James A. Shula v. PAUL D. LAWENT and J.V.D.B. ASSOCIATES , INC .

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3194
J AMES A. S HULA ,
Plaintiff-Appellee,
v.
P AUL D. L AWENT and J.V.D.B. A SSOCIATES , I NC .,
Defendants-Appellants.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 01 C 4883—Arlander Keys, Magistrate Judge.
____________
A RGUED J ANUARY 21, 2004—DECIDED F EBRUARY 26, 2004
____________
Before F LAUM , Chief Judge, and P OSNER and R IPPLE , Circuit
Judges.
P OSNER , Circuit Judge. The Fair Debt Collection Practices
Act, 15 U.S.C. §§ 1692 et seq., forbids a debt collector (which
the corporate defendant and its lawyer, the individual de-
fendant, are conceded to be) to collect any amount of money
“(including any interest, fee, charge, or expense incidental
to the principal obligation) unless such amount is expressly
authorized by the agreement creating the debt or permitted
by law.” § 1692f(1). The defendants are accused by the
plaintiff, James Shula, of violating not only that section but

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2 No. 03-3194
also section 1692e, which forbids the use of misrepresenta-
tions in debt collection, and section 1692g(a), which requires
the debt collector in certain circumstances to send the debtor
a follow-up letter to his initial collection letter, containing
specified information to facilitate the debtor’s challenging
the debt if he doesn’t consider it valid. The district court
granted summary judgment for Shula with regard to all
three alleged violations and awarded him statutory dam-
ages of $1,000, plus attorneys’ fees and costs, precipitating
this appeal.
The defendants had originally dunned Shula for $187.87
that they claimed he owed a doctor. When Shula disputed
the debt, the defendants filed suit against him in the name
of the doctor in an Illinois state court, seeking $187.87 plus
court costs. To avoid having to defend against the suit,
Shula mailed the doctor a check for the full amount. Oddly,
but also irrelevantly, the doctor refunded Shula $152.45. The
defendants then abandoned the suit against him, though
without bothering to dismiss it—it was dismissed by the
court, on the court’s own initiative, two years after having
been filed. But they nevertheless mailed Shula a letter
demanding $52.73 for court costs in the abandoned proceed-
ing. The letter stated that Shula “owe[d]” this amount to the
defendants and explained that the letter was “an attempt to
collect a debt.” But besides not having obtained a judgment
in their Illinois suit, the defendants had not obtained a court
order that Shula pay them (technically their client, the
doctor) the court costs.
The violations of the Fair Debt Collection Practices Act
disclosed by this record are blatant, and reflect very poorly
upon attorney Lawent’s professionalism.
Although section 1692f(1) does not require proof that
the court costs that the defendants dunned Shula for con-
stituted a “debt” within the meaning of the Act, it will pro-

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No. 03-3194 3
mote clarity to begin with the 1692e and 1692g(a) violations,
which do, and to ask first whether Shula became indebted
to anyone to pay those costs. Although Illinois law autho-
rizes a court to award costs to a plaintiff if the defendant
pays the debt on which the suit was based before the entry
of judgment, 225 ILCS 425/8a-1(b), as happened here, the
court in the doctor’s suit against Shula did not make any
award of costs and therefore Shula did not become indebted
to anyone for costs.
If the court had awarded costs, they would have become
a debt owed by Shula. But there was no award, nor any cer-
tainty that had the defendants moved for one they would
have gotten it. The award of costs is not automatic in a case
that, like the doctor’s case against Shula, does not go to
judgment. Whether to award costs in such a case is a matter
committed to the judge’s discretion. 735 ILCS 5/5-118; see
Gebelein v. Blumfield, 597 N.E.2d 265 (Ill. App. 1992); Village
of Franklin Park v. Aragon Management, Inc., 699 N.E.2d 1053
(Ill. App. 1998); compare 735 ILCS 5/5-108, -109. That
makes it absurd to think that Shula ever became obligated
to pay the court costs. And even when a case does go to
judgment, so that the winning party has an entitlement to
an award of costs rather than having to appeal to the judge’s
discretion, 735 ILCS 5/5-108, -109, a judicial order is still
necessary for a debt to arise. Veach v. Sheeks, 316 F.3d 690,
692-93 (7th Cir. 2003); Duffy v. Landberg, 215 F.3d 871, 873-
74 (8th Cir. 2000). The point is general. Suppose a defendant
is held liable to the plaintiff after a trial and the statute
under which the plaintiff had sued entitled the plaintiff if he
prevailed to exactly $1,000, not a penny more or less. He still
could not levy on the defendant’s assets without first
obtaining a judgment ordering the defendant to pay him.
All this assumes of course that the costs that the defen-
dants were dunning Shula for constituted a (claimed)

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4 No. 03-3194
“debt,” for if not Lawent did not violate section 1692g(a) by
failing (and fail he did) to send the plaintiff the required
follow-up letter. Lawent himself described the costs in his
dunning letter to the plaintiff as a “debt,” and he should
doubtless be estopped to repudiate that characterization.
But in any event, 15 U.S.C. § 1692a(5) defines “debt” as “any
obligation or alleged obligation of a consumer to pay money
arising out of a transaction in which the money, property,
insurance, or services which are the subject of the transac-
tion are primarily for personal, family, or household
purposes, whether or not such obligation has been reduced
to judgment,” and that definition fits Shula’s alleged obli-
gation to pay the costs sought by the defendants to a
T. Person v. Stupar, Schuster & Cooper, S.C., 136 F. Supp.
2d 957, 961 (E.D. Wis. 2001); cf. Newman v. Boehm, Pearlstein
& Bright, Ltd., 119 F.3d 477, 481 (7th Cir. 1997).
There is a further wrinkle. The Fair Debt Collection
Practices Act regulates debt collectors, not creditors. So if
the defendants in trying to obtain court costs from Shula
were seeking to enforce their own debt, not their client’s—
the doctor’s—and so were creditors rather than debt col-
lectors, they are beyond the Act’s reach. Transamerica
Financial Services, Inc. v. Sykes, 171 F.3d 553, 554 n. 1 (7th Cir.
1999); Aubert v. American General Finance, Inc., 137 F.3d 976,
978 (7th Cir. 1998); Pollice v. National Tax Funding, L.P., 225
F.3d 379, 403-04 (3d Cir. 2000). There is an exception for the
case in which a creditor uses a pseudonym to collect a
debt—that is, poses as a debt collector. 15 U.S.C. § 1692a(6).
But here we have the converse case of a debt collector
posing as a creditor.
Costs like attorneys’ fees are awarded not to the lawyer
but to the client, though often the lawyer will have ad-
vanced the costs and charged them back to the client later.
Actually the cases establishing the client’s entitlement in-

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No. 03-3194 5
volve attorneys’ fees rather than costs. E.g., Venegas v.
Mitchell, 495 U.S. 82, 86-88 (1990); Evans v. Jeff D., 475 U.S.
717, 730-32 (1986); Central States, Southeast & Southwest Areas
Pension Fund v. Central Cartage Co., 76 F.3d 114, 116 (7th Cir.
1996); Richardson v. Penfold, 900 F.2d 116, 117 (7th Cir. 1990);
Klein v. Chicago Title & Trust Co., 14 N.E.2d 852, 857 (Ill.
App. 1938). But that is merely because court costs in the
sense of filing fees and the like are usually too slight to
make it important whether they are awarded to the lawyer
or his client. The principle that costs like attorneys’ fees are
the entitlement of the client rather than the lawyer is clear,
especially since it is standard for fee-shifting statutes to
award attorneys’ fees as part of the costs normally awarded
a prevailing party. E.g., 42 U.S.C. § 1988; 42 U.S.C. § 2000e-
5(k); 20 U.S.C. § 1415(i)(3)(B); cf. Alyeska Pipeline Service Co.
v. Wilderness Society, 421 U.S. 240, 254-55, 260-62 (1975).
So when the defendants were dunning Shula for costs,
they were doing so on behalf of the doctor. An award of
costs would have created a debt owed to the doctor rather
than to them. They thus were acting as debt collectors rather
than as creditors. It is true that Illinois law allows a debt
collection agency sometimes to obtain costs on its own
behalf; 225 ILCS 425/8a-1(b) provides that “court costs ex-
pended by the [collection] agency or the creditor for filing
a complaint are recoverable by the agency or the creditor
if the principal on the debt is paid before the judgment is
issued.” But this statute is applicable only when the col-
lection agency takes an assignment from the (original) cre-
ditor and sues in its own name to collect the debt. See 225
ILCS 425/8b. For that is the only case in which the agency
pays the court costs out of its own pocket rather than merely
advancing them as a loan to the creditor. There was no
assignment here. The defendants brought the state court suit
against Shula in their client’s, the doctor’s, name.

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6 No. 03-3194
Because the plaintiff did not owe the defendants $52.73,
the letter demanding that payment as a debt that he did owe
them was false and misleading and so violated section
1692e, while the failure to send a follow-up letter violated
section 1692g(a).
To establish a violation of section 1692f(1), Shula had
to show that the money demanded from him was “inciden-
tal” to a claimed debt and that the claimed obligation to pay
it arose neither by agreement nor by operation of law, in
which event it would be “permitted by law” to be the
subject of a collection action. Freyermuth v. Credit Bureau
Services, Inc., 248 F.3d 767, 770-71 (8th Cir. 2001); Duffy
v. Landberg, supra, 215 F.3d at 873-74; Tuttle v.
Equifax Check, 190 F.3d 9, 11-15 (2d Cir. 1999); Federal Trade
Commission, Statements of General Policy or Interpretation,
Staff Commentary on the Fair Debt Collection Practices Act,
53 Fed. Reg. 50,097, 50,108 (Dec. 13, 1988); cf. Johnson v.
Riddle, 305 F.3d 1107, 1117-21 (10th Cir. 2002). There is no
doubt that the defendants’ claim for the payment of costs by
Shula was “incidental” to Shula’s alleged debt to the doctor.
Tuttle v. Equifax Check, supra, 190 F.3d at 14-15; West v.
Costen, 558 F. Supp. 564, 581 (W.D. Va. 1983); see Freyermuth
v. Credit Bureau Services, Inc., supra, 248 F.3d at 770-71;
Dutton v. Wolhar, 809 F. Supp. 1130, 1140 (D. Del. 1992). Had
it not been for the suit against Shula to collect the debt he
owed the doctor, no claim for costs would have arisen. And
of course there was no agreement by Shula to pay the costs
and of course no debt arose by operation of law, since, as we
said earlier, that would have required the entry of a judicial
order commanding him to pay the costs. Therefore section
1692f(1) was violated as well.
A FFIRMED .

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No. 03-3194 7
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—2-26-04

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