Whitaker v. Ameritech Corp.

• Decision Date: 09 January 1998
• Docket Number: No. 96-2550,96-2550
• Citation: 129 F.3d 952
• Parties: RICO Bus.Disp.Guide 9375 Ruthene WHITAKER, on her own behalf and on behalf of all others similarly situated, Plaintiff-Appellant, v. AMERITECH CORPORATION, 1 Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 952

129 F.3d 952

RICO Bus.Disp.Guide 9375

Ruthene WHITAKER, on her own behalf and on behalf of all others similarly situated, Plaintiff-Appellant, v. AMERITECH CORPORATION, ¹ Defendant-Appellee No. 96-2550.

United States Court of Appeals Seventh Circuit.

Argued Dec. 3, 1996.

Decided Nov. 20, 1997.

Rehearing Denied Jan. 9, 1998.

Nicholas P. Iavarone (argued), Joel J. Bellows, Laurel G. Bellows, Adam K. Hollander, Bellows & Bellows, Chicago, IL, for Plaintiff-Appellant.

Deborah A. Golden (argued), Ameritech Corporation, Chicago, IL, for Defendant-Appellee.

Before ESCHBACH, FLAUM, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

Ameritech Corporation ("Ameritech") provided telephone service to Ruthene Whitaker on two separate lines. After Ameritech obtained a default judgment against Whitaker for failing to pay her bills, Whitaker sued Ameritech in the United States District Court for the Northern District of Illinois, alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and the Illinois Consumer Fraud and Deceptive Trade Practices Act ("Illinois Act"). She also asserted causes of action for common law fraud and breach of fiduciary duty. The district court dismissed her amended complaint as barred by res judicata for the telephone line that was the subject of the default judgment, and for lack of standing to sue Ameritech for violations regarding her second telephone line.

We agree that res judicata bars Whitaker's action for violations of RICO, the Illinois Act, and the common law causes of action; therefore we affirm the district court's ruling on those points. We also agree that Whitaker lacks standing to pursue her claims as to her second telephone line; therefore, we also affirm the district court on that point. We disagree with the district court's decision that res judicata bars Whitaker's claim under the FDCPA; however, we affirm the outcome reached by the district court because the FDCPA does not apply to Ameritech.

I. HISTORY

The facts taken in the light most favorable to Whitaker are as follows. Ameritech is a local telephone service provider. Ameritech also contracts with other telephone service companies, such as long distance service providers and "information providers." Information providers offer such services as adult entertainment and trivia games. Ameritech purchases the accounts receivable of these other telephone service companies with recourse, bills the customer for all the services, and collects payments. As a result, Ameritech customers receive one monthly bill that includes charges for their local service as well as for any long distance or other telephone services they have used.

If an Ameritech customer fails to pay the full amount past due on a telephone bill, and if the amount exceeds a certain sum, Ameritech sends the customer a disconnect notice demanding that the entire amount past due be paid to avoid disconnection.

Ameritech provided local telephone service to Whitaker on two telephone lines. We will refer to her first telephone line, the subject of the default judgment, as "0508." In December 1993, Whitaker incurred charges for three calls to an information provider. In February and March 1994, Ameritech sent disconnect notices to Whitaker with a demand for payment of all charges, including the charges from the information provider. Ameritech temporarily disconnected Whitaker's telephone service in April 1994. In May 1994, after service was restored, one of Whitaker's minor sons made additional calls to information providers. Total charges for these calls were in the hundreds of dollars. Whitaker disputed these charges, to no avail. In June 1994, Ameritech sent Whitaker a disconnect notice which included charges for the May 1994 information provider calls as well as the December 1993 information provider calls. In July 1994 Whitaker made a partial payment, but in August 1994 Ameritech permanently disconnected her telephone service.

Whitaker had another Ameritech telephone line, the "0499" line, for her college-aged daughter. Ameritech temporarily disconnected 0499 for nonpayment in October 1994. Whitaker paid the full amount due, and Ameritech restored service. The cycle repeated itself. Some small charges for calls to information providers appeared on Whitaker's bills and eventually on her disconnect notice. As far as the record shows, Ameritech has not permanently disconnected or taken legal action on the 0499 line.

Ameritech sued Whitaker in Illinois Circuit Court for the balance due on 0508. Whitaker appeared pro se but took no further action in the case, and Ameritech obtained a default judgment against her and began garnishing her wages. Whitaker did not appeal.

Whitaker then sued Ameritech in the United States District Court for the Northern District of Illinois. She asserted claims under FDCPA, RICO, the Illinois Consumer Fraud and Deceptive Trade Practices Act, common law fraud, and common law breach of fiduciary duty. Her position in the court below and on this appeal is that under 47 U.S.C. § 228(4), ² Ameritech cannot disconnect local service for failure to pay charges owed to information providers. Thus, she argues, Ameritech's bills and disconnect notices are intentionally misleading because customers are not aware that they need only pay the charges for local service in order to avoid disconnection of all telephone service. Whitaker also alleges that Ameritech defrauds its customers by printing the logos or trademarks of long distance companies and information providers directly on the Ameritech bill, thus allegedly misleading customers about the nature or quality of the services they are receiving. Whitaker argues that had she known she could maintain her local service by paying only the amount owed for local charges, she would have done so and avoided disconnection of 0508. She also alleges that she would have used her money to maintain service on 0499, rather than attempting to pay her entire bill for 0508.

The district court held that all of her claims regarding the 0508 line are barred by res judicata arising out of the default judgment in Illinois Circuit Court. The district court further held that Whitaker lacks standing to pursue her claims regarding the 0499 line because she has not met the constitutional requirement of injury-in-fact. The district court dismissed Whitaker's entire amended complaint with prejudice.

II. ANALYSIS

We review the dismissal of Whitaker's amended complaint de novo. Northern Trust Co. v. Peters, 69 F.3d 123, 129 (7th Cir.1995). The dismissal is proper only if it is clear that the nonmoving party can prove no set of facts consistent with her complaint which entitles her to relief. Id.; see also Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). We accept as true all well-pleaded facts in the complaint, and we draw all reasonable inferences in favor of the nonmoving party. However, we are not obliged to accept as true conclusory statements of law or unsupported conclusions of fact. Northern Trust, 69 F.3d at 129.

A. Res Judicata

Since an Illinois state court rendered the initial default judgment, this Court must apply Illinois preclusion law to determine whether res judicata bars Whitaker's claims. 28 U.S.C. § 1738; Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S 373, 381, 105 S.Ct. 1327, 1332, 84 L.Ed.2d 274 (1985).

In Illinois, res judicata extends to all questions actually decided in a previous action as well as to all grounds of recovery and defenses which might have been presented in the prior litigation. LaSalle Nat'l Bank v. County Bd. of Sch. Trustees, 61 Ill.2d 524, 337 N.E.2d 19, 22 (1975), cert. denied, 425 U.S. 936, 96 S.Ct. 1668, 48 L.Ed.2d 177 (1976). Res judicata bars a subsequent action if three requirements are met: "(1) there was a final judgment on the merits rendered by a court of competent jurisdiction; (2) there is an identity of cause of action; and (3) there is an identity of parties or their privies." Downing v. Chicago Transit Auth., 162 Ill.2d 70, 204 Ill.Dec. 755, 757, 642 N.E.2d 456, 458 (1994). The parties do not dispute that the first and third elements are satisfied. This case centers on identity of cause of action; that is, whether Ameritech's default judgment is the same cause of action as Whitaker's later statutory claims.

Illinois applies two quite different approaches for determining identity of cause of action. The first is the "proof" or "evidence" approach, which asks whether the same evidence will support both claims. See Torcasso v. Standard Outdoor Sales, Inc., 157 Ill.2d 484, 193 Ill.Dec. 192, 195, 626 N.E.2d 225, 228 (1993); Rodgers v. St. Mary's Hosp., 149 Ill.2d 302, 173 Ill.Dec. 642, 647, 597 N.E.2d 616, 621 (1992). If the same evidence would support the later claim, it is barred by the resolution of the earlier one. Torcasso, 193 Ill.Dec. at 195, 626 N.E.2d at 228. The second approach to res judicata that the Illinois courts use is the broader "transactional" approach, "which considers whether both suits arise from the same transaction, incident, or factual situation. The transactional approach provides that 'the assertion of different kinds of theories of relief still constitutes a single cause of action if a single group of operative facts give rise to the assertion of relief.' " Rodgers, 173 Ill.Dec. at 647, 597 N.E.2d at 621.

The Seventh Circuit has been asked on several previous occasions to apply the Illinois law of res judicata. Each time this Court has held that Illinois allows either approach to be used. See, e.g., Mortell v. Mortell Co., 887 F.2d 1322, 1325 (7th Cir.1989); Durhan v. Neopolitan, 875 F.2d 91, 95-96 (7th Cir.1989); Frier v. City of Vandalia, 770 F.2d 699, 702 (7th Cir.1985). There has been no substantial change to the law of res judicata in Illinois since we decided these cases. With Illinois law...