In Horia v. Nationwide Credit & Collection, Inc., the Seventh Circuit Court of Appeals overturned a district court’s decision dismissing the plaintiff’s second FDCPA lawsuit.

Consumer plaintiff Henry Horia received separate correspondence from Nationwide Credit regarding two debts owed to two different creditors, both of which had been assigned to Nationwide Credit in its capacity as a debt collection agency. Horia disputed both debts, but Nationwide Credit allegedly failed to notify a consumer reporting agency of the disputes as required by the Fair Debt Collection Practices Act.

Horia filed a lawsuit against Nationwide Credit, alleging violation of the FDCPA based on its failure to notify a CRA of Horia’s disputes. But Horia asserted claims related to only one of his two disputed debts. Just 16 days after the Court approved a settlement agreement between Horia and Nationwide Credit, Horia filed a second lawsuit alleging the same FDCPA violations, this time based on the second debt.

At first glance, it appears that claim preclusion (i.e., res judicata) should forbid a plaintiff from making the same claim against the same defendant after a court has entered a final order disposing of the claim. Indeed, this was the argument Nationwide Credit made in support of its motion to dismiss the second lawsuit. The district court agreed.

However, the Seventh Circuit reversed the dismissal and remanded the case for further proceedings, finding that “[e]ach time a debt collector fails to give a credit agency the required notice for a debt,” such failure “is a stand-alone wrong.” Horia’s disputes regarding the debts therefore gave rise to separate causes of action. The Court held that “[d]isputes that have an independent existence may be litigated separately.”

Nationwide Credit also argued that “allowing sequential litigation is inequitable because 15 U.S.C. §1692k(a)(2)(A) sets a maximum of $1,000 in statutory damages per case.” Hence, multiplying the number of permissible cases multiplies the maximum award available to plaintiffs. The Seventh Circuit concluded that, although this may be the case, “[j]udges aren’t authorized to turn per-case caps into per-defendant caps; that choice is legislative.”

The Court also noted that, given that the parties settled the previous lawsuit pursuant to a stipulated agreement, the onus was on Nationwide Credit to prevent subsequent litigation regarding the second debt. The Court opined: “If Nationwide Credit wanted to extend the effect of the settlement, it had only to negotiate a broad release. Many a release covers all disputes between the same parties, not just the dispute already in court. Maybe the release in Horia’s first suit does cover the second, but release is an affirmative defense, see Fed. R. Civ. P. 8(c)(1), which Nationwide Credit has not asserted.”

There are two key lessons to be learned from the outcome in Horia v. Nationwide Credit. First, always ensure that the language of the release included in any settlement agreement is broad enough to encompass all disputes between the parties. Second, if the plaintiff brings a second lawsuit after the same parties previously agreed to release the claims, be sure to assert release as an affirmative defense.