CS Wang & Assoc. v. Wells Fargo Bank, N.A.
| Decision Date | 29 March 2018 |
| Docket Number | No. 16 C 11223,16 C 11223 |
| Parties | CS WANG & ASSOCIATE, Sat Narayan dba Express Hauling, Robert Meyer dba Mangia Nosh, and Tasir Tayeh dba Chief's Market, individually and on behalf of all others similarly situated, Plaintiffs, v. WELLS FARGO BANK, N.A., Fifth Third Bank, First Data Merchant Services LLC, Vantiv, Inc., National Processing Company, International Payment Services, LLC dba Elitepay Global and dba Primepay Global, Brian Bentley, Andrew Bentley, Adam Bentley, Ironwood Financial, LLC dba Ironwood Payments, Dewitt Lovelace and John Lewis, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Jessica Cherry Chavin, Myron Milton Cherry, Myron M. Cherry & Associates, Chicago, IL, for Plaintiffs.
Colleen S. Walter, Anthony C. Porcelli, Claire E. Brennan, Polsinelli PC, George James Tzanetopoulos, Michael Thomas Werner, Baker Hostetler, Jess M. Krannich, Manning Curtis Bradshaw & Bednar PLLC, Salt Lake City, UT, James R. Figliulo, James H. Bowhay, Peter A. Silverman, Figliulo & Silverman, Chicago, IL, John Wellington Peterson, Pro Hac Vice, Polsinelli P.C., Nashville, TN, Matthew S. Knoop, Pro Hac Vice, Polsinelli PC, Atlanta, GA, for Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiffs CS Wang & Associate, Sat Narayan d.b.a. Express Hauling, Robert Meyer d.b.a. Mangia Nosh, and Taysir Tayeh d.b.a. Chief's Market are all small businesses located in California. The Plaintiffs launched this putative class action against a dozen different defendants for alleged violations of the California Invasion of Privacy Act ("CIPA"), Cal. Penal Code §§ 630 et seq . Their claim is, in essence, that two of the defendant corporations, International Payment Services, LLC ("IPS") and Ironwood Financial, LLC ("Ironwood"), secretly recorded them during telemarketing calls. (Amended Complaint [88], ¶¶ 106–08.) IPS and Ironwood made these calls in the attempt to sell credit and debit card payment processing services and hardware to the Plaintiffs on behalf of fellow Defendants Wells Fargo Bank, N.A.; First Data Merchant Services LLC; Fifth Third Bank; Vantiv, Inc.; and National Processing Company ("NPC"). (Id. at ¶ 9.)
Named as additional Defendants in Plaintiffs' lawsuit are the owners of IPS and Ironwood: Brian, Andrew, and Adam Bentley ("the Bentleys"; together with IPS, "the IPS Defendants"); and Dewitt Lovelace and John Lewis, respectively. The Plaintiffs seek to hold the Bentleys personally liable because they allegedly created and implemented "the system of secretly recording telephone calls with sales targets" at IPS despite knowing their actions were illegal. (Id. at ¶ 74.) Plaintiffs seek the same from Lovelace and Lewis because they allegedly "refined and expanded" the program after purchasing IPS's telemarketing operations for Ironwood in 2015. (Id. at ¶¶ 92, 94.)
Plaintiffs bring this suit on behalf of four putative classes of California businesses, all of which received telemarketing calls from either IPS or Ironwood, but did not sign contracts with them. (Id. at ¶ 109.) The Amended Complaint asserts eighteen counts for relief arising from the Defendants' alleged violations of two provisions of CIPA: Cal. Penal Code §§ 632 and 632.7. Section 632 prohibits the nonconsensual recording of confidential communications transmitted using any variety of telephone. Section 632.7 prohibits the nonconsensual recording of any communications that involve at least one cellular or cordless telephone. Plaintiffs assert that every Defendant violated both of these provisions. (See Am. Compl. ¶¶ 123–290.) Plaintiffs seek to permanently enjoin the Defendants from recording further telephonic communications without consent, and seek damages from each Defendant in the amount of $5,000 per violation of section 632 or 632.7. (See, e.g., id. at 27.)
Defendants have filed a total of five motions to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (b)(2), and (b)(6).1 Each motion raises those defenses unique to its group of Defendants, and adopts any defense shared with the others. Broadly speaking, all Defendants argue that (1) Plaintiffs lack Article III standing to sue for relief under CIPA based on Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 194 L.Ed.2d 635 (2016), because they did not suffer a concrete injury; (2) CIPA only protects individuals, not businesses, and Plaintiffs therefore lack "statutory standing" to sue; (3) the Section 632 claims fail because "routine business communications" are not "confidential" as a matter of law and because Plaintiffs reasonably expected that their calls would be recorded; and (4) the Section 632.7 claims fail because Plaintiffs failed to allege that the calls were made using the required type of equipment.2
Beyond these common objections, Lovelace and Lewis and the IPS Defendants also object to the court's exercise of personal jurisdiction over them, as they claim that Plaintiffs have failed to establish those Defendants' minimum contacts with the State of Illinois. Lovelace and Lewis argue only that the court lacks personal jurisdiction over them as individuals independent from their ownership of Ironwood. The IPS Defendants, for their part, assert that neither the Bentleys as individuals nor IPS as a company are subject to personal jurisdiction in Illinois. Finally, the majority of the Defendants—all but Ironwood and the IPS Defendants—argue that the Amended Complaint does not allege facts sufficient to hold them legally accountable for any secret recordings allegedly made by Ironwood and IPS. These Defendants claim that the Plaintiffs' "threadbare and conclusory allegations" of control over (or ratification of) Ironwood and IPS's activities do not state a plausible claim for relief against them under CIPA.
In addition to their motions to dismiss, Lovelace and Lewis and the IPS Defendants have each filed identical Motions for Rule 11 Sanctions against Plaintiffs' counsel, the Cherry Firm. The Sanctions Motions, which rely on the same set of facts and largely overlap, assert that this lawsuit is based on "patently false allegations" derived from a disgruntled former employee of IPS and Ironwood, James Tibor. (Lovelace Sanctions Mot. ¶ 2.) Those Defendants request that the court sanction Plaintiffs' counsel by dismissing all claims against Lovelace and Lewis and the IPS Defendants, and by ordering Plaintiffs' counsel to pay attorneys' fees.
For the reasons stated below, the court denies all of the Defendants' Motions to Dismiss [94, 97, 102, 105, 109]. The court also denies the Defendants' Motions for Rule 11 Sanctions [119, 129] without prejudice, pending further discovery.
Plaintiffs are all partnerships or sole-proprietorships located in Northern California. In order to accept payment by customers using VISA or Mastercard credit and debit cards, businesses like Plaintiffs must have a relationship with a bank that is a member of the VISA and Mastercard systems. (Am. Compl. ¶ 37.) These banks (called acquiring banks, or "acquirers") process all of the credit and debit card transactions at a given business (or "merchant") in exchange for a percentage fee of each transaction. (Id. at 37–38.) According to Plaintiffs, "[a]cquiring merchants is big business" and acquiring banks will often compete with each other for merchants so that they can process more transactions and earn more money in processing fees. (Id. at ¶ 39.) Defendants Wells Fargo and Fifth Third are some such acquiring banks.
Other parties participate in the card processing market as well. Acquiring banks often work with outside technology firms ("third party processing agents," or "processing TPAs") to help manage the enormous volume of data that comes with processing billions of card transactions nationwide. (Id. at ¶ 42.) Processing TPAs also make and sell the hardware—like PIN pads—used to facilitate card transactions. (Id. at ¶ 47.) Throughout the time period relevant to this lawsuit, Defendant First Data worked with Wells Fargo as a processing TPA. Defendants Vantiv and NPC had the same arrangement with Fifth Third. (Id. at ¶¶ 44–46.) Acquiring banks also farm out their sales and marketing functions to "third party sales agents" ("sales TPAs"), who then solicit merchants on behalf of an acquiring bank in exchange for a cut of the bank's processing fees. (Id. at ¶¶ 40, 41). Among other sales tactics, employees at sales TPAs make telemarketing calls to merchants in an attempt to sell credit and debit card processing services and hardware for an acquiring bank and affiliated processing TPA. (Id. at ¶¶ 48, 49.)
Defendant IPS is a Nevada corporation that once operated telemarketing call centers in Chicago and Naperville, Illinois. (Id. at ¶ 26.) IPS is owned and controlled by Defendants Brian, Adam, and Andrew Bentley—all residents of Utah. (Id. at ¶¶ 3, 16, 28–30.) At various times, IPS served as a sales TPA for all of the Defendants mentioned above and made telemarketing calls on their behalf. From 2011 to 2014, IPS was employed by Wells Fargo and First Data to market their processing services and hardware from the Chicago call center. (Id. at...
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