Fair Debt Collection Practices Act and the ‘Overshadowing’ Demand Letter – Part II of II

Part II – 5.5.14 12:14 p.m.

In Vincent v. Chuhak & Tecson 2014 WL 1612697 (N.D.Ill. 2014) the Court denied the Firm’s motion to dismiss the plaintiffs’ FDCPA claims because it was at least plausible that the Firm’s demand letter was confusing and contradictory to the “unsophisticated consumer.”  All that’s required for a plaintiff to survive a Rule 12(b)(6) motion is that a Complaint allege facts that plausibly state a valid claim. 

The Court first noted that Section 1692g of the Act requires a debt collector, within five days of initial communication with a consumer, to provide a written “validation notice.”  The validation notice must contain (1) a statement that unless the consumer disputes the validity of the debt within 30 days after receipt of the notice, the debt will be assumed valid; and (2) a statement notifying the consumer that if he disputes the debt in writing within that 30-day period, the debt collector will obtain verification of the debt and mail a copy of it to the consumer.  The FDCPA cautions that collection activities and communications must not “overshadow” or be “inconsistent” with the disclosure requirements of the validation notice. 15 U.S.C. § 1692g(b); Vincent, *1.

In determining whether a creditor’s demand letter satisfies the FDCPA’s validation strictures, the court applies the “unsophisticated consumer” standard.  Whether a demand letter is confusing under the unsophisticated consumer standard is a fact-based inquiry decided on a case-by-case basis.  But if it’s plain from a reading of the demand letter that a significant fraction of the population wouldn’t be misled, the demand letter complies with the FDCPA.

The Northern District held that the Firm’s demand letter was confusing because there was an “apparent” contradiction between (a) allowing the unit owner to contest the validity of the debt, and (b) simultaneously stating that if the unit owner didn’t pay within 30 days, his right to possession of the condo would end. Vincent, *2-3. 

What Should Have the Demand Letter Said?

The Firm’s demand letter would satisfy the FDCPA if it included “safe harbor” language that explained the letter’s apparent inconsistencies.  The model “safe harbor” language suggested by the Seventh Circuit (a so-called “Bartlett letter”) provides that (1) the creditor doesn’t have to wait until the end of the thirty-day period before suing to collect this debt; but (2) if the debtor requests proof of the debt or of the name and address of the original creditor within that thirty-day period, (3) the creditor must suspend its collection efforts, and stop any litigation based on the debt.  Vincent, *3; Bartlett v. Heibl, 128 F.3d 497 (7th Cir. 1997).

The Court also rejected the Firm’s argument that the letter complied with the FDCPA because the 30-day letter was required by the Illinois Forcible statute.  735 ILCS 5/9-104.1 (30-demand notice on delinquent unit owner  requirement).  The Court held that when sending a demand letter to a debtor, the Firm still has a duty under the FDCPA to explain how the debt collector’s rights fit with the consumer’s.  And since the Firm failed to do this (reconcile the creditor’s and consumer’s rights), the Firm’s demand letter violated the Act and the plaintiffs’ FDCPA claims survived dismissal.

Notes: The case provides some much-needed guidance on the contents of a proper demand letter under the FDCPA in a delinquent condo assessment case.  In my practice, I always recommend that my association (or landlord) clients serve the 30-day (or 5-day) notice.  That way, the unit owner or tenant can’t claim a FDCPA violation since the landlord likely won’t qualify as a “debt collector” under the FDCPA (i.e. the landlord’s main business is renting properties; not collecting debts).  

Condo Association Sues Developer Based on False Statements In Sales Brochure and For Anemic Repair Reserves

In Henderson Square Condominium Association v. LAB Townhomes, LLC, 2014 IL App (1st) 130764, a condominium association sued the developer and contractor after unit owners discovered wide-ranging property defects in their units. (For Chicago readers: the project is near that nightmarish, multi-cornered Belmont-Lincoln-Ashland intersection on the North side).

The property’s construction was completed in 1996, the unit owners discovered the property defects in 2007-2008 and filed suit in 2011 – nearly 15 years after construction was finished and about 4 years after discovery of the defects.  The extent of the unit damage wasn’t revealed until a consultant hired by the association opened up the unit walls and ceilings. 

The association sued for breach of implied warranty of habitability, fraud, negligence, for violating the Chicago Municipal Code section (Section 13-72-030) governing real estate marketing misrepresentations.  The trial court dismissed all the claims as time-barred.  The association appealed.

Result: Trial court reversed.  Association’s claims reinstated


The basis for the reversal was the defendants’ possible fraudulent concealment of the association’s causes of action.  Code Section 13-214(a)and (b) provide a four-year limitations and 10-year repose period for construction-related claims, respectively.  The construction repose period can have harsh results: it means that no matter when a plaintiff discovers an injury, if more than 10 years have elapsed since construction was complete, the plaintiff’s claim is barred.

But Code section 13-214(e) provides that the repose period doesn’t apply where a defendant makes fraudulent misrepresentations or fraudulently conceals a plaintiff’s claim.  735 ILCS 5/13-214(e); ¶ 28.  When fraud is involved, the five-year limitations period set forth in Code Section 13-205 (735 ILCS 5/13-205) applies.  To demonstrate fraudulent concealment, a plaintiff must show silence coupled with deceptive conduct or the suppression of material facts.  ¶¶ 95-96. 

The Court found a question of fact as to whether there was active concealment based on (1) defendants’ marketing documents: a sales brochure that made specific statements concerning unit insulation; and (2) the anemic repair reserves earmarked by the developer for repairs.  The Court held that if the defendants didn’t inform the plaintiff that the units lacked insulation – as the plaintiff’s consultant found and noted in its report – and if the reserve levels weren’t large enough to meet anticipated future repairs, this could show fraudulent concealment sufficient to beat the repose period argument.  (¶¶ 98- 102).

The Court also sustained the association’s claims that were premised on Municipal Code.  Sections 13-72-030 and 13-72-100 of the Code provide a real estate buyer both with a private cause of action and damages remedy (including attorneys’ fees) where a seller makes misrepresentations in the course of marketing the sale of real estate; including condominiums.  The First District found that the association stated a cause of action under the Ordinance and rejected the defendants’ argument that the Ordinance claims were duplicative of the association’s fraud claims.  The Court found the Ordinance gave rise to a private right of action and provided an additional remedy to a common law fraud claim.  (¶¶112-113).

Validating the plaintiff’s breach of fiduciary duty claim, the Court looked to the Illinois Condominium Act (“Act”). Section 9.2 of the Act imposes a duty on a developer to adequately fund a reserve account for future improvements and repairs.  765 ILCS  605/9(c)(1), (2).  A “reasonable reserve” amount is a fact-based inquiry determined by (1) repair and replacement costs, and the (2) estimated remaining useful life of the property’s various structural, mechanical and energy components and its common elements.  (¶¶ 122-123, 129). 

The Court held that the question of whether the developer adequately funded the repairs reserve account wasn’t properly decided on a Section 2-615 motion.  And since the association properly pled that the developer breached fiduciary duties by failing to disclose known, latent defects in the property, the association stated a valid claim for breach of fiduciary duty (or at least one that survives a motion to dismiss).


The Court found that a breach of fiduciary duty claim against a developer can survive almost 15 years after the developer’s last involvement with the property (the property was completed in 1996 and suit wasn’t filed until 2011).  The case also underscores the importance of adequately funding reserve accounts and demonstrates that claims premised on the City Ordinance sections governing false statements in real estate sales literature can be brought independently of common law fraud claims.  Henderson Square also illustrates the evidentiary showing a plaintiff must make to trigger the fraudulent concealment exception to the 10-year repose period applicable to construction claims.

Negligent Infliction of Emotional Distress: The Physical Injury Requirement

Ultimate_Post_wCat__V402326037_Maggie”, “Mr. Kitty” and “Carmel Cream.”

Are they the stage names of the um, “dancers”, at your local gentleman’s club, peut-etre?

Not sure. But they are the names of the plaintiff’s cats who figure prominently in Myers v. Condominiums of Edelweiss, Inc., 2013 WL 4597973 (N.D.Ill. August 29, 2013). 

Myers examines what happens when a condominium association’s no-pet policy collides with a Federal discrimination statute.

The plaintiff lived in a condominium unit managed by defendant (which has a recorded no-pet policy) for over 15 years.  For that entire time, plaintiff has had multiple cats in her unit: a clear violation of the no-pet rule. 

After several years of litigation in Illinois eviction court (ultimately resolved in plaintiff’s favor), plaintiff sued in Federal court alleging that the defendants (condominium association and individual board members) violated the Fair Housing Act (42 U.S.C. § 3601 et seq.)(FHA) and joined state law claims for intentional and negligent infliction of emotional distress against the defendants.

Held: Defendants’ summary judgment motion on negligent infliction claim granted.


cats) was reasonable and necessary under the FHA standard. *6.

Intentional Infliction of Emotional Distress

The court denied summary judgment for the defendant on this count.  An intentional infliction plaintiff must allege (1) defendant’s conduct was “extreme and outrageous”; (2) defendant intended to inflict severe emotional distress or knew there was high probability that his conduct would do so; (3) defendant’s conduct actually caused severe emotional distress. *7. 

To determine whether conduct is extreme and outrageous, the court considers  (a) the power and control the defendant has over plaintiff; (b) whether defendant believed his objective was legitimate; and (c) defendant’s awareness of plaintiff’s susceptibility to mental distress.  *7. 

The court found that a jury could find the Association’s conduct extreme and outrageous.  The Association, knowing of plaintiff’s chronic depression (supported by a doctor’s opinion), still sued to evict her and didn’t follow its by-laws by not first calling a meeting to discuss the no-pets infraction. *3, 8.  The Association’s decision to try and force plaintiff from her home instead of “less disruptive” measures raised a question of fact on the extreme and outrageous element.  *8.

Negligent Infliction of Emotional Distress (the ‘Impact Rule’)

Defendant’s motion on plaintiff’s negligent infliction claim was  granted.

A Negligent infliction plaintiff must satisfy the impact rule: a plaintiff can’t recover for emotional distress suffered due to a defendant’s negligence unless the emotional distress is accompanied “by a contemporaneous physical injury or impact to the plaintiff.”  *8. 

Emotional pressure, loss of business, and reputational damage do not constitute sufficient physical injury or impact.  *9.  Since plaintiff didn’t offer any physical harm or injury (beyond mental anguish) evidence, she failed to raise a genuine fact question on whether she suffered physical impact sufficient to survive summary judgment.


– Whether given conduct is extreme and outrageous for an intentional infliction claim is a highly fact-specific calculus with no bright-line rules;

– For a negligent infliction claim, physical injury is required.  Mental distress, economic and reputational harm don’t suffice;