CARTER v. AMC (May 13, 2011)

Jackson Square Properties owns the Riverstone Apartments in Bolingbrook Illinois. AMC, LLC managed the building on its behalf. AMC brought suit in state court to evict tenant Geaneice Carter. Although AMC prevailed at the trial court level, the appellate court reversed on the ground that AMC failed to give proper notice. One judge on the panel also concluded that AMC violated the Fair Debt Collection Practices Act. Carter brought suit in federal court seeking damages for AMC's violation of the Act. Judge Gettleman (N.D. Ill.) dismissed the complaint on the ground that AMC was not a "debt collector" under the Act because it collected money owed to itself. Carter appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Sykes affirmed. The Court rejected Carter's position that AMC's violation of the Act was established in state court. Not only is the opinion of one judge on a three-judge panel not enough to resolve an issue, but even the one judge who expressed an opinion acknowledged that the resolution of that issue was not necessary for the court's decision. Collateral estoppel applies only when an issue is necessarily decided. The Court then pointed out an incorrect factual assumption made by both the state court and the district court. Both assumed that AMC was the lessor. In fact, it is clear that Jackson Square Properties is the lessor and AMC is its agent. AMC can therefore not escape liability under the Act as the lessor. But AMC can also escape liability if it is attempting to collect a debt it "obtained" from another and the debt was not in default when AMC obtained it. The Court noted that several courts of appeals have concluded that a mortgage loan servicer "obtains" the bank's debt. Although no court of appeals has considered the lessor situation, many district courts have and have concluded that a lease servicer "obtains" the debt when the lease is signed. The FTC staff has also concluded, albeit not in a regulation or advisory opinion, that a lease servicer "obtains" the debt when it becomes the agent. The agent is not a debt collector under the Act unless the rent was in arrears at that time. The Court therefore concluded that AMC obtained the debt when it acquired the authority to collect the rent. Since Carter was not in arrears at that time, AMC is not a debt collector under the Act.