United States Court of Appeals

For the Eighth Circuit

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No. 17-2826

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David Coyne, on behalf of himself and all others similarly situated

lllllllllllllllllllllPlaintiff - Appellant

v.

Midland Funding LLC; Midland Credit Management, Inc.

lllllllllllllllllllllDefendants

Messerli & Kramer P.A.

lllllllllllllllllllllDefendant - Appellee

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Appeal from United States District Court 

for the District of Minnesota - Minneapolis

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Submitted: June 13, 2018

Filed: July 16, 2018 

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Before WOLLMAN, ARNOLD, and KELLY, Circuit Judges.

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ARNOLD, Circuit Judge.

In 2016, Minnesota resident David Coyne received three collection letters

about a credit-card debt in his name. The law firm of Messerli & Kramer P.A. sent
him the first letter, asserting he owed an "account balance of $17,230.29 consist[ing]

of the principal balance of $13,205.30 and interest of $3,871.39 at the rate of 6.00%

plus incurred costs of $153.60." Another debt collector, Midland Credit Management,

Inc., sent himthe other letters on behalf of the debt's current owner, Midland Funding

LLC, but those parties and letters are not before us in this appeal.

Coyne filed a putative class action against Midland Funding and the two debt

collectors under the Fair Debt Collection Practices Act, see 15 U.S.C. § 1692k(d),

claiming they used a "false, deceptive, or misleading representation or means," see

id. § 1692e, and an "unfair or unconscionable means," see id. § 1692f, in attempting

to collect the credit-card debt when they told him, among other things, that he owed

interest on the debt's principal balance. In his amended complaint, Coyne alleges that

the principal balance included contractual interest. He also alleges that since the

underlying credit-card agreement does not authorize the charging of compound

interest (i.e., interest on the contractual interest), the defendants falsely represented

the amount of the debt and impermissibly tried to collect interest that they could not

charge under Minnesota law. See Minn. Stat. § 334.01(1) (setting forth the rule that

"[i]n the computation of interest upon any . . . instrument or agreement, interest shall

not be compounded" unlessthe parties have contracted for compound interest).Coyne

attached all three collection letters to his amended complaint. See Brown v. Green

Tree Servicing LLC, 820 F.3d 371, 373 (8th Cir. 2016).

When Midland Funding and the debt collectors moved the district court to

dismiss the amended complaint for failing to state a claim, the district court granted

the motion and dismissed the action on the ground that Coyne failed to allege that any

statement in the collection letters "was not only false but materially so." The district

court explained why some of the statements Coyne had contested did not violate the

FDCPA, but it did not discuss whether he had pleaded a claim based on the charging

and attempted collection of compound interest that state law did not allow. Coyne

moved the district court for leave to file a motion to reconsider, but the district court

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denied him leave since it had determined that the representations in the letters

"regarding interest were either not material or did not violate the FDCPA." Coyne

appeals from the judgment dismissing his complaint, and we reverse.

We review de novo a district court's dismissal of a complaint for failing to state

a claim, "accepting the factual allegations in the complaint as true and viewing them

in the light most favorable to the plaintiff." United States ex rel. Ambrosecchia v.

Paddock Labs., LLC, 855 F.3d 949, 954 (8th Cir. 2017). The only claim that Coyne

seeks to resuscitate against Messerli is that it violated 15 U.S.C. §§ 1692e and 1692f

by attempting to collect, and representing he owed, compound interest on the debt.

The amended complaint, moreover, alleges facts against Messerli only in relation to

its letter to Coyne. So as Coyne conceded at oral argument, we now have only one

issue to review: Whether Coyne stated a FDCPA claim when he alleged thatsince the

debt's principal balance included contractual interest and since "compounded interest

upon interest" was "not expressly authorized by the agreement creating the debt," the

interest on the principal balance that Messerli's letter tried to collect, and said that he

owed, was compound interest "in violation of Minn. Stat. § 334.01."

The FDCPA is a consumer-protection statute authorizing private lawsuits and

weighty fines to deter wayward collection practices. Henson v. Santander Consumer

USA Inc., 137 S. Ct. 1718, 1720 (2017). The statute prohibits a debt collector from

asserting any "false, deceptive, or misleading representation," or using any "unfair or

unconscionable means," to attempt to collect a debt. See 15 U.S.C. §§ 1692e, 1692f.

In determining whether a collection letter sent directly to a debtor uses a prohibited

representation ormeans, we normally view it "through the eyes ofthe unsophisticated

consumer." Freyermuth v. Credit Bureau Servs., Inc., 248 F.3d 767, 771 (8th Cir.

2001). That standard is designed to protect consumers of below average intelligence

or sophistication. Strand v. Diversified Collection Serv., Inc., 380 F.3d 316, 317 (8th

Cir. 2004). Coyne may well be sophisticated since he is a licensed attorney, and if he

were "interposed as an intermediary" between a debt collector and a debtor in another

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case, we would apply the "competent lawyer" standard to collection letterssent to him

in his capacity as the debtor's counsel. See Powers v. Credit Mgmt. Servs., Inc., 776

F.3d 567, 574 (8th Cir. 2015). Though the parties below disputed which standard

should apply to a collection letter sent to a debtor who is a lawyer, Messerli does not

contest the district court's holding that the unsophisticated-consumerstandard applies.

So we assume for purposes of the appeal that Messerli's letter must be evaluated from

the perspective of an unsophisticated consumer.

It is undisputed that Minnesota law governs Coyne's alleged credit-card debt.

Minn. Stat. § 334.01(1) provides that "[i]n the computation of interest upon any . . .

instrument or agreement, interest shall not be compounded" unlessthere is a "contract

to pay [such] interest." See Lampert Lumber Co. v. Ram Constr., 413 N.W.2d 878,

883 (Minn. Ct. App. 1987). Coyne alleges he did not agree to pay compound interest

on the debt, and at this stage we must accept that allegation as true. See Paddock

Labs., 855 F.3d at 954. He further alleges that the debt's principal balance already

contained contractual interest. The district court agreed that an unpaid credit-card

debt sold to another party would include "the interest and fees [the credit-card

company] originally charged." Neither party conteststhat ruling on appeal, and so we

hold that Coyne has plausibly alleged that the principal balance that Messerli's letter

mentions contained contractual interest. Cf. Haney v. Portfolio Recovery Assocs.,

L.L.C., 837 F.3d 918, 921, 924 (8th Cir. 2016) (per curiam).

It is also plausible that the interest charged on the principal balance included

interest on the contractual interest: Messerli's letter to Coyne was dated February 26,

2016, and it asserted that he owed "interest of $3,871.39 at the rate of 6.00%" on "the

principal balance of $13,205.30." This amount of interest is approximately what

would accrue on the principal balance under an annual rate of 6.00% simple interest

fromthe date the credit-card company sold the debt—April 14, 2011, according to the

final debt-collection letter—to the date of Messerli's letter. So if the principal balance

has contractual interest in it, the interest sought in Messerli's letter would include

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interest on that contractual interest. We thus hold that Coyne has plausibly alleged

that Messerli tried to collect, and told him that he owed, an amount and a type of

interest that state law prohibited in the circumstances.

In Haney, we held under the unsophisticated-consumer standard that a debtor

stated a claim under 15 U.S.C. §§ 1692e and 1692f(1) when he alleged that a debtcollection letter had sought to collect, and informed him he owed, "an interest-oninterest amount not allowed as a matter ofstate law." Id. at 931–32. We reasoned that,

under the unsophisticated-consumer standard, demands to pay an amount of debt

"unauthorized . . . or even 'slightly overstated'" under state law is actionable as a false

statement or unfair collection attempt. See id. at 932. But in Haney we did not address

whether attempts to collect a debt amount that the debtor does not legally owe are a

material violation of §§ 1692e and 1692f. We have since established that a materiality

standard applies to § 1692e. Hill v. Accounts Receivable Servs., LLC, 888 F.3d 343,

346 (8th Cir. 2018). We have not yet stated whether the standard also applies to §

1692f, but we need not decide that issue today since "an attempt to collect a debt not

owed is a material violation of § 1692f(1)." Demarais v. Gurstel Chargo, P.A., 869

F.3d 685, 699 (8th Cir. 2017).

We now hold that a false representation of the amount of a debt that overstates

what is owed under state law materially violates 15 U.S.C. § 1692e(2)(A) as well. It

is material not only because the representation violates the plain language of that

subsection prohibiting the "false representation" of the "amount" of "any debt," but

also because an overstatement of the debt's amount necessarily misleads the debtor

about the amount he owes under his agreement with the creditor. See Hill, 888 F.3d

at 345–46; cf. Demarais, 869 F.3d at 699. So the district court erred in holding that

the allegation under review—that Messerli's letter to Coyne attempted to collect, and

asserted he owed, compound interest in violation of Minn. Stat. § 334.01—did not

state a plausible claim under §§ 1692e and 1692f.

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Messerli argues nonetheless that it did not violate the FDCPA since the amount

of interest stated in its letter to Coyne was contractually authorized. That may prove

to be true. But at the pleading stage we must accept Coyne's allegation that he did not

agree to be charged compound interest and so may not be charged it. See Minn. Stat.

§ 334.01(1). Messerli maintains we must calculate the interest Coyne may be charged

under some credit-card terms it attached to its motion to dismiss, asserting the district

court considered them"governing" and Coyne did not object to their authenticity. But

Messerli is wrong. In his opposition to the motion, Coyne specifically contested the

terms as "unauthenticated," noting they were "boilerplate" and did not "identify [him]

as a party" to them. He also noted that Messerli provided no reason to believe the

terms were in any way related to the underlying credit card "aside from [a Messerli

attorney] just unilaterally stating that those are the terms . . . that applied." Since

Coyne questioned the applicability of the terms, we may not consider them in

reviewing the sufficiency of his complaint. Ryan v. Ryan, 889 F.3d 499, 505 (8th Cir.

2018). The district court, moreover, did not consider those terms when it granted the

motion: Instead of looking to the interest provisions in the terms Messerli proffered,

the district court simply noticed that a credit card's terms "always include interest."

We express no view on the propriety of that notice. See Fed. R. Evid. 201(b). The

notice did not help Messerli in any event since the notice taken said nothing about

terms authorizing compound interest.

Since the amended complaint and the documentsit necessarily embraces do not

indicate the interest rates that apply to the debt, we have no occasion to consider

Messerli's argument that a debt collector may try to collect compound interest (which

state law does not allow) without materially violating the FDCPA so long asthe total

amount of interest sought does not exceed the maximum amount permitted under the

debtor's contract. Messerli contendsthe district court held thatrequesting lessinterest

than the amount owed does not materially violate the FDCPA, but that is simply not

correct. Nothing in the district court's orders granting the motion to dismiss and

denying Coyne leave to file a motion to reconsider supports Messerli's representation.

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At oral argument, Messerli further asserted that the district court had correctly noted

that its letter to Coyne "was not a collection letter," but Messerli errs again: The

district court did not make that observation, and it was not even in a position at the

pleading stage to do so since that observation would have conflicted not only with the

allegations in the amended complaint, but also with the declaration printed on the

letter's face that it "is from a debt collector and is an attempt to collect a debt." 

We reverse the judgment of the district court only as to Coyne's claim against

Messerli that it violated 15 U.S.C. §§ 1692e and 1692f when it attempted to collect,

and represented he owed, compound interest on the debt in violation of Minnesota

law. We remand the case for further proceedings on that claim. 

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