Opinion
Civil No. 00-934 ADM/AJB
July 30, 2001
Jordan M. Lewis, Esq. and Wood R. Foster, Jr., Esq., Siegel, Brill, Greupner, Duffy Foster, P.A., Minneapolis, Minnesota, and Mark G. Stephenson, Esq., Stephenson Sutcliffe, P.A., Rochester, Minnesota, appeared for and on behalf of the Plaintiff.
Susan K. Fitzke, Esq. and James F. Roegge, Esq., Meagher Geer, P.L.L.P., Minneapolis Minnesota, appeared for and on behalf of the Defendant.
MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
On June 8, 2001, this matter came on for hearing before the undersigned United States District Court Judge pursuant to Defendant's Motion for Summary Judgment [Doc. No. 38]. For the reasons set forth below, Defendant's Motion is denied.
II. BACKGROUND
Plaintiff David Egge ("Egge") alleges that Defendant Healthspan Services Company ("Healthspan") violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692e 1692f, by attempting to collect interest in circumstances where there is no underlying obligation or promise by the debtor to pay any interest.
In March 1995, Egge's spouse, Mary Egge, was hospitalized for nearly three weeks at Allina's Abbott Northwestern Hospital in Minneapolis, Minnesota. Roe Aff. ¶ 3. Mary Egge was responsible for $3,759.00 of her medical bills. Id. ¶ 4. She later incurred another $200 of medical expenses with Allina. Id. ¶ 7. With the exception of a $50 payment towards the $200 debt, neither debt was paid. Id. ¶ 5, Ex. B. On November 13, 1995, Allina assigned the debt to Healthspan for collection. Id. ¶ 6. Healthspan's records indicate that it mailed the first two collection notices to the Egges on November 14, 1995 and December 14, 1995. Roe Supp. Aff. ¶ 3, Ex. J. These communications stated that "interest may be charged at 6% per annum on the past due balance." Id. ¶ 3, Ex. J. As of January 7, 1996, Healthspan began to send collection letters adding 6% interest on to the principal. Id. ¶¶ 5, 6. Healthspan brought a suit against David and Mary Egge in conciliation court on August 3, 1999, seeking $4,970.85, which included the principal, 6% interest and a $35 filing fee. Roe Aff. Ex. E. On October 20, 1999, judgment was entered against Mary Egge for $3,257 and David Egge was dismissed from the suit. Id. Ex. F.
Under Minnesota law at the time, Egge was legally responsible for his wife's medical expenses. Egge v. Healthspan Servs. Co., 115 F. Supp.2d 1126, 1128 (D.Minn. 2000).
III. DISCUSSION
David Egge's lone FDCPA claim centers around Healthspan's attempted collection of interest charges on the Egge's account. Egge claims that under Minnesota law, interest may not be charged on a debt unless contractually agreed to by the parties. Hence, Egge alleges that the attempted collection of interest, which he was not obligated to pay at that time, is a violation of the FDCPA. Healthspan seeks summary judgment on the ground that the account stated doctrine allowed interest to be charged. "Summary judgment is proper if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law." Cooper v. Olin Corp., 246 F.3d 1083, 1087 (8th Cir. 2001).
Under § 1692e of the FDCPA, it is illegal to falsely represent the character or amount of any debt. 15 U.S.C. § 1692e. Likewise, it is a violation of § 1692f to attempt to "[collect] of any amount. . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law." Sandlin v. Shapiro Fishman, 919 F. Supp. 1564, 1568 (M.D.Fla. 1996). Thus, the question is whether the collection of interest on this debt is specifically allowed by Minnesota or federal law. See Ballard v. Equifax Check Servs., Inc., 27 F. Supp.2d 1201, 1205 (E.D.Cal. 1998). There apparently is no written contract or agreement between the Egges and Allina regarding the payment of the medical expenses. However, "when one requests the performance of services by another, there is an implied promise to pay for the services rendered." Bigelow v. Hill, 152 N.W. 763 (Minn. 1915); accord 8 Dunnell Minn. Digest Contracts § 2.06(a) (citing e.g. Sagl v. Hirt, 52 N.W.2d 721 (Minn. 1952)) ("Where a person performs services for another at the other's request but without any agreement about compensation, the person may recover the reasonable value of his services on implied contract."). It is uncontroverted that Healthspan sent the Egges debt notices that included interest charges. Under Minnesota law, "the general rule is that liability for interest is purely a matter of contract, requiring a promise to pay it." Am. Druggists Ins. v. Thompson Lumber Co., 349 N.W.2d 569, 573 (Minn.Ct.App. 1984) (citing Tate v. Ballard, 68 N.W.2d 261 (Minn. 1951). However, the account stated doctrine permits liability for interest under circumstances where a party never expressly agreed to pay it. Id. If one side proffers a "statement" of an account between the parties, the other side's retention of it without objection for an unreasonable amount of time constitutes prima facie evidence of the accuracy of the account that has been set forth. See Erickson v. Gen.United Life Ins. Co., 256 N.W.2d 255, 259 (Minn. 1977); Kittler Hedelson v. Sheehan Props., Inc., 203 N.W.2d 835, 839-40 (Minn. 1973). For example, in American Druggists Insurance v. Thompson Lumber Co., the Minnesota Court of Appeals held that where a lumber company's invoices to a customer "clearly indicated interest would be charged" and the customer did not complain, the "acquiescence in the charges resulted in the law implying a promise to pay those charges." 349 N.W.2d at 573.
On November 14, 1995 and December 14, 1995, Healthspan sent the Egges a letter outlining the debt that stated "interest may be charged at 6% per annum on the past due balance." Roe Supp. Aff. ¶ 3, Ex. J. These were the first two collection letters sent to the Egges by Healthspan and are evidently the first documents notifying the Egges that interest may be charged on their Allina medical debt. Def.'s Mem. Supp. at 7. In January of 1996, less than two months after the first of these communications, Healthspan began sending the Egges bills with interest charges added onto the principal. Id. ¶¶ 5, 6. The only authority Healthspan has set forth as permitting collection of interest from the Egges is the account stated doctrine. Although Minnesota law sometimes requires a debtor to pay interest or other amounts pursuant to the account stated doctrine, it does not explicitly permit the imposition of interest in the first place. See Am. Druggists, N.W.2d at 573. That Minnesota law may allow the collection of interest at a later point in time does not retroactively authorize the collection of an amount that was not originally permitted by law at an earlier time.
Therefore, the proper focus of the account stated inquiry is on the conduct of Healthspan and Egge prior to the first interest charges in January of 1996. At this summary judgment stage it cannot be determined whether, as a matter of law, Healthspan's 1995 November and December notices created an account stated allowing the charging of interest by January of 1996. Summary judgment is denied.
Courts are split on whether the determination of the reasonableness of the delay in objection is a question for the jury or solely the court in circumstances where there are no facts in dispute. Compare Nello L. Teer Co. v. Dickerson, Inc., 126 S.E.2d 500, 532 (N.C. 1962) ("Ordinarily what is a reasonable time [under account stated doctrine] is a question for the jury"), and W. Newspaper Union v. Segerstrom Piano Mfg. Co., 136 N.W. 752, 754 (Minn. 1912) (whether defendant made "seasonable" objection to account stated was question for the jury); with Standard Oil Co. v. Van Etten, 107 U.S. 325, 333-34 (1882) ("what constitutes a reasonable time [under account stated doctrine] is a question of law"), and Auffenberg v. Bd. Of Trs. of Columbus Reg'l Hosp., 646 N.E.2d 328, 331 (Ind.Ct.App. 1995) ("When the underlying material facts are undisputed, what constitutes a reasonable time to object to a statement of account is a question of law"); see generally 1 Am. Jur.2d Accounts and Accounting § 40 (1994).
This Order does not determine whether the account stated doctrine may be used as a defense to a § 1962e action at trial.