In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 06-2059

DELISA ROSS,

Plaintiff-Appellant,

v.

RJM ACQUISITIONS FUNDING LLC,

Defendant-Appellee.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 04 C 6557—Geraldine Soat Brown, Magistrate Judge.

____________

ARGUED JANUARY 4, 2007—DECIDED MARCH 13, 2007

____________

Before POSNER, RIPPLE, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge. When a debtor’s debts are discharged in bankruptcy, efforts to collect them are unlawful.

A debtor dunned after bankruptcy, if he knows his rights,

can simply ignore any dunning letter he receives in respect of

one of the discharged debts. But there is a danger that debt

collectors would continue sending these letters, thinking

that the recipient mightn’t realize that his debts had been

discharged or that the debt he was being dunned for, perhaps long after the bankruptcy, was among the debts that

had been discharged. Or he might think the debt was a

debt that cannot be discharged in bankruptcy.
2 No. 06-2059

Dunning people for their discharged debts would undermine the “fresh start” rationale of bankruptcy (bankruptcy

as a system of debtors’ rights as well as creditors’ remedies),

and is prohibited by the Fair Debt Collection Practices Act,

which so far as relates to this case prohibits a debt collector

(a defined term) from making a “false representation of the

character, amount, or legal status of any debt.” 15 U.S.C.

§ 1692e(2)(A). Although not aimed specifically at efforts to

collect debts that have been discharged in bankruptcy, this

provision fits that practice to a T. Turner v. J.V.D.B. & Associates, Inc., 330 F.3d 991, 994-95 (7th Cir. 2003); cf. Randolph v.

IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (“a demand for

immediate payment while a debtor is in bankruptcy (or

after the debt’s discharge) is ‘false’ in the sense that it asserts

that money is due, although, because of the automatic stay

(11 U.S.C. § 362) or the discharge injunction (11 U.S.C. § 524),

it is not”). However, although the representation need not

be deliberate, reckless, or even negligent to trigger liability—

it need only be false—the Act provides a complete defense

to a debt collector who “shows by a preponderance of

evidence that the violation was not intentional and resulted

from a bona fide error notwithstanding the maintenance of

procedures reasonably adapted to avoid any such error.” 15

U.S.C. § 1692k(c).

This safety hatch is important because the Act authorizes

damages in excess of the actual cost incurred by the victim of

a violation: The victim is entitled to “any actual damage

sustained by [him] as a result of” the violation, plus, “in the

case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or

in the case of a class action, (i) such amount for each named

plaintiff as could be recovered under subparagraph (A),

and (ii) such amount as the court may allow for all other

class members, without regard to a minimum individual

recovery, not to exceed the lesser of $500,000 or 1 per centum
No. 06-2059 3

of the net worth of the debt collector.” 15 U.S.C.

§§ 1692k(a)(1), 2(A), (B). When damages are capped at the

harm to the victim, a potential injurer will not take precautions to avert that harm that cost more than the cost the

harm causes the victim. Brotherhood Shipping Co. v. St. Paul

Fire & Marine Ins. Co., 985 F.2d 323, 327 (7th Cir. 1993); Eimann

v. Soldier of Fortune Magazine, Inc., 880 F.2d 830, 835 (5th

Cir. 1989); Rhode Island Hospital Trust National Bank v. Zapata

Corp., 848 F.2d 291, 295 (1st Cir. 1988). So if required by a

court to pay more, he will spend more, if necessary to avert

the harm, than the cost the harm causes the victim; and

that is too much from an overall social standpoint. Movitz v.

First National Bank, 148 F.3d 760, 763 (7th Cir. 1998); BMW

of North America, Inc. v. Gore, 517 U.S. 559, 593 (1996) (concurring opinion); compare Kemezy v. Peters, 79 F.3d 33, 34

(7th Cir. 1996). Hence the section 1692k(a) defense, which

forgives mistakes, even though they inflict harm, when the

cost of avoiding a mistake would be disproportionate to the

harm.

We must decide whether the procedures that the defendant debt collector, RJM, adopted in order to try to

avoid—unsuccessfully in the case of the plaintiff, Ross—

dunning a debtor for a discharged debt were reasonable

within the meaning of section 1692k(a).

In 2002 RJM purchased a number of charged-off accounts

from Federated Department Stores; among them was a

$574.72 debt that Ross owed Federated. The parties to the

sale of the debts—Federated and RJM—agreed in the sale

agreement that “they have not and will not intentionally

attempt to collect[,] or collect[,] debt that has been discharged

in bankruptcy.” But Federated did not guarantee that the

package of debts it was selling to RJM contained no discharged debts.

RJM retained its affiliate Plaza Associates to collect Ross’s

debt. In May 2003 Plaza Associates sent a dunning letter to
4 No. 06-2059

“Lisa Ross.” That was the name under which she had incurred the debt to Federated, but she normally goes by the

name “Delisa Ross.” Delisa Ross declared bankruptcy the

following month, listing the Federated debt under the

name Delisa Ross rather than Lisa Ross and stating that

Plaza Associates and RMA—not RJM—were trying to collect the debt. There is a debt collector named RMA, but it is

unrelated to RJM and had nothing to do with Ross’s debt.

Plaza Associates, having been named in the listing of the

debt in the bankruptcy proceeding, was notified of the

bankruptcy and realized (we are not told how) that the

debtor Lisa Ross was the bankruptcy debtor Delisa Ross. Not

waiting for the debt to be discharged, Plaza Associates

abandoned collection efforts and returned the Lisa Ross

file to RJM. But it failed to inform RJM what Lisa Ross’s

true name was and that she had declared bankruptcy.

She received a discharge of the debt on October 17, thus

placing the debt beyond the reach of RJM. Plaza Associates

received notice of the discharge but did not forward it to RJM.

Many months later, RJM, not realizing that Lisa Ross was

Delisa Ross, twice mailed dunning letters to Lisa Ross at

Delisa Ross’s address, for Ross had given her correct address, though an incorrect name, to Federated. Ross did not

respond to either letter by paying RJM anything, but instead

referred the letters to her lawyer. He informed RJM that

Lisa Ross was the same person as Delisa Ross. RJM made

no further effort to collect the debt. Nevertheless, Ross—

whose lawyer’s motto is “We sue abusive debt collectors,”

www.myfairdebt.com/b/62/david-philipps/, visited Jan. 19,

2007—sued RJM. The district court granted summary judgment in favor of RJM on the basis of the section 1692k(c)

defense, and Ross appeals.

RJM was mindful of its legal duty not to dun a discharged

bankrupt, and to that end conducted a computerized search
No. 06-2059 5

of bankruptcies, which failed however to reveal Delisa

Ross’s bankruptcy because the search was for Lisa Ross, the

name on the account that had been sold to RJM for collection.

RJM had several procedures in place to minimize errors

such as occurred in this case: an understanding with the

firms that sell it debts for collection that they would not

knowingly sell RJM a discharged debt and that they

would notify RJM if after forwarding a debt they discovered

that it had been discharged or had otherwise become uncollectable; RJM’s bankruptcy search (actually done for it by

another firm); Plaza’s promise to notify RJM if it received a

notice of discharge; and RJM’s prompt cessation of any

attempt to collect a debt upon notification that it had

been discharged. These procedures are reasonable—indeed

Hyman v. Tate, 362 F.3d 965, 968-69 (7th Cir. 2004), holds that

the first and fourth are enough to discharge the duty of

reasonableness, remarking that only .01 percent (1 in 10,000)

of all the debts referred for collection by the debt collector

in that case were later discovered to have been discharged

in bankruptcy. Id. at 968; see also Kort v. Diversified Collection

Services, Inc., 394 F.3d 530, 539 (7th Cir. 2005); Jenkins v.

Heintz, 124 F.3d 824, 834-35 (7th Cir. 1997); Lewis v. ACB

Business Services, Inc., 135 F.3d 389, 401-02 (6th Cir. 1998). We

estimated in Hyman that it would have cost the defendant

$1.5 million to obtain a credit report on each debtor. That

was too much relative to the likely harm caused by the

dunning letters mailed in error in that case—and in this one.

There may for all we know be a nefarious practice of dunning

these unfortunates and laying off only if the plaintiff is

fortunate enough to be represented by a bulldog like

Mr. Philipps. But there is no evidence of this.

The plaintiff argues that with the rapid advances in digital

search technology, pertinently illustrated by the feature of

the Google search engine that asks the searcher “do you

mean?” when the searcher has mistyped a word yet it is
6 No. 06-2059

possible to infer what word he probably meant, RJM

should have adopted a search method that would have

pegged Lisa Ross as Delisa Ross. We don’t know whether

such a method is as yet commercially available. If you type

“Lisa Ross” into Google, you don’t get “do you mean Delisa

Ross?” Google’s approach looks for spelling variations

and suggests a variant (usually the correct) spelling if it

produces substantially more hits. That won’t work for most

searches on names, unless you misspell a famous and distinctive one. So type “Lisa Ross” into Google and you get

such things as “Lisa Ross Birth & Women’s Center.” And

in a Boolean search the exclamation mark serves as a root

expander, so that the name “ros!” will turn up ross, or

roster, or rostenkowski, but no “Delisa Ross.” There are

other types of search algorithm as well, such as phonetic

and approximate-string matching algorithms, see, e.g.,

http://en.wikipedia.org/wiki/Soundex; /www. codeproject.

com/string/dmetaphone6.asp; http://en.wikipedia.org/

wiki/Approximate_string_matching, but they probably

would not have detected the error either.

Even if there is a search algorithm that would have

turned up Delisa Ross in a search under the name Lisa

Ross, it would not make her case. The word “reasonable”

in the Fair Debt Collection Practices Act defense cannot be

equated to “state of the art,” which is to say, at the technological frontier. For then whenever a new, more powerful

search program came on the market, debt collectors

who failed to purchase it post haste would find themselves

sued by clients of Mr. Philipps seeking statutory damages on

top of any actual damages they might have suffered. The

investment would be disproportionate to the slight aggregate harms resulting from the handful of dunning letters

that modest procedures occasionally let through the sieve.

Still another objection would be to the invasions of privacy

that would result from the breadth of search designed to
No. 06-2059 7

identify people using more than one name. It is not their

privacy that concerns us but that of people who have nothing to do with the debt that the debt collector is trying

to collect. Had RJM searched under “Ross,” or searched

under Ross’s address or social security number (a search

that if conducted today, however, would be limited to the

last four digits because the full number, though required to

be submitted to the bankruptcy court, is no longer public,

Bankr. R. 1005, 1007(f); Laura DiBiase, “Identity Theft in the

Bankruptcy World,” 22-9 Am. Bankr. Inst. J. 36, 36 (2003)), it

might have collected financial information about a host of

people named Ross who were not Delisa Ross, including

family members at her address, persons with the name Ross

at a different address (since she might have moved), and

people with similar social security numbers.

Liability would be especially perverse in this case because

the plaintiff is the principal author of the harm of which

she complains. In her bankruptcy schedule she was required to list debts contracted under aliases, Bankr. R. 1005,

a simple and salutary precaution that she was irresponsible in

omitting. In re Tully, 818 F.2d 106, 110-12 (1st Cir. 1987). “The

successful functioning of the Bankruptcy Code hinges both

upon the bankrupt’s veracity and his willingness to make a

full disclosure.” In re Mascolo, 505 F.2d 274, 278 (1st Cir. 1974).

Ross flouted that duty. She was what economists, and even

some judges, call the “least cost avoider” of the harm for

which she now seeks legal redress. Holtz v. J.J.B. Hilliard W.L.

Lyons, Inc., 185 F.3d 732, 743 (7th Cir. 1999); United States v.

Tex-Tow, Inc., 589 F.2d 1310, 1314-15 and n. 10 (7th Cir. 1978);

Rankin v. City of Wichita Falls, 762 F.2d 444, 448 n. 4 (5th

Cir. 1985).

But shouldn’t we worry about the role of Plaza Associates,

a well-known debt-collection company (see www.

plazaassociates.com/, visited March 7, 2007) that is affiliated

with (probably the parent of) RJM? It was Plaza Associates
8 No. 06-2059

that committed the blunder that resulted in the dunning

letters to Ross—and can a debt collector be permitted to

evade the statute by delegating to an affiliate the responsibility for determining whether a debt referred to the debt

collector for collection has been discharged in bankruptcy?

But that is not what happened here. Plaza is a debt collector

too, and was operating in that capacity when it mailed

the dunning letter to Ross. See 15 U.S.C. § 1692a(6). Presumably it escaped being sued only because it mailed its dunning

letter before Ross declared bankruptcy, and therefore its

letter contained no false representation.

But even if we collapsed the two companies into one,

attributing Plaza’s blunder to RJM, Ross could not prevail.

Remember that a mistake is not fatal if it was committed even

though reasonable procedures for avoiding mistakes were

followed; and we are given no reason to doubt that Plaza’s

procedures were reasonable. The reason for its mistake may

simply have been that the notice of Ross’s discharge in

bankruptcy named RMA, not RJM, as the creditor. Maybe

Plaza forwarded the notice to RMA rather than to RJM. Of

course, if so, RMA may have returned it to Plaza, but even

then Plaza might not have guessed that the real creditor was

RJM.

RJM has moved for an award of sanctions under Rule 38 of

the appellate rules, arguing that Ross’s appeal is frivolous.

The appeal has failed, but it is not frivolous, though we

warn Mr. Philipps that he is skating near the edge of his

pond.

The judgment is affirmed, the motion for sanctions denied.
No. 06-2059 9

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—3-13-07