaming the system” by seeking multiple recoveries for the same type of violation. The District Court judge ruled that the plaintiff had impermissibly split his claims.
The Appeals Court disagreed with the lower court in overturning the dismissal.
“Suppose this were an employment-discrimination suit,” it wrote in its ruling. “On Monday a potential employer turns down an applicant because of the applicant’s race. Unfazed, the applicant tries again on Friday and is rejected again, for the same forbidden reason. Does the disappointed applicant have one claim or two? The answer is two — for National Railroad Passenger Corp. v. Morgan, 536 U.S. 101, 111 (2002), holds that each discrete discriminatory act produces one claim. In Morgan that mattered to the statute of limitations; here it matters to claim preclusion, but the principle is the same. Discrete and independently wrongful acts produce different claims, even if the same wrongdoer commits both offenses and the second wrong is similar to the first.”
Because the debts were owed to different creditors and because two separate letters were sent and because each debt was disputed separately and because both times the defendant failed to report the debt as disputed, the two incidents are separate, not part of one larger incident, the Appeals Court ruled.
The Appeals Court also chided the defendant for not crafting a broader release when it settled the first suit.
“If Nationwide Credit wanted to extend the effect of the settlement, it had only to negotiate a broad release,” the Appeals Court wrote. “Many a release covers all disputes between the same parties, not just the dispute already in court. Maybe the release in Horia’s first suit does cover the second, but release is an affirmative defense, see Fed. R. Civ. P. 8(c)(1), which Nationwide Credit has not asserted.”
The plaintiff may have “difficulty” showing he suffered the same harm when the second dispute was not reported, but he is entitled to try, the Appeals Court ruled.
