Eul v. Transworld Sys.

• Decision Date: 30 March 2017
• Docket Number: No. 15 C 7755,15 C 7755
• Parties: SHARON EUL et al., on behalf of themselves and a class, Plaintiffs, v. TRANSWORLD SYSTEMS et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

SHARON EUL et al., on behalf of themselves and a class, Plaintiffs, v. TRANSWORLD SYSTEMS et al., Defendants.

No. 15 C 7755

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

March 30, 2017

Chief Judge Rubén Castillo

MEMORANDUM OPINION AND ORDER

Plaintiffs in this putative class action allege that the Defendants—various debt holders, debt servicers, and law firms retained to collect debt—violated multiple provisions of the federal Fair Debt Collection Practices Act ("FDCPA"), the Illinois Interest Act, the Illinois Collection Agency Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act in the course of their attempts to collect on alleged student loan debt from the Plaintiffs. (R. 79, Cons. Compl.) Before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). (R. 72.) For the reasons set forth below, Defendants' motion is granted in part and denied in part, as set forth below.

BACKGROUND

Because of the wide array of conduct alleged in Plaintiffs' Consolidated Complaint, (R. 79), and the varying circumstances alleged as to each named Plaintiff, the Court sets forth only a general background of the allegations sufficient to enable an understanding of the more specific allegations that are discussed in each section of the Court's analysis.

The Plaintiffs are 19 individuals, mostly citizens of Illinois, who all currently live in Illinois or at some relevant time in the past lived in Illinois. (R. 79, Cons. Compl. ¶¶ 3-15.) All but one of them allege that they have been sued in Cook County Circuit Court to collect on alleged student loan debts, some because they were cosigners on the loans. (Id. ¶¶ 79(a)-(m), 96-97, 100, 118, 126, 153, 167, 171, 176-77, 181, 189.) They hired lawyers and defended against those lawsuits by filing answers and asserting various defenses. (Id. ¶¶ 112, 114, 152(a), 155, 175, 185.) Many of the lawsuits were nonsuited shortly after the Plaintiffs appeared and filed answers. (Id. ¶¶ 79(a)-(m), 116, 123, 131, 150(f), 186.) These lawsuits were all brought by various "National Collegiate Trust" ("NCT") entities, which are Delaware statutory trusts that acquire and hold a significant number of private student loans. (Id. ¶¶ 25-42.) For example, the NCT entities that are named as Defendants here are: National Collegiate Student Loan Trust 2003-1; National Collegiate Student Loan Trust 2004-1; National Collegiate Student Loan Trust 2006-2; National Collegiate Student Loan Trust 2006-3; National Collegiate Student Loan Trust 2006-4; National Collegiate Student Loan Trust 2007-1; National Collegiate Student Loan Trust 2007-2; National Collegiate Student Loan Trust 2007-3; and National Collegiate Student Loan Trust 2007-4. (Id.) These NCT entities did not originate Plaintiffs' students loans; rather they acquired the loans after they were originated by another entity. (Id. ¶ 88.) The NCT entities all have a corporate trustee, but the trustee is not involved in the filing of lawsuits in the name of the trusts, and the NCT entities have no employees and never had any. (Id. ¶¶ 27, 45.) None of the NCT entities have a bank or financial institutions charter or a license from the State of Illinois entitling them to charge interest at more than 9%. (Id. ¶ 44.)

All the actions taken on behalf of the NCT entities against the Plaintiffs were actually performed by a "servicing agent," either Defendant NCO Financial Systems, Inc. ("NCO") or its successor, Defendant Transworld Systems ("Transworld"), or by attorneys employed by these servicing agents. (Id. ¶¶ 20, 46, 55.) Transworld is a collection agency that seeks to collect ondefaulted consumer debts, and it holds a collection agency license from the State of Illinois. (Id. ¶¶ 17, 18.) NCO, Transworld's predecessor, was also a collection agency and also is licensed as one by the State of Illinois. (Id. ¶¶ 20, 22.) As of approximately 2013-2014, NCO claimed to be the "servicing agent" for the NCT entities. (Id. ¶ 57.) Subsequent to corporate changes in early 2015 involving NCO and Transworld, Transworld claimed to be the servicing agent of the NCT entities. (Id. ¶¶ 58-59.) The same personnel, practices, and form documents were employed by NCO and Transworld in collecting debts for NCT entities before and after the changeover from NCO to Transworld. (Id. ¶ 63.) NCO represented on its website that it maintained an "Attorney Network" for filing suits to collect debt, including student loan debt. (Id. ¶ 65.) Transworld similarly manages "Agency and Attorney Networks," which are described on its website as designing and implementing "cost-effective collection solutions on behalf of clients across the country." (Id. ¶ 64.) NCO represented in filings with the U.S. Securities and Exchange Commission that through its "Attorney Network Services," it "coordinate[s] and implement[s] legal collection solutions undertaken on behalf of our clients through the management of nationwide legal resources specializing in collection litigation." (Id. ¶ 66.)

Defendant Blitt and Gaines, P.C. ("Blitt") is a consumer collection law firm organized as an Illinois professional corporation. (Id. ¶ 47.) Blitt is one of the firms in the Transworld/NCO "Attorney Network," and was hired to collect debts against some of the Plaintiffs. (Id. ¶¶ 49, 67.) Defendant Weltman, Weinberg, and Reis Co. L.P.A. ("WWR") is a law firm organized as an Ohio professional corporation and was likewise hired to pursue debt collection litigation against some of the Plaintiffs. (Id. ¶¶ 51, 67.) NCO and Transworld selected counsel, communicated with counsel, and instructed counsel; the nominal plaintiff (as relevant here, the NCT entities) did not select, communicate with, or instruct counsel. (Id. ¶ 69.)

Plaintiffs allege that the NCT entities, NCO/Transworld, Blitt, and WWR engaged in a variety of misconduct in the process of attempting to collect alleged student loan debt from the Plaintiffs, including violating multiple provisions of the federal Fair Debt Collection Practices Act, the Illinois Interest Act, the Illinois Collection Agency Act, and the Illinois Consumer Fraud and Deceptive Business Practices Act. The Plaintiffs define various classes of individuals on whose behalf they bring suit.¹ (Id. ¶¶ 209-10.)

The Defendants presently move to dismiss most Counts of the Consolidated Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (R. 72.) Defendants offer numerous arguments in support of their motion, which are addressed below.

LEGAL STANDARD

A complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). To survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, 'to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. In deciding a motion to dismiss under Rule 12(b)(6), the Court must accept the factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Kubiak v. City of Chi., 810 F.3d 476, 480-81 (7thCir. 2016), cert. denied, 137 S. Ct. 491 (2016). In deciding a motion to dismiss, the Court may consider the complaint itself, "documents that are attached to the complaint, documents that are central to the complaint and are referred to in it, and information that is properly subject to judicial notice." Williamson v. Curran, 714 F.3d 432, 436 (7th Cir. 2013). The purpose of considering such documents is "to prevent parties from surviving a motion to dismiss by artful pleading or by failing to attach relevant documents." 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002).

ANALYSIS

I. Count I - Usury (FDCPA)

Count I, captioned "FDCPA Usury - Class Claim," is asserted by six of the Plaintiffs as representatives of the putative "Usury FDCPA" class against Defendants NCO and Transworld. (R. 79, Cons. Compl. ¶¶ 216-17.) Plaintiffs² allege in Count I that Defendants violated §§ 1692e and 1692f of the FDCPA, 15 U.S.C. §§ 1692e and 1692f, by collecting and attempting to collect interest on the Plaintiffs' students loans that exceeds state law limits, as well as by filing and prosecuting state court lawsuits that sought to collect such interest on those loans. (Id. ¶¶ 218-20.) In support of Count I, Plaintiffs allege that "[e]ach of the[ir] loans had a variable rate formula that produced a rate in excess of the 9% maximum under Illinois law, 815 ILL. COMP. STAT. 205/4, or the 8% maximum under Ohio law, Ohio R.C. §1343.01 . . . or, to the extent relevant because a national bank was the purported originator of the loans, . . . any rate allowable under 12 U.S.C. §85." (Id. ¶ 80.) Plaintiffs allege that collecting or attempting to collect interestthat is usurious under state law constitutes both "false, deceptive, or misleading representation or means" in violation of § 1692e and "unfair or unconscionable means" of collecting debt in violation of § 1692f. (Id. ¶¶ 216-20.)

Section 1692e of the FDCPA prohibits debt collectors from using "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. Section 1692f prohibits debt collectors from using "unfair or unconscionable means to collect or attempt to collect any debt." 15 U.S.C. § 1692f. Both provisions include numerous subsections setting forth nonexhaustive examples of prohibited conduct. See 15 U.S.C. §§...